H. R. 1586 
One Hundred Eleventh Congress 
of the 
United States of America 
AT THE SECOND SESSION 
Begun and held at the City of Washington on Tuesday, 
the fifth day of January, two thousand and ten 
An Act 
To modernize the air traffic control system, improve the safety, reliability, and 
availability of transportation by air in the United States, provide for modernization 
of the air traffic control system, reauthorize the Federal Aviation Administration, 
and for other purposes. 
Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, 
SHORT TITLE 
SECTION 1. This Act may be cited as the ‘‘llllllAct 
ofllll’’. 
TITLE I 
EDUCATION JOBS FUND 
EDUCATION JOBS FUNDS 
SEC. 101. There are authorized to be appropriated and there 
are appropriated out of any money in the Treasury not otherwise 
obligated for necessary expenses for an Education Jobs Fund, 
$10,000,000,000: Provided, That the amount under this heading 
shall be administered under the terms and conditions of sections 
14001 through 14013 and title XV of division A of the American 
Recovery and Reinvestment Act of 2009 (Public Law 111–5) except 
as follows: 
(1) ALLOCATION OF FUNDS.— 
(A) Funds appropriated under this heading shall be 
available only for allocation by the Secretary of Education 
(in this heading referred to as the Secretary) in accordance 
with subsections (a), (b), (d), (e), and (f) of section 14001 
of division A of Public Law 111–5 and subparagraph (B) 
of this paragraph, except that the amount reserved under 
such subsection (b) shall not exceed $1,000,000 and such 
subsection (f) shall be applied by substituting one year 
for two years. 
(B) Prior to allocating funds to States under section 
14001(d) of division A of Public Law 111–5, the Secretary 
shall allocate 0.5 percent to the Secretary of the Interior 
for schools operated or funded by the Bureau of Indian 
Affairs on the basis of the schools’ respective needs for 
activities consistent with this heading under such terms 
and conditions as the Secretary of the Interior may deter-
mine.
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(2) RESERVATION.—A State that receives an allocation of 
funds appropriated under this heading may reserve not more 
than 2 percent for the administrative costs of carrying out 
its responsibilities with respect to those funds. 
(3) AWARDS TO LOCAL EDUCATIONAL AGENCIES.— 
(A) Except as specified in paragraph (2), an allocation 
of funds to a State shall be used only for awards to local 
educational agencies for the support of elementary and 
secondary education in accordance with paragraph (5) for 
the 2010–2011 school year (or, in the case of reallocations 
made under section 14001(f) of division A of Public Law 
111–5, for the 2010–2011 or the 2011–2012 school year). 
(B) Funds used to support elementary and secondary 
education shall be distributed through a State’s primary 
elementary and secondary funding formulae or based on 
local educational agencies’ relative shares of funds under 
part A of title I of the Elementary and Secondary Education 
Act of 1965 (20 U.S.C. 6311 et seq.) for the most recent 
fiscal year for which data are available. 
(C) Subsections (a) and (b) of section 14002 of division 
A of Public Law 111–5 shall not apply to funds appropriated 
under this heading. 
(4) COMPLIANCE WITH EDUCATION REFORM ASSURANCES.— 
For purposes of awarding funds appropriated under this 
heading, any State that has an approved application for Phase 
II of the State Fiscal Stabilization Fund that was submitted 
in accordance with the application notice published in the Fed-
eral Register on November 17, 2009 (74 Fed. Reg. 59142) shall 
be deemed to be in compliance with subsection (b) and para-
graphs (2) through (5) of subsection (d) of section 14005 of 
division A of Public Law 111–5. 
(5) REQUIREMENT
TO
USE
FUNDS
TO
RETAIN
OR
CREATE 
EDUCATION JOBS.—Notwithstanding section 14003(a) of division 
A of Public Law 111–5, funds awarded to local educational 
agencies under paragraph (3)— 
(A) may be used only for compensation and benefits 
and other expenses, such as support services, necessary 
to retain existing employees, to recall or rehire former 
employees, and to hire new employees, in order to provide 
early childhood, elementary, or secondary educational and 
related services; and 
(B) may not be used for general administrative 
expenses or for other support services expenditures as those 
terms were defined by the National Center for Education 
Statistics in its Common Core of Data as of the date of 
enactment of this Act. 
