[House Report 109-330]
[From the U.S. Government Publishing Office]
109th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 109-330
======================================================================
PROVIDING FOR CONSIDERATION OF H.R. 4297, TAX RELIEF EXTENSION
RECONCILIATION ACT OF 2005
_______
December 7, 2005.--Referred to the House Calendar and ordered to be
printed
_______
Mr. Putnam, from the Committee on Rules, submitted the following
R E P O R T
[To accompany H. Res. 588]
The Committee on Rules, having had under consideration
House Resolution 588, by a nonrecord vote, report the same to
the House with the recommendation that the resolution be
adopted.
Summary of Provisions of the Resolution
The resolution provides for the consideration of H.R. 4297,
the Tax Relief Extension Reconciliation Act of 2005, under a
structured rule. The rule provides one hour of debate in the
House equally divided and controlled by the chairman and
ranking minority member of the Committee on Ways and Means. The
rule waives all points of order against consideration of the
bill.
The rule provides that the amendment in the nature of a
substitute recommended by the Committee on Ways and Means now
printed in the bill shall be considered as adopted. The rule
makes in order the amendment in the nature of a substitute
printed in this report, if offered by Representative Rangel of
New York or his designee, which shall be considered as read,
and shall be separately debatable for one hour equally divided
and controlled by the proponent and an opponent. The rule
waives all points of order against the amendment in the nature
of a substitute printed in this report. Finally, the rule
provides on motion to recommit with or without instructions.
Explanation of Waivers
The waiver of all points of order against consideration of
the bill includes a waiver of Section 303 of the Congressional
Budget Act, which prohibits consideration of legislation, as
reported, providing new budget authority, change in revenues,
change in public debt, new entitlement authority, or new credit
authority for a fiscal year until the budget resolution for
that year has been agreed to. This is necessary because some of
the programs affecting revenue contained in H.R. 4297 first
take effect in fiscal year 2007 and there is currently no
budget resolution agreed to governing that fiscal year.
Swnmary of the Amendment in the Nature of a Substitute Made in Order to
H.R. 4297--Tax Relief Extension Reconciliation Act of 2005
(Summary derived from information provided by amendment
sponsor.)
Rangel: Amendment in the Nature of a Substitute. The
amendment would extend for one year all expiring provisions
contained in Title I of H.R. 4297, including the deduction for
state and local retail sales taxes, the deduction for college
tuition expenses, tax incentives for the District of Columbia
and Indian reservations, 15 year depreciation period for
leasehold and restaurant improvements, qualified zone academy
bonds, the Brownfields cleanup tax incentive, and several other
more minor provisions. The amendment makes no substantive
changes to the expiring provisions, except for the research
credit, work opportunity tax credit, and welfare-to-work tax
credit, which are expanded to match the Thomas bill. In
addition to the one-year extensions that are retained by the
amendment, the amendment also would extend the temporary
provision that terminates at the end of this calendar year and
that provides a larger earned income tax credit for the
families of those serving in Iraq.
In addition the amendment would totally eliminate all
individual minimum tax liability for individuals with incomes
below $200,000 for joint returns, $100,000 in other cases, for
taxable year 2006. This provision would reduce the number of
AMT taxpayers from 19 million under current law for taxable
year 2006 to slightly over 3 million.
The amendment does not extend tax benefits that do not
terminate at the end of this calendar year such as the lower
rates on capital gains and dividends. The alternative also
includes a broad package of additional provisions that were
added by the full Committee.
The provisions of the alternative described above would
cost approximately $43 billion. The cost is offset by taking
back a portion of the recent tax cuts from individuals with
annual incomes over $1 million for joint returns, $500,000 for
other returns. (60 minutes)
Text of the Amendment in the Nature of a Substitute Made in Order
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE, ETC.
(a) Short Title.--This Act may be cited as the ``Tax Relief
Extension Reconciliation Act of 2005''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a section
or other provision, the reference shall be considered to be
made to a section or other provision of the Internal Revenue
Code of 1986.
(c) Table of Contents.--The table of contents for this Act is
as follows:
Sec. 1. Short title, etc.
