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[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 347 Introduced in Senate (IS)]

110th CONGRESS
  1st Session
                                 S. 347

    To amend the Fair Labor Standards Act of 1938 to provide for an 
     increase in the Federal minimum wage, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                            January 22, 2007

  Mr. Voinovich (for himself and Mr. Warner) introduced the following 
  bill; which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
    To amend the Fair Labor Standards Act of 1938 to provide for an 
     increase in the Federal minimum wage, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Minimum Wage Act of 2007''.

                         TITLE I--MINIMUM WAGE

SEC. 101. MINIMUM WAGE.

    (a) In General.--Section 6(a)(1) of the Fair Labor Standards Act of 
1938 (29 U.S.C. 206(a)(1)) is amended to read as follows:
            ``(1) except as otherwise provided in this section, not 
        less than--
                    ``(A) $5.85 an hour, beginning on the 60th day 
                after the date of enactment of the Minimum Wage Act of 
                2007;
                    ``(B) $6.55 an hour, beginning 12 months after that 
                60th day; and
                    ``(C) $7.25 an hour, beginning 24 months after that 
                60th day;''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect 60 days after the date of enactment of this Act.

                        TITLE II--TAX PROVISIONS

SEC. 200. AMENDMENT OF CODE.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

                 Subtitle A--Small Business Tax Relief

SEC. 201. EXTENSION OF 15-YEAR STRAIGHT-LINE COST RECOVERY FOR 
              QUALIFIED LEASEHOLD IMPROVEMENTS AND QUALIFIED RESTAURANT 
              PROPERTY.

    (a) In General.--Clauses (iv) and (v) of section 168(e)(3)(E) 
(relating to 15-year property) are each amended by striking ``placed in 
service before January 1, 2008''.
    (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after December 31, 2007.

SEC. 202. CLARIFICATION OF CASH ACCOUNTING RULES FOR SMALL BUSINESS.

    (a) Cash Accounting Permitted.--
            (1) In general.--Section 446 of the Internal Revenue Code 
        of 1986 (relating to general rule for methods of accounting) is 
        amended by adding at the end the following new subsection:
    ``(g) Certain Small Business Taxpayers Permitted To Use Cash 
Accounting Method Without Limitation.--
            ``(1) In general.--An eligible taxpayer shall not be 
        required to use an accrual method of accounting for any taxable 
        year.
            ``(2) Eligible taxpayer.--For purposes of this subsection, 
        a taxpayer is an eligible taxpayer with respect to any taxable 
        year if--
                    ``(A) for all prior taxable years beginning after 
                December 31, 2006, the taxpayer (or any predecessor) 
                met the gross receipts test of section 448(c), and
                    ``(B) the taxpayer is not subject to section 447 or 
                448.''.
            (2) Expansion of gross receipts test.--
                    (A) In general.--Paragraph (3) of section 448(b) of 
                such Code (relating to entities with gross receipts of 
                not more than $5,000,000) is amended by striking 
                ``$5,000,000'' in the text and in the heading and 
                inserting ``$10,000,000''.
                    (B) Conforming amendments.--Section 448(c) of such 
                Code is amended--
                            (i) by striking ``$5,000,000'' each place 
                        it appears in the text and in the heading of 
                        paragraph (1) and inserting ``$10,000,000'', 
                        and
                            (ii) by adding at the end the following new 
                        paragraph:
            ``(4) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2007, the dollar amount 
        contained in subsection (b)(3) and paragraph (1) of this 
        subsection shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, by substituting `calendar year 
                2006' for `calendar year 1992' in subparagraph (B) 
                thereof.
        If any amount as adjusted under this subparagraph is not a 
        multiple of $100,000, such amount shall be rounded to the 
        nearest multiple of $100,000.''.
    (b) Clarification of Inventory Rules for Small Business.--
            (1) In general.--Section 471 of the Internal Revenue Code 
        of 1986 (relating to general rule for inventories) is amended 
        by redesignating subsection (c) as subsection (d) and by 
        inserting after subsection (b) the following new subsection:
    ``(c) Small Business Taxpayers Not Required To Use Inventories.--
            ``(1) In general.--A qualified taxpayer shall not be 
        required to use inventories under this section for a taxable 
        year.
            ``(2) Treatment of taxpayers not using inventories.--If a 
        qualified taxpayer does not use inventories with respect to any 
        property for any taxable year beginning after December 31, 
        2006, such property shall be treated as a material or supply 
        which is not incidental.
            ``(3) Qualified taxpayer.--For purposes of this subsection, 
        the term `qualified taxpayer' means--
                    ``(A) any eligible taxpayer (as defined in section 
                446(g)(2)), and
                    ``(B) any taxpayer described in section 
                448(b)(3).''.
            (2) Conforming amendments.--
                    (A) Subpart D of part II of subchapter E of chapter 
                1 of such Code is amended by striking section 474.
                    (B) The table of sections for subpart D of part II 
                of subchapter E of chapter 1 of such Code is amended by 
                striking the item relating to section 474.
    (c) Effective Date and Special Rules.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2006.
            (2) Change in method of accounting.--In the case of any 
        taxpayer changing the taxpayer's method of accounting for any 
        taxable year under the amendments made by this section--
                    (A) such change shall be treated as initiated by 
                the taxpayer;
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury; and
                    (C) the net amount of the adjustments required to 
                be taken into account by the taxpayer under section 481 
                of the Internal Revenue Code of 1986 shall be taken 
                into account over a period (not greater than 4 taxable 
                years) beginning with such taxable year.

