the national security of the United States of countries en-
gaging in significant currency manipulation, and the effect 
of such currency manipulation on critical manufacturing 
sectors such as the semiconductor industry. 
(b) OTHER UNFAIR TRADE PRACTICES.—Not later 
than 90 days after the date of the enactment of this Act, 
the United States Trade Representative and the Inter-
national Trade Commission shall evaluate and report in 
detail to the appropriate congressional committees on 
other trade practices and trade barriers by major East 
Asian trading countries that may violate international 
trade agreements, including the practice of maintaining a 
value-added or other tax regime that effectively discrimi-
nates against imports by underpricing domestically pro-
duced goods. 
(c) TRADE ENFORCEMENT.—Not later than 90 days 
after the date of the enactment of this Act, the United 
States Trade Representative and the International Trade 
Commission shall report in detail to the appropriate con-
gressional committees on steps that could be taken to sig-
nificantly improve trade enforcement efforts against un-
fair trade practices by competitor trading countries, in-
cluding making recommendations for additional support 
for trade enforcement efforts.
(d) TRADE PROMOTION.—Not later than 90 days 
after the date of the enactment of this Act, the Secretary 
of State, the Secretary of Commerce, and the United 
States Trade Representative shall report in detail to the 
appropriate congressional committees on steps that could 
be taken to significantly improve trade promotion for 
United States goods and services, including recommenda-
tions on additional support to improve such trade pro-
motion. 
SEC. 405. CURRENCY MANIPULATION DEFINED. 
In this title, the term ‘‘currency manipulation’’ 
means— 
(1) large-scale manipulation of exchange rates 
by a country in order to gain an unfair competitive 
advantage as stated in Article IV of the Articles of 
Agreement of the International Monetary Fund and 
related provisions; 
(2) sustained, large-scale currency intervention 
by a country in one direction, through mandatory 
foreign exchange sales at the central bank of a coun-
try at a fixed exchange rate; or 
(3) other mechanisms used by a country to 
maintain a currency at a fixed exchange rate relative 
to the currency of another country.
TITLE V—INTERNAL REVENUE 
CODE AMENDMENTS 
SEC. 501. DISINCENTIVIZATION OF CORPORATE EXPATRIA-
TION TO AVOID UNITED STATES INCOME TAX. 
(a) IN GENERAL.—Paragraph 4 of section 7701(a) 
of the Internal Revenue Code of 1986 (defining domestic) 
is amended to read as follows: 
‘‘(4) DOMESTIC.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the term ‘domestic’ when ap-
plied to a corporation or partnership means cre-
ated or organized in the United States or under 
the law of the United States or of any State 
unless, in the case of a partnership, the Sec-
retary provides otherwise by regulations. 
‘‘(B) CERTAIN
CORPORATIONS
TREATED 
AS DOMESTIC.— 
‘‘(i) IN GENERAL.—The acquiring cor-
poration in a corporate expatriation trans-
action shall be treated as a domestic cor-
poration. 
‘‘(ii) 
CORPORATE
EXPATRIATION 
TRANSACTION.—For purposes of this sub-
paragraph, the term ‘corporate expatria-
tion transaction’ means any transaction 
if— 
‘‘(I) a nominally foreign corpora-
tion (referred to in this subparagraph 
as the ‘acquiring corporation’) ac-
quires, as a result of such transaction, 
directly or indirectly substantially all 
of the properties held directly or indi-
rectly by a domestic corporation, and 
‘‘(II) immediately after the trans-
action, more than 80 percent of the 
stock (by vote or value) of the acquir-
ing corporation is held by former 
shareholders of the domestic corpora-
tion by reason of holding stock in the 
domestic corporation. 
‘‘(iii) LOWER STOCK OWNERSHIP RE-
QUIREMENT
IN
CERTAIN
CASES.—Sub-
clause (II) of clause (ii) shall be applied by 
substituting ‘50 percent’ for ‘80 percent’ 
with respect to any nominally foreign cor-
poration if— 
‘‘(I) such corporation does not 
have substantial business activities 
(when compared to the total business
activities of the expanded affiliated 
group) in the foreign country in which 
or under the law of which the corpora-
tion is created or organized, and 
‘‘(II) the stock of the corporation 
is publicly traded and the principal 
market for the public trading of such 
stock is in the United States. 
