H. R. 4520—177
‘‘(III) is purchased by the REMIC pursuant
to a fixed price contract in effect on the startup
day.’’.
(B) Section 860G(a)(7)(B) is amended to read as follows:
‘‘(B) QUALIFIED
RESERVE
FUND.—For purposes of
subparagraph (A), the term ‘qualified reserve fund’ means
any reasonably required reserve to—
‘‘(i) provide for full payment of expenses of the
REMIC or amounts due on regular interests in the
event of defaults on qualified mortgages or lower than
expected returns on cash flow investments, or
‘‘(ii) provide a source of funds for the purchase
of obligations described in clause (ii) or (iii) of para-
graph (3)(A).
The aggregate fair market value of the assets held in
any such reserve shall not exceed 50 percent of the aggre-
gate fair market value of all of the assets of the REMIC
on the startup day, and the amount of any such reserve
shall be promptly and appropriately reduced to the extent
the amount held in such reserve is no longer reasonably
required for purposes specified in clause (i) or (ii) of this
subparagraph.’’.
(9) Subparagraph (C) of section 1202(e)(4) is amended by
striking ‘‘REMIC, or FASIT’’ and inserting ‘‘or REMIC’’.
(10) Clause (xi) of section 7701(a)(19)(C) is amended—
(A) by striking ‘‘and any regular interest in a FASIT,’’,
and
(B) by striking ‘‘or FASIT’’ each place it appears.
(11) Subparagraph (A) of section 7701(i)(2) is amended
by striking ‘‘or a FASIT’’.
(12) The table of parts for subchapter M of chapter 1
is amended by striking the item relating to part V.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall take effect on January
1, 2005.
(2) EXCEPTION FOR EXISTING FASITS.—Paragraph (1) shall
not apply to any FASIT in existence on the date of the enact-
ment of this Act to the extent that regular interests issued
by the FASIT before such date continue to remain outstanding
in accordance with the original terms of issuance.
SEC. 836. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN
LOSSES.
(a) IN GENERAL.—Section 362 (relating to basis to corporations)
is amended by adding at the end the following new subsection:
‘‘(e) LIMITATIONS ON BUILT-IN LOSSES.—
‘‘(1) LIMITATION
ON
IMPORTATION
OF
BUILT-IN
LOSSES.—
‘‘(A) IN GENERAL.—If in any transaction described in
subsection (a) or (b) there would (but for this subsection)
be an importation of a net built-in loss, the basis of each
property described in subparagraph (B) which is acquired
in such transaction shall (notwithstanding subsections (a)
and (b)) be its fair market value immediately after such
transaction.
‘‘(B) PROPERTY DESCRIBED.—For purposes of subpara-
graph (A), property is described in this subparagraph if—
H. R. 4520—178
‘‘(i) gain or loss with respect to such property is
not subject to tax under this subtitle in the hands
of the transferor immediately before the transfer, and
‘‘(ii) gain or loss with respect to such property
is subject to such tax in the hands of the transferee
immediately after such transfer.
In any case in which the transferor is a partnership, the
preceding sentence shall be applied by treating each
partner in such partnership as holding such partner’s
proportionate share of the property of such partnership.
‘‘(C) IMPORTATION OF NET BUILT-IN LOSS.—For purposes
of subparagraph (A), there is an importation of a net built-
in loss in a transaction if the transferee’s aggregate
adjusted bases of property described in subparagraph (B)
which is transferred in such transaction would (but for
this paragraph) exceed the fair market value of such prop-
erty immediately after such transaction.
‘‘(2) LIMITATION ON TRANSFER OF BUILT-IN LOSSES IN SEC-
TION 351 TRANSACTIONS.—
‘‘(A) IN GENERAL.—If—
‘‘(i) property is transferred by a transferor in any
transaction which is described in subsection (a) and
which is not described in paragraph (1) of this sub-
section, and
‘‘(ii) the transferee’s aggregate adjusted bases of
such property so transferred would (but for this para-
graph) exceed the fair market value of such property
immediately after such transaction,
then, notwithstanding subsection (a), the transferee’s
aggregate adjusted bases of the property so transferred
shall not exceed the fair market value of such property
immediately after such transaction.