TITLE I--EXTENSIONS OF CERTAIN PROVISIONS THROUGH 2006
Sec. 101. Allowance of nonrefundable personal credits against regular
and minimum tax liability.
Sec. 102. State and local general sales taxes.
Sec. 103. Research credit.
Sec. 104. Qualified tuition and related expenses.
Sec. 105. Certain expenses of elementary and secondary school teachers.
Sec. 106. Qualified Zone Academy Bonds.
Sec. 107. Tax incentives for business activities on Indian reservations.
Sec. 108. Deduction for corporate donations of computer technology and
equipment.
Sec. 109. Availability of medical savings accounts.
Sec. 110. 15-year cost recovery for leasehold improvements.
Sec. 111. 15-year cost recovery for restaurant improvements.
Sec. 112. Taxable income limit on percentage depletion for oil and
natural gas produced from marginal properties.
Sec. 113. District of Columbia Enterprise Zone.
Sec. 114. Possession tax credit with respect to American Samoa.
Sec. 115. Parity in the application of certain limits to mental health
benefits.
Sec. 116. Election to include combat pay under earned income credit.
Sec. 117. Work opportunity credit.
Sec. 118. Welfare-to-work credit.
Sec. 119. Extension of expensing of environmental remediation costs.
Sec. 120. Temporary relief from the alternative minimum tax.
TITLE II--REDUCTION IN BENEFIT OF RATE REDUCTION FOR FAMILIES WITH
INCOMES OVER $1,000,000
Sec. 201. Reduction in benefit of rate reduction for families with
incomes over $1,000,000.
TITLE III--MISCELLANEOUS PROVISIONS
Sec. 301. Modification of active business definition under section 355.
Sec. 302. Veterans' mortgage bonds.
Sec. 303. Capital gains treatment for certain self-created musical
works.
Sec. 304. Vessel tonnage limit.
Sec. 305. Clarification of taxation of certain settlement funds.
TITLE I--EXTENSIONS OF CERTAIN PROVISIONS THROUGH 2006
SECTION 101. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST
REGULAR AND MINIMUM TAX LIABILITY.
(a) In General.--Paragraph (2) of section 26(a) (relating to
special rule for taxable years 2000 through 2005) is amended--
(1) in the text by striking ``or 2005'' and inserting
``2005, or 2006'', and
(2) in the heading by striking ``2005'' and inserting
``2006''.
(b) Conforming Provisions.--
(1) Subsection (i) of section 904 (relating to
coordination with nonrefundable personal credits) is
amended by striking ``or 2005'' and inserting ``2005,
or 2006''.
(2) The amendments made by sections 201(b), 202(f),
and 618(b) of the Economic Growth and Tax Relief
Reconciliation Act of 2001 shall not apply to taxable
years beginning during 2006.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2005.
SEC. 102. STATE AND LOCAL GENERAL SALES TAXES.
(a) In General.--Subparagraph (I) of section 164(b)(5)
(relating to application of paragraph) is amended by striking
``January 1, 2006'' and inserting ``January 1, 2007''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 2005.
SEC. 103. RESEARCH CREDIT.
(a) Extension.--
(1) In general.--Subparagraph (B) of section 41(h)(1)
(relating to termination) is amended by striking
``December 31, 2005'' and inserting ``December 31,
2006''.
(2) Conforming amendment.--Subparagraph (D) of
section 45C(b)(1) (relating to special rule) is amended
by striking ``December 31, 2005'' and inserting
``December 31, 2006''.
(3) Effective date.--The amendments made by this
subsection shall apply to amounts paid or incurred
after December 31, 2005.
(b) Increase in Rates of Alternative Incremental Credit.--
(1) In general.--Subparagraph (A) of section 41(c)(4)
(relating to election of alternative incremental
credit) is amended--
(A) by striking ``2.65 percent'' and
inserting ``3 percent'',
(B) by striking ``3.2 percent'' and inserting
``4 percent'', and
(C) by striking ``3.75 percent'' and
inserting ``5 percent''.
(2) Effective date.--The amendments made by this
subsection shall apply to taxable years ending after
the date of the enactment of this Act.
