Provision Effective 2004 2005 2006 2007 2008 2009 2010 20

Corporate Reform and Growth Incentive Provisions 

A. Reduction in Corporate Income Tax Rates [1] 

1. Corporate tax rate reductions for manufacturing and 

other specified income, including maximum 34% rate for 2004 through 2006, and 32% for 2007 and thereafter [2] ......................................................................... tyba 12/31/03 -1,380 -2,115 -3,604 -5,664 -6,260 -7,259 -8,182 -8,4

2. 33% corporate income tax rate applies to taxable 

income over $75,000 and under $1 million in 2004 through 2006; 32% corporate income tax rate applies to taxable income over $75,000 and under: $1 million in 2007 and 2008, $5 million in 2009 through 2011, and $20 million thereafter for non-manufacturing income [2] .............................................. tyba 12/31/03 -353 -627 -757 -1,030 -1,150 -1,753 -2,046 -2,1

B. Two-Year Extension of Increased Expensing for

Small Business - increase section 179 expensingfrom $25,000 to $100,000 and increase thephaseout threshold amount from $200,000 to$400,000; include software in section 179 property;and extend indexing of both the deduction limit andthe phaseout threshold (sunset after 2007) ......................... tyba 12/31/05 --- --- -3,833 -6,832 -899 3,493 2,338 1,6

C. Depreciation 

1. 15-year straight-line cost recovery for qualified 

leasehold improvements (sunset after 2005) ....................... ppisa DOE -59 -148 -245 -276 -267 -252 -235 -2

2. 15-year straight-line cost recovery for qualified 

restaurant improvements (sunset after 2005) [3] ................. ppisa DOE -300 -174 -28 -33 -33 -33 -33 -

D. Alternative Minimum Tax Relief 

1. Repeal the 90% limitation on the use of foreign tax 

credits against the AMT ....................................................... tyba 12/31/04 --- -236 -355 -338 -334 -333 -334 -3

2. Phaseout 90% limitation on use on net operating

losses (92% in 2005 through 2007, 94% in 2008 and2009, 96% in 2010, 98% in 2011, and 100% in 2012and thereafter) ...................................................................... tyba 12/31/04 --- -116 -175 -171 -310 -381 -538 -7

3. Expansion of exemption from alternative minimum 

tax for small corporations to $20 million ............................... tyba 12/31/04 --- -105 -136 -118 -113 -109 -106 -1

4. Coordinate farmer income averaging and the 

alternative minimum tax ....................................................... tyba 12/31/02 -2 -2 -2 -3 -4 -5 -6 

E. S Corporation Reform and Simplification 

1. Treat members of family as one shareholder (3 

generations, without limit) (includes interaction with tyba 12/31/03 & line 2 below) ......................................................................... eatma 12/31/03 -1 -3 -4 -6 -7 -7 -8 

ESTIMATED REVENUE EFFECTS OF THE CHAIRMAN'S AMENDMENT IN THE NATURE OF A SUBSTITUTE TO H.R. 2896

[Millions of Dollars] 

Fiscal Years 2004 - 2013 

THE "AMERICAN JOBS CREATION ACT OF 2003," 

SCHEDULED FOR MARKUP BY THE COMMITTEE ON WAYS AND MEANS ON OCTOBER 28, 2003 
Page 2

Provision Effective 2004 2005 2006 2007 2008 2009 2010 20

2. Increase in number of eligible shareholders to 100 ............. tyba 12/31/03 -17 -42 -54 -64 -72 -77 -79 -3. Expansion of bank S corporation eligible 

shareholders to include IRAs ............................................... DOE -16 -33 -34 -36 -37 -39 -41 -

4. Disregard of unexercised powers of appointment in 

determining potential current beneficiaries of ESBT ............ tyba 12/31/03 

5. Transfer of suspended losses incident to divorce ............... tyba 12/31/03 -1 -2 -2 -2 -2 -3 -3 6. Use of passive activity loss by subchapter S trust 

income beneficiaries ............................................................ tma 12/31/03 -1 -1 -1 -1 -1 -1 -1 

