H. R. 2014—148
of such terminal offers dyed diesel fuel and kerosene for removal
for nontaxable use in accordance with section 4082(a).
‘‘(2) EXCEPTION.—Paragraph (1) shall not apply to any
terminal exclusively providing aviation-grade kerosene by pipe-
line to an airport.’’.
(e) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 4041(a), as amended by title
IX, is amended by striking ‘‘kerosene,’’.
(2) Paragraph (1) of section 4041(c) is amended by striking
‘‘any liquid’’ and inserting ‘‘kerosene and any other liquid’’.
(3)(A) The heading for section 4082 is amended by inserting
‘‘AND KEROSENE’’ after ‘‘DIESEL FUEL’’.
(B) The table of sections for subpart A of part III of sub-
chapter A of chapter 32 is amended by inserting ‘‘and kerosene’’
after ‘‘diesel fuel’’ in the item relating to section 4082.
(4) Subsection (b) of section 4083 is amended by striking
‘‘gasoline, diesel fuel,’’ and inserting ‘‘taxable fuels’’.
(5) Subsection (a) of section 4093 is amended by striking
‘‘any liquid’’ and inserting ‘‘kerosene and any other liquid’’.
(6) The material following subparagraph (F) of section
6416(b)(2) is amended by inserting ‘‘or kerosene’’ after ‘‘diesel
fuel’’.
(7) Paragraphs (1) and (3) of section 6427(f), and the head-
ing for section 6427(f), are each amended by inserting ‘‘ker-
osene,’’ after ‘‘diesel fuel,’’.
(8) Paragraph (2) of section 6427(f) is amended by striking
‘‘or diesel fuel’’ each place it appears and inserting ‘‘, diesel
fuel, or kerosene’’.
(9) Subparagraph (A) of section 6427(i)(3) is amended by
striking ‘‘or diesel fuel’’ and inserting ‘‘, diesel fuel, or kerosene’’.
(10) The heading for paragraph (4) of section 6427(i) is
amended to read as follows:
‘‘(4) SPECIAL
RULE
FOR
REFUNDS
UNDER
SUBSECTION
(l).—’’.
(11) Paragraph (1) of section 6715(c) is amended by insert-
ing ‘‘or kerosene’’ after ‘‘diesel fuel’’.
(12)(A) The text of section 7232 is amended by striking
‘‘gasoline, lubricating oil, diesel fuel’’ and inserting ‘‘any taxable
fuel (as defined in section 4083)’’.
(B) The section heading for section 7232 is amended to
read as follows:
‘‘SEC. 7232. FAILURE TO REGISTER UNDER SECTION 4101, FALSE REP-
RESENTATIONS OF REGISTRATION STATUS, ETC.’’.
(C) The table of sections for part II of subchapter A of
chapter 75 is amended by striking the item relating to section
7232 and inserting the following:
‘‘Sec. 7232. Failure to register under section 4101, false representations of
registration status, etc.’’.
(13) Sections 9503(b)(1)(E) and 9508(b)(2) are each amend-
ed by striking ‘‘and diesel fuel’’ and inserting ‘‘, diesel fuel,
and kerosene’’.
(14) Subparagraph (B) of section 9503(b)(5) is amended
by striking ‘‘or diesel fuel’’ and inserting ‘‘, diesel fuel, or ker-
osene’’.
(f) EFFECTIVE DATE.—The amendments made by this section
shall take effect on July 1, 1998.
H. R. 2014—149
(g) FLOOR STOCK TAXES.—
(1) IMPOSITION
OF
TAX.—In the case of kerosene which
is held on July 1, 1998, by any person, there is hereby imposed
a floor stocks tax of 24.4 cents per gallon.
(2) LIABILITY FOR TAX AND METHOD OF PAYMENT.—
(A) LIABILITY
FOR
TAX.—A person holding kerosene
on July 1, 1998, to which the tax imposed by paragraph
(1) applies shall be liable for such tax.
(B) METHOD OF PAYMENT.—The tax imposed by para-
graph (1) shall be paid in such manner as the Secretary
shall prescribe.
(C) TIME FOR PAYMENT.—The tax imposed by para-
graph (1) shall be paid on or before August 31, 1998.
(3) DEFINITIONS.—For purposes of this subsection—
(A) HELD BY A PERSON.—Kerosene shall be considered
as ‘‘held by a person’’ if title thereto has passed to such
person (whether or not delivery to the person has been
made).
(B) SECRETARY.—The term ‘‘Secretary’’ means the Sec-
retary of the Treasury or his delegate.
(4) EXCEPTION
FOR
EXEMPT
USES.—The tax imposed by
paragraph (1) shall not apply to kerosene held by any person
exclusively for any use to the extent a credit or refund of
the tax imposed by section 4081 of the Internal Revenue Code
of 1986 is allowable for such use.
(5) EXCEPTION FOR FUEL HELD IN VEHICLE TANK.—No tax
shall be imposed by paragraph (1) on kerosene held in the
tank of a motor vehicle or motorboat.
(6) EXCEPTION FOR CERTAIN AMOUNTS OF FUEL.—
(A) IN GENERAL.—No tax shall be imposed by para-
graph (1) on kerosene held on July 1, 1998, by any person
if the aggregate amount of kerosene held by such person
on such date does not exceed 2,000 gallons. The preceding
sentence shall apply only if such person submits to the
Secretary (at the time and in the manner required by
the Secretary) such information as the Secretary shall
require for purposes of this paragraph.
(B) EXEMPT FUEL.—For purposes of subparagraph (A),
there shall not be taken into account fuel held by any
person which is exempt from the tax imposed by paragraph
(1) by reason of paragraph (4) or (5).
(C) CONTROLLED GROUPS.—For purposes of this para-
graph—
(i) CORPORATIONS.—
(I) IN GENERAL.—All persons treated as a con-
trolled group shall be treated as 1 person.
(II) CONTROLLED
GROUP.—The term ‘‘con-
trolled group’’ has the meaning given to such term
by subsection (a) of section 1563 of such Code;
except that for such purposes the phrase ‘‘more
than 50 percent’’ shall be substituted for the
phrase ‘‘at least 80 percent’’ each place it appears
in such subsection.
(ii) NONINCORPORATED
PERSONS
UNDER
COMMON
CONTROL.—Under regulations prescribed by the Sec-
retary, principles similar to the principles of clause
(i) shall apply to a group of persons under common
H. R. 2014—150
control where 1 or more of such persons is not a
corporation.
(7) COORDINATION
WITH
SECTION
4081.—No tax shall be
imposed by paragraph (1) on kerosene to the extent that tax
has been (or will be) imposed on such kerosene under section
4081 or 4091 of such Code.