(c) Alternative Simplified Credit for Qualified Research
Expenses.--
(1) In general.--Subsection (c) of section 41
(relating to base amount) is amended by redesignating
paragraphs (5) and (6) as paragraphs (6) and (7),
respectively, and by inserting after paragraph (4) the
following new paragraph:
``(5) Election of alternative simplified credit.--
``(A) In general.--At the election of the
taxpayer, the credit determined under
subsection (a)(1) shall be equal to 12 percent
of so much of the qualified research expenses
for the taxable year as exceeds 50 percent of
the average qualified research expenses for the
3 taxable years preceding the taxable year for
which the credit is being determined.
``(B) Special rule in case of no qualified
research expenses in any of 3 preceding taxable
years.--
``(i) Taxpayers to which subparagraph
applies.--The credit under this
paragraph shall be determined under
this subparagraph if the taxpayer has
no qualified research expenses in any
one of the 3 taxable years preceding
the taxable year for which the credit
is being determined.
``(ii) Credit rate.--The credit
determined under this subparagraph
shall be equal to 6 percent of the
qualified research expenses for the
taxable year.
``(C) Election.--An election under this
paragraph shall apply to the taxable year for
which made and all succeeding taxable years
unless revoked with the consent of the
Secretary. An election under this paragraph may
not be made for any taxable year to which an
election under paragraph (4) applies.''.
(2) Coordination with election of alternative
incremental credit.--
(A) In general.--Section 41(c)(4)(B)
(relating to election) is amended by adding at
the end the following: ``An election under this
paragraph may not be made for any taxable year
to which an election under paragraph (5)
applies.''.
(B) Transition rule.--In the case of an
election under section 41(c)(4) of the Internal
Revenue Code of 1986 which applies to the
taxable year which includes the date of the
enactment of this Act, such election shall be
treated as revoked with the consent of the
Secretary of the Treasury if the taxpayer makes
an election under section 41(c)(5) of such Code
(as added by subsection (a)) for such year.
(3) Effective date.--The amendments made by this
subsection shall apply to taxable years ending after
the date of the enactment of this Act.
SEC. 104. QUALIFIED TUITION AND RELATED EXPENSES.
(a) In General.--Subsection (e) of section 222 (relating to
termination) is amended by striking ``December 31, 2005'' and
inserting ``December 31, 2006''.
(b) Limitations.--Paragraph (2) of section 222(b) (relating
to applicable dollar limit) is amended by striking
subparagraphs (A) and (B), by redesignating subparagraph (C) as
subparagraph (B), and by inserting before subparagraph (B) (as
so redesignated) the following:
``(A) 2006.--In the case of a taxable year
beginning in 2006, the applicable dollar amount
shall be equal to--
``(i) in the case of a taxpayer whose
adjusted gross income for the taxable
year does not exceed $65,000 ($130,000
in the case of a joint return), $4,000,
``(ii) in the case of a taxpayer not
described in clause (i) whose adjusted
gross income for the taxable year does
not exceed $80,000 ($160,000 in the
case of a joint return), $2,000, and
``(iii) in the case of any other
taxpayer, zero.''.
(c) Effective Date.--The amendments made by this section
shall apply to payments made in taxable years beginning after
December 31, 2005.
SEC. 105. CERTAIN EXPENSES OF ELEMENTARY AND SECONDARY SCHOOL TEACHERS.
(a) In General.--Subparagraph (D) of section 62(a)(2)
(relating to certain expenses of elementary and secondary
school teachers) is amended by striking ``or 2005'' and
inserting ``2005, or 2006''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to expenses paid or incurred in taxable years
beginning after December 31, 2005.
SEC. 106. QUALIFIED ZONE ACADEMY BONDS.
(a) In General.--Paragraph (1) of section 1397E(e) (relating
to national limit) is amended by striking ``and 2005'' and
inserting ``2005, and 2006''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to obligations issued after December 31, 2005.
SEC. 107. TAX INCENTIVES FOR BUSINESS ACTIVITIES ON INDIAN
RESERVATIONS.
(a) Indian Employment Tax Credit.--
(1) In general.--Subsection (f) of section 45A
(relating to termination) is amended by striking
``December 31, 2005'' and inserting ``December 31,
2006''.
(2) Effective date.--The amendment made by paragraph
(1) shall apply to taxable years beginning after
December 31, 2005.
