[Congressional Record Volume 158, Number 30 (Monday, February 27, 2012)]
[Senate]
[Pages S1051-S1061]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           TEXT OF AMENDMENTS

                                 ______
                                 
  SA 1736. Mr. PORTMAN (for himself and Mr. Coburn) submitted an 
amendment intended to be proposed by him to the bill S. 1813, to 
reauthorize Federal-aid highway and highway safety construction 
programs, and for other purposes; which was ordered to lie on the 
table; as follows:

       At the appropriate place, add the following:

               Subtitle--State Transportation Flexibility

     SEC. __01. SHORT TITLE.

       This subtitle may be cited as the ``State Transportation 
     Flexibility Act''.

     SEC. __02. DIRECT FEDERAL-AID HIGHWAY PROGRAM.

       (a) In General.--Chapter 1 of title 23, United States Code 
     (as amended by section 1115(a)), is amended by adding at the 
     end the following:

     ``Sec.  168. Direct Federal-aid highway program

       ``(a) Election by State Not To Participate.--
     Notwithstanding any other provision of law, a State may elect 
     not to participate in any Federal program relating to 
     highways, including a Federal highway program under the 
     SAFETEA LU (Public Law 109 59; 119 Stat. 1144), this title, 
     or title 49.
       ``(b) Direct Federal-Aid Highway Program.--
       ``(1) In general.--Beginning in fiscal year 2011, the 
     Secretary shall carry out a direct Federal-aid highway 
     program in accordance with the requirements of this section 
     under which the legislature of a State may elect, not fewer 
     than 90 days before the beginning of a fiscal year--
       ``(A) to waive the right of the State to receive amounts 
     apportioned or allocated to the State under the Federal-aid 
     highway program for the fiscal year to which the election 
     relates; and
       ``(B) to receive an amount for that fiscal year that is 
     determined in accordance with subsection (e) for that fiscal 
     year.
       ``(2) Effect.--On making an election under paragraph (1), a 
     State--
       ``(A) assumes all Federal obligations relating to each 
     program that is the subject of the election; and
       ``(B) shall fulfill those obligations using the amounts 
     transferred to the State under subsection (e).
       ``(c) State Responsibility.--
       ``(1) In general.--The Governor of a State making an 
     election under subsection (b) shall--
       ``(A) agree to maintain the Interstate System in accordance 
     with the current Interstate System program;
       ``(B) submit a plan to the Secretary describing--
       ``(i) the purposes, projects, and uses to which amounts 
     received under the program will be put; and
       ``(ii) which programmatic requirements of this title the 
     State elects to continue;
       ``(C) agree to obligate or expend amounts received under 
     the direct Federal-aid highway program exclusively for 
     projects that would be eligible for funding under section 
     133(b) if the State was not participating in the program; and
       ``(D) agree to report annually to the Secretary on the use 
     of amounts received under the direct Federal-aid highway 
     program and to make the report available to the public in an 
     easily accessible format.
       ``(2) No federal limitation on use of funds.--Except as 
     provided in paragraph (1), the expenditure or obligation of 
     funds received by a State under the direct Federal-aid 
     highway program shall not be subject to any Federal 
     regulation under this title (except for this section), title 
     49, or any other Federal law.
       ``(3) Election irrevocable.--An election under subsection 
     (b) shall be irrevocable during the applicable fiscal year.
       ``(d) Effect on Preexisting Commitments.--The making of an 
     election under subsection (b) shall not affect any 
     responsibility or commitment of the State under this title 
     for any fiscal year with respect to--
       ``(1) a project or program funded under this title (other 
     than under this section); or
       ``(2) any project or program funded under this title in any 
     fiscal year for which an election under subsection (b) is not 
     in effect.
       ``(e) Transfers.--
       ``(1) In general.--The amount to be transferred to a State 
     under the direct Federal-aid highway program for a fiscal 
     year shall be the portion of the taxes appropriated to the 
     Highway Trust Fund under section 9503 of the Internal Revenue 
     Code of 1986, other than for the Mass Transit Account, for 
     that fiscal year that is attributable to highway users in 
     that State during that fiscal year, reduced by a pro rata 
     share withheld by the Secretary to fund contract authority 
     for programs of the National Highway Traffic Safety 
     Administration and the Federal Motor Carrier Safety 
     Administration.
       ``(2) Transfers under program.--
       ``(A) In general.--Transfers under the program--
       ``(i) shall be made at the same time as deposits to the 
     Highway Trust Fund are made by the Secretary of the Treasury; 
     and
       ``(ii) shall be made on the basis of estimates by the 
     Secretary, in consultation with the Secretary of the 
     Treasury, based on the most recent data available, and proper 
     adjustments shall be made in amounts subsequently transferred 
     to the extent prior estimates were in excess of, or less 
     than, the amounts required to be transferred.
       ``(B) Limitation.--An adjustment under subparagraph (A)(ii) 
     to any transfer may not exceed 5 percent of the transferred 
     amount to which the adjustment relates. If the adjustment 
     required under subparagraph (A)(ii) exceeds that percentage, 
     the excess shall be taken into account in making subsequent 
     adjustments under subparagraph (A)(ii).
       ``(f) Application With Other Authority.--Any contract 
     authority under this chapter (and any obligation limitation) 
     authorized for a State for a fiscal year for which an 
     election by that State is in effect under subsection (b)--
       ``(1) shall be rescinded or canceled; and
       ``(2) shall not be reallocated or distributed to any other 
     State under the Federal-aid highway program.
       ``(g) Maintenance of Effort.--
       ``(1) In general.--Not later than 30 days after the date on 
     which an amount is distributed to a State or State agency 
     under the State Highway Flexibility Act or an amendment made 
     by that Act, the Governor of the State shall certify to the 
     Secretary that the State will maintain the effort of the 
     State with regard to State funding for the types of projects 
     that are funded by the amounts.
       ``(2) Amounts.--As part of the certification, the Governor 
     shall submit to the Secretary a statement identifying the 
     amount of funds the State plans to expend from State sources 
     during the covered period, for the types of projects that are 
     funded by the amounts.
       ``(h) Treatment of General Revenues.--For purposes of this 
     section, any general revenue funds appropriated to the 
     Highway Trust Fund shall be transferred to a State under the 
     program in the manner described in subsection (e)(1).''.
       (b) Conforming Amendment.--The analysis for title 23, 
     United States Code (as amended by section 1115(b)), is 
     amended by inserting after the item relating to section 149 
     the following:

``168. Direct Federal-aid highway program''.

     SEC. __03. ALTERNATIVE FUNDING OF PUBLIC TRANSPORTATION 
                   PROGRAMS.

       (a) In General.--Chapter 53 of title 49, United States Code 
     (as amended by section 20030), is amended by adding at the 
     end the following:

     ``Sec.  5341. Alternative funding of public transportation 
       programs

       ``(a) Definitions.--In this section--
       ``(1) Alternative funding program.--The term `alternative 
     funding program' means the program established under 
     subsection (c).
       ``(2) Covered programs.--The term `covered programs' means 
     the programs authorized under--
       ``(A) sections 5305, 5307, 5308, 5309, 5310, 5311, 5316, 
     5317, 5320, 5335, 5339, and 5340; and
       ``(B) section 3038 of the Federal Transit Act of 1998 (49 
     U.S.C. 5310 note).
       ``(b) Election by State Not To Participate.--
       ``(1) In general.--Notwithstanding any other provision of 
     law, a State may elect not to participate in all Federal 
     programs relating to public transportation funded under the 
     Mass Transit Account of the Highway Trust Fund, including the 
     Federal public transportation programs under the SAFETEA LU 
     (Public Law 109 59; 119 Stat. 1144), title 23, or this title.
       ``(2) Effect.--On making an election under paragraph (1), a 
     State--
       ``(A) assumes all Federal obligations relating to each 
     program that is the subject of the election; and

[[Page S1052]]

       ``(B) shall fulfill those obligations using the amounts 
     transferred to the State under subsection (e).
       ``(c) Public Transportation Program.--
       ``(1) Program established.--Beginning in fiscal year 2011, 
     the Secretary shall carry out an alternative funding program 
     under which the legislature of a State may elect, not fewer 
     than 90 days before the beginning of a fiscal year--
       ``(A) to waive the right of the State to receive amounts 
     apportioned or allocated to the State under the covered 
     programs for the fiscal year to which the election relates; 
     and
       ``(B) to receive an amount for that fiscal year that is 
     determined in accordance with subsection (e).
       ``(2) Program requirements.--
       ``(A) In general.--The Governor of a State that 
     participates in the alternative funding program shall--
       ``(i) submit a plan to the Secretary describing--

       ``(I) the purposes, projects, and uses to which amounts 
     received under the alternative funding program will be put; 
     and
       ``(II) which programmatic requirements of this title the 
     State elects to continue;

       ``(ii) agree to obligate or expend amounts received under 
     the alternative funding program exclusively for projects that 
     would be eligible for funding under the covered programs if 
     the State was not participating in the alternative funding 
     program; and
       ``(iii) submit to the Secretary an annual report on the use 
     of amounts received under the alternative funding program, 
     and to make the report available to the public in an easily 
     accessible format.
       ``(B) No federal limitation on use of funds.--Except as 
     provided in subparagraph (A), the expenditure or obligation 
     of funds received by a State under the alternative funding 
     program shall not be subject to the provisions of this title 
     (except for this section), title 23, or any other Federal 
     law.
       ``(3) Election irrevocable.--An election under paragraph 
     (1) shall be irrevocable during the applicable fiscal year.
       ``(d) Effect on Preexisting Commitments.--Participation in 
     the alternative funding program shall not affect any 
     responsibility or commitment of the State under this title 
     for any fiscal year with respect to--
       ``(1) a project or program funded under this title (other 
     than under this section); or
       ``(2) any project or program funded under this title in any 
     fiscal year for which the State elects not to participate in 
     the alternative funding program.
       ``(e) Transfers.--
       ``(1) In general.--The amount to be transferred to a State 
     under the alternative funding program for a fiscal year shall 
     be the portion of the taxes transferred to the Mass Transit 
     Account of the Highway Trust Fund under section 9503(e) of 
     the Internal Revenue Code of 1986, for that fiscal year, that 
     is attributable to highway users in that State during that 
     fiscal year.
       ``(2) Transfers.--
       ``(A) In general.--Transfers under the program--
       ``(i) shall be made at the same time as transfers to the 
     Mass Transit Account of the Highway Trust Fund are made by 
     the Secretary of the Treasury; and
       ``(ii) shall be made on the basis of estimates by the 
     Secretary, in consultation with the Secretary of the 
     Treasury, based on the most recent data available, and proper 
     adjustments shall be made in amounts subsequently 
     transferred, to the extent prior estimates were in excess of, 
     or less than, the amounts required to be transferred.
       ``(B) Limitation.--An adjustment under subparagraph (A)(ii) 
     to any transfer may not exceed 5 percent of the transferred 
     amount to which the adjustment relates. If the adjustment 
     required under subparagraph (A)(ii) exceeds that percentage, 
     the excess shall be taken into account in making subsequent 
     adjustments under subparagraph (A)(ii).
       ``(f) Contract Authority.--There shall be rescinded or 
     canceled any contract authority under this chapter (and any 
     obligation limitation) authorized for a State for a fiscal 
     year for which the State elects to participate in the 
     alternative funding program.
       ``(g) Maintenance of Effort.--
       ``(1) In general.--Not later than 30 days after the date on 
     which an amount is distributed to a State or State agency 
     under the State Highway Flexibility Act or an amendment made 
     by that Act, the Governor of the State shall certify to the 
     Secretary that the State will maintain the effort of the 
     State with regard to State funding for the types of projects 
     that are funded by the amounts.
       ``(2) Amounts.--The certification under paragraph (1) shall 
     include a statement identifying the amount of funds the State 
     plans to expend from State sources for projects funded under 
     the alternative funding program, during the fiscal year for 
     which the State elects to participate in the alternative 
     funding program.
       ``(h) Treatment of General Revenues.--For purposes of this 
     section, any general revenue funds appropriated to the 
     Highway Trust Fund shall be transferred to a State under the 
     program in the manner described in subsection (e).''.
       (b) Conforming Amendment.--The analysis for title 49, 
     United States Code (as amended by section 20031(k)), is 
     amended by adding after the item relating to section 5340 the 
     following:

``5341. Alternative funding of public transportation programs''.