(8) OTHER LAWS APPLICABLE.—All provisions of law, includ-
ing penalties, applicable with respect to the taxes imposed
by section 4081 of such Code shall, insofar as applicable and
not inconsistent with the provisions of this subsection, apply
with respect to the floor stock taxes imposed by paragraph
(1) to the same extent as if such taxes were imposed by such
section 4081.
SEC. 1033. RESTORATION OF LEAKING UNDERGROUND STORAGE TANK
TRUST FUND TAXES.
Paragraph (3) of section 4081(d) is amended by striking ‘‘shall
not apply after December 31, 1995’’ and inserting ‘‘shall apply
after September 30, 1997, and before April 1, 2005’’.
SEC. 1034. APPLICATION OF COMMUNICATIONS TAX TO PREPAID TELE-
PHONE CARDS.
(a) IN GENERAL.—Section 4251 is amended by adding at the
end the following new subsection:
‘‘(d) TREATMENT OF PREPAID TELEPHONE CARDS.—
‘‘(1) IN GENERAL.—For purposes of this subchapter, in the
case of communications services acquired by means of a prepaid
telephone card—
‘‘(A) the face amount of such card shall be treated
as the amount paid for such communications services, and
‘‘(B) that amount shall be treated as paid when the
card is transferred by any telecommunications carrier to
any person who is not such a carrier.
‘‘(2) DETERMINATION OF FACE AMOUNT IN ABSENCE OF SPECI-
FIED DOLLAR AMOUNT.—In the case of any prepaid telephone
card which entitles the user other than to a specified dollar
amount of use, the face amount shall be determined under
regulations prescribed by the Secretary.
‘‘(3) PREPAID TELEPHONE CARD.—For purposes of this sub-
section, the term ‘prepaid telephone card’ means any card or
other similar arrangement which permits its holder to obtain
communications services and pay for such services in advance.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to amounts paid in calendar months beginning more
than 60 days after the date of the enactment of this Act.
SEC. 1035. EXTENSION OF TEMPORARY UNEMPLOYMENT TAX.
Section 3301 (relating to rate of unemployment tax) is amend-
ed—
(1) by striking ‘‘1998’’ in paragraph (1) and inserting ‘‘2007’’,
and
(2) by striking ‘‘1999’’ in paragraph (2) and inserting ‘‘2008’’.
H. R. 2014—151
Subtitle E—Provisions Relating to Tax-
Exempt Entities
SEC. 1041. EXPANSION OF LOOK-THRU RULE FOR INTEREST, ANNU-
ITIES, ROYALTIES, AND RENTS DERIVED BY SUBSIDI-
ARIES OF TAX-EXEMPT ORGANIZATIONS.
(a) IN GENERAL.—Paragraph (13) of section 512(b) is amended
to read as follows:
‘‘(13) SPECIAL RULES FOR CERTAIN AMOUNTS RECEIVED FROM
CONTROLLED ENTITIES.—
‘‘(A) IN GENERAL.—If an organization (in this paragraph
referred to as the ‘controlling organization’) receives
(directly or indirectly) a specified payment from another
entity which it controls (in this paragraph referred to as
the ‘controlled entity’), notwithstanding paragraphs (1), (2),
and (3), the controlling organization shall include such
payment as an item of gross income derived from an unre-
lated trade or business to the extent such payment reduces
the net unrelated income of the controlled entity (or
increases any net unrelated loss of the controlled entity).
There shall be allowed all deductions of the controlling
organization directly connected with amounts treated as
derived from an unrelated trade or business under the
preceding sentence.
‘‘(B) NET UNRELATED INCOME OR LOSS.—For purposes
of this paragraph—
‘‘(i) NET UNRELATED INCOME.—The term ‘net unre-
lated income’ means—
‘‘(I) in the case of a controlled entity which
is not exempt from tax under section 501(a), the
portion of such entity’s taxable income which
would be unrelated business taxable income if such
entity were exempt from tax under section 501(a)
and had the same exempt purposes (as defined
in 
section 
513A(a)(5)(A)) 
as 
the 
controlling
organization, or
‘‘(II) in the case of a controlled entity which
is exempt from tax under section 501(a), the
amount of the unrelated business taxable income
of the controlled entity.
‘‘(ii) NET UNRELATED LOSS.—The term ‘net unre-
lated loss’ means the net operating loss adjusted under
rules similar to the rules of clause (i).
‘‘(C) SPECIFIED PAYMENT.—For purposes of this para-
graph, the term ‘specified payment’ means any interest,
annuity, royalty, or rent.
‘‘(D) DEFINITION OF CONTROL.—For purposes of this
paragraph—
‘‘(i) CONTROL.—The term ‘control’ means—
‘‘(I) in the case of a corporation, ownership
(by vote or value) of more than 50 percent of
the stock in such corporation,
‘‘(II) in the case of a partnership, ownership
of more than 50 percent of the profits interests
or capital interests in such partnership, or
H. R. 2014—152
‘‘(III) in any other case, ownership of more
than 50 percent of the beneficial interests in the
entity.
‘‘(ii) 
CONSTRUCTIVE
OWNERSHIP.—Section 
318
(relating to constructive ownership of stock) shall apply
for purposes of determining ownership of stock in a
corporation. Similar principles shall apply for purposes
of determining ownership of interests in any other
entity.
‘‘(E) RELATED PERSONS.—The Secretary shall prescribe
such rules as may be necessary or appropriate to prevent
avoidance of the purposes of this paragraph through the
use of related persons.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after the date of the enactment of this Act.
(2) BINDING CONTRACTS.—The amendments made by this
section shall not apply to any payment made during the first
2 taxable years beginning on or after the date of the enactment
of this Act if such payment is made pursuant to a written
binding contract in effect on June 8, 1997, and at all times
thereafter before such payment.
SEC. 1042. TERMINATION OF CERTAIN EXCEPTIONS FROM RULES
RELATING TO EXEMPT ORGANIZATIONS WHICH PROVIDE
COMMERCIAL-TYPE INSURANCE.
(a) IN
GENERAL.—Subparagraphs (A) and (B) of section
1012(c)(4) of the Tax Reform Act of 1986 shall not apply to any
taxable year beginning after December 31, 1997.
(b) SPECIAL RULES.—In the case of an organization to which
section 501(m) of the Internal Revenue Code of 1986 applies solely
by reason of the amendment made by subsection (a)—
(1) no adjustment shall be made under section 481 (or
any other provision) of such Code on account of a change
in its method of accounting for its first taxable year beginning
after December 31, 1997, and
(2) for purposes of determining gain or loss, the adjusted
basis of any asset held on the 1st day of such taxable year
shall be treated as equal to its fair market value as of such
day.
(c) RESERVE WEAKENING AFTER JUNE 8, 1997.—Any reserve
weakening after June 8, 1997, by an organization described in
subsection (b) shall be treated as occurring in such organization’s
1st taxable year beginning after December 31, 1997.