(b) Accelerated Depreciation for Business Property on Indian
Reservations.--
(1) In general.--Paragraph (8) of section 168(j)
(relating to termination) is amended by striking
``December 31, 2005'' and inserting ``December 31,
2006''.
(2) Effective date.--The amendment made by paragraph
(1) shall apply with respect to property placed in
service after December 31, 2005.
SEC. 108. DEDUCTION FOR CORPORATE DONATIONS OF COMPUTER TECHNOLOGY AND
EQUIPMENT.
(a) In General.--Subparagraph (G) of section 170(e)(6)
(relating to termination) is amended by striking ``December 31,
2005'' and inserting ``December 31, 2006''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to contributions made in taxable years beginning
after December 31, 2005.
SEC. 109. AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS.
(a) In General.--Paragraphs (2) and (3)(B) of section 220(i)
(defining cut-off year) are each amended by striking ``2005''
each place it appears in the text and headings and inserting
``2006''.
(b) Conforming Amendments.--
(1) Paragraph (2) of section 220(j) is amended--
(A) in the text by striking ``or 2004'' each
place it appears and inserting ``2004, or
2005'', and
(B) in the heading by striking ``or 2004''
and inserting ``2004, or 2005''.
(2) Subparagraph (A) of section 220(j)(4) is amended
by striking ``and 2004'' and inserting ``2004, and
2005''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
(d) Time for Filing Reports, Etc.--
(1) The report required by section 220(j)(4) of the
Internal Revenue Code of 1986 to be made on August 1,
2005, shall be treated as timely if made before the
close of the 90-day period beginning on the date of the
enactment of this Act.
(2) The determination and publication required by
section 220(j)(5) of such Code with respect to calendar
year 2005 shall be treated as timely if made before the
close of the 120-day period beginning on the date of
the enactment of this Act. If the determination under
the preceding sentence is that 2005 is a cut-off year
under section 220(i) of such Code, the cut-off date
under such section 220(i) shall be the last day of such
120-day period.
SEC. 110. 15-YEAR COST RECOVERY FOR LEASEHOLD IMPROVEMENTS.
(a) In General.--Clause (iv) of section 168(e)(3)(E)
(relating to 15-year property) is amended by striking ``January
1, 2006'' and inserting ``January 1, 2007''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to property placed in service after December 31,
2005.
SEC. 111. 15-YEAR COST RECOVERY FOR RESTAURANT IMPROVEMENTS.
(a) In General.--Clause (v) of section 168(e)(3)(E) (relating
to 15-year property) is amended by striking ``January 1, 2006''
and inserting ``January 1, 2007''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to property placed in service after December 31,
2005.
SEC. 112. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR OIL AND
NATURAL GAS PRODUCED FROM MARGINAL PROPERTIES.
(a) In General.--Subparagraph (H) of section 613A(c)(6)
(relating to oil and natural gas produced from marginal
properties) is amended by striking ``January 1, 2006'' and
inserting ``January 1, 2007''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 2005.
SEC. 113. DISTRICT OF COLUMBIA ENTERPRISE ZONE.
(a) Period for Which Designation Applicable.--Subsection (f)
of section 1400 (relating to time for which designation
applicable) is amended by striking ``December 31, 2005'' both
places it appears and inserting ``December 31, 2006''.
(b) Tax-Exempt Economic Development Bonds.--Subsection (b) of
section 1400A (relating to period of applicability) is amended
by striking ``December 31, 2005'' and inserting ``December 31,
2006''.
(c) Zero Percent Capital Gains Rate.--
(1) In general.--Subsection (b) of section 1400B
(relating to DC Zone Asset) is amended by striking
``January 1, 2006'' each place it appears and inserting
``January 1, 2007''.
(2) Conforming amendments.--
(A) Paragraph (2) of section 1400B(e)
(relating to gain before 1998 and after 2010
not qualified) is amended--
(i) by striking ``December 31, 2010''
and inserting ``December 31, 2011'',
and
(ii) by striking ``2010'' in the
heading and inserting ``2011''.
