States unless any such withholding tax would be re-
duced under a treaty of the United States if such 
payment were made directly to the foreign parent cor-
poration. 
‘‘(2) DEDUCTIBLE RELATED-PARTY PAYMENT.— 
For purposes of this subsection, the term ‘deductible 
related-party payment’ means any payment made, 
directly or indirectly, by any person to any other per-
son if the payment is allowable as a deduction under 
this chapter and both persons are members of the 
same foreign controlled group of entities. 
‘‘(3) FOREIGN
CONTROLLED
GROUP
OF
ENTI-
TIES.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘foreign con-
trolled group of entities’ means a controlled 
group of entities the common parent of which is 
a foreign corporation. 
‘‘(B) CONTROLLED GROUP OF ENTITIES.— 
The term ‘controlled group of entities’ means a 
controlled group of corporations as defined in 
section 1563(a)(1), except that— 
‘‘(i) ‘more than 50 percent’ shall be 
substituted for ‘at least 80 percent’ each 
place it appears therein, and 
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‘‘(ii) the determination shall be made 
without regard to subsections (a)(4) and 
(b)(2) of section 1563. 
A partnership or any other entity (other than a 
corporation) shall be treated as a member of a 
controlled group of entities if such entity is con-
trolled (within the meaning of section 954(d)(3)) 
by members of such group (including any entity 
treated as a member of such group by reason of 
this sentence). 
‘‘(4) FOREIGN PARENT CORPORATION.—For pur-
poses of this subsection, the term ‘foreign parent cor-
poration’ means, with respect to any deductible re-
lated-party payment, the common parent of the for-
eign controlled group of entities referred to in para-
graph (3)(A). 
‘‘(5) REGULATIONS.—The Secretary may pre-
scribe such regulations or other guidance as are nec-
essary or appropriate to carry out the purposes of 
this subsection, including regulations or other guid-
ance which provide for— 
‘‘(A) the treatment of two or more persons 
as members of a foreign controlled group of enti-
ties if such persons would be the common parent 
of such group if treated as one corporation, and 
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‘‘(B) the treatment of any member of a for-
eign controlled group of entities as the common 
parent of such group if such treatment is appro-
priate taking into account the economic relation-
ships among such entities.’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to payments made after the date of the 
enactment of this Act. 
SEC. 302. TREATMENT OF SECURITIES OF A CONTROLLED 
CORPORATION EXCHANGED FOR ASSETS IN 
CERTAIN REORGANIZATIONS. 
(a) IN GENERAL.—Section 361 (relating to non-
recognition of gain or loss to corporations; treatment of dis-
tributions) is amended by adding at the end the following 
new subsection: 
‘‘(d) SPECIAL RULES FOR TRANSACTIONS INVOLVING 
SECTION 355 DISTRIBUTIONS.—In the case of a reorganiza-
tion described in section 368(a)(1)(D) with respect to which 
stock or securities of the corporation to which the assets are 
transferred are distributed in a transaction which qualifies 
under section 355— 
‘‘(1) this section shall be applied by substituting 
‘stock other than nonqualified preferred stock (as de-
fined in section 351(g)(2))’ for ‘stock or securities’ in 
subsections (a) and (b)(1), and 
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‘‘(2) the first sentence of subsection (b)(3) shall 
apply only to the extent that the sum of the money 
and the fair market value of the other property trans-
ferred to such creditors does not exceed the adjusted 
bases of such assets transferred (reduced by the 
amount of the liabilities assumed (within the mean-
ing of section 357(c))).’’. 
(b) CONFORMING AMENDMENT.—Paragraph (3) of sec-
tion 361(b) is amended by striking the last sentence. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall 
apply to exchanges after the date of the enactment of 
this Act. 
(2) TRANSITION RULE.—The amendments made 
by this section shall not apply to any exchange pursu-
ant to a transaction which is— 
(A) made pursuant to an agreement which 
was binding on March 15, 2010, and at all times 
thereafter, 
(B) described in a ruling request submitted 
to the Internal Revenue Service on or before such 
date, or 
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(C) described on or before such date in a 
public announcement or in a filing with the Se-
curities and Exchange Commission. 
SEC. 303. REPEAL OF SPECIAL RULES FOR INTEREST AND 
DIVIDENDS RECEIVED FROM PERSONS MEET-
ING THE 80-PERCENT FOREIGN BUSINESS RE-
QUIREMENTS. 
(a) REPEAL OF SPECIAL RULE TREATING INTEREST 
AS UNITED STATES SOURCE.—Paragraph (1) of section 
861(a) is amended by striking subparagraph (A) and by 
redesignating subparagraphs (B) and (C) as subparagraphs 
(A) and (B), respectively. 