(d) REGULATIONS.—The Secretary of the Treasury or his dele-
gate may prescribe rules for providing proper adjustments for
organizations described in subsection (b) with respect to short tax-
able years which begin during 1998 by reason of section 843 of
the Internal Revenue Code of 1986.
H. R. 2014—153
Subtitle F—Foreign Provisions
SEC. 1051. DEFINITION OF FOREIGN PERSONAL HOLDING COMPANY
INCOME.
(a) INCOME FROM NOTIONAL PRINCIPAL CONTRACTS AND PAY-
MENTS IN LIEU OF DIVIDENDS.—
(1) IN GENERAL.—Paragraph (1) of section 954(c) (defining
foreign personal holding company income) is amended by adding
at the end the following new subparagraphs:
‘‘(F) INCOME FROM NOTIONAL PRINCIPAL CONTRACTS.—
Net income from notional principal contracts. Any item
of income, gain, deduction, or loss from a notional principal
contract entered into for purposes of hedging any item
described in any preceding subparagraph shall not be taken
into account for purposes of this subparagraph but shall
be taken into account under such other subparagraph.
‘‘(G) PAYMENTS IN LIEU OF DIVIDENDS.—Payments in
lieu of dividends which are made pursuant to an agreement
to which section 1058 applies.’’.
(2) CONFORMING AMENDMENT.—Subparagraph (B) of section
954(c)(1) is amended—
(A) by striking the second sentence, and
(B) by striking ‘‘also’’ in the last sentence.
(b) EXCEPTION FOR DEALERS.—Paragraph (2) of section 954(c)
is amended by adding at the end the following new subparagraph:
‘‘(C) EXCEPTION FOR DEALERS.—Except as provided in
subparagraph (A), (E), or (G) of paragraph (1) or by regula-
tions, in the case of a regular dealer in property (within
the meaning of paragraph (1)(B)), forward contracts, option
contracts, or similar financial instruments (including
notional principal contracts and all instruments referenced
to commodities), there shall not be taken into account
in computing foreign personal holding income any item
of income, gain, deduction, or loss from any transaction
(including hedging transactions) entered into in the ordi-
nary course of such dealer’s trade or business as such
a dealer.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after the date of the enact-
ment of this Act.
SEC. 1052. PERSONAL PROPERTY USED PREDOMINANTLY IN THE
UNITED STATES TREATED AS NOT PROPERTY OF A LIKE
KIND WITH RESPECT TO PROPERTY USED PREDOMI-
NANTLY OUTSIDE THE UNITED STATES.
(a) IN GENERAL.—Subsection (h) of section 1031 (relating to
exchange of property held for productive use or investment) is
amended to read as follows:
‘‘(h) SPECIAL RULES FOR FOREIGN REAL AND PERSONAL PROP-
ERTY.—For purposes of this section—
‘‘(1) REAL PROPERTY.—Real property located in the United
States and real property located outside the United States
are not property of a like kind.
‘‘(2) PERSONAL PROPERTY.—
‘‘(A) IN
GENERAL.—Personal property used predomi-
nantly within the United States and personal property
H. R. 2014—154
used predominantly outside the United States are not prop-
erty of a like kind.
‘‘(B) PREDOMINANT
USE.—Except as provided in
subparagraph (C) and (D), the predominant use of any
property shall be determined based on—
‘‘(i) in the case of the property relinquished in
the exchange, the 2-year period ending on the date
of such relinquishment, and
‘‘(ii) in the case of the property acquired in the
exchange, the 2-year period beginning on the date of
such acquisition.
‘‘(C) PROPERTY HELD FOR LESS THAN 2 YEARS.—Except
in the case of an exchange which is part of a transaction
(or series of transactions) structured to avoid the purposes
of this subsection—
‘‘(i) only the periods the property was held by
the person relinquishing the property (or any related
person) shall be taken into account under subpara-
graph (B)(i), and
‘‘(ii) only the periods the property was held by
the person acquiring the property (or any related per-
son) shall be taken into account under subparagraph
(B)(ii).
‘‘(D) SPECIAL RULE FOR CERTAIN PROPERTY.—Property
described in any subparagraph of section 168(g)(4) shall
be treated as used predominantly in the United States.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by this section
shall apply to transfers after June 8, 1997, in taxable years
ending after such date.
(2) BINDING CONTRACTS.—The amendment made by this
section shall not apply to any transfer pursuant to a written
binding contract in effect on June 8, 1997, and at all times
thereafter before the disposition of property. A contract shall
not fail to meet the requirements of the preceding sentence
solely because—
(A) it provides for a sale in lieu of an exchange, or
(B) the property to be acquired as replacement property
was not identified under such contract before June 9, 1997.
SEC. 1053. HOLDING PERIOD REQUIREMENT FOR CERTAIN FOREIGN
TAXES.
(a) IN GENERAL.—Section 901 is amended by redesignating
subsection (k) as subsection (l) and by inserting after subsection
(j) the following new subsection:
‘‘(k) MINIMUM HOLDING PERIOD FOR CERTAIN TAXES.—
‘‘(1) WITHHOLDING TAXES.—
‘‘(A) IN GENERAL.—In no event shall a credit be allowed
under subsection (a) for any withholding tax on a dividend
with respect to stock in a corporation if—
‘‘(i) such stock is held by the recipient of the divi-
dend for 15 days or less during the 30-day period
beginning on the date which is 15 days before the
date on which such share becomes ex-dividend with
respect to such dividend, or
‘‘(ii) to the extent that the recipient of the dividend
is under an obligation (whether pursuant to a short
H. R. 2014—155
sale or otherwise) to make related payments with
respect to positions in substantially similar or related
property.
‘‘(B) WITHHOLDING TAX.—For purposes of this para-
graph, the term ‘withholding tax’ includes any tax deter-
mined on a gross basis; but does not include any tax
which is in the nature of a prepayment of a tax imposed
on a net basis.
‘‘(2) DEEMED PAID TAXES.—In the case of income, war prof-
its, or excess profits taxes deemed paid under section 853,
902, or 960 through a chain of ownership of stock in 1 or
more corporations, no credit shall be allowed under subsection
(a) for such taxes if—
‘‘(A) any stock of any corporation in such chain (the
ownership of which is required to obtain credit under sub-
section (a) for such taxes) is held for less than the period
described in paragraph (1)(A)(i), or
‘‘(B) the corporation holding the stock is under an
obligation referred to in paragraph (1)(A)(ii).
‘‘(3) 45-DAY RULE IN THE CASE OF CERTAIN PREFERENCE
DIVIDENDS.—In the case of stock having preference in dividends
and dividends with respect to such stock which are attributable
to a period or periods aggregating in excess of 366 days, para-
graph (1)(A)(i) shall be applied—
‘‘(A) by substituting ‘45 days’ for ‘15 days’ each place
it appears, and
‘‘(B) by substituting ‘90-day period’ for ‘30-day period’.
