[Congressional Record Volume 150, Number 84 (Thursday, June 17, 2004)]
[House]
[Pages H4393-H4433]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
[[Page H4393]]
House of Representatives
AMERICAN JOBS CREATION ACT OF 2004--Continued
The SPEAKER pro tempore. The gentleman from California (Mr. Thomas)
and the gentleman from New York (Mr. Rangel) each will control 30
minutes.
The Chair recognizes the gentleman from California (Mr. Thomas).
Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
(Mr. THOMAS asked and was given permission to revise and extend his
remarks.)
Mr. THOMAS. Mr. Speaker, we are here today because the United States
Tax Code is out of sync with the rest of the world. Among our major
trading partners, the United States is alone in the world in not using
other forms of taxation other than direct income taxation.
Four times the United States defended our ability to create subsidies
and, therefore, produce a more level playing field among our trading
partners. We had for years refused to reexamine our code more
fundamentally and thought that a subsidy mandate would create a more
level playing field. Four times, the World Trade Organization said that
under the rules of the World Trade Organization, of which we are a
founding member, that that would not be permissible.
We are here today because the core of the bill is to repeal the
Foreign Sales Corporation extraterritorial tax structure, and it also
affords us an opportunity to examine an out-of-date Tax Code.
For those who say all we should be doing is repealing the subsidy,
which has been declared against the rules, is to ignore the reason why
we put the rules in place in the first place. The reason we did the
subsidy was because we were at a disadvantage. It can certainly be
argued we should have fundamentally changed our Tax Code back when we
did that, but the simple answer is, we did not.
What we are trying to do is correct the errors of our ways, primarily
by omission, but occasionally by commission, of not allowing U.S.-
based, U.S. workers to put products and services out in the world on a
level playing field with the rest of the world. That is what this bill
does.
In addition to that, in examining these areas, we discovered portions
of the Tax Code that are just flat out unfair. And this is an
opportunity; I believe everybody deserves 1 day every 20 years to have
a look at the problems they face in the Tax Code. Why? Because small
business in certain industries are faced with a discriminatory U.S. Tax
Code that puts U.S. small businesses at a disadvantage to foreign
businesses.
We are going to hear there is a provision in here about arrows, there
is a provision in here about tackle boxes, there is a provision in here
about sonar, fish detecting equipment. The reason it is in here is
because our code discriminates against American producers.
So not only are we rewriting our laws to be good trading partners and
assisting those people who no longer get the subsidy because we are
rewriting the laws, we are providing one day every 20 years to examine
those portions of the code that make absolutely no sense.
Mr. Speaker, I reserve the balance of my time.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
This is so interesting. The chairman of the committee stands to tell
us what this bill is all about, which is labeled the American Jobs
Creation Act and, guess what? This is nothing about jobs. He would have
us believe that the reason for this legislation is to reform the Tax
Code, to bring it up to date. Well, I have heard this type of
Republican talk before: we have to pull it out by the roots. That is
when we only had thousands of pages in the Tax Code.
But in the middle of the night, they bring us now a bill that is 400
pages long, and probably nobody in the House has even seen it yet. Do
not call this a tax bill and do not say that you are reforming the
system, because the fact is, if you wanted to really fix what this bill
was supposed to do, and that is to remove the subsidy, all you do is
remove the subsidy, and you do not give a tax cut for $150 billion, but
you pick up $50 billion, which is the amount of the subsidy.
So you can put lipstick on a pig, but you cannot call it a lady. This
is a lousy bill. It has nothing to do with reform.
And about this one day that someone is entitled to get their
priorities, well, he is 100 percent correct. They sent the word out
that every lobbyist in Washington has one day to get his favorite in
this bill. It is just unfortunate that the American people did not get
their one day to get jobs in this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
I do not rise to defend the honor of Miss Piggy, as the gentleman
from New York indicated, and I am anxiously finding a flashlight
because, apparently, the gentleman from New York exists in perpetual
darkness since he believes night extends for more than 2 years. This
bill has been around a long, long time.
Mr. Speaker, I yield such time as he may consume to the gentleman
from New York (Mr. Walsh) for the purpose of entering into a colloquy
with the gentleman from Colorado (Mr. Beauprez).
Mr. WALSH. Mr. Speaker, I thank the gentleman from California
(Chairman Thomas) for his leadership on this important legislation.
I understand the Senate version of the FSC/ETI bill includes the
``Green Bonds'' proposal. As the gentleman
[[Page H4394]]
knows, the Green Bonds proposal is intended to spur investment in
building design and technologies which reduce energy consumption. They
promote alternative energy use and improve environmental quality. The
Green Bonds proposal also has tremendous job creation potential, as it
includes specific minimum job creation requirements for projects.
While the legislation we are about to approve does not include the
language relating to Green Bonds, I hope that the House will be able to
accept the Senate-passed Green Bonds proposal in conference.
Mr. Speaker, I yield to the gentleman from Colorado (Mr. Beauprez).
Mr. BEAUPREZ. Mr. Speaker, I thank the gentleman for yielding, and I
thank him for raising this question.
This is technology, Mr. Speaker, that I am very familiar with, have
been for many, many years, and similar to the gentleman from New York,
this technology holds great potential for economic development, job and
career development within my own district back in Colorado. I similarly
hope that the House can favorably entertain inclusion of this provision
when we go to conference.
Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume to
thank the gentlemen from New York and Colorado, because without their
active participation, the Green Bonds provision would not have been
included in the House Energy Conference Report, H.R. 6, but it was, and
this House passed it. Therefore, the opportunity to examine it in this
conference is available to us. We did not deliberately exclude that
measure from this bill, and I look forward to working with the
gentlemen as we deliberate with the Senate on this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from
California (Mr. Stark), a senior member of the Committee on Ways and
Means and ranking member of the Subcommittee on Health.
(Mr. STARK asked and was given permission to revise and extend his
remarks.)
Mr. STARK. Mr. Speaker, very seldom do I find myself almost
speechless. If it were not for the rule which appears to gag all of the
Members from offering any amendments that would perhaps help this bill
and correct the problem which we know as FSC, and it is the first time
that I have known that when you take away a subsidy that was not any
good, that was improper in the first place, that for some reason you
owe business the money that you have been improperly paying them all of
these years.
As anybody who has ever had a job in private industry would know,
this bill does very little for producers or farmers or small business.
It is a return to right-wing radical McCarthyism.
The real serious problem, as I have thought about it this morning, my
young 8-year-old son is here, and he is going to be paying for this
bill for a long time. It is us elderly white, mostly elderly white
males who are doing this to help the lobbyists who have contributed so
generously to the Republican campaigns who are going to make these
youngsters pay for it, and I think that is an obscenity that will stand
long after we have left these halls.
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore. The Chair would remind all Members that it
is not appropriate under the rules of debate to introduce guests on the
House floor.
Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 3 minutes to the
gentleman from Illinois (Mr. Crane), and to observe that I was worried
about a job for the young man, but it is clear that he now has a job
being a shield for his father.
Mr. CRANE. Mr. Speaker, I thank the gentleman for yielding me this
time.
Mr. Speaker, I am pleased to offer my strong support for H.R. 4520,
the American Jobs Creation Act of 2004. This important legislation will
end EU sanctions against our exporters, which is harming U.S. workers,
and will deliver much-needed tax relief to the manufacturing sector of
our economy.
In April 2003, I introduced bipartisan legislation to repeal ETI and
return that money to domestic manufacturers. That legislation lowered
the corporate tax rate for domestic manufacturing from 35 to 32
percent, and I am therefore quite pleased that $75 billion in direct
relief for U.S. manufacturers has been included in this legislation. Of
this, $13 billion is devoted to current ETI beneficiaries through
important transition relief, and over $60 billion is devoted to rate
cuts for manufacturers. Lowering the cost of doing business for this
sector of our economy is critical for keeping the playing field level
with our foreign competitors and stimulating U.S. job growth.
I would like to thank the gentleman from California (Chairman Thomas)
for working with me to include these very important provisions in the
legislation before us today and, at the same time, I am pleased that
the legislation also includes significant international tax reforms.
Contrary to the assertion by some, these provisions do not shift jobs
overseas. Rather, they allow our multinationals doing business abroad
to become more competitive.
{time} 1230
This creates jobs here at home and is critically important to the
long-term competitiveness of our multinationals engaged in the global
economy.
H.R. 4520 also extends the enhanced section 179 expensing for 2
years, making it easier for small businesses to invest in new equipment
and grow their businesses, and includes many tax relief and
simplification provisions for smaller, subchapter S corporations. This,
coupled with the nearly $200 billion in tax relief for small businesses
provided in the Bush cuts of 2001 and 2003, is fundamental for helping
small business, the backbone of our economy, continue to thrive.
No legislation is perfect; and I, for one, wish we had the resources
available to do more. But this is a great first step, and it comes at
an important time. If we do not act, EU sanctions against many U.S.
goods will continue to grow until they reach 17 percent, further
harming U.S. businesses and workers. And we must not allow that to
happen.
Mr. Speaker, we have traveled a long road in bringing this
legislation to the floor, and I am glad to be here today in support of
a great bill. We have two alternatives. We can vote to end EU sanctions
against U.S. manufacturers then ensuring that all sectors of our
corporate economy continue to flourish, or we can vote to allow
sanctions to continue to grow. I suggest that there is only one
responsible choice, and I urge my colleagues to vote for the American
Job Creation Act.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Michigan (Mr. Levin), a senior member of Committee on Ways and Means
and ranking member on the Subcommittee on Trade.
(Mr. LEVIN asked and was given permission to revise and extend his
remarks.)
Mr. LEVIN. Mr. Speaker, this bill is called the American Jobs
Creation Act. Because of specific provisions in it under truth-in-
packaging, it should be called the Overseas Job Creation Act. I point
to three provisions. They are technical. They matter.
One, reducing nine foreign tax credit baskets to two, costing $8
billion. And what it would do is make it more profitable, and I urge
you to listen to this, to invest in a tax haven overseas than in the
U.S. It was President Reagan who put it this way some years ago: this
kind of provision ``gives U.S. taxpayers with operations in a high-tax
country an incentive to invest in low-tax countries overseas. Low-tax
country investments may be more attractive than investments in the
United States.''
Secondly, the look-through provisions for payments between related
corporations, $3\1/2\ billion. What it tells the U.S. multinational is
invest your overseas profit other than in the United States and get
benefits.
Thirdly, the repatriation provision, $5 billion. It says those
profits coming back need to be invested in the United States. There is
no definition of what an investment is. They could use the money to
close down a factory.
Last year, the gentleman from Illinois (Mr. Crane), the gentleman
from New York (Mr. Rangel), and the gentleman from Illinois (Mr.
Manzullo), and I introduced a bill to replace FSC that related to
manufacturing with
[[Page H4395]]
provisions that related to manufacturing, 40 billion for 40 billion.
Instead, we have 150 billion, and monies for so-called manufacturing
can be used for entities that process hamburgers. This bill makes
mincemeat out of good, sound policy. Reject it.
Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
In 1986 the reason the basket went from two to nine was for pure
revenue to be spent in other areas. And as President Reagan said, it
would entice someone to go from a high-tax country to a low-tax
country. Shame on us if we are the high-tax country.
Mr. Speaker, I yield 1 minute to the gentlewoman from Washington (Ms.
Dunn), a champion in trade around the world.
Ms. DUNN. Mr. Speaker, this is a critically important bill for the
constituents I represent. It contains tax relief for domestic
manufacturers including producers of software, a provision on which I
insisted during committee consideration.
The bill also restores after 18 years a tax deduction for State sales
taxes. This relief is long overdue; and it enjoys bipartisan support,
very strong here in the House.
The litigation of major provisions goes on and on. It provides a tax
rate cut for small business. It updates 40-year-old provisions in the
law that overtax U.S. businesses operating overseas. It provides
incentives to companies to bring home foreign earnings, invest them
here in the United States; and it extends the R&D tax credit, and it
provides transition relief for current users of ETI.
I am sure every Member of this Chamber could think of ways he or she
would change this bill. But insisting this or that provision and
ignoring the larger issue will not bring us into compliance with our
international trade obligations under the WTO. And it will not get us
closer to providing real tax relief to U.S. workers and businesses.
I urge support of this bill.
Mr. Speaker, I rise in strong support of H.R. 4520 and urge my
colleagues on both sides of the aisle to join me in voting for this
important legislation.
This bill contains a number of critically important provisions. It
brings us into compliance with the WTO and it will remove punitive
sanctions on American products that are hurting U.S. sales in Europe
and jeopardizing American workers.
Voting against this bill is a sure way to increase foreign tariffs on
U.S. products, making it tougher for U.S. workers to compete in the
world economy.
The simple fact is this: U.S. workers need this bill. They need the
opportunity to compete domestically and internationally.
I urge my colleagues to vote for it.
Mr. Speaker, this is a good bill, a strong bill, a bipartisan bill,
and it is a necessary bill.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Washington (Mr. McDermott), who will explain how in the Congress we
find Christmas in mid-June.
(Mr. McDERMOTT asked and was given permission to revise and extend
his remarks.)
Mr. McDERMOTT. Mr. Speaker, I wanted to bring out the symbol for
today.
Like the Queen of England, the Republican Party can declare when
Christmas comes. Christmas comes on the 17th of June. We were supposed
to fix an international trade practice bill here; but every day we
delay, American companies have to pay more, and so they finally got
around to the other day putting out this beautiful Christmas tree that
we have; but instead of offering a solution to the trades problems,
they just had a giveaway for all the special interests.
They raised the taxes on the exporters and lowered the taxes on those
people who put the jobs overseas. They intended to give $30 billion to
oil, tobacco, drug companies; and to get this bill passed, the
Republican leadership bought one special interest after another.
Now, they started out with corporate jets. That is this one up here.
And then the collection agents. Do you know that they are going to give
your tax record to private collection agencies to collect people's
debts to the IRS? And also there is tackle boxes here, and there are
bows and arrows and sonar devices. And there are two for tobacco here:
one, they reduce their taxes, and then they have a buy out. And they
were just practically for anybody.
This one is the pharmaceutical companies. Here is Coke and Pepsi. My
goodness, they have just gone on and on and on.
Now, my Latin friends say this is Feliz Navidad, but I say it is
fleecing America. They are not taking care of small business people.
Every one of those. Yes, I know the bow and arrow makers, they are not
very big. They are just a little bauble that gets two votes or one
vote. Some of these are two votes, and some of these are 25 votes.
There are a whole bunch more that I wanted to put on here.
Maybe we could give unemployment benefits to people who have had
long-term unemployment. That would be Christmas for them. But, no, we
just got special interests. Do not vote for this bill.
Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I tell the gentleman, only my friends on the other side
of the aisle would have a 6-inch tree and call it Christmas.
Mr. Speaker, I yield 1 minute to the gentleman from Arizona (Mr.
Hayworth).
Mr. HAYWORTH. Mr. Speaker, I appreciate very much the comments of my
friend from Washington State. Apparently, they were not pre-cleared by
the ACLU because he referred to a Christmas tree rather than a holiday
tree. I am sure he may get phone calls on that.
Be that as it may, rather than focusing on posturing or props or
process, let us take a look at results, a little economics 101.
The fact is when you reduce income tax rates, you create economic
incentive. You put people back to work. That is the essence of the job
bill. One of the biggest taxes, as the chairman pointed out,
geopolitically right now as it exists, American manufacturers and
farmers are being hit with escalating tariffs. Tariffs is another term
for taxes. Right now they are at 8 percent.
Guess what happens because of rising tariffs? The very exports that
everyone champions, even those who say they are friends of workers,
when you have higher tariffs, you do not have the exports; that costs
jobs. Lowering those tariffs will actually create jobs.
We could talk more about the restaurant owners and depreciation and
opportunities, but the bottom line is with this bill we create jobs.
Vote ``yes.'' Reject the holiday ornamentation and the props and the
pandering. Vote ``yes'' on this bill.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Georgia (Mr. Lewis), the conscience of the Congress, a member of the
Committee on Ways and Means.
Mr. LEWIS of Georgia. Mr. Speaker, I want to thank the gentleman from
New York (Mr. Rangel) for yielding me time.
Mr. Speaker, I rise in outrage at this irresponsible bill we are
voting on today. This bill is so reckless that the majority refused to
allow us to vote on a substitute for fear that the debate would show
the bill for what it really is. This bill is an overloaded Christmas
tree with Christmas gifts for all sorts of special interests, from
Chinese ceiling fans, to tackle boxes.
Mr. Speaker, instead of replacing the FSC incentive with much-needed
help for United States manufacturers, as the Rangel substitute would
have done, this bill provides $5 billion in new tax breaks that
actually encourages companies to move their operations offshore. We are
bleeding manufacturing jobs, and this bill encourages outsourcing. It
is outrageous. It is a disgrace and a shame.
To add insult to injury, this bill will increase our deficit by a
minimum of $34 billion over 10 years. But because the gimmicks are
designed to hide the true costs, the actual price tag will be much
higher.
Perhaps the most outrageous provisions of the bill, though, are the
blatant sweeteners and special interest tax breaks designed to buy
votes. Not one of them has anything to do with FSC.
These are just a few of the many gifts that have been placed on the
tree: a tax break for manufacturers of fish and tackle boxes, a tax
break for a maker of sonar devices used in fishing, a tax break for
landowners who sell timber from their land, a tax break for makers of
bows and arrows, a tax break for whaling, a tax break for alcoholic
beverage wholesalers, and a $9 million buyout for tobacco.
[[Page H4396]]
Mr. Speaker, the calendar may say June 17; but make no mistake, today
is Christmas for specialty interests. I urge my colleagues to do what
is right and reject this bill.
Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I just find it amazing that allowing American
manufacturers to have a level playing field with foreign manufacturers
is called a tax break.
Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from Florida
(Mr. Shaw), a valuable member of the Committee on Ways and Means.
Mr. SHAW. Mr. Speaker, I thank the gentleman for yielding me time to
speak in strong favor of this most important bill.
We have heard so much. The gentleman from Georgia (Mr. Lewis), while
very eloquent, was missing the point. The point is this bill does
create jobs and the louder one talks does not change that fact.
We have been running corporations offshore in this country because of
our tax bills. One has to look no further than Chrysler leaving the
United States, one of the Big Three going to Germany because they got a
better deal. That is what jobs are: companies and people. Employers
create jobs, not the United States Congress. But the United States
Congress for years has been taking jobs away and running jobs offshore
because of higher taxes and more regulation and then coming to the
floor and complaining about the jobs leaving.
But I want to speak about one other part of this bill which is very
important. If you are from Nevada, if you are from Texas, if you are
from Florida and some other States, this bill has something that is so
long in coming, something that we have been working for for so many
years; and that part of this bill is for the first time in about 20
years, the American public is going to be able to deduct its sales tax
from its taxable income here in this country.
This is huge. If you are from Florida you better think about this. If
you vote against the deductibility of sales tax, you are voting against
the taxpayers of Florida, Texas, Nevada, Ohio, and other States. We do
not have an income tax in Florida to deduct from taxable income tax. So
Florida does not get to deduct anything. This is pure fairness. I am
proud that it is part of this bill.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I do not know why he is so proud of giving these people
a break just for 2 years when the Democratic alternative would have
made it permanent so they would not have to worry about paying it back
in 2 years.
Mr. Speaker, I yield 2 minutes to the gentleman from California (Mr.
Becerra), a strong, hard-working member of the Committee on Ways and
Means.
{time} 1245
Mr. BECERRA. Mr. Speaker, I thank the gentleman for yielding me time.
There are 8.2 million Americans unemployed today, another 4.7 million
Americans who have been so frustrated in their search for a job that
they have dropped out of the workforce looking for work, and another
4.7 million Americans who cannot find anything more than part-time
employment: Close to 18 million Americans today not satisfied with
their opportunities to have a full paying job.
There were 2.7 million manufacturing jobs lost in the last 3 years.
The share of the population in America that is working today at 62
percent is the lowest it has ever been since 1994. Payroll remains 5.5
million jobs short of the average that we have seen in most economic
recoveries since World War II.
What is the response of this House to those conditions of America's
trying to work? Billions of dollars of tax incentives for corporations
to invest abroad and ship American jobs with that investment. This is a
textbook case of how loopholes seep into our Tax Code. Where else but
in the world of catering to special interests would it take $150
billion in tax cuts for corporations to remedy a $4 billion problem?
The dirtiest joke about all of this is that while we are giving tax
cuts to corporations to send jobs overseas, there is a provision in
this bill that actually would have bounty hunters to go out and try to
collect taxes from Americans who actually filed a tax return but have
not yet been able to pay the perhaps $500 that they still owe the IRS.
So now these bounty hunters will be paid 25 percent of what they
collect from you and you and you to do the work that the IRS says it
could do at 4 to 5 percent of the cost.
That is what this bill is loaded down with. That is why this bill
should not win. Democrats had a bill that would have kept jobs here,
given manufacturing corporations in America a chance to pay less in
taxes if they kept jobs here. We were not given a chance to put that
bill on the floor today. That is what we have today.
Who will win? It will not be the interests of the American public,
but there are a lot of special interests that are watching very
closely. Vote against this bill.
Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
The gentleman well knows that no substitute was offered in committee,
no substitute was offered in front of the Committee on Rules. You can
say it till you are blue in the face, but the Democrats offered no
substitute, neither in committee nor in the Committee on Rules.
Mr. Speaker, it is now my pleasure to yield 1\1/2\ minutes to the
gentlewoman from Connecticut (Mrs. Johnson), someone who is extremely
interested in American jobs.
Mrs. JOHNSON of Connecticut. Mr. Speaker, I thank the chairman for
yielding me the time.
This is plain and simple a jobs bill. If American multinational
companies are not competitive, we lose jobs all across this country, in
the millions and millions of small businesses that produce parts and
products that go abroad, and furthermore, if our multinationals are not
strong, we do not produce jobs in America for this reason.
A 10-year study of our multinationals showed that they produced 2.8
million jobs abroad over the last 10 years, but those same parent
companies produced 5.5 million new jobs right here in America. Being
able to compete internationally is what creates jobs here at home. And
it is not just those who export that have to be able to compete
internationally; it is everyone because international competition is
right down the street at Wal-Mart. So if we are not competitive, we
lose jobs.
This bill reforms the structure under which we tax international
earnings so we are competitive. That is all it does. We have to repeal
one section of our law, so we feed that money back in to level the
playing field for our companies so that they can continue to grow more
jobs in America than they do abroad and so that they can continue to
buy product from the millions of small businesses all across America
that supply the goods that go abroad and make us competitive.
This is a jobs bill, and do not forget it for one minute. If we do
not pass it, we lose jobs.
Mr. RANGEL. Mr. Speaker, talking about jobs or lack of it, I yield 2
minutes to the gentlewoman from Ohio (Mrs. Jones), who knows that they
do not have the jobs. She is a hardworking member of the Committee on
Ways and Means.
Mrs. JONES of Ohio. Mr. Speaker, I want to thank my ranking member
and my chairman the gentleman from New York (Mr. Rangel) for his
leadership.
I rise against H.R. 4520, and in Ohio it is truly the place where we
know about a loss of jobs. Since President Bush took office, in the
City of Cleveland alone we have lost 60,000 jobs. In the State of Ohio
we have lost more than 200,000 jobs, many of them manufacturing jobs
and many of them service workers jobs, and that was why in the
Committee on Ways and Means I offered an amendment and subsequently
withdrew it that would have provided benefits to service sector workers
that have lost their jobs due to international trade.
The irony is that my amendment was ruled nongermane. H.R. 4520 is
overloaded with special interest measures, but my amendment which would
have dealt with service workers who are left out of the process was
denied an opportunity, but more importantly, if H.R. 4520 is such a
good bill, why not allow the Democrats to offer a bill so that our
colleagues would have an option? I know they keep saying it was not a
substitute, but this is a semantical argument that it is not a
substitute. The Democrats had a bill that would have allowed us to do
many of the things that are offered in H.R. 4520 but made them
permanent.
[[Page H4397]]
I smile as I stand here and say this this morning to all the people
of America, do not be fooled. Do not get fooled. Do not be fooled. This
is not a jobs bill. Tell the Republican leadership you want a J-O-B.
You want a J-O-B, not benefits for other corporations.
Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 1 minute to the
gentleman from California (Mr. Herger), a colleague and member of the
Committee on Ways and Means.
Mr. HERGER. Mr. Speaker, I rise in strong support of the American
Jobs Creation Act. It is critical that we pass this legislation today.
Many of our exports to Europe are currently facing an 8 percent tariff,
and this tariff will rise to 17 percent if we do not act.
This legislation is also critical because it recognizes that American
companies are operating in a global economy, and we need a tax system
that allows them to compete and win.
This bill makes necessary reforms, but most importantly, this
legislation will be a tremendous benefit to U.S. manufacturers, both
large and small.
Some have said this legislation does not do enough for small
business; yet this legislation is strongly supported by the largest
small business group in America, the National Federation of Independent
Business.
I urge my colleagues to support this legislation.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Maryland (Mr. Cardin), a hard-working member of the Committee on Ways
and Means.
Mr. CARDIN. Mr. Speaker, if Congress was subject to the truth-in-
advertising law, we would be held accountable for the title of this
bill, American Jobs Creation Act, as misleading the American people. My
colleagues can call it what they want, this bill will not create jobs
or save jobs in this country. It will cost us jobs, and we know that.
This bill costs $34 billion, according to the Joint Tax Committee,
over the next 10 years. It will add to the deficit of the country. That
is certainly not going to help our economy, but the truth is it costs a
lot more than $34 billion. Because of all the sunsets and the phasing
in, this bill costs a lot more than that, hundreds of billions of
dollars, which is just going to add to the national debt and cost us
jobs.
Mr. Speaker, the tragedy is that we do have a problem with the World
Trade Organization that we should correct. Legislation has been offered
to do that on a revenue neutral basis, without adding to the deficit
and helping U.S. manufacturers so we keep jobs here in America. That
has been rejected.
So what do we have? We have a bill that is laden with special
interest provisions, hundreds of special interest provisions, that have
been given out, that have nothing to do with job creation, have nothing
to with the underlying problem with the World Trade Organization and
has everything to do with trying to pass a bill to help special
interests. Then we have provisions in here that actually harm our
country, such as the private contracting of tax collection functions. I
cannot think of anything more basic to our government than collection
of taxes, and now we want to have private collection agencies dealing
with our constituents? I do not want to see that happen.
Mr. Speaker, this bill will not help create jobs. It will hurt us in
keeping jobs in America. We should have done better. We should have
corrected the problem. Let us go back and do that. I urge my colleagues
to reject this bill.
Mr. THOMAS. Mr. Speaker, it is now my pleasure to yield 1 minute to
the gentlewoman from Tennessee (Mrs. Blackburn), a newer Member of the
House but someone who has already made an impact on a portion of this
bill.
Mrs. BLACKBURN. Mr. Speaker, I want to thank the chairman for his
work on this issue.
As we pass the American Jobs Creation Act today, this is a great day,
a great day for the people of Tennessee and Florida and Texas and
Washington and Wyoming. There are 55 million people in the U.S. that
live in States that do not have a State income tax, that have a State
sales tax, and restoring the deductibility of that State sales tax to
our Federal income tax filing is important.
It is important in my State. I started working on this issue when I
was in the State Senate. This means $1 billion a year to Tennessee's
economy, and let me tell my colleagues, Mr. Speaker, that means jobs
because Tennessee is a small business State. This will assist us in
creating jobs, good, solid, home-grown jobs, that are going to stay
right there with us.
I want to thank the gentleman from Texas (Mr. Brady) and the
gentleman from Texas (Mr. DeLay) for their work on this important piece
of legislation and especially thank our chairman.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
I would just like to make it clear that if the Democrats had a chance
to have an alternative this provision would have not lasted just for 2
years, as Republicans would have it, but would have been made
permanent.
Mr. Speaker, I yield 2 minutes to the gentleman from Texas (Mr.
Doggett), a hardworking member of the Committee on Ways and Means.
Mr. DOGGETT. Mr. Speaker, I thank the gentleman for the time.
When $4 billion in sanctions are imposed for an unjustified tax break
declared illegal in an international forum, this House Republican
leadership produces this monstrosity of a bill to expand this $4
billion problem to an outrageous $150 billion chunk of corporate
welfare.
The title of a lead column in the Business section of the Washington
Post captures the essence of this sorry legislation: ``Tax Legislation
Only Worthy of the Trash Heap.'' At least one corporate lobbyist was
candid in boasting that this bill has ``risen to a new level of
sleaze.'' The latest bit of sleaze was added only in the wee hours of
this morning, a provision to obstruct an ongoing investigation by the
Internal Revenue Service of corporate tax shelters, denying our IRS
even the identity of those who were sold abusive corporate tax
products.
Once again, with tax breaks for the private jets of corporate
executives, for sonar devices for finding fish, for whale hunters, we
can see that the big fish do rather well in this bill, while the
American people are told one whopper after another.
This is a jobs bill all right. It is a jobs bill for corporate
lobbyists who have done rather well. It is also a jobs bill for people
in Bermuda and China. Indeed, I think the taxpayers of Bermuda and
China ought to be footing the $150 billion price tag for this bill, not
the American taxpayers because they appear to be the ones benefiting
from this legislation. To those corporations that will dodge their
taxes by planting their corporate flags on the shores of Bermuda, this
bill gives them a pat on the back.
The Republicans once said they were opposed to this fleeing of
American corporations abroad. Now they help buy them first class
airfare at the expense of American taxpayers. Certainly, the most
appalling provision of all is the $10 billion given to the producers of
nicotine, a lethal product that ruins the lives of so many American
families. Under this outrageous section, Big Tobacco will get cheaper
tobacco, even more tobacco will be grown, and the American taxpayer
will be the loser.
{time} 1300
Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I believe the gentleman from Texas (Judge Doggett) needs
to know that provision has been ruled by the courts not to provide
attorney/client privilege and that there was no new power granted under
that language. And the gentleman from Texas (Judge Doggett) knows that
when the courts rule, we try to be responsible in that regard.
Former Speaker Tip O'Neill said, ``All politics is local.'' I had
said that some areas of the code have not been examined in 20 years or
more, and people deserve a day at least once every 20 years to try to
correct the horrible, horrible condition of many areas of our economy
under our current Tax Code.
Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from North
Carolina (Mr. McIntyre) who wants to talk about ending a subsidy to a
particular group of Americans, and this is the first time they have had
their day in court in almost three-quarters of a century.
Mr. McINTYRE. Mr. Speaker, I rise in strong support of H.R. 4520, the
[[Page H4398]]
American Jobs Creation Act. In North Carolina, we have known something
about losing jobs and we know what it means to be able to gain jobs
back. That is why these WTO penalties that we are concerned about are
being discussed today in many areas like textile, agriculture, and
high-tech.
But my point today is a concern about tobacco. There are some things
that are rather disparaging that are simply not true. This is not a
Republican or Democratic issue. This is about helping families and
helping gain jobs for those who have suffered enough under the only
remaining Depression-era Federal farm program in America.
Members are concerned about American government being involved in
tobacco. Well, let us get out of the 1930s. This is not a bail-out; it
is a buy-out. And if we continue to do nothing, it will be a wipe-out.
What if Members' income was cut by 50 percent in the last 5 years
like our tobacco farmers and you do not have control over it? It is
done through a formula set by the Secretary of Agriculture, and this
fall you may face another 20 to 30 percent cut in income. How are you
going to pay for your kids, their education, their health care, their
families? Are we going to take these farmers and put them on welfare?
We have to get the American government out of the tobacco business,
and we can do that with this buy-out. We are not just paying off
farmers, we are giving back to them what the Federal Government has
taken from them. There is a Federal property interest in a tobacco
allotment. Farmers can put it in deed, lease it, rent it, and that is
controlled through the Federal Government.
This would be an opportunity to help our farmers make a decision: Are
they going to continue to farm tobacco or get out? This is an
opportunity for us to make a decision for the American taxpayer: Will
the American taxpayer continue to subsidize tobacco or will we get out
of the tobacco business, which so many people want to do?
This is a logical situation to help the American tobacco farmer and
their family to be able to have the interest that the Federal
Government has taken from them and now controls their income to be able
to buy back that interest and then let them make the decision.
Our farmers in our rural regional and State economies have suffered
enough. It is time for this uncertainty to end, not only for these
families but for the American government's involvement in tobacco. It
is also time to give farmers the freedom of choice and get them out
from under a government mandate where they have no control over the
amount of income they can make.
Let us do right by our farmers and their families. Let this be a win
for the farmer, a win for the taxpayer, and a win for the American
government.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, this is the biggest fraud on farmers, and especially
tobacco farmers, that I have seen in my 34 years in Congress. Here we
have some help allegedly for the tobacco farmers, and those of us on
the Committee on Ways and Means could not even discuss it because it is
not in our jurisdiction, yet it is in our bill.
A person does not have to be a politician or Member of Congress to
know if we are talking about farming and tobacco, we should be talking
about the Committee on Agriculture and not the tax-writing committee.
This bill has nothing to do with taxes, nothing to do with
international sanctions against us. It has everything to do with trying
to pick up votes for those people who know that they are facing
economic distress in this area.
The right thing to have done was to have it in the Committee on
Agriculture, which has jurisdiction and who understands this issue even
better than some of the smartest Members on the Committee on Ways and
Means.
Mr. Speaker, I yield 1 minute to the gentleman from Mississippi (Mr.
Taylor).
Mr. TAYLOR of Mississippi. Mr. Speaker, it is interesting that the
sponsor of this bill would mention that all politics is local. I would
remind the gentleman that in my State of Mississippi local elected
officials are held personally liable for debts they incur while in
office. If they spend more money than they can collect in taxes, they
are personally liable. I wonder if the sponsor of this bill would be
willing to pay his share of the $1,553,114,795,203.56 that his policies
have added to the American debt in just the past 3 years?
I wonder how many of the Members who feel so strongly about this bill
would be willing to pay their share of the $34 billion it is going to
add to our Nation's debt. Do Members really feel that strongly about
it? Do Members really think they are doing enough good to stick my kids
with their $34 billion bill?
We are at war, and shame on us if we are the first generation of
Americans to cut taxes as young Americans are dying on a daily basis.
We are at war and we ought to be willing to pay for it and we ought to
quit sticking our kids with our bills.
Mr. THOMAS. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from
Louisiana (Mr. McCrery), the chairman of the Subcommittee on Select
Revenue of the Committee on Ways and Means.
Mr. McCRERY. Mr. Speaker, I thank the gentleman for yielding me this
time to talk about what I think is perhaps the most important tax bill
we have passed through this House in the last several years.
There has been a lot of talk and rhetoric about how the international
tax provisions contained in this bill will ship jobs overseas when in
fact just the opposite is the case and just the opposite is supported
by the facts, but we do not hear many facts coming from those critics
from the bill, we just hear rhetoric. Rhetoric is easy.
Let me give Members some facts. I will start with the fact that 93
percent of all products made overseas by American companies with
operations overseas are sold overseas, not made over there and brought
back here to be sold in our market to replace part of the market share
here in the United States. Those products made overseas by American
companies that have affiliates overseas are sold overseas. That should
tell Members something. It should tell Members that our American
companies who create facilities overseas to make things do so in order
to compete in those overseas markets. They want market share over
there, and in many cases and in most cases they need those facilities
over there to serve those markets.
Another fact, another statistic that is important: 40 percent of all
exports by American manufacturers from the United States go to foreign
affiliates of those same American manufacturers. In other words, our
manufacturers here in the United States are making things here to sell
over there to their own foreign affiliates. So if it were not for the
fact that American companies had those foreign affiliates overseas,
those exports probably would not be sold. Those exports would not be
leaving the United States. And all those exports, those products, are
made by workers here in the United States.
So those jobs overseas, those plants overseas owned by American
manufacturers support jobs here in the United States. Those are the
facts. Forget the rhetoric, this bill is about jobs here in the United
States. It is the best bill we have had on the floor in a long, long
time, and we ought to pass it.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Maryland (Mr. Hoyer), our distinguished minority whip.
Mr. HOYER. Mr. Speaker, the other side can say it over and over and
over again, but the facts are correct that this is not about jobs here
because if it was about jobs here, we could have passed the Manzullo-
Rangel bill 6 months ago. We did not. We did not because we wanted to
pass a partisan bill.
The Heritage Foundation says, ``There is always a certain amount of
grease that is part of getting any tax policy changes through the
process,'' but with this bill the Heritage Foundation says that ``the
actual policy seems to be secondary to the grease.''
This is a sad day in this House. I have served here for 23 years.
This is the worst tax bill that I have seen on the floor of this House.
It is the most irresponsible bill. I challenge the Members on that side
of the aisle to bring me one editorial, Members will not find it in the
Wall Street Journal, Members will not find it out of the Heritage
Foundation, one editorial that says this bill is worth passing.
[[Page H4399]]
We have been involved in an orgy of self-indulgence. That is how
great empires fail, so focused on self and corporate and individual
embellishment that they forget about the community, they forget about
their country, they forget about investing in their people. They forget
about investing in jobs in America.
The gentleman from Illinois (Mr. Manzullo) is not on the floor, he
was just a few minutes ago. He and the gentleman from New York (Mr.
Rangel) and the gentleman from Illinois (Mr. Crane) had a bill that
spoke to jobs in America. This bill does not. Defeat this bill. Be
responsible, stand up for America, send this bill back to committee.
Mr. THOMAS. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from
Kentucky (Mr. Lewis) who understands all politics are local, and the
Chair appreciates the tremendous work the gentleman from Kentucky has
put in in perfecting this bill.
(Mr. LEWIS of Kentucky asked and was given permission to revise and
extend his remarks.)
Mr. LEWIS of Kentucky. Mr. Speaker, I rise today to voice my support,
my strong support for H.R. 4520, the American Jobs Creation Act of
2004, and encourage my colleagues to vote in favor of this important
legislation.
There are over 40,000 tobacco farms in Kentucky alone. Tobacco
farming is the primary source of livelihood of tens of thousands of
Americans supporting local economies in nine U.S. States. Every tobacco
dollar is said to turn over 6 to 7 times in its community.
Under current Federal policy, American farmers lose while farmers in
countries like Brazil win. American tobacco farmers simply cannot
respond to new market pressures and opportunities while beholden to an
outdated government-controlled system.
With this bill, farmers can move beyond tobacco. By ending the quota
system, economists anticipate as many as two-thirds of current tobacco
farmers would exit the business without increasing taxes or the
national debt.
Our obligation as Members of Congress is always to our constituents,
not to special interest groups. Including a buy-out provision in H.R.
4520 provides long-awaited relief to American farmers, replacing lost
jobs and revitalizing thousands of communities across the Nation who
depend upon tobacco for their economic stability.
I commend the gentleman from California (Mr. Thomas) for his
leadership and vision on this issue, understanding the plight of
American farmers and working with a bipartisan coalition to include
this important provision in the Jobs Creation bill. I urge my
colleagues to vote in favor of H.R. 4520.
Mr. RANGEL. Mr. Speaker, I yield 10 seconds to the gentleman from
Maryland (Mr. Hoyer), our distinguished whip.
Mr. HOYER. Mr. Speaker, there will be some Members who will speak on
behalf of this bill, but I have not talked to one of them that thought
this was a good bill. They think there are provisions in this bill, as
the chairman said, that have not been considered for some time, and
they are voting for that provision. Not one Member have I talked to on
this side of the aisle or that thinks this is a good bill.
{time} 1315
Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the gentleman from
Illinois (Mr. Manzullo) from the other side of the aisle. He is just as
much a Republican as I am a Democrat. One thing we have in common is
that when we have a problem with the WTO we do not think it is a
Republican or a Democratic issue, but we think in a bipartisan way we
should work toward trying to resolve that. We have done that. It has
been a pleasure working with him.
