II 

113TH CONGRESS 

1ST SESSION S. 277 

To replace the Budget Control Act sequester by eliminating tax loopholes, 

and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 11, 2013 

Mr. WHITEHOUSE (for himself, Mr. HARKIN, Mr. SANDERS, and Mr. LEVIN) 

introduced the following bill; which was read twice and referred to the 

Committee on Finance 

A BILL 

To replace the Budget Control Act sequester by eliminating 

tax loopholes, 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; TABLE OF CONTENTS. 

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

5 ‘‘Job Preservation and Economic Certainty Act of 2013’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—ELIMINATION OF SEQUESTRATION 

Sec. 101. Discretionary spending limits. 


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TITLE II—ELIMINATION OF TAX LOOPHOLES FOR HIGH-INCOME 

TAXPAYERS 

Sec. 201. Minimum tax for high-income earners. 

Sec. 202. Requiring high-income professionals to pay their payroll taxes. 

Sec. 203. Elimination of private jet giveaway. 

Sec. 204. Limitation on itemized deductions to 28-percent rate bracket. 

TITLE III—ELIMINATION OF TAX LOOPHOLES FOR OFFSHORING 

MANUFACTURERS 

Sec. 301. Ending tax breaks for offshoring manufacturers. 

TITLE IV—ELIMINATION OF TAX LOOPHOLES FOR OIL AND GAS 

COMPANIES 

Sec. 401. Modifications of foreign tax credit rules applicable to major integrated oil companies which are dual capacity taxpayers. 

Sec. 402. Limitation on section 199 deduction attributable to oil, natural gas, 

or primary products thereof. 

Sec. 403. Limitation on deduction for intangible drilling and development costs. 

Sec. 404. Limitation on percentage depletion allowance for oil and gas wells. 

Sec. 405. Limitation on deduction for tertiary injectants. 

Sec. 406. Repeal of outer Continental Shelf deep water and deep gas royalty 

relief. 

TITLE V—ENDING INTERNATIONAL TAX ABUSES 

Sec. 501. Allocation of expenses and taxes on basis of repatriation of foreign 

income. 

Sec. 502. Excess income from transfers of intangibles to low-taxed affiliates 

treated as subpart F income. 

Sec. 503. Limitations on income shifting through intangible property transfers. 

Sec. 504. Limitation on earnings stripping by expatriated entities. 

Sec. 505. Modifications of foreign tax credit rules applicable to dual capacity 

taxpayers. 

Sec. 506. Separate basket treatment taxes paid on foreign oil and gas income. 

TITLE VI—FINANCIAL CRISIS RESPONSIBILITY FEE 

Sec. 601. Definitions and special rules. 

Sec. 602. Financial crisis responsibility fee. 

Sec. 603. Other provisions. 

TITLE VII—TAX ON TRADING TRANSACTIONS 

Sec. 701. Transaction tax. 

TITLE VIII—MODIFICATION OF ACCOUNTING RULES 

Sec. 801. Repeal of last-in, first-out method of inventory. 

Sec. 802. Repeal of lower of cost or market method of inventory. 

TITLE IX—FAIR TREATMENT OF OPTIONS 

Sec. 901. Consistent treatment of stock options by corporations. 

Sec. 902. Application of executive pay deduction limit. 


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1 TITLE I—ELIMINATION OF 

2 SEQUESTRATION 

3 SEC. 101. DISCRETIONARY SPENDING LIMITS. 

4 (a) IN GENERAL.—Part C of title II of the Balanced 

5 Budget and Emergency Deficit Control Act of 1985 (2 

6 U.S.C. 900 et seq.) is amended— 

7 (1) by striking section 251(c) (2 U.S.C. 901(c)) 

8 and inserting the following: 

9 ‘‘(c) DISCRETIONARY SPENDING LIMIT.—As used in 

10 this part, the term ‘discretionary spending limit’ means— 

11 ‘‘(1) with respect to fiscal year 2012— 

12 ‘‘(A) for the security category, 

13 $684,000,000,000 in new budget authority; and 

14 ‘‘(B) for the nonsecurity category, 

15 $359,000,000,000 in new budget authority; 

16 ‘‘(2) with respect to fiscal year 2013— 

17 ‘‘(A) for the security category, 

18 $686,000,000,000 in new budget authority; and 

19 ‘‘(B) for the nonsecurity category, 

20 $361,000,000,000 in new budget authority; 

21 ‘‘(3) with respect to fiscal year 2014, for the 

22 discretionary category, $1,066,000,000,000 in new 

23 budget authority; 


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1 ‘‘(4) with respect to fiscal year 2015, for the 

2 discretionary category, $1,086,000,000,000 in new 

3 budget authority; 

4 ‘‘(5) with respect to fiscal year 2016, for the 

5 discretionary category, $1,107,000,000,000 in new 

6 budget authority; 

7 ‘‘(6) with respect to fiscal year 2017, for the 

8 discretionary category, $1,131,000,000,000 in new 

9 budget authority; 

10 ‘‘(7) with respect to fiscal year 2018, for the 

11 discretionary category, $1,156,000,000,000 in new 

12 budget authority; 

13 ‘‘(8) with respect to fiscal year 2019, for the 

14 discretionary category, $1,182,000,000,000 in new 

15 budget authority; 

16 ‘‘(9) with respect to fiscal year 2020, for the 

17 discretionary category, $1,208,000,000,000 in new 

18 budget authority; and 

19 ‘‘(10) with respect to fiscal year 2021, for the 

20 discretionary category, $1,234,000,000,000 in new 

21 budget authority; 

22 as adjusted in strict conformance with subsection (b).’’; 

23 (2) by striking section 251A (2 U.S.C. 901a); 

24 and 


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1 (3) in the table of contents set forth in section 

2 250(a), by striking the item relating to section 

3 251A. 

4 (b) TECHNICAL AND CONFORMING AMENDMENT.— 

5 Section 901(e) of the American Taxpayer Relief Act of 

6 2012 (Public Law 112–240) is repealed. 

7 TITLE II—ELIMINATION OF TAX 

8 LOOPHOLES FOR HIGH-IN9 COME TAXPAYERS 

10 SEC. 201. MINIMUM TAX FOR HIGH-INCOME EARNERS. 

11 (a) IN GENERAL.—Subchapter A of chapter 1 is 

12 amended by adding at the end the following new part: 

13 ‘‘PART VIII—FAIR SHARE TAX ON HIGH-INCOME 

14 TAXPAYERS 

‘‘Sec. 59B. Fair share tax. 

15 ‘‘SEC. 59B. FAIR SHARE TAX. 

16 ‘‘(a) GENERAL RULE.— 

17 ‘‘(1) PHASE-IN OF TAX.—In the case of any 

18 high-income taxpayer, there is hereby imposed for a 

19 taxable year (in addition to any other tax imposed 

20 by this subtitle) a tax equal to the product of— 

21 ‘‘(A) the amount determined under para22 graph (2), and 

23 ‘‘(B) a fraction (not to exceed 1)— 


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1 ‘‘(i) the numerator of which is the ex2 cess of— 

3 ‘‘(I) the taxpayer’s adjusted 

4 gross income, over 

5 ‘‘(II) the dollar amount in effect 

6 under subsection (c)(1), and 

7 ‘‘(ii) the denominator of which is the 

8 dollar amount in effect under subsection 

9 (c)(1). 

10 ‘‘(2) AMOUNT OF TAX.—The amount of tax de11 termined under this paragraph is an amount equal 

12 to the excess (if any) of— 

13 ‘‘(A) the tentative fair share tax for the 

14 taxable year, over 

15 ‘‘(B) the excess of— 

16 ‘‘(i) the sum of— 

17 ‘‘(I) the regular tax liability (as 

18 defined in section 26(b)) for the tax19 able year, determined without regard 

20 to any tax liability determined under 

21 this section, 

22 ‘‘(II) the tax imposed by section 

23 55 for the taxable year, plus 

24 ‘‘(III) the payroll tax for the tax25 able year, over 


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1 ‘‘(ii) the credits allowable under part 

2 IV of subchapter A (other than sections 

3 27(a), 31, and 34). 

4 ‘‘(b) TENTATIVE FAIR SHARE TAX.—For purposes 

5 of this section— 

6 ‘‘(1) IN GENERAL.—The tentative fair share tax 

7 for the taxable year is 30 percent of the excess of— 

8 ‘‘(A) the adjusted gross income of the tax9 payer, over 

10 ‘‘(B) the modified charitable contribution 

11 deduction for the taxable year. 

12 ‘‘(2) MODIFIED CHARITABLE CONTRIBUTION

13 DEDUCTION.—For purposes of paragraph (1)— 

14 ‘‘(A) IN GENERAL.—The modified chari15 table contribution deduction for any taxable 

16 year is an amount equal to the amount which 

17 bears the same ratio to the deduction allowable 

18 under section 170 (section 642(c) in the case of 

19 a trust or estate) for such taxable year as— 

20 ‘‘(i) the amount of itemized deduc21 tions allowable under the regular tax (as 

22 defined in section 55) for such taxable 

23 year, determined after the application of 

24 section 68, bears to 


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1 ‘‘(ii) such amount, determined before 

2 the application of section 68. 

3 ‘‘(B) TAXPAYER MUST ITEMIZE.—In the 

4 case of any individual who does not elect to 

5 itemize deductions for the taxable year, the 

6 modified charitable contribution deduction shall 

7 be zero. 

8 ‘‘(c) HIGH-INCOME TAXPAYER.—For purposes of this 

9 section— 

10 ‘‘(1) IN GENERAL.—The term ‘high-income tax11 payer’ means, with respect to any taxable year, any 

12 taxpayer (other than a corporation) with an adjusted 

13 gross income for such taxable year in excess of 

14 $1,000,000 (50 percent of such amount in the case 

15 of a married individual who files a separate return). 

16 ‘‘(2) INFLATION ADJUSTMENT.— 

17 ‘‘(A) IN GENERAL.—In the case of a tax18 able year beginning after 2013, the $1,000,000 

19 amount under paragraph (1) shall be increased 

20 by an amount equal to— 

21 ‘‘(i) such dollar amount, multiplied by 

22 ‘‘(ii) the cost-of-living adjustment de23 termined under section 1(f)(3) for the cal24 endar year in which the taxable year be25 gins, determined by substituting ‘calendar 


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1 year 2012’ for ‘calendar year 1992’ in sub2 paragraph (B) thereof. 

3 ‘‘(B) ROUNDING.—If any amount as ad4 justed under subparagraph (A) is not a multiple 

5 of $10,000, such amount shall be rounded to 

6 the next lowest multiple of $10,000. 

7 ‘‘(d) PAYROLL TAX.—For purposes of this section, 

8 the payroll tax for any taxable year is an amount equal 

9 to the excess of— 

10 ‘‘(1) the taxes imposed on the taxpayer under 

11 sections 1401, 1411, 3101, 3201, and 3211(a) (to 

12 the extent such tax is attributable to the rate of tax 

13 in effect under section 3101) with respect to such 

14 taxable year or wages or compensation received dur15 ing such taxable year, over 

16 ‘‘(2) the deduction allowable under section 

17 164(f) for such taxable year. 

18 ‘‘(e) SPECIAL RULE FOR ESTATES AND TRUSTS.— 

19 For purposes of this section, in the case of an estate or 

20 trust, adjusted gross income shall be computed in the 

21 manner described in section 67(e). 

22 ‘‘(f) NOT TREATED AS TAX IMPOSED BY THIS CHAP23 TER FOR CERTAIN PURPOSES.—The tax imposed under 

24 this section shall not be treated as tax imposed by this 

25 chapter for purposes of determining the amount of any 


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1 credit under this chapter (other than the credit allowed 

2 under section 27(a)) or for purposes of section 55.’’. 

3 (b) CLERICAL AMENDMENT.—The table of parts for 

4 subchapter A of chapter 1 is amended by adding at the 

5 end the following new item: 

‘‘PART VIII—FAIR SHARE TAX ON HIGH-INCOME TAXPAYERS’’. 

