I 
111TH CONGRESS 
2D SESSION 
H. R. 5793 
To amend the Internal Revenue Code of 1986 to close foreign tax loopholes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 20, 2010 
Mr. GARAMENDI (for himself, Mr. MCDERMOTT, Mrs. NAPOLITANO, Mr. 
DEFAZIO, Mr. HARE, Ms. SUTTON, Mr. SCHAUER, Mr. HINCHEY, Ms. 
KAPTUR, Mr. KAGEN, and Mr. PERLMUTTER) 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 close foreign 
tax loopholes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; 
TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Close Foreign Tax Loopholes: Make it in America Act 
of 2010’’. 
(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 
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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.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title; amendment of 1986 code; table of contents. 
Sec. 2. Rules to prevent splitting foreign tax credits from the income to which 
they relate. 
Sec. 3. Denial of foreign tax credit with respect to foreign income not subject 
to United States taxation by reason of covered asset acquisi-
tions. 
Sec. 4. Separate application of foreign tax credit limitation, etc., to items 
resourced under treaties. 
Sec. 5. Limitation on the amount of foreign taxes deemed paid with respect to 
section 956 inclusions. 
Sec. 6. Special rule with respect to certain redemptions by foreign subsidiaries. 
Sec. 7. Modification of affiliation rules for purposes of rules allocating interest 
expense. 
Sec. 8. Termination of special rules for interest and dividends received from 
persons meeting the 80-percent foreign business requirements. 
Sec. 9. Source rules for income on guarantees. 
Sec. 10. Limitation on extension of statute of limitations for failure to notify 
Secretary of certain foreign transfers. 
SEC. 2. RULES TO PREVENT SPLITTING FOREIGN TAX 
CREDITS FROM THE INCOME TO WHICH THEY 
RELATE. 
(a) IN GENERAL.—Subpart A of part III of sub-
chapter N of chapter 1 is amended by adding at the end 
the following new section: 
‘‘SEC. 909. SUSPENSION OF TAXES AND CREDITS UNTIL RE-
LATED INCOME TAKEN INTO ACCOUNT. 
‘‘(a) IN GENERAL.—If there is a foreign tax credit 
splitting event with respect to a foreign income tax paid 
or accrued by the taxpayer, such tax shall not be taken 
into account for purposes of this title before the taxable 
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year in which the related income is taken into account 
under this chapter by the taxpayer. 
‘‘(b) SPECIAL RULES WITH RESPECT TO SECTION 
902 CORPORATIONS.—If there is a foreign tax credit split-
ting event with respect to a foreign income tax paid or 
accrued by a section 902 corporation, such tax shall not 
be taken into account— 
‘‘(1) for purposes of section 902 or 960, or 
‘‘(2) for purposes of determining earnings and 
profits under section 964(a), 
before the taxable year in which the related income is 
taken into account under this chapter by such section 902 
corporation or a domestic corporation which meets the 
ownership requirements of subsection (a) or (b) of section 
902 with respect to such section 902 corporation. 
‘‘(c) SPECIAL RULES.—For purposes of this sec-
tion— 
‘‘(1) APPLICATION TO PARTNERSHIPS, ETC.—In 
the case of a partnership, subsections (a) and (b) 
shall be applied at the partner level. Except as oth-
erwise provided by the Secretary, a rule similar to 
the rule of the preceding sentence shall apply in the 
case of any S corporation or trust. 
‘‘(2) TREATMENT OF FOREIGN TAXES AFTER 
SUSPENSION.—In the case of any foreign income tax 
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not taken into account by reason of subsection (a) 
or (b), except as otherwise provided by the Sec-
retary, such tax shall be so taken into account in the 
taxable year referred to in such subsection (other 
than for purposes of section 986(a)) as a foreign in-
come tax paid or accrued in such taxable year. 
‘‘(d) DEFINITIONS.—For purposes of this section— 
‘‘(1) 
FOREIGN
TAX
CREDIT
SPLITTING 
EVENT.—There is a foreign tax credit splitting event 
with respect to a foreign income tax if the related 
income is (or will be) taken into account under this 
chapter by a covered person. 
‘‘(2) FOREIGN INCOME TAX.—The term ‘foreign 
income tax’ means any income, war profits, or excess 
profits tax paid or accrued to any foreign country or 
to any possession of the United States. 