‘‘(B) ALLOCATION OF BASIS REDUCTION.—The aggregate
reduction in basis by reason of subparagraph (A) shall
be allocated among the property so transferred in propor-
tion to their respective built-in losses immediately before
the transaction.
‘‘(C) ELECTION TO APPLY LIMITATION TO TRANSFEROR’S
STOCK BASIS.—
‘‘(i) IN GENERAL.—If the transferor and transferee
of a transaction described in subparagraph (A) both
elect the application of this subparagraph—
‘‘(I) subparagraph (A) shall not apply, and
‘‘(II) the transferor’s basis in the stock received
for property to which subparagraph (A) does not
apply by reason of the election shall not exceed
its fair market value immediately after the
transfer.
‘‘(ii) ELECTION.—An election under clause (i) shall
be included with the return of tax for the taxable
year in which the transaction occurred, shall be in
such form and manner as the Secretary may prescribe,
and, once made, shall be irrevocable.’’.
(b) COMPARABLE TREATMENT WHERE LIQUIDATION.—Paragraph
(1) of section 334(b) (relating to liquidation of subsidiary) is
amended to read as follows:
H. R. 4520—179
‘‘(1) IN GENERAL.—If property is received by a corporate
distributee in a distribution in a complete liquidation to which
section 332 applies (or in a transfer described in section
337(b)(1)), the basis of such property in the hands of such
distributee shall be the same as it would be in the hands
of the transferor; except that the basis of such property in
the hands of such distributee shall be the fair market value
of the property at the time of the distribution—
‘‘(A) in any case in which gain or loss is recognized
by the liquidating corporation with respect to such prop-
erty, or
‘‘(B) in any case in which the liquidating corporation
is a foreign corporation, the corporate distributee is a
domestic corporation, and the corporate distributee’s aggre-
gate adjusted bases of property described in section
362(e)(1)(B) which is distributed in such liquidation would
(but for this subparagraph) exceed the fair market value
of such property immediately after such liquidation.’’.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendment made by subsection (a)
shall apply to transactions after the date of the enactment
of this Act.
(2) LIQUIDATIONS.—The amendment made by subsection
(b) shall apply to liquidations after the date of the enactment
of this Act.
SEC. 837. CLARIFICATION OF BANKING BUSINESS FOR PURPOSES OF
DETERMINING INVESTMENT OF EARNINGS IN UNITED
STATES PROPERTY.
(a) IN GENERAL.—Subparagraph (A) of section 956(c)(2) is
amended to read as follows:
‘‘(A) obligations of the United States, money, or
deposits with—
‘‘(i) any bank (as defined by section 2(c) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)),
without regard to subparagraphs (C) and (G) of para-
graph (2) of such section), or
‘‘(ii) any corporation not described in clause (i)
with respect to which a bank holding company (as
defined by section 2(a) of such Act) or financial holding
company (as defined by section 2(p) of such Act) owns
directly or indirectly more than 80 percent by vote
or value of the stock of such corporation;’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall take effect on the date of the enactment of this Act.
SEC. 838. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS
ATTRIBUTABLE TO NONDISCLOSED REPORTABLE TRANS-
ACTIONS.
(a) IN GENERAL.—Section 163 (relating to deduction for interest)
is amended by redesignating subsection (m) as subsection (n) and
by inserting after subsection (l) the following new subsection:
‘‘(m) INTEREST ON UNPAID TAXES ATTRIBUTABLE TO NONDIS-
CLOSED REPORTABLE TRANSACTIONS.—No deduction shall be allowed
under this chapter for any interest paid or accrued under section
6601 on any underpayment of tax which is attributable to the
portion of any reportable transaction understatement (as defined
H. R. 4520—180
in section 6662A(b)) with respect to which the requirement of section
6664(d)(2)(A) is not met.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to transactions in taxable years beginning after the
date of the enactment of this Act.
SEC. 839. CLARIFICATION OF RULES FOR PAYMENT OF ESTIMATED
TAX FOR CERTAIN DEEMED ASSET SALES.
