II 

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. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Minimum Wage Act 

5 of 2007’’. 

6 TITLE I—MINIMUM WAGE 

7 SEC. 101. MINIMUM WAGE. 

8 (a) IN GENERAL.—Section 6(a)(1) of the Fair Labor 

9 Standards Act of 1938 (29 U.S.C. 206(a)(1)) is amended 

10 to read as follows: 


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1 ‘‘(1) except as otherwise provided in this sec2 tion, not less than— 

3 ‘‘(A) $5.85 an hour, beginning on the 60th 

4 day after the date of enactment of the Min5 imum Wage Act of 2007; 

6 ‘‘(B) $6.55 an hour, beginning 12 months 

7 after that 60th day; and 

8 ‘‘(C) $7.25 an hour, beginning 24 months 

9 after that 60th day;’’. 

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

11 subsection (a) shall take effect 60 days after the date of 

12 enactment of this Act. 

13 TITLE II—TAX PROVISIONS 

14 SEC. 200. AMENDMENT OF CODE. 

15 Except as otherwise expressly provided, whenever in 

16 this title an amendment or repeal is expressed in terms 

17 of an amendment to, or repeal of, a section or other provi18 sion, the reference shall be considered to be made to a 

19 section or other provision of the Internal Revenue Code 

20 of 1986. 


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1 Subtitle A—Small Business Tax 

2 Relief 

3 SEC. 201. EXTENSION OF 15-YEAR STRAIGHT-LINE COST RE4 COVERY FOR QUALIFIED LEASEHOLD IM5 PROVEMENTS AND QUALIFIED RESTAURANT 

6 PROPERTY. 

7 (a) IN GENERAL.—Clauses (iv) and (v) of section 

8 168(e)(3)(E) (relating to 15-year property) are each 

9 amended by striking ‘‘placed in service before January 1, 

10 2008’’. 

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

12 this section shall apply to property placed in service after 

13 December 31, 2007. 

14 SEC. 202. CLARIFICATION OF CASH ACCOUNTING RULES 

15 FOR SMALL BUSINESS. 

16 (a) CASH ACCOUNTING PERMITTED.— 

17 (1) IN GENERAL.—Section 446 of the Internal 

18 Revenue Code of 1986 (relating to general rule for 

19 methods of accounting) is amended by adding at the 

20 end the following new subsection: 

21 ‘‘(g) CERTAIN SMALL BUSINESS TAXPAYERS PER22 MITTED TO USE CASH ACCOUNTING METHOD WITHOUT

23 LIMITATION.— 


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1 ‘‘(1) IN GENERAL.—An eligible taxpayer shall 

2 not be required to use an accrual method of account3 ing for any taxable year. 

4 ‘‘(2) ELIGIBLE TAXPAYER.—For purposes of 

5 this subsection, a taxpayer is an eligible taxpayer 

6 with respect to any taxable year if— 

7 ‘‘(A) for all prior taxable years beginning 

8 after December 31, 2006, the taxpayer (or any 

9 predecessor) met the gross receipts test of sec10 tion 448(c), and 

11 ‘‘(B) the taxpayer is not subject to section 

12 447 or 448.’’. 

13 (2) EXPANSION OF GROSS RECEIPTS TEST.— 

14 (A) IN GENERAL.—Paragraph (3) of sec15 tion 448(b) of such Code (relating to entities 

16 with gross receipts of not more than 

17 $5,000,000) is amended by striking 

18 ‘‘$5,000,000’’ in the text and in the heading 

19 and inserting ‘‘$10,000,000’’. 

20 (B) CONFORMING AMENDMENTS.—Section 

21 448(c) of such Code is amended— 

22 (i) by striking ‘‘$5,000,000’’ each 

23 place it appears in the text and in the 

24 heading of paragraph (1) and inserting 

25 ‘‘$10,000,000’’, and 


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1 (ii) by adding at the end the following 

2 new paragraph: 

3 ‘‘(4) INFLATION ADJUSTMENT.—In the case of 

4 any taxable year beginning in a calendar year after 

5 2007, the dollar amount contained in subsection 

6 (b)(3) and paragraph (1) of this subsection shall be 

7 increased by an amount equal to— 

8 ‘‘(A) such dollar amount, multiplied by 

9 ‘‘(B) the cost-of-living adjustment deter10 mined under section 1(f)(3) for the calendar 

11 year in which the taxable year begins, by sub12 stituting ‘calendar year 2006’ for ‘calendar year 

13 1992’ in subparagraph (B) thereof. 