                                 ______
                                 
  SA 1737. Mr. COBURN (for himself and Mr. Udall of Colorado) submitted 
an amendment intended to be proposed by him to the bill S. 1813, to 
reauthorize Federal-aid highway and highway safety construction 
programs, and for other purposes; which was ordered to lie on the 
table; as follows:

       At the appropriate place, insert the following:

     SEC. ___. PREVENTING DUPLICATIVE AND OVERLAPPING GOVERNMENT 
                   PROGRAMS.

       (a) Short Title.--This section may be cited as the 
     ``Preventing Duplicative and Overlapping Government Programs 
     Act''.
       (b) Reported Legislation.--Paragraph 11 of rule XXVI of the 
     Standing Rules of the Senate is amended--
       (1) in subparagraph (c), by striking ``and (b)'' and 
     inserting ``(b), and (c)'';
       (2) by redesignating subparagraph (c) and subparagraph (d); 
     and
       (3) by inserting after subparagraph (b) the following:
       ``(c) The report accompanying each bill or joint resolution 
     of a public character reported by any committee (including 
     the Committee on Appropriations and the Committee on the 
     Budget) shall contain--
       ``(1) an analysis by the Congressional Research Service to 
     determine if the bill or joint resolution creates any new 
     Federal program, office, or initiative that would duplicate 
     or overlap any existing Federal program, office, or 
     initiative with similar mission, purpose, goals, or 
     activities along with a listing of all of the overlapping or 
     duplicative Federal program or programs, office or offices, 
     or initiative or initiatives; and
       ``(2) an explanation provided by the committee as to why 
     the creation of each new program, office, or initiative is 
     necessary if a similar program or programs, office or 
     offices, or initiative or initiatives already exist.''.
       (c) Senate.--Rule XVII of the Standing Rules of the Senate 
     is amended by inserting at the end thereof the following:
       ``6. (a) It shall not be in order in the Senate to proceed 
     to any bill or joint resolution unless the committee of 
     jurisdiction has prepared and posted on the committee website 
     an overlapping and duplicative programs analysis and 
     explanation for the bill or joint resolution as described in 
     subparagraph (b) prior to proceeding.
       ``(b) The analysis and explanation required by this 
     subparagraph shall contain--
       ``(1) an analysis by the Congressional Research Service to 
     determine if the bill or joint resolution creates any new 
     Federal program, office, or initiative that would duplicate 
     or overlap any existing Federal program, office, or 
     initiative with similar mission, purpose, goals, or 
     activities along with a listing of all of the overlapping or 
     duplicative Federal program or programs, office or offices, 
     or initiative or initiatives; and
       ``(2) an explanation provided by the committee as to why 
     the creation of each new program, office, or initiative is 
     necessary if a similar program or programs, office or 
     offices, or initiative or initiatives already exist.
       ``(c) This paragraph may be waived by joint agreement of 
     the Majority Leader and the Minority Leader of the Senate 
     upon their certification that such waiver is necessary as a 
     result of--
       ``(1) a significant disruption to Senate facilities or to 
     the availability of the Internet; or
       ``(2) an emergency as determined by the leaders.''.
                                 ______
                                 
  SA 1738. Mr. COBURN submitted an amendment intended to be proposed by 
him to the bill S. 1813, to reauthorize Federal-aid highway and highway 
safety construction programs, and for other purposes; which was ordered 
to lie on the table; as follows:

       At the appropriate place, insert the following:

     SEC. __. CONSOLIDATING UNNECESSARY DUPLICATIVE AND 
                   OVERLAPPING GOVERNMENT PROGRAMS.

       Notwithstanding any other provision of law and not later 
     than 150 days after the date of enactment of this Act, the 
     Director of the Office of Management and Budget shall 
     coordinate with the heads of the relevant department and 
     agencies to--
       (1) use available administrative authority to eliminate, 
     consolidate, or streamline Government programs and agencies 
     with duplicative and overlapping missions identified in the--
       (A) March 2011 Government Accountability Office report to 
     Congress entitled ``Opportunities to Reduce Potential 
     Duplication in Government Programs, Save Tax Dollars, and 
     Enhance Revenue'' (GAO 11 318SP); and
       (B) February 2012 Government Accountability Office report 
     to Congress entitled ``2012 Annual Report: Opportunities to 
     Reduce Potential Duplication in Government Programs, Save Tax 
     Dollars, and Enhance Revenue'' (GAO 12 342SP);
       (2) identify and report to Congress any legislative changes 
     required to further eliminate, consolidate, or streamline 
     Government programs and agencies with duplicative and 
     overlapping missions identified in the--
       (A) March 2011 Government Accountability Office report to 
     Congress entitled ``Opportunities to Reduce Potential 
     Duplication in Government Programs, Save Tax Dollars, and 
     Enhance Revenue'' (GAO 11 318SP); and

[[Page S1053]]

       (B) February 2012 Government Accountability Office report 
     to Congress entitled ``2012 Annual Report: Opportunities to 
     Reduce Potential Duplication in Government Programs, Save Tax 
     Dollars, and Enhance Revenue'' (GAO 12 342SP);
       (3) determine the total cost savings that shall result to 
     each agency, office, and department from the actions 
     described in paragraph (1); and
       (4) rescind from the appropriate accounts and apply the 
     savings towards deficit reduction the amount greater of--
       (A) $10,000,000,000; or
       (B) the total amount of cost savings estimated by paragraph 
     (3).
                                 ______
                                 
  SA 1739. Mrs. MURRAY submitted an amendment intended to be proposed 
to amendment SA 1730 proposed by Mr. Reid to the bill S. 1813, to 
reauthorize Federal-aid highway and highway safety construction 
programs, and for other purposes; which was ordered to lie on the 
table; as follows:

       On page 6, strike lines 15 through 17, and insert the 
     following:
       ``(A) in which a substantial portion of each line operates 
     in a separated right-of-way that is semi-dedicated for public 
     transportation use during peak periods;
                                 ______
                                 
  SA 1740. Mrs. MURRAY submitted an amendment intended to be proposed 
to amendment SA 1730 proposed by Mr. Reid to the bill S. 1813, to 
reauthorize Federal-aid highway and highway safety construction 
programs, and for other purposes; which was ordered to lie on the 
table; as follows:

       On page 13, line 24, insert ``and other high occupancy 
     vehicles'' before the semicolon at the end.
                                 ______
                                 
  SA 1741. Mr. LEVIN (for himself and Mr. Conrad) submitted an 
amendment intended to be proposed by him to the bill S. 1813, to 
reauthorize Federal-aid highway and highway safety construction 
programs, and for other purposes; which was ordered to lie on the 
table; as follows:

       At the end, add the following:

                       DIVISION__--CUT LOOPHOLES

     SECTION __001. SHORT TITLE; ETC.

       (a) Short Title.--This division may be cited as the ``Cut 
     Unjustified Tax Loopholes Act'' or ``CUT Loopholes Act''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this division 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 
     division is as follows:

                       DIVISION __--CUT LOOPHOLES

Sec. __001. Short title; etc.

                  TITLE I--ENDING OFFSHORE TAX ABUSES

      Subtitle A--Deterring the Use of Tax Havens for Tax Evasion

Sec. __101. Authorizing special measures against foreign jurisdictions, 
              financial institutions, and others that impede United 
              States tax enforcement.
Sec. __102. Strengthening the Foreign Account Tax Compliance Act 
              (FATCA).
Sec. __103. Treatment of foreign corporations managed and controlled in 
              the United States as domestic corporations.
Sec. __104. Reporting United States beneficial owners of foreign owned 
              financial accounts.
Sec. __105. Swap payments made from the United States to persons 
              offshore.
Sec. __106. Tax on income of controlled foreign corporation deposited 
              in financial account located in the United States.

 Subtitle B--Other Measures to Combat Tax Haven and Tax Shelter Abuses

Sec. __111. Country-by-country reporting.
Sec. __112. Penalty for failing to disclose offshore holdings.
Sec. __113. Deadline for anti-money laundering rule for private funds 
              and venture capital funds.
Sec. __114. Anti-money laundering requirements for formation agents.
Sec. __115. Strengthening John Doe summons proceedings.
Sec. __116. Improving enforcement of foreign financial account 
              reporting.

              Subtitle C--Combating Tax Shelter Promoters

Sec. __121. Penalty for promoting abusive tax shelters.
Sec. __122. Penalty for aiding and abetting the understatement of tax 
              liability.
Sec. __123. Prohibited fee arrangement.
Sec. __124. Preventing tax shelter activities by financial 
              institutions.
Sec. __125. Information sharing for enforcement purposes.
Sec. __126. Disclosure of information to Congress.
Sec. __127. Tax opinion standards for tax practitioners.

        Subtitle D--Reformation of U.S. International Tax System

Sec. __131. Allocation of expenses and taxes on basis of repatriation 
              of foreign income.
Sec. __132. Excess income from transfers of intangibles to low-taxed 
              affiliates treated as subpart F income.
Sec. __133. Limitations on income shifting through intangible property 
              transfers.
Sec. __134. Limitation on earnings stripping by expatriated entities.

 TITLE II--ENDING EXCESSIVE CORPORATE TAX DEDUCTIONS FOR STOCK OPTIONS

Sec. __201. Consistent treatment of stock options by corporations.
Sec. __202. Application of executive pay deduction limit.

                  TITLE I--ENDING OFFSHORE TAX ABUSES

      Subtitle A--Deterring the Use of Tax Havens for Tax Evasion

     SEC. __101. AUTHORIZING SPECIAL MEASURES AGAINST FOREIGN 
                   JURISDICTIONS, FINANCIAL INSTITUTIONS, AND 
                   OTHERS THAT IMPEDE UNITED STATES TAX 
                   ENFORCEMENT.