‘‘(iv) PARTNERSHIP TRANSACTIONS.— 
The term ‘corporate expatriation trans-
action’ includes any transaction if— 
‘‘(I) a nominally foreign corpora-
tion (referred to in this subparagraph 
as the ‘acquiring corporation’) ac-
quires, as a result of such transaction, 
directly or indirectly properties consti-
tuting a trade or business of a domes-
tic partnership, 
‘‘(II) immediately after the trans-
action, more than 80 percent of the 
stock (by vote or value) of the acquir-
ing corporation is held by former 
partners of the domestic partnership 
or related foreign partnerships (deter-
mined without regard to stock of the
acquiring corporation which is sold in 
a public offering related to the trans-
action), and 
‘‘(III) the acquiring corporation 
meets the requirements of subclauses 
(I) and (II) of clause (iii). 
‘‘(v) SPECIAL RULES.—For purposes 
of this subparagraph— 
‘‘(I) a series of related trans-
actions shall be treated as 1 trans-
action, and 
‘‘(II) stock held by members of 
the expanded affiliated group which 
includes the acquiring corporation 
shall not be taken into account in de-
termining ownership. 
‘‘(vi) OTHER DEFINITIONS.—For pur-
poses of this subparagraph— 
‘‘(I) NOMINALLY FOREIGN COR-
PORATION.—The term ‘nominally for-
eign corporation’ means any corpora-
tion which would (but for this sub-
paragraph) be treated as a foreign 
corporation.
‘‘(II) 
EXPANDED
AFFILIATED 
GROUP.—The term ‘expanded affili-
ated group’ means an affiliated group 
(as defined in section 1504(a) without 
regard to section 1504(b)). 
‘‘(III) RELATED FOREIGN PART-
NERSHIP.—A foreign partnership is 
related to a domestic partnership if 
they are under common control (with-
in the meaning of section 482), or 
they shared the same trademark or 
tradename.’’. 
(b) EFFECTIVE DATES.— 
(1) IN
GENERAL.—The amendment made by 
this section shall apply to corporate expatriation 
transactions completed after December 31, 2003. 
(2) SPECIAL RULE.—The amendment made by 
this section shall also apply to corporate expatriation 
transactions completed on or before December 31, 
2003, but only with respect to taxable years of the 
acquiring corporation beginning after such date. 
SEC. 502. INCLUSION OF INCOME FROM U.S. IMPORTS IN 
SUBPART F INCOME. 
(a) IN GENERAL.—Subsection (a) of section 954 of 
the Internal Revenue Code of 1986 (defining foreign base
company income) is amended by striking ‘‘and’’ at the end 
of paragraph (4), by striking the period at the end of para-
graph (5) and inserting ‘‘, and’’, and by adding at the 
end the following: 
‘‘(6) the foreign base company United States 
import income for the taxable year (determined 
under subsection (j) and reduced as provided in sub-
section (b)(5)).’’. 
(b) Section 954 of such Code (defining foreign base 
company income) is amended by adding at the end the 
following: 
‘‘(j) FOREIGN BASE COMPANY UNITED STATES IM-
PORT INCOME.—For purposes of subsection (a)(6)— 
‘‘(1) IN
GENERAL.—The term ‘foreign base 
company United States import income’ means gross 
income derived from the sale of goods manufactured, 
produced, grown, or extracted outside the United 
States and imported into the United States. 
‘‘(2) NOT TREATED AS ANOTHER KIND OF BASE 
COMPANY INCOME.—Income of a corporation which 
is foreign base company United States import in-
come shall not be considered foreign base company 
income of such corporation under paragraph (2), 
(3), (4), or (5) of subsection (a).’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section apply to taxable years of controlled foreign 
corporations beginning after the date of enactment of this 
Act and to taxable years of United States shareholders 
in which or with which such taxable years of controlled 
foreign corporations end. 
SEC. 503. DENIAL OF TREATY BENEFITS FOR CERTAIN DE-
DUCTIBLE PAYMENTS. 