14 If any amount as adjusted under this subparagraph 

15 is not a multiple of $100,000, such amount shall be 

16 rounded to the nearest multiple of $100,000.’’. 

17 (b) CLARIFICATION OF INVENTORY RULES FOR

18 SMALL BUSINESS.— 

19 (1) IN GENERAL.—Section 471 of the Internal 

20 Revenue Code of 1986 (relating to general rule for 

21 inventories) is amended by redesignating subsection 

22 (c) as subsection (d) and by inserting after sub23 section (b) the following new subsection: 

24 ‘‘(c) SMALL BUSINESS TAXPAYERS NOT REQUIRED

25 TO USE INVENTORIES.— 


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1 ‘‘(1) IN GENERAL.—A qualified taxpayer shall 

2 not be required to use inventories under this section 

3 for a taxable year. 

4 ‘‘(2) TREATMENT OF TAXPAYERS NOT USING

5 INVENTORIES.—If a qualified taxpayer does not use 

6 inventories with respect to any property for any tax7 able year beginning after December 31, 2006, such 

8 property shall be treated as a material or supply 

9 which is not incidental. 

10 ‘‘(3) QUALIFIED TAXPAYER.—For purposes of 

11 this subsection, the term ‘qualified taxpayer’ 

12 means— 

13 ‘‘(A) any eligible taxpayer (as defined in 

14 section 446(g)(2)), and 

15 ‘‘(B) any taxpayer described in section 

16 448(b)(3).’’. 

17 (2) CONFORMING AMENDMENTS.— 

18 (A) Subpart D of part II of subchapter E 

19 of chapter 1 of such Code is amended by strik20 ing section 474. 

21 (B) The table of sections for subpart D of 

22 part II of subchapter E of chapter 1 of such 

23 Code is amended by striking the item relating 

24 to section 474. 

25 (c) EFFECTIVE DATE AND SPECIAL RULES.— 


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1 (1) IN GENERAL.—The amendments made by 

2 this section shall apply to taxable years beginning 

3 after December 31, 2006. 

4 (2) CHANGE IN METHOD OF ACCOUNTING.—In 

5 the case of any taxpayer changing the taxpayer’s 

6 method of accounting for any taxable year under the 

7 amendments made by this section— 

8 (A) such change shall be treated as initi9 ated by the taxpayer; 

10 (B) such change shall be treated as made 

11 with the consent of the Secretary of the Treas12 ury; and 

13 (C) the net amount of the adjustments re14 quired to be taken into account by the taxpayer 

15 under section 481 of the Internal Revenue Code 

16 of 1986 shall be taken into account over a pe17 riod (not greater than 4 taxable years) begin18 ning with such taxable year. 

19 SEC. 203. EXTENSION OF WORK OPPORTUNITY TAX CREDIT 

20 TO QUALIFIED RESTAURANT EMPLOYEES. 

21 (a) IN GENERAL.—Section 51(d)(1) is amended by 

22 striking ‘‘or’’ at the end of subparagraph (H), by striking 

23 the period at the end of subparagraph (I) and inserting 

24 ‘‘, or’’, and by adding at the end the following new sub25 paragraph: 


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1 ‘‘(J) a qualified restaurant employee.’’. 

2 (b) QUALIFIED RESTAURANT EMPLOYEE.—Section 

3 51(d) is amended by redesignating paragraphs (11) 

4 through (13) as paragraphs (12) through (14), respec5 tively, and by inserting after paragraph (10) the following 

6 new paragraph: 

7 ‘‘(11) QUALIFIED RESTAURANT EMPLOYEE.— 

8 ‘‘(A) IN GENERAL.—The term ‘qualified 

9 restaurant employee’ means any individual— 

10 ‘‘(i) who performs services in a res11 taurant where tipping is not customary, 

12 ‘‘(ii) who is not exempt under the 

13 Fair Labor Standards Act and earns at 

14 least the Federal minimum wage, and 

15 ‘‘(iii) who is certified by the employer 

16 during the hiring process as having at17 tained age 16 but not 20 on the hiring 

18 date. 

19 ‘‘(B) SPECIAL RULE FOR DETERMINING

20 AMOUNT OF CREDIT.—For purposes of applying 

21 this subpart to wages paid or incurred to any 

22 qualified restaurant employee, subsection (b)(3) 

23 shall be applied by substituting ‘$3,000’ for 

24 ‘$6,000’.’’. 


