TITLE VI—REVENUE 
PROVISIONS 
Subtitle A—Nonqualified Deferred 
Compensation From Certain Tax 
Indifferent Parties 
SEC. 601. NONQUALIFIED DEFERRED COMPENSATION FROM 
CERTAIN TAX INDIFFERENT PARTIES. 
(a) IN GENERAL.—Subpart B of part II of subchapter 
E of chapter 1 (relating to taxable year for which items 
of gross income included) is amended by inserting after sec-
tion 457 the following new section: 
‘‘SEC. 457A. NONQUALIFIED DEFERRED COMPENSATION 
FROM CERTAIN TAX INDIFFERENT PARTIES. 
‘‘(a) IN GENERAL.—Any compensation which is de-
ferred under a nonqualified deferred compensation plan of 
a nonqualified entity shall be taken into account for pur-
poses of this chapter when there is no substantial risk of 
forfeiture of the rights to such compensation. 
‘‘(b) NONQUALIFIED ENTITY.—For purposes of this 
section, the term ‘nonqualified entity’ means— 
‘‘(1) any foreign corporation unless substantially 
all of such income is— 
‘‘(A) effectively connected with the conduct 
of a trade or business in the United States, or 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00062
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(B) subject to a comprehensive foreign in-
come tax, and 
‘‘(2) any partnership unless substantially all of 
such income is allocated to persons other than— 
‘‘(A) foreign persons with respect to whom 
such income is not subject to a comprehensive 
foreign income tax, and 
‘‘(B) organizations which are exempt from 
tax under this title. 
‘‘(c) ASCERTAINABILITY OF AMOUNTS OF COMPENSA-
TION.— 
‘‘(1) IN GENERAL.—If the amount of any com-
pensation is not ascertainable at the time that such 
compensation is otherwise to be taken into account 
under subsection (a)— 
‘‘(A) such amount shall be so taken into ac-
count when ascertainable, and 
‘‘(B) the tax imposed under this chapter for 
the taxable year in which such compensation is 
taken into account under subparagraph (A) shall 
be increased by the sum of— 
‘‘(i) the amount of interest determined 
under paragraph (2), and 
‘‘(ii) an amount equal to 20 percent of 
the amount of such compensation. 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00063
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(2) INTEREST.—For purposes of paragraph 
(1)(B)(i), the interest determined under this para-
graph for any taxable year is the amount of interest 
at the underpayment rate under section 6621 plus 1 
percentage point on the underpayments that would 
have occurred had the deferred compensation been in-
cludible in gross income for the taxable year in which 
first deferred or, if later, the first taxable year in 
which such deferred compensation is not subject to a 
substantial risk of forfeiture. 
‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—For 
purposes of this section— 
‘‘(1) SUBSTANTIAL RISK OF FORFEITURE.—The 
rights of a person to compensation shall be treated as 
subject to a substantial risk of forfeiture only if such 
person’s rights to such compensation are conditioned 
upon the future performance of substantial services by 
any individual. 
‘‘(2) COMPREHENSIVE FOREIGN INCOME TAX.— 
The term ‘comprehensive foreign income tax’ means, 
with respect to any foreign person, the income tax of 
a foreign country if— 
‘‘(A) such person is eligible for the benefits 
of a comprehensive income tax treaty between 
such foreign country and the United States, or 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00064
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(B) such person demonstrates to the satis-
faction of the Secretary that such foreign country 
has a comprehensive income tax. 
Such term shall not include any tax unless such tax 
includes rules for the deductibility of deferred com-
pensation which are similar to the rules of this title. 
‘‘(3) NONQUALIFIED DEFERRED COMPENSATION 
PLAN.—The term ‘nonqualified deferred compensation 
plan’ has the meaning given such term under section 
409A(d), except that such term shall include any plan 
that provides a right to compensation based on the 
appreciation in value of a specified number of equity 
units of the service recipient. 
‘‘(4) APPLICATION OF RULES.—Rules similar to 
the rules of paragraphs (5) and (6) of section 409A(d) 
shall apply. 
‘‘(e) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section, including regulations 
disregarding a substantial risk of forfeiture in cases where 
necessary to carry out the purposes of this section.’’. 
(b) CONFORMING AMENDMENT.—Section 26(b)(2) is 
amended by striking ‘‘and’’ at the end of subparagraph (S), 
by striking the period at the end of subparagraph (T) and 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00065
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
inserting ‘‘, and’’, and by adding at the end the following 
new subparagraph: 
‘‘(U) section 457A(c)(1)(B) (relating to as-
certainability of amounts of compensation).’’. 
(c) CLERICAL AMENDMENT.—The table of sections of 
subpart B of part II of subchapter E of chapter 1 is amend-
ed by inserting after the item relating to section 457 the 
following new item: 
‘‘Sec. 457A. Nonqualified deferred compensation from certain tax indifferent par-
ties.’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to amounts deferred which are attrib-
utable to services performed after December 31, 2007. 
(2) APPLICATION TO EXISTING DEFERRALS.—In 
the case of any amount deferred to which the amend-
ments made by this section do not apply solely by 
reason of the fact that the amount is attributable to 
services performed before January 1, 2008, to the ex-
tent such amount is not includible in gross income in 
a taxable year beginning before 2017, such amounts 
shall be includible in gross income in the later of— 
(A) the last taxable year beginning before 
2017, or 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00066
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
(B) the taxable year in which there is no 
substantial risk of forfeiture of the rights to such 
compensation (determined in the same manner 
as determined for purposes of section 457A of the 
Internal Revenue Code of 1986, as added by this 
section). 
