IIB 

111TH CONGRESS 

1ST SESSION H. R. 4213 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 10, 2009 

Received; read twice and referred to the Committee on Finance 

AN ACT 

To amend the Internal Revenue Code of 1986 to extend 

certain expiring provisions, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; 

2 TABLE OF CONTENTS. 

3 (a) SHORT TITLE.—This Act may be cited as the 

4 ‘‘Tax Extenders Act of 2009’’. 

5 (b) AMENDMENT OF 1986 CODE.—Except as other6 wise expressly provided, whenever in this Act an amend7 ment or repeal is expressed in terms of an amendment 

8 to, or repeal of, a section or other provision, the reference 

9 shall be considered to be made to a section or other provi10 sion of the Internal Revenue Code of 1986. 

11 (c) TABLE OF CONTENTS.—The table of contents for 

12 this Act is as follows: 

Sec. 1. Short title; amendment of 1986 Code; table of contents. 

TITLE I—GENERAL PROVISIONS 

Subtitle A—Individual Tax Relief 

Sec. 101. Deduction of State and local sales taxes. 

Sec. 102. Additional standard deduction for State and local real property taxes. 

Sec. 103. Above-the-line deduction for qualified tuition and related expenses. 

Sec. 104. Deduction for certain expenses of elementary and secondary school 

teachers. 

Subtitle B—Business Tax Relief 

Sec. 111. Research credit. 

Sec. 112. Exceptions for active financing income. 

Sec. 113. Look-thru treatment of payments between related controlled foreign 

corporations under foreign personal holding company rules. 

Sec. 114. 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and 

qualified retail improvements. 

Sec. 115. 7-year recovery period for motorsports entertainment complexes. 

Sec. 116. Railroad track maintenance credit. 

Sec. 117. Special expensing rules for certain film and television productions. 

Sec. 118. Expensing of environmental remediation costs. 

Sec. 119. Mine rescue team training credit. 

Sec. 120. Election to expense advanced mine safety equipment. 

Sec. 121. Employer wage credit for employees who are active duty members of 

the uniformed services. 

Sec. 122. 5-year depreciation for farming business machinery and equipment. 


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Sec. 123. Treatment of certain dividends and assets of regulated investment 

companies. 

Sec. 124. Look-thru of certain regulated investment company stock in determining gross estate of nonresidents. 

Sec. 125. RIC qualified investment entity treatment under FIRPTA. 

Sec. 126. Suspension of limitation on percentage depletion for oil and gas from 

marginal wells. 

Subtitle C—Charitable Provisions 

Sec. 131. Contributions of capital gain real property made for conservation purposes. 

Sec. 132. Enhanced charitable deduction for contributions of food inventory. 

Sec. 133. Enhanced charitable deduction for contributions of book inventories 

to public schools. 

Sec. 134. Enhanced charitable deduction for corporate contributions of computer technology and equipment for educational purposes. 

Sec. 135. Tax-free distributions from individual retirement plans for charitable 

purposes. 

Sec. 136. Modification of tax treatment of certain payments to controlling exempt organizations. 

Sec. 137. Exclusion of gain or loss on sale or exchange of certain brownfield 

sites from unrelated business taxable income. 

Sec. 138. Basis adjustment to stock of S corporations making charitable contributions of property. 

Subtitle D—Miscellaneous Provisions 

Sec. 141. Indian employment tax credit. 

Sec. 142. Accelerated depreciation for business property on an Indian reservation. 

Sec. 143. Deduction allowable with respect to income attributable to domestic 

production activities in Puerto Rico. 

Sec. 144. Temporary increase in limit on cover over of rum excise taxes to 

Puerto Rico and the Virgin Islands. 

Sec. 145. American Samoa economic development credit. 

TITLE II—COMMUNITY ASSISTANCE PROVISIONS 

Sec. 201. Empowerment zone tax incentives. 

Sec. 202. Renewal community tax incentives. 

Sec. 203. New markets tax credit. 

Sec. 204. Tax incentives for investment in the District of Columbia. 

Sec. 205. Tax incentives for New York Liberty Zone. 

Sec. 206. Tax incentives for the Gulf Opportunity Zone. 

Sec. 207. Election for refundable low-income housing credit for 2010. 

TITLE III—DISASTER RELIEF PROVISIONS 

Sec. 301. Deductibility of personal casualty losses attributable to federally declared disasters. 

Sec. 302. Expensing of certain qualified disaster expenses. 

Sec. 303. 5-year carryback of net operating losses attributable to Federally declared disasters. 

Sec. 304. Waiver of certain mortgage revenue bond requirements for residences 

located in Federally declared disaster areas. 


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Sec. 305. Expensing and special depreciation allowance for qualified disaster 

assistance property. 

TITLE IV—ENERGY PROVISIONS 

Sec. 401. Incentives for biodiesel and renewable diesel. 

Sec. 402. Alternative motor vehicle credit for heavy hybrids. 

Sec. 403. Alternative fuel credit for natural gas and liquified petroleum gas. 

Sec. 404. Special rule for sales or dispositions to implement FERC or State 

electric restructuring policy for qualified electric utilities. 

TITLE V—FOREIGN ACCOUNT TAX COMPLIANCE 

Subtitle A—Increased Disclosure of Beneficial Owners 

Sec. 501. Reporting on certain foreign accounts. 

Sec. 502. Repeal of certain foreign exceptions to registered bond requirements. 

Subtitle B—Under Reporting With Respect to Foreign Assets 

Sec. 511. Disclosure of information with respect to foreign financial assets. 

Sec. 512. Penalties for underpayments attributable to undisclosed foreign financial assets. 

Sec. 513. Modification of statute of limitations for significant omission of income in connection with foreign assets. 

Subtitle C—Other Disclosure Provisions 

Sec. 521. Reporting of activities with respect to passive foreign investment companies. 

Sec. 522. Secretary permitted to require financial institutions to file certain returns related to withholding on foreign transfers electronically. 

Subtitle D—Provisions Related to Foreign Trusts 

Sec. 531. Clarifications with respect to foreign trusts which are treated as having a United States beneficiary. 

Sec. 532. Presumption that foreign trust has United States beneficiary. 

Sec. 533. Uncompensated use of trust property. 

Sec. 534. Reporting requirement of United States owners of foreign trusts. 

Sec. 535. Minimum penalty with respect to failure to report on certain foreign 

trusts. 

Subtitle E—Substitute Dividends and Dividend Equivalent Payments Received 

by Foreign Persons Treated as Dividends 

Sec. 541. Substitute dividends and dividend equivalent payments received by 

foreign persons treated as dividends. 

TITLE VI—OTHER REVENUE PROVISIONS 

Subtitle A—Partnership Interests Held by Partners Providing Services 

Sec. 601. Partnership interests transferred in connection with performance of 

services. 

Sec. 602. Income of partners for performing investment management services 

treated as ordinary income received for performance of services. 


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Subtitle B—Time for Payment of Corporate Estimated Taxes 

Sec. 611. Time for payment of corporate estimated taxes. 

Subtitle C—Tax Expenditure Study 

Sec. 621. Findings. 

Sec. 622. Study of extended tax expenditures. 

1 TITLE I—GENERAL PROVISIONS 

2 Subtitle A—Individual Tax Relief 

3 SEC. 101. DEDUCTION OF STATE AND LOCAL SALES TAXES. 

4 (a) IN GENERAL.—Subparagraph (I) of section 

5 164(b)(5) is amended by striking ‘‘January 1, 2010’’ and 

6 inserting ‘‘January 1, 2011’’. 

7 (b) EFFECTIVE DATE.—The amendment made by 

8 this section shall apply to taxable years beginning after 

9 December 31, 2009. 

10 SEC. 102. ADDITIONAL STANDARD DEDUCTION FOR STATE 

11 AND LOCAL REAL PROPERTY TAXES. 

12 (a) IN GENERAL.—Subparagraph (C) of section 

13 63(c)(1) is amended by striking ‘‘or 2009’’ and inserting 

14 ‘‘, 2009, or 2010’’. 

15 (b) EFFECTIVE DATE.—The amendment made by 

16 this section shall apply to taxable years beginning after 

17 December 31, 2009. 

18 SEC. 103. ABOVE-THE-LINE DEDUCTION FOR QUALIFIED 

19 TUITION AND RELATED EXPENSES. 

20 (a) IN GENERAL.—Subsection (e) of section 222 is 

21 amended by striking ‘‘December 31, 2009’’ and inserting 

22 ‘‘December 31, 2010’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2009. 

4 SEC. 104. DEDUCTION FOR CERTAIN EXPENSES OF ELE5 MENTARY AND SECONDARY SCHOOL TEACH6 ERS. 

7 (a) IN GENERAL.—Subparagraph (D) of section 

8 62(a)(2) is amended by striking ‘‘or 2009’’ and inserting 

9 ‘‘2009, or 2010’’. 

10 (b) EFFECTIVE DATE.—The amendment made by 

11 this section shall apply to taxable years beginning after 

12 December 31, 2009. 

13 Subtitle B—Business Tax Relief 

14 SEC. 111. RESEARCH CREDIT. 

15 (a) IN GENERAL.—Subparagraph (B) of section 

16 41(h)(1) is amended by striking ‘‘December 31, 2009’’ 

17 and inserting ‘‘December 31, 2010’’. 

18 (b) CONFORMING AMENDMENT.—Subparagraph (D) 

19 of section 45C(b)(1) is amended by striking ‘‘December 

20 31, 2009’’ and inserting ‘‘December 31, 2010’’. 

21 (c) EFFECTIVE DATE.—The amendment made by 

22 this section shall apply to amounts paid or incurred after 

23 December 31, 2009. 


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1 SEC. 112. EXCEPTIONS FOR ACTIVE FINANCING INCOME. 

2 (a) IN GENERAL.—Sections 953(e)(10) and 

3 954(h)(9) are each amended by striking ‘‘January 1, 

4 2010’’ and inserting ‘‘January 1, 2011’’. 

5 (b) CONFORMING AMENDMENT.—Section 953(e)(10) 

6 is amended by striking ‘‘December 31, 2009’’ and insert7 ing ‘‘December 31, 2010’’. 

8 (c) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to taxable years of foreign corpora10 tions beginning after December 31, 2009, and to taxable 

11 years of United States shareholders with or within which 

12 any such taxable year of such foreign corporation ends. 

13 SEC. 113. LOOK-THRU TREATMENT OF PAYMENTS BE14 TWEEN RELATED CONTROLLED FOREIGN 

15 CORPORATIONS UNDER FOREIGN PERSONAL 

16 HOLDING COMPANY RULES. 

17 (a) IN GENERAL.—Subparagraph (C) of section 

18 954(c)(6) is amended by striking ‘‘January 1, 2010’’ and 

19 inserting ‘‘January 1, 2011’’. 

20 (b) EFFECTIVE DATE.—The amendment made by 

21 this section shall apply to taxable years of foreign corpora22 tions beginning after December 31, 2009, and to taxable 

23 years of United States shareholders with or within which 

24 any such taxable year of such foreign corporation ends. 


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1 SEC. 114. 15-YEAR STRAIGHT-LINE COST RECOVERY FOR 

2 QUALIFIED LEASEHOLD IMPROVEMENTS, 

3 QUALIFIED RESTAURANT BUILDINGS AND IM4 PROVEMENTS, AND QUALIFIED RETAIL IM5 PROVEMENTS. 

6 (a) IN GENERAL.—Clauses (iv), (v), and (ix) of sec7 tion 168(e)(3)(E) are each amended by striking ‘‘January 

8 1, 2010’’ and inserting ‘‘January 1, 2011’’. 

9 (b) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to property placed in service after 

11 December 31, 2009. 

12 SEC. 115. 7-YEAR RECOVERY PERIOD FOR MOTORSPORTS 

13 ENTERTAINMENT COMPLEXES. 

14 (a) IN GENERAL.—Subparagraph (D) of section 

15 168(i)(15) is amended by striking ‘‘December 31, 2009’’ 

16 and inserting ‘‘December 31, 2010’’. 

17 (b) EFFECTIVE DATE.—The amendment made by 

18 this section shall apply to property placed in service after 

19 December 31, 2009. 

20 SEC. 116. RAILROAD TRACK MAINTENANCE CREDIT. 

21 (a) IN GENERAL.—Subsection (f) of section 45G is 

22 amended by striking ‘‘January 1, 2010’’ and inserting 

23 ‘‘January 1, 2011’’. 

24 (b) EFFECTIVE DATE.—The amendment made by 

25 this section shall apply to expenditures paid or incurred 

26 in taxable years beginning after December 31, 2009. 


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1 SEC. 117. SPECIAL EXPENSING RULES FOR CERTAIN FILM 

2 AND TELEVISION PRODUCTIONS. 

3 (a) IN GENERAL.—Subsection (f) of section 181 is 

4 amended by striking ‘‘December 31, 2009’’ and inserting 

5 ‘‘December 31, 2010’’. 

6 (b) EFFECTIVE DATE.—The amendment made by 

7 this section shall apply to productions commencing after 

8 December 31, 2009. 

9 SEC. 118. EXPENSING OF ENVIRONMENTAL REMEDIATION 

10 COSTS. 

11 (a) IN GENERAL.—Subsection (h) of section 198 is 

12 amended by striking ‘‘December 31, 2009’’ and inserting 

13 ‘‘December 31, 2010’’. 

14 (b) EFFECTIVE DATE.—The amendment made by 

15 this section shall apply to expenditures paid or incurred 

16 after December 31, 2009. 

17 SEC. 119. MINE RESCUE TEAM TRAINING CREDIT. 

18 (a) IN GENERAL.—Subsection (e) of section 45N is 

19 amended by striking ‘‘December 31, 2009’’ and inserting 

20 ‘‘December 31, 2010’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 this section shall apply to taxable years beginning after 

23 December 31, 2009. 


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1 SEC. 120. ELECTION TO EXPENSE ADVANCED MINE SAFETY 

2 EQUIPMENT. 

3 (a) IN GENERAL.—Subsection (g) of section 179E is 

4 amended by striking ‘‘December 31, 2009’’ and inserting 

5 ‘‘December 31, 2010’’. 

6 (b) EFFECTIVE DATE.—The amendment made by 

7 this section shall apply to property placed in service after 

8 December 31, 2009. 

9 SEC. 121. EMPLOYER WAGE CREDIT FOR EMPLOYEES WHO 

10 ARE ACTIVE DUTY MEMBERS OF THE UNI11 FORMED SERVICES. 

12 (a) IN GENERAL.—Subsection (f) of section 45P is 

13 amended by striking ‘‘December 31, 2009’’ and inserting 

14 ‘‘December 31, 2010’’. 

15 (b) EFFECTIVE DATE.—The amendment made by 

16 this section shall apply to payments made after December 

17 31, 2009. 

18 SEC. 122. 5-YEAR DEPRECIATION FOR FARMING BUSINESS 

19 MACHINERY AND EQUIPMENT. 

20 (a) IN GENERAL.—Clause (vii) of section 

21 168(e)(3)(B) is amended by striking ‘‘January 1, 2010’’ 

22 and inserting ‘‘January 1, 2011’’. 

23 (b) EFFECTIVE DATE.—The amendment made by 

24 this section shall apply to property placed in service after 

25 December 31, 2009. 


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1 SEC. 123. TREATMENT OF CERTAIN DIVIDENDS AND ASSETS 

2 OF REGULATED INVESTMENT COMPANIES. 

3 (a) IN GENERAL.—Paragraphs (1)(C) and (2)(C) of 

4 section 871(k) are each amended by striking ‘‘December 

5 31, 2009’’ and inserting ‘‘December 31, 2010’’. 

6 (b) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to taxable years beginning after 

8 December 31, 2009. 

9 SEC. 124. LOOK-THRU OF CERTAIN REGULATED INVEST10 MENT COMPANY STOCK IN DETERMINING 

11 GROSS ESTATE OF NONRESIDENTS. 

12 (a) IN GENERAL.—Paragraph (3) of section 2105(d) 

13 is amended by striking ‘‘December 31, 2009’’ and insert14 ing ‘‘December 31, 2010’’. 

15 (b) EFFECTIVE DATE.—The amendment made by 

16 this section shall apply to estates of decedents dying after 

17 December 31, 2009. 

18 SEC. 125. RIC QUALIFIED INVESTMENT ENTITY TREATMENT 

19 UNDER FIRPTA. 

20 (a) IN GENERAL.—Clause (ii) of section 

21 897(h)(4)(A) is amended by striking ‘‘December 31, 

22 2009’’ and inserting ‘‘December 31, 2010’’. 

23 (b) EFFECTIVE DATE.—The amendment made by 

24 this section shall apply to distributions made after Decem25 ber 31, 2009. 