(6) PROHIBITION ON USE OF FUNDS FOR RAINY-DAY FUNDS 
OR DEBT RETIREMENT.—A State that receives an allocation may 
not use such funds, directly or indirectly, to— 
(A) establish, restore, or supplement a rainy-day fund; 
(B) supplant State funds in a manner that has the 
effect of establishing, restoring, or supplementing a rainy- 
day fund; 
(C) reduce or retire debt obligations incurred by the 
State; or
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(D) supplant State funds in a manner that has the 
effect of reducing or retiring debt obligations incurred by 
the State. 
(7) DEADLINE
FOR
AWARD.—The Secretary shall award 
funds appropriated under this heading not later than 45 days 
after the date of the enactment of this Act to States that 
have 
submitted 
applications 
meeting 
the 
requirements 
applicable to funds under this heading. The Secretary shall 
not require information in applications beyond what is nec-
essary to determine compliance with applicable provisions of 
law. 
(8) ALTERNATE DISTRIBUTION OF FUNDS.—If, within 30 days 
after the date of the enactment of this Act, a Governor has 
not submitted an approvable application, the Secretary shall 
provide for funds allocated to that State to be distributed to 
another entity or other entities in the State (notwithstanding 
section 14001(e) of division A of Public Law 111–5) for support 
of elementary and secondary education, under such terms and 
conditions as the Secretary may establish, provided that all 
terms and conditions that apply to funds appropriated under 
this heading shall apply to such funds distributed to such 
entity or entities. No distribution shall be made to a State 
under this paragraph, however, unless the Secretary has deter-
mined (on the basis of such information as may be available) 
that the requirements of clauses (i), (ii), or (iii) of paragraph 
10(A) are likely to be met, notwithstanding the lack of an 
application from the Governor of that State. 
(9) LOCAL EDUCATIONAL AGENCY APPLICATION.—Section 442 
of the General Education Provisions Act shall not apply to 
a local educational agency that has previously submitted an 
application to the State under title XIV of division A of Public 
Law 111–5. The assurances provided under that application 
shall continue to apply to funds awarded under this heading. 
(10) MAINTENANCE OF EFFORT.— 
(A) Except as provided in paragraph (8), the Secretary 
shall not allocate funds to a State under paragraph (1) 
unless the Governor of the State provides an assurance 
to the Secretary that— 
(i) for State fiscal year 2011, the State will main-
tain State support for elementary and secondary edu-
cation (in the aggregate or on the basis of expenditures 
per pupil) and for public institutions of higher edu-
cation (not including support for capital projects or 
for research and development or tuition and fees paid 
by students) at not less than the level of such support 
for each of the two categories, respectively, for State 
fiscal year 2009; 
(ii) for State fiscal year 2011, the State will main-
tain State support for elementary and secondary edu-
cation and for public institutions of higher education 
(not including support for capital projects or for 
research and development or tuition and fees paid 
by students) at a percentage of the total revenues 
available to the State that is equal to or greater than 
the percentage provided for each of the two categories, 
respectively, for State fiscal year 2010; or
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(iii) in the case of a State in which State tax 
collections for calendar year 2009 were less than State 
tax collections for calendar year 2006, for State fiscal 
year 2011 the State will maintain State support for 
elementary and secondary education (in the aggregate) 
and for public institutions of higher education (not 
including support for capital projects or for research 
and development or tuition and fees paid by stu-
dents)— 
(I) at not less than the level of such support 
for each of the two categories, respectively, for 
State fiscal year 2006; or 
(II) at a percentage of the total revenues avail-
able to the State that is equal to or greater than 
the percentage provided for each of the two cat-
egories, respectively, for State fiscal year 2006. 
(B) Section 14005(d)(1) and subsections (a) through 
(c) of section 14012 of division A of Public Law 111–5 
shall not apply to funds appropriated under this heading. 
(11) ADDITIONAL REQUIREMENTS FOR THE STATE OF TEXAS.— 
The following requirements shall apply to the State of Texas: 
(A) Notwithstanding paragraph (3)(B), funds used to 
support elementary and secondary education shall be 
distributed based on local educational agencies’ relative 
shares of funds under part A of title I of the Elementary 
and Secondary Education Act of 1965 (20 U.S.C. 6311 
et seq.) for the most recent fiscal year which data are 
available. Funds distributed pursuant to this paragraph 
shall be used to supplement and not supplant State formula 
funding that is distributed on a similar basis to part A 
of title I of the Elementary and Secondary Education Act 
of 1965 (20 U.S.C. 6311 et seq.). 