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

7 this section shall apply to taxable years beginning after 

8 December 31, 2012. 

9 SEC. 202. REQUIRING HIGH-INCOME PROFESSIONALS TO 

10 PAY THEIR PAYROLL TAXES. 

11 (a) IN GENERAL.—Section 1402 of the Internal Rev12 enue Code of 1986 is amended by adding at the end the 

13 following new subsection: 

14 ‘‘(m) SPECIAL RULES FOR PROFESSIONAL SERVICE

15 BUSINESSES.— 

16 ‘‘(1) SHAREHOLDERS PROVIDING SERVICES TO

17 SPECIFIED S CORPORATIONS.— 

18 ‘‘(A) IN GENERAL.—In the case of an ap19 plicable shareholder who provides substantial 

20 services with respect to a professional service 

21 business referred to in subparagraph (C) of a 

22 specified S corporation— 

23 ‘‘(i) such shareholder shall be treated 

24 as engaged in the trade or business of such 

25 professional service business with respect 


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1 to items of income or loss described in sec2 tion 1366 which are attributable to such 

3 business, and 

4 ‘‘(ii) such shareholder’s net earnings 

5 from self-employment shall include such 

6 shareholder’s pro rata share of such items 

7 of income or loss, except that in computing 

8 such pro rata share of such items the ex9 ceptions provided in subsection (a) shall 

10 apply. 

11 ‘‘(B) TREATMENT OF FAMILY MEMBERS.— 

12 Except as otherwise provided by the Secretary, 

13 the applicable shareholder’s pro rata share of 

14 items referred to in subparagraph (A) shall be 

15 increased by the pro rata share of such items 

16 of each member of such applicable shareholder’s 

17 family (within the meaning of section 

18 318(a)(1)) who does not provide substantial 

19 services with respect to such professional serv20 ice business. 

21 ‘‘(C) SPECIFIED S CORPORATION.—For 

22 purposes of this subsection, the term ‘specified 

23 S corporation’ means— 

24 ‘‘(i) any S corporation which is a 

25 partner in a partnership which is engaged 


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1 in a professional service business if sub2 stantially all of the activities of such S cor3 poration are performed in connection with 

4 such partnership, and 

5 ‘‘(ii) any other S corporation which is 

6 engaged in a professional service business 

7 if 75 percent or more of the gross income 

8 of such business is attributable to service 

9 of 3 or fewer shareholders of such corpora10 tion. 

11 ‘‘(D) APPLICABLE SHAREHOLDER.—For 

12 purposes of this paragraph, the term ‘applicable 

13 shareholder’ means any shareholder whose 

14 modified adjusted gross income for the taxable 

15 year exceeds— 

16 ‘‘(i) in the case of a shareholder mak17 ing a joint return under section 6013 or a 

18 surviving spouse (as defined in section 

19 2(a)), $250,000, 

20 ‘‘(ii) in the case of a married share21 holder (as defined in section 7703) filing a 

22 separate return, half of the dollar amount 

23 determined under clause (i), and 

24 ‘‘(iii) in any other case, $200,000. 

25 ‘‘(2) PARTNERS.— 


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

2 partnership which is engaged in a professional 

3 service business, subsection (a)(13) shall not 

4 apply to any applicable partner who provides 

5 substantial services with respect to such profes6 sional service business. 

7 ‘‘(B) APPLICABLE PARTNER.—For pur8 poses of this paragraph, the term ‘applicable 

9 partner’ means any partner whose modified ad10 justed gross income for the taxable year ex11 ceeds— 

12 ‘‘(i) in the case of a partner making 

13 a joint return under section 6013 or a sur14 viving spouse (as defined in section 2(a)), 

15 $250,000, 

16 ‘‘(ii) in the case of a married partner 

17 (as defined in section 7703) filing a sepa18 rate return, half of the dollar amount de19 termined under clause (i), and 

20 ‘‘(iii) in any other case, $200,000. 

21 ‘‘(3) PROFESSIONAL SERVICE BUSINESS.—For 

22 purposes of this subsection, the term ‘professional 

23 service business’ means any trade or business (or 

24 portion thereof) providing services in the fields of 

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1 counting, actuarial science, performing arts, con2 sulting, athletics, investment advice or management, 

3 or brokerage services. 

4 ‘‘(4) MODIFIED ADJUSTED GROSS INCOME.— 

5 For purposes of this subsection, the term ‘modified 

6 adjusted gross income’ means adjusted gross in7 come— 

8 ‘‘(A) determined without regard to any de9 duction allowed under section 164(f), and 

10 ‘‘(B) increased by the amount excluded 

11 from gross income under section 911(a)(1). 

12 ‘‘(5) REGULATIONS.—The Secretary shall pre13 scribe such regulations as may be necessary or ap14 propriate to carry out the purposes of this sub15 section, including regulations which prevent the 

16 avoidance of the purposes of this subsection through 

17 tiered entities or otherwise. 

18 ‘‘(6) CROSS REFERENCE.—For employment tax 

19 treatment of wages paid to shareholders of S cor20 porations, see subtitle C.’’. 

21 (b) CONFORMING AMENDMENT.—Section 211 of the 

22 Social Security Act is amended by adding at the end the 

23 following new subsection: 

24 ‘‘(l) SPECIAL RULES FOR PROFESSIONAL SERVICE

25 BUSINESSES.— 


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1 ‘‘(1) SHAREHOLDERS PROVIDING SERVICES TO

2 SPECIFIED S CORPORATIONS.— 

3 ‘‘(A) IN GENERAL.—In the case of an ap4 plicable shareholder who provides substantial 

5 services with respect to a professional service 

6 business referred to in subparagraph (C) of a 

7 specified S corporation— 

8 ‘‘(i) such shareholder shall be treated 

9 as engaged in the trade or business of such 

10 professional service business with respect 

11 to items of income or loss described in sec12 tion 1366 of the Internal Revenue Code of 

13 1986 which are attributable to such busi14 ness, and 

15 ‘‘(ii) such shareholder’s net earnings 

16 from self-employment shall include such 

17 shareholder’s pro rata share of such items 

18 of income or loss, except that in computing 

19 such pro rata share of such items the ex20 ceptions provided in subsection (a) shall 

21 apply. 

22 ‘‘(B) TREATMENT OF FAMILY MEMBERS.— 

23 Except as otherwise provided by the Secretary 

24 of the Treasury, the applicable shareholder’s 

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1 graph (A) shall be increased by the pro rata 

2 share of such items of each member of such ap3 plicable shareholder’s family (within the mean4 ing of section 318(a)(1) of the Internal Revenue 

5 Code of 1986) who does not provide substantial 

6 services with respect to such professional serv7 ice business. 

8 ‘‘(C) SPECIFIED S CORPORATION.—For 

9 purposes of this subsection, the term ‘specified 

10 S corporation’ means— 

11 ‘‘(i) any S corporation (as defined in 

12 section 1361(a) of the Internal Revenue 

13 Code of 1986) which is a partner in a 

14 partnership which is engaged in a profes15 sional service business if substantially all 

16 of the activities of such S corporation are 

17 performed in connection with such partner18 ship, and 

19 ‘‘(ii) any other S corporation (as so 

20 defined) which is engaged in a professional 

21 service business if 75 percent or more of 

22 the gross income of such business is attrib23 utable to service of 3 or fewer shareholders 

24 of such corporation. 


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1 ‘‘(D) APPLICABLE SHAREHOLDER.—For 

2 purposes of this paragraph, the term ‘applicable 

3 shareholder’ means any shareholder whose 

4 modified adjusted gross income for the taxable 

5 year exceeds— 

6 ‘‘(i) in the case of a shareholder mak7 ing a joint return under section 6013 of 

8 the Internal Revenue Code of 1986 or a 

9 surviving spouse (as defined in section 2(a) 

10 of such Code), $250,000, 

11 ‘‘(ii) in the case of a married share12 holder (as defined in section 7703 of such 

13 Code) filing a separate return, half of the 

14 dollar amount determined under clause (i), 

15 and 

16 ‘‘(iii) in any other case, $200,000. 

17 ‘‘(2) PARTNERS.— 

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

19 partnership which is engaged in a professional 

20 service business, subsection (a)(12) shall not 

21 apply to any applicable partner who provides 

22 substantial services with respect to such profes23 sional service business. 

24 ‘‘(B) APPLICABLE PARTNER.—For pur25 poses of this paragraph, the term ‘applicable 


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1 partner’ means any partner whose modified ad2 justed gross income for the taxable year ex3 ceeds— 

4 ‘‘(i) in the case of a partner making 

5 a joint return under section 6013 of the 

6 Internal Revenue Code of 1986 or a sur7 viving spouse (as defined in section 2(a) of 

8 such Code), $250,000, 

9 ‘‘(ii) in the case of a married partner 

10 (as defined in section 7703 of such Code) 

11 filing a separate return, half of the dollar 

12 amount determined under clause (i), and 

13 ‘‘(iii) in any other case, $200,000. 

14 ‘‘(3) PROFESSIONAL SERVICE BUSINESS.—For 

15 purposes of this subsection, the term ‘professional 

16 service business’ means any trade or business (or 

17 portion thereof) providing services in the fields of 

18 health, law, lobbying, engineering, architecture, ac19 counting, actuarial science, performing arts, con20 sulting, athletics, investment advice or management, 

21 or brokerage services. 

22 ‘‘(4) MODIFIED ADJUSTED GROSS INCOME.— 

23 For purposes of this subsection, the term ‘modified 

24 adjusted gross income’ means adjusted gross income 


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1 as determined under section 62 of the Internal Rev2 enue Code of 1986— 

3 ‘‘(A) determined without regard to any de4 duction allowed under section 164(f) of such 

5 Code, and 

6 ‘‘(B) increased by the amount excluded 

7 from gross income under section 911(a)(1) of 

8 such Code.’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2012. 

12 SEC. 203. ELIMINATION OF PRIVATE JET GIVEAWAY. 

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

14 168(e)(3) of the Internal Revenue Code of 1986 is amend15 ed by striking ‘‘and’’ at the end of clause (iv), by redesig16 nating clause (v) as clause (vi), and by inserting after 

17 clause (iv) the following new clause: 

18 ‘‘(v) any general aviation aircraft, 

19 and’’. 

20 (b) CLASS LIFE.—Paragraph (3) of section 168(g) 

21 of the Internal Revenue Code of 1986 is amended by in22 serting after subparagraph (E) the following new subpara23 graph: 

24 ‘‘(F) GENERAL AVIATION AIRCRAFT.—In 

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1 covery period used for purposes of paragraph 

2 (2) shall be 12 years.’’. 

3 (c) GENERAL AVIATION AIRCRAFT.—Subsection (i) 

4 of section 168 of the Internal Revenue Code of 1986 is 

5 amended by inserting after paragraph (19) the following 

6 new paragraph: 

7 ‘‘(20) GENERAL AVIATION AIRCRAFT.—The 

8 term ‘general aviation aircraft’ means any airplane 

9 or helicopter (including airframes and engines) not 

10 used in commercial or contract carrying of pas11 sengers or freight, but which primarily engages in 

12 the carrying of passengers.’’. 

13 (d) EFFECTIVE DATE.—This section shall be effec14 tive for property placed in service after December 31, 

15 2012. 

16 SEC. 204. LIMITATION ON ITEMIZED DEDUCTIONS TO 28- 

17 PERCENT RATE BRACKET. 

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

19 1986 is amended by inserting after section 68 the fol20 lowing new section: 

21 ‘‘SEC. 68A. BENEFIT OF ITEMIZED DEDUCTIONS LIMITED 

22 TO 28-PERCENT RATE BRACKET. 

23 ‘‘(a) IN GENERAL.—In the case of an individual 

24 whose adjusted gross income exceeds $200,000 ($250,000 

25 in the case of a joint return), the amount of the itemized 


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1 deductions otherwise allowable for the taxable year shall 

2 be reduced by an amount necessary to increase the amount 

3 of regular tax liability of the taxpayer to an amount that 

4 would be imposed if such deductions reduced the regular 

5 tax liability by not more than the amount such deductions 

6 would reduce the tax imposed by section 1 on taxable in7 come within the 28-percent bracket amount. 

8 ‘‘(b) REGULAR TAX LIABILITY.—For purposes of 

9 this section, the term ‘regular tax liability’ has the mean10 ing given such term by section 26(b). 

11 ‘‘(c) COORDINATION WITH SECTION 68.—This sec12 tion shall apply after the application of section 68.’’. 