7. Exclusion of investment securities income from 

passive income test for bank S corporations ....................... tyba 12/31/03 

8. Treatment of qualifying director shares ................................ tyba 12/31/03 -4 -10 -13 -14 -15 -16 -16 -9. Relief from inadvertently invalid qualified subchapter 

S subsidiary elections and terminations ............................... tyba 12/31/03 -1 -1 -1 -1 -1 -1 -1 

10. Information returns for qualified subchapter S 

subsidiaries .......................................................................... tyba 12/31/03 

11. Repayment of loan for qualifying employer

securities............................................................................... dma 12/31/03 [4] [4] [4] [4] [4] [4] [4] 

F. Protecting Employee Benefits 

1. Treatment of nonqualified deferred compensation 

plans ..................................................................................... [5] 137 160 91 31 15 14 13 

2. Exclusion of incentive stock options and employee 

stock purchase plan stock options from wages ................... saptoea DOE 

3. Extend provision under section 420 permitting 

qualified transfers of excess defined benefit pension plan assets to 401(h) accounts (through 12/31/13) .............................................................................. DOE --- --- 18 38 40 40 40 

G. Treatment of Active Income 

1. Treat European Union as one country for certain

purposes of subpart F .......................................................... [6] --- --- --- --- --- -533 -1,982 -2,2

2. Look-through treatment of payments between related 

CFCs under foreign personal holding company income rules ......................................................................... [7] --- --- --- -83 -235 -249 -272 -2

3. Look-through treatment for sales of partnership 

interests ................................................................................ [7] --- --- --- -43 -101 -106 -111 -1

4. Repeal of foreign personal holding company rules 

and foreign investment company rules ................................ [7] --- --- --- -31 -81 -91 -102 -1

5. Clarification of treatment of pipeline transportation 

income .................................................................................. [8] --- -1 -7 -9 -11 -14 -19 -

6. Determination of foreign personal holding company 

income with respect to transactions in commodities ............ teia 12/31/04 --- -4 -10 -10 -10 -10 -11 -

7. Repeal of CFC rules on foreign base company 

shipping income [9] .............................................................. [8] --- -6 -42 -52 -64 -76 -88 -

8. Modification of exceptions under subpart F for active 

financing income .................................................................. [10] 

9. Partial exclusion for foreign-source royalties from

certain film-related intangibles ............................................. tyea 12/31/06 --- --- [4] -2 -15 -38 -72 -1

H. Reduction in Double Taxation of Corporate Earnings 

1. Interest expense allocation rules ......................................... tyba 12/31/08 --- --- --- --- --- -944 -2,487 -2,52. Recharacterization of overall domestic loss ........................ lf tyba 12/31/05 --- --- -54 -647 -680 -713 -756 -73. Reduction to 2 foreign tax credit baskets [11] ...................... tyba 12/31/04 --- -557 -749 -824 -900 -927 -1,002 -1,0

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - - - 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - 
Page 3

Provision Effective 2004 2005 2006 2007 2008 2009 2010 20

4. Look-through rules to apply to dividends from 

noncontrolled section 902 corporations ............................... tyba 12/31/02 -585 -77 -51 -23 -6 -1 [12] [1

5. Attribution of stock ownership through partnerships 

to apply in determining section 902 and 960 credits ............ tyba DOE --- -1 -3 -3 -3 -3 -3 

6. Clarification of treatment of certain transfers of 

intangible property ................................................................ aro/a 8/5/97 -22 -4 -5 -5 -5 -5 -5 

7. United States property not to include certain assets 

acquired by dealers in ordinary course of trade or business ............................................................................... [8] --- -1 -12 -12 -12 -13 -13 -

8. Election not to use average exchange rate for 

foreign tax paid other than in functional currency ................ tyba 12/31/04 

9. Repeal of withholding tax on dividends from certain 

foreign corporations ............................................................. pma 12/31/04 --- -2 -3 -3 -3 -3 -3 

10. Provide equal treatment for interest paid by foreign 

partnerships and foreign corporations doing business in the U.S. ............................................................. tyba 12/31/03 -1 -2 -2 -2 -2 -2 -2 