(a) IN GENERAL.—Paragraph (13) of section 338(h) (relating
to tax on deemed sale not taken into account for estimated tax
purposes) is amended by adding at the end the following: ‘‘The
preceding sentence shall not apply with respect to a qualified stock
purchase for which an election is made under paragraph (10).’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to transactions occurring after the date of the enactment
of this Act.
SEC. 840. RECOGNITION OF GAIN FROM THE SALE OF A PRINCIPAL
RESIDENCE ACQUIRED IN A LIKE-KIND EXCHANGE
WITHIN 5 YEARS OF SALE.
(a) IN GENERAL.—Section 121(d) (relating to special rules for
exclusion of gain from sale of principal residence) is amended by
adding at the end the following new paragraph:
‘‘(10) PROPERTY ACQUIRED IN LIKE-KIND EXCHANGE.—If a
taxpayer acquired property in an exchange to which section
1031 applied, subsection (a) shall not apply to the sale or
exchange of such property if it occurs during the 5-year period
beginning with the date of the acquisition of such property.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to sales or exchanges after the date of the enactment
of this Act.
SEC. 841. PREVENTION OF MISMATCHING OF INTEREST AND ORIGINAL
ISSUE DISCOUNT DEDUCTIONS AND INCOME INCLUSIONS
IN TRANSACTIONS WITH RELATED FOREIGN PERSONS.
(a) ORIGINAL ISSUE DISCOUNT.—Section 163(e)(3) (relating to
special rule for original issue discount on obligation held by related
foreign person) is amended by redesignating subparagraph (B) as
subparagraph (C) and by inserting after subparagraph (A) the fol-
lowing new subparagraph:
‘‘(B) SPECIAL RULE FOR CERTAIN FOREIGN ENTITIES.—
‘‘(i) IN
GENERAL.—In the case of any debt
instrument having original issue discount which is held
by a related foreign person which is a controlled foreign
corporation (as defined in section 957) or a passive
foreign investment company (as defined in section
1297), a deduction shall be allowable to the issuer
with respect to such original issue discount for any
taxable year before the taxable year in which paid
only to the extent such original issue discount is includ-
ible (determined without regard to properly allocable
deductions 
and 
qualified 
deficits 
under 
section
952(c)(1)(B)) during such prior taxable year in the gross
income of a United States person who owns (within
the meaning of section 958(a)) stock in such corpora-
tion.
‘‘(ii) SECRETARIAL AUTHORITY.—The Secretary may
by regulation exempt transactions from the application
H. R. 4520—181
of clause (i), including any transaction which is entered
into by a payor in the ordinary course of a trade
or business in which the payor is predominantly
engaged.’’.
(b) INTEREST
AND
OTHER
DEDUCTIBLE
AMOUNTS.—Section
267(a)(3) is amended—
(1) by striking ‘‘The Secretary’’ and inserting:
‘‘(A) IN GENERAL.—The Secretary’’, and
(2) by adding at the end the following new subparagraph:
‘‘(B) SPECIAL RULE FOR CERTAIN FOREIGN ENTITIES.—
‘‘(i) IN GENERAL.—Notwithstanding subparagraph
(A), in the case of any item payable to a controlled
foreign corporation (as defined in section 957) or a
passive foreign investment company (as defined in sec-
tion 1297), a deduction shall be allowable to the payor
with respect to such amount for any taxable year before
the taxable year in which paid only to the extent
that an amount attributable to such item is includible
(determined without regard to properly allocable deduc-
tions and qualified deficits under section 952(c)(1)(B))
during such prior taxable year in the gross income
of a United States person who owns (within the
meaning of section 958(a)) stock in such corporation.
‘‘(ii) SECRETARIAL AUTHORITY.—The Secretary may
by regulation exempt transactions from the application
of clause (i), including any transaction which is entered
into by a payor in the ordinary course of a trade
or business in which the payor is predominantly
engaged and in which the payment of the accrued
amounts occurs within 81⁄2 months after accrual or
within such other period as the Secretary may pre-
scribe.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to payments accrued on or after the date of the enact-
ment of this Act.
SEC. 842. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON
POTENTIAL UNDERPAYMENTS.