Mr. MANZULLO. Mr. Speaker, after 1999 all businesses, from normally
large chapter C corporations to nontraditional corporations such as sub
S partnerships, limited liability corporations and sole
proprietorships, have had a tax break for the items that they export.
This is the extraterritorial income exclusion, or ETI. The WTO held
this tax break illegal because it gives a preferential tax break to
exported items, even though Europe does the very same thing through its
VAT tax, which is rebated at the border.
The present House bill replaces the ETI tax with a large tax cut for
businesses that manufacture in the U.S., similar to what the other body
did, except that in this House bill, only chapter C corporations get
the tax cut because the House bill tax cut does not apply to other
nonchapter C businesses, such as subchapter S, limited liability and
sole proprietorships, normally the little guys.
The present House bill has the same problem as my bill did from early
last year. That is why I admitted my mistake and abandoned the original
Crane-Rangel-Manzullo bill because it, too, limited relief only to
chapter C corporations. My district's 2,000 manufacturing businesses
are little guys, mostly sub S like the rest of the Nation. I worked
with the other body last summer to include the manufacturing benefit to
everybody, which is what that body did. The House bill hurts businesses
which are presently exporting and which are nonchapter C corporations
by causing a tax increase.
SAS in North Carolina, 100 employees, manufactures software, exports
a lot. Because it is a subchapter S business and not a chapter C
corporation, SAS will have a massive tax increase. Excel Foundry and
Machine in Pekin, Illinois, 100 employees, a third of its revenue
coming from exports. They just added three engineers and put on an
addition. Because they are a sub S and not a chapter C, their tax
benefit will end, and they will have a tax increase. National Machinery
of Tiffin, Ohio, the last U.S. manufacturer of cold forming machines,
exports most of its product. Because they are an LLC and not a chapter
C, they will have a massive tax increase. They make a machine that
makes bullets.
There are tax cuts for small businesses and depending on how you
total them, somewhere between $2.75 billion and $18 billion; and I want
to thank everybody for those tax cuts. We appreciate the sub S reform
and expensing extension for 2 years. However, the bill totals about
$143 billion in gross tax cuts, meaning the large and multinational
corporations get a benefit of about 93 percent of the entire bill.
The class warfare between large and small businesses was not asked
for by the large companies. They want the smaller manufacturers to
thrive because the little guys are the suppliers for the large
companies. The supporters of the bill say the nonchapter C people got
their tax break when personal income tax rates were reduced for
everybody, but everybody knows it costs a lot more to run a small
business. As chairman of the Committee on Small Business, I cannot
discriminate against small businesses; and I hope the majority of the
House will agree with that.
Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, now I guess I am a little bit baffled. The gentleman
from Illinois, chairman of the Committee on Small Business, was an
original cosponsor of H.R. 1769, the Rangel-Manzullo bill. That
included a corporate rate cut and specifically limited it to C corps.
It did not extend it to S corps and partnerships, and it did not have
any of the 11 subchapter S provisions that we include. He is making an
appeal for bullets, but he is not supporting bows and arrows.
Mr. Speaker, it is my pleasure to yield 1 minute to the gentleman
from Tennessee (Mr. Jenkins).
Mr. JENKINS. I thank the gentleman for yielding me this time.
Mr. Speaker, I strongly support H.R. 4520 for many reasons. Number
one, it protects American jobs. In addition, it brings some measure of
relief to a segment of our economy that has been under assault for a
long period of time. Lawsuits, actions and inactions of our government
have put hardworking tobacco farm families in peril and threaten the
economic well-being of rural communities in many States. This will help
prevent an economic train wreck in those areas that have depended on
this crop as a mainstay of their economy longer than we have been a
Nation. In addition, it will help, in my honest opinion, to satisfy the
mandate of the fifth amendment to our Constitution that no property
will be taken without just compensation.
Finally, Mr. Speaker, it will address a great inequity that has
existed since 1986. It restores the State sales tax exemption for
Federal income tax. I urge my colleagues to support this legislation.
[[Page H4400]]
Mr. Speaker. I strongly support H.R. 4520 and I commend the chairman
and the Committee on Ways and Means for bringing to the House this
legislation to protect American jobs and to bring fairness to a segment
of our agricultural economy and a section of our Tax Code.
Assessments totaling billions of dollars are being assessed against
exported American goods by the World Trade Organization--threatening
tens of thousands of American jobs--unless the Congress responds with
remedial measures. This is the remedial action that will provide
protection for those jobs for thousands of Americans.
In addition it brings some measure of relief to a segment of our
economy that has been under assault for a long period of time.
Lawsuits--actions and inactions of our government have put hardworking
tobacco farm families in peril--and threaten the economic well being of
rural communities in many States. This will help prevent an economic
train wreck in those areas that have depended on this crop as a
mainstay of their economy longer than we have been a nation. In
addition it will help--in my opinion--to satisfy the mandate of the
fifth amendment to our Constitution--that no property will be taken
without compensation.
Finally, Mr. Speaker, it will address a great inequity that has
existed since 1986. In that year the ability to claim as a deduction on
our Federal income tax an amount that was paid in State sales tax was
taken away. Many states rely on sales tax as their principle source of
revenue and do not have a State income tax. State income tax is still a
valid deduction on a Federal income tax return--but not State sales
tax. H.R. 4520 restores sales tax as a deduction. If H.R. 4520 becomes
the law of the land it will alleviate the existence of this inequity
that many have never been able to understand.
I urge my colleagues to support this legislation.
Mr. RANGEL. Mr. Speaker, I yield 30 seconds to the gentleman from
Illinois (Mr. Manzullo), whom I would like to believe as the chairman
of the Committee on Small Business knows more about small businesses
than the chairman of the Committee on Ways and Means knows about
tobacco.
Mr. MANZULLO. Mr. Speaker, I would like to respond to my colleague,
the chairman of the Committee on Ways and Means. I am in favor of a tax
cut for all manufacturing entities, from large corporations through to
the sole proprietorships. The reason I abandoned my own bill, Manzullo-
Rangel-Crane, is the fact that it limited relief only to the large
corporations. Only. Only to the large corporations. I cannot support
that. What we need is a bill as in the other body that has a
manufacturing benefit for everybody who manufactures, not just the
large ones.
Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 1 minute to the
gentleman from Texas (Mr. Sam Johnson), a valuable member of the
Committee on Ways and Means.
(Mr. SAM JOHNSON of Texas asked and was given permission to revise
and extend his remarks.)
Mr. SAM JOHNSON of Texas. Mr. Speaker, I rise today in strong support
of this international tax bill. We worked for the better part of 3
years to get to this point. Everyone in here knows we need it. I want
to congratulate Chairman Thomas for leading us. The bill strikes the
right tone in the repeal and replacement of FSC/ETI. This section of
the bill was debated long and hard, and I am proud of the deal we have
reached on this section. I am also glad to see long overdue
international competitiveness reforms are still in this bill.
In addition, I want to mention my strong support for the return of
the State sales tax deduction. Since 1986, the residents of seven
States, including Texas, that rely upon sales taxes rather than income
taxes have been unfairly denied this deduction. From every corner of my
congressional district, my constituents are thrilled at the prospect of
being given this tax deduction. We like to say no taxes in Texas.
I urge my colleagues to vote for this bill.
Mr. Speaker, I rise today in strong support of this international tax
bill. We have worked for the better part of 3 years to get to this
point and I want to thank and congratulate Chairman Thomas for leading
us.
The bill strikes the right tone in the repeal and replacement of the
``FSC-ETI'' benefit. This section of the bill was debated long and
hard, and I am proud of the deal we have reached on this section. I am
also glad to see long-overdue international competitiveness reforms are
still in this bill.
In addition, I want to mention my strong support for the return of
the State sales tax deduction. Since 1986, the residents of seven
States, including Texas, that rely upon sales taxes rather than income
taxes, have been unfairly denied this deduction.
From every corner of my congressional district, my constituents are
thrilled at the prospect of being given this tax deduction. We like to
say no taxes in Texas.
I urge my colleagues to vote for this bill.
I want to urge caution however on the revenue raisers that are used
to offset some of our tax cuts.
I find the revenue raisers in the House bill to have many flaws--
large and small. I have been sharing my reservations with the Chairman
and other committee members who are likely to be conferees.
My reservations about the House offsets, however, are magnified into
grave concerns when I look at the Senate tax increases. In particular,
I cannot accept retroactive tax increases and will not support a
conference agreement that includes retroactive tax increases.
I am firmly in the camp of those who believe that tax cuts do not
need to be offset with tax increases. This is simply money the Federal
Government is not collecting that belongs to individuals or companies
that have earned the money.
However, to the extent that we are forced to offset some off our tax
cuts, I urge the Chairman and other conferees to pick through these
offsets so that the ``pay-for'' is not worse policy than the items we
are trying to fix.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentlewoman from
California (Ms. Waters).
Ms. WATERS. Mr. Speaker, I certainly would like to thank the
gentleman from New York (Mr. Rangel) for all the hard work that he has
put in on this legislation, and I would like to thank Lou Dobbs at CNN
for his constant exposure of the practice of U.S. firms that are
outsourcing jobs. These firms are simply exporting American jobs to
Third World countries for cheap exploited labor. This bill is a prime
example of what Lou Dobbs has been reporting about. This bill is a $140
billion tax boondoggle at a time when U.S. unemployment rates are still
too high and at a time when this administration has created historic
deficits.
This bill gives $35 billion of the $140 billion tax break that they
have created to U.S. firms to invest in jobs overseas, not American
jobs, not jobs in your city, not jobs in your hometown, not jobs in
your county. The Republicans have become experts at outsourcing jobs.
The Republican National Committee and George W. Bush even outsourced
their fund-raising solicitation telephone calls to a firm that employs
workers in India. This brazen, costly tax giveaway to corporations
exporting jobs, 60 percent of whom pay no taxes, is an assault on
hardworking Americans who are now collectively paying more taxes than
rich corporations. Shame, shame, shame.
The Republicans refused to support targeted U.S. manufacturing
credits. These so-called conservative Republicans, who are supposed to
be fiscal conservatives, no longer care about the huge United States
deficit. They have become the big spenders of the taxpayers' dollars,
outsourcing the jobs to foreign countries for cheap labor. These are
conservative Republicans piling up this deficit and giving away our
American jobs. They no longer care about the joblessness of Americans
in their own hometowns.
Shame, shame, shame.
Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 15 seconds to the
gentleman from Ohio (Mr. Portman) who understands the difference
between spending and investing.
(Mr. PORTMAN asked and was given permission to revise and extend his
remarks.)
Mr. PORTMAN. Mr. Speaker, I thank the gentleman from California for
putting together a good bill that actually does just the opposite of
what my friend from California just talked about. It helps American
businesses be able to compete in the global marketplace. That will
create jobs in this country. And it enables our businesses to be able
to compete in an increasingly competitive global marketplace. That is
good for America.
I want to commend Chairman Thomas for crafting a bill that will
create jobs here in America. I am particularly pleased that the
American Jobs Creation Act includes important and long-needed reforms
to the rules under which U.S. businesses are taxed on their global
operations. Those reforms are one of the key reasons I support this
legislation.
[[Page H4401]]
They are a long time in coming, and I want to particularly thank Mr.
Houghton for his leadership and perseverance in this area. He has been
a champion of tax simplification, and focused much of his attention on
the complicated, archaic and outdated international tax rules. On a
bipartisan basis, he initiated a comprehensive package of reforms that
have been vetted and fine-tuned over a decade. I am pleased many of
those provisions are in this bill. These are critical provisions that
will determine whether or not our nation can compete in the global
marketplace.
Some have tried to characterize the international tax reforms as
provisions that would reward U.S. companies that move jobs offshore.
The exact opposite is true. These reforms are critical to U.S.
manufacturers that make products in the United States and sell those
products in the global marketplace. To access global markets, U.S.
exporters must compete directly with non-U.S. companies. The
international tax reforms in the American Jobs Creation Act begin to
level the playing field between U.S. companies and their foreign
competitors. They are necessary to protect and grow U.S. manufacturing
jobs in export industries. Ninety-six percent of the world's consumers
are outside the United States. Without markets in which to sell their
goods, U.S. companies cannot provide U.S. jobs to manufacture those
goods. Companies with global operations provide over half of all U.S.
manufacturing jobs. Suppliers who depend on those multinational
companies to buy their products provide many more U.S. manufacturing
jobs.
Mr. Speaker, I want to mention two specific reforms that are included
in this bill. The first, dealing with interest allocation, would
eliminate a fundamental distortion in the U.S. tax law that results in
double taxation of U.S. taxpayers that have operations abroad.
Currently, we tax corporations on their worldwide income, but allow a
foreign tax credit against the U.S. tax on foreign-source income. The
foreign tax credit limitation applies so that foreign tax credits may
be used to offset only the U.S. tax on foreign-source income and not on
U.S.-source income.
In order to determine the foreign tax credit that can be claimed,
expenses must be allocated between U.S.-source income and foreign-
source income. These allocation rules cause a disproportionate amount
of U.S. interest expense to be allocated to foreign-source income--
which in turns reduces the foreign tax credit. This double taxation
makes it more difficult for U.S. companies to compete in the global
marketplace.
Perhaps the most outrageous aspect is the fact that this double
taxation makes it more costly to build factories in the United States.
Only our own U.S. companies are facing this distortion. Foreign
corporations making an investment in the United States do not suffer
double taxation. That is a perverse result. H.R. 4520 would correct
this.
Another key international reform is the reduction in the number of
foreign tax credit limitation baskets. It is a matter of
simplification, fairness and U.S. jobs. The current basket structure is
a major source of complexity and inefficiency in the U.S. international
tax rules. It requires a U.S. company to divide its business income
earned outside the U.S. into at least two, and perhaps many more,
baskets. Thus, every company with global operations must characterize
and allocate each dollar of its business income--on an item-by-item
basis--to one of the nine baskets. The company must then associate
every item of expense incurred everywhere in the world to one of the
nine baskets. The company must then go through the same exercise for
every dollar of tax paid to any foreign government. That does not make
sense. No other country in the world requires anything approaching this
level of complexity.
Reducing the number of foreign tax credit limitation baskets is also
a matter of fairness. Some U.S. global companies do not face the
complications caused by the separate baskets simply because they do not
engage in any financial services businesses or because they engage in
those businesses exclusively. U.S. companies that do both should not be
disadvantaged. Finally, it's a matter of U.S. jobs. For many companies,
creating one active business basket will rescue the U.S. tax on
exports. The export of U.S. manufactured property typically gives rise
to foreign-source income that is not highly taxed. If credits
attributable to other types of business income can be used to reduce
that tax burden further, those exports will be more competitive in the
global marketplace. That means more jobs here.
Mr. Speaker, our international tax system needs to be changed to
reflect today's economy. It's time to simplify these taxes to make U.S.
companies more competitive and to create more jobs here in America.
Mr. RANGEL. Mr. Speaker, it is my pleasure to yield 1 minute to the
gentlewoman from California (Ms. Pelosi), the leader of the minority
and a person that has been very sensitive to the necessity and the
creation of jobs for all Americans.
Ms. PELOSI. Mr. Speaker, I thank the gentleman from New York for
yielding me this time.
Mr. Speaker, today our country is at a crossroads, and this debate on
the floor clearly defines the choice that we have to make. The
gentleman from New York (Mr. Rangel) at that crossroads offers us a
path to expand opportunity in our country and to grow community. The
gentleman from New York, as we make this important decision, knows that
nothing less is at stake than our technological, industrial, and
manufacturing base. The path that the gentleman from New York will take
us down is one that will stop the hemorrhaging of U.S. jobs overseas.
The gentleman from New York will strengthen our base. That is a
decision we have to make. Are we going to strengthen that base, which
is so essential to our national security, so essential to job creation
in our country? Or are we going to abandon it? The gentleman from New
York strengthens it. The Republican proposal abandons it.
But I have to give the Republicans credit, I really have to give them
credit, because they are consistent. They are consistently the
handmaidens of the special interests at the expense of the public
interest and the public good. Every opportunity they get to bring
legislation to the floor, we see the difference between the Democrats
and the Republicans in that regard. That is most unfortunate. Because
people across our country are suffering from job loss, from uncertainty
in their lives, from their communities dissolving because businesses
are leaving and what that means to America's families and America's
communities. That is most unfortunate.
The gentleman from New York on the other hand again takes us to a
place which strengthens community and strengthens and expands
opportunity. We have to view what the Republicans are doing within the
context of their reckless economic policies. Here they come to the
floor abandoning the American worker at a time when the Republican
reckless policies have produced the worst job loss since Herbert
Hoover. No President of the United States since Herbert Hoover has lost
jobs in office, but these Republican policies have produced those
losses. It has to be viewed within the context of, again, that
uncertainty in American life. How sad.
The gentleman from New York's proposal should be viewed in the
context of a Democratic proposal to take the initiative on outsourcing,
a proposal that says we must have innovation to create the jobs of the
future, we must have education to produce the workforce of the future,
and we must have job creation using the Tax Code that will reward
businesses that stay here, create jobs here, and maintain jobs in the
U.S.; and that is the distinct difference between what the Republicans
are proposing and what the gentleman from New York is proposing today.
{time} 1330
Unfortunately, because the Republicans are once again afraid of
ideas, they would not allow the gentleman from New York's (Mr. Rangel)
proposal to come to the floor. They would not allow a substitute to be
brought to the floor so we could have a fair airing of these different
visions of America, because they are two different visions of America.
Instead, the gentleman from New York (Mr. Rangel) is confined to a
motion to recommit, a parliamentary instrument that gives him only a
few minutes to present his case. But his case is a clearly distinctly
different one from the Republicans.
We are talking about two different visions of America. The gentleman
from New York's (Mr. Rangel) is about supporting American values, of
expanding opportunity again through innovation, education, using the
Tax Code for job creations, rewarding those who keep jobs here in the
U.S. It recognizes the reality of the global economy and wants to make
the U.S. manufacturers the most competitive in the world with the most
productive workers, the U.S. workers, in the world.
So I thank the gentleman from New York (Mr. Rangel) for his sense of
responsibility to the American worker,
[[Page H4402]]
to the American economy, for his sense of responsibility that we all
have to make the future better and not have an erosion of jobs in our
country but of an enhancing of opportunity. And I thank him for what he
is doing as far as a sense of communities is concerned because that is
a strong American value that is being seriously undermined by again the
erosion of our manufacturing base and what that does to communities
across the country.
So I urge my colleagues as they stand at this crossroad to choose the
gentleman from New York's (Mr. Rangel) vision of America. They can do
so by supporting his motion to recommit. They can do so by rejecting
the Republicans' ill-conceived legislation and voting ``no'' on final
passage.
Mr. THOMAS. Mr. Speaker, I request respectively that I have the same
1 minute to be able to yield to the gentleman from Florida, a member of
the committee.
The SPEAKER pro tempore (Mr. LaTourette). With all due respect, the
Chair has historically granted the courtesy to the Speaker, the
majority leader, and the minority leader to conclude their
observations, and the Chair provided the same courtesy to the minority
leader.
Mr. THOMAS. Mr. Speaker, I understand 1 minute was yielded, and I
just respectfully ask for 1 minute to the gentleman from Florida as was
done on the other side. That is all.
The SPEAKER pro tempore. The Chair will recognize the gentleman from
Florida (Mr. Foley) for 1 minute.
Mr. FOLEY. Mr. Speaker, I never thought I would see the day on this
House floor that Democrats would criticize and belittle American
workers making tackle boxes and bows and arrows, hard-working citizens.
They may not be as elegant as George Soros or as wealthy, but they work
hard.
The very simple issue is a tackle box made in America has an excise
tax; a tackle box sent from China does not. So I guess their inference
is keep jobs in China, do not worry about us.
I never thought I would see the day when the Democrats would
criticize a corporation like Tyco that has thousands of American
workers, hard-working citizens in our community and they criticize them
and call them unpatriotic, but they get up on the floor and start
worrying about protecting people that owe the taxpayers money. They are
afraid of collecting taxes that are due the United States Treasury.
This is a perverse sense of arguments that really is almost laughable.
We have got great provisions in this bill. We have got important
provisions in this bill. We have got things that will make the economy
work, leasehold improvements, faster, accelerated depreciation. So they
can crow all they want about this, but it is a jobs bill.
It is a fair bill, and we urge its adoption.
Mr. RANGEL. Mr. Speaker, I ask how much time is remaining?
The SPEAKER pro tempore. The gentleman from New York (Mr. Rangel) has
2 minutes, and the gentleman from California (Mr. Thomas) has 3\1/4\
minutes.
Mr. RANGEL. Mr. Speaker, I reserve the balance of my time.
Mr. THOMAS. Mr. Speaker, I yield 30 seconds to the gentlewoman from
Guam (Ms. Bordallo) for a colloquy.
Ms. BORDALLO. Mr. Speaker, I thank the chairman for yielding me this
time.
The Senate has included a provision in their version of this
legislation that uses an offset derived from closing a loophole in
residency requirements for filing taxes in the U.S. Territories to fund
Green Bonds.
Given that this issue has been addressed by the House in other
legislation, I hope that the House will take the position that this
offset should be used instead to help the U.S. Territories with the
unfunded federal mandate of the earned income credit, and I hope he can
help us with this provision.
Mr. THOMAS. Mr. Speaker, will the gentlewoman yield?
Ms. BORDALLO. I yield to the gentleman from California.
Mr. THOMAS. Mr. Speaker, I tell the gentlewoman, a Delegate from
Guam, and the gentlewoman from the Virgin Islands I would be pleased to
work with them in conference to try to solve this problem for the
Territories.
Ms. BORDALLO. Mr. Speaker, I thank the gentleman for his response.
Mr. THOMAS. Mr. Speaker, I yield 1 minute to the gentleman from
Wisconsin (Mr. Ryan), a very valued member of the committee.
Mr. RYAN of Wisconsin. Mr. Speaker, let us look at what this bill is
all about. What we do when our companies go overseas to compete, to
sell goods and services, to create jobs here at home and sell overseas,
they pay two taxes. Our foreign competitor countries pay one tax. When
an American company sells a good and service overseas, they pay the
U.S. tax and the foreign country tax at the same time. When our foreign
competitors compete against us, they pay one tax. We are double taxing
American jobs and American operations overseas.
So in replacing this current tax policy we have which goes to \1/2\
of 1 percent of American manufacturers, we are giving a tax rate
reduction for all American manufacturing corporations on what they
produce in America, and we are removing this double tax so when we
operate overseas by selling goods and services overseas to create jobs
here at home, we are not tying one hand behind our backs.
We are pushing jobs overseas with the American Tax Code we have
today, and this bill corrects that problem. This protects jobs, and
this is a good bill that has to pass because we have to get rid of
these tariffs. I urge adoption of this legislation.
Mr. THOMAS. Mr. Speaker, I yield 1 minute to the gentleman from Texas
(Mr. Brady), who has been a champion for something that is extremely
important to his constituency.
Mr. BRADY of Texas. Mr. Speaker, I rise in strong support of this
measure. My older brother is a computer salesman in Houston, Texas, and
when he and his American colleagues try to sell their American products
overseas, they find they have an anchor around their neck. It is the
American Tax Code. It is so outdated that it really costs us American
jobs and American workers.
This bill changes that. It gives us a chance to compete overseas, and
we help local manufacturers build and local farmers grow and local
companies sell by lowering their tax rates so they can hire new
workers, so they can buy new equipment, so they can compete wherever
they choose to be sell.
This provision also includes a sales tax deductibility to help
families afford clothes and cars and tires, and all that adds up over
the years. It allows taxpayers in each State to choose the highest of
their State income or their State sales tax. It is a direct economic
boost to families to help them afford it. It is very important to
States like Texas, which will capture almost, I think, $1 billion for
families through this, and it provides a measure of fairness.
We are pushing for permanency. That will come. But this is a major
victory for sales tax States.
The SPEAKER pro tempore. The Chair would advise the gentleman from
California (Mr. Thomas) has 3\1/4\ minutes remaining, and the gentleman
from New York (Mr. Rangel) has 2 minutes.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
It is abundantly clear that the majority will succeed in passing this
bill not because the bill is good but because they have succeeded in
reaching out to other people and giving them gifts to be putting on the
tree under this Christmas tree bill. In other words, we call it buying
votes.
But I would ask the seller to beware and the buyer to beware because
when some of these gifts are opened, they will find the boxes empty.
Our beleaguered tobacco farmers will find that there will be a sign
there: We do not have the money we promised, go to Appropriations; we
do not have the regulations, go to Commerce; we do not have the
jurisdiction, go to Agriculture. They will find that when they take a
look at this bill and they are looking for jobs, there is going to be a
sign there: Take a flight overseas. That is where the jobs are going to
be.
So I am suggesting that even though they may be successful in winning
this, they are not winning the minds and the hearts of the American
people, who know that they have denied the minority an opportunity to
say that we have a better idea in order to do these things.
Mr. Speaker, I yield 30 seconds to the gentleman from California (Mr.
Waxman).
[[Page H4403]]
Mr. WAXMAN. Mr. Speaker, I thank the gentleman for yielding me this
time.
I include my statement in the Record, especially in opposition to the
giveaway of taxpayers' dollars, the money that is going to go to those
who hold quotas for big tobacco.
I am here today to express my strong opposition to a $9.6 billion
dollar taxpayer-funded tobacco bailout that has been slipped into
unrelated legislation at the 11th hour. This proposal undermines public
health, fleeces taxpayers, and embarrasses Congress.
We have learned today that Americans reject this bailout by an eight
to one margin. It is no surprise why. The bailout is a massive giveaway
to Big Tobacco. The quota program keeps prices of tobacco leaf high. By
ending the program, the legislation would cause the price to collapse.
The result would be windfall profits for cigarette manufacturers. An
Agriculture Department economist has estimated that Big Tobacco would
pocket $15 billion dollars in profit over 14 years. This profit could
then be used to lower prices and addict more children.
The public health impact of this proposal is reason enough to reject
it. But there's more. The proposal is also a shameless raid on the
Federal treasury. It is a no-stings-attached $9.6 billion dollar cash
transfer from taxpayers to tobacco growers. There is not even a
guarantee that anyone will stop growing tobacco.
Other farmers do not get this kind of treatment. Nor do factory
workers, service employees, or anyone else that I know. It does not
make any sense for the taxpayer to write checks to tobacco growers and
not expect anything in return. Even newspapers in tobacco-growing
regions have objected to this proposal.
An idea this bad and unpopular could never pass the House in an
honest, up-or-down vote. That's why the Republican leadership has
refused to permit a vote on the bailout.
Taxpayers deserve not to be fleeced. And parents need our help
keeping their kids from becoming addicted to tobacco. But we are doing
just the opposite by passing a massive giveaway to Big Tobacco. All we
are asking is for the Republican leadership to schedule a vote on this
proposal and let democracy take its course.
Mr. RANGEL. Mr. Speaker, I yield myself the balance of my time.
I am suggesting if this bill was as good as some of you are saying
that it is, you would not have to come on this side of the aisle and
offer promises that you know you cannot fulfill in conference and you
know you cannot fulfill because you do not have jurisdiction. There
will come a time that we are going to say when you call it a jobs bill,
at least it should mean jobs for United States citizens and not jobs
for foreigners.
Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
Perhaps the gentleman is not aware that the gentleman from Virginia
(Mr. Goodlatte), chairman of the Committee on Agriculture, and the
chairman of the Committee on Ways and Means have exchanged letters on
questions of jurisdiction as is often done. Also, I guess the gentleman
is expressing clearly the current attitude of the minority, and, sadly,
it is different than it used to be. What happened to the can-do
attitude that Americans always exhibit?
It seems to me after 20 years, somebody ought to get 1 day to take a
look at the fact that when he was in the majority, if one were in a
State that had a sales tax and they rented, they got nothing. After 65
years people want an end of subsidy. Why not? Why not allow U.S. aero
manufacturers to be treated the same as foreigners? If someone has new
technology, why not, not punish them with a different tax system?
Mr. Speaker, I will place in the Record the Statement of
Administration Policy which says ``The administration urges the House
to pass H.R. 4520 promptly.'' And I would urge the House to do the
same.
Statement of Administration Policy
h.r. 4520--american jobs creation Act of 2004
The Administration supports foreign sales corporation/
extraterritorials income (FSC/ETI) legislation that reforms
the tax code, removes the underlying reason for the tariffs
that have been imposed on American exports by the European
Union (EU), and further advances the competitiveness of
American manufacturers and other job creators.
The Administration urges the House to pass H.R. 4520
promptly. If Congress does not act to replace the current
FSC/ETI provisions in the tax code, then the tariffs that
were imposed by the EU on March 1st will inflict an
increasing burden on American exporters, American workers,
and the overall economy. To support the continued
strengthening of our economy and to create more jobs,
Congress should act now to end the threat posed by these
tariffs and to promote the competitiveness of American
manufacturers and other job-creating sectors of the U.S.
economy. The Administration looks forward to working with the
conferees on this legislation to move it toward budget
neutrality, and to enacting legislation that removes the
threat of escalating EU sanctions and encourages economic
growth and job creation at home.
Mr. STARK. Mr. Speaker, I rise today in strident opposition to H.R.
4520 the so-called ``Jobs Creation Act.'' This bill is a sham and a
disgrace--and everybody knows it. Repealing the extraterritorial income
(ETI) regime is absolutely necessary to avoid retaliatory duties
imposed by the European Union, but replacing that regime with
unnecessary corporate tax cuts, and including extraneous provisions
that have no business in a corporate tax bill, is ludicrous.
We have known for years that tax systems benefiting exports are
clearly prohibited under our international trade agreements. Now we are
faced with growing duties on certain exports, which hurt manufacturers
and put American jobs in jeopardy. A bill to put the United States in
compliance with World Trade Organization trade laws has been turned
into a Christmas tree of special interest give-aways. By reducing from
nine to two the number of foreign tax credit baskets, foreign
controlled subsidiaries of U.S. corporations will have new tax shelters
including domestic companies to move even more jobs overseas. During
this jobless economic recovery, we cannot afford to give corporations
even more incentive to ship jobs offshore. I'm appalled that such a
bill would even be considered on the House floor.
The Republicans have always claimed to be fiscally responsible, but
this bill is one of the most fiscally irresponsible pieces of
legislation I have ever seen. According to a February GAO report, on
average, 61 percent of all U.S. controlled corporations reported no tax
liability between 1996 and 2000. When nearly two-thirds of U.S.
corporations already have no tax liability, it is preposterous that we
would reduce the top corporate tax rate from 35 to 32 percent at an
estimated cost of over $63 billion over the next ten years. It would
only cost $50 billion to make corporations whole after the loss of the
ETI exclusion, but the Republicans are reducing corporate tax revenue
by another $29 billion with these new rate reductions.
Fiscal irresponsibility surrounding the ETI exclusion is reason
enough to vote against this bill, but H.R. 4520 goes even further,
adding a total of $34 billion to the national debt through a litany of
unnecessary tax breaks. For example, the bill would allow foreign
controlled corporations to move income back to the U.S. with a one time
85 percent deduction for that foreign income. This provision would cost
more than $3 billion over ten years, and rewards corporations who have
moved jobs overseas in the past. In addition, the reduction of foreign
tax credit baskets from nine to two categories will decrease revenue by
almost $8 billion during the next 10 years. These provisions and many
others mortgage the future of our economy and create an enormous tax
burden for our children and grandchildren.
Even if the American Jobs Creation Act merely repealed the ETI
exclusion and replaced it with fair tax breaks for domestic production,
I could not support this bill. Why? Because it contains so many blatant
and shameful provisions that have no business being in a tax bill! The
Republican leadership refused to write a bill that could garner
bipartisan support, so they tossed in these provisions to buy members
votes. This is not democracy. This is a Republican House bowing to the
power of corporate America and doing whatever it takes to get this
ridiculous piece of legislation passed.
The most egregious portion of this legislation is a dangerous buyout
for the tobacco industry that would cost $9.6 billion dollars, most of
which would line the pockets of large tobacco manufacturers like
Phillip Morris. The tobacco buyout is nothing more than an election
year bribe to enlist southern Democrats' votes on a bill they would
otherwise be unlikely to support. Just recently the Surgeon General
released a report saying that tobacco causes diseases in ``nearly every
organ of the body.'' Instead of using this opportunity to allow the FDA
to regulate tobacco, Republicans are giving a huge windfall to the
tobacco industry while doing nothing to reduce tobacco production and
improve public health.
Finally, the Republicans have thwarted the democratic process by
refusing to allow the Democrats an amendment in the nature of a
substitute for this bill. Are the Republicans afraid that the
bipartisan approach that passed with flying colors in the Senate might
actually have enough votes to pass in the House? My friend and
colleague Mr. Rangel has been working on a bipartisan approach to
solving the FSC/ETI problem for years. But we won't have the
opportunity to vote on that proposal today because the Republicans
don't want anyone to compare our fair and responsible
[[Page H4404]]
alternative to their unfair, irresponsible corporate tax break grab
bag.
The so-called American Jobs Creation Act does not create jobs.
Instead, it creates new incentives for U.S. corporations to send jobs
overseas. The fiscal irresponsibility of adding another $34 billion to
the national debt over the next 10 years while the economy is trying to
recover from recession is inconceivable to me. Finally, the extraneous
provisions in this bill are mere gifts to Republican friends. This bill
is a disaster for the American people and our tax code. Republicans
should be hanging their heads in shame--but Republicans have no shame,
as this bill clearly shows. I strongly urge all my colleagues to vote
against H.R. 4520.
Mr. HOLT. Mr. Speaker, today I rise to express my disappointment that
the American Jobs Creation Act (H.R. 4520) includes a provision that
grants the tobacco industry a $10 billion buyout but does not grant the
Food and Drug Administration the authority to regulate tobacco
products.
The consequences of tobacco use are disturbing. Smoking-related
illnesses claim an estimated 430,700 American lives each year. Smoking
costs the United States approximately $92.2 billion annually in health-
care costs and lost productivity. It is directly responsible for 87
percent of lung cancer cases and causes most cases of emphysema and
chronic bronchitis. Spit tobacco and other smokeless tobacco are not
safe alternatives. They can lead to tooth decay and loss, gum disease
and oral cancer.
Dispite the enormous risks to tobacco--which is the most deadly of
all consumer products--the Federal agency that is most responsible for
protecting the public health is powerless to effectively regulate this
product. In 2000, the Supreme Court explicitly ruled that the FDA does
not have the authority to regulate tobacco products and that it is the
responsibility of Congress to provide the USDA with this authority.
Congress cannot wait any longer to act on this matter.
Many of my colleagues have fought hard to reach a compromise that
will give the proper authority to the FDA to regulate tobacco products
without needlessly impeding on the tobacco industry's right to produce
and sell its product. Unfortunately, the legislation we are considering
today squanders an opportunity to couple a tobacco buyout measure with
improving public health. Even more disheartening than this missed
opportunity is the sad reality that a bargaining tool has been removed
from the table and our ability to pass legislation providing the FDA
with the regulatory authority it needs has been jeopardized.
I urge my colleagues to vote against this bill and to pass
legislation that will allow the FDA to carry out its mission to ensure
the safety of products consumed by the public.
Mr. UDALL of Colorado. Mr. Speaker, Congress definitely needs to
respond to the retaliatory tariffs imposed on American exports because
of the World Trade Organization's rulings addressed by this bill.
But, we do not need to pass the bill as it stands--in fact, we
shouldn't.
The bill is unbalanced and excessive. It includes provisions that
could provide new incentives for American companies to move overseas. I
am concerned that it could allow companies to simultaneously outsource
much of the work needed to make a product and at the same time benefit
from a tax break for ``domestic production.''
The bill is unduly tilted toward large companies rather than the
small businesses that are the source of most jobs in our country. It
also includes billions of dollars worth of new narrow special-interest
tax breaks, as well as other provisions that supposedly will raise
revenue to offset the corporate tax incentives. Those offsets include
provisions for outsourcing IRS debt collection, which I think is a bad
idea, and creating additional paperwork for charitable contributions.
Of course, the bill also includes desirable provisions. If they stood
alone, or were part of a bill that otherwise was acceptable, I would be
happy to vote for the legislation. And I did support the motion to
recommit, which would have greatly improved the bill.
If the motion to recommit had been adopted, the result would have
been to provide an incentive to manufacturers to keep jobs in the
United States by reducing corporate tax rates for domestic production
by 3.5 percent.
The motion to recommit also would have removed the provisions that
provide incentives to move jobs overseas and the targeted special
interest provisions. It would have provided better treatment for small
businesses, farming cooperatives, and domestic manufacturers.
At the same time, the motion to recommit would have retained such
desirable provisions as those extending small business expensing, the
research and development tax credit, and renewable energy credits as
well as the same temporary foreign income repatriation provisions as
those in the Senate-passed version of this legislation.
Unfortunately, the motion to recommit was not successful, and so I
cannot support this bill in its present form.
I expect that a conference committee will be appointed to resolve
differences between this bill and corresponding legislation passed by
the Senate. I hope that this will result in a revised and improved
version that deserves enactment.
Mr. BALDWIN. Mr. Speaker, many months ago, Congress was tasked with
replacing a $5 billion-a-year export subsidy for domestic manufacturers
that was deemed illegal by the World Trade Organization. At the time, I
believed this would be a golden opportunity for Congress to not only
replace the subsidy, but also craft a bill that would provide
incentives to domestic manufacturers in order to create more jobs and
get America back to work. The bill on the floor today, H.R. 4520, is
sad evidence that Congress has squandered this opportunity by letting
the needs of special interests and lobbyists come before the needs of
American families.
Like the rest of America, my home State of Wisconsin has been hit
hard by the loss of good paying manufacturing jobs over the last few
years. Many of those workers who have found new jobs are typically
working longer hours, working for less pay, working for fewer benefits,
and working harder than ever to keep their families' budgets afloat.
There are thousands of other Wisconsinites who have yet to find a job.
By passing H.R. 4520 today, Congress will essentially turn its back on
those who are struggling to maintain or find a job.
The so-called American Jobs Creation Act is a 930-page bill that
reads like a horror story to me. Simply replacing the export subsidy
would have cost $50 billion over 10 years. Instead, House Republicans
have brought to the floor a bill, riddled with special-interest
provisions and favors, that costs $150 billion over 10 years. Instead
of creating jobs, it creates tax cuts for cruise-ship operators,
foreign dog-race gamblers, NASCAR track owners, whaling tribes, bow-
and-arrow makers, Chinese ceiling fan manufacturers, Oldsmobile
dealers, and beer and liquor wholesalers.
It is clear to me that our nation's economy is changing--and not for
the better. As you may know, 2.7 million manufacturing jobs have been
lost since the beginning of the Bush Administration. Many on the other
side of this issue say that the outsourcing of information technology
and service industry jobs to other countries like China and India is
healthy for our economy even though it is estimated that 3.4 million
service industry jobs alone will move offshore by 2015. This is
outrageous. Instead of confronting and fixing these serious economic
challenges, H.R. 4520 makes them worse.
For example, H.R. 4250 provides Republican plan includes at least $30
billion in additional tax incentives for companies to move overseas.
Specifically, it includes a large loophole that allows corporations to
outsource almost all of the work needed to make a product and still
reap most of the benefits from a tax break for ``domestic production.''
For example, if Microsoft hires foreign computer programmers to produce
parts of its software because of lower wage rates overseas, it will
receive a rate reduction for the cost savings so long as the final
computer program is assembled in the U.S. I find it reprehensible that
Republicans would bring a bill to the floor that discourages companies
from keeping jobs where they belong--right here in the United States.
As I mentioned earlier, I believe that we need to give American
companies the incentives they need to expand their businesses and
create more good paying jobs. Unfortunately, tax breaks in H.R. 4250
unfairly discriminate against smaller companies even though these small
firms create 75 percent of all new U.S. jobs every year. In fact, 82
percent of all profitable corporations will receive no tax benefit from
this bill because they do not have incomes large enough to benefit from
reducing the corporate tax rate to 32 from 35 percent. The rate
reduction is essentially the core of this bill and I believe it makes
no sense that subchapter S corporations, partnerships, farms, and other
proprietorships engaged in manufacturing activities will receive no
benefit from this reduction even though they are vital to the health of
our nation's economy.