(3) ACCELERATED PAYMENTS.—No later than 60 
days after the date of the enactment of this Act, the 
Secretary shall issue guidance providing a limited pe-
riod of time during which a nonqualified deferred 
compensation arrangement attributable to services 
performed on or before December 31, 2007, may, with-
out violating the requirements of section 409A(a) of 
the Internal Revenue Code of 1986, be amended to 
conform the date of distribution to the date the 
amounts are required to be included in income. 
Subtitle B—Provisions Related to 
Certain Investment Partnerships 
SEC. 611. INCOME OF PARTNERS FOR PERFORMING INVEST-
MENT MANAGEMENT SERVICES TREATED AS 
ORDINARY INCOME RECEIVED FOR PERFORM-
ANCE OF SERVICES. 
(a) IN GENERAL.—Part I of subchapter K of chapter 
1 is amended by adding at the end the following new sec-
tion: 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00067
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘SEC. 710. SPECIAL RULES FOR PARTNERS PROVIDING IN-
VESTMENT 
MANAGEMENT 
SERVICES 
TO 
PARTNERSHIP. 
‘‘(a) TREATMENT OF DISTRIBUTIVE SHARE OF PART-
NERSHIP ITEMS.—For purposes of this title, in the case of 
an investment services partnership interest— 
‘‘(1) IN
GENERAL.—Notwithstanding section 
702(b)— 
‘‘(A) any net income with respect to such 
interest for any partnership taxable year shall be 
treated as ordinary income for the performance 
of services, and 
‘‘(B) any net loss with respect to such inter-
est for such year, to the extent not disallowed 
under paragraph (2) for such year, shall be 
treated as an ordinary loss. 
‘‘(2) TREATMENT OF LOSSES.— 
‘‘(A) LIMITATION.—Any net loss with re-
spect to such interest shall be allowed for any 
partnership taxable year only to the extent that 
such loss does not exceed the excess (if any) of— 
‘‘(i) the aggregate net income with re-
spect to such interest for all prior partner-
ship taxable years, over 
‘‘(ii) the aggregate net loss with respect 
to such interest not disallowed under this 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00068
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
subparagraph for all prior partnership tax-
able years. 
‘‘(B) CARRYFORWARD.—Any net loss for 
any partnership taxable year which is not al-
lowed by reason of subparagraph (A) shall be 
treated as an item of loss with respect to such 
partnership interest for the succeeding partner-
ship taxable year. 
‘‘(C) BASIS ADJUSTMENT.—No adjustment 
to the basis of a partnership interest shall be 
made on account of any net loss which is not al-
lowed by reason of subparagraph (A). 
‘‘(D) EXCEPTION FOR BASIS ATTRIBUTABLE 
TO PURCHASE OF A PARTNERSHIP INTEREST.— 
In the case of an investment services partnership 
interest acquired by purchase, paragraph (1)(B) 
shall not apply to so much of any net loss with 
respect to such interest for any taxable year as 
does not exceed the excess of— 
‘‘(i) the basis of such interest imme-
diately after such purchase, over 
‘‘(ii) the aggregate net loss with respect 
to such interest to which paragraph (1)(B) 
did not apply by reason of this subpara-
graph for all prior taxable years. 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00069
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
Any net loss to which paragraph (1)(B) does not 
apply by reason of this subparagraph shall not 
be taken into account under subparagraph (A). 
‘‘(E) PRIOR
PARTNERSHIP
YEARS.—Any 
reference in this paragraph to prior partnership 
taxable years shall only include prior partner-
ship taxable years to which this section applies. 
‘‘(3) NET INCOME AND LOSS.—For purposes of 
this section— 
‘‘(A) NET INCOME.—The term ‘net income’ 
means, with respect to any investment services 
partnership interest, for any partnership taxable 
year, the excess (if any) of— 
‘‘(i) all items of income and gain taken 
into account by the holder of such interest 
under section 702 with respect to such in-
terest for such year, over 
‘‘(ii) all items of deduction and loss so 
taken into account. 
‘‘(B) NET LOSS.—The term ‘net loss’ means 
with respect to such interest for such year, the 
excess (if any) of the amount described in sub-
paragraph (A)(ii) over the amount described in 
subparagraph (A)(i). 
‘‘(b) DISPOSITIONS OF PARTNERSHIP INTERESTS.— 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00070
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(1) GAIN.—Any gain on the disposition of an 
investment services partnership interest shall be treat-
ed as ordinary income for the performance of services. 
‘‘(2) LOSS.—Any loss on the disposition of an 
investment services partnership interest shall be treat-
ed as an ordinary loss to the extent of the excess (if 
any) of— 
‘‘(A) the aggregate net income with respect 
to such interest for all partnership taxable years, 
over 
‘‘(B) the aggregate net loss with respect to 
such interest allowed under subsection (a)(2) for 
all partnership taxable years. 
‘‘(3) DISPOSITION OF PORTION OF INTEREST.— 
In the case of any disposition of an investment serv-
ices partnership interest, the amount of net loss which 
otherwise would have (but for subsection (a)(2)(C)) 
applied to reduce the basis of such interest shall be 
disregarded for purposes of this section for all suc-
ceeding partnership taxable years. 