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1 SEC. 126. SUSPENSION OF LIMITATION ON PERCENTAGE 

2 DEPLETION FOR OIL AND GAS FROM MAR3 GINAL WELLS. 

4 (a) IN GENERAL.—Clause (ii) of section 

5 613A(c)(6)(H) is amended by striking ‘‘January 1, 2010’’ 

6 and inserting ‘‘January 1, 2011’’. 

7 (b) EFFECTIVE DATE.—The amendment made by 

8 this section shall apply to taxable years beginning after 

9 December 31, 2009. 

10 Subtitle C—Charitable Provisions 

11 SEC. 131. CONTRIBUTIONS OF CAPITAL GAIN REAL PROP12 ERTY MADE FOR CONSERVATION PURPOSES. 

13 (a) IN GENERAL.—Clause (vi) of section 

14 170(b)(1)(E) is amended by striking ‘‘December 31, 

15 2009’’ and inserting ‘‘December 31, 2010’’. 

16 (b) CONTRIBUTIONS BY CERTAIN CORPORATE FARM17 ERS AND RANCHERS.—Clause (iii) of section 170(b)(2)(B) 

18 is amended by striking ‘‘December 31, 2009’’ and insert19 ing ‘‘December 31, 2010’’. 

20 (c) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to contributions made in taxable 

22 years beginning after December 31, 2009. 


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1 SEC. 132. ENHANCED CHARITABLE DEDUCTION FOR CON2 TRIBUTIONS OF FOOD INVENTORY. 

3 (a) IN GENERAL.—Clause (iv) of section 

4 170(e)(3)(C) is amended by striking ‘‘December 31, 

5 2009’’ and inserting ‘‘December 31, 2010’’. 

6 (b) EFFECTIVE DATE.—The amendment made by 

7 this section shall apply to contributions made after De8 cember 31, 2009. 

9 SEC. 133. ENHANCED CHARITABLE DEDUCTION FOR CON10 TRIBUTIONS OF BOOK INVENTORIES TO PUB11 LIC SCHOOLS. 

12 (a) IN GENERAL.—Clause (iv) of section 

13 170(e)(3)(D) is amended by striking ‘‘December 31, 

14 2009’’ and inserting ‘‘December 31, 2010’’. 

15 (b) EFFECTIVE DATE.—The amendment made by 

16 this section shall apply to contributions made after De17 cember 31, 2009. 

18 SEC. 134. ENHANCED CHARITABLE DEDUCTION FOR COR19 PORATE CONTRIBUTIONS OF COMPUTER 

20 TECHNOLOGY AND EQUIPMENT FOR EDU21 CATIONAL PURPOSES. 

22 (a) IN GENERAL.—Subparagraph (G) of section 

23 170(e)(6) is amended by striking ‘‘December 31, 2009’’ 

24 and inserting ‘‘December 31, 2010’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to contributions made in taxable 

3 years beginning after December 31, 2009. 

4 SEC. 135. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RE5 TIREMENT PLANS FOR CHARITABLE PUR6 POSES. 

7 (a) IN GENERAL.—Subparagraph (F) of section 

8 408(d)(8) is amended by striking ‘‘December 31, 2009’’ 

9 and inserting ‘‘December 31, 2010’’. 

10 (b) EFFECTIVE DATE.—The amendment made by 

11 this section shall apply to distributions made in taxable 

12 years beginning after December 31, 2009. 

13 SEC. 136. MODIFICATION OF TAX TREATMENT OF CERTAIN 

14 PAYMENTS TO CONTROLLING EXEMPT ORGA15 NIZATIONS. 

16 (a) IN GENERAL.—Clause (iv) of section 

17 512(b)(13)(E) is amended by striking ‘‘December 31, 

18 2009’’ and inserting ‘‘December 31, 2010’’. 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 this section shall apply to payments received or accrued 

21 after December 31, 2009. 


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1 SEC. 137. EXCLUSION OF GAIN OR LOSS ON SALE OR EX2 CHANGE OF CERTAIN BROWNFIELD SITES 

3 FROM UNRELATED BUSINESS TAXABLE IN4 COME. 

5 (a) IN GENERAL.—Subparagraph (K) of section 

6 512(b)(19) is amended by striking ‘‘December 31, 2009’’ 

7 and inserting ‘‘December 31, 2010’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall apply to property acquired after Decem10 ber 31, 2009. 

11 SEC. 138. BASIS ADJUSTMENT TO STOCK OF S CORPORA12 TIONS MAKING CHARITABLE CONTRIBU13 TIONS OF PROPERTY. 

14 (a) IN GENERAL.—Paragraph (2) of section 1367(a) 

15 is amended by striking ‘‘December 31, 2009’’ and insert16 ing ‘‘December 31, 2010’’. 

17 (b) EFFECTIVE DATE.—The amendment made by 

18 this section shall apply to contributions made in taxable 

19 years beginning after December 31, 2009. 

20 Subtitle D—Miscellaneous 

21 Provisions 

22 SEC. 141. INDIAN EMPLOYMENT TAX CREDIT. 

23 (a) IN GENERAL.—Subsection (f) of section 45A is 

24 amended by striking ‘‘December 31, 2009’’ and inserting 

25 ‘‘December 31, 2010’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2009. 

4 SEC. 142. ACCELERATED DEPRECIATION FOR BUSINESS 

5 PROPERTY ON AN INDIAN RESERVATION. 

6 (a) IN GENERAL.—Paragraph (8) of section 168(j) 

7 is amended by striking ‘‘December 31, 2009’’ and insert8 ing ‘‘December 31, 2010’’. 

9 (b) EFFECTIVE DATE.—The amendment made by 

10 this section shall apply to property placed in service after 

11 December 31, 2009. 

12 SEC. 143. DEDUCTION ALLOWABLE WITH RESPECT TO IN13 COME ATTRIBUTABLE TO DOMESTIC PRO14 DUCTION ACTIVITIES IN PUERTO RICO. 

15 (a) IN GENERAL.—Subparagraph (C) of section 

16 199(d)(8) is amended— 

17 (1) by striking ‘‘first 4 taxable years’’ and in18 serting ‘‘first 5 taxable years’’, and 

19 (2) by striking ‘‘January 1, 2010’’ and insert20 ing ‘‘January 1, 2011’’. 

21 (b) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to taxable years beginning after 

23 December 31, 2009. 


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1 SEC. 144. TEMPORARY INCREASE IN LIMIT ON COVER OVER 

2 OF RUM EXCISE TAXES TO PUERTO RICO AND 

3 THE VIRGIN ISLANDS. 

4 (a) IN GENERAL.—Paragraph (1) of section 7652(f) 

5 is amended by striking ‘‘January 1, 2010’’ and inserting 

6 ‘‘January 1, 2011’’. 

7 (b) EFFECTIVE DATE.—The amendment made by 

8 this section shall apply to distilled spirits brought into the 

9 United States after December 31, 2009. 

10 SEC. 145. AMERICAN SAMOA ECONOMIC DEVELOPMENT 

11 CREDIT. 

12 (a) IN GENERAL.—Subsection (d) of section 119 of 

13 division A of the Tax Relief and Health Care Act of 2006 

14 is amended— 

15 (1) by striking ‘‘first 4 taxable years’’ and in16 serting ‘‘first 5 taxable years’’, and 

17 (2) by striking ‘‘January 1, 2010’’ and insert18 ing ‘‘January 1, 2011’’. 

19 (b) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to taxable years beginning after 

21 December 31, 2009. 


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1 TITLE II—COMMUNITY 

2 ASSISTANCE PROVISIONS 

3 SEC. 201. EMPOWERMENT ZONE TAX INCENTIVES. 

4 (a) IN GENERAL.—Clause (i) of section 

5 1391(d)(1)(A) is amended by striking ‘‘December 31, 

6 2009’’ and inserting ‘‘December 31, 2010’’. 

7 (b) INCREASED EXCLUSION OF GAIN ON STOCK OF

8 EMPOWERMENT ZONE BUSINESSES.—Subparagraph (C) 

9 of section 1202(a)(2) is amended— 

10 (1) by striking ‘‘December 31, 2014’’ and in11 serting ‘‘December 31, 2015’’, and 

12 (2) by striking ‘‘2014’’ in the heading and in13 serting ‘‘2015’’. 

14 (c) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to periods after December 31, 

16 2009. 

17 SEC. 202. RENEWAL COMMUNITY TAX INCENTIVES. 

18 (a) IN GENERAL.—Subsection (b) of section 1400E 

19 is amended— 

20 (1) by striking ‘‘December 31, 2009’’ in para21 graphs (1)(A) and (3) and inserting ‘‘December 31, 

22 2010’’, and 

23 (2) by striking ‘‘January 1, 2010’’ in paragraph 

24 (3) and inserting ‘‘January 1, 2011’’. 

25 (b) ZERO-PERCENT CAPITAL GAINS RATE.— 


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1 (1) ACQUISITION DATES.—Paragraphs 

2 (2)(A)(i), (3)(A), (4)(A)(i), and (4)(B)(i) of section 

3 1400F(b) are each amended by striking ‘‘January 1, 

4 2010’’ and inserting ‘‘January 1, 2011’’. 

5 (2) LIMITATION ON PERIOD OF GAINS.—Para6 graph (2) of section 1400F(c) is amended— 

7 (A) by striking ‘‘December 31, 2014’’ and 

8 inserting ‘‘December 31, 2015’’, and 

9 (B) by striking ‘‘2014’’ in the heading and 

10 inserting ‘‘2015’’. 

11 (3) CLERICAL AMENDMENT.—Subsection (d) of 

12 section 1400F is amended by striking ‘‘and ‘Decem13 ber 31, 2014’ for ‘December 31, 2014’ ’’. 

14 (c) COMMERCIAL REVITALIZATION DEDUCTION.— 

15 Subsection (g) of section 1400I is amended by striking 

16 ‘‘December 31, 2009’’ and inserting ‘‘December 31, 

17 2010’’. 

18 (d) INCREASED EXPENSING UNDER SECTION 179.— 

19 Subparagraph (A) of section 1400J(b)(1) is amended by 

20 striking ‘‘January 1, 2010’’ and inserting ‘‘January 1, 

21 2011’’. 

22 (e) EFFECTIVE DATES.— 

23 (1) IN GENERAL.—Except as otherwise pro24 vided in this subsection, the amendments made by 


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1 this section shall apply to periods after December 

2 31, 2009. 

3 (2) ACQUISITIONS.—The amendments made by 

4 subsection (b)(1) and (d) shall apply to acquisitions 

5 after December 31, 2009. 

6 (3) COMMERCIAL REVITALIZATION DEDUC7 TION.—The amendment made by subsection (c) shall 

8 apply to building placed in service after December 

9 31, 2009. 

10 SEC. 203. NEW MARKETS TAX CREDIT. 

11 (a) IN GENERAL.—Subparagraph (F) of section 

12 45D(f)(1) is amended by inserting ‘‘and 2010’’ after 

13 ‘‘2009’’. 

14 (b) CARRYOVER OF UNUSED LIMITATION.—Para15 graph (3) of section 45D(f) is amended by striking 

16 ‘‘2014’’ and inserting ‘‘2015’’. 

17 (c) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to calendar years beginning after 

19 2009. 

20 SEC. 204. TAX INCENTIVES FOR INVESTMENT IN THE DIS21 TRICT OF COLUMBIA. 

22 (a) IN GENERAL.—Subsection (f) of section 1400 is 

23 amended by striking ‘‘December 31, 2009’’ each place it 

24 appears and inserting ‘‘December 31, 2010’’. 


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1 (b) TAX-EXEMPT DC EMPOWERMENT ZONE

2 BONDS.—Subsection (b) of section 1400A is amended by 

3 striking ‘‘December 31, 2009’’ and inserting ‘‘December 

4 31, 2010’’. 

5 (c) ZERO-PERCENT CAPITAL GAINS RATE.— 

6 (1) ACQUISITION DATES.—Paragraphs 

7 (2)(A)(i), (3)(A), (4)(A)(i), and (4)(B)(i)(I) of sec8 tion 1400B(b) are each amended by striking ‘‘Janu9 ary 1, 2010’’ and inserting ‘‘January 1, 2011’’. 

10 (2) LIMITATION ON PERIOD OF ZERO-PERCENT

11 CAPITAL GAINS.— 

12 (A) IN GENERAL.—Paragraph (2) of sec13 tion 1400B(e) is amended— 

14 (i) by striking ‘‘December 31, 2014’’ 

15 and inserting ‘‘December 31, 2015’’, and 

16 (ii) by striking ‘‘2014’’ in the heading 

17 and inserting ‘‘2015’’. 

18 (B) INTERESTS IN PARTNERSHIP AND S

19 CORPORATIONS.—Paragraph (2) of section 

20 1400B(g) is amended by striking ‘‘December 

21 31, 2014’’ and inserting ‘‘December 31, 2015’’. 

22 (d) FIRST-TIME HOMEBUYER CREDIT.—Subsection 

23 (i) of section 1400C is amended by striking ‘‘January 1, 

24 2010’’ and inserting ‘‘January 1, 2011’’. 

25 (e) EFFECTIVE DATES.— 


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1 (1) IN GENERAL.—Except as otherwise pro2 vided in this subsection, the amendments made by 

3 this section shall apply to periods after December 

4 31, 2009. 

5 (2) TAX-EXEMPT DC EMPOWERMENT ZONE

6 BONDS.—The amendment made by subsection (b) 

7 shall apply to bonds issued after December 31, 

8 2009. 

9 (3) ACQUISITION DATES FOR ZERO-PERCENT

10 CAPITAL GAINS RATE.—The amendments made by 

11 subsection (c)(1) shall apply to property acquired or 

12 substantially improved after December 31, 2009. 

13 (4) FIRST-TIME HOMEBUYER CREDIT.—The 

14 amendment made by subsection (d) shall apply to 

15 property purchased after December 31, 2009. 

16 SEC. 205. TAX INCENTIVES FOR NEW YORK LIBERTY ZONE. 

17 (a) BONUS DEPRECIATION FOR NONRESIDENTIAL

18 REAL PROPERTY AND RESIDENTIAL RENTAL PROP19 ERTY.—Subparagraph (A) of section 1400L(b)(2) is 

20 amended by striking ‘‘December 31, 2009’’ in the last sen21 tence and inserting ‘‘December 31, 2010’’. 

22 (b) TAX-EXEMPT BOND FINANCING.—Subparagraph 

23 (D) of section 1400L(d)(2) is amended by striking ‘‘Janu24 ary 1, 2010’’ and inserting ‘‘January 1, 2011’’. 

25 (c) EFFECTIVE DATES.— 


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1 (1) BONUS DEPRECIATION.—The amendment 

2 made by subsection (a) shall apply to property 

3 placed in service after December 31, 2009. 

4 (2) TAX-EXEMPT BOND FINANCING.—The 

5 amendment made by subsection (b) shall apply to 

6 bonds issued after December 31, 2009. 

7 SEC. 206. TAX INCENTIVES FOR THE GULF OPPORTUNITY 

8 ZONE. 

9 (a) WORK OPPORTUNITY TAX CREDIT FOR CORE

10 DISASTER AREA.—Paragraph (1) of section 201(b) of the 

11 Katrina Emergency Tax Relief Act of 2005 is amended 

12 by striking ‘‘4-year’’ and inserting ‘‘5-year’’. 

13 (b) INCREASE IN REHABILITATION CREDIT.—Sub14 section (h) of section 1400N is amended by striking ‘‘De15 cember 31, 2009’’ and inserting ‘‘December 31, 2010’’. 

16 (c) EFFECTIVE DATES.— 

17 (1) WORK OPPORTUNITY TAX CREDIT.—The 

18 amendment made by subsection (a) shall apply to in19 dividuals hired on or after August 28, 2009. 

20 (2) REHABILITATION CREDIT.—The amend21 ment made by subsection (b) shall apply to amounts 

22 paid or incurred after December 31, 2009. 


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1 SEC. 207. ELECTION FOR REFUNDABLE LOW-INCOME HOUS2 ING CREDIT FOR 2010. 

3 (a) IN GENERAL.—Section 42 is amended by redesig4 nating subsection (n) as subsection (o) and by inserting 

5 after subsection (m) the following new subsection: 

6 ‘‘(n) ELECTION FOR REFUNDABLE CREDITS.— 

7 ‘‘(1) IN GENERAL.—The housing credit agency 

8 of each State shall be allowed a credit in an amount 

9 equal to such State’s 2010 low-income housing re10 fundable credit election amount which shall be pay11 able by the Secretary as provided in paragraph (5). 