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1 (c) SPECIAL RULE FOR CERTIFICATIONS.—Subpara2 graph (A) of section 51(d)(14), as redesignated by sub3 section (b), is amended by inserting ‘‘, other than an indi4 vidual described in paragraph (11),’’ after ‘‘An indi5 vidual’’. 

6 (d) NONQUALIFYING REHIRES.—Paragraph (2) of 

7 section 51(i) is amended to read as follows: 

8 ‘‘(2) NONQUALIFYING REHIRES.— 

9 ‘‘(A) IN GENERAL.—No wages shall be 

10 taken into account under subsection (a) with re11 spect to any individual, other than an individual 

12 described in subsection (d)(11), if, prior to the 

13 hiring date of such individual, such individual 

14 had been employed by the employer at any 

15 time. 

16 ‘‘(B) QUALIFIED RESTAURANT EMPLOY17 EES.—In the case of an individual described in 

18 subsection (d)(11), no wages shall be taken into 

19 account under subsection (a) if, prior to the hir20 ing date of such individual, such individual had 

21 been employed by the employer within the prior 

22 90 day period.’’. 

23 (e) MINIMUM EMPLOYMENT PERIODS.—Section 

24 51(i)(3) is amended by adding at the end the following 

25 new subparagraph: 


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1 ‘‘(C) NONAPPLICATION TO QUALIFIED RES2 TAURANT EMPLOYEES.—Subparagraphs (A) 

3 and (B) shall not apply to an individual de4 scribed in subsection (d)(11).’’. 

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

6 this section shall apply to individuals who begin work for 

7 the employer after the date of the enactment of this Act. 

8 Subtitle B—Revenue Offset 

9 Provisions 

10 SEC. 211. CLARIFICATION OF ECONOMIC SUBSTANCE DOC11 TRINE. 

12 (a) IN GENERAL.—Section 7701 is amended by re13 designating subsection (p) as subsection (q) and by insert14 ing after subsection (o) the following new subsection: 

15 ‘‘(p) CLARIFICATION OF ECONOMIC SUBSTANCE

16 DOCTRINE; ETC.— 

17 ‘‘(1) GENERAL RULES.— 

18 ‘‘(A) IN GENERAL.—In any case in which 

19 a court determines that the economic substance 

20 doctrine is relevant for purposes of this title to 

21 a transaction (or series of transactions), such 

22 transaction (or series of transactions) shall have 

23 economic substance only if the requirements of 

24 this paragraph are met. 


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1 ‘‘(B) DEFINITION OF ECONOMIC SUB2 STANCE.—For purposes of subparagraph (A)— 

3 ‘‘(i) IN GENERAL.—A transaction has 

4 economic substance only if— 

5 ‘‘(I) the transaction changes in a 

6 meaningful way (apart from Federal 

7 tax effects) the taxpayer’s economic 

8 position, and 

9 ‘‘(II) the taxpayer has a substan10 tial nontax purpose for entering into 

11 such transaction and the transaction 

12 is a reasonable means of accom13 plishing such purpose. 

14 In applying subclause (II), a purpose of 

15 achieving a financial accounting benefit 

16 shall not be taken into account in deter17 mining whether a transaction has a sub18 stantial nontax purpose if the origin of 

19 such financial accounting benefit is a re20 duction of income tax. 

21 ‘‘(ii) SPECIAL RULE WHERE TAX22 PAYER RELIES ON PROFIT POTENTIAL.—A 

23 transaction shall not be treated as having 

24 economic substance by reason of having a 

25 potential for profit unless— 


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1 ‘‘(I) the present value of the rea2 sonably expected pre-tax profit from 

3 the transaction is substantial in rela4 tion to the present value of the ex5 pected net tax benefits that would be 

6 allowed if the transaction were re7 spected, and 

8 ‘‘(II) the reasonably expected 

9 pre-tax profit from the transaction ex10 ceeds a risk-free rate of return. 

11 ‘‘(C) TREATMENT OF FEES AND FOREIGN

12 TAXES.—Fees and other transaction expenses 

13 and foreign taxes shall be taken into account as 

14 expenses in determining pre-tax profit under 

15 subparagraph (B)(ii). 