       (a) In General.--Section 5318A of title 31, United States 
     Code, is amended--
       (1) by striking the section heading and inserting the 
     following new heading:

     ``Sec.  5318A. Special measures for jurisdictions, financial 
       institutions, or international transactions that are of 
       primary money laundering concern or impede United States 
       tax enforcement'';

       (2) in subsection (a), by striking all before paragraph (1) 
     and inserting the following:
       ``(a) Special Measures To Counter Money Laundering and 
     Efforts To Impede United States Tax Enforcement.--'';
       (3) in subsection (c), by striking all before paragraph (1) 
     and inserting the following:
       ``(c) Consultations and Information To Be Considered in 
     Finding Jurisdictions, Institutions, Types of Accounts, or 
     Transactions To Be of Primary Money Laundering Concern or To 
     Be Impeding United States Tax Enforcement.--'';
       (4) in subsection (a)(1), by inserting ``or is impeding 
     United States tax enforcement'' after ``primary money 
     laundering concern'';
       (5) in subsection (a)(4)--
       (A) in subparagraph (A)--
       (i) by inserting ``in matters involving money laundering,'' 
     before ``shall consult''; and
       (ii) by striking ``and'' at the end;
       (B) by redesignating subparagraph (B) as subparagraph (C); 
     and
       (C) by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) in matters involving United States tax enforcement, 
     shall consult with the Commissioner of the Internal Revenue 
     Service, the Secretary of State, the Attorney General of the 
     United States, and in the sole discretion of the Secretary, 
     such other agencies and interested parties as the Secretary 
     may find to be appropriate; and'';
       (6) in each of paragraphs (1)(A), (2), (3), and (4) of 
     subsection (b), by inserting ``or to be impeding United 
     States tax enforcement'' after ``primary money laundering 
     concern'' each place that term appears;
       (7) in subsection (b), by striking paragraph (5) and 
     inserting the following new paragraph:
       ``(5) Prohibitions or conditions on opening or maintaining 
     certain correspondent or payable-through accounts or 
     authorizing certain payment cards.--If the Secretary finds a 
     jurisdiction outside of the United States, 1 or more 
     financial institutions operating outside of the United 
     States, or 1 or more classes of transactions within or 
     involving a jurisdiction outside of the United States to be 
     of primary money laundering concern or to be impeding United 
     States tax enforcement, the Secretary, in consultation with 
     the Secretary of State, the Attorney General of the United 
     States, and the Chairman of the Board of Governors of the 
     Federal Reserve System, may prohibit, or impose conditions 
     upon--
       ``(A) the opening or maintaining in the United States of a 
     correspondent account or payable-through account; or
       ``(B) the authorization, approval, or use in the United 
     States of a credit card, charge card, debit card, or similar 
     credit or debit financial instrument by any domestic 
     financial institution, financial agency, or credit card 
     company or association, for or on behalf of a foreign banking 
     institution, if such correspondent account, payable-through 
     account, credit card, charge card, debit card, or similar 
     credit or debit financial instrument, involves any such 
     jurisdiction or institution, or if any such transaction may 
     be conducted through such correspondent account, payable-
     through account, credit card, charge card, debit card, or 
     similar credit or debit financial instrument.'';
       (8) in subsection (c)(1), by inserting ``or is impeding 
     United States tax enforcement'' after ``primary money 
     laundering concern'';
       (9) in subsection (c)(2)(A)--
       (A) in clause (ii), by striking ``bank secrecy or special 
     regulatory advantages'' and inserting ``bank, tax, corporate, 
     trust, or financial secrecy or regulatory advantages'';
       (B) in clause (iii), by striking ``supervisory and counter-
     money'' and inserting ``supervisory, international tax 
     enforcement, and counter-money'';

[[Page S1054]]

       (C) in clause (v), by striking ``banking or secrecy'' and 
     inserting ``banking, tax, or secrecy''; and
       (D) in clause (vi), by inserting ``, tax treaty, or tax 
     information exchange agreement'' after ``treaty'';
       (10) in subsection (c)(2)(B)--
       (A) in clause (i), by inserting ``or tax evasion'' after 
     ``money laundering''; and
       (B) in clause (iii), by inserting ``, tax evasion,'' after 
     ``money laundering''; and
       (11) in subsection (d), by inserting ``involving money 
     laundering, and shall notify, in writing, the Committee on 
     Finance of the Senate and the Committee on Ways and Means of 
     the House of Representatives of any such action involving 
     United States tax enforcement'' after ``such action''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. __102. STRENGTHENING THE FOREIGN ACCOUNT TAX COMPLIANCE 
                   ACT (FATCA).

       (a) Reporting Activities With Respect to Passive Foreign 
     Investment Companies.--Section 1298(f) is amended by 
     inserting ``, or who directly or indirectly forms, transfers 
     assets to, is a beneficiary of, has a beneficial interest in, 
     or receives money or property or the use thereof from,'' 
     after ``shareholder of''.
       (b) Withholdable Payments to Foreign Financial 
     Institutions.--Section 1471(d) is amended--
       (1) by inserting ``or transaction'' after ``any 
     depository'' in paragraph (2)(A), and
       (2) by striking ``or any interest'' and all that follows in 
     paragraph (5)(C) and inserting ``derivatives, or any interest 
     (including a futures or forward contract, swap, or option) in 
     such securities, partnership interests, commodities, or 
     derivatives.''.
       (c) Withholdable Payments to Other Foreign Financial 
     Institutions.--Section 1472 is amended--
       (1) by inserting ``as a result of any customer 
     identification, anti-money laundering, anti-corruption, or 
     similar obligation to identify account holders,'' after 
     ``reason to know,'' in subsection (b)(2), and
       (2) by inserting ``as posing a low risk of tax evasion'' 
     after ``this subsection'' in subsection (c)(1)(G).
       (d) Definitions.--Clauses (i) and (ii) of section 
     1473(2)(A) are each amended by inserting ``or as a beneficial 
     owner'' after ``indirectly''.
       (e) Special Rules.--Section 1474(c) is amended--
       (1) by inserting ``, except that information provided under 
     sections 1471(c) or 1472(b) may be disclosed to any Federal 
     law enforcement agency, upon request or upon the initiation 
     of the Secretary, to investigate or address a possible 
     violation of United States law'' after ``shall apply'' in 
     paragraph (1), and
       (2) by inserting ``, or has had an agreement terminated 
     under such section,'' after ``section 1471(b)'' in paragraph 
     (2).
       (f) Information With Respect to Foreign Financial Assets.--
     Section 6038D(a) is amended by inserting ``ownership or 
     beneficial ownership'' after ``holds any''.
       (g) Establishing Presumptions for Entities and Transactions 
     Involving Non-FATCA Institutions.--
       (1) Presumptions for tax purposes.--
       (A) In general.--Chapter 76 is amended by inserting after 
     section 7491 the following new subchapter:

       ``Subchapter F--Presumptions for Certain Legal Proceedings

``Sec. 7492. Presumptions pertaining to entities and transactions 
              involving non-FATCA institutions.

     ``SEC. 7492. PRESUMPTIONS PERTAINING TO ENTITIES AND 
                   TRANSACTIONS INVOLVING NON-FATCA INSTITUTIONS.

       ``(a) Control.--For purposes of any United States civil 
     judicial or administrative proceeding to determine or collect 
     tax, there shall be a rebuttable presumption that a United 
     States person (other than an entity with shares regularly 
     traded on an established securities market) who, directly or 
     indirectly, formed, transferred assets to, was a beneficiary 
     of, had a beneficial interest in, or received money or 
     property or the use thereof from an entity, including a 
     trust, corporation, limited liability company, partnership, 
     or foundation (other than an entity with shares regularly 
     traded on an established securities market), that holds an 
     account, or in any other manner has assets, in a non-FATCA 
     institution, exercised control over such entity. The 
     presumption of control created by this subsection shall not 
     be applied to prevent the Secretary from determining or 
     arguing the absence of control.
       ``(b) Transfers of Income.--For purposes of any United 
     States civil judicial or administrative proceeding to 
     determine or collect tax, there shall be a rebuttable 
     presumption that any amount or thing of value received by a 
     United States person (other than an entity with shares 
     regularly traded on an established securities market) 
     directly or indirectly from an account or from an entity 
     (other than an entity with shares regularly traded on an 
     established securities market) that holds an account, or in 
     any other manner has assets, in a non-FATCA institution, 
     constitutes income of such person taxable in the year of 
     receipt; and any amount or thing of value paid or transferred 
     by or on behalf of a United States person (other than an 
     entity with shares regularly traded on an established 
     securities market) directly or indirectly to an account, or 
     entity (other than an entity with shares regularly traded on 
     an established securities market) that holds an account, or 
     in any other manner has assets, in a non-FATCA institution, 
     represents previously unreported income of such person 
     taxable in the year of the transfer.
       ``(c) Rebutting the Presumptions.--The presumptions 
     established in this section may be rebutted only by clear and 
     convincing evidence, including detailed documentary, 
     testimonial, and transactional evidence, establishing that--
       ``(1) in subsection (a), such taxpayer exercised no 
     control, directly or indirectly, over account or entity at 
     the time in question, and
       ``(2) in subsection (b), such amounts or things of value 
     did not represent income related to such United States 
     person.
     Any court having jurisdiction of a civil proceeding in which 
     control of such an offshore account or offshore entity or the 
     income character of such receipts or amounts transferred is 
     an issue shall prohibit the introduction by the taxpayer of 
     any foreign based document that is not authenticated in open 
     court by a person with knowledge of such document, or any 
     other evidence supplied by a person outside the jurisdiction 
     of a United States court, unless such person appears before 
     the court.''.
       (B) The table of subchapters for chapter 76 is amended by 
     inserting after the item relating to subchapter E the 
     following new item:

     ``subchapter f--presumptions for certain legal proceedings''.

