I 
109TH CONGRESS 
2D SESSION 
H. R. 6122 
To amend the Internal Revenue Code of 1986 to provide an additional 
standard deduction for real property taxes for nonitemizers. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 20, 2006 
Mr. HOLT introduced the following bill; which was referred to the Committee 
on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
an additional standard deduction for real property taxes 
for nonitemizers. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Nonitemizer Real 
Property Tax Deduction Act of 2006’’. 
SEC. 2. ADDITIONAL STANDARD DEDUCTION FOR REAL 
PROPERTY TAXES FOR NONITEMIZERS. 
(a) IN GENERAL.—Section 63(c)(1) (defining stand-
ard deduction) is amended by striking ‘‘and’’ at the end 
of subparagraph (A), by striking the period at the end 
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of subparagraph (B) and inserting ‘‘, and’’, and by adding 
at the end the following new subparagraph: 
‘‘(C) the real property tax deduction.’’. 
(b) DEFINITION.—Section 63(c) is amended by add-
ing at the end the following new paragraph: 
‘‘(8) REAL PROPERTY TAX DEDUCTION.—For 
purposes of paragraph (1), the real property tax de-
duction is so much of the amount of State and local 
real property taxes (within the meaning of section 
164) paid or accrued by the taxpayer during the tax-
able year which do not exceed $500 ($1,000 in the 
case of a joint return).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 3. CLARIFICATION OF ECONOMIC SUBSTANCE DOC-
TRINE. 
(a) IN GENERAL.—Section 7701 is amended by re-
designating subsection (o) as subsection (p) and by insert-
ing after subsection (n) the following new subsection: 
‘‘(o) CLARIFICATION
OF
ECONOMIC
SUBSTANCE 
DOCTRINE; ETC.— 
‘‘(1) GENERAL RULES.— 
‘‘(A) IN GENERAL.—In any case in which 
a court determines that the economic substance 
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doctrine is relevant for purposes of this title to 
a transaction (or series of transactions), such 
transaction (or series of transactions) shall have 
economic substance only if the requirements of 
this paragraph are met. 
‘‘(B) DEFINITION
OF
ECONOMIC
SUB-
STANCE.—For purposes of subparagraph (A)— 
‘‘(i) IN GENERAL.—A transaction has 
economic substance only if— 
‘‘(I) the transaction changes in a 
meaningful way (apart from Federal 
tax effects) the taxpayer’s economic 
position, and 
‘‘(II) the taxpayer has a substan-
tial nontax purpose for entering into 
such transaction and the transaction 
is a reasonable means of accom-
plishing such purpose. 
In applying subclause (II), a purpose of 
achieving a financial accounting benefit 
shall not be taken into account in deter-
mining whether a transaction has a sub-
stantial nontax purpose if the origin of 
such financial accounting benefit is a re-
duction of income tax. 
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‘‘(ii) SPECIAL
RULE
WHERE
TAX-
PAYER RELIES ON PROFIT POTENTIAL.—A 
transaction shall not be treated as having 
economic substance by reason of having a 
potential for profit unless— 
‘‘(I) the present value of the rea-
sonably expected pre-tax profit from 
the transaction is substantial in rela-
tion to the present value of the ex-
pected net tax benefits that would be 
allowed if the transaction were re-
spected, and 
‘‘(II) the reasonably expected 
pre-tax profit from the transaction ex-
ceeds a risk-free rate of return. 
‘‘(C) TREATMENT OF FEES AND FOREIGN 
TAXES.—Fees and other transaction expenses 
and foreign taxes shall be taken into account as 
expenses in determining pre-tax profit under 
subparagraph (B)(ii). 
‘‘(2) SPECIAL RULES FOR TRANSACTIONS WITH 
TAX-INDIFFERENT PARTIES.— 
‘‘(A) SPECIAL
RULES
FOR
FINANCING 
TRANSACTIONS.—The form of a transaction 
which is in substance the borrowing of money 
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or the acquisition of financial capital directly or 
indirectly from a tax-indifferent party shall not 
be respected if the present value of the deduc-
tions to be claimed with respect to the trans-
action is substantially in excess of the present 
value of the anticipated economic returns of the 
person lending the money or providing the fi-
nancial capital. A public offering shall be treat-
ed as a borrowing, or an acquisition of financial 
capital, from a tax-indifferent party if it is rea-
sonably expected that at least 50 percent of the 
offering will be placed with tax-indifferent par-
ties. 
‘‘(B) ARTIFICIAL INCOME SHIFTING AND 
BASIS
ADJUSTMENTS.—The form of a trans-
action with a tax-indifferent party shall not be 
respected if— 
‘‘(i) it results in an allocation of in-
come or gain to the tax-indifferent party in 
excess of such party’s economic income or 
gain, or 
‘‘(ii) it results in a basis adjustment 
or shifting of basis on account of over-
stating the income or gain of the tax-indif-
ferent party. 
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‘‘(3) DEFINITIONS AND SPECIAL RULES.—For 
purposes of this subsection— 
‘‘(A) ECONOMIC SUBSTANCE DOCTRINE.— 
The term ‘economic substance doctrine’ means 
the common law doctrine under which tax bene-
fits under subtitle A with respect to a trans-
action are not allowable if the transaction does 
not have economic substance or lacks a business 
purpose. 
‘‘(B) 
TAX-INDIFFERENT
PARTY.—The 
term ‘tax-indifferent party’ means any person 
or entity not subject to tax imposed by subtitle 
A. A person shall be treated as a tax-indifferent 
party with respect to a transaction if the items 
taken into account with respect to the trans-
action have no substantial impact on such per-
son’s liability under subtitle A. 
‘‘(C) EXCEPTION FOR PERSONAL TRANS-
ACTIONS OF INDIVIDUALS.—In the case of an 
individual, this subsection shall apply only to 
transactions entered into in connection with a 
trade or business or an activity engaged in for 
the production of income. 
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