(B) Paragraph (2) of section 1400B(g)
(relating to sales and exchanges of interests
in partnerships and S corporations which are DC
Zone businesses) is amended by striking
``December 31, 2010'' and inserting ``December
31, 2011''.
(C) Subsection (d) of section 1400F (relating
to certain rules to apply) is amended by
striking ``December 31, 2010'' and inserting
``December 31, 2011''.
(d) First-Time Homebuyer Credit for District of Columbia.--
Subsection (i) of section 1400C (relating to application of
section) is amended by striking ``January 1, 2006'' and
inserting ``January 1, 2007''.
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2),
the amendments made by this section shall take effect
on January 1, 2006.
(2) Tax-exempt economic development bonds.--The
amendment made by subsection (b) shall apply to
obligations issued after the date of the enactment of
this Act.
SEC. 114. POSSESSION TAX CREDIT WITH RESPECT TO AMERICAN SAMOA.
(a) In General.--Subparagraph (A) of section 936(j)(8)
(relating to special rules for certain possessions) is amended
by inserting before the period at the end the following:
``(before January 1, 2007, in the case of American Samoa)''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 2005.
SEC. 115. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH
BENEFITS.
(a) In General.--Paragraph (3) of section 9812(f) (relating
to application of section) is amended by striking ``December
31, 2005'' and inserting ``December 31, 2006''.
(b) Effective Dates.--The amendment made by subsection (a)
shall take effect on the date of the enactment of this Act.
SEC. 116. ELECTION TO INCLUDE COMBAT PAY UNDER EARNED INCOME CREDIT.
(a) In General.--Subclause (II) of section 32(c)(2)(B)(vi)
(defining earned income) is amended by striking ``January 1,
2006'' and inserting ``January 1, 2007''.
(b) Special Rule.--The amount of any refund to which an
individual is entitled by reason of amendment made by
subsection (a) shall not exceed the aggregate liability
reflected in the individual's tax account (determined by taking
into account the taxable year and all prior taxable years).
(c) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 2005.
SEC. 117. WORK OPPORTUNITY CREDIT.
(a) In General.--Subparagraph (B) of section 51(c)(4)
(relating to termination) is amended by striking ``December 31,
2005'' and inserting ``December 31, 2006''.
(b) Increase in Age Limit for Food Stamp Recipients.--Clause
(i) of section 51(d)(8)(A) (relating to qualified food stamp
recipient) is amended by striking ``25'' and inserting ``35''.
(c) Effective Date.--The amendments made by this section
shall apply to individuals who begin work for the employer
after December 31, 2005.
SEC. 118. WELFARE-TO-WORK CREDIT.
(a) In General.--Subsection (f) of section 51A (relating to
termination) is amended by striking ``December 31, 2005'' and
inserting ``December 31, 2006''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to individuals who begin work for the employer
after December 31, 2005.
SEC. 119. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.
(a) In General.--Subsection (h) of section 198 (relating to
termination) is amended by striking ``December 31, 2005'' and
inserting ``December 31, 2006''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to expenditures paid or incurred after December 31,
2005.
SEC. 120. TEMPORARY RELIEF FROM THE ALTERNATIVE MINIMUM TAX.
(a) In General.--Section 55 (relating to alternative minimum
tax imposed) is amended by adding at the end the following new
subsection:
``(f) Exemption for Individuals for Taxable Years Beginning
in 2006.--For any taxable year beginning in 2006, in the case
of an individual--
``(1) In general.--The tentative minimum tax of the
taxpayer shall be zero if the adjusted gross income of
the taxpayer (as determined for purposes of the regular
tax) is equal to or less than the threshold amount.
``(2) Phasein of liability above exemption level.--In
the case of a taxpayer whose adjusted gross income
exceeds the threshold amount but does not exceed
$112,500 ($225,000 in the case of a joint return), the
tax imposed by subsection (a) shall be the amount which
bears the same ratio to such tax (determined without
regard to this subsection) as--
``(A) the excess of--
``(i) the adjusted gross income of
the taxpayer (as determined for
purposes of the regular tax), over
``(ii) the threshold amount, bears to
``(B) $12,500 ($25,000 in the case of a joint
return).
``(3) Threshold amount.--For purposes of this
paragraph, the term `threshold amount' means $100,000
($200,000 in the case of a joint return).