12 ‘‘(2) 2010 LOW-INCOME HOUSING REFUNDABLE

13 CREDIT ELECTION AMOUNT.—For purposes of this 

14 subsection, the term ‘2010 low-income housing re15 fundable credit election amount’ means, with respect 

16 to any State, such amount as the State may elect 

17 which does not exceed 85 percent of the product 

18 of— 

19 ‘‘(A) the sum of— 

20 ‘‘(i) 100 percent of the State housing 

21 credit ceiling for 2010 which is attrib22 utable to amounts described in clauses (i) 

23 and (iii) of subsection (h)(3)(C), and 

24 ‘‘(ii) 40 percent of the State housing 

25 credit ceiling for 2010 which is attribVerDate Nov 24 2008 00:30 Dec 11, 2009 Jkt 089200 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\H4213.RFS H4213

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1 utable to amounts described in clauses (ii) 

2 and (iv) of such subsection, multiplied by 

3 ‘‘(B) 10. 

4 ‘‘(3) COORDINATION WITH NON-REFUNDABLE

5 CREDIT.—For purposes of this section, the amounts 

6 described in clauses (i) through (iv) of subsection 

7 (h)(3)(C) with respect to any State for 2010 shall 

8 each be reduced by so much of such amount as is 

9 taken into account in determining the amount of the 

10 credit allowed with respect to such State under para11 graph (1). 

12 ‘‘(4) SPECIAL RULE FOR BASIS.—Basis of a 

13 qualified low-income building shall not be reduced by 

14 the amount of any payment made under this sub15 section. 

16 ‘‘(5) PAYMENT OF CREDIT; USE TO FINANCE

17 LOW-INCOME BUILDINGS.—The Secretary shall pay 

18 to the housing credit agency of each State an 

19 amount equal to the credit allowed under paragraph 

20 (1). Rules similar to the rules of subsections (c) and 

21 (d) of section 1602 of the American Recovery and 

22 Reinvestment Tax Act of 2009 shall apply with re23 spect to any payment made under this paragraph, 

24 except that such subsection (d) shall be applied by 


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1 substituting ‘January 1, 2012’ for ‘January 1, 

2 2011’.’’. 

3 (b) CONFORMING AMENDMENT.—Section 1324(b)(2) 

4 of title 31, United States Code, is amended by inserting 

5 ‘‘42(n),’’ after ‘‘36A,’’. 

6 TITLE III—DISASTER RELIEF 

7 PROVISIONS 

8 SEC. 301. DEDUCTIBILITY OF PERSONAL CASUALTY LOSSES 

9 ATTRIBUTABLE TO FEDERALLY DECLARED 

10 DISASTERS. 

11 (a) IN GENERAL.—Subclause (I) of section 

12 165(h)(3)(B)(i) is amended by striking ‘‘January 1, 

13 2010’’ and inserting ‘‘January 1, 2011’’. 

14 (b) EXTENSION OF $500 LIMITATION.—Paragraph 

15 (1) of section 165(h) is amended by striking ‘‘December 

16 31, 2009’’ and inserting ‘‘December 31, 2010’’. 

17 (c) EFFECTIVE DATE.— 

18 (1) IN GENERAL.—Except as otherwise pro19 vided in this subsection, the amendments made by 

20 this section shall apply to losses attributable to dis21 asters occurring after December 31, 2009. 

22 (2) EXTENSION OF $500 LIMITATION.—The 

23 amendment made by subsection (b) shall apply to 

24 taxable years beginning after December 31, 2009. 


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1 SEC. 302. EXPENSING OF CERTAIN QUALIFIED DISASTER 

2 EXPENSES. 

3 (a) IN GENERAL.—Subparagraph (A) of section 

4 198A(b)(2) is amended by striking ‘‘January 1, 2010’’ 

5 and inserting ‘‘January 1, 2011’’. 

6 (b) EFFECTIVE DATE.—The amendment made by 

7 this section shall apply to expenditures on account of dis8 asters occurring after December 31, 2009. 

9 SEC. 303. 5-YEAR CARRYBACK OF NET OPERATING LOSSES 

10 ATTRIBUTABLE TO FEDERALLY DECLARED 

11 DISASTERS. 

12 (a) IN GENERAL.—Subclause (I) of section 

13 172(j)(1)(A)(i) is amended by striking ‘‘January 1, 2010’’ 

14 and inserting ‘‘January 1, 2011’’. 

15 (b) EFFECTIVE DATE.—The amendment made by 

16 this section shall apply to losses attributable to disasters 

17 occurring after December 31, 2009. 

18 SEC. 304. WAIVER OF CERTAIN MORTGAGE REVENUE BOND 

19 REQUIREMENTS FOR RESIDENCES LOCATED 

20 IN FEDERALLY DECLARED DISASTER AREAS. 

21 (a) IN GENERAL.—Paragraph (11) of section 143(k) 

22 is amended by striking ‘‘January 1, 2010’’ and inserting 

23 ‘‘January 1, 2011’’. 

24 (b) SPECIAL RULE FOR RESIDENCES DESTROYED IN

25 FEDERALLY DECLARED DISASTER AREAS.—Paragraph 

26 (13) of section 143(k), as redesignated under subsection 


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1 (c), is amended by striking ‘‘January 1, 2010’’ in subpara2 graphs (A)(i) and (B)(i) and inserting ‘‘January 1, 2011’’. 

3 (c) TECHNICAL AMENDMENT.—Subsection (k) of sec4 tion 143 is amended by redesignating the second para5 graph (12) (relating to special rules for residences de6 stroyed in Federally declared disasters) as paragraph 

7 (13). 

8 (d) EFFECTIVE DATES.— 

9 (1) IN GENERAL.—Except as otherwise pro10 vided in this subsection, the amendments made by 

11 this section shall apply to bonds issued after Decem12 ber 31, 2009. 

13 (2) RESIDENCES DESTROYED IN FEDERALLY

14 DECLARED DISASTER AREAS.—The amendments 

15 made by subsection (b) shall apply with respect to 

16 disasters occurring after December 31, 2009. 

17 (3) TECHNICAL AMENDMENT.—The amendment 

18 made by subsection (c) shall take effect as if in19 cluded in section 709 of the Tax Extenders and Al20 ternative Minimum Tax Relief Act of 2008. 


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1 SEC. 305. EXPENSING AND SPECIAL DEPRECIATION ALLOW2 ANCE FOR QUALIFIED DISASTER ASSISTANCE 

3 PROPERTY. 

4 (a) IN GENERAL.—Subclause (I) of section 

5 168(n)(2)(A)(ii) is amended by striking ‘‘January 1, 

6 2010’’ and inserting ‘‘January 1, 2011’’. 

7 (b) EFFECTIVE DATE.—The amendment made by 

8 this section shall apply to disasters occurring after Decem9 ber 31, 2009. 

10 TITLE IV—ENERGY PROVISIONS 

11 SEC. 401. INCENTIVES FOR BIODIESEL AND RENEWABLE 

12 DIESEL. 

13 (a) CREDITS FOR BIODIESEL AND RENEWABLE DIE14 SEL USED AS FUEL.—Subsection (g) of section 40A is 

15 amended by striking ‘‘December 31, 2009’’ and inserting 

16 ‘‘December 31, 2010’’. 

17 (b) EXCISE TAX CREDITS AND PAYMENTS FOR BIO18 DIESEL AND RENEWABLE DIESEL FUEL MIXTURES.— 

19 (1) Paragraph (6) of section 6426(c) is amend20 ed by striking ‘‘December 31, 2009’’ and inserting 

21 ‘‘December 31, 2010’’. 

22 (2) Subparagraph (B) of section 6427(e)(6) is 

23 amended by striking ‘‘December 31, 2009’’ and in24 serting ‘‘December 31, 2010’’. 


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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to sales and uses after December 

3 31, 2009. 

4 SEC. 402. ALTERNATIVE MOTOR VEHICLE CREDIT FOR 

5 HEAVY HYBRIDS. 

6 (a) IN GENERAL.—Paragraph (3) of section 30B(k) 

7 is amended by striking ‘‘December 31, 2009’’ and insert8 ing ‘‘December 31, 2010’’. 

9 (b) EFFECTIVE DATE.—The amendment made by 

10 this section shall apply to property purchased after De11 cember 31, 2009. 

12 SEC. 403. ALTERNATIVE FUEL CREDIT FOR NATURAL GAS 

13 AND LIQUIFIED PETROLEUM GAS. 

14 (a) IN GENERAL.—Paragraph (5) of section 6426(d) 

15 is amended by striking ‘‘after December 31, 2009’’ and 

16 all that follows and inserting ‘‘after— 

17 ‘‘(A) September 30, 2014, in the case of 

18 liquefied hydrogen, 

19 ‘‘(B) December 31, 2010, in the case of— 

20 ‘‘(i) compressed or liquified natural 

21 gas, and 

22 ‘‘(ii) liquified petroleum gas (other 

23 than for use as fuel in a forklift), and 

24 ‘‘(C) December 31, 2009, in any other 

25 case.’’. 


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1 (b) PAYMENT AUTHORITY.—Paragraph (6) of section 

2 6427(e) is amended by striking ‘‘and’’ at the end of sub3 paragraph (C), by striking the period at the end of sub4 paragraph (D) and inserting a comma and by adding at 

5 the end the following new subparagraphs: 

6 ‘‘(E) any alternative fuel (as so defined) 

7 involving compressed or liquified natural gas 

8 sold or used after December 31, 2010, and 

9 ‘‘(F) any alternative fuel (as so defined) 

10 involving liquified petroleum gas (other than for 

11 use as fuel in a forklift) sold or used after De12 cember 31, 2010.’’. 

13 (c) CONFORMING AMENDMENT.—Subparagraph (C) 

14 of section 6427(e)(6) is amended by inserting ‘‘(E), or 

15 (F)’’ after ‘‘subparagraph (D)’’. 

16 (d) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to fuel sold or used after December 

18 31, 2009. 

19 SEC. 404. SPECIAL RULE FOR SALES OR DISPOSITIONS TO 

20 IMPLEMENT FERC OR STATE ELECTRIC RE21 STRUCTURING POLICY FOR QUALIFIED ELEC22 TRIC UTILITIES. 

23 (a) IN GENERAL.—Paragraph (3) of section 451(i) 

24 is amended by striking ‘‘January 1, 2010’’ and inserting 

25 ‘‘January 1, 2011’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to dispositions after December 31, 

3 2009. 

4 TITLE V—FOREIGN ACCOUNT 

5 TAX COMPLIANCE 

6 Subtitle A—Increased Disclosure of 

7 Beneficial Owners 

8 SEC. 501. REPORTING ON CERTAIN FOREIGN ACCOUNTS. 

9 (a) IN GENERAL.—The Internal Revenue Code of 

10 1986 is amended by inserting after chapter 3 the following 

11 new chapter: 

12 ‘‘CHAPTER 4—TAXES TO ENFORCE RE13 PORTING ON CERTAIN FOREIGN AC14 COUNTS 

‘‘Sec. 1471. Withholdable payments to foreign financial institutions. 

‘‘Sec. 1472. Withholdable payments to other foreign entities. 

‘‘Sec. 1473. Definitions. 

‘‘Sec. 1474. Special rules. 

15 ‘‘SEC. 1471. WITHHOLDABLE PAYMENTS TO FOREIGN FI16 NANCIAL INSTITUTIONS. 

17 ‘‘(a) IN GENERAL.—In the case of any withholdable 

18 payment to a foreign financial institution which does not 

19 meet the requirements of subsection (b), the withholding 

20 agent with respect to such payment shall deduct and with21 hold from such payment a tax equal to 30 percent of the 

22 amount of such payment. 

23 ‘‘(b) REPORTING REQUIREMENTS, ETC.— 


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1 ‘‘(1) IN GENERAL.—The requirements of this 

2 subsection are met with respect to any foreign finan3 cial institution if an agreement is in effect between 

4 such institution and the Secretary under which such 

5 institution agrees— 

6 ‘‘(A) to obtain such information regarding 

7 each holder of each account maintained by such 

8 institution as is necessary to determine which 

9 (if any) of such accounts are United States ac10 counts, 

11 ‘‘(B) to comply with such verification and 

12 due diligence procedures as the Secretary may 

13 require with respect to the identification of 

14 United States accounts, 

15 ‘‘(C) in the case of any United States ac16 count maintained by such institution, to report 

17 on an annual basis the information described in 

18 subsection (c) with respect to such account, 

19 ‘‘(D) to deduct and withhold a tax equal to 

20 30 percent of— 

21 ‘‘(i) any passthru payment which is 

22 made by such institution to a recalcitrant 

23 account holder or another foreign financial 

24 institution which does not meet the re25 quirements of this subsection, and 


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1 ‘‘(ii) in the case of any passthru pay2 ment which is made by such institution to 

3 a foreign financial institution which has in 

4 effect an election under paragraph (3) with 

5 respect to such payment, so much of such 

6 payment as is allocable to accounts held by 

7 recalcitrant account holders or foreign fi8 nancial institutions which do not meet the 

9 requirements of this subsection, 

10 ‘‘(E) to comply with requests by the Sec11 retary for additional information with respect to 

12 any United States account maintained by such 

13 institution, and 

14 ‘‘(F) in any case in which any foreign law 

15 would (but for a waiver described in clause (i)) 

16 prevent the reporting of any information re17 ferred to in this subsection or subsection (c) 

18 with respect to any United States account 

19 maintained by such institution— 

20 ‘‘(i) to attempt to obtain a valid and 

21 effective waiver of such law from each 

22 holder of such account, and 

23 ‘‘(ii) if a waiver described in clause (i) 

24 is not obtained from each such holder 


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1 within a reasonable period of time, to close 

2 such account. 

3 Any agreement entered into under this subsection 

4 may be terminated by the Secretary upon a deter5 mination by the Secretary that the foreign financial 

6 institution is out of compliance with such agreement. 

7 ‘‘(2) FINANCIAL INSTITUTIONS DEEMED TO

8 MEET REQUIREMENTS IN CERTAIN CASES.—A for9 eign financial institution may be treated by the Sec10 retary as meeting the requirements of this sub11 section if— 

12 ‘‘(A) such institution— 

13 ‘‘(i) complies with such procedures as 

14 the Secretary may prescribe to ensure that 

15 such institution does not maintain United 

16 States accounts, and 

17 ‘‘(ii) meets such other requirements as 

18 the Secretary may prescribe with respect 

19 to accounts of other foreign financial insti20 tutions maintained by such institution, or 

21 ‘‘(B) such institution is a member of a 

22 class of institutions with respect to which the 

23 Secretary has determined that the application 

24 of this section is not necessary to carry out the 

25 purposes of this section. 


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1 ‘‘(3) ELECTION TO BE WITHHELD UPON RATH2 ER THAN WITHHOLD ON PAYMENTS TO RECAL3 CITRANT ACCOUNT HOLDERS AND NONPARTICI4 PATING FOREIGN FINANCIAL INSTITUTIONS.—In the 

5 case of a foreign financial institution which meets 

6 the requirements of this subsection and such other 

7 requirements as the Secretary may provide and 

8 which elects the application of this paragraph— 

9 ‘‘(A) the requirements of paragraph (1)(D) 

10 shall not apply, 

11 ‘‘(B) the withholding tax imposed under 

12 subsection (a) shall apply with respect to any 

13 withholdable payment to such institution to the 

14 extent such payment is allocable to accounts 

15 held by recalcitrant account holders or foreign 

16 financial institutions which do not meet the re17 quirements of this subsection, and 

18 ‘‘(C) the agreement described in paragraph 

19 (1) shall— 

20 ‘‘(i) require such institution to notify 

21 the withholding agent with respect to each 

22 such payment of the institution’s election 

23 under this paragraph and such other infor24 mation as may be necessary for the with25 holding agent to determine the appropriate 


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1 amount to deduct and withhold from such 

2 payment, and 

3 ‘‘(ii) include a waiver of any right 

4 under any treaty of the United States with 

5 respect to any amount deducted and with6 held pursuant to an election under this 

7 paragraph. 

8 To the extent provided by the Secretary, the election 

9 under this paragraph may be made with respect to 

10 certain classes or types of accounts of the foreign fi11 nancial institution. 

12 ‘‘(c) INFORMATION REQUIRED TO BE REPORTED ON

13 UNITED STATES ACCOUNTS.— 

14 ‘‘(1) IN GENERAL.—The agreement described in 

15 subsection (b) shall require the foreign financial in16 stitution to report the following with respect to each 

17 United States account maintained by such institu18 tion: 

19 ‘‘(A) The name, address, and TIN of each 

20 account holder which is a specified United 

21 States person and, in the case of any account 

22 holder which is a United States owned foreign 

23 entity, the name, address, and TIN of each sub24 stantial United States owner of such entity. 