‘‘(4) DISTRIBUTIONS
OF
PARTNERSHIP
PROP-
ERTY.—In the case of any distribution of appreciated 
property by a partnership with respect to any invest-
ment services partnership interest, gain shall be rec-
ognized by the partnership in the same manner as if 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00071
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
the partnership sold such property at fair market 
value at the time of the distribution. For purposes of 
this paragraph, the term ‘appreciated property’ 
means any property with respect to which gain would 
be determined if sold as described in the preceding 
sentence. 
‘‘(5) APPLICATION OF SECTION 751.—In applying 
section 751(a), an investment services partnership in-
terest shall be treated as an inventory item. 
‘‘(c) INVESTMENT SERVICES PARTNERSHIP INTER-
EST.—For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘investment serv-
ices partnership interest’ means any interest in a 
partnership which is held by any person if such per-
son provides (directly or indirectly) a substantial 
quantity of any of the following services with respect 
to the assets of the partnership in the conduct of the 
trade or business of providing such services: 
‘‘(A) Advising as to the advisability of in-
vesting in, purchasing, or selling any specified 
asset. 
‘‘(B) Managing, acquiring, or disposing of 
any specified asset. 
‘‘(C) Arranging financing with respect to 
acquiring specified assets. 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00072
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(D) Any activity in support of any service 
described in subparagraphs (A) through (C). 
For purposes of this paragraph, the term ‘specified 
asset’ means securities (as defined in section 475(c)(2) 
without regard to the last sentence thereof), real es-
tate, commodities (as defined in section 475(e)(2))), 
or options or derivative contracts with respect to secu-
rities (as so defined), real estate, or commodities (as 
so defined). 
‘‘(2) EXCEPTION FOR CERTAIN CAPITAL INTER-
ESTS.— 
‘‘(A) IN GENERAL.—If— 
‘‘(i) a portion of an investment services 
partnership interest is acquired on account 
of a contribution of invested capital, and 
‘‘(ii) the partnership makes a reason-
able allocation of partnership items between 
the portion of the distributive share that is 
with respect to invested capital and the por-
tion of such distributive share that is not 
with respect to invested capital, 
then subsection (a) shall not apply to the portion 
of the distributive share that is with respect to 
invested capital. An allocation will not be treat-
ed as reasonable for purposes of this subpara-
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00073
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
graph if such allocation would result in the part-
nership allocating a greater portion of income to 
invested capital than any other partner not pro-
viding services would have been allocated with 
respect to the same amount of invested capital. 
‘‘(B) SPECIAL RULE FOR DISPOSITIONS.— 
In any case to which subparagraph (A) applies, 
subsection (b) shall not apply to any gain or loss 
allocable to invested capital. The portion of any 
gain or loss attributable to invested capital is the 
proportion of such gain or loss which is based on 
the distributive share of gain or loss that would 
have been allocable to invested capital under sub-
paragraph (A) if the partnership sold all of its 
assets immediately before the disposition. 
‘‘(C) INVESTED CAPITAL.—For purposes of 
this paragraph, the term ‘invested capital’ 
means, the fair market value at the time of con-
tribution of any money or other property con-
tributed to the partnership. 
‘‘(D) TREATMENT OF CERTAIN LOANS.— 
‘‘(i) 
PROCEEDS
OF
PARTNERSHIP 
LOANS NOT TREATED AS INVESTED CAPITAL 
OF
SERVICE
PROVIDING
PARTNERS.—For 
purposes of this paragraph, an investment 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00074
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
services partnership interest shall not be 
treated as acquired on account of a con-
tribution of invested capital to the extent 
that such capital is attributable to the pro-
ceeds of any loan or other advance made or 
guaranteed, directly or indirectly, by any 
partner or the partnership. 
‘‘(ii) LOANS FROM NONSERVICE PRO-
VIDING
PARTNERS
TO
THE
PARTNERSHIP 
TREATED AS INVESTED CAPITAL.—For pur-
poses of this paragraph, any loan or other 
advance to the partnership made or guaran-
teed, directly or indirectly, by a partner not 
providing services to the partnership shall 
be treated as invested capital of such part-
ner and amounts of income and loss treated 
as allocable to invested capital shall be ad-
justed accordingly. 
‘‘(d) OTHER INCOME AND GAIN IN CONNECTION WITH 
INVESTMENT MANAGEMENT SERVICES.— 
‘‘(1) IN GENERAL.—If— 
‘‘(A) a person performs (directly or indi-
rectly) investment management services for any 
entity, 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00075
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(B) such person holds a disqualified inter-
est with respect to such entity, and 
‘‘(C) the value of such interest (or payments 
thereunder) is substantially related to the 
amount of income or gain (whether or not real-
ized) from the assets with respect to which the 
investment management services are performed, 
any income or gain with respect to such interest shall 
be treated as ordinary income for the performance of 
services. Rules similar to the rules of subsection (c)(2) 
shall apply where such interest was acquired on ac-
count of invested capital in such entity. 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) DISQUALIFIED INTEREST.—The term 
‘disqualified interest’ means, with respect to any 
entity— 
‘‘(i) any interest in such entity other 
than indebtedness, 
‘‘(ii) convertible or contingent debt of 
such entity, 
‘‘(iii) any option or other right to ac-
quire property described in clause (i) or 
(ii), and 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00076
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(iv) any derivative instrument en-
tered into (directly or indirectly) with such 
entity or any investor in such entity. 
Such term shall not include a partnership inter-
est and shall not include stock in a taxable cor-
poration. 