``(4) Estates and trusts.--This subsection shall not
apply to any estate or trust.''.
(b) Effective Date.--The amendment made by this section shall
apply to taxable years beginning after December 31, 2005.
TITLE II--REDUCTION IN BENEFIT OF RATE REDUCTION FOR FAMILIES WITH
INCOMES OVER $1,000,000
SEC. 201. REDUCTION IN BENEFIT OF RATE REDUCTION FOR FAMILIES WITH
INCOMES OVER $1,000,000.
(a) General Rule.--Section 1 (relating to imposition of tax
on individuals) is amended by adding at the end the following
new subsection:
``(j) Reduction in Benefit of Rate Reduction for Families
With Incomes Over $1,000,000.--
``(1) In general.--If the adjusted gross income of a
taxpayer exceeds the threshold amount, the tax imposed
by this section (determined without regard to this
subsection) shall be increased by an amount equal to
1.45 percent of so much of the adjusted gross income as
exceeds the threshold amount.
``(2) Threshold amounts.--For purposes of this
subsection, the term `threshold amount' means--
``(A) $1,000,000 in the case of a joint
return, and
``(B) $500,000 in the case of any other
return.
``(3) Tax not to apply to estates and trusts.--This
subsection shall not apply to an estate or trust.
``(4) Special rule.--For purposes of section 55, the
amount of the regular tax shall be determined without
regard to this subsection.
``(5) Termination.--This subsection shall not apply
to taxable years beginning after December 31, 2010.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2005.
(c) Section 15 not to Apply.--The amendment made by
subsection (a) shall not be treated as a change in a rate of
tax for purposes of section 15 of the Internal Revenue Code of
1986.
TITLE III--MISCELLANEOUS PROVISIONS
SEC. 301. MODIFICATION OF ACTIVE BUSINESS DEFINITION UNDER SECTION 355.
Subsection (b) of section 355 (defining active conduct of a
trade or business) is amended by adding at the end the
following new paragraph:
``(3) Special rule relating to active business
requirement.--
``(A) In general.--In the case of any
distribution made after the date of the
enactment of this paragraph and before December
31, 2010, a corporation shall be treated as
meeting the requirement of paragraph (2)(A) if
and only if such corporation is engaged in the
active conduct of a trade or business.
``(B) Affiliated group rule.--For purposes of
subparagraph (A), all members of such
corporation's separate affiliated group shall
be treated as one corporation. For purposes of
the preceding sentence, a corporation's
separate affiliated group is the affiliated
group which would be determined under section
1504(a) if such corporation were the common
parent and section 1504(b) did not apply.
``(C) Transition rule.--Subparagraph (A)
shall not apply to any distribution pursuant to
a transaction which is--
``(i) made pursuant to an agreement
which was binding on the date of the
enactment of this paragraph and at all
times thereafter,
``(ii) described in a ruling request
submitted to the Internal Revenue
Service on or before such date, or
``(iii) described on or before such
date in a public announcement or in a
filing with the Securities and Exchange
Commission.
The preceding sentence shall not apply if the
distributing corporation elects not to have
such sentence apply to distributions of such
corporation. Any such election, once made,
shall be irrevocable.
``(D) Special rule for certain pre-enactment
distributions.--For purposes of determining the
continued qualification under paragraph (2)(A)
of distributions made before the date of the
enactment of this paragraph as a result of an
acquisition, disposition, or other
restructuring after such date and before
December 31, 2010, such distribution shall be
treated as made after the date of the enactment
of this paragraph for purposes of applying
subparagraphs (A) through (C) of this
paragraph.''.
SEC. 302. VETERANS' MORTGAGE BONDS.
(a) All Veterans Eligible for State Home Loan Programs Funded
by Qualified Veterans' Mortgage Bonds.--
(1) In general.--Paragraph (4) of section 143(l)
(defining qualified veteran) is amended--
(A) by striking ``at some time before January
1, 1977'' in subparagraph (A), and
(B) by striking subparagraph (B) and
inserting the following:
``(B) who applied for the financing before
the date 25 years after the last on which such
veteran left active service.''.
(2) Effective date.--The amendments made by this
subsection shall apply to financing provided after the
date of the enactment of this Act.