       (2) Definition of non-fatca institution.--Section 7701(a) 
     is amended by adding at the end the following new paragraph:
       ``(51) Non-fatca institution.--The term `non-FATCA 
     institution' means any financial institution that does not 
     meet the reporting requirements of section 1471(b).''.
       (3) Presumptions for securities law purposes.--Section 21 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78u) is 
     amended by adding at the end the following new subsection:
       ``(j) Presumptions Pertaining to Control and Beneficial 
     Ownership.--
       ``(1) Control.--For purposes of any civil judicial or 
     administrative proceeding under this title, there shall be a 
     rebuttable presumption that a United States person (other 
     than an entity with shares regularly traded on an established 
     securities market) who, directly or indirectly, formed, 
     transferred assets to, was a beneficiary of, had a beneficial 
     interest in, or received money or property or the use thereof 
     from an entity, including a trust, corporation, limited 
     liability company, partnership, or foundation (other than an 
     entity with shares regularly traded on an established 
     securities market), that holds an account, or in any other 
     manner has assets, in a non-FATCA institution (as defined in 
     section 7701(a)(51) of the Internal Revenue Code of 1986), 
     exercised control over such entity. The presumption of 
     control created by this paragraph shall not be applied to 
     prevent the Commission from determining or arguing the 
     absence of control.
       ``(2) Beneficial ownership.--For purposes of any civil 
     judicial or administrative proceeding under this title, there 
     shall be a rebuttable presumption that securities that are 
     nominally owned by an entity, including a trust, corporation, 
     limited liability company, partnership, or foundation (other 
     than an entity with shares regularly traded on an established 
     securities market), and that are held in a non-FATCA 
     institution (as so defined), are beneficially owned by any 
     United States person (other than an entity with shares 
     regularly traded on an established securities market) who 
     directly or indirectly exercised control over such entity. 
     The presumption of beneficial ownership created by this 
     paragraph shall not be applied to prevent the Commission from 
     determining or arguing the absence of beneficial 
     ownership.''.
       (4) Presumption for reporting purposes relating to foreign 
     financial accounts.--Section 5314 of title 31, United States 
     Code, is amended by adding at the end the following new 
     subsection:
       ``(d) Rebuttable Presumption.--For purposes of this 
     section, there shall be a rebuttable presumption that any 
     account with a non-FATCA institution (as defined in section 
     7701(a)(51) of the Internal Revenue Code of 1986) contains 
     funds in an amount that is at least sufficient to require a 
     report prescribed by regulations under this section.''.
       (5) Regulatory authority.--Not later than 180 days after 
     the date of the enactment of this Act, the Secretary of the 
     Treasury and the Chairman of the Securities and Exchange 
     Commission shall each adopt regulations or other guidance 
     necessary to implement the amendments made by this 
     subsection. The Secretary and the Chairman may by regulation 
     or guidance provide that the presumption of control shall not 
     extend to particular classes of transactions, such as 
     corporate reorganizations or transactions below a specified 
     dollar threshold, if either determines that applying such 
     amendments to such transactions is not necessary to carry out 
     the purposes of such amendments.
       (h) Effective Date.--The amendments made by this section 
     shall take effect on the date which is 180 days after the 
     date of the enactment of this Act, whether or not regulations 
     are issued under subsection (g)(5).

     SEC. __103. TREATMENT OF FOREIGN CORPORATIONS MANAGED AND 
                   CONTROLLED IN THE UNITED STATES AS DOMESTIC 
                   CORPORATIONS.

       (a) In General.--Section 7701 is amended by redesignating 
     subsection (p) as subsection

[[Page S1055]]

     (q) and by inserting after subsection (o) the following new 
     subsection:
       ``(p) Certain Corporations Managed and Controlled in the 
     United States Treated as Domestic for Income Tax.--
       ``(1) In general.--Notwithstanding subsection (a)(4), in 
     the case of a corporation described in paragraph (2) if--
       ``(A) the corporation would not otherwise be treated as a 
     domestic corporation for purposes of this title, but
       ``(B) the management and control of the corporation occurs, 
     directly or indirectly, primarily within the United States,

     then, solely for purposes of chapter 1 (and any other 
     provision of this title relating to chapter 1), the 
     corporation shall be treated as a domestic corporation.
       ``(2) Corporation described.--
       ``(A) In general.--A corporation is described in this 
     paragraph if--
       ``(i) the stock of such corporation is regularly traded on 
     an established securities market, or
       ``(ii) the aggregate gross assets of such corporation (or 
     any predecessor thereof), including assets under management 
     for investors, whether held directly or indirectly, at any 
     time during the taxable year or any preceding taxable year is 
     $50,000,000 or more.
       ``(B) General exception.--A corporation shall not be 
     treated as described in this paragraph if--
       ``(i) such corporation was treated as a corporation 
     described in this paragraph in a preceding taxable year,
       ``(ii) such corporation--

       ``(I) is not regularly traded on an established securities 
     market, and
       ``(II) has, and is reasonably expected to continue to have, 
     aggregate gross assets (including assets under management for 
     investors, whether held directly or indirectly) of less than 
     $50,000,000, and

       ``(iii) the Secretary grants a waiver to such corporation 
     under this subparagraph.
       ``(C) Exception from gross assets test.--Subparagraph 
     (A)(ii) shall not apply to a corporation which is a 
     controlled foreign corporation (as defined in section 957) 
     and which is a member of an affiliated group (as defined 
     section 1504, but determined without regard to section 
     1504(b)(3)) the common parent of which--
       ``(i) is a domestic corporation (determined without regard 
     to this subsection), and
       ``(ii) has substantial assets (other than cash and cash 
     equivalents and other than stock of foreign subsidiaries) 
     held for use in the active conduct of a trade or business in 
     the United States.
       ``(3) Management and control.--
       ``(A) In general.--The Secretary shall prescribe 
     regulations for purposes of determining cases in which the 
     management and control of a corporation is to be treated as 
     occurring primarily within the United States.
       ``(B) Executive officers and senior management.--Such 
     regulations shall provide that--
       ``(i) the management and control of a corporation shall be 
     treated as occurring primarily within the United States if 
     substantially all of the executive officers and senior 
     management of the corporation who exercise day-to-day 
     responsibility for making decisions involving strategic, 
     financial, and operational policies of the corporation are 
     located primarily within the United States, and
       ``(ii) individuals who are not executive officers and 
     senior management of the corporation (including individuals 
     who are officers or employees of other corporations in the 
     same chain of corporations as the corporation) shall be 
     treated as executive officers and senior management if such 
     individuals exercise the day-to-day responsibilities of the 
     corporation described in clause (i).
       ``(C) Corporations primarily holding investment assets.--
     Such regulations shall also provide that the management and 
     control of a corporation shall be treated as occurring 
     primarily within the United States if--
       ``(i) the assets of such corporation (directly or 
     indirectly) consist primarily of assets being managed on 
     behalf of investors, and
       ``(ii) decisions about how to invest the assets are made in 
     the United States.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning on or after the date 
     which is 2 years after the date of the enactment of this Act, 
     whether or not regulations are issued under section 
     7701(p)(3) of the Internal Revenue Code of 1986, as added by 
     this section.

     SEC. __104. REPORTING UNITED STATES BENEFICIAL OWNERS OF 
                   FOREIGN OWNED FINANCIAL ACCOUNTS.

       (a) In General.--Subpart B of part III of subchapter A of 
     chapter 61 is amended by inserting after section 6045B the 
     following new sections:

     ``SEC. 6045C. RETURNS REGARDING UNITED STATES BENEFICIAL 
                   OWNERS OF FINANCIAL ACCOUNTS LOCATED IN THE 
                   UNITED STATES AND HELD IN THE NAME OF A FOREIGN 
                   ENTITY.

       ``(a) Requirement of Return.--If--
       ``(1) any withholding agent under sections 1441 and 1442 
     has the control, receipt, custody, disposal, or payment of 
     any amount constituting gross income from sources within the 
     United States of any foreign entity, including a trust, 
     corporation, limited liability company, partnership, or 
     foundation (other than an entity with shares regularly traded 
     on an established securities market), and
       ``(2) such withholding agent determines for purposes of 
     titles 14, 18, or 31 of the United States Code that a United 
     States person has any beneficial interest in the foreign 
     entity or in the account in such entity's name (hereafter in 
     this section referred to as `United States beneficial 
     owner'),

     then the withholding agent shall make a return according to 
     the forms or regulations prescribed by the Secretary.
       ``(b) Required Information.--For purposes of subsection (a) 
     the information required to be included on the return shall 
     include--
       ``(1) the name, address, and, if known, the taxpayer 
     identification number of the United States beneficial owner,

       ``(2) the known facts pertaining to the relationship of 
     such United States beneficial owner to the foreign entity and 
     the account,
       ``(3) the gross amount of income from sources within the 
     United States (including gross proceeds from brokerage 
     transactions), and
       ``(4) such other information as the Secretary may by forms 
     or regulations provide.
       ``(c) Statements To Be Furnished to Beneficial Owners With 
     Respect to Whom Information Is Required To Be Reported.--A 
     withholding agent required to make a return under subsection 
     (a) shall furnish to each United States beneficial owner 
     whose name is required to be set forth in such return a 
     statement showing--
       ``(1) the name, address, and telephone number of the 
     information contact of the person required to make such 
     return, and
       ``(2) the information required to be shown on such return 
     with respect to such United States beneficial owner.

     The written statement required under the preceding sentence 
     shall be furnished to the United States beneficial owner on 
     or before January 31 of the year following the calendar year 
     for which the return under subsection (a) was required to be 
     made. In the event the person filing such return does not 
     have a current address for the United States beneficial 
     owner, such written statement may be mailed to the address of 
     the foreign entity.

     ``SEC. 6045D. RETURNS BY FINANCIAL INSTITUTIONS REGARDING 
                   ESTABLISHMENT OF ACCOUNTS IN NON-FATCA 
                   INSTITUTIONS.

       ``(a) Requirement of Return.--Any financial institution 
     directly or indirectly opening a bank, brokerage, or other 
     financial account for or on behalf of an offshore entity, 
     including a trust, corporation, limited liability company, 
     partnership, or foundation (other than an entity with shares 
     regularly traded on an established securities market), in a 
     non-FATCA institution (as defined in section 7701(a)(51)) at 
     the direction of, on behalf of, or for the benefit of a 
     United States person shall make a return according to the 
     forms or regulations prescribed by the Secretary.
       ``(b) Required Information.--For purposes of subsection (a) 
     the information required to be included on the return shall 
     include--
       ``(1) the name, address, and taxpayer identification number 
     of such United States person,
       ``(2) the name and address of the financial institution at 
     which a financial account is opened, the type of account, the 
     account number, the name under which the account was opened, 
     and the amount of the initial deposit,
       ``(3) if the account is held in the name of an entity, the 
     name and address of such entity, the type of entity, and the 
     name and address of any company formation agent or other 
     professional employed to form or acquire the entity, and
       ``(4) such other information as the Secretary may by forms 
     or regulations provide.
       ``(c) Statements To Be Furnished to United States Persons 
     With Respect to Whom Information Is Required To Be 
     Reported.--A financial institution required to make a return 
     under subsection (a) shall furnish to each United States 
     person whose name is required to be set forth in such return 
     a statement showing--
       ``(1) the name, address, and telephone number of the 
     information contact of the person required to make such 
     return, and
       ``(2) the information required to be shown on such return 
     with respect to such United States person.

     The written statement required under the preceding sentence 
     shall be furnished to such United States person on or before 
     January 31 of the year following the calendar year for which 
     the return under subsection (a) was required to be made.
       ``(d) Exemption.--The Secretary may by regulations exempt 
     any class of United States persons or any class of accounts 
     or entities from the requirements of this section if the 
     Secretary determines that applying this section to such 
     persons, accounts, or entities is not necessary to carry out 
     the purposes of this section.''.
       (b) Penalties.--
       (1) Returns.--Section 6724(d)(1)(B) is amended by striking 
     ``or'' at the end of clause (xxiv), by striking ``and'' at 
     the end of clause (xxv), and by adding after clause (xxv) the 
     following new clauses:
       ``(xxvi) section 6045C(a) (relating to returns regarding 
     United States beneficial owners of financial accounts located 
     in the United States and held in the name of a foreign 
     entity), or
       ``(xxvii) section 6045D(a) (relating to returns by 
     financial institutions regarding establishment of accounts at 
     non-FATCA institutions), and''.