16 ‘‘(2) SPECIAL RULES FOR TRANSACTIONS WITH

17 TAX-INDIFFERENT PARTIES.— 

18 ‘‘(A) SPECIAL RULES FOR FINANCING

19 TRANSACTIONS.—The form of a transaction 

20 which is in substance the borrowing of money 

21 or the acquisition of financial capital directly or 

22 indirectly from a tax-indifferent party shall not 

23 be respected if the present value of the deduc24 tions to be claimed with respect to the trans25 action is substantially in excess of the present 


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1 value of the anticipated economic returns of the 

2 person lending the money or providing the fi3 nancial capital. A public offering shall be treat4 ed as a borrowing, or an acquisition of financial 

5 capital, from a tax-indifferent party if it is rea6 sonably expected that at least 50 percent of the 

7 offering will be placed with tax-indifferent par8 ties. 

9 ‘‘(B) ARTIFICIAL INCOME SHIFTING AND

10 BASIS ADJUSTMENTS.—The form of a trans11 action with a tax-indifferent party shall not be 

12 respected if— 

13 ‘‘(i) it results in an allocation of in14 come or gain to the tax-indifferent party in 

15 excess of such party’s economic income or 

16 gain, or 

17 ‘‘(ii) it results in a basis adjustment 

18 or shifting of basis on account of over19 stating the income or gain of the tax-indif20 ferent party. 

21 ‘‘(3) DEFINITIONS AND SPECIAL RULES.—For 

22 purposes of this subsection— 

23 ‘‘(A) ECONOMIC SUBSTANCE DOCTRINE.— 

24 The term ‘economic substance doctrine’ means 

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1 fits under subtitle A with respect to a trans2 action are not allowable if the transaction does 

3 not have economic substance or lacks a business 

4 purpose. 

5 ‘‘(B) TAX-INDIFFERENT PARTY.—The 

6 term ‘tax-indifferent party’ means any person 

7 or entity not subject to tax imposed by subtitle 

8 A. A person shall be treated as a tax-indifferent 

9 party with respect to a transaction if the items 

10 taken into account with respect to the trans11 action have no substantial impact on such per12 son’s liability under subtitle A. 

13 ‘‘(C) EXCEPTION FOR PERSONAL TRANS14 ACTIONS OF INDIVIDUALS.—In the case of an 

15 individual, this subsection shall apply only to 

16 transactions entered into in connection with a 

17 trade or business or an activity engaged in for 

18 the production of income. 

19 ‘‘(D) TREATMENT OF LESSORS.—In apply20 ing paragraph (1)(B)(ii) to the lessor of tan21 gible property subject to a lease— 

22 ‘‘(i) the expected net tax benefits with 

23 respect to the leased property shall not in24 clude the benefits of— 

25 ‘‘(I) depreciation, 


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1 ‘‘(II) any tax credit, or 

2 ‘‘(III) any other deduction as 

3 provided in guidance by the Secretary, 

4 and 

5 ‘‘(ii) subclause (II) of paragraph 

6 (1)(B)(ii) shall be disregarded in deter7 mining whether any of such benefits are al8 lowable. 

9 ‘‘(4) OTHER COMMON LAW DOCTRINES NOT AF10 FECTED.—Except as specifically provided in this 

11 subsection, the provisions of this subsection shall not 

12 be construed as altering or supplanting any other 

13 rule of law, and the requirements of this subsection 

14 shall be construed as being in addition to any such 

15 other rule of law. 

16 ‘‘(5) REGULATIONS.—The Secretary shall pre17 scribe such regulations as may be necessary or ap18 propriate to carry out the purposes of this sub19 section. Such regulations may include exemptions 

20 from the application of this subsection.’’. 

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

22 this section shall apply to transactions entered into after 

23 the date of the enactment of this Act. 


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1 SEC. 212. PENALTY FOR UNDERSTATEMENTS ATTRIB2 UTABLE TO TRANSACTIONS LACKING ECO3 NOMIC SUBSTANCE, ETC. 

4 (a) IN GENERAL.—Subchapter A of chapter 68 is 

5 amended by inserting after section 6662A the following 

6 new section: 

7 ‘‘SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIB8 UTABLE TO TRANSACTIONS LACKING ECO9 NOMIC SUBSTANCE, ETC. 

10 ‘‘(a) IMPOSITION OF PENALTY.—If a taxpayer has an 

11 noneconomic substance transaction understatement for 

12 any taxable year, there shall be added to the tax an 

13 amount equal to 40 percent of the amount of such under14 statement. 

