I 
108TH CONGRESS 
1ST SESSION H. R. 2896
To amend the Internal Revenue Code of 1986 to remove impediments in 
such Code and make our manufacturing, service, and high-technology 
businesses and workers more competitive and productive both at home 
and abroad. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 25, 2003
Mr. THOMAS 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 remove 
impediments in such Code and make our manufacturing, 
service, and high-technology businesses and workers more 
competitive and productive both at home and abroad.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘American Jobs Creation Act of 2003’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—
Sec. 1. Short title; etc. 
TITLE I—CORPORATE REFORM AND GROWTH INCENTIVES 
Subtitle A—Reduction in Corporate Income Tax Rates 
Sec. 1001. Reduced corporate income tax rate for small corporations. 
Subtitle B—Extension and Modification of Research Credit 
Sec. 1011. Extension and modification of research credit. 
Subtitle C—Incentives to Reinvest Foreign Earnings in United States 
Sec. 1021. Temporary deduction by United States shareholders for dividends 
received from controlled foreign corporations. 
Subtitle D—Small Business Expensing 
Sec. 1031. 2-year extension of increased expensing for small business. 
Subtitle E—Depreciation 
Sec. 1041. 1-year extension of bonus depreciation. 
Sec. 1042. Recovery period for depreciation of certain leasehold improvements 
and restaurant property. 
Sec. 1043. Shorter recovery periods for manufacturing property. 
Subtitle F—5-Year Carryback of Certain Net Operating Losses 
Sec. 1051. 5-year carryback of certain net operating losses. 
Subtitle G—Alternative Minimum Tax Relief 
Sec. 1061. Net operating losses and foreign tax credit under alternative min-
imum tax. 
Sec. 1062. Expansion of exemption from alternative minimum tax for small 
corporations. 
Sec. 1063. Reduction in amount of depreciation subject to alternative minimum 
tax. 
Subtitle H—S Corporation Reform and Simplification 
Sec. 1071. Members of family treated as 1 shareholder. 
Sec. 1072. Increase in number of eligible shareholders to 100. 
Sec. 1073. Expansion of bank S corporation eligible shareholders to include 
IRAs. 
Sec. 1074. Disregard of unexercised powers of appointment in determining po-
tential current beneficiaries of ESBT. 
Sec. 1075. Transfer of suspended losses incident to divorce, etc.
Sec. 1076. Use of passive activity loss and at-risk amounts by qualified sub-
chapter S trust income beneficiaries. 
Sec. 1077. Exclusion of investment securities income from passive income test 
for bank S corporations. 
Sec. 1078. Treatment of qualifying director shares. 
Sec. 1079. Relief from inadvertently invalid qualified subchapter S subsidiary 
elections and terminations. 
Sec. 1080. Information returns for qualified subchapter S subsidiaries. 
Subtitle I—Protecting Employee Benefits 
Sec. 1091. Treatment of nonqualified deferred compensation plans. 
Sec. 1092. Exclusion of incentive stock options and employee stock purchase 
plan stock options from wages. 
Sec. 1093. Extension of transfers of excess pension assets to retiree health ac-
counts. 
Subtitle J—Treatment of Active Income 
Sec. 1101. Repeal of CFC rules on foreign base company sales and services in-
come. 
Sec. 1102. Extension of exception of active financing income from foreign per-
sonal holding company income. 
Sec. 1103. Look-thru treatment of payments between related controlled foreign 
corporations under foreign personal holding company income 
rules. 
Sec. 1104. Look-thru treatment for sales of partnership interests. 
Sec. 1105. Repeal of foreign personal holding company rules and foreign invest-
ment company rules. 
Sec. 1106. Clarification of treatment of pipeline transportation income. 
Sec. 1107. Determination of foreign personal holding company income with re-
spect to transactions in commodities. 
Sec. 1108. Repeal of CFC rules on foreign base company shipping income. 
Sec. 1109. Effective date. 
Subtitle K—Reduction of Double Taxation of Corporate Earnings 
Sec. 1111. Interest expense allocation rules. 
Sec. 1112. Recharacterization of overall domestic loss. 
Sec. 1113. Reduction to 2 foreign tax credit baskets. 
Sec. 1114. 10-year foreign tax credit carryforward. 
Sec. 1115. Look-thru rules to apply to dividends from noncontrolled section 
902 corporations. 
Sec. 1116. Attribution of stock ownership through partnerships to apply in de-
termining section 902 and 960 credits. 
Sec. 1117. Clarification of treatment of certain transfers of intangible property. 
Sec. 1118. Application of uniform capitalization rules to foreign persons. 
Sec. 1119. United States property not to include certain assets acquired by 
dealers in ordinary course of trade or business. 
Sec. 1120. Treatment of certain dividends of regulated investment companies. 
Sec. 1121. Election not to use average exchange rate for foreign tax paid other 
than in functional currency. 
Sec. 1122. Repeal of withholding tax on dividends from certain foreign corpora-
tions. 
TITLE II—PROVISIONS TO REDUCE TAX AVOIDANCE THROUGH 
CORPORATE EARNINGS STRIPPING AND EXPATRIATION
Sec. 2001. Reduction in potential for earnings stripping by further limiting de-
duction for interest on certain indebtedness. 
Sec. 2002. Tax treatment of expatriated entities and their foreign parents. 
Sec. 2003. Excise tax on stock compensation of insiders in expatriated corpora-
tions. 
Sec. 2004. Reinsurance of United States risks in foreign jurisdictions. 
Sec. 2005. Revision of tax rules on expatriation of individuals. 
Sec. 2006. Reporting of taxable mergers and acquisitions. 
Sec. 2007. Studies. 
TITLE III—PROVISIONS RELATING TO TAX SHELTERS 
Subtitle A—Taxpayer-Related Provisions 
Sec. 3001. Penalty for failing to disclose reportable transactions. 
Sec. 3002. Accuracy-related penalty for listed transactions, other reportable 
transactions having a significant tax avoidance purpose, etc. 
Sec. 3003. Tax shelter exception to confidentiality privileges relating to tax-
payer communications. 
Sec. 3004. Statute of limitations for taxable years for which required listed 
transactions not reported. 
Sec. 3005. Disclosure of reportable transactions. 
Sec. 3006. Failure to furnish information regarding reportable transactions. 
Sec. 3007. Modification of penalty for failure to maintain lists of investors. 
Sec. 3008. Penalty on promoters of tax shelters. 
Sec. 3009. Modifications of substantial understatement penalty for nonreport-
able transactions. 
Sec. 3010. Modification of actions to enjoin certain conduct related to tax shel-
ters and reportable transactions. 
Sec. 3011. Penalty on failure to report interests in foreign financial accounts. 
Sec. 3012. Regulation of individuals practicing before the department of the 
treasury. 
Subtitle B—Other Provisions 
Sec. 3021. Treatment of stripped interests in bond and preferred stock funds, 
etc. 
Sec. 3022. Minimum holding period for foreign tax credit on withholding taxes 
on income other than dividends. 
Sec. 3023. Affirmation of consolidated return regulation authority. 
Sec. 3024. Disallowance of certain partnership loss transfers. 
Sec. 3025. No reduction of basis under section 734 in stock held by partnership 
in corporate partner. 
Sec. 3026. Repeal of special rules for FASITs. 
Sec. 3027. Limitation on transfer of built-in losses on REMIC residuals. 
Sec. 3028. Clarification of banking business for purposes of determining invest-
ment of earnings in United States property. 
Sec. 3029. Clarification of exemption from tax for small property and casualty 
insurance companies. 
Sec. 3030. Definition of insurance company for section 831. 
Sec. 3031. Qualified tax collection contracts. 
TITLE IV—TRADE ENHANCEMENT AND COMPLIANCE PROVISIONS 
Sec. 4001. Repeal of exclusion for extraterritorial income. 
Sec. 4002. COBRA fees.
TITLE I—CORPORATE REFORM 
AND GROWTH INCENTIVES 
Subtitle A—Reduction in Corporate 
Income Tax Rates 
SEC. 1001. REDUCED CORPORATE INCOME TAX RATE FOR 
SMALL CORPORATIONS. 
(a) IN GENERAL.—Subsection (b) of section 11 (re-
lating to tax imposed on corporations) is amended by re-
designating paragraph (2) as paragraph (4) and by strik-
ing paragraph (1) and inserting the following new para-
graphs: 
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) shall be the sum of—
‘‘(A) 15 percent of so much of the taxable 
income as does not exceed $50,000, 
‘‘(B) 25 percent of so much of the taxable 
income as exceeds $50,000 but does not exceed 
$75,000, 
‘‘(C) 33 percent (32 percent for taxable 
years beginning after December 31, 2009) of so 
much of the taxable income as exceeds $75,000 
but does not exceed the applicable amount,
‘‘(D) in the case of taxable years beginning 
before January 1, 2012, 34 percent of so much
of the taxable income as exceeds the applicable 
amount but does not exceed $10,000,000, and 
‘‘(E) 35 percent of so much of the taxable 
income as exceeds $10,000,000. 
‘‘(2) PHASEOUT OF LOWER RATES FOR CER-
TAIN TAXPAYERS.—
‘‘(A) IN GENERAL.—In the case of a corpora-
tion which has taxable income in excess of the appli-
cable amount for any taxable year, the amount of 
tax determined under paragraph (1) for such taxable 
year shall be increased by the lesser of (i) 5 percent 
of such excess, or (ii) maximum increase amount. 
‘‘(B) HIGHER INCOME CORPORATIONS.—In the 
case of a corporation which has taxable income in 
excess of $10,000,000, the amount of the tax deter-
mined under the foregoing provisions of this para-
graph shall be increased by an additional amount 
equal to the lesser of (i) 3 percent of such excess, 
or (ii) $100,000. 
‘‘(3) DEFINITIONS.—For purposes of this sub-
section—
‘‘In the case of any taxable year
beginning during: 
The applicable 
amount is: 
The maximum 
increase amount 
is: 
2005, 2006, 2007, or 2008 ................
$1,000,000
$21,000
2009 ....................................................
$2,000,000
$31,000
2010 and 2011 ...................................
$5,000,000
$110,250
‘‘In the case of any taxable year
beginning during: 
The applicable 
amount is: 
The maximum 
increase amount 
is: 
2012 and thereafter ...........................
$10,000,000
$210,250.’’
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2004. 
Subtitle B—Extension and 
Modification of Research Credit 
SEC. 1011. EXTENSION AND MODIFICATION OF RESEARCH 
CREDIT. 
(a) EXTENSION OF RESEARCH CREDIT.—
(1) IN GENERAL.—Subparagraph (B) of section 
41(h)(1) (relating to credit for increasing research 
activities) is amended by striking ‘‘June 30, 2004’’ 
and inserting ‘‘December 31, 2007’’. 
(2) CONFORMING AMENDMENT.—Subparagraph 
(D) of section 45C(b)(1) is amended by striking 
‘‘June 30, 2004’’ and inserting ‘‘December 31, 
2007’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to amounts paid or in-
curred after the date of the enactment of this Act. 
(b) ALTERNATIVE SIMPLIFIED CREDIT FOR QUALI-
FIED RESEARCH EXPENSES.—
(1) IN GENERAL.—Subsection (c) of section 41 
(relating to base amount) is amended by redesig-