SEC. 203. EXTENSION OF WORK OPPORTUNITY TAX CREDIT TO QUALIFIED 
              RESTAURANT EMPLOYEES.

    (a) In General.--Section 51(d)(1) is amended by striking ``or'' at 
the end of subparagraph (H), by striking the period at the end of 
subparagraph (I) and inserting ``, or'', and by adding at the end the 
following new subparagraph:
                    ``(J) a qualified restaurant employee.''.
    (b) Qualified Restaurant Employee.--Section 51(d) is amended by 
redesignating paragraphs (11) through (13) as paragraphs (12) through 
(14), respectively, and by inserting after paragraph (10) the following 
new paragraph:
            ``(11) Qualified restaurant employee.--
                    ``(A) In general.--The term `qualified restaurant 
                employee' means any individual--
                            ``(i) who performs services in a restaurant 
                        where tipping is not customary,
                            ``(ii) who is not exempt under the Fair 
                        Labor Standards Act and earns at least the 
                        Federal minimum wage, and
                            ``(iii) who is certified by the employer 
                        during the hiring process as having attained 
                        age 16 but not 20 on the hiring date.
                    ``(B) Special rule for determining amount of 
                credit.--For purposes of applying this subpart to wages 
                paid or incurred to any qualified restaurant employee, 
                subsection (b)(3) shall be applied by substituting 
                `$3,000' for `$6,000'.''.
    (c) Special Rule for Certifications.--Subparagraph (A) of section 
51(d)(14), as redesignated by subsection (b), is amended by inserting 
``, other than an individual described in paragraph (11),'' after ``An 
individual''.
    (d) Nonqualifying Rehires.--Paragraph (2) of section 51(i) is 
amended to read as follows:
            ``(2) Nonqualifying rehires.--
                    ``(A) In general.--No wages shall be taken into 
                account under subsection (a) with respect to any 
                individual, other than an individual described in 
                subsection (d)(11), if, prior to the hiring date of 
                such individual, such individual had been employed by 
                the employer at any time.
                    ``(B) Qualified restaurant employees.--In the case 
                of an individual described in subsection (d)(11), no 
                wages shall be taken into account under subsection (a) 
                if, prior to the hiring date of such individual, such 
                individual had been employed by the employer within the 
                prior 90 day period.''.
    (e) Minimum Employment Periods.--Section 51(i)(3) is amended by 
adding at the end the following new subparagraph:
                    ``(C) Nonapplication to qualified restaurant 
                employees.--Subparagraphs (A) and (B) shall not apply 
                to an individual described in subsection (d)(11).''.
    (f) Effective Date.--The amendments made by this section shall 
apply to individuals who begin work for the employer after the date of 
the enactment of this Act.