13 (b) ALTERNATIVE MINIMUM TAX.— 

14 (1) IN GENERAL.—Subsection (b) of section 55 

15 is amended by adding at the end the following new 

16 paragraph: 

17 ‘‘(5) COORDINATION WITH SECTION 68A.—In 

18 the case of an individual, for purposes of paragraph 

19 (2), alternative minimum taxable income shall be de20 termined by reducing the amount of any itemized 

21 deductions otherwise allowed in determining alter22 native minimum taxable income by an amount which 

23 bears the same ratio to the amount by which the 

24 itemized deductions of the taxpayer were reduced for 

25 the taxable year under section 68A as— 


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1 ‘‘(A) the amount of itemized deductions 

2 otherwise allowed in determining the alternative 

3 minimum taxable income for the taxable year, 

4 bears to 

5 ‘‘(B) the aggregate amount of itemized de6 ductions of the taxpayer for the taxable year 

7 (determined without regard to section 68A).’’. 

8 (2) CONFORMING AMENDMENT.—Paragraph (1) 

9 of section 56(b) is amended by adding at the end the 

10 following new subparagraph: 

11 ‘‘(G) SECTION 68A NOT APPLICABLE.—Sec12 tion 68A shall not apply.’’. 

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

14 for part I of subchapter B of chapter 1 is amended by 

15 adding at the end the following new item: 

‘‘Sec. 68A. Benefit of itemized deductions limited to 28-percent rate bracket.’’. 

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

17 this section shall apply to taxable years beginning after 

18 December 31, 2012. 

19 TITLE III—ELIMINATION OF TAX 

20 LOOPHOLES FOR OFFSHOR21 ING MANUFACTURERS 

22 SEC. 301. ENDING TAX BREAKS FOR OFFSHORING MANU23 FACTURERS. 

24 (a) GENERAL RULE.—Subsection (a) of section 954 

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1 ing the period at the end of paragraph (5) and inserting 

2 ‘‘, and’’, by redesignating paragraph (5) as paragraph (4), 

3 and by adding at the end the following new paragraph: 

4 ‘‘(5) imported property income for the taxable 

5 year (determined under subsection (j) and reduced 

6 as provided in subsection (b)(5)).’’. 

7 (b) DEFINITION OF IMPORTED PROPERTY IN8 COME.—Section 954 of the Internal Revenue Code of 1986 

9 is amended by adding at the end the following new sub10 section: 

11 ‘‘(j) IMPORTED PROPERTY INCOME.— 

12 ‘‘(1) IN GENERAL.—For purposes of subsection 

13 (a)(5), the term ‘imported property income’ means 

14 income (whether in the form of profits, commissions, 

15 fees, or otherwise) derived in connection with— 

16 ‘‘(A) manufacturing, producing, growing, 

17 or extracting imported property; 

18 ‘‘(B) the sale, exchange, or other disposi19 tion of imported property; or 

20 ‘‘(C) the lease, rental, or licensing of im21 ported property. 

22 Such term shall not include any foreign oil and gas 

23 extraction income (within the meaning of section 

24 907(c)) or any foreign oil related income (within the 

25 meaning of section 907(c)). 


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1 ‘‘(2) IMPORTED PROPERTY.—For purposes of 

2 this subsection— 

3 ‘‘(A) IN GENERAL.—Except as otherwise 

4 provided in this paragraph, the term ‘imported 

5 property’ means property which is imported 

6 into the United States by the controlled foreign 

7 corporation or a related person. 

8 ‘‘(B) IMPORTED PROPERTY INCLUDES CER9 TAIN PROPERTY IMPORTED BY UNRELATED

10 PERSONS.—The term ‘imported property’ in11 cludes any property imported into the United 

12 States by an unrelated person if, when such 

13 property was sold to the unrelated person by 

14 the controlled foreign corporation (or a related 

15 person), it was reasonable to expect that— 

16 ‘‘(i) such property would be imported 

17 into the United States; or 

18 ‘‘(ii) such property would be used as 

19 a component in other property which would 

20 be imported into the United States. 

21 ‘‘(C) EXCEPTION FOR PROPERTY SUBSE22 QUENTLY EXPORTED.—The term ‘imported 

23 property’ does not include any property which is 

24 imported into the United States and which— 


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•S 277 IS

1 ‘‘(i) before substantial use in the 

2 United States, is sold, leased, or rented by 

3 the controlled foreign corporation or a re4 lated person for direct use, consumption, 

5 or disposition outside the United States; or 

6 ‘‘(ii) is used by the controlled foreign 

7 corporation or a related person as a com8 ponent in other property which is so sold, 

9 leased, or rented. 

10 ‘‘(D) EXCEPTION FOR CERTAIN AGRICUL11 TURAL COMMODITIES.—The term ‘imported 

12 property’ does not include any agricultural com13 modity which is not grown in the United States 

14 in commercially marketable quantities. 

15 ‘‘(3) DEFINITIONS AND SPECIAL RULES.— 

16 ‘‘(A) IMPORT.—For purposes of this sub17 section, the term ‘import’ means entering, or 

18 withdrawal from warehouse, for consumption or 

19 use. Such term includes any grant of the right 

20 to use intangible property (as defined in section 

21 936(h)(3)(B)) in the United States. 

22 ‘‘(B) UNITED STATES.—For purposes of 

23 this subsection, the term ‘United States’ in24 cludes the Commonwealth of Puerto Rico, the 

25 Virgin Islands of the United States, Guam, 


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1 American Samoa, and the Commonwealth of 

2 the Northern Mariana Islands. 

3 ‘‘(C) UNRELATED PERSON.—For purposes 

4 of this subsection, the term ‘unrelated person’ 

5 means any person who is not a related person 

6 with respect to the controlled foreign corpora7 tion. 

8 ‘‘(D) COORDINATION WITH FOREIGN BASE

9 COMPANY SALES INCOME.—For purposes of this 

10 section, the term ‘foreign base company sales 

11 income’ shall not include any imported property 

12 income.’’. 

13 (c) SEPARATE APPLICATION OF LIMITATIONS ON

14 FOREIGN TAX CREDIT FOR IMPORTED PROPERTY IN15 COME.— 

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

17 904(d) of the Internal Revenue Code of 1986 is 

18 amended by striking ‘‘and’’ at the end of subpara19 graph (A), by redesignating subparagraph (B) as 

20 subparagraph (C), and by inserting after subpara21 graph (A) the following new subparagraph: 

22 ‘‘(B) imported property income, and’’. 

23 (2) IMPORTED PROPERTY INCOME DEFINED.— 

24 Paragraph (2) of section 904(d) of such Code is 

25 amended by redesignating subparagraphs (I), (J), 


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1 and (K) as subparagraphs (J), (K), and (L), respec2 tively, and by inserting after subparagraph (H) the 

3 following new subparagraph: 

4 ‘‘(I) IMPORTED PROPERTY INCOME.—The 

5 term ‘imported property income’ means any in6 come received or accrued by any person which 

7 is of a kind which would be imported property 

8 income (as defined in section 954(j)).’’. 

9 (3) CONFORMING AMENDMENT.—Clause (ii) of 

10 section 904(d)(2)(A) of such Code is amended by in11 serting ‘‘or imported property income’’ after ‘‘pas12 sive category income’’. 

13 (d) TECHNICAL AMENDMENTS.— 

14 (1) Clause (iii) of section 952(c)(1)(B) of the 

15 Internal Revenue Code of 1986 is amended— 

16 (A) by redesignating subclauses (II), (III), 

17 (IV), and (V) as subclauses (III), (IV), (V), and 

18 (VI), and 

19 (B) by inserting after subclause (I) the fol20 lowing new subclause: 

21 ‘‘(II) imported property in22 come,’’. 

23 (2) The last sentence of paragraph (4) of sec24 tion 954(b) of such Code is amended by striking 


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1 ‘‘subsection (a)(5)’’ and inserting ‘‘subsection 

2 (a)(4)’’. 

3 (3) Paragraph (5) of section 954(b) of such 

4 Code is amended by striking ‘‘and the foreign base 

5 company oil related income’’ and inserting ‘‘the for6 eign base company oil related income, and the im7 ported property income’’. 

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

9 this section shall apply to taxable years of foreign corpora10 tions beginning after the date of the enactment of this 

11 Act, and to taxable years of United States shareholders 

12 within which or with which such taxable years of such for13 eign corporations end. 

14 TITLE IV—ELIMINATION OF TAX 

15 LOOPHOLES FOR OIL AND 

16 GAS COMPANIES 

17 SEC. 401. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 

18 APPLICABLE TO MAJOR INTEGRATED OIL 

19 COMPANIES WHICH ARE DUAL CAPACITY 

20 TAXPAYERS. 

21 (a) IN GENERAL.—Section 901 of the Internal Rev22 enue Code of 1986 is amended by redesignating subsection 

23 (n) as subsection (o) and by inserting after subsection (m) 

24 the following new subsection: 


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1 ‘‘(n) SPECIAL RULES RELATING TO MAJOR INTE2 GRATED OIL COMPANIES WHICH ARE DUAL CAPACITY

3 TAXPAYERS.— 

4 ‘‘(1) GENERAL RULE.—Notwithstanding any 

5 other provision of this chapter, any amount paid or 

6 accrued by a dual capacity taxpayer which is a 

7 major integrated oil company (as defined in section 

8 167(h)(5)(B)) to a foreign country or possession of 

9 the United States for any period shall not be consid10 ered a tax— 

11 ‘‘(A) if, for such period, the foreign coun12 try or possession does not impose a generally 

13 applicable income tax, or 

14 ‘‘(B) to the extent such amount exceeds 

15 the amount (determined in accordance with reg16 ulations) which— 

17 ‘‘(i) is paid by such dual capacity tax18 payer pursuant to the generally applicable 

19 income tax imposed by the country or pos20 session, or 

21 ‘‘(ii) would be paid if the generally ap22 plicable income tax imposed by the country 

23 or possession were applicable to such dual 

24 capacity taxpayer. 


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1 Nothing in this paragraph shall be construed to 

2 imply the proper treatment of any such amount not 

3 in excess of the amount determined under subpara4 graph (B). 

5 ‘‘(2) DUAL CAPACITY TAXPAYER.—For pur6 poses of this subsection, the term ‘dual capacity tax7 payer’ means, with respect to any foreign country or 

8 possession of the United States, a person who— 

9 ‘‘(A) is subject to a levy of such country or 

10 possession, and 

11 ‘‘(B) receives (or will receive) directly or 

12 indirectly a specific economic benefit (as deter13 mined in accordance with regulations) from 

14 such country or possession. 

15 ‘‘(3) GENERALLY APPLICABLE INCOME TAX.— 

16 For purposes of this subsection— 

17 ‘‘(A) IN GENERAL.—The term ‘generally 

18 applicable income tax’ means an income tax (or 

19 a series of income taxes) which is generally im20 posed under the laws of a foreign country or 

21 possession on income derived from the conduct 

22 of a trade or business within such country or 

23 possession. 


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1 ‘‘(B) EXCEPTIONS.—Such term shall not 

2 include a tax unless it has substantial applica3 tion, by its terms and in practice, to— 

4 ‘‘(i) persons who are not dual capacity 

5 taxpayers, and 

6 ‘‘(ii) persons who are citizens or resi7 dents of the foreign country or posses8 sion.’’. 

9 (b) EFFECTIVE DATE.— 

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

11 this section shall apply to taxes paid or accrued in 

12 taxable years beginning after the date of the enact13 ment of this Act. 

14 (2) CONTRARY TREATY OBLIGATIONS

15 UPHELD.—The amendments made by this section 

16 shall not apply to the extent contrary to any treaty 

17 obligation of the United States. 

18 SEC. 402. LIMITATION ON SECTION 199 DEDUCTION ATTRIB19 UTABLE TO OIL, NATURAL GAS, OR PRIMARY 

20 PRODUCTS THEREOF. 

21 (a) DENIAL OF DEDUCTION.—Paragraph (4) of sec22 tion 199(c) of the Internal Revenue Code of 1986 is 

23 amended by adding at the end the following new subpara24 graph: 


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1 ‘‘(E) SPECIAL RULE FOR CERTAIN OIL

2 AND GAS INCOME.—In the case of any taxpayer 

3 who is a major integrated oil company (as de4 fined in section 167(h)(5)(B)) for the taxable 

5 year, the term ‘domestic production gross re6 ceipts’ shall not include gross receipts from the 

7 production, transportation, or distribution of 

8 oil, natural gas, or any primary product (within 

9 the meaning of subsection (d)(9)) thereof.’’. 

