PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2577

Public Law 109–135

109th Congress

An Act

To amend the Internal Revenue Code of 1986 to provide tax benefits for the

Gulf Opportunity Zone and certain areas affected by Hurricanes Rita and Wilma,

and for other purposes.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; ETC.

(a) SHORT TITLE.—This Act may be cited as the ‘‘Gulf Opportunity Zone 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 of this Act

is as follows:

Sec. 1. Short title; etc.

TITLE I—ESTABLISHMENT OF GULF OPPORTUNITY ZONE

Sec. 101. Tax benefits for Gulf Opportunity Zone.

Sec. 102. Expansion of Hope Scholarship and Lifetime Learning Credit for students

in the Gulf Opportunity Zone.

Sec. 103. Housing relief for individuals affected by Hurricane Katrina.

Sec. 104. Extension of special rules for mortgage revenue bonds.

Sec. 105. Special extension of bonus depreciation placed in service date for taxpayers affected by Hurricanes Katrina, Rita, and Wilma.

TITLE II—TAX BENEFITS RELATED TO HURRICANES RITA AND WILMA

Sec. 201. Extension of certain emergency tax relief for Hurricane Katrina to Hurricanes Rita and Wilma.

TITLE III—OTHER PROVISIONS

Sec. 301. Gulf Coast Recovery Bonds.

Sec. 302. Election to include combat pay as earned income for purposes of earned

income credit.

Sec. 303. Modification of effective date of exception from suspension rules for certain listed and reportable transactions.

Sec. 304. Authority for undercover operations.

Sec. 305. Disclosures of certain tax return information.

TITLE IV—TECHNICALS

Subtitle A—Tax Technicals

Sec. 401. Short title.

Sec. 402. Amendments related to Energy Policy Act of 2005.

Sec. 403. Amendments related to the American Jobs Creation Act of 2004.

Sec. 404. Amendments related to the Working Families Tax Relief Act of 2004.

Sec. 405. Amendments related to the Jobs and Growth Tax Relief Reconciliation

Act of 2003.

Sec. 406. Amendment related to the Victims of Terrorism Tax Relief Act of 2001.

26 USC 1 note.

Gulf Opportunity

Zone Act of 2005.

Dec. 21, 2005

[H.R. 4440]

119 STAT. 2578 PUBLIC LAW 109–135—DEC. 21, 2005

Sec. 407. Amendments related to the Economic Growth and Tax Relief Reconciliation Act of 2001.

Sec. 408. Amendments related to the Internal Revenue Service Restructuring and

Reform Act of 1998.

Sec. 409. Amendments related to the Taxpayer Relief Act of 1997.

Sec. 410. Amendment related to the Omnibus Budget Reconciliation Act of 1990.

Sec. 411. Amendment related to the Omnibus Budget Reconciliation Act of 1987.

Sec. 412. Clerical corrections.

Sec. 413. Other corrections related to the American Jobs Creation Act of 2004.

Subtitle B—Trade Technicals

Sec. 421. Technical corrections to regional value content methods for rules of origin

under Public Law 109–53.

TITLE V—EMERGENCY REQUIREMENT

Sec. 501. Emergency requirement.

TITLE I—ESTABLISHMENT OF GULF

OPPORTUNITY ZONE

SEC. 101. TAX BENEFITS FOR GULF OPPORTUNITY ZONE.

(a) IN GENERAL.—Subchapter Y of chapter 1 is amended by

adding at the end the following new part:

‘‘PART II—TAX BENEFITS FOR GO ZONES

‘‘Sec. 1400M. Definitions.

‘‘Sec. 1400N. Tax benefits for Gulf Opportunity Zone.

‘‘SEC. 1400M. DEFINITIONS.

‘‘For purposes of this part—

‘‘(1) GULF OPPORTUNITY ZONE.—The terms ‘Gulf Opportunity Zone’ and ‘GO Zone’ mean that portion of the Hurricane

Katrina disaster area determined by the President to warrant

individual or individual and public assistance from the Federal

Government under the Robert T. Stafford Disaster Relief and

Emergency Assistance Act by reason of Hurricane Katrina.

‘‘(2) HURRICANE KATRINA DISASTER AREA.—The term ‘Hurricane Katrina disaster area’ means an area with respect to

which a major disaster has been declared by the President

before September 14, 2005, under section 401 of such Act by

reason of Hurricane Katrina.

‘‘(3) RITA GO ZONE.—The term ‘Rita GO Zone’ means that

portion of the Hurricane Rita disaster area determined by

the President to warrant individual or individual and public

assistance from the Federal Government under such Act by

reason of Hurricane Rita.

‘‘(4) HURRICANE RITA DISASTER AREA.—The term ‘Hurricane

Rita disaster area’ means an area with respect to which a

major disaster has been declared by the President before

October 6, 2005, under section 401 of such Act by reason

of Hurricane Rita.

‘‘(5) WILMA GO ZONE.—The term ‘Wilma GO Zone’ means

that portion of the Hurricane Wilma disaster area determined

by the President to warrant individual or individual and public

assistance from the Federal Government under such Act by

reason of Hurricane Wilma.

‘‘(6) HURRICANE WILMA DISASTER AREA.—The term ‘Hurricane Wilma disaster area’ means an area with respect to which

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2579

a major disaster has been declared by the President before

November 14, 2005, under section 401 of such Act by reason

of Hurricane Wilma.

‘‘SEC. 1400N. TAX BENEFITS FOR GULF OPPORTUNITY ZONE.

‘‘(a) TAX-EXEMPT BOND FINANCING.—

‘‘(1) IN GENERAL.—For purposes of this title—

‘‘(A) any qualified Gulf Opportunity Zone Bond

described in paragraph (2)(A)(i) shall be treated as an

exempt facility bond, and

‘‘(B) any qualified Gulf Opportunity Zone Bond

described in paragraph (2)(A)(ii) shall be treated as a qualified mortgage bond.

‘‘(2) QUALIFIED GULF OPPORTUNITY ZONE BOND.—For purposes of this subsection, the term ‘qualified Gulf Opportunity

Zone Bond’ means any bond issued as part of an issue if—

‘‘(A)(i) 95 percent or more of the net proceeds (as

defined in section 150(a)(3)) of such issue are to be used

for qualified project costs, or

‘‘(ii) such issue meets the requirements of a qualified

mortgage issue, except as otherwise provided in this subsection,

‘‘(B) such bond is issued by the State of Alabama,

Louisiana, or Mississippi, or any political subdivision

thereof,

‘‘(C) such bond is designated for purposes of this section

by—

‘‘(i) in the case of a bond which is required under

State law to be approved by the bond commission

of such State, such bond commission, and

‘‘(ii) in the case of any other bond, the Governor

of such State,

‘‘(D) such bond is issued after the date of the enactment

of this section and before January 1, 2011, and

‘‘(E) no portion of the proceeds of such issue is to

be used to provide any property described in section

144(c)(6)(B).

‘‘(3) LIMITATIONS ON BONDS.—

‘‘(A) AGGREGATE AMOUNT DESIGNATED.—The maximum

aggregate face amount of bonds which may be designated

under this subsection with respect to any State shall not

exceed the product of $2,500 multiplied by the portion

of the State population which is in the Gulf Opportunity

Zone (as determined on the basis of the most recent census

estimate of resident population released by the Bureau

of Census before August 28, 2005).

‘‘(B) MOVABLE PROPERTY.—No bonds shall be issued

which are to be used for movable fixtures and equipment.

‘‘(4) QUALIFIED PROJECT COSTS.—For purposes of this subsection, the term ‘qualified project costs’ means—

‘‘(A) the cost of any qualified residential rental project

(as defined in section 142(d)) located in the Gulf Opportunity Zone, and

‘‘(B) the cost of acquisition, construction, reconstruction, and renovation of—

119 STAT. 2580 PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(i) nonresidential real property (including fixed

improvements associated with such property) located

in the Gulf Opportunity Zone, and

‘‘(ii) public utility property (as defined in section

168(i)(10)) located in the Gulf Opportunity Zone.

‘‘(5) SPECIAL RULES.—In applying this title to any qualified

Gulf Opportunity Zone Bond, the following modifications shall

apply:

‘‘(A) Section 142(d)(1) (defining qualified residential

rental project) shall be applied—

‘‘(i) by substituting ‘60 percent’ for ‘50 percent’

in subparagraph (A) thereof, and

‘‘(ii) by substituting ‘70 percent’ for ‘60 percent’

in subparagraph (B) thereof.

‘‘(B) Section 143 (relating to mortgage revenue bonds:

qualified mortgage bond and qualified veterans’ mortgage

bond) shall be applied—

‘‘(i) only with respect to owner-occupied residences

in the Gulf Opportunity Zone,

‘‘(ii) by treating any such residence in the Gulf

Opportunity Zone as a targeted area residence,

‘‘(iii) by applying subsection (f)(3) thereof without

regard to subparagraph (A) thereof, and ‘‘(iv) by substituting ‘$150,000’ for ‘$15,000’ in subsection (k)(4) thereof.

‘‘(C) Except as provided in section 143, repayments

of principal on financing provided by the issue of which

such bond is a part may not be used to provide financing.

‘‘(D) Section 146 (relating to volume cap) shall not

apply.

‘‘(E) Section 147(d)(2) (relating to acquisition of existing

property not permitted) shall be applied by substituting

‘50 percent’ for ‘15 percent’ each place it appears.

‘‘(F) Section 148(f)(4)(C) (relating to exception from

rebate for certain proceeds to be used to finance construction expenditures) shall apply to the available construction

proceeds of bonds which are part of an issue described

in paragraph (2)(A)(i).

‘‘(G) Section 57(a)(5) (relating to tax-exempt interest)

shall not apply.

‘‘(6) SEPARATE ISSUE TREATMENT OF PORTIONS OF AN

ISSUE.—This subsection shall not apply to the portion of an

issue which (if issued as a separate issue) would be treated

as a qualified bond or as a bond that is not a private activity

bond (determined without regard to paragraph (1)), if the issuer

elects to so treat such portion.

‘‘(b) ADVANCE REFUNDINGS OF CERTAIN TAX-EXEMPT BONDS.—

‘‘(1) IN GENERAL.—With respect to a bond described in

paragraph (3), one additional advance refunding after the date

of the enactment of this section and before January 1, 2011,

shall be allowed under the applicable rules of section 149(d)

if—

‘‘(A) the Governor of the State designates the advance

refunding bond for purposes of this subsection, and

‘‘(B) the requirements of paragraph (5) are met.

‘‘(2) CERTAIN PRIVATE ACTIVITY BONDS.—With respect to

a bond described in paragraph (3) which is an exempt facility

Applicability.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2581

bond described in paragraph (1) or (2) of section 142(a), one

advance refunding after the date of the enactment of this

section and before January 1, 2011, shall be allowed under

the applicable rules of section 149(d) (notwithstanding paragraph (2) thereof) if the requirements of subparagraphs (A)

and (B) of paragraph (1) are met.

‘‘(3) BONDS DESCRIBED.—A bond is described in this paragraph if such bond was outstanding on August 28, 2005, and

is issued by the State of Alabama, Louisiana, or Mississippi,

or a political subdivision thereof.

‘‘(4) AGGREGATE LIMIT.—The maximum aggregate face

amount of bonds which may be designated under this subsection

by the Governor of a State shall not exceed— ‘‘(A) $4,500,000,000 in the case of the State of Louisiana,

‘‘(B) $2,250,000,000 in the case of the State of Mississippi, and ‘‘(C) $1,125,000,000 in the case of the State of Alabama.

‘‘(5) ADDITIONAL REQUIREMENTS.—The requirements of this

paragraph are met with respect to any advance refunding of

a bond described in paragraph (3) if—

‘‘(A) no advance refundings of such bond would be

allowed under this title on or after August 28, 2005,

‘‘(B) the advance refunding bond is the only other

outstanding bond with respect to the refunded bond, and

‘‘(C) the requirements of section 148 are met with

respect to all bonds issued under this subsection.

‘‘(6) USE OF PROCEEDS REQUIREMENT.—This subsection shall

not apply to any advance refunding of a bond which is issued

as part of an issue if any portion of the proceeds of such

issue (or any prior issue) was (or is to be) used to provide

any property described in section 144(c)(6)(B).

‘‘(c) LOW-INCOME HOUSING CREDIT.—

‘‘(1) ADDITIONAL HOUSING CREDIT DOLLAR AMOUNT FOR GULF

OPPORTUNITY ZONE.— ‘‘(A) IN GENERAL.—For purposes of section 42, in the

case of calendar years 2006, 2007, and 2008, the State

housing credit ceiling of each State, any portion of which

is located in the Gulf Opportunity Zone, shall be increased

by the lesser of—

‘‘(i) the aggregate housing credit dollar amount

allocated by the State housing credit agency of such

State to buildings located in the Gulf Opportunity Zone

for such calendar year, or

‘‘(ii) the Gulf Opportunity housing amount for such

State for such calendar year.

‘‘(B) GULF OPPORTUNITY HOUSING AMOUNT.—For purposes of subparagraph (A), the term ‘Gulf Opportunity

housing amount’ means, for any calendar year, the amount

equal to the product of $18.00 multiplied by the portion

of the State population which is in the Gulf Opportunity

Zone (as determined on the basis of the most recent census

estimate of resident population released by the Bureau

of Census before August 28, 2005).

‘‘(C) ALLOCATIONS TREATED AS MADE FIRST FROM ADDI- TIONAL ALLOCATION AMOUNT FOR PURPOSES OF DETER- MINING CARRYOVER.—For purposes of determining the

119 STAT. 2582 PUBLIC LAW 109–135—DEC. 21, 2005

unused State housing credit ceiling under section

42(h)(3)(C) for any calendar year, any increase in the State

housing credit ceiling under subparagraph (A) shall be

treated as an amount described in clause (ii) of such section.

‘‘(2) ADDITIONAL HOUSING CREDIT DOLLAR AMOUNT FOR

TEXAS AND FLORIDA.—For purposes of section 42, in the case

of calendar year 2006, the State housing credit ceiling of Texas

and Florida shall each be increased by $3,500,000.

‘‘(3) DIFFICULT DEVELOPMENT AREA.— ‘‘(A) IN GENERAL.—For purposes of section 42, in the

case of property placed in service during 2006, 2007, or

2008, the Gulf Opportunity Zone, the Rita GO Zone, and

the Wilma GO Zone—

‘‘(i) shall be treated as difficult development areas

designated under subclause (I) of section

42(d)(5)(C)(iii), and

‘‘(ii) shall not be taken into account for purposes

of applying the limitation under subclause (II) of such

section.

‘‘(B) APPLICATION.—Subparagraph (A) shall apply only

to—

‘‘(i) housing credit dollar amounts allocated during

the period beginning on January 1, 2006, and ending

on December 31, 2008, and

‘‘(ii) buildings placed in service during such period

to the extent that paragraph (1) of section 42(h) does

not apply to any building by reason of paragraph (4)

thereof, but only with respect to bonds issued after

December 31, 2005.

‘‘(4) SPECIAL RULE FOR APPLYING INCOME TESTS.—In the

case of property placed in service—

‘‘(A) during 2006, 2007, or 2008,

‘‘(B) in the Gulf Opportunity Zone, and

‘‘(C) in a nonmetropolitan area (as defined in section

42(d)(5)(C)(iv)(IV)),

section 42 shall be applied by substituting ‘national nonmetropolitan median gross income (determined under rules similar

to the rules of section 142(d)(2)(B))’ for ‘area median gross

income’ in subparagraphs (A) and (B) of section 42(g)(1).

‘‘(5) DEFINITIONS.—Any term used in this subsection which

is also used in section 42 shall have the same meaning as

when used in such section.

‘‘(d) SPECIAL ALLOWANCE FOR CERTAIN PROPERTY ACQUIRED

ON OR AFTER AUGUST 28, 2005.—

‘‘(1) ADDITIONAL ALLOWANCE.—In the case of any qualified

Gulf Opportunity Zone property—

‘‘(A) the depreciation deduction provided by section

167(a) for the taxable year in which such property is placed

in service shall include an allowance equal to 50 percent

of the adjusted basis of such property, and

‘‘(B) the adjusted basis of the qualified Gulf Opportunity Zone property shall be reduced by the amount of

such deduction before computing the amount otherwise

allowable as a depreciation deduction under this chapter

for such taxable year and any subsequent taxable year.

‘‘(2) QUALIFIED GULF OPPORTUNITY ZONE PROPERTY.—For

purposes of this subsection—

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2583

‘‘(A) IN GENERAL.—The term ‘qualified Gulf Opportunity Zone property’ means property—

‘‘(i)(I) which is described in section 168(k)(2)(A)(i),

or

‘‘(II) which is nonresidential real property or residential rental property,

‘‘(ii) substantially all of the use of which is in

the Gulf Opportunity Zone and is in the active conduct

of a trade or business by the taxpayer in such Zone,

‘‘(iii) the original use of which in the Gulf Opportunity Zone commences with the taxpayer on or after

August 28, 2005,

‘‘(iv) which is acquired by the taxpayer by purchase

(as defined in section 179(d)) on or after August 28,

2005, but only if no written binding contract for the

acquisition was in effect before August 28, 2005, and

‘‘(v) which is placed in service by the taxpayer

on or before December 31, 2007 (December 31, 2008,

in the case of nonresidential real property and residential rental property).

‘‘(B) EXCEPTIONS.—

‘‘(i) ALTERNATIVE DEPRECIATION PROPERTY.—Such

term shall not include any property described in section

168(k)(2)(D)(i).

‘‘(ii) TAX-EXEMPT BOND-FINANCED PROPERTY.—Such

term shall not include any property any portion of

which is financed with the proceeds of any obligation

the interest on which is exempt from tax under section

103.

‘‘(iii) QUALIFIED REVITALIZATION BUILDINGS.—Such

term shall not include any qualified revitalization

building with respect to which the taxpayer has elected

the application of paragraph (1) or (2) of section

1400I(a).

‘‘(iv) ELECTION OUT.—If a taxpayer makes an election under this clause with respect to any class of

property for any taxable year, this subsection shall

not apply to all property in such class placed in service

during such taxable year.

‘‘(3) SPECIAL RULES.—For purposes of this subsection, rules

similar to the rules of subparagraph (E) of section 168(k)(2)

shall apply, except that such subparagraph shall be applied—

‘‘(A) by substituting ‘August 27, 2005’ for ‘September

10, 2001’ each place it appears therein,

‘‘(B) by substituting ‘January 1, 2008’ for ‘January

1, 2005’ in clause (i) thereof, and

‘‘(C) by substituting ‘qualified Gulf Opportunity Zone

property’ for ‘qualified property’ in clause (iv) thereof.

‘‘(4) ALLOWANCE AGAINST ALTERNATIVE MINIMUM TAX.—For

purposes of this subsection, rules similar to the rules of section

168(k)(2)(G) shall apply.

‘‘(5) RECAPTURE.—For purposes of this subsection, rules

similar to the rules under section 179(d)(10) shall apply with

respect to any qualified Gulf Opportunity Zone property which

ceases to be qualified Gulf Opportunity Zone property.

‘‘(e) INCREASE IN EXPENSING UNDER SECTION 179.—

‘‘(1) IN GENERAL.—For purposes of section 179—

Applicability.

Applicability.

Applicability.

119 STAT. 2584 PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(A) the dollar amount in effect under section 179(b)(1)

for the taxable year shall be increased by the lesser of—

‘‘(i) $100,000, or

‘‘(ii) the cost of qualified section 179 Gulf Opportunity Zone property placed in service during the taxable year, and

‘‘(B) the dollar amount in effect under section 179(b)(2)

for the taxable year shall be increased by the lesser of—

‘‘(i) $600,000, or

‘‘(ii) the cost of qualified section 179 Gulf Opportunity Zone property placed in service during the taxable year.

‘‘(2) QUALIFIED SECTION 179 GULF OPPORTUNITY ZONE PROPERTY.—For purposes of this subsection, the term ‘qualified section 179 Gulf Opportunity Zone property’ means section 179

property (as defined in section 179(d)) which is qualified Gulf

Opportunity Zone property (as defined in subsection (d)(2)).

‘‘(3) COORDINATION WITH EMPOWERMENT ZONES AND

RENEWAL COMMUNITIES.—For purposes of sections 1397A and

1400J, qualified section 179 Gulf Opportunity Zone property

shall not be treated as qualified zone property or qualified

renewal property, unless the taxpayer elects not to take such

qualified section 179 Gulf Opportunity Zone property into

account for purposes of this subsection.

‘‘(4) RECAPTURE.—For purposes of this subsection, rules

similar to the rules under section 179(d)(10) shall apply with

respect to any qualified section 179 Gulf Opportunity Zone

property which ceases to be qualified section 179 Gulf Opportunity Zone property.

‘‘(f) EXPENSING FOR CERTAIN DEMOLITION AND CLEAN-UP

COSTS.—

‘‘(1) IN GENERAL.—A taxpayer may elect to treat 50 percent

of any qualified Gulf Opportunity Zone clean-up cost as an

expense which is not chargeable to capital account. Any cost

so treated shall be allowed as a deduction for the taxable

year in which such cost is paid or incurred.

‘‘(2) QUALIFIED GULF OPPORTUNITY ZONE CLEAN-UP COST.—

For purposes of this subsection, the term ‘qualified Gulf Opportunity Zone clean-up cost’ means any amount paid or incurred

during the period beginning on August 28, 2005, and ending

on December 31, 2007, for the removal of debris from, or

the demolition of structures on, real property which is located

in the Gulf Opportunity Zone and which is—

‘‘(A) held by the taxpayer for use in a trade or business

or for the production of income, or

‘‘(B) property described in section 1221(a)(1) in the

hands of the taxpayer.

For purposes of the preceding sentence, amounts paid or

incurred shall be taken into account only to the extent that

such amount would (but for paragraph (1)) be chargeable to

capital account.

‘‘(g) EXTENSION OF EXPENSING FOR ENVIRONMENTAL REMEDIATION COSTS.—With respect to any qualified environmental remediation expenditure (as defined in section 198(b)) paid or incurred

on or after August 28, 2005, in connection with a qualified contaminated site located in the Gulf Opportunity Zone, section 198

Applicability.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2585

(relating to expensing of environmental remediation costs) shall

be applied—

‘‘(1) in the case of expenditures paid or incurred on or

after August 28, 2005, and before January 1, 2008, by substituting ‘December 31, 2007’ for the date contained in section

198(h), and

‘‘(2) except as provided in section 198(d)(2), by treating

petroleum products (as defined in section 4612(a)(3)) as a hazardous substance.

‘‘(h) INCREASE IN REHABILITATION CREDIT.—In the case of qualified rehabilitation expenditures (as defined in section 47(c)) paid

or incurred during the period beginning on August 28, 2005, and

ending on December 31, 2008, with respect to any qualified rehabilitated building or certified historic structure (as defined in section

47(c)) located in the Gulf Opportunity Zone, subsection (a) of section

47 (relating to rehabilitation credit) shall be applied—

‘‘(1) by substituting ‘13 percent’ for ‘10 percent’ in paragraph (1) thereof, and

‘‘(2) by substituting ‘26 percent’ for ‘20 percent’ in paragraph (2) thereof.