[[Page S1056]]

       (2) Payee statements.--Section 6724(d)(2) is amended by 
     striking ``or'' at the end of subparagraph (GG), by striking 
     the period at the end of subparagraph (HH), and by inserting 
     after subparagraph (HH) the following new subparagraphs:
       ``(II) section 6045C(c) (relating to returns regarding 
     United States beneficial owners of financial accounts located 
     in the United States and held in the name of a foreign 
     entity),
       ``(JJ) section 6045D(c) (relating to returns by financial 
     institutions regarding establishment of accounts at non-FATCA 
     institutions).''.
       (c) Clerical Amendment.--The table of sections for subpart 
     B of part III of subchapter A of chapter 61 is amended by 
     inserting after the item relating to section 6045B the 
     following new items:

``Sec. 6045C. Returns regarding United States beneficial owners of 
              financial accounts located in the United States and held 
              in the name of a foreign entity.
``Sec. 6045D. Returns by financial institutions regarding establishment 
              of accounts at non-FATCA institutions.''.
       (d) Additional Penalties.--
       (1) Additional penalties on banks.--Section 5239(b)(1) of 
     the Revised Statutes (12 U.S.C. 93(b)(1)) is amended by 
     inserting ``or any of the provisions of section 6045D of the 
     Internal Revenue Code of 1986,'' after ``any regulation 
     issued pursuant to,''.
       (2) Additional penalties on securities firms.--Section 
     21(d)(3)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 
     78u(d)(3)(A)) is amended by inserting ``any of the provisions 
     of section 6045D of the Internal Revenue Code of 1986,'' 
     after ``the rules or regulations thereunder,''.
       (e) Regulatory Authority and Effective Date.--
       (1) Regulatory authority.--Not later than 180 days after 
     the date of the enactment of this Act, the Secretary of the 
     Treasury shall adopt regulations, forms, or other guidance 
     necessary to implement this section.
       (2) Effective date.--Section 6045C of the Internal Revenue 
     Code of 1986 (as added by this section) and the amendment 
     made by subsection (d)(1) shall take effect with respect to 
     amounts paid into foreign owned accounts located in the 
     United States after December 31 of the year of the date of 
     the enactment of this Act. Section 6045D of such Code (as so 
     added) and the amendment made by subsection (d)(2) shall take 
     effect with respect to accounts opened after December 31 of 
     the year of the date of the enactment of this Act.

     SEC. __105. SWAP PAYMENTS MADE FROM THE UNITED STATES TO 
                   PERSONS OFFSHORE.

       (a) Tax on Swap Payments Received by Foreign Persons.--
     Section 871(a)(1) is amended--
       (1) by inserting ``swap payments (as identified in section 
     1256(b)(2)(B)),'' after ``annuities,'' in subparagraph (A), 
     and
       (2) by adding at the end the following new sentence: ``In 
     the case of swap payments, the source of a swap payment is 
     determined by reference to the location of the payor.''.
       (b) Tax on Swap Payments Received by Foreign 
     Corporations.--Section 881(a) is amended--
       (1) by inserting ``swap payments (as identified in section 
     1256(b)(2)(B)),'' after ``annuities,'' in paragraph (1), and
       (2) by adding at the end the following new sentence: ``In 
     the case of swap payments, the source of a swap payment is 
     determined by reference to the location of the payor.''.

     SEC. __106. TAX ON INCOME OF CONTROLLED FOREIGN CORPORATION 
                   DEPOSITED IN FINANCIAL ACCOUNT LOCATED IN THE 
                   UNITED STATES.

       Section 952(a) is amended by adding at the end the 
     following new sentence: ``Notwithstanding section 
     956(c)(2)(A), any property (as defined in section 317(a)) of 
     such controlled foreign corporation that is deposited and 
     maintained, directly or indirectly, for or on behalf of such 
     corporation in a financial account located in the United 
     States, including in a correspondent account of a financial 
     institution, is a constructive distribution with respect to 
     the stock which such United States shareholder owns.''.

 Subtitle B--Other Measures to Combat Tax Haven and Tax Shelter Abuses

     SEC. __111. COUNTRY-BY-COUNTRY REPORTING.

       (a) In General.--Section 13 of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78m) is amended by adding at the end the 
     following new subsection:
       ``(r) Disclosure of Financial Performance on a Country-by-
     Country Basis.--
       ``(1) Definitions.--In this subsection--
       ``(A) the term `issuer group' shall mean the issuer, each 
     subsidiary of the issuer, and each entity under the control 
     of the issuer;
       ``(B) the term `country of operation' shall mean each 
     country in which a member of the issuer group is incorporated 
     or organized, or maintains employees or conducts business 
     activities; and
       ``(C) the term `world-wide allocation of group members' 
     shall mean each member of the issuer group listed according 
     to their country of operation.
       ``(2) Country-by-country reporting.--The Commission shall 
     issue rules that require each issuer to include in an annual 
     report filed by the issuer with the Commission information 
     indicative of financial performance on a country-by-country 
     basis during the covered period, including--
       ``(A) a list of each country of operation;
       ``(B) the world-wide allocation of group members;
       ``(C) the financial performance of each member of the 
     issuer group in each country of operation, without exception, 
     including, and set forth according to--
       ``(i) total number of employees physically working in the 
     country of operation;
       ``(ii) total sales by the member of the issuer group to 
     third parties;
       ``(iii) total sales by the member of the issuer group to 
     other members of the issuer group and total sales to each 
     such member;
       ``(iv) total purchases by the member of the issuer group 
     from third parties;
       ``(v) total purchases by the member of the issuer group 
     from other members of the issuer group and total purchases 
     from each such member;
       ``(vi) total financing payments made by the member of the 
     issuer group to third parties;
       ``(vii) total financing payments made by the member of the 
     issuer group to other members of the issuer group and total 
     financing payments made to each such member;
       ``(viii) pre-tax gross revenues of the member of the issuer 
     group;
       ``(ix) pre-tax net revenues of the member of the issuer 
     group; and
       ``(x) such other financial information as the Commission 
     may determine is indicative of the financial performance of 
     the issuer;
       ``(D) the tax paid by each member of the issuer group in 
     each country of operation, without exception, including, and 
     set forth according to--
       ``(i) total Federal, regional, local, and other tax 
     assessed against each member of the issuer group with respect 
     to each country of operation during the covered period;
       ``(ii) after taking into account any tax deductions, tax 
     credits, tax forgiveness, or other tax benefits or waivers, 
     total amount of tax paid from the treasury of the member of 
     the issuer group to the government of each country of 
     operation during the covered period; and
       ``(iii) such other financial information as the Commission 
     may determine is necessary or appropriate to inform the 
     public of the tax obligations of and payments by each member 
     of the issuer group; and
       ``(E) such other financial information as the Commission 
     may determine is necessary or appropriate in the public 
     interest or for the protection of investors.''.
       (b) Rulemaking.--
       (1) Deadlines.--Not later than 180 days after the date of 
     the enactment of this Act, the Commission shall issue a 
     proposed rule to carry out this section and, not later than 
     270 days after the date of the enactment of this Act, shall 
     issue a final rule to carry out this section.
       (2) Consultation.--In issuing the rules under this section, 
     the Commission shall consult with the Secretary of the 
     Treasury and the Commissioner of Internal Revenue and, to the 
     extent practicable and in furtherance of its obligation to 
     protect investors, shall issue rules that support Federal 
     efforts to reduce offshore tax evasion and abuses.
       (3) Interactive data format.--The rules issued under this 
     section shall require that the information provided by 
     issuers in their annual reports be submitted in an 
     interactive data format as provided in section 13(q)(2)(D) of 
     the Securities Exchange Act of 1934 (15 U.S.C. 78m(q)(2)(D)), 
     and to the extent practicable, the Commission shall make 
     available online, to the public, a compilation of such 
     information.
       (4) Aggregate data.--The rules may allow issuers to provide 
     the financial information required under section 13(r) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78m(r)), as added 
     by this section, aggregated at the level of each country of 
     operation instead of with respect to each member of the 
     issuer group individually, provided that the Commission 
     retains the authority, at its discretion, to require further 
     disaggregation.
       (5) Effective date.--Each issuer shall be required to 
     comply with the requirements of section 13(r) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78m(r)), as added 
     by this section, not later than the date on which the issuer 
     must file with the Commission its first annual report that is 
     due not later than 1 year after the date on which the 
     Commission issues a final rule under this section.

     SEC. __112. PENALTY FOR FAILING TO DISCLOSE OFFSHORE 
                   HOLDINGS.

       (a) Securities Exchange Act of 1934.--Section 21(d)(3)(B) 
     of the Securities Exchange Act of 1934 (15 U.S.C. 
     78u(d)(3)(B)) is amended by adding at the end the following:
       ``(iv) Fourth tier.--Notwithstanding clauses (i), (ii), and 
     (iii), the amount of the penalty for each such violation 
     shall not exceed $1,000,000 for any person if the violation 
     described in subparagraph (A) involved a knowing failure to 
     disclose any holding or transaction involving equity or debt 
     instruments of an issuer and known by such person to involve 
     a foreign entity, including any trust, corporation, limited 
     liability company, partnership, or foundation that is 
     directly or indirectly controlled by such person, and which 
     would have been otherwise subject to disclosure by such 
     person under this title.''.
       (b) Securities Act of 1933.--Section 20(d)(2) of the 
     Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is amended by 
     adding at the end the following:
       ``(D) Fourth tier.--Notwithstanding subparagraphs (A), (B), 
     and (C), the amount of

[[Page S1057]]

     penalty for each such violation shall not exceed $1,000,000 
     for any person, if the violation described in paragraph (1) 
     involved a knowing failure to disclose any holding or 
     transaction involving equity or debt instruments of an issuer 
     and known by such person to involve a foreign entity, 
     including any trust, corporation, limited liability company, 
     partnership, or foundation, directly or indirectly controlled 
     by such person, and which would have been otherwise subject 
     to disclosure by such person under this title.''.
       (c) Investment Company Act of 1940.--Section 9(d)(2) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a 9(d)(2)) is 
     amended by adding at the end the following:
       ``(D) Fourth tier.--Notwithstanding subparagraphs (A), (B), 
     and (C), the amount of penalty for each such violation shall 
     not exceed $1,000,000 for any person, if the violation 
     described in paragraph (1) involved a knowing failure to 
     disclose any holding or transaction involving equity or debt 
     instruments of an issuer and known by such person to involve 
     a foreign entity, including any trust, corporation, limited 
     liability company, partnership, or foundation, directly or 
     indirectly controlled by such person, and which would have 
     been otherwise subject to disclosure by such person under 
     this title.''.
       (d) Investment Advisers Act of 1940.--Section 203(i)(2) of 
     the Investment Advisers Act of 1940 (15 U.S.C. 80b 3(i)(2)) 
     is amended by adding at the end the following:
       ``(D) Fourth tier.--Notwithstanding subparagraphs (A), (B), 
     and (C), the amount of penalty for each such violation shall 
     not exceed $1,000,000 for any person, if the violation 
     described in paragraph (1) involved a knowing failure to 
     disclose any holding or transaction involving equity or debt 
     instruments of an issuer and known by such person to involve 
     a foreign entity, including any trust, corporation, limited 
     liability company, partnership, or foundation, directly or 
     indirectly controlled by such person, and which would have 
     been otherwise subject to disclosure by such person under 
     this title.''.