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2012. 

13 SEC. 403. LIMITATION ON DEDUCTION FOR INTANGIBLE 

14 DRILLING AND DEVELOPMENT COSTS. 

15 (a) IN GENERAL.—Section 263(c) of the Internal 

16 Revenue Code of 1986 is amended by adding at the end 

17 the following new sentence: ‘‘This subsection shall not 

18 apply to amounts paid or incurred by a taxpayer in any 

19 taxable year in which such taxpayer is a major integrated 

20 oil company (as defined in section 167(h)(5)(B)).’’. 

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

22 this section shall apply to amounts paid or incurred in tax23 able years beginning after December 31, 2012. 


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1 SEC. 404. LIMITATION ON PERCENTAGE DEPLETION AL2 LOWANCE FOR OIL AND GAS WELLS. 

3 (a) IN GENERAL.—Section 613A of the Internal Rev4 enue Code of 1986 is amended by adding at the end the 

5 following new subsection: 

6 ‘‘(f) APPLICATION WITH RESPECT TO MAJOR INTE7 GRATED OIL COMPANIES.—In the case of any taxable year 

8 in which the taxpayer is a major integrated oil company 

9 (as defined in section 167(h)(5)(B)), the allowance for 

10 percentage depletion shall be zero.’’. 

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

12 this section shall apply to taxable years beginning after 

13 December 31, 2012. 

14 SEC. 405. LIMITATION ON DEDUCTION FOR TERTIARY 

15 INJECTANTS. 

16 (a) IN GENERAL.—Section 193 of the Internal Rev17 enue Code of 1986 is amended by adding at the end the 

18 following new subsection: 

19 ‘‘(d) APPLICATION WITH RESPECT TO MAJOR INTE20 GRATED OIL COMPANIES.—This section shall not apply to 

21 amounts paid or incurred by a taxpayer in any taxable 

22 year in which such taxpayer is a major integrated oil com23 pany (as defined in section 167(h)(5)(B)).’’. 

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

25 this section shall apply to amounts paid or incurred in tax26 able years beginning after December 31, 2012. 


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1 SEC. 406. REPEAL OF OUTER CONTINENTAL SHELF DEEP 

2 WATER AND DEEP GAS ROYALTY RELIEF. 

3 (a) IN GENERAL.—Sections 344 and 345 of the En4 ergy Policy Act of 2005 (42 U.S.C. 15904, 15905) are 

5 repealed. 

6 (b) ADMINISTRATION.—The Secretary of the Interior 

7 shall not be required to provide for royalty relief in the 

8 lease sale terms beginning with the first lease sale held 

9 on or after the date of enactment of this Act for which 

10 a final notice of sale has not been published. 

11 TITLE V—ENDING 

12 INTERNATIONAL TAX ABUSES 

13 SEC. 501. ALLOCATION OF EXPENSES AND TAXES ON BASIS 

14 OF REPATRIATION OF FOREIGN INCOME. 

15 (a) IN GENERAL.—Part III of subchapter N of chap16 ter 1 of the Internal Revenue Code of 1986 is amended 

17 by inserting after subpart G the following new subpart: 

18 ‘‘Subpart H—Special Rules for Allocation of Foreign19 Related Deductions and Foreign Tax Credits 

‘‘Sec. 975. Deductions allocated to deferred foreign income may not offset 

United States source income. 

‘‘Sec. 976. Amount of foreign taxes computed on overall basis. 

‘‘Sec. 977. Application of subpart. 


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•S 277 IS

1 ‘‘SEC. 975. DEDUCTIONS ALLOCATED TO DEFERRED FOR2 EIGN INCOME MAY NOT OFFSET UNITED 

3 STATES SOURCE INCOME. 

4 ‘‘(a) CURRENT YEAR DEDUCTIONS.—For purposes 

5 of this chapter, foreign-related deductions for any taxable 

6 year— 

7 ‘‘(1) shall be taken into account for such tax8 able year only to the extent that such deductions are 

9 allocable to currently-taxed foreign income, and 

10 ‘‘(2) to the extent not so allowed, shall be taken 

11 into account in subsequent taxable years as provided 

12 in subsection (b). 

13 Foreign-related deductions shall be allocated to currently 

14 taxed foreign income in the same proportion which cur15 rently taxed foreign income bears to the sum of currently 

16 taxed foreign income and deferred foreign income. 

17 ‘‘(b) DEDUCTIONS RELATED TO REPATRIATED DE18 FERRED FOREIGN INCOME.— 

19 ‘‘(1) IN GENERAL.—If there is repatriated for20 eign income for a taxable year, the portion of the 

21 previously deferred deductions allocated to the repa22 triated foreign income shall be taken into account 

23 for the taxable year as a deduction allocated to in24 come from sources outside the United States. Any 

25 such amount shall not be included in foreign-related 


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•S 277 IS

1 deductions for purposes of applying subsection (a) to 

2 such taxable year. 

3 ‘‘(2) PORTION OF PREVIOUSLY DEFERRED DE4 DUCTIONS.—For purposes of paragraph (1), the por5 tion of the previously deferred deductions allocated 

6 to repatriated foreign income is— 

7 ‘‘(A) the amount which bears the same 

8 proportion to such deductions, as 

9 ‘‘(B) the repatriated income bears to the 

10 previously deferred foreign income. 

11 ‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur12 poses of this section— 

13 ‘‘(1) FOREIGN-RELATED DEDUCTIONS.—The 

14 term ‘foreign-related deductions’ means the total 

15 amount of deductions and expenses which would be 

16 allocated or apportioned to gross income from 

17 sources without the United States for the taxable 

18 year if both the currently-taxed foreign income and 

19 deferred foreign income were taken into account. 

20 ‘‘(2) CURRENTLY-TAXED FOREIGN INCOME.— 

21 The term ‘currently-taxed foreign income’ means the 

22 amount of gross income from sources without the 

23 United States for the taxable year (determined with24 out regard to repatriated foreign income for such 

25 year). 


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•S 277 IS

1 ‘‘(3) DEFERRED FOREIGN INCOME.—The term 

2 ‘deferred foreign income’ means the excess of— 

3 ‘‘(A) the amount that would be includible 

4 in gross income under subpart F of this part 

5 for the taxable year if— 

6 ‘‘(i) all controlled foreign corporations 

7 were treated as one controlled foreign cor8 poration, and 

9 ‘‘(ii) all earnings and profits of all 

10 controlled foreign corporations were sub11 part F income (as defined in section 952), 

12 over 

13 ‘‘(B) the sum of— 

14 ‘‘(i) all dividends received during the 

15 taxable year from controlled foreign cor16 porations, plus 

17 ‘‘(ii) amounts includible in gross in18 come under section 951(a). 

19 ‘‘(4) PREVIOUSLY DEFERRED FOREIGN IN20 COME.—The term ‘previously deferred foreign in21 come’ means the aggregate amount of deferred for22 eign income for all prior taxable years to which this 

23 part applies, determined as of the beginning of the 

24 taxable year, reduced by the repatriated foreign in25 come for all such prior taxable years. 


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1 ‘‘(5) REPATRIATED FOREIGN INCOME.—The 

2 term ‘repatriated foreign income’ means the amount 

3 included in gross income on account of distributions 

4 out of previously deferred foreign income. 

5 ‘‘(6) PREVIOUSLY DEFERRED DEDUCTIONS.— 

6 The term ‘previously deferred deductions’ means the 

7 aggregate amount of foreign-related deductions not 

8 taken into account under subsection (a) for all prior 

9 taxable years (determined as of the beginning of the 

10 taxable year), reduced by any amounts taken into 

11 account under subsection (b) for such prior taxable 

12 years. 

13 ‘‘(7) TREATMENT OF CERTAIN FOREIGN

14 TAXES.— 

15 ‘‘(A) PAID BY CONTROLLED FOREIGN COR16 PORATION.—Section 78 shall not apply for pur17 poses of determining currently-taxed foreign in18 come and deferred foreign income. 

19 ‘‘(B) PAID BY TAXPAYER.—For purposes 

20 of determining currently-taxed foreign income, 

21 gross income from sources without the United 

22 States shall be reduced by the aggregate 

23 amount of taxes described in the applicable 

24 paragraph of section 901(b) which are paid by 


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•S 277 IS

1 the taxpayer (without regard to sections 902 

2 and 960) during the taxable year. 

3 ‘‘(8) COORDINATION WITH SECTION 976.—In 

4 determining currently-taxed foreign income and de5 ferred foreign income, the amount of deemed foreign 

6 tax credits shall be determined with regard to sec7 tion 976. 

8 ‘‘SEC. 976. AMOUNT OF FOREIGN TAXES COMPUTED ON 

9 OVERALL BASIS. 

10 ‘‘(a) CURRENT YEAR ALLOWANCE.—For purposes of 

11 this chapter, the amount taken into account as foreign in12 come taxes for any taxable year shall be an amount which 

13 bears the same ratio to the total foreign income taxes for 

14 that taxable year as— 

15 ‘‘(1) the currently-taxed foreign income for such 

16 taxable year, bears to 

17 ‘‘(2) the sum of the currently-taxed foreign in18 come and deferred foreign income for such year. 

19 The portion of the total foreign income taxes for any tax20 able year not taken into account under the preceding sen21 tence for a taxable year shall only be taken into account 

22 as provided in subsection (b) (and shall not be taken into 

23 account for purposes of applying sections 902 and 960). 

24 ‘‘(b) ALLOWANCE RELATED TO REPATRIATED DE25 FERRED FOREIGN INCOME.— 


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1 ‘‘(1) IN GENERAL.—If there is repatriated for2 eign income for any taxable year, the portion of the 

3 previously deferred foreign income taxes paid or ac4 crued during such taxable year shall be taken into 

5 account for the taxable year as foreign taxes paid or 

6 accrued. Any such taxes so taken into account shall 

7 not be included in foreign income taxes for purposes 

8 of applying subsection (a) to such taxable year. 

9 ‘‘(2) PORTION OF PREVIOUSLY DEFERRED FOR10 EIGN INCOME TAXES.—For purposes of paragraph 

11 (1), the portion of the previously deferred foreign in12 come taxes allocated to repatriated deferred foreign 

13 income is— 

14 ‘‘(A) the amount which bears the same 

15 proportion to such taxes, as 

16 ‘‘(B) the repatriated deferred income bears 

17 to the previously deferred foreign income. 

18 ‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur19 poses of this section— 

20 ‘‘(1) PREVIOUSLY DEFERRED FOREIGN INCOME

21 TAXES.—The term ‘previously deferred foreign in22 come taxes’ means the aggregate amount of total 

23 foreign income taxes not taken into account under 

24 subsection (a) for all prior taxable years (determined 

25 as of the beginning of the taxable year), reduced by 


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•S 277 IS

1 any amounts taken into account under subsection 

2 (b) for such prior taxable years. 

3 ‘‘(2) TOTAL FOREIGN INCOME TAXES.—The 

4 term ‘total foreign income taxes’ means the sum of 

5 foreign income taxes paid or accrued during the tax6 able year (determined without regard to section 

7 904(c)) plus the increase in foreign income taxes 

8 that would be paid or accrued during the taxable 

9 year under sections 902 and 960 if— 

10 ‘‘(A) all controlled foreign corporations 

11 were treated as one controlled foreign corpora12 tion, and 

13 ‘‘(B) all earnings and profits of all con14 trolled foreign corporations were subpart F in15 come (as defined in section 952). 

16 ‘‘(3) FOREIGN INCOME TAXES.—The term ‘for17 eign income taxes’ means any income, war profits, or 

18 excess profits taxes paid by the taxpayer to any for19 eign country or possession of the United States. 

20 ‘‘(4) CURRENTLY-TAXED FOREIGN INCOME AND

21 DEFERRED FOREIGN INCOME.—The terms ‘cur22 rently-taxed foreign income’ and ‘deferred foreign in23 come’ have the meanings given such terms by sec24 tion 975(c). 


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•S 277 IS

1 ‘‘SEC. 977. APPLICATION OF SUBPART. 

2 ‘‘This subpart— 

3 ‘‘(1) shall be applied before subpart A, and 

4 ‘‘(2) shall be applied separately with respect to 

5 the categories of income specified in section 

6 904(d)(1).’’. 