‘‘(3) RELATED INCOME.—The term ‘related in-
come’ means, with respect to any portion of any for-
eign income tax, the income (or, as appropriate, 
earnings and profits) to which such portion of for-
eign income tax relates. 
‘‘(4) COVERED
PERSON.—The term ‘covered 
person’ means, with respect to any person who pays 
or accrues a foreign income tax (hereafter in this 
paragraph referred to as the ‘payor’)— 
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‘‘(A) any entity in which the payor holds, 
directly or indirectly, at least a 10 percent own-
ership interest (determined by vote or value), 
‘‘(B) any person which holds, directly or 
indirectly, at least a 10 percent ownership in-
terest (determined by vote or value) in the 
payor, 
‘‘(C) any person which bears a relationship 
to the payor described in section 267(b) or 
707(b), and 
‘‘(D) any other person specified by the 
Secretary for purposes of this paragraph. 
‘‘(5) SECTION
902
CORPORATION.—The term 
‘section 902 corporation’ means any foreign corpora-
tion with respect to which one or more domestic cor-
porations meets the ownership requirements of sub-
section (a) or (b) of section 902. 
‘‘(e) REGULATIONS.—The Secretary may issue such 
regulations or other guidance as is necessary or appro-
priate to carry out the purposes of this section, including 
regulations or other guidance which provides— 
‘‘(1) appropriate exceptions from the provisions 
of this section, and 
‘‘(2) for the proper application of this section 
with respect to hybrid instruments.’’. 
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(b) CLERICAL AMENDMENT.—The table of sections 
for subpart A of part III of subchapter N of chapter 1 
is amended by adding at the end the following new item: 
‘‘Sec. 909. Suspension of taxes and credits until related income taken into ac-
count.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to— 
(1) foreign income taxes (as defined in section 
909(d) of the Internal Revenue Code of 1986, as 
added by this section) paid or accrued after May 20, 
2010; and 
(2) foreign income taxes (as so defined) paid or 
accrued by a section 902 corporation (as so defined) 
on or before such date (and not deemed paid under 
section 902(a) or 960 of such Code on or before 
such date), but only for purposes of applying sec-
tions 902 and 960 with respect to periods after such 
date. 
Section 909(b)(2) of the Internal Revenue Code of 1986, 
as added by this section, shall not apply to foreign income 
taxes described in paragraph (2). 
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SEC. 3. DENIAL OF FOREIGN TAX CREDIT WITH RESPECT 
TO 
FOREIGN 
INCOME 
NOT 
SUBJECT 
TO 
UNITED STATES TAXATION BY REASON OF 
COVERED ASSET ACQUISITIONS. 
(a) IN GENERAL.—Section 901 is amended by redes-
ignating subsection (m) as subsection (n) and by inserting 
after subsection (l) the following new subsection: 
‘‘(m) DENIAL OF FOREIGN TAX CREDIT WITH RE-
SPECT TO FOREIGN INCOME NOT SUBJECT TO UNITED 
STATES TAXATION BY REASON OF COVERED ASSET AC-
QUISITIONS.— 
‘‘(1) IN GENERAL.—In the case of a covered 
asset acquisition, the disqualified portion of any for-
eign income tax determined with respect to the in-
come or gain attributable to the relevant foreign as-
sets— 
‘‘(A) shall not be taken into account in de-
termining the credit allowed under subsection 
(a), and 
‘‘(B) in the case of a foreign income tax 
paid by a section 902 corporation (as defined in 
section 909(d)(5)), shall not be taken into ac-
count for purposes of section 902 or 960. 
‘‘(2) COVERED ASSET ACQUISITION.—For pur-
poses of this section, the term ‘covered asset acquisi-
tion’ means— 
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‘‘(A) a qualified stock purchase (as defined 
in section 338(d)(3)) to which section 338(a) 
applies, 
‘‘(B) any transaction which— 
‘‘(i) is treated as an acquisition of as-
sets for purposes of this chapter, and 
‘‘(ii) is treated as the acquisition of 
stock of a corporation (or is disregarded) 
for purposes of the foreign income taxes of 
the relevant jurisdiction, 
‘‘(C) any acquisition of an interest in a 
partnership which has an election in effect 
under section 754, and 
‘‘(D) to the extent provided by the Sec-
retary, any other similar transaction. 