‘‘(4) EXCEPTION
FOR
CERTAIN
TAXES
PAID
BY
SECURITIES
DEALERS.—
‘‘(A) IN GENERAL.—Paragraphs (1) and (2) shall not
apply to any qualified tax with respect to any security
held in the active conduct in a foreign country of a securi-
ties business of any person—
‘‘(i) who is registered as a securities broker or
dealer under section 15(a) of the Securities Exchange
Act of 1934,
‘‘(ii) who is registered as a Government securities
broker or dealer under section 15C(a) of such Act,
or
‘‘(iii) who is licensed or authorized in such foreign
country to conduct securities activities in such country
and is subject to bona fide regulation by a securities
regulating authority of such country.
‘‘(B) QUALIFIED TAX.—For purposes of subparagraph
(A), the term ‘qualified tax’ means a tax paid to a foreign
country (other than the foreign country referred to in
subparagraph (A)) if—
‘‘(i) the dividend to which such tax is attributable
is subject to taxation on a net basis by the country
referred to in subparagraph (A), and
‘‘(ii) such country allows a credit against its net
basis tax for the full amount of the tax paid to such
other foreign country.
‘‘(C) REGULATIONS.—The Secretary may prescribe such
regulations as may be appropriate to carry out this para-
graph, including regulations to prevent the abuse of the
H. R. 2014—156
exception provided by this paragraph and to treat other
taxes as qualified taxes.
‘‘(5) CERTAIN RULES TO APPLY.—For purposes of this sub-
section, the rules of paragraphs (3) and (4) of section 246(c)
shall apply.
‘‘(6) TREATMENT OF BONA FIDE SALES.—If a person’s holding
period is reduced by reason of the application of the rules
of section 246(c)(4) to any contract for the bona fide sale of
stock, the determination of whether such person’s holding
period meets the requirements of paragraph (2) with respect
to taxes deemed paid under section 902 or 960 shall be made
as of the date such contract is entered into.
‘‘(7) TAXES ALLOWED AS 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.’’.
(b) NOTICE OF WITHHOLDING TAXES PAID BY REGULATED INVEST-
MENT COMPANY.—Subsection (c) of section 853 (relating to foreign
tax credit allowed to shareholders) is amended by adding at the
end the following new sentence: ‘‘Such notice shall also include
the amount of such taxes which (without regard to the election
under this section) would not be allowable as a credit under section
901(a) to the regulated investment company by reason of section
901(k).’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to dividends paid or accrued more than 30 days after
the date of the enactment of this Act.
SEC. 1054. DENIAL OF TREATY BENEFITS FOR CERTAIN PAYMENTS
THROUGH HYBRID ENTITIES.
(a) IN GENERAL.—Section 894 (relating to income affected by
treaty) is amended by inserting after subsection (b) the following
new subsection:
‘‘(c) DENIAL
OF TREATY BENEFITS
FOR CERTAIN PAYMENTS
THROUGH HYBRID ENTITIES.—
‘‘(1) APPLICATION TO CERTAIN PAYMENTS.—A foreign person
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 an item of income
derived through an entity which is treated as a partnership
(or is otherwise treated as fiscally transparent) for purposes
of this title if—
‘‘(A) such item is not treated for purposes of the tax-
ation laws of such foreign country as an item of income
of such person,
‘‘(B) the treaty does not contain a provision addressing
the applicability of the treaty in the case of an item of
income derived through a partnership, and
‘‘(C) the foreign country does not impose tax on a
distribution of such item of income from such entity to
such person.
‘‘(2) REGULATIONS.—The Secretary shall prescribe such
regulations as may be necessary or appropriate to determine
the extent to which a taxpayer to which paragraph (1) does
not apply shall not be entitled to benefits under any income
tax treaty of the United States with respect to any payment
received by, or income attributable to any activities of, an
entity organized in any jurisdiction (including the United
H. R. 2014—157
States) that is treated as a partnership or is otherwise treated
as fiscally transparent for purposes of this title (including a
common investment trust under section 584, a grantor trust,
or an entity that is disregarded for purposes of this title)
and is treated as fiscally nontransparent for purposes of the
tax laws of the jurisdiction of residence of the taxpayer.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply upon the date of enactment of this Act.
SEC. 1055. INTEREST ON UNDERPAYMENTS NOT REDUCED BY FOREIGN
TAX CREDIT CARRYBACKS.
(a) IN GENERAL.—Subsection (d) of section 6601 is amended
by redesignating paragraphs (2) and (3) as paragraphs (3) and
(4), respectively, and by inserting after paragraph (1) the following
new paragraph:
‘‘(2) FOREIGN
TAX
CREDIT
CARRYBACKS.—If any credit
allowed for any taxable year is increased by reason of a
carryback of tax paid or accrued to foreign countries or posses-
sions of the United States, such increase shall not affect the
computation of interest under this section for the period ending
with the filing date for the taxable year in which such taxes
were in fact paid or accrued, or, with respect to any portion
of such credit carryback from a taxable year attributable to
a net operating loss carryback or a capital loss carryback from
a subsequent taxable year, such increase shall not affect the
computation of interest under this section for the period ending
with the filing date for such subsequent taxable year.’’.
(b) CONFORMING AMENDMENT TO REFUNDS ATTRIBUTABLE TO
FOREIGN TAX CREDIT CARRYBACKS.—
(1) IN GENERAL.—Subsection (f) of section 6611 is amended
by redesignating paragraphs (2) and (3) as paragraphs (3) and
(4), respectively, and by inserting after paragraph (1) the follow-
ing new paragraph:
‘‘(2) FOREIGN TAX CREDIT CARRYBACKS.—For purposes of
subsection (a), if any overpayment of tax imposed by subtitle
A results from a carryback of tax paid or accrued to foreign
countries or possessions of the United States, such overpayment
shall be deemed not to have been made before the filing date
for the taxable year in which such taxes were in fact paid
or accrued, or, with respect to any portion of such credit
carryback from a taxable year attributable to a net operating
loss carryback or a capital loss carryback from a subsequent
taxable year, such overpayment shall be deemed not to have
been made before the filing date for such subsequent taxable
year.’’.
(2) CONFORMING AMENDMENTS.—
(A) Paragraph (4) of section 6611(f) (as so redesignated)
is amended—
(i) by striking ‘‘PARAGRAPHS (1) AND (2)’’ and insert-
ing ‘‘PARAGRAPHS (1), (2), AND (3)’’, and
(ii) by striking ‘‘paragraph (1) or (2)’’ each place
it appears and inserting ‘‘paragraph (1), (2), or (3)’’.