(a) IN GENERAL.—Subchapter A of chapter 67 (relating to
interest on underpayments) is amended by adding at the end the
following new section:
‘‘SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON
POTENTIAL UNDERPAYMENTS, ETC.
‘‘(a) AUTHORITY TO MAKE DEPOSITS OTHER THAN AS PAYMENT
OF TAX.—A taxpayer may make a cash deposit with the Secretary
which may be used by the Secretary to pay any tax imposed under
subtitle A or B or chapter 41, 42, 43, or 44 which has not been
assessed at the time of the deposit. Such a deposit shall be made
in such manner as the Secretary shall prescribe.
‘‘(b) NO INTEREST IMPOSED.—To the extent that such deposit
is used by the Secretary to pay tax, for purposes of section 6601
(relating to interest on underpayments), the tax shall be treated
as paid when the deposit is made.
‘‘(c) RETURN OF DEPOSIT.—Except in a case where the Secretary
determines that collection of tax is in jeopardy, the Secretary shall
return to the taxpayer any amount of the deposit (to the extent
H. R. 4520—182
not used for a payment of tax) which the taxpayer requests in
writing.
‘‘(d) PAYMENT OF INTEREST.—
‘‘(1) IN GENERAL.—For purposes of section 6611 (relating
to interest on overpayments), except as provided in paragraph
(4), a deposit which is returned to a taxpayer shall be treated
as a payment of tax for any period to the extent (and only
to the extent) attributable to a disputable tax for such period.
Under regulations prescribed by the Secretary, rules similar
to the rules of section 6611(b)(2) shall apply.
‘‘(2) DISPUTABLE TAX.—
‘‘(A) IN GENERAL.—For purposes of this section, the
term ‘disputable tax’ means the amount of tax specified
at the time of the deposit as the taxpayer’s reasonable
estimate of the maximum amount of any tax attributable
to disputable items.
‘‘(B) SAFE HARBOR BASED ON 30-DAY LETTER.—In the
case of a taxpayer who has been issued a 30-day letter,
the maximum amount of tax under subparagraph (A) shall
not be less than the amount of the proposed deficiency
specified in such letter.
‘‘(3) OTHER DEFINITIONS.—For purposes of paragraph (2)—
‘‘(A) DISPUTABLE
ITEM.—The term ‘disputable item’
means any item of income, gain, loss, deduction, or credit
if the taxpayer—
‘‘(i) has a reasonable basis for its treatment of
such item, and
‘‘(ii) reasonably believes that the Secretary also
has a reasonable basis for disallowing the taxpayer’s
treatment of such item.
‘‘(B) 30-DAY LETTER.—The term ‘30-day letter’ means
the first letter of proposed deficiency which allows the
taxpayer an opportunity for administrative review in the
Internal Revenue Service Office of Appeals.
‘‘(4) RATE OF INTEREST.—The rate of interest under this
subsection shall be the Federal short-term rate determined
under section 6621(b), compounded daily.
‘‘(e) USE OF DEPOSITS.—
‘‘(1) PAYMENT OF TAX.—Except as otherwise provided by
the taxpayer, deposits shall be treated as used for the payment
of tax in the order deposited.
‘‘(2) RETURNS OF DEPOSITS.—Deposits shall be treated as
returned to the taxpayer on a last-in, first-out basis.’’.
(b) CLERICAL AMENDMENT.—The table of sections for subchapter
A of chapter 67 is amended by adding at the end the following
new item:
‘‘Sec. 6603. Deposits made to suspend running of interest on potential un-
derpayments, etc.’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to deposits made after the date of the enactment
of this Act.
(2) COORDINATION WITH DEPOSITS MADE UNDER REVENUE
PROCEDURE 84–58.—In the case of an amount held by the Sec-
retary of the Treasury or his delegate on the date of the
enactment of this Act as a deposit in the nature of a cash
bond deposit pursuant to Revenue Procedure 84–58, the date
H. R. 4520—183
that the taxpayer identifies such amount as a deposit made
pursuant to section 6603 of the Internal Revenue Code (as
added by this Act) shall be treated as the date such amount
is deposited for purposes of such section 6603.
SEC. 843. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALLMENT
AGREEMENTS.