                 Subtitle B--Revenue Offset Provisions

SEC. 211. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

    (a) In General.--Section 7701 is amended by redesignating 
subsection (p) as subsection (q) and by inserting after subsection (o) 
the following new subsection:
    ``(p) Clarification of Economic Substance Doctrine; etc.--
            ``(1) General rules.--
                    ``(A) In general.--In any case in which a court 
                determines that the economic substance doctrine is 
                relevant for purposes of this title to a transaction 
                (or series of transactions), such transaction (or 
                series of transactions) shall have economic substance 
                only if the requirements of this paragraph are met.
                    ``(B) Definition of economic substance.--For 
                purposes of subparagraph (A)--
                            ``(i) In general.--A transaction has 
                        economic substance only if--
                                    ``(I) the transaction changes in a 
                                meaningful way (apart from Federal tax 
                                effects) the taxpayer's economic 
                                position, and
                                    ``(II) the taxpayer has a 
                                substantial nontax purpose for entering 
                                into such transaction and the 
                                transaction is a reasonable means of 
                                accomplishing such purpose.
                        In applying subclause (II), a purpose of 
                        achieving a financial accounting benefit shall 
                        not be taken into account in determining 
                        whether a transaction has a substantial nontax 
                        purpose if the origin of such financial 
                        accounting benefit is a reduction of income 
                        tax.
                            ``(ii) Special rule where taxpayer relies 
                        on profit potential.--A transaction shall not 
                        be treated as having economic substance by 
                        reason of having a potential for profit 
                        unless--
                                    ``(I) the present value of the 
                                reasonably expected pre-tax profit from 
                                the transaction is substantial in 
                                relation to the present value of the 
                                expected net tax benefits that would be 
                                allowed if the transaction were 
                                respected, and
                                    ``(II) the reasonably expected pre-
                                tax profit from the transaction exceeds 
                                a risk-free rate of return.
                    ``(C) Treatment of fees and foreign taxes.--Fees 
                and other transaction expenses and foreign taxes shall 
                be taken into account as expenses in determining pre-
                tax profit under subparagraph (B)(ii).
            ``(2) Special rules for transactions with tax-indifferent 
        parties.--
                    ``(A) Special rules for financing transactions.--
                The form of a transaction which is in substance the 
                borrowing of money or the acquisition of financial 
                capital directly or indirectly from a tax-indifferent 
                party shall not be respected if the present value of 
                the deductions to be claimed with respect to the 
                transaction is substantially in excess of the present 
                value of the anticipated economic returns of the person 
                lending the money or providing the financial capital. A 
                public offering shall be treated as a borrowing, or an 
                acquisition of financial capital, from a tax-
                indifferent party if it is reasonably expected that at 
                least 50 percent of the offering will be placed with 
                tax-indifferent parties.
                    ``(B) Artificial income shifting and basis 
                adjustments.--The form of a transaction with a tax-
                indifferent party shall not be respected if--
                            ``(i) it results in an allocation of income 
                        or gain to the tax-indifferent party in excess 
                        of such party's economic income or gain, or
                            ``(ii) it results in a basis adjustment or 
                        shifting of basis on account of overstating the 
                        income or gain of the tax-indifferent party.
            ``(3) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Economic substance doctrine.--The term 
                `economic substance doctrine' means the common law 
                doctrine under which tax benefits under subtitle A with 
                respect to a transaction are not allowable if the 
                transaction does not have economic substance or lacks a 
                business purpose.
                    ``(B) Tax-indifferent party.--The term `tax-
                indifferent party' means any person or entity not 
                subject to tax imposed by subtitle A. A person shall be 
                treated as a tax-indifferent party with respect to a 
                transaction if the items taken into account with 
                respect to the transaction have no substantial impact 
                on such person's liability under subtitle A.
                    ``(C) Exception for personal transactions of 
                individuals.--In the case of an individual, this 
                subsection shall apply only to transactions entered 
                into in connection with a trade or business or an 
                activity engaged in for the production of income.
                    ``(D) Treatment of lessors.--In applying paragraph 
                (1)(B)(ii) to the lessor of tangible property subject 
                to a lease--
                            ``(i) the expected net tax benefits with 
                        respect to the leased property shall not 
                        include the benefits of--
                                    ``(I) depreciation,
                                    ``(II) any tax credit, or
                                    ``(III) any other deduction as 
                                provided in guidance by the Secretary, 
                                and
                            ``(ii) subclause (II) of paragraph 
                        (1)(B)(ii) shall be disregarded in determining 
                        whether any of such benefits are allowable.
            ``(4) Other common law doctrines not affected.--Except as 
        specifically provided in this subsection, the provisions of 
        this subsection shall not be construed as altering or 
        supplanting any other rule of law, and the requirements of this 
        subsection shall be construed as being in addition to any such 
        other rule of law.
            ``(5) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this subsection. Such regulations may include 
        exemptions from the application of this subsection.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after the date of the enactment of 
this Act.