‘‘(i) SPECIAL RULES FOR SMALL TIMBER PRODUCERS.—

‘‘(1) INCREASED EXPENSING FOR QUALIFIED TIMBER PROPERTY.—In the case of qualified timber property any portion

of which is located in the Gulf Opportunity Zone, in that

portion of the Rita GO Zone which is not part of the Gulf

Opportunity Zone, or in the Wilma GO Zone, the limitation

under subparagraph (B) of section 194(b)(1) shall be increased

by the lesser of—

‘‘(A) the limitation which would (but for this subsection)

apply under such subparagraph, or

‘‘(B) the amount of reforestation expenditures (as

defined in section 194(c)(3)) paid or incurred by the taxpayer with respect to such qualified timber property during

the specified portion of the taxable year.

‘‘(2) 5 YEAR NOL CARRYBACK OF CERTAIN TIMBER LOSSES.—

For purposes of determining any farming loss under section

172(i), income and deductions which are allocable to the specified portion of the taxable year and which are attributable

to qualified timber property any portion of which is located

in the Gulf Opportunity Zone, in that portion of the Rita

GO Zone which is not part of the Gulf Opportunity Zone,

or in the Wilma GO Zone shall be treated as attributable

to farming businesses.

‘‘(3) RULES NOT APPLICABLE TO CERTAIN ENTITIES.—Paragraphs (1) and (2) shall not apply to any taxpayer which—

‘‘(A) is a corporation the stock of which is publicly

traded on an established securities market, or

‘‘(B) is a real estate investment trust.

‘‘(4) RULES NOT APPLICABLE TO LARGE TIMBER PRODUCERS.—

‘‘(A) EXPENSING.—Paragraph (1) shall not apply to any

taxpayer if such taxpayer holds more than 500 acres of

qualified timber property at any time during the taxable

year.

‘‘(B) NOL CARRYBACK.—Paragraph (2) shall not apply

with respect to any qualified timber property unless—

‘‘(i) such property was held by the taxpayer—

119 STAT. 2586 PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(I) on August 28, 2005, in the case of qualified

timber property any portion of which is located

in the Gulf Opportunity Zone,

‘‘(II) on September 23, 2005, in the case of

qualified timber property (other than property

described in subclause (I)) any portion of which

is located in that portion of the Rita GO Zone

which is not part of the Gulf Opportunity Zone,

or

‘‘(III) on October 23, 2005, in the case of qualified timber property (other than property described

in subclause (I) or (II)) any portion of which is

located in the Wilma GO Zone, and

‘‘(ii) such taxpayer held not more than 500 acres

of qualified timber property on such date.

‘‘(5) DEFINITIONS.—For purposes of this subsection—

‘‘(A) SPECIFIED PORTION.—

‘‘(i) IN GENERAL.—The term ‘specified portion’

means—

‘‘(I) in the case of qualified timber property

any portion of which is located in the Gulf Opportunity Zone, that portion of the taxable year which

is on or after August 28, 2005, and before the

termination date,

‘‘(II) in the case of qualified timber property

(other than property described in clause (i)) any

portion of which is located in the Rita GO Zone,

that portion of the taxable year which is on or

after September 23, 2005, and before the termination date, or

‘‘(III) in the case of qualified timber property

(other than property described in clause (i) or (ii))

any portion of which is located in the Wilma GO

Zone, that portion of the taxable year which is

on or after October 23, 2005, and before the termination date.

‘‘(ii) TERMINATION DATE.—The term ‘termination

date’ means—

‘‘(I) for purposes of paragraph (1), January

1, 2008, and

‘‘(II) for purposes of paragraph (2), January

1, 2007.

‘‘(B) QUALIFIED TIMBER PROPERTY.—The term ‘qualified

timber property’ has the meaning given such term in section 194(c)(1).

‘‘(j) SPECIAL RULE FOR GULF OPPORTUNITY ZONE PUBLIC UTILITY

CASUALTY LOSSES.—

‘‘(1) IN GENERAL.—The amount described in section

172(f)(1)(A) for any taxable year shall be increased by the

Gulf Opportunity Zone public utility casualty loss for such

taxable year.

‘‘(2) GULF OPPORTUNITY ZONE PUBLIC UTILITY CASUALTY

LOSS.—For purposes of this subsection, the term ‘Gulf Opportunity Zone public utility casualty loss’ means any casualty

loss of public utility property (as defined in section 168(i)(10))

located in the Gulf Opportunity Zone if—

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2587

‘‘(A) such loss is allowed as a deduction under section

165 for the taxable year,

‘‘(B) such loss is by reason of Hurricane Katrina, and

‘‘(C) the taxpayer elects the application of this subsection with respect to such loss.

‘‘(3) REDUCTION FOR GAINS FROM INVOLUNTARY CONVERSION.—The amount of any Gulf Opportunity Zone public utility

casualty loss which would (but for this paragraph) be taken

into account under paragraph (1) for any taxable year shall

be reduced by the amount of any gain recognized by the taxpayer for such year from the involuntary conversion by reason

of Hurricane Katrina of public utility property (as so defined)

located in the Gulf Opportunity Zone.

‘‘(4) COORDINATION WITH GENERAL DISASTER LOSS RULES.—

Subsection (k) and section 165(i) shall not apply to any Gulf

Opportunity Zone public utility casualty loss to the extent

such loss is taken into account under paragraph (1).

‘‘(5) ELECTION.—Any election under paragraph (2)(C) shall

be made in such manner as may be prescribed by the Secretary

and shall be made by the due date (including extensions of

time) for filing the taxpayer’s return for the taxable year of

the loss. Such election, once made for any taxable year, shall

be irrevocable for such taxable year.

‘‘(k) TREATMENT OF NET OPERATING LOSSES ATTRIBUTABLE TO

GULF OPPORTUNITY ZONE LOSSES.—

‘‘(1) IN GENERAL.—If a portion of any net operating loss

of the taxpayer for any taxable year is a qualified Gulf Opportunity Zone loss, the following rules shall apply:

‘‘(A) EXTENSION OF CARRYBACK PERIOD.—Section

172(b)(1) shall be applied with respect to such portion—

‘‘(i) by substituting ‘5 taxable years’ for ‘2 taxable

years’ in subparagraph (A)(i), and

‘‘(ii) by not taking such portion into account in

determining any eligible loss of the taxpayer under

subparagraph (F) thereof for the taxable year.

‘‘(B) SUSPENSION OF 90 PERCENT AMT LIMITATION.—

Section 56(d)(1) shall be applied by increasing the amount

determined under subparagraph (A)(ii)(I) thereof by the

sum of the carrybacks and carryovers of any net operating

loss attributable to such portion.

‘‘(2) QUALIFIED GULF OPPORTUNITY ZONE LOSS.—For purposes of paragraph (1), the term ‘qualified Gulf Opportunity

Zone loss’ means the lesser of—

‘‘(A) the excess of—

‘‘(i) the net operating loss for such taxable year,

over

‘‘(ii) the specified liability loss for such taxable

year to which a 10-year carryback applies under section

172(b)(1)(C), or

‘‘(B) the aggregate amount of the following deductions

to the extent taken into account in computing the net

operating loss for such taxable year:

‘‘(i) Any deduction for any qualified Gulf Opportunity Zone casualty loss.

‘‘(ii) Any deduction for moving expenses paid or

incurred after August 27, 2005, and before January

Applicability.

119 STAT. 2588 PUBLIC LAW 109–135—DEC. 21, 2005

1, 2008, and allowable under this chapter to any taxpayer in connection with the employment of any

individual—

‘‘(I) whose principal place of abode was located

in the Gulf Opportunity Zone before August 28,

2005,

‘‘(II) who was unable to remain in such abode

as the result of Hurricane Katrina, and

‘‘(III) whose principal place of employment

with the taxpayer after such expense is located

in the Gulf Opportunity Zone.

For purposes of this clause, the term ‘moving expenses’

has the meaning given such term by section 217(b),

except that the taxpayer’s former residence and new

residence may be the same residence if the initial

vacating of the residence was as the result of Hurricane

Katrina.

‘‘(iii) Any deduction allowable under this chapter

for expenses paid or incurred after August 27, 2005,

and before January 1, 2008, to temporarily house any

employee of the taxpayer whose principal place of

employment is in the Gulf Opportunity Zone.

‘‘(iv) Any deduction for depreciation (or amortization in lieu of depreciation) allowable under this

chapter with respect to any qualified Gulf Opportunity

Zone property (as defined in subsection (d)(2), but without regard to subparagraph (B)(iv) thereof)) for the

taxable year such property is placed in service.

‘‘(v) Any deduction allowable under this chapter

for repair expenses (including expenses for removal

of debris) paid or incurred after August 27, 2005, and

before January 1, 2008, with respect to any damage

attributable to Hurricane Katrina and in connection

with property which is located in the Gulf Opportunity

Zone.

‘‘(3) QUALIFIED GULF OPPORTUNITY ZONE CASUALTY LOSS.—

‘‘(A) IN GENERAL.—For purposes of paragraph (2)(B)(i),

the term ‘qualified Gulf Opportunity Zone casualty loss’

means any uncompensated section 1231 loss (as defined

in section 1231(a)(3)(B)) of property located in the Gulf

Opportunity Zone if—

‘‘(i) such loss is allowed as a deduction under section 165 for the taxable year, and

‘‘(ii) such loss is by reason of Hurricane Katrina.

‘‘(B) REDUCTION FOR GAINS FROM INVOLUNTARY

CONVERSION.—The amount of qualified Gulf Opportunity

Zone casualty loss which would (but for this subparagraph)

be taken into account under subparagraph (A) for any

taxable year shall be reduced by the amount of any gain

recognized by the taxpayer for such year from the involuntary conversion by reason of Hurricane Katrina of property

located in the Gulf Opportunity Zone.

‘‘(C) COORDINATION WITH GENERAL DISASTER LOSS

RULES.—Section 165(i) shall not apply to any qualified Gulf

Opportunity Zone casualty loss to the extent such loss

is taken into account under this subsection.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2589

‘‘(4) SPECIAL RULES.—For purposes of paragraph (1), rules

similar to the rules of paragraphs (2) and (3) of section 172(i)

shall apply with respect to such portion.

‘‘(l) CREDIT TO HOLDERS OF GULF TAX CREDIT BONDS.—

‘‘(1) ALLOWANCE OF CREDIT.—If a taxpayer holds a Gulf

tax credit bond on one or more credit allowance dates of the

bond occurring during any taxable year, there shall be allowed

as a credit against the tax imposed by this chapter for the

taxable year an amount equal to the sum of the credits determined under paragraph (2) with respect to such dates.

‘‘(2) AMOUNT OF CREDIT.—

‘‘(A) IN GENERAL.—The amount of the credit determined

under this paragraph with respect to any credit allowance

date for a Gulf tax credit bond is 25 percent of the annual

credit determined with respect to such bond.

‘‘(B) ANNUAL CREDIT.—The annual credit determined

with respect to any Gulf tax credit bond is the product

of—

‘‘(i) the credit rate determined by the Secretary

under subparagraph (C) for the day on which such

bond was sold, multiplied by

‘‘(ii) the outstanding face amount of the bond.

‘‘(C) DETERMINATION.—For purposes of subparagraph

(B), with respect to any Gulf tax credit bond, the Secretary

shall determine daily or cause to be determined daily a

credit rate which shall apply to the first day on which

there is a binding, written contract for the sale or exchange

of the bond. The credit rate for any day is the credit

rate which the Secretary or the Secretary’s designee estimates will permit the issuance of Gulf tax credit bonds

with a specified maturity or redemption date without discount and without interest cost to the issuer.

‘‘(D) CREDIT ALLOWANCE DATE.—For purposes of this

subsection, the term ‘credit allowance date’ means March

15, June 15, September 15, and December 15. Such term

also includes the last day on which the bond is outstanding.

‘‘(E) SPECIAL RULE FOR ISSUANCE AND REDEMPTION.—

In the case of a bond which is issued during the 3-month

period ending on a credit allowance date, the amount of

the credit determined under this paragraph with respect

to such credit allowance date shall be a ratable portion

of the credit otherwise determined based on the portion

of the 3-month period during which the bond is outstanding.

A similar rule shall apply when the bond is redeemed

or matures.

‘‘(3) LIMITATION BASED ON AMOUNT OF TAX.—The credit

allowed under paragraph (1) for any taxable year shall not

exceed the excess of—

‘‘(A) the sum of the regular tax liability (as defined

in section 26(b)) plus the tax imposed by section 55, over

‘‘(B) the sum of the credits allowable under part IV

of subchapter A (other than subpart C and this subsection).

‘‘(4) GULF TAX CREDIT BOND.—For purposes of this

subsection—

‘‘(A) IN GENERAL.—The term ‘Gulf tax credit bond’

means any bond issued as part of an issue if—

Applicability.

119 STAT. 2590 PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(i) the bond is issued by the State of Alabama,

Louisiana, or Mississippi,

‘‘(ii) 95 percent or more of the proceeds of such

issue are to be used to—

‘‘(I) pay principal, interest, or premiums on

qualified bonds issued by such State or any political subdivision of such State, or

‘‘(II) make a loan to any political subdivision

of such State to pay principal, interest, or premiums on qualified bonds issued by such political

subdivision,

‘‘(iii) the Governor of such State designates such

bond for purposes of this subsection,

‘‘(iv) the bond is a general obligation of such State

and is in registered form (within the meaning of section

149(a)),

‘‘(v) the maturity of such bond does not exceed

2 years, and

‘‘(vi) the bond is issued after December 31, 2005,

and before January 1, 2007.

‘‘(B) STATE MATCHING REQUIREMENT.—A bond shall not

be treated as a Gulf tax credit bond unless—

‘‘(i) the issuer of such bond pledges as of the date

of the issuance of the issue an amount equal to the

face amount of such bond to be used for payments

described in subclause (I) of subparagraph (A)(ii), or

loans described in subclause (II) of such subparagraph,

as the case may be, with respect to the issue of which

such bond is a part, and

‘‘(ii) any such payment or loan is made in equal

amounts from the proceeds of such issue and from

the amount pledged under clause (i).

The requirement of clause (ii) shall be treated as met

with respect to any such payment or loan made during

the 1-year period beginning on the date of the issuance

(or any successor 1-year period) if such requirement is

met when applied with respect to the aggregate amount

of such payments and loans made during such period.

‘‘(C) AGGREGATE LIMIT ON BOND DESIGNATIONS.—The

maximum aggregate face amount of bonds which may be

designated under this subsection by the Governor of a

State shall not exceed—

‘‘(i) $200,000,000 in the case of the State of Louisiana,

‘‘(ii) $100,000,000 in the case of the State of Mississippi, and

‘‘(iii) $50,000,000 in the case of the State of Alabama.

‘‘(D) SPECIAL RULES RELATING TO ARBITRAGE.—A bond

which is part of an issue shall not be treated as a Gulf

tax credit bond unless, with respect to the issue of which

the bond is a part, the issuer satisfies the arbitrage requirements of section 148 with respect to proceeds of the issue

and any loans made with such proceeds.

‘‘(5) QUALIFIED BOND.—For purposes of this subsection—

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2591

‘‘(A) IN GENERAL.—The term ‘qualified bond’ means

any obligation of a State or political subdivision thereof

which was outstanding on August 28, 2005.

‘‘(B) EXCEPTION FOR PRIVATE ACTIVITY BONDS.—Such

term shall not include any private activity bond.

‘‘(C) EXCEPTION FOR ADVANCE REFUNDINGS.—Such term

shall not include any bond with respect to which there

is any outstanding refunded or refunding bond during the

period in which a Gulf tax credit bond is outstanding

with respect to such bond.

‘‘(D) USE OF PROCEEDS REQUIREMENT.—Such term shall

not include any bond issued as part of an issue if any

portion of the proceeds of such issue was (or is to be)

used to provide any property described in section

144(c)(6)(B).

‘‘(6) CREDIT INCLUDED IN GROSS INCOME.—Gross income

includes the amount of the credit allowed to the taxpayer

under this subsection (determined without regard to paragraph

(3)) and the amount so included shall be treated as interest

income.

‘‘(7) OTHER DEFINITIONS AND SPECIAL RULES.—For purposes

of this subsection—

‘‘(A) BOND.—The term ‘bond’ includes any obligation.

‘‘(B) PARTNERSHIP; S CORPORATION; AND OTHER PASSTHRU ENTITIES.—

‘‘(i) IN GENERAL.—Under regulations prescribed by

the Secretary, in the case of a partnership, trust, S

corporation, or other pass-thru entity, rules similar

to the rules of section 41(g) shall apply with respect

to the credit allowable under paragraph (1).

‘‘(ii) NO BASIS ADJUSTMENT.—In the case of a bond

held by a partnership or an S corporation, rules similar

to the rules under section 1397E(i) shall apply.

‘‘(C) BONDS HELD BY REGULATED INVESTMENT COMPANIES.—If any Gulf tax credit bond is held by a regulated

investment company, the credit determined under paragraph (1) shall be allowed to shareholders of such company

under procedures prescribed by the Secretary.

‘‘(D) REPORTING.—Issuers of Gulf tax credit bonds shall

submit reports similar to the reports required under section

149(e).

‘‘(E) CREDIT TREATED AS NONREFUNDABLE BONDHOLDER

CREDIT.—For purposes of this title, the credit allowed by

this subsection shall be treated as a credit allowable under

subpart H of part IV of subchapter A of this chapter.

‘‘(m) APPLICATION OF NEW MARKETS TAX CREDIT TO INVESTMENTS IN COMMUNITY DEVELOPMENT ENTITIES SERVING GULF

OPPORTUNITY ZONE.—For purposes of section 45D—

‘‘(1) a qualified community development entity shall be

eligible for an allocation under subsection (f)(2) thereof of the

increase in the new markets tax credit limitation described

in paragraph (2) only if a significant mission of such entity

is the recovery and redevelopment of the Gulf Opportunity

Zone,

‘‘(2) the new markets tax credit limitation otherwise determined under subsection (f)(1) thereof shall be increased by

an amount equal to—

Procedures.

Regulations.

Applicability.

119 STAT. 2592 PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(A) $300,000,000 for 2005 and 2006, to be allocated

among qualified community development entities to make

qualified low-income community investments within the

Gulf Opportunity Zone, and

‘‘(B) $400,000,000 for 2007, to be so allocated, and

‘‘(3) subsection (f)(3) thereof shall be applied separately

with respect to the amount of the increase under paragraph

(2).

‘‘(n) TREATMENT OF REPRESENTATIONS REGARDING INCOME

ELIGIBILITY FOR PURPOSES OF QUALIFIED RESIDENTIAL RENTAL

PROJECT REQUIREMENTS.—For purposes of determining if any residential rental project meets the requirements of section 142(d)(1)

and if any certification with respect to such project meets the

requirements under section 142(d)(7), the operator of the project

may rely on the representations of any individual applying for

tenancy in such project that such individual’s income will not exceed

the applicable income limits of section 142(d)(1) upon commencement of the individual’s tenancy if such tenancy begins during

the 6-month period beginning on and after the date such individual

was displaced by reason of Hurricane Katrina.

‘‘(o) TREATMENT OF PUBLIC UTILITY PROPERTY DISASTER

LOSSES.—

‘‘(1) IN GENERAL.—Upon the election of the taxpayer, in

the case of any eligible public utility property loss—

‘‘(A) section 165(i) shall be applied by substituting ‘the

fifth taxable year immediately preceding’ for ‘the taxable

year immediately preceding’,

‘‘(B) an application for a tentative carryback adjustment of the tax for any prior taxable year affected by

the application of subparagraph (A) may be made under

section 6411, and

‘‘(C) section 6611 shall not apply to any overpayment

attributable to such loss.

‘‘(2) ELIGIBLE PUBLIC UTILITY PROPERTY LOSS.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘eligible public utility

property loss’ means any loss with respect to public utility

property located in the Gulf Opportunity Zone and attributable to Hurricane Katrina.

‘‘(B) PUBLIC UTILITY PROPERTY.—The term ‘public

utility property’ has the meaning given such term by section 168(i)(10) without regard to the matter following

subparagraph (D) thereof.

‘‘(3) WAIVER OF LIMITATIONS.—If refund or credit of any

overpayment of tax resulting from the application of paragraph

(1) is prevented at any time before the close of the 1-year

period beginning on the date of the enactment of this section

by the operation of any law or rule of law (including res judicata), such refund or credit may nevertheless be made or

allowed if claim therefor is filed before the close of such period.

‘‘(p) TAX BENEFITS NOT AVAILABLE WITH RESPECT TO CERTAIN

PROPERTY.—

‘‘(1) QUALIFIED GULF OPPORTUNITY ZONE PROPERTY.—For

purposes of subsections (d), (e), and (k)(2)(B)(iv), the term ‘qualified Gulf Opportunity Zone property’ shall not include any

property described in paragraph (3).

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2593

‘‘(2) QUALIFIED GULF OPPORTUNITY ZONE CASUALTY

LOSSES.—For purposes of subsection (k)(2)(B)(i), the term ‘qualified Gulf Opportunity Zone casualty loss’ shall not include

any loss with respect to any property described in paragraph

(3).

‘‘(3) PROPERTY DESCRIBED.— ‘‘(A) IN GENERAL.—For purposes of this subsection,

property is described in this paragraph if such property

is—

‘‘(i) any property used in connection with any private or commercial golf course, country club, massage

parlor, hot tub facility, suntan facility, or any store

the principal business of which is the sale of alcoholic

beverages for consumption off premises, or

‘‘(ii) any gambling or animal racing property.

‘‘(B) GAMBLING OR ANIMAL RACING PROPERTY.—For purposes of subparagraph (A)(ii)—

‘‘(i) IN GENERAL.—The term ‘gambling or animal

racing property’ means—

‘‘(I) any equipment, furniture, software, or

other property used directly in connection with

gambling, the racing of animals, or the on-site

viewing of such racing, and

‘‘(II) the portion of any real property (determined by square footage) which is dedicated to

gambling, the racing of animals, or the on-site

viewing of such racing.

‘‘(ii) DE MINIMIS PORTION.—Clause (i)(II) shall not

apply to any real property if the portion so dedicated

is less than 100 square feet.’’.

(b) CONFORMING AMENDMENTS.— (1) Paragraph (2) of section 54(c) is amended by inserting

‘‘, section 1400N(l),’’ after ‘‘subpart C’’.

(2) Subparagraph (A) of section 6049(d)(8) is amended—

(A) by inserting ‘‘or 1400N(l)(6)’’ after ‘‘section 54(g)’’,

and

(B) by inserting ‘‘or 1400N(l)(2)(D), as the case may

be’’ after ‘‘section 54(b)(4)’’.

(3) So much of subchapter Y of chapter 1 as precedes

section 1400L is amended to read as follows:

‘‘Subchapter Y—Short-Term Regional Benefits

‘‘PART I—TAX BENEFITS FOR NEW YORK LIBERTY ZONE

‘‘PART II—TAX BENEFITS FOR GO ZONES

‘‘PART I—TAX BENEFITS FOR NEW YORK

LIBERTY ZONE

‘‘Sec. 1400L. Tax benefits for New York Liberty Zone.’’.

(4) The item relating to subchapter Y in the table of subchapters for chapter 1 is amended to read as follows:

‘‘SUBCHAPTER Y—SHORT-TERM REGIONAL BENEFITS’’.

(c) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as provided in paragraph (2), the

amendments made by this section shall apply to taxable years

ending on or after August 28, 2005.