25 ‘‘(B) The account number. 


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1 ‘‘(C) The account balance or value (deter2 mined at such time and in such manner as the 

3 Secretary may provide). 

4 ‘‘(D) The gross receipts and gross with5 drawals or payments from the account (deter6 mined for such period and in such manner as 

7 the Secretary may provide). 

8 ‘‘(2) ELECTION TO BE SUBJECT TO SAME RE9 PORTING AS UNITED STATES FINANCIAL INSTITU10 TIONS.—In the case of a foreign financial institution 

11 which elects the application of this paragraph— 

12 ‘‘(A) subparagraphs (C) and (D) of para13 graph (1) shall not apply, and 

14 ‘‘(B) the agreement described in subsection 

15 (b) shall require such foreign financial institu16 tion to report such information with respect to 

17 each United States account maintained by such 

18 institution as such institution would be required 

19 to report under sections 6041, 6042, 6045, and 

20 6049 if— 

21 ‘‘(i) such institution were a United 

22 States person, and 

23 ‘‘(ii) each holder of such account 

24 which is a specified United States person 

25 or United States owned foreign entity were 


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1 a natural person and citizen of the United 

2 States. 

3 An election under this paragraph shall be made 

4 at such time, in such manner, and subject to 

5 such conditions as the Secretary may provide. 

6 ‘‘(3) SEPARATE REQUIREMENTS FOR QUALI7 FIED INTERMEDIARIES.—In the case of a foreign fi8 nancial institution which is treated as a qualified 

9 intermediary by the Secretary for purposes of sec10 tion 1441 and the regulations issued thereunder, the 

11 requirements of this section shall be in addition to 

12 any reporting or other requirements imposed by the 

13 Secretary for purposes of such treatment. 

14 ‘‘(d) DEFINITIONS.—For purposes of this section— 

15 ‘‘(1) UNITED STATES ACCOUNT.— 

16 ‘‘(A) IN GENERAL.—The term ‘United 

17 States account’ means any financial account 

18 which is held by one or more specified United 

19 States persons or United States owned foreign 

20 entities. 

21 ‘‘(B) EXCEPTION FOR CERTAIN ACCOUNTS

22 HELD BY INDIVIDUALS.—Unless the foreign fi23 nancial institution elects to not have this sub24 paragraph apply, such term shall not include 


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1 any depository account maintained by such fi2 nancial institution if— 

3 ‘‘(i) each holder of such account is a 

4 natural person, and 

5 ‘‘(ii) with respect to each holder of 

6 such account, the aggregate value of all de7 pository accounts held (in whole or in part) 

8 by such holder and maintained by the 

9 same financial institution which maintains 

10 such account does not exceed $50,000. 

11 To the extent provided by the Secretary, finan12 cial institutions which are members of the same 

13 expanded affiliated group shall be treated for 

14 purposes of clause (ii) as a single financial in15 stitution. 

16 ‘‘(C) ELIMINATION OF DUPLICATIVE RE17 PORTING REQUIREMENTS.—Such term shall not 

18 include any financial account in a foreign finan19 cial institution if— 

20 ‘‘(i) such account is held by another 

21 financial institution which meets the re22 quirements of subsection (b), or 

23 ‘‘(ii) the holder of such account is oth24 erwise subject to information reporting re25 quirements which the Secretary determines 


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1 would make the reporting required by this 

2 section with respect to United States ac3 counts duplicative. 

4 ‘‘(2) FINANCIAL ACCOUNT.—The term ‘finan5 cial account’ means, with respect to any financial in6 stitution— 

7 ‘‘(A) any depository account maintained by 

8 such financial institution, 

9 ‘‘(B) any custodial account maintained by 

10 such financial institution, and 

11 ‘‘(C) except as otherwise provided by the 

12 Secretary, any equity or debt interest in such 

13 financial institution (other than interests which 

14 are regularly traded on an established securities 

15 market). 

16 Any equity or debt interest which constitutes a fi17 nancial account under subparagraph (C) with re18 spect to any financial institution shall be treated for 

19 purposes of this section as maintained by such fi20 nancial institution. 

21 ‘‘(3) UNITED STATES OWNED FOREIGN ENTI22 TY.—The term ‘United States owned foreign entity’ 

23 means any foreign entity which has one or more sub24 stantial United States owners. 


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1 ‘‘(4) FOREIGN FINANCIAL INSTITUTION.—The 

2 term ‘foreign financial institution’ means any finan3 cial institution which is a foreign entity. Except as 

4 otherwise provided by the Secretary, such term shall 

5 not include a financial institution which is organized 

6 under the laws of any possession of the United 

7 States. 

8 ‘‘(5) FINANCIAL INSTITUTION.—Except as oth9 erwise provided by the Secretary, the term ‘financial 

10 institution’ means any entity that— 

11 ‘‘(A) accepts deposits in the ordinary 

12 course of a banking or similar business, 

13 ‘‘(B) is engaged in the business of holding 

14 financial assets for the account of others, or 

15 ‘‘(C) is engaged (or holding itself out as 

16 being engaged) primarily in the business of in17 vesting, reinvesting, or trading in securities (as 

18 defined in section 475(c)(2) without regard to 

19 the last sentence thereof), partnership interests, 

20 commodities (as defined in section 475(e)(2)), 

21 or any interest (including a futures or forward 

22 contract or option) in such securities, partner23 ship interests, or commodities. 


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1 ‘‘(6) RECALCITRANT ACCOUNT HOLDER.—The 

2 term ‘recalcitrant account holder’ means any ac3 count holder which— 

4 ‘‘(A) fails to comply with reasonable re5 quests for the information referred to in sub6 section (b)(1)(A) or (c)(1)(A), or 

7 ‘‘(B) fails to provide a waiver described in 

8 subsection (b)(1)(F) upon request. 

9 ‘‘(7) PASSTHRU PAYMENT.—The term ‘passthru 

10 payment’ means any withholdable payment or other 

11 payment which is attributable to a withholdable pay12 ment. 

13 ‘‘(e) AFFILIATED GROUPS.— 

14 ‘‘(1) IN GENERAL.—The requirements of sub15 sections (b) and (c)(1) shall apply— 

16 ‘‘(A) with respect to United States ac17 counts maintained by the foreign financial insti18 tution, and 

19 ‘‘(B) except as otherwise provided by the 

20 Secretary, with respect to United States ac21 counts maintained by each other foreign finan22 cial institution (other than any foreign financial 

23 institution which meets the requirements of 

24 subsection (b)) which is a member of the same 


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1 expanded affiliated group as such foreign finan2 cial institution. 

3 ‘‘(2) EXPANDED AFFILIATED GROUP.—For pur4 poses of this section, the term ‘expanded affiliated 

5 group’ means an affiliated group as defined in sec6 tion 1504(a), determined— 

7 ‘‘(A) by substituting ‘more than 50 per8 cent’ for ‘at least 80 percent’ each place it ap9 pears, and 

10 ‘‘(B) without regard to paragraphs (2) and 

11 (3) of section 1504(b). 

12 A partnership or any other entity (other than a cor13 poration) shall be treated as a member of an ex14 panded affiliated group if such entity is controlled 

15 (within the meaning of section 954(d)(3)) by mem16 bers of such group (including any entity treated as 

17 a member of such group by reason of this sentence). 

18 ‘‘(f) EXCEPTION FOR CERTAIN PAYMENTS.—Sub19 section (a) shall not apply to any payment if the beneficial 

20 owner of such payment is— 

21 ‘‘(1) any foreign government, any political sub22 division of a foreign government, or any wholly 

23 owned agency or instrumentality of any one or more 

24 of the foregoing, 


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1 ‘‘(2) any international organization or any 

2 wholly owned agency or instrumentality thereof, 

3 ‘‘(3) any foreign central bank of issue, or 

4 ‘‘(4) any other class of persons identified by the 

5 Secretary for purposes of this subsection as posing 

6 a low risk of tax evasion. 

7 ‘‘SEC. 1472. WITHHOLDABLE PAYMENTS TO OTHER FOR8 EIGN ENTITIES. 

9 ‘‘(a) IN GENERAL.—In the case of any withholdable 

10 payment to a non-financial foreign entity, if— 

11 ‘‘(1) the beneficial owner of such payment is 

12 such entity or any other non-financial foreign entity, 

13 and 

14 ‘‘(2) the requirements of subsection (b) are not 

15 met with respect to such beneficial owner, 

16 then the withholding agent with respect to such payment 

17 shall deduct and withhold from such payment a tax equal 

18 to 30 percent of the amount of such payment. 

19 ‘‘(b) REQUIREMENTS FOR WAIVER OF WITH20 HOLDING.—The requirements of this subsection are met 

21 with respect to the beneficial owner of a payment if— 

22 ‘‘(1) such beneficial owner or the payee provides 

23 the withholding agent with either— 


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1 ‘‘(A) a certification that such beneficial 

2 owner does not have any substantial United 

3 States owners, or 

4 ‘‘(B) the name, address, and TIN of each 

5 substantial United States owner of such bene6 ficial owner, 

7 ‘‘(2) the withholding agent does not know, or 

8 have reason to know, that any information provided 

9 under paragraph (1) is incorrect, and 

10 ‘‘(3) the withholding agent reports the informa11 tion provided under paragraph (1)(B) to the Sec12 retary in such manner as the Secretary may provide. 

13 ‘‘(c) EXCEPTIONS.—Subsection (a) shall not apply 

14 to— 

15 ‘‘(1) except as otherwise provided by the Sec16 retary, any payment beneficially owned by— 

17 ‘‘(A) any corporation the stock of which is 

18 regularly traded on an established securities 

19 market, 

20 ‘‘(B) any corporation which is a member of 

21 the same expanded affiliated group (as defined 

22 in section 1471(e)(2) without regard to the last 

23 sentence thereof) as a corporation described in 

24 subparagraph (A), 


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1 ‘‘(C) any entity which is organized under 

2 the laws of a possession of the United States 

3 and which is wholly owned by one or more bona 

4 fide residents (as defined in section 937(a)) of 

5 such possession, 

6 ‘‘(D) any foreign government, any political 

7 subdivision of a foreign government, or any 

8 wholly owned agency or instrumentality of any 

9 one or more of the foregoing, 

10 ‘‘(E) any international organization or any 

11 wholly owned agency or instrumentality thereof, 

12 ‘‘(F) any foreign central bank of issue, or 

13 ‘‘(G) any other class of persons identified 

14 by the Secretary for purposes of this subsection, 

15 and 

16 ‘‘(2) any class of payments identified by the 

17 Secretary for purposes of this subsection as posing 

18 a low risk of tax evasion. 

19 ‘‘(d) NON-FINANCIAL FOREIGN ENTITY.—For pur20 poses of this section, the term ‘non-financial foreign enti21 ty’ means any foreign entity which is not a financial insti22 tution (as defined in section 1471(d)(5)). 

23 ‘‘SEC. 1473. DEFINITIONS. 

24 ‘‘For purposes of this chapter— 


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1 ‘‘(1) WITHHOLDABLE PAYMENT.—Except as 

2 otherwise provided by the Secretary— 

3 ‘‘(A) IN GENERAL.—The term 

4 ‘withholdable payment’ means— 

5 ‘‘(i) any payment of interest (includ6 ing any original issue discount), dividends, 

7 rents, salaries, wages, premiums, annuities, 

8 compensations, remunerations, emolu9 ments, and other fixed or determinable an10 nual or periodical gains, profits, and in11 come, if such payment is from sources 

12 within the United States, and 

13 ‘‘(ii) any gross proceeds from the sale 

14 or other disposition of any property of a 

15 type which can produce interest or divi16 dends from sources within the United 

17 States. 

18 ‘‘(B) EXCEPTION FOR INCOME CONNECTED

19 WITH UNITED STATES BUSINESS.—Such term 

20 shall not include any item of income which is 

21 taken into account under section 871(b)(1) or 

22 882(a)(1) for the taxable year. 

23 ‘‘(C) SPECIAL RULE FOR SOURCING INTER24 EST PAID BY FOREIGN BRANCHES OF DOMESTIC


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1 FINANCIAL INSTITUTIONS.—Subparagraph (B) 

2 of section 861(a)(1) shall not apply. 

3 ‘‘(2) SUBSTANTIAL UNITED STATES OWNER.— 

4 ‘‘(A) IN GENERAL.—The term ‘substantial 

5 United States owner’ means— 

6 ‘‘(i) with respect to any corporation, 

7 any specified United States person which 

8 owns, directly or indirectly, more than 10 

9 percent of the stock of such corporation 

10 (by vote or value), 

11 ‘‘(ii) with respect to any partnership, 

12 any specified United States person which 

13 owns, directly or indirectly, more than 10 

14 percent of the profits interests or capital 

15 interests in such partnership, and 

16 ‘‘(iii) in the case of a trust— 

17 ‘‘(I) any specified United States 

18 person treated as an owner of any 

19 portion of such trust under subpart E 

20 of part I of subchapter J of chapter 

21 1, and 

22 ‘‘(II) to the extent provided by 

23 the Secretary in regulations or other 

24 guidance, any specified United States 

25 person which holds, directly or indiVerDate Nov 24 2008 00:30 Dec 11, 2009 Jkt 089200 PO 00000 Frm 00049 Fmt 6652 Sfmt 6201 E:\BILLS\H4213.RFS H4213

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1 rectly, more than 10 percent of the 

2 beneficial interests of such trust. 

3 ‘‘(B) SPECIAL RULE FOR INVESTMENT VE4 HICLES.—In the case of any financial institu5 tion described in section 1471(d)(5)(C), clauses 

6 (i), (ii), and (iii) of subparagraph (A) shall be 

7 applied by substituting ‘0 percent’ for ‘10 per8 cent’. 

9 ‘‘(3) SPECIFIED UNITED STATES PERSON.—Ex10 cept as otherwise provided by the Secretary, the 

11 term ‘specified United States person’ means any 

12 United States person other than— 

13 ‘‘(A) any corporation the stock of which is 

14 regularly traded on an established securities 

15 market, 

16 ‘‘(B) any corporation which is a member of 

17 the same expanded affiliated group (as defined 

18 in section 1471(e)(2) without regard to the last 

19 sentence thereof) as a corporation the stock of 

20 which is regularly traded on an established se21 curities market, 

22 ‘‘(C) any organization exempt from tax23 ation under section 501(a) or an individual re24 tirement plan, 


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1 ‘‘(D) the United States or any wholly 

2 owned agency or instrumentality thereof, 

3 ‘‘(E) any State, the District of Columbia, 

4 any possession of the United States, any polit5 ical subdivision of any of the foregoing, or any 

6 wholly owned agency or instrumentality of any 

7 one or more of the foregoing, 

8 ‘‘(F) any bank (as defined in section 581), 

9 ‘‘(G) any real estate investment trust (as 

10 defined in section 856), 

11 ‘‘(H) any regulated investment company 

12 (as defined in section 851), 

13 ‘‘(I) any common trust fund (as defined in 

14 section 584(a)), and 

15 ‘‘(J) any trust which— 

16 ‘‘(i) is exempt from tax under section 

17 664(c), or 

18 ‘‘(ii) is described in section 

19 4947(a)(1). 

20 ‘‘(4) WITHHOLDING AGENT.—The term ‘with21 holding agent’ means all persons, in whatever capac22 ity acting, having the control, receipt, custody, dis23 posal, or payment of any withholdable payment. 


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1 ‘‘(5) FOREIGN ENTITY.—The term ‘foreign en2 tity’ means any entity which is not a United States 

3 person. 

4 ‘‘SEC. 1474. SPECIAL RULES. 

5 ‘‘(a) LIABILITY FOR WITHHELD TAX.—Every person 

6 required to deduct and withhold any tax under this chap7 ter is hereby made liable for such tax and is hereby indem8 nified against the claims and demands of any person for 

9 the amount of any payments made in accordance with the 

10 provisions of this chapter. 

11 ‘‘(b) CREDITS AND REFUNDS.— 

12 ‘‘(1) IN GENERAL.—Except as provided in para13 graph (2), the determination of whether any tax de14 ducted and withheld under this chapter results in an 

15 overpayment by the beneficial owner of the payment 

16 to which such tax is attributable shall be made as 

17 if such tax had been deducted and withheld under 

18 subchapter A of chapter 3. 