(a) IN GENERAL.—Section 894 of the Internal Rev-
enue Code of 1986 (relating to income affected by treaty) 
is amended by adding at the end the following new sub-
section: 
‘‘(d) DENIAL OF TREATY BENEFITS FOR CERTAIN 
DEDUCTIBLE PAYMENTS.— 
‘‘(1) IN GENERAL.—A foreign entity shall not 
be entitled under any income tax treaty of the 
United States with a foreign country to any reduced 
rate of any withholding tax imposed by this title on 
any deductible foreign payment unless such entity is 
predominantly owned by individuals who are resi-
dents of such foreign country. 
‘‘(2) DEDUCTIBLE
FOREIGN
PAYMENT.—For 
purposes of paragraph (1), the term ‘deductible for-
eign payment’ means any payment—
‘‘(A) which is made by a domestic entity 
directly or indirectly to a related person which 
is a foreign entity, and 
‘‘(B) which is allowable as a deduction 
under this chapter. 
‘‘(3) DOMESTIC AND FOREIGN ENTITIES; RE-
LATED PERSON.—For purposes of this subsection— 
‘‘(A) DOMESTIC ENTITY.—The term ‘do-
mestic entity’ means any domestic corporation 
or domestic partnership. 
‘‘(B) FOREIGN
ENTITY.—The term ‘for-
eign entity’ means any foreign corporation or 
foreign partnership. 
‘‘(C) RELATED
PERSON.—The term ‘re-
lated person’ has the meaning given such term 
by section 954(d)(3) (determined by sub-
stituting ‘domestic entity’ for ‘controlled foreign 
corporation’ each place it appears). 
‘‘(4) PREDOMINANT
OWNERSHIP.—For pur-
poses of this subsection— 
‘‘(A) IN GENERAL.—An entity is predomi-
nantly owned by individuals who are residents 
of a foreign country if— 
‘‘(i) in the case of a corporation, more 
than 50 percent (by value) of the stock of
such corporation is owned (within the 
meaning of section 883(c)(4)) by individ-
uals who are residents of such foreign 
country, or 
‘‘(ii) in the case of a partnership, 
more than 50 percent (by value) of the 
beneficial interests in such partnership are 
so owned. 
‘‘(B) PUBLICLY TRADED CORPORATIONS.— 
A foreign corporation also shall be treated as 
predominantly owned by individuals who are 
residents of a foreign country if— 
‘‘(i)(I) the stock of such corporation is 
primarily and regularly traded on an estab-
lished securities market in such foreign 
country, and 
‘‘(II) such corporation has activities 
within such foreign country which are sub-
stantial in relation to the total activities of 
such corporation and its related persons, 
or 
‘‘(ii) such corporation is wholly owned 
(directly or indirectly) by another foreign 
corporation which is described in clause (i).
‘‘(5) CONDUIT PAYMENTS.—Under regulations 
prescribed by the Secretary, paragraph (1) shall not 
apply to a payment received by a foreign entity re-
ferred to in paragraph (1) if— 
‘‘(A) within a reasonable period after such 
entity receives such payment, such entity makes 
a comparable payment directly or indirectly to 
another related person, 
‘‘(B) such related person is a resident of a 
foreign country with which the United States 
has an income tax treaty, 
‘‘(C) such related person is predominantly 
owned by individuals who are residents of such 
country, and 
‘‘(D) the withholding tax rate reduction 
under such treaty is not less than the with-
holding tax rate reduction applicable (without 
regard to this paragraph) to the payment re-
ceived by such foreign entity.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act.
SEC. 504. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL 
INCOME. 
(a) IN GENERAL.—Section 114 of the Internal Rev-
enue Code of 1986 is hereby repealed. 
(b) CONFORMING AMENDMENTS.— 
(1) Subpart E of part III of subchapter N of 
chapter 1 of such Code (relating to qualifying for-
eign trade income) is hereby repealed. 
(2) The table of subparts for such part III is 
amended by striking the item relating to subpart E. 
(3) The table of sections for part III of sub-
chapter B of chapter 1 of such Code is amended by 
striking the item relating to section 114. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to transactions occurring 
after the date of the enactment of this Act. 
(2) BINDING
CONTRACTS.—The amendments 
made by this section shall not apply to any trans-
action in the ordinary course of a trade or business 
which occurs pursuant to a binding contract— 
(A) which is between the taxpayer and a 
person who is not a related person (as defined 
in section 943(b)(3) of such Code, as in effect 
on the day before the date of the enactment of 
this Act), and
(B) which is in effect on April 11, 2003, 
and at all times thereafter. 