11. Interaction ............................................................................. --- --- 217 238 263 313 587 802 8

I. Other Provisions

1. Special rules for livestock sold on account of 

weather-related conditions - Increase reinvestment period from 2 to 4 years for involuntary conversion of livestock due to drought, flood, or other weather-related conditions ................................................... trda 12/31/02 --- -18 -7 -4 -3 -3 -3 

2. Payment of dividends on stock of cooperatives 

without reducing patronage dividends ................................. dmi tyba DOE [4] [4] -1 -1 -1 -1 -2 

3. Add Hepatitis A to the list of taxable vaccines ..................... [13] 11 9 9 9 9 9 9 

4. Expand human clinical trials expenses qualifying for

the orphan drug tax credit .................................................... eia DOE -10 -16 -16 -17 -18 -19 -20 -

5. Distributions from publicly traded partnerships

treated as qualifying income for regulatedinvestment company............................................................. tyba DOE -1 -3 -4 -5 -6 -6 -6 

6. Real estate investment trust modification tyba 12/31/00 &

provisions.............................................................................. tyba DOE

7. Simplification of excise tax imposed on bows and

arrows [14]............................................................................. asbmpoia 12/31/03 -1 -1 -1 -1 -1 -1 -1 

8. Repeal excise tax on fishing tackle boxes [14] .................... asbmpoia 12/31/03 -3 -3 -3 -3 -3 -3 -3 9. Income tax credit for cost of carrying tax-paid

distilled spirits in wholesale inventories................................ tyba 12/31/03 -12 -18 -19 -19 -20 -20 -20 -

10. Capital gains treatment to apply to outright sales of

timber by landowner ............................................................. sota DOE 

11. Repeal excise tax on sonar devices suitable for

finding fish [14]...................................................................... asbmpoia 12/31/03 [4] [4] [4] [4] [4] [4] [4] 

12. Taxation of certain settlement funds..................................... tyba 12/31/03 -4 -6 -6 -6 -7 -7 -7 13. Suspension of the occupational taxes relating to distilled

spirits, wine, and beer (sunset 6/30/07) ............................... tia 6/30/04 -66 -78 -78 -12 --- --- --- 

Total of Corporate Reform and Growth Incentive Provisions .................................... -2,692 -4,027 -9,961 -16,065 -11,315 -9,914 -15,417 -17,1

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - 
Page 4

Provision Effective 2004 2005 2006 2007 2008 2009 2010 20

Provisions to Reduce Tax Avoidance Through Corporate Earnings Stripping and Expatriation 

1. Reduction in potential for earnings stripping by further 

limiting deduction for interest on certain indebtedness (eliminate debt/equity safe harbor, use 35% generally for pre-2005 and 25% for post-2004 debt and 50% for guaranteed debt, or elect 30% for all post-2004 debt, eliminate excess limit carryforward, and change excess interest carryforward period for net interest expense/ATI test to 10 years) .............................................. [15] 61 65 142 288 318 355 360 3

2. Tax treatment of expatriated entities .................................... tyea 3/4/03 27 19 24 28 30 32 37 3. 15% excise tax on stock compensation of insiders 

in expatriated corporations ................................................... [16] 11 7 7 7 7 7 8 

4. Reinsurance of United States risks in foreign 

jurisdictions ........................................................................... rra DOE [17] [17] [17] [17] [17] [17] [17] [1

5. Revision of tax rules for individuals who expatriate ............. iwea 2/27/03 19 18 21 24 28 32 37 6. Reporting of taxable mergers and acquisitions .................... aa DOE 1 2 3 3 3 3 3 7. Studies .................................................................................. DOE

Total of Provisions to Reduce Tax Avoidance Through Corporate Earnings Stripping and Expatriation ...................................................... 119 111 197 350 386 429 445 4Provisions Relating to Tax Shelters and MiscellaneousOther Provisions

A. Tax Shelter Provisions 

1. Provisions relating to reportable transactions and 

tax shelters (sections 3001, 3002, 3003, 3004, various dates 3005, 3006, 3007, and 3008) ............................................... after DOE [18] 92 115 119 120 124 131 139 1