7 (b) CLERICAL AMENDMENT.—The table of subparts 

8 for part III of subpart N of chapter 1 of such Code is 

9 amended by inserting after the item relating to subpart 

10 G the following new item: 

‘‘SUBPART H. SPECIAL RULES FOR ALLOCATION OF FOREIGN-RELATED

DEDUCTIONS AND FOREIGN TAX CREDITS.’’. 

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

12 this section shall apply to taxable years beginning after 

13 the date of the enactment of this Act. 

14 SEC. 502. EXCESS INCOME FROM TRANSFERS OF INTANGI15 BLES TO LOW-TAXED AFFILIATES TREATED 

16 AS SUBPART F INCOME. 

17 (a) IN GENERAL.—Subsection (a) of section 954 of 

18 the Internal Revenue Code of 1986 is amended by insert19 ing after paragraph (3) the following new paragraph: 

20 ‘‘(4) the foreign base company excess intangible 

21 income for the taxable year (determined under sub22 section (f) and reduced as provided in subsection 

23 (b)(5)), and’’. 


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•S 277 IS

1 (b) FOREIGN BASE COMPANY EXCESS INTANGIBLE

2 INCOME.—Section 954 of such Code is amended by insert3 ing after subsection (e) the following new subsection: 

4 ‘‘(f) FOREIGN BASE COMPANY EXCESS INTANGIBLE

5 INCOME.—For purposes of subsection (a)(4) and this sub6 section: 

7 ‘‘(1) FOREIGN BASE COMPANY EXCESS INTAN8 GIBLE INCOME DEFINED.— 

9 ‘‘(A) IN GENERAL.—The term ‘foreign 

10 base company excess intangible income’ means, 

11 with respect to any covered intangible, the ex12 cess of— 

13 ‘‘(i) the sum of— 

14 ‘‘(I) gross income from the sale, 

15 lease, license, or other disposition of 

16 property in which such covered intan17 gible is used directly or indirectly, and 

18 ‘‘(II) gross income from the pro19 vision of services related to such cov20 ered intangible or in connection with 

21 property in which such covered intan22 gible is used directly or indirectly, 

23 over 

24 ‘‘(ii) 150 percent of the costs properly 

25 allocated and apportioned to the gross inVerDate Mar 15 2010 04:50 Feb 20, 2013 Jkt 029200 PO 00000 Frm 00043 Fmt 6652 Sfmt 6201 E:\BILLS\S277.IS S277

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•S 277 IS

1 come taken into account under clause (i) 

2 other than expenses for interest and taxes 

3 and any expenses which are not directly al4 locable to such gross income. 

5 ‘‘(B) SAME COUNTRY INCOME NOT TAKEN

6 INTO ACCOUNT.—If— 

7 ‘‘(i) the sale, lease, license, or other 

8 disposition of the property referred to in 

9 subparagraph (A)(i)(I) is for use, con10 sumption, or disposition in the country 

11 under the laws of which the controlled for12 eign corporation is created or organized, or 

13 ‘‘(ii) the services referred to in sub14 paragraph (A)(i)(II) are performed in such 

15 country, 

16 the gross income from such sale, lease, license, 

17 or other disposition, or provision of services, 

18 shall not be taken into account under subpara19 graph (A)(i). 

20 ‘‘(2) EXCEPTION BASED ON EFFECTIVE FOR21 EIGN INCOME TAX RATE.— 

22 ‘‘(A) IN GENERAL.—Foreign base company 

23 excess intangible income shall not include the 

24 applicable percentage of any item of income re25 ceived by a controlled foreign corporation if the 


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•S 277 IS

1 taxpayer establishes to the satisfaction of the 

2 Secretary that such income was subject to an 

3 effective rate of income tax imposed by a for4 eign country in excess of 5 percent. 

5 ‘‘(B) APPLICABLE PERCENTAGE.—For 

6 purposes of subparagraph (A), the term ‘appli7 cable percentage’ means the ratio (expressed as 

8 a percentage), not greater than 100 percent, 

9 of— 

10 ‘‘(i) the number of percentage points 

11 by which the effective rate of income tax 

12 referred to in subparagraph (A) exceeds 5 

13 percentage points, over 

14 ‘‘(ii) 10 percentage points. 

15 ‘‘(C) TREATMENT OF LOSSES IN DETER16 MINING EFFECTIVE RATE OF FOREIGN INCOME

17 TAX.—For purposes of determining the effective 

18 rate of income tax imposed by any foreign 

19 country— 

20 ‘‘(i) such effective rate shall be deter21 mined without regard to any losses carried 

22 to the relevant taxable year, and 

23 ‘‘(ii) to the extent the income with re24 spect to such intangible reduces losses in 

25 the relevant taxable year, such effective 


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•S 277 IS

1 rate shall be treated as being the effective 

2 rate which would have been imposed on 

3 such income without regard to such losses. 

4 ‘‘(3) COVERED INTANGIBLE.—The term ‘cov5 ered intangible’ means, with respect to any con6 trolled foreign corporation, any intangible property 

7 (as defined in section 936(h)(3)(B))— 

8 ‘‘(A) which is sold, leased, licensed, or oth9 erwise transferred (directly or indirectly) to 

10 such controlled foreign corporation from a re11 lated person, or 

12 ‘‘(B) with respect to which such controlled 

13 foreign corporation and one or more related 

14 persons has (directly or indirectly) entered into 

15 any shared risk or development agreement (in16 cluding any cost sharing agreement). 

17 ‘‘(4) RELATED PERSON.—The term ‘related 

18 person’ has the meaning given such term in sub19 section (d)(3).’’. 

20 (c) SEPARATE BASKET FOR FOREIGN TAX CRED21 IT.—Subsection (d) of section 904 of such Code is amend22 ed by redesignating paragraph (7) as paragraph (8) and 

23 by inserting after paragraph (6) the following new para24 graph: 


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1 ‘‘(6) SEPARATE APPLICATION TO FOREIGN

2 BASE COMPANY EXCESS INTANGIBLE INCOME.— 

3 ‘‘(A) IN GENERAL.—Subsections (a), (b), 

4 and (c) of this section and sections 902, 907, 

5 and 960 shall be applied separately with respect 

6 to each item of income which is taken into ac7 count under section 954(a)(4) as foreign base 

8 company excess intangible income. 

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

10 issue such regulations or other guidance as is 

11 necessary or appropriate to carry out the pur12 poses of this subsection, including regulations 

13 or other guidance which provides that related 

14 items of income may be aggregated for pur15 poses of this paragraph.’’. 

16 (d) CONFORMING AMENDMENTS.— 

17 (1) Paragraph (4) of section 954(b) of such 

18 Code is amended by inserting ‘‘foreign base company 

19 excess intangible income described in subsection 

20 (a)(4) or’’ before ‘‘foreign base company oil-related 

21 income’’ in the last sentence thereof. 

22 (2) Subsection (b) of section 954 of such Code 

23 is amended by adding at the end the following new 

24 paragraph: 


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1 ‘‘(7) FOREIGN BASE COMPANY EXCESS INTAN2 GIBLE INCOME NOT TREATED AS ANOTHER KIND OF

3 BASE COMPANY INCOME.—Income of a corporation 

4 which is foreign base company excess intangible in5 come shall not be considered foreign base company 

6 income of such corporation under paragraph (2), 

7 (3), or (5) of subsection (a).’’. 

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

9 this section shall apply to taxable years beginning after 

10 the date of the enactment of this Act. 

11 SEC. 503. LIMITATIONS ON INCOME SHIFTING THROUGH IN12 TANGIBLE PROPERTY TRANSFERS. 

13 (a) CLARIFICATION OF DEFINITION OF INTANGIBLE

14 ASSET.—Clause (vi) of section 936(h)(3)(B) of the Inter15 nal Revenue Code of 1986 is amended by inserting ‘‘(in16 cluding any section 197 intangible described in subpara17 graph (A), (B), or (C)(i) of subsection (d)(1) of such sec18 tion)’’ after ‘‘item’’. 

19 (b) CLARIFICATION OF ALLOWABLE VALUATION

20 METHODS.— 

21 (1) FOREIGN CORPORATIONS.—Paragraph (2) 

22 of section 367(d) of the Internal Revenue Code of 

23 1986 is amended by adding at the end the following 

24 new subparagraph: 


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1 ‘‘(D) REGULATORY AUTHORITY.—For pur2 poses of the last sentence of subparagraph (A), 

3 the Secretary may require— 

4 ‘‘(i) the valuation of transfers of in5 tangible property on an aggregate basis, or 

6 ‘‘(ii) the valuation of such a transfer 

7 on the basis of the realistic alternatives to 

8 such a transfer, 

9 in any case in which the Secretary determines 

10 that such basis is the most reliable means of 

11 valuation of such transfers.’’. 

12 (2) ALLOCATION AMONG TAXPAYERS.—Section 

13 482 of such Code is amended by adding at the end 

14 the following: ‘‘For purposes of the preceding sen15 tence, the Secretary may require the valuation of 

16 transfers of intangible property on an aggregate 

17 basis or the valuation of such a transfer on the basis 

18 of the realistic alternatives to such a transfer, in any 

19 case in which the Secretary determines that such 

20 basis is the most reliable means of valuation of such 

21 transfers.’’. 

22 (c) EFFECTIVE DATE.— 

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

24 this section shall apply to transfers in taxable years 


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1 beginning after the date of the enactment of this 

2 Act. 

3 (2) NO INFERENCE.—Nothing in the amend4 ment made by subsection (a) shall be construed to 

5 create any inference with respect to the application 

6 of section 936(h)(3) of the Internal Revenue Code of 

7 1986, or the authority of the Secretary of the Treas8 ury to provide regulations for such application, on or 

9 before the date of the enactment of such amend10 ment. 

11 SEC. 504. LIMITATION ON EARNINGS STRIPPING BY EXPA12 TRIATED ENTITIES. 

13 (a) IN GENERAL.—Subsection (j) of section 163 of 

14 the Internal Revenue Code of 1986 is amended— 

15 (1) by redesignating paragraph (9) as para16 graph (10), and 

17 (2) by inserting after paragraph (8) the fol18 lowing new paragraph: 

19 ‘‘(9) SPECIAL RULES FOR EXPATRIATED ENTI20 TIES.— 

21 ‘‘(A) IN GENERAL.—In the case of a cor22 poration to which this subsection applies which 

23 is an expatriated entity, this subsection shall 

24 apply to such corporation with the following 

25 modifications: 


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1 ‘‘(i) Paragraph (2)(A) shall be applied 

2 without regard to clause (ii) thereof. 

3 ‘‘(ii) Paragraph (1)(B) shall be ap4 plied— 

5 ‘‘(I) without regard to the par6 enthetical, and 

7 ‘‘(II) by substituting ‘in the 1st 

8 succeeding taxable year and in the 

9 2nd through 10th succeeding taxable 

10 years to the extent not previously 

11 taken into account under this sub12 paragraph’ for ‘in the succeeding tax13 able year’. 

14 ‘‘(iii) Paragraph (2)(B) shall be ap15 plied— 

16 ‘‘(I) without regard to clauses (ii) 

17 and (iii), and 

18 ‘‘(II) by substituting ‘25 percent 

19 of the adjusted taxable income of the 

20 corporation for such taxable year’ for 

21 the matter of clause (i)(II) thereof. 

22 ‘‘(B) EXPATRIATED ENTITY.—For pur23 poses of this paragraph— 

24 ‘‘(i) IN GENERAL.—With respect to a 

25 corporation and a taxable year, the term 


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1 ‘expatriated entity’ has the meaning given 

2 such term by section 7874(a)(2), deter3 mined as if such section and the regula4 tions under such section as in effect on the 

5 first day of such taxable year applied to all 

6 taxable years of the corporation beginning 

7 after July 10, 1989. 

8 ‘‘(ii) EXCEPTION FOR SURROGATES

9 TREATED AS A DOMESTIC CORPORATION.— 

10 The term ‘expatriated entity’ does not in11 clude a surrogate foreign corporation 

12 which is treated as a domestic corporation 

13 by reason of section 7874(b).’’. 

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

15 this section shall apply to taxable years beginning after 

16 the date of the enactment of this Act. 