For purposes of this paragraph, a binding contract 
shall include a purchase option, renewal option, or 
replacement option which is included in such con-
tract. 
(d) REVOCATION OF SECTION 943(e) ELECTIONS.— 
(1) IN GENERAL.—In the case of a corporation 
that elected to be treated as a domestic corporation 
under section 943(e) of the Internal Revenue Code 
of 1986 (as in effect on the day before the date of 
the enactment of this Act)— 
(A) the corporation may revoke such elec-
tion, effective as of the date of the enactment 
of this Act, and 
(B) if the corporation does revoke such 
election— 
(i) such corporation shall be treated 
as a domestic corporation transferring (as 
of the date of the enactment of this Act) 
all of its property to a foreign corporation 
in connection with an exchange described 
in section 354 of the Internal Revenue 
Code of 1986, and
(ii) no gain or loss shall be recognized 
on such transfer. 
(2) 
EXCEPTION.—Subparagraph 
(B)(ii) 
of 
paragraph (1) shall not apply to gain on any asset 
held by the revoking corporation if— 
(A) the basis of such asset is determined 
in whole or in part by reference to the basis of 
such asset in the hands of the person from 
whom the revoking corporation acquired such 
asset, 
(B) the asset was acquired by transfer (not 
as a result of the election under section 943(e) 
of such Code) occurring on or after the 1st day 
on which its election under section 943(e) of 
such Code was effective, and 
(C) a principal purpose of the acquisition 
was the reduction or avoidance of tax. 
(e) GENERAL TRANSITION.— 
(1) IN GENERAL.—In the case of a taxable year 
ending after the date of the enactment of this Act 
and beginning before January 1, 2009, for purposes 
of chapter 1 of such Code, each current FSC/ETI 
beneficiary shall be allowed a deduction equal to the 
transition amount determined under this subsection 
with respect to such beneficiary for such year.
(2) CURRENT
FSC/ETI
BENEFICIARY.—The 
term ‘‘current FSC/ETI beneficiary’’ means any cor-
poration which entered into one or more transactions 
during its taxable year beginning in calendar year 
2001 with respect to which FSC/ETI benefits were 
allowable. 
(3) TRANSITION
AMOUNT.—For purposes of 
this subsection— 
(A) IN GENERAL.—The transition amount 
applicable to any current FSC/ETI beneficiary 
for any taxable year is the phaseout percentage 
of the adjusted base period amount. 
(B) PHASEOUT PERCENTAGE.— 
(i) IN
GENERAL.—In the case of a 
taxpayer using the calendar year as its 
taxable year, the phaseout percentage shall 
be determined under the following table: 
The phaseout 
Years: 
percentage is: 
2004 and 2005 ...................................................................................
100 
2006 ...................................................................................................
2007 ...................................................................................................
2008 ...................................................................................................
2009 and thereafter ...........................................................................
0. 
(ii) SPECIAL
RULE
FOR
2003.—The 
phaseout percentage for 2003 shall be the 
amount that bears the same ratio to 100 
percent as the number of days after the
date of the enactment of this Act bears to 
365. 
(iii) SPECIAL RULE FOR FISCAL YEAR 
TAXPAYERS.—In the case of a taxpayer 
not using the calendar year as its taxable 
year, the phaseout percentage is the 
weighted average of the phaseout percent-
ages determined under the preceding provi-
sions of this paragraph with respect to cal-
endar years any portion of which is in-
cluded in the taxpayer’s taxable year. The 
weighted average shall be determined on 
the basis of the respective portions of the 
taxable year in each calendar year. 
(4) ADJUSTED
BASE
PERIOD
AMOUNT.—For 
purposes of this subsection— 
(A) IN GENERAL.—In the case of a tax-
payer using the calendar year as its taxable 
year, the adjusted base period amount for any 
taxable year is the base period amount multi-
plied by the applicable percentage, as deter-
mined in the following table: 
The applicable 
Years: 
percentage is: 
2003 ...................................................................................................
100 
2004 ...................................................................................................
100 
2005 ...................................................................................................
105 
2006 ...................................................................................................
110 
2007 ...................................................................................................
115
The applicable 
Years: 
percentage is: 
2008 ...................................................................................................
120 
2009 and thereafter ...........................................................................
0. 
(B) BASE PERIOD AMOUNT.—The base pe-
riod amount is the aggregate FSC/ETI benefits 
for the taxpayer’s taxable year beginning in cal-
endar year 2001. 
(C) SPECIAL
RULES
FOR
FISCAL
YEAR 
TAXPAYERS, ETC.—Rules similar to rules of 
clauses (ii) and (iii) of paragraph (3)(B) shall 
apply for purposes of this paragraph. 
(5) FSC/ETI BENEFIT.—For purposes of this 
subsection, the term ‘‘FSC/ETI benefit’’ means— 
(A) amounts excludable from gross income 
under section 114 of such Code, and 
(B) the exempt foreign trade income of re-
lated foreign sales corporations from property 
acquired from the taxpayer (determined without 
regard to section 923(a)(5) of such Code (relat-
ing to special rule for military property), as in 
effect on the day before the date of the enact-
ment of the FSC Repeal and Extraterritorial 
Income Exclusion Act of 2000). 
In determining the FSC/ETI benefit there shall be 
excluded any amount attributable to a transaction 
with respect to which the taxpayer is the lessor un-
less the leased property was manufactured or pro-
duced in whole or in part by the taxpayer. 
(6) SPECIAL RULE FOR FARM COOPERATIVES.— 
Under regulations prescribed by the Secretary, de-
terminations under this subsection with respect to 
an organization described in section 943(g)(1) of 
such Code, as in effect on the day before the date 
of the enactment of this Act, shall be made at the 
cooperative level and the purposes of this subsection 
shall be carried out by excluding amounts from the 
gross income of its patrons. 
(7) CERTAIN RULES TO APPLY.—Rules similar 
to the rules of section 41(f) of such Code shall apply 
for purposes of this subsection. 
(8) COORDINATION WITH BINDING CONTRACT 
RULE.—The deduction determined under paragraph 
(1) for any taxable year shall be reduced by the 
phaseout percentage of any FSC/ETI benefit real-
ized for the taxable year by reason of subsection 
(c)(2). The preceding sentence shall not apply to any 
FSC/ETI benefit attributable to a transaction de-
scribed in the last sentence of paragraph (5). 
(9) SPECIAL RULE FOR TAXABLE YEAR WHICH 
INCLUDES DATE OF ENACTMENT.—In the case of a 
taxable year which includes the date of the enact-
ment of this Act, the deduction allowed under this 
subsection to any current FSC/ETI beneficiary shall 
in no event exceed— 
(A) 100 percent of such beneficiary’s ad-
justed base period amount for calendar year 
2003, reduced by 
(B) the aggregate FSC/ETI benefits of 
such beneficiary with respect to transactions oc-
curring during the portion of the taxable year 
ending on the date of the enactment of this Act. 
SEC. 505. DEDUCTION RELATING TO INCOME ATTRIB-
UTABLE TO UNITED STATES PRODUCTION 
ACTIVITIES. 
(a) IN GENERAL.—Part VIII of subchapter B of 
chapter 1 of the Internal Revenue Code of 1986 (relating 
to special deductions for corporations) is amended by add-
ing at the end the following new section: 
‘‘SEC. 250. INCOME ATTRIBUTABLE TO DOMESTIC PRODUC-
TION ACTIVITIES. 
‘‘(a) IN GENERAL.—In the case of a corporation, 
there shall be allowed as a deduction an amount equal to 
10 percent of the qualified production activities income of 
the corporation for the taxable year. 
‘‘(b) PHASE IN.—In the case of taxable years begin-
ning in 2006, 2007, 2008 or 2009, subsection (a) shall
be applied by substituting for the percentage contained 
therein the transition percentage determined under the 
following table: 
‘‘Taxable years 
The transition 
beginning in: 
percentage is: 
2006 ...................................................................................................
2007 ...................................................................................................
2008 ...................................................................................................
2009 ...................................................................................................
9. 