(a) IN GENERAL.—
(1) Section 6159(a) (relating to authorization of agreements)
is amended—
(A) by striking ‘‘satisfy liability for payment of’’ and
inserting ‘‘make payment on’’, and
(B) by inserting ‘‘full or partial’’ after ‘‘facilitate’’.
(2) Section 6159(c) (relating to Secretary required to enter
into installment agreements in certain cases) is amended in
the matter preceding paragraph (1) by inserting ‘‘full’’ before
‘‘payment’’.
(b) REQUIREMENT TO REVIEW PARTIAL PAYMENT AGREEMENTS
EVERY TWO YEARS.—Section 6159 is amended by redesignating
subsections (d) and (e) as subsections (e) and (f), respectively, and
inserting after subsection (c) the following new subsection:
‘‘(d) SECRETARY REQUIRED TO REVIEW INSTALLMENT AGREE-
MENTS FOR PARTIAL COLLECTION EVERY TWO YEARS.—In the case
of an agreement entered into by the Secretary under subsection
(a) for partial collection of a tax liability, the Secretary shall review
the agreement at least once every 2 years.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to agreements entered into on or after the date of
the enactment of this Act.
SEC. 844. AFFIRMATION OF CONSOLIDATED RETURN REGULATION
AUTHORITY.
(a) IN GENERAL.—Section 1502 is amended by adding at the
end the following new sentence: ‘‘In carrying out the preceding
sentence, the Secretary may prescribe rules that are different from
the provisions of chapter 1 that would apply if such corporations
filed separate returns.’’.
(b) RESULT NOT OVERTURNED.—Notwithstanding the amend-
ment made by subsection (a), the Internal Revenue Code of 1986
shall be construed by treating Treasury Regulation § 1.1502-
20(c)(1)(iii) (as in effect on January 1, 2001) as being inapplicable
to the factual situation in Rite Aid Corporation and Subsidiary
Corporations v. United States, 255 F.3d 1357 (Fed. Cir. 2001).
(c) EFFECTIVE DATE.—This section, and the amendment made
by this section, shall apply to taxable years beginning before, on,
or after the date of the enactment of this Act.
SEC. 845. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST
ON CONVERTIBLE DEBT.
(a) IN GENERAL.—Paragraph (2) of section 163(l) is amended
by inserting ‘‘or equity held by the issuer (or any related party)
in any other person’’ after ‘‘or a related party’’.
(b) CAPITALIZATION ALLOWED WITH RESPECT
TO EQUITY
OF
PERSONS OTHER THAN ISSUER
AND RELATED PARTIES.—Section
163(l) is amended by redesignating paragraphs (4) and (5) as para-
graphs (5) and (6) and by inserting after paragraph (3) the following
new paragraph:
H. R. 4520—184
‘‘(4) CAPITALIZATION ALLOWED WITH RESPECT TO EQUITY OF
PERSONS OTHER THAN ISSUER AND RELATED PARTIES.—If the
disqualified debt instrument of a corporation is payable in
equity held by the issuer (or any related party) in any other
person (other than a related party), the basis of such equity
shall be increased by the amount not allowed as a 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 amended by subsection (b), is
amended by redesignating paragraphs (5) and (6) as paragraphs
(6) and (7) and by inserting 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 instrument’ does not include indebted-
ness issued by a dealer in securities (or a related party) which
is payable 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 para-
graph, the term ‘dealer in securities’ has the meaning given
such term by section 475.’’.
(d) CONFORMING AMENDMENT.—Paragraph (3) of section 163(l)
is amended by striking ‘‘or a related party’’ in the material preceding
subparagraph (A) and inserting ‘‘or any other person’’.
(e) EFFECTIVE DATE.—The amendments made by this section
shall apply to debt instruments issued after October 3, 2004.
Part III—Leasing
SEC. 847. REFORM OF TAX TREATMENT OF CERTAIN LEASING
ARRANGEMENTS.
(a) CLARIFICATION OF RECOVERY PERIOD FOR TAX-EXEMPT USE
PROPERTY
SUBJECT
TO
LEASE.—Subparagraph (A) of section
168(g)(3) (relating to special rules for determining class life) is
amended by inserting ‘‘(notwithstanding any other subparagraph
of this paragraph)’’ after ‘‘shall’’.