     SEC. __113. DEADLINE FOR ANTI-MONEY LAUNDERING RULE FOR 
                   PRIVATE FUNDS AND VENTURE CAPITAL FUNDS.

       (a) In General.--
       (1) Proposed rule.--Not later than 90 days after the date 
     of the enactment of this Act, the Secretary of the Treasury, 
     in consultation with the Chairman of the Securities and 
     Exchange Commission and the Chairman of the Commodity Futures 
     Trading Commission, shall publish a proposed rule in the 
     Federal Register requiring any private fund (as defined in 
     paragraph (29) of section 202(a) of the Investment Advisors 
     Act of 1940 (15 U.S.C. 80b 2(a)) or venture capital fund 
     (within the meaning of subsection (l) of section 203 of such 
     Act (15 U.S.C. 80b 3) to establish anti-money laundering 
     programs and submit suspicious activity reports under 
     subsections (g) and (h) of section 5318 of title 31, United 
     States Code.
       (2) Final rule.--Not later than 180 days after the date of 
     the enactment of this Act, the Secretary of the Treasury 
     shall publish a final rule in the Federal Register on the 
     matter described in paragraph (1).
       (b) Contents.--The final rule published under this section 
     shall require, at a minimum, that to safeguard against 
     terrorist financing and money laundering, any such private 
     fund or venture capital fund shall--
       (1) use risk-based due diligence policies, procedures, and 
     controls that are reasonably designed to ascertain the 
     identity of any foreign person (including the nominal and 
     beneficial owner or beneficiary of a foreign corporation, 
     partnership, trust, or other foreign entity) planning to 
     supply or supplying funds to be invested with the advice or 
     assistance of such private fund or venture capital fund; and
       (2) be subject to section 5318(k)(2) of title 31, United 
     States Code.

     SEC. __114. ANTI-MONEY LAUNDERING REQUIREMENTS FOR FORMATION 
                   AGENTS.

       (a) Anti-Money Laundering Obligations for Formation 
     Agents.--Section 5312(a)(2) of title 31, United States Code, 
     is amended, by--
       (1) in subparagraph (Y), by striking ``or'' at the end;
       (2) by redesignating subparagraph (Z) as subparagraph (AA); 
     and
       (3) by inserting after subparagraph (Y) the following:
       ``(Z) persons engaged in the business of forming new 
     corporations, limited liability companies, partnerships, 
     trusts, or other legal entities; or''.
       (b) Deadline for Anti-Money Laundering Rule for Formation 
     Agents.--
       (1) Proposed rule.--Not later than 120 days after the date 
     of the enactment of this Act, the Secretary of the Treasury, 
     in consultation with the Attorney General of the United 
     States, the Secretary of Homeland Security, and the 
     Commissioner of Internal Revenue, shall publish a proposed 
     rule in the Federal Register requiring persons described in 
     section 5312(a)(2)(Z) of title 31, United States Code, as 
     added by this section, to establish anti-money laundering 
     programs under subsections (g) and (h) of section 5318 of 
     that title.
       (2) Final rule.--Not later than 270 days after such date of 
     enactment, the Secretary of the Treasury shall publish a 
     final rule in the Federal Register on the matter described in 
     paragraph (1).
       (3) Exclusions.--Any rule promulgated under this subsection 
     shall exclude from the category of persons engaged in the 
     business of forming new corporations or other entities--
       (A) any government agency; and
       (B) any attorney or law firm that uses a paid formation 
     agent operating within the United States to form such 
     corporations or other entities.

     SEC. __115. STRENGTHENING JOHN DOE SUMMONS PROCEEDINGS.

       (a) In General.--Subsection (f) of section 7609 is amended 
     to read as follows:
       ``(f) Additional Requirement in the Case of a John Doe 
     Summons.--
       ``(1) General rule.--Any summons described in subsection 
     (c)(1) which does not identify the person with respect to 
     whose liability the summons is issued may be served only 
     after a court proceeding in which the Secretary establishes 
     that--
       ``(A) the summons relates to the investigation of a 
     particular person or ascertainable group or class of persons,
       ``(B) there is a reasonable basis for believing that such 
     person or group or class of persons may fail or may have 
     failed to comply with any provision of any internal revenue 
     law, and
       ``(C) the information sought to be obtained from the 
     examination of the records or testimony (and the identity of 
     the person or persons with respect to whose liability the 
     summons is issued) is not readily available from other 
     sources.
       ``(2) Exception.--Paragraph (1) shall not apply to any 
     summons which specifies that it is limited to information 
     regarding a United States correspondent account (as defined 
     in section 5318A(e)(1)(B) of title 31, United States Code) or 
     a United States payable-through account (as defined in 
     section 5318A(e)(1)(C) of such title) of a financial 
     institution that is held at a non-FATCA institution (as 
     defined in section 7701(a)(51)).
       ``(3) Presumption in cases involving non-fatca 
     institutions.--For purposes of this section, in any case in 
     which the particular person or ascertainable group or class 
     of persons have financial accounts in or transactions related 
     to a non-FATCA institution (as defined in section 
     7701(a)(51)), there shall be a presumption that there is a 
     reasonable basis for believing that such person or group or 
     class of persons may fail or may have failed to comply with 
     provisions of internal revenue law.
       ``(4) Project john doe summonses.--
       ``(A) In general.--Notwithstanding the requirements of 
     paragraph (1), the Secretary may issue a summons described in 
     paragraph (1) if the summons--
       ``(i) relates to a project which is approved under 
     subparagraph (B),
       ``(ii) is issued to a person who is a member of the group 
     or class established under subparagraph (B)(i), and
       ``(iii) is issued within 3 years of the date on which such 
     project was approved under subparagraph (B).
       ``(B) Approval of projects.--A project may only be approved 
     under this subparagraph after a court proceeding in which the 
     Secretary establishes that--
       ``(i) any summons issues with respect to the project will 
     be issued to a member of an ascertainable group or class of 
     persons, and
       ``(ii) any summons issued with respect to such project will 
     meet the requirements of paragraph (1).
       ``(C) Extension.--Upon application of the Secretary, the 
     court may extend the time for issuing such summonses under 
     subparagraph (A)(i) for additional 3-year periods, but only 
     if the court continues to exercise oversight of such project 
     under subparagraph (D).
       ``(D) Ongoing court oversight.--During any period in which 
     the Secretary is authorized to issue summonses in relation to 
     a project approved under subparagraph (B) (including during 
     any extension under subparagraph (C)), the Secretary shall 
     report annually to the court on the use of such authority, 
     provide copies of all summonses with such report, and comply 
     with the court's direction with respect to the issuance of 
     any John Doe summons under such project.''.
       (b) Jurisdiction of Court.--
       (1) In general.--Paragraph (1) of section 7609(h) is 
     amended by inserting after the first sentence the following 
     new sentence: ``Any United States district court in which a 
     member of the group or class to which a summons may be issued 
     resides or is found shall have jurisdiction to hear and 
     determine the approval of a project under subsection 
     (f)(2)(B).''.
       (2) Conforming amendment.--The first sentence of section 
     7609(h)(1) is amended by striking ``(f)'' and inserting 
     ``(f)(1)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to summonses issued after the date of the 
     enactment of this Act.

     SEC. __116. IMPROVING ENFORCEMENT OF FOREIGN FINANCIAL 
                   ACCOUNT REPORTING.

       (a) Clarifying the Connection of Foreign Financial Account 
     Reporting to Tax Administration.--Paragraph (4) of section 
     6103(b) is amended by adding at the end the following new 
     sentence:

     ``For purposes of subparagraph (A)(i), section 5314 of title 
     31, United States Code, and sections 5321 and 5322 of such 
     title (as such sections pertain to such section 5314), shall 
     be considered related statutes.''.
       (b) Simplifying the Calculation of Foreign Financial 
     Account Reporting Penalties.--Section 5321(a)(5)(D)(ii) of 
     title 31, United States Code, is amended by striking ``the 
     balance in the account at the time of

[[Page S1058]]

     the violation'' and inserting ``the highest balance in the 
     account during the reporting period to which the violation 
     relates''.
       (c) Clarifying the Use of Suspicious Activity Reports Under 
     the Bank Secrecy Act for Civil Tax Law Enforcement.--Section 
     5319 of title 31, United States Code, is amended by inserting 
     ``the civil and criminal enforcement divisions of the 
     Internal Revenue Service,'' after ``including''.

              Subtitle C--Combating Tax Shelter Promoters

     SEC. __121. PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.

       (a) Penalty for Promoting Abusive Tax Shelters.--Section 
     6700 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 150 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 
     considered an ordinary and necessary expense in carrying on a 
     trade or business for purposes of this title and shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (b) Conforming Amendment.--Section 6700(a) is amended by 
     striking the last sentence.
       (c) Effective Date.--The amendments made by this section 
     shall apply to activities after the date of the enactment of 
     this Act.

     SEC. __122. PENALTY FOR AIDING AND ABETTING THE 
                   UNDERSTATEMENT OF TAX LIABILITY.

       (a) In General.--Section 6701(a) 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 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 150 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 
     considered an ordinary and necessary expense in carrying on a 
     trade or business for purposes of this title and 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. __123. PROHIBITED FEE ARRANGEMENT.

       (a) In General.--Section 6701, as amended by this Act, is 
     amended--
       (1) by redesignating subsections (f) and (g) as subsections 
     (g) and (h), respectively,
       (2) by striking ``subsection (a).'' in paragraphs (2) and 
     (3) of subsection (g) (as redesignated by paragraph (1)) and 
     inserting ``subsection (a) or (f).'', and
       (3) by inserting after subsection (e) the following new 
     subsection:
       ``(f) Prohibited Fee Arrangement.--
       ``(1) In general.--Any person who makes an agreement for, 
     charges, or collects a fee which is for services provided in 
     connection with the internal revenue laws, and the amount of 
     which is calculated according to, or is dependent upon, a 
     projected or actual amount of--
       ``(A) tax savings or benefits, or
       ``(B) losses which can be used to offset other taxable 
     income,

     shall pay a penalty with respect to each such fee activity in 
     the amount determined under subsection (b).
       ``(2) Rules.--The Secretary may issue rules to carry out 
     the purposes of this subsection and may provide exceptions 
     for fee arrangements that are in the public interest.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to fee agreements, charges, and collections made 
     after the date of the enactment of this Act.