‘‘(c) 
QUALIFIED
PRODUCTION
ACTIVITIES
IN-
COME.—For purposes of this section, the term ‘qualified 
production activities income’ means the product of— 
‘‘(1) the portion of the modified taxable income 
of the taxpayer which is attributable to domestic 
production activities, and 
‘‘(2) the domestic/foreign fraction. 
‘‘(d) DETERMINATION OF INCOME ATTRIBUTABLE 
TO DOMESTIC PRODUCTION ACTIVITIES.—For purposes 
of this section— 
‘‘(1) IN GENERAL.—The portion of the modified 
taxable income which is attributable to domestic pro-
duction activities is so much of the modified taxable 
income for the taxable year as does not exceed— 
‘‘(A) the taxpayer’s domestic production 
gross receipts for such taxable year, reduced by 
‘‘(B) the sum of— 
‘‘(i) the costs of goods sold that are 
allocable to such receipts,
‘‘(ii) other deductions, expenses, or 
losses directly allocable to such receipts, 
and 
‘‘(iii) a ratable portion of other deduc-
tions, expenses, and losses that are not di-
rectly allocable to such receipts or another 
class of income. 
‘‘(2) ALLOCATION
METHOD.—Except as pro-
vided in regulations, allocations under clauses (ii) 
and (iii) of paragraph (1)(B) shall be made under 
the principles used in determining the portion of tax-
able income from sources within and without the 
United States. 
‘‘(3) SPECIAL RULE.— 
‘‘(A) For purposes of determining costs 
under clause (i) of paragraph (1)(B), any item 
or service brought into the United States with-
out a transfer price meeting the requirements 
of section 482 shall be treated as acquired by 
purchase, and its cost shall be treated as not 
less than its value when it entered the United 
States. A similar rule shall apply in determining 
the adjusted basis of leased or rented property 
where the lease or rental gives rise to domestic 
production gross receipts.
‘‘(B) In the case of any property described 
in subparagraph (A) that had been exported by 
the taxpayer for further manufacture, the in-
crease in cost (or adjusted basis) under sub-
paragraph (A) shall not exceed the difference 
between the value of the property when ex-
ported and the value of the property when 
brought back into the United States after the 
further manufacture. 
‘‘(4) MODIFIED TAXABLE INCOME.—The term 
‘modified taxable income’ means taxable income 
computed without regard to the deduction allowable 
under this section. 
‘‘(e) DOMESTIC PRODUCTION GROSS RECEIPTS.— 
For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘domestic produc-
tion gross receipts’ means the gross receipts of the 
taxpayer which are derived from— 
‘‘(A) any sale, exchange, or other disposi-
tion of, or 
‘‘(B) any lease, rental or license of, 
qualifying production property which was manufac-
tured, produced, grown, or extracted in whole or in 
significant part by the taxpayer within the United 
States.
‘‘(2) SPECIAL RULE.—The term ‘domestic pro-
duction gross receipts’ includes gross receipts of the 
taxpayer from the sale, exchange, or other disposi-
tion of replacement parts if— 
‘‘(A) such parts are sold by the taxpayer 
as replacement parts for qualified production 
property produced or manufactured in whole or 
significant part by the taxpayer in the United 
States, and 
‘‘(B) the taxpayer (or a related party) 
owns the designs for such parts. 
‘‘(3) RELATED
PARTY.—The term ‘related 
party’ means any corporation which is a member of 
the taxpayer’s expanded affiliated group. 
‘‘(f) QUALIFYING
PRODUCTION
PROPERTY.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this paragraph, the term ‘qualifying produc-
tion property’ means— 
‘‘(A) any tangible personal property, 
‘‘(B) any computer software, and 
‘‘(C) any films, tapes, records, or similar 
reproductions.
‘‘(2) EXCLUSIONS FROM QUALIFYING PRODUC-
TION PROPERTY.—The term ‘qualifying production 
property’ shall not include— 
‘‘(A) consumable property that is sold, 
leased, or licensed by the taxpayer as an inte-
gral part of the provision of services, 
‘‘(B) oil or gas (or any primary product 
thereof), 
‘‘(C) electricity, 
‘‘(D) water supplied by pipeline to the con-
sumer, 
‘‘(E) any unprocessed timber which is 
softwood, 
‘‘(F) utility services, or 
‘‘(G) any property (not described in para-
graph (1)(B)) which is a film, tape, recording, 
book, magazine, newspaper, or similar property 
the market for which is primarily topical or oth-
erwise essentially transitory in nature. 