(b) Revision of State Veterans Limit.--
(1) In general.--Subparagraph (B) of section
143(l)(3) (relating to volume limitation) is amended to
read as follows:
``(B) State veterans limit.--
``(i) In general.--A State veterans
limit for any calendar year is the
amount equal to--
``(I) $53,750,000 for the
State of Texas,
``(II) $66,250,000 for the
State of California,
``(III) $25,000,000 for the
State of Oregon,
``(IV) $25,000,000 for the
State of Wisconsin, and
``(V) $25,000,000 for the
State of Alaska.
``(ii) Phasein.--In the case of
calendar years beginning before 2010,
clause (i) shall be applied by
substituting for each of the dollar
amounts therein by the applicable
percentage. For purposes of the
preceding sentence, the applicable
percentage shall be determined in
accordance with the following table:
Applicable percentage
``Calendar Year: is:
2006........................................... 20 percent
2007........................................... 40 percent
2008........................................... 60 percent
2009........................................... 80 percent.
``(iii) Termination.--The State
veterans limit for any calendar year
after 2010 is zero.''.
(2) Effective date.--The amendment made by this
subsection shall apply to bonds issued after December
31, 2005.
SEC. 303. CAPITAL GAINS TREATMENT FOR CERTAIN SELF-CREATED MUSICAL
WORKS.
(a) In General.--Subsection (b) of section 1221 (relating to
capital asset defined) is amended by redesignating paragraph
(3) as paragraph (4) and by inserting after paragraph (2) the
following new paragraph:
``(3) Sale or exchange of self-created musical
works.--At the election of the taxpayer, paragraphs (1)
and (3) of subsection (a) shall not apply with respect
to any sale or exchange before January 1, 2011, of
musical compositions or copyrights in musical works by
a taxpayer described in subsection (a)(3).''.
(b) Limitation on Charitable Contributions.--Subparagraph (A)
of section 170(e)(1) is amended by inserting ``(determined
without regard to section 1221(b)(3))'' after ``long-term
capital gain''.
(c) Effective Date.--The amendments made by this section
shall apply to sales and exchanges in taxable years beginning
after the date of the enactment of this Act.
SEC. 304. VESSEL TONNAGE LIMIT.
(a) In General.--Paragraph (4) of section 1355(a) (relating
to qualifying vessel) is amended by inserting ``(6,000, in the
case of taxable years beginning after December 31, 2005, and
ending before January 1, 2011)'' after ``10,000''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 2005.
SEC. 305. CLARIFICATION OF TAXATION OF CERTAIN SETTLEMENT FUNDS.
(a) In General.--Subsection (g) of section 468B (relating to
clarification of taxation of certain funds) is amended to read
as follows:
``(g) Clarification of Taxation of Certain Funds.--
``(1) In general.--Except as provided in paragraph
(2), nothing in any provision of law shall be construed
as providing that an escrow account, settlement fund,
or similar fund is not subject to current income tax.
The Secretary shall prescribe regulations providing for
the taxation of any such account or fund whether as a
grantor trust or otherwise.
``(2) Exemption from tax for certain settlement
funds.--An escrow account, settlement fund, or similar
fund shall be treated as beneficially owned by the
United States and shall be exempt from taxation under
this subtitle if--
``(A) it is established pursuant to a consent
decree entered by a judge of a United States
District Court,
``(B) it is created for the receipt of
settlement payments as directed by a government
entity for the sole purpose of resolving or
satisfying one or more claims asserting
liability under the Comprehensive Environmental
Response, Compensation, and Liability Act of
1980,
``(C) the authority and control over the
expenditure of funds therein (including the
expenditure of contributions thereto and any
net earnings thereon) is with such government
entity, and
``(D) upon termination, any remaining funds
will be disbursed to such government entity for
use in accordance with applicable law.
For purposes of this paragraph, the term `government
entity' means the United States, any State or political
subdivision thereof, the District of Columbia, any
possession of the United States, and any agency or
instrumentality of any of the foregoing.
``(3) Termination.--This subsection shall not apply
to accounts and funds established after December 31,
2010.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to accounts and funds established after the date of
the enactment of this Act.