‘‘(3) DISQUALIFIED PORTION.—For purposes of 
this section— 
‘‘(A) IN GENERAL.—The term ‘disqualified 
portion’ means, with respect to any covered 
asset acquisition, for any taxable year, the ratio 
(expressed as a percentage) of— 
‘‘(i) the aggregate basis differences 
(but not below zero) allocable to such tax-
able year under subparagraph (B) with re-
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spect to all relevant foreign assets, divided 
by 
‘‘(ii) the income on which the foreign 
income tax referred to in paragraph (1) is 
determined (or, if the taxpayer fails to sub-
stantiate such income to the satisfaction of 
the Secretary, such income shall be deter-
mined by dividing the amount of such for-
eign income tax by the highest marginal 
tax rate applicable to such income in the 
relevant jurisdiction). 
‘‘(B) 
ALLOCATION
OF
BASIS
DIF-
FERENCE.—For 
purposes 
of 
subparagraph 
(A)(i)— 
‘‘(i) IN
GENERAL.—The basis dif-
ference with respect to any relevant foreign 
asset shall be allocated to taxable years 
using the applicable cost recovery method 
under this chapter. 
‘‘(ii) SPECIAL RULE FOR DISPOSITION 
OF ASSETS.—Except as otherwise provided 
by the Secretary, in the case of the disposi-
tion of any relevant foreign asset— 
‘‘(I) the basis difference allocated 
to the taxable year which includes the 
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date of such disposition shall be the 
excess of the basis difference with re-
spect to such asset over the aggregate 
basis difference with respect to such 
asset which has been allocated under 
clause (i) to all prior taxable years, 
and 
‘‘(II) no basis difference with re-
spect to such asset shall be allocated 
under clause (i) to any taxable year 
thereafter. 
‘‘(C) BASIS DIFFERENCE.— 
‘‘(i) IN
GENERAL.—The term ‘basis 
difference’ means, with respect to any rel-
evant foreign asset, the excess of— 
‘‘(I) the adjusted basis of such 
asset immediately after the covered 
asset acquisition, over 
‘‘(II) the adjusted basis of such 
asset immediately before the covered 
asset acquisition. 
‘‘(ii) BUILT-IN LOSS ASSETS.—In the 
case of a relevant foreign asset with re-
spect to which the amount described in 
clause (i)(II) exceeds the amount described 
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in clause (i)(I), such excess shall be taken 
into account under this subsection as a 
basis difference of a negative amount. 
‘‘(iii) SPECIAL RULE FOR SECTION 338 
ELECTIONS.—In the case of a covered 
asset acquisition described in paragraph 
(2)(A), the covered asset acquisition shall 
be treated for purposes of this subpara-
graph as occurring at the close of the ac-
quisition date (as defined in section 
338(h)(2)). 
‘‘(4) RELEVANT
FOREIGN
ASSETS.—For pur-
poses of this section, the term ‘relevant foreign 
asset’ means, with respect to any covered asset ac-
quisition, any asset (including any goodwill, going 
concern value, or other intangible) with respect to 
such acquisition if income, deduction, gain, or loss 
attributable to such asset is taken into account in 
determining the foreign income tax referred to in 
paragraph (1). 
‘‘(5) FOREIGN INCOME TAX.—For purposes of 
this section, the term ‘foreign income tax’ means 
any income, war profits, or excess profits tax paid 
or accrued to any foreign country or to any posses-
sion of the United States. 
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‘‘(6) TAXES ALLOWED AS A DEDUCTION, ETC.— 
Sections 275 and 78 shall not apply to any tax 
which is not allowable as a credit under subsection 
(a) by reason of this subsection. 
‘‘(7) REGULATIONS.—The Secretary may issue 
such regulations or other guidance as is necessary or 
appropriate to carry out the purposes of this sub-
section, including to exempt from the application of 
this subsection certain covered asset acquisitions, 
and relevant foreign assets with respect to which the 
basis difference is de minimis.’’. 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to covered asset acquisitions (as defined 
in section 901(m)(2) of the Internal Revenue Code 
of 1986, as added by this section) after— 
(A) May 20, 2010, if the transferor and 
the transferee are related, and 
(B) the date of the enactment of this Act 
in any other case. 
(2) 
TRANSITION
RULE.—The 
amendments 
made by this section shall not apply to any covered 
asset acquisition (as so defined) with respect to 
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which the transferor and the transferee are not re-
lated if such acquisition is— 
(A) made pursuant to a written agreement 
which was binding on May 20, 2010, and at all 
times thereafter, 
(B) described in a ruling request submitted 
to the Internal Revenue Service on or before 
such date, or 
(C) described on or before such date in a 
public announcement or in a filing with the Se-
curities and Exchange Commission. 