17 SEC. 505. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 

18 APPLICABLE TO DUAL CAPACITY TAXPAYERS. 

19 (a) IN GENERAL.—Section 901 of the Internal Rev20 enue Code of 1986 is amended by redesignating subsection 

21 (n) as subsection (o) and by inserting after subsection (m) 

22 the following new subsection: 

23 ‘‘(n) SPECIAL RULES RELATING TO DUAL CAPACITY

24 TAXPAYERS.— 


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1 ‘‘(1) GENERAL RULE.—Notwithstanding any 

2 other provision of this chapter, any amount paid or 

3 accrued by a dual capacity taxpayer or any member 

4 of the worldwide affiliated group of which such dual 

5 capacity taxpayer is also a member to any foreign 

6 country or to any possession of the United States 

7 for any period shall not be considered a tax to the 

8 extent such amount exceeds the amount (determined 

9 in accordance with regulations) which would have 

10 been required to be paid if the taxpayer were not a 

11 dual capacity taxpayer. 

12 ‘‘(2) DUAL CAPACITY TAXPAYER.—For pur13 poses of this subsection, the term ‘dual capacity tax14 payer’ means, with respect to any foreign country or 

15 possession of the United States, a person who— 

16 ‘‘(A) is subject to a levy of such country or 

17 possession, and 

18 ‘‘(B) receives (or will receive) directly or 

19 indirectly a specific economic benefit (as deter20 mined in accordance with regulations) from 

21 such country or possession. 

22 ‘‘(3) REGULATIONS.—The Secretary may issue 

23 such regulations or other guidance as is necessary or 

24 appropriate to carry out the purposes of this sub25 section.’’. 


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1 (b) CONTRARY TREATY OBLIGATIONS UPHELD.— 

2 The amendments made by this section shall not apply to 

3 the extent contrary to any treaty obligation of the United 

4 States. 

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

6 this section shall apply to amounts that, if such amounts 

7 were an amount of tax paid or accrued, would be consid8 ered paid or accrued in taxable years beginning after De9 cember 31, 2012. 

10 SEC. 506. SEPARATE BASKET TREATMENT TAXES PAID ON 

11 FOREIGN OIL AND GAS INCOME. 

12 (a) SEPARATE BASKET FOR FOREIGN TAX CRED13 IT.—Paragraph (1) of section 904(d) of the Internal Rev14 enue Code of 1986 is amended by striking ‘‘and’’ at the 

15 end of subparagraph (A), by striking the period at the 

16 end of subparagraph (B) and inserting ‘‘, and’’, and by 

17 adding at the end the following: 

18 ‘‘(C) combined foreign oil and gas income 

19 (as defined in section 907(b)(1)).’’. 

20 (b) COORDINATION.—Section 904(d)(2) of such Code 

21 is amended by redesignating subparagraphs (J) and (K) 

22 as subparagraphs (K) and (L) and by inserting after sub23 paragraph (I) the following: 

24 ‘‘(J) COORDINATION WITH COMBINED FOR25 EIGN OIL AND GAS INCOME.—For purposes of 


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1 this section, passive category income and gen2 eral category income shall not include combined 

3 foreign oil and gas income (as defined in section 

4 907(b)(1)).’’. 

5 (c) CONFORMING AMENDMENTS.— 

6 (1) Section 907(a) of such Code is hereby re7 pealed. 

8 (2) Section 907(c)(4) of such Code is hereby re9 pealed. 

10 (3) Section 907(f) of such Code is hereby re11 pealed. 

12 (d) EFFECTIVE DATES.— 

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

14 this section shall apply to taxable years beginning 

15 after December 31, 2012. 

16 (2) TRANSITIONAL RULES.— 

17 (A) CARRYOVERS.—Any unused foreign oil 

18 and gas taxes which under section 907(f) of 

19 such Code (as in effect before the amendment 

20 made by subsection (c)(3)) would have been al21 lowable as a carryover to the taxpayer’s first 

22 taxable year beginning after December 31, 

23 2012 (without regard to the limitation of para24 graph (2) of such section 907(f) for first tax25 able year) shall be allowed as carryovers under 


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1 section 904(c) of such Code in the same man2 ner as if such taxes were unused taxes under 

3 such section 904(c) with respect to foreign oil 

4 and gas extraction income. 

5 (B) LOSSES.—The amendment made by 

6 subsection (c)(2) shall not apply to foreign oil 

7 and gas extraction losses arising in taxable 

8 years beginning on or before the date of the en9 actment of this Act. 

10 TITLE VI—FINANCIAL CRISIS 

11 RESPONSIBILITY FEE 

12 SEC. 601. DEFINITIONS AND SPECIAL RULES. 

13 (a) DEFINITIONS.—In this title, the following defini14 tions shall apply: 

15 (1) APPROPRIATE FEDERAL AGENCY.—The 

16 term ‘‘appropriate Federal agency’’ means— 

17 (A) for a covered firm that is a bank hold18 ing company, a savings and loan holding com19 pany, any company controlled by a bank hold20 ing company or savings and loan institution 

21 (other than a depository institution), a state 

22 member bank, a branch or agency of a foreign 

23 bank, a foreign bank that does not operate an 

24 insured branch, an agency or commercial lend25 ing company other than a Federal agency or 


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1 any company that controls a registered broker 

2 or dealer but does not also control an insured 

3 depository institution, the Board of Governors 

4 of the Federal Reserve System; 

5 (B) for a covered firm that is a national 

6 banking association, a Federal branch or agen7 cy of a foreign bank, or a federal savings asso8 ciation, the Office of the Comptroller of the 

9 Currency; 

10 (C) for a covered firm that is a state non11 member insured bank, a foreign bank that has 

12 an insured branch, a state savings association, 

13 or a company that controls an insured deposi14 tory institution and is not regulated as a bank 

15 holding company or a savings and loan associa16 tion holding company, the Federal Deposit In17 surance Corporation; and 

18 (D) for a covered firm that is a covered 

19 broker or dealer, the Securities and Exchange 

20 Commission. 

21 (2) BANK HOLDING COMPANY.—The term 

22 ‘‘bank holding company’’ has the same meaning as 

23 in section 3(w)(2) of the Federal Deposit Insurance 

24 Act (12 U.S.C. 1813(w)(2)). 


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1 (3) COVERED BROKER OR DEALER.—The term 

2 ‘‘covered broker or dealer’’ means a broker or dealer 

3 designated by the Board of Governors of the Federal 

4 Reserve System or the Federal Reserve Bank of 

5 New York as a primary dealer in government debt 

6 instruments. 

7 (4) COVERED FIRM.—The term ‘‘covered firm’’ 

8 means any corporation or other entity that is orga9 nized under the laws of the United States or any 

10 state or territory thereof if— 

11 (A) as of January 14, 2012, such corpora12 tion or other entity was, or is at any time dur13 ing a the beginning of the fiscal year for which 

14 this section is applicable, an insured depository 

15 institution, a bank holding company, a savings 

16 and loan holding company, a company that di17 rectly or indirectly controls an insured deposi18 tory institution, a covered broker or dealer, or 

19 a company that directly or indirectly controls a 

20 covered broker or dealer; and 

21 (B) has $50,000,000,000 or more in total 

22 consolidated balance sheet assets that are asso23 ciated with activities that are permissible for a 

24 bank holding company or a financial holding 

25 company under sections 3 and 4 of the Bank 


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1 Holding Company Act of 1956 (12 U.S.C. 1842 

2 and 1843) at the beginning of the fiscal year. 

3 (5) FEE.—The term ‘‘fee’’ means the Financial 

4 Crisis Responsibility Fee authorized under section 

5 502. 

6 (6) FINANCIAL HOLDING COMPANY.—The term 

7 ‘‘financial holding company’’ has the same meaning 

8 as in section 2(p) of the Bank Holding Company Act 

9 of 1956, (12 U.S.C. 1841(2)(q)). 

10 (7) FISCAL YEAR.—The term ‘‘fiscal year’’ 

11 means the Government’s fiscal year beginning on 

12 October 1. 

13 (8) FOREIGN BANKING ORGANIZATION.—The 

14 term ‘‘foreign banking organization’’ means— 

15 (A) a foreign bank, as defined in section 

16 1(b)(7) of the International Banking Act of 

17 1978 (12 U.S.C. 3101(7)), that— 

18 (i) operates a branch, agency, or com19 mercial lending company subsidiary in the 

20 United States; 

21 (ii) controls a bank in the United 

22 States; or 

23 (iii) controls an Edge corporation ac24 quired after March 5, 1987; and 


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1 (B) any company that directly or indirectly 

2 controls the foreign bank. 

3 (9) SECRETARY.—The term ‘‘Secretary’’ means 

4 the Secretary of the Treasury. 

5 (10) TOP-TIER COVERED FIRM.—The term 

6 ‘‘top-tier covered firm’’ means a covered firm that 

7 controls one or more other covered firms but is not 

8 itself directly or indirectly controlled by another cov9 ered firm. 

10 (11) ADDITIONAL DEFINITIONS.—For purposes 

11 of this chapter, the terms ‘‘insured depository insti12 tution’’ and ‘‘savings and loan holding company’’ 

13 shall have the same meanings as in section 3 of the 

14 Federal Deposit Insurance Act (12 U.S.C. 1813). 

15 (b) SPECIAL RULES.— 

16 (1) DETERMINATION OF CONTROL.—For pur17 poses of this Act, a person shall be considered to 

18 control another person if the first such person di19 rectly or indirectly owns (or otherwise has the power 

20 to vote) 25 percent or more of any class of voting 

21 securities of the second such person. 

22 (2) TREATMENT OF CERTAIN AFFILIATED COM23 PANIES.—For purposes of determining the applica24 bility of this Act and the amount of the Fee payable 

25 under section 502, the total consolidated balance 


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1 sheet assets of any two or more corporations or 

2 other entities that are organized under the laws of 

3 the United States or any state or territory thereof 

4 that each meet any of the criteria described in sub5 section (a)(4)(A) and that are under common con6 trol, directly or indirectly, by the same person but 

7 that are not under common control, directly or indi8 rectly, by any top-tier covered firm shall be consoli9 dated together. If, following such consolidation, the 

10 amount and other characteristics of the combined 

11 balance sheet assets of such firms satisfy the criteria 

12 specified in subsection (a)(4)(B), each such firm 

13 shall be deemed a covered firm and the resulting 

14 amount of fee shall be appropriately apportioned by 

15 the Secretary. 

16 SEC. 602. FINANCIAL CRISIS RESPONSIBILITY FEE. 

17 (a) AMOUNT TO BE COLLECTED.—In order to re18 cover the costs to the Federal Government of assistance 

19 provided through the Troubled Asset Relief Program and 

20 other Federal programs and activities, the Secretary, dur21 ing the 10-year period beginning in fiscal year 2014 and 

22 continuing through the end of fiscal year 2023, shall as23 sess a risk-based Financial Crisis Responsibility Fee that 

24 shall collect a total of $30,000,000,000, net of any estiVerDate Mar 15 2010 04:50 Feb 20, 2013 Jkt 029200 PO 00000 Frm 00061 Fmt 6652 Sfmt 6201 E:\BILLS\S277.IS S277

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1 mated corporate income tax deductions attributable to the 

2 Fee, during that period. 

3 (b) ASSESSMENT AND SCHEDULE.— 

4 (1) IN GENERAL.—To collect the fee authorized 

5 by this section, the Secretary shall establish, by reg6 ulation, an assessment schedule by fiscal year, in7 cluding assessment base and rates, that— 

8 (A) is designed, in the Secretary’s judg9 ment, to result in the collection of a total of 

10 $30,000,000,000, net of the estimated cor11 porate income tax deduction, by the end of fis12 cal year 2023; and 

13 (B) shall apply to— 

14 (i) a top-tiered covered firm, with re15 spect to the group consisting of such top16 tier covered firm and each other covered 

17 firm controlled by such top-tier covered 

18 firm; and 

19 (ii) a covered firm, if such covered 

20 firm is not controlled by a top-tier covered 

21 firm. 

22 (2) PHASE IN.—To promote the full recovery of 

23 the economy and financial sector, the Secretary shall 

24 phase-in the assessment rate over the 10-year pe25 riod, in a manner determined by the Secretary. 