19 ‘‘(2) SPECIAL RULE WHERE FOREIGN FINAN20 CIAL INSTITUTION IS BENEFICIAL OWNER OF PAY21 MENT.— 

22 ‘‘(A) IN GENERAL.—In the case of any tax 

23 properly deducted and withheld under section 

24 1471 from a specified financial institution pay25 ment— 


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1 ‘‘(i) if the foreign financial institution 

2 referred to in subparagraph (B) with re3 spect to such payment is entitled to a re4 duced rate of tax with respect to such pay5 ment by reason of any treaty obligation of 

6 the United States— 

7 ‘‘(I) the amount of any credit or 

8 refund with respect to such tax shall 

9 not exceed the amount of credit or re10 fund attributable to such reduction in 

11 rate, and 

12 ‘‘(II) no interest shall be allowed 

13 or paid with respect to such credit or 

14 refund, and 

15 ‘‘(ii) if such foreign financial institu16 tion is not so entitled, no credit or refund 

17 shall be allowed or paid with respect to 

18 such tax. 

19 ‘‘(B) SPECIFIED FINANCIAL INSTITUTION

20 PAYMENT.—The term ‘specified financial insti21 tution payment’ means any payment if the ben22 eficial owner of such payment is a foreign fi23 nancial institution. 

24 ‘‘(3) REQUIREMENT TO IDENTIFY SUBSTANTIAL

25 UNITED STATES OWNERS.—No credit or refund shall 


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1 be allowed or paid with respect to any tax properly 

2 deducted and withheld under this chapter unless the 

3 beneficial owner of the payment provides the Sec4 retary such information as the Secretary may re5 quire to determine whether such beneficial owner is 

6 a United States owned foreign entity (as defined in 

7 section 1471(d)(3)) and the identity of any substan8 tial United States owners of such entity. 

9 ‘‘(c) CONFIDENTIALITY OF INFORMATION.— 

10 ‘‘(1) IN GENERAL.—For purposes of this chap11 ter, rules similar to the rules of section 3406(f) shall 

12 apply. 

13 ‘‘(2) DISCLOSURE OF LIST OF PARTICIPATING

14 FOREIGN FINANCIAL INSTITUTIONS PERMITTED.— 

15 The identity of a foreign financial institution which 

16 meets the requirements of section 1471(b) shall not 

17 be treated as return information for purposes of sec18 tion 6103. 

19 ‘‘(d) COORDINATION WITH OTHER WITHHOLDING

20 PROVISIONS.—The Secretary shall provide for the coordi21 nation of this chapter with other withholding provisions 

22 under this title, including providing for the proper cred23 iting of amounts deducted and withheld under this chapter 

24 against amounts required to be deducted and withheld 

25 under such other provisions. 


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1 ‘‘(e) TREATMENT OF WITHHOLDING UNDER AGREE2 MENTS.—Any tax deducted and withheld pursuant to an 

3 agreement described in section 1471(b) shall be treated 

4 for purposes of this title as a tax deducted and withheld 

5 by a withholding agent under section 1471(a). 

6 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

7 such regulations or other guidance as may be necessary 

8 or appropriate to carry out the purposes of this chapter.’’. 

9 (b) SPECIAL RULE FOR INTEREST ON OVERPAY10 MENTS.—Subsection (e) of section 6611 is amended by 

11 adding at the end the following new paragraph: 

12 ‘‘(4) CERTAIN WITHHOLDING TAXES.—In the 

13 case of any overpayment resulting from tax deducted 

14 and withheld under chapter 3 or 4, paragraphs (1), 

15 (2), and (3) shall be applied by substituting ‘180 

16 days’ for ‘45 days’ each place it appears.’’. 

17 (c) CONFORMING AMENDMENTS.— 

18 (1) Section 6414 is amended by inserting ‘‘or 

19 4’’ after ‘‘chapter 3’’. 

20 (2) Paragraph (1) of section 6501(b) is amend21 ed by inserting ‘‘4,’’ after ‘‘chapter 3,’’. 

22 (3) Paragraph (2) of section 6501(b) is amend23 ed— 

24 (A) by inserting ‘‘4,’’ after ‘‘chapter 3,’’ in 

25 the text thereof, and 


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1 (B) by striking ‘‘TAXES AND TAX IMPOSED

2 BY CHAPTER 3’’ in the heading thereof and in3 serting ‘‘AND WITHHOLDING TAXES’’. 

4 (4) Paragraph (3) of section 6513(b) is amend5 ed— 

6 (A) by inserting ‘‘or 4’’ after ‘‘chapter 3’’, 

7 and 

8 (B) by inserting ‘‘or 1474(b)’’ after ‘‘sec9 tion 1462’’. 

10 (5) Subsection (c) of section 6513 is amended 

11 by inserting ‘‘4,’’ after ‘‘chapter 3,’’. 

12 (6) Paragraph (1) of section 6724(d) is amend13 ed by inserting ‘‘under chapter 4 or’’ after ‘‘filed 

14 with the Secretary’’ in the last sentence thereof. 

15 (7) Paragraph (2) of section 6724(d) is amend16 ed by inserting ‘‘or 4’’ after ‘‘chapter 3’’. 

17 (8) The table of chapters of the Internal Rev18 enue Code of 1986 is amended by adding at the end 

19 the following new item: 

‘‘CHAPTER 4. TAXES TO ENFORCE REPORTING ON CERTAIN FOREIGN

ACCOUNTS.’’. 

20 (d) EFFECTIVE DATE.— 

21 (1) IN GENERAL.—Except as otherwise pro22 vided in this subsection, the amendments made by 

23 this section shall apply to payments made after De24 cember 31, 2012. 


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1 (2) GRANDFATHERED TREATMENT OF OUT2 STANDING OBLIGATIONS.—The amendments made 

3 by this section shall not require any amount to be 

4 deducted or withheld from any payment under any 

5 obligation outstanding on the date which is 2 years 

6 after the date of the enactment of this Act. 

7 (3) INTEREST ON OVERPAYMENTS.—The 

8 amendment made by subsection (b) shall apply— 

9 (A) in the case of such amendment’s appli10 cation to paragraph (1) of section 6611(e) of 

11 the Internal Revenue Code of 1986, to returns 

12 the due date for which (determined without re13 gard to extensions) is after the date of the en14 actment of this Act, 

15 (B) in the case of such amendment’s appli16 cation to paragraph (2) of such section, to 

17 claims for credit or refund of any overpayment 

18 filed after the date of the enactment of this Act 

19 (regardless of the taxable period to which such 

20 refund relates), and 

21 (C) in the case of such amendment’s appli22 cation to paragraph (3) of such section, to re23 funds paid after the date of the enactment of 

24 this Act (regardless of the taxable period to 

25 which such refund relates). 


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1 SEC. 502. REPEAL OF CERTAIN FOREIGN EXCEPTIONS TO 

2 REGISTERED BOND REQUIREMENTS. 

3 (a) REPEAL OF EXCEPTION TO DENIAL OF DEDUC4 TION FOR INTEREST ON NON-REGISTERED BONDS.— 

5 (1) IN GENERAL.—Paragraph (2) of section 

6 163(f) is amended by striking subparagraph (B) and 

7 by redesignating subparagraph (C) as subparagraph 

8 (B). 

9 (2) CONFORMING AMENDMENTS.— 

10 (A) Subparagraph (A) of section 163(f)(2) 

11 is amended by inserting ‘‘or’’ at the end of 

12 clause (ii), by striking ‘‘, or’’ at the end of 

13 clause (iii) and inserting a period, and by strik14 ing clause (iv). 

15 (B) Subparagraph (B) of section 

16 163(f)(2), as redesignated by paragraph (1), is 

17 amended— 

18 (i) by striking ‘‘, and subparagraph 

19 (B),’’ in the matter preceding clause (i), 

20 and 

21 (ii) by amending clause (i) to read as 

22 follows: 

23 ‘‘(i) such obligation is of a type which 

24 the Secretary has determined by regula25 tions to be used frequently in avoiding 

26 Federal taxes, and’’. 


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1 (C) Sections 165(j)(2)(A) and 1287(b)(1) 

2 are each amended by striking ‘‘except that 

3 clause (iv) of subparagraph (A), and subpara4 graph (B), of such section shall not apply’’. 

5 (b) REPEAL OF TREATMENT AS PORTFOLIO DEBT.— 

6 (1) IN GENERAL.—Paragraph (2) of section 

7 871(h) is amended to read as follows: 

8 ‘‘(2) PORTFOLIO INTEREST.—For purposes of 

9 this subsection, the term ‘portfolio interest’ means 

10 any interest (including original issue discount) 

11 which— 

12 ‘‘(A) would be subject to tax under sub13 section (a) but for this subsection, and 

14 ‘‘(B) is paid on an obligation— 

15 ‘‘(i) which is in registered form, and 

16 ‘‘(ii) with respect to which— 

17 ‘‘(I) the United States person 

18 who would otherwise be required to 

19 deduct and withhold tax from such in20 terest under section 1441(a) receives 

21 a statement (which meets the require22 ments of paragraph (5)) that the ben23 eficial owner of the obligation is not a 

24 United States person, or 


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1 ‘‘(II) the Secretary has deter2 mined that such a statement is not re3 quired in order to carry out the pur4 poses of this subsection.’’. 

5 (2) CONFORMING AMENDMENTS.— 

6 (A) Section 871(h)(3)(A) is amended by 

7 striking ‘‘subparagraph (A) or (B) of’’. 

8 (B) Paragraph (2) of section 881(c) is 

9 amended to read as follows: 

10 ‘‘(2) PORTFOLIO INTEREST.—For purposes of 

11 this subsection, the term ‘portfolio interest’ means 

12 any interest (including original issue discount) 

13 which— 

14 ‘‘(A) would be subject to tax under sub15 section (a) but for this subsection, and 

16 ‘‘(B) is paid on an obligation— 

17 ‘‘(i) which is in registered form, and 

18 ‘‘(ii) with respect to which— 

19 ‘‘(I) the person who would other20 wise be required to deduct and with21 hold tax from such interest under sec22 tion 1442(a) receives a statement 

23 which meets the requirements of sec24 tion 871(h)(5) that the beneficial 


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1 owner of the obligation is not a 

2 United States person, or 

3 ‘‘(II) the Secretary has deter4 mined that such a statement is not re5 quired in order to carry out the pur6 poses of this subsection.’’. 

7 (c) DEMATERIALIZED BOOK ENTRY SYSTEMS

8 TREATED AS REGISTERED FORM.—Paragraph (3) of sec9 tion 163(f) is amended by inserting ‘‘, except that a dema10 terialized book entry system shall be treated as a book 

11 entry system described in such section’’ before the period 

12 at the end. 

13 (d) REPEAL OF EXCEPTION TO REQUIREMENT THAT

14 TREASURY OBLIGATIONS BE IN REGISTERED FORM.— 

15 (1) IN GENERAL.—Subsection (g) of section 

16 3121 of title 31, United States Code, is amended by 

17 striking paragraph (2) and by redesignating para18 graphs (3) and (4) as paragraphs (2) and (3), re19 spectively. 

20 (2) CONFORMING AMENDMENTS.—Paragraph 

21 (1) of section 3121(g) of such title is amended— 

22 (A) by adding ‘‘or’’ at the end of subpara23 graph (A), 

24 (B) by striking ‘‘; or’’ at the end of sub25 paragraph (B) and inserting a period, and 


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1 (C) by striking subparagraph (C). 

2 (e) PRESERVATION OF EXCEPTION FOR EXCISE TAX

3 PURPOSES.—Paragraph (1) of section 4701(b) is amend4 ed to read as follows: 

5 ‘‘(1) REGISTRATION-REQUIRED OBLIGATION.— 

6 ‘‘(A) IN GENERAL.—The term ‘registra7 tion-required obligation’ has the same meaning 

8 as when used in section 163(f), except that 

9 such term shall not include any obligation 

10 which— 

11 ‘‘(i) is required to be registered under 

12 section 149(a), or 

13 ‘‘(ii) is described in subparagraph (B). 

14 ‘‘(B) CERTAIN OBLIGATIONS NOT IN15 CLUDED.—An obligation is described in this 

16 subparagraph if— 

17 ‘‘(i) there are arrangements reason18 ably designed to ensure that such obliga19 tion will be sold (or resold in connection 

20 with the original issue) only to a person 

21 who is not a United States person, 

22 ‘‘(ii) interest on such obligation is 

23 payable only outside the United States and 

24 its possessions, and 


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1 ‘‘(iii) on the face of such obligation 

2 there is a statement that any United 

3 States person who holds such obligation 

4 will be subject to limitations under the 

5 United States income tax laws.’’. 

6 (f) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to obligations issued after the date 

8 which is 2 years after the date of the enactment of this 

9 Act. 

10 Subtitle B—Under Reporting With 

11 Respect to Foreign Assets 

12 SEC. 511. DISCLOSURE OF INFORMATION WITH RESPECT 

13 TO FOREIGN FINANCIAL ASSETS. 

14 (a) IN GENERAL.—Subpart A of part III of sub15 chapter A of chapter 61 is amended by inserting after sec16 tion 6038C the following new section: 

17 ‘‘SEC. 6038D. INFORMATION WITH RESPECT TO FOREIGN FI18 NANCIAL ASSETS. 

19 ‘‘(a) IN GENERAL.—Any individual who, during any 

20 taxable year, holds any interest in a specified foreign fi21 nancial asset shall attach to such person’s return of tax 

22 imposed by subtitle A for such taxable year the informa23 tion described in subsection (c) with respect to each such 

24 asset if the aggregate value of all such assets exceeds 


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1 $50,000 (or such higher dollar amount as the Secretary 

2 may prescribe). 

3 ‘‘(b) SPECIFIED FOREIGN FINANCIAL ASSETS.—For 

4 purposes of this section, the term ‘specified foreign finan5 cial asset’ means— 

6 ‘‘(1) any financial account (as defined in section 

7 1471(d)(2)) maintained by a foreign financial insti8 tution (as defined in section 1471(d)(4)), and 

9 ‘‘(2) any of the following assets which are not 

10 held in an account maintained by a financial institu11 tion (as defined in section 1471(d)(5))— 

12 ‘‘(A) any stock or security issued by a per13 son other than a United States person, 

14 ‘‘(B) any financial instrument or contract 

15 held for investment that has an issuer or 

16 counterparty which is other than a United 

17 States person, and 

18 ‘‘(C) any interest in a foreign entity (as 

19 defined in section 1473). 

20 ‘‘(c) REQUIRED INFORMATION.—The information de21 scribed in this subsection with respect to any asset is: 

22 ‘‘(1) In the case of any account, the name and 

23 address of the financial institution in which such ac24 count is maintained and the number of such ac25 count. 


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1 ‘‘(2) In the case of any stock or security, the 

2 name and address of the issuer and such informa3 tion as is necessary to identify the class or issue of 

4 which such stock or security is a part. 

5 ‘‘(3) In the case of any other instrument, con6 tract, or interest— 

7 ‘‘(A) such information as is necessary to 

8 identify such instrument, contract, or interest, 

9 and 

10 ‘‘(B) the names and addresses of all 

11 issuers and counterparties with respect to such 

12 instrument, contract, or interest. 

13 ‘‘(4) The maximum value of the asset during 

14 the taxable year. 

15 ‘‘(d) PENALTY FOR FAILURE TO DISCLOSE.— 

16 ‘‘(1) IN GENERAL.—If any individual fails to 

17 furnish the information described in subsection (c) 

18 with respect to any taxable year at the time and in 

19 the manner described in subsection (a), such person 

20 shall pay a penalty of $10,000. 

21 ‘‘(2) INCREASE IN PENALTY WHERE FAILURE

22 CONTINUES AFTER NOTIFICATION.—If any failure 

23 described in paragraph (1) continues for more than 

24 90 days after the day on which the Secretary mails 

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1 vidual shall pay a penalty (in addition to the pen2 alties under paragraph (1)) of $10,000 for each 30- 

3 day period (or fraction thereof) during which such 

4 failure continues after the expiration of such 90-day 

5 period. The penalty imposed under this paragraph 

6 with respect to any failure shall not exceed $50,000. 

7 ‘‘(e) PRESUMPTION THAT VALUE OF SPECIFIED

8 FOREIGN FINANCIAL ASSETS EXCEEDS DOLLAR

9 THRESHOLD.—If— 

10 ‘‘(1) the Secretary determines that an indi11 vidual has an interest in one or more specified for12 eign financial assets, and 

13 ‘‘(2) such individual does not provide sufficient 

14 information to demonstrate the aggregate value of 

15 such assets, 

16 then the aggregate value of such assets shall be treated 

17 as being in excess of $50,000 (or such higher dollar 

18 amount as the Secretary prescribes for purposes of sub19 section (a)) for purposes of assessing the penalties im20 posed under this section. 

21 ‘‘(f) APPLICATION TO CERTAIN ENTITIES.—To the 

22 extent provided by the Secretary in regulations or other 

23 guidance, the provisions of this section shall apply to any 

24 domestic entity which is formed or availed of for purposes 

25 of holding, directly or indirectly, specified foreign financial 


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1 assets, in the same manner as if such entity were an indi2 vidual. 