26 USC 1400N

note.

26 USC 54.

119 STAT. 2594 PUBLIC LAW 109–135—DEC. 21, 2005

(2) CARRYBACKS.—Subsections (i)(2), (j), and (k) of section

1400N of the Internal Revenue Code of 1986 (as added by

this section) shall apply to losses arising in such taxable years.

SEC. 102. EXPANSION OF HOPE SCHOLARSHIP AND LIFETIME

LEARNING CREDIT FOR STUDENTS IN THE GULF OPPORTUNITY ZONE.

(a) IN GENERAL.—Part II of subchapter Y of chapter 1 (as

added by this Act) is amended by adding at the end the following

new section:

‘‘SEC. 1400O. EDUCATION TAX BENEFITS.

‘‘In the case of an individual who attends an eligible educational

institution (as defined in section 25A(f)(2)) located in the Gulf

Opportunity Zone for any taxable year beginning during 2005 or

2006—

‘‘(1) in applying section 25A, the term ‘qualified tuition

and related expenses’ shall include any costs which are qualified

higher education expenses (as defined in section 529(e)(3)),

‘‘(2) each of the dollar amounts in effect under of subparagraphs (A) and (B) of section 25A(b)(1) shall be twice the

amount otherwise in effect before the application of this subsection, and

‘‘(3) section 25A(c)(1) shall be applied by substituting ‘40

percent’ for ‘20 percent’.’’.

(b) CONFORMING AMENDMENT.—The table of sections for part

II of subchapter Y of chapter 1 is amended by adding at the

end the following new item:

‘‘Sec. 1400O. Education tax benefits.’’.

SEC. 103. HOUSING RELIEF FOR INDIVIDUALS AFFECTED BY HURRICANE KATRINA.

(a) IN GENERAL.—Part II of subchapter Y of chapter 1 (as

added by this Act) is amended by adding at the end the following

new section:

‘‘SEC. 1400P. HOUSING TAX BENEFITS .

‘‘(a) EXCLUSION OF EMPLOYER PROVIDED HOUSING FOR INDIVIDUAL AFFECTED BY HURRICANE KATRINA.—

‘‘(1) IN GENERAL.—Gross income of a qualified employee

shall not include the value of any lodging furnished in-kind

to such employee (and such employee’s spouse or any of such

employee’s dependents) by or on behalf of a qualified employer

for any month during the taxable year.

‘‘(2) LIMITATION.—The amount which may be excluded

under paragraph (1) for any month for which lodging is furnished during the taxable year shall not exceed $600.

‘‘(3) TREATMENT OF EXCLUSION.—The exclusion under paragraph (1) shall be treated as an exclusion under section 119

(other than for purposes of sections 3121(a)(19) and

3306(b)(14)).

‘‘(b) EMPLOYER CREDIT FOR HOUSING EMPLOYEES AFFECTED

BY HURRICANE KATRINA.—For purposes of section 38, in the case

of a qualified employer, the Hurricane Katrina housing credit for

any month during the taxable year is an amount equal to 30

percent of any amount which is excludable from the gross income

of a qualified employee of such employer under subsection (a) and

not otherwise excludable under section 119.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2595

‘‘(c) QUALIFIED EMPLOYEE.—For purposes of this section, the

term ‘qualified employee’ means, with respect to any month, an

individual—

‘‘(1) who had a principal residence (as defined in section

121) in the Gulf Opportunity Zone on August 28, 2005, and

‘‘(2) who performs substantially all employment services—

‘‘(A) in the Gulf Opportunity Zone, and

‘‘(B) for the qualified employer which furnishes lodging

to such individual.

‘‘(d) QUALIFIED EMPLOYER.—For purposes of this section, the

term ‘qualified employer’ means any employer with a trade or

business located in the Gulf Opportunity Zone.

‘‘(e) CERTAIN RULES TO APPLY.—For purposes of this subsection,

rules similar to the rules of sections 51(i)(1) and 52 shall apply.

‘‘(f) APPLICATION OF SECTION.—This section shall apply to

lodging furnished during the period—

‘‘(1) beginning on the first day of the first month beginning

after the date of the enactment of this section, and

‘‘(2) ending on the date which is 6 months after the first

day described in paragraph (1).’’.

(b) CONFORMING AMENDMENTS.—

(1) Subsection (b) of section 38 is amended by striking

‘‘and’’ at the end of paragraph (25), by striking the period

at the end of paragraph (26) and inserting ‘‘, and’’, and by

adding at the end the following new paragraph:

‘‘(27) the Hurricane Katrina housing credit determined

under section 1400P(b).’’.

(2) Section 280C(a) is amended by striking ‘‘and 1396(a)’’

and inserting ‘‘1396(a), and 1400P(b)’’.

(3) The table of sections for part II of subchapter Y of

chapter 1 is amended by adding at the end the following new

item:

‘‘Sec. 1400P. Housing tax benefits.’’.

SEC. 104. EXTENSION OF SPECIAL RULES FOR MORTGAGE REVENUE

BONDS.

Section 404(d) of the Katrina Emergency Tax Relief Act of

2005 is amended by striking ‘‘December 31, 2007’’ and inserting

‘‘December 31, 2010’’.

SEC. 105. SPECIAL EXTENSION OF BONUS DEPRECIATION PLACED IN

SERVICE DATE FOR TAXPAYERS AFFECTED BY HURRICANES KATRINA, RITA, AND WILMA.

In applying the rule under section 168(k)(2)(A)(iv) of the

Internal Revenue Code of 1986 to any property described in

subparagraph (B) or (C) of section 168(k)(2) of such Code—

(1) the placement in service of which—

(A) is to be located in the GO Zone (as defined in

section 1400M(1) of such Code), the Rita GO Zone (as

defined in section 1400M(3) of such Code), or the Wilma

GO Zone (as defined in section 1400M(5) of such Code),

and

(B) is to be made by any taxpayer affected by Hurricane

Katrina, Rita, or Wilma, or

(2) which is manufactured in such Zone by any person

affected by Hurricane Katrina, Rita, or Wilma,

Ante, p. 2027.

26 USC 38.

119 STAT. 2596 PUBLIC LAW 109–135—DEC. 21, 2005

the Secretary of the Treasury may, on a taxpayer by taxpayer

basis, extend the required date of the placement in service of

such property under such section by such period of time as is

determined necessary by the Secretary but not to exceed 1 year.

For purposes of the preceding sentence, the determination shall

be made by only taking into account the effect of one or more

hurricanes on the date of such placement by the taxpayer.

TITLE II—TAX BENEFITS RELATED TO

HURRICANES RITA AND WILMA

SEC. 201. EXTENSION OF CERTAIN EMERGENCY TAX RELIEF FOR

HURRICANE KATRINA TO HURRICANES RITA AND WILMA.

(a) IN GENERAL.—Part II of subchapter Y of chapter 1 (as

added by this Act) is amended by adding at the end the following

new sections:

‘‘SEC. 1400Q. SPECIAL RULES FOR USE OF RETIREMENT FUNDS.

‘‘(a) TAX-FAVORED WITHDRAWALS FROM RETIREMENT PLANS.— ‘‘(1) IN GENERAL.—Section 72(t) shall not apply to any

qualified hurricane distribution.

‘‘(2) AGGREGATE DOLLAR LIMITATION.— ‘‘(A) IN GENERAL.—For purposes of this subsection, the

aggregate amount of distributions received by an individual

which may be treated as qualified hurricane distributions

for any taxable year shall not exceed the excess (if any)

of—

‘‘(i) $100,000, over

‘‘(ii) the aggregate amounts treated as qualified

hurricane distributions received by such individual for

all prior taxable years.

‘‘(B) TREATMENT OF PLAN DISTRIBUTIONS.—If a distribution to an individual would (without regard to subparagraph (A)) be a qualified hurricane distribution, a plan

shall not be treated as violating any requirement of this

title merely because the plan treats such distribution as

a qualified hurricane distribution, unless the aggregate

amount of such distributions from all plans maintained

by the employer (and any member of any controlled group

which includes the employer) to such individual exceeds

$100,000.

‘‘(C) CONTROLLED GROUP.—For purposes of subparagraph (B), the term ‘controlled group’ means any group

treated as a single employer under subsection (b), (c), (m),

or (o) of section 414.

‘‘(3) AMOUNT DISTRIBUTED MAY BE REPAID.—

‘‘(A) IN GENERAL.—Any individual who receives a qualified hurricane distribution may, at any time during the

3-year period beginning on the day after the date on which

such distribution was received, make one or more contributions in an aggregate amount not to exceed the amount

of such distribution to an eligible retirement plan of which

such individual is a beneficiary and to which a rollover

contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16),

as the case may be.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2597

‘‘(B) TREATMENT OF REPAYMENTS OF DISTRIBUTIONS

FROM ELIGIBLE RETIREMENT PLANS OTHER THAN IRAS.—For

purposes of this title, if a contribution is made pursuant

to subparagraph (A) with respect to a qualified hurricane

distribution from an eligible retirement plan other than

an individual retirement plan, then the taxpayer shall,

to the extent of the amount of the contribution, be treated

as having received the qualified hurricane distribution in

an eligible rollover distribution (as defined in section

402(c)(4)) and as having transferred the amount to the

eligible retirement plan in a direct trustee to trustee

transfer within 60 days of the distribution.

‘‘(C) TREATMENT OF REPAYMENTS FOR DISTRIBUTIONS

FROM IRAS.—For purposes of this title, if a contribution

is made pursuant to subparagraph (A) with respect to

a qualified hurricane distribution from an individual retirement plan (as defined by section 7701(a)(37)), then, to

the extent of the amount of the contribution, the qualified

hurricane distribution shall be treated as a distribution

described in section 408(d)(3) and as having been transferred to the eligible retirement plan in a direct trustee

to trustee transfer within 60 days of the distribution.

‘‘(4) DEFINITIONS.—For purposes of this subsection—

‘‘(A) QUALIFIED HURRICANE DISTRIBUTION.—Except as

provided in paragraph (2), the term ‘qualified hurricane

distribution’ means—

‘‘(i) any distribution from an eligible retirement

plan made on or after August 25, 2005, and before

January 1, 2007, to an individual whose principal place

of abode on August 28, 2005, is located in the Hurricane Katrina disaster area and who has sustained

an economic loss by reason of Hurricane Katrina,

‘‘(ii) any distribution (which is not described in

clause (i)) from an eligible retirement plan made on

or after September 23, 2005, and before January 1,

2007, to an individual whose principal place of abode

on September 23, 2005, is located in the Hurricane

Rita disaster area and who has sustained an economic

loss by reason of Hurricane Rita, and

‘‘(iii) any distribution (which is not described in

clause (i) or (ii)) from an eligible retirement plan made

on or after October 23, 2005, and before January 1,

2007, to an individual whose principal place of abode

on October 23, 2005, is located in the Hurricane Wilma

disaster area and who has sustained an economic loss

by reason of Hurricane Wilma.

‘‘(B) ELIGIBLE RETIREMENT PLAN.—The term ‘eligible

retirement plan’ shall have the meaning given such term

by section 402(c)(8)(B).

‘‘(5) INCOME INCLUSION SPREAD OVER 3-YEAR PERIOD.—

‘‘(A) IN GENERAL.—In the case of any qualified hurricane distribution, unless the taxpayer elects not to have

this paragraph apply for any taxable year, any amount

required to be included in gross income for such taxable

year shall be so included ratably over the 3-taxable year

period beginning with such taxable year.

119 STAT. 2598 PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(B) SPECIAL RULE.—For purposes of subparagraph (A),

rules similar to the rules of subparagraph (E) of section

408A(d)(3) shall apply.

‘‘(6) SPECIAL RULES.— ‘‘(A) EXEMPTION OF DISTRIBUTIONS FROM TRUSTEE TO

TRUSTEE TRANSFER AND WITHHOLDING RULES.—For purposes of sections 401(a)(31), 402(f), and 3405, qualified

hurricane distributions shall not be treated as eligible rollover distributions.

‘‘(B) QUALIFIED HURRICANE DISTRIBUTIONS TREATED AS

MEETING PLAN DISTRIBUTION REQUIREMENTS.—For purposes

this title, a qualified hurricane distribution shall be treated

as meeting the requirements of sections 401(k)(2)(B)(i),

403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A).

‘‘(b) RECONTRIBUTIONS OF WITHDRAWALS FOR HOME PUR- CHASES.—

‘‘(1) RECONTRIBUTIONS.—

‘‘(A) IN GENERAL.—Any individual who received a qualified distribution may, during the applicable period, make

one or more contributions in an aggregate amount not

to exceed the amount of such qualified distribution to an

eligible retirement plan (as defined in section 402(c)(8)(B))

of which such individual is a beneficiary and to which

a rollover contribution of such distribution could be made

under section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3), as

the case may be.

‘‘(B) TREATMENT OF REPAYMENTS.—Rules similar to the

rules of subparagraphs (B) and (C) of subsection (a)(3)

shall apply for purposes of this subsection.

‘‘(2) QUALIFIED DISTRIBUTION.—For purposes of this

subsection—

‘‘(A) IN GENERAL.—The term ‘qualified distribution’

means any qualified Katrina distribution, any qualified

Rita distribution, and any qualified Wilma distribution.

‘‘(B) QUALIFIED KATRINA DISTRIBUTION.—The term

‘qualified Katrina distribution’ means any distribution—

‘‘(i) described in section 401(k)(2)(B)(i)(IV),

403(b)(7)(A)(ii) (but only to the extent such distribution

relates to financial hardship), 403(b)(11)(B), or

72(t)(2)(F),

‘‘(ii) received after February 28, 2005, and before

August 29, 2005, and

‘‘(iii) which was to be used to purchase or construct

a principal residence in the Hurricane Katrina disaster

area, but which was not so purchased or constructed

on account of Hurricane Katrina.

‘‘(C) QUALIFIED RITA DISTRIBUTION.—The term ‘qualified Rita distribution’ means any distribution (other than

a qualified Katrina distribution)—

‘‘(i) described in section 401(k)(2)(B)(i)(IV),

403(b)(7)(A)(ii) (but only to the extent such distribution

relates to financial hardship), 403(b)(11)(B), or

72(t)(2)(F),

‘‘(ii) received after February 28, 2005, and before

September 24, 2005, and

‘‘(iii) which was to be used to purchase or construct

a principal residence in the Hurricane Rita disaster

Applicability.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2599

area, but which was not so purchased or constructed

on account of Hurricane Rita.

‘‘(D) QUALIFIED WILMA DISTRIBUTION.—The term ‘qualified Wilma distribution’ means any distribution (other than

a qualified Katrina distribution or a qualified Rita distribution)—

‘‘(i) described in section 401(k)(2)(B)(i)(IV),

403(b)(7)(A)(ii) (but only to the extent such distribution

relates to financial hardship), 403(b)(11)(B), or

72(t)(2)(F),

‘‘(ii) received after February 28, 2005, and before

October 24, 2005, and

‘‘(iii) which was to be used to purchase or construct

a principal residence in the Hurricane Wilma disaster

area, but which was not so purchased or constructed

on account of Hurricane Wilma.

‘‘(3) APPLICABLE PERIOD.—For purposes of this subsection,

the term ‘applicable period’ means—

‘‘(A) with respect to any qualified Katrina distribution,

the period beginning on August 25, 2005, and ending on

February 28, 2006,

‘‘(B) with respect to any qualified Rita distribution,

the period beginning on September 23, 2005, and ending

on February 28, 2006, and

‘‘(C) with respect to any qualified Wilma distribution,

the period beginning on October 23, 2005, and ending on

February 28, 2006.

‘‘(c) LOANS FROM QUALIFIED PLANS.—

‘‘(1) INCREASE IN LIMIT ON LOANS NOT TREATED AS DISTRIBUTIONS.—In the case of any loan from a qualified employer

plan (as defined under section 72(p)(4)) to a qualified individual

made during the applicable period—

‘‘(A) clause (i) of section 72(p)(2)(A) shall be applied

by substituting ‘$100,000’ for ‘$50,000’, and

‘‘(B) clause (ii) of such section shall be applied by

substituting ‘the present value of the nonforfeitable accrued

benefit of the employee under the plan’ for ‘one-half of

the present value of the nonforfeitable accrued benefit of

the employee under the plan’.

‘‘(2) DELAY OF REPAYMENT.—In the case of a qualified individual with an outstanding loan on or after the qualified beginning date from a qualified employer plan (as defined in section

72(p)(4))—

‘‘(A) if the due date pursuant to subparagraph (B)

or (C) of section 72(p)(2) for any repayment with respect

to such loan occurs during the period beginning on the

qualified beginning date and ending on December 31, 2006,

such due date shall be delayed for 1 year,

‘‘(B) any subsequent repayments with respect to any

such loan shall be appropriately adjusted to reflect the

delay in the due date under paragraph (1) and any interest

accruing during such delay, and

‘‘(C) in determining the 5-year period and the term

of a loan under subparagraph (B) or (C) of section 72(p)(2),

the period described in subparagraph (A) shall be disregarded.

Applicability.

119 STAT. 2600 PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(3) QUALIFIED INDIVIDUAL.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘qualified individual’

means any qualified Hurricane Katrina individual, any

qualified Hurricane Rita individual, and any qualified

Hurricane Wilma individual.

‘‘(B) QUALIFIED HURRICANE KATRINA INDIVIDUAL.—The

term ‘qualified Hurricane Katrina individual’ means an

individual whose principal place of abode on August 28,

2005, is located in the Hurricane Katrina disaster area

and who has sustained an economic loss by reason of Hurricane Katrina.

‘‘(C) QUALIFIED HURRICANE RITA INDIVIDUAL.—The term

‘qualified Hurricane Rita individual’ means an individual

(other than a qualified Hurricane Katrina individual)

whose principal place of abode on September 23, 2005,

is located in the Hurricane Rita disaster area and who

has sustained an economic loss by reason of Hurricane

Rita.

‘‘(D) QUALIFIED HURRICANE WILMA INDIVIDUAL.—The

term ‘qualified Hurricane Wilma individual’ means an individual (other than a qualified Hurricane Katrina individual

or a qualified Hurricane Rita individual) whose principal

place of abode on October 23, 2005, is located in the Hurricane Wilma disaster area and who has sustained an economic loss by reason of Hurricane Wilma.

‘‘(4) APPLICABLE PERIOD; QUALIFIED BEGINNING DATE.—For

purposes of this subsection—

‘‘(A) HURRICANE KATRINA.—In the case of any qualified

Hurricane Katrina individual—

‘‘(i) the applicable period is the period beginning

on September 24, 2005, and ending on December 31,

2006, and

‘‘(ii) the qualified beginning date is August 25,

2005.

‘‘(B) HURRICANE RITA.—In the case of any qualified

Hurricane Rita individual—

‘‘(i) the applicable period is the period beginning

on the date of the enactment of this subsection and

ending on December 31, 2006, and

‘‘(ii) the qualified beginning date is September 23,

2005.

‘‘(C) HURRICANE WILMA.—In the case of any qualified

Hurricane Wilma individual—

‘‘(i) the applicable period is the period beginning

on the date of the enactment of this subparagraph

and ending on December 31, 2006, and

‘‘(ii) the qualified beginning date is October 23,

2005.

‘‘(d) PROVISIONS RELATING TO PLAN AMENDMENTS.—

‘‘(1) IN GENERAL.—If this subsection applies to any amendment to any plan or annuity contract, such plan or contract

shall be treated as being operated in accordance with the terms

of the plan during the period described in paragraph (2)(B)(i).

‘‘(2) AMENDMENTS TO WHICH SUBSECTION APPLIES.—

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2601

‘‘(A) IN GENERAL.—This subsection shall apply to any

amendment to any plan or annuity contract which is

made—

‘‘(i) pursuant to any provision of this section, or

pursuant to any regulation issued by the Secretary

or the Secretary of Labor under any provision of this

section, and

‘‘(ii) on or before the last day of the first plan

year beginning on or after January 1, 2007, or such

later date as the Secretary may prescribe.

In the case of a governmental plan (as defined in section

414(d)), clause (ii) shall be applied by substituting the

date which is 2 years after the date otherwise applied

under clause (ii).

‘‘(B) CONDITIONS.—This subsection shall not apply to

any amendment unless—

‘‘(i) during the period—

‘‘(I) beginning on the date that this section

or the regulation described in subparagraph (A)(i)

takes effect (or in the case of a plan or contract

amendment not required by this section or such

regulation, the effective date specified by the plan),

and

‘‘(II) ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan or

contract amendment is adopted),

the plan or contract is operated as if such plan or

contract amendment were in effect; and

‘‘(ii) such plan or contract amendment applies

retroactively for such period.

‘‘SEC. 1400R. EMPLOYMENT RELIEF.

‘‘(a) EMPLOYEE RETENTION CREDIT FOR EMPLOYERS AFFECTED

BY HURRICANE KATRINA.—

‘‘(1) IN GENERAL.—For purposes of section 38, in the case

of an eligible employer, the Hurricane Katrina employee retention credit for any taxable year is an amount equal to 40

percent of the qualified wages with respect to each eligible

employee of such employer for such taxable year. For purposes

of the preceding sentence, the amount of qualified wages which

may be taken into account with respect to any individual shall

not exceed $6,000.

‘‘(2) DEFINITIONS.—For purposes of this subsection—

‘‘(A) ELIGIBLE EMPLOYER.—The term ‘eligible employer’

means any employer—

‘‘(i) which conducted an active trade or business

on August 28, 2005, in the GO Zone, and

‘‘(ii) with respect to whom the trade or business

described in clause (i) is inoperable on any day after

August 28, 2005, and before January 1, 2006, as a

result of damage sustained by reason of Hurricane

Katrina.

‘‘(B) ELIGIBLE EMPLOYEE.—The term ‘eligible employee’

means with respect to an eligible employer an employee

whose principal place of employment on August 28, 2005,

with such eligible employer was in the GO Zone.

119 STAT. 2602 PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(C) QUALIFIED WAGES.—The term ‘qualified wages’

means wages (as defined in section 51(c)(1), but without

regard to section 3306(b)(2)(B)) paid or incurred by an

eligible employer with respect to an eligible employee on

any day after August 28, 2005, and before January 1,

2006, which occurs during the period—

‘‘(i) beginning on the date on which the trade or

business described in subparagraph (A) first became

inoperable at the principal place of employment of

the employee immediately before Hurricane Katrina,

and

‘‘(ii) ending on the date on which such trade or

business has resumed significant operations at such

principal place of employment.

Such term shall include wages paid without regard to

whether the employee performs no services, performs services at a different place of employment than such principal

place of employment, or performs services at such principal

place of employment before significant operations have

resumed.

‘‘(3) CERTAIN RULES TO APPLY.—For purposes of this subsection, rules similar to the rules of sections 51(i)(1) and 52

shall apply.

‘‘(4) EMPLOYEE NOT TAKEN INTO ACCOUNT MORE THAN

ONCE.—An employee shall not be treated as an eligible

employee for purposes of this subsection for any period with

respect to any employer if such employer is allowed a credit

under section 51 with respect to such employee for such period.

‘‘(b) EMPLOYEE RETENTION CREDIT FOR EMPLOYERS AFFECTED

BY HURRICANE RITA.—

‘‘(1) IN GENERAL.—For purposes of section 38, in the case

of an eligible employer, the Hurricane Rita employee retention

credit for any taxable year is an amount equal to 40 percent

of the qualified wages with respect to each eligible employee

of such employer for such taxable year. For purposes of the

preceding sentence, the amount of qualified wages which may

be taken into account with respect to any individual shall

not exceed $6,000.