(3) RELATED PERSONS.—For purposes of this 
subsection, a person shall be treated as related to 
another person if the relationship between such per-
sons is described in section 267 or 707(b) of the In-
ternal Revenue Code of 1986. 
SEC. 4. SEPARATE APPLICATION OF FOREIGN TAX CREDIT 
LIMITATION, ETC., TO ITEMS RESOURCED 
UNDER TREATIES. 
(a) IN GENERAL.—Subsection (d) of section 904 is 
amended by redesignating paragraph (6) as paragraph (7) 
and by inserting after paragraph (5) the following new 
paragraph: 
‘‘(6) 
SEPARATE
APPLICATION
TO
ITEMS 
RESOURCED UNDER TREATIES.— 
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‘‘(A) IN GENERAL.—If— 
‘‘(i) without regard to any treaty obli-
gation of the United States, any item of 
income would be treated as derived from 
sources within the United States, 
‘‘(ii) under a treaty obligation of the 
United States, such item would be treated 
as arising from sources outside the United 
States, and 
‘‘(iii) the taxpayer chooses the bene-
fits of such treaty obligation, 
subsections (a), (b), and (c) of this section and 
sections 902, 907, and 960 shall be applied sep-
arately with respect to each such item. 
‘‘(B) COORDINATION WITH OTHER PROVI-
SIONS.—This paragraph shall not apply to any 
item of income to which subsection (h)(10) or 
section 865(h) applies. 
‘‘(C) REGULATIONS.—The Secretary may 
issue such regulations or other guidance as is 
necessary or appropriate to carry out the pur-
poses of this paragraph, including regulations 
or other guidance which provides that related 
items of income may be aggregated for pur-
poses of this paragraph.’’. 
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(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 5. LIMITATION ON THE AMOUNT OF FOREIGN TAXES 
DEEMED PAID WITH RESPECT TO SECTION 
956 INCLUSIONS. 
(a) IN GENERAL.—Section 960 is amended by adding 
at the end the following new subsection: 
‘‘(c) LIMITATION WITH RESPECT TO SECTION 956 
INCLUSIONS.— 
‘‘(1) IN GENERAL.—If there is included under 
section 951(a)(1)(B) in the gross income of a do-
mestic corporation any amount attributable to the 
earnings and profits of a foreign corporation which 
is a member of a qualified group (as defined in sec-
tion 902(b)) with respect to the domestic corpora-
tion, the amount of any foreign income taxes deemed 
to have been paid during the taxable year by such 
domestic corporation under section 902 by reason of 
subsection (a) with respect to such inclusion in gross 
income shall not exceed the amount of the foreign 
income taxes which would have been deemed to have 
been paid during the taxable year by such domestic 
corporation if cash in an amount equal to the 
amount of such inclusion in gross income were dis-
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tributed as a series of distributions (determined 
without regard to any foreign taxes which would be 
imposed on an actual distribution) through the chain 
of ownership which begins with such foreign cor-
poration and ends with such domestic corporation. 
‘‘(2) AUTHORITY
TO
PREVENT
ABUSE.—The 
Secretary shall issue such regulations or other guid-
ance as is necessary or appropriate to carry out the 
purposes of this subsection, including regulations or 
other guidance which prevent the inappropriate use 
of the foreign corporation’s foreign income taxes not 
deemed paid by reason of paragraph (1).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to acquisitions of United States 
property (as defined in section 956(c) of the Internal Rev-
enue Code of 1986) after May 20, 2010. 
SEC. 6. SPECIAL RULE WITH RESPECT TO CERTAIN RE-
DEMPTIONS BY FOREIGN SUBSIDIARIES. 
(a) IN GENERAL.—Paragraph (5) of section 304(b) 
is amended by redesignating subparagraph (B) as sub-
paragraph (C) and by inserting after subparagraph (A) 
the following new subparagraph: 
‘‘(B) SPECIAL RULE IN CASE OF FOREIGN 
ACQUIRING CORPORATION.—In the case of any 
acquisition to which subsection (a) applies in 
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which the acquiring corporation is a foreign 
corporation, no earnings and profits shall be 
taken into account under paragraph (2)(A) 
(and subparagraph (A) shall not apply) if more 
than 50 percent of the dividends arising from 
such acquisition (determined without regard to 
this subparagraph) would not— 
‘‘(i) be subject to tax under this chap-
ter for the taxable year in which the divi-
dends arise, or 
‘‘(ii) be includible in the earnings and 
profits of a controlled foreign corporation 
(as defined in section 957 and without re-
gard to section 953(c)).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to acquisitions after May 20, 2010. 