‘‘(B) TAXABLE
CORPORATION.—The term 
‘taxable corporation’ means— 
‘‘(i) a domestic C corporation, or 
‘‘(ii) a foreign corporation subject to a 
comprehensive foreign income tax (as de-
fined in section 457A(d)(4)). 
‘‘(C) 
INVESTMENT
MANAGEMENT
SERV-
ICES.—The term ‘investment management serv-
ices’ means a substantial quantity of any of the 
services described in subsection (c)(1) which are 
provided in the conduct of the trade or business 
of providing such services. 
‘‘(e) REGULATIONS.—The Secretary shall prescribe 
such regulations as are necessary or appropriate to carry 
out the purposes of this section, including regulations to— 
‘‘(1) prevent the avoidance of the purposes of this 
section, and 
‘‘(2) coordinate this section with the other provi-
sions of this subchapter. 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00077
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(f) CROSS REFERENCE.—For 40 percent no fault 
penalty on certain underpayments due to the avoidance of 
this section, see section 6662.’’. 
(b) APPLICATION
TO
REAL
ESTATE
INVESTMENT 
TRUSTS.—Subsection (c) of section 856 is amended by add-
ing at the end the following new paragraph: 
‘‘(8) EXCEPTION FROM RECHARACTERIZATION OF 
INCOME FROM INVESTMENT SERVICES PARTNERSHIP 
INTERESTS.— 
‘‘(A) IN
GENERAL.—Paragraphs (2), (3), 
and (4) shall be applied without regard to sec-
tion 710 (relating to special rules for partners 
providing investment management services to 
partnership). 
‘‘(B) SPECIAL
RULE
FOR
PARTNERSHIPS 
OWNED BY REITS.—Section 7704 shall be applied 
without regard to section 710 in the case of a 
partnership which meets each of the following re-
quirements: 
‘‘(i) Such partnership is treated as 
publicly traded under section 7704 solely by 
reason of interests in such partnership 
being convertible into interests in a real es-
tate investment trust which is publicly trad-
ed. 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00078
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(ii) 50 percent or more of the capital 
and profits interests of such partnership are 
owned, directly or indirectly, at all times 
during the taxable year by such real estate 
investment trust (determined with the ap-
plication of section 267(c)). 
‘‘(iii) Such partnership meets the re-
quirements of paragraphs (2), (3), and (4) 
(applied without regard to section 710).’’. 
(c) IMPOSITION OF PENALTY ON UNDERPAYMENTS.— 
(1) IN GENERAL.—Subsection (b) of section 6662 
is amended by inserting after paragraph (5) the fol-
lowing new paragraph: 
‘‘(6) The application of subsection (d) of section 
710 or the regulations prescribed under section 710(e) 
to prevent the avoidance of the purposes of section 
710.’’. 
(2) AMOUNT OF PENALTY.— 
(A) IN GENERAL.—Section 6662 is amended 
by adding at the end the following new sub-
section: 
‘‘(i) INCREASE IN PENALTY IN CASE OF PROPERTY 
TRANSFERRED
FOR
INVESTMENT
MANAGEMENT
SERV-
ICES.—In the case of any portion of an underpayment to 
which this section applies by reason of subsection (b)(6), 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00079
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
subsection (a) shall be applied with respect to such portion 
by substituting ‘40 percent’ for ‘20 percent’.’’. 
(B) CONFORMING AMENDMENTS.—Subpara-
graph (B) of section 6662A(e)(2) is amended— 
(i) by striking ‘‘section 6662(h)’’ and 
inserting ‘‘subsection (h) or (i) of section 
6662’’, and 
(ii) by striking ‘‘GROSS
VALUATION 
MISSTATEMENT
PENALTY’’ in the heading 
and inserting ‘‘CERTAIN INCREASED UNDER-
PAYMENT PENALTIES’’. 
(3) REASONABLE CAUSE EXCEPTION NOT APPLI-
CABLE.—Subsection (c) of section 6664 is amended— 
(A) by redesignating paragraphs (2) and 
(3) as paragraphs (3) and (4), respectively, 
(B) by striking ‘‘paragraph (2)’’ in para-
graph (4), as so redesignated, and inserting 
‘‘paragraph (3)’’, and 
(C) by inserting after paragraph (1) the fol-
lowing new paragraph: 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply to any portion of an underpayment to which 
this section applies by reason of subsection (b)(6).’’. 
(d) CONFORMING AMENDMENTS.— 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00080
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
(B) by striking the semi-colon at the end 
and inserting ‘‘, and’’, and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(B) any income treated as ordinary in-
come under section 710 of the Internal Revenue 
Code of 1986 received by an individual who pro-
vides investment management services (as de-
fined in section 710(d)(2) of such Code);’’. 
(5) The table of sections for part I of subchapter 
K of chapter 1 is amended by adding at the end the 
following new item: 
‘‘Sec. 710. Special rules for partners providing investment management services 
to partnership.’’. 
(e) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to taxable years ending after Novem-
ber 1, 2007. 
(2) PARTNERSHIP TAXABLE YEARS WHICH IN-
CLUDE EFFECTIVE DATE.—In applying section 710(a) 
of the Internal Revenue Code of 1986 (as added by 
this section) in the case of any partnership taxable 
year which includes November 1, 2007, the amount of 
the net income referred to in such section shall be 
treated as being the lesser of the net income for the 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00082
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
entire partnership taxable year or the net income de-
termined by only taking into account items attrib-
utable to the portion of the partnership taxable year 
which is after such date. 