I am supporting an alternative bill, H.R. 1769, which was authored by
Representative Charles Rangel (D-NY). The bill provides tax incentives
for companies to manufacture their products in America and provides no
incentives for businesses to move offshore or utilize tax havens. It
would also extend tax incentives and tax relief to small firms and
farms--not just large corporations. Above any other reason, I support
H.R. 1769 rather than the bill on the floor today because it puts our
nation's best economic interests before special interests.
In conclusion, the number of gifts and favors in this bill makes it
clear that Christmas has indeed come early for many lobbyists in
Washington, DC. They have succeeded in taking a bill that could have
created thousands of
[[Page H4405]]
jobs in the U.S. and converting it into a bill that no Member of
Congress--and no American worker--should be proud of. I urge the House
to reject the American Jobs Creation Act of 2004 and bring to the floor
a bill that truly creates American jobs now and well into the future.
Mr. BLUMENAUER. Mr. Speaker, there is no more fitting counterpoint to
the Reagan legacy than what we are seeing here today. Ronald Reagan was
President during one of Congress's most significant tax
accomplishments--The Tax Reform Act of 1986. It truly was tax reform.
It made the tax system more fair, less complicated, and reduced
governmental distortion of fundamental economic decisions by reducing
categories of taxation. There was at least some nod towards maintaining
a balance between resources and requirements.
Today's bill, H.R. 4520, is the antithesis of reform, making the tax
code more complex while ignoring fiscal realities. Some provisions are
just downright cynical. The Republican leadership was forced to
withdraw an invitation for churches to break the law and to violate the
fundamental principle of separation of church and State three times
every election year.
This bill represents a troubling breakdown of the legislative
process, illustrating how far the Ways and Means Committee has fallen
from its previous reputation for bipartisanship and cooperation in
crafting tax policy. This measure is a political grab-bag for
lobbyists. Good legislation has been taken hostage by adding on
provisions to ``buy'' votes for passage. We will then roll the
political dice and let the chips fall where they may.
At a time of exploding deficits, when there's a battle over
adequately funding our Nation's infrastructure which would put tens of
thousands of people to work everyday, we're spending at least $34
billion, but realistically up to $180 billion over the next 11 years,
if supposedly temporary provisions are extended.
The saddest aspect of this legislation is not a lack of fiscal
responsibility or an abnegation of sound tax policy. This bill signals
a surrender; not just by the leadership, but by Members of Congress, in
the struggle to be meaningful, responsible policy makers. This cannot
be foisted off on the inability of one committee chairman to manage the
committee inconsistent with its historic role and achievements. It's
not merely his failure. It's not just the failure of the majority
leadership to be able to have the committee function and have a set of
comprehensive objectives that meet the needs of the country. A vote of
support on H.R. 4520 is our failure as a Congress.
Mr. MATSUI. Mr. Speaker, I rise today in strong opposition to H.R.
4520. Let me be clear--I support enacting legislation that would bring
the United States into compliance with its WTO obligations and lead to
the removal of the millions of dollars in sanctions that are hurting
farmers and business across America. However, I cannot support a bill
that provides over $250 million in corporate tax cuts over 10 years--
during a time when our nation is experiencing record deficits.
Mr. Speaker, this year, the United States is expected to incur record
deficits of over $450 billion. Over the next 10 years, the nation's
debt is expected to grow by more than $2.5 trillion! If there ever was
a time when Congress should be promoting fiscal responsibility--now is
that time.
Mr. Speaker, the bill before us today would add hundreds of billions
of dollars to our nation's deficit over the next ten years. The
official cost of this bill is $34 billion. However, this estimate
severely underestimates the true, long-term cost of the bill. The
legislation includes numerous budget gimmicks--such as phasing in some
of the major tax cuts and scheduling other tax cuts to expire after
only a few years. In fact, when these budget gimmicks are removed, the
true long-term cost of the bill is more than $250 billion!
Mr. Speaker, it is important to consider what the American people are
getting for a bill that would add hundreds of billions of dollars to
our nation's deficit. Unfortunately, rather than addressing critical
national priorities--such as protecting Social Security and Medicare,
providing incentives for the creation of U.S. jobs, or promoting
affordable and accessible health care--this bill would provide billions
of dollars in tax cuts to special interests and corporations.
Mr. Speaker, almost two-thirds of America's corporations paid no
federal taxes from 1996 to 2000, according to a study by the General
Accounting Office. Given these figures, I cannot understand why we
would not take the money raised by repealing our WTO-inconsistent tax
provisions and use these funds to address America's critical
priorities--such as paying down the national debt to protect Social
Security and Medicare, promoting U.S. jobs, or providing for affordable
and accessible health care.
Mr. Speaker, we are a nation at war. We have deficits so large that
international organizations like the IMF are warning that the
continuation of our fiscal policies threaten to hurt not just the U.S.
economy, but the global economy. This is no time to be giving special
interests and corporations hundreds of billions in tax cuts. Mr.
Speaker, the legislation under consideration today is a stark
reflection of the differences in priorities and values that many of us
have with the current tax and economic agenda of the majority. I
strongly encourage my colleagues to vote ``no'' on this bill.
Mr. SANDLIN. Mr. Speaker, I rise today to claim a victory for Texans,
but I remain uncertain that this bill is a victory for Americans or
American jobs.
For Texans, I am pleased that after a great many months of work and
much discussion, this legislation finally returns some fairness to our
nation's tax code that had been missing for almost twenty years. Since
1986, some 54 million American taxpayers--almost 20% of our nation's
population--have been denied the ability to deduct the state tax burden
they bear from their income solely because the seven states where they
live rely only on a retail sales tax to meet their needs.
Mr. Speaker, as a consequence of the reinstatement of the
deductibility of sales tax provided in this bill, the taxpayers in my
home state of Texas will save almost a billion dollars from their
federal income tax burden in this year alone. That works out to around
$300 in federal tax savings for every family in Texas, and, Mr.
Speaker, that's a good thing. This bill is not.
While I am pleased that this legislation provides 22 million Texans
with the ability to deduct their state tax burden from their income, I
am disappointed that Chairman Thomas's provision only allows Texans
this benefit for two years. In the Ways and Means Committee on Monday,
in the Rules Committee this morning, and in discussions over the past
several weeks, I have insisted that Texans and the 42 million other
Americans who live in states with a retail sales tax and without a
state income tax deserve better than temporary equality. I have
insisted that the deductibility of sales tax payments be made
permanent.
If the deductibility of sales tax was good tax policy before 1986 and
it is good tax policy for the next two years, then it appears clear to
me that the ability to deduct sales tax payments is good tax policy on
a permanent basis. The citizens of Florida, Nevada, South Dakota,
Washington, Wyoming, and Texas have for too long borne a
disproportionate share of the federal tax burden. That is not fair.
That is not American.
While I wish that the deduction had been made permanent and made more
generous, I am pleased that this bill at least rectifies an obvious
inequity and reinstates the deductibility of sales tax payments,
however temporarily.
However, Mr. Speaker, the good news for Texans is tempered by what is
a terribly flawed bill. A wise man once said, ``There are two things
you never want to see made: legislation and sausage.'' After witnessing
the development of this bill for the past two years, I am convinced
that he was right.
Mr. Speaker, the legislation before us today takes a $40 million
problem and purports to solve it with $150 billion. In doing so, it
passes on at least $34 billion in debt to the American people--to our
children and grandchildren. I say that it adds ``at least'' $34
billion, because the bill is riddled with budget gimmicks such as
delayed provisions and sunsets that obscure the true effect of this
bill on the national debt. It is estimated that without these gimmicks
the true cost of this bill could be as much as $300 billion over ten
years--that comes out to $1,000 in corporate tax breaks for every man,
woman and child in this country.
As a Blue Dog, Mr. Speaker, the continuing glut of deficit spending
that we have witnessed in the past few years is of great concern to me
and to my constituents. Potentially adding $300 billion to the national
debt to solve a $40 billion problem--a problem that the Senate has
proven can be solved without adding a penny to the debt--is a tragic
breach of faith with the people who sent us to this House, whose best
interests we are supposed to be representing. Adding $1,000 to the
``debt tax'' owed by every man, woman and child is simply bad tax
policy, not to mention bad financial policy for the generations to come
who will have to pay for this bill.
Mr. Speaker, this bill has some good provisions. Texans and others
need to be treated fairly under our tax code; they need the ability to
deduct their state tax burden, just as other Americans have the last 18
years. This bill allows that, and that's a good thing. Mr. Speaker, our
nation's corporations thrive on their capacity to innovate. Innovation
is driven by their ability to invest in research and development, and
this bill extends the very important R&D tax credit that drives the
innovation that makes America's corporations the envy of the world.
That's a good thing.
Mr. Speaker, this bill fixes the problem for which U.S. companies are
being subjected to
[[Page H4406]]
international trade sanctions. That repair will take a significant
burden off the backs of our nation's exporters and once again enable
them to compete effectively around the world. Finally, Mr. Speaker, the
bill reduces the tax rate for American manufacturers, which frees up
necessary capital to continue to build their business and keep American
business on its best game. These are good things, to.
However, Mr. Speaker, while those provisions may be good for American
business, for American taxpayers, and for American workers, the vast
majority of the 450-page bill is so larded with special interest
corporate giveaways, that it gives the term ``pork barrel'' a bad name.
I for one have never been whaling, but I am no sure why native Alaskan
subsistence whalers need a tax break. But of one thing I am absolutely
certain, my children and grandchildren should not have to pay for it.
Mr. PAUL. Mr. Speaker, I will vote for H.R. 4520 today because the
tax cuts contained in the bill outweigh the unfortunate but inevitable
subsidies also included. I promise my constituents that I will vote for
all tax cuts and against all new spending. So when faced with a bill
that contains both, my decision is based on whether the bill cuts taxes
overall, i.e. whether its ultimate impact will be to reduce or increase
federal revenues. This legislation does reduce revenues, and therefore
takes a small step towards reducing the size of the federal government.
So while I certainly object to some parts of the bill, especially the
tobacco bailout, I do support tax cuts.
My biggest concern with the bill, however, is not based on its
contents. I object to the process underlying the bill and the political
reason for which it was written. This bill is on the floor for one
reason and one reason only: the World Trade Organization demanded that
we change our domestic tax law. Since America first joined the WTO in
1994, Europe has objected to how we tax American companies on their
overseas earnings. The EU took its dispute to the WTO grievance board,
which voted in favor of the Europeans. After all, it's not fair for
high-tax Europe to compete with relatively low tax America; the only
solution is to force the U.S. to tax its companies more. The WTO ruling
was clear: Congress must change American tax rules to comply with
``international law.''
Sadly, Congress chose to comply. We scrambled to change our corporate
tax laws in 2001, but failed to appease the Europeans. They again
complained to the WTO, which again sided with the EU. So we're back to
the drawing board, working overtime to change our domestic laws to
satisfy the WTO and the Europeans.
This outrageous affront to our national sovereignty was of course
predictable when we joined the WTO. During congressional debates we
were assured that entry into the organization posed no threat
whatsoever to our sovereignty. But this was nonsense. A Congressional
Research Service report was quite clear about the consequences of our
membership: ``As a member of the WTO, the United States does commit to
act in accordance with the rules of the multi-lateral body. It is
legally obligated to insure that national laws do not conflict with WTO
rules.'' With the Europeans and the WTO now telling us our laws are
illegal and must be changed, it's hard to imagine a more blatant loss
of American sovereignty.
The bill does cut taxes overall, and for that reason I will vote in
favor of it. Any legislation that results in less money being sent to
the black hole that is the federal Treasury is worth supporting. I
especially support the provision that allows Texans (and citizens of
other states that do not have an income tax) to deduct state sales
taxes, and will vote yes accordingly.
Mr. CAMP. Mr. Speaker, I rise today in strong support of H.R. 4520,
the American Jobs Creation Act.
Mr. Speaker, the bill before us today is about creating American jobs
and making U.S. manufacturers more competitive in the world
marketplace. To accomplish these core objectives we need to pass
legislation that reduces the high tax rate U.S. manufacturers are
forced to pay. Many would be surprised to learn that the U.S. has the
second highest corporate tax burden at 40 percent, of any developed
nation, just two percentage points below Japan. While the Republican
Congress has done much to lower individual tax rates, it is also
important to pass legislation that helps American employers better
compete with Irish companies that have a 12.5 percent tax rate, Korean
businesses that have a 29.7 percent rate, and British companies that
incur a 30 percent tax rate. Although the United States leads the world
in terms of productivity and efficiency, we need to begin to erase the
serious disadvantages our tax code places on our companies.
By passing this bill today, we will be on our way to stopping another
tariff increase imposed by the European Union on U.S. exports. On June
1, the EU increased the retaliatory tariff another percentage point to
eight percent on American goods. If Congress fails to address this
issue, the EU will continue to tack on another tariff each month until
we act. Tariffs on American exports could go as high as 17 percent.
Every one of our districts will feel the effects of the EU's actions.
Products on the wide-ranging EU sanctions list range from agriculture,
iron and steel, timber, textiles, to machinery. Imagine a 17 percent
tax on U.S. exports! This would amount to a $4 billion bill that the
American people would ultimately pay every time they went to the
grocery store or mall.
If we do nothing and let the tariffs grow to the full 17 percent,
American companies will not be able to hire new workers, expand
operations, make new investments, and remain viable in the marketplace.
The bill before us today will make the needed adjustments to our
international tax laws plus give our U.S. manufacturers overdue tax
relief, and lift the onerous tariffs on American products.
I urge my colleagues to vote for this critically important jobs bill.
If you want to help the U.S. manufacturing sector grow and our economy
to continue to expand, vote for this bill. By doing nothing, we risk
crippling our robust new economy and endanger American job creation.
Mr. HOLT. Mr. Speaker, I rise in opposition to this tax bill which is
full of giveaways to special interests. I wanted to support this bill.
I support an across-the-board corporate rate reduction for income from
U.S. manufacturing activities so that more manufacturing jobs can be
created here in the United States. I am also a strong supporter of the
R&D tax credit because it is an investment in the future and will keep
our economy strong over the longterm.
However, this bill is full of items that have nothing to do with job
creation or long-term investment in research.
This bill is a tax break for special interests. Do we really need a
special tax loophole for manufactures of fishing tackle boxes? Or a tax
break to benefit makers of sonar devices used for fishing. As an
outdoorsman, I support fishing but we don't need a tax break to do it.
Many of my constituents enjoy target shooting with bow and arrows but
do the makers of bow and arrows really need the tax break that this
bill provides?
Further, the bill continues the Republicans' attack on the
environment. In this bill is a tax break for whaling and a tax break to
benefit landowners who sell timber from their property.
Also in this bill is a provision that isn't even tax policy, that is
the tobacco ``buyout''. I can understand helping small tobacco farmers,
however this bill only helps big tobacco corporations. The provisions
of this bill will line their pockets with billions of dollars.
If the current quota system is eliminated, as proposed in the FSC
bill, the price of tobacco will collapse. The minimum drop that can be
expected in 50 cents per pound of tobacco--roughly the current amount
that goes for rent to quota owners. As the U.S. price drops, foreign
producers will lower their prices too. Falling prices will drive small
tobacco farmers off of their land, while enriching Big Tobacco.
U.S. tobacco manufacturers intend to purchase 450 million pounds of
domestic tobacco this year. At a discount of 50 cents per pound, the
immediate savings is $225 million. But this is just a minimum estimate.
According to a USDA economist, factoring in prices changes for both
domestic and foreign tobacco, the end of the quota is worth $15 billion
to the tobacco industry over 14 years.
Cigarette manufacturers can take this entire windfall as profit or
use part of it to lower prices, addicting more children and killing
more Americans. It is no surprise that leading public health groups
consider this proposal an unmitigated disaster.
The list of special interest tax breaks goes on. If that is not bad
enough the bill once again hurts the future generations of Americans by
adding at least $34 billion in debt that will have to be paid back by
our children. The legislation in the other body was at least revenue
neutral.
More tax cuts of this sort will not only jeopardize critical public
services now, but they will also hurt Americans well into the future.
Massive deficits create large debt and will create high interest
payments that will crowd out spending on public investments for future
generations. Moreover, these deep deficits threaten to increase
interest rates in the future--making it harder for Americans to buy
homes and afford higher education and making it harder for businesses
to raise capital.
The President is pretending that we can have war without sacrifice.
Eventually, someone has to pay. I believe Chairman Greenspan's recent
comments are appropriate: ``Our fiscal prospects are, in my judgment, a
significant obstacle to long-term stability because the budget deficit
is not readily subject to correction by market forces that stabilize
other imbalances. The free lunch has still to be invented.''
Mr. Speaker, today we should be passing a revenue neutral bill that
helps manufacturing
[[Page H4407]]
here in the United States, discourages sending jobs overseas and
invests in research and development for our future.
Ms. GINNY BROWN-WAITE of Florida. Mr. Speaker, I rise today to thank
the honorable gentleman from California for his hard and patient work
in getting the American Jobs Creation Act out of committee and to the
floor.
It has been a difficult process I know, but with the passage of this
bill we will add to the 1.1 million jobs this economy has created in
the last 9 months.
I want to say that again: We have added 1.1 million new jobs in the
last 9 months. And still the Democrats are talking about the worst
economy since the great Depression.
I call their strategy Snipe and Gripe. Snipe at the heels of the
leaders who are making progress and gripe about the economic recovery.
Theirs is a deliberate effort to talk down this economic recovery and
slow its growth.
Our economy took a blow 2\1/2\ years ago, but Americans are fighting
back. Thanks to the policies of this President and this Republican
Congress, businesses are putting people back to work and our economy is
growing at rates not seen in 20 years.
I want to take a second to thank Chairman Thomas for cutting the
corporate tax rate from 35 percent to 32 percent permanently. With this
and other tax changes in the bill, American companies will be more
competitive, more able to compete internationally, and, to the dismay
of the Democrats, able to add even still more jobs.
As importantly, this bill recognizes the inequity taxpayers of states
without income taxes face under current law. Finally, residents of
Florida will be allowed to deduct their state sales tax from federal
taxable income.
By including the sales tax deductibility, even temporarily, this bill
brings fairness and relief to the residents of Florida.
It is only with dogged determination that we have been able to move
this legislation and bring a greater measure of fairness to the tax
code.
Ms. WATSON. Mr. Speaker, I rise today to voice my strong opposition
to the Thomas ``American Jobs Exportation Act'' that provides billions
of new tax breaks for offshore operations at the expense of
exacerbating our Nation's deficits.
At the same time, I am extremely disappointed that millions of U.S.
producers, farmers, and small business owners will be left behind. In
my Los Angeles district, where the entertainment industry is the main
driving force of our local economy, hundreds of thousands of workers
are hurt by the phenomenon of runaway production, or the practice of
filming overseas for pure economic reasons. The Senate JOBS Act has
taken a serious look at this issue and included provisions to encourage
domestic film production through tax write-offs. I regret that this was
stripped out of the House bill, and, with the closed rule we are
operating under today, no member could offer an amendment to address
this devastating issue.
I support the underlying goals of what we are attempting today, which
is to replace FSC/ETI export incentives with help for U.S.
manufacturers. But H.R. 4520 has turned into a big corporate gift that
keeps on giving, an overstuffed pinata for lobbyists. Millions of
workers, such as the creative workforce hit hard by the outsourcing of
film production, are altogether ignored.
H.R. 4520 is an outrageous bill not only because it fails to
adequately address the plight of U.S. workers, but it helps move U.S.
investment and jobs abroad. There is little wonder then that a modest
provision to help keep entertainment jobs in the United States was
completely discounted. While I strongly urge my colleagues to oppose
H.R. 4520, I hope better legislation will be negotiated in conference.
Mr. GRAVES. Mr. Speaker, I rise today in support of the tobacco
buyout provision that has been added to H.R. 4520, the American Jobs
Creation Act. This provision offers great relief to the hard working
tobacco farmers of Missouri and the Nation.
The American tobacco farmer has been financially pressed for decades
due to outdated government regulations. This bill provides hope to many
tobacco farmers and quota owners nationwide that face the increased
challenges to their operations.
This tobacco provision provides $9.6 billion in compensation to quota
holders and tobacco growers over 5 years. This ends a depression-era
program and introduces free market reforms to tobacco farming.
Many may not realize Missouri's contribution to the tobacco industry,
but our state alone in 2000 contributed roughly $2 million in annual
sales. While tobacco farmers may be small in numbers, their
contribution should not go unnoticed.
I want to commend Chairman Thomas and House leadership for working to
assist Missouri tobacco farmers and farmers across the Nation. I am
pleased by my colleagues' efforts to include the tobacco provision in
the American Jobs Creation Act and I look forward to supporting this
legislation.
Mr. ROGERS of Michigan. Mr. Speaker, over the last 15 years, the
Archery products industry has seen a tremendous growth in its sport due
to increased deer populations and expanded hunting seasons.
Unfortunately, that expansion has reached a plateau and we are seeing
decreasing numbers of bow hunters and sportsmen nationwide.
This problem threatens not only our industry but the future of our
sport as well. The archery industry tax adopted in the early 1970's has
accomplished many of its original goals, but has shown a limitation
that keeps the sport from growing in the future.
I believe that it is once again time for the leaders in the archery
industry to step forward and reform the archery excise tax to meet the
demands of the next century. This reform must protect the archery
industry by benefiting the next generation of sportsmen and enhancing
our heritage.
The current tax represents an unfair burden shared by only a few
manufacturers in the larger archery industry. While you cannot fault
the leaders who drafted this legislation in the early 1970's, since
then, the sport has created dozens of new industries and products.
Unfortunately, the tax has not changed to keep up with the changing
market in archery products. Today, only a few of the manufacturers of
archery products pay the tax, most products used in archery hunting
today have never paid the tax, and with the legislation passing today,
that failed legacy will continue. It is time to create a program that
will accomplish the goal of expanding the sport and sharing the tax
among the broad variety of archery product industries.
When the legislation to tax the archery industry was enacted in the
1970's, one-half of the revenue was to be used for purposes of the
regular Federal Aid in Wildlife Restoration Program and one-half could
be used for the acquisition and development of public archery ranges
and for courses. Unfortunately, budget constraints have limited the
amount of money state agencies had been able to expend on development
of ranges.
Reform should mandate that 20 percent of the funding be directed to
``wildlife heritage, skills and education programs.'' This would
include tremendous programs like ``Becoming an Outdoors Woman'' and
``Archery in Schools.''
The current system taxes domestically made arrows, bows and equipment
leaving much of the current industry untaxed and making the current
structure a heavy burden on the consumers and a few manufacturers.
Reform should clarify the definition of arrows and make several
additional changes to the bow and arrow excise tax provisions in
current law. Under current law, imported arrows are not taxed. To
remedy this, a 3-5 percent excise tax would be imposed on the first
sale of a shaft suitable for making an arrow. Since many arrow shaft
manufacturers also sell arrows, a 3-5 percent excise tax would be
imposed on the first sale of an arrow unless the excise tax has already
been collected on the arrow shaft used in making the arrow. In
addition, a 3-5 percent tax will be levied on other industry items
including: tree stands, releases, quivers, hunting blinds, archery
targets, scents and sprays. The list of taxable items, among others,
already includes bow handles, bow levels, bow stabilizers, camouflaged
bow covers, kisser buttons, and string peeps.
This proposal never received serious consideration from Congress and
was dismissed by the proponents of the current proposal as too
complicated and too troublesome to consider. Unfortunately, the
proposal in H.R. 4520 is a half step that will force the State
agencies, wildlife groups, and the archery industry to come back to the
Congress for a real reform that will promote the sport of archery,
enhance our nation's wildlife resources and protect the archery
industry.
Mrs. MALONEY. Mr. Speaker, I rise today in opposition to this
legislation. There is no question that Congress must act promptly to
repeal the tax breaks for U.S. exporters. The EU sanctions are
increasing and are unfairly hurting sectors of the economy that do not
benefit from the tax advantage.
But this is the wrong way to do it. This bill--with all the special
interest tax breaks that have been loaded onto it--would hurt the
economy more than doing nothing. It abolishes the tax subsidies for
exporters but replaces them with an array of special interest tax
breaks. We have an opportunity here for reform that would help our
manufacturing sector while responding to the UE sanctions. We should
not affirmatively do harm by passing this bill instead.
I am particularly concerned that this bill substantially increases
incentives to move American jobs offshore--by 40 million dollars,
according to one estimate. How can we encourage companies to move jobs
offshore at a time when the unemployment rate in New
[[Page H4408]]
York City is at 8.1 percent and the national rate is 5.6 percent? Who
are we helping here? Certainly not the American worker.
Unfortunately, the Majority has denied us the opportunity to vote on
the Rangel substitute to this misguided legislation. The Rangel
alternative would strike provisions that promote shipping jobs
overseas, add provisions to create more jobs in the United States by
giving tax relief to American manufacturing including small business
and farmers, strike narrow special interest provisions, and is fully
paid for. And the Rangel substitute would close tax loopholes for
corporations and individuals that move abroad to avoid paying taxes. By
limiting debate on these critical issues, the Republicans do a
disservice to the American people.
I strongly urge my colleagues to vote against this legislation.
Ms. ESHOO. Mr. Speaker, I'm very disappointed that I can't support
this legislation because there are parts of the bill that I do support
and also because American industry needs to have a resolution to avoid
debilitating trade sanctions and tariffs.
I support the bill's extension of the Research and Development tax
credit which is set to expire at the end of this month. I also strongly
support the inclusion of incentives for corporations to repatriate
their overseas profits which would stimulate the investment of hundreds
of millions of dollars in our domestic economy. I've been a strong
advocate of both of these provisions which were included in the
alternative offered by Representative Rangel. In fact, the alternative
includes language on repatriation of overseas profits that would
provide even greater benefits than the bill before us.
Unfortunately, with this bill, what began as an opportunity to
correct the tax code and avert retaliatory tariffs has turned into a
special interest handout for everything from tobacco to tackle boxes.
None of the special interest provisions added have anything to do with
amending international tax law but are merely an attempt to buy votes
for this misguided bill. The bill also discriminates against small
businesses, excluding them from many of the tax breaks granted to large
corporation.
Not only does this bill not do enough to create American jobs, as the
title claims, but it adds $34 billion to our nation's deficit at a time
when the Administration and the Majority in Congress are underfunding
important priorities such as education, health care, and antiterrorism.
In contract to this bill, Representative Rangel's alternative is a
responsible approach and I'm pleased to vote for it. Instead of a $34
billion price tag, the alternative is revenue neutral; every provision
in the bill is offset with other revenue. In addition to the Research
and Development tax credit extension and reduced taxes on repatriated
profits, the proposal also provides tax relief for domestic
manufacturers--including small businesses and farms--to promote job
growth here in America and boost our economy.
I'm hopeful that the conference committee will report back to the
House a bill that addresses the necessary reform of international tax
law without creating special interest loopholes and exacerbating our
record national deficits.
The SPEAKER pro tempore. All time for debate has expired.
Pursuant to House Resolution 681, the previous question is ordered on
the bill, as amended.
The question is on the engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
Motion to Recommit Offered by Mr. Rangel
Mr. RANGEL. Mr. Speaker, I offer a motion to recommit.
The SPEAKER pro tempore. Is the gentleman opposed to the bill?
Mr. RANGEL. Yes, Mr. Speaker.
The SPEAKER pro tempore. The Clerk will report the motion to
recommit.
The Clerk read as follows:
Mr. Rangel moves to recommit the bill H.R. 4520 to the
Committee on Ways and Means with instructions to report the
same back to the House forthwith with the following
amendments:
Strike all after the enacting clause other than title VII
and insert before title VII the following:
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``American
Jobs Creation Act of 2004''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; etc.
TITLE I--ELIMINATE TRADE SANCTIONS AND REDUCE CORPORATE AND
NONCORPORATE TAX RATES FOR DOMESTIC PRODUCERS
Sec. 101. Repeal of exclusion for extraterritorial income.
Sec. 102. Deduction relating to income attributable to United States
production activities.
TITLE II--ADDITIONAL BUSINESS BENEFITS
Subtitle A--Small Business Expensing
Sec. 201. 2-year extension of increased expensing for small business.
Subtitle B--S Corporation Reform and Simplification
Sec. 211. Members of family treated as 1 shareholder.
Sec. 212. Increase in number of eligible shareholders to 100.
Sec. 213. Expansion of bank S corporation eligible shareholders to
include IRAs.
Sec. 214. Disregard of unexercised powers of appointment in determining
potential current beneficiaries of ESBT.
Sec. 215. Transfer of suspended losses incident to divorce, etc.
Sec. 216. Use of passive activity loss and at-risk amounts by qualified
subchapter S trust income beneficiaries.
Sec. 217. Exclusion of investment securities income from passive income
test for bank S corporations.
Sec. 218. Treatment of bank director shares.
Sec. 219. Relief from inadvertently invalid qualified subchapter S
subsidiary elections and terminations.
Sec. 220. Information returns for qualified subchapter S subsidiaries.
Sec. 221. Repayment of loans for qualifying employer securities.
Subtitle C--Toll Tax on Excess Qualified Foreign Distribution Amount
Sec. 231. Toll tax on excess qualified foreign distribution amount.
TITLE III--EXTENSION OF EXPIRING PROVISIONS
Sec. 301. Allowance of nonrefundable personal credits against regular
and minimum tax liability.
Sec. 302. Extension of research credit.
Sec. 303. Extension of credit for electricity produced from certain
renewable resources.
Sec. 304. Indian employment tax credit.
Sec. 305. Work opportunity credit.
Sec. 306. Welfare-to-work credit.
Sec. 307. Certain expenses of elementary and secondary school teachers.
Sec. 308. Extension of accelerated depreciation benefit for property on
Indian reservations.
Sec. 309. Charitable contributions of computer technology and equipment
used for educational purposes.
Sec. 310. Expensing of environmental remediation costs.
Sec. 311. Availability of medical savings accounts.
Sec. 312. Taxable income limit on percentage depletion for oil and
natural gas produced from marginal properties.
Sec. 313. Qualified zone academy bonds.
Sec. 314. District of Columbia.
Sec. 315. Extension of certain New York liberty zone bond financing.
Sec. 316. Disclosures relating to terrorist activities.
Sec. 317. Disclosure of return information relating to student loans.
Sec. 318. Cover over of tax on distilled spirits.
Sec. 319. Joint review of strategic plans and budget for the Internal
Revenue Service.
Sec. 320. Parity in the application of certain limits to mental health
benefits.
Sec. 321. Combined employment tax reporting project.
Sec. 322. Clean-fuel vehicles.
TITLE IV--PERMANENT DEDUCTION FOR STATE AND LOCAL GENERAL RETAIL SALES
TAXES
Sec. 401. Deduction of State and local general sales taxes in lieu of
State and local income taxes.
TITLE V--PROVISIONS TO PREVENT TAX AVOIDANCE THROUGH INDIVIDUAL AND
CORPORATE EXPATRIATION
Subtitle A--Individual Expatriation
Sec. 501. Imposition of mark-to-market tax on individuals who
expatriate.
Subtitle B--Corporate Expatriation
Sec. 511. Prevention of corporate expatriation to avoid United States
income tax.
TITLE VI--OTHER REVENUE OFFSETS
Subtitle A--Provisions Designed To Curtail Tax Shelters
Sec. 601. Clarification of economic substance doctrine.
Sec. 602. Penalty for failing to disclose reportable transaction.
Sec. 603. Accuracy-related penalty for listed transactions and other
reportable transactions having a significant tax
avoidance purpose.
Sec. 604. Penalty for understatements attributable to transactions
lacking economic substance, etc.
[[Page H4409]]
Sec. 605. Modifications of substantial understatement penalty for
nonreportable transactions.
Sec. 606. Tax shelter exception to confidentiality privileges relating
to taxpayer communications.
Sec. 607. Disclosure of reportable transactions.
Sec. 608. Modifications to penalty for failure to register tax
shelters.
Sec. 609. Modification of penalty for failure to maintain lists of
investors.
Sec. 610. Modification of actions to enjoin certain conduct related to
tax shelters and reportable transactions.
Sec. 611. Understatement of taxpayer's liability by income tax return
preparer.
Sec. 612. Penalty on failure to report interests in foreign financial
accounts.
Sec. 613. Frivolous tax submissions.
Sec. 614. Regulation of individuals practicing before the department of
treasury.
Sec. 615. Penalty for promoting abusive tax shelters.
Sec. 616. Statute of limitations for taxable years for which required
listed transactions not reported.
Sec. 617. Denial of deduction for interest on underpayments
attributable to nondisclosed reportable and noneconomic
substance transactions.
Sec. 618. Authorization of appropriations for tax law enforcement.
Sec. 619. Penalty for aiding and abetting the understatement of tax
liability.
Sec. 620. Study on information sharing among law enforcement agencies.
Subtitle B--Enron-Related Tax Shelter Provisions
Sec. 631. Limitation on transfer or importation of built-in losses.
Sec. 632. No reduction of basis under section 734 in stock held by
partnership in corporate partner.
Sec. 633. Repeal of special rules for FASITs.
Sec. 634. Expanded disallowance of deduction for interest on
convertible debt.
Sec. 635. Expanded authority to disallow tax benefits under section
269.
Sec. 636. Modification of interaction between subpart F and passive
foreign investment company rules.
Subtitle C--Restructuring of Incentives for Alcohol Fuels, Etc.
Sec. 641. Reduced rates of tax on gasohol replaced with excise tax
credit; repeal of other alcohol-based fuel incentives;
etc.
Sec. 642. Alcohol fuel subsidies borne by general fund.
Subtitle D--Reduction of Fuel Tax Evasion
Sec. 651. Exemption from certain excise taxes for mobile machinery.
Sec. 652. Taxation of aviation-grade kerosene.
Sec. 653. Dye injection equipment.
Sec. 654. Authority to inspect on-site records.
Sec. 655. Registration of pipeline or vessel operators required for
exemption of bulk transfers to registered terminals or
refineries.
Sec. 656. Display of registration.
Sec. 657. Penalties for failure to register and failure to report.
Sec. 658. Collection from customs bond where importer not registered.
Sec. 659. Modifications of tax on use of certain vehicles.
Sec. 660. Modification of ultimate vendor refund claims with respect to
farming.
Sec. 661. Dedication of revenues from certain penalties to the highway
trust fund.
Sec. 662. Taxable fuel refunds for certain ultimate vendors.
Sec. 663. Two-party exchanges.
Sec. 664. Simplification of tax on tires.
Subtitle E--Prevention of Tax Avoidance Through Treaty Shopping
Sec. 671. Denial of treaty benefits for certain deductible payments.
Sec. 672. Transfer price reduced by deflected tax haven income.
Subtitle F--Additions to List of Taxable Vaccines
Sec. 681. Addition of vaccines against hepatitis A to list of taxable
vaccines.
Sec. 682. Addition of vaccines against influenza to list of taxable
vaccines.
Subtitle G--Other Provisions
Sec. 691. IRS user fees made permanent.
Sec. 692. Cobra fees.
TITLE I--ELIMINATE TRADE SANCTIONS AND REDUCE CORPORATE AND
NONCORPORATE TAX RATES FOR DOMESTIC PRODUCERS
SEC. 101. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL INCOME.
(a) In General.--Section 114 of the Internal Revenue Code
of 1986 is hereby repealed.
(b) Conforming Amendments.--
(1)(A) Subpart E of part III of subchapter N of chapter 1
(relating to qualifying foreign trade income) is hereby
repealed.
(B) The table of subparts for such part III is amended by
striking the item relating to subpart E.
(2) The table of sections for part III of subchapter B of
chapter 1 is amended by striking the item relating to section
114.
(3) The second sentence of section 56(g)(4)(B)(i) is
amended by striking ``or under section 114''.
(4) Section 275(a) is amended--
(A) by inserting ``or'' at the end of paragraph (4)(A), by
striking ``or'' at the end of paragraph (4)(B) and inserting
a period, and by striking subparagraph (C), and
(B) by striking the last sentence.
(5) Paragraph (3) of section 864(e) is amended--
(A) by striking:
``(3) Tax-exempt assets not taken into account.--
``(A) In general.--For purposes of''; and inserting:
``(3) Tax-exempt assets not taken into account.--For
purposes of'', and
(B) by striking subparagraph (B).
(6) Section 903 is amended by striking ``114, 164(a),'' and
inserting ``164(a)''.
(7) Section 999(c)(1) is amended by striking
``941(a)(5),''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to transactions occurring after December 31, 2004.
(2) Binding contracts.--The amendments made by this section
shall not apply to any transaction in the ordinary course of
a trade or business which occurs pursuant to a binding
contract--
(A) which is between the taxpayer and a person who is not a
related person (as defined in section 943(b)(3) of such Code,
as in effect on the day before the date of the enactment of
this Act), and
(B) which is in effect on September 17, 2003, and at all
times thereafter.
(d) Revocation of Section 943(e) Elections.--
(1) In general.--In the case of a corporation that elected
to be treated as a domestic corporation under section 943(e)
of the Internal Revenue Code of 1986 (as in effect on the day
before the date of the enactment of this Act)--
(A) the corporation may revoke such election, effective as
of the close of December 31, 2004, and
(B) if the corporation does revoke such election--
(i) such corporation shall be treated as a domestic
corporation transferring (as of December 31, 2004) all of its
property to a foreign corporation in connection with an
exchange described in section 354 of the Internal Revenue
Code of 1986, and
(ii) no gain or loss shall be recognized on such transfer.
(2) Exception.--Subparagraph (B)(ii) of paragraph (1) shall
not apply to gain on any asset held by the revoking
corporation if--
(A) the basis of such asset is determined in whole or in
part by reference to the basis of such asset in the hands of
the person from whom the revoking corporation acquired such
asset,
(B) the asset was acquired by transfer (not as a result of
the election under section 943(e) of such Code) occurring on
or after the 1st day on which its election under section
943(e) of such Code was effective, and
(C) a principal purpose of the acquisition was the
reduction or avoidance of tax (other than a reduction in tax
under section 114 of such Code, as in effect on the day
before the date of the enactment of this Act).
(e) General Transition.--
(1) In general.--In the case of a taxable year ending after
the date of the enactment of this Act and beginning before
January 1, 2007, for purposes of chapter 1 of such Code, each
current FSC/ETI beneficiary shall be allowed a deduction
equal to the transition amount determined under this
subsection with respect to such beneficiary for such year.
(2) Current fsc/eti beneficiary.--The term ``current FSC/
ETI beneficiary'' means any corporation which entered into
one or more transactions during its taxable year beginning in
calendar year 2001 with respect to which FSC/ETI benefits
were allowable.
(3) Transition amount.--For purposes of this subsection--
(A) In general.--The transition amount applicable to any
current FSC/ETI beneficiary for any taxable year is the
phaseout percentage of the base period amount.
(B) Phaseout percentage.--
(i) In general.--In the case of a taxpayer using the
calendar year as its taxable year, the phaseout percentage
shall be determined under the following table:
The phaseout
``Years: percentage is:
2005................................................ 80
2006................................................ 60
2007 and thereafter................................. 0
(ii) Special rule for fiscal year taxpayers.--In the case
of a taxpayer not using the calendar year as its taxable
year, the phaseout percentage is the weighted average of the
phaseout percentages determined under the preceding
provisions of this paragraph with respect to calendar years
any portion of which is included in the taxpayer's taxable
year. The weighted average shall be determined on the basis
of the respective portions of the taxable year in each
calendar year.
(4) Base period amount.--For purposes of this subsection,
the base period amount is the aggregate FSC/ETI benefits for
the taxpayer's taxable year beginning in calendar year 2001.