2. Modifications to the substantial understatement penalty 

for nonreportable transactions (section 3009) ..................... tyba DOE --- 4 11 19 23 26 30 

3. Modification of actions to enjoin certain conduct 

related to tax shelters and reportable transactions (section 3010) ....................................................................... da DOE 

4. Impose a civil penalty (of up to $5,000) on failure 

to report interest in foreign financial accounts (section 3011) ....................................................................... DOE --- [17] [17] [17] [17] [17] [17] [1

5. Regulation of individuals practicing before the 

Department of Treasury (section 3012) ............................... ata DOE 

B. Other Provisions

1. Treatment of stripped interest in bond and preferred 

stock funds (section 3021) ................................................... pada DOE 11 8 3 [17] [17] [17] [17] [1

2. Minimum holding period for foreign tax credit on 

withholding tax on income other than dividends (section 3022) ....................................................................... apoamt 30da DOE 1 3 3 3 3 3 3 

3. Disallowance of certain partnership loss transfers

(section 3023) ....................................................................... ctada DOE 18 39 57 70 79 84 86 

4. No reduction of basis under section 734 in stock 

held by partnership in corporate partner (section 3024) .................................................................................... da DOE 5 13 20 28 36 44 51 

5. Repeal of special rules for FASITs (section 3025) .............. tyba 12/31/03 6. Limitation on transfer of built-in losses on REMIC 

residuals (section 3026) ....................................................... ta DOE [17] 2 4 6 8 10 13 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Negligible Revenue Effect - 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No Revenue Effect - - - - 
Page 5

Provision Effective 2004 2005 2006 2007 2008 2009 2010 20

7. Clarification of banking business for purposes of 

determining investment of earnings in United States property (section 3027) ........................................................ DOE --- 7 13 14 16 18 20 

8. Modify rules related to certain small property and

casualty insurance companies - reform of 501(c)(15) to apply to organizations with gross receipts not exceeding $600,000 and premiums at least 50% of gross receipts; increase thenet-written-premium threshold permitting certainsmall insurance companies to be taxed oninvestment income to $1.89 million and index forinflation (section 3028) ........................................................ tyba 12/31/03 45 98 111 117 122 127 131 1

9. Modification of definition of insurance companies 

other than life insurance companies (section 3029) ............ tyba 12/31/03 1 2 2 2 2 3 3 

10. Deny deduction for interest paid to the IRS on 

underpayments involving certain tax motivated transactions (section 3030) .................................................. tyba DOE --- --- 1 1 3 4 4 

11. Clarification of rules for payment of estimated tax for 

certain deemed asset sales (section 3031) ......................... toa DOE 51 37 10 3 3 3 3 

12. Exclusion of like-kind exchange property from 

nonrecognition treatment on the sale or exchange of a principal residence (section 3032) .................................... sopra DOE [17] 11 13 15 17 19 21 

13. Prevent mismatching of deductions and income 

inclusions in transactions with related foreign persons (section 3033) ......................................................... pao/a DOE 12 41 84 79 33 35 37 

14. Exclusion from gross income for interest on 

overpayments of income tax by individuals (section 3034)........................................................................ iri cyba DOE --- 1,034 -103 -106 -109 -112 -116 -1

15. Deposits made to suspend the running of interest

on potential underpayments (section 3035) ......................... dma DOE 157 -5 -6 -6 -6 -6 -7 

16. Authorize IRS to enter into installment agreements 

that provide for partial payment (section 3036) ................... iaeio/a DOE 48 14 5 [19] [19] [19] [19] [1

17. Extension of IRS user fees (through 9/30/13)

(section 3037) [20] ................................................................ DOE --- 25 35 36 38 39 41 

Provisions Relating to Tax Shelters and MiscellaneousOther Provisions ................................................................................................ 441 1,448 382 401 392 428 459 4Trade Enhancement and Compliance Provisions 