(B) The Secretary shall not allocate funds to the State 
of Texas under paragraph (1) unless the Governor of the 
State provides an assurance to the Secretary that the State 
will for fiscal years 2011, 2012, and 2013 maintain State 
support for elementary and secondary education at a 
percentage of the total revenues available to the State 
that is equal to or greater than the percentage provided 
for such purpose for fiscal year 2011 prior to the enactment 
of this Act. 
(C) Notwithstanding paragraph (8), no distribution 
shall be made to the State of Texas or local education 
agencies therein unless the Governor of Texas makes an 
assurance to the Secretary that the requirements in para-
graphs (11)(A) and (11)(B) will be met, notwithstanding 
the lack of an application from the Governor of Texas.
H. R. 1586—5 
TITLE II 
STATE FISCAL RELIEF AND OTHER PROVISIONS; REVENUE 
OFFSETS 
Subtitle A—State Fiscal Relief and Other Provisions 
EXTENSION OF ARRA INCREASE IN FMAP 
SEC. 201. Section 5001 of the American Recovery and Reinvest-
ment Act of 2009 (Public Law 111–5) is amended— 
(1) in subsection (a)(3), by striking ‘‘first calendar quarter’’ 
and inserting ‘‘first 3 calendar quarters’’; 
(2) in subsection (b)— 
(A) in paragraph (1), by striking ‘‘paragraph (2)’’ and 
inserting ‘‘paragraphs (2) and (3)’’; and 
(B) by adding at the end the following: 
‘‘(3) PHASE-DOWN OF GENERAL INCREASE.— 
‘‘(A) SECOND QUARTER OF FISCAL YEAR 2011.—For each 
State, for the second quarter of fiscal year 2011, the FMAP 
percentage increase for the State under paragraph (1) or 
(2) (as applicable) shall be 3.2 percentage points. 
‘‘(B) THIRD QUARTER OF FISCAL YEAR 2011.—For each 
State, for the third quarter of fiscal year 2011, the FMAP 
percentage increase for the State under paragraph (1) or 
(2) (as applicable) shall be 1.2 percentage points.’’; 
(3) in subsection (c)— 
(A) in paragraph (2)(B), by striking ‘‘July 1, 2010’’ 
and inserting ‘‘January 1, 2011’’; 
(B) in paragraph (3)(B)(i), by striking ‘‘July 1, 2010’’ 
and inserting ‘‘January 1, 2011’’ each place it appears; 
and 
(C) in paragraph (4)(C)(ii), by striking ‘‘the 3-consecu-
tive-month period beginning with January 2010’’ and 
inserting ‘‘any 3-consecutive-month period that begins after 
December 2009 and ends before January 2011’’; 
(4) in subsection (e), by adding at the end the following: 
‘‘Notwithstanding paragraph (5), effective for payments made on 
or after January 1, 2010, the increases in the FMAP for a State 
under this section shall apply to payments under title XIX of 
such Act that are attributable to expenditures for medical assistance 
provided to nonpregnant childless adults made eligible under a 
State plan under such title (including under any waiver under 
such title or under section 1115 of such Act (42 U.S.C. 1315)) 
who would have been eligible for child health assistance or other 
health benefits under eligibility standards in effect as of December 
31, 2009, of a waiver of the State child health plan under the 
title XXI of such Act.’’; 
(5) in subsection (g)— 
(A) in paragraph (1), by striking ‘‘September 30, 2011’’ 
and inserting ‘‘March 31, 2012’’; 
(B) in paragraph (2), by inserting ‘‘of such Act’’ after 
‘‘1923’’; and 
(C) by adding at the end the following: 
‘‘(3) CERTIFICATION BY CHIEF EXECUTIVE OFFICER.—No addi-
tional Federal funds shall be paid to a State as a result of 
this section with respect to a calendar quarter occurring during 
the period beginning on January 1, 2011, and ending on June
H. R. 1586—6 
30, 2011, unless, not later than 45 days after the date of 
enactment of this paragraph, the chief executive officer of the 
State certifies that the State will request and use such addi-
tional Federal funds.’’; and 
(6) in subsection (h)(3), by striking ‘‘December 31, 2010’’ 
and inserting ‘‘June 30, 2011’’. 