(5) FSC/ETI benefit.--For purposes of this subsection, the
term `FSC/ETI benefit' means--
[[Page H4410]]
(A) amounts excludable from gross income under section 114
of such Code, and
(B) the exempt foreign trade income of related foreign
sales corporations from property acquired from the taxpayer
(determined without regard to section 923(a)(5) of such Code
(relating to special rule for military property), as in
effect on the day before the date of the enactment of the FSC
Repeal and Extraterritorial Income Exclusion Act of 2000).
In determining the FSC/ETI benefit there shall be excluded
any amount attributable to a transaction with respect to
which the taxpayer is the lessor unless the leased property
was manufactured or produced in whole or in significant part
by the taxpayer.
(6) Special rule for farm and horticultural cooperatives.--
Determinations under this subsection with respect to an
organization described in section 943(g)(1) of such Code, as
in effect on the day before the date of the enactment of this
Act, shall be made at the cooperative level and the purposes
of this subsection shall be carried out in a manner similar
to section 199(h)(2) of such Code, as added by this Act. Such
determinations shall be in accordance with such requirements
and procedures as the Secretary may prescribe.
(7) Certain rules to apply.--Rules similar to the rules of
section 41(f) of such Code shall apply for purposes of this
subsection.
(8) Coordination with binding contract rule.--The deduction
determined under paragraph (1) for any taxable year shall be
reduced by the phaseout percentage of any FSC/ETI benefit
realized for the taxable year by reason of subsection (c)(2)
or section 5(c)(1)(B) of the FSC Repeal and Extraterritorial
Income Exclusion Act of 2000.
(9) Special rule for certain taxable years which include
December 31, 2004.--In the case of a taxable year which is
not a calendar year and which includes December 31, 2004, the
deduction allowed under this subsection to any current FSC/
ETI beneficiary shall in no event exceed--
(A) 100 percent of such beneficiary's base period amount,
reduced by
(B) the aggregate FSC/ETI benefits of such beneficiary with
respect to transactions occurring during the portion of the
taxable year ending on December 31, 2004.
SEC. 102. DEDUCTION RELATING TO INCOME ATTRIBUTABLE TO UNITED
STATES PRODUCTION ACTIVITIES.
(a) In General.--Part VII of subchapter B of chapter 1
(relating to itemized deductions for individuals and
corporations) is amended by adding at the end the following
new section:
``SEC. 199. INCOME ATTRIBUTABLE TO DOMESTIC PRODUCTION
ACTIVITIES.
``(a) In General.--There shall be allowed as a deduction an
amount equal to 10 percent of the qualified production
activities income of the taxpayer for the taxable year.
``(b) Phasein.--In the case of taxable years beginning in
2005, 2006, or 2007, subsection (a) shall be applied by
substituting for the percentage contained therein the
transition percentage determined under the following table:
``Taxable years The transition
beginning in: percentage is:
2005.................................................. 3
2006.................................................. 6
2007.................................................. 9
``(c) Qualified Production Activities Income.--For purposes
of this section, the term `qualified production activities
income' means the product of--
``(1) the portion of the modified taxable income of the
taxpayer which is attributable to domestic production
activities, and
``(2) the domestic/worldwide fraction.
``(d) Determination of Income Attributable to Domestic
Production Activities.--For purposes of this section--
``(1) In general.--The portion of the modified taxable
income which is attributable to domestic production
activities is so much of the modified taxable income for the
taxable year as does not exceed--
``(A) the taxpayer's domestic production gross receipts for
such taxable year, reduced by
``(B) the sum of--
``(i) the costs of goods sold that are allocable to such
receipts,
``(ii) other deductions, expenses, or losses directly
allocable to such receipts, and
``(iii) a proper share of other deductions, expenses, and
losses that are not directly allocable to such receipts or
another class of income.
``(2) Allocation method.--The Secretary shall prescribe
rules for the proper allocation of items of income,
deduction, expense, and loss for purposes of determining
income attributable to domestic production activities.
``(3) Special rule for determining costs.--
``(A) For purposes of determining costs under clause (i) of
paragraph (1)(B), any item or service brought into the United
States shall be treated as acquired by purchase, and its cost
shall be treated as not less than its value in the United
States, determined immediately after it was brought into the
United States. A similar rule shall apply in determining the
adjusted basis of leased or rented property where the lease
or rental gives rise to domestic production gross receipts.
``(B) In the case of any property described in subparagraph
(A) that had been exported by the taxpayer for further
manufacture, the increase in cost (or adjusted basis) under
subparagraph (A) shall not exceed the difference between the
value of the property when exported and the value of the
property when brought back into the United States after the
further manufacture.
``(4) Modified taxable income.--The term `modified taxable
income' means taxable income computed without regard to the
deduction allowable under this section.
``(e) Domestic Production Gross Receipts.--For purposes of
this section--
``(1) In general.--The term `domestic production gross
receipts' means the gross receipts of the taxpayer which are
derived from--
``(A) any sale, exchange, or other disposition of, or
``(B) any lease, rental or license of,
qualifying production property which was manufactured,
produced, grown, or extracted in whole or in significant part
by the taxpayer within the United States.
``(2) Special rules for certain property.--In the case of
any qualifying production property described in subsection
(f)(1)(C)--
(A) such property shall be treated for purposes of
paragraph (1) as produced in significant part by the taxpayer
within the United States if more than 50 percent of the
aggregate development and production costs are incurred by
the taxpayer within the United States, and
(B) if a taxpayer acquires such property before such
property begins to generate substantial gross receipts, any
development or production costs incurred before the
acquisition shall be treated as incurred by the taxpayer for
purposes of subparagraph (A) and paragraph (1).
``(f) Qualifying Production Property.--For purposes of this
section--
``(1) In general.--Except as otherwise provided in this
subsection, the term `qualifying production property' means--
``(A) any tangible personal property,
``(B) any computer software, and
``(C) any property described in paragraph (3) or (4) of
section 168(f), including any underlying copyright or
trademark.
Subparagraph (C) shall not apply to any property with respect
to which records are required to be maintained under section
2257 of title 18, United States Code.
``(2) Exclusions from qualifying production property.--The
term `qualifying production property' shall not include--
``(A) consumable property that is sold, leased, or licensed
by the taxpayer as an integral part of the provision of
services,
``(B) oil or gas (or any primary product thereof),
``(C) electricity,
``(D) water supplied by pipeline to the consumer,
``(E) utility services, or
``(F) any property (not described in paragraph (1)(B))
which is a film, tape, recording, book, magazine, newspaper,
or similar property the market for which is primarily topical
or otherwise essentially transitory in nature.
``(3) Special rule for noncorporate taxpayers.--In the case
of a taxpayer other than a corporation subject to tax under
section 11, the term `qualifying production property' only
includes--
``(A) agricultural or horticultural products, including
timber, and
``(B) other tangible personal property not described in
subparagraph (B) or (C) of paragraph (1) and not described in
section 1221(a)(3).
``(g) Domestic/Worldwide Fraction.--For purposes of this
section--
``(1) In general.--The term `domestic/worldwide fraction'
means a fraction (not greater than 1)--
``(A) the numerator of which is the value of the domestic
production of the taxpayer, and
``(B) the denominator of which is the value of the
worldwide production of the taxpayer.
``(2) Value of domestic production.--The value of domestic
production is the excess (if any) of--
``(A) the domestic production gross receipts, over
``(B) the cost of purchased inputs allocable to such
receipts that are deductible under this chapter for the
taxable year.
``(3) Purchased inputs.--
``(A) In general.--Purchased inputs are any of the
following items acquired by purchase:
``(i) Services (other than services of employees) used in
manufacture, production, growth, or extraction activities.
``(ii) Items consumed in connection with such activities.
``(iii) Items incorporated as part of the property being
manufactured, produced, grown, or extracted.
``(B) Special rule.--Rules similar to the rules of
subsection (d)(3) shall apply for purposes of this
subsection.
``(4) Value of worldwide production.--
``(A) In general.--The value of worldwide production shall
be determined under the principles of paragraph (2), except
that--
``(i) worldwide production gross receipts shall be taken
into account, and
``(ii) paragraph (3)(B) shall not apply.
``(B) Worldwide production gross receipts.--The worldwide
production gross receipts is the amount that would be
determined under subsection (e) if such subsection were
applied without any reference to the United States.
``(h) Definitions and Special Rules.--
[[Page H4411]]
``(1) United states.--For purposes of this section, the
term `United States' includes the Commonwealth of Puerto Rico
and any other possession of the United States.
``(2) Exclusion for patrons of agricultural and
horticultural cooperatives.--
``(A) In general.--If any amount described in paragraph (1)
or (3) of section 1385 (a)--
``(i) is received by a person from an organization to which
part I of subchapter T applies which is engaged in the
marketing of agricultural or horticultural products, and
``(ii) is allocable to the portion of the qualified
production activities income of the organization which is
deductible under subsection (a) (determined as if the
organization were a corporation if it is not) and designated
as such by the organization in a written notice mailed to its
patrons during the payment period described in section
1382(a),
then such person shall be allowed an exclusion from gross
income with respect to such amount. The taxable income of the
organization shall not be reduced under section 1382 by the
portion of any such amount with respect to which an exclusion
is allowable to a person by reason of this paragraph.
``(B) Special rules.--For purposes of applying subparagraph
(A), in determining the qualified production activities
income of the organization under this section--
``(i) there shall not be taken into account in computing
the organization's modified taxable income any deduction
allowable under subsection (b) or (c) of section 1382
(relating to patronage dividends, per-unit retain
allocations, and nonpatronage distributions), and
``(ii) the organization shall be treated as having
manufactured, produced, grown, or extracted in whole or
significant part any qualifying production property marketed
by the organization which its patrons have so manufactured,
produced, grown, or extracted.
``(3) Special rules for partnerships and s corporations.--
For purposes of this section, a partner's distributive share
of any partnership item shall be taken into account as if
directly realized by the partner. A rule similar to the rule
of the preceding sentence shall apply in the case of a
shareholder in an S Corporation.
``(4) Special rule for affiliated groups.--
``(A) In general.--All members of an expanded affiliated
group shall be treated as a single corporation for purposes
of this section.
``(B) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group as defined in
section 1504(a), determined--
``(i) by substituting `50 percent' for `80 percent' each
place it appears, and
``(ii) without regard to paragraphs (2) and (4) of section
1504(b).
For purposes of determining the domestic/worldwide fraction
under subsection (g), clause (ii) shall be applied by also
disregarding paragraphs (3) and (8) of section 1504(b).
``(5) Coordination with minimum tax.--The deduction under
this section shall be allowed for purposes of the tax imposed
by section 55; except that for purposes of section 55,
alternative minimum taxable income shall be taken into
account in determining the deduction under this section.
``(6) Ordering rule.--The amount of any other deduction
allowable under this chapter shall be determined as if this
section had not been enacted.
``(7) Trade or business requirement.--This section shall be
applied by only taking into account items which are
attributable to the actual conduct of a trade or business.
``(8) Coordination with transition rules.--For purposes of
this section--
``(A) domestic production gross receipts shall not include
gross receipts from any transaction if the binding contract
transition relief of section 101(c)(2) of the American Jobs
Creation Act of 2004 applies to such transaction, and
``(B) any deduction allowed under section 101(e) of such
Act shall be disregarded in determining the portion of the
taxable income which is attributable to domestic production
gross receipts.''.
(b) Clerical Amendment.--The table of sections for part VII
of subchapter B of chapter 1 is amended by adding at the end
the following new item:
``Sec. 199. Income attributable to domestic production activities.''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years ending after December 31, 2004.
(2) Application of section 15.--Section 15 of the Internal
Revenue Code of 1986 shall apply to the amendments made by
this section as if they were changes in a rate of tax.
TITLE II--ADDITIONAL BUSINESS BENEFITS
Subtitle A--Small Business Expensing
SEC. 201. 2-YEAR EXTENSION OF INCREASED EXPENSING FOR SMALL
BUSINESS.
Subsections (b), (c), and (d) of section 179 are each
amended by striking ``2006'' each place it appears and
inserting ``2008''.
Subtitle B--S Corporation Reform and Simplification
SEC. 211. MEMBERS OF FAMILY TREATED AS 1 SHAREHOLDER.
(a) In General.--Paragraph (1) of section 1361(c) (relating
to special rules for applying subsection (b)) is amended to
read as follows:
``(1) Members of family treated as 1 shareholder.--
``(A) In general.--For purpose of subsection (b)(1)(A)--
``(i) except as provided in clause (ii), a husband and wife
(and their estates) shall be treated as 1 shareholder, and
``(ii) in the case of a family with respect to which an
election is in effect under subparagraph (D), all members of
the family shall be treated as 1 shareholder.
``(B) Members of the family.--For purpose of subparagraph
(A)(ii)--
``(i) In general.--The term `members of the family' means
the common ancestor, lineal descendants of the common
ancestor, and the spouses (or former spouses) of such lineal
descendants or common ancestor.
``(ii) Common Ancestor.--For purposes of this paragraph, an
individual shall not be considered a common ancestor if, as
of the later of the effective date of this paragraph or the
time the election under section 1362(a) is made, the
individual is more than 3 generations removed from the
youngest generation of shareholders who would (but for this
clause) be members of the family. For purposes of the
preceding sentence, a spouse (or former spouse) shall be
treated as being of the same generation as the individual to
which such spouse is (or was) married.
``(C) Effect of adoption, etc.--In determining whether any
relationship specified in subparagraph (B) exists, the rules
of section 152(b)(2) shall apply.
``(D) Election.--An election under subparagraph (A)(ii)--
``(i) may, except as otherwise provided in regulations
prescribed by the Secretary, be made by any member of the
family, and
``(ii) shall remain in effect until terminated as provided
in regulations prescribed by the Secretary.''.
(b) Relief From Inadvertent Invalid Election or
Termination.--Section 1362(f) (relating to inadvertent
invalid elections or terminations), as amended by section
219, is amended--
(1) by inserting ``or section 1361(c)(1)(A)(ii)'' after
``section 1361(b)(3)(B)(ii),'' in paragraph (1), and
(2) by inserting ``or section 1361(c)(1)(D)(iii)'' after
``section 1361(b)(3)(C),'' in paragraph (1)(B).
(c) Effective Dates.--
(1) Subsection (a).--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2004.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to elections and terminations made after December
31, 2004.
SEC. 212. INCREASE IN NUMBER OF ELIGIBLE SHAREHOLDERS TO 100.
(a) In General.--Section 1361(b)(1)(A) (defining small
business corporation) is amended by striking ``75'' and
inserting ``100''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2004.
SEC. 213. EXPANSION OF BANK S CORPORATION ELIGIBLE
SHAREHOLDERS TO INCLUDE IRAS.
(a) In General.--Section 1361(c)(2)(A) (relating to certain
trusts permitted as shareholders) is amended by inserting
after clause (v) the following new clause:
``(vi) In the case of a corporation which is a bank (as
defined in section 581), a trust which constitutes an
individual retirement account under section 408(a), including
one designated as a Roth IRA under section 408A, but only to
the extent of the stock held by such trust in such bank as of
the date of the enactment of this clause.''.
(b) Treatment as Shareholder.--Section 1361(c)(2)(B)
(relating to treatment as shareholders) is amended by adding
at the end the following new clause:
``(vi) In the case of a trust described in clause (vi) of
subparagraph (A), the individual for whose benefit the trust
was created shall be treated as a shareholder.''.
(c) Sale of Bank Stock in IRA Relating to S Corporation
Election Exempt From Prohibited Transaction Rules.--Section
4975(d) (relating to exemptions) is amended by striking
``or'' at the end of paragraph (14), by striking the period
at the end of paragraph (15) and inserting ``; or'', and by
adding at the end the following new paragraph:
``(16) a sale of stock held by a trust which constitutes an
individual retirement account under section 408(a) to the
individual for whose benefit such account is established if--
``(A) such stock is in a bank (as defined in section 581),
``(B) such stock is held by such trust as of the date of
the enactment of this paragraph,
``(C) such sale is pursuant to an election under section
1362(a) by such bank,
``(D) such sale is for fair market value at the time of
sale (as established by an independent appraiser) and the
terms of the sale are otherwise at least as favorable to such
trust as the terms that would apply on a sale to an unrelated
party,
``(E) such trust does not pay any commissions, costs, or
other expenses in connection with the sale, and
``(F) the stock is sold in a single transaction for cash
not later than 120 days after the S corporation election is
made.''.
(d) Conforming Amendment.--Section 512(e)(1) is amended by
inserting ``1361(c)(2)(A)(vi) or'' before ``1361(c)(6)''.
(e) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
[[Page H4412]]
SEC. 214. DISREGARD OF UNEXERCISED POWERS OF APPOINTMENT IN
DETERMINING POTENTIAL CURRENT BENEFICIARIES OF
ESBT.
(a) In General.--Section 1361(e)(2) (defining potential
current beneficiary) is amended--
(1) by inserting ``(determined without regard to any power
of appointment to the extent such power remains unexercised
at the end of such period)'' after ``of the trust'' in the
first sentence, and
(2) by striking ``60-day'' in the second sentence and
inserting ``1-year''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2004.
SEC. 215. TRANSFER OF SUSPENDED LOSSES INCIDENT TO DIVORCE,
ETC.
(a) In General.--Section 1366(d)(2) (relating to indefinite
carryover of disallowed losses and deductions) is amended to
read as follows:
``(2) Indefinite carryover of disallowed losses and
deductions.--
``(A) In general.--Except as provided in subparagraph (B),
any loss or deduction which is disallowed for any taxable
year by reason of paragraph (1) shall be treated as incurred
by the corporation in the succeeding taxable year with
respect to that shareholder.
``(B) Transfers of stock between spouses or incident to
divorce.--In the case of any transfer described in section
1041(a) of stock of an S corporation, any loss or deduction
described in subparagraph (A) with respect such stock shall
be treated as incurred by the corporation in the succeeding
taxable year with respect to the transferee.''
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2004.
SEC. 216. USE OF PASSIVE ACTIVITY LOSS AND AT-RISK AMOUNTS BY
QUALIFIED SUBCHAPTER S TRUST INCOME
BENEFICIARIES.
(a) In General.--Section 1361(d)(1) (relating to special
rule for qualified subchapter S trust) is amended--
(1) by striking ``and'' at the end of subparagraph (A),
(2) by striking the period at the end of subparagraph (B)
and inserting ``, and'', and
(3) by adding at the end the following new subparagraph:
``(C) for purposes of applying sections 465 and 469 to the
beneficiary of the trust, the disposition of the S
corporation stock by the trust shall be treated as a
disposition by such beneficiary.''.
(b) Effective Date.--The amendments made by this section
shall apply to transfers made after December 31, 2004.
SEC. 217. EXCLUSION OF INVESTMENT SECURITIES INCOME FROM
PASSIVE INCOME TEST FOR BANK S CORPORATIONS.
(a) In General.--Section 1362(d)(3) (relating to where
passive investment income exceeds 25 percent of gross
receipts for 3 consecutive taxable years and corporation has
accumulated earnings and profits) is amended by adding at the
end the following new subparagraph:
``(F) Exception for banks; etc.--In the case of a bank (as
defined in section 581), a bank holding company (within the
meaning of section 2(a) of the Bank Holding Company Act of
1956 (12 U.S.C. 1841(a))), or a financial holding company
(within the meaning of section 2(p) of such Act), the term
`passive investment income' shall not include--
``(i) interest income earned by such bank or company, or
``(ii) dividends on assets required to be held by such bank
or company, including stock in the Federal Reserve Bank, the
Federal Home Loan Bank, or the Federal Agricultural Mortgage
Bank or participation certificates issued by a Federal
Intermediate Credit Bank.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2004.
SEC. 218. TREATMENT OF BANK DIRECTOR SHARES.
(a) In General.--Section 1361 (defining S corporation) is
amended by adding at the end the following new subsection:
``(f) Restricted Bank Director Stock.--
``(1) In general.--Restricted bank director stock shall not
be taken into account as outstanding stock of the S
corporation in applying this subchapter (other than section
1368(f)).
``(2) Restricted bank director stock.--For purposes of this
subsection, the term `restricted bank director stock' means
stock in a bank (as defined in section 581), a bank holding
company (within the meaning of section 2(a) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841(a))), or a
financial holding company (within the meaning of section 2(p)
of such Act), registered with the Federal Reserve System if
such stock--
``(A) is required to be held by an individual under
applicable Federal or State law in order to permit such
individual to serve as a director, and
``(B) is subject to an agreement with such bank or company
(or a corporation which controls (within the meaning of
section 368(c)) such bank or company) pursuant to which the
holder is required to sell back such stock (at the same price
as the individual acquired such stock) upon ceasing to hold
the office of director.
``(3) Cross reference.--
``For treatment of certain distributions with respect to restricted
bank director stock, see section 1368(f).''.
(b) Distributions.--Section 1368 (relating to
distributions) is amended by adding at the end the following
new subsection:
``(f) Restricted Bank Director Stock.--If a director
receives a distribution (not in part or full payment in
exchange for stock) from an S corporation with respect to any
restricted bank director stock (as defined in section
1361(f)), the amount of such distribution--
``(1) shall be includible in gross income of the director,
and
``(2) shall be deductible by the corporation for the
taxable year of such corporation in which or with which ends
the taxable year in which such amount in included in the
gross income of the director.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2004.
SEC. 219. RELIEF FROM INADVERTENTLY INVALID QUALIFIED
SUBCHAPTER S SUBSIDIARY ELECTIONS AND
TERMINATIONS.
(a) In General.--Section 1362(f) (relating to inadvertent
invalid elections or terminations) is amended--
(1) by inserting ``, section 1361(b)(3)(B)(ii),'' after
``subsection (a)'' in paragraph (1),
(2) by inserting ``, section 1361(b)(3)(C),'' after
``subsection (d)'' in paragraph (1)(B),
(3) by amending paragraph (3)(A) to read as follows:
``(A) so that the corporation for which the election was
made is a small business corporation or a qualified
subchapter S subsidiary, as the case may be, or'',
(4) by amending paragraph (4) to read as follows:
``(4) the corporation for which the election was made, and
each person who was a shareholder in such corporation at any
time during the period specified pursuant to this subsection,
agrees to make such adjustments (consistent with the
treatment of such corporation as an S corporation or a
qualified subchapter S subsidiary, as the case may be) as may
be required by the Secretary with respect to such period,'',
and
(5) by inserting ``or a qualified subchapter S subsidiary,
as the case may be'' after ``S corporation'' in the matter
following paragraph (4).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2004.
SEC. 220. INFORMATION RETURNS FOR QUALIFIED SUBCHAPTER S
SUBSIDIARIES.
(a) In General.--Section 1361(b)(3)(A) (relating to
treatment of certain wholly owned subsidiaries) is amended by
inserting ``and in the case of information returns required
under part III of subchapter A of chapter 61'' after
``Secretary''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2004.
SEC. 221. REPAYMENT OF LOANS FOR QUALIFYING EMPLOYER
SECURITIES.
(a) In General.--Subsection (f) of section 4975 (relating
to other definitions and special rules) is amended by adding
at the end the following new paragraph:
``(7) S corporation repayment of loans for qualifying
employer securities.--A plan shall not be treated as
violating the requirements of section 401 or 409 or
subsection (e)(7), or as engaging in a prohibited transaction
for purposes of subsection (d)(3), merely by reason of any
distribution (as described in section 1368(a)) with respect
to S corporation stock that constitutes qualifying employer
securities, which in accordance with the plan provisions is
used to make payments on a loan described in subsection
(d)(3) the proceeds of which were used to acquire such
qualifying employer securities (whether or not allocated to
participants). The preceding sentence shall not apply in the
case of a distribution which is paid with respect to any
employer security which is allocated to a participant unless
the plan provides that employer securities with a fair market
value of not less than the amount of such distribution are
allocated to such participant for the year which (but for the
preceding sentence) such distribution would have been
allocated to such participant.''.
(b) Effective Date.--The amendment made by this section
shall apply to distributions with respect to S corporation
stock made after December 31, 2004.
Subtitle C--Toll Tax on Excess Qualified Foreign Distribution Amount
SEC. 231. TOLL TAX ON EXCESS QUALIFIED FOREIGN DISTRIBUTION
AMOUNT.
(a) In General.--Subpart F of part III of subchapter N of
chapter 1 is amended by adding at the end the following new
section:
``SEC. 965. TOLL TAX IMPOSED ON EXCESS QUALIFIED FOREIGN
DISTRIBUTION AMOUNT.
``(a) Toll Tax Imposed on Excess Qualified Foreign
Distribution Amount.--If a corporation elects the application
of this section, a tax shall be imposed on the taxpayer in an
amount equal to 5.25 percent of--
``(1) the taxpayer's excess qualified foreign distribution
amount, and
``(2) the amount determined under section 78 which is
attributable to such excess qualified foreign distribution
amount.
Such tax shall be imposed in lieu of the tax imposed under
section 11 or 55 on the amounts described in paragraphs (1)
and (2) for the taxable year.
``(b) Excess Qualified Foreign Distribution Amount.--For
purposes of this section--
``(1) In general.--The term `excess qualified foreign
distribution amount' means the excess (if any) of--
[[Page H4413]]
``(A) the aggregate dividends received by the taxpayer
during the taxable year which are--
``(i) from 1 or more corporations which are controlled
foreign corporations in which the taxpayer is a United States
shareholder on the date such dividends are paid, and
``(ii) described in a domestic reinvestment plan which--
``(I) is approved by the taxpayer's president, chief
executive officer, or comparable official before the payment
of such dividends and subsequently approved by the taxpayer's
board of directors, management committee, executive
committee, or similar body, and
``(II) provides for the reinvestment of such dividends in
the United States (other than as payment for executive
compensation), including as a source for the funding of
worker hiring and training, infrastructure, research and
development, capital investments, or the financial
stabilization of the corporation for the purposes of job
retention or creation, over
``(B) the base dividend amount.
``(2) Base dividend amount.--The term `base dividend
amount' means an amount designated under subsection (c)(7),
but not less than the average amount of dividends received
during the fixed base period from 1 or more corporations
which are controlled foreign corporations in which the
taxpayer is a United States shareholder on the date such
dividends are paid.
``(3) Fixed base period.--
``(A) In general.--The term `fixed base period' means each
of 3 taxable years which are among the 5 most recent taxable
years of the taxpayer ending on or before December 31, 2002,
determined by disregarding--
``(i) the 1 taxable year for which the taxpayer had the
highest amount of dividends from 1 or more corporations which
are controlled foreign corporations relative to the other 4
taxable years, and
``(ii) the 1 taxable year for which the taxpayer had the
lowest amount of dividends from such corporations relative to
the other 4 taxable years.
``(B) Shorter period.--If the taxpayer has fewer than 5
taxable years ending on or before December 31, 2002, then in
lieu of applying subparagraph (A), the fixed base period
shall include all the taxable years of the taxpayer ending on
or before December 31, 2002.
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) Dividends.--The term `dividend' has the meaning given
such term by section 316, except that the term shall include
amounts described in section 951(a)(1)(B), but shall not
include amounts described in sections 78 and 959.
``(2) Controlled foreign corporations and united states
shareholders.--The term `controlled foreign corporation' has
the meaning given such term by section 957(a) and the term
`United States shareholder' has the meaning given such term
by section 951(b).
``(3) Foreign tax credits.--The amount of any income, war,
profits, or excess profit taxes paid (or deemed paid under
sections 902 and 960) or accrued by the taxpayer with respect
to the excess qualified foreign distribution amount for which
a credit would be allowable under section 901 in the absence
of this section, shall be reduced by 85 percent. No deduction
shall be allowed under this chapter for the portion of any
tax for which credit is not allowable by reason of the
preceding sentence.
``(4) Foreign tax credit limitation.--For purposes of
section 904, there shall be disregarded 85 percent of--
``(A) the excess qualified foreign distribution amount,
``(B) the amount determined under section 78 which is
attributable to such excess qualified foreign distribution
amount, and
``(C) the amounts (including assets, gross income, and
other relevant bases of apportionment) which are attributable
to the excess qualified foreign distribution amount which
would, determined without regard to this section, be used to
apportion the expenses, losses, and deductions of the
taxpayer under section 861 and 864 in determining its taxable
income from sources without the United States.
For purposes of applying subparagraph (C), the principles of
section 864(e)(3)(A) shall apply.
``(5) Treatment of acquisitions and dispositions.--Rules
similar to the rules of section 41(f)(3) shall apply in the
case of acquisitions or dispositions of controlled foreign
corporations occurring on or after the first day of the
earliest taxable year taken into account in determining the
fixed base period.
``(6) Treatment of consolidated groups.--Members of an
affiliated group of corporations filing a consolidated return
under section 1501 shall be treated as a single taxpayer for
purposes of this section.
``(7) Designation of dividends.--Subject to subsection
(b)(2), the taxpayer shall designate the particular dividends
received during the taxable year from 1 or more corporations
which are controlled foreign corporations in which it is a
United States shareholder which are dividends excluded from
the excess qualified foreign distribution amount. The total
amount of such designated dividends shall equal the base
dividend amount.
``(8) Treatment of expenses, losses, and deductions.--Any
expenses, losses, or deductions of the taxpayer allowable
under subchapter B--
``(A) shall not be applied to reduce the amounts described
in subsection (a)(1), and
``(B) shall be applied to reduce other income of the
taxpayer (determined without regard to the amounts described
in subsection (a)(1)).
``(d) Election.--
``(1) In general.--An election under this section shall be
made on the taxpayer's timely filed income tax return for the
first taxable year (determined by taking extensions into
account) ending 120 days or more after the date of the
enactment of this section, and, once made, may be revoked
only with the consent of the Secretary.
``(2) All controlled foreign corporations.--The election
shall apply to all corporations which are controlled foreign
corporations in which the taxpayer is a United States
shareholder during the taxable year.
``(3) Consolidated groups.--If a taxpayer is a member of an
affiliated group of corporations filing a consolidated return
under section 1501 for the taxable year, an election under
this section shall be made by the common parent of the
affiliated group which includes the taxpayer and shall apply
to all members of the affiliated group.
``(e) Regulations.--The Secretary shall prescribe such
regulations as may be necessary and appropriate to carry out
the purposes of this section, including regulations under
section 55 and regulations addressing corporations which,
during the fixed base period or thereafter, join or leave an
affiliated group of corporations filing a consolidated
return.''.
(b) Conforming Amendment.--The table of sections for
subpart F of part III of subchapter N of chapter 1 is amended
by adding at the end the following new item:
``Sec. 965. Toll tax imposed on excess qualified foreign distribution
amount.''.
(c) Effective Date.--The amendments made by this section
shall apply only to the first taxable year of the electing
taxpayer ending 120 days or more after the date of the
enactment of this Act.
TITLE III--EXTENSION OF EXPIRING PROVISIONS
SEC. 301. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST
REGULAR AND MINIMUM TAX LIABILITY.
(a) In General.--Paragraph (2) of section 26(a) is
amended--
(1) by striking ``rule for 2000, 2001, 2002, and 2003.--''
and inserting ``rule for taxable years 2000 through 2005.--
'', and
(2) by striking ``or 2003,'' and inserting ``2003, 2004, or
2005,''.
(b) Conforming Provisions.--
(1) Section 904(h) is amended by striking ``or 2003'' and
inserting ``2003, 2004, or 2005''.
(2) The amendments made by sections 201(b), 202(f), and
618(b) of the Economic Growth and Tax Relief Reconciliation
Act of 2001 shall not apply to taxable years beginning during
2004 or 2005.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 302. EXTENSION OF RESEARCH CREDIT.
(a) Extension.--
(1) In general.--Section 41(h)(1)(B) (relating to
termination) is amended by striking ``June 30, 2004'' and
inserting ``December 31, 2005''.
(2) Conforming amendment.--Section 45C(b)(1)(D) is amended
by striking ``June 30, 2004'' and inserting ``December 31,
2005''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to amounts paid or incurred after the date of the
enactment of this Act.
SEC. 303. EXTENSION OF CREDIT FOR ELECTRICITY PRODUCED FROM
CERTAIN RENEWABLE RESOURCES.
(a) In General.--Subparagraphs (A) and (B) of section
45(c)(3) (defining qualified facility) are both amended by
striking ``2004'' and inserting ``2006''.
(b) Effective Date.--The amendments made by this section
shall apply to electricity produced and sold after December
31, 2003.
SEC. 304. INDIAN EMPLOYMENT TAX CREDIT.
Section 45A(f) (relating to termination) is amended by
striking ``December 31, 2004'' and inserting ``December 31,
2005''.
SEC. 305. WORK OPPORTUNITY CREDIT.
(a) In General.--Subparagraph (B) of section 51(c)(4) is
amended by striking ``December 31, 2003'' and inserting
``December 31, 2005''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to individuals who begin work for the employer
after December 31, 2003.
SEC. 306. WELFARE-TO-WORK CREDIT.
(a) In General.--Subsection (f) of section 51A is amended
by striking ``December 31, 2003'' and inserting ``December
31, 2005''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to individuals who begin work for the employer
after December 31, 2003.
SEC. 307. CERTAIN EXPENSES OF ELEMENTARY AND SECONDARY SCHOOL
TEACHERS.
(a) In General.--Subparagraph (D) of section 62(a)(2)
(relating to certain trade and business deductions of
employees) is amended by striking ``or 2003'' and inserting
``, 2003, 2004, or 2005''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2003.
SEC. 308. EXTENSION OF ACCELERATED DEPRECIATION BENEFIT FOR
PROPERTY ON INDIAN RESERVATIONS.
Paragraph (8) of section 168(j) (relating to termination)
is amended by striking ``December 31, 2004'' and inserting
``December 31, 2005''.
[[Page H4414]]
SEC. 309. CHARITABLE CONTRIBUTIONS OF COMPUTER TECHNOLOGY AND
EQUIPMENT USED FOR EDUCATIONAL PURPOSES.
(a) In General.--Subparagraph (G) of section 170(e)(6)
(relating to special rule for contributions of computer
technology and equipment for educational purposes) is amended
by striking ``December 31, 2003'' and inserting ``December
31, 2005''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2003.
SEC. 310. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.
(a) In General.--Subsection (h) of section 198 (relating to
termination) is amended by striking ``December 31, 2003'' and
inserting ``December 31, 2005''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to expenditures paid or incurred after December
31, 2003.
SEC. 311. AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS.
(a) In General.--Paragraphs (2) and (3)(B) of section
220(i) (defining cut-off year) are each amended by striking
``2003'' each place it appears in the text and headings and
inserting ``2004''.
(b) Conforming Amendments.--
(1) Subparagraph (A) of section 220(j)(4) is amended by
striking ``and 2002'' and inserting ``2002, and 2004''.
(2) Subparagraph (C) of section 220(j)(2) is amended to
read as follows:
``(C) No limitation for 2000 or 2003.--The numerical
limitation shall not apply for 2000 or 2003.''.
(c) Effective Date.--The amendments made by this section
shall take effect on January 1, 2004.
(d) Time for Filing Reports.--The report required by
section 220(j)(4) of the Internal Revenue Code of 1986 to be
made on August 1, 2004, shall be treated as timely if made
before the close of the 90-day period beginning on the date
of the enactment of this Act.
SEC. 312. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR
OIL AND NATURAL GAS PRODUCED FROM MARGINAL
PROPERTIES.
(a) In General.--Subparagraph (H) of section 613A(c)(6) is
amended by striking ``January 1, 2004'' and inserting
``January 1, 2006''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2003.
SEC. 313. QUALIFIED ZONE ACADEMY BONDS.
(a) In General.--Paragraph (1) of section 1397E(e) is
amended by striking ``and 2003'' and inserting ``2003, 2004,
and 2005''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to obligations issued after the date of the
enactment of this Act.
SEC. 314. DISTRICT OF COLUMBIA.
(a) District of Columbia Enterprise Zone.--Subsection (f)
of section 1400 is amended by striking ``December 31, 2003''
both places it appears and inserting ``December 31, 2005''.
(b) Tax-Exempt Economic Development Bonds.--Subsection (b)
of section 1400A is amended by striking ``December 31, 2003''
and inserting ``December 31, 2005''.
(c) Zero Percent Capital Gains Rate.--
(1) Section 1400B is amended by striking ``January 1,
2004'' each place it appears and inserting ``January 1,
2006''.
(2) Subsections (e)(2) and (g)(2) of section 1400B are each
amended by striking ``2008'' each place it appears in the
headings and text and inserting ``2010''.
(3) Subsection (d) of section 1400F is amended by striking
``December 31, 2008'' and inserting ``December 31, 2010''.
(d) First-Time Homebuyer Credit.--Subsection (i) of section
1400C is amended by striking ``January 1, 2004'' and
inserting ``January 1, 2006''.
(e) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall take
effect on the date of the enactment of this Act.
(2) Tax-exempt economic development bonds.--The amendment
made by subsection (b) shall apply to obligations issued
after December 31, 2003.
SEC. 315. EXTENSION OF CERTAIN NEW YORK LIBERTY ZONE BOND
FINANCING.
Subparagraph (D) of section 1400L(d)(2) is amended by
striking ``2005'' and inserting ``2009''.
SEC. 316. DISCLOSURES RELATING TO TERRORIST ACTIVITIES.
(a) In General.--Clause (iv) of section 6103(i)(3)(C) and
subparagraph (E) of section 6103(i)(7) are both amended by
striking ``December 31, 2003'' and inserting ``December 31,
2005''.
(b) Disclosure of Taxpayer Identity to Law Enforcement
Agencies Investigating Terrorism.--Subparagraph (A) of
section 6103(i)(7) is amended by adding at the end the
following new clause:
``(v) Taxpayer identity.--For purposes of this
subparagraph, a taxpayer's identity shall not be treated as
taxpayer return information.''.
(c) Effective Dates.--
(1) In general.--The amendments made by subsection (a)
shall apply to disclosures on or after the date of the
enactment of this Act.
(2) Subsection (b).--The amendment made by subsection (b)
shall take effect as if included in section 201 of the
Victims of Terrorism Tax Relief Act of 2001.
SEC. 317. DISCLOSURE OF RETURN INFORMATION RELATING TO
STUDENT LOANS.
Section 6103(l)(13)(D) (relating to termination) is amended
by striking ``December 31, 2004'' and inserting ``December
31, 2005''.
SEC. 318. COVER OVER OF TAX ON DISTILLED SPIRITS.
(a) In General.--Paragraph (1) of section 7652(f) is
amended by striking ``January 1, 2004'' and inserting
``January 1, 2006''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to articles brought into the United States after
December 31, 2003.
SEC. 319. JOINT REVIEW OF STRATEGIC PLANS AND BUDGET FOR THE
INTERNAL REVENUE SERVICE.
(a) In General.--Paragraph (2) of section 8021(f) (relating
to joint reviews) is amended by striking ``2004'' and
inserting ``2005''.
(b) Report.--Subparagraph (C) of section 8022(3) (regarding
reports) is amended--
(1) by striking ``2004'' and inserting ``2005'', and
(2) by striking ``with respect to--'' and all that follows
and inserting ``with respect to the matters addressed in the
joint review referred to in section 8021(f)(2).''.
(c) Time for Joint Review.--The joint review required by
section 8021(f)(2) of the Internal Revenue Code of 1986 to be
made before June 1, 2004, shall be treated as timely if made
before June 1, 2005.
SEC. 320. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO
MENTAL HEALTH BENEFITS.
(a) In General.--Subsection (f) of section 9812 is
amended--
(1) by striking ``and'' at the end of paragraph (1), by
striking paragraph (2), and by inserting after paragraph (1)
the following new paragraphs:
``(2) on or after January 1, 2004, and before the date of
the enactment of American Jobs Creation Act of 2004, and
``(3) after December 31, 2005.''.
(b) Effective Date.--The amendments made by this section
shall apply to benefits for services furnished on or after
December 31, 2003.