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1 (c) ANNUAL ADJUSTMENT.—For each fiscal year, 

2 starting with fiscal year 2015, the Secretary— 

3 (1) shall apply the fee to— 

4 (A) a top-tiered covered firm, with respect 

5 to the group consisting of such top-tier covered 

6 firm and each other covered firm controlled by 

7 such top-tier covered firm; and 

8 (B) a covered firm, if such covered firm is 

9 not controlled by a top-tier covered firm; and 

10 (2) shall adjust the rates under this subsection 

11 in a manner that is designed, in the judgment of the 

12 Secretary, to result in the collection of a total of 

13 $30,000,000,000, net of the estimated corporate in14 come tax deduction, by the end of fiscal year 2023. 

15 (d) EXTENSION OF THE FINANCIAL CRISIS RESPON16 SIBILITY FEE.— 

17 (1) IN GENERAL.—If the estimated cost of the 

18 Troubled Asset Relief Program, as projected in the 

19 Fiscal Year 2024 Budget of the U.S. Government, 

20 exceeds the total fee collections received as of the 

21 end of Fiscal Year 2023, the Secretary shall extend 

22 the operation of the Fee beyond the end of fiscal 

23 year 2023 in order to collect such excess amount. 

24 (2) ASSESSMENT SCHEDULE UNDER EXTEN25 SION.—In order to collect, by the end of fiscal year 


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1 2028, the excess amount determined under para2 graph (d), the Secretary shall establish, by regula3 tion, an assessment schedule, including assessment 

4 base and rates, that— 

5 (A) is designed, in the judgment of the 

6 Secretary, to result in the collection of such ex7 cess amount by the end of fiscal year 2028; and 

8 (B) shall apply to— 

9 (i) a top-tiered covered firm, with re10 spect to the group consisting of such top11 tier covered firm and each other covered 

12 firm controlled by such top-tier covered 

13 firm; and 

14 (ii) a covered firm, if such covered 

15 firm is not controlled by a top-tier covered 

16 firm. 

17 (3) ANNUAL ADJUSTMENT.—For each fiscal 

18 year, starting with fiscal year 2024, the Secretary— 

19 (A) shall apply the fee required by this sec20 tion to— 

21 (i) a top-tiered covered firm, with re22 spect to the group consisting of such top23 tier covered firm and each other covered 

24 firm controlled by such top-tier covered 

25 firm; and 


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1 (ii) a covered firm, if such covered 

2 firm is not controlled by a top-tier covered 

3 firm; and 

4 (B) shall adjust the rates under this sub5 section in a manner that is designed, in the 

6 judgment of the Secretary, to result in the col7 lection of such excess amount as may be deter8 mined under this section by the end of fiscal 

9 year 2028. 

10 (e) DEPOSIT OF COLLECTIONS.—All amounts col11 lected pursuant to the fee, during fiscal year 2014 and 

12 each fiscal year thereafter (including during the extension 

13 period, if applicable)— 

14 (1) shall be deposited and credited as general 

15 revenue of the Treasury for the purposes of deficit 

16 reduction; and 

17 (2) shall not be available for obligation. 

18 SEC. 603. OTHER PROVISIONS. 

19 (a) ASSISTANCE WITH ASSESSMENT AND COLLEC20 TION.—The appropriate Federal agencies shall respond 

21 promptly to any request for information or assistance from 

22 the Secretary with regard to the determination or collec23 tion of any Fee to be determined or imposed under this 

24 Act. 


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1 (b) SEVERABILITY; RULE OF CONSTRUCTION.—It is 

2 the intent of Congress that the provisions of this Act be 

3 severable, and be construed to avoid the constitutional in4 validity of any provision of the Act or any application of 

5 any provision of the Act to any person or circumstance. 

6 If a provision of this Act is held invalid, all valid provisions 

7 shall remain in effect. If a provision of this Act is held 

8 invalid in one or more of its applications to any person 

9 or circumstance, the Act shall remain in effect in all its 

10 valid applications. In any challenge to the constitutionality 

11 of any provision of this Act, a reviewing court shall con12 strue such provision as necessary to avoid any constitu13 tional invalidity. 

14 TITLE VII—TAX ON TRADING 

15 TRANSACTIONS 

16 SEC. 701. TRANSACTION TAX. 

17 (a) IN GENERAL.—Chapter 36 of the Internal Rev18 enue Code of 1986 is amended by inserting after sub19 chapter B the following new subchapter: 

20 ‘‘Subchapter C—Tax on Trading Transactions 

‘‘Sec. 4475. Tax on trading transactions. 

21 ‘‘SEC. 4475. TAX ON TRADING TRANSACTIONS. 

22 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 

23 a tax on each covered transaction with respect to any secu24 rity. 


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1 ‘‘(b) RATE OF TAX.—The tax imposed under sub2 section (a) with respect to any covered transaction shall 

3 be 0.03 percent of the specified base amount with respect 

4 to such covered transaction. 

5 ‘‘(c) SPECIFIED BASE AMOUNT.—For purposes of 

6 this section, the term ‘specified base amount’ means— 

7 ‘‘(1) except as provided in paragraph (2), the 

8 fair market value of the security (determined as of 

9 the time of the covered transaction), and 

10 ‘‘(2) in the case of any payment described in 

11 subsection (h), the amount of such payment. 

12 ‘‘(d) COVERED TRANSACTION.—For purposes of this 

13 section, the term ‘covered transaction’ means— 

14 ‘‘(1) except as provided in paragraph (2), any 

15 purchase if— 

16 ‘‘(A) such purchase occurs or is cleared on 

17 a facility located in the United States, or 

18 ‘‘(B) the purchaser or seller is a United 

19 States person, and 

20 ‘‘(2) any transaction with respect to a security 

21 described in subparagraph (D), (E), or (F) of sub22 section (e)(1), if— 

23 ‘‘(A) such security is traded or cleared on 

24 a facility located in the United States, or 


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1 ‘‘(B) any party with rights under such se2 curity is a United States person. 

3 ‘‘(e) SECURITY AND OTHER DEFINITIONS.—For pur4 poses of this section— 

5 ‘‘(1) IN GENERAL.—The term ‘security’ 

6 means— 

7 ‘‘(A) any share of stock in a corporation, 

8 ‘‘(B) any partnership or beneficial owner9 ship interest in a partnership or trust, 

10 ‘‘(C) any note, bond, debenture, or other 

11 evidence of indebtedness, 

12 ‘‘(D) any evidence of an interest in, or a 

13 derivative financial instrument with respect to, 

14 any security or securities described in subpara15 graph (A), (B), or (C), 

16 ‘‘(E) any derivative financial instrument 

17 with respect to any currency or commodity, and 

18 ‘‘(F) any notional principal contract. 

19 ‘‘(2) DERIVATIVE FINANCIAL INSTRUMENT.— 

20 The term ‘derivative financial instrument’ includes 

21 any option, forward contract, futures contract, or 

22 any similar financial instrument. 

23 ‘‘(3) NOTIONAL PRINCIPAL CONTRACT.—Except 

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1 ment which requires two or more payments at speci2 fied intervals calculated by reference to a specified 

3 index upon one or more notional principal amounts. 

4 An amount shall not fail to be treated as a payment 

5 described in the preceding sentence merely because 

6 such amount is fixed on one date and paid or other7 wise taken into account on a different date. 

8 ‘‘(4) SPECIFIED INDEX.—The term ‘specified 

9 index’ means any 1 or more of any combination of— 

10 ‘‘(A) a fixed rate, price, or amount, or 

11 ‘‘(B) a variable rate, price, or amount,

12 ‘‘(C) any index based on any objectively 

13 determinable information (including the occur14 rence or nonoccurrence of any event) which is 

15 not within the control of any of the parties to 

16 the instrument and is not unique to any of the 

17 parties’ circumstances, and 

18 ‘‘(D) any other index as the Secretary may 

19 prescribe. 

20 ‘‘(5) TREATMENT OF EXCHANGES.— 

21 ‘‘(A) IN GENERAL.—An exchange shall be 

22 treated as the sale of the property transferred 

23 and a purchase of the property received by each 

24 party to the exchange. 


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1 ‘‘(B) CERTAIN DEEMED EXCHANGES.—In 

2 the case of a distribution treated as an ex3 change for stock under section 302 or 331, the 

4 corporation making such distribution shall be 

5 treated as having purchased such stock for pur6 poses of this section. 

7 ‘‘(f) EXCEPTIONS.— 

8 ‘‘(1) EXCEPTION FOR INITIAL ISSUES.—No tax 

9 shall be imposed under subsection (a) on any cov10 ered transaction with respect to the initial issuance 

11 of any security described in subparagraph (A), (B), 

12 or (C) of subsection (e)(1). 

13 ‘‘(2) EXCEPTION FOR CERTAIN TRADED SHORT14 TERM INDEBTEDNESS.—A note, bond, debenture, or 

15 other evidence of indebtedness which— 

16 ‘‘(A) is traded on a trading facility located 

17 in the United States, and 

18 ‘‘(B) has a fixed maturity of not more 

19 than 100 days, 

20 shall not be treated as described in subsection 

21 (e)(1)(C). 

22 ‘‘(3) EXCEPTION FOR SECURITIES LENDING AR23 RANGEMENTS.—No tax shall be imposed under sub24 section (a) on any covered transaction with respect 


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1 to which gain or loss is not recognized by reason of 

2 section 1058. 

3 ‘‘(g) BY WHOM PAID.— 

4 ‘‘(1) IN GENERAL.—The tax imposed by this 

5 section shall be paid by— 

6 ‘‘(A) in the case of a transaction which oc7 curs or is cleared on a facility located in the 

8 United States, such facility, and 

9 ‘‘(B) in the case of a purchase not de10 scribed in subparagraph (A) which is executed 

11 by a broker (as defined in section 6045(c)(1)) 

12 which is a United States person, such broker. 

13 ‘‘(2) SPECIAL RULES FOR DIRECT, ETC., 

14 TRANSACTIONS.—In the case of any transaction to 

15 which paragraph (1) does not apply, the tax imposed 

16 by this section shall be paid by— 

17 ‘‘(A) in the case of a transaction described 

18 in subsection (d)(1)— 

19 ‘‘(i) the purchaser if the purchaser is 

20 a United States person, and 

21 ‘‘(ii) the seller if the purchaser is not 

22 a United States person, and 

23 ‘‘(B) in the case of a transaction described 

24 in subsection (d)(2)— 


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1 ‘‘(i) the payor if the payor is a United 

2 States person, and 

3 ‘‘(ii) the payee if the payor is not a 

4 United States person. 

5 ‘‘(h) CERTAIN PAYMENTS TREATED AS SEPARATE

6 TRANSACTIONS.—Except as otherwise provided by the 

7 Secretary, any payment with respect to a security de8 scribed in subparagraph (D), (E), or (F) of subsection 

9 (e)(1) shall be treated as a separate transaction for pur10 poses of this section, including— 

11 ‘‘(1) any net initial payment, net final or termi12 nating payment, or net periodical payment with re13 spect to a notional principal contract (or similar fi14 nancial instrument), 

15 ‘‘(2) any payment with respect to any forward 

16 contract (or similar financial instrument), and 

17 ‘‘(3) any premium paid with respect to any op18 tion (or similar financial instrument). 

19 ‘‘(i) APPLICATION TO TRANSACTIONS BY CON20 TROLLED FOREIGN CORPORATIONS.— 

21 ‘‘(1) IN GENERAL.—For purposes of this sec22 tion, a controlled foreign corporation shall be treated 

23 as a United States person. 

24 ‘‘(2) SPECIAL RULES FOR PAYMENT OF TAX ON

25 DIRECT, ETC., TRANSACTIONS.—In the case of any 


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1 transaction which is a covered transaction solely by 

2 reason of paragraph (1) and which is not described 

3 in subsection (g)(1)— 

4 ‘‘(A) PAYMENT BY UNITED STATES SHARE5 HOLDERS.—Any tax which would (but for this 

6 paragraph) be payable under subsection (g)(2) 

7 by the controlled foreign corporation shall, in 

8 lieu thereof, be paid by the United States 

9 shareholders of such controlled foreign corpora10 tion as provided in subparagraph (B). 

11 ‘‘(B) PRO RATA SHARES.—Each such 

12 United States shareholder shall pay the same 

13 proportion of such tax as— 

14 ‘‘(i) the stock which such United 

15 States shareholder owns (within the mean16 ing of section 958(a)) in such controlled 

17 foreign corporation, bears to 

18 ‘‘(ii) the stock so owned by all United 

19 States shareholders in such controlled for20 eign corporation. 

21 ‘‘(C) DEFINITIONS.—For purposes of this 

22 subsection, the terms ‘United States share23 holder’ and ‘controlled foreign corporation’ have 

24 the meanings given such terms in sections 

25 951(b) and 957(a), respectively. 


