deduction by reason of paragraph (1) with respect to 
the instrument.’’. 
(c) EXCEPTION FOR CERTAIN INSTRUMENTS ISSUED 
BY DEALERS IN SECURITIES.—Section 163(l), as amend-
ed by subsection (b), is amended by redesignating para-
graphs (5) and (6) as paragraphs (6) and (7) and by in-
serting after paragraph (4) the following new paragraph: 
‘‘(5) EXCEPTION FOR CERTAIN INSTRUMENTS 
ISSUED BY DEALERS IN SECURITIES.—For purposes 
of this subsection, the term ‘disqualified debt instru-
ment’ does not include indebtedness issued by a 
dealer in securities (or a related party) which is pay-
able in, or by reference to, equity (other than equity 
of the issuer or a related party) held by such dealer 
in its capacity as a dealer in securities. For purposes 
of this paragraph, the term ‘dealer in securities’ has 
the meaning given such term by section 475.’’. 
(d) CONFORMING AMENDMENTS.—Paragraph (3) of 
section 163(l) is amended— 
(1) by striking ‘‘or a related party’’ in the ma-
terial preceding subparagraph (A) and inserting ‘‘or 
any other person’’, and 
(2) by striking ‘‘or interest’’ each place it ap-
pears.
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to debt instruments issued after 
February 13, 2003. 
SEC. 325. EXPANDED AUTHORITY TO DISALLOW TAX BENE-
FITS UNDER SECTION 269. 
(a) IN GENERAL.—Subsection (a) of section 269 (re-
lating to acquisitions made to evade or avoid income tax) 
is amended to read as follows: 
‘‘(a) IN GENERAL.—If— 
‘‘(1)(A) any person or persons acquire, directly 
or indirectly, control of a corporation, or 
‘‘(B) any corporation acquires, directly or indi-
rectly, property of another corporation and the basis 
of such property, in the hands of the acquiring cor-
poration, is determined by reference to the basis in 
the hands of the transferor corporation, and 
‘‘(2) the principal purpose for which such acqui-
sition was made is evasion or avoidance of Federal 
income tax, 
then the Secretary may disallow such deduction, credit, 
or other allowance. For purposes of paragraph (1)(A), 
control means the ownership of stock possessing at least 
50 percent of the total combined voting power of all class-
es of stock entitled to vote or at least 50 percent of the
total value of all shares of all classes of stock of the cor-
poration.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to stock and property acquired 
after February 13, 2003. 
SEC. 326. MODIFICATION OF INTERACTION BETWEEN SUB-
PART F AND PASSIVE FOREIGN INVESTMENT 
COMPANY RULES. 
(a) LIMITATION ON EXCEPTION FROM PFIC RULES 
FOR UNITED STATES SHAREHOLDERS OF CONTROLLED 
FOREIGN
CORPORATIONS.—Paragraph (2) of section 
1297(e) (relating to passive foreign investment company) 
is amended by adding at the end the following flush sen-
tence: 
‘‘Such term shall not include any period if the 
earning of subpart F income by such corpora-
tion during such period would result in only a 
remote likelihood of an inclusion in gross in-
come under section 951(a)(1)(A)(i).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years of controlled for-
eign corporations beginning after February 13, 2003, and 
to taxable years of United States shareholders with or 
within which such taxable years of controlled foreign cor-
porations end.
Subtitle C—Extension of Customs 
User Fees 
SEC. 331. EXTENSION OF CUSTOMS USER FEES. 
Section 13031(j)(3) of the Consolidated Omnibus 
Budget Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) 
is amended by striking ‘‘March 1, 2005’’ and inserting 
‘‘September 30, 2013’’. 
Æ