SEC. 7. MODIFICATION OF AFFILIATION RULES FOR PUR-
POSES OF RULES ALLOCATING INTEREST EX-
PENSE. 
(a) IN GENERAL.—Subparagraph (A) of section 
864(e)(5) is amended by adding at the end the following: 
‘‘Notwithstanding the preceding sentence, a foreign cor-
poration shall be treated as a member of the affiliated 
group if— 
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‘‘(i) more than 50 percent of the gross 
income of such foreign corporation for the 
taxable year is effectively connected with 
the conduct of a trade or business within 
the United States, and 
‘‘(ii) at least 80 percent of either the 
vote or value of all outstanding stock of 
such foreign corporation is owned directly 
or indirectly by members of the affiliated 
group (determined with regard to this sen-
tence).’’. 
(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. 8. TERMINATION OF SPECIAL RULES FOR INTEREST 
AND DIVIDENDS RECEIVED FROM PERSONS 
MEETING THE 80-PERCENT FOREIGN BUSI-
NESS REQUIREMENTS. 
(a) IN GENERAL.—Paragraph (1) of section 861(a) 
is amended by striking subparagraph (A) and by redesig-
nating subparagraphs (B) and (C) as subparagraphs (A) 
and (B), respectively. 
(b) GRANDFATHER RULE WITH RESPECT TO WITH-
HOLDING ON INTEREST AND DIVIDENDS RECEIVED FROM 
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PERSONS MEETING THE 80-PERCENT FOREIGN BUSI-
NESS REQUIREMENTS.— 
(1) IN GENERAL.—Subparagraph (B) of section 
871(i)(2) is amended to read as follows: 
‘‘(B) The active foreign business percent-
age of— 
‘‘(i) any dividend paid by an existing 
80/20 company, and 
‘‘(ii) any interest paid by an existing 
80/20 company.’’. 
(2) DEFINITIONS AND SPECIAL RULES.—Sec-
tion 871 is amended by redesignating subsections (l) 
and (m) as subsections (m) and (n), respectively, 
and by inserting after subsection (k) the following 
new subsection: 
‘‘(l) RULES RELATING TO EXISTING 80/20 COMPA-
NIES.—For purposes of this subsection and subsection 
(i)(2)(B)— 
‘‘(1) EXISTING 80/20 COMPANY.— 
‘‘(A) IN GENERAL.—The term ‘existing 80/ 
20 company’ means any corporation if— 
‘‘(i) such corporation met the 80-per-
cent foreign business requirements of sec-
tion 861(c)(1) (as in effect before the en-
actment of this subsection) for such cor-
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poration’s last taxable year beginning be-
fore January 1, 2011, 
‘‘(ii) such corporation meets the 80- 
percent foreign business requirements of 
subparagraph (B) with respect to each tax-
able year after the taxable year referred to 
in clause (i), and 
‘‘(iii) there has not been an addition 
of a substantial line of business with re-
spect to such corporation after the date of 
the enactment of this subsection. 
‘‘(B) 
FOREIGN
BUSINESS
REQUIRE-
MENTS.— 
‘‘(i) IN
GENERAL.—A corporation 
meets the 80-percent foreign business re-
quirements of this subparagraph if it is 
shown to the satisfaction of the Secretary 
that at least 80 percent of the gross in-
come from all sources of such corporation 
for the testing period is active foreign busi-
ness income. 
‘‘(ii) ACTIVE FOREIGN BUSINESS IN-
COME.—For purposes of clause (i), the 
term ‘active foreign business income’ 
means gross income which— 
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‘‘(I) is derived from sources out-
side the United States (as determined 
under this subchapter), and 
‘‘(II) is attributable to the active 
conduct of a trade or business in a 
foreign country or possession of the 
United States. 
‘‘(iii) TESTING
PERIOD.—For pur-
poses of this subsection, the term ‘testing 
period’ means the 3-year period ending 
with the close of the taxable year of the 
corporation preceding the payment (or 
such part of such period as may be appli-
cable). If the corporation has no gross in-
come for such 3-year period (or part there-
of), the testing period shall be the taxable 
year in which the payment is made. 