     SEC. __124. PREVENTING TAX SHELTER ACTIVITIES BY FINANCIAL 
                   INSTITUTIONS.

       (a) Examinations.--
       (1) Development of examination techniques.--Each of the 
     Federal banking agencies and the Commission shall, in 
     consultation with the Internal Revenue Service, develop 
     examination techniques to detect potential violations of 
     section 6700 or 6701 of the Internal Revenue Code of 1986, by 
     depository institutions, brokers, dealers, and investment 
     advisers, as appropriate.
       (2) Implementation.--Each of the Federal banking agencies 
     and the Commission shall implement the examination techniques 
     developed under paragraph (1) with respect to each of the 
     depository institutions, brokers, dealers, or investment 
     advisers subject to their enforcement authority. Such 
     examination shall, to the extent possible, be combined with 
     any examination by such agency otherwise required or 
     authorized by Federal law.
       (b) Report to Internal Revenue Service.--In any case in 
     which an examination conducted under this section with 
     respect to a financial institution or other entity reveals a 
     potential violation, such agency shall promptly notify the 
     Internal Revenue Service of such potential violation for 
     investigation and enforcement by the Internal Revenue 
     Service, in accordance with applicable provisions of law.
       (c) Report to Congress.--The Federal banking agencies and 
     the Commission shall submit a joint written report to 
     Congress in 2013 on their progress in preventing violations 
     of sections 6700 and 6701 of the Internal Revenue Code of 
     1986, by depository institutions, brokers, dealers, and 
     investment advisers, as appropriate.
       (d) Definitions.--For purposes of this section--
       (1) the terms ``broker'', ``dealer'', and ``investment 
     adviser'' have the same meanings as in section 3 of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78c);
       (2) the term ``Commission'' means the Securities and 
     Exchange Commission;
       (3) the term ``depository institution'' has the same 
     meaning as in section 3(c) of the Federal Deposit Insurance 
     Act (12 U.S.C. 1813(c));
       (4) the term ``Federal banking agencies'' has the same 
     meaning as in section 3(q) of the Federal Deposit Insurance 
     Act (12 U.S.C. 1813(q)); and
       (5) the term ``Secretary'' means the Secretary of the 
     Treasury.

     SEC. __125. INFORMATION SHARING FOR ENFORCEMENT PURPOSES.

       (a) Promotion of Prohibited Tax Shelters or Tax Avoidance 
     Schemes.--Section 6103(h) is amended by adding at the end the 
     following new paragraph:
       ``(7) Disclosure of returns and return information related 
     to promotion of prohibited tax shelters or tax avoidance 
     schemes.--
       ``(A) Written request.--Upon receipt by the Secretary of a 
     written request which meets the requirements of subparagraph 
     (B) from the head of the United States Securities and 
     Exchange Commission, an appropriate Federal banking agency as 
     defined under section 1813(q) of title 12, United States 
     Code, or the Public Company Accounting Oversight Board, a 
     return or return information shall be disclosed to such 
     requestor's officers and employees who are personally and 
     directly engaged in an investigation, examination, or 
     proceeding by such requestor to evaluate, determine, 
     penalize, or deter conduct by a financial institution, 
     issuer, or public accounting firm, or associated person, in 
     connection with a potential or actual violation of section 
     6700 (promotion of abusive tax shelters), 6701 (aiding and 
     abetting understatement of tax liability), or activities 
     related to promoting or facilitating inappropriate tax 
     avoidance or tax evasion. Such disclosure shall be solely for 
     use by such officers and employees in such investigation, 
     examination, or proceeding. In the discretion of the 
     Secretary, such disclosure may take the form of the 
     participation of Internal Revenue Service employees in a 
     joint investigation, examination, or proceeding with the 
     Securities Exchange Commission, Federal banking agency, or 
     Public Company Accounting Oversight Board.
       ``(B) Requirements.--A request meets the requirements of 
     this subparagraph if it sets forth--
       ``(i) the nature of the investigation, examination, or 
     proceeding,
       ``(ii) the statutory authority under which such 
     investigation, examination, or proceeding is being conducted,
       ``(iii) the name or names of the financial institution, 
     issuer, or public accounting firm to which such return 
     information relates,

[[Page S1059]]

       ``(iv) the taxable period or periods to which such return 
     information relates, and
       ``(v) the specific reason or reasons why such disclosure 
     is, or may be, relevant to such investigation, examination or 
     proceeding.
       ``(C) Financial institution.--For the purposes of this 
     paragraph, the term `financial institution' means a 
     depository institution, foreign bank, insured institution, 
     industrial loan company, broker, dealer, investment company, 
     investment advisor, or other entity subject to regulation or 
     oversight by the United States Securities and Exchange 
     Commission or an appropriate Federal banking agency.''.
       (b) Financial and Accounting Fraud Investigations.--Section 
     6103(i) is amended by adding at the end the following new 
     paragraph:
       ``(9) Disclosure of returns and return information for use 
     in financial and accounting fraud investigations.--
       ``(A) Written request.--Upon receipt by the Secretary of a 
     written request which meets the requirements of subparagraph 
     (B) from the head of the United States Securities and 
     Exchange Commission or the Public Company Accounting 
     Oversight Board, a return or return information shall be 
     disclosed to such requestor's officers and employees who are 
     personally and directly engaged in an investigation, 
     examination, or proceeding by such requester to evaluate the 
     accuracy of a financial statement or report, or to determine 
     whether to require a restatement, penalize, or deter conduct 
     by an issuer, investment company, or public accounting firm, 
     or associated person, in connection with a potential or 
     actual violation of auditing standards or prohibitions 
     against false or misleading statements or omissions in 
     financial statements or reports. Such disclosure shall be 
     solely for use by such officers and employees in such 
     investigation, examination, or proceeding.
       ``(B) Requirements.--A request meets the requirements of 
     this subparagraph if it sets forth--
       ``(i) the nature of the investigation, examination, or 
     proceeding,
       ``(ii) the statutory authority under which such 
     investigation, examination, or proceeding is being conducted,
       ``(iii) the name or names of the issuer, investment 
     company, or public accounting firm to which such return 
     information relates,
       ``(iv) the taxable period or periods to which such return 
     information relates, and
       ``(v) the specific reason or reasons why such disclosure 
     is, or may be, relevant to such investigation, examination or 
     proceeding.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to disclosures and to information and document 
     requests made after the date of the enactment of this Act.

     SEC. __126. DISCLOSURE OF INFORMATION TO CONGRESS.

       (a) Disclosure by Tax Return Preparer.--
       (1) In general.--Subparagraph (B) of section 7216(b)(1) is 
     amended to read as follows:
       ``(B) pursuant to any 1 of the following documents, if 
     clearly identified:
       ``(i) The order of any Federal, State, or local court of 
     record.
       ``(ii) A subpoena issued by a Federal or State grand jury.
       ``(iii) An administrative order, summons, or subpoena which 
     is issued in the performance of its duties by--

       ``(I) any Federal agency, including Congress or any 
     committee or subcommittee thereof, or
       ``(II) any State agency, body, or commission charged under 
     the laws of the State or a political subdivision of the State 
     with the licensing, registration, or regulation of tax return 
     preparers.''.

       (2) Effective date.--The amendment made by this subsection 
     shall apply to disclosures made after the date of the 
     enactment of this Act pursuant to any document in effect on 
     or after such date.
       (b) Disclosure by Secretary.--Paragraph (2) of section 
     6104(a) is amended to read as follows:
       ``(2) Inspection by congress.--
       ``(A) In general.--Upon receipt of a written request from a 
     committee or subcommittee of Congress, copies of documents 
     related to a determination by the Secretary to grant, deny, 
     revoke, or restore an organization's exemption from taxation 
     under section 501 shall be provided to such committee or 
     subcommittee, including any application, notice of status, or 
     supporting information provided by such organization to the 
     Internal Revenue Service; any letter, analysis, or other 
     document produced by or for the Internal Revenue Service 
     evaluating, determining, explaining, or relating to the tax 
     exempt status of such organization (other than returns, 
     unless such returns are available to the public under this 
     section or section 6103 or 6110); and any communication 
     between the Internal Revenue Service and any other party 
     relating to the tax exempt status of such organization.
       ``(B) Additional information.--Section 6103(f) shall apply 
     with respect to--
       ``(i) the application for exemption of any organization 
     described in subsection (c) or (d) of section 501 which is 
     exempt from taxation under section 501(a) for any taxable 
     year and any application referred to in subparagraph (B) of 
     subsection (a)(1) of this section, and
       ``(ii) any other papers which are in the possession of the 
     Secretary and which relate to such application,
     as if such papers constituted returns.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to disclosures and to information and document 
     requests made after the date of the enactment of this Act.

     SEC. __127. TAX OPINION STANDARDS FOR TAX PRACTITIONERS.

       Section 330(d) of title 31, United States Code, is amended 
     to read as follows:
       ``(d) The Secretary of the Treasury shall impose standards 
     applicable to the rendering of written advice with respect to 
     any listed transaction or any entity, plan, arrangement, or 
     other transaction which has a potential for tax avoidance or 
     evasion. Such standards shall address, but not be limited to, 
     the following issues:
       ``(1) Independence of the practitioner issuing such written 
     advice from persons promoting, marketing, or recommending the 
     subject of the advice.
       ``(2) Collaboration among practitioners, or between a 
     practitioner and other party, which could result in such 
     collaborating parties having a joint financial interest in 
     the subject of the advice.
       ``(3) Avoidance of conflicts of interest which would impair 
     auditor independence.
       ``(4) For written advice issued by a firm, standards for 
     reviewing the advice and ensuring the consensus support of 
     the firm for positions taken.
       ``(5) Reliance on reasonable factual representations by the 
     taxpayer and other parties.
       ``(6) Appropriateness of the fees charged by the 
     practitioner for the written advice.
       ``(7) Preventing practitioners and firms from aiding or 
     abetting the understatement of tax liability by clients.
       ``(8) Banning the promotion of potentially abusive or 
     illegal tax shelters.''.

        Subtitle D--Reformation of U.S. International Tax System

     SEC. __131. ALLOCATION OF EXPENSES AND TAXES ON BASIS OF 
                   REPATRIATION OF FOREIGN INCOME.

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

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

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

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

       ``(a) Current Year Deductions.--For purposes of this 
     chapter, foreign-related deductions for any taxable year--
       ``(1) shall be taken into account for such taxable year 
     only to the extent that such deductions are allocable to 
     currently-taxed foreign income, and
       ``(2) to the extent not so allowed, shall be taken into 
     account in subsequent taxable years as provided in subsection 
     (b).