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1 ‘‘(j) ADMINISTRATION.—The Secretary shall carry 

2 out this section in consultation with the Securities and Ex3 change Commission and the Commodity Futures Trading 

4 Commission. 

5 ‘‘(k) GUIDANCE; REGULATIONS.—The Secretary 

6 shall— 

7 ‘‘(1) provide guidance regarding such informa8 tion reporting concerning covered transactions as the 

9 Secretary deems appropriate, and 

10 ‘‘(2) prescribe such regulations as are necessary 

11 or appropriate to prevent avoidance of the purposes 

12 of this section, including the use of non-United 

13 States persons in such transactions.’’. 

14 (b) CREDIT WITH RESPECT TO CERTAIN TAX-FA15 VORED ACCOUNTS TO OFFSET TRANSACTION TAX.— 

16 (1) IN GENERAL.—Subpart C of part IV of sub17 chapter A of chapter 1 of such Code is amended by 

18 inserting after section 36B the following new sec19 tion: 

20 ‘‘SEC. 36C. OFFSET FOR TRANSACTION TAX WITH RESPECT 

21 TO CERTAIN TAX-FAVORED ACCOUNTS. 

22 ‘‘(a) IN GENERAL.—There shall be allowed as a cred23 it against the tax imposed by this subtitle for the taxable 

24 year an amount equal to 0.03 percent of the qualified taxVerDate Mar 15 2010 01:14 Feb 21, 2013 Jkt 029200 PO 00000 Frm 00074 Fmt 6652 Sfmt 6201 E:\BILLS\S277.IS S277

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1 favored account contributions of the taxpayer for the tax2 able year. 

3 ‘‘(b) QUALIFIED TAX-FAVORED ACCOUNT CON4 TRIBUTIONS.—For purposes of this section, the term 

5 ‘qualified tax-favored account contributions’ means, with 

6 respect to any taxable year, the sum of— 

7 ‘‘(1) with respect to qualified retirement plans 

8 (as defined in section 4974(c)) of the taxpayer, the 

9 amount contributed to such plans for such taxable 

10 year to the extent that such contributions are allow11 able as a deduction or are excludable from gross in12 come (or, in the case of a Roth IRA (as defined in 

13 section 408A(b)), the amount contributed), 

14 ‘‘(2) with respect to Archer MSAs of the tax15 payer, the amount allowed as a deduction under sec16 tion 220 for such taxable year, 

17 ‘‘(3) with respect to health savings accounts of 

18 the taxpayer, the amount allowed as a deduction 

19 under section 223 for such taxable year, plus 

20 ‘‘(4) with respect to qualified tuition programs 

21 (as defined in section 529) and Coverdell education 

22 savings accounts (as defined in section 530) with re23 spect to which the taxpayer is the designated bene24 ficiary (or, in the case of a designated beneficiary 

25 with respect to whom another taxpayer is allowed a 


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1 deduction under section 151, such other taxpayer in 

2 lieu of such designated beneficiary), the amount con3 tributed for such taxable year.’’. 

4 (2) CONFORMING AMENDMENTS.— 

5 (A) Section 1324(b)(2) of title 31, United 

6 States Code, is amended by inserting ‘‘, 36C’’ 

7 after ‘‘36B’’. 

8 (B) The table of sections for subpart C of 

9 part IV of subchapter A of chapter 1 of the In10 ternal Revenue Code of 1986 is amended by in11 serting before the item relating to section 37 

12 the following new item: 

‘‘Sec. 36C. Offset for transaction tax on contributions to certain tax-favored accounts.’’. 

13 (c) INFORMATION REPORTING WITH RESPECT TO

14 CONTROLLED FOREIGN CORPORATIONS.—Subparagraph 

15 (B) of section 6038(a)(1) is amended by inserting ‘‘and 

16 transactions which are covered transactions for purposes 

17 of section 4475 by reason of the application of section 

18 4475(i)(1) to such corporation’’ before the semicolon at 

19 the end. 

20 (d) CLERICAL AMENDMENT.—The table of sub21 chapters for chapter 36 of the Internal Revenue Code of 

22 1986 is amended by inserting after the item relating to 

23 subchapter B the following new item: 

‘‘Subchapter C. Tax on trading transactions.’’. 


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

2 this section shall apply to transactions after December 31, 

3 2013. 

4 TITLE VIII—MODIFICATION OF 

5 ACCOUNTING RULES 

6 SEC. 801. REPEAL OF LAST-IN, FIRST-OUT METHOD OF IN7 VENTORY. 

8 (a) IN GENERAL.—Subpart D of part II of sub9 chapter E of chapter 1 is amended by striking sections 

10 472 (relating to last-in, first-out inventories), 473 (relat11 ing to qualified liquidations of LIFO inventories), and 474 

12 (relating to simplified dollar-value LIFO method for cer13 tain small businesses). 

14 (b) CONFORMING AMENDMENTS.— 

15 (1)(A) Section 312(n) is amended by striking 

16 paragraph (4) and by redesignating paragraphs (5) 

17 through (8) as paragraphs (4) through (7), respec18 tively. 

19 (B) Section 312(n)(7), as redesignated by sub20 paragraph (A), is amended— 

21 (i) by striking ‘‘paragraphs (4) and (6)’’ in 

22 subparagraph (A) and inserting ‘‘paragraph 

23 (5)’’, and 

24 (ii) by striking ‘‘paragraph (5)’’ in sub25 paragraph (B) and inserting ‘‘paragraph (4)’’. 


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1 (C) Section 56(g)(4)(D) is amended by striking 

2 clause (iii) and by redesignating clause (iv) as clause 

3 (iii). 

4 (2) Section 1363 is amended by striking sub5 section (d). 

6 (c) EFFECTIVE DATE.— 

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

8 this section shall apply to taxable years beginning 

9 after the date of the enactment of this Act. 

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

11 the case of any taxpayer required by the amend12 ments made by this section to change its method of 

13 accounting for its first taxable year beginning after 

14 the date of the enactment of this Act— 

15 (A) such change shall be treated as initi16 ated by the taxpayer, 

17 (B) such change shall be treated as made 

18 with the consent of the Secretary of the Treas19 ury, and 

20 (C) if the net amount of the adjustments 

21 required to be taken into account by the tax22 payer under section 481 of the Internal Rev23 enue Code of 1986 is positive, such amount 

24 shall be taken into account over a period of 8 

25 years beginning with such first taxable year. 


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1 SEC. 802. REPEAL OF LOWER OF COST OR MARKET METH2 OD OF INVENTORY. 

3 (a) IN GENERAL.—Section 471 is amended by redes4 ignating subsection (c) as subsection (d) and by inserting 

5 after subsection (b) the following new subsection: 

6 ‘‘(c) INVENTORIES TAKEN INTO ACCOUNT AT

7 COST.—A method of determining inventories shall not be 

8 treated as clearly reflecting income unless such method 

9 provides that inventories shall be taken into account at 

10 cost.’’. 

11 (b) EFFECTIVE DATE.— 

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

13 this section shall apply to taxable years beginning 

14 after the date of the enactment of this Act. 

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

16 the case of any taxpayer required by the amend17 ments made by this section to change its method of 

18 accounting for its first taxable year beginning after 

19 the date of the enactment of this Act— 

20 (A) such change shall be treated as initi21 ated by the taxpayer, 

22 (B) such change shall be treated as made 

23 with the consent of the Secretary of the Treas24 ury, and 

25 (C) if the net amount of the adjustments 

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1 payer under section 481 of the Internal Rev2 enue Code of 1986 is positive, such amount 

3 shall be taken into account over a period of 8 

4 years beginning with such first taxable year. 

5 TITLE IX—FAIR TREATMENT OF 

6 OPTIONS 

7 SEC. 901. CONSISTENT TREATMENT OF STOCK OPTIONS BY 

8 CORPORATIONS. 

9 (a) CONSISTENT TREATMENT FOR WAGE DEDUC10 TION.— 

11 (1) IN GENERAL.—Section 83(h) is amended— 

12 (A) by striking ‘‘In the case of’’ and in13 serting: 

14 ‘‘(1) IN GENERAL.—In the case of’’, and 

15 (B) by adding at the end the following new 

16 paragraph: 

17 ‘‘(2) STOCK OPTIONS.—In the case of property 

18 transferred to a person in connection with a stock 

19 option, any deduction related to such stock option 

20 shall be allowed only under section 162(q) and para21 graph (1) shall not apply.’’. 

22 (2) TREATMENT OF COMPENSATION PAID WITH

23 STOCK OPTIONS.—Section 162 is amended by redes24 ignating subsection (q) as subsection (r) and by inVerDate Mar 15 2010 04:50 Feb 20, 2013 Jkt 029200 PO 00000 Frm 00080 Fmt 6652 Sfmt 6201 E:\BILLS\S277.IS S277

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1 serting after subsection (p) the following new sub2 section: 

3 ‘‘(q) TREATMENT OF COMPENSATION PAID WITH

4 STOCK OPTIONS.— 

5 ‘‘(1) IN GENERAL.—In the case of compensa6 tion for personal services that is paid with stock op7 tions, the deduction under subsection (a)(1) shall 

8 not exceed the amount the taxpayer has treated as 

9 compensation cost with respect to such stock options 

10 for the purpose of ascertaining income, profit, or 

11 loss in a report or statement to shareholders, part12 ners, or other proprietors (or to beneficiaries), and 

13 shall be taken into account in the same period that 

14 such compensation cost is recognized for such pur15 pose. 

16 ‘‘(2) SPECIAL RULES FOR CONTROLLED

17 GROUPS.—The Secretary may prescribe rules for the 

18 application of paragraph (1) in cases where the 

19 stock option is granted by— 

20 ‘‘(A) a parent or subsidiary corporation 

21 (within the meaning of section 424) of the tax22 payer, or 

23 ‘‘(B) another corporation.’’. 


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1 (b) CONSISTENT TREATMENT FOR RESEARCH TAX

2 CREDIT.—Section 41(b)(2)(D) is amended by inserting at 

3 the end the following new clause: 

4 ‘‘(iv) SPECIAL RULE FOR STOCK OP5 TIONS.—The amount which may be treated 

6 as wages for any taxable year in connec7 tion with the issuance of a stock option 

8 shall not exceed the amount allowed for 

9 such taxable year as a compensation de10 duction under section 162(q) with respect 

11 to such stock option.’’. 

12 (c) APPLICATION OF AMENDMENTS.—The amend13 ments made by this section shall apply to stock options 

14 exercised after the date of the enactment of this Act, ex15 cept that— 

16 (1) such amendments shall not apply to stock 

17 options that were granted before such date and that 

18 vested in taxable periods beginning on or before 

19 June 15, 2005, 

20 (2) for stock options that were granted before 

21 such date of enactment and vested during taxable 

22 periods beginning after June 15, 2005, and ending 

23 before such date of enactment, a deduction under 

24 section 162(q) of the Internal Revenue Code of 1986 

25 (as added by subsection (a)(2)) shall be allowed in 


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1 the first taxable period of the taxpayer that ends 

2 after such date of enactment, 

3 (3) for public entities reporting as small busi4 ness issuers and for non-public entities required to 

5 file public reports of financial condition, paragraphs 

6 (1) and (2) shall be applied by substituting ‘‘Decem7 ber 15, 2005’’ for ‘‘June 15, 2005’’, and 

8 (4) no deduction shall be allowed under section 

9 83(h) or section 162(q) of such Code with respect to 

10 any stock option the vesting date of which is 

11 changed to accelerate the time at which the option 

12 may be exercised in order to avoid the applicability 

13 of such amendments. 

14 SEC. 902. APPLICATION OF EXECUTIVE PAY DEDUCTION 

15 LIMIT. 

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

17 162(m)(4) is amended to read as follows: 

18 ‘‘(D) STOCK OPTION COMPENSATION.— 

19 The term ‘applicable employee remuneration’ 

20 shall include any compensation deducted under 

21 subsection (q), and such compensation shall not 

22 qualify as performance-based compensation 

23 under subparagraph (C).’’. 


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

2 this section shall apply to stock options exercised or grant3 ed after the date of the enactment of this Act. 

Æ 


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