SEC. 321. COMBINED EMPLOYMENT TAX REPORTING PROJECT.
(a) In General.--Paragraph (1) of section 976(b) of the
Taxpayer Relief Act of 1997 (111 Stat. 898) is amended by
striking ``for a period ending with the date which is 5 years
after the date of the enactment of this Act'' and inserting
``during the period ending on December 31, 2005''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to disclosures on or after the date of the
enactment of this Act.
SEC. 322. CLEAN-FUEL VEHICLES.
(a) Credit for Qualified Electric Vehicles.--Paragraph (2)
of section 30(b) (relating to phaseout) is amended to read as
follows:
``(2) Phaseout.--In the case of any qualified electric
vehicle placed in service after December 31, 2005, the credit
otherwise allowable under subsection (a) (determined after
the application of paragraph (1)) shall be reduced by 75
percent.''.
(b) Deduction for Qualified Clean-Fuel Vehicle Property.--
Subparagraph (B) of section 179A(b)(1) (relating to phaseout)
is amended to read as follows:
``(B) Phaseout.--In the case of any qualified clean-fuel
vehicle property placed in service after December 31, 2005,
the limit otherwise applicable under subparagraph (A) shall
be reduced by 75 percent.''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2003.
TITLE IV--PERMANENT DEDUCTION FOR STATE AND LOCAL GENERAL RETAIL SALES
TAXES
SEC. 401. DEDUCTION OF STATE AND LOCAL GENERAL SALES TAXES IN
LIEU OF STATE AND LOCAL INCOME TAXES.
(a) In General.--Subsection (b) of section 164 (relating to
definitions and special rules) is amended by adding at the
end the following:
``(5) General sales taxes.--For purposes of subsection
(a)--
``(A) Election to deduct state and local sales taxes in
lieu of state and local income taxes.--
``(i) In general.--At the election of the taxpayer for the
taxable year, subsection (a) shall be applied--
``(I) without regard to the reference to State and local
income taxes, and
``(II) as if State and local general sales taxes were
referred to in a paragraph thereof.
``(B) Definition of general sales tax.--The term `general
sales tax' means a tax imposed at one rate with respect to
the sale at retail of a broad range of classes of items.
``(C) Special rules for food, etc.--In the case of items of
food, clothing, medical supplies, and motor vehicles--
``(i) the fact that the tax does not apply with respect to
some or all of such items shall not be taken into account in
determining whether the tax applies with respect to a broad
range of classes of items, and
``(ii) the fact that the rate of tax applicable with
respect to some or all of such items is lower than the
general rate of tax shall not be taken into account in
determining whether the tax is imposed at one rate.
``(D) Items taxed at different rates.--Except in the case
of a lower rate of tax applicable with respect to an item
described in subparagraph (C), no deduction shall be allowed
under this paragraph for any general sales tax imposed with
respect to an item at a rate other than the general rate of
tax.
[[Page H4415]]
``(E) Compensating use taxes.--A compensating use tax with
respect to an item shall be treated as a general sales tax.
For purposes of the preceding sentence, the term
`compensating use tax' means, with respect to any item, a tax
which--
``(i) is imposed on the use, storage, or consumption of
such item, and
``(ii) is complementary to a general sales tax, but only if
a deduction is allowable under this paragraph with respect to
items sold at retail in the taxing jurisdiction which are
similar to such item.
``(F) Special rule for motor vehicles.--In the case of
motor vehicles, if the rate of tax exceeds the general rate,
such excess shall be disregarded and the general rate shall
be treated as the rate of tax.
``(G) Separately stated general sales taxes.--If the amount
of any general sales tax is separately stated, then, to the
extent that the amount so stated is paid by the consumer
(other than in connection with the consumer's trade or
business) to the seller, such amount shall be treated as a
tax imposed on, and paid by, such consumer.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
TITLE V--PROVISIONS TO PREVENT TAX AVOIDANCE THROUGH INDIVIDUAL AND
CORPORATE EXPATRIATION
Subtitle A--Individual Expatriation
SEC. 501. IMPOSITION OF MARK-TO-MARKET TAX ON INDIVIDUALS WHO
EXPATRIATE.
(a) In General.--Subpart A of part II of subchapter N of
chapter 1 is amended by inserting after section 877 the
following new section:
``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.
``(a) General Rules.--For purposes of this subtitle--
``(1) Mark to market.--Except as provided in subsections
(d) and (f), all property of a covered expatriate to whom
this section applies shall be treated as sold on the day
before the expatriation date for its fair market value.
``(2) Recognition of gain or loss.--In the case of any sale
under paragraph (1)--
``(A) notwithstanding any other provision of this title,
any gain arising from such sale shall be taken into account
for the taxable year of the sale, and
``(B) any loss arising from such sale shall be taken into
account for the taxable year of the sale to the extent
otherwise provided by this title, except that section 1091
shall not apply to any such loss.
Proper adjustment shall be made in the amount of any gain or
loss subsequently realized for gain or loss taken into
account under the preceding sentence.
``(3) Exclusion for certain gain.--
``(A) In general.--The amount which, but for this
paragraph, would be includible in the gross income of any
individual by reason of this section shall be reduced (but
not below zero) by $600,000. For purposes of this paragraph,
allocable expatriation gain taken into account under
subsection (f)(2) shall be treated in the same manner as an
amount required to be includible in gross income.
``(B) Cost-of-living adjustment.--
``(i) In general.--In the case of an expatriation date
occurring in any calendar year after 2004, the $600,000
amount under subparagraph (A) 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 such calendar year, determined by
substituting `calendar year 2003' for `calendar year 1992' in
subparagraph (B) thereof.
``(ii) Rounding rules.--If any amount after adjustment
under clause (i) is not a multiple of $1,000, such amount
shall be rounded to the next lower multiple of $1,000.
``(4) Election to continue to be taxed as united states
citizen.--
``(A) In general.--If a covered expatriate elects the
application of this paragraph--
``(i) this section (other than this paragraph and
subsection (i)) shall not apply to the expatriate, but
``(ii) in the case of property to which this section would
apply but for such election, the expatriate shall be subject
to tax under this title in the same manner as if the
individual were a United States citizen.
``(B) Requirements.--Subparagraph (A) shall not apply to an
individual unless the individual--
``(i) provides security for payment of tax in such form and
manner, and in such amount, as the Secretary may require,
``(ii) consents to the waiver of any right of the
individual under any treaty of the United States which would
preclude assessment or collection of any tax which may be
imposed by reason of this paragraph, and
``(iii) complies with such other requirements as the
Secretary may prescribe.
``(C) Election.--An election under subparagraph (A) shall
apply to all property to which this section would apply but
for the election and, once made, shall be irrevocable. Such
election shall also apply to property the basis of which is
determined in whole or in part by reference to the property
with respect to which the election was made.
``(b) Election To Defer Tax.--
``(1) In general.--If the taxpayer elects the application
of this subsection with respect to any property treated as
sold by reason of subsection (a), the payment of the
additional tax attributable to such property shall be
postponed until the due date of the return for the taxable
year in which such property is disposed of (or, in the case
of property disposed of in a transaction in which gain is not
recognized in whole or in part, until such other date as the
Secretary may prescribe).
``(2) Determination of tax with respect to property.--For
purposes of paragraph (1), the additional tax attributable to
any property is an amount which bears the same ratio to the
additional tax imposed by this chapter for the taxable year
solely by reason of subsection (a) as the gain taken into
account under subsection (a) with respect to such property
bears to the total gain taken into account under subsection
(a) with respect to all property to which subsection (a)
applies.
``(3) Termination of postponement.--No tax may be postponed
under this subsection later than the due date for the return
of tax imposed by this chapter for the taxable year which
includes the date of death of the expatriate (or, if earlier,
the time that the security provided with respect to the
property fails to meet the requirements of paragraph (4),
unless the taxpayer corrects such failure within the time
specified by the Secretary).
``(4) Security.--
``(A) In general.--No election may be made under paragraph
(1) with respect to any property unless adequate security is
provided to the Secretary with respect to such property.
``(B) Adequate security.--For purposes of subparagraph (A),
security with respect to any property shall be treated as
adequate security if--
``(i) it is a bond in an amount equal to the deferred tax
amount under paragraph (2) for the property, or
``(ii) the taxpayer otherwise establishes to the
satisfaction of the Secretary that the security is adequate.
``(5) Waiver of certain rights.--No election may be made
under paragraph (1) unless the taxpayer consents to the
waiver of any right under any treaty of the United States
which would preclude assessment or collection of any tax
imposed by reason of this section.
``(6) Elections.--An election under paragraph (1) shall
only apply to property described in the election and, once
made, is irrevocable. An election may be made under paragraph
(1) with respect to an interest in a trust with respect to
which gain is required to be recognized under subsection
(f)(1).
``(7) Interest.--For purposes of section 6601--
``(A) the last date for the payment of tax shall be
determined without regard to the election under this
subsection, and
``(B) section 6621(a)(2) shall be applied by substituting
`5 percentage points' for `3 percentage points' in
subparagraph (B) thereof.
``(c) Covered Expatriate.--For purposes of this section--
``(1) In general.--Except as provided in paragraph (2), the
term `covered expatriate' means an expatriate.
``(2) Exceptions.--An individual shall not be treated as a
covered expatriate if--
``(A) the individual--
``(i) became at birth a citizen of the United States and a
citizen of another country and, as of the expatriation date,
continues to be a citizen of, and is taxed as a resident of,
such other country, and
``(ii) has not been a resident of the United States (as
defined in section 7701(b)(1)(A)(ii)) during the 5 taxable
years ending with the taxable year during which the
expatriation date occurs, or
``(B)(i) the individual's relinquishment of United States
citizenship occurs before such individual attains age 18\1/
2\, and
``(ii) the individual has been a resident of the United
States (as so defined) for not more than 5 taxable years
before the date of relinquishment.
``(d) Exempt Property; Special Rules for Pension Plans.--
``(1) Exempt property.--This section shall not apply to the
following:
``(A) United states real property interests.--Any United
States real property interest (as defined in section
897(c)(1)), other than stock of a United States real property
holding corporation which does not, on the day before the
expatriation date, meet the requirements of section
897(c)(2).
``(B) Specified property.--Any property or interest in
property not described in subparagraph (A) which the
Secretary specifies in regulations.
``(2) Special rules for certain retirement plans.--
``(A) In general.--If a covered expatriate holds on the day
before the expatriation date any interest in a retirement
plan to which this paragraph applies--
``(i) such interest shall not be treated as sold for
purposes of subsection (a)(1), but
``(ii) an amount equal to the present value of the
expatriate's nonforfeitable accrued benefit shall be treated
as having been received by such individual on such date as a
distribution under the plan.
``(B) Treatment of subsequent distributions.--In the case
of any distribution on or after the expatriation date to or
on behalf of the covered expatriate from a plan from which
the expatriate was treated as receiving a distribution under
subparagraph (A), the amount otherwise includible in gross
income by reason of the subsequent distribution shall be
reduced by the excess of the amount includible in gross
income under subparagraph (A) over any portion of such amount
to which this subparagraph previously applied.
``(C) Treatment of subsequent distributions by plan.--For
purposes of this title, a
[[Page H4416]]
retirement plan to which this paragraph applies, and any
person acting on the plan's behalf, shall treat any
subsequent distribution described in subparagraph (B) in the
same manner as such distribution would be treated without
regard to this paragraph.
``(D) Applicable plans.--This paragraph shall apply to--
``(i) any qualified retirement plan (as defined in section
4974(c)),
``(ii) an eligible deferred compensation plan (as defined
in section 457(b)) of an eligible employer described in
section 457(e)(1)(A), and
``(iii) to the extent provided in regulations, any foreign
pension plan or similar retirement arrangements or programs.
``(e) Definitions.--For purposes of this section--
``(1) Expatriate.--The term `expatriate' means--
``(A) any United States citizen who relinquishes
citizenship, and
``(B) any long-term resident of the United States who--
``(i) ceases to be a lawful permanent resident of the
United States (within the meaning of section 7701(b)(6)), or
``(ii) commences to be treated as a resident of a foreign
country under the provisions of a tax treaty between the
United States and the foreign country and who does not waive
the benefits of such treaty applicable to residents of the
foreign country.
``(2) Expatriation date.--The term `expatriation date'
means--
``(A) the date an individual relinquishes United States
citizenship, or
``(B) in the case of a long-term resident of the United
States, the date of the event described in clause (i) or (ii)
of paragraph (1)(B).
``(3) Relinquishment of citizenship.--A citizen shall be
treated as relinquishing United States citizenship on the
earliest of--
``(A) the date the individual renounces such individual's
United States nationality before a diplomatic or consular
officer of the United States pursuant to paragraph (5) of
section 349(a) of the Immigration and Nationality Act (8
U.S.C. 1481(a)(5)),
``(B) the date the individual furnishes to the United
States Department of State a signed statement of voluntary
relinquishment of United States nationality confirming the
performance of an act of expatriation specified in paragraph
(1), (2), (3), or (4) of section 349(a) of the Immigration
and Nationality Act (8 U.S.C. 1481(a)(1)-(4)),
``(C) the date the United States Department of State issues
to the individual a certificate of loss of nationality, or
``(D) the date a court of the United States cancels a
naturalized citizen's certificate of naturalization.
Subparagraph (A) or (B) shall not apply to any individual
unless the renunciation or voluntary relinquishment is
subsequently approved by the issuance to the individual of a
certificate of loss of nationality by the United States
Department of State.
``(4) Long-term resident.--The term `long-term resident'
has the meaning given to such term by section 877(e)(2).
``(f) Special Rules Applicable to Beneficiaries' Interests
in Trust.--
``(1) In general.--Except as provided in paragraph (2), if
an individual is determined under paragraph (3) to hold an
interest in a trust on the day before the expatriation date--
``(A) the individual shall not be treated as having sold
such interest,
``(B) such interest shall be treated as a separate share in
the trust, and
``(C)(i) such separate share shall be treated as a separate
trust consisting of the assets allocable to such share,
``(ii) the separate trust shall be treated as having sold
its assets on the day before the expatriation date for their
fair market value and as having distributed all of its assets
to the individual as of such time, and
``(iii) the individual shall be treated as having
recontributed the assets to the separate trust.
Subsection (a)(2) shall apply to any income, gain, or loss of
the individual arising from a distribution described in
subparagraph (C)(ii). In determining the amount of such
distribution, proper adjustments shall be made for
liabilities of the trust allocable to an individual's share
in the trust.
``(2) Special rules for interests in qualified trusts.--
``(A) In general.--If the trust interest described in
paragraph (1) is an interest in a qualified trust--
``(i) paragraph (1) and subsection (a) shall not apply, and
``(ii) in addition to any other tax imposed by this title,
there is hereby imposed on each distribution with respect to
such interest a tax in the amount determined under
subparagraph (B).
``(B) Amount of tax.--The amount of tax under subparagraph
(A)(ii) shall be equal to the lesser of--
``(i) the highest rate of tax imposed by section 1(e) for
the taxable year which includes the day before the
expatriation date, multiplied by the amount of the
distribution, or
``(ii) the balance in the deferred tax account immediately
before the distribution determined without regard to any
increases under subparagraph (C)(ii) after the 30th day
preceding the distribution.
``(C) Deferred tax account.--For purposes of subparagraph
(B)(ii)--
``(i) Opening balance.--The opening balance in a deferred
tax account with respect to any trust interest is an amount
equal to the tax which would have been imposed on the
allocable expatriation gain with respect to the trust
interest if such gain had been included in gross income under
subsection (a).
``(ii) Increase for interest.--The balance in the deferred
tax account shall be increased by the amount of interest
determined (on the balance in the account at the time the
interest accrues), for periods after the 90th day after the
expatriation date, by using the rates and method applicable
under section 6621 for underpayments of tax for such periods,
except that section 6621(a)(2) shall be applied by
substituting `5 percentage points' for `3 percentage points'
in subparagraph (B) thereof.
``(iii) Decrease for taxes previously paid.--The balance in
the tax deferred account shall be reduced--
``(I) by the amount of taxes imposed by subparagraph (A) on
any distribution to the person holding the trust interest,
and
``(II) in the case of a person holding a nonvested
interest, to the extent provided in regulations, by the
amount of taxes imposed by subparagraph (A) on distributions
from the trust with respect to nonvested interests not held
by such person.
``(D) Allocable expatriation gain.--For purposes of this
paragraph, the allocable expatriation gain with respect to
any beneficiary's interest in a trust is the amount of gain
which would be allocable to such beneficiary's vested and
nonvested interests in the trust if the beneficiary held
directly all assets allocable to such interests.
``(E) Tax deducted and withheld.--
``(i) In general.--The tax imposed by subparagraph (A)(ii)
shall be deducted and withheld by the trustees from the
distribution to which it relates.
``(ii) Exception where failure to waive treaty rights.--If
an amount may not be deducted and withheld under clause (i)
by reason of the distributee failing to waive any treaty
right with respect to such distribution--
``(I) the tax imposed by subparagraph (A)(ii) shall be
imposed on the trust and each trustee shall be personally
liable for the amount of such tax, and
``(II) any other beneficiary of the trust shall be entitled
to recover from the distributee the amount of such tax
imposed on the other beneficiary.
``(F) Disposition.--If a trust ceases to be a qualified
trust at any time, a covered expatriate disposes of an
interest in a qualified trust, or a covered expatriate
holding an interest in a qualified trust dies, then, in lieu
of the tax imposed by subparagraph (A)(ii), there is hereby
imposed a tax equal to the lesser of--
``(i) the tax determined under paragraph (1) as if the day
before the expatriation date were the date of such cessation,
disposition, or death, whichever is applicable, or
``(ii) the balance in the tax deferred account immediately
before such date.
Such tax shall be imposed on the trust and each trustee shall
be personally liable for the amount of such tax and any other
beneficiary of the trust shall be entitled to recover from
the covered expatriate or the estate the amount of such tax
imposed on the other beneficiary.
``(G) Definitions and special rules.--For purposes of this
paragraph--
``(i) Qualified trust.--The term `qualified trust' means a
trust which is described in section 7701(a)(30)(E).
``(ii) Vested interest.--The term `vested interest' means
any interest which, as of the day before the expatriation
date, is vested in the beneficiary.
``(iii) Nonvested interest.--The term `nonvested interest'
means, with respect to any beneficiary, any interest in a
trust which is not a vested interest. Such interest shall be
determined by assuming the maximum exercise of discretion in
favor of the beneficiary and the occurrence of all
contingencies in favor of the beneficiary.
``(iv) Adjustments.--The Secretary may provide for such
adjustments to the bases of assets in a trust or a deferred
tax account, and the timing of such adjustments, in order to
ensure that gain is taxed only once.
``(v) Coordination with retirement plan rules.--This
subsection shall not apply to an interest in a trust which is
part of a retirement plan to which subsection (d)(2) applies.
``(3) Determination of beneficiaries' interest in trust.--
``(A) Determinations under paragraph (1).--For purposes of
paragraph (1), a beneficiary's interest in a trust shall be
based upon all relevant facts and circumstances, including
the terms of the trust instrument and any letter of wishes or
similar document, historical patterns of trust distributions,
and the existence of and functions performed by a trust
protector or any similar adviser.
``(B) Other determinations.--For purposes of this section--
``(i) Constructive ownership.--If a beneficiary of a trust
is a corporation, partnership, trust, or estate, the
shareholders, partners, or beneficiaries shall be deemed to
be the trust beneficiaries for purposes of this section.
``(ii) Taxpayer return position.--A taxpayer shall clearly
indicate on its income tax return--
``(I) the methodology used to determine that taxpayer's
trust interest under this section, and
``(II) if the taxpayer knows (or has reason to know) that
any other beneficiary of such
[[Page H4417]]
trust is using a different methodology to determine such
beneficiary's trust interest under this section.
``(g) Termination of Deferrals, etc.--In the case of any
covered expatriate, notwithstanding any other provision of
this title--
``(1) any period during which recognition of income or gain
is deferred shall terminate on the day before the
expatriation date, and
``(2) any extension of time for payment of tax shall cease
to apply on the day before the expatriation date and the
unpaid portion of such tax shall be due and payable at the
time and in the manner prescribed by the Secretary.
``(h) Imposition of Tentative Tax.--
``(1) In general.--If an individual is required to include
any amount in gross income under subsection (a) for any
taxable year, there is hereby imposed, immediately before the
expatriation date, a tax in an amount equal to the amount of
tax which would be imposed if the taxable year were a short
taxable year ending on the expatriation date.
``(2) Due date.--The due date for any tax imposed by
paragraph (1) shall be the 90th day after the expatriation
date.
``(3) Treatment of tax.--Any tax paid under paragraph (1)
shall be treated as a payment of the tax imposed by this
chapter for the taxable year to which subsection (a) applies.
``(4) Deferral of tax.--The provisions of subsection (b)
shall apply to the tax imposed by this subsection to the
extent attributable to gain includible in gross income by
reason of this section.
``(i) Special Liens for Deferred Tax Amounts.--
``(1) Imposition of lien.--
``(A) In general.--If a covered expatriate makes an
election under subsection (a)(4) or (b) which results in the
deferral of any tax imposed by reason of subsection (a), the
deferred amount (including any interest, additional amount,
addition to tax, assessable penalty, and costs attributable
to the deferred amount) shall be a lien in favor of the
United States on all property of the expatriate located in
the United States (without regard to whether this section
applies to the property).
``(B) Deferred amount.--For purposes of this subsection,
the deferred amount is the amount of the increase in the
covered expatriate's income tax which, but for the election
under subsection (a)(4) or (b), would have occurred by reason
of this section for the taxable year including the
expatriation date.
``(2) Period of lien.--The lien imposed by this subsection
shall arise on the expatriation date and continue until--
``(A) the liability for tax by reason of this section is
satisfied or has become unenforceable by reason of lapse of
time, or
``(B) it is established to the satisfaction of the
Secretary that no further tax liability may arise by reason
of this section.
``(3) Certain rules apply.--The rules set forth in
paragraphs (1), (3), and (4) of section 6324A(d) shall apply
with respect to the lien imposed by this subsection as if it
were a lien imposed by section 6324A.
``(j) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''.
(b) Inclusion in Income of Gifts and Bequests Received by
United States Citizens and Residents From Expatriates.--
Section 102 (relating to gifts, etc. not included in gross
income) is amended by adding at the end the following new
subsection:
``(d) Gifts and Inheritances From Covered Expatriates.--
``(1) In general.--Subsection (a) shall not exclude from
gross income the value of any property acquired by gift,
bequest, devise, or inheritance from a covered expatriate
after the expatriation date. For purposes of this subsection,
any term used in this subsection which is also used in
section 877A shall have the same meaning as when used in
section 877A.
``(2) Exceptions for transfers otherwise subject to estate
or gift tax.--Paragraph (1) shall not apply to any property
if either--
``(A) the gift, bequest, devise, or inheritance is--
``(i) shown on a timely filed return of tax imposed by
chapter 12 as a taxable gift by the covered expatriate, or
``(ii) included in the gross estate of the covered
expatriate for purposes of chapter 11 and shown on a timely
filed return of tax imposed by chapter 11 of the estate of
the covered expatriate, or
``(B) no such return was timely filed but no such return
would have been required to be filed even if the covered
expatriate were a citizen or long-term resident of the United
States.''.
(c) Definition of Termination of United States
Citizenship.--Section 7701(a) is amended by adding at the end
the following new paragraph:
``(48) Termination of united states citizenship.--
``(A) In general.--An individual shall not cease to be
treated as a United States citizen before the date on which
the individual's citizenship is treated as relinquished under
section 877A(e)(3).
``(B) Dual citizens.--Under regulations prescribed by the
Secretary, subparagraph (A) shall not apply to an individual
who became at birth a citizen of the United States and a
citizen of another country.''.
(d) Conforming Amendments.--
(1) Section 877 is amended by adding at the end the
following new subsection:
``(g) Application.--This section shall not apply to an
expatriate (as defined in section 877A(e)) whose expatriation
date (as so defined) occurs after the date of the enactment
of this subsection.''.
(2) Section 2107 is amended by adding at the end the
following new subsection:
``(f) Application.--This section shall not apply to any
expatriate subject to section 877A.''.
(3) Section 2501(a)(3) is amended by adding at the end the
following new subparagraph:
``(F) Application.--This paragraph shall not apply to any
expatriate subject to section 877A.''.
(4)(A) Paragraph (1) of section 6039G(d) is amended by
inserting ``or 877A'' after ``section 877''.
(B) The second sentence of section 6039G(e) is amended by
inserting ``or who relinquishes United States citizenship
(within the meaning of section 877A(e)(3))'' after
``877(a))''.
(C) Section 6039G(f) is amended by inserting ``or
877A(e)(2)(B)'' after ``877(e)(1)''.
(e) Clerical Amendment.--The table of sections for subpart
A of part II of subchapter N of chapter 1 is amended by
inserting after the item relating to section 877 the
following new item:
``Sec. 877A. Tax responsibilities of expatriation.''.
(f) Effective Date.--
(1) In general.--Except as provided in this subsection, the
amendments made by this section shall apply to expatriates
(within the meaning of section 877A(e) of the Internal
Revenue Code of 1986, as added by this section) whose
expatriation date (as so defined) occurs after the date of
the enactment of this Act.
(2) Gifts and bequests.--Section 102(d) of the Internal
Revenue Code of 1986 (as added by subsection (b)) shall apply
to gifts and bequests received after the date of the
enactment of this Act, from an individual or the estate of an
individual whose expatriation date (as so defined) occurs
after such date.
(3) Due date for tentative tax.--The due date under section
877A(h)(2) of the Internal Revenue Code of 1986, as added by
this section, shall in no event occur before the 90th day
after the date of the enactment of this Act.
Subtitle B--Corporate Expatriation
SEC. 511. PREVENTION OF CORPORATE EXPATRIATION TO AVOID
UNITED STATES INCOME TAX.
(a) In General.--Paragraph (4) of section 7701(a) of the
Internal Revenue Code of 1986 (defining domestic) is amended
to read as follows:
``(4) Domestic.--
``(A) In general.--Except as provided in subparagraph (B),
the term `domestic' when applied to a corporation or
partnership means created or organized in the United States
or under the law of the United States or of any State unless,
in the case of a partnership, the Secretary provides
otherwise by regulations.
``(B) Certain corporations treated as domestic.--
``(i) In general.--The acquiring corporation in a corporate
expatriation transaction shall be treated as a domestic
corporation.
``(ii) Corporate expatriation transaction.--For purposes of
this subparagraph, the term `corporate expatriation
transaction' means any transaction if--
``(I) a nominally foreign corporation (referred to in this
subparagraph as the `acquiring corporation') acquires, as a
result of such transaction, directly or indirectly
substantially all of the properties held directly or
indirectly by a domestic corporation, and
``(II) immediately after the transaction, more than 80
percent of the stock (by vote or value) of the acquiring
corporation is held by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation.
``(iii) Lower stock ownership requirement in certain
cases.--Subclause (II) of clause (ii) shall be applied by
substituting `50 percent' for `80 percent' with respect to
any nominally foreign corporation if--
``(I) such corporation does not have substantial business
activities (when compared to the total business activities of
the expanded affiliated group) in the foreign country in
which or under the law of which the corporation is created or
organized, and
``(II) the stock of the corporation is publicly traded and
the principal market for the public trading of such stock is
in the United States.
``(iv) Partnership transactions.--The term `corporate
expatriation transaction' includes any transaction if--
``(I) a nominally foreign corporation (referred to in this
subparagraph as the `acquiring corporation') acquires, as a
result of such transaction, directly or indirectly properties
constituting a trade or business of a domestic partnership,
``(II) immediately after the transaction, more than 80
percent of the stock (by vote or value) of the acquiring
corporation is held by former partners of the domestic
partnership or related foreign partnerships (determined
without regard to stock of the acquiring corporation which is
sold in a public offering related to the transaction), and
``(III) the acquiring corporation meets the requirements of
subclauses (I) and (II) of clause (iii).
``(v) Special rules.--For purposes of this subparagraph--
``(I) a series of related transactions shall be treated as
1 transaction, and
[[Page H4418]]
``(II) stock held by members of the expanded affiliated
group which includes the acquiring corporation shall not be
taken into account in determining ownership.
``(vi) Other definitions.--For purposes of this
subparagraph--
``(I) Nominally foreign corporation.--The term `nominally
foreign corporation' means any corporation which would (but
for this subparagraph) be treated as a foreign corporation.
``(II) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group (as defined in
section 1504(a) without regard to section 1504(b)).
``(III) Related foreign partnership.--A foreign partnership
is related to a domestic partnership if they are under common
control (within the meaning of section 482), or they shared
the same trademark or tradename.''
(b) Effective Dates.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2004.
TITLE VI--OTHER REVENUE OFFSETS
Subtitle A--Provisions Designed To Curtail Tax Shelters
SEC. 601. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.
(a) In General.--Section 7701 is amended by redesignating
subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:
``(n) Clarification of Economic Substance Doctrine; Etc.--
``(1) General rules.--
``(A) In general.--In any case in which a court determines
that the economic substance doctrine is relevant for purposes
of this title to a transaction (or series of transactions),
such transaction (or series of transactions) shall have
economic substance only if the requirements of this paragraph
are met.
``(B) Definition of economic substance.--For purposes of
subparagraph (A)--
``(i) In general.--A transaction has economic substance
only if--
``(I) the transaction changes in a meaningful way (apart
from Federal tax effects) the taxpayer's economic position,
and
``(II) the taxpayer has a substantial nontax purpose for
entering into such transaction and the transaction is a
reasonable means of accomplishing such purpose.
In applying subclause (II), a purpose of achieving a
financial accounting benefit shall not be taken into account
in determining whether a transaction has a substantial nontax
purpose if the origin of such financial accounting benefit is
a reduction of income tax.
``(ii) Special rule where taxpayer relies on profit
potential.--A transaction shall not be treated as having
economic substance by reason of having a potential for profit
unless--
``(I) the present value of the reasonably expected pre-tax
profit from the transaction is substantial in relation to the
present value of the expected net tax benefits that would be
allowed if the transaction were respected, and
``(II) the reasonably expected pre-tax profit from the
transaction exceeds a risk-free rate of return.
``(C) Treatment of fees and foreign taxes.--Fees and other
transaction expenses and foreign taxes shall be taken into
account as expenses in determining pre-tax profit under
subparagraph (B)(ii).
``(2) Special rules for transactions with tax-indifferent
parties.--
``(A) Special rules for financing transactions.--The form
of a transaction which is in substance the borrowing of money
or the acquisition of financial capital directly or
indirectly from a tax-indifferent party shall not be
respected if the present value of the deductions to be
claimed with respect to the transaction is substantially in
excess of the present value of the anticipated economic
returns of the person lending the money or providing the
financial capital. A public offering shall be treated as a
borrowing, or an acquisition of financial capital, from a
tax-indifferent party if it is reasonably expected that at
least 50 percent of the offering will be placed with tax-
indifferent parties.
``(B) Artificial income shifting and basis adjustments.--
The form of a transaction with a tax-indifferent party shall
not be respected if--
``(i) it results in an allocation of income or gain to the
tax-indifferent party in excess of such party's economic
income or gain, or
``(ii) it results in a basis adjustment or shifting of
basis on account of overstating the income or gain of the
tax-indifferent party.
``(3) Definitions and special rules.--For purposes of this
subsection--
``(A) Economic substance doctrine.--The term `economic
substance doctrine' means the common law doctrine under which
tax benefits under subtitle A with respect to a transaction
are not allowable if the transaction does not have economic
substance or lacks a business purpose.
``(B) Tax-indifferent party.--The term `tax-indifferent
party' means any person or entity not subject to tax imposed
by subtitle A. A person shall be treated as a tax-indifferent
party with respect to a transaction if the items taken into
account with respect to the transaction have no substantial
impact on such person's liability under subtitle A.
``(C) Exception for personal transactions of individuals.--
In the case of an individual, this subsection shall apply
only to transactions entered into in connection with a trade
or business or an activity engaged in for the production of
income.
``(D) Treatment of lessors.--In applying paragraph
(1)(B)(ii) to the lessor of tangible property subject to a
lease--
``(i) the expected net tax benefits with respect to the
leased property shall not include the benefits of--
``(I) depreciation,
``(II) any tax credit, or
``(III) any other deduction as provided in guidance by the
Secretary, and
``(ii) subclause (II) of paragraph (1)(B)(ii) shall be
disregarded in determining whether any of such benefits are
allowable.
``(4) Other common law doctrines not affected.--Except as
specifically provided in this subsection, the provisions of
this subsection shall not be construed as altering or
supplanting any other rule of law, and the requirements of
this subsection shall be construed as being in addition to
any such other rule of law.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this subsection. Such regulations may include
exemptions from the application of this subsection.''.
(b) Effective Date.--The amendments made by this section
shall apply to transactions entered into after the date of
the enactment of this Act.
SEC. 602. PENALTY FOR FAILING TO DISCLOSE REPORTABLE
TRANSACTION.
(a) In General.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by inserting
after section 6707 the following new section:
``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE
TRANSACTION INFORMATION WITH RETURN OR
STATEMENT.
``(a) Imposition of Penalty.--Any person who fails to
include on any return or statement any information with
respect to a reportable transaction which is required under
section 6011 to be included with such return or statement
shall pay a penalty in the amount determined under subsection
(b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the amount of the penalty under subsection (a) shall be
$50,000.
``(2) Listed transaction.--The amount of the penalty under
subsection (a) with respect to a listed transaction shall be
$100,000.
``(3) Increase in penalty for large entities and high net
worth individuals.--
``(A) In general.--In the case of a failure under
subsection (a) by--
``(i) a large entity, or
``(ii) a high net worth individual,
the penalty under paragraph (1) or (2) shall be twice the
amount determined without regard to this paragraph.
``(B) Large entity.--For purposes of subparagraph (A), the
term `large entity' means, with respect to any taxable year,
a person (other than a natural person) with gross receipts in
excess of $10,000,000 for the taxable year in which the
reportable transaction occurs or the preceding taxable year.
Rules similar to the rules of paragraph (2) and subparagraphs
(B), (C), and (D) of paragraph (3) of section 448(c) shall
apply for purposes of this subparagraph.
``(C) High net worth individual.--For purposes of
subparagraph (A), the term `high net worth individual' means,
with respect to a reportable transaction, a natural person
whose net worth exceeds $2,000,000 immediately before the
transaction.
``(c) Definitions.--For purposes of this section--
``(1) Reportable transaction.--The term `reportable
transaction' means any transaction with respect to which
information is required to be included with a return or
statement because, as determined under regulations prescribed
under section 6011, such transaction is of a type which the
Secretary determines as having a potential for tax avoidance
or evasion.
``(2) Listed transaction.--Except as provided in
regulations, the term `listed transaction' means a reportable
transaction which is the same as, or substantially similar
to, a transaction specifically identified by the Secretary as
a tax avoidance transaction for purposes of section 6011.
``(d) Authority To Rescind Penalty.--
``(1) In general.--The Commissioner of Internal Revenue may
rescind all or any portion of any penalty imposed by this
section with respect to any violation if--
``(A) the violation is with respect to a reportable
transaction other than a listed transaction,
``(B) the person on whom the penalty is imposed has a
history of complying with the requirements of this title,
``(C) it is shown that the violation is due to an
unintentional mistake of fact;
``(D) imposing the penalty would be against equity and good
conscience, and
``(E) rescinding the penalty would promote compliance with
the requirements of this title and effective tax
administration.
``(2) Discretion.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the
Commissioner and may be delegated only to the head of the
Office of Tax Shelter Analysis. The Commissioner, in the
Commissioner's sole discretion, may establish a procedure to
determine if a penalty should be referred to the Commissioner
or
[[Page H4419]]
the head of such Office for a determination under paragraph
(1).
``(3) No appeal.--Notwithstanding any other provision of
law, any determination under this subsection may not be
reviewed in any administrative or judicial proceeding.
``(4) Records.--If a penalty is rescinded under paragraph
(1), the Commissioner shall place in the file in the Office
of the Commissioner the opinion of the Commissioner or the
head of the Office of Tax Shelter Analysis with respect to
the determination, including--
``(A) the facts and circumstances of the transaction,
``(B) the reasons for the rescission, and
``(C) the amount of the penalty rescinded.
``(5) Report.--The Commissioner shall each year report to
the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate--
``(A) a summary of the total number and aggregate amount of
penalties imposed, and rescinded, under this section, and
``(B) a description of each penalty rescinded under this
subsection and the reasons therefor.
``(e) Penalty Reported to SEC.--In the case of a person--
``(1) which is required to file periodic reports under
section 13 or 15(d) of the Securities Exchange Act of 1934 or
is required to be consolidated with another person for
purposes of such reports, and
``(2) which--
``(A) is required to pay a penalty under this section with
respect to a listed transaction,
``(B) is required to pay a penalty under section 6662A with
respect to any reportable transaction at a rate prescribed
under section 6662A(c), or
``(C) is required to pay a penalty under section 6662B with
respect to any noneconomic substance transaction,
the requirement to pay such penalty shall be disclosed in
such reports filed by such person for such periods as the
Secretary shall specify. Failure to make a disclosure in
accordance with the preceding sentence shall be treated as a
failure to which the penalty under subsection (b)(2) applies.
``(f) Coordination With Other Penalties.--The penalty
imposed by this section is in addition to any penalty imposed
under this title.''.
(b) Disclosure by Secretary.--
(1) In general.--Section 6103 is amended by redesignating
subsection (q) as subsection (r) and by inserting after
subsection (p) the following new subsection:
``(q) Disclosure Relating to Payments of Certain
Penalties.--Notwithstanding any other provision of this
section, the Secretary shall make public the name of any
person required to pay a penalty described in section
6707A(e)(2) and the amount of the penalty.''.
(2) Records.--Section 6103(p)(3)(A) is amended by striking
``or (n)'' and inserting ``(n), or (q)''.
(c) Conforming Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by inserting after
the item relating to section 6707 the following:
``Sec. 6707A. Penalty for failure to include reportable transaction
information with return or statement.''.
(d) Effective Date.--The amendments made by this section
shall apply to returns and statements the due date for which
is after the date of the enactment of this Act.
SEC. 603. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS
AND OTHER REPORTABLE TRANSACTIONS HAVING A
SIGNIFICANT TAX AVOIDANCE PURPOSE.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662 the following new section:
``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERSTATEMENTS WITH RESPECT TO REPORTABLE
TRANSACTIONS.
``(a) Imposition of Penalty.--If a taxpayer has a
reportable transaction understatement for any taxable year,
there shall be added to the tax an amount equal to 20 percent
of the amount of such understatement.
``(b) Reportable Transaction Understatement.--For purposes
of this section--
``(1) In general.--The term `reportable transaction
understatement' means the sum of--
``(A) the product of--
``(i) the amount of the increase (if any) in taxable income
which results from a difference between the proper tax
treatment of an item to which this section applies and the
taxpayer's treatment of such item (as shown on the taxpayer's
return of tax), and
``(ii) the highest rate of tax imposed by section 1
(section 11 in the case of a taxpayer which is a
corporation), and
``(B) the amount of the decrease (if any) in the aggregate
amount of credits determined under subtitle A which results
from a difference between the taxpayer's treatment of an item
to which this section applies (as shown on the taxpayer's
return of tax) and the proper tax treatment of such item.
For purposes of subparagraph (A), any reduction of the excess
of deductions allowed for the taxable year over gross income
for such year, and any reduction in the amount of capital
losses which would (without regard to section 1211) be
allowed for such year, shall be treated as an increase in
taxable income.
``(2) Items to which section applies.--This section shall
apply to any item which is attributable to--
``(A) any listed transaction, and
``(B) any reportable transaction (other than a listed
transaction) if a significant purpose of such transaction is
the avoidance or evasion of Federal income tax.