     Foreign-related deductions shall be allocated to currently 
     taxed foreign income in the same proportion which currently 
     taxed foreign income bears to the sum of currently taxed 
     foreign income and deferred foreign income.
       ``(b) Deductions Related to Repatriated Deferred Foreign 
     Income.--
       ``(1) In general.--If there is repatriated foreign income 
     for a taxable year, the portion of the previously deferred 
     deductions allocated to the repatriated foreign income shall 
     be taken into account for the taxable year as a deduction 
     allocated to income from sources outside the United States. 
     Any such amount shall not be included in foreign-related 
     deductions for purposes of applying subsection (a) to such 
     taxable year.
       ``(2) Portion of previously deferred deductions.--For 
     purposes of paragraph (1), the portion of the previously 
     deferred deductions allocated to repatriated foreign income 
     is--
       ``(A) the amount which bears the same proportion to such 
     deductions, as
       ``(B) the repatriated income bears to the previously 
     deferred foreign income.
       ``(c) Definitions and Special Rule.--For purposes of this 
     section--
       ``(1) Foreign-related deductions.--The term `foreign-
     related deductions' means the total amount of deductions and 
     expenses which would be allocated or apportioned to gross 
     income from sources without the United States for the taxable 
     year if both the currently-taxed foreign income and deferred 
     foreign income were taken into account.
       ``(2) Currently-taxed foreign income.--The term `currently-
     taxed foreign income' means the amount of gross income from 
     sources without the United States for the taxable year 
     (determined without regard to repatriated foreign income for 
     such year).
       ``(3) Deferred foreign income.--The term `deferred foreign 
     income' means the excess of--
       ``(A) the amount that would be includible in gross income 
     under subpart F of this part for the taxable year if--
       ``(i) all controlled foreign corporations were treated as 
     one controlled foreign corporation, and
       ``(ii) all earnings and profits of all controlled foreign 
     corporations were subpart F income (as defined in section 
     952), over

[[Page S1060]]

       ``(B) the sum of--
       ``(i) all dividends received during the taxable year from 
     controlled foreign corporations, plus
       ``(ii) amounts includible in gross income under section 
     951(a).
       ``(4) Previously deferred foreign income.--The term 
     `previously deferred foreign income' means the aggregate 
     amount of deferred foreign income for all prior taxable years 
     to which this part applies, determined as of the beginning of 
     the taxable year, reduced by the repatriated foreign income 
     for all such prior taxable years.
       ``(5) Repatriated foreign income.--The term `repatriated 
     foreign income' means the amount included in gross income on 
     account of distributions out of previously deferred foreign 
     income.
       ``(6) Previously deferred deductions.--The term `previously 
     deferred deductions' means the aggregate amount of foreign-
     related deductions not taken into account under subsection 
     (a) for all prior taxable years (determined as of the 
     beginning of the taxable year), reduced by any amounts taken 
     into account under subsection (b) for such prior taxable 
     years.
       ``(7) Treatment of certain foreign taxes.--
       ``(A) Paid by controlled foreign corporation.--Section 78 
     shall not apply for purposes of determining currently-taxed 
     foreign income and deferred foreign income.
       ``(B) Paid by taxpayer.--For purposes of determining 
     currently-taxed foreign income, gross income from sources 
     without the United States shall be reduced by the aggregate 
     amount of taxes described in the applicable paragraph of 
     section 901(b) which are paid by the taxpayer (without regard 
     to sections 902 and 960) during the taxable year.
       ``(8) Coordination with section 976.--In determining 
     currently-taxed foreign income and deferred foreign income, 
     the amount of deemed foreign tax credits shall be determined 
     with regard to section 976.

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

       ``(a) Current Year Allowance.--For purposes of this 
     chapter, the amount taken into account as foreign income 
     taxes for any taxable year shall be an amount which bears the 
     same ratio to the total foreign income taxes for that taxable 
     year as--
       ``(1) the currently-taxed foreign income for such taxable 
     year, bears to
       ``(2) the sum of the currently-taxed foreign income and 
     deferred foreign income for such year.

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

     ``SEC. 977. APPLICATION OF SUBPART.

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

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

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

     SEC. __132. EXCESS INCOME FROM TRANSFERS OF INTANGIBLES TO 
                   LOW-TAXED AFFILIATES TREATED AS SUBPART F 
                   INCOME.

       (a) In General.--Subsection (a) of section 954 is amended 
     by inserting after paragraph (3) the following new paragraph:
       ``(4) the foreign base company excess intangible income for 
     the taxable year (determined under subsection (f) and reduced 
     as provided in subsection (b)(5)), and''.
       (b) Foreign Base Company Excess Intangible Income.--Section 
     954 is amended by inserting after subsection (e) the 
     following new subsection:
       ``(f) Foreign Base Company Excess Intangible Income.--For 
     purposes of subsection (a)(4) and this subsection:
       ``(1) Foreign base company excess intangible income 
     defined.--
       ``(A) In general.--The term `foreign base company excess 
     intangible income' means, with respect to any covered 
     intangible, the excess of--
       ``(i) the sum of--

       ``(I) gross income from the sale, lease, license, or other 
     disposition of property in which such covered intangible is 
     used directly or indirectly, and
       ``(II) gross income from the provision of services related 
     to such covered intangible or in connection with property in 
     which such covered intangible is used directly or indirectly, 
     over

       ``(ii) 150 percent of the costs properly allocated and 
     apportioned to the gross income taken into account under 
     clause (i) other than expenses for interest and taxes and any 
     expenses which are not directly allocable to such gross 
     income.
       ``(B) Same country income not taken into account.--If--
       ``(i) the sale, lease, license, or other disposition of the 
     property referred to in subparagraph (A)(i)(I) is for use, 
     consumption, or disposition in the country under the laws of 
     which the controlled foreign corporation is created or 
     organized, or
       ``(ii) the services referred to in subparagraph (A)(i)(II) 
     are performed in such country,

     the gross income from such sale, lease, license, or other 
     disposition, or provision of services, shall not be taken 
     into account under subparagraph (A)(i).
       ``(2) Exception based on effective foreign income tax 
     rate.--
       ``(A) In general.--Foreign base company excess intangible 
     income shall not include the applicable percentage of any 
     item of income received by a controlled foreign corporation 
     if the taxpayer establishes to the satisfaction of the 
     Secretary that such income was subject to an effective rate 
     of income tax imposed by a foreign country in excess of 5 
     percent.
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the term `applicable percentage' means the ratio 
     (expressed as a percentage), not greater than 100 percent, 
     of--
       ``(i) the number of percentage points by which the 
     effective rate of income tax referred to in subparagraph (A) 
     exceeds 5 percentage points, over
       ``(ii) 10 percentage points.
       ``(C) Treatment of losses in determining effective rate of 
     foreign income tax.--For purposes of determining the 
     effective rate of income tax imposed by any foreign country--
       ``(i) such effective rate shall be determined without 
     regard to any losses carried to the relevant taxable year, 
     and
       ``(ii) to the extent the income with respect to such 
     intangible reduces losses in the relevant taxable year, such 
     effective rate shall be treated as being the effective rate 
     which would have been imposed on such income without regard 
     to such losses.
       ``(3) Covered intangible.--The term `covered intangible' 
     means, with respect to any controlled foreign corporation, 
     any intangible property (as defined in section 
     936(h)(3)(B))--
       ``(A) which is sold, leased, licensed, or otherwise 
     transferred (directly or indirectly) to such controlled 
     foreign corporation from a related person, or
       ``(B) with respect to which such controlled foreign 
     corporation and one or more related persons has (directly or 
     indirectly) entered into any shared risk or development 
     agreement (including any cost sharing agreement).
       ``(4) Related person.--The term `related person' has the 
     meaning given such term in subsection (d)(3).''.
       (c) Separate Basket for Foreign Tax Credit.--Subsection (d) 
     of section 904 is amended by redesignating paragraph (7) as 
     paragraph (8) and by inserting after paragraph (6) the 
     following new paragraph:
       ``(6) Separate application to foreign base company excess 
     intangible income.--
       ``(A) In general.--Subsections (a), (b), and (c) of this 
     section and sections 902, 907, and 960 shall be applied 
     separately with respect to each item of income which is taken 
     into account under section 954(a)(4) as foreign base company 
     excess intangible income.
       ``(B) Regulations.--The Secretary may issue such 
     regulations or other guidance as is necessary or appropriate 
     to carry out the

[[Page S1061]]

     purposes of this subsection, including regulations or other 
     guidance which provides that related items of income may be 
     aggregated for purposes of this paragraph.''.
       (d) Conforming Amendments.--
       (1) Paragraph (4) of section 954(b) is amended by inserting 
     ``foreign base company excess intangible income described in 
     subsection (a)(4) or'' before ``foreign base company oil-
     related income'' in the last sentence thereof.
       (2) Subsection (b) of section 954 is amended by adding at 
     the end the following new paragraph:
       ``(7) Foreign base company excess intangible income not 
     treated as another kind of base company income.--Income of a 
     corporation which is foreign base company excess intangible 
     income shall not be considered foreign base company income of 
     such corporation under paragraph (2), (3), or (5) of 
     subsection (a).''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. __133. LIMITATIONS ON INCOME SHIFTING THROUGH INTANGIBLE 
                   PROPERTY TRANSFERS.

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

     SEC. __134. LIMITATION ON EARNINGS STRIPPING BY EXPATRIATED 
                   ENTITIES.

       (a) In General.--Subsection (j) of section 163 is amended--
       (1) by redesignating paragraph (9) as paragraph (10), and
       (2) by inserting after paragraph (8) the following new 
     paragraph:
       ``(9) Special rules for expatriated entities.--
       ``(A) In general.--In the case of a corporation to which 
     this subsection applies which is an expatriated entity, this 
     subsection shall apply to such corporation with the following 
     modifications:
       ``(i) Paragraph (2)(A) shall be applied without regard to 
     clause (ii) thereof.
       ``(ii) Paragraph (1)(B) shall be applied--

       ``(I) without regard to the parenthetical, and
       ``(II) by substituting `in the 1st succeeding taxable year 
     and in the 2nd through 10th succeeding taxable years to the 
     extent not previously taken into account under this 
     subparagraph' for `in the succeeding taxable year'.

       ``(iii) Paragraph (2)(B) shall be applied--

       ``(I) without regard to clauses (ii) and (iii), and
       ``(II) by substituting `25 percent of the adjusted taxable 
     income of the corporation for such taxable year' for the 
     matter of clause (i)(II) thereof.

       ``(B) Expatriated entity.--For purposes of this paragraph--
       ``(i) In general.--With respect to a corporation and a 
     taxable year, the term `expatriated entity' has the meaning 
     given such term by section 7874(a)(2), determined as if such 
     section and the regulations under such section as in effect 
     on the first day of such taxable year applied to all taxable 
     years of the corporation beginning after July 10, 1989.
       ``(ii) Exception for surrogates treated as a domestic 
     corporation.--The term `expatriated entity' does not include 
     a surrogate foreign corporation which is treated as a 
     domestic corporation by reason of section 7874(b).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

 TITLE II--ENDING EXCESSIVE CORPORATE TAX DEDUCTIONS FOR STOCK OPTIONS

     SEC. __201. CONSISTENT TREATMENT OF STOCK OPTIONS BY 
                   CORPORATIONS.

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

     SEC. __202. APPLICATION OF EXECUTIVE PAY DEDUCTION LIMIT.

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

                          ____________________