(b) LIMITATION ON DEPRECIATION AND AMORTIZATION PERIODS
FOR INTANGIBLES LEASED TO TAX-EXEMPT ENTITY.—
(1) COMPUTER SOFTWARE.—Paragraph (1) of section 167(f)
is amended by adding at the end the following new subpara-
graph:
‘‘(C) TAX-EXEMPT USE PROPERTY SUBJECT TO LEASE.—
In the case of computer software which would be tax-
exempt use property as defined in subsection (h) of section
168 if such section applied to computer software, the useful
life under subparagraph (A) shall not be less than 125
percent of the lease term (within the meaning of section
168(i)(3)).’’.
(2) CERTAIN INTERESTS OR RIGHTS ACQUIRED SEPARATELY.—
Paragraph (2) of section 167(f) is amended by adding at the
end the following new sentence: ‘‘If such property would be
tax-exempt use property as defined in subsection (h) of section
168 if such section applied to such property, the useful life
under such regulations shall not be less than 125 percent
of the lease term (within the meaning of section 168(i)(3)).’’.
H. R. 4520—185
(3) SECTION 197 INTANGIBLES.—Section 197(f) (relating to
special rules) is amended by adding at the end the following
new paragraph:
‘‘(10) TAX-EXEMPT USE PROPERTY SUBJECT TO LEASE.—In
the case of any section 197 intangible which would be tax-
exempt use property as defined in subsection (h) of section
168 if such section applied to such intangible, the amortization
period under this section shall not be less than 125 percent
of the lease term (within the meaning of section 168(i)(3)).’’.
(c) LEASE TERM TO INCLUDE RELATED SERVICE CONTRACTS.—
Subparagraph (A) of section 168(i)(3) (relating to lease term) is
amended by striking ‘‘and’’ at the end of clause (i), by redesignating
clause (ii) as clause (iii), and by inserting after clause (i) the
following new clause:
‘‘(ii) the term of a lease shall include the term
of any service contract or similar arrangement
(whether or not treated as a lease under section
7701(e))—
‘‘(I) which is part of the same transaction (or
series of related transactions) which includes the
lease, and
‘‘(II) which is with respect to the property
subject to the lease or substantially similar prop-
erty, and’’.
(d) EXPANSION OF SHORT-TERM LEASE EXEMPTION FOR QUALI-
FIED TECHNOLOGICAL EQUIPMENT.—Subparagraph (A) of section
168(h)(3) is amended by adding at the end the following new sen-
tence: ‘‘Notwithstanding subsection (i)(3)(A)(i), in determining a
lease term for purposes of the preceding sentence, there shall not
be taken into account any option of the lessee to renew at the
fair market value rent determined at the time of renewal; except
that the aggregate period not taken into account by reason of
this sentence shall not exceed 24 months.’’.
(e) TREATMENT OF CERTAIN INDIAN TRIBAL GOVERNMENTS AS
TAX-EXEMPT ENTITIES.—Section 168(h)(2)(A) is amended by striking
‘‘and’’ at the end of clause (ii), by striking the period at the end
of clause (iii) and inserting ‘‘, and’’, and by inserting at the end
the following:
‘‘(iv) any Indian tribal government described in
section 7701(a)(40).
For purposes of applying this subsection, any Indian tribal
government referred to in clause (iv) shall be treated in
the same manner as a State.’’.
SEC. 848. LIMITATION ON DEDUCTIONS ALLOCABLE TO PROPERTY
USED BY GOVERNMENTS OR OTHER TAX-EXEMPT ENTI-
TIES.
(a) IN GENERAL.—Subpart C of part II of subchapter E of
chapter 1 (relating to taxable year for which deductions taken)
is amended by adding at the end the following new section:
‘‘SEC. 470. LIMITATION ON DEDUCTIONS ALLOCABLE TO PROPERTY
USED BY GOVERNMENTS OR OTHER TAX-EXEMPT ENTI-
TIES.
‘‘(a) LIMITATION ON LOSSES.—Except as otherwise provided in
this section, a tax-exempt use loss for any taxable year shall not
be allowed.