``(c) Higher Penalty for Nondisclosed Listed and Other
Avoidance Transactions.--
``(1) In general.--Subsection (a) shall be applied by
substituting `30 percent' for `20 percent' with respect to
the portion of any reportable transaction understatement with
respect to which the requirement of section 6664(d)(2)(A) is
not met.
``(2) Rules applicable to assertion and compromise of
penalty.--
``(A) In general.--Only upon the approval by the Chief
Counsel for the Internal Revenue Service or the Chief
Counsel's delegate at the national office of the Internal
Revenue Service may a penalty to which paragraph (1) applies
be included in a 1st letter of proposed deficiency which
allows the taxpayer an opportunity for administrative review
in the Internal Revenue Service Office of Appeals. If such a
letter is provided to the taxpayer, only the Commissioner of
Internal Revenue may compromise all or any portion of such
penalty.
``(B) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
subparagraph (A).
``(d) Definitions of Reportable and Listed Transactions.--
For purposes of this section, the terms `reportable
transaction' and `listed transaction' have the respective
meanings given to such terms by section 6707A(c).
``(e) Special Rules.--
``(1) Coordination with penalties, etc., on other
understatements.--In the case of an understatement (as
defined in section 6662(d)(2))--
``(A) the amount of such understatement (determined without
regard to this paragraph) shall be increased by the aggregate
amount of reportable transaction understatements and
noneconomic substance transaction understatements for
purposes of determining whether such understatement is a
substantial understatement under section 6662(d)(1), and
``(B) the addition to tax under section 6662(a) shall apply
only to the excess of the amount of the substantial
understatement (if any) after the application of subparagraph
(A) over the aggregate amount of reportable transaction
understatements and noneconomic substance transaction
understatements.
``(2) Coordination with other penalties.--
``(A) Application of fraud penalty.--References to an
underpayment in section 6663 shall be treated as including
references to a reportable transaction understatement and a
noneconomic substance transaction understatement.
``(B) No double penalty.--This section shall not apply to
any portion of an understatement on which a penalty is
imposed under section 6662B or 6663.
``(3) Special rule for amended returns.--Except as provided
in regulations, in no event shall any tax treatment included
with an amendment or supplement to a return of tax be taken
into account in determining the amount of any reportable
transaction understatement or noneconomic substance
transaction understatement if the amendment or supplement is
filed after the earlier of the date the taxpayer is first
contacted by the Secretary regarding the examination of the
return or such other date as is specified by the Secretary.
``(4) Noneconomic substance transaction understatement.--
For purposes of this subsection, the term `noneconomic
substance transaction understatement' has the meaning given
such term by section 6662B(c).
``(5) Cross reference.--
``For reporting of section 6662A(c) penalty to the Securities and
Exchange Commission, see section 6707A(e).''.
(b) Determination of Other Understatements.--Subparagraph
(A) of section 6662(d)(2) is amended by adding at the end the
following flush sentence:
``The excess under the preceding sentence shall be determined
without regard to items to which section 6662A applies and
without regard to items with respect to which a penalty is
imposed by section 6662B.''.
(c) Reasonable Cause Exception.--
(1) In general.--Section 6664 is amended by adding at the
end the following new subsection:
``(d) Reasonable Cause Exception for Reportable Transaction
Understatements.--
``(1) In general.--No penalty shall be imposed under
section 6662A with respect to any portion of a reportable
transaction understatement if it is shown that there was a
reasonable cause for such portion and that the taxpayer acted
in good faith with respect to such portion.
``(2) Special rules.--Paragraph (1) shall not apply to any
reportable transaction understatement unless--
``(A) the relevant facts affecting the tax treatment of the
item are adequately disclosed in accordance with the
regulations prescribed under section 6011,
``(B) there is or was substantial authority for such
treatment, and
[[Page H4420]]
``(C) the taxpayer reasonably believed that such treatment
was more likely than not the proper treatment.
A taxpayer failing to adequately disclose in accordance with
section 6011 shall be treated as meeting the requirements of
subparagraph (A) if the penalty for such failure was
rescinded under section 6707A(d).
``(3) Rules relating to reasonable belief.--For purposes of
paragraph (2)(C)--
``(A) In general.--A taxpayer shall be treated as having a
reasonable belief with respect to the tax treatment of an
item only if such belief--
``(i) is based on the facts and law that exist at the time
the return of tax which includes such tax treatment is filed,
and
``(ii) relates solely to the taxpayer's chances of success
on the merits of such treatment and does not take into
account the possibility that a return will not be audited,
such treatment will not be raised on audit, or such treatment
will be resolved through settlement if it is raised.
``(B) Certain opinions may not be relied upon.--
``(i) In general.--An opinion of a tax advisor may not be
relied upon to establish the reasonable belief of a taxpayer
if--
``(I) the tax advisor is described in clause (ii), or
``(II) the opinion is described in clause (iii).
``(ii) Disqualified tax advisors.--A tax advisor is
described in this clause if the tax advisor--
``(I) is a material advisor (within the meaning of section
6111(b)(1)) who participates in the organization, management,
promotion, or sale of the transaction or who is related
(within the meaning of section 267(b) or 707(b)(1)) to any
person who so participates,
``(II) is compensated directly or indirectly by a material
advisor with respect to the transaction,
``(III) has a fee arrangement with respect to the
transaction which is contingent on all or part of the
intended tax benefits from the transaction being sustained,
``(IV) has an arrangement with respect to the transaction
which provides that contractual disputes between the taxpayer
and the advisor are to be settled by arbitration or which
limits damages by reference to fees paid to the advisor for
such transaction, or
``(V) as determined under regulations prescribed by the
Secretary, has a disqualifying financial interest with
respect to the transaction.
``(iii) Disqualified opinions.--For purposes of clause (i),
an opinion is disqualified if the opinion--
``(I) is based on unreasonable factual or legal assumptions
(including assumptions as to future events),
``(II) unreasonably relies on representations, statements,
findings, or agreements of the taxpayer or any other person,
``(III) does not identify and consider all relevant facts,
``(IV) is not signed by all individuals who are principal
authors of the opinion, or
``(V) fails to meet any other requirement as the Secretary
may prescribe.''.
(2) Conforming amendment.--The heading for subsection (c)
of section 6664 is amended by inserting ``for Underpayments''
after ``Exception''.
(d) Conforming Amendments.--
(1) Subparagraph (C) of section 461(i)(3) is amended by
striking ``section 6662(d)(2)(C)(iii)'' and inserting
``section 1274(b)(3)(C)''.
(2) Paragraph (3) of section 1274(b) is amended--
(A) by striking ``(as defined in section
6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
(B) by adding at the end the following new subparagraph:
``(C) Tax shelter.--For purposes of subparagraph (B), the
term `tax shelter' means--
``(i) a partnership or other entity,
``(ii) any investment plan or arrangement, or
``(iii) any other plan or arrangement,
if a significant purpose of such partnership, entity, plan,
or arrangement is the avoidance or evasion of Federal income
tax.''.
(3) Section 6662(d)(2) is amended by striking subparagraphs
(C) and (D).
(4) Section 6664(c)(1) is amended by striking ``this part''
and inserting ``section 6662 or 6663''.
(5) Subsection (b) of section 7525 is amended by striking
``section 6662(d)(2)(C)(iii)'' and inserting ``section
1274(b)(3)(C)''.
(6)(A) The heading for section 6662 is amended to read as
follows:
``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERPAYMENTS.''.
(B) The table of sections for part II of subchapter A of
chapter 68 is amended by striking the item relating to
section 6662 and inserting the following new items:
``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements
with respect to reportable transactions.''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 604. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662A the following new section:
``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
``(a) Imposition of Penalty.--If a taxpayer has an
noneconomic substance transaction understatement for any
taxable year, there shall be added to the tax an amount equal
to 40 percent of the amount of such understatement.
``(b) Reduction of Penalty for Disclosed Transactions.--
Subsection (a) shall be applied by substituting `20 percent'
for `40 percent' with respect to the portion of any
noneconomic substance transaction understatement with respect
to which the relevant facts affecting the tax treatment of
the item are adequately disclosed in the return or a
statement attached to the return.
``(c) Noneconomic Substance Transaction Understatement.--
For purposes of this section--
``(1) In general.--The term `noneconomic substance
transaction understatement' means any amount which would be
an understatement under section 6662A(b)(1) if section 6662A
were applied by taking into account items attributable to
noneconomic substance transactions rather than items to which
section 6662A would apply without regard to this paragraph.
``(2) Noneconomic substance transaction.--The term
`noneconomic substance transaction' means any transaction
if--
``(A) there is a lack of economic substance (within the
meaning of section 7701(n)(1)) for the transaction giving
rise to the claimed benefit or the transaction was not
respected under section 7701(n)(2), or
``(B) the transaction fails to meet the requirements of any
similar rule of law.
``(d) Rules Applicable To Compromise of Penalty.--
``(1) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which this section
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(2) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
paragraph (1).
``(e) Coordination With Other Penalties.--Except as
otherwise provided in this part, the penalty imposed by this
section shall be in addition to any other penalty imposed by
this title.
``(f) Cross References.--
``(1) For coordination of penalty with understatements under section
6662 and other special rules, see section 6662A(e).
``(2) For reporting of penalty imposed under this section to the
Securities and Exchange Commission, see section 6707A(e).''.
(b) Clerical Amendment.--The table of sections for part II
of subchapter A of chapter 68 is amended by inserting after
the item relating to section 6662A the following new item:
``Sec. 6662B. Penalty for understatements attributable to transactions
lacking economic substance, etc.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions entered into after the date of
the enactment of this Act.
SEC. 605. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY
FOR NONREPORTABLE TRANSACTIONS.
(a) Substantial Understatement of Corporations.--Section
6662(d)(1)(B) (relating to special rule for corporations) is
amended to read as follows:
``(B) Special rule for corporations.--In the case of a
corporation other than an S corporation or a personal holding
company (as defined in section 542), there is a substantial
understatement of income tax for any taxable year if the
amount of the understatement for the taxable year exceeds the
lesser of--
``(i) 10 percent of the tax required to be shown on the
return for the taxable year (or, if greater, $10,000), or
``(ii) $10,000,000.''.
(b) Reduction for Understatement of Taxpayer Due to
Position of Taxpayer or Disclosed Item.--
(1) In general.--Section 6662(d)(2)(B)(i) (relating to
substantial authority) is amended to read as follows:
``(i) the tax treatment of any item by the taxpayer if the
taxpayer had reasonable belief that the tax treatment was
more likely than not the proper treatment, or''.
(2) Conforming amendment.--Section 6662(d) is amended by
adding at the end the following new paragraph:
``(3) Secretarial list.--For purposes of this subsection,
section 6664(d)(2), and section 6694(a)(1), the Secretary may
prescribe a list of positions for which the Secretary
believes there is not substantial authority or there is no
reasonable belief that the tax treatment is more likely than
not the proper tax treatment. Such list (and any revisions
thereof) shall be published in the Federal Register or the
Internal Revenue Bulletin.''.
(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. 606. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES
RELATING TO TAXPAYER COMMUNICATIONS.
(a) In General.--Section 7525(b) (relating to section not
to apply to communications regarding corporate tax shelters)
is amended to read as follows:
[[Page H4421]]
``(b) Section Not To Apply to Communications Regarding Tax
Shelters.--The privilege under subsection (a) shall not apply
to any written communication which is--
``(1) between a federally authorized tax practitioner and--
``(A) any person,
``(B) any director, officer, employee, agent, or
representative of the person, or
``(C) any other person holding a capital or profits
interest in the person, and
``(2) in connection with the promotion of the direct or
indirect participation of the person in any tax shelter (as
defined in section 1274(b)(3)(C)).''.
(b) Effective Date.--The amendment made by this section
shall apply to communications made on or after the date of
the enactment of this Act.
SEC. 607. DISCLOSURE OF REPORTABLE TRANSACTIONS.
(a) In General.--Section 6111 (relating to registration of
tax shelters) is amended to read as follows:
``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.
``(a) In General.--Each material advisor with respect to
any reportable transaction shall make a return (in such form
as the Secretary may prescribe) setting forth--
``(1) information identifying and describing the
transaction,
``(2) information describing any potential tax benefits
expected to result from the transaction, and
``(3) such other information as the Secretary may
prescribe.
Such return shall be filed not later than the date specified
by the Secretary.
``(b) Definitions.--For purposes of this section--
``(1) Material advisor.--
``(A) In general.--The term `material advisor' means any
person--
``(i) who provides any material aid, assistance, or advice
with respect to organizing, managing, promoting, selling,
implementing, insuring, or carrying out any reportable
transaction, and
``(ii) who directly or indirectly derives gross income in
excess of the threshold amount for such aid, assistance, or
advice.
``(B) Threshold amount.--For purposes of subparagraph (A),
the threshold amount is--
``(i) $50,000 in the case of a reportable transaction
substantially all of the tax benefits from which are provided
to natural persons, and
``(ii) $250,000 in any other case.
``(2) Reportable transaction.--The term `reportable
transaction' has the meaning given to such term by section
6707A(c).
``(c) Regulations.--The Secretary may prescribe regulations
which provide--
``(1) that only 1 person shall be required to meet the
requirements of subsection (a) in cases in which 2 or more
persons would otherwise be required to meet such
requirements,
``(2) exemptions from the requirements of this section, and
``(3) such rules as may be necessary or appropriate to
carry out the purposes of this section.''.
(b) Conforming Amendments.--
(1) The item relating to section 6111 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6111. Disclosure of reportable transactions.''.
(2)(A) So much of section 6112 as precedes subsection (c)
thereof is amended to read as follows:
``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS
MUST KEEP LISTS OF ADVISEES.
``(a) In General.--Each material advisor (as defined in
section 6111) with respect to any reportable transaction (as
defined in section 6707A(c)) shall maintain, in such manner
as the Secretary may by regulations prescribe, a list--
``(1) identifying each person with respect to whom such
advisor acted as such a material advisor with respect to such
transaction, and
``(2) containing such other information as the Secretary
may by regulations require.
This section shall apply without regard to whether a material
advisor is required to file a return under section 6111 with
respect to such transaction.''.
(B) Section 6112 is amended by redesignating subsection (c)
as subsection (b).
(C) Section 6112(b), as redesignated by subparagraph (B),
is amended--
(i) by inserting ``written'' before ``request'' in
paragraph (1)(A), and
(ii) by striking ``shall prescribe'' in paragraph (2) and
inserting ``may prescribe''.
(D) The item relating to section 6112 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6112. Material advisors of reportable transactions must keep
lists of advisees.''.
(3)(A) The heading for section 6708 is amended to read as
follows:
``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH
RESPECT TO REPORTABLE TRANSACTIONS.''.
(B) The item relating to section 6708 in the table of
sections for part I of subchapter B of chapter 68 is amended
to read as follows:
``Sec. 6708. Failure to maintain lists of advisees with respect to
reportable transactions.''.
(c) Required Disclosure Not Subject to Claim of
Confidentiality.--Subparagraph (A) of section 6112(b)(1), as
redesignated by subsection (b)(2)(B), is amended by adding at
the end the following new flush sentence:
``For purposes of this section, the identity of any person on
such list shall not be privileged.''.
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to transactions
with respect to which material aid, assistance, or advice
referred to in section 6111(b)(1)(A)(i) of the Internal
Revenue Code of 1986 (as added by this section) is provided
after the date of the enactment of this Act.
(2) No claim of confidentiality against disclosure.--The
amendment made by subsection (c) shall take effect as if
included in the amendments made by section 142 of the Deficit
Reduction Act of 1984.
SEC. 608. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER
TAX SHELTERS.
(a) In General.--Section 6707 (relating to failure to
furnish information regarding tax shelters) is amended to
read as follows:
``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING
REPORTABLE TRANSACTIONS.
``(a) In General.--If a person who is required to file a
return under section 6111(a) with respect to any reportable
transaction--
``(1) fails to file such return on or before the date
prescribed therefor, or
``(2) files false or incomplete information with the
Secretary with respect to such transaction,
such person shall pay a penalty with respect to such return
in the amount determined under subsection (b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraph (2), the
penalty imposed under subsection (a) with respect to any
failure shall be $50,000.
``(2) Listed transactions.--The penalty imposed under
subsection (a) with respect to any listed transaction shall
be an amount equal to the greater of--
``(A) $200,000, or
``(B) 50 percent of the gross income derived by such person
with respect to aid, assistance, or advice which is provided
with respect to the listed transaction before the date the
return including the transaction is filed under section 6111.
Subparagraph (B) shall be applied by substituting `75
percent' for `50 percent' in the case of an intentional
failure or act described in subsection (a).
``(c) Certain Rules To Apply.--The provisions of section
6707A(d) shall apply to any penalty imposed under this
section.
``(d) Reportable and Listed Transactions.--The terms
`reportable transaction' and `listed transaction' have the
respective meanings given to such terms by section
6707A(c).''.
(b) Clerical Amendment.--The item relating to section 6707
in the table of sections for part I of subchapter B of
chapter 68 is amended by striking ``tax shelters'' and
inserting ``reportable transactions''.
(c) Effective Date.--The amendments made by this section
shall apply to returns the due date for which is after the
date of the enactment of this Act.
SEC. 609. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN
LISTS OF INVESTORS.
(a) In General.--Subsection (a) of section 6708 is amended
to read as follows:
``(a) Imposition of Penalty.--
``(1) In general.--If any person who is required to
maintain a list under section 6112(a) fails to make such list
available upon written request to the Secretary in accordance
with section 6112(b)(1)(A) within 20 business days after the
date of the Secretary's request, such person shall pay a
penalty of $10,000 for each day of such failure after such
20th day.
``(2) Reasonable cause exception.--No penalty shall be
imposed by paragraph (1) with respect to the failure on any
day if such failure is due to reasonable cause.''.
(b) Effective Date.--The amendment made by this section
shall apply to requests made after the date of the enactment
of this Act.
SEC. 610. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT
RELATED TO TAX SHELTERS AND REPORTABLE
TRANSACTIONS.
(a) In General.--Section 7408 (relating to action to enjoin
promoters of abusive tax shelters, etc.) is amended by
redesignating subsection (c) as subsection (d) and by
striking subsections (a) and (b) and inserting the following
new subsections:
``(a) Authority To Seek Injunction.--A civil action in the
name of the United States to enjoin any person from further
engaging in specified conduct may be commenced at the request
of the Secretary. Any action under this section shall be
brought in the district court of the United States for the
district in which such person resides, has his principal
place of business, or has engaged in specified conduct. The
court may exercise its jurisdiction over such action (as
provided in section 7402(a)) separate and apart from any
other action brought by the United States against such
person.
``(b) Adjudication and Decree.--In any action under
subsection (a), if the court finds--
``(1) that the person has engaged in any specified conduct,
and
``(2) that injunctive relief is appropriate to prevent
recurrence of such conduct,
the court may enjoin such person from engaging in such
conduct or in any other activity subject to penalty under
this title.
``(c) Specified Conduct.--For purposes of this section, the
term `specified conduct'
[[Page H4422]]
means any action, or failure to take action, which is--
``(1) subject to penalty under section 6700, 6701, 6707, or
6708, or
``(2) in violation of any requirement under regulations
issued under section 320 of title 31, United States Code.''.
(b) Conforming Amendments.--
(1) The heading for section 7408 is amended to read as
follows:
``SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RELATED TO
TAX SHELTERS AND REPORTABLE TRANSACTIONS.''.
(2) The table of sections for subchapter A of chapter 67 is
amended by striking the item relating to section 7408 and
inserting the following new item:
``Sec. 7408. Actions to enjoin specified conduct related to tax
shelters and reportable transactions.''.
(c) Effective Date.--The amendment made by this section
shall take effect on the day after the date of the enactment
of this Act.
SEC. 611. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME
TAX RETURN PREPARER.
(a) Standards Conformed to Taxpayer Standards.--Section
6694(a) (relating to understatements due to unrealistic
positions) is amended--
(1) by striking ``realistic possibility of being sustained
on its merits'' in paragraph (1) and inserting ``reasonable
belief that the tax treatment in such position was more
likely than not the proper treatment'',
(2) by striking ``or was frivolous'' in paragraph (3) and
inserting ``or there was no reasonable basis for the tax
treatment of such position'', and
(3) by striking ``Unrealistic'' in the heading and
inserting ``Improper''.
(b) Amount of Penalty.--Section 6694 is amended--
(1) by striking ``$250'' in subsection (a) and inserting
``$1,000'', and
(2) by striking ``$1,000'' in subsection (b) and inserting
``$5,000''.
(c) Effective Date.--The amendments made by this section
shall apply to documents prepared after the date of the
enactment of this Act.
SEC. 612. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN
FINANCIAL ACCOUNTS.
(a) In General.--Section 5321(a)(5) of title 31, United
States Code, is amended to read as follows:
``(5) Foreign financial agency transaction violation.--
``(A) Penalty authorized.--The Secretary of the Treasury
may impose a civil money penalty on any person who violates,
or causes any violation of, any provision of section 5314.
``(B) Amount of penalty.--
``(i) In general.--Except as provided in subparagraph (C),
the amount of any civil penalty imposed under subparagraph
(A) shall not exceed $10,000.
``(ii) Reasonable cause exception.--No penalty shall be
imposed under subparagraph (A) with respect to any violation
if--
``(I) such violation was due to reasonable cause, and
``(II) the amount of the transaction or the balance in the
account at the time of the transaction was properly reported.
``(C) Willful violations.--In the case of any person
willfully violating, or willfully causing any violation of,
any provision of section 5314--
``(i) the maximum penalty under subparagraph (B)(i) shall
be increased to the greater of--
``(I) $100,000, or
``(II) 50 percent of the amount determined under
subparagraph (D), and
``(ii) subparagraph (B)(ii) shall not apply.
``(D) Amount.--The amount determined under this
subparagraph is--
``(i) in the case of a violation involving a transaction,
the amount of the transaction, or
``(ii) in the case of a violation involving a failure to
report the existence of an account or any identifying
information required to be provided with respect to an
account, the balance in the account at the time of the
violation.''.
(b) Effective Date.--The amendment made by this section
shall apply to violations occurring after the date of the
enactment of this Act.
SEC. 613. FRIVOLOUS TAX SUBMISSIONS.
(a) Civil Penalties.--Section 6702 is amended to read as
follows:
``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
``(a) Civil Penalty for Frivolous Tax Returns.--A person
shall pay a penalty of $5,000 if--
``(1) such person files what purports to be a return of a
tax imposed by this title but which--
``(A) does not contain information on which the substantial
correctness of the self-assessment may be judged, or
``(B) contains information that on its face indicates that
the self-assessment is substantially incorrect; and
``(2) the conduct referred to in paragraph (1)--
``(A) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(B) reflects a desire to delay or impede the
administration of Federal tax laws.
``(b) Civil Penalty for Specified Frivolous Submissions.--
``(1) Imposition of penalty.--Except as provided in
paragraph (3), any person who submits a specified frivolous
submission shall pay a penalty of $5,000.
``(2) Specified frivolous submission.--For purposes of this
section--
``(A) Specified frivolous submission.--The term `specified
frivolous submission' means a specified submission if any
portion of such submission--
``(i) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(ii) reflects a desire to delay or impede the
administration of Federal tax laws.
``(B) Specified submission.--The term `specified
submission' means--
``(i) a request for a hearing under--
``(I) section 6320 (relating to notice and opportunity for
hearing upon filing of notice of lien), or
``(II) section 6330 (relating to notice and opportunity for
hearing before levy), and
``(ii) an application under--
``(I) section 6159 (relating to agreements for payment of
tax liability in installments),
``(II) section 7122 (relating to compromises), or
``(III) section 7811 (relating to taxpayer assistance
orders).
``(3) Opportunity to withdraw submission.--If the Secretary
provides a person with notice that a submission is a
specified frivolous submission and such person withdraws such
submission within 30 days after such notice, the penalty
imposed under paragraph (1) shall not apply with respect to
such submission.
``(c) Listing of Frivolous Positions.--The Secretary shall
prescribe (and periodically revise) a list of positions which
the Secretary has identified as being frivolous for purposes
of this subsection. The Secretary shall not include in such
list any position that the Secretary determines meets the
requirement of section 6662(d)(2)(B)(ii)(II).
``(d) Reduction of Penalty.--The Secretary may reduce the
amount of any penalty imposed under this section if the
Secretary determines that such reduction would promote
compliance with and administration of the Federal tax laws.
``(e) Penalties in Addition to Other Penalties.--The
penalties imposed by this section shall be in addition to any
other penalty provided by law.''.
(b) Treatment of Frivolous Requests for Hearings Before
Levy.--
(1) Frivolous requests disregarded.--Section 6330 (relating
to notice and opportunity for hearing before levy) is amended
by adding at the end the following new subsection:
``(g) Frivolous Requests for Hearing, etc.--Notwithstanding
any other provision of this section, if the Secretary
determines that any portion of a request for a hearing under
this section or section 6320 meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such
portion shall not be subject to any further administrative or
judicial review.''.
(2) Preclusion from raising frivolous issues at hearing.--
Section 6330(c)(4) is amended--
(A) by striking ``(A)'' and inserting ``(A)(i)'';
(B) by striking ``(B)'' and inserting ``(ii)'';
(C) by striking the period at the end of the first sentence
and inserting ``; or''; and
(D) by inserting after subparagraph (A)(ii) (as so
redesignated) the following:
``(B) the issue meets the requirement of clause (i) or (ii)
of section 6702(b)(2)(A).''.
(3) Statement of grounds.--Section 6330(b)(1) is amended by
striking ``under subsection (a)(3)(B)'' and inserting ``in
writing under subsection (a)(3)(B) and states the grounds for
the requested hearing''.
(c) Treatment of Frivolous Requests for Hearings Upon
Filing of Notice of Lien.--Section 6320 is amended--
(1) in subsection (b)(1), by striking ``under subsection
(a)(3)(B)'' and inserting ``in writing under subsection
(a)(3)(B) and states the grounds for the requested hearing'',
and
(2) in subsection (c), by striking ``and (e)'' and
inserting ``(e), and (g)''.
(d) Treatment of Frivolous Applications for Offers-in-
Compromise and Installment Agreements.--Section 7122 is
amended by adding at the end the following new subsection:
``(e) Frivolous Submissions, etc.--Notwithstanding any
other provision of this section, if the Secretary determines
that any portion of an application for an offer-in-compromise
or installment agreement submitted under this section or
section 6159 meets the requirement of clause (i) or (ii) of
section 6702(b)(2)(A), then the Secretary may treat such
portion as if it were never submitted and such portion shall
not be subject to any further administrative or judicial
review.''.
(e) Clerical Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by striking the item
relating to section 6702 and inserting the following new
item:
``Sec. 6702. Frivolous tax submissions.''.
(f) Effective Date.--The amendments made by this section
shall apply to submissions made and issues raised after the
date on which the Secretary first prescribes a list under
section 6702(c) of the Internal Revenue Code of 1986, as
amended by subsection (a).
SEC. 614. REGULATION OF INDIVIDUALS PRACTICING BEFORE THE
DEPARTMENT OF TREASURY.
(a) Censure; Imposition of Penalty.--
(1) In general.--Section 330(b) of title 31, United States
Code, is amended--
[[Page H4423]]
(A) by inserting ``, or censure,'' after ``Department'',
and
(B) by adding at the end the following new flush sentence:
``The Secretary may impose a monetary penalty on any
representative described in the preceding sentence. If the
representative was acting on behalf of an employer or any
firm or other entity in connection with the conduct giving
rise to such penalty, the Secretary may impose a monetary
penalty on such employer, firm, or entity if it knew, or
reasonably should have known, of such conduct. Such penalty
shall not exceed the gross income derived (or to be derived)
from the conduct giving rise to the penalty and may be in
addition to, or in lieu of, any suspension, disbarment, or
censure of the representative.''.
(2) Effective date.--The amendments made by this subsection
shall apply to actions taken after the date of the enactment
of this Act.
(b) Tax Shelter Opinions, etc.--Section 330 of such title
31 is amended by adding at the end the following new
subsection:
``(d) Nothing in this section or in any other provision of
law shall be construed to limit the authority of the
Secretary of the Treasury to impose standards applicable to
the rendering of written advice with respect to any entity,
transaction plan or arrangement, or other plan or
arrangement, which is of a type which the Secretary
determines as having a potential for tax avoidance or
evasion.''.
SEC. 615. PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.
(a) Penalty for Promoting Abusive Tax Shelters.--Section
6700 (relating to promoting abusive tax shelters, etc.) is
amended--
(1) by redesignating subsections (b) and (c) as subsections
(d) and (e), respectively,
(2) by striking ``a penalty'' and all that follows through
the period in the first sentence of subsection (a) and
inserting ``a penalty determined under subsection (b)'', and
(3) by inserting after subsection (a) the following new
subsections:
``(b) Amount of Penalty; Calculation of Penalty; Liability
for Penalty.--
``(1) Amount of penalty.--The amount of the penalty imposed
by subsection (a) shall not exceed 100 percent of the gross
income derived (or to be derived) from such activity by the
person or persons subject to such penalty.
``(2) Calculation of penalty.--The penalty amount
determined under paragraph (1) shall be calculated with
respect to each instance of an activity described in
subsection (a), each instance in which income was derived by
the person or persons subject to such penalty, and each
person who participated in such an activity.
``(3) Liability for penalty.--If more than 1 person is
liable under subsection (a) with respect to such activity,
all such persons shall be jointly and severally liable for
the penalty under such subsection.
``(c) Penalty Not Deductible.--The payment of any penalty
imposed under this section or the payment of any amount to
settle or avoid the imposition of such penalty shall not be
deductible by the person who is subject to such penalty or
who makes such payment.''.
(b) Effective Date.--The amendments made by this section
shall apply to activities after the date of the enactment of
this Act.
SEC. 616. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH
REQUIRED LISTED TRANSACTIONS NOT REPORTED.
(a) In General.--Section 6501(c) (relating to exceptions)
is amended by adding at the end the following new paragraph:
``(10) Listed transactions.--If a taxpayer fails to include
on any return or statement for any taxable year any
information with respect to a listed transaction (as defined
in section 6707A(c)(2)) which is required under section 6011
to be included with such return or statement, the time for
assessment of any tax imposed by this title with respect to
such transaction shall not expire before the date which is 1
year after the earlier of--
``(A) the date on which the Secretary is furnished the
information so required; or
``(B) the date that a material advisor (as defined in
section 6111) meets the requirements of section 6112 with
respect to a request by the Secretary under section 6112(b)
relating to such transaction with respect to such
taxpayer.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years with respect to which the period
for assessing a deficiency did not expire before the date of
the enactment of this Act.
SEC. 617. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS
ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND
NONECONOMIC SUBSTANCE TRANSACTIONS.
(a) In General.--Section 163 (relating to deduction for
interest) is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the
following new subsection:
``(m) Interest on Unpaid Taxes Attributable To Nondisclosed
Reportable Transactions and Noneconomic Substance
Transactions.--No deduction shall be allowed under this
chapter for any interest paid or accrued under section 6601
on any underpayment of tax which is attributable to--
``(1) the portion of any reportable transaction
understatement (as defined in section 6662A(b)) with respect
to which the requirement of section 6664(d)(2)(A) is not met,
or
``(2) any noneconomic substance transaction understatement
(as defined in section 6662B(c)).''.
(b) Effective Date.--The amendments made by this section
shall apply to transactions in taxable years beginning after
the date of the enactment of this Act.
SEC. 618. AUTHORIZATION OF APPROPRIATIONS FOR TAX LAW
ENFORCEMENT.
There is authorized to be appropriated $300,000,000 for
each fiscal year beginning after September 30, 2003, for the
purpose of carrying out tax law enforcement to combat tax
avoidance transactions and other tax shelters, including the
use of offshore financial accounts to conceal taxable income.
SEC. 619. PENALTY FOR AIDING AND ABETTING THE UNDERSTATEMENT
OF TAX LIABILITY.
(a) In General.--Section 6701(a) (relating to imposition of
penalty) is amended--
(1) by inserting ``the tax liability or'' after ``respect
to,'' in paragraph (1),
(2) by inserting ``aid, assistance, procurement, or advice
with respect to such'' before ``portion'' both places it
appears in paragraphs (2) and (3), and
(3) by inserting ``instance of aid, assistance,
procurement, or advice or each such'' before ``document'' in
the matter following paragraph (3).
(b) Amount of Penalty.--Subsection (b) of section 6701
(relating to penalties for aiding and abetting understatement
of tax liability) is amended to read as follows:
``(b) Amount of Penalty; Calculation of Penalty; Liability
for Penalty.--
``(1) Amount of penalty.--The amount of the penalty imposed
by subsection (a) shall not exceed 100 percent of the gross
income derived (or to be derived) from such aid, assistance,
procurement, or advice provided by the person or persons
subject to such penalty.
``(2) Calculation of penalty.--The penalty amount
determined under paragraph (1) shall be calculated with
respect to each instance of aid, assistance, procurement, or
advice described in subsection (a), each instance in which
income was derived by the person or persons subject to such
penalty, and each person who made such an understatement of
the liability for tax.
``(3) Liability for penalty.--If more than 1 person is
liable under subsection (a) with respect to providing such
aid, assistance, procurement, or advice, all such persons
shall be jointly and severally liable for the penalty under
such subsection.''.
(c) Penalty Not Deductible.--Section 6701 is amended by
adding at the end the following new subsection:
``(g) Penalty Not Deductible.--The payment of any penalty
imposed under this section or the payment of any amount to
settle or avoid the imposition of such penalty shall not be
deductible by the person who is subject to such penalty or
who makes such payment.''.
(d) Effective Date.--The amendments made by this section
shall apply to activities after the date of the enactment of
this Act.
SEC. 620. STUDY ON INFORMATION SHARING AMONG LAW ENFORCEMENT
AGENCIES.
(a) Study.--The Secretary of the Treasury shall, jointly
with the Attorney General, the Securities and Exchange
Commission, and the Commissioner of Internal Revenue, study
the effectiveness of, and ways to improve, the sharing of
information related to the promotion of prohibited tax
shelters or tax avoidance schemes and other potential
violations of Federal laws.
(b) Report.--The Secretary shall, not later than 1 year
after the date of the enactment of this Act, report to the
appropriate committees of the Congress the results of the
study under subsection (a), including any recommendations for
legislation.
Subtitle B--Enron-Related Tax Shelter Provisions
SEC. 631. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN
LOSSES.
(a) In General.--Section 362 (relating to basis to
corporations) is amended by adding at the end the following
new subsection:
``(e) Limitations on Built-In Losses.--
``(1) Limitation on importation of built-in losses.--
``(A) In general.--If in any transaction described in
subsection (a) or (b) there would (but for this subsection)
be an importation of a net built-in loss, the basis of each
property described in subparagraph (B) which is acquired in
such transaction shall (notwithstanding subsections (a) and
(b)) be its fair market value immediately after such
transaction.
``(B) Property described.--For purposes of subparagraph
(A), property is described in this subparagraph if--
``(i) gain or loss with respect to such property is not
subject to tax under this subtitle in the hands of the
transferor immediately before the transfer, and
``(ii) gain or loss with respect to such property is
subject to such tax in the hands of the transferee
immediately after such transfer.
In any case in which the transferor is a partnership, the
preceding sentence shall be applied by treating each partner
in such partnership as holding such partner's proportionate
share of the property of such partnership.
``(C) Importation of net built-in loss.--For purposes of
subparagraph (A), there is an importation of a net built-in
loss in a transaction if the transferee's aggregate adjusted
bases of property described in subparagraph
[[Page H4424]]
(B) which is transferred in such transaction would (but for
this paragraph) exceed the fair market value of such property
immediately after such transaction.
``(2) Limitation on transfer of built-in losses in section
351 transactions.--
``(A) In general.--If--
``(i) property is transferred by a transferor in any
transaction which is described in subsection (a) and which is
not described in paragraph (1) of this subsection, and
``(ii) the transferee's aggregate adjusted bases of such
property so transferred would (but for this paragraph) exceed
the fair market value of such property immediately after such
transaction,
then, notwithstanding subsection (a), the transferee's
aggregate adjusted bases of the property so transferred shall
not exceed the fair market value of such property immediately
after such transaction.
``(B) Allocation of basis reduction.--The aggregate
reduction in basis by reason of subparagraph (A) shall be
allocated among the property so transferred in proportion to
their respective built-in losses immediately before the
transaction.
``(C) Exception for transfers within affiliated group.--
Subparagraph (A) shall not apply to any transaction if the
transferor owns stock in the transferee meeting the
requirements of section 1504(a)(2). In the case of property
to which subparagraph (A) does not apply by reason of the
preceding sentence, the transferor's basis in the stock
received for such property shall not exceed its fair market
value immediately after the transfer.''.
(b) Comparable Treatment Where Liquidation.--Paragraph (1)
of section 334(b) (relating to liquidation of subsidiary) is
amended to read as follows:
``(1) In general.--If property is received by a corporate
distributee in a distribution in a complete liquidation to
which section 332 applies (or in a transfer described in
section 337(b)(1)), the basis of such property in the hands
of such distributee shall be the same as it would be in the
hands of the transferor; except that the basis of such
property in the hands of such distributee shall be the fair
market value of the property at the time of the
distribution--
``(A) in any case in which gain or loss is recognized by
the liquidating corporation with respect to such property, or
``(B) in any case in which the liquidating corporation is a
foreign corporation, the corporate distributee is a domestic
corporation, and the corporate distributee's aggregate
adjusted bases of property described in section 362(e)(1)(B)
which is distributed in such liquidation would (but for this
subparagraph) exceed the fair market value of such property
immediately after such liquidation.''.
(c) Effective Dates.--
(1) In general.--The amendment made by subsection (a) shall
apply to transactions after December 31, 2003.
(2) Liquidations.--The amendment made by subsection (b)
shall apply to liquidations after December 31, 2003.
SEC. 632. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK
HELD BY PARTNERSHIP IN CORPORATE PARTNER.
(a) In General.--Section 755 is amended by adding at the
end the following new subsection:
``(c) No Allocation of Basis Decrease to Stock of Corporate
Partner.--In making an allocation under subsection (a) of any
decrease in the adjusted basis of partnership property under
section 734(b)--
``(1) no allocation may be made to stock in a corporation
(or any person which is related (within the meaning of
section 267(b) or 707(b)(1)) to such corporation) which is a
partner in the partnership, and
``(2) any amount not allocable to stock by reason of
paragraph (1) shall be allocated under subsection (a) to
other partnership property in such manner as the Secretary
may prescribe.
Gain shall be recognized to the partnership to the extent
that the amount required to be allocated under paragraph (2)
to other partnership property exceeds the aggregate adjusted
basis of such other property immediately before the
allocation required by paragraph (2).''.
(b) Effective Date.--The amendment made by this section
shall apply to distributions after February 13, 2003.
SEC. 633. REPEAL OF SPECIAL RULES FOR FASITS.
(a) In general.--Part V of subchapter M of chapter 1
(relating to financial asset securitization investment
trusts) is hereby repealed.
(b) Conforming Amendments.--
(1) Paragraph (6) of section 56(g) is amended by striking
``REMIC, or FASIT'' and inserting ``or REMIC''.
(2) Clause (ii) of section 382(l)(4)(B) is amended by
striking ``a REMIC to which part IV of subchapter M applies,
or a FASIT to which part V of subchapter M applies,'' and
inserting ``or a REMIC to which part IV of subchapter M
applies,''.
(3) Paragraph (1) of section 582(c) is amended by striking
``, and any regular interest in a FASIT,''.
(4) Subparagraph (E) of section 856(c)(5) is amended by
striking the last sentence.