TREATMENT OF CERTAIN DRUGS FOR COMPUTATION OF MEDICAID AMP 
SEC. 202. Effective as if included in the enactment of Public 
Law 111–148, section 1927(k)(1)(B)(i)(IV) of the Social Security 
Act (42 U.S.C. 1396r–8(k)(1)(B)(i)(IV)), as amended by section 
2503(a)(2)(B) of Public Law 111–148 and section 1101(c)(2) of Public 
Law 111–152, is amended by adding at the end the following: 
‘‘, unless the drug is an inhalation, infusion, instilled, implanted, 
or injectable drug that is not generally dispensed through a retail 
community pharmacy; and’’. 
SUNSET OF TEMPORARY INCREASE IN BENEFITS UNDER THE 
SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM 
SEC. 203. Section 101(a) of title I of division A of Public Law 
111–5 (123 Stat. 120), as amended by section 4262 of this Act, 
is amended by striking paragraph (2) and inserting the following: 
‘‘(2) TERMINATION.—The authority provided by this sub-
section shall terminate after March 31, 2014.’’. 
Subtitle B—Revenue Offsets 
RULES TO PREVENT SPLITTING FOREIGN TAX CREDITS FROM THE 
INCOME TO WHICH THEY RELATE 
SEC. 211. (a) IN GENERAL.—Subpart A of part III of subchapter 
N of chapter 1 of the Internal Revenue Code of 1986 is amended 
by adding at the end the following new section: 
‘‘SEC. 909. SUSPENSION OF TAXES AND CREDITS UNTIL RELATED 
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 year in which the related income 
is taken into account under this chapter by the taxpayer. 
‘‘(b) SPECIAL RULES WITH RESPECT TO SECTION 902 CORPORA-
TIONS.—If there is a foreign tax credit splitting 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 section— 
‘‘(1) APPLICATION TO PARTNERSHIPS, ETC.—In the case of 
a partnership, subsections (a) and (b) shall be applied at the 
partner level. Except as otherwise provided by the Secretary,
H. R. 1586—7 
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 not taken into account 
by reason of subsection (a) or (b), except as otherwise provided 
by the Secretary, 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 income 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 income’ means, 
with respect to any portion of any foreign income tax, the 
income (or, as appropriate, earnings and profits) to which such 
portion of foreign 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’)— 
‘‘(A) any entity in which the payor holds, directly or 
indirectly, at least a 10 percent ownership interest (deter-
mined by vote or value), 
‘‘(B) any person which holds, directly or indirectly, 
at least a 10 percent ownership interest (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 cor-
poration’ means any foreign corporation with respect to which 
one or more domestic corporations meets the ownership require-
ments of subsection (a) or (b) of section 902. 
‘‘(e) 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 provides— 
‘‘(1) appropriate exceptions from the provisions of this sec-
tion, and 
‘‘(2) for the proper application of this section with respect 
to hybrid instruments.’’. 
(b) CLERICAL AMENDMENT.—The table of sections for subpart 
A of part III of subchapter N of chapter 1 of the Internal Revenue 
Code of 1986 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—
H. R. 1586—8 
(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 in taxable years beginning after December 
31, 2010; and 
(2) foreign income taxes (as so defined) paid or accrued 
by a section 902 corporation (as so defined) in taxable years 
beginning 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 sections 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). 
DENIAL OF FOREIGN TAX CREDIT WITH RESPECT TO FOREIGN INCOME 
NOT SUBJECT TO UNITED STATES TAXATION BY REASON OF COVERED 
ASSET ACQUISITIONS 
SEC. 212. (a) IN GENERAL.—Section 901 of the Internal Revenue 
Code of 1986 is amended by redesignating subsection (m) as sub-
section (n) and by inserting after subsection (l) the following new 
subsection: 
‘‘(m) DENIAL OF FOREIGN TAX CREDIT WITH RESPECT TO FOR-
EIGN INCOME NOT SUBJECT TO UNITED STATES TAXATION BY REASON 
OF COVERED ASSET ACQUISITIONS.— 
‘‘(1) IN GENERAL.—In the case of a covered asset acquisition, 
the disqualified portion of any foreign income tax determined 
with respect to the income or gain attributable to the relevant 
foreign assets— 
‘‘(A) shall not be taken into account in determining 
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 account for purposes of section 
902 or 960. 