(B) Clause (ii) of section 6611(f)(4)(B) (as so redesig-
nated) is amended by striking ‘‘and’’ at the end of subclause
(I), by redesignating subclause (II) as subclause (III), and
by inserting after subclause (I) the following new subclause:
H. R. 2014—158
‘‘(II) in the case of a carryback of taxes paid
or accrued to foreign countries or possessions of
the United States, the taxable year in which such
taxes were in fact paid or accrued (or, with respect
to any portion of such carryback from a taxable
year attributable to a net operating loss carryback
or a capital loss carryback from a subsequent tax-
able year, such subsequent taxable year), and’’.
(C) Subclause (III) of section 6611(f)(4)(B)(ii) (as so
redesignated) is amended by inserting ‘‘(as defined in para-
graph (3)(B))’’ after ‘‘credit carryback’’ the first place it
appears.
(D) Section 6611 is amended by striking subsection
(g) and by redesignating subsections (h) and (i) as sub-
sections (g) and (h), respectively.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to foreign tax credit carrybacks arising in taxable years
beginning after the date of the enactment of this Act.
SEC. 1056. CLARIFICATION OF PERIOD OF LIMITATIONS ON CLAIM
FOR CREDIT OR REFUND ATTRIBUTABLE TO FOREIGN
TAX CREDIT CARRYFORWARD.
(a) IN GENERAL.—Subparagraph (A) of section 6511(d)(3) is
amended by striking ‘‘for the year with respect to which the claim
is made’’ and inserting ‘‘for the year in which such taxes were
actually paid or accrued’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to taxes paid or accrued in taxable years beginning
after the date of the enactment of this Act.
SEC. 1057. REPEAL OF EXCEPTION TO ALTERNATIVE MINIMUM FOR-
EIGN TAX CREDIT LIMIT.
(a) IN GENERAL.—Section 59(a)(2) (relating to limitation to 90
percent of tax) is amended by striking subparagraph (C).
(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.
Subtitle G—Partnership Provisions
SEC. 1061. ALLOCATION OF BASIS AMONG PROPERTIES DISTRIBUTED
BY PARTNERSHIP.
(a) IN GENERAL.—Subsection (c) of section 732 is amended
to read as follows:
‘‘(c) ALLOCATION OF BASIS.—
‘‘(1) IN GENERAL.—The basis of distributed properties to
which subsection (a)(2) or (b) is applicable shall be allocated—
‘‘(A)(i) first to any unrealized receivables (as defined
in section 751(c)) and inventory items (as defined in section
751(d)(2)) in an amount equal to the adjusted basis of
each such property to the partnership, and
‘‘(ii) if the basis to be allocated is less than the sum
of the adjusted bases of such properties to the partnership,
then, to the extent any decrease is required in order to
have the adjusted bases of such properties equal the basis
to be allocated, in the manner provided in paragraph (3),
and
H. R. 2014—159
‘‘(B) to the extent of any basis remaining after the
allocation under subparagraph (A), to other distributed
properties—
‘‘(i) first by assigning to each such other property
such other property’s adjusted basis to the partnership,
and
‘‘(ii) then, to the extent any increase or decrease
in basis is required in order to have the adjusted
bases of such other distributed properties equal such
remaining basis, in the manner provided in paragraph
(2) or (3), whichever is appropriate.
‘‘(2) METHOD
OF
ALLOCATING
INCREASE.—Any increase
required under paragraph (1)(B) shall be allocated among the
properties—
‘‘(A) first to properties with unrealized appreciation
in proportion to their respective amounts of unrealized
appreciation before such increase (but only to the extent
of each property’s unrealized appreciation), and
‘‘(B) then, to the extent such increase is not allocated
under subparagraph (A), in proportion to their respective
fair market values.
‘‘(3) METHOD
OF
ALLOCATING
DECREASE.—Any decrease
required under paragraph (1)(A) or (1)(B) shall be allocated—
‘‘(A) first to properties with unrealized depreciation
in proportion to their respective amounts of unrealized
depreciation before such decrease (but only to the extent
of each property’s unrealized depreciation), and
‘‘(B) then, to the extent such decrease is not allocated
under subparagraph (A), in proportion to their respective
adjusted bases (as adjusted under subparagraph (A)).’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to distributions after the date of the enactment of
this Act.
SEC. 1062. REPEAL OF REQUIREMENT THAT INVENTORY BE SUBSTAN-
TIALLY APPRECIATED WITH RESPECT TO SALE OR
EXCHANGE OF PARTNERSHIP INTEREST.
(a) IN GENERAL.—Paragraph (2) of section 751(a) is amended
to read as follows:
‘‘(2) inventory items of the partnership,’’.
(b) CONFORMING AMENDMENTS.—
(1)(A) Paragraph (1) of section 751(b) is amended by strik-
ing subparagraphs (A) and (B) and inserting the following
new subparagraphs:
‘‘(A) partnership property which is—
‘‘(i) unrealized receivables, or
‘‘(ii) inventory items which have appreciated
substantially in value,
in exchange for all or a part of his interest in other partner-
ship property (including money), or
‘‘(B) partnership property (including money) other than
property described in subparagraph (A)(i) or (ii) in exchange
for all or a part of his interest in partnership property
described in subparagraph (A)(i) or (ii),’’.
(B) Subsection (b) of section 751 is amended by adding
at the end the following new paragraph:
H. R. 2014—160
‘‘(3) SUBSTANTIAL
APPRECIATION.—For purposes of para-
graph (1)—
‘‘(A) IN GENERAL.—Inventory items of the partnership
shall be considered to have appreciated substantially in
value if their fair market value exceeds 120 percent of
the adjusted basis to the partnership of such property.
‘‘(B) CERTAIN PROPERTY EXCLUDED.—For purposes of
subparagraph (A), there shall be excluded any inventory
property if a principal purpose for acquiring such property
was to avoid the provisions of this subsection relating to
inventory items.’’.
(2) Subsection (d) of section 751 is amended to read as
follows:
‘‘(d) INVENTORY ITEMS.—For purposes of this subchapter, the
term ‘inventory items’ means—
‘‘(1) property of the partnership of the kind described in
section 1221(1),
‘‘(2) any other property of the partnership which, on sale
or exchange by the partnership, would be considered property
other than a capital asset and other than property described
in section 1231,
‘‘(3) any other property of the partnership which, if sold
or exchanged by the partnership, would result in a gain taxable
under subsection (a) of section 1246 (relating to gain on foreign
investment company stock), and
‘‘(4) any other property held by the partnership which,
if held by the selling or distributee partner, would be considered
property of the type described in paragraph (1), (2), or (3).’’.
(3) Sections 724(d)(2), 731(a)(2)(B), 731(c)(6), 732(c)(1)(A)
(as amended by the preceding section), 735(a)(2), and 735(c)(1)
are each amended by striking ‘‘section 751(d)(2)’’ and inserting
‘‘section 751(d)’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to sales, exchanges, and distributions after the
date of the enactment of this Act.