(5)(A) Section 860G(a)(1) is amended by adding at the end
the following new sentence: ``An interest shall not fail to
qualify as a regular interest solely because the specified
principal amount of the regular interest (or the amount of
interest accrued on the regular interest) can be reduced as a
result of the nonoccurrence of 1 or more contingent payments
with respect to any reverse mortgage loan held by the REMIC
if, on the startup day for the REMIC, the sponsor reasonably
believes that all principal and interest due under the
regular interest will be paid at or prior to the liquidation
of the REMIC.''.
(B) The last sentence of section 860G(a)(3) is amended by
inserting ``, and any reverse mortgage loan (and each balance
increase on such loan meeting the requirements of
subparagraph (A)(iii)) shall be treated as an obligation
secured by an interest in real property'' before the period
at the end.
(6) Paragraph (3) of section 860G(a) is amended by adding
``and'' at the end of subparagraph (B), by striking ``, and''
at the end of subparagraph (C) and inserting a period, and by
striking subparagraph (D).
(7) Section 860G(a)(3), as amended by paragraph (6), is
amended by adding at the end the following new sentence:
``For purposes of subparagraph (A), if more than 50 percent
of the obligations transferred to, or purchased by, the REMIC
are originated by the United States or any State (or any
political subdivision, agency, or instrumentality of the
United States or any State) and are principally secured by an
interest in real property, then each obligation transferred
to, or purchased by, the REMIC shall be treated as secured by
an interest in real property.''.
(8)(A) Section 860G(a)(3)(A) is amended by striking ``or''
at the end of clause (i), by inserting ``or'' at the end of
clause (ii), and by inserting after clause (ii) the following
new clause:
``(iii) represents an increase in the principal amount
under the original terms of an obligation described in clause
(i) or (ii) if such increase--
``(I) is attributable to an advance made to the obligor
pursuant to the original terms of the obligation,
``(II) occurs after the startup day, and
``(III) is purchased by the REMIC pursuant to a fixed price
contract in effect on the startup day.''.
(B) Section 860G(a)(7)(B) is amended to read as follows:
``(B) Qualified reserve fund.--For purposes of subparagraph
(A), the term `qualified reserve fund' means any reasonably
required reserve to--
``(i) provide for full payment of expenses of the REMIC or
amounts due on regular interests in the event of defaults on
qualified mortgages or lower than expected returns on cash
flow investments, or
``(ii) provide a source of funds for the purchase of
obligations described in clause (ii) or (iii) of paragraph
(3)(A).
The aggregate fair market value of the assets held in any
such reserve shall not exceed 50 percent of the aggregate
fair market value of all of the assets of the REMIC on the
startup day, and the amount of any such reserve shall be
promptly and appropriately reduced to the extent the amount
held in such reserve is no longer reasonably required for
purposes specified in clause (i) or (ii) of this
subparagraph.''.
(9) Subparagraph (C) of section 1202(e)(4) is amended by
striking ``REMIC, or FASIT'' and inserting ``or REMIC''.
(10) Clause (xi) of section 7701(a)(19)(C) is amended--
(A) by striking ``and any regular interest in a FASIT,'',
and
(B) by striking ``or FASIT'' each place it appears.
(11) Subparagraph (A) of section 7701(i)(2) is amended by
striking ``or a FASIT''.
(12) The table of parts for subchapter M of chapter 1 is
amended by striking the item relating to part V.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall take effect on February
14, 2003.
(2) Exception for existing fasits.--Paragraph (1) shall not
apply to any FASIT in existence on the date of the enactment
of this Act to the extent that regular interests issued by
the FASIT before such date continue to remain outstanding in
accordance with the original terms of issuance.
SEC. 634. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON
CONVERTIBLE DEBT.
(a) In General.--Paragraph (2) of section 163(l) is amended
by inserting ``or equity held by the issuer (or any related
party) in any other person'' after ``or a related party''.
(b) Capitalization Allowed With Respect to Equity of
Persons Other Than Issuer and Related Parties.--Section
163(l) is amended by redesignating paragraphs (4) and (5) as
paragraphs (5) and (6) and by inserting after paragraph (3)
the following new paragraph:
``(4) Capitalization allowed with respect to equity of
persons other than issuer and related parties.--If the
disqualified debt instrument of a corporation is payable in
equity held by the issuer (or any related party) in any other
person (other than a related party), the basis of such equity
shall be increased by the amount not allowed as a deduction
by reason of paragraph (1) with respect to the instrument.''.
(c) Exception for Certain Instruments Issued by Dealers in
Securities.--Section 163(l), as amended by subsection (b), is
amended by redesignating paragraphs (5) and (6) as paragraphs
(6) and (7) and by inserting after paragraph (4) the
following new paragraph:
[[Page H4425]]
``(5) Exception for certain instruments issued by dealers
in securities.--For purposes of this subsection, the term
`disqualified debt instrument' does not include indebtedness
issued by a dealer in securities (or a related party) which
is payable in, or by reference to, equity (other than equity
of the issuer or a related party) held by such dealer in its
capacity as a dealer in securities. For purposes of this
paragraph, the term `dealer in securities' has the meaning
given such term by section 475.''.
(d) Conforming Amendments.--Paragraph (3) of section 163(l)
is amended--
(1) by striking ``or a related party'' in the material
preceding subparagraph (A) and inserting ``or any other
person'', and
(2) by striking ``or interest'' each place it appears.
(e) Effective Date.--The amendments made by this section
shall apply to debt instruments issued after February 13,
2003.
SEC. 635. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER
SECTION 269.
(a) In General.--Subsection (a) of section 269 (relating to
acquisitions made to evade or avoid income tax) is amended to
read as follows:
``(a) In General.--If--
``(1)(A) any person or persons acquire, directly or
indirectly, control of a corporation, or
``(B) any corporation acquires, directly or indirectly,
property of another corporation and the basis of such
property, in the hands of the acquiring corporation, is
determined by reference to the basis in the hands of the
transferor corporation, and
``(2) the principal purpose for which such acquisition was
made is evasion or avoidance of Federal income tax,
then the Secretary may disallow such deduction, credit, or
other allowance. For purposes of paragraph (1)(A), control
means the ownership of stock possessing at least 50 percent
of the total combined voting power of all classes of stock
entitled to vote or at least 50 percent of the total value of
all shares of all classes of stock of the corporation.''.
(b) Effective Date.--The amendment made by this section
shall apply to stock and property acquired after February 13,
2003.
SEC. 636. MODIFICATION OF INTERACTION BETWEEN SUBPART F AND
PASSIVE FOREIGN INVESTMENT COMPANY RULES.
(a) Limitation on Exception From PFIC Rules for United
States Shareholders of Controlled Foreign Corporations.--
Paragraph (2) of section 1297(e) (relating to passive foreign
investment company) is amended by adding at the end the
following flush sentence:
``Such term shall not include any period if the earning of
subpart F income by such corporation during such period would
result in only a remote likelihood of an inclusion in gross
income under section 951(a)(1)(A)(i).''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years of controlled foreign
corporations beginning after February 13, 2003, and to
taxable years of United States shareholders with or within
which such taxable years of controlled foreign corporations
end.
Subtitle C--Restructuring of Incentives for Alcohol Fuels, Etc.
SEC. 641. REDUCED RATES OF TAX ON GASOHOL REPLACED WITH
EXCISE TAX CREDIT; REPEAL OF OTHER ALCOHOL-
BASED FUEL INCENTIVES; ETC.
(a) Excise Tax Credit for Alcohol Fuel Mixtures.--
(1) In general.--Subsection (f) of section 6427 is amended
to read as follows:
``(f) Alcohol Fuel Mixtures.--
``(1) In general.--The amount of credit which would (but
for section 40(c)) be determined under section 40(a)(1) for
any period--
``(A) shall, with respect to taxable events occurring
during such period, be treated--
``(i) as a payment of the taxpayer's liability for tax
imposed by section 4081, and
``(ii) as received at the time of the taxable event, and
``(B) to the extent such amount of credit exceeds such
liability for such period, shall (except as provided in
subsection (k)) be paid subject to subsection (i)(3) by the
Secretary without interest.
``(2) Special rules.--
``(A) Only certain alcohol taken into account.--For
purposes of paragraph (1), section 40 shall be applied--
``(i) by not taking into account alcohol with a proof of
less than 190, and
``(ii) by treating as alcohol the alcohol gallon equivalent
of ethyl tertiary butyl ether or other ethers produced from
such alcohol.
``(B) Treatment of refiners.--For purposes of paragraph
(1), in the case of a mixture--
``(i) the alcohol in which is described in subparagraph
(A)(ii), and
``(ii) which is produced by any person at a refinery prior
to any taxable event,
section 40 shall be applied by treating such person as having
sold such mixture at the time of its removal from the
refinery (and only at such time) to another person for use as
a fuel.
``(3) Mixtures not used as fuel.--Rules similar to the
rules of subparagraphs (A) and (D) of section 40(d)(3) shall
apply for purposes of this subsection.
``(4) Termination.--This section shall apply only to
periods to which section 40 applies, determined by
substituting in section 40(e)--
``(A) `December 31, 2010' for `December 31, 2007', and
``(B) `January 1, 2011' for `January 1, 2008'.''
(2) Revision of rules for payment of credit.--Paragraph (3)
of section 6427(i) is amended to read as follows:
``(3) Special rule for alcohol mixture credit.--
``(A) In general.--A claim may be filed under subsection
(f)(1)(B) by any person for any period--
``(i) for which $200 or more is payable under such
subsection (f)(1)(B), and
``(ii) which is not less than 1 week.
In the case of an electronic claim, this subparagraph shall
be applied without regard to clause (i).
``(B) Payment of claim.--Notwithstanding subsection
(f)(1)(B), if the Secretary has not paid pursuant to a claim
filed under this section within 45 days of the date of the
filing of such claim (20 days in the case of an electronic
claim), the claim shall be paid with interest from such date
determined by using the overpayment rate and method under
section 6621.
``(C) Time for filing claim.--No claim filed under this
paragraph shall be allowed unless filed on or before the last
day of the first quarter following the earliest quarter
included in the claim.''
(b) Repeal of Other Incentives for Fuel Mixtures.--
(1) Subsection (b) of section 4041 is amended to read as
follows:
``(b) Exemption for Off-Highway Business Use.--
``(1) In general.--No tax shall be imposed by subsection
(a) or (d)(1) on liquids sold for use or used in an off-
highway business use.
``(2) Tax where other use.--If a liquid on which no tax was
imposed by reason of paragraph (1) is used otherwise than in
an off-highway business use, a tax shall be imposed by
paragraph (1)(B), (2)(B), or (3)(A)(ii) of subsection (a)
(whichever is appropriate) and by the corresponding provision
of subsection (d)(1) (if any).
``(3) Off-highway business use defined.--For purposes of
this subsection, the term `off-highway business use' has the
meaning given to such term by section 6421(e)(2); except that
such term shall not, for purposes of subsection (a)(1),
include use in a diesel-powered train.''
(2) Section 4041(k) is hereby repealed.
(3) Section 4081(c) is hereby repealed.
(4) Section 4091(c) is hereby repealed.
(c) Transfers to Highway Trust Fund.--Paragraph (4) of
section 9503(b) is amended by adding ``or'' at the end of
subparagraph (B), by striking the comma at the end of
subparagraph (C) and inserting a period, and by striking
subparagraphs (D), (E), and (F).
(d) Conforming Amendments.--
(1) Subsection (c) of section 40 is amended to read as
follows:
``(c) Coordination With Excise Tax Benefits.--The amount of
the credit determined under this section with respect to any
alcohol shall, under regulations prescribed by the Secretary,
be properly reduced to take into account the benefit provided
with respect to such alcohol under section 6427(f).''
(2) Subparagraph (B) of section 40(d)(4) is amended by
striking ``under section 4041(k) or 4081(c)'' and inserting
``under section 6427(f)''.
(e) Effective Dates.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to fuel sold or
used after September 30, 2004.
(2) Subsection (c).--The amendments made by subsection (c)
shall apply to taxes imposed after September 30, 2003.
SEC. 642. ALCOHOL FUEL SUBSIDIES BORNE BY GENERAL FUND.
(a) Transfers to Fund.--Section 9503(b)(1) is amended by
adding at the end the following new flush sentence:
``For purposes of this paragraph, the amount of taxes
received under section 4081 shall include any amount treated
as a payment under section 6427(f)(1)(A) and shall not be
reduced by the amount paid under section 6427(f)(1)(B).''.
(b) Transfers From Fund.--Subparagraph (A) of section
9503(c)(2) is amended by adding at the end the following new
sentence: ``Clauses (i)(III) and (ii) shall not apply to
claims under section 6427(f)(1)(B).''
(c) Effective Date.--
(1) Subsection (a).--The amendment made by subsection (a)
shall apply to taxes received after September 30, 2004.
(2) Subsection (b).--The amendment made by subsection (b)
shall apply to amounts paid after September 30, 2004, and (to
the extent related to section 34 of the Internal Revenue Code
of 1986) to fuel used after such date.
Subtitle D--Reduction of Fuel Tax Evasion
SEC. 651. EXEMPTION FROM CERTAIN EXCISE TAXES FOR MOBILE
MACHINERY.
(a) Exemption From Tax on Heavy Trucks and Trailers Sold at
Retail.--
(1) In general.--Section 4053 (relating to exemptions) is
amended by adding at the end the following new paragraph:
``(8) Mobile machinery.--Any vehicle which consists of a
chassis--
``(A) to which there has been permanently mounted (by
welding, bolting, riveting, or other means) machinery or
equipment to perform a construction, manufacturing,
processing, farming, mining, drilling, timbering, or similar
operation if the operation of the machinery or equipment is
unrelated to transportation on or off the public highways,
``(B) which has been specially designed to serve only as a
mobile carriage and mount (and a power source, where
applicable) for the particular machinery or equipment
involved, whether or not such machinery or equipment is in
operation, and
[[Page H4426]]
``(C) which, by reason of such special design, could not,
without substantial structural modification, be used as a
component of a vehicle designed to perform a function of
transporting any load other than that particular machinery or
equipment or similar machinery or equipment requiring such a
specially designed chassis.''.
(2) Effective date.--The amendment made by this subsection
shall take effect on the day after the date of the enactment
of this Act.
(b) Exemption From Tax on Use of Certain Vehicles.--
(1) In general.--Section 4483 (relating to exemptions) is
amended by redesignating subsection (g) as subsection (h) and
by inserting after subsection (f) the following new
subsection:
``(g) Exemption for Mobile Machinery.--No tax shall be
imposed by section 4481 on the use of any vehicle described
in section 4053(8).''.
(2) Effective date.--The amendments made by this subsection
shall take effect on the day after the date of the enactment
of this Act.
(c) Exemption From Tax on Tires.--
(1) In general.--Section 4072(b)(2) is amended by adding at
the end the following flush sentence: ``Such term shall not
include tires of a type used exclusively on vehicles
described in section 4053(8).''.
(2) Effective date.--The amendment made by this subsection
shall take effect on the day after the date of the enactment
of this Act.
(d) Refund of Fuel Taxes.--
(1) In general.--Section 6421(e)(2) (defining off-highway
business use) is amended by adding at the end the following
new subparagraph:
``(C) Uses in mobile machinery.--
``(i) In general.--The term `off-highway business use'
shall include any use in a vehicle which meets the
requirements described in clause (ii).
``(ii) Requirements for mobile machinery.--The requirements
described in this clause are--
``(I) the design-based test, and
``(II) the use-based test.
``(iii) Design-based test.--For purposes of clause (ii)(I),
the design-based test is met if the vehicle consists of a
chassis--
``(I) to which there has been permanently mounted (by
welding, bolting, riveting, or other means) machinery or
equipment to perform a construction, manufacturing,
processing, farming, mining, drilling, timbering, or similar
operation if the operation of the machinery or equipment is
unrelated to transportation on or off the public highways,
``(II) which has been specially designed to serve only as a
mobile carriage and mount (and a power source, where
applicable) for the particular machinery or equipment
involved, whether or not such machinery or equipment is in
operation, and
``(III) which, by reason of such special design, could not,
without substantial structural modification, be used as a
component of a vehicle designed to perform a function of
transporting any load other than that particular machinery or
equipment or similar machinery or equipment requiring such a
specially designed chassis.
``(iv) Use-based test.--For purposes of clause (ii)(II),
the use-based test is met if the use of the vehicle on public
highways was less than 7,500 miles during the taxpayer's
taxable year.''.
(2) No tax-free sales.--Subsection (b) of section 4082, as
amended by section 652, is amended by inserting before the
period at the end ``and such term shall not include any use
described in section 6421(e)(2)(C)''.
(3) Annual refund of tax paid.--Section 6427(i)(2)
(relating to exceptions) is amended by adding at the end the
following new subparagraph:
``(C) Nonapplication of paragraph.--This paragraph shall
not apply to any fuel used solely in any off-highway business
use described in section 6421(e)(2)(C).''.
(4) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 652. TAXATION OF AVIATION-GRADE KEROSENE.
(a) Rate of Tax.--
(1) In general.--Subparagraph (A) of section 4081(a)(2) is
amended by striking ``and'' at the end of clause (ii), by
striking the period at the end of clause (iii) and inserting
``, and'', and by adding at the end the following new clause:
``(iv) in the case of aviation-grade kerosene, 21.8 cents
per gallon.''.
(2) Commercial aviation.--Paragraph (2) of section 4081(a)
is amended by adding at the end the following new
subparagraph:
``(C) Taxes imposed on fuel used in commercial aviation.--
In the case of aviation-grade kerosene which is removed from
any refinery or terminal directly into the fuel tank of an
aircraft for use in commercial aviation, the rate of tax
under subparagraph (A)(iv) shall be 4.3 cents per gallon.''.
(3) Certain refueler trucks, tankers, and tank wagons
treated as terminal.--Subsection (a) of section 4081 is
amended by adding at the end the following new paragraph:
``(3) Certain refueler trucks, tankers, and tank wagons
treated as terminal.--
``(A) In general.--In the case of aviation-grade kerosene
which is removed from any terminal directly into the fuel
tank of an aircraft (determined without regard to any
refueler truck, tanker, or tank wagon which meets the
requirements of subparagraph (B)), a refueler truck, tanker,
or tank wagon shall be treated as part of such terminal if--
``(i) such truck, tanker, or wagon meets the requirements
of subparagraph (B) with respect to an airport, and
``(ii) except in the case of exigent circumstances
identified by the Secretary in regulations, no vehicle
registered for highway use is loaded with aviation-grade
kerosene at such terminal.
``(B) Requirements.--A refueler truck, tanker, or tank
wagon meets the requirements of this subparagraph with
respect to an airport if such truck, tanker, or wagon--
``(i) is loaded with aviation-grade kerosene at such
terminal located within such airport and delivers such
kerosene only into aircraft at such airport,
``(ii) has storage tanks, hose, and coupling equipment
designed and used for the purposes of fueling aircraft,
``(iii) is not registered for highway use, and
``(iv) is operated by--
``(I) the terminal operator of such terminal, or
``(II) a person that makes a daily accounting to such
terminal operator of each delivery of fuel from such truck,
tanker, or wagon.
``(C) Reporting.--The Secretary shall require under section
4101(d) reporting by such terminal operator of--
``(i) any information obtained under subparagraph
(B)(iv)(II), and
``(ii) any similar information maintained by such terminal
operator with respect to deliveries of fuel made by trucks,
tankers, or wagons operated by such terminal operator.''.
(4) Liability for tax on aviation-grade kerosene used in
commercial aviation.--Subsection (a) of section 4081 is
amended by adding at the end the following new paragraph:
``(4) Liability for tax on aviation-grade kerosene used in
commercial aviation.--For purposes of paragraph (2)(C), the
person who uses the fuel for commercial aviation shall pay
the tax imposed under such paragraph. For purposes of the
preceding sentence, fuel shall be treated as used when such
fuel is removed into the fuel tank.''.
(5) Nontaxable uses.--
(A) In general.--Section 4082 is amended by redesignating
subsections (e) and (f) as subsections (f) and (g),
respectively, and by inserting after subsection (d) the
following new subsection:
``(e) Aviation-Grade Kerosene.--In the case of aviation-
grade kerosene which is exempt from the tax imposed by
section 4041(c) (other than by reason of a prior imposition
of tax) and which is removed from any refinery or terminal
directly into the fuel tank of an aircraft, the rate of tax
under section 4081(a)(2)(A)(iv) shall be zero.''.
(B) Conforming amendments.--
(i) Subsection (b) of section 4082 is amended by adding at
the end the following new flush sentence:
``The term `nontaxable use' does not include the use of
aviation-grade kerosene in an aircraft.''.
(ii) Section 4082(d) is amended by striking paragraph (1)
and by redesignating paragraphs (2) and (3) as paragraphs (1)
and (2), respectively.
(6) Nonaircraft use of aviation-grade kerosene.--
(A) In general.--Subparagraph (B) of section 4041(a)(1) is
amended by adding at the end the following new sentence:
``This subparagraph shall not apply to aviation-grade
kerosene.''.
(B) Conforming amendment.--The heading for paragraph (1) of
section 4041(a) is amended by inserting ``and kerosene''
after ``diesel fuel''.
(b) Commercial Aviation.--Section 4083 is amended by
redesignating subsections (b) and (c) as subsections (c) and
(d), respectively, and by inserting after subsection (a) the
following new subsection:
``(b) Commercial Aviation.--For purposes of this subpart,
the term `commercial aviation' means any use of an aircraft
in a business of transporting persons or property for
compensation or hire by air, unless properly allocable to any
transportation exempt from the taxes imposed by sections 4261
and 4271 by reason of section 4281 or 4282 or by reason of
section 4261(h).''.
(c) Refunds.--
(1) In general.--Paragraph (4) of section 6427(l) is
amended to read as follows:
``(4) Refunds for aviation-grade kerosene.--
``(A) No refund of certain taxes on fuel used in commercial
aviation.--In the case of aviation-grade kerosene used in
commercial aviation (as defined in section 4083(b)) (other
than supplies for vessels or aircraft within the meaning of
section 4221(d)(3)), paragraph (1) shall not apply to so much
of the tax imposed by section 4081 as is attributable to--
``(i) the Leaking Underground Storage Tank Trust Fund
financing rate imposed by such section, and
``(ii) so much of the rate of tax specified in section
4081(a)(2)(A)(iv) as does not exceed 4.3 cents per gallon.
``(B) Payment to ultimate, registered vendor.--With respect
to aviation-grade kerosene, if the ultimate purchaser of such
kerosene waives (at such time and in such form and manner as
the Secretary shall prescribe) the right to payment under
paragraph (1) and assigns such right to the ultimate vendor,
then the Secretary shall pay the amount
[[Page H4427]]
which would be paid under paragraph (1) to such ultimate
vendor, but only if such ultimate vendor--
``(i) is registered under section 4101, and
``(ii) meets the requirements of subparagraph (A), (B), or
(D) of section 6416(a)(1).''.
(2) Time for filing claims.--Subparagraph (A) of section
6427(i)(4) is amended--
(A) by striking ``subsection (l)(5)'' both places it
appears and inserting ``paragraph (4)(B) or (5) of subsection
(l)'', and
(B) by striking ``the preceding sentence'' and inserting
``subsection (l)(5)''.
(3) Conforming amendment.--Subparagraph (B) of section
6427(l)(2) is amended to read as follows:
``(B) in the case of aviation-grade kerosene--
``(i) any use which is exempt from the tax imposed by
section 4041(c) other than by reason of a prior imposition of
tax, or
``(ii) any use in commercial aviation (within the meaning
of section 4083(b)).''.
(d) Repeal of Prior Taxation of Aviation Fuel.--
(1) In general.--Part III of subchapter A of chapter 32 is
amended by striking subpart B and by redesignating subpart C
as subpart B.
(2) Conforming amendments.--
(A) Section 4041(c) is amended to read as follows:
``(c) Aviation-Grade Kerosene.--
``(1) In general.--There is hereby imposed a tax upon
aviation-grade kerosene--
``(A) sold by any person to an owner, lessee, or other
operator of an aircraft for use in such aircraft, or
``(B) used by any person in an aircraft unless there was a
taxable sale of such fuel under subparagraph (A).
``(2) Exemption for previously taxed fuel.--No tax shall be
imposed by this subsection on the sale or use of any
aviation-grade kerosene if tax was imposed on such liquid
under section 4081 and the tax thereon was not credited or
refunded.
``(3) Rate of tax.--The rate of tax imposed by this
subsection shall be the rate of tax specified in section
4081(a)(2)(A)(iv) which is in effect at the time of such sale
or use.''.
(B) Section 4041(d)(2) is amended by striking ``section
4091'' and inserting ``section 4081''.
(C) Section 4041 is amended by striking subsection (e).
(D) Section 4041 is amended by striking subsection (i).
(E) Sections 4101(a), 4103, 4221(a), and 6206 are each
amended by striking ``, 4081, or 4091'' and inserting ``or
4081''.
(F) Section 6416(b)(2) is amended by striking ``4091 or''.
(G) Section 6416(b)(3) is amended by striking ``or 4091''
each place it appears.
(H) Section 6416(d) is amended by striking ``or to the tax
imposed by section 4091 in the case of refunds described in
section 4091(d)''.
(I) Section 6427(j)(1) is amended by striking ``, 4081, and
4091'' and inserting ``and 4081''.
(J)(i) Section 6427(l)(1) is amended to read as follows:
``(1) In general.--Except as otherwise provided in this
subsection and in subsection (k), if any diesel fuel or
kerosene on which tax has been imposed by section 4041 or
4081 is used by any person in a nontaxable use, the Secretary
shall pay (without interest) to the ultimate purchaser of
such fuel an amount equal to the aggregate amount of tax
imposed on such fuel under section 4041 or 4081, as the case
may be, reduced by any payment made to the ultimate vendor
under paragraph (4)(B).''.
(ii) Paragraph (5)(B) of section 6427(l) is amended by
striking ``Paragraph (1)(A) shall not apply to kerosene'' and
inserting ``Paragraph (1) shall not apply to kerosene (other
than aviation-grade kerosene)''.
(K) Subparagraph (B) of section 6724(d)(1) is amended by
striking clause (xv) and by redesignating the succeeding
clauses accordingly.
(L) Paragraph (2) of section 6724(d) is amended by striking
subparagraph (W) and by redesignating the succeeding
subparagraphs accordingly.
(M) Paragraph (1) of section 9502(b) is amended by adding
``and'' at the end of subparagraph (B) and by striking
subparagraphs (C) and (D) and inserting the following new
subparagraph:
``(C) section 4081 with respect to aviation gasoline and
aviation-grade kerosene, and''.
(N) The last sentence of section 9502(b) is amended to read
as follows:
``There shall not be taken into account under paragraph (1)
so much of the taxes imposed by section 4081 as are
determined at the rate specified in section 4081(a)(2)(B).''.
(O) Subsection (b) of section 9508 is amended by striking
paragraph (3) and by redesignating paragraphs (4) and (5) as
paragraphs (3) and (4), respectively.
(P) Section 9508(c)(2)(A) is amended by striking ``sections
4081 and 4091'' and inserting ``section 4081''.
(Q) The table of subparts for part III of subchapter A of
chapter 32 is amended to read as follows:
``Subpart A. Motor and aviation fuels.
``Subpart B. Special provisions applicable to fuels tax.''.
(R) The heading for subpart A of part III of subchapter A
of chapter 32 is amended to read as follows:
``Subpart A--Motor and Aviation Fuels''.
(S) The heading for subpart B of part III of subchapter A
of chapter 32, as redesignated by paragraph (1), is amended
to read as follows:
``Subpart B--Special Provisions Applicable to Fuels Tax''.
(e) Effective Date.--The amendments made by this section
shall apply to aviation-grade kerosene removed, entered, or
sold after September 30, 2004.
(f) Floor Stocks Tax.--
(1) In general.--There is hereby imposed on aviation-grade
kerosene held on October 1, 2004, by any person a tax equal
to--
(A) the tax which would have been imposed before such date
on such kerosene had the amendments made by this section been
in effect at all times before such date, reduced by
(B) the tax imposed before such date under section 4091 of
the Internal Revenue Code of 1986, as in effect on the day
before the date of the enactment of this Act.
(2) Liability for tax and method of payment.--
(A) Liability for tax.--The person holding the kerosene on
October 1, 2004, to which the tax imposed by paragraph (1)
applies shall be liable for such tax.
(B) Method and time for payment.--The tax imposed by
paragraph (1) shall be paid at such time and in such manner
as the Secretary of the Treasury (or the Secretary's
delegate) shall prescribe, including the nonapplication of
such tax on de minimis amounts of kerosene.
(3) Transfer of floor stock tax revenues to trust funds.--
For purposes of determining the amount transferred to any
trust fund, the tax imposed by this subsection shall be
treated as imposed by section 4081 of the Internal Revenue
Code of 1986--
(A) at the Leaking Underground Storage Tank Trust Fund
financing rate under such section to the extent of 0.1 cents
per gallon, and
(B) at the rate under section 4081(a)(2)(A)(iv) to the
extent of the remainder.
(4) Held by a person.--For purposes of this section,
kerosene shall be considered as held by a person if title
thereto has passed to such person (whether or not delivery to
the person has been made).
(5) Other laws applicable.--All provisions of law,
including penalties, applicable with respect to the tax
imposed by section 4081 of such Code shall, insofar as
applicable and not inconsistent with the provisions of this
subsection, apply with respect to the floor stock tax imposed
by paragraph (1) to the same extent as if such tax were
imposed by such section.
SEC. 653. DYE INJECTION EQUIPMENT.
(a) In General.--Section 4082(a)(2) (relating to exemptions
for diesel fuel and kerosene) is amended by inserting ``by
mechanical injection'' after ``indelibly dyed''.
(b) Dye Injector Security.--Not later than 180 days after
the date of the enactment of this Act, the Secretary of the
Treasury shall issue regulations regarding mechanical dye
injection systems described in the amendment made by
subsection (a), and such regulations shall include standards
for making such systems tamper resistant.
(c) Penalty for Tampering With or Failing To Maintain
Security Requirements for Mechanical Dye Injection Systems.--
(1) In general.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by adding after
section 6715 the following new section:
``SEC. 6715A. TAMPERING WITH OR FAILING TO MAINTAIN SECURITY
REQUIREMENTS FOR MECHANICAL DYE INJECTION
SYSTEMS.
``(a) Imposition of Penalty--
``(1) Tampering.--If any person tampers with a mechanical
dye injection system used to indelibly dye fuel for purposes
of section 4082, such person shall pay a penalty in addition
to the tax (if any).
``(2) Failure to maintain security requirements.--If any
operator of a mechanical dye injection system used to
indelibly dye fuel for purposes of section 4082 fails to
maintain the security standards for such system as
established by the Secretary, then such operator shall pay a
penalty in addition to the tax (if any).
``(b) Amount of Penalty.--The amount of the penalty under
subsection (a) shall be--
``(1) for each violation described in paragraph (1), the
greater of--
``(A) $25,000, or
``(B) $10 for each gallon of fuel involved, and
``(2) for each--
``(A) failure to maintain security standards described in
paragraph (2), $1,000, and
``(B) failure to correct a violation described in paragraph
(2), $1,000 per day for each day after which such violation
was discovered or such person should have reasonably known of
such violation.
``(c) Joint and Several Liability.--
``(1) In general.--If a penalty is imposed under this
section on any business entity, each officer, employee, or
agent of such entity or other contracting party who willfully
participated in any act giving rise to such penalty shall be
jointly and severally liable with such entity for such
penalty.
``(2) Affiliated groups.--If a business entity described in
paragraph (1) is part of an affiliated group (as defined in
section 1504(a)), the parent corporation of such entity shall
be jointly and severally liable with such entity for the
penalty imposed under this section.''.
(2) Clerical amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by adding after the
item related to section 6715 the following new item:
[[Page H4428]]
``Sec. 6715A. Tampering with or failing to maintain security
requirements for mechanical dye injection systems.''.
(d) Effective Date.--The amendments made by subsections (a)
and (c) shall take effect on the 180th day after the date on
which the Secretary issues the regulations described in
subsection (b).
SEC. 654. AUTHORITY TO INSPECT ON-SITE RECORDS.
(a) In General.--Section 4083(d)(1)(A) (relating to
administrative authority), as previously amended by this Act,
is amended by striking ``and'' at the end of clause (i) and
by inserting after clause (ii) the following new clause:
``(iii) inspecting any books and records and any shipping
papers pertaining to such fuel, and''.
(b) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 655. REGISTRATION OF PIPELINE OR VESSEL OPERATORS
REQUIRED FOR EXEMPTION OF BULK TRANSFERS TO
REGISTERED TERMINALS OR REFINERIES.
(a) In general.--Section 4081(a)(1)(B) (relating to
exemption for bulk transfers to registered terminals or
refineries) is amended--
(1) by inserting ``by pipeline or vessel'' after
``transferred in bulk'', and
(2) by inserting ``, the operator of such pipeline or
vessel,'' after ``the taxable fuel''.
(b) Effective Date.--The amendments made by this section
shall take effect on October 1, 2004.
(c) Publication of Registered Persons.--Beginning on July
1, 2004, the Secretary of the Treasury (or the Secretary's
delegate) shall periodically publish a current list of
persons registered under section 4101 of the Internal Revenue
Code of 1986 who are required to register under such section.
SEC. 656. DISPLAY OF REGISTRATION.
(a) In General.--Subsection (a) of section 4101 (relating
to registration) is amended--
(1) by striking ``Every'' and inserting the following:
``(1) In general.--Every'', and
(2) by adding at the end the following new paragraph:
``(2) Display of registration.--Every operator of a vessel
required by the Secretary to register under this section
shall display proof of registration through an electronic
identification device prescribed by the Secretary on each
vessel used by such operator to transport any taxable
fuel.''.
(b) Civil Penalty for Failure To Display Registration.--
(1) In general.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by inserting
after section 6716 the following new section:
``SEC. 6717. FAILURE TO DISPLAY TAX REGISTRATION ON VESSELS.
``(a) Failure To Display Registration.--Every operator of a
vessel who fails to display proof of registration pursuant to
section 4101(a)(2) shall pay a penalty of $500 for each such
failure. With respect to any vessel, only one penalty shall
be imposed by this section during any calendar month.
``(b) Multiple Violations.--In determining the penalty
under subsection (a) on any person, subsection (a) shall be
applied by increasing the amount in subsection (a) by the
product of such amount and the aggregate number of penalties
(if any) imposed with respect to prior months by this section
on such person (or a related person or any predecessor of
such person or related person).
``(c) Reasonable Cause Exception.--No penalty shall be
imposed under this section with respect to any failure if it
is shown that such failure is due to reasonable cause.''.
(2) Clerical amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by inserting after
the item relating to section 6716 the following new item:
``Sec. 6717. Failure to display tax registration on vessels.''.
(c) Effective Dates.--
(1) Subsection (a).--The amendments made by subsection (a)
shall take effect on October 1, 2004.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to penalties imposed after September 30, 2004.
SEC. 657. PENALTIES FOR FAILURE TO REGISTER AND FAILURE TO
REPORT.
(a) Increased Penalty.--Subsection (a) of section 7272
(relating to penalty for failure to register) is amended by
inserting ``($10,000 in the case of a failure to register
under section 4101)'' after ``$50''.
(b) Increased Criminal Penalty.--Section 7232 (relating to
failure to register under section 4101, false representations
of registration status, etc.) is amended by striking
``$5,000'' and inserting ``$10,000''.
(c) Assessable Penalty for Failure To Register.--
(1) In general.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by inserting
after section 6717 the following new section:
``SEC. 6718. FAILURE TO REGISTER.
``(a) Failure To Register.--Every person who is required to
register under section 4101 and fails to do so shall pay a
penalty in addition to the tax (if any).
``(b) Amount of Penalty.--The amount of the penalty under
subsection (a) shall be--
``(1) $10,000 for each initial failure to register, and
``(2) $1,000 for each day thereafter such person fails to
register.
``(c) Reasonable Cause Exception.--No penalty shall be
imposed under this section with respect to any failure if it
is shown that such failure is due to reasonable cause.''.
(2) Clerical amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by inserting after
the item relating to section 6717 the following new item:
``Sec. 6718. Failure to register.''.
(d) Assessable Penalty for Failure To Report.--
(1) In general.--Part II of subchapter B of chapter 68
(relating to assessable penalties) is amended by adding at
the end the following new section:
``SEC. 6725. FAILURE TO REPORT INFORMATION UNDER SECTION
4101.
``(a) In General.--In the case of each failure described in
subsection (b) by any person with respect to a vessel or
facility, such person shall pay a penalty of $10,000 in
addition to the tax (if any).
``(b) Failures Subject to Penalty.--For purposes of
subsection (a), the failures described in this subsection
are--
``(1) any failure to make a report under section 4101(d) on
or before the date prescribed therefor, and
``(2) any failure to include all of the information
required to be shown on such report or the inclusion of
incorrect information.
``(c) Reasonable Cause Exception.--No penalty shall be
imposed under this section with respect to any failure if it
is shown that such failure is due to reasonable cause.''.
(2) Clerical amendment.--The table of sections for part II
of subchapter B of chapter 68 is amended by adding at the end
the following new item:
``Sec. 6725. Failure to report information under section 4101.''.
(e) Effective Date.--The amendments made by this section
shall apply to penalties imposed after September 30, 2004.
SEC. 658. COLLECTION FROM CUSTOMS BOND WHERE IMPORTER NOT
REGISTERED.
(a) Tax at Point of Entry Where Importer Not Registered.--
Subpart B of part III of subchapter A of chapter 32, as
redesignated by section 652(d), is amended by adding after
section 4103 the following new section:
``SEC. 4104. COLLECTION FROM CUSTOMS BOND WHERE IMPORTER NOT
REGISTERED.
``(a) In General.--The importer of record shall be jointly
and severally liable for the tax imposed by section
4081(a)(1)(A)(iii) if, under regulations prescribed by the
Secretary, any other person that is not a person who is
registered under section 4101 is liable for such tax.
``(b) Collection From Customs Bond.--If any tax for which
any importer of record is liable under subsection (a), or for
which any importer of record that is not a person registered
under section 4101 is otherwise liable, is not paid on or
before the last date prescribed for payment, the Secretary
may collect such tax from the Customs bond posted with
respect to the importation of the taxable fuel to which the
tax relates. For purposes of determining the jurisdiction of
any court of the United States or any agency of the United
States, any action by the Secretary described in the
preceding sentence shall be treated as an action to collect
the tax from a bond described in section 4101(b)(1) and not
as an action to collect from a bond relating to the
importation of merchandise.''.
(b) Conforming Amendment.--The table of sections for
subpart B of part III of subchapter A of chapter 32, as
redesignated by section 652(d), is amended by adding after
the item related to section 4103 the following new item:
``Sec. 4104. Collection from Customs bond where importer not
registered.''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to fuel entered after September 30,
2004.
SEC. 659. MODIFICATIONS OF TAX ON USE OF CERTAIN VEHICLES.
(a) Proration of Tax Where Vehicle Sold.--
(1) In general.--Subparagraph (A) of section 4481(c)(2)
(relating to where vehicle destroyed or stolen) is amended by
striking ``destroyed or stolen'' both places it appears and
inserting ``sold, destroyed, or stolen''.
(2) Conforming amendment.--The heading for section
4481(c)(2) is amended by striking ``destroyed or stolen'' and
inserting ``sold, destroyed, or stolen''.
(b) Repeal of Installment Payment.--
(1) Section 6156 (relating to installment payment of tax on
use of highway motor vehicles) is repealed.
(2) The table of sections for subchapter A of chapter 62 is
amended by striking the item relating to section 6156.
(c) Electronic Filing.--Section 4481 is amended by
redesignating subsection (e) as subsection (f) and by
inserting after subsection (d) the following new subsection:
``(e) Electronic Filing.--Any taxpayer who files a return
under this section with respect to 25 or more vehicles for
any taxable period shall file such return electronically.''.
(d) Repeal of Reduction in Tax for Certain Trucks.--Section
4483 is amended by striking subsection (f).