1. Repeal of exclusion for extraterritorial income ..................... [21] 453 880 1,436 3,636 5,490 5,714 5,983 6,22. Extend Customs User Fees: 

a. Passenger and conveyance processing fee 

(through 12/31/13) [20] ..................................................... DOE 148 377 396 416 437 459 482 5

b. Merchandise processing fee (through 12/31/13) [20] ..... DOE 537 1,042 1,094 1,149 1,206 1,266 1,330 1,3

Total of Trade Enhancement and Compliance Provisions ....................................... 1,138 2,299 2,926 5,201 7,133 7,439 7,795 8,1

 NET TOTAL ............................................................................................................ -994 -169 -6,456 -10,113 -3,404 -1,618 -6,718 -8,0

Joint Committee on Taxation 

-------------------------------------- NOTE: Details may not add to totals due to rounding. [Legend and Footnotes for JCX-95-03 appear on the following page] 
Page 6

Legend and Footnotes for JCX-95-03: Legend for "Effective" column: 

aa = acquisitions after dmi = distributions made in saptoe

apoamt = amounts paid or accrued more than iwea = individuals who expatriate after exearo/a = amounts received on or after eatma = elections and terminations made after sopra asbmpoia = articles sold by the manufacturer, producer, eia = expenses incurred after sota =  or importer after iaeio/a = installment agreements entered into on or after ta = tra

ata = actions taken after iri = interest received in teia = t

ctada = contributions, transfers, and distributions after lf = losses for tia = ta

cyba = calendar years beginning after pa = periods after tma = da = day after pada = purchases and dispositions after toa = tDa = distributions after pao/a = payments accrued on or after trda = dma = distributions made after pma = payments made after tyba = DOE = date of enactment rra = risk reinsured after tyea = 

30da = 

[1] Estimates have been revised. Note, non-manufacturing income is stacked first in the application of these proposals. [2] Overlap between the two rate reduction proposals (items A.1. and A.2.) is reflected in A.1.[3] Estimate has been revised to cover improvements only. [4] Loss of less than $500,000. [5] Effective for amounts deferred in taxable years beginning after December 31, 2003, except for amounts deferred in 2004 pursuant to an irrevocable election made pri

[6] Effective for taxable years of foreign corporations beginning after December 31, 2008, and taxable years of United States persons owning stock in such corporations 

corporation's taxable years end. 

[7] Effective for taxable years of foreign corporations beginning after December 31, 2006, and taxable years of United States persons owning stock in such corporations 

corporation's taxable years end. 

[8] Effective for taxable years of foreign corporations beginning after December 31, 2004, and taxable years of United States persons owning stock in such corporations 

corporation's taxable years end. 

[9] Estimate accounts for interaction with reduction to 2 foreign tax credit baskets in item H.3. 

[10] Effective for taxable years of foreign corporations beginning after December 31, 2004, and taxable years of U.S. shareholders ending with or within such taxable year

[11] Pre-effective date excess credits carried forward to new basket that would apply under new system. [12] Loss of less than $1 million. [13] Effective for vaccines sold beginning on the first day of the first month beginning more than four weeks after the date of enactment. 

[14] Provision will have partially offsetting effects on outlays which will be provided by the Congressional Budget Office. [15] Effective for taxable years beginning after 2003, and taxable years ending after March 4, 2003, for "surrogate" corporations with lookback to December 31, 1996.[16] Generally effective March 4, 2003. [17] Gain of less than $1 million. [18] Effective dates for provisions relating to reportable transactions and tax shelters: section 3001 is effective for returns and statements the due date of which is after th

section 3002 is effective for taxable years ending after the date of enactment; section 3003 is effective for communications made on or after the date of enactment; se

taxable years for which the statute of limitations under section 6501 has not run as of the date of enactment; section 3005 is effective for transactions with respect to wassistance or advice is provided after the date of enactment; section 3006 is effective for returns the due date for which is after the date of enactment; section 3007 is 

made after the date of enactment; and section 3008 is effective for activities after the date of enactment. 

[19] Gain of less than $500,000. [20] Estimate provided by the Congressional Budget Office. [21] Generally effective for transactions after 2003, with transition for transactions during 2004 through 2006.