‘‘(2) DEFINITIONS.—For purposes of this subsection—

‘‘(A) ELIGIBLE EMPLOYER.—The term ‘eligible employer’

means any employer—

‘‘(i) which conducted an active trade or business

on September 23, 2005, in the Rita GO Zone, and

‘‘(ii) with respect to whom the trade or business

described in clause (i) is inoperable on any day after

September 23, 2005, and before January 1, 2006, as

a result of damage sustained by reason of Hurricane

Rita.

‘‘(B) ELIGIBLE EMPLOYEE.—The term ‘eligible employee’

means with respect to an eligible employer an employee

whose principal place of employment on September 23,

2005, with such eligible employer was in the Rita GO

Zone.

‘‘(C) QUALIFIED WAGES.—The term ‘qualified wages’

means wages (as defined in section 51(c)(1), but without

regard to section 3306(b)(2)(B)) paid or incurred by an

eligible employer with respect to an eligible employee on

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2603

any day after September 23, 2005, and before January

1, 2006, which occurs during the period—

‘‘(i) beginning on the date on which the trade or

business described in subparagraph (A) first became

inoperable at the principal place of employment of

the employee immediately before Hurricane Rita, and

‘‘(ii) ending on the date on which such trade or

business has resumed significant operations at such

principal place of employment.

Such term shall include wages paid without regard to

whether the employee performs no services, performs services at a different place of employment than such principal

place of employment, or performs services at such principal

place of employment before significant operations have

resumed.

‘‘(3) CERTAIN RULES TO APPLY.—For purposes of this subsection, rules similar to the rules of sections 51(i)(1) and 52

shall apply.

‘‘(4) EMPLOYEE NOT TAKEN INTO ACCOUNT MORE THAN

ONCE.—An employee shall not be treated as an eligible

employee for purposes of this subsection for any period with

respect to any employer if such employer is allowed a credit

under subsection (a) or section 51 with respect to such employee

for such period.

‘‘(c) EMPLOYEE RETENTION CREDIT FOR EMPLOYERS AFFECTED

BY HURRICANE WILMA.—

‘‘(1) IN GENERAL.—For purposes of section 38, in the case

of an eligible employer, the Hurricane Wilma employee retention credit for any taxable year is an amount equal to 40

percent of the qualified wages with respect to each eligible

employee of such employer for such taxable year. For purposes

of the preceding sentence, the amount of qualified wages which

may be taken into account with respect to any individual shall

not exceed $6,000.

‘‘(2) DEFINITIONS.—For purposes of this subsection—

‘‘(A) ELIGIBLE EMPLOYER.—The term ‘eligible employer’

means any employer—

‘‘(i) which conducted an active trade or business

on October 23, 2005, in the Wilma GO Zone, and

‘‘(ii) with respect to whom the trade or business

described in clause (i) is inoperable on any day after

October 23, 2005, and before January 1, 2006, as a

result of damage sustained by reason of Hurricane

Wilma.

‘‘(B) ELIGIBLE EMPLOYEE.—The term ‘eligible employee’

means with respect to an eligible employer an employee

whose principal place of employment on October 23, 2005,

with such eligible employer was in the Wilma GO Zone.

‘‘(C) QUALIFIED WAGES.—The term ‘qualified wages’

means wages (as defined in section 51(c)(1), but without

regard to section 3306(b)(2)(B)) paid or incurred by an

eligible employer with respect to an eligible employee on

any day after October 23, 2005, and before January 1,

2006, which occurs during the period—

‘‘(i) beginning on the date on which the trade or

business described in subparagraph (A) first became

inoperable at the principal place of employment of

119 STAT. 2604 PUBLIC LAW 109–135—DEC. 21, 2005

the employee immediately before Hurricane Wilma,

and

‘‘(ii) ending on the date on which such trade or

business has resumed significant operations at such

principal place of employment.

Such term shall include wages paid without regard to

whether the employee performs no services, performs services at a different place of employment than such principal

place of employment, or performs services at such principal

place of employment before significant operations have

resumed.

‘‘(3) CERTAIN RULES TO APPLY.—For purposes of this subsection, rules similar to the rules of sections 51(i)(1) and 52

shall apply.

‘‘(4) EMPLOYEE NOT TAKEN INTO ACCOUNT MORE THAN

ONCE.—An employee shall not be treated as an eligible

employee for purposes of this subsection for any period with

respect to any employer if such employer is allowed a credit

under subsection (a) or (b) or section 51 with respect to such

employee for such period.

‘‘SEC. 1400S. ADDITIONAL TAX RELIEF PROVISIONS.

‘‘(a) TEMPORARY SUSPENSION OF LIMITATIONS ON CHARITABLE

CONTRIBUTIONS.—

‘‘(1) IN GENERAL.—Except as otherwise provided in paragraph (2), section 170(b) shall not apply to qualified contributions and such contributions shall not be taken into account

for purposes of applying subsections (b) and (d) of section 170

to other contributions.

‘‘(2) TREATMENT OF EXCESS CONTRIBUTIONS.—For purposes

of section 170—

‘‘(A) INDIVIDUALS.—In the case of an individual—

‘‘(i) LIMITATION.—Any qualified contribution shall

be allowed only to the extent that the aggregate of

such contributions does not exceed the excess of the

taxpayer’s contribution base (as defined in subparagraph (F) of section 170(b)(1)) over the amount of all

other charitable contributions allowed under section

170(b)(1).

‘‘(ii) CARRYOVER.—If the aggregate amount of

qualified contributions made in the contribution year

(within the meaning of section 170(d)(1)) exceeds the

limitation of clause (i), such excess shall be added

to the excess described in the portion of subparagraph

(A) of such section which precedes clause (i) thereof

for purposes of applying such section.

‘‘(B) CORPORATIONS.—In the case of a corporation—

‘‘(i) LIMITATION.—Any qualified contribution shall

be allowed only to the extent that the aggregate of

such contributions does not exceed the excess of the

taxpayer’s taxable income (as determined under paragraph (2) of section 170(b)) over the amount of all

other charitable contributions allowed under such paragraph.

‘‘(ii) CARRYOVER.—Rules similar to the rules of

subparagraph (A)(ii) shall apply for purposes of this

subparagraph.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2605

‘‘(3) EXCEPTION TO OVERALL LIMITATION ON ITEMIZED

DEDUCTIONS.—So much of any deduction allowed under section

170 as does not exceed the qualified contributions paid during

the taxable year shall not be treated as an itemized deduction

for purposes of section 68.

‘‘(4) QUALIFIED CONTRIBUTIONS.—

‘‘(A) IN GENERAL.—For purposes of this subsection, the

term ‘qualified contribution’ means any charitable contribution (as defined in section 170(c)) if—

‘‘(i) such contribution is paid during the period

beginning on August 28, 2005, and ending on December

31, 2005, in cash to an organization described in section

170(b)(1)(A) (other than an organization described in

section 509(a)(3)),

‘‘(ii) in the case of a contribution paid by a corporation, such contribution is for relief efforts related to

Hurricane Katrina, Hurricane Rita, or Hurricane

Wilma, and

‘‘(iii) the taxpayer has elected the application of

this subsection with respect to such contribution.

‘‘(B) EXCEPTION.—Such term shall not include a contribution if the contribution is for establishment of a new,

or maintenance in an existing, segregated fund or account

with respect to which the donor (or any person appointed

or designated by such donor) has, or reasonably expects

to have, advisory privileges with respect to distributions

or investments by reason of the donor’s status as a donor.

‘‘(C) APPLICATION OF ELECTION TO PARTNERSHIPS AND

S CORPORATIONS.—In the case of a partnership or S corporation, the election under subparagraph (A)(iii) shall be made

separately by each partner or shareholder.

‘‘(b) SUSPENSION OF CERTAIN LIMITATIONS ON PERSONAL CASUALTY LOSSES.—Paragraphs (1) and (2)(A) of section 165(h) shall

not apply to losses described in section 165(c)(3)—

‘‘(1) which arise in the Hurricane Katrina disaster area

on or after August 25, 2005, and which are attributable to

Hurricane Katrina,

‘‘(2) which arise in the Hurricane Rita disaster area on

or after September 23, 2005, and which are attributable to

Hurricane Rita, or

‘‘(3) which arise in the Hurricane Wilma disaster area

on or after October 23, 2005, and which are attributable to

Hurricane Wilma.

In the case of any other losses, section 165(h)(2)(A) shall be applied

without regard to the losses referred to in the preceding sentence.

‘‘(c) REQUIRED EXERCISE OF AUTHORITY UNDER SECTION

7508A.—In the case of any taxpayer determined by the Secretary

to be affected by the Presidentially declared disaster relating to

Hurricane Katrina, Hurricane Rita, or Hurricane Wilma, any relief

provided by the Secretary under section 7508A shall be for a period

ending not earlier than February 28, 2006.

‘‘(d) SPECIAL RULE FOR DETERMINING EARNED INCOME.—

‘‘(1) IN GENERAL.—In the case of a qualified individual,

if the earned income of the taxpayer for the taxable year

which includes the applicable date is less than the earned

income of the taxpayer for the preceding taxable year, the

Termination

date.

119 STAT. 2606 PUBLIC LAW 109–135—DEC. 21, 2005

credits allowed under sections 24(d) and 32 may, at the election

of the taxpayer, be determined by substituting—

‘‘(A) such earned income for the preceding taxable year,

for

‘‘(B) such earned income for the taxable year which

includes the applicable date.

‘‘(2) QUALIFIED INDIVIDUAL.—For purposes of this

subsection—

‘‘(A) IN GENERAL.—The term ‘qualified individual’

means any qualified Hurricane Katrina individual, any

qualified Hurricane Rita individual, and any qualified

Hurricane Wilma individual.

‘‘(B) QUALIFIED HURRICANE KATRINA INDIVIDUAL.—The

term ‘qualified Hurricane Katrina individual’ means any

individual whose principal place of abode on August 25,

2005, was located—

‘‘(i) in the GO Zone, or

‘‘(ii) in the Hurricane Katrina disaster area (but

outside the GO Zone) and such individual was displaced from such principal place of abode by reason

of Hurricane Katrina.

‘‘(C) QUALIFIED HURRICANE RITA INDIVIDUAL.—The term

‘qualified Hurricane Rita individual’ means any individual

(other than a qualified Hurricane Katrina individual)

whose principal place of abode on September 23, 2005,

was located—

‘‘(i) in the Rita GO Zone, or

‘‘(ii) in the Hurricane Rita disaster area (but outside the Rita GO Zone) and such individual was displaced from such principal place of abode by reason

of Hurricane Rita.

‘‘(D) QUALIFIED HURRICANE WILMA INDIVIDUAL.—The

term ‘qualified Hurricane Wilma individual’ means any

individual whose principal place of abode on October 23,

2005, was located—

‘‘(i) in the Wilma GO Zone, or

‘‘(ii) in the Hurricane Wilma disaster area (but

outside the Wilma GO Zone) and such individual was

displaced from such principal place of abode by reason

of Hurricane Wilma.

‘‘(3) APPLICABLE DATE.—For purposes of this subsection,

the term ‘applicable date’ means—

‘‘(A) in the case of a qualified Hurricane Katrina individual, August 25, 2005,

‘‘(B) in the case of a qualified Hurricane Rita individual, September 23, 2005, and

‘‘(C) in the case of a qualified Hurricane Wilma individual, October 23, 2005.

‘‘(4) EARNED INCOME.—For purposes of this subsection, the

term ‘earned income’ has the meaning given such term under

section 32(c).

‘‘(5) SPECIAL RULES.—

‘‘(A) APPLICATION TO JOINT RETURNS.—For purposes

of paragraph (1), in the case of a joint return for a taxable

year which includes the applicable date—

‘‘(i) such paragraph shall apply if either spouse

is a qualified individual, and

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2607

‘‘(ii) the earned income of the taxpayer for the

preceding taxable year shall be the sum of the earned

income of each spouse for such preceding taxable year.

‘‘(B) UNIFORM APPLICATION OF ELECTION.—Any election

made under paragraph (1) shall apply with respect to both

sections 24(d) and section 32.

‘‘(C) ERRORS TREATED AS MATHEMATICAL ERROR.—For

purposes of section 6213, an incorrect use on a return

of earned income pursuant to paragraph (1) shall be treated

as a mathematical or clerical error.

‘‘(D) NO EFFECT ON DETERMINATION OF GROSS INCOME, ETC.—Except as otherwise provided in this subsection, this

title shall be applied without regard to any substitution

under paragraph (1).

‘‘(e) SECRETARIAL AUTHORITY TO MAKE ADJUSTMENTS

REGARDING TAXPAYER AND DEPENDENCY STATUS.—With respect to

taxable years beginning in 2005 or 2006, the Secretary may make

such adjustments in the application of the internal revenue laws

as may be necessary to ensure that taxpayers do not lose any

deduction or credit or experience a change of filing status by reason

of temporary relocations by reason of Hurricane Katrina, Hurricane

Rita, or Hurricane Wilma. Any adjustments made under the preceding sentence shall ensure that an individual is not taken into

account by more than one taxpayer with respect to the same tax

benefit.

‘‘SEC. 1400T. SPECIAL RULES FOR MORTGAGE REVENUE BONDS.

‘‘(a) IN GENERAL.—In the case of financing provided with respect

to owner-occupied residences in the GO Zone, the Rita GO Zone,

or the Wilma GO Zone, section 143 shall be applied—

‘‘(1) by treating any such residence in the Rita GO Zone

or the Wilma GO Zone as a targeted area residence,

‘‘(2) by applying subsection (f)(3) thereof without regard

to subparagraph (A) thereof, and

‘‘(3) by substituting ‘$150,000’ for ‘$15,000’ in subsection

(k)(4) thereof.

‘‘(b) APPLICATION.—Subsection (a) shall not apply to financing

provided after December 31, 2010.’’.

(b) CONFORMING AMENDMENTS.—

(1) Subsection (b) of section 38, as amended by this Act,

is amended by striking ‘‘and’’ at the end of paragraph (26),

by striking the period at the end of paragraph (27) and inserting

a comma, and by adding at the end the following new paragraphs:

‘‘(28) the Hurricane Katrina employee retention credit

determined under section 1400R(a),

‘‘(29) the Hurricane Rita employee retention credit determined under section 1400R(b), and

‘‘(30) the Hurricane Wilma employee retention credit determined under section 1400R(c).’’.

(2) Section 280C(a), as amended by this Act, is amended

by striking ‘‘and 1400P(b)’’ and inserting ‘‘1400P(b), and 1400R’’.

(3) The table of sections for part II of subchapter Y of

chapter 1 is amended by adding at the end the following new

items:

‘‘Sec. 1400Q. Special rules for use of retirement funds.

‘‘Sec. 1400R. Employment relief.

‘‘Sec. 1400S. Additional tax relief provisions.’’.

26 USC 38.

Applicability.

119 STAT. 2608 PUBLIC LAW 109–135—DEC. 21, 2005

(4) The following provisions of the Katrina Emergency Tax

Relief Act of 2005 are hereby repealed:

(A) Title I.

(B) Sections 202, 301, 402, 403(b), 406, and 407.

TITLE III—OTHER PROVISIONS

SEC. 301. GULF COAST RECOVERY BONDS.

It is the sense of the Congress that the Secretary of the

Treasury, or the Secretary’s delegate, should designate one or more

series of bonds or certificates (or any portion thereof) issued under

section 3105 of title 31, United States Code, as ‘‘Gulf Coast Recovery

Bonds’’ in response to Hurricanes Katrina, Rita, and Wilma.

SEC. 302. ELECTION TO INCLUDE COMBAT PAY AS EARNED INCOME

FOR PURPOSES OF EARNED INCOME CREDIT.

(a) IN GENERAL.—Subclause (II) of section 32(c)(2)(B)(vi) 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. 303. MODIFICATION OF EFFECTIVE DATE OF EXCEPTION FROM

SUSPENSION RULES FOR CERTAIN LISTED AND REPORTABLE TRANSACTIONS.

(a) EFFECTIVE DATE MODIFICATION.—

(1) IN GENERAL.—Paragraph (2) of section 903(d) of the

American Jobs Creation Act of 2004 is amended to read as

follows:

‘‘(2) EXCEPTION FOR REPORTABLE OR LISTED TRANSACTIONS.—

‘‘(A) IN GENERAL.—The amendments made by subsection (c) shall apply with respect to interest accruing

after October 3, 2004.

‘‘(B) SPECIAL RULE FOR CERTAIN LISTED AND REPORTABLE TRANSACTIONS.—

‘‘(i) IN GENERAL.—Except as provided in clauses

(ii), (iii), and (iv), the amendments made by subsection

(c) shall also apply with respect to interest accruing

on or before October 3, 2004.

‘‘(ii) PARTICIPANTS IN SETTLEMENT INITIATIVES.—

Clause (i) shall not apply to any transaction if, as

of January 23, 2006—

‘‘(I) the taxpayer is participating in a settlement initiative described in Internal Revenue

Service Announcement 2005–80 with respect to

such transaction, or

‘‘(II) the taxpayer has entered into a settlement agreement pursuant to such an initiative.

Subclause (I) shall not apply to any taxpayer if, after

January 23, 2006, the taxpayer withdraws from, or

terminates, participation in the initiative or the Secretary of the Treasury or the Secretary’s delegate determines that a settlement agreement will not be reached

pursuant to the initiative within a reasonable period

of time.

26 USC 6404

note.

26 USC 32 note.

Ante, pp. 2021,

2022, 2027–2029.

Ante, p. 2017.

Repeal.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2609

‘‘(iii) TAXPAYERS ACTING IN GOOD FAITH.—The Secretary of the Treasury may except from the application

of clause (i) any transaction in which the taxpayer

has acted reasonably and in good faith.

‘‘(iv) CLOSED TRANSACTIONS.—Clause (i) shall not

apply to a transaction if, as of December 14, 2005—

‘‘(I) the assessment of all Federal income taxes

for the taxable year in which the tax liability to

which the interest relates arose is prevented by

the operation of any law or rule of law, or

‘‘(II) a closing agreement under section 7121

has been entered into with respect to the tax

liability arising in connection with the transaction.’’.

(2) EFFECTIVE DATE.—The amendment made by this subsection shall take effect as if included in the provisions of

the American Jobs Creation Act of 2004 to which it relates.

(b) TREATMENT OF AMENDED RETURNS AND OTHER SIMILAR

NOTICES OF ADDITIONAL TAX OWED.—

(1) IN GENERAL.—Section 6404(g)(1) (relating to suspension)

is amended by adding at the end the following new sentence:

‘‘If, after the return for a taxable year is filed, the taxpayer

provides to the Secretary 1 or more signed written documents

showing that the taxpayer owes an additional amount of tax

for the taxable year, clause (i) shall be applied by substituting

the date the last of the documents was provided for the date

on which the return is filed.’’.

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to documents provided on or after the date

of the enactment of this Act.

SEC. 304. AUTHORITY FOR UNDERCOVER OPERATIONS.

Paragraph (6) of section 7608(c) (relating to application of section) is amended by striking ‘‘January 1, 2006’’ both places is

appears and inserting ‘‘January 1, 2007’’.

SEC. 305. DISCLOSURES OF CERTAIN TAX RETURN INFORMATION.

(a) DISCLOSURES TO FACILITATE COMBINED EMPLOYMENT TAX

REPORTING.—

(1) IN GENERAL.—Subparagraph (B) of section 6103(d)(5)

(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 disclosures after December 31, 2005.

(b) DISCLOSURES RELATING TO TERRORIST ACTIVITIES.—

(1) IN GENERAL.—Clause (iv) of section 6103(i)(3)(C) and

subparagraph (E) of section 6103(i)(7) are each amended by

striking ‘‘December 31, 2005’’ and inserting ‘‘December 31,

2006’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall apply to disclosures after December 31, 2005.

(c) DISCLOSURES RELATING TO STUDENT LOANS.—

(1) IN GENERAL.—Subparagraph (D) of section 6103(l)(13)

(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 requests made after December 31, 2005.

26 USC 6103

note.

26 USC 6103

note.

26 USC 6103

note.

26 USC 6404

note.

26 USC 6404.

26 USC 6404

note.

119 STAT. 2610 PUBLIC LAW 109–135—DEC. 21, 2005

TITLE IV—TECHNICALS

Subtitle A—Tax Technicals

SEC. 401. SHORT TITLE.

This subtitle may be cited as the ‘‘Tax Technical Corrections

Act of 2005’’.

SEC. 402. AMENDMENTS RELATED TO ENERGY POLICY ACT OF 2005.

(a) AMENDMENTS RELATED TO SECTION 1263.—

(1) Part VI of subchapter O of chapter 1 is repealed.

(2) Section 1223 is amended by striking paragraph (3)

and by redesignating paragraphs (4) through (16) as paragraphs

(3) through (15), respectively.

(3) Section 121(g) is amended by striking ‘‘1223(7)’’ and

inserting ‘‘1223(6)’’.

(4) Section 246(c)(3)(B) is amended by striking ‘‘paragraph

(4) of section 1223’’ and inserting ‘‘paragraph (3) of section

1223’’.

(5) Section 247(b)(2)(D) is amended by inserting ‘‘as in

effect before its repeal’’ after ‘‘part VI of subchapter O’’.

(6)(A) Section 1245(b) is amended by striking paragraph

(5) and redesignating paragraphs (6) through (9) as paragraphs

(5) through (8), respectively.

(B) Section 1245(b)(3) is amended by striking ‘‘paragraph

(7)’’ and inserting ‘‘paragraph (6)’’.

(7)(A) Section 1250(d) is amended by striking paragraph

(5) and redesignating paragraphs (6) through (8) as paragraphs

(5) through (7), respectively.

(B) Section 1250(e)(2) is amended by striking ‘‘(3), or (5)’’

and inserting ‘‘or (3)’’.

(b) AMENDMENT RELATED TO SECTION 1301.—Clause (ii) of section 45(c)(3)(A) is amended by striking ‘‘nonhazardous lignin waste

material’’ and inserting ‘‘lignin material’’.

(c) AMENDMENTS RELATED TO SECTION 1303.—

(1) Subsection (l) of section 54 is amended by striking

paragraph (5), and by redesignating paragraphs (6) and (7)

as paragraphs (5) and (6), respectively.

(2) Subsection (e) of section 1303 of the Energy Policy

Act of 2005 is amended to read as follows:

‘‘(e) EFFECTIVE DATES.—

‘‘(1) IN GENERAL.—Except as provided in paragraph (2),

the amendments made by this section shall apply to bonds

issued after December 31, 2005.

‘‘(2) SUBSECTION (C).—The amendments made by subsection

(c) shall apply to taxable years beginning after December 31,

2005.’’.

(d) AMENDMENTS RELATED TO SECTION 1306.—

(1) Paragraph (2) of section 45J(c) is amended to read

as follows:

‘‘(2) PHASEOUT OF CREDIT.—

‘‘(A) IN GENERAL.—The amount of the credit determined

under subsection (a) shall be reduced by an amount which

bears the same ratio to the amount of the credit (determined without regard to this paragraph) as—

Ante, p. 991.