(e) Effective Date.--The amendments made by this section
shall apply to taxable periods beginning after the date of
the enactment of this Act.
SEC. 660. MODIFICATION OF ULTIMATE VENDOR REFUND CLAIMS WITH
RESPECT TO FARMING.
(a) In General.--
[[Page H4429]]
(1) Refunds.--Section 6427(l) is amended by adding at the
end the following new paragraph:
``(6) Registered vendors permitted to administer certain
claims for refund of diesel fuel and kerosene sold to
farmers.--
``(A) In general.--In the case of diesel fuel or kerosene
used on a farm for farming purposes (within the meaning of
section 6420(c)), paragraph (1) shall not apply to the
aggregate amount of such diesel fuel or kerosene if such
amount does not exceed 250 gallons (as determined under
subsection (i)(5)(A)(iii)).
``(B) Payment to ultimate vendor.--The amount which would
(but for subparagraph (A)) have been paid under paragraph (1)
with respect to any fuel shall be paid to the ultimate vendor
of such fuel, if such vendor--
``(i) is registered under section 4101, and
``(ii) meets the requirements of subparagraph (A), (B), or
(D) of section 6416(a)(1).''.
(2) Filing of claims.--Section 6427(i) is amended by
inserting at the end the following new paragraph:
``(5) Special rule for vendor refunds with respect to
farmers.--
``(A) In general.--A claim may be filed under subsection
(l)(6) by any person with respect to fuel sold by such person
for any period--
``(i) for which $200 or more ($100 or more in the case of
kerosene) is payable under subsection (l)(6),
``(ii) which is not less than 1 week, and
``(iii) which is for not more than 250 gallons for each
farmer for which there is a claim.
Notwithstanding subsection (l)(1), paragraph (3)(B) shall
apply to claims filed under the preceding sentence.
``(B) Time for filing claim.--No claim filed under this
paragraph shall be allowed unless filed on or before the last
day of the first quarter following the earliest quarter
included in the claim.''.
(3) Conforming amendments.--
(A) Section 6427(l)(5)(A) is amended to read as follows:
``(A) In general.--Paragraph (1) shall not apply to diesel
fuel or kerosene used by a State or local government.''.
(B) The heading for section 6427(l)(5) is amended by
striking ``farmers and''.
(b) Effective Date.--The amendment made by this section
shall apply to fuels sold for nontaxable use after the date
of the enactment of this Act.
SEC. 661. DEDICATION OF REVENUES FROM CERTAIN PENALTIES TO
THE HIGHWAY TRUST FUND.
(a) In General.--Subsection (b) of section 9503 (relating
to transfer to Highway Trust Fund of amounts equivalent to
certain taxes) is amended by redesignating paragraph (5) as
paragraph (6) and inserting after paragraph (4) the following
new paragraph:
``(5) Certain penalties.--There are hereby appropriated to
the Highway Trust Fund amounts equivalent to the penalties
paid under sections 6715, 6715A, 6717, 6718, 6725, 7232, and
7272 (but only with regard to penalties under such section
related to failure to register under section 4101).''.
(b) Conforming Amendments.--
(1) The heading of subsection (b) of section 9503 is
amended by inserting ``and Penalties'' after ``Taxes''.
(2) The heading of paragraph (1) of section 9503(b) is
amended by striking ``In general'' and inserting ``Certain
taxes''.
(c) Effective Date.--The amendments made by this section
shall apply to penalties assessed after October 1, 2004.
SEC. 662. TAXABLE FUEL REFUNDS FOR CERTAIN ULTIMATE VENDORS.
(a) In General.--Paragraph (4) of section 6416(a) (relating
to abatements, credits, and refunds) is amended to read as
follows:
``(4) Registered ultimate vendor to administer credits and
refunds of gasoline tax.--
``(A) In general.--For purposes of this subsection, if an
ultimate vendor purchases any gasoline on which tax imposed
by section 4081 has been paid and sells such gasoline to an
ultimate purchaser described in subparagraph (C) or (D) of
subsection (b)(2) (and such gasoline is for a use described
in such subparagraph), such ultimate vendor shall be treated
as the person (and the only person) who paid such tax, but
only if such ultimate vendor is registered under section
4101. For purposes of this subparagraph, if the sale of
gasoline is made by means of a credit card, the person
extending the credit to the ultimate purchaser shall be
deemed to be the ultimate vendor.
``(B) Timing of claims.--The procedure and timing of any
claim under subparagraph (A) shall be the same as for claims
under section 6427(i)(4), except that the rules of section
6427(i)(3)(B) regarding electronic claims shall not apply
unless the ultimate vendor has certified to the Secretary for
the most recent quarter of the taxable year that all ultimate
purchasers of the vendor covered by such claim are certified
and entitled to a refund under subparagraph (C) or (D) of
subsection (b)(2).''.
(b) Credit Card Purchases of Diesel Fuel or Kerosene by
State and Local Governments.--Section 6427(l)(5)(C) (relating
to nontaxable uses of diesel fuel, kerosene, and aviation
fuel) is amended by adding at the end the following new flush
sentence: ``For purposes of this subparagraph, if the sale of
diesel fuel or kerosene is made by means of a credit card,
the person extending the credit to the ultimate purchaser
shall be deemed to be the ultimate vendor.''.
(c) Effective Date.--The amendments made by this section
shall take effect on October 1, 2004.
SEC. 663. TWO-PARTY EXCHANGES.
(a) In General.--Subpart B of part III of subchapter A of
chapter 32, as amended by this Act, is amended by adding
after section 4104 the following new section:
``SEC. 4105. TWO-PARTY EXCHANGES.
``(a) In General.--In a two-party exchange, the delivering
person shall not be liable for the tax imposed under section
4081(a)(1)(A)(ii).
``(b) Two-Party Exchange.--The term `two-party exchange'
means a transaction, other than a sale, in which taxable fuel
is transferred from a delivering person registered under
section 4101 as a taxable fuel registrant fuel to a receiving
person who is so registered where all of the following occur:
``(1) The transaction includes a transfer from the
delivering person, who holds the inventory position for
taxable fuel in the terminal as reflected in the records of
the terminal operator.
``(2) The exchange transaction occurs before or
contemporaneous with completion of removal across the rack
from the terminal by the receiving person.
``(3) The terminal operator in its books and records treats
the receiving person as the person that removes the taxable
fuel across the terminal rack for purposes of reporting the
transaction to the Secretary.
``(4) The transaction is the subject of a written
contract.''.
(b) Conforming Amendment.--The table of sections for
subpart B of part III of subchapter A of chapter 32, as
amended by this Act, is amended by adding after the item
relating to section 4104 the following new item:
``Sec. 4105. Two-party exchanges.''.
(c) Effective Date.--The amendment made by this section
shall take effect on the date of the enactment of this Act.
SEC. 664. SIMPLIFICATION OF TAX ON TIRES.
(a) In General.--Subsection (a) of section 4071 is amended
to read as follows:
``(a) Imposition and Rate of Tax.--There is hereby imposed
on taxable tires sold by the manufacturer, producer, or
importer thereof a tax at the rate of 9.4 cents (4.7 cents in
the case of a biasply tire) for each 10 pounds so much of the
maximum rated load capacity thereof as exceeds 3,500
pounds.''
(b) Taxable Tire.--Section 4072 is amended by redesignating
subsections (a) and (b) as subsections (b) and (c),
respectively, and by inserting before subsection (b) (as so
redesignated) the following new subsection:
``(a) Taxable Tire.--For purposes of this chapter, the term
`taxable tire' means any tire of the type used on highway
vehicles if wholly or in part made of rubber and if marked
pursuant to Federal regulations for highway use.''
(c) Exemption for Tires Sold to Department of Defense.--
Section 4073 is amended to read as follows:
``SEC. 4073. EXEMPTIONS.
``The tax imposed by section 4071 shall not apply to tires
sold for the exclusive use of the Department of Defense or
the Coast Guard.''
(d) Conforming Amendments.--
(1) Section 4071 is amended by striking subsection (c) and
by moving subsection (e) after subsection (b) and
redesignating subsection (e) as subsection (c).
(2) The item relating to section 4073 in the table of
sections for part II of subchapter A of chapter 32 is amended
to read as follows:
``Sec. 4073. Exemptions.''
(e) Effective Date.--The amendments made by this section
shall apply to sales in calendar years beginning more than 30
days after the date of the enactment of this Act.
Subtitle E--Prevention of Tax Avoidance Through Treaty Shopping
SEC. 671. DENIAL OF TREATY BENEFITS FOR CERTAIN DEDUCTIBLE
PAYMENTS.
(a) In General.--Section 894 (relating to income affected
by treaty) is amended by adding at the end the following new
subsection:
``(d) Denial of Treaty Benefits for Certain Deductible
Payments.--
``(1) In general.--A foreign entity shall not be entitled
under any income tax treaty of the United States with a
foreign country to any reduced rate of any withholding tax
imposed by this title on any deductible foreign payment
unless such entity is predominantly owned by individuals who
are residents of such foreign country.
``(2) Deductible foreign payment.--For purposes of
paragraph (1), the term `deductible foreign payment' means
any payment--
``(A) which is made by a domestic entity directly or
indirectly to a related person which is a foreign entity, and
``(B) which is allowable as a deduction under this chapter.
``(3) Domestic and foreign entities; related person.--For
purposes of this subsection--
``(A) Domestic entity.--The term `domestic entity' means
any domestic corporation or domestic partnership.
``(B) Foreign entity.--The term `foreign entity' means any
foreign corporation or foreign partnership.
``(C) Related person.--The term `related person' has the
meaning given such term by
[[Page H4430]]
section 954(d)(3) (determined by substituting `domestic
entity' for `controlled foreign corporation' each place it
appears).
``(4) Predominant ownership.--For purposes of this
subsection--
``(A) In general.--An entity is predominantly owned by
individuals who are residents of a foreign country if--
``(i) in the case of a corporation, more than 50 percent
(by value) of the stock of such corporation is owned (within
the meaning of section 883(c)(4)) by individuals who are
residents of such foreign country, or
``(ii) in the case of a partnership, more than 50 percent
(by value) of the beneficial interests in such partnership
are so owned.
``(B) Publicly traded corporations.--A foreign corporation
also shall be treated as predominantly owned by individuals
who are residents of a foreign country if--
``(i)(I) the stock of such corporation is primarily and
regularly traded on an established securities market in such
foreign country, and
``(II) such corporation has activities within such foreign
country which are substantial in relation to the total
activities of such corporation and its related persons, or
``(ii) such corporation is wholly owned (directly or
indirectly) by another foreign corporation which is described
in clause (i).
``(C) Special rule.--
``(i) In general.--A foreign corporation shall be treated
as meeting the requirements of subparagraph (A) if--
``(I) such requirements would be met if `30 percent' were
substituted for `50 percent' in subparagraph (A)(i),
``(II) the treaty country is a member of a multinational
economic association such as the European Union, and
``(III) at least 50 percent of the value of the stock of
the corporation is owned (within the meaning of section
883(c)(4)) by individuals who are residents of the treaty
country or other qualified foreign countries.
``(ii) Qualified foreign country.--For purposes of this
subparagraph, the term `qualified foreign country' means any
foreign country if--
``(I) such foreign country is a member of the multinational
economic association of which the treaty country is a member,
and
``(II) such foreign country has a tax treaty with the
United States providing a withholding tax rate reduction
which is not less than the withholding tax rate reduction
applicable (without regard to this subsection) to the payment
received by such foreign corporation.
``(5) Exception for corporations with substantial business
activities in treaty country.--Paragraph (1) shall not apply
to a payment received by a foreign corporation if such
corporation has substantial business activities in the treaty
country and if such corporation establishes to the
satisfaction of the Secretary that the payment is subject to
an effective rate of income tax imposed by such country
greater than 90 percent of the maximum rate of tax specified
in section 11.
``(6) Exception for payments received by controlled foreign
corporation.--Paragraph (1) shall not apply to any deductible
foreign payment made by a corporation if the recipient of the
payment is a controlled foreign corporation and the payor is
a United States shareholder (as defined in section 951(b)) of
such corporation.
``(7) Conduit payments.--Under regulations prescribed by
the Secretary, paragraph (1) shall not apply to a payment
received by a foreign entity referred to in paragraph (1)
if--
``(A) within a reasonable period after such entity receives
such payment, such entity makes a comparable payment directly
or indirectly to another related person,
``(B) such related person is a resident of a foreign
country with which the United States has an income tax
treaty,
``(C) such related person is predominantly owned by
individuals who are residents of such country, and
``(D) the withholding tax rate applicable under such treaty
is equal to or greater than the withholding tax rate
applicable (without regard to this paragraph) to the payment
received by such foreign entity.
A similar rule shall apply where the payment is includible in
the gross income of a related person by reason of a foreign
law comparable to subpart F of part III of subchapter N.''
(b) Effective Date.--The amendment made by this section
shall take effect on the date of the enactment of this Act.
SEC. 672. TRANSFER PRICE REDUCED BY DEFLECTED TAX HAVEN
INCOME.
(a) In General.--Section 482 (relating to allocation of
income and deductions among taxpayers) is amended by
inserting ``(a) In General.--'' before ``In the case of two
or more'' and by adding at the end the following new
subsection:
``(b) Special Rule for Related-Party Inbound and Outbound
Transactions.--
``(1) In general.--In the case of property or services to
which this subsection applies, the transfer price under this
section for such property or service shall be the transfer
price determined without regard to this subsection--
``(A) in the case of a related-party inbound transaction,
reduced by the deflected tax haven income with respect to
such property or service, or
``(B) in the case of a related-party outbound transaction,
increased by the deflected tax haven income with respect to
such property or service.
``(2) Property or services to which subsection applies.--
``(A) In general.--This subsection applies to any property
or services if there is a related-party inbound or outbound
transaction with respect to such property or services.
``(B) Related-party inbound transaction.--A related-party
inbound transaction is any transaction where--
``(i) property is acquired directly or indirectly by a
foreign-controlled domestic corporation from a foreign
related person, or
``(ii) the services are performed directly or indirectly
for a foreign-controlled domestic corporation by a foreign
related person.
``(C) Related-party outbound transaction.--A related-party
outbound transaction is any transaction where--
``(i) property is sold directly or indirectly by a foreign-
controlled domestic corporation to a foreign related person,
or
``(ii) services are performed directly or indirectly by a
foreign-controlled domestic corporation for a foreign related
person.
``(3) Deflected tax haven income.--For purposes of this
subsection--
``(A) In general.--The term `deflected tax haven income'
means income (whether in the form of profits, commissions,
fees, or otherwise) derived by a foreign related person in
connection with any transaction related to property or
services to which this subsection applies if such income
would be treated as foreign base company sales income (as
defined in section 954(d)) or foreign base company services
income (as defined in section 954(e)) were such foreign
related person treated as a controlled foreign corporation.
``(B) Exception for income subject to foreign taxes.--
``(i) High taxes.--Such term shall not include any item of
income with respect to which the requirements of section
954(b)(4) are met.
``(ii) Other taxes.--If the taxpayer establishes to the
satisfaction of the Secretary that an item of income was
subject to an income tax imposed by a foreign country and the
effective rate of such tax (and such effective rate was not
greater than 90 percent of the maximum rate of tax specified
in section 11), the term `deflected tax haven income' shall
not include the same proportion of such income as such
effective rate of tax bears to 90 percent.
``(4) Other definitions.--For purposes of this subsection--
``(A) Foreign related person.--The term `foreign related
person' means any foreign person who is related (within the
meaning of subsection (a)) to the foreign-controlled domestic
corporation.
``(B) Foreign-controlled domestic corporation.--The term
`foreign-controlled domestic corporation' means any domestic
corporation which is 25-percent foreign-owned (as defined in
section 6038A(c)).''
(b) Effective Date.--The amendment made by this section
shall apply to property acquired, and services performed,
after the date of the enactment of this Act.
Subtitle F--Additions to List of Taxable Vaccines
SEC. 681. ADDITION OF VACCINES AGAINST HEPATITIS A TO LIST OF
TAXABLE VACCINES.
(a) In General.--Paragraph (1) of section 4132(a) (defining
taxable vaccine) is amended by redesignating subparagraphs
(I), (J), (K), and (L) as subparagraphs (J), (K), (L), and
(M), respectively, and by inserting after subparagraph (H)
the following new subparagraph:
``(I) Any vaccine against hepatitis A.''
(b) Effective Date.--
(1) Sales, etc.--The amendments made by subsection (a)
shall apply to sales and uses on or after the first day of
the first month which begins more than 4 weeks after the date
of the enactment of this Act.
(2) Deliveries.--For purposes of paragraph (1) and section
4131 of the Internal Revenue Code of 1986, in the case of
sales on or before the effective date described in such
paragraph for which delivery is made after such date, the
delivery date shall be considered the sale date.
SEC. 682. ADDITION OF VACCINES AGAINST INFLUENZA TO LIST OF
TAXABLE VACCINES.
(a) In General.--Section 4132(a)(1) (defining taxable
vaccine), as amended by this Act, is amended by adding at the
end the following new subparagraph:
``(N) Any trivalent vaccine against influenza.''.
(b) Effective Date.--
(1) Sales, etc.--The amendment made by this section shall
apply to sales and uses on or after the later of--
(A) the first day of the first month which begins more than
4 weeks after the date of the enactment of this Act, or
(B) the date on which the Secretary of Health and Human
Services lists any vaccine against influenza for purposes of
compensation for any vaccine-related injury or death through
the Vaccine Injury Compensation Trust Fund.
(2) Deliveries.--For purposes of paragraph (1) and section
4131 of the Internal Revenue Code of 1986, in the case of
sales on or before the effective date described in such
paragraph for which delivery is made after such date, the
delivery date shall be considered the sale date.
Subtitle G--Other Provisions
SEC. 691. IRS USER FEES MADE PERMANENT.
(a) In General.--Section 7528 (relating to Internal Revenue
Service user fees) is amended by striking subsection (c).
[[Page H4431]]
(b) Effective Date.--The amendment made by this section
shall apply to requests after the date of the enactment of
this Act.
SEC. 692. COBRA FEES.
(a) Use of Merchandise Processing Fee.--Section 13031(f) of
the Consolidated Omnibus Budget Reconciliation Act of 1985
(19 U.S.C. 58c(f)) is amended--
(1) in paragraph (1), by aligning subparagraph (B) with
subparagraph (A); and
(2) in paragraph (2), by striking ``commercial operations''
and all that follows through ``processing.'' and inserting
``customs revenue functions as defined in section 415 of the
Homeland Security Act of 2002 (other than functions performed
by the Office of International Affairs referred to in section
415(8) of that Act), and for automation (including the
Automation Commercial Environment computer system), and for
no other purpose. To the extent that funds in the Customs
User Fee Account are insufficient to pay the costs of such
customs revenue functions, customs duties in an amount equal
to the amount of such insufficiency shall be available, to
the extent provided for in appropriations Acts, to pay the
costs of such customs revenue functions in the amount of such
insufficiency, and shall be available for no other purpose.
The provisions of the first and second sentences of this
paragraph specifying the purposes for which amounts in the
Customs User Fee Account may be made available shall not be
superseded except by a provision of law which specifically
modifies or supersedes such provisions.''.
(b) Reimbursement of Appropriations From COBRA Fees.--
Section 13031(f)(3) of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (19 U.S.C. 58c(f)(3)) is amended
by adding at the end the following:
``(E) Nothing in this paragraph shall be construed to
preclude the use of appropriated funds, from sources other
than the fees collected under subsection (a), to pay the
costs set forth in clauses (i), (ii), and (iii) of
subparagraph (A).''.
(c) Sense of Congress; Effective Period for Collecting
Fees; Standard for Setting Fees.--
(1) Sense of congress.--The Congress finds that--
(A) the fees set forth in paragraphs (1) through (8) of
subsection (a) of section 13031 of the Consolidated Omnibus
Budget Reconciliation Act of 1985 have been reasonably
related to the costs of providing customs services in
connection with the activities or items for which the fees
have been charged under such paragraphs; and
(B) the fees collected under such paragraphs have not
exceeded, in the aggregate, the amounts paid for the costs
described in subsection (f)(3)(A) incurred in providing
customs services in connection with the activities or items
for which the fees were charged under such paragraphs.
(2) Effective period; standard for setting fees.--Section
13031(j) of the Consolidated Omnibus Budget Reconciliation
Act of 1985 is amended by striking paragraph (3).
(d) Clerical Amendments.--Section 13031 of the Consolidated
Omnibus Budget Reconciliation Act of 1985 is amended--
(1) in subsection (a)(5)(B), by striking ``$1.75'' and
inserting ``$1.75.'';
(2) in subsection (b)--
(A) in paragraph (1)(A), by aligning clause (iii) with
clause (ii);
(B) in paragraph (7), by striking ``paragraphs'' and
inserting ``paragraph''; and
(C) in paragraph (9), by aligning subparagraph (B) with
subparagraph (A); and
(3) in subsection (e)(2), by aligning subparagraph (B) with
subparagraph (A).
(e) Study of All Fees Collected by Department of Homeland
Security.--The Secretary of the Treasury shall conduct a
study of all the fees collected by the Department of Homeland
Security, and shall submit to the Congress, not later than
September 30, 2005, a report containing the recommendations
of the Secretary on--
(1) what fees should be eliminated;
(2) what the rate of fees retained should be; and
(3) any other recommendations with respect to the fees that
the Secretary considers appropriate.
Amend subsection (c) of section 641 of the bill as amended
above to read as follows:
(c) Transfers to Highway Trust Fund.--
(1) Paragraph (4) of section 9503(b) is amended by adding
``or'' at the end of subparagraph (C), by striking the comma
at the end of subparagraph (D) and inserting a period, and by
striking subparagraphs (E) and (F).
(2) Paragraph (4) of section 9503(b), as amended by
paragraph (1), is further amended by adding ``or'' at the end
of subparagraph (B), by striking the comma at the end of
subparagraph (C) and inserting a period, and by striking
subparagraph (D).
Amend paragraph (2) of section 641(e) of the bill as
amended above to read as follows:
(2) Subsection (c).--
(A) The amendments made by subsection (c)(1) shall apply to
taxes imposed after September 30, 2003.
(B) The amendments made by subsection (c)(2) shall apply to
taxes imposed after September 30, 2006.
Mr. RANGEL (during the reading). Mr. Speaker, I ask unanimous consent
that the motion to recommit be considered as read and printed in the
Record.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from New York?
There was no objection.
The SPEAKER pro tempore. The gentleman from New York (Mr. Rangel) is
recognized for 5 minutes in support of his motion.
Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from
Tennessee (Mr. Cooper).
Mr. COOPER. Mr. Speaker, I thank the gentleman from New York for
yielding me this time.
Many Members here today are voting for this motion to recommit for a
very important reason, because if we care about State tax fairness, if
one is from one of those seven States like Florida or Texas or
Tennessee or Washington or Nevada or South Dakota that rely primarily
on a State sales tax, the best way to give one's citizens relief is
through their Rangel motion to recommit because tax relief there is
permanent, not temporary. All that is being offered in the majority
bill here is 2 years of relief.
What are they going to tell their people back home when they have
given them a tax break for 2 years, not the permanent relief that my
friend from New York is offering?
So it is very important for folks who are sincere about this issue,
who really care about tax relief for their citizens, to vote for the
motion to recommit. If one is from one of these seven States and do not
vote for the motion to recommit, they are not truly serving their
people.
{time} 1345
Mr. RANGEL. Mr. Speaker, this motion to recommit, we have a
restricted amount of time, because the majority denied us the
opportunity to have a substitute. If the underlying bill is so good,
why not allow in the democratic process, with a small ``d,'' the
opportunity for someone to say, I have a better idea; and since they
are the majority, why do they not believe that they have enough votes
and must have confidence in what they are doing, at least to get the
majority to vote for it?
So my motion to recommit, what we would have done if we had had the
chance, is that we do not provide tax incentives for manufacturers and
other people to move their jobs overseas. What we do is grab the
essence of the agreement that we had with the gentleman from Illinois
(Mr. Manzullo), with the gentleman from Illinois (Mr. Crane) when we
put together a bipartisan bill to create jobs, not for those overseas,
but for those in the United States of America.
We also do not include all of the addition of tax incentives for
things that are not related to resolving the problem before us. We have
what is indeed called a jobs bill, and that is what we had hoped that
we would be able to do.
As was pointed out by the gentleman from Tennessee (Mr. Cooper), we
believe that States who do not have income taxes and rely on sales
taxes should get relief, but why the majority would restrict this
relief to 2 years is far beyond my expectation; and that is why we
thought we had a better idea to make it permanent.
When kids look under the Christmas tree, there is going to be a gift
for them too. They will be inheriting one of the biggest debts that we
have ever seen, because this bill that started out with a plus of $50
billion, they have now provided a $34 billion deficit. And indeed, if
you take all of the phasing-outs and take the sunsettings out of it, it
is estimated that it would add $300 million to the deficit.
One thing that we do not do, and that is to provide safe harbor for
churches, allowing them entry into partisan politics, because we were
so pleased to see that they knew that they really had overburdened the
purposes of this bill and finally excluded that.
It would seem to me that those people who really are interested in
the jobs of the United States will have an opportunity to vote on this
motion to recommit, and those people who believe that there is a gift
for them under the tree and that that is the only reason that they are
voting for a bill that most people who get a chance to read this bill,
since it was not made available today to most of the members of the
subcommittees in this House, would realize that this bill is bad for
American job seekers, it is bad for America, and it is bad for our
economy.
So I do hope that perhaps sometime in the future when Republicans
think that they have a great idea, that they
[[Page H4432]]
also should remember in a democracy and in this Congress they should
not just attempt continuously to stifle the opposition but to have
enough confidence in what they are doing to give us a chance to say, we
want a substitute, we want to be heard, we want our bill on the floor
for people to evaluate and to be able to vote for.
But each time we do it, they said that if we did not take their
tobacco, it was out of the jurisdiction. We have been hampered in the
committee, we have been hampered by the Committee on Rules, and we are
hampered now by the rules of the House. I think we should stop talking
about what happened in the days of Rostenkowski and think what is
happening to the American people today and what can we do in a
bipartisan way, working together to resolve problems that we have.
It should be embarrassing to everyone in this House that when a
foreign group like the World Trade Organization provides sanctions
against United States exporters that we believe that we come up with a
Republican solution. It should be an American solution, congressional
solution, and not an attempt of a partisan solution for partisan
purposes.
Mr. THOMAS. Mr. Speaker, I rise in opposition to the motion to
recommit.
The SPEAKER pro tempore (Mr. LaTourette). The gentleman from
California (Mr. Thomas) is recognized for 5 minutes.
Mr. THOMAS. Mr. Speaker, the minority leader, in discussing the
minority position, talked about the vision of the gentleman from New
York, the path that he wished to take. We were just handed 3 minutes
ago this particular motion to recommit, so if we are looking for a
contest of freshness, the gentleman's vision is clearly the most
recently pasted-together piece of legislation to be presented us. In
fact, the paste is still kind of damp.
So if, in fact, the vision is the path that the gentleman from New
York wishes to follow, we would hope it is a shining path. But when you
look at this legislation, what you discover, notwithstanding the half
an hour of berating on the floor of the House the tobacco proposal,
guess what is recently pasted to his vision? You guessed it, the
tobacco proposal. Apparently he has had a change of vision.
For more than 20 years, when they were the majority, they did not
give a dang about people deducting sales taxes, because they were the
ones who removed it from the code. But, guess what? That vision had a
bolt of lightning 20 minutes ago, and now we have permanent sales tax
removal.
Had Republicans decided to go with permanent sales tax removal, I am
quite sure they would have come up with a deduction for your dog. Why?
Because no matter what we do, they are going to be better. But better
is not copying. Better is starting out with an idea, carrying it
through, and presenting it to you.
What their motion to recommit will do is to say if you are a company
in the U.S. and you deign to try to make a profit by selling overseas,
you will be punished. It says that in our desire to raise revenue, we
will examine what you have been doing. Not tomorrow, not the day after
tomorrow. We will retroactively go back to what you have been doing for
20 or 30 or 40 years and now say not only can you not do it; you are
going to have to pay for doing it, notwithstanding the fact it was
legal. Retroactively.
And then bragging about the fact that they removed the international
tax provisions, what they are really bragging about is since U.S.-based
companies are double taxed today, without these changes, they will
continue to be double taxed.
Why are companies going overseas? Because they are double taxed. They
want to keep double taxation, and they want to complain about companies
going overseas.
It is pretty simple: support H.R. 4520. Companies will stay at home,
and that creates jobs.
So I appreciate the gentleman from New York's vision. I just hope the
paste lasts through the vote, because, frankly, that is about what it
is worth.
Parliamentary Inquiry
Mr. RANGEL. Mr. Speaker, I have a parliamentary inquiry.
The SPEAKER pro tempore. The gentleman will state his parliamentary
inquiry.
Mr. RANGEL. Mr. Speaker, how does one find out whether or not the
former speaker did not tell the truth as it relates to what is in the
motion to recommit? How would one be able to find out, when he said
that the tobacco proposals are in the motion to recommit, that he did
not tell the truth? What procedure does one follow in order to adjust
the record and to make certain that truth will prevail over this
partisan effort?
The SPEAKER pro tempore. In response to the gentleman's inquiry, the
Chair is not able to place remarks in debate in historical context.
That is a matter for the Members to debate.
Mr. RANGEL. Mr. Speaker, I am sorry, I did not hear the Speaker.
The SPEAKER pro tempore. The Chair is unable to put the matter into
historical context. The gentleman has raised a matter for Members to
address by debate.
Without objection, the previous question is ordered on the motion to
recommit.
There was no objection.
The SPEAKER pro tempore. The question is on the motion to recommit.
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Mr. RANGEL. Mr. Speaker, I object to the vote on the ground that a
quorum is not present and make the point of order that a quorum is not
present.
The SPEAKER pro tempore. Evidently a quorum is not present.
The Sergeant at Arms will notify absent Members.
The SPEAKER pro tempore. Pursuant to clause 8, rule XX, this 15-
minute vote on the motion to recommit will be followed by a 15-minute
vote, if ordered, on the passage of H.R. 4520, and then a 5-minute
vote, if ordered, on the approval of the Journal.
The vote was taken by electronic device, and there were--yeas 193,
nays 235, not voting 5, as follows:
[Roll No. 258]
YEAS--193
Abercrombie
Ackerman
Alexander
Allen
Andrews
Baca
Baird
Baldwin
Becerra
Bell
Berkley
Berman
Berry
Bishop (NY)
Blumenauer
Boswell
Boucher
Boyd
Brady (PA)
Brown (OH)
Brown, Corrine
Capps
Capuano
Cardin
Cardoza
Carson (IN)
Carson (OK)
Case
Clay
Clyburn
Cooper
Costello
Cramer
Crowley
Cummings
Davis (AL)
Davis (CA)
Davis (FL)
Davis (IL)
Davis (TN)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Doggett
Dooley (CA)
Doyle
Edwards
Emanuel
Engel
Eshoo
Evans
Farr
Fattah
Filner
Ford
Frank (MA)
Frost
Gephardt
Gonzalez
Green (TX)
Grijalva
Gutierrez
Harman
Herseth
Hill
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Honda
Hooley (OR)
Hoyer
Inslee
Israel
Jackson (IL)
Jackson-Lee (TX)
Jefferson
John
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kind
Kleczka
Kucinich
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Lee
Levin
Lewis (GA)
Lipinski
Lofgren
Lowey
Lynch
Majette
Maloney
Markey
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McDermott
McGovern
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Michaud
Millender-McDonald
Miller (NC)
Miller, George
Mollohan
Moore
Moran (VA)
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Peterson (MN)
Price (NC)
Rahall
Rangel
Reyes
Rodriguez
Ross
Rothman
Roybal-Allard
Ruppersberger
Rush
Ryan (OH)
Sabo
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Sandlin
Schakowsky
Schiff
Scott (VA)
Serrano
Sherman
Skelton
Slaughter
Smith (WA)
Snyder
Solis
Spratt
Stark
Stenholm
Strickland
Stupak
Tanner
Tauscher
Taylor (MS)
Thompson (CA)
Thompson (MS)
Tierney
Towns
Turner (TX)
Udall (CO)
Udall (NM)
Van Hollen
Velazquez
Visclosky
Waters
Watson
Watt
Waxman
Weiner
Wexler
Woolsey
Wu
Wynn
NAYS--235
Aderholt
Akin
Bachus
Baker
Ballenger
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Bereuter
Biggert
Bilirakis
Bishop (GA)
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Bradley (NH)
Brady (TX)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
[[Page H4433]]
Cantor
Capito
Carter
Castle
Chabot
Chandler
Chocola
Coble
Cole
Collins
Cox
Crane
Crenshaw
Cubin
Culberson
Cunningham
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
Diaz-Balart, L.
Diaz-Balart, M.
Doolittle
Dreier
Duncan
Dunn
Ehlers
Emerson
English
Etheridge
Everett
Feeney
Ferguson
Flake
Foley
Forbes
Fossella
Franks (AZ)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gilchrest
Gillmor
Gingrey
Goode
Goodlatte
Gordon
Goss
Granger
Graves
Green (WI)
Greenwood
Gutknecht
Hall
Harris
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Hobson
Hoekstra
Hostettler
Houghton
Hulshof
Hunter
Hyde
Isakson
Issa
Istook
Jenkins
Johnson (CT)
Johnson (IL)
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Latham
LaTourette
Leach
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lucas (KY)
Lucas (OK)
Manzullo
Marshall
Matheson
McCotter
McCrery
McHugh
McInnis
McIntyre
McKeon
Mica
Miller (FL)
Miller (MI)
Miller, Gary
Moran (KS)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Osborne
Ose
Otter
Oxley
Paul
Pearce
Pence
Peterson (PA)
Petri
Pickering
Pitts
Platts
Pombo
Pomeroy
Porter
Portman
Pryce (OH)
Putnam
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Royce
Ryan (WI)
Ryun (KS)
Saxton
Schrock
Scott (GA)
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shuster
Simmons
Simpson
Smith (MI)
Smith (NJ)
Smith (TX)
Souder
Stearns
Sullivan
Sweeney
Tancredo
Tauzin
Taylor (NC)
Terry
Thomas
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Upton
Vitter
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Young (AK)
Young (FL)
NOT VOTING--5
Conyers
DeMint
Hastings (FL)
Kilpatrick
Quinn
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. LaTourette) (during the vote). Members
are advised that 2 minutes remain in this vote.
{time} 1418
Mr. TIAHRT, Mr. WALSH and Mr. OSE changed their vote from ``yea'' to
``nay.''
So the motion to recommit was rejected.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore. The question is on the passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Recorded Vote
Mr. LEVIN. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
The SPEAKER pro tempore. This will be a 15-minute vote followed by a
5-minute vote on approval of the Journal.
The vote was taken by electronic device, and there were--ayes 251,
noes 178, not voting 5, as follows:
[Roll No. 259]
AYES--251
Abercrombie
Aderholt
Akin
Alexander
Bachus
Baker
Ballenger
Barrett (SC)
Barton (TX)
Beauprez
Bereuter
Biggert
Bilirakis
Bishop (GA)
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Boswell
Boucher
Boyd
Brady (TX)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
Cantor
Carson (OK)
Carter
Chabot
Chandler
Chocola
Clyburn
Coble
Cole
Collins
Cooper
Cox
Cramer
Crane
Crenshaw
Cubin
Culberson
Cunningham
Davis (AL)
Davis (FL)
Davis (IL)
Davis (TN)
Deal (GA)
DeLay
Diaz-Balart, L.
Diaz-Balart, M.
Dooley (CA)
Doolittle
Dreier
Duncan
Dunn
Edwards
Ehlers
Emerson
English
Etheridge
Everett
Feeney
Ferguson
Foley
Forbes
Ford
Fossella
Franks (AZ)
Frelinghuysen
Frost
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gilchrest
Gillmor
Gingrey
Goode
Goodlatte
Gordon
Goss
Granger
Graves
Green (WI)
Greenwood
Gutknecht
Hall
Harris
Hart
Hastert
Hastings (WA)
Hayes
Hayworth
Hensarling
Herger
Herseth
Hobson
Hoekstra
Hooley (OR)
Hostettler
Houghton
Hulshof
Hunter
Hyde
Isakson
Issa
Istook
Jefferson
Jenkins
John
Johnson (CT)
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
King (IA)
King (NY)
Kingston
Kline
Knollenberg
Kolbe
LaHood
Lampson
Latham
LaTourette
Leach
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lucas (KY)
Lucas (OK)
Majette
Marshall
Matheson
McCotter
McCrery
McHugh
McInnis
McIntyre
McKeon
Mica
Miller (FL)
Miller (MI)
Miller (NC)
Miller, Gary
Moore
Moran (KS)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Norwood
Nunes
Nussle
Osborne
Ose
Otter
Oxley
Paul
Pearce
Pence
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Pombo
Porter
Portman
Price (NC)
Pryce (OH)
Putnam
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Ros-Lehtinen
Ross
Ruppersberger
Ryan (WI)
Ryun (KS)
Sandlin
Saxton
Schrock
Scott (GA)
Sessions
Shadegg
Shaw
Sherwood
Shimkus
Shuster
Simmons
Simpson
Smith (MI)
Smith (NJ)
Smith (TX)
Snyder
Souder
Spratt
Stearns
Stenholm
Sullivan
Sweeney
Tanner
Tauzin
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thompson (MS)
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Turner (TX)
Vitter
Walden (OR)
Walsh
Wamp
Watt
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson (SC)
Wu
Young (AK)
NOES--178
Ackerman
Allen
Andrews
Baca
Baird
Baldwin
Bartlett (MD)
Bass
Becerra
Bell
Berkley
Berman
Berry
Bishop (NY)
Blumenauer
Bradley (NH)
Brady (PA)
Brown (OH)
Brown, Corrine
Capito
Capps
Capuano
Cardin
Cardoza
Carson (IN)
Case
Castle
Clay
Costello
Crowley
Cummings
Davis (CA)
Davis, Jo Ann
Davis, Tom
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Doggett
Doyle
Emanuel
Engel
Eshoo
Evans
Farr
Fattah
Filner
Flake
Frank (MA)
Gephardt
Gonzalez
Green (TX)
Grijalva
Gutierrez
Harman
Hefley
Hill
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Honda
Hoyer
Inslee
Israel
Jackson (IL)
Jackson-Lee (TX)
Johnson (IL)
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kind
Kirk
Kleczka
Kucinich
Langevin
Lantos
Larsen (WA)
Larson (CT)
Lee
Levin
Lewis (GA)
Lipinski
Lofgren
Lowey
Lynch
Maloney
Manzullo
Markey
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McDermott
McGovern
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Michaud
Millender-McDonald
Miller, George
Mollohan
Moran (VA)
Murtha
Nadler
Napolitano
Neal (MA)
Northup
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Platts
Pomeroy
Rahall
Rangel
Reyes
Rodriguez
Rohrabacher
Rothman
Roybal-Allard
Royce
Rush
Ryan (OH)
Sabo
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Schakowsky
Schiff
Scott (VA)
Sensenbrenner
Serrano
Shays
Sherman
Skelton
Slaughter
Smith (WA)
Solis
Stark
Strickland
Stupak
Tancredo
Tauscher
Taylor (MS)
Tierney
Towns
Udall (CO)
Udall (NM)
Upton
Van Hollen
Velazquez
Visclosky
Waters
Watson
Waxman
Weiner
Wexler
Wilson (NM)
Wolf
Woolsey
Wynn
Young (FL)
NOT VOTING--5
Conyers
DeMint
Hastings (FL)
Kilpatrick
Quinn
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. LaTourette) (during the vote). Members
are advised 2 minutes remain in this vote.
{time} 1437
Ms. MAJETTE changed her vote from ``no'' to ``aye.''
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
____________________