15 ‘‘(b) REDUCTION OF PENALTY FOR DISCLOSED

16 TRANSACTIONS.—Subsection (a) shall be applied by sub17 stituting ‘20 percent’ for ‘40 percent’ with respect to the 

18 portion of any noneconomic substance transaction under19 statement with respect to which the relevant facts affect20 ing the tax treatment of the item are adequately disclosed 

21 in the return or a statement attached to the return. 

22 ‘‘(c) NONECONOMIC SUBSTANCE TRANSACTION UN23 DERSTATEMENT.—For purposes of this section— 

24 ‘‘(1) IN GENERAL.—The term ‘noneconomic 

25 substance transaction understatement’ means any 

26 amount which would be an understatement under 


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1 section 6662A(b)(1) if section 6662A were applied 

2 by taking into account items attributable to non3 economic substance transactions rather than items 

4 to which section 6662A would apply without regard 

5 to this paragraph. 

6 ‘‘(2) NONECONOMIC SUBSTANCE TRANS7 ACTION.—The term ‘noneconomic substance trans8 action’ means any transaction if— 

9 ‘‘(A) there is a lack of economic substance 

10 (within the meaning of section 7701(p)(1)) for 

11 the transaction giving rise to the claimed ben12 efit or the transaction was not respected under 

13 section 7701(p)(2), or 

14 ‘‘(B) the transaction fails to meet the re15 quirements of any similar rule of law. 

16 ‘‘(d) RULES APPLICABLE TO COMPROMISE OF PEN17 ALTY.— 

18 ‘‘(1) IN GENERAL.—If the 1st letter of pro19 posed deficiency which allows the taxpayer an oppor20 tunity for administrative review in the Internal Rev21 enue Service Office of Appeals has been sent with 

22 respect to a penalty to which this section applies, 

23 only the Commissioner of Internal Revenue may 

24 compromise all or any portion of such penalty. 


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1 ‘‘(2) APPLICABLE RULES.—The rules of para2 graphs (2) and (3) of section 6707A(d) shall apply 

3 for purposes of paragraph (1). 

4 ‘‘(e) COORDINATION WITH OTHER PENALTIES.—Ex5 cept as otherwise provided in this part, the penalty im6 posed by this section shall be in addition to any other pen7 alty imposed by this title. 

8 ‘‘(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).’’. 

9 (b) COORDINATION WITH OTHER UNDERSTATE10 MENTS AND PENALTIES.— 

11 (1) The second sentence of section 

12 6662(d)(2)(A) is amended by inserting ‘‘and without 

13 regard to items with respect to which a penalty is 

14 imposed by section 6662B’’ before the period at the 

15 end. 

16 (2) Subsection (e) of section 6662A is amend17 ed— 

18 (A) in paragraph (1), by inserting ‘‘and 

19 noneconomic substance transaction understate20 ments’’ after ‘‘reportable transaction under21 statements’’ both places it appears, 


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1 (B) in paragraph (2)(A), by inserting ‘‘and 

2 a noneconomic substance transaction under3 statement’’ after ‘‘reportable transaction under4 statement’’, 

5 (C) in paragraph (2)(B), by inserting 

6 ‘‘6662B or’’ before ‘‘6663’’, 

7 (D) in paragraph (2)(C)(i), by inserting 

8 ‘‘or section 6662B’’ before the period at the 

9 end, 

10 (E) in paragraph (2)(C)(ii), by inserting 

11 ‘‘and section 6662B’’ after ‘‘This section’’, 

12 (F) in paragraph (3), by inserting ‘‘or non13 economic substance transaction understate14 ment’’ after ‘‘reportable transaction understate15 ment’’, and 

16 (G) by adding at the end the following new 

17 paragraph: 

18 ‘‘(4) NONECONOMIC SUBSTANCE TRANSACTION

19 UNDERSTATEMENT.—For purposes of this sub20 section, the term ‘noneconomic substance trans21 action understatement’ has the meaning given such 

22 term by section 6662B(c).’’. 

23 (3) Subsection (e) of section 6707A is amend24 ed— 


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1 (A) by striking ‘‘or’’ at the end of subpara2 graph (B), and 

3 (B) by striking subparagraph (C) and in4 serting the following new subparagraphs: 

5 ‘‘(C) is required to pay a penalty under 

6 section 6662B with respect to any noneconomic 

7 substance transaction, or 

8 ‘‘(D) is required to pay a penalty under 

9 section 6662(h) with respect to any transaction 

10 and would (but for section 6662A(e)(2)(C)) 

11 have been subject to penalty under section 

12 6662A at a rate prescribed under section 

13 6662A(c) or under section 6662B,’’. 