‘‘(2) COVERED
ASSET
ACQUISITION.—For purposes of this 
section, the term ‘covered asset acquisition’ means— 
‘‘(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 assets for pur-
poses of this chapter, and 
‘‘(ii) is treated as the acquisition of stock of a 
corporation (or is disregarded) for purposes of the for-
eign 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 Secretary, 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 taxable year under subpara-
graph (B) with respect to all relevant foreign assets, 
divided by
H. R. 1586—9 
‘‘(ii) the income on which the foreign income tax 
referred to in paragraph (1) is determined (or, if the 
taxpayer fails to substantiate such income to the satis-
faction of the Secretary, such income shall be deter-
mined by dividing the amount of such foreign income 
tax by the highest marginal tax rate applicable to 
such income in the relevant jurisdiction). 
‘‘(B) ALLOCATION OF BASIS DIFFERENCE.—For purposes 
of subparagraph (A)(i)— 
‘‘(i) IN GENERAL.—The basis difference with respect 
to any relevant foreign asset shall be allocated to tax-
able 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 disposition of any relevant foreign asset— 
‘‘(I) the basis difference allocated to the taxable 
year which includes the date of such disposition 
shall be the excess of the basis difference with 
respect to such asset over the aggregate basis dif-
ference with respect to such asset which has been 
allocated under clause (i) to all prior taxable years, 
and 
‘‘(II) no basis difference with respect 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 relevant foreign asset, the 
excess of— 
‘‘(I) the adjusted basis of such asset imme-
diately after the covered asset acquisition, over 
‘‘(II) the adjusted basis of such asset imme-
diately before the covered asset acquisition. 
‘‘(ii) BUILT-IN LOSS ASSETS.—In the case of a rel-
evant foreign asset with respect to which the amount 
described in clause (i)(II) exceeds the amount described 
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 subparagraph as occur-
ring at the close of the acquisition date (as defined 
in section 338(h)(2)). 
‘‘(4) RELEVANT FOREIGN ASSETS.—For purposes of this sec-
tion, the term ‘relevant foreign asset’ means, with respect to 
any covered asset acquisition, 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 possession of the United States.
H. R. 1586—10 
‘‘(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 regula-
tions or other guidance as is necessary or appropriate to carry 
out the purposes of this subsection, including to exempt from 
the application of this subsection certain covered asset acquisi-
tions, and relevant foreign assets with respect to which the 
basis difference is de minimis.’’. 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in paragraph (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 December 
31, 2010. 
(2) TRANSITION RULE.—The amendments made by this sec-
tion shall not apply to any covered asset acquisition (as so 
defined) with respect to which the transferor and the transferee 
are not related if such acquisition is— 
(A) made pursuant to a written agreement which was 
binding on January 1, 2011, and at all times thereafter, 
(B) described in a ruling request submitted to the 
Internal Revenue Service on or before July 29, 2010, or 
(C) described on or before January 1, 2011, in a public 
announcement or in a filing with the Securities 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 persons is described in section 267 
or 707(b) of the Internal Revenue Code of 1986. 
SEPARATE APPLICATION OF FOREIGN TAX CREDIT LIMITATION, ETC., TO 
ITEMS RESOURCED UNDER TREATIES 
SEC. 213. (a) IN GENERAL.—Subsection (d) of section 904 of 
the Internal Revenue Code of 1986 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.— 
‘‘(A) IN GENERAL.—If— 
‘‘(i) without regard to any treaty obligation 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 benefits of such 
treaty obligation, 
subsections (a), (b), and (c) of this section and sections 
902, 907, and 960 shall be applied separately with respect 
to each such item. 
‘‘(B) COORDINATION
WITH
OTHER
PROVISIONS.—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
H. R. 1586—11 
to carry out the purposes of this paragraph, including regu-
lations or other guidance which provides that related items 
of income may be aggregated for purposes of this para-
graph.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after the date of the enact-
ment of this Act. 
LIMITATION ON THE AMOUNT OF FOREIGN TAXES DEEMED PAID WITH 
RESPECT TO SECTION 956 INCLUSIONS 
SEC. 214. (a) IN GENERAL.—Section 960 of the Internal Revenue 
Code of 1986 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 domestic corporation any 
amount attributable to the earnings and profits of a foreign 
corporation which is a member of a qualified group (as defined 
in section 902(b)) with respect to the domestic corporation, 
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 distributed as a series of dis-
tributions (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 corpora-
tion and ends with such domestic corporation. 