SEC. 212. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS 
              LACKING ECONOMIC SUBSTANCE, ETC.

    (a) In General.--Subchapter A of chapter 68 is amended by inserting 
after section 6662A the following new section:

``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS 
              LACKING ECONOMIC SUBSTANCE, ETC.

    ``(a) Imposition of Penalty.--If a taxpayer has an noneconomic 
substance transaction understatement for any taxable year, there shall 
be added to the tax an amount equal to 40 percent of the amount of such 
understatement.
    ``(b) Reduction of Penalty for Disclosed Transactions.--Subsection 
(a) shall be applied by substituting `20 percent' for `40 percent' with 
respect to the portion of any noneconomic substance transaction 
understatement with respect to which the relevant facts affecting the 
tax treatment of the item are adequately disclosed in the return or a 
statement attached to the return.
    ``(c) Noneconomic Substance Transaction Understatement.--For 
purposes of this section--
            ``(1) In general.--The term `noneconomic substance 
        transaction understatement' means any amount which would be an 
        understatement under section 6662A(b)(1) if section 6662A were 
        applied by taking into account items attributable to 
        noneconomic substance transactions rather than items to which 
        section 6662A would apply without regard to this paragraph.
            ``(2) Noneconomic substance transaction.--The term 
        `noneconomic substance transaction' means any transaction if--
                    ``(A) there is a lack of economic substance (within 
                the meaning of section 7701(p)(1)) for the transaction 
                giving rise to the claimed benefit or the transaction 
                was not respected under section 7701(p)(2), or
                    ``(B) the transaction fails to meet the 
                requirements of any similar rule of law.
    ``(d) Rules Applicable to Compromise of Penalty.--
            ``(1) In general.--If the 1st letter of proposed deficiency 
        which allows the taxpayer an opportunity for administrative 
        review in the Internal Revenue Service Office of Appeals has 
        been sent with respect to a penalty to which this section 
        applies, only the Commissioner of Internal Revenue may 
        compromise all or any portion of such penalty.
            ``(2) Applicable rules.--The rules of paragraphs (2) and 
        (3) of section 6707A(d) shall apply for purposes of paragraph 
        (1).
    ``(e) Coordination With Other Penalties.--Except as otherwise 
provided in this part, the penalty imposed by this section shall be in 
addition to any other penalty imposed by this title.
    ``(f) Cross References.--

            ``(1) For coordination of penalty with 
            understatements under section 6662 and other 
            special rules, see section 6662A(e).
            ``(2) For reporting of penalty imposed under 
            this section to the Securities and Exchange 
            Commission, see section 6707A(e).''.
    (b) Coordination With Other Understatements and Penalties.--
            (1) The second sentence of section 6662(d)(2)(A) is amended 
        by inserting ``and without regard to items with respect to 
        which a penalty is imposed by section 6662B'' before the period 
        at the end.
            (2) Subsection (e) of section 6662A is amended--
                    (A) in paragraph (1), by inserting ``and 
                noneconomic substance transaction understatements'' 
                after ``reportable transaction understatements'' both 
                places it appears,
                    (B) in paragraph (2)(A), by inserting ``and a 
                noneconomic substance transaction understatement'' 
                after ``reportable transaction understatement'',
                    (C) in paragraph (2)(B), by inserting ``6662B or'' 
                before ``6663'',
                    (D) in paragraph (2)(C)(i), by inserting ``or 
                section 6662B'' before the period at the end,
                    (E) in paragraph (2)(C)(ii), by inserting ``and 
                section 6662B'' after ``This section'',
                    (F) in paragraph (3), by inserting ``or noneconomic 
                substance transaction understatement'' after 
                ``reportable transaction understatement'', and
                    (G) by adding at the end the following new 
                paragraph:
            ``(4) Noneconomic substance transaction understatement.--
        For purposes of this subsection, the term `noneconomic 
        substance transaction understatement' has the meaning given 
        such term by section 6662B(c).''.
            (3) Subsection (e) of section 6707A is amended--
                    (A) by striking ``or'' at the end of subparagraph 
                (B), and
                    (B) by striking subparagraph (C) and inserting the 
                following new subparagraphs:
                    ``(C) is required to pay a penalty under section 
                6662B with respect to any noneconomic substance 
                transaction, or
                    ``(D) is required to pay a penalty under section 
                6662(h) with respect to any transaction and would (but 
                for section 6662A(e)(2)(C)) have been subject to 
                penalty under section 6662A at a rate prescribed under 
                section 6662A(c) or under section 6662B,''.
    (c) Clerical Amendment.--The table of sections for part II of 
subchapter A of chapter 68 is amended by inserting after the item 
relating to section 6662A the following new item:

``Sec. 6662B. Penalty for understatements attributable to transactions 
                            lacking economic substance, etc.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after the date of the enactment of 
this Act.

SEC. 213. APPLICATION OF RULES TREATING INVERTED CORPORATIONS AS 
              DOMESTIC CORPORATIONS TO CERTAIN TRANSACTIONS OCCURRING 
              AFTER MARCH 20, 2002.

    (a) In General.--Section 7874(b) (relating to inverted corporations 
treated as domestic corporations) is amended to read as follows:
    ``(b) Inverted Corporations Treated as Domestic Corporations.--
            ``(1) In general.--Notwithstanding section 7701(a)(4), a 
        foreign corporation shall be treated for purposes of this title 
        as a domestic corporation if such corporation would be a 
        surrogate foreign corporation if subsection (a)(2) were applied 
        by substituting `80 percent' for `60 percent'.
            ``(2) Special rule for certain transactions occurring after 
        march 20, 2002.--
                    ``(A) In general.--If--
                            ``(i) paragraph (1) does not apply to a 
                        foreign corporation, but
                            ``(ii) paragraph (1) would apply to such 
                        corporation if, in addition to the substitution 
                        under paragraph (1), subsection (a)(2) were 
                        applied by substituting `March 20, 2002' for 
                        `March 4, 2003' each place it appears,
                then paragraph (1) shall apply to such corporation but 
                only with respect to taxable years of such corporation 
                beginning after December 31, 2006.
                    ``(B) Special rules.--Subject to such rules as the 
                Secretary may prescribe, in the case of a corporation 
                to which paragraph (1) applies by reason of this 
                paragraph--
                            ``(i) the corporation shall be treated, as 
                        of the close of its last taxable year beginning 
                        before January 1, 2007, as having transferred 
                        all of its assets, liabilities, and earnings 
                        and profits to a domestic corporation in a 
                        transaction with respect to which no tax is 
                        imposed under this title,
                            ``(ii) the bases of the assets transferred 
                        in the transaction to the domestic corporation 
                        shall be the same as the bases of the assets in 
                        the hands of the foreign corporation, subject 
                        to any adjustments under this title for built-
                        in losses,
                            ``(iii) the basis of the stock of any 
                        shareholder in the domestic corporation shall 
                        be the same as the basis of the stock of the 
                        shareholder in the foreign corporation for 
                        which it is treated as exchanged, and
                            ``(iv) the transfer of any earnings and 
                        profits by reason of clause (i) shall be 
                        disregarded in determining any deemed dividend 
                        or foreign tax creditable to the domestic 
                        corporation with respect to such transfer.
                    ``(C) Regulations.--The Secretary may prescribe 
                such regulations as may be necessary or appropriate to 
                carry out this paragraph, including regulations to 
                prevent the avoidance of the purposes of this 
                paragraph.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2006.

SEC. 214. MODIFICATION OF COLLECTION DUE PROCESS PROCEDURES FOR 
              EMPLOYMENT TAX LIABILITIES.

    (a) In General.--Section 6330(f) (relating to jeopardy and State 
refund collection) is amended--
            (1) by striking ``; or'' at the end of paragraph (1) and 
        inserting a comma,
            (2) by adding ``or'' at the end of paragraph (2), and
            (3) by inserting after paragraph (2) the following new 
        paragraph:
            ``(3) the Secretary has served a levy in connection with 
        the collection of taxes under chapter 21, 22, 23, or 24,''.
    (b) Effective Date.--The amendments made by this section shall 
apply to levies issued after December 31, 2006.
                                 <all>
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