(b) REPEAL OF EXCEPTION TO TAX ON DIVIDENDS 
RECEIVED BY NONRESIDENT ALIENS.—Paragraph (2) of 
section 871(i) is amended by striking subparagraph (B) 
and by redesignating subparagraphs (C) and (D) as sub-
paragraphs (B) and (C), respectively. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 861 is amended by striking sub-
section (c) and by redesignating subsections (d), (e), 
and (f) as subsections (c), (d), and (e), respectively. 
(2) Paragraph (9) of section 904(h) is amended 
to read as follows: 
‘‘(9) TREATMENT OF CERTAIN DOMESTIC COR-
PORATIONS.—In the case of any dividend treated as 
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not from sources with the United States under section 
861(a)(2)(A), the corporation paying such dividend 
shall be treated for purposes of this subsection as a 
United States-owned foreign corporation.’’. 
(3) Subsection (c) of section 2104 is amended in 
the last sentence by striking ‘‘or to a debt obligation 
of a domestic corporation’’ and all that follows and 
inserting a period. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall 
apply to taxable years beginning after December 31, 
2010. 
(2) GRANDFATHER
RULE
FOR
OUTSTANDING 
DEBT OBLIGATIONS.— 
(A) IN GENERAL.—The amendments made 
by this section shall not apply to payments of 
interest on obligations issued before the date of 
the enactment of this Act. 
(B) 
EXCEPTION
FOR
RELATED
PARTY 
DEBT.—Subparagraph (A) shall not apply to 
any interest which is payable to a related person 
(determined under rules similar to the rules of 
section 954(d)(3)). 
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(C) SIGNIFICANT MODIFICATIONS TREATED 
AS NEW ISSUES.—For purposes of subparagraph 
(A), a significant modification of the terms of 
any obligation (including any extension of the 
term of such obligation) shall be treated as a new 
issue. 
SEC. 304. INFORMATION REPORTING FOR RENTAL PROP-
ERTY EXPENSE PAYMENTS. 
(a) IN GENERAL.—Section 6041 is amended by adding 
at the end the following new subsection: 
‘‘(h) TREATMENT OF RENTAL PROPERTY EXPENSE 
PAYMENTS.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), a person receiving rental income from real estate 
(other than a qualified residence) shall be considered 
to be engaged in a trade or business of renting prop-
erty. 
‘‘(2) QUALIFIED RESIDENCE.—For purposes of 
paragraph 
(1), 
the 
term 
‘qualified 
residence’ 
means—— 
‘‘(A) the principal residence (within the 
meaning of section 121) of the taxpayer, and 
‘‘(B) 1 other residence of the taxpayer which 
is selected by the taxpayer for purposes of this 
subsection for the taxable year and which is used 
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by the taxpayer as a residence (within the mean-
ing of section 280A(d)(1)).’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to payments made after December 31, 
2010. 
SEC. 305. APPLICATION OF LEVY TO PAYMENTS TO FED-
ERAL VENDORS RELATING TO PROPERTY. 
(a) IN GENERAL.—Section 6331(h)(3) is amended by 
striking ‘‘goods or services’’ and inserting ‘‘property, goods, 
or services’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to levies approved after the date of the 
enactment of this Act. 
SEC. 306. APPLICATION OF CONTINUOUS LEVY TO EMPLOY-
MENT TAX LIABILITY OF CERTAIN FEDERAL 
CONTRACTORS. 
(a) IN GENERAL.—Section 6330(h) is amended by in-
serting ‘‘or if the person subject to the levy (or any prede-
cessor thereof) is a Federal contractor that was identified 
as owing such employment taxes through the Federal Pay-
ment Levy Program’’ before the period at the end of the 
first sentence. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to levies issued after December 31, 2010. 
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SEC. 307. REQUIRED MINIMUM 10-YEAR TERM, ETC., FOR 
GRANTOR RETAINED ANNUITY TRUSTS. 
(a) IN GENERAL.—Subsection (b) of section 2702 is 
amended— 
(1) by redesignating paragraphs (1), (2) and (3) 
as subparagraphs (A), (B), and (C), respectively, and 
by moving such subparagraphs (as so redesignated) 2 
ems to the right, 
(2) by striking ‘‘For purposes of’’ and inserting 
the following: 
‘‘(1) IN GENERAL.—For purposes of’’, and 
(3) by striking ‘‘paragraph (1) or (2)’’ in para-
graph (1)(C) (as so redesignated) and inserting ‘‘sub-
paragraph (A) or (B)’’, and 
(4) by adding at the end the following new para-
graph: 
‘‘(2) ADDITIONAL REQUIREMENTS WITH RESPECT 
TO GRANTOR RETAINED ANNUITIES.—For purposes of 
subsection (a), in the case of an interest described in 
paragraph (1)(A) (determined without regard to this 
paragraph) which is retained by the transferor, such 
interest shall be treated as described in such para-
graph only if— 
‘‘(A) the right to receive the fixed amounts 
referred to in such paragraph is for a term of 
not less than 10 years, 
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‘‘(B) such fixed amounts, when determined 
on an annual basis, do not decrease relative to 
any prior year during the first 10 years of the 
term referred to in subparagraph (A), and 
‘‘(C) the remainder interest has a value 
greater than zero determined as of the time of the 
transfer.’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to transfers made after the date of the 
enactment of this Act. 