(2) BINDING CONTRACTS.—The amendments made by this
section shall not apply to any sale or exchange pursuant to
a written binding contract in effect on June 8, 1997, and at
all times thereafter before such sale or exchange.
SEC. 1063. EXTENSION OF TIME FOR TAXING PRECONTRIBUTION GAIN.
(a) IN GENERAL.—Sections 704(c)(1)(B) and 737(b)(1) are each
amended by striking ‘‘5 years’’ and inserting ‘‘7 years’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by subsection (a)
shall apply to property contributed to a partnership after June
8, 1997.
(2) BINDING CONTRACTS.—The amendment made by sub-
section (a) shall not apply to any property contributed pursuant
to a written binding contract in effect on June 8, 1997, and
at all times thereafter before such contribution if such contract
provides for the contribution of a fixed amount of property.
H. R. 2014—161
Subtitle H—Pension Provisions
SEC. 1071. PENSION ACCRUED BENEFIT DISTRIBUTABLE WITHOUT
CONSENT INCREASED TO $5,000.
(a) AMENDMENT TO 1986 CODE.—
(1) IN GENERAL.—Subparagraph (A) of section 411(a)(11)
(relating to restrictions on certain mandatory distributions)
is amended by striking ‘‘$3,500’’ and inserting ‘‘$5,000’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 411(a)(7)(B), paragraphs (1) and (2) of sec-
tion 417(e), and section 457(e)(9) are each amended by
striking ‘‘$3,500’’ each place it appears (other than the
headings) and inserting ‘‘the dollar limit under section
411(a)(11)(A)’’.
(B) The headings for paragraphs (1) and (2) of section
417(e) and subparagraph (A) of section 457(e)(9) are each
amended by striking ‘‘$3,500’’ and inserting ‘‘DOLLAR LIMIT’’.
(b) AMENDMENTS TO ERISA.—
(1) IN GENERAL.—Section 203(e)(1) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1053(e)(1)) is
amended by striking ‘‘$3,500’’ and inserting ‘‘$5,000’’.
(2) CONFORMING
AMENDMENTS.—Sections 204(d)(1) and
205(g) (1) and (2) (29 U.S.C. 1054(d)(1) and 1055(g) (1) and
(2)) are each amended by striking ‘‘$3,500’’ and inserting ‘‘the
dollar limit under section 203(e)(1)’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to plan years beginning after the date of the enactment
of this Act.
SEC. 1072. ELECTION TO RECEIVE TAXABLE CASH COMPENSATION IN
LIEU OF NONTAXABLE PARKING BENEFITS.
(a) IN GENERAL.—Section 132(f)(4) (relating to benefits not in
lieu of compensation) is amended by adding at the end the following
new sentence: ‘‘This paragraph shall not apply to any qualified
parking provided in lieu of compensation which otherwise would
have been includible in gross income of the employee, and no
amount shall be included in the gross income of the employee
solely because the employee may choose between the qualified park-
ing and compensation.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 1997.
SEC. 1073. REPEAL OF EXCESS DISTRIBUTION AND EXCESS RETIRE-
MENT ACCUMULATION TAX.
(a) REPEAL OF EXCESS DISTRIBUTION AND EXCESS RETIREMENT
ACCUMULATION TAX.—Section 4980A (relating to excess distribu-
tions from qualified retirement plans) is repealed.
(b) CONFORMING AMENDMENTS.—
(1) Section 691(c)(1) is amended by striking subparagraph
(C).
(2) Section 2013 is amended by striking subsection (g).
(3) Section 2053(c)(1)(B) is amended by striking the last
sentence.
(4) Section 6018(a) is amended by striking paragraph (4).
(c) EFFECTIVE DATES.—
H. R. 2014—162
(1) EXCESS DISTRIBUTION TAX REPEAL.—Except as provided
in paragraph (2), the repeal made by subsection (a) shall apply
to excess distributions received after December 31, 1996.
(2) EXCESS RETIREMENT ACCUMULATION TAX REPEAL.—The
repeal made by subsection (a) with respect to section 4980A(d)
of the Internal Revenue Code of 1986 and the amendments
made by subsection (b) shall apply to estates of decedents
dying after December 31, 1996.
SEC. 1074. INCREASE IN TAX ON PROHIBITED TRANSACTIONS.
(a) IN GENERAL.—Section 4975(a) is amended by striking ‘‘10
percent’’ and inserting ‘‘15 percent’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to prohibited transactions occurring after the date of
the enactment of this Act.
SEC. 1075. BASIS RECOVERY RULES FOR ANNUITIES OVER MORE THAN
ONE LIFE.
(a) IN GENERAL.—Section 72(d)(1)(B) is amended by adding
at the end the following new clause:
‘‘(iv) NUMBER OF ANTICIPATED PAYMENTS WHERE
MORE THAN ONE LIFE.—If the annuity is payable over
the lives of more than 1 individual, the number of
anticipated payments shall be determined as follows:
‘‘If the combined ages of annu-
itants are:
The number is:
Not more than 110 ...........................................................................
410
More than 110 but not more than 120 ...........................................
360
More than 120 but not more than 130 ...........................................
310
More than 130 but not more than 140 ...........................................
260
More than 140 ..................................................................................
210.’’.
(b) 
CONFORMING
AMENDMENT.—Section 
72(d)(1)(B)(iii) 
is
amended—
(1) by inserting ‘‘If the annuity is payable over the life
of a single individual, the number of anticipated payments
shall be determined as follows:’’ after the heading and before
the table, and
(2) by striking ‘‘primary’’ in the table.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply with respect to annuity starting dates beginning after
December 31, 1997.
Subtitle I—Other Revenue Provisions
SEC. 1081. TERMINATION OF SUSPENSE ACCOUNTS FOR FAMILY COR-
PORATIONS REQUIRED TO USE ACCRUAL METHOD OF
ACCOUNTING.
(a) IN GENERAL.—Subsection (i) of section 447 (relating to
method of accounting for corporations engaged in farming) is amend-
ed by striking paragraphs (3) and (4), by redesignating paragraphs
(5) and (6) as paragraphs (3) and (4), respectively, and by adding
at the end the following new paragraph:
‘‘(5) TERMINATION.—
‘‘(A) IN GENERAL.—No suspense account may be estab-
lished under this subsection by any corporation required
by this section to change its method of accounting for
any taxable year ending after June 8, 1997.
H. R. 2014—163
‘‘(B) PHASEOUT OF EXISTING SUSPENSE ACCOUNTS.—
‘‘(i) IN
GENERAL.—Each suspense account under
this subsection shall be reduced (but not below zero)
for each taxable year beginning after June 8, 1997,
by an amount equal to the lesser of—
‘‘(I) the applicable portion of such account, or
‘‘(II) 50 percent of the taxable income of the
corporation for the taxable year, or, if the corpora-
tion has no taxable income for such year, the
amount of any net operating loss (as defined in
section 172(c)) for such taxable year.