‘‘(2) ACTIVE
FOREIGN
BUSINESS
PERCENT-
AGE.—The term ‘active foreign business percentage’ 
means, with respect to any existing 80/20 company, 
the percentage which— 
‘‘(A) the active foreign business income of 
such company for the testing period, is of 
‘‘(B) the gross income of such company for 
the testing period from all sources. 
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‘‘(3) AGGREGATION RULES.—For purposes of 
applying paragraph (1) (other than subparagraph 
(A)(i) thereof) and paragraph (2)— 
‘‘(A) IN
GENERAL.—The corporation re-
ferred to in paragraph (1)(A) and all of such 
corporation’s subsidiaries shall be treated as 
one corporation. 
‘‘(B) SUBSIDIARIES.—For purposes of sub-
paragraph (A), the term ‘subsidiary’ means any 
corporation in which the corporation referred to 
in subparagraph (A) owns (directly or indi-
rectly) stock meeting the requirements of sec-
tion 1504(a)(2) (determined by substituting ‘50 
percent’ for ‘80 percent’ each place it appears 
and without regard to section 1504(b)(3)). 
‘‘(4) REGULATIONS.—The Secretary may issue 
such regulations or other guidance as is necessary or 
appropriate to carry out the purposes of this section, 
including regulations or other guidance which pro-
vide for the proper application of the aggregation 
rules described in paragraph (3).’’. 
(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. 
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(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 
not from sources within the United States under 
section 861(a)(2)(A), the corporation paying such 
dividend shall be treated for purposes of this sub-
section as a United States-owned foreign corpora-
tion.’’. 
(3) Subsection (c) of section 2104 is amended 
in the last sentence by striking ‘‘or to a debt obliga-
tion 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 Decem-
ber 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. 
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(B) EXCEPTION
FOR
RELATED
PARTY 
DEBT.—Subparagraph (A) shall not apply to 
any interest which is payable to a related per-
son (determined under rules similar to the rules 
of section 954(d)(3)). 
(C) SIGNIFICANT MODIFICATIONS TREAT-
ED AS NEW ISSUES.—For purposes of subpara-
graph (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. 9. SOURCE RULES FOR INCOME ON GUARANTEES. 
(a) AMOUNTS
SOURCED
WITHIN
THE
UNITED 
STATES.—Subsection (a) of section 861 is amended by 
adding at the end the following new paragraph: 
‘‘(9) GUARANTEES.—Amounts— 
‘‘(A) received from noncorporate residents 
or domestic corporations with respect to guar-
antees, and 
‘‘(B) paid by any foreign person with re-
spect to guarantees if such amount is connected 
with income which is effectively connected (or 
treated as effectively connected) with the con-
duct of a trade or business in the United 
States.’’. 
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(b) AMOUNTS SOURCED WITHOUT
THE UNITED 
STATES.—Subsection (a) of section 862 is amended by 
striking ‘‘and’’ at the end of paragraph (7), by striking 
the period at the end of paragraph (8) and inserting ‘‘; 
and’’, and by adding at the end the following new para-
graph: 
‘‘(9) amounts received with respect to guaran-
tees other than those derived from sources within 
the United States as provided in section 861(a)(9).’’. 
(c) CONFORMING AMENDMENT.—Clause (ii) of sec-
tion 864(c)(4)(B) is amended by striking ‘‘dividends or in-
terest’’ and inserting ‘‘dividends, interest, or amounts with 
respect to guarantees’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to guarantees issued after the date 
of the enactment of this Act. 
SEC. 10. LIMITATION ON EXTENSION OF STATUTE OF LIMI-
TATIONS FOR FAILURE TO NOTIFY SEC-
RETARY OF CERTAIN FOREIGN TRANSFERS. 
(a) IN GENERAL.—Paragraph (8) of section 6501(c) 
is amended— 
(1) by striking ‘‘In the case of any information’’ 
and inserting the following: 
‘‘(A) IN GENERAL.—In the case of any in-
formation’’; and 
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(2) by adding at the end the following: 
‘‘(B) APPLICATION TO FAILURES DUE TO 
REASONABLE CAUSE.—If the failure to furnish 
the information referred to in subparagraph (A) 
is due to reasonable cause and not willful ne-
glect, subparagraph (A) shall apply only to the 
item or items related to such failure.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect as if included in section 513 
of the Hiring Incentives to Restore Employment Act. 
Æ 
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