‘‘(2) AUTHORITY TO PREVENT ABUSE.—The Secretary shall 
issue such regulations or other guidance 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 Revenue Code of 1986) after 
December 31, 2010. 
SPECIAL RULE WITH RESPECT TO CERTAIN REDEMPTIONS BY FOREIGN 
SUBSIDIARIES 
SEC. 215. (a) IN GENERAL.—Paragraph (5) of section 304(b) 
of the Internal Revenue Code of 1986 is amended by redesignating 
subparagraph (B) as subparagraph (C) and by inserting after 
subparagraph (A) the following new subparagraph: 
‘‘(B) SPECIAL RULE IN CASE OF FOREIGN ACQUIRING COR-
PORATION.—In the case of any acquisition to which sub-
section (a) applies in which the acquiring corporation is 
a foreign corporation, no earnings and profits shall be 
taken into account under paragraph (2)(A) (and subpara-
graph (A) shall not apply) if more than 50 percent of 
the dividends arising from such acquisition (determined 
without regard to this subparagraph) would neither—
H. R. 1586—12 
‘‘(i) be subject to tax under this chapter for the 
taxable year in which the dividends arise, nor 
‘‘(ii) be includible in the earnings and profits of 
a controlled foreign corporation (as defined in section 
957 and without regard to section 953(c)).’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to acquisitions after the date of the enactment of this 
Act. 
MODIFICATION OF AFFILIATION RULES FOR PURPOSES OF RULES 
ALLOCATING INTEREST EXPENSE 
SEC. 216. (a) IN
GENERAL.—Subparagraph (A) of section 
864(e)(5) of the Internal Revenue Code of 1986 is amended by 
adding at the end the following: ‘‘Notwithstanding the preceding 
sentence, a foreign corporation shall be treated as a member of 
the affiliated group if— 
‘‘(i) more than 50 percent of the gross income of 
such foreign corporation for the taxable year is effec-
tively 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 affili-
ated group (determined with regard to this sentence).’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to taxable years beginning after the date of the enact-
ment of this Act. 
TERMINATION OF SPECIAL RULES FOR INTEREST AND DIVIDENDS RE-
CEIVED FROM PERSONS MEETING THE 80-PERCENT FOREIGN BUSI-
NESS REQUIREMENTS 
SEC. 217. (a) IN GENERAL.—Paragraph (1) of section 861(a) 
of the Internal Revenue Code of 1986 is amended by striking 
subparagraph (A) and by redesignating subparagraphs (B) and (C) 
as subparagraphs (A) and (B), respectively. 
(b) GRANDFATHER RULE WITH RESPECT TO WITHHOLDING ON 
INTEREST AND DIVIDENDS RECEIVED FROM PERSONS MEETING THE 
80-PERCENT FOREIGN BUSINESS REQUIREMENTS.— 
(1) IN GENERAL.—Subparagraph (B) of section 871(i)(2) of 
the Internal Revenue Code of 1986 is amended to read as 
follows: 
‘‘(B) The active foreign business percentage of— 
‘‘(i) any dividend paid by an existing 80/20 com-
pany, and 
‘‘(ii) any interest paid by an existing 80/20 com-
pany.’’. 
(2) DEFINITIONS AND SPECIAL RULES.—Section 871 of such 
Code 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 COMPANIES.—For pur-
poses 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—
H. R. 1586—13 
‘‘(i) such corporation met the 80-percent foreign 
business requirements of section 861(c)(1) (as in effect 
before the date of the enactment of this subsection) 
for such corporation’s last taxable year beginning 
before January 1, 2011, 
‘‘(ii) such corporation meets the 80-percent foreign 
business requirements of subparagraph (B) with 
respect to each taxable year after the taxable year 
referred to in clause (i), and 
‘‘(iii) there has not been an addition of a substan-
tial line of business with respect to such corporation 
after the date of the enactment of this subsection. 
‘‘(B) FOREIGN BUSINESS REQUIREMENTS.— 
‘‘(i) IN
GENERAL.—Except as provided in clause 
(iv), a corporation meets the 80-percent foreign busi-
ness requirements of this subparagraph if it is shown 
to the satisfaction of the Secretary that at least 80 
percent of the gross income from all sources of such 
corporation for the testing period is active foreign busi-
ness income. 