SEC. 308. INCREASE IN INFORMATION RETURN PENALTIES. 
(a) FAILURE TO FILE CORRECT INFORMATION RE-
TURNS.— 
(1) IN GENERAL.—Subsections (a)(1), (b)(1)(A), 
and (b)(2)(A) of section 6721 are each amended by 
striking ‘‘$50’’ and inserting ‘‘$100’’. 
(2) AGGREGATE
ANNUAL
LIMITATION.—Sub-
sections (a)(1), (d)(1)(A), and (e)(3)(A) of section 
6721 are each amended by striking ‘‘$250,000’’ and 
inserting ‘‘$1,500,000’’. 
(b) REDUCTION WHERE CORRECTION WITHIN 30 
DAYS.— 
(1) IN GENERAL.—Subparagraph (A) of section 
6721(b)(1) is amended by striking ‘‘$15’’ and insert-
ing ‘‘$30’’. 
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(2) AGGREGATE
ANNUAL
LIMITATION.—Sub-
sections (b)(1)(B) and (d)(1)(B) of section 6721 are 
each amended by striking ‘‘$75,000’’ and inserting 
‘‘$250,000’’. 
(c) REDUCTION WHERE CORRECTION ON OR BEFORE 
AUGUST 1.— 
(1) IN GENERAL.—Subparagraph (A) of section 
6721(b)(2) is amended by striking ‘‘$30’’ and insert-
ing ‘‘$60’’. 
(2) AGGREGATE
ANNUAL
LIMITATION.—Sub-
sections (b)(2)(B) and (d)(1)(C) of section 6721 are 
each amended by striking ‘‘$150,000’’ and inserting 
‘‘$500,000’’. 
(d) AGGREGATE ANNUAL LIMITATIONS FOR PERSONS 
WITH GROSS RECEIPTS OF NOT MORE THAN $5,000,000.— 
Paragraph (1) of section 6721(d) is amended— 
(1) by striking ‘‘$100,000’’ in subparagraph (A) 
and inserting ‘‘$500,000’’, 
(2) by striking ‘‘$25,000’’ in subparagraph (B) 
and inserting ‘‘$75,000’’, and 
(3) by striking ‘‘$50,000’’ in subparagraph (C) 
and inserting ‘‘$200,000’’. 
(e) PENALTY IN CASE OF INTENTIONAL DISREGARD.— 
Paragraph (2) of section 6721(e) is amended by striking 
‘‘$100’’ and inserting ‘‘$250’’. 
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(f) ADJUSTMENT FOR INFLATION.—Section 6721 is 
amended by adding at the end the following new subsection: 
‘‘(f) ADJUSTMENT FOR INFLATION.— 
‘‘(1) IN GENERAL.—For each fifth calendar year 
beginning after 2012, each of the dollar amounts 
under subsections (a), (b), (d) (other than paragraph 
(2)(A) thereof), and (e) shall be increased by such dol-
lar amount multiplied by the cost-of-living adjust-
ment determined under section 1(f)(3) determined by 
substituting ‘calendar year 2011’ for ‘calendar year 
1992’ in subparagraph (B) thereof. 
‘‘(2) ROUNDING.—If any amount adjusted under 
paragraph (1)— 
‘‘(A) is not less than $75,000 and is not a 
multiple of $500, such amount shall be rounded 
to the next lowest multiple of $500, and 
‘‘(B) is not described in subparagraph (A) 
and is not a multiple of $10, such amount shall 
be rounded to the next lowest multiple of $10.’’. 
(g) EFFECTIVE DATE.—The amendments made by this 
section shall apply with respect to information returns re-
quired to be filed on or after January 1, 2011. 
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Union Calendar No. 257 
111TH CONGRESS 
2D SESSION 
H. R. 4849 
[Report No. 111–447] 
A BILL 
To amend the Internal Revenue Code of 1986 to 
provide tax incentives for small business job cre-
ation, extend the Build America Bonds program, 
provide other infrastructure job creation tax in-
centives, and for other purposes. 
MARCH 19, 2010 
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union, 
and ordered to be printed 
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