For purposes of subparagraph (E), the term ‘un-
processed timber’ means any log, cant, or similar 
form of timber. 
‘‘(g) DOMESTIC/FOREIGN FRACTION.—For purposes 
of this section—
‘‘(1) IN GENERAL.—The term ‘domestic/foreign 
fraction’ means a fraction— 
‘‘(A) the numerator of which is the value 
of the domestic production of the taxpayer, and 
‘‘(B) the denominator of which is the value 
of the worldwide production of the taxpayer. 
‘‘(2) VALUE OF DOMESTIC PRODUCTION.—The 
value of domestic production is the excess of— 
‘‘(A) the domestic production gross re-
ceipts, over 
‘‘(B) the cost of purchased inputs allocable 
to such receipts that are deductible under this 
chapter for the taxable year. 
‘‘(3) PURCHASED INPUTS.— 
‘‘(A) IN GENERAL.—Purchased inputs are 
any of the following items acquired by pur-
chase: 
‘‘(i) Services (other than services of 
employees) used in manufacture, produc-
tion, growth, or extraction activities. 
‘‘(ii) Items consumed in connection 
with such activities. 
‘‘(iii) Items incorporated as part of 
the property being manufactured, pro-
duced, grown, or extracted.
‘‘(B) SPECIAL RULE.—Rules similar to the 
rules of subsection (d)(3) shall apply for pur-
poses of this subsection. 
‘‘(4) VALUE OF WORLDWIDE PRODUCTION.— 
‘‘(A) IN GENERAL.—The value of world-
wide production shall be determined under the 
principles of paragraph (2), except that— 
‘‘(i) worldwide production gross re-
ceipts shall be taken into account, and 
‘‘(ii) paragraph (3)(B) shall not apply. 
‘‘(B) WORLDWIDE PRODUCTION GROSS RE-
CEIPTS.—The worldwide production gross re-
ceipts is the amount that would be determined 
under subsection (e) if such subsection were ap-
plied without any reference to the United 
States. 
‘‘(5) 
SPECIAL
RULE
FOR
AFFILIATED 
GROUPS.— 
‘‘(A) IN GENERAL.—In the case of a tax-
payer that is a member of an expanded affili-
ated group, the domestic/foreign fraction shall 
be the amount determined under the preceding 
provisions of this subsection by treating all 
members of such group as a single corporation.
‘‘(B) EXPANDED
AFFILIATED
GROUP.— 
The term ‘expanded affiliated group’ means an 
affiliated group as defined in section 1504(a), 
determined— 
‘‘(i) by substituting ‘50 percent’ for 
‘80 percent’ each place it appears, and 
‘‘(ii) without regard to paragraphs 
(2), (3), and (4) of section 1504(b). 
‘‘(h) DEFINITIONS AND SPECIAL RULES.— 
‘‘(1) UNITED
STATES.—For purposes of this 
section, the term ‘United States’ includes the Com-
monwealth of Puerto Rico and any other possession 
of the United States. 
‘‘(2) SPECIAL RULE FOR PARTNERSHIPS.—For 
purposes of this section, a corporation’s distributive 
share of any partnership item shall be taken into ac-
count as if directly realized by the corporation. 
‘‘(3) COORDINATION WITH MINIMUM TAX.—The 
deduction under this section shall be allowed for 
purposes of the tax imposed by section 55; except 
that for purposes of section 55, alternative minimum 
taxable income shall be taken into account in deter-
mining the deduction under this section.
‘‘(4) ORDERING
RULE.—The amount of any 
other deduction allowable under this chapter shall be 
determined as if this section had not been enacted. 
‘‘(5) 
COORDINATION
WITH
TRANSITION 
RULES.—For purposes of this section— 
‘‘(A) domestic production gross receipts 
shall not include gross receipts from any trans-
action if the binding contract transition relief of 
section 2(c)(2) of the Job Protection Act of 
2003 applies to such transaction, and 
‘‘(B) any deduction allowed under section 
2(e) of such Act shall be disregarded in deter-
mining the portion of the taxable income which 
is attributable to domestic production gross re-
ceipts.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for part VIII of subchapter B of chapter 1 of such Code 
is amended by adding at the end the following new item: 
‘‘250. Income attributable to domestic production activities.’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxable years beginning 
after 2005. 