14 (c) CLERICAL AMENDMENT.—The table of sections 

15 for part II of subchapter A of chapter 68 is amended by 

16 inserting after the item relating to section 6662A the fol17 lowing new item: 

‘‘Sec. 6662B. Penalty for understatements attributable to transactions lacking 

economic substance, etc.’’. 

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

19 this section shall apply to transactions entered into after 

20 the date of the enactment of this Act. 


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1 SEC. 213. APPLICATION OF RULES TREATING INVERTED 

2 CORPORATIONS AS DOMESTIC CORPORA3 TIONS TO CERTAIN TRANSACTIONS OCCUR4 RING AFTER MARCH 20, 2002. 

5 (a) IN GENERAL.—Section 7874(b) (relating to in6 verted corporations treated as domestic corporations) is 

7 amended to read as follows: 

8 ‘‘(b) INVERTED CORPORATIONS TREATED AS DO9 MESTIC CORPORATIONS.— 

10 ‘‘(1) IN GENERAL.—Notwithstanding section 

11 7701(a)(4), a foreign corporation shall be treated for 

12 purposes of this title as a domestic corporation if 

13 such corporation would be a surrogate foreign cor14 poration if subsection (a)(2) were applied by sub15 stituting ‘80 percent’ for ‘60 percent’. 

16 ‘‘(2) SPECIAL RULE FOR CERTAIN TRANS17 ACTIONS OCCURRING AFTER MARCH 20, 2002.— 

18 ‘‘(A) IN GENERAL.—If— 

19 ‘‘(i) paragraph (1) does not apply to 

20 a foreign corporation, but 

21 ‘‘(ii) paragraph (1) would apply to 

22 such corporation if, in addition to the sub23 stitution under paragraph (1), subsection 

24 (a)(2) were applied by substituting ‘March 

25 20, 2002’ for ‘March 4, 2003’ each place 

26 it appears, 


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1 then paragraph (1) shall apply to such corpora2 tion but only with respect to taxable years of 

3 such corporation beginning after December 31, 

4 2006. 

5 ‘‘(B) SPECIAL RULES.—Subject to such 

6 rules as the Secretary may prescribe, in the 

7 case of a corporation to which paragraph (1) 

8 applies by reason of this paragraph— 

9 ‘‘(i) the corporation shall be treated, 

10 as of the close of its last taxable year be11 ginning before January 1, 2007, as having 

12 transferred all of its assets, liabilities, and 

13 earnings and profits to a domestic corpora14 tion in a transaction with respect to which 

15 no tax is imposed under this title, 

16 ‘‘(ii) the bases of the assets trans17 ferred in the transaction to the domestic 

18 corporation shall be the same as the bases 

19 of the assets in the hands of the foreign 

20 corporation, subject to any adjustments 

21 under this title for built-in losses, 

22 ‘‘(iii) the basis of the stock of any 

23 shareholder in the domestic corporation 

24 shall be the same as the basis of the stock 

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1 tion for which it is treated as exchanged, 

2 and 

3 ‘‘(iv) the transfer of any earnings and 

4 profits by reason of clause (i) shall be dis5 regarded in determining any deemed divi6 dend or foreign tax creditable to the do7 mestic corporation with respect to such 

8 transfer. 

9 ‘‘(C) REGULATIONS.—The Secretary may 

10 prescribe such regulations as may be necessary 

11 or appropriate to carry out this paragraph, in12 cluding regulations to prevent the avoidance of 

13 the purposes of this paragraph.’’. 

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

15 this section shall apply to taxable years beginning after 

16 December 31, 2006. 

17 SEC. 214. MODIFICATION OF COLLECTION DUE PROCESS 

18 PROCEDURES FOR EMPLOYMENT TAX LI19 ABILITIES. 

20 (a) IN GENERAL.—Section 6330(f) (relating to jeop21 ardy and State refund collection) is amended— 

22 (1) by striking ‘‘; or’’ at the end of paragraph 

23 (1) and inserting a comma, 

24 (2) by adding ‘‘or’’ at the end of paragraph (2), 

25 and 


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1 (3) by inserting after paragraph (2) the fol2 lowing new paragraph: 

3 ‘‘(3) the Secretary has served a levy in connec4 tion with the collection of taxes under chapter 21, 

5 22, 23, or 24,’’. 

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

7 this section shall apply to levies issued after December 31, 

8 2006. 

Æ 


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