(3) DISPOSITIONS
OF
PARTNERSHIP
INTER-
ESTS.—Section 710(b) of the Internal Revenue Code 
of 1986 (as added by this section) shall apply to dis-
positions and distributions after November 1, 2007. 
(4) OTHER INCOME AND GAIN IN CONNECTION 
WITH INVESTMENT MANAGEMENT SERVICES.—Section 
710(d) of such Code (as added by this section) shall 
take effect on November 1, 2007. 
(5) PUBLICLY
TRADED
PARTNERSHIPS.—For 
purposes of applying section 7704, the amendments 
made by this section shall apply to taxable years be-
ginning after December 31, 2009. 
SEC. 612. INDEBTEDNESS INCURRED BY A PARTNERSHIP IN 
ACQUIRING SECURITIES AND COMMODITIES 
NOT TREATED AS ACQUISITION INDEBTED-
NESS FOR ORGANIZATIONS WHICH ARE PART-
NERS WITH LIMITED LIABILITY. 
(a) IN GENERAL.—Subsection (c) of section 514 (relat-
ing to acquisition indebtedness) is amended by adding at 
the end the following new paragraph: 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00083
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(10) SECURITIES AND COMMODITIES ACQUIRED 
BY PARTNERSHIPS IN WHICH AN ORGANIZATION IS A 
PARTNER WITH LIMITED LIABILITY.— 
‘‘(A) IN GENERAL.—In the case of any orga-
nization which is a partner with limited liabil-
ity in a partnership, the term ‘acquisition in-
debtedness’ does not, for purposes of this section, 
include indebtedness incurred or continued by 
such partnership in purchasing or carrying any 
qualified security or commodity. 
‘‘(B) 
QUALIFIED
SECURITY
OR
COM-
MODITY.—For purposes of this paragraph, the 
term ‘qualified security or commodity’ means 
any security (as defined in section 475(c)(2) 
without regard to the last sentence thereof), any 
commodity (as defined in section 475(e)(2)), or 
any option or derivative contract with respect to 
such a security or commodity. 
‘‘(C) APPLICATION
TO
TIERED
PARTNER-
SHIPS AND OTHER PASS-THRU ENTITIES.—Rules 
similar to the rules of subparagraph (A) shall 
apply in the case of tiered partnerships and 
other pass-thru entities. 
‘‘(D) REGULATIONS.—The Secretary may 
prescribe such regulations as may be necessary 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00084
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
or appropriate to carry out the purposes of this 
paragraph, including regulations to prevent the 
abuse of this paragraph.’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to taxable years beginning after the date 
of the enactment of this Act. 
SEC. 613. APPLICATION TO PARTNERSHIP INTERESTS AND 
TAX SHARING AGREEMENTS OF RULE TREAT-
ING CERTAIN GAIN ON SALES BETWEEN RE-
LATED PERSONS AS ORDINARY INCOME. 
(a) PARTNERSHIP INTERESTS.—Subsection (a) of sec-
tion 1239 is amended to read as follows: 
‘‘(a) TREATMENT OF GAIN AS ORDINARY INCOME.— 
In the case of a sale or exchange of property, directly or 
indirectly, between related persons, any gain recognized to 
the transferor shall be treated as ordinary income if— 
‘‘(1) such property is, in the hands of the trans-
feree, of a character which is subject to the allowance 
for depreciation provided in section 167, or 
‘‘(2) such property is an interest in a partner-
ship, but only to the extent of gain attributable to un-
realized appreciation in property which is of a char-
acter subject to the allowance for depreciation pro-
vided in section 167.’’. 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00085
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
(b) TAX SHARING AGREEMENTS.—Section 1239 (relat-
ing to gain from sale of depreciable property between cer-
tain related taxpayers) is amended by adding at the end 
the following new subsection: 
‘‘(f) APPLICATION TO TAX SHARING AGREEMENTS.— 
‘‘(1) IN
GENERAL.—If there is a tax sharing 
agreement with respect to any sale or exchange, the 
transferee and the transferor shall be treated as re-
lated persons for purposes of this section. 
‘‘(2) TAX SHARING AGREEMENT.—For purposes 
of this subsection, the term ‘tax sharing agreement’ 
means any agreement which provides for the payment 
to the transferor of any amount which is determined 
by reference to any portion of the tax benefit realized 
by the transferee with respect to the depreciation (or 
amortization) of the property transferred.’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall 
apply to sales and exchanges after the date of the en-
actment of this Act. 
(2) EXCEPTION FOR BINDING CONTRACTS.—The 
amendment made by subsection (b) shall not apply to 
any sale or exchange pursuant to a written binding 
contract which includes a tax sharing agreement and 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00086
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
which is in effect on November 1, 2007, and not 
modified thereafter in any material respect. 
Subtitle C—Other Provisions 
SEC. 621. DELAY IN APPLICATION OF WORLDWIDE ALLOCA-
TION OF INTEREST. 
(a) IN GENERAL.—Paragraphs (5)(D) and (6) of sec-
tion 864(f) are each amended by striking ‘‘December 31, 
2008’’ and inserting ‘‘December 31, 2017’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2008. 
SEC. 622. BROKER REPORTING OF CUSTOMER’S BASIS IN 
SECURITIES TRANSACTIONS. 