For purposes of the preceding sentence, the amount
of taxable income and net operating loss shall be deter-
mined without regard to this paragraph.
‘‘(ii) COORDINATION WITH OTHER REDUCTIONS.—The
amount of the applicable portion for any taxable year
shall be reduced (but not below zero) by the amount
of any reduction required for such taxable year under
any other provision of this subsection.
‘‘(iv) INCLUSION IN INCOME.—Any reduction in a
suspense account under this paragraph shall be
included in gross income for the taxable year of the
reduction.
‘‘(C) APPLICABLE PORTION.—For purposes of subpara-
graph (B), the term ‘applicable portion’ means, for any
taxable year, the amount which would ratably reduce the
amount in the account (after taking into account prior
reductions) to zero over the period consisting of such tax-
able year and the remaining taxable years in such first
20 taxable years.
‘‘(D) AMOUNTS AFTER 20TH YEAR.—Any amount in the
account as of the close of the 20th year referred to in
subparagraph (C) shall be treated as the applicable portion
for each succeeding year thereafter to the extent not
reduced under this paragraph for any prior taxable year
after such 20th year.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years ending after June 8, 1997.
SEC. 1082. MODIFICATION OF TAXABLE YEARS TO WHICH NET OPERAT-
ING LOSSES MAY BE CARRIED.
(a) IN GENERAL.—Subparagraph (A) of section 172(b)(1) (relat-
ing to years to which loss may be carried) is amended—
(1) by striking ‘‘3’’ in clause (i) and inserting ‘‘2’’, and
(2) by striking ‘‘15’’ in clause (ii) and inserting ‘‘20’’.
(b) RETENTION OF 3-YEAR CARRYBACK FOR CERTAIN LOSSES.—
Paragraph (1) of section 172(b) is amended by adding at the end
the following new subparagraph:
‘‘(F) RETENTION
OF
3-YEAR
CARRYBACK
IN
CERTAIN
CASES.—
‘‘(i) IN
GENERAL.—Subparagraph (A)(i) shall be
applied by substituting ‘3 years’ for ‘2 years’ with
respect to the portion of the net operating loss for
the taxable year which is an eligible loss with respect
to the taxpayer.
‘‘(ii) ELIGIBLE LOSS.—For purposes of clause (i),
the term ‘eligible loss’ means—
H. R. 2014—164
‘‘(I) in the case of an individual, losses of prop-
erty arising from fire, storm, shipwreck, or other
casualty, or from theft,
‘‘(II) in the case of a taxpayer which is a small
business, net operating losses attributable to Presi-
dentially declared disasters (as defined in section
1033(h)(3)), and
‘‘(III) in the case of a taxpayer engaged in
the trade or business of farming (as defined in
section 263A(e)(4)), net operating losses attrib-
utable to such Presidentially declared disasters.
‘‘(iii) SMALL
BUSINESS.—For purposes of this
subparagraph, the term ‘small business’ means a cor-
poration or partnership which meets the gross receipts
test of section 448(c) for the taxable year in which
the loss arose (or, in the case of a sole proprietorship,
which would meet such test if such proprietorship were
a corporation).’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to net operating losses for taxable years beginning
after the date of the enactment of this Act.
SEC. 1083. MODIFICATIONS TO TAXABLE YEARS TO WHICH UNUSED
CREDITS MAY BE CARRIED.
(a) IN GENERAL.—Section 39(a) (relating to unused credits)
is amended—
(1) in paragraph (1), by striking ‘‘3’’ each place it appears
and inserting ‘‘1’’ and by striking ‘‘15’’ each place it appears
and inserting ‘‘20’’; and
(2) in paragraph (2), by striking ‘‘18’’ each place it appears
and inserting ‘‘22’’ and by striking ‘‘17’’ each place it appears
and inserting ‘‘21’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to credits arising in taxable years beginning after
December 31, 1997.
SEC. 1084. EXPANSION OF DENIAL OF DEDUCTION FOR CERTAIN
AMOUNTS PAID IN CONNECTION WITH INSURANCE.
(a) DENIAL OF DEDUCTION FOR PREMIUMS.—
(1) IN GENERAL.—Paragraph (1) of section 264(a) is amend-
ed to read as follows:
‘‘(1) Premiums on any life insurance policy, or endowment
or annuity contract, if the taxpayer is directly or indirectly
a beneficiary under the policy or contract.’’.
(2) EXCEPTIONS.—Section 264 is amended by redesignating
subsections (b), (c), and (d) as subsections (c), (d), and (e),
respectively, and by inserting after subsection (a) the following
new subsection:
‘‘(b) EXCEPTIONS TO SUBSECTION (a)(1).—Subsection (a)(1) shall
not apply to—
‘‘(1) any annuity contract described in section 72(s)(5), and
‘‘(2) any annuity contract to which section 72(u) applies.’’.
(b) INTEREST ON POLICY LOANS.—
(1) IN GENERAL.—Paragraph (4) of section 264(a) is amend-
ed by striking ‘‘individual, who’’ and all that follows and insert-
ing ‘‘individual.’’.
H. R. 2014—165
(2) COORDINATION WITH TRANSFERS FOR VALUE.—Paragraph
(2) of section 101(a) is amended by adding at the end the
following new flush sentence:
‘‘The term ‘other amounts’ in the first sentence of this para-
graph includes interest paid or accrued by the transferee on
indebtedness with respect to such contract or any interest
therein if such interest paid or accrued is not allowable as
a deduction by reason of section 264(a)(4).’’.
(c) PRO RATA ALLOCATION OF INTEREST EXPENSE TO POLICY
CASH VALUES.—Section 264 is amended by adding at the end the
following new subsection:
‘‘(f) PRO RATA ALLOCATION OF INTEREST EXPENSE TO POLICY
CASH VALUES.—
‘‘(1) IN GENERAL.—No deduction shall be allowed for that
portion of the taxpayer’s interest expense which is allocable
to unborrowed policy cash values.
‘‘(2) ALLOCATION.—For purposes of paragraph (1), the por-
tion of the taxpayer’s interest expense which is allocable to
unborrowed policy cash values is an amount which bears the
same ratio to such interest expense as—
‘‘(A) the taxpayer’s average unborrowed policy cash
values of life insurance policies, and annuity and endow-
ment contracts, issued after June 8, 1997, bears to
‘‘(B) the sum of—
‘‘(i) in the case of assets of the taxpayer which
are life insurance policies or annuity or endowment
contracts, the average unborrowed policy cash values
of such policies and contracts, and
‘‘(ii) in the case of assets of the taxpayer not
described in clause (i), the average adjusted bases
(within the meaning of section 1016) of such assets.