3 ‘‘(g) REASONABLE CAUSE EXCEPTION.—No penalty 

4 shall be imposed by this section on any failure which is 

5 shown to be due to reasonable cause and not due to willful 

6 neglect. The fact that a foreign jurisdiction would impose 

7 a civil or criminal penalty on the taxpayer (or any other 

8 person) for disclosing the required information is not rea9 sonable cause. 

10 ‘‘(h) REGULATIONS.—The Secretary shall prescribe 

11 such regulations or other guidance as may be necessary 

12 or appropriate to carry out the purposes of this section, 

13 including regulations or other guidance which provide ap14 propriate exceptions from the application of this section 

15 in the case of— 

16 ‘‘(1) classes of assets identified by the Sec17 retary, including any assets with respect to which 

18 the Secretary determines that disclosure under this 

19 section would be duplicative of other disclosures, 

20 ‘‘(2) nonresident aliens, and 

21 ‘‘(3) bona fide residents of any possession of 

22 the United States.’’. 

23 (b) CLERICAL AMENDMENT.—The table of sections 

24 for subpart A of part III of subchapter A of chapter 61 


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1 is amended by inserting after the item relating to section 

2 6038C the following new item: 

‘‘Sec. 6038D. Information with respect to foreign financial assets.’’. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to taxable years beginning after 

5 the date of the enactment of this Act. 

6 SEC. 512. PENALTIES FOR UNDERPAYMENTS ATTRIB7 UTABLE TO UNDISCLOSED FOREIGN FINAN8 CIAL ASSETS. 

9 (a) IN GENERAL.—Section 6662 is amended— 

10 (1) in subsection (b), by inserting after para11 graph (5) the following new paragraph: 

12 ‘‘(6) Any undisclosed foreign financial asset un13 derstatement.’’, and 

14 (2) by adding at the end the following new sub15 section: 

16 ‘‘(i) UNDISCLOSED FOREIGN FINANCIAL ASSET UN17 DERSTATEMENT.— 

18 ‘‘(1) IN GENERAL.—For purposes of this sec19 tion, the term ‘undisclosed foreign financial asset 

20 understatement’ means, for any taxable year, the 

21 portion of the understatement for such taxable year 

22 which is attributable to any transaction involving an 

23 undisclosed foreign financial asset. 

24 ‘‘(2) UNDISCLOSED FOREIGN FINANCIAL

25 ASSET.—For purposes of this subsection, the term 


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1 ‘undisclosed foreign financial asset’ means, with re2 spect to any taxable year, any asset with respect to 

3 which information was required to be provided under 

4 section 6038, 6038B, 6038D, 6046A, or 6048 for 

5 such taxable year but was not provided by the tax6 payer as required under the provisions of those sec7 tions. 

8 ‘‘(3) INCREASE IN PENALTY FOR UNDISCLOSED

9 FOREIGN FINANCIAL ASSET UNDERSTATEMENTS.— 

10 In the case of any portion of an underpayment 

11 which is attributable to any undisclosed foreign fi12 nancial asset understatement, subsection (a) shall be 

13 applied with respect to such portion by substituting 

14 ‘40 percent’ for ‘20 percent’.’’. 

15 (b) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to taxable years beginning after 

17 the date of the enactment of this Act. 

18 SEC. 513. MODIFICATION OF STATUTE OF LIMITATIONS 

19 FOR SIGNIFICANT OMISSION OF INCOME IN 

20 CONNECTION WITH FOREIGN ASSETS. 

21 (a) EXTENSION OF STATUTE OF LIMITATIONS.— 

22 (1) IN GENERAL.—Paragraph (1) of section 

23 6501(e) is amended by redesignating subparagraphs 

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1 tively, and by inserting before subparagraph (B) (as 

2 so redesignated) the following new subparagraph: 

3 ‘‘(A) GENERAL RULE.—If the taxpayer 

4 omits from gross income an amount properly 

5 includible therein and— 

6 ‘‘(i) such amount is in excess of 25 

7 percent of the amount of gross income 

8 stated in the return, or 

9 ‘‘(ii) such amount— 

10 ‘‘(I) is attributable to one or 

11 more assets with respect to which in12 formation is required to be reported 

13 under section 6038D (or would be so 

14 required if such section were applied 

15 without regard to the dollar threshold 

16 specified in subsection (a) thereof and 

17 without regard to any exceptions pro18 vided pursuant to subsection (h)(1) 

19 thereof), and 

20 ‘‘(II) is in excess of $5,000, 

21 the tax may be assessed, or a proceeding in 

22 court for collection of such tax may be begun 

23 without assessment, at any time within 6 years 

24 after the return was filed.’’. 

25 (2) CONFORMING AMENDMENTS.— 


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1 (A) Subparagraph (B) of section 

2 6501(e)(1), as redesignated by paragraph (1), 

3 is amended by striking all that precedes clause 

4 (i) and inserting the following: 

5 ‘‘(B) DETERMINATION OF GROSS IN6 COME.—For purposes of subparagraph (A)—’’. 

7 (B) Paragraph (2) of section 6229(c) is 

8 amended by striking ‘‘which is in excess of 25 

9 percent of the amount of gross income stated in 

10 its return’’ and inserting ‘‘and such amount is 

11 described in clause (i) or (ii) of section 

12 6501(e)(1)(A)’’. 

13 (b) ADDITIONAL REPORTS SUBJECT TO EXTENDED

14 PERIOD.—Paragraph (8) of section 6501(c) is amended— 

15 (1) by inserting ‘‘pursuant to an election under 

16 section 1295(b) or’’ before ‘‘under section 6038’’, 

17 (2) by inserting ‘‘1298(f),’’ before ‘‘6038’’, and 

18 (3) by inserting ‘‘6038D,’’ after ‘‘6038B,’’. 

19 (c) CLARIFICATIONS RELATED TO FAILURE TO DIS20 CLOSE FOREIGN TRANSFERS.—Paragraph (8) of section 

21 6501(c) is amended by striking ‘‘event’’ and inserting ‘‘tax 

22 return, event,’’. 

23 (d) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to— 


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1 (1) returns filed after the date of the enactment 

2 of this Act; and 

3 (2) returns filed on or before such date if the 

4 period specified in section 6501 of the Internal Rev5 enue Code of 1986 (determined without regard to 

6 such amendments) for assessment of such taxes has 

7 not expired as of such date. 

8 Subtitle C—Other Disclosure 

9 Provisions 

10 SEC. 521. REPORTING OF ACTIVITIES WITH RESPECT TO 

11 PASSIVE FOREIGN INVESTMENT COMPANIES. 

12 (a) IN GENERAL.—Section 1298 is amended by re13 designating subsection (f) as subsection (g) and by insert14 ing after subsection (e) the following new subsection: 

15 ‘‘(f) REPORTING REQUIREMENT.—Except as other16 wise provided by the Secretary, each United States person 

17 who is a shareholder of a passive foreign investment com18 pany shall file an annual report containing such informa19 tion as the Secretary may require.’’. 

20 (b) CONFORMING AMENDMENT.—Subsection (e) of 

21 section 1291 is amended by striking ‘‘, (d), and (f)’’ and 

22 inserting ‘‘and (d)’’. 

23 (c) EFFECTIVE DATE.—The amendments made by 

24 this section take effect on the date of the enactment of 

25 this Act. 


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1 SEC. 522. SECRETARY PERMITTED TO REQUIRE FINANCIAL 

2 INSTITUTIONS TO FILE CERTAIN RETURNS 

3 RELATED TO WITHHOLDING ON FOREIGN 

4 TRANSFERS ELECTRONICALLY. 

5 (a) IN GENERAL.—Subsection (e) of section 6011 is 

6 amended by adding at the end the following new para7 graph: 

8 ‘‘(3) SPECIAL RULE FOR RETURNS FILED BY

9 FINANCIAL INSTITUTIONS WITH RESPECT TO WITH10 HOLDING ON FOREIGN TRANSFERS.—Paragraph 

11 (2)(A) shall not apply to any return filed by a finan12 cial institution (as defined in section 1471(d)(5)) 

13 with respect to tax for which such institution is 

14 made liable under section 1461 or 1474(a).’’. 

15 (b) CONFORMING AMENDMENT.—Subsection (c) of 

16 section 6724 is amended by inserting ‘‘or with respect to 

17 a return described in section 6011(e)(3)’’. 

18 (c) EFFECTIVE DATE.—The amendment made by 

19 this section shall apply to returns the due date for which 

20 (determined without regard to extensions) is after the date 

21 of the enactment of this Act. 


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1 Subtitle D—Provisions Related to 

2 Foreign Trusts 

3 SEC. 531. CLARIFICATIONS WITH RESPECT TO FOREIGN 

4 TRUSTS WHICH ARE TREATED AS HAVING A 

5 UNITED STATES BENEFICIARY. 

6 (a) IN GENERAL.—Paragraph (1) of section 679(c) 

7 is amended by adding at the end the following: 

8 ‘‘For purposes of subparagraph (A), an amount 

9 shall be treated as accumulated for the benefit of a 

10 United States person even if the United States per11 son’s interest in the trust is contingent on a future 

12 event.’’. 

13 (b) CLARIFICATION REGARDING DISCRETION TO

14 IDENTIFY BENEFICIARIES.—Subsection (c) of section 679 

15 is amended by adding at the end the following new para16 graph: 

17 ‘‘(4) SPECIAL RULE IN CASE OF DISCRETION TO

18 IDENTIFY BENEFICIARIES.—For purposes of para19 graph (1)(A), if any person has the discretion (by 

20 authority given in the trust agreement, by power of 

21 appointment, or otherwise) of making a distribution 

22 from the trust to, or for the benefit of, any person, 

23 such trust shall be treated as having a beneficiary 

24 who is a United States person unless— 


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1 ‘‘(A) the terms of the trust specifically 

2 identify the class of persons to whom such dis3 tributions may be made, and 

4 ‘‘(B) none of those persons are United 

5 States persons during the taxable year.’’. 

6 (c) CLARIFICATION THAT CERTAIN AGREEMENTS

7 AND UNDERSTANDINGS ARE TERMS OF THE TRUST.— 

8 Subsection (c) of section 679, as amended by subsection 

9 (b), is amended by adding at the end the following new 

10 paragraph: 

11 ‘‘(5) CERTAIN AGREEMENTS AND UNDER12 STANDINGS TREATED AS TERMS OF THE TRUST.— 

13 For purposes of paragraph (1)(A), if any United 

14 States person who directly or indirectly transfers 

15 property to the trust is directly or indirectly involved 

16 in any agreement or understanding (whether writ17 ten, oral, or otherwise) that may result in the in18 come or corpus of the trust being paid or accumu19 lated to or for the benefit of a United States person, 

20 such agreement or understanding shall be treated as 

21 a term of the trust.’’. 


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1 SEC. 532. PRESUMPTION THAT FOREIGN TRUST HAS 

2 UNITED STATES BENEFICIARY. 

3 (a) IN GENERAL.—Section 679 is amended by redes4 ignating subsection (d) as subsection (e) and inserting 

5 after subsection (c) the following new subsection: 

6 ‘‘(d) PRESUMPTION THAT FOREIGN TRUST HAS

7 UNITED STATES BENEFICIARY.—If a United States per8 son directly or indirectly transfers property to a foreign 

9 trust (other than a trust described in section 

10 6048(a)(3)(B)(ii)), the Secretary may treat such trust as 

11 having a United States beneficiary for purposes of apply12 ing this section to such transfer unless such person— 

13 ‘‘(1) submits such information to the Secretary 

14 as the Secretary may require with respect to such 

15 transfer, and 

16 ‘‘(2) demonstrates to the satisfaction of the 

17 Secretary that such trust satisfies the requirements 

18 of subparagraphs (A) and (B) of subsection (c)(1).’’. 

19 (b) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to transfers of property after the 

21 date of the enactment of this Act. 

22 SEC. 533. UNCOMPENSATED USE OF TRUST PROPERTY. 

23 (a) IN GENERAL.—Paragraph (1) of section 643(i) 

24 is amended— 


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1 (1) by striking ‘‘directly or indirectly to’’ and 

2 inserting ‘‘(or permits the use of any other trust 

3 property) directly or indirectly to or by’’, and 

4 (2) by inserting ‘‘(or the fair market value of 

5 the use of such property)’’ after ‘‘the amount of 

6 such loan’’. 

7 (b) EXCEPTION FOR COMPENSATED USE.—Para8 graph (2) of section 643(i) is amended by adding at the 

9 end the following new subparagraph: 

10 ‘‘(E) EXCEPTION FOR COMPENSATED USE

11 OF PROPERTY.—In the case of the use of any 

12 trust property other than a loan of cash or 

13 marketable securities, paragraph (1) shall not 

14 apply to the extent that the trust is paid the 

15 fair market value of such use within a reason16 able period of time of such use.’’. 

17 (c) APPLICATION TO GRANTOR TRUSTS.—Subsection 

18 (c) of section 679, as amended by section 531, is amended 

19 by adding at the end the following new paragraph: 

20 ‘‘(6) UNCOMPENSATED USE OF TRUST PROP21 ERTY TREATED AS A PAYMENT.—For purposes of 

22 this subsection, a loan of cash or marketable securi23 ties (or the use of any other trust property) directly 

24 or indirectly to or by any United States person 

25 (whether or not a beneficiary under the terms of the 


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1 trust) shall be treated as paid or accumulated for 

2 the benefit of a United States person. The preceding 

3 sentence shall not apply to the extent that the 

4 United States person repays the loan at a market 

5 rate of interest (or pays the fair market value of the 

6 use of such property) within a reasonable period of 

7 time.’’. 

8 (d) CONFORMING AMENDMENTS.—Paragraph (3) of 

9 section 643(i) is amended— 

10 (1) by inserting ‘‘(or use of property)’’ after ‘‘If 

11 any loan’’, 

12 (2) by inserting ‘‘or the return of such prop13 erty’’ before ‘‘shall be disregarded’’, and 

14 (3) by striking ‘‘REGARDING LOAN PRINCIPAL’’ 

15 in the heading thereof. 

16 (e) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to loans made, and uses of prop18 erty, after the date of the enactment of this Act. 

19 SEC. 534. REPORTING REQUIREMENT OF UNITED STATES 

20 OWNERS OF FOREIGN TRUSTS. 

21 (a) IN GENERAL.—Paragraph (1) of section 6048(b) 

22 is amended by inserting ‘‘shall submit such information 

23 as the Secretary may prescribe with respect to such trust 

24 for such year and’’ before ‘‘shall be responsible to ensure’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

4 SEC. 535. MINIMUM PENALTY WITH RESPECT TO FAILURE 

5 TO REPORT ON CERTAIN FOREIGN TRUSTS. 

6 (a) IN GENERAL.—Subsection (a) of section 6677 is 

7 amended— 

8 (1) by inserting ‘‘the greater of $10,000 or’’ be9 fore ‘‘35 percent’’, and 

10 (2) by striking the last sentence and inserting 

11 the following: ‘‘At such time as the gross reportable 

12 amount with respect to any failure can be deter13 mined by the Secretary, any subsequent penalty im14 posed under this subsection with respect to such fail15 ure shall be reduced as necessary to assure that the 

16 aggregate amount of such penalties do not exceed 

17 the gross reportable amount (and to the extent that 

18 such aggregate amount already exceeds the gross re19 portable amount the Secretary shall refund such ex20 cess to the taxpayer).’’ 

21 (b) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to notices and returns required to 

23 be filed after December 31, 2009. 


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1 Subtitle E—Substitute Dividends 

2 and Dividend Equivalent Pay3 ments Received by Foreign Per4 sons Treated as Dividends 

5 SEC. 541. SUBSTITUTE DIVIDENDS AND DIVIDEND EQUIVA6 LENT PAYMENTS RECEIVED BY FOREIGN 

7 PERSONS TREATED AS DIVIDENDS. 

8 (a) IN GENERAL.—Section 871 is amended by redes9 ignating subsection (l) as subsection (m) and by inserting 

10 after subsection (k) the following new subsection: 

11 ‘‘(l) TREATMENT OF DIVIDEND EQUIVALENT PAY12 MENTS.— 

13 ‘‘(1) IN GENERAL.—For purposes of this sec14 tion, sections 881 and 4948(a), and chapters 3 and 

15 4, a dividend equivalent shall be treated as a divi16 dend from sources within the United States. 

17 ‘‘(2) DIVIDEND EQUIVALENT.—For purposes of 

18 this subsection, the term ‘dividend equivalent’ 

19 means— 

20 ‘‘(A) any substitute dividend, 

21 ‘‘(B) any payment made pursuant to a 

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1 dend from sources within the United States, 

2 and 

3 ‘‘(C) any other payment determined by the 

4 Secretary to be substantially similar to a pay5 ment described in subparagraph (A) or (B). 

6 ‘‘(3) SPECIFIED NOTIONAL PRINCIPAL CON7 TRACT.—For purposes of this subsection, the term 

8 ‘specified notional principal contract’ means— 

9 ‘‘(A) any notional principal contract if— 

10 ‘‘(i) in connection with entering into 

11 such contract, any long party transfers the 

12 underlying security, 

13 ‘‘(ii) in connection with the termi14 nation of such contract, any short party 

15 transfers the underlying security to any 

16 long party, 

17 ‘‘(iii) the underlying security is not 

18 readily tradable on an established securi19 ties market, 

20 ‘‘(iv) in connection with entering into 

21 such contract, the underlying security is 

22 posted as collateral by any short party to 

23 the contract, or 


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1 ‘‘(v) such contract is identified by the 

2 Secretary as a specified notional principal 

3 contract, 

4 ‘‘(B) in the case of payments made after 

5 the date which is 2 years after the date of the 

6 enactment of this subsection, any notional prin7 cipal contract unless the Secretary determines 

8 that such contract is of a type which does not 

9 have the potential for tax avoidance. 

10 ‘‘(4) DEFINITIONS.—For purposes of paragraph 

11 (3)(A)— 

12 ‘‘(A) LONG PARTY.—The term ‘long party’ 

13 means, with respect to any underlying security 

14 of any notional principal contract, any party to 

15 the contract which is entitled to receive any 

16 payment pursuant to such contract which is 

17 contingent upon, or determined by reference to, 

18 the payment of a dividend from sources within 

19 the United States with respect to such under20 lying security. 

21 ‘‘(B) SHORT PARTY.—The term ‘short 

22 party’ means, with respect to any underlying se23 curity of any notional principal contract, any 

24 party to the contract which is not a long party 

25 with respect to such underlying security. 


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1 ‘‘(C) UNDERLYING SECURITY.—The term 

2 ‘underlying security’ means, with respect to any 

3 notional principal contract, the security with re4 spect to which the dividend referred to in para5 graph (2)(B) is paid. For purposes of this para6 graph, any index or fixed basket of securities 

7 shall be treated as a single security. 

8 ‘‘(5) PAYMENTS DETERMINED ON GROSS

9 BASIS.—For purposes of this subsection, the term 

10 ‘payment’ includes any gross amount which is used 

11 in computing any net amount which is transferred to 

12 or from the taxpayer. 

13 ‘‘(6) PREVENTION OF OVER-WITHHOLDING.—In 

14 the case of any chain of dividend equivalents one or 

15 more of which is subject to tax under this section or 

16 section 881, the Secretary may reduce such tax, but 

17 only to the extent that the taxpayer can establish 

18 that such tax has been paid with respect to another 

19 dividend equivalent in such chain. For purposes of 

20 this paragraph, a dividend shall be treated as a divi21 dend equivalent. 

22 ‘‘(7) COORDINATION WITH CHAPTERS 3 AND

23 4.—For purposes of chapters 3 and 4, each person 

24 that is a party to any contract or other arrangement 

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1 lent shall be treated as having control of such pay2 ment.’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to payments made on or after the 

5 date that is 90 days after the date of the enactment of 

6 this Act. 

7 TITLE VI—OTHER REVENUE 

8 PROVISIONS 

9 Subtitle A—Partnership Interests 

10 Held by Partners Providing 

11 Services 

12 SEC. 601. PARTNERSHIP INTERESTS TRANSFERRED IN 

13 CONNECTION WITH PERFORMANCE OF SERV14 ICES. 

15 (a) MODIFICATION TO ELECTION TO INCLUDE PART16 NERSHIP INTEREST IN GROSS INCOME IN YEAR OF

17 TRANSFER.—Subsection (c) of section 83 is amended by 

18 redesignating paragraph (4) as paragraph (5) and by in19 serting after paragraph (3) the following new paragraph: 

20 ‘‘(4) PARTNERSHIP INTERESTS.—Except as 

21 provided by the Secretary, in the case of any trans22 fer of an interest in a partnership in connection with 

23 the provision of services to (or for the benefit of) 

24 such partnership— 


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1 ‘‘(A) the fair market value of such interest 

2 shall be treated for purposes of this section as 

3 being equal to the amount of the distribution 

4 which the partner would receive if the partner5 ship sold (at the time of the transfer) all of its 

6 assets at fair market value and distributed the 

7 proceeds of such sale (reduced by the liabilities 

8 of the partnership) to its partners in liquidation 

9 of the partnership, and 

10 ‘‘(B) the person receiving such interest 

11 shall be treated as having made the election 

12 under subsection (b)(1) unless such person 

13 makes an election under this paragraph to have 

14 such subsection not apply.’’. 

15 (b) CONFORMING AMENDMENT.—Paragraph (2) of 

16 section 83(b) is amended by inserting ‘‘or subsection 

17 (c)(4)(B)’’ after ‘‘paragraph (1)’’. 

18 (c) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to interests in partnerships trans20 ferred after the date of the enactment of this Act. 


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1 SEC. 602. INCOME OF PARTNERS FOR PERFORMING IN2 VESTMENT MANAGEMENT SERVICES TREAT3 ED AS ORDINARY INCOME RECEIVED FOR 

4 PERFORMANCE OF SERVICES. 

5 (a) IN GENERAL.—Part I of subchapter K of chapter 

6 1 is amended by adding at the end the following new sec7 tion: 

8 ‘‘SEC. 710. SPECIAL RULES FOR PARTNERS PROVIDING IN9 VESTMENT MANAGEMENT SERVICES TO 

10 PARTNERSHIP. 

11 ‘‘(a) TREATMENT OF DISTRIBUTIVE SHARE OF

12 PARTNERSHIP ITEMS.—For purposes of this title, in the 

13 case of an investment services partnership interest— 

14 ‘‘(1) IN GENERAL.—Notwithstanding section 

15 702(b)— 

16 ‘‘(A) any net income with respect to such 

17 interest for any partnership taxable year shall 

18 be treated as ordinary income, and 

19 ‘‘(B) any net loss with respect to such in20 terest for such year, to the extent not dis21 allowed under paragraph (2) for such year, 

22 shall be treated as an ordinary loss. 

23 All items of income, gain, deduction, and loss which 

24 are taken into account in computing net income or 

25 net loss shall be treated as ordinary income or ordi26 nary loss (as the case may be). 


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1 ‘‘(2) TREATMENT OF LOSSES.— 

2 ‘‘(A) LIMITATION.—Any net loss with re3 spect to such interest shall be allowed for any 

4 partnership taxable year only to the extent that 

5 such loss does not exceed the excess (if any) 

6 of— 

7 ‘‘(i) the aggregate net income with re8 spect to such interest for all prior partner9 ship taxable years, over 

10 ‘‘(ii) the aggregate net loss with re11 spect to such interest not disallowed under 

12 this subparagraph for all prior partnership 

13 taxable years. 

14 ‘‘(B) CARRYFORWARD.—Any net loss for 

15 any partnership taxable year which is not al16 lowed by reason of subparagraph (A) shall be 

17 treated as an item of loss with respect to such 

18 partnership interest for the succeeding partner19 ship taxable year. 

20 ‘‘(C) BASIS ADJUSTMENT.—No adjustment 

21 to the basis of a partnership interest shall be 

22 made on account of any net loss which is not 

23 allowed by reason of subparagraph (A). 

24 ‘‘(D) PRIOR PARTNERSHIP YEARS.—Any 

25 reference in this paragraph to prior partnership 


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1 taxable years shall only include prior partner2 ship taxable years to which this section applies. 

3 ‘‘(3) NET INCOME AND LOSS.—For purposes of 

4 this section— 

5 ‘‘(A) NET INCOME.—The term ‘net in6 come’ means, with respect to any investment 

7 services partnership interest for any partner8 ship taxable year, the excess (if any) of— 

9 ‘‘(i) all items of income and gain 

10 taken into account by the holder of such 

11 interest under section 702 with respect to 

12 such interest for such year, over 

13 ‘‘(ii) all items of deduction and loss so 

14 taken into account. 

15 ‘‘(B) NET LOSS.—The term ‘net loss’ 

16 means, with respect to such interest for such 

17 year, the excess (if any) of the amount de18 scribed in subparagraph (A)(ii) over the amount 

19 described in subparagraph (A)(i). 

20 ‘‘(b) DISPOSITIONS OF PARTNERSHIP INTERESTS.— 

21 ‘‘(1) GAIN.—Any gain on the disposition of an 

22 investment services partnership interest shall be 

23 treated as ordinary income and shall be recognized 

24 notwithstanding any other provision of this subtitle. 


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1 ‘‘(2) LOSS.—Any loss on the disposition of an 

2 investment services partnership interest shall be 

3 treated as an ordinary loss to the extent of the ex4 cess (if any) of— 

5 ‘‘(A) the aggregate net income with respect 

6 to such interest for all partnership taxable 

7 years, over 

8 ‘‘(B) the aggregate net loss with respect to 

9 such interest allowed under subsection (a)(2) 

10 for all partnership taxable years. 

11 ‘‘(3) DISPOSITION OF PORTION OF INTEREST.— 

12 In the case of any disposition of an investment serv13 ices partnership interest, the amount of net loss 

14 which otherwise would have (but for subsection 

15 (a)(2)(C)) applied to reduce the basis of such inter16 est shall be disregarded for purposes of this section 

17 for all succeeding partnership taxable years. 

18 ‘‘(4) DISTRIBUTIONS OF PARTNERSHIP PROP19 ERTY.—In the case of any distribution of property 

20 by a partnership with respect to any investment 

21 services partnership interest held by a partner— 

22 ‘‘(A) the excess (if any) of— 

23 ‘‘(i) the fair market value of such 

24 property at the time of such distribution, 

25 over 


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1 ‘‘(ii) the adjusted basis of such prop2 erty in the hands of the partnership, 

3 shall be taken into account as an increase in 

4 such partner’s distributive share of the taxable 

5 income of the partnership (except to the extent 

6 such excess is otherwise taken into account in 

7 determining the taxable income of the partner8 ship), 

9 ‘‘(B) such property shall be treated for 

10 purposes of subpart B of part II as money dis11 tributed to such partner in an amount equal to 

12 such fair market value, and 

13 ‘‘(C) the basis of such property in the 

14 hands of such partner shall be such fair market 

15 value. 

16 Subsection (b) of section 734 shall be applied with17 out regard to the preceding sentence. 

18 ‘‘(5) APPLICATION OF SECTION 751.—In apply19 ing section 751(a), an investment services partner20 ship interest shall be treated as an inventory item. 

21 ‘‘(c) INVESTMENT SERVICES PARTNERSHIP INTER22 EST.—For purposes of this section— 

23 ‘‘(1) IN GENERAL.—The term ‘investment serv24 ices partnership interest’ means any interest in a 

25 partnership which is held (directly or indirectly) by 


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1 any person if it was reasonably expected (at the time 

2 that such person acquired such interest) that such 

3 person (or any person related to such person) would 

4 provide (directly or indirectly) a substantial quantity 

5 of any of the following services with respect to assets 

6 held (directly or indirectly) by the partnership: 

7 ‘‘(A) Advising as to the advisability of in8 vesting in, purchasing, or selling any specified 

9 asset. 

10 ‘‘(B) Managing, acquiring, or disposing of 

11 any specified asset. 

12 ‘‘(C) Arranging financing with respect to 

13 acquiring specified assets. 

14 ‘‘(D) Any activity in support of any service 

15 described in subparagraphs (A) through (C). 

16 For purposes of this paragraph, the term ‘specified 

17 asset’ means securities (as defined in section 

18 475(c)(2) without regard to the last sentence there19 of), real estate held for rental or investment, inter20 ests in partnerships, commodities (as defined in sec21 tion 475(e)(2)), or options or derivative contracts 

22 with respect to any of the foregoing. 

23 ‘‘(2) EXCEPTION FOR CERTAIN CAPITAL INTER24 ESTS.— 


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1 ‘‘(A) IN GENERAL.—In the case of any 

2 portion of an investment services partnership 

3 interest which is a qualified capital interest, all 

4 items of income, gain, loss, and deduction which 

5 are allocated to such qualified capital interest 

6 shall not be taken into account under sub7 section (a) if— 

8 ‘‘(i) allocations of items are made by 

9 the partnership to such qualified capital 

10 interest in the same manner as such allo11 cations are made to other qualified capital 

12 interests held by partners who do not pro13 vide any services described in paragraph 

14 (1) and who are not related to the partner 

15 holding the qualified capital interest, and 

16 ‘‘(ii) the allocations made to such 

17 other interests are significant compared to 

18 the allocations made to such qualified cap19 ital interest. 

20 ‘‘(B) SPECIAL RULE FOR NO OR INSIGNIFI21 CANT ALLOCATIONS TO NONSERVICE PRO22 VIDERS.—To the extent provided by the Sec23 retary in regulations or other guidance, in any 

24 case in which the requirements of subparagraph 

25 (A)(ii) are not satisfied, items of income, gain, 


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1 loss, and deduction shall not be taken into ac2 count under subsection (a) to the extent that 

3 such items are properly allocable under such 

4 regulations or other guidance to qualified cap5 ital interests. 

6 ‘‘(C) SPECIAL RULE FOR DISPOSITIONS.— 

7 In the case of any investment services partner8 ship interest any portion of which is a qualified 

9 capital interest, subsection (b) shall not apply 

10 to so much of any gain or loss as bears the 

11 same proportion to the entire amount of such 

12 gain or loss as— 

13 ‘‘(i) the distributive share of gain or 

14 loss that would have been allocable to the 

15 qualified capital interest under subpara16 graph (A) if the partnership sold all of its 

17 assets immediately before the disposition, 

18 bears to 

19 ‘‘(ii) the distributive share of gain or 

20 loss that would have been so allocable to 

21 the investment services partnership inter22 est of which such qualified capital interest 

23 is a part. 

24 ‘‘(D) QUALIFIED CAPITAL INTEREST.—For 

25 purposes of this paragraph, the term ‘qualified 


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1 capital interest’ means so much of a partner’s 

2 interest in the capital of the partnership as is 

3 attributable to— 

4 ‘‘(i) the fair market value of any 

5 money or other property contributed to the 

6 partnership in exchange for such interest 

7 (determined without regard to section 

8 752(a)) , 

9 ‘‘(ii) any amounts which have been in10 cluded in gross income under section 83 

11 with respect to the transfer of such inter12 est, and 

13 ‘‘(iii) the excess (if any) of— 

14 ‘‘(I) any items of income and 

15 gain taken into account under section 

16 702 with respect to such interest for 

17 taxable years to which this section ap18 plies, over 

19 ‘‘(II) any items of deduction and 

20 loss so taken into account. 

21 The qualified capital interest shall be reduced 

22 by distributions from the partnership with re23 spect to such interest for taxable years to which 

24 this section applies and by the excess (if any) 


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1 of the amount described in clause (iii)(II) over 

2 the amount described in clause (iii)(I). 

3 ‘‘(E) TREATMENT OF CERTAIN LOANS.— 

4 ‘‘(i) PROCEEDS OF PARTNERSHIP

5 LOANS NOT TREATED AS QUALIFIED CAP6 ITAL INTEREST OF SERVICE PROVIDING

7 PARTNERS.—For purposes of this para8 graph, an investment services partnership 

9 interest shall not be treated as a qualified 

10 capital interest to the extent that such in11 terest is acquired in connection with the 

12 proceeds of any loan or other advance 

13 made or guaranteed, directly or indirectly, 

14 by any other partner or the partnership (or 

15 any person related to any such other part16 ner or the partnership). 

17 ‘‘(ii) REDUCTION IN ALLOCATIONS TO

18 QUALIFIED CAPITAL INTERESTS FOR

19 LOANS FROM NONSERVICE PROVIDING

20 PARTNERS TO THE PARTNERSHIP.—For 

21 purposes of this paragraph, any loan or 

22 other advance to the partnership made or 

23 guaranteed, directly or indirectly, by a 

24 partner not providing services described in 

25 paragraph (1) to the partnership (or any 


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1 person related to such partner) shall be 

2 taken into account in determining the 

3 qualified capital interests of the partners 

4 in the partnership. 

5 ‘‘(3) RELATED PERSONS.—A person shall be 

6 treated as related to another person if the relation7 ship between such persons would result in a dis8 allowance of losses under section 267 or 707(b). 