‘‘(ii) ACTIVE FOREIGN BUSINESS INCOME.—For pur-
poses of clause (i), the term ‘active foreign business 
income’ means gross income which— 
‘‘(I) is derived from sources outside 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 posses-
sion of the United States. 
‘‘(iii) TESTING PERIOD.—For purposes of this sub-
section, 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 applicable). If the corporation 
has no gross income for such 3-year period (or part 
thereof), the testing period shall be the taxable year 
in which the payment is made. 
‘‘(iv) TRANSITION RULE.—In the case of a taxable 
year for which the testing period includes 1 or more 
taxable years beginning before January 1, 2011— 
‘‘(I) a corporation meets the 80-percent foreign 
business requirements of this subparagraph if and 
only if the weighted average of— 
‘‘(aa) the percentage of the corporation’s 
gross income from all sources that is active 
foreign 
business 
income 
(as 
defined 
in 
subparagraph (B) of section 861(c)(1) (as in 
effect before the date of the enactment of this 
subsection)) for the portion of the testing 
period that includes taxable years beginning 
before January 1, 2011, and 
‘‘(bb) the percentage of the corporation’s 
gross income from all sources that is active 
foreign business income (as defined in clause 
(ii) of this subparagraph) for the portion of 
the testing period, if any, that includes taxable 
years beginning on or after January 1, 2011, 
is at least 80 percent, and
H. R. 1586—14 
‘‘(II) the active foreign business percentage for 
such taxable year shall equal the weighted average 
percentage determined under subclause (I). 
‘‘(2) ACTIVE
FOREIGN
BUSINESS
PERCENTAGE.—Except as 
provided in paragraph (1)(B)(iv), the term ‘active foreign busi-
ness 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. 
‘‘(3) AGGREGATION RULES.—For purposes of applying para-
graph (1) (other than subparagraphs (A)(i) and (B)(iv) thereof) 
and paragraph (2)— 
‘‘(A) IN GENERAL.—The corporation referred to in para-
graph (1)(A) and all of such corporation’s subsidiaries shall 
be treated as one corporation. 
‘‘(B) SUBSIDIARIES.—For purposes of subparagraph (A), 
the term ‘subsidiary’ means any corporation in which the 
corporation referred to in subparagraph (A) owns (directly 
or indirectly) stock meeting the requirements of section 
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 regula-
tions or other guidance as is necessary or appropriate to carry 
out the purposes of this section, including regulations or other 
guidance which provide for the proper application of the 
aggregation rules described in paragraph (3).’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 861 of the Internal Revenue Code of 1986 is 
amended by striking subsection (c) and by redesignating sub-
sections (d), (e), and (f) as subsections (c), (d), and (e), respec-
tively. 
(2) Paragraph (9) of section 904(h) of such Code is amended 
to read as follows: 
‘‘(9) TREATMENT
OF
CERTAIN
DOMESTIC
CORPORATIONS.— 
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 
subsection as a United States-owned foreign corporation.’’. 
(3) Subsection (c) of section 2104 of such Code 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 paragraph (2), the 
amendments made by this section shall apply to taxable years 
beginning after December 31, 2010. 
(2) GRANDFATHER RULE FOR OUTSTANDING DEBT OBLIGA-
TIONS.— 
(A) IN GENERAL.—The amendments made by this sec-
tion 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.—Subpara-
graph (A) shall not apply to any interest which is payable
H. R. 1586—15 
to a related person (determined under rules similar to 
the rules of section 954(d)(3)). 
(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. 
LIMITATION ON EXTENSION OF STATUTE OF LIMITATIONS FOR FAILURE 
TO NOTIFY SECRETARY OF CERTAIN FOREIGN TRANSFERS 
SEC. 218. (a) IN GENERAL.—Paragraph (8) of section 6501(c) 
of the Internal Revenue Code of 1986 is amended— 
(1) by striking ‘‘In the case of any information’’ and 
inserting the following: 
‘‘(A) IN
GENERAL.—In the case of any information’’; 
and 
(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 neglect, 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. 
ELIMINATION OF ADVANCE REFUNDABILITY OF EARNED INCOME 
CREDIT 
SEC. 219. (a) IN GENERAL.—The following provisions of the 
Internal Revenue Code of 1986 are repealed: 
(1) Section 3507. 