(a) IN GENERAL.— 
(1) BROKER REPORTING FOR SECURITIES TRANS-
ACTIONS.—Section 6045 (relating to returns of bro-
kers) is amended by adding at the end the following 
new subsection: 
‘‘(g) ADDITIONAL INFORMATION REQUIRED IN THE 
CASE OF SECURITIES TRANSACTIONS.— 
‘‘(1) IN GENERAL.—If a broker is otherwise re-
quired to make a return under subsection (a) with re-
spect to the gross proceeds of the sale of a covered se-
curity, the broker shall include in such return the in-
formation described in paragraph (2). 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00087
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(2) ADDITIONAL INFORMATION REQUIRED.— 
‘‘(A) IN
GENERAL.—The information re-
quired under paragraph (1) to be shown on a re-
turn with respect to a covered security of a cus-
tomer shall include the customer’s adjusted basis 
in such security and whether any gain or loss 
with respect to such security is long-term or 
short-term (within the meaning of section 1222). 
‘‘(B) 
DETERMINATION
OF
ADJUSTED 
BASIS.—For purposes of subparagraph (A)— 
‘‘(i) IN GENERAL.—The customer’s ad-
justed basis shall be determined— 
‘‘(I) in the case of any stock (other 
than any stock in an open-end fund), 
in accordance with the first-in first-out 
method unless the customer notifies the 
broker by means of making an ade-
quate identification of the stock sold or 
transferred, 
‘‘(II) in the case of any stock in 
an open-end fund acquired before Jan-
uary 1, 2011, in accordance with any 
acceptable method under section 1012 
with respect to the account in which 
such interest is held, 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00088
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(III) in the case of any stock in 
an open-end fund acquired after De-
cember 31, 2010, in accordance with 
the broker’s default method unless the 
customer notifies the broker that he 
elects another acceptable method under 
section 1012 with respect to the ac-
count in which such interest is held, 
and 
‘‘(IV) in any other case, under the 
method for making such determination 
under section 1012. 
‘‘(ii) EXCEPTION FOR WASH SALES.— 
Except as otherwise provided by the Sec-
retary, the customer’s adjusted basis shall be 
determined without regard to section 1091 
(relating to loss from wash sales of stock or 
securities) unless the transactions occur in 
the same account with respect to identical 
securities. 
‘‘(3) COVERED SECURITY.—For purposes of this 
subsection— 
‘‘(A) IN GENERAL.—The term ‘covered secu-
rity’ means any specified security acquired on or 
after the applicable date if such security— 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00089
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(i) was acquired through a trans-
action in the account in which such security 
is held, or 
‘‘(ii) was transferred to such account 
from an account in which such security was 
a covered security, but only if the broker re-
ceived a statement under section 6045A 
with respect to the transfer. 
‘‘(B) 
SPECIFIED
SECURITY.—The 
term 
‘specified security’ means— 
‘‘(i) any share of stock in a corpora-
tion, 
‘‘(ii) any note, bond, debenture, or 
other evidence of indebtedness, 
‘‘(iii) any commodity, or contract or 
derivative with respect to such commodity, 
if the Secretary determines that adjusted 
basis reporting is appropriate for purposes 
of this subsection, and 
‘‘(iv) any other financial instrument 
with respect to which the Secretary deter-
mines that adjusted basis reporting is ap-
propriate for purposes of this subsection. 
‘‘(C) APPLICABLE DATE.—The term ‘appli-
cable date’ means— 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00090
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘(i) January 1, 2009, in the case of 
any specified security which is stock in a 
corporation, and 
‘‘(ii) January 1, 2011, or such later 
date determined by the Secretary in the case 
of any other specified security. 
‘‘(4) OPEN-END FUND.—For purposes of this sub-
section, the term ‘open-end fund’ means a regulated 
investment company (as defined in section 851) 
which is offering for sale or has outstanding any re-
deemable security of which it is the issuer and the 
shares of which are not traded on an established secu-
rities exchange.’’. 
(2) BROKER INFORMATION REQUIRED WITH RE-
SPECT TO OPTIONS.—Section 6045, as amended by 
subsection (a), is amended by adding at the end the 
following new subsection: 
‘‘(h) APPLICATION TO OPTIONS ON COVERED SECURI-
TIES.— 
‘‘(1) EXERCISE
OF
OPTION.—For purposes of 
this section, in the case of any exercise of an option 
on a covered security where the taxpayer is the grant-
or of the option and the option was acquired in the 
same account as the covered security, the amount re-
ceived for the grant of an option on a covered security 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00091
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
shall be treated as an adjustment to gross proceeds or 
as an adjustment to basis, as the case may be. A 
similar rule shall apply in the case of the exercise of 
an option where the taxpayer is not the grantor of the 
option. 
‘‘(2) LAPSE
OR
CLOSING
TRANSACTION.—For 
purposes of this section, in the case of the lapse (or 
closing 
transaction 
(as 
defined 
in 
section 
1234(b)(2)(A))) of an option on a covered security 
where the taxpayer is the grantor of the option, this 
section shall apply as if the premium received for 
such option were gross proceeds received on the date 
of the lapse or closing transaction, and the cost (if 
any) of the closing transaction shall be taken into ac-
count as adjusted basis. A similar rule shall apply in 
the case of a lapse or closing transaction where the 
taxpayer is not the grantor of the option. 
‘‘(3) PROSPECTIVE
APPLICATION.—Paragraphs 
(1) and (2) shall not apply to any option which is 
granted or acquired before January 1, 2011. 
‘‘(4) COVERED SECURITY.—For purposes of this 
subsection, the term ‘covered security’ shall have the 
meaning given such term in subsection (g)(3).’’. 
(3) EXTENSION
OF
PERIOD
FOR
STATEMENTS 
SENT TO CUSTOMERS.— 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00092
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
(A) IN GENERAL.—Subsection (b) of section 
6045 is amended by striking ‘‘January 31’’ and 
inserting ‘‘February 15’’. 
(B) STATEMENTS RELATED TO SUBSTITUTE 
PAYMENTS.—Subsection (d) of section 6045 is 
amended— 
(i) by striking ‘‘at such time and’’, and 
(ii) by inserting after ‘‘other item.’’ the 
following new sentence: ‘‘The written state-
ment required under the preceding sentence 
shall be furnished on or before February 15 
of the year following the calendar year dur-
ing which such payment was made.’’. 
(C) OTHER
STATEMENTS.—Subsection (b) 
of section 6045 is amended by adding at the end 
the following: ‘‘In the case of a consolidated re-
porting statement (as defined in regulations) 
with respect to any account which includes the 
statement required by this subsection, any state-
ment which would otherwise be required to be 
furnished on or before January 31 under section 
6042(c), 6049(c)(2)(A), or 6050N(b) with respect 
to any item in such account shall instead be re-
quired to be furnished on or before February 15 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00093
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
if furnished as part of such consolidated report-
ing statement.’’. 
(b) DETERMINATION OF BASIS OF CERTAIN SECURI-
TIES ON ACCOUNT BY ACCOUNT METHOD.—Section 1012 
(relating to basis of property–cost) is amended— 
(1) by striking ‘‘The basis of property’’ and in-
serting the following: 
‘‘(a) IN GENERAL.—The basis of property’’, 
(2) by striking ‘‘The cost of real property’’ and 
inserting the following: 
‘‘(b) SPECIAL RULE FOR APPORTIONED REAL ESTATE 
TAXES.—The cost of real property’’, and 
(3) by adding at the end the following new sub-
section: 
‘‘(c) DETERMINATIONS BY ACCOUNT.— 
‘‘(1) IN GENERAL.—In the case of the sale, ex-
change, or other disposition of a specified security on 
or after the applicable date, the conventions pre-
scribed by regulations under this section shall be ap-
plied on an account by account basis. 
‘‘(2) APPLICATION TO OPEN-END FUNDS.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), any stock in an open-end 
fund acquired before January 1, 2009, shall be 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00094
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
treated as a separate account from any such 
stock acquired on or after such date. 
‘‘(B) ELECTION
BY
OPEN-END
FUND
FOR 
TREATMENT AS SINGLE ACCOUNT.—If an open- 
end fund elects (at such time and in such form 
and manner as the Secretary may prescribe) to 
have this subparagraph apply with respect to 
one or more of its stockholders— 
‘‘(i) subparagraph (A) shall not apply 
with respect to any stock in such fund held 
by such stockholders, and 
‘‘(ii) all stock in such fund which is 
held by such stockholders shall be treated as 
covered 
securities 
described 
in 
section 
6045(g)(3) without regard to the date of the 
acquisition of such stock. 
‘‘(3) DEFINITIONS.—For purposes of this section, 
the terms ‘specified security’, ‘applicable date’, and 
‘open-end fund’ shall have the meaning given such 
terms in section 6045(g).’’. 
(c) INFORMATION
BY TRANSFERORS TO AID BRO-
KERS.— 
(1) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 is amended by inserting after 
section 6045 the following new section: 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00095
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘SEC. 6045A. INFORMATION REQUIRED IN CONNECTION 
WITH TRANSFERS OF COVERED SECURITIES 
TO BROKERS. 
‘‘(a) FURNISHING OF INFORMATION.—Every applica-
ble person which transfers to a broker (as defined in section 
6045(c)(1)) a security which is a covered security (as de-
fined in section 6045(g)(3)) in the hands of such applicable 
person shall furnish to such broker a written statement in 
such manner and setting forth such information as the Sec-
retary may by regulations prescribe for purposes of ena-
bling such broker to meet the requirements of section 
6045(g). 
‘‘(b) APPLICABLE PERSON.—For purposes of sub-
section (a), the term ‘applicable person’ means— 
‘‘(1) 
any 
broker 
(as 
defined 
in 
section 
6045(c)(1)), and 
‘‘(2) any other person as provided by the Sec-
retary in regulations. 
‘‘(c) TIME FOR FURNISHING STATEMENT.—Any state-
ment required by subsection (a) shall be furnished not later 
than the earlier of— 
‘‘(1) 45 days after the date of the transfer de-
scribed in subsection (a), or 
‘‘(2) January 15 of the year following the cal-
endar year during which such transfer occurred.’’. 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00096
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
(2) ASSESSABLE PENALTIES.—Paragraph (2) of 
section 6724(d) (defining payee statement) is amend-
ed by redesignating subparagraphs (I) through (CC) 
as subparagraphs (J) through (DD), respectively, and 
by inserting after subparagraph (H) the following 
new subparagraph: 
‘‘(I) section 6045A (relating to information 
required in connection with transfers of covered 
securities to brokers).’’. 
(3) CLERICAL AMENDMENT.—The table of sec-
tions for subpart B of part III of subchapter A of 
chapter 61 is amended by inserting after the item re-
lating to section 6045 the following new item: 
‘‘Sec. 6045A. Information required in connection with transfers of covered securi-
ties to brokers.’’. 
(d) ADDITIONAL ISSUER INFORMATION TO AID BRO-
KERS.— 
(1) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 of the Internal Revenue Code 
of 1986, as amended by subsection (b), is amended by 
inserting after section 6045A the following new sec-
tion: 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00097
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
‘‘SEC. 6045B. RETURNS RELATING TO ACTIONS AFFECTING 
BASIS OF SPECIFIED SECURITIES. 
‘‘(a) IN GENERAL.—According to the forms or regula-
tions prescribed by the Secretary, any issuer of a specified 
security shall make a return setting forth— 
‘‘(1) a description of any organizational action 
which affects the basis of such specified security of 
such issuer, 
‘‘(2) the quantitative effect on the basis of such 
specified security resulting from such action, and 
‘‘(3) such other information as the Secretary 
may prescribe. 
‘‘(b) TIME FOR FILING RETURN.—Any return required 
by subsection (a) shall be filed not later than the earlier 
of— 
‘‘(1) 45 days after the date of the action de-
scribed in subsection (a), or 
‘‘(2) January 31 of the year following the cal-
endar year during which such action occurred. 
‘‘(c) STATEMENTS TO BE FURNISHED TO HOLDERS OF 
SPECIFIED SECURITIES OR THEIR NOMINEES.—According 
to the forms or regulations prescribed by the Secretary, 
every person required to make a return under subsection 
(a) with respect to a specified security shall furnish to the 
nominee with respect to the specified security (or certificate 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00098
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
holder if there is no nominee) a written statement show-
ing— 
‘‘(1) the name, address, and phone number of the 
information contact of the person required to make 
such return, 
‘‘(2) the information required to be shown on 
such return with respect to such security, and 
‘‘(3) such other information as the Secretary 
may prescribe. 
The written statement required under the preceding sen-
tence shall be furnished to the holder on or before January 
31 of the year following the calendar year during which 
the action described in subsection (a) occurred. 
‘‘(d) SPECIFIED SECURITY.—For purposes of this sec-
tion, the term ‘specified security’ has the meaning given 
such term by section 6045(g)(3)(B). No return shall be re-
quired under this section with respect to actions described 
in subsection (a) with respect to a specified security which 
occur before the applicable date (as defined in section 
6045(g)(3)(C) with respect to such security. 
‘‘(e) PUBLIC REPORTING IN LIEU OF RETURN.—The 
Secretary may waive the requirements under subsections 
(a) and (c) with respect to a specified security, if the person 
required to make the return under subsection (a) makes 
publicly available, in such form and manner as the Sec-
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00099
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
102 
SEC. 624. PENALTY FOR FAILURE TO FILE S CORPORATION 
RETURNS. 
(a) IN GENERAL.—Part I of subchapter B of chapter 
68 (relating to assessable penalties) is amended by adding 
at the end the following new section: 
‘‘SEC. 6699A. FAILURE TO FILE S CORPORATION RETURN. 
‘‘(a) GENERAL RULE.—In addition to the penalty im-
posed by section 7203 (relating to willful failure to file re-
turn, supply information, or pay tax), if any S corporation 
required to file a return under section 6037 for any taxable 
year— 
‘‘(1) fails to file such return at the time pre-
scribed therefor (determined with regard to any exten-
sion of time for filing), or 
‘‘(2) files a return which fails to show the infor-
mation required under section 6037, 
such S corporation shall be liable for a penalty determined 
under subsection (b) for each month (or fraction thereof) 
during which such failure continues (but not to exceed 12 
months), unless it is shown that such failure is due to rea-
sonable cause. 
‘‘(b) AMOUNT PER MONTH.—For purposes of sub-
section (a), the amount determined under this subsection 
for any month is the product of— 
‘‘(1) $25, multiplied by 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00102
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
103 
‘‘(2) the number of persons who were share-
holders in the S corporation during any part of the 
taxable year. 
‘‘(c) ASSESSMENT OF PENALTY.—The penalty imposed 
by subsection (a) shall be assessed against the S corpora-
tion. 
‘‘(d) DEFICIENCY PROCEDURES NOT TO APPLY.—Sub-
chapter B of chapter 63 (relating to deficiency procedures 
for income, estate, gift, and certain excise taxes) shall not 
apply in respect of the assessment or collection of any pen-
alty imposed by subsection (a).’’. 
(b) CLERICAL AMENDMENT.—The table of sections for 
part I of subchapter B of chapter 68 is amended by adding 
at the end the following new item: 
‘‘Sec. 6699A. Failure to file S corporation return.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to returns required to be filed after the 
date of the enactment of this Act. 
SEC. 625. TIME FOR PAYMENT OF CORPORATE ESTIMATED 
TAXES. 
Subparagraph (B) of section 401(1) of the Tax In-
crease Prevention and Reconciliation Act of 2005 is amend-
ed by striking ‘‘115 percent’’ and inserting ‘‘181 percent’’. 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00103
Fmt 6652
Sfmt 6203
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS
Union Calendar No. 271 
110TH CONGRESS 
1ST SESSION 
H. R. 3996 
[Report No. 110–431] 
A BILL 
To amend the Internal Revenue Code of 1986 to 
extend certain expiring provisions, and for other 
purposes. 
NOVEMBER 6, 2007 
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union, 
and ordered to be printed 
VerDate Aug 31 2005 
22:10 Nov 06, 2007
Jkt 069200
PO 00000
Frm 00104
Fmt 6651
Sfmt 6651
E:\BILLS\H3996.RH
H3996
hsrobinson on PROD1PC76 with BILLS