(2) APPLICATION OF SECTION 15.—Section 15 
of the Internal revenue Code of 1986 shall apply to
the amendments made to this section as if they were 
changes in a rate of tax. 
TITLE VI—BUY AMERICAN 
PROVISIONS 
SEC. 601. REQUIREMENTS FOR WAIVERS. 
(a) IN GENERAL.—Section 2 of the Buy American 
Act (41 U.S.C. 10a) is amended— 
(1) by striking ‘‘Notwithstanding’’ and insert-
ing the following: 
‘‘(a) IN GENERAL.—Notwithstanding’’; and 
(2) by adding at the end the following: 
‘‘(b) SPECIAL RULES.—The following rules shall 
apply in carrying out the provisions of subsection (a): 
‘‘(1) PUBLIC INTEREST WAIVER.—A determina-
tion that it is not in the public interest to enter into 
a contract in accordance with this Act may not be 
made after a notice of solicitation of offers for the 
contract is published in accordance with section 18 
of the Office of Federal Procurement Policy Act (41 
U.S.C. 416) and section 8(e) of the Small Business 
Act (15 U.S.C. 637(e)). 
‘‘(2) DOMESTIC
BIDDER.—A Federal agency 
entering into a contract shall give preference to a 
company submitting an offer on the contract that
riers and increasing the access of United States 
industry and the industry of other countries to 
such markets; and 
(C) to reduce diversion of third country ex-
ports to the United States because of restricted 
market access in foreign countries. 
(5) Foreign country performance under certain 
agreements has been less than contemplated, and in 
some cases rises to the level of noncompliance. 
(6) The credibility of, and support for, the 
United States Government’s trade policy is, to a sig-
nificant extent, a function of the belief that trade 
agreements made are trade agreements enforced. 
(7) The accession of the People’s Republic of 
China to the World Trade Organization will create 
unprecedented challenges and it is important to the 
world trading system that China comply with the 
numerous and significant commitments China makes 
as part of the accession process. Congress must play 
a key role in ensuring full and continuous moni-
toring of the People’s Republic of China’s compli-
ance with its commitments.
SEC. 702. ESTABLISHMENT OF OFFICE. 
(a) IN GENERAL.—There is established an office in 
Congress to be known as the Congressional Trade Office 
(in this title referred to as the ‘‘Office’’). 
(b) PURPOSES.—The purposes of the Office are as 
follows: 
(1) To reassert the constitutional responsibility 
of Congress with respect to international trade. 
(2) To provide Congress, through the Com-
mittee on Finance of the Senate and the Committee 
on Ways and Means of the House of Representa-
tives, with additional independent, nonpartisan, neu-
tral trade expertise. 
(3) To assist Congress in providing more effec-
tive and active oversight of trade policy. 
(4) To assist Congress in providing to the exec-
utive branch more effective direction on trade policy. 
(5) To provide Congress with long-term, institu-
tional memory on trade issues. 
(6) To provide Congress with more analytical 
capability on trade issues. 
(7) To advise relevant committees on the im-
pact of trade negotiations, including past, ongoing, 
and future negotiations, with respect to the areas of 
jurisdiction of the respective committees.
(c) FUNCTIONS.—The functions of the Office are as 
follows: 
(1) ASSISTANCE TO CONGRESS.—To provide the 
Committee on Finance of the Senate and the Com-
mittee on Ways and Means of the House of Rep-
resentative and any other appropriate committee of 
Congress or joint committee of Congress information 
which will assist the committees in the discharge of 
the matters within their jurisdiction. 
(2) MONITOR COMPLIANCE.—To monitor com-
pliance with major bilateral, regional, and multilat-
eral trade agreements by— 
(A) consulting with the affected industries 
and interested parties; 
(B) analyzing the success of those agree-
ments based on commercial results; 
(C) recommending actions, including legis-
lative action, necessary to ensure that foreign 
countries that have made commitments through 
those agreements with the United States fully 
abide by their commitments; 
(D) annually assessing the extent to which 
those agreements comply with environmental 
goals; and