(2) Subsection (g) of section 32. 
(3) Paragraph (7) of section 6051(a). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 6012(a) of the Internal Revenue Code of 1986 
is amended by striking paragraph (8) and by redesignating 
paragraph (9) as paragraph (8). 
(2) Section 6302 of such Code is amended by striking sub-
section (i). 
(3) The table of sections for chapter 25 of such Code is 
amended by striking the item relating to section 3507. 
(c) EFFECTIVE DATE.—The repeals and amendments made by 
this section shall apply to taxable years beginning after December 
31, 2010. 
TITLE III 
RESCISSIONS 
SEC. 301. There is rescinded from accounts under the heading 
‘‘Department of Agriculture—Rural Development’’, $122,000,000, to 
be derived from the unobligated balances of funds that were pro-
vided for such accounts in prior appropriation Acts (other than 
Public Law 111–5) and that were designated by the Congress in 
such Acts as an emergency requirement pursuant to a concurrent
H. R. 1586—16 
resolution on the budget or the Balanced Budget and Emergency 
Deficit Control Act of 1985. 
SEC. 302. Of the funds made available for ‘‘Department of 
Commerce—National 
Telecommunications 
and 
Information 
Administration—Broadband Technology Opportunities Program’’ in 
title II of division A of Public Law 111–5, $302,000,000 are 
rescinded. 
SEC. 303. Of the funds appropriated in Department of Defense 
Appropriations Acts, the following funds are rescinded from the 
following accounts in the specified amounts: 
‘‘Aircraft Procurement, Army, 2008/2010’’, $21,000,000; 
‘‘Procurement of Weapons and Tracked Combat Vehicles, 
Army, 2008/2010’’, $21,000,000; 
‘‘Procurement 
of 
Ammunition, 
Army, 
2008/2010’’, 
$17,000,000; 
‘‘Other Procurement, Army, 2008/2010’’, $75,000,000; 
‘‘Weapons Procurement, Navy, 2008/2010’’, $26,000,000; 
‘‘Other Procurement, Navy, 2008/2010’’, $42,000,000; 
‘‘Procurement, Marine Corps, 2008/2010’’, $13,000,000; 
‘‘Aircraft 
Procurement, 
Air 
Force, 
2008/2010’’, 
$102,000,000; 
‘‘Missile Procurement, Air Force, 2008/2010’’, $28,000,000; 
‘‘Procurement of Ammunition, Air Force, 2008/2010’’, 
$7,000,000; 
‘‘Other Procurement, Air Force, 2008/2010’’, $130,000,000; 
‘‘Procurement, Defense-Wide, 2008/2010’’, $33,000,000; 
‘‘Research, Development, Test and Evaluation, Army, 2009/ 
2010’’, $76,000,000; 
‘‘Research, Development, Test and Evaluation, Air Force, 
2009/2010’’, $164,000,000; 
‘‘Research, Development, Test and Evaluation, Defense- 
Wide, 2009/2010’’, $137,000,000; 
‘‘Operation, Test and Evaluation, Defense, 2009/2010’’, 
$1,000,000; 
‘‘Operation and Maintenance, Army, 2010’’, $154,000,000; 
‘‘Operation and Maintenance, Navy, 2010’’, $155,000,000; 
‘‘Operation 
and 
Maintenance, 
Marine 
Corps, 
2010’’, 
$25,000,000; 
‘‘Operation 
and 
Maintenance, 
Air 
Force, 
2010’’, 
$155,000,000; 
‘‘Operation 
and 
Maintenance, 
Defense-Wide, 
2010’’, 
$126,000,000; 
‘‘Operation and Maintenance, Army Reserve, 2010’’, 
$12,000,000; 
‘‘Operation and Maintenance, Navy Reserve, 2010’’, 
$6,000,000; 
‘‘Operation and Maintenance, Marine Corps Reserve, 2010’’, 
$1,000,000; 
‘‘Operation and Maintenance, Air Force Reserve, 2010’’, 
$14,000,000; 
‘‘Operation and Maintenance, Army National Guard, 2010’’, 
$28,000,000; and 
‘‘Operation and Maintenance, Air National Guard, 2010’’, 
$27,000,000. 
SEC. 304. (a) Of the funds appropriated in the American 
Recovery and Reinvestment Act of 2009 (Public Law 111–5), the