Repeal.

26 USC

1081–1083.

26 USC 1 note.

Tax Technical

Corrections Act

of 2005.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2611

‘‘(i) the amount by which the reference price (as

defined in section 45(e)(2)(C)) for the calendar year

in which the sale occurs exceeds 8 cents, bears to

‘‘(ii) 3 cents.

‘‘(B) PHASEOUT ADJUSTMENT BASED ON INFLATION.— The 8 cent amount in subparagraph (A) shall be adjusted

by multiplying such amount by the inflation adjustment

factor (as defined in section 45(e)(2)(B)) for the calendar

year in which the sale occurs. If any amount as increased

under the preceding sentence is not a multiple of 0.1 cent,

such amount shall be rounded to the nearest multiple

of 0.1 cent.’’.

(2) Subsection (e) of section 45J is amended by striking

‘‘(2),’’.

(e) AMENDMENT RELATED TO SECTION 1309.—Subparagraph (B)

of section 169(d)(5) is amended by adding at beginning thereof

‘‘in the case of facility placed in service in connection with a plant

or other property placed in operation after December 31, 1975,’’.

(f) AMENDMENTS RELATED TO SECTION 1311.—

(1) Clause (i) of section 172(b)(1)(I) is amended to read

as follows:

‘‘(i) IN GENERAL.—At the election of the taxpayer

for any taxable year ending after December 31, 2005,

and before January 1, 2009, in the case of a net operating loss for a taxable year ending after December

31, 2002, and before January 1, 2006, there shall be

a net operating loss carryback to each of the 5 taxable

years preceding the taxable year of such loss to the

extent that such loss does not exceed 20 percent of

the sum of the electric transmission property capital

expenditures and the pollution control facility capital

expenditures of the taxpayer for the taxable year preceding the taxable year for which such election is

made.’’.

(2) Clause (ii) of section 172(b)(1)(I) is amended by striking

‘‘in a taxable year’’ and inserting ‘‘for a taxable year’’.

(3) Subparagraph (I) of section 172(b)(1) is amended by

striking clause (iv) and (v), by redesignating clause (vi) as

clause (v), and by inserting after clause (iii) the following:

‘‘(iv) SPECIAL RULES RELATING TO CREDIT OR

REFUND.—In the case of the portion of the loss which

is carried back 5 years by reason of clause (i)—

‘‘(I) an application under section 6411(a) with

respect to such portion shall not fail to be treated

as timely filed if filed within 24 months after the

due date specified under such section, and

‘‘(II) references in sections 6501(h),

6511(d)(2)(A), and 6611(f)(1) to the taxable year

in which such net operating loss arises or results

in a net operating loss carryback shall be treated

as references to the taxable year for which such

election is made.’’.

(g) AMENDMENT RELATED TO SECTION 1322.—Subsection (a)

of section 45K is amended by striking ‘‘if the taxpayer elects to

have this section apply,’’.

(h) AMENDMENT RELATED TO SECTION 1331.—Paragraph (3)

of section 1250(b) is amended by striking ‘‘or by section 179D’’.

26 USC 45J.

119 STAT. 2612 PUBLIC LAW 109–135—DEC. 21, 2005

(i) AMENDMENTS RELATED TO SECTION 1335.—

(1) Paragraph (1) of section 25D(b) is amended by inserting

‘‘(determined without regard to subsection (c))’’ after ‘‘subsection

(a)’’.

(2) Subparagraphs (A) and (B) of section 25D(e)(4) are

amended to read as follows:

‘‘(A) MAXIMUM EXPENDITURES.—The maximum amount

of expenditures which may be taken into account under

subsection (a) by all such individuals with respect to such

dwelling unit during such calendar year shall be— ‘‘(i) $6,667 in the case of any qualified photovoltaic

property expenditures, ‘‘(ii) $6,667 in the case of any qualified solar water

heating property expenditures, and ‘‘(iii) $1,667 in the case of each half kilowatt of

capacity of qualified fuel cell property (as defined in

section 48(c)(1)) for which qualified fuel cell property

expenditures are made.

‘‘(B) ALLOCATION OF EXPENDITURES.—The expenditures

allocated to any individual for the taxable year in which

such calendar year ends shall be an amount equal to the

lesser of—

‘‘(i) the amount of expenditures made by such individual with respect to such dwelling during such calendar year, or

‘‘(ii) the maximum amount of such expenditures

set forth in subparagraph (A) multiplied by a fraction—

‘‘(I) the numerator of which is the amount

of such expenditures with respect to such dwelling

made by such individual during such calendar

year, and

‘‘(II) the denominator of which is the total

expenditures made by all such individuals with

respect to such dwelling during such calendar

year.’’.

(3)(A)(i) The matter preceding subparagraph (A) of section

23(b)(4) is amended by striking ‘‘The credit’’ and inserting ‘‘In

the case of a taxable year to which section 26(a)(2) does not

apply, the credit’’.

(ii) Subsection (c) of section 23 is amended to read as

follows:

‘‘(c) CARRYFORWARDS OF UNUSED CREDIT.—

‘‘(1) RULE FOR YEARS IN WHICH ALL PERSONAL CREDITS

ALLOWED AGAINST REGULAR AND ALTERNATIVE MINIMUM TAX.—

In the case of a taxable year to which section 26(a)(2) applies,

if the credit allowable under subsection (a) for any taxable

year exceeds the limitation imposed by section 26(a)(2) for

such taxable year reduced by the sum of the credits allowable

under this subpart (other than this section and sections 25D

and 1400C), such excess shall be carried to the succeeding

taxable year and added to the credit allowable under subsection

(a) for such taxable year.

‘‘(2) RULE FOR OTHER YEARS.—In the case of a taxable

year to which section 26(a)(2) does not apply, if the credit

allowable under subsection (a) for any taxable year exceeds

the limitation imposed by subsection (b)(4) for such taxable

year, such excess shall be carried to the succeeding taxable

26 USC 25D.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2613

year and added to the credit allowable under subsection (a)

for such taxable year.

‘‘(3) LIMITATION.—No credit may be carried forward under

this subsection to any taxable year following the fifth taxable

year after the taxable year in which the credit arose. For

purposes of the preceding sentence, credits shall be treated

as used on a first-in first-out basis.’’.

(B)(i) The matter preceding subparagraph (A) of section

24(b)(3) is amended by striking ‘‘The credit’’ and inserting ‘‘In

the case of a taxable year to which section 26(a)(2) does not

apply, the credit’’.

(ii) Paragraph (1) of section 24(d) is amended to read as

follows:

‘‘(1) IN GENERAL.—The aggregate credits allowed to a taxpayer under subpart C shall be increased by the lesser of—

‘‘(A) the credit which would be allowed under this

section without regard to this subsection and the limitation

under section 26(a)(2) or subsection (b)(3), as the case may

be, or

‘‘(B) the amount by which the aggregate amount of

credits allowed by this subpart (determined without regard

to this subsection) would increase if the limitation imposed

by section 26(a)(2) or subsection (b)(3), as the case may

be, were increased by the excess (if any) of—

‘‘(i) 15 percent of so much of the taxpayer’s earned

income (within the meaning of section 32) which is

taken into account in computing taxable income for

the taxable year as exceeds $10,000, or

‘‘(ii) in the case of a taxpayer with 3 or more

qualifying children, the excess (if any) of—

‘‘(I) the taxpayer’s social security taxes for the

taxable year, over

‘‘(II) the credit allowed under section for the

taxable year.

The amount of the credit allowed under this subsection shall

not be treated as a credit allowed under this subpart and

shall reduce the amount of credit otherwise allowable under

subsection (a) without regard to section 26(a)(2) or subsection

(b)(3), as the case may be. For purposes of subparagraph (B),

any amount excluded from gross income by reason of section

112 shall be treated as earned income which is taken into

account in computing taxable income for the taxable year.’’.

(C) Subparagraph (C) of section 25(e)(1) is amended to

read as follows:

‘‘(C) APPLICABLE TAX LIMIT.—For purposes of this paragraph, the term ‘applicable tax limit’ means—

‘‘(i) in the case of a taxable year to which section

26(a)(2) applies, the limitation imposed by section

26(a)(2) for the taxable year reduced by the sum of

the credits allowable under this subpart (other than

this section and sections 23, 25D, and 1400C), and

‘‘(ii) in the case of a taxable year to which section

26(a)(2) does not apply, the limitation imposed by section 26(a)(1) for the taxable year reduced by the sum

of the credits allowable under this subpart (other than

this section and sections 23, 24, 25B, 25D, and

1400C).’’.

26 USC 24.

119 STAT. 2614 PUBLIC LAW 109–135—DEC. 21, 2005

(D) The matter preceding paragraph (1) of section 25B(g)

is amended by striking ‘‘The credit’’ and inserting ‘‘In the case

of a taxable year to which section 26(a)(2) does not apply,

the credit’’.

(E) Subsection (c) of section 25D is amended to read as

follows:

‘‘(c) CARRYFORWARD OF UNUSED CREDIT.—

‘‘(1) RULE FOR YEARS IN WHICH ALL PERSONAL CREDITS

ALLOWED AGAINST REGULAR AND ALTERNATIVE MINIMUM TAX.—

In the case of a taxable year to which section 26(a)(2) applies,

if the credit allowable under subsection (a) exceeds the limitation imposed by section 26(a)(2) for such taxable year reduced

by the sum of the credits allowable under this subpart (other

than this section), such excess shall be carried to the succeeding

taxable year and added to the credit allowable under subsection

(a) for such succeeding taxable year.

‘‘(2) RULE FOR OTHER YEARS.—In the case of a taxable

year to which section 26(a)(2) does not apply, if the credit

allowable under subsection (a) exceeds the limitation imposed

by section 26(a)(1) for such taxable year reduced by the sum

of the credits allowable under this subpart (other than this

section and sections 23, 24, and 25B), such excess shall be

carried to the succeeding taxable year and added to the credit

allowable under subsection (a) for such succeeding taxable

year.’’.

(F) Subsection (d) of section 1400C is amended to read

as follows:

‘‘(d) CARRYFORWARD OF UNUSED CREDIT.—

‘‘(1) RULE FOR YEARS IN WHICH ALL PERSONAL CREDITS

ALLOWED AGAINST REGULAR AND ALTERNATIVE MINIMUM TAX.—

In the case of a taxable year to which section 26(a)(2) applies,

if the credit allowable under subsection (a) exceeds the limitation imposed by section 26(a)(2) for such taxable year reduced

by the sum of the credits allowable under subpart A of part

IV of subchapter A (other than this section and section 25D),

such excess shall be carried to the succeeding taxable year

and added to the credit allowable under subsection (a) for

such taxable year.

‘‘(2) RULE FOR OTHER YEARS.—In the case of a taxable

year to which section 26(a)(2) does not apply, if the credit

allowable under subsection (a) exceeds the limitation imposed

by section 26(a)(1) for such taxable year reduced by the sum

of the credits allowable under subpart A of part IV of subchapter A (other than this section and sections 23, 24, 25B,

and 25D), such excess shall be carried to the succeeding taxable

year and added to the credit allowable under subsection (a)

for such taxable year.’’.

(G) Subsection (i) of section 904 is amended to read as

follows:

‘‘(i) COORDINATION WITH NONREFUNDABLE PERSONAL

CREDITS.—In the case of any taxable year of an individual to

which section 26(a)(2) does not apply, for purposes of subsection

(a), the tax against which the credit is taken is such tax reduced

by the sum of the credits allowable under subpart A of part IV

of subchapter A of this chapter (other than sections 23, 24, and

25B).’’.

26 USC 25B.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2615

(H) APPLICATION OF EGTRRA SUNSET.—The amendments

made by this paragraph (and each part thereof) shall be subject

to title IX of the Economic Growth and Tax Relief Reconciliation

Act of 2001 in the same manner as the provisions of such

Act to which such amendment (or part thereof) relates.

(4) Subsection (b) of section 1335 of the Energy Policy

Act of 2005 is amended by striking paragraphs (1), (2), and

(3). The Internal Revenue Code of 1986 shall be applied and

administered as if the amendments made such paragraphs

had never been enacted.

(j) AMENDMENT RELATED TO SECTION 1341.—Paragraph (6) of

section 30B(h) is amended by adding at the end the following

sentence: ‘‘For purposes of subsection (g), property to which this

paragraph applies shall be treated as of a character subject to

an allowance for depreciation.’’.

(k) AMENDMENT RELATED TO SECTION 1342.—Paragraph (2)

of section 30C(e) is amended by adding at the end the following

sentence: ‘‘For purposes of subsection (d), property to which this

paragraph applies shall be treated as of a character subject to

an allowance for depreciation.’’.

(l) AMENDMENTS RELATED TO SECTION 1351.—

(1) Paragraph (6) of section 41(f) (relating to special rules)

is amended by adding at the end the following:

‘‘(C) FOREIGN RESEARCH.—For purposes of subsection

(a)(3), amounts paid or incurred for any energy research

conducted outside the United States, the Commonwealth

of Puerto Rico, or any possession of the United States

shall not be taken into account.

‘‘(D) DENIAL OF DOUBLE BENEFIT.—Any amount taken

into account under subsection (a)(3) shall not be taken

into account under paragraph (1) or (2) of subsection (a).’’.

(2) Clause (ii) of section 41(b)(3)(C) is amended by striking

‘‘(other than an energy research consortium)’’.

(m) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as provided in paragraphs (2)

and (3), the amendments made by this section shall take effect

as if included in the provisions of the Energy Policy Act of

2005 to which they relate.

(2) REPEAL OF PUBLIC UTILITY HOLDING COMPANY ACT OF

1935.—The amendments made by subsection (a) shall not apply

with respect to any transaction ordered in compliance with

the Public Utility Holding Company Act of 1935 before its

repeal.

(3) COORDINATION OF PERSONAL CREDITS.—The amendments made by subsection (i)(3) shall apply to taxable years

beginning after December 31, 2005.

SEC. 403. AMENDMENTS RELATED TO THE AMERICAN JOBS CREATION

ACT OF 2004.

(a) AMENDMENTS RELATED TO SECTION 102 OF THE ACT.—

(1) Paragraph (1) of section 199(b) is amended by striking

‘‘the employer’’ and inserting ‘‘the taxpayer’’.

(2) Paragraph (2) of section 199(b) is amended to read

as follows:

‘‘(2) W–2 WAGES.—For purposes of this section, the term

‘W–2 wages’ means, with respect to any person for any taxable

year of such person, the sum of the amounts described in

26 USC 23 note.

26 USC 30B.

Applicability.

Ante, p. 1033.

26 USC 23 note.

119 STAT. 2616 PUBLIC LAW 109–135—DEC. 21, 2005

paragraphs (3) and (8) of section 6051(a) paid by such person

with respect to employment of employees by such person during

the calendar year ending during such taxable year. Such term

shall not include any amount which is not properly included

in a return filed with the Social Security Administration on

or before the 60th day after the due date (including extensions)

for such return.’’.

(3) Subparagraph (B) of section 199(c)(1) is amended by

inserting ‘‘and’’ at the end of clause (i), by striking clauses

(ii) and (iii), and by inserting after clause (i) the following:

‘‘(ii) other expenses, losses, or deductions (other

than the deduction allowed under this section), which

are properly allocable to such receipts.’’.

(4) Paragraph (2) of section 199(c) is amended to read

as follows:

‘‘(2) ALLOCATION METHOD.—The Secretary shall prescribe

rules for the proper allocation of items described in paragraph

(1) for purposes of determining qualified production activities

income. Such rules shall provide for the proper allocation of

items whether or not such items are directly allocable to

domestic production gross receipts.’’.

(5) Subparagraph (A) of section 199(c)(4) is amended by

striking clauses (ii) and (iii) and inserting the following new

clauses:

‘‘(ii) in the case of a taxpayer engaged in the active

conduct of a construction trade or business, construction of real property performed in the United States

by the taxpayer in the ordinary course of such trade

or business, or

‘‘(iii) in the case of a taxpayer engaged in the

active conduct of an engineering or architectural services trade or business, engineering or architectural

services performed in the United States by the taxpayer in the ordinary course of such trade or business

with respect to the construction of real property in

the United States.’’.

(6) Subparagraph (B) of section 199(c)(4) is amended by

striking ‘‘and’’ at the end of clause (i), by striking the period

at the end of clause (ii) and inserting ‘‘, or’’, and by adding

at the end the following:

‘‘(iii) the lease, rental, license, sale, exchange, or

other disposition of land.’’.

(7) Paragraph (4) of section 199(c) is amended by adding

at the end the following new subparagraphs:

‘‘(C) SPECIAL RULE FOR CERTAIN GOVERNMENT CONTRACTS.—Gross receipts derived from the manufacture or

production of any property described in subparagraph

(A)(i)(I) shall be treated as meeting the requirements of

subparagraph (A)(i) if—

‘‘(i) such property is manufactured or produced

by the taxpayer pursuant to a contract with the Federal

Government, and

‘‘(ii) the Federal Acquisition Regulation requires

that title or risk of loss with respect to such property

be transferred to the Federal Government before the

manufacture or production of such property is complete.

Regulations.

26 USC 199.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2617

‘‘(D) PARTNERSHIPS OWNED BY EXPANDED AFFILIATED

GROUPS.—For purposes of this paragraph, if all of the

interests in the capital and profits of a partnership are

owned by members of a single expanded affiliated group

at all times during the taxable year of such partnership,

the partnership and all members of such group shall be

treated as a single taxpayer during such period.’’.

(8) Paragraph (1) of section 199(d) is amended to read

as follows:

‘‘(1) APPLICATION OF SECTION TO PASS-THRU ENTITIES.—

‘‘(A) PARTNERSHIPS AND S CORPORATIONS.—In the case

of a partnership or S corporation—

‘‘(i) this section shall be applied at the partner

or shareholder level,

‘‘(ii) each partner or shareholder shall take into

account such person’s allocable share of each item

described in subparagraph (A) or (B) of subsection

(c)(1) (determined without regard to whether the items

described in such subparagraph (A) exceed the items

described in such subparagraph (B)), and

‘‘(iii) each partner or shareholder shall be treated

for purposes of subsection (b) as having W–2 wages

for the taxable year in an amount equal to the lesser

of—

‘‘(I) such person’s allocable share of the W–

2 wages of the partnership or S corporation for

the taxable year (as determined under regulations

prescribed by the Secretary), or

‘‘(II) 2 times 9 percent of so much of such

person’s qualified production activities income as

is attributable to items allocated under clause (ii)

for the taxable year.

‘‘(B) TRUSTS AND ESTATES.—In the case of a trust or

estate—

‘‘(i) the items referred to in subparagraph (A)(ii)

(as determined therein) and the W–2 wages of the

trust or estate for the taxable year, shall be apportioned between the beneficiaries and the fiduciary (and

among the beneficiaries) under regulations prescribed

by the Secretary, and

‘‘(ii) for purposes of paragraph (2), adjusted gross

income of the trust or estate shall be determined as

provided in section 67(e) with the adjustments

described in such paragraph.

‘‘(C) REGULATIONS.—The Secretary may prescribe rules

requiring or restricting the allocation of items and wages

under this paragraph and may prescribe such reporting

requirements as the Secretary determines appropriate.’’.

(9) Paragraph (3) of section 199(d) is amended to read

as follows:

‘‘(3) AGRICULTURAL AND HORTICULTURAL COOPERATIVES.—

‘‘(A) DEDUCTION ALLOWED TO PATRONS.—Any person

who receives a qualified payment from a specified agricultural or horticultural cooperative shall be allowed for the

taxable year in which such payment is received a deduction

under subsection (a) equal to the portion of the deduction

26 USC 199.

119 STAT. 2618 PUBLIC LAW 109–135—DEC. 21, 2005

allowed under subsection (a) to such cooperative which

is—

‘‘(i) allowed with respect to the portion of the qualified production activities income to which such payment is attributable, and

‘‘(ii) identified by such cooperative in a written

notice mailed to such person during the payment period

described in section 1382(d).

‘‘(B) COOPERATIVE DENIED DEDUCTION FOR PORTION OF

QUALIFIED PAYMENTS.—The taxable income of a specified

agricultural or horticultural cooperative shall not be

reduced under section 1382 by reason of that portion of

any qualified payment as does not exceed the deduction

allowable under subparagraph (A) with respect to such

payment.

‘‘(C) TAXABLE INCOME OF COOPERATIVES DETERMINED

WITHOUT REGARD TO CERTAIN DEDUCTIONS.—For purposes

of this section, the taxable income of a specified agricultural

or horticultural cooperative shall be computed without

regard to any deduction allowable under subsection (b)

or (c) of section 1382 (relating to patronage dividends,

per-unit retain allocations, and nonpatronage distributions).

‘‘(D) SPECIAL RULE FOR MARKETING COOPERATIVES.—

For purposes of this section, a specified agricultural or

horticultural cooperative described in subparagraph (F)(ii)

shall be treated as having manufactured, produced, grown,

or extracted in whole or significant part any qualifying

production property marketed by the organization which

its patrons have so manufactured, produced, grown, or

extracted.

‘‘(E) QUALIFIED PAYMENT.—For purposes of this paragraph, the term ‘qualified payment’ means, with respect

to any person, any amount which—

‘‘(i) is described in paragraph (1) or (3) of section

1385(a),

‘‘(ii) is received by such person from a specified

agricultural or horticultural cooperative, and

‘‘(iii) is attributable to qualified production activities income with respect to which a deduction is

allowed to such cooperative under subsection (a).

‘‘(F) SPECIFIED AGRICULTURAL OR HORTICULTURAL

COOPERATIVE.—For purposes of this paragraph, the term

‘specified agricultural or horticultural cooperative’ means

an organization to which part I of subchapter T applies

which is engaged—

‘‘(i) in the manufacturing, production, growth, or

extraction in whole or significant part of any agricultural or horticultural product, or

‘‘(ii) in the marketing of agricultural or horticultural products.’’.

(10) Clause (i) of section 199(d)(4)(B) is amended—

(A) by striking ‘‘50 percent’’ and inserting ‘‘more than

50 percent’’, and

(B) by striking ‘‘80 percent’’ and inserting ‘‘at least

80 percent’’.

26 USC 199.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2619

(11)(A) Paragraph (6) of section 199(d) is amended to read

as follows:

‘‘(6) COORDINATION WITH MINIMUM TAX.—For purposes of

determining alternative minimum taxable income under section

55—

‘‘(A) qualified production activities income shall be

determined without regard to any adjustments under sections 56 through 59, and

‘‘(B) in the case of a corporation, subsection (a)(1)(B)

shall be applied by substituting ‘alternative minimum taxable income’ for ‘taxable income’.’’.

(B) Paragraph (2) of section 199(a) is amended by striking

‘‘subsections (d)(1) and (d)(6)’’ and inserting ‘‘subsection (d)(1)’’.

(12) Subsection (d) of section 199 is amended by redesignating paragraph (7) as paragraph (8) and by inserting after

paragraph (6) the following new paragraph:

‘‘(7) UNRELATED BUSINESS TAXABLE INCOME.—For purposes

of determining the tax imposed by section 511, subsection

(a)(1)(B) shall be applied by substituting ‘unrelated business

taxable income’ for ‘taxable income’.’’.

(13) Paragraph (8) of section 199(d), as redesignated by

paragraph (12), is amended by inserting ‘‘, including regulations

which prevent more than 1 taxpayer from being allowed a

deduction under this section with respect to any activity

described in subsection (c)(4)(A)(i)’’ before the period at the

end.

(14) Clauses (i)(II) and (ii)(II) of section 56(d)(1)(A) are

each amended by striking ‘‘such deduction’’ and inserting ‘‘such

deduction and the deduction under section 199’’.

(15) Clause (i) of section 163(j)(6)(A) is amended by striking

‘‘and’’ at the end of subclause (II), by redesignating subclause

(III) as subclause (IV), and by inserting after subclause (II)

the following new subclause:

‘‘(III) any deduction allowable under section

199, and’’.

(16) Paragraph (2) of section 170(b) is amended by redesignating subparagraphs (C) and (D) as subparagraphs (D) and

(E), respectively, and by inserting after subparagraph (B) the

following new subparagraph:

‘‘(C) section 199,’’.

(17) Subsection (d) of section 172 is amended by adding

at the end the following new paragraph:

‘‘(7) MANUFACTURING DEDUCTION.—The deduction under

section 199 shall not be allowed.’’.

(18) Paragraph (1) of section 613A(d) is amended by

redesignating subparagraphs (B), (C), and (D) as subparagraphs

(C), (D), and (E), respectively, and by inserting after subparagraph (A) the following new subparagraph:

‘‘(B) any deduction allowable under section 199,’’.

(19) Subsection (e) of section 102 of the American Jobs

Creation Act of 2004 is amended to read as follows:

‘‘(e) EFFECTIVE DATE.—

‘‘(1) IN GENERAL.—The amendments made by this section

shall apply to taxable years beginning after December 31, 2004.

‘‘(2) APPLICATION TO PASS-THRU ENTITIES, ETC.—In determining the deduction under section 199 of the Internal Revenue

Code of 1986 (as added by this section), items arising from

26 USC 56 note.

Applicability.

26 USC 199.

119 STAT. 2620 PUBLIC LAW 109–135—DEC. 21, 2005

a taxable year of a partnership, S corporation, estate, or trust

beginning before January 1, 2005, shall not be taken into

account for purposes of subsection (d)(1) of such section.’’.

(b) AMENDMENT RELATED TO SECTION 231 OF THE ACT.—Paragraph (1) of section 1361(c) is amended to read as follows:

‘‘(1) MEMBERS OF A FAMILY TREATED AS 1 SHAREHOLDER.—

‘‘(A) IN GENERAL.—For purposes of subsection (b)(1)(A),

there shall be treated as one shareholder—

‘‘(i) a husband and wife (and their estates), and

‘‘(ii) all members of a family (and their estates).

‘‘(B) MEMBERS OF A FAMILY.—For purposes of this

paragraph—

‘‘(i) IN GENERAL.—The term ‘members of a family’

means a common ancestor, any lineal descendant of

such common ancestor, and any spouse or former

spouse of such common ancestor or any such lineal

descendant.

‘‘(ii) COMMON ANCESTOR.—An individual shall not

be considered to be a common ancestor if, on the

applicable date, the individual is more than 6 generations removed from the youngest generation of shareholders who would (but for this subparagraph) be members of the family. For purposes of the preceding sentence, a spouse (or former spouse) shall be treated

as being of the same generation as the individual to

whom such spouse is (or was) married.

‘‘(iii) APPLICABLE DATE.—The term ‘applicable date’

means the latest of—

‘‘(I) the date the election under section 1362(a)

is made,

‘‘(II) the earliest date that an individual

described in clause (i) holds stock in the S corporation, or

‘‘(III) October 22, 2004.

‘‘(C) EFFECT OF ADOPTION, ETC.—Any legally adopted

child of an individual, any child who is lawfully placed

with an individual for legal adoption by the individual,

and any eligible foster child of an individual (within the

meaning of section 152(f)(1)(C)), shall be treated as a child

of such individual by blood.’’.

(c) AMENDMENT RELATED TO SECTION 235 OF THE ACT.—Subsection (b) of section 235 of the American Jobs Creation Act of

2004 is amended by striking ‘‘taxable years beginning’’ and inserting

‘‘transfers’’.

(d) AMENDMENTS RELATED TO SECTION 243 OF THE ACT.—

(1) Paragraph (7) of section 856(c) is amended to read

as follows:

‘‘(7) RULES OF APPLICATION FOR FAILURE TO SATISFY PARAGRAPH (4).—

‘‘(A) IN GENERAL.—A corporation, trust, or association

that fails to meet the requirements of paragraph (4) (other

than a failure to meet the requirements of paragraph

(4)(B)(iii) which is described in subparagraph (B)(i) of this

paragraph) for a particular quarter shall nevertheless be

considered to have satisfied the requirements of such paragraph for such quarter if—

26 USC 1366

note.

26 USC 1361.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2621

‘‘(i) following the corporation, trust, or association’s

identification of the failure to satisfy the requirements

of such paragraph for a particular quarter, a description of each asset that causes the corporation, trust,

or association to fail to satisfy the requirements of

such paragraph at the close of such quarter of any

taxable year is set forth in a schedule for such quarter

filed in accordance with regulations prescribed by the

Secretary,

‘‘(ii) the failure to meet the requirements of such

paragraph for a particular quarter is due to reasonable

cause and not due to willful neglect, and

‘‘(iii)(I) the corporation, trust, or association disposes of the assets set forth on the schedule specified

in clause (i) within 6 months after the last day of

the quarter in which the corporation, trust or association’s identification of the failure to satisfy the requirements of such paragraph occurred or such other time

period prescribed by the Secretary and in the manner

prescribed by the Secretary, or

‘‘(II) the requirements of such paragraph are otherwise met within the time period specified in subclause

(I).

‘‘(B) RULE FOR CERTAIN DE MINIMIS FAILURES.—A corporation, trust, or association that fails to meet the requirements of paragraph (4)(B)(iii) for a particular quarter shall

nevertheless be considered to have satisfied the requirements of such paragraph for such quarter if—

‘‘(i) such failure is due to the ownership of assets

the total value of which does not exceed the lesser

of—

‘‘(I) 1 percent of the total value of the trust’s

assets at the end of the quarter for which such

measurement is done, and

‘‘(II) $10,000,000, and

‘‘(ii)(I) the corporation, trust, or association, following the identification of such failure, disposes of

assets in order to meet the requirements of such paragraph within 6 months after the last day of the quarter

in which the corporation, trust or association’s identification of the failure to satisfy the requirements of

such paragraph occurred or such other time period

prescribed by the Secretary and in the manner prescribed by the Secretary, or

‘‘(II) the requirements of such paragraph are otherwise met within the time period specified in subclause

(I).

‘‘(C) TAX.—

‘‘(i) TAX IMPOSED.—If subparagraph (A) applies to

a corporation, trust, or association for any taxable year,

there is hereby imposed on such corporation, trust,

or association a tax in an amount equal to the greater

of—

‘‘(I) $50,000, or

‘‘(II) the amount determined (pursuant to regulations promulgated by the Secretary) by multiplying the net income generated by the assets

Regulations.

119 STAT. 2622 PUBLIC LAW 109–135—DEC. 21, 2005

described in the schedule specified in subparagraph (A)(i) for the period specified in clause (ii)

by the highest rate of tax specified in section 11.

‘‘(ii) PERIOD.—For purposes of clause (i)(II), the

period described in this clause is the period beginning

on the first date that the failure to satisfy the requirements of such paragraph (4) occurs as a result of

the ownership of such assets and ending on the earlier

of the date on which the trust disposes of such assets

or the end of the first quarter when there is no longer

a failure to satisfy such paragraph (4).

‘‘(iii) ADMINISTRATIVE PROVISIONS.—For purposes

of subtitle F, the taxes imposed by this subparagraph

shall be treated as excise taxes with respect to which

the deficiency procedures of such subtitle apply.’’.

(2) Subsection (m) of section 856 is amended by adding

at the end the following new paragraph:

‘‘(6) TRANSITION RULE.—

‘‘(A) IN GENERAL.—Notwithstanding paragraph (2)(C),

securities held by a trust shall not be considered securities

held by the trust for purposes of subsection (c)(4)(B)(iii)(III)

during any period beginning on or before October 22, 2004,

if such securities—

‘‘(i) are held by such trust continuously during

such period, and

‘‘(ii) would not be taken into account for purposes

of such subsection by reason of paragraph (7)(C) of

subsection (c) (as in effect on October 22, 2004) if

the amendments made by section 243 of the American

Jobs Creation Act of 2004 had never been enacted.

‘‘(B) RULE NOT TO APPLY TO SECURITIES HELD AFTER

MATURITY DATE.—Subparagraph (A) shall not apply with

respect to any security after the later of October 22, 2004,

or the latest maturity date under the contract (as in effect

on October 22, 2004) taking into account any renewal or

extension permitted under the contract if such renewal

or extension does not significantly modify any other terms

of the contract.

‘‘(C) SUCCESSORS.—If the successor of a trust to which

this paragraph applies acquires securities in a transaction

to which section 381 applies, such trusts shall be treated

as a single entity for purposes of determining the holding

period of such securities under subparagraph (A).’’.

(3) Subparagraph (E) of section 857(b)(2) is amended by

striking ‘‘section 856(c)(7)(B)(iii), and section 856(g)(1).’’ and

inserting ‘‘section 856(c)(7)(C), and section 856(g)(5)’’.

(4) Subsection (g) of section 243 of the American Jobs

Creation Act of 2004 is amended to read as follows:

‘‘(g) EFFECTIVE DATES.—

‘‘(1) SUBSECTIONS (a) AND (b).—The amendments made by

subsections (a) and (b) shall apply to taxable years beginning

after December 31, 2000.

‘‘(2) SUBSECTIONS (c) AND (e).—The amendments made by

subsections (c) and (e) shall apply to taxable years beginning

after the date of the enactment of this Act.

26 USC 856 note.

26 USC 856.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2623

‘‘(3) SUBSECTION (d).—The amendment made by subsection

(d) shall apply to transactions entered into after December

31, 2004.

‘‘(4) SUBSECTION (f).—

‘‘(A) The amendment made by paragraph (1) of subsection (f) shall apply to failures with respect to which

the requirements of subparagraph (A) or (B) of section

856(c)(7) of the Internal Revenue Code of 1986 (as added

by such paragraph) are satisfied after the date of the

enactment of this Act.

‘‘(B) The amendment made by paragraph (2) of subsection (f) shall apply to failures with respect to which

the requirements of paragraph (6) of section 856(c) of the

Internal Revenue Code of 1986 (as amended by such paragraph) are satisfied after the date of the enactment of

this Act.

‘‘(C) The amendments made by paragraph (3) of subsection (f) shall apply to failures with respect to which

the requirements of paragraph (5) of section 856(g) of the

Internal Revenue Code of 1986 (as added by such paragraph) are satisfied after the date of the enactment of

this Act.

‘‘(D) The amendment made by paragraph (4) of subsection (f) shall apply to taxable years ending after the

date of the enactment of this Act.

‘‘(E) The amendments made by paragraph (5) of subsection (f) shall apply to statements filed after the date

of the enactment of this Act.’’.

(e) AMENDMENTS RELATED TO SECTION 244 OF THE ACT.—

(1) Paragraph (2) of section 181(d) is amended by striking

the last sentence in subparagraph (A), by redesignating

subparagraph (B) as subparagraph (C), and by inserting after

subparagraph (A) the following new subparagraph:

‘‘(B) SPECIAL RULES FOR TELEVISION SERIES.—In the

case of a television series—

‘‘(i) each episode of such series shall be treated

as a separate production, and

‘‘(ii) only the first 44 episodes of such series shall

be taken into account.’’.

(2) Subparagraph (C) of section 1245(a)(2) is amended by

inserting ‘‘181,’’ after ‘‘179B,’’.

(f) AMENDMENTS RELATED TO SECTION 245 OF THE ACT.—

(1) Subsection (b) of section 45G is amended to read as

follows:

‘‘(b) LIMITATION.—

‘‘(1) IN GENERAL.—The credit allowed under subsection (a)

for any taxable year shall not exceed the product of—

‘‘(A) $3,500, multiplied by

‘‘(B) the sum of—

‘‘(i) the number of miles of railroad track owned

or leased by the eligible taxpayer as of the close of

the taxable year, and

‘‘(ii) the number of miles of railroad track assigned

for purposes of this subsection to the eligible taxpayer

by a Class II or Class III railroad which owns or

leases such railroad track as of the close of the taxable

year.

26 USC 181.

119 STAT. 2624 PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(2) ASSIGNMENTS.—With respect to any assignment of a

mile of railroad track under paragraph (1)(B)(ii)—

‘‘(A) such assignment may be made only once per taxable year of the Class II or Class III railroad and shall

be treated as made as of the close of such taxable year,

‘‘(B) such mile may not be taken into account under

this section by such railroad for such taxable year, and

‘‘(C) such assignment shall be taken into account for

the taxable year of the assignee which includes the date

that such assignment is treated as effective.’’.

(2) Paragraph (2) of section 45G(c) is amended to read

as follows:

‘‘(2) any person who transports property using the rail

facilities of a Class II or Class III railroad or who furnishes

railroad-related property or services to a Class II or Class

III railroad, but only with respect to miles of railroad track

assigned to such person by such Class II or Class III railroad

for purposes of subsection (b).’’.

(g) AMENDMENTS RELATED TO SECTION 248 OF THE ACT.—

(1)(A) Subsection (d) of section 1353 is amended by striking

‘‘ownership and charter interests’’ and inserting ‘‘ownership,

charter, and operating agreement interests’’.

(B) Subsection (a) of section 1355 is amended by striking

paragraph (8).

(C) Paragraph (1) of section 1355(b) is amended to read

as follows:

‘‘(1) IN GENERAL.—Except as provided in paragraph (2),

a person is treated as operating any vessel during any period

if—

‘‘(A)(i) such vessel is owned by, or chartered (including

a time charter) to, the person, or

‘‘(ii) the person provides services for such vessel pursuant to an operating agreement, and

‘‘(B) such vessel is in use as a qualifying vessel during

such period.’’.

(D) Paragraph (3) of section 1355(d) is amended to read

as follows:

‘‘(3) the extent of a partner’s ownership, charter, or operating agreement interest in any vessel operated by the partnership shall be determined on the basis of the partner’s interest

in the partnership.’’.

(2) Paragraph (3) of section 1355(c) is amended by striking

‘‘determined—’’ and all that follows and inserting ‘‘determined

by treating all members of such group as 1 person.’’.

(3) Subsection (c) of section 1356 is amended—

(A) by striking paragraph (3), and

(B) by adding at the end of paragraph (2) the following

new flush sentence:

‘‘Such term shall not include any core qualifying activities.’’.

(4) The last sentence of section 1354(b) is amended by

inserting ‘‘on or’’ after ‘‘only if made’’.

(h) AMENDMENT RELATED TO SECTION 314 OF THE ACT.—Paragraph (2) of section 55(c) is amended by striking ‘‘regular tax’’

and inserting ‘‘regular tax liability’’.

(i) AMENDMENTS RELATED TO SECTION 322 OF THE ACT.— (1)(A) Subparagraph (B) of section 194(b)(1) is amended

to read as follows:

26 USC 45G.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2625

‘‘(B) DOLLAR LIMITATION.—The aggregate amount of

reforestation expenditures which may be taken into account

under subparagraph (A) with respect to each qualified

timber property for any taxable year shall not exceed—

‘‘(i) except as provided in clause (ii) or (iii), $10,000,

‘‘(ii) in the case of a separate return by a married

individual (as defined in section 7703), $5,000, and

‘‘(iii) in the case of a trust, zero.’’.

(B) Paragraph (4) of section 194(c) is amended to read

as follows:

‘‘(4) TREATMENT OF TRUSTS AND ESTATES.—The aggregate

amount of reforestation expenditures incurred by any trust

or estate shall be apportioned between the income beneficiaries

and the fiduciary under regulations prescribed by the Secretary.

Any amount so apportioned to a beneficiary shall be taken

into account as expenditures incurred by such beneficiary in

applying this section to such beneficiary.’’.

(2) Subparagraph (C) of section 1245(a)(2) is amended by

striking ‘‘or 193’’ and inserting ‘‘193, or 194’’.

(j) AMENDMENTS RELATED TO SECTION 336 OF THE ACT.—

(1) Clause (iv) of section 168(k)(2)(A) is amended by striking

‘‘subparagraphs (B) and (C)’’ and inserting ‘‘subparagraph (B)

or (C)’’.

(2) Clause (iii) of section 168(k)(4)(B) is amended by striking

‘‘and paragraph (2)(C)’’ and inserting ‘‘or paragraph (2)(C) (as

so modified)’’.

(k) AMENDMENT RELATED TO SECTION 402 OF THE ACT.—Paragraph (2) of section 904(g) is amended to read as follows:

‘‘(2) OVERALL DOMESTIC LOSS.—For purposes of this

subsection—

‘‘(A) IN GENERAL.—The term ‘overall domestic loss’

means—

‘‘(i) with respect to any qualified taxable year,

the domestic loss for such taxable year to the extent

such loss offsets taxable income from sources without

the United States for the taxable year or for any preceding qualified taxable year by reason of a carryback,

and

‘‘(ii) with respect to any other taxable year, the

domestic loss for such taxable year to the extent such

loss offsets taxable income from sources without the

United States for any preceding qualified taxable year

by reason of a carryback.

‘‘(B) DOMESTIC LOSS.—For purposes of subparagraph

(A), the term ‘domestic loss’ means the amount by which

the gross income for the taxable year from sources within

the United States is exceeded by the sum of the deductions

properly apportioned or allocated thereto (determined without regard to any carryback from a subsequent taxable

year).

‘‘(C) QUALIFIED TAXABLE YEAR.—For purposes of

subparagraph (A), the term ‘qualified taxable year’ means

any taxable year for which the taxpayer chose the benefits

of this subpart.’’.

(l) AMENDMENT RELATED TO SECTION 403 OF THE ACT.—Section

403 of the American Jobs Creation Act of 2004 is amended by

adding at the end the following new subsection:

26 USC 864 note.

26 USC 194.

119 STAT. 2626 PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(d) TRANSITION RULE.—If the taxpayer elects (at such time

and in such form and manner as the Secretary of the Treasury

may prescribe) to have the rules of this subsection apply—

‘‘(1) the amendments made by this section shall not apply

to taxable years beginning after December 31, 2002, and before

January 1, 2005, and

‘‘(2) in the case of taxable years beginning after December

31, 2004, clause (iv) of section 904(d)(4)(C) of the Internal

Revenue Code of 1986 (as amended by this section) shall be

applied by substituting ‘January 1, 2005’ for ‘January 1, 2003’

both places it appears.’’.

(m) AMENDMENT RELATED TO SECTION 412 OF THE ACT.— Subparagraph (B) of section 954(c)(4) is amended by adding at

the end the following: ‘‘If a controlled foreign corporation is treated

as owning a capital or profits interest in a partnership under

constructive ownership rules similar to the rules of section 958(b),

the controlled foreign corporation shall be treated as owning such

interest directly for purposes of this subparagraph.’’.

(n) AMENDMENTS RELATED TO SECTION 413 OF THE ACT.—

(1) Subsection (b) of section 532 is amended by striking

paragraph (2) and redesignating paragraphs (3) and (4) as

paragraphs (2) and (3), respectively.

(2) Subsection (b) of section 535 is amended by adding

at the end the following new paragraph:

‘‘(10) CONTROLLED FOREIGN CORPORATIONS.—There shall be

allowed as a deduction the amount of the corporation’s income

for the taxable year which is included in the gross income

of a United States shareholder under section 951(a). In the

case of any corporation the accumulated taxable income of

which would (but for this sentence) be determined without

allowance of any deductions, the deduction under this paragraph shall be allowed and shall be appropriately adjusted

to take into account any deductions which reduced such inclusion.’’.

(3)(A) Section 6683 is repealed.

(B) The table of sections for part I of subchapter B of

chapter 68 is amended by striking the item relating to section

6683.

(o) AMENDMENT RELATED TO SECTION 415 OF THE ACT.—

Subparagraph (D) of section 904(d)(2) is amended by inserting

‘‘as in effect before its repeal’’ after ‘‘section 954(f)’’.

(p) AMENDMENTS RELATED TO SECTION 418 OF THE ACT.—

(1) The second sentence of section 897(h)(1) is amended—

(A) by striking ‘‘any distribution’’ and all that follows

through ‘‘any class of stock’’ and inserting ‘‘any distribution

by a real estate investment trust with respect to any class

of stock’’, and

(B) by striking ‘‘the taxable year’’ and inserting ‘‘the

1-year period ending on the date of the distribution’’.

(2) Subsection (c) of section 418 of the American Jobs

Creation Act of 2004 is amended to read as follows:

‘‘(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to—

‘‘(1) any distribution by a real estate investment trust

which is treated as a deduction for a taxable year of such

trust beginning after the date of the enactment of this Act,

and

26 USC 857 note.

26 USC 954.

Applicability.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2627

‘‘(2) any distribution by a real estate investment trust

made after such date which is treated as a deduction under

section 860 for a taxable year of such trust beginning on or

before such date.’’.

(q) AMENDMENTS RELATED TO SECTION 422 OF THE ACT.—

(1) Subparagraph (B) of section 965(a)(2) is amended by

inserting ‘‘from another controlled foreign corporation in such

chain of ownership’’ before ‘‘, but only to the extent’’.

(2) Subparagraph (A) of section 965(b)(2) is amended by

inserting ‘‘cash’’ before ‘‘dividends’’.

(3) Paragraph (3) of section 965(b) is amended by adding

at the end the following: ‘‘The Secretary may prescribe such

regulations as may be necessary or appropriate to prevent

the avoidance of the purposes of this paragraph, including

regulations which provide that cash dividends shall not be

taken into account under subsection (a) to the extent such

dividends are attributable to the direct or indirect transfer

(including through the use of intervening entities or capital

contributions) of cash or other property from a related person

(as so defined) to a controlled foreign corporation.’’.

(4) Paragraph (1) of section 965(c) is amended to read

as follows:

‘‘(1) APPLICABLE FINANCIAL STATEMENT.—The term

‘applicable financial statement’ means—

‘‘(A) with respect to a United States shareholder which

is required to file a financial statement with the Securities

and Exchange Commission (or which is included in such

a statement so filed by another person), the most recent

audited annual financial statement (including the notes

which form an integral part of such statement) of such

shareholder (or which includes such shareholder)—

‘‘(i) which was so filed on or before June 30, 2003,

and

‘‘(ii) which was certified on or before June 30,

2003, as being prepared in accordance with generally

accepted accounting principles, and

‘‘(B) with respect to any other United States shareholder, the most recent audited financial statement

(including the notes which form an integral part of such

statement) of such shareholder (or which includes such

shareholder)—

‘‘(i) which was certified on or before June 30, 2003,

as being prepared in accordance with generally

accepted accounting principles, and

‘‘(ii) which is used for the purposes of a statement

or report—

‘‘(I) to creditors,

‘‘(II) to shareholders, or

‘‘(III) for any other substantial nontax purpose.’’.

(5) Paragraph (2) of section 965(d) is amended by striking

‘‘properly allocated and apportioned’’ and inserting ‘‘directly

allocable’’.

(6) Subsection (d) of section 965 is amended by adding

at the end the following new paragraph:

26 USC 965.

119 STAT. 2628 PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(4) COORDINATION WITH SECTION 78.—Section 78 shall not

apply to any tax which is not allowable as a credit under

section 901 by reason of this subsection.’’.

(7) The last sentence of section 965(e)(1) is amended by

inserting ‘‘which are imposed by foreign countries and possessions of the United States and are’’ after ‘‘taxes’’.

(8) Subsection (f) of section 965 is amended by inserting

‘‘on or’’ before ‘‘before the due date’’.

(r) AMENDMENTS RELATED TO SECTION 501 OF THE ACT.—

(1) Subparagraph (A) of section 164(b)(5) is amended to

read as follows:

‘‘(A) ELECTION TO DEDUCT STATE AND LOCAL SALES

TAXES IN LIEU OF STATE AND LOCAL INCOME TAXES.—At

the election of the taxpayer for the taxable year, subsection

(a) shall be applied—

‘‘(i) without regard to the reference to State and

local income taxes, and

‘‘(ii) as if State and local general sales taxes were

referred to in a paragraph thereof.’’.

(2) Clause (ii) of section 56(b)(1)(A) is amended by inserting

‘‘or clause (ii) of section 164(b)(5)(A)’’ before the period at the

end.

(s) AMENDMENTS RELATED TO SECTION 708 OF THE ACT.—Section 708 of the American Jobs Creation Act of 2004 is amended—

(1) in subsection (a), by striking ‘‘contract commencement

date’’ and inserting ‘‘construction commencement date’’, and

(2) by redesignating subsection (d) as subsection (e) and

inserting after subsection (c) the following new subsection:

‘‘(d) CERTAIN ADJUSTMENTS NOT TO APPLY.—Section 481 of

the Internal Revenue Code of 1986 shall not apply with respect

to any change in the method of accounting which is required by

this section.’’.

(t) AMENDMENT RELATED TO SECTION 710 OF THE ACT.—Clause

(i) of section 45(c)(7)(A) is amended by striking ‘‘synthetic’’.

(u) AMENDMENT RELATED TO SECTION 801 OF THE ACT.—Paragraph (3) of section 7874(a) is amended to read as follows:

‘‘(3) COORDINATION WITH SUBSECTION (b).—A corporation

which is treated as a domestic corporation under subsection

(b) shall not be treated as a surrogate foreign corporation

for purposes of paragraph (2)(A).’’.

(v) AMENDMENTS RELATED TO SECTION 804 OF THE ACT.—

(1) Subparagraph (C) of section 877(g)(2) is amended by

striking ‘‘section 7701(b)(3)(D)(ii)’’ and inserting ‘‘section

7701(b)(3)(D)’’.

(2) Subsection (n) of section 7701 is amended to read as

follows:

‘‘(n) SPECIAL RULES FOR DETERMINING WHEN AN INDIVIDUAL

IS NO LONGER A UNITED STATES CITIZEN OR LONG-TERM RESIDENT.—For purposes of this chapter—

‘‘(1) UNITED STATES CITIZENS.—An individual who would

(but for this paragraph) cease to be treated as a citizen of

the United States shall continue to be treated as a citizen

of the United States until such individual—

‘‘(A) gives notice of an expatriating act (with the requisite intent to relinquish citizenship) to the Secretary

of State, and

26 USC 460 note.

Applicability.

26 USC 965.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2629

‘‘(B) provides a statement in accordance with section

6039G (if such a statement is otherwise required).

‘‘(2) LONG-TERM RESIDENTS.—A long-term resident (as

defined in section 877(e)(2)) who would (but for this paragraph)

be described in section 877(e)(1) shall be treated as a lawful

permanent resident of the United States and as not described

in section 877(e)(1) until such individual—

‘‘(A) gives notice of termination of residency (with the

requisite intent to terminate residency) to the Secretary

of Homeland Security, and

‘‘(B) provides a statement in accordance with section

6039G (if such a statement is otherwise required).’’.

(w) AMENDMENT RELATED TO SECTION 811 OF THE ACT.—Subsection (c) of section 811 of the American Jobs Creation Act of

2004 is amended by inserting ‘‘and which were not filed before

such date’’ before the period at the end.

(x) AMENDMENTS RELATED TO SECTION 812 OF THE ACT.—

(1) Subsection (b) of section 6662 is amended by adding

at the end the following new sentence: ‘‘Except as provided

in paragraph (1) or (2)(B) of section 6662A(e), this section

shall not apply to the portion of any underpayment which

is attributable to a reportable transaction understatement on

which a penalty is imposed under section 6662A.’’.

(2) Paragraph (2) of section 6662A(e) is amended to read

as follows:

‘‘(2) COORDINATION WITH OTHER PENALTIES.—

‘‘(A) COORDINATION WITH FRAUD PENALTY.—This section shall not apply to any portion of an understatement

on which a penalty is imposed under section 6663.

‘‘(B) COORDINATION WITH GROSS VALUATION

MISSTATEMENT PENALTY.—This section shall not apply to

any portion of an understatement on which a penalty is

imposed under section 6662 if the rate of the penalty is

determined under section 6662(h).’’.

(3) Subsection (f) of section 812 of the American Jobs Creation Act of 2004 is amended to read as follows:

‘‘(f) EFFECTIVE DATES.—

‘‘(1) IN GENERAL.—Except as provided in paragraph (2),

the amendments made by this section shall apply to taxable

years ending after the date of the enactment of this Act.

‘‘(2) DISQUALIFIED OPINIONS.—Section 6664(d)(3)(B) of the

Internal Revenue Code of 1986 (as added by subsection (c))

shall not apply to the opinion of a tax advisor if—

‘‘(A) the opinion was provided to the taxpayer before

the date of the enactment of this Act,

‘‘(B) the opinion relates to one or more transactions

all of which were entered into before such date, and

‘‘(C) the tax treatment of items relating to each such

transaction was included on a return or statement filed

by the taxpayer before such date.’’.

(y) AMENDMENT RELATED TO SECTION 814 OF THE ACT.—

Subparagraph (B) of section 6501(c)(10) is amended by striking

‘‘(as defined in section 6111)’’.

(z) AMENDMENT RELATED TO SECTION 815 OF THE ACT.—Paragraph (1) of section 6112(b) is amended by inserting ‘‘(or was

required to maintain a list under subsection (a) as in effect before

26 USC 6662

note.

26 USC 6662.

26 USC 6707A

note.

119 STAT. 2630 PUBLIC LAW 109–135—DEC. 21, 2005

the enactment of the American Jobs Creation Act of 2004)’’ after

‘‘a list under subsection (a)’’.

(aa) AMENDMENTS RELATED TO SECTION 832 OF THE ACT.—

(1) Subsection (e) of section 853 is amended to read as

follows:

‘‘(e) TREATMENT OF CERTAIN TAXES NOT ALLOWED AS A CREDIT

UNDER SECTION 901.—This section shall not apply to any tax with

respect to which the regulated investment company is not allowed

a credit under section 901 by reason of subsection (k) or (l) of

such section.’’.

(2) Clause (i) of section 901(l)(2)(C) is amended by striking

‘‘if such security were stock’’.

(bb) AMENDMENTS RELATED TO SECTION 833 OF THE ACT.—

(1) Subsection (a) of section 734 is amended by inserting

‘‘with respect to such distribution’’ before the period at the

end.

(2) So much of subsection (b) of section 734 as precedes

paragraph (1) is amended to read as follows:

‘‘(b) METHOD OF ADJUSTMENT.—In the case of a distribution

of property to a partner by a partnership with respect to which

the election provided in section 754 is in effect or with respect

to which there is a substantial basis reduction, the partnership

shall—’’.

(cc) AMENDMENT RELATED TO SECTION 835 OF THE ACT.—Paragraph (3) of section 860G(a) is amended—

(1) in subparagraph (A)(iii)(I), by striking ‘‘the obligation’’

and inserting ‘‘a reverse mortgage loan or other obligation’’,

and

(2) by striking all that follows subparagraph (C) and

inserting the following:

‘‘For purposes of subparagraph (A), any obligation secured by

stock held by a person as a tenant-stockholder (as defined

in section 216) in a cooperative housing corporation (as so

defined) shall be treated as secured by an interest in real

property. For purposes of subparagraph (A), any obligation

originated by the United States or any State (or any political

subdivision, agency, or instrumentality of the United States

or any State) shall be treated as principally secured by an

interest in real property if more than 50 percent of such obligations which are transferred to, or purchased by, the REMIC

are principally secured by an interest in real property (determined without regard to this sentence).’’.

(dd) AMENDMENTS RELATED TO SECTION 836 OF THE ACT.—

(1) Paragraph (1) of section 334(b) is amended by striking

‘‘except that’’ and all that follows and inserting ‘‘except that,

in the hands of such distributee—

‘‘(A) the basis of such property shall be the fair market

value of the property at the time of the distribution in

any case in which gain or loss is recognized by the liquidating corporation with respect to such property, and

‘‘(B) the basis of any property described in section

362(e)(1)(B) shall be the fair market value of the property

at the time of the distribution in any case in which such

distributee’s aggregate adjusted basis of such property

would (but for this subparagraph) exceed the fair market

value of such property immediately after such liquidation.’’.

26 USC 853.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2631

(2) Clause (ii) of section 362(e)(2)(C) is amended to read

as follows:

‘‘(ii) ELECTION.—Any election under clause (i) shall

be made at such time and in such form and manner

as the Secretary may prescribe, and, once made, shall

be irrevocable.’’.

(ee) AMENDMENT RELATED TO SECTION 840 OF THE ACT.—Subsection (d) of section 121 is amended—

(1) by redesignating the paragraph (10) relating to property

acquired from a decedent as paragraph (11) and by moving

such paragraph to the end of such subsection, and

(2) by amending the paragraph (10) relating to property

acquired in like-kind exchange to read as follows:

‘‘(10) PROPERTY ACQUIRED IN LIKE-KIND EXCHANGE.—If a

taxpayer acquires property in an exchange with respect to

which gain is not recognized (in whole or in part) to the taxpayer under subsection (a) or (b) of section 1031, subsection

(a) shall not apply to the sale or exchange of such property

by such taxpayer (or by any person whose basis in such property

is determined, in whole or in part, by reference to the basis

in the hands of such taxpayer) during the 5-year period beginning with the date of such acquisition.’’.

(ff) AMENDMENT RELATED TO SECTION 849 OF THE ACT.—Subsection (a) of section 849 of the American Jobs Creation Act of

2004 is amended by inserting ‘‘, and in the case of property treated

as tax-exempt use property other than by reason of a lease, to

property acquired after March 12, 2004’’ before the period at the

end.

(gg) AMENDMENT RELATED TO SECTION 884 OF THE ACT.—

Subparagraph (B) of section 170(f)(12) is amended by adding at

the end the following new clauses:

‘‘(v) Whether the donee organization provided any

goods or services in consideration, in whole or in part,

for the qualified vehicle.

‘‘(vi) A description and good faith estimate of the

value of any goods or services referred to in clause

(v) or, if such goods or services consist solely of intangible religious benefits (as defined in paragraph (8)(B)),

a statement to that effect.’’.

(hh) AMENDMENTS RELATED TO SECTION 885 OF THE ACT.—

(1) Paragraph (2) of section 26(b) is amended by striking

‘‘and’’ at the end of subparagraph (R), by striking the period

at the end of subparagraph (S) and inserting ‘‘, and’’, and

by adding at the end the following new subparagraph:

‘‘(T) subsections (a)(1)(B)(i) and (b)(4)(A) of section 409A

(relating to interest and additional tax with respect to

certain deferred compensation).’’.

(2) Clause (ii) of section 409A(a)(4)(C) is amended by

striking ‘‘first’’.

(3)(A) Notwithstanding section 885(d)(1) of the American

Jobs Creation Act of 2004, subsection (b) of section 409A of

the Internal Revenue Code of 1986 shall take effect on January

1, 2005.

(B) Not later than 90 days after the date of the enactment

of this Act, the Secretary of the Treasury shall issue guidance

under which a nonqualified deferred compensation plan which

is in violation of the requirements of section 409A(b) of such

Deadline.

Guidance.

Effective date.

26 USC 409A

note.

26 USC 470 note.

26 USC 362.

119 STAT. 2632 PUBLIC LAW 109–135—DEC. 21, 2005

Code shall be treated as not having violated such requirements

if such plan comes into conformance with such requirements

during such limited period as the Secretary may specify in

such guidance.

(4) Subsection (f) of section 885 of the American Jobs Creation Act of 2004 is amended by striking ‘‘December 31, 2004’’

the first place it appears and inserting ‘‘January 1, 2005’’.

(ii) AMENDMENT RELATED TO SECTION 888 OF THE ACT.—Paragraph (2) of section 1092(a) is amended by striking the last sentence

and adding at the end the following new subparagraph:

‘‘(C) REGULATIONS.—The Secretary shall prescribe such

regulations or other guidance as may be necessary or appropriate to carry out the purposes of this paragraph. Such

regulations or other guidance may specify the proper

methods for clearly identifying a straddle as an identified

straddle (and for identifying the positions comprising such

straddle), the rules for the application of this section to

a taxpayer which fails to comply with those identification

requirements, and the ordering rules in cases where a

taxpayer disposes (or otherwise ceases to be the holder)

of any part of any position which is part of an identified

straddle.’’.

(jj) AMENDMENTS RELATED TO SECTION 898 OF THE ACT.—

(1) Paragraph (3) of section 361(b) is amended by inserting

‘‘(reduced by the amount of the liabilities assumed (within

the meaning of section 357(c)))’’ before the period at the end.

(2) Paragraph (1) of section 357(d) is amended by inserting

‘‘section 361(b)(3),’’ after ‘‘section 358(h),’’.

(kk) AMENDMENT RELATED TO SECTION 899 OF THE ACT.—

Subparagraph (A) of section 351(g)(3) is amended by adding at

the end the following: ‘‘If there is not a real and meaningful likelihood that dividends beyond any limitation or preference will actually be paid, the possibility of such payments will be disregarded

in determining whether stock is limited and preferred as to dividends.’’.

(ll) AMENDMENT RELATED TO SECTION 902 OF THE ACT.—Paragraph (1) of section 709(b) is amended by striking ‘‘taxpayer’’ both

places it appears and inserting ‘‘partnership’’.

(mm) AMENDMENTS RELATED TO SECTION 907 OF THE ACT.—

Clause (ii) of section 274(e)(2)(B) is amended—

(1) in subclause (I), by inserting ‘‘or a related party to

the taxpayer’’ after ‘‘the taxpayer’’,

(2) in subclause (II), by inserting ‘‘(or such related party)’’

after ‘‘the taxpayer’’, and

(3) by adding at the end the following new flush sentence:

‘‘For purposes of this clause, a person is a related

party with respect to another person if such person

bears a relationship to such other person described

in section 267(b) or 707(b).’’.

(nn) EFFECTIVE DATE.—The amendments made by this section

shall take effect as if included in the provisions of the American

Jobs Creation Act of 2004 to which they relate.

SEC. 404. AMENDMENTS RELATED TO THE WORKING FAMILIES TAX

RELIEF ACT OF 2004.

(a) AMENDMENT RELATED TO SECTION 201 OF THE ACT.—Subsection (e) of section 152 is amended to read as follows:

26 USC 26 note.

26 USC 1092.

26 USC 409A

note.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2633

‘‘(e) SPECIAL RULE FOR DIVORCED PARENTS, ETC.— ‘‘(1) IN GENERAL.—Notwithstanding subsection (c)(1)(B),

(c)(4), or (d)(1)(C), if—

‘‘(A) a child receives over one-half of the child’s support

during the calendar year from the child’s parents—

‘‘(i) who are divorced or legally separated under

a decree of divorce or separate maintenance,

‘‘(ii) who are separated under a written separation

agreement, or

‘‘(iii) who live apart at all times during the last

6 months of the calendar year, and—

‘‘(B) such child is in the custody of 1 or both of the

child’s parents for more than one-half of the calendar year,

such child shall be treated as being the qualifying child

or qualifying relative of the noncustodial parent for a calendar year if the requirements described in paragraph

(2) or (3) are met.

‘‘(2) EXCEPTION WHERE CUSTODIAL PARENT RELEASES CLAIM

TO EXEMPTION FOR THE YEAR.—For purposes of paragraph (1),

the requirements described in this paragraph are met with

respect to any calendar year if—

‘‘(A) the custodial parent signs a written declaration

(in such manner and form as the Secretary may by regulations prescribe) that such custodial parent will not claim

such child as a dependent for any taxable year beginning

in such calendar year, and

‘‘(B) the noncustodial parent attaches such written declaration to the noncustodial parent’s return for the taxable

year beginning during such calendar year.

‘‘(3) EXCEPTION FOR CERTAIN PRE-1985 INSTRUMENTS.—

‘‘(A) IN GENERAL .—For purposes of paragraph (1), the

requirements described in this paragraph are met with

respect to any calendar year if—

‘‘(i) a qualified pre-1985 instrument between the

parents applicable to the taxable year beginning in

such calendar year provides that the noncustodial

parent shall be entitled to any deduction allowable

under section 151 for such child, and

‘‘(ii) the noncustodial parent provides at least $600

for the support of such child during such calendar

year.

For purposes of this subparagraph, amounts expended for

the support of a child or children shall be treated as

received from the noncustodial parent to the extent that

such parent provided amounts for such support.

‘‘(B) QUALIFIED PRE-1985 INSTRUMENT.—For purposes

of this paragraph, the term ‘qualified pre-1985 instrument’

means any decree of divorce or separate maintenance or

written agreement—

‘‘(i) which is executed before January 1, 1985,

‘‘(ii) which on such date contains the provision

described in subparagraph (A)(i), and

‘‘(iii) which is not modified on or after such date

in a modification which expressly provides that this

paragraph shall not apply to such decree or agreement.

‘‘(4) CUSTODIAL PARENT AND NONCUSTODIAL PARENT.—For

purposes of this subsection—

Regulations.

119 STAT. 2634 PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(A) CUSTODIAL PARENT.—The term ‘custodial parent’

means the parent having custody for the greater portion

of the calendar year.

‘‘(B) NONCUSTODIAL PARENT.—The term ‘noncustodial

parent’ means the parent who is not the custodial parent.

‘‘(5) EXCEPTION FOR MULTIPLE-SUPPORT AGREEMENT.—This

subsection shall not apply in any case where over one-half

of the support of the child is treated as having been received

from a taxpayer under the provision of subsection (d)(3).

‘‘(6) SPECIAL RULE FOR SUPPORT RECEIVED FROM NEW

SPOUSE OF PARENT.—For purposes of this subsection, in the

case of the remarriage of a parent, support of a child received

from the parent’s spouse shall be treated as received from

the parent.’’.

(b) AMENDMENT RELATED TO SECTION 203 OF THE ACT.—

Subparagraph (B) of section 21(b)(1) is amended by inserting ‘‘(as

defined in section 152, determined without regard to subsections

(b)(1), (b)(2), and (d)(1)(B))’’ after ‘‘dependent of the taxpayer’’.

(c) AMENDMENT RELATED TO SECTION 207 OF THE ACT.—

Subparagraph (A) of section 223(d)(2) is amended by inserting ‘‘,

determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B)

thereof’’ after ‘‘section 152’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall take effect as if included in the provisions of the Working

Families Tax Relief Act of 2004 to which they relate.

SEC. 405. AMENDMENTS RELATED TO THE JOBS AND GROWTH TAX

RELIEF RECONCILIATION ACT OF 2003.

(a) AMENDMENTS RELATED TO SECTION 201 OF THE ACT.—

(1) Clause (ii) of section 168(k)(4)(B) is amended to read

as follows:

‘‘(ii) which is—

‘‘(I) acquired by the taxpayer after May 5,

2003, and before January 1, 2005, but only if no

written binding contract for the acquisition was

in effect before May 6, 2003, or

‘‘(II) acquired by the taxpayer pursuant to a

written binding contract which was entered into

after May 5, 2003, and before January 1, 2005,

and’’.

(2) Subparagraph (D) of section 1400L(b)(2) is amended

by striking ‘‘September 11, 2004’’ and inserting ‘‘January 1,

2005’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall take effect as if included in section 201 of the Jobs and

Growth Tax Relief and Reconciliation Act of 2003.

SEC. 406. AMENDMENT RELATED TO THE VICTIMS OF TERRORISM TAX

RELIEF ACT OF 2001.

(a) AMENDMENT RELATED TO SECTION 201 OF THE ACT.—Paragraph (17) of section 6103(l) is amended by striking ‘‘subsection

(f), (i)(7), or (p)’’ and inserting ‘‘subsection (f), (i)(8), or (p)’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall take effect as if included in section 201 of the Victims of

Terrorism Tax Relief Act of 2001.

26 USC 6103

note.

26 USC 168 note.

26 USC 21 note.

26 USC 21.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2635

SEC. 407. AMENDMENTS RELATED TO THE ECONOMIC GROWTH AND

TAX RELIEF RECONCILIATION ACT OF 2001.

(a) AMENDMENTS RELATED TO SECTION 617 OF THE ACT.—

(1) Clause (ii) of section 402(g)(7)(A) is amended to read

as follows:

‘‘(ii) $15,000 reduced by the sum of—

‘‘(I) the amounts not included in gross income

for prior taxable years by reason of this paragraph,

plus

‘‘(II) the aggregate amount of designated Roth

contributions (as defined in section 402A(c)) for

prior taxable years, or’’.

(2) Subparagraph (A) of section 402(g)(1) is amended by

inserting ‘‘to’’ after ‘‘shall not apply’’.

(b) AMENDMENT RELATED TO SECTION 632 OF THE ACT.—

Subparagraph (C) of section 415(c)(7) is amended by striking ‘‘the

greater of $3,000’’ and all that follows and inserting ‘‘$3,000. This

subparagraph shall not apply with respect to any taxable year

to any individual whose adjusted gross income for such taxable

year (determined separately and without regard to community property laws) exceeds $17,000.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall take effect as if included in the provisions of the Economic

Growth and Tax Relief Reconciliation Act of 2001 to which they

relate.

SEC. 408. AMENDMENTS RELATED TO THE INTERNAL REVENUE

SERVICE RESTRUCTURING AND REFORM ACT OF 1998.

(a) AMENDMENTS RELATED TO SECTION 3415 OF THE ACT.—

(1) Paragraph (2) of section 7609(c) is amended by inserting

‘‘or’’ at the end of subparagraph (D), by striking ‘‘; or’’ at

the end of subparagraph (E) and inserting a period, and by

striking subparagraph (F).

(2) Subsection (c) of section 7609 is amended by redesignating paragraph (3) as paragraph (4) and by inserting after

paragraph (2) the following new paragraph:

‘‘(3) JOHN DOE AND CERTAIN OTHER SUMMONSES.—Subsection (a) shall not apply to any summons described in subsection (f) or (g).’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall take effect as if included in section 3415 of the Internal

Revenue Service Restructuring and Reform Act of 1998.

SEC. 409. AMENDMENTS RELATED TO THE TAXPAYER RELIEF ACT OF

1997.

(a) AMENDMENTS RELATED TO SECTION 1055 OF THE ACT.—

(1) The last sentence of section 6411(a) is amended by

striking ‘‘6611(f)(3)(B)’’ and inserting ‘‘6611(f)(4)(B)’’.

(2) Paragraph (4) of section 6601(d) is amended by striking

‘‘6611(f)(3)(A)’’ and inserting ‘‘6611(f)(4)(A)’’.

(b) AMENDMENT RELATED TO SECTION 1112 OF THE ACT.—

Subsection (c) of section 961 is amended to read as follows:

‘‘(c) BASIS ADJUSTMENTS IN STOCK HELD BY FOREIGN CORPORATIONS.—Under regulations prescribed by the Secretary, if a United

States shareholder is treated under section 958(a)(2) as owning

stock in a controlled foreign corporation which is owned by another

controlled foreign corporation, then adjustments similar to the

Regulations.

26 USC 7609

note.

26 USC 402 note.

26 USC 402.

119 STAT. 2636 PUBLIC LAW 109–135—DEC. 21, 2005

adjustments provided by subsections (a) and (b) shall be made

to—

‘‘(1) the basis of such stock, and

‘‘(2) the basis of stock in any other controlled foreign corporation by reason of which the United States shareholder

is considered under section 958(a)(2) as owning the stock

described in paragraph (1),

but only for the purposes of determining the amount included

under section 951 in the gross income of such United States shareholder (or any other United States shareholder who acquires from

any person any portion of the interest of such United States shareholder by reason of which such shareholder was treated as owning

such stock, but only to the extent of such portion, and subject

to such proof of identity of such interest as the Secretary may

prescribe by regulations). The preceding sentence shall not apply

with respect to any stock to which a basis adjustment applies

under subsection (a) or (b).’’.

(c) AMENDMENT RELATED TO SECTION 1144 OF THE ACT.—

Subparagraph (B) of section 6038B(a)(1) is amended by inserting

‘‘or’’ at the end.

(d) EFFECTIVE DATE.—The amendments made by this section

shall take effect as if included in the provisions of the Taxpayer

Relief Act of 1997 to which they relate.

SEC. 410. AMENDMENT RELATED TO THE OMNIBUS BUDGET RECONCILIATION ACT OF 1990.

(a) AMENDMENT RELATED TO SECTION 11813 OF THE ACT.—

Subclause (I) of section 168(e)(3)(B)(vi) is amended by striking ‘‘if

‘solar and wind’ were substituted for ‘solar’ in clause (i) thereof’’

and inserting ‘‘if ‘solar or wind energy’ were substituted for ‘solar

energy’ in clause (i) thereof’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall take effect as if included in section 11813 of the Omnibus

Budget Reconciliation Act of 1990.

SEC. 411. AMENDMENT RELATED TO THE OMNIBUS BUDGET RECONCILIATION ACT OF 1987.

(a) AMENDMENT RELATED TO SECTION 10227 OF THE ACT.—

Section 1363(d) is amended by adding at the end the following

new paragraph:

‘‘(5) SPECIAL RULE.—Sections 1367(a)(2)(D) and 1371(c)(1)

shall not apply with respect to any increase in the tax imposed

by reason of this subsection.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall take effect as if included in section 10227 of the Omnibus

Budget Reconciliation Act of 1987.

SEC. 412. CLERICAL CORRECTIONS.

(a) Subparagraph (C) of section 2(b)(2) is amended by striking

‘‘subparagraph (C)’’ and inserting ‘‘subparagraph (B)’’.

(b) Paragraph (2) of section 25C(b) is amended by striking

‘‘subsection (c)(3)(B)’’ and inserting ‘‘subsection (c)(2)(B)’’.

(c) Subparagraph (E) of section 26(b)(2) is amended by striking

‘‘section 530(d)(3)’’ and inserting ‘‘section 530(d)(4)’’.

(d) Subparagraph (A) of section 30B(g)(2) and subparagraph

(A) of section 30C(d)(2) are each amended by striking ‘‘regular

tax’’ and inserting ‘‘regular tax liability (as defined in section 26(b))’’.

26 USC 1363

note.

26 USC 168 note.

26 USC 961 note.

26 USC 6038B.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2637

(e) The table of sections for subpart B of part IV of subchapter

A of chapter 1 is amended by striking the item relating to section

30C and inserting the following new item:

‘‘Sec. 30C. Alternative fuel vehicle refueling property credit.’’.

(f)(1) Subclause (II) of section 38(c)(2)(A)(ii) is amended by

striking ‘‘or the New York Liberty Zone business employee credit

or the specified credits’’ and inserting ‘‘, the New York Liberty

Zone business employee credit, and the specified credits’’.

(2) Subclause (II) of section 38(c)(3)(A)(ii) is amended by striking

‘‘or the specified credits’’ and inserting ‘‘and the specified credits’’.

(3) Subparagraph (B) of section 38(c)(4) is amended—

(A) by striking ‘‘includes’’ and inserting ‘‘means’’, and

(B) by inserting ‘‘and’’ at the end of clause (i).

(g)(1) Subparagraph (A) of section 39(a)(1) is amended by

striking ‘‘each of the 1 taxable years’’ and inserting ‘‘the taxable

year’’.

(2) Subparagraph (B) of section 39(a)(3) is amended to read

as follows:

‘‘(B) paragraph (1) shall be applied by substituting

‘each of the 5 taxable years’ for ‘the taxable year’ in

subparagraph (A) thereof, and’’.

(h) Subparagraph (B) of section 40A(b)(5) is amended by

striking ‘‘(determined without regard to the last sentence of subsection (d)(2))’’.

(i) Paragraph (5) of section 43(c) is amended to read as follows:

‘‘(5) ALASKA NATURAL GAS.—For purposes of paragraph

(1)(D)—

‘‘(A) IN GENERAL.—The term ‘Alaska natural gas’

means natural gas entering the Alaska natural gas pipeline

(as defined in section 168(i)(16) (determined without regard

to subparagraph (B) thereof)) which is produced from a

well—

‘‘(i) located in the area of the State of Alaska

lying north of 64 degrees North latitude, determined

by excluding the area of the Alaska National Wildlife

Refuge (including the continental shelf thereof within

the meaning of section 638(1)), and

‘‘(ii) pursuant to the applicable State and Federal

pollution prevention, control, and permit requirements

from such area (including the continental shelf thereof

within the meaning of section 638(1)).

‘‘(B) NATURAL GAS.—The term ‘natural gas’ has the

meaning given such term by section 613A(e)(2).’’.

(j) Subsection (d) of section 45 is amended—

(1) in paragraph (8) by striking ‘‘The term’’ and inserting

‘‘In the case of a facility that produces refined coal, the term’’,

and

(2) in paragraph (10) by striking ‘‘The term’’ and inserting

‘‘In the case of a facility that produces Indian coal, the term’’.

(k) Paragraph (2) of section 45I(a) is amended by striking

‘‘qualified credit oil production’’ and inserting ‘‘qualified crude oil

production’’.

(l) Subsection (g) of section 45K, as redesignated by section

1322 of the Energy Policy Act of 2005, is amended—

(1) in the matter preceding paragraph (1), by striking ‘‘subsection (f)’’ and inserting ‘‘subsection (e)’’, and

Ante, p. 1011.

Applicability.

26 USC 38.

119 STAT. 2638 PUBLIC LAW 109–135—DEC. 21, 2005

(2) in paragraph (2)(C), by striking ‘‘subsection (g)’’ and

inserting ‘‘subsection (f)’’.

(m) Paragraph (1) of section 48(a), as amended by section

1336 of the Energy Policy Act of 2005, is amended by striking

‘‘paragraph (1)(B) or (2)(B) of subsection (d)’’ and inserting ‘‘paragraphs (1)(B) and (2)(B) of subsection (c)’’.

(n) Subparagraph (A) of section 48(a)(3) is amended—

(1) by redesignating clause (iii) (relating to qualified fuel

cell property or qualified microturbine property), as added by

section 1336 of the Energy Policy Act of 2005, as clause (iv)

and by moving such clause to the end of such subparagraph,

and

(2) by striking ‘‘or’’ at the end of clause (ii).

(o) Subparagraph (E) of section 50(a)(2) is amended by striking

‘‘section 48(a)(5)’’ and inserting ‘‘section 48(b)’’.

(p)(1) Paragraph (3) of section 55(c) is amended by inserting

‘‘30B(g)(2), 30C(d)(2),’’ after ‘‘30(b)(3),’’.

(2) Section 1341(b)(3) of the Energy Policy Act of 2005 is

repealed.

(3) Section 1342(b)(3) of the Energy Policy Act of 2005 is

repealed.

(q)(1) Subsection (a) of section 62 is amended—

(A) by redesignating paragraph (19) (relating to costs

involving discrimination suits, etc.), as added by section 703

of the American Jobs Creation Act of 2004, as paragraph (20),

and

(B) by moving such paragraph after paragraph (19)

(relating to health savings accounts).

(2) Subsection (e) of section 62 is amended by striking ‘‘subsection (a)(19)’’ and inserting ‘‘subsection (a)(20)’’.

(r) Paragraph (3) of section 167(f) is amended by striking ‘‘section 197(e)(7)’’ and inserting ‘‘section 197(e)(6)’’.

(s) Subparagraph (D) of section 168(i)(15) is amended by

striking ‘‘This paragraph shall not apply to’’ and inserting ‘‘Such

term shall not include’’.

(t) Paragraph (2) of section 221(d) is amended by striking

‘‘this Act’’ and inserting ‘‘the Taxpayer Relief Act of 1997’’.

(u) Paragraph (8) of section 318(b) is amended by striking

‘‘section 6038(d)(2)’’ and inserting ‘‘section 6038(e)(2)’’.

(v) Subparagraph (B) of section 332(d)(1) is amended by striking

‘‘distribution to which section 301 applies’’ and inserting ‘‘distribution of property to which section 301 applies’’.

(w) Subparagraph (B) of section 403(b)(9) is amended by

inserting ‘‘or’’ before ‘‘a convention’’.

(x)(1) Clause (i) of section 412(m)(4)(B) is amended by striking

‘‘subsection (c)’’ and inserting ‘‘subsection (d)’’.

(2) Clause (i) of section 302(e)(4)(B) of the Employee Retirement

Income Security Act of 1974 is amended by striking ‘‘subsection

(c)’’ and inserting ‘‘subsection (d)’’.

(y) Paragraph (1) of section 415(l) is amended by striking ‘‘individual medical account’’ and inserting ‘‘individual medical benefit

account’’.

(z) The matter following clause (iv) of section 415(n)(3)(C) is

amended by striking ‘‘clauses’’ and inserting ‘‘clause’’.

(aa) Subparagraph (C) of section 461(i)(3) is amended by

striking ‘‘section 6662(d)(2)(C)(iii)’’ and inserting ‘‘section

6662(d)(2)(C)(ii)’’.

29 USC 1082.

Repeal.

Ante, p. 1049.

Repeal.

Ante, p. 1038.

26 USC 50.

Ante, p. 1036.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2639

(bb) Paragraph (12) of section 501(c) is amended—

(1) by striking ‘‘subparagraph (C)(iii)’’ in subparagraph (F)

and inserting ‘‘subparagraph (C)(iv)’’, and

(2) by striking ‘‘subparagraph (C)(iv)’’ in subparagraph (G)

and inserting ‘‘subparagraph (C)(v)’’.

(cc) Clause (ii) of section 501(c)(22)(B) is amended by striking

‘‘clause (ii) of paragraph (21)(B)’’ and inserting ‘‘clause (ii) of paragraph (21)(D)’’.

(dd) Paragraph (1) of section 512(b) is amended by striking

‘‘section 512(a)(5)’’ and inserting ‘‘subsection (a)(5)’’.

(ee)(1) Subsection (b) of section 512 is amended—

(A) by redesignating paragraph (18) (relating to the treatment of gain or loss on sale or exchange of certain brownfield

sites), as added by section 702 of the American Jobs Creation

Act of 2004, as paragraph (19), and

(B) by moving such paragraph to the end of such subsection.

(2) Subparagraph (E) of section 514(b)(1) is amended by striking

‘‘section 512(b)(18)’’ and inserting ‘‘section 512(b)(19)’’.

(3) Paragraph (6) of section 529(c) is amended by striking

‘‘education individual retirement account’’ and inserting ‘‘Coverdell

education savings account’’.

(ff)(1) Subsection (b) of section 530 is amended by striking

paragraph (3) and by redesignating paragraphs (4) and (5) as paragraphs (3) and (4), respectively.

(2) Clause (ii) of section 530(b)(2)(A) is amended by striking

‘‘paragraph (4)’’ and inserting ‘‘paragraph (3)’’.

(gg) Subparagraph (H) of section 613(c)(4) is amended by

inserting ‘‘(including in situ retorting)’’ after ‘‘and retorting’’.

(hh) Subparagraph (A) of section 856(g)(5) is amended by

striking ‘‘subsection (c)(6) or (c)(7) of section 856’’ and inserting

‘‘paragraph (2), (3), or (4) of subsection (c)’’.

(ii) Paragraph (6) of section 857(b) is amended—

(1) in subparagraph (E), by striking ‘‘subparagraph (C)’’

and inserting ‘‘subparagraphs (C) and (D)’’, and

(2) in subparagraph (F)—

(A) by striking ‘‘subparagraph (C) of this paragraph’’

and inserting ‘‘subparagraph (C) or (D)’’, and

(B) by striking ‘‘subparagraphs (C) and (D)’’ and

inserting ‘‘subparagraphs (C), (D), and (E)’’.

(jj) Subparagraph (C) of section 881(e)(1) is amended by

inserting ‘‘interest-related dividend received by a controlled foreign

corporation’’ after ‘‘shall apply to any’’.

(kk) Clause (ii) of section 952(c)(1)(B) is amended—

(1) by striking ‘‘clause (iii)(III) or (IV)’’ and inserting ‘‘subclause (II) or (III) of clause (iii)’’, and

(2) by striking ‘‘clause (iii)(II)’’ and inserting ‘‘clause (iii)(I)’’.

(ll) Clause (i) of section 954(c)(1)(C) is amended by striking

‘‘paragraph (4)(A)’’ and inserting ‘‘paragraph (5)(A)’’.

(mm) Subparagraph (F) of section 954(c)(1) is amended by

striking ‘‘Net income from notional principal contracts.’’ after

‘‘Income from notional principal contracts.—’’.

(nn) Paragraph (23) of section 1016(a) is amended by striking

‘‘1045(b)(4)’’ and inserting ‘‘1045(b)(3)’’.

(oo) Paragraph (1) of section 1256(f) is amended by striking

‘‘subsection (e)(2)(C)’’ and inserting ‘‘subsection (e)(2)’’.

26 USC 501.

119 STAT. 2640 PUBLIC LAW 109–135—DEC. 21, 2005

(pp) The matter preceding clause (i) of section 1031(h)(2)(B)

is amended by striking ‘‘subparagraph’’ and inserting ‘‘subparagraphs’’.

(qq) Paragraphs (1) and (2) of section 1375(d) are each amended

by striking ‘‘subchapter C’’ and inserting ‘‘accumulated’’.

(rr) Each of the following provisions are amended by striking

‘‘General Accounting Office’’ each place it appears therein and

inserting ‘‘Government Accountability Office’’:

(1) Clause (ii) of section 1400E(c)(4)(A).

(2) Paragraph (1) of section 6050M(b).

(3) Subparagraphs (A), (B)(i), and (B)(ii) of section

6103(i)(8).

(4) Paragraphs (3)(C)(i), (4), (5), and (6)(B) of section

6103(p).

(5) Subsection (e) of section 8021.

(ss)(1) Clause (ii) of section 1400L(b)(2)(C) is amended by

striking ‘‘section 168(k)(2)(C)(i)’’ and inserting ‘‘section

168(k)(2)(D)(i)’’.

(2) Clause (iv) of section 1400L(b)(2)(C) is amended by striking

‘‘section 168(k)(2)(C)(iii)’’ and inserting ‘‘section 168(k)(2)(D)(iii)’’.

(3) Subparagraph (D) of section 1400L(b)(2) is amended by

striking ‘‘section 168(k)(2)(D)’’ and inserting ‘‘section 168(k)(2)(E)’’.

(4) Subparagraph (E) of section 1400L(b)(2) is amended by

striking ‘‘section 168(k)(2)(F)’’ and inserting ‘‘section 168(k)(2)(G)’’.

(5) Paragraph (5) of section 1400L(c) is amended by striking

‘‘section 168(k)(2)(C)(iii)’’ and inserting ‘‘section 168(k)(2)(D)(iii)’’.

(tt) Section 3401 is amended by redesignating subsection (h)

as subsection (g).

(uu) Paragraph (2) of section 4161(a) is amended to read as

follows:

‘‘(2) 3 PERCENT RATE OF TAX FOR ELECTRIC OUTBOARD

MOTORS.—In the case of an electric outboard motor, paragraph

(1) shall be applied by substituting ‘3 percent’ for ‘10 percent’.’’.

(vv) Subparagraph (C) of section 4261(e)(4) is amended by

striking ‘‘imposed subsection (b)’’ and inserting ‘‘imposed by subsection (b)’’.

(ww) Subsection (a) of section 4980D is amended by striking

‘‘plans’’ and inserting ‘‘plan’’.

(xx) The matter following clause (iii) of section 6045(e)(5)(A)

is amended by striking ‘‘for ‘$250,000’.’’ and all that follows through

‘‘to the Treasury.’’ and inserting ‘‘for ‘$250,000’. The Secretary may

by regulation increase the dollar amounts under this subparagraph

if the Secretary determines that such an increase will not materially

reduce revenues to the Treasury.’’.

(yy) Subsection (p) of section 6103 is amended—

(1) by striking so much of paragraph (4) as precedes

subparagraph (A) and inserting the following:

‘‘(4) SAFEGUARDS.—Any Federal agency described in subsection (h)(2), (h)(5), (i)(1), (2), (3), (5), or (7), (j)(1), (2), or

(5), (k)(8), (l)(1), (2), (3), (5), (10), (11), (13), (14), or (17) or

(o)(1), the Government Accountability Office, the Congressional

Budget Office, or any agency, body, or commission described

in subsection (d), (i)(3)(B)(i) or 7(A)(ii), or (l)(6), (7), (8), (9),

(12), (15), or (16) or any other person described in subsection

(l)(16), (18), (19), or (20) shall, as a condition for receiving

returns or return information—’’,

(2) by amending paragraph (4)(F)(i) to read as follows:

Applicability.

26 USC 1031.

PUBLIC LAW 109–135—DEC. 21, 2005 119 STAT. 2641

‘‘(i) in the case of an agency, body, or commission

described in subsection (d), (i)(3)(B)(i), or (l)(6), (7),

(8), (9), or (16), or any other person described in subsection (l)(16), (18), (19), or (20) return to the Secretary

such returns or return information (along with any

copies made therefrom) or make such returns or return

information undisclosable in any manner and furnish

a written report to the Secretary describing such

manner,’’, and

(3) by striking the first full sentence in the matter following

subparagraph (F) of paragraph (4) and inserting the following:

‘‘If the Secretary determines that any such agency, body, or

commission, including an agency or any other person described

in subsection (l)(16), (18), (19), or (20), or the Government

Accountability Office or the Congressional Budget Office, has

failed to, or does not, meet the requirements of this paragraph,

he may, after any proceedings for review established under

paragraph (7), take such actions as are necessary to ensure

such requirements are met, including refusing to disclose

returns or return information to such agency, body, or commission, including an agency or any other person described in

subsection (l)(16), (18), (19), or (20), or the Government Accountability Office or the Congressional Budget Office, until he determines that such requirements have been or will be met.’’.

(zz) Clause (ii) of section 6111(b)(1)(A) is amended by striking

‘‘advice or assistance’’ and inserting ‘‘aid, assistance, or advice’’.

(aaa) Paragraph (3) of section 6662(d) is amended by striking

‘‘the’’ before ‘‘1 or more’’.

SEC. 413. OTHER CORRECTIONS RELATED TO THE AMERICAN JOBS

CREATION ACT OF 2004.

(a) AMENDMENTS RELATED TO SECTION 233 OF THE ACT.—

(1) Clause (vi) of section 1361(c)(2)(A) is amended—

(A) by inserting ‘‘or a depository institution holding

company (as defined in section 3(w)(1) of the Federal

Deposit Insurance Act (12 U.S.C. 1813(w)(1))’’ after ‘‘a bank

(as defined in section 581)’’, and

(B) by inserting ‘‘or company’’ after ‘‘such bank’’.

(2) Paragraph (16) of section 4975(d) is amended—

(A) in subparagraph (A), by inserting ‘‘or a depository

institution holding company (as defined in section 3(w)(1)

of the Federal Deposit Insurance Act (12 U.S.C.

1813(w)(1))’’ after ‘‘a bank (as defined in section 581)’’,

and

(B) in subparagraph (C), by inserting ‘‘or company’’

after ‘‘such bank’’.

(b) AMENDMENT RELATED TO SECTION 237 OF THE ACT.—

Subparagraph (F) of section 1362(d)(3) is amended by striking ‘‘a

bank holding company’’ and all that follows through ‘‘section 2(p)

of such Act)’’ and inserting ‘‘a depository institution holding company (as defined in section 3(w)(1) of the Federal Deposit Insurance

Act (12 U.S.C. 1813(w)(1))’’.

(c) AMENDMENTS RELATED TO SECTION 239 OF THE ACT.—Paragraph (3) of section 1361(b) is amended—

(1) in subparagraph (A), by striking ‘‘and in the case of

information returns required under part III of subchapter A

of chapter 61’’, and

26 USC 6111.

119 STAT. 2642 PUBLIC LAW 109–135—DEC. 21, 2005

LEGISLATIVE HISTORY—H.R. 4440:

CONGRESSIONAL RECORD, Vol. 151 (2005):

Dec. 7, considered and passed House.

Dec. 16, considered and passed Senate, amended. House concurred in Senate

amendment.

WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 41 (2005):

Dec. 21, Presidential remarks.

Æ

(2) by adding at the end the following new subparagraph:

‘‘(E) INFORMATION RETURNS.—Except to the extent provided by the Secretary, this paragraph shall not apply

to part III of subchapter A of chapter 61 (relating to

information returns).’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall take effect as if included in the provisions of the American

Jobs Creation Act of 2004 to which they relate.

Subtitle B—Trade Technicals

SEC. 421. TECHNICAL CORRECTIONS TO REGIONAL VALUE-CONTENT

METHODS FOR RULES OF ORIGIN UNDER PUBLIC LAW

109–53.

Section 203(c) of the Dominican Republic-Central AmericaUnited States Free Trade Agreement Implementation Act (Public

Law 109–53; 19 U.S.C. 4033(c)) is amended as follows:

(1) In paragraph (2)(A), by striking all that follows ‘‘the

following build-down method:’’ and inserting the following:

AV–VNM ‘‘RVC = ———— × 100’’. AV

(2) In paragraph (3)(A), by striking all that follows ‘‘the

following build-up method:’’ and inserting the following:

VOM ‘‘RVC = ———— × 100’’. AV

(3) In paragraph (4)(A), by striking all that follows ‘‘the

following net cost method:’’ and inserting the following:

NC–VNM ‘‘RVC = ———— × 100’’. NC

TITLE V—EMERGENCY REQUIREMENT

SEC. 501. EMERGENCY REQUIREMENT.

Any provision of this Act causing an effect on receipts, budget

authority, or outlays is designated as an emergency requirement

pursuant to section 402 of H. Con. Res. 95 (109th Congress).

Approved December 21, 2005.

26 USC 1361

note.