9 ‘‘(d) OTHER INCOME AND GAIN IN CONNECTION

10 WITH INVESTMENT MANAGEMENT SERVICES.— 

11 ‘‘(1) IN GENERAL.—If— 

12 ‘‘(A) a person performs (directly or indi13 rectly) investment management services for any 

14 entity, 

15 ‘‘(B) such person holds (directly or indi16 rectly) a disqualified interest with respect to 

17 such entity, and 

18 ‘‘(C) the value of such interest (or pay19 ments thereunder) is substantially related to 

20 the amount of income or gain (whether or not 

21 realized) from the assets with respect to which 

22 the investment management services are per23 formed, 

24 any income or gain with respect to such interest 

25 shall be treated as ordinary income. Rules similar to 


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1 the rules of subsection (c)(2) shall apply for pur2 poses of this subsection. 

3 ‘‘(2) DEFINITIONS.—For purposes of this sub4 section— 

5 ‘‘(A) DISQUALIFIED INTEREST.— 

6 ‘‘(i) IN GENERAL.—The term ‘dis7 qualified interest’ means, with respect to 

8 any entity— 

9 ‘‘(I) any interest in such entity 

10 other than indebtedness, 

11 ‘‘(II) convertible or contingent 

12 debt of such entity, 

13 ‘‘(III) any option or other right 

14 to acquire property described in sub15 clause (I) or (II), and 

16 ‘‘(IV) any derivative instrument 

17 entered into (directly or indirectly) 

18 with such entity or any investor in 

19 such entity. 

20 ‘‘(ii) EXCEPTIONS.—Such term shall 

21 not include— 

22 ‘‘(I) a partnership interest, 

23 ‘‘(II) except as provided by the 

24 Secretary, any interest in a taxable 

25 corporation, and 


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1 ‘‘(III) except as provided by the 

2 Secretary, stock in an S corporation. 

3 ‘‘(B) TAXABLE CORPORATION.—The term 

4 ‘taxable corporation’ means— 

5 ‘‘(i) a domestic C corporation, or 

6 ‘‘(ii) a foreign corporation substan7 tially all of the income of which is— 

8 ‘‘(I) effectively connected with 

9 the conduct of a trade or business in 

10 the United States, or 

11 ‘‘(II) subject to a comprehensive 

12 foreign income tax (as defined in sec13 tion 457A(d)(2)). 

14 ‘‘(C) INVESTMENT MANAGEMENT SERV15 ICES.—The term ‘investment management serv16 ices’ means a substantial quantity of any of the 

17 services described in subsection (c)(1). 

18 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 

19 such regulations or other guidance as is necessary or ap20 propriate to carry out the purposes of this section, includ21 ing regulations or other guidance to— 

22 ‘‘(1) provide modifications to the application of 

23 this section (including treating related persons as 

24 not related to one another) to the extent such modiVerDate Nov 24 2008 00:30 Dec 11, 2009 Jkt 089200 PO 00000 Frm 00098 Fmt 6652 Sfmt 6201 E:\BILLS\H4213.RFS H4213

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1 fication is consistent with the purposes of this sec2 tion, 

3 ‘‘(2) prevent the avoidance of the purposes of 

4 this section, and 

5 ‘‘(3) coordinate this section with the other pro6 visions of this title. 

7 ‘‘(f) CROSS REFERENCE.—For 40 percent penalty on 

8 certain underpayments due to the avoidance of this sec9 tion, see section 6662.’’. 

10 (b) INCOME FROM INVESTMENT SERVICES PART11 NERSHIP INTERESTS NOT TREATED AS QUALIFYING IN12 COME OF PUBLICLY TRADED PARTNERSHIPS.—Sub13 section (d) of section 7704 is amended by adding at the 

14 end the following new paragraph: 

15 ‘‘(6) INCOME FROM INVESTMENT SERVICES

16 PARTNERSHIP INTERESTS NOT QUALIFIED.— 

17 ‘‘(A) IN GENERAL.—Items of income and 

18 gain shall not be treated as qualifying income 

19 if such items are treated as ordinary income by 

20 reason of the application of section 710 (relat21 ing to special rules for partners providing in22 vestment management services to partnership). 

23 ‘‘(B) SPECIAL RULES FOR CERTAIN PART24 NERSHIPS.— 


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1 ‘‘(i) CERTAIN PARTNERSHIPS OWNED

2 BY REAL ESTATE INVESTMENT TRUSTS.— 

3 Subparagraph (A) shall not apply in the 

4 case of a partnership which meets each of 

5 the following requirements: 

6 ‘‘(I) Such partnership is treated 

7 as publicly traded under this section 

8 solely by reason of interests in such 

9 partnership being convertible into in10 terests in a real estate investment 

11 trust which is publicly traded. 

12 ‘‘(II) 50 percent or more of the 

13 capital and profits interests of such 

14 partnership are owned, directly or in15 directly, at all times during the tax16 able year by such real estate invest17 ment trust (determined with the ap18 plication of section 267(c)). 

19 ‘‘(III) Such partnership meets 

20 the requirements of paragraphs (2), 

21 (3), and (4) of section 856(c). 

22 ‘‘(ii) CERTAIN PARTNERSHIPS OWN23 ING OTHER PUBLICLY TRADED PARTNER24 SHIPS.—Subparagraph (A) shall not apply 


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1 in the case of a partnership which meets 

2 each of the following requirements: 

3 ‘‘(I) Substantially all of the as4 sets of such partnership consist of in5 terests in one or more publicly traded 

6 partnerships (determined without re7 gard to subsection (b)(2)). 

8 ‘‘(II) Substantially all of the in9 come of such partnership is ordinary 

10 income or section 1231 gain (as de11 fined in section 1231(a)(3)). 

12 ‘‘(C) TRANSITIONAL RULE.—In the case of 

13 a partnership which is a publicly traded part14 nership on the date of the enactment of this 

15 paragraph, subparagraph (A) shall not apply to 

16 any taxable year of the partnership beginning 

17 before the date which is 10 years after the date 

18 of the enactment of this paragraph.’’. 

19 (c) IMPOSITION OF PENALTY ON UNDERPAY20 MENTS.— 

21 (1) IN GENERAL.—Subsection (b) of section 

22 6662, as amended by section 512, is amended by in23 serting after paragraph (6) the following new para24 graph: 


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1 ‘‘(7) The application of subsection (d) of section 

2 710 or the regulations prescribed under section 

3 710(e) to prevent the avoidance of the purposes of 

4 section 710.’’. 

5 (2) AMOUNT OF PENALTY.— 

6 (A) IN GENERAL.—Section 6662, as 

7 amended by section 512, is amended by adding 

8 at the end the following new subsection: 

9 ‘‘(j) INCREASE IN PENALTY IN CASE OF PROPERTY

10 TRANSFERRED FOR INVESTMENT MANAGEMENT SERV11 ICES.—In the case of any portion of an underpayment to 

12 which this section applies by reason of subsection (b)(7), 

13 subsection (a) shall be applied with respect to such portion 

14 by substituting ‘40 percent’ for ‘20 percent’.’’. 

15 (B) CONFORMING AMENDMENTS.—Sub16 paragraph (B) of section 6662A(e)(2) is 

17 amended— 

18 (i) by striking ‘‘section 6662(h)’’ and 

19 inserting ‘‘subsection (h) or (i) of section 

20 6662’’, and 

21 (ii) by striking ‘‘GROSS VALUATION

22 MISSTATEMENT PENALTY’’ in the heading 

23 and inserting ‘‘CERTAIN INCREASED UN24 DERPAYMENT PENALTIES’’. 


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1 (3) SPECIAL RULES FOR APPLICATION OF REA2 SONABLE CAUSE EXCEPTION.—Subsection (c) of sec3 tion 6664 is amended— 

4 (A) by redesignating paragraphs (2) and 

5 (3) as paragraphs (3) and (4), respectively, 

6 (B) by striking ‘‘paragraph (2)’’ in para7 graph (4), as so redesignated, and inserting 

8 ‘‘paragraph (3)’’, and 

9 (C) by inserting after paragraph (1) the 

10 following new paragraph: 

11 ‘‘(2) SPECIAL RULE FOR UNDERPAYMENTS AT12 TRIBUTABLE TO INVESTMENT MANAGEMENT SERV13 ICES.— 

14 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

15 not apply to any portion of an underpayment to 

16 which this section applies by reason of sub17 section (b)(7) unless— 

18 ‘‘(i) the relevant facts affecting the 

19 tax treatment of the item are adequately 

20 disclosed, 

21 ‘‘(ii) there is or was substantial au22 thority for such treatment, and 

23 ‘‘(iii) the taxpayer reasonably believed 

24 that such treatment was more likely than 

25 not the proper treatment. 


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1 ‘‘(B) RULES RELATING TO REASONABLE

2 BELIEF.—Rules similar to the rules of sub3 section (d)(3) shall apply for purposes of sub4 paragraph (A)(iii).’’. 

5 (d) INCOME AND LOSS FROM INVESTMENT SERVICES

6 PARTNERSHIP INTERESTS TAKEN INTO ACCOUNT IN DE7 TERMINING NET EARNINGS FROM SELF-EMPLOYMENT.— 

8 (1) INTERNAL REVENUE CODE.—Section 

9 1402(a) is amended by striking ‘‘and’’ at the end of 

10 paragraph (16), by striking the period at the end of 

11 paragraph (17) and inserting ‘‘; and’’, and by insert12 ing after paragraph (17) the following new para13 graph: 

14 ‘‘(18) notwithstanding the preceding provisions 

15 of this subsection, in the case of any individual en16 gaged in the trade or business of providing services 

17 described in section 710(c)(1) with respect to any 

18 entity, any amount treated as ordinary income or or19 dinary loss of such individual under section 710 with 

20 respect to such entity shall be taken into account in 

21 determining the net earnings from self-employment 

22 of such individual.’’. 

23 (2) SOCIAL SECURITY ACT.—Section 211(a) of 

24 the Social Security Act is amended by inserting after 

25 paragraph (16) the following new paragraph: 


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1 ‘‘(17) Notwithstanding the preceding provisions 

2 of this subsection, in the case of any individual en3 gaged in the trade or business of providing services 

4 described in section 710(c)(1) of the Internal Rev5 enue Code of 1986 with respect to any entity, any 

6 amount treated as ordinary income or ordinary loss 

7 of such individual under section 710 of such Code 

8 with respect to such entity shall be taken into ac9 count in determining the net earnings from self-em10 ployment of such individual.’’. 

11 (e) CONFORMING AMENDMENTS.— 

12 (1) Subsection (d) of section 731 is amended by 

13 inserting ‘‘section 710(b)(4) (relating to distribu14 tions of partnership property),’’ after ‘‘to the extent 

15 otherwise provided by’’. 

16 (2) Section 741 is amended by inserting ‘‘or 

17 section 710 (relating to special rules for partners 

18 providing investment management services to part19 nership)’’ before the period at the end. 

20 (3) The table of sections for part I of sub21 chapter K of chapter 1 is amended by adding at the 

22 end the following new item: 

‘‘Sec. 710. Special rules for partners providing investment management services 

to partnership.’’. 

23 (f) EFFECTIVE DATE.— 


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1 (1) IN GENERAL.—Except as otherwise pro2 vided in this subsection, the amendments made by 

3 this section shall apply to taxable years ending after 

4 December 31, 2009. 

5 (2) PARTNERSHIP TAXABLE YEARS WHICH IN6 CLUDE EFFECTIVE DATE.—In applying section 

7 710(a) of the Internal Revenue Code of 1986 (as 

8 added by this section) in the case of any partnership 

9 taxable year which includes December 31, 2009, the 

10 amount of the net income referred to in such section 

11 shall be treated as being the lesser of the net income 

12 for the entire partnership taxable year or the net in13 come determined by only taking into account items 

14 attributable to the portion of the partnership taxable 

15 year which is after such date. 

16 (3) DISPOSITIONS OF PARTNERSHIP INTER17 ESTS.—Section 710(b) of the Internal Revenue Code 

18 of 1986 (as added by this section) shall apply to dis19 positions and distributions after December 31, 2009. 

20 (4) OTHER INCOME AND GAIN IN CONNECTION

21 WITH INVESTMENT MANAGEMENT SERVICES.—Sec22 tion 710(d) of such Code (as added by this section) 

23 shall take effect on January 1, 2010. 


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1 (5) PUBLICLY TRADED PARTNERSHIPS.—The 

2 amendment made by subsection (b) shall apply to 

3 taxable years beginning after December 31, 2009. 

4 Subtitle B—Time for Payment of 

5 Corporate Estimated Taxes 

6 SEC. 611. TIME FOR PAYMENT OF CORPORATE ESTIMATED 

7 TAXES. 

8 The percentage under paragraph (1) of section 

9 202(b) of the Corporate Estimated Tax Shift Act of 2009 

10 in effect on the date of the enactment of this Act is in11 creased by 26.5 percentage points. 

12 Subtitle C—Tax Expenditure Study 

13 SEC. 621. FINDINGS. 

14 Congress finds the following: 

15 (1) Currently, the aggregate cost of Federal tax 

16 expenditures rivals, or even exceeds, the amount of 

17 total Federal discretionary spending. 

18 (2) Given the escalating public debt, a critical 

19 examination of this use of taxpayer dollars is essen20 tial. 

21 (3) Additionally, tax expenditures can com22 plicate the Internal Revenue Code of 1986 for tax23 payers and complicate tax administration for the In24 ternal Revenue Service. 


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1 (4) To facilitate a better understanding of tax 

2 expenditures in the future, it is constructive for leg3 islation extending these provisions to include a study 

4 of such provisions.

5 SEC. 622. STUDY OF EXTENDED TAX EXPENDITURES. 

6 (a) IN GENERAL.—Not later than November 30, 

7 2010, the Chief of Staff of the Joint Committee on Tax8 ation, in consultation with the Comptroller General of the 

9 United States, shall submit to the Committee on Ways 

10 and Means of the House of Representatives and the Com11 mittee on Finance of the Senate a report on each tax ex12 penditure (as defined in section 3(3) of the Congressional 

13 Budget Impoundment Control Act of 1974 (2 U.S.C. 

14 622(3)) extended by this Act. 

15 (b) ROLLING SUBMISSION OF REPORTS.—The Chief 

16 of Staff of the Joint Committee on Taxation shall initially 

17 submit the reports for each such tax expenditure enacted 

18 in subtitle B of title I (relating to business tax relief) and 

19 title IV (relating to energy provisions) in order of the tax 

20 expenditure incurring the least aggregate cost to the 

21 greatest aggregate cost (determined by reference to the 

22 cost estimate of this Act by the Joint Committee on Tax23 ation). Thereafter, such reports may be submitted in such 

24 order as the Chief of Staff determines appropriate. 


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1 (c) CONTENTS OF REPORT.—Such reports shall con2 tain the following: 

3 (1) An explanation of the tax expenditure and 

4 any relevant economic, social, or other context under 

5 which it was first enacted. 

6 (2) A description of the intended purpose of the 

7 tax expenditure. 

8 (3) An analysis of the overall success of the tax 

9 expenditure in achieving such purpose, and evidence 

10 supporting such analysis. 

11 (4) An analysis of the extent to which further 

12 extending the tax expenditure, or making it perma13 nent, would contribute to achieving such purpose. 

14 (5) A description of the direct and indirect 

15 beneficiaries of the tax expenditure, including identi16 fying any unintended beneficiaries. 

17 (6) An analysis of whether the tax expenditure 

18 is the most cost-effective method for achieving the 

19 purpose for which it was intended, and a description 

20 of any more cost-effective methods through which 

21 such purpose could be accomplished. 

22 (7) A description of any unintended effects of 

23 the tax expenditure that are useful in understanding 

24 the tax expenditure’s overall value. 


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1 (8) An analysis of how the tax expenditure 

2 could be modified to better achieve its original pur3 pose. 

4 (9) A brief description of any interactions (ac5 tual or potential) with other tax expenditures or di6 rect spending programs in the same or related budg7 et function worthy of further study. 

8 (10) A description of any unavailable informa9 tion the staff of the Joint Committee on Taxation 

10 may need to complete a more thorough examination 

11 and analysis of the tax expenditure, and what must 

12 be done to make such information available. 

13 (d) MINIMUM ANALYSIS BY DEADLINE.—In the event 

14 the Chief of Staff of the Joint Committee on Taxation 

15 concludes it will not be feasible to complete all reports by 

16 the date specified in subsection (a), at a minimum, the 

17 reports for each tax expenditure enacted in subtitle B of 

18 title I (relating to business tax relief) and title IV (relating 

19 to energy provisions) shall be completed by such date. 

Passed the House of Representatives December 9, 

2009. 

Attest: LORRAINE C. MILLER, 

Clerk. 


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