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‘‘(2) PAYMENT OR REIMBURSEMENT OF TAX BY 
CORPORATION TREATED AS SPECIFIED STOCK COM-
PENSATION.—Any payment of the tax imposed by 
this section directly or indirectly by the expatriated 
corporation or by any member of the expanded affili-
ated group which includes such corporation—
‘‘(A) shall be treated as specified stock 
compensation, and 
‘‘(B) shall not be allowed as a deduction 
under any provision of chapter 1. 
‘‘(3) 
CERTAIN
RESTRICTIONS
IGNORED.—
Whether there is specified stock compensation, and 
the value thereof, shall be determined without regard 
to any restriction other than a restriction which by 
its terms will never lapse. 
‘‘(4) PROPERTY TRANSFERS.—Any transfer of 
property shall be treated as a payment and any right 
to a transfer of property shall be treated as a right 
to a payment. 
‘‘(5) OTHER
ADMINISTRATIVE
PROVISIONS.—
For purposes of subtitle F, any tax imposed by this 
section shall be treated as a tax imposed by subtitle 
A.
148
‘‘(g) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section.’’
(b) DENIAL OF DEDUCTION.—
(1) IN
GENERAL.—Paragraph (6) of section 
275(a) is amended by inserting ‘‘45,’’ before ‘‘46,’’. 
(2) $1,000,000 LIMIT
ON
DEDUCTIBLE
COM-
PENSATION REDUCED BY PAYMENT OF EXCISE TAX 
ON SPECIFIED STOCK COMPENSATION.—Paragraph 
(4) of section 162(m) is amended by adding at the 
end the following new subparagraph: 
‘‘(G) COORDINATION WITH EXCISE TAX ON 
SPECIFIED STOCK COMPENSATION.—The dollar 
limitation contained in paragraph (1) with re-
spect to any covered employee shall be reduced 
(but not below zero) by the amount of any pay-
ment (with respect to such employee) of the tax 
imposed by section 4985 directly or indirectly 
by the expatriated corporation (as defined in 
such section) or by any member of the ex-
panded affiliated group (as defined in such sec-
tion) which includes such corporation.’’
(c) CONFORMING AMENDMENTS.—
(1) The last sentence of section 3121(v)(2)(A) 
is amended by inserting before the period ‘‘or to any
149
specified stock compensation (as defined in section 
4985) on which tax is imposed by section 4985’’. 
(2) The table of chapters for subtitle D is 
amended by inserting after the item relating to 
chapter 44 the following new item:
‘‘Chapter 45. Provisions relating to expatriated entities.’’
(d) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on March 4, 2003; except that 
periods before such date shall not be taken into account 
in applying the periods in subsections (a) and (e)(1) of 
section 4985 of the Internal Revenue Code of 1986, as 
added by this section. 
SEC. 2004. REINSURANCE OF UNITED STATES RISKS IN 
FOREIGN JURISDICTIONS. 
(a) IN GENERAL.—Section 845(a) (relating to alloca-
tion in case of reinsurance agreement involving tax avoid-
ance or evasion) is amended by striking ‘‘source and char-
acter’’ and inserting ‘‘amount, source, or character’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to any risk reinsured after the date 
of the enactment of this Act.
SEC. 2005. REVISION OF TAX RULES ON EXPATRIATION OF 
INDIVIDUALS. 
(a) EXPATRIATION TO AVOID TAX.—
150
(1) IN
GENERAL.—Subsection (a) of section 
877 (relating to treatment of expatriates) is amend-
ed to read as follows: 
‘‘(a) TREATMENT OF EXPATRIATES.—
‘‘(1) IN GENERAL.—Every nonresident alien in-
dividual to whom this section applies and who, with-
in the 10-year period immediately preceding the 
close of the taxable year, lost United States citizen-
ship shall be taxable for such taxable year in the 
manner provided in subsection (b) if the tax imposed 
pursuant to such subsection (after any reduction in 
such tax under the last sentence of such subsection) 
exceeds the tax which, without regard to this section, 
is imposed pursuant to section 871. 
‘‘(2) INDIVIDUALS
SUBJECT
TO
THIS
SEC-
TION.—This section shall apply to any individual 
if—
‘‘(A) the average annual net income tax 
(as defined in section 38(c)(1)) of such indi-
vidual for the period of 5 taxable years ending 
before the date of the loss of United States citi-
zenship is greater than $122,000, 
‘‘(B) the net worth of the individual as of 
such date is $2,000,000 or more, or
151
‘‘(C) such individual fails to certify under 
penalty of perjury that he has met the require-
ments of this title for the 5 preceding taxable 
years or fails to submit such evidence of such 
compliance as the Secretary may require. 
In the case of the loss of United States citizenship 
in any calendar year after 2003, such $122,000 
amount shall be increased by an amount equal to 
such dollar amount multiplied by the cost-of-living 
adjustment determined under section 1(f)(3) for 
such calendar year by substituting ‘2002’ for ‘1992’ 
in subparagraph (B) thereof. Any increase under the 
preceding sentence shall be rounded to the nearest 
multiple of $1,000.’’. 
(2) REVISION
OF
EXCEPTIONS
FROM
ALTER-
NATIVE TAX.—Subsection (c) of section 877 (relat-
ing to tax avoidance not presumed in certain cases) 
is amended to read as follows: 
‘‘(c) EXCEPTIONS.—
‘‘(1) IN
GENERAL.—Subparagraphs (A) and 
(B) of subsection (a)(2) shall not apply to an indi-
vidual described in paragraph (2) or (3). 
‘‘(2) DUAL CITIZENS.—
‘‘(A) IN GENERAL.—An individual is de-
scribed in this paragraph if—