‘‘(3) UNBORROWED POLICY CASH VALUE.—For purposes of
this subsection, the term ‘unborrowed policy cash value’ means,
with respect to any life insurance policy or annuity or endow-
ment contract, the excess of—
‘‘(A) the cash surrender value of such policy or contract
determined without regard to any surrender charge, over
‘‘(B) the amount of any loan with respect to such policy
or contract.
‘‘(4) EXCEPTION FOR CERTAIN POLICIES AND CONTRACTS.—
‘‘(A) POLICIES AND CONTRACTS COVERING 20-PERCENT
OWNERS, OFFICERS, DIRECTORS, AND
EMPLOYEES.—Para-
graph (1) shall not apply to any policy or contract owned
by an entity engaged in a trade or business if such policy
or contract covers only 1 individual and if such individual
is (at the time first covered by the policy or contract)—
‘‘(i) a 20-percent owner of such entity, or
‘‘(ii) an individual (not described in clause (i)) who
is an officer, director, or employee of such trade or
business.
A policy or contract covering a 20-percent owner of such
entity shall not be treated as failing to meet the require-
ments of the preceding sentence by reason of covering
the joint lives of such owner and such owner’s spouse.
‘‘(B) CONTRACTS SUBJECT TO CURRENT INCOME INCLU-
SION.—Paragraph (1) shall not apply to any annuity con-
tract to which section 72(u) applies.
H. R. 2014—166
‘‘(C) COORDINATION WITH PARAGRAPH (2).—Any policy
or contract to which paragraph (1) does not apply by reason
of this paragraph shall not be taken into account under
paragraph (2).
‘‘(D) 20-PERCENT
OWNER.—For purposes of subpara-
graph (A), the term ‘20-percent owner’ has the meaning
given such term by subsection (e)(4).
‘‘(5) EXCEPTION
FOR
POLICIES
AND
CONTRACTS
HELD
BY
NATURAL PERSONS; TREATMENT OF PARTNERSHIPS AND S COR-
PORATIONS.—
‘‘(A) POLICIES AND CONTRACTS HELD BY NATURAL PER-
SONS.—
‘‘(i) IN GENERAL.—This subsection shall not apply
to any policy or contract held by a natural person.
‘‘(ii) EXCEPTION WHERE BUSINESS IS BENEFICIARY.—
If a trade or business is directly or indirectly the
beneficiary under any policy or contract, such policy
or contract shall be treated as held by such trade
or business and not by a natural person.
‘‘(iii) SPECIAL RULES.—
‘‘(I) CERTAIN
TRADES
OR
BUSINESSES
NOT
TAKEN INTO ACCOUNT.—Clause (ii) shall not apply
to any trade or business carried on as a sole
proprietorship and to any trade or business
performing services as an employee.
‘‘(II) 
LIMITATION
ON
UNBORROWED
CASH
VALUE.—The amount of the unborrowed cash value
of any policy or contract which is taken into
account by reason of clause (ii) shall not exceed
the benefit to which the trade or business is
directly or indirectly entitled under the policy or
contract.
‘‘(iv) REPORTING.—The Secretary shall require such
reporting from policyholders and issuers as is nec-
essary to carry out clause (ii). Any report required
under the preceding sentence shall be treated as a
statement referred to in section 6724(d)(1).
‘‘(B) TREATMENT
OF
PARTNERSHIPS
AND
S
CORPORA-
TIONS.—In the case of a partnership or S corporation, this
subsection shall be applied at the partnership and corporate
levels.
‘‘(6) SPECIAL RULES.—
‘‘(A) COORDINATION WITH SUBSECTION (a) AND SECTION
265.—If interest on any indebtedness is disallowed under
subsection (a) or section 265—
‘‘(i) such disallowed interest shall not be taken
into account for purposes of applying this subsection,
and
‘‘(ii) the amount otherwise taken into account
under paragraph (2)(B) shall be reduced (but not below
zero) by the amount of such indebtedness.
‘‘(B) COORDINATION
WITH
SECTION
263A.—This sub-
section shall be applied before the application of section
263A (relating to capitalization of certain expenses where
taxpayer produces property).
‘‘(7) INTEREST EXPENSE.—The term ‘interest expense’ means
the aggregate amount allowable to the taxpayer as a deduction
H. R. 2014—167
for interest (within the meaning of section 265(b)(4)) for the
taxable year (determined without regard to this subsection,
section 265(b), and section 291).
‘‘(8) AGGREGATION RULES.—
‘‘(A) IN GENERAL.—All members of a controlled group
(within the meaning of subsection (d)(5)(B)) shall be treated
as 1 taxpayer for purposes of this subsection.
‘‘(B) TREATMENT OF INSURANCE COMPANIES.—This sub-
section shall not apply to an insurance company subject
to tax under subchapter L, and subparagraph (A) shall
be applied without regard to any member of an affiliated
group which is an insurance company.’’.
(b) TREATMENT OF INSURANCE COMPANIES.—
(1)(A) Clause (ii) of section 805(a)(4)(C) is amended by
inserting ‘‘, or out of the increase for the taxable year in
policy cash values (within the meaning of subparagraph (F))
of life insurance policies and annuity and endowment contracts
to which section 264(f) applies,’’ after ‘‘tax-exempt interest’’.
(B) Clause (iii) of section 805(a)(4)(D) is amended by strik-
ing ‘‘and’’ and inserting ‘‘, the increase for the taxable year
in policy cash values (within the meaning of subparagraph
(F)) of life insurance policies and annuity and endowment con-
tracts to which section 264(f) applies, and’’.
(C) Paragraph (4) of section 805(a) is amended by adding
at the end the following new subparagraph:
‘‘(F) INCREASE IN POLICY CASH VALUES.—For purposes
of subparagraphs (C) and (D)—
‘‘(i) IN GENERAL.—The increase in the policy cash
value for any taxable year with respect to policy or
contract is the amount of the increase in the adjusted
cash value during such taxable year determined with-
out regard to—
‘‘(I) gross premiums paid during such taxable
year, and
‘‘(II) distributions (other than amounts includ-
ible in the policyholder’s gross income) during such
taxable year to which section 72(e) applies.
‘‘(ii) ADJUSTED
CASH
VALUE.—For purposes of
clause (i), the term ‘adjusted cash value’ means the
cash surrender value of the policy or contract increased
by the sum of—
‘‘(I) commissions payable with respect to such
policy or contract for the taxable year, and
‘‘(II) 
asset 
management 
fees, 
surrender
charges, mortality and expense charges, and any
other fees or charges specified in regulations pre-
scribed by the Secretary which are imposed (or
which would be imposed were the policy or contract
canceled) with respect to such policy or contract
for the taxable year.’’.
(2)(A) Subparagraph (B) of section 807(a)(2) is amended
by striking ‘‘interest,’’ and inserting ‘‘interