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(D) The matter preceding paragraph (1) of sec-
tion 25B(g) is amended by striking ‘‘The credit’’ and
inserting ‘‘In the case of a taxable year to which sec-
tion 26(a)(2) does not apply, the credit’’.
(E) Subsection (c) of section 25D is amended to
read as follows:
‘‘(c) CARRYFORWARD OF UNUSED CREDIT.—
‘‘(1) RULE FOR YEARS IN WHICH ALL PERSONAL
CREDITS
ALLOWED
AGAINST
REGULAR
AND
ALTER-
NATIVE MINIMUM TAX.—In the case of a taxable year
to which section 26(a)(2) applies, if the credit allow-
able under subsection (a) exceeds the limitation im-
posed by section 26(a)(2) for such taxable year re-
duced by the sum of the credits allowable under this
subpart (other than this section), such excess shall be
carried to the succeeding taxable year and added to
the credit allowable under subsection (a) for such suc-
ceeding taxable year.
‘‘(2) RULE FOR OTHER YEARS.—In the case of a
taxable year to which section 26(a)(2) does not apply,
if the credit allowable under subsection (a) exceeds the
limitation imposed by section 26(a)(1) for such tax-
able year reduced by the sum of the credits allowable
under this subpart (other than this section and sec-
tions 23, 24, and 25B), such excess shall be carried
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to the succeeding taxable year and added to the credit
allowable under subsection (a) for such succeeding
taxable year.’’.
(F) Subsection (d) of section 1400C is amended
to read as follows:
‘‘(d) CARRYFORWARD OF UNUSED CREDIT.—
‘‘(1) RULE FOR YEARS IN WHICH ALL PERSONAL
CREDITS
ALLOWED
AGAINST
REGULAR
AND
ALTER-
NATIVE MINIMUM TAX.—In the case of a taxable year
to which section 26(a)(2) applies, if the credit allow-
able under subsection (a) exceeds the limitation im-
posed by section 26(a)(2) for such taxable year re-
duced by the sum of the credits allowable under sub-
part A of part IV of subchapter A (other than this
section and section 25D), such excess shall be carried
to the succeeding taxable year and added to the credit
allowable under subsection (a) for such taxable year.
‘‘(2) RULE FOR OTHER YEARS.—In the case of a
taxable year to which section 26(a)(2) does not apply,
if the credit allowable under subsection (a) exceeds the
limitation imposed by section 26(a)(1) for such tax-
able year reduced by the sum of the credits allowable
under subpart A of part IV of subchapter A (other
than this section and sections 23, 24, 25B, and 25D),
such excess shall be carried to the succeeding taxable
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year and added to the credit allowable under sub-
section (a) for such taxable year.’’.
(G) Subsection (i) of section 904 is amended to
read as follows:
‘‘(i) COORDINATION WITH NONREFUNDABLE PER-
SONAL CREDITS.—In the case of any taxable year of an
individual to which section 26(a)(2) does not apply, for
purposes of subsection (a), the tax against which the credit
is taken is such tax reduced by the sum of the credits allow-
able under subpart A of part IV of subchapter A of this
chapter (other than sections 23, 24, and 25B).’’.
(H) APPLICATION
OF
EGTRRA
SUNSET.—The
amendments made by this paragraph (and each part
thereof) shall be subject to title IX of the Economic
Growth and Tax Relief Reconciliation Act of 2001 in
the same manner as the provisions of such Act to
which such amendment (or part thereof) relates.
(4) Subsection (b) of section 1335 of the Energy
Policy Act of 2005 is amended by striking paragraphs
(1), (2), and (3). The Internal Revenue Code of 1986
shall be applied and administered as if the amend-
ments made such paragraphs had never been enacted.
(j) AMENDMENT RELATED TO SECTION 1341.—Para-
graph (6) of section 30B(h) is amended by adding at the
end the following sentence: ‘‘For purposes of subsection (g),
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property to which this paragraph applies shall be treated
as of a character subject to an allowance for depreciation.’’.
(k) AMENDMENT RELATED TO SECTION 1342.—Para-
graph (2) of section 30C(e) is amended by adding at the
end the following sentence: ‘‘For purposes of subsection (d),
property to which this paragraph applies shall be treated
as of a character subject to an allowance for depreciation.’’.
(l) AMENDMENTS RELATED TO SECTION 1351.—
(1) Paragraph (6) of section 41(f) (relating to
special rules) is amended by adding at the end the
following:
‘‘(C) FOREIGN RESEARCH.—For purposes of
subsection (a)(3), amounts paid or incurred for
any energy research conducted outside the
United States, the Commonwealth of Puerto
Rico, or any possession of the United States shall
not be taken into account.
‘‘(D) DENIAL OF DOUBLE BENEFIT.—Any
amount taken into account under subsection
(a)(3) shall not be taken into account under
paragraph (1) or (2) of subsection (a).’’.
(2) Clause (ii) of section 41(b)(3)(C) is amended
by striking ‘‘(other than an energy research consor-
tium)’’.
(m) EFFECTIVE DATE.—
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(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), the amendments made by this sec-
tion shall take effect as if included in the provisions
of the Energy Policy Act of 2005 to which they relate.
(2) REPEAL OF PUBLIC UTILITY HOLDING COM-
PANY ACT OF 1935.—The amendments made by sub-
section (a) shall not apply with respect to any trans-
action ordered in compliance with the Public Utility
Holding Company Act of 1935 before its repeal.
(3) COORDINATION OF PERSONAL CREDITS.—The
amendments made by subsection (i)(3) shall apply to
taxable years beginning after December 31, 2005.
SEC. 403. AMENDMENTS RELATED TO THE AMERICAN JOBS
CREATION ACT OF 2004.
(a) AMENDMENTS RELATED TO SECTION 102 OF THE
ACT.—
(1) Paragraph (1) of section 199(b) is amended
by striking ‘‘the employer’’ and inserting ‘‘the tax-
payer’’.
(2) Paragraph (2) of section 199(b) is amended
to read as follows:
‘‘(2) W–2 WAGES.—For purposes of this section,
the term ‘W–2 wages’ means, with respect to any per-
son for any taxable year of such person, the sum of
the amounts described in paragraphs (3) and (8) of
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section 6051(a) paid by such person with respect to
employment of employees by such person during the
calendar year ending during such taxable year. Such
term shall not include any amount which is not prop-
erly included in a return filed with the Social Secu-
rity Administration on or before the 60th day after
the due date (including extensions) for such return.’’.
(3) Subparagraph (B) of section 199(c)(1) is
amended by inserting ‘‘and’’ at the end of clause (i),
by striking clauses (ii) and (iii), and by inserting
after clause (i) the following:
‘‘(ii) other expenses, losses, or deduc-
tions (other than the deduction allowed
under this section), which are properly allo-
cable to such receipts.’’.
(4) Paragraph (2) of section 199(c) is amended
to read as follows:
‘‘(2) ALLOCATION METHOD.—The Secretary shall
prescribe rules for the proper allocation of items de-
scribed in paragraph (1) for purposes of determining
qualified production activities income. Such rules
shall provide for the proper allocation of items wheth-
er or not such items are directly allocable to domestic
production gross receipts.’’.
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(5) Subparagraph (A) of section 199(c)(4) is
amended by striking clauses (ii) and (iii) and insert-
ing the following new clauses:
‘‘(ii) in the case of a taxpayer engaged
in the active conduct of a construction trade
or business, construction of real property
performed in the United States by the tax-
payer in the ordinary course of such trade
or business, or
‘‘(iii) in the case of a taxpayer engaged
in the active conduct of an engineering or
architectural services trade or business, en-
gineering or architectural services per-
formed in the United States by the taxpayer
in the ordinary course of such trade or busi-
ness with respect to the construction of real
property in the United States.’’.
(6) Subparagraph (B) of section 199(c)(4) is
amended by striking ‘‘and’’ at the end of clause (i),
by striking the period at the end of clause (ii) and
inserting ‘‘, or’’, and by adding at the end the fol-
lowing:
‘‘(iii) the lease, rental, license, sale, ex-
change, or other disposition of land.’’.
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(7) Paragraph (4) of section 199(c) is amended
by adding at the end the following new subpara-
graphs:
‘‘(C) SPECIAL RULE FOR CERTAIN GOVERN-
MENT CONTRACTS.—Gross receipts derived from
the manufacture or production of any property
described in subparagraph (A)(i)(I) shall be
treated as meeting the requirements of subpara-
graph (A)(i) if—
‘‘(i) such property is manufactured or
produced by the taxpayer pursuant to a
contract with the Federal Government, and
‘‘(ii) the Federal Acquisition Regula-
tion requires that title or risk of loss with
respect to such property be transferred to
the Federal Government before the manufac-
ture or production of such property is com-
plete.
‘‘(D) PARTNERSHIPS OWNED BY EXPANDED
AFFILIATED
GROUPS.—For purposes of this
paragraph, if all of the interests in the capital
and profits of a partnership are owned by mem-
bers of a single expanded affiliated group at all
times during the taxable year of such partner-
ship, the partnership and all members of such
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group shall be treated as a single taxpayer dur-
ing such period.’’.
(8) Paragraph (1) of section 199(d) is amended
to read as follows:
‘‘(1) APPLICATION OF SECTION TO PASS-THRU
ENTITIES.—
‘‘(A) PARTNERSHIPS
AND
S
CORPORA-
TIONS.—In the case of a partnership or S
corporation—
‘‘(i) this section shall be applied at the
partner or shareholder level,
‘‘(ii) each partner or shareholder shall
take into account such person’s allocable
share of each item described in subpara-
graph (A) or (B) of subsection (c)(1) (deter-
mined without regard to whether the items
described in such subparagraph (A) exceed
the items described in such subparagraph
(B)), and
‘‘(iii) each partner or shareholder shall
be treated for purposes of subsection (b) as
having W–2 wages for the taxable year in
an amount equal to the lesser of—
‘‘(I) such person’s allocable share
of the W–2 wages of the partnership or
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S corporation for the taxable year (as
determined 
under 
regulations 
pre-
scribed by the Secretary), or
‘‘(II) 2 times 9 percent of so much
of such person’s qualified production
activities income as is attributable to
items allocated under clause (ii) for the
taxable year.
‘‘(B) TRUSTS AND ESTATES.—In the case of
a trust or estate—
‘‘(i) the items referred to in subpara-
graph (A)(ii) (as determined therein) and
the W–2 wages of the trust or estate for the
taxable year, shall be apportioned between
the beneficiaries and the fiduciary (and
among the beneficiaries) under regulations
prescribed by the Secretary, and
‘‘(ii) for purposes of paragraph (2),
adjusted gross income of the trust or estate
shall be determined as provided in section
67(e) with the adjustments described in such
paragraph.
‘‘(C) REGULATIONS.—The Secretary may
prescribe rules requiring or restricting the alloca-
tion of items and wages under this paragraph
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and may prescribe such reporting requirements
as the Secretary determines appropriate.’’.
(9) Paragraph (3) of section 199(d) is amended
to read as follows:
‘‘(3) AGRICULTURAL AND HORTICULTURAL CO-
OPERATIVES.—
‘‘(A) DEDUCTION ALLOWED TO PATRONS.—
Any person who receives a qualified payment
from a specified agricultural or horticultural co-
operative shall be allowed for the taxable year in
which such payment is received a deduction
under subsection (a) equal to the portion of the
deduction allowed under subsection (a) to such
cooperative which is—
‘‘(i) allowed with respect to the portion
of the qualified production activities income
to which such payment is attributable, and
‘‘(ii) identified by such cooperative in
a written notice mailed to such person dur-
ing the payment period described in section
1382(d).
‘‘(B) COOPERATIVE
DENIED
DEDUCTION
FOR
PORTION
OF
QUALIFIED
PAYMENTS.—The
taxable income of a specified agricultural or hor-
ticultural cooperative shall not be reduced under
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section 1382 by reason of that portion of any
qualified payment as does not exceed the deduc-
tion allowable under subparagraph (A) with re-
spect to such payment.
‘‘(C) TAXABLE INCOME OF COOPERATIVES
DETERMINED WITHOUT REGARD TO CERTAIN DE-
DUCTIONS.—For purposes of this section, the tax-
able income of a specified agricultural or horti-
cultural cooperative shall be computed without
regard to any deduction allowable under sub-
section (b) or (c) of section 1382 (relating to pa-
tronage dividends, per-unit retain allocations,
and nonpatronage distributions).
‘‘(D) SPECIAL RULE FOR MARKETING CO-
OPERATIVES.—For purposes of this section, a
specified agricultural or horticultural cooperative
described in subparagraph (F)(ii) shall be treat-
ed as having manufactured, produced, grown, or
extracted in whole or significant part any quali-
fying production property marketed by the orga-
nization which its patrons have so manufac-
tured, produced, grown, or extracted.
‘‘(E) QUALIFIED PAYMENT.—For purposes
of this paragraph, the term ‘qualified payment’
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means, with respect to any person, any amount
which—
‘‘(i) is described in paragraph (1) or
(3) of section 1385(a),
‘‘(ii) is received by such person from a
specified agricultural or horticultural coop-
erative, and
‘‘(iii) is attributable to qualified pro-
duction activities income with respect to
which a deduction is allowed to such cooper-
ative under subsection (a).
‘‘(F) SPECIFIED AGRICULTURAL OR HORTI-
CULTURAL COOPERATIVE.—For purposes of this
paragraph, the term ‘specified agricultural or
horticultural cooperative’ means an organization
to which part I of subchapter T applies which is
engaged—
‘‘(i) in the manufacturing, production,
growth, or extraction in whole or significant
part of any agricultural or horticultural
product, or
‘‘(ii) in the marketing of agricultural
or horticultural products.’’.
(10) Clause (i) of section 199(d)(4)(B) is
amended—
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(A) by striking ‘‘50 percent’’ and inserting
‘‘more than 50 percent’’, and
(B) by striking ‘‘80 percent’’ and inserting
‘‘at least 80 percent’’.
(11)(A) Paragraph (6) of section 199(d) is
amended to read as follows:
‘‘(6) COORDINATION WITH MINIMUM TAX.—For
purposes of determining alternative minimum taxable
income under section 55—
‘‘(A) qualified production activities income
shall be determined without regard to any ad-
justments under sections 56 through 59, and
‘‘(B) in the case of a corporation, subsection
(a)(1)(B) shall be applied by substituting ‘alter-
native minimum taxable income’ for ‘taxable in-
come’.’’.
(B) Paragraph (2) of section 199(a) is amended
by striking ‘‘subsections (d)(1) and (d)(6)’’ and in-
serting ‘‘subsection (d)(1)’’.
(12) Subsection (d) of section 199 is amended by
redesignating paragraph (7) as paragraph (8) and by
inserting after paragraph (6) the following new para-
graph:
‘‘(7) UNRELATED BUSINESS TAXABLE INCOME.—
For purposes of determining the tax imposed by sec-
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tion 511, subsection (a)(1)(B) shall be applied by sub-
stituting ‘unrelated business taxable income’ for ‘tax-
able income’.’’.
(13) Paragraph (8) of section 199(d), as redesig-
nated by paragraph (12), is amended by inserting ‘‘,
including regulations which prevent more than 1 tax-
payer from being allowed a deduction under this sec-
tion with respect to any activity described in sub-
section (c)(4)(A)(i)’’ before the period at the end.
(14) Clauses (i)(II) and (ii)(II) of section
56(d)(1)(A) are each amended by striking ‘‘such de-
duction’’ and inserting ‘‘such deduction and the de-
duction under section 199’’.
(15) Clause (i) of section 163(j)(6)(A) is amend-
ed by striking ‘‘and’’ at the end of subclause (II), by
redesignating subclause (III) as subclause (IV), and
by inserting after subclause (II) the following new
subclause:
‘‘(III) any deduction allowable
under section 199, and’’.
(16) Paragraph (2) of section 170(b) is amended
by redesignating subparagraphs (C) and (D) as sub-
paragraphs (D) and (E), respectively, and by insert-
ing after subparagraph (B) the following new sub-
paragraph:
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‘‘(C) section 199,’’.
(17) Subsection (d) of section 172 is amended by
adding at the end the following new paragraph:
‘‘(7) MANUFACTURING DEDUCTION.—The deduc-
tion under section 199 shall not be allowed.’’.
(18) Paragraph (1) of section 613A(d) is amend-
ed by redesignating subparagraphs (B), (C), and (D)
as subparagraphs (C), (D), and (E), respectively, and
by inserting after subparagraph (A) the following new
subparagraph:
‘‘(B) any deduction allowable under section
199,’’.
(19) Subsection (e) of section 102 of the Amer-
ican Jobs Creation Act of 2004 is amended to read
as follows:
‘‘(e) EFFECTIVE DATE.—
‘‘(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years beginning
after December 31, 2004.
‘‘(2) APPLICATION
TO
PASS-THRU
ENTITIES,
ETC.—In determining the deduction under section
199 of the Internal Revenue Code of 1986 (as added
by this section), items arising from a taxable year of
a partnership, S corporation, estate, or trust begin-
ning before January 1, 2005, shall not be taken into
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account for purposes of subsection (d)(1) of such sec-
tion.’’.
(b) AMENDMENT RELATED TO SECTION 231 OF THE
ACT.—Paragraph (1) of section 1361(c) is amended to read
as follows:
‘‘(1) MEMBERS
OF
A
FAMILY
TREATED
AS
SHAREHOLDER.—
‘‘(A) IN GENERAL.—For purposes of sub-
section (b)(1)(A), there shall be treated as one
shareholder—
‘‘(i) a husband and wife (and their es-
tates), and
‘‘(ii) all members of a family (and
their estates).
‘‘(B) MEMBERS
OF
A
FAMILY.—For pur-
poses of this paragraph—
‘‘(i) IN GENERAL.—The term ‘members
of a family’ means a common ancestor, any
lineal descendant of such common ancestor,
and any spouse or former spouse of such
common ancestor or any such lineal de-
scendant.
‘‘(ii) COMMON
ANCESTOR.—An indi-
vidual shall not be considered to be a com-
mon ancestor if, on the applicable date, the
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individual is more than 6 generations re-
moved from the youngest generation of
shareholders who would (but for this sub-
paragraph) be members of the family. For
purposes of the preceding sentence, a spouse
(or former spouse) shall be treated as being
of the same generation as the individual to
whom such spouse is (or was) married.
‘‘(iii) APPLICABLE
DATE.—The term
‘applicable date’ means the latest of—
‘‘(I) the date the election under
section 1362(a) is made,
‘‘(II) the earliest date that an in-
dividual described in clause (i) holds
stock in the S corporation, or
‘‘(III) October 22, 2004.
‘‘(C) EFFECT OF ADOPTION, ETC.—Any le-
gally adopted child of an individual, any child
who is lawfully placed with an individual for
legal adoption by the individual, and any eligi-
ble foster child of an individual (within the
meaning of section 152(f)(1)(C)), shall be treated
as a child of such individual by blood.’’.
(c) AMENDMENT RELATED TO SECTION 235 OF THE
ACT.—Subsection (b) of section 235 of the American Jobs
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Creation Act of 2004 is amended by striking ‘‘taxable years
beginning’’ and inserting ‘‘transfers’’.
(d) AMENDMENTS RELATED TO SECTION 243 OF THE
ACT.—
(1) Paragraph (7) of section 856(c) is amended
to read as follows:
‘‘(7) RULES OF APPLICATION FOR FAILURE TO
SATISFY PARAGRAPH (4).—
‘‘(A) IN GENERAL.—A corporation, trust, or
association that fails to meet the requirements of
paragraph (4) (other than a failure to meet the
requirements of paragraph (4)(B)(iii) which is
described in subparagraph (B)(i) of this para-
graph) for a particular quarter shall nevertheless
be considered to have satisfied the requirements
of such paragraph for such quarter if—
‘‘(i) following the corporation, trust, or
association’s identification of the failure to
satisfy the requirements of such paragraph
for a particular quarter, a description of
each asset that causes the corporation, trust,
or association to fail to satisfy the require-
ments of such paragraph at the close of such
quarter of any taxable year is set forth in
a schedule for such quarter filed in accord-
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ance with regulations prescribed by the Sec-
retary,
‘‘(ii) the failure to meet the require-
ments of such paragraph for a particular
quarter is due to reasonable cause and not
due to willful neglect, and
‘‘(iii)(I) the corporation, trust, or asso-
ciation disposes of the assets set forth on the
schedule specified in clause (i) within 6
months after the last day of the quarter in
which the corporation, trust or association’s
identification of the failure to satisfy the re-
quirements of such paragraph occurred or
such other time period prescribed by the
Secretary and in the manner prescribed by
the Secretary, or
‘‘(II) the requirements of such para-
graph are otherwise met within the time pe-
riod specified in subclause (I).
‘‘(B) RULE FOR CERTAIN DE MINIMIS FAIL-
URES.—A corporation, trust, or association that
fails to meet the requirements of paragraph
(4)(B)(iii) for a particular quarter shall never-
theless be considered to have satisfied the require-
ments of such paragraph for such quarter if—
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‘‘(i) such failure is due to the owner-
ship of assets the total value of which does
not exceed the lesser of—
‘‘(I) 1 percent of the total value of
the trust’s assets at the end of the quar-
ter for which such measurement is
done, and
‘‘(II) $10,000,000, and
‘‘(ii)(I) the corporation, trust, or asso-
ciation, following the identification of such
failure, disposes of assets in order to meet
the requirements of such paragraph within
6 months after the last day of the quarter
in which the corporation, trust or associa-
tion’s identification of the failure to satisfy
the requirements of such paragraph oc-
curred or such other time period prescribed
by the Secretary and in the manner pre-
scribed by the Secretary, or
‘‘(II) the requirements of such para-
graph are otherwise met within the time pe-
riod specified in subclause (I).
‘‘(C) TAX.—
‘‘(i) TAX IMPOSED.—If subparagraph
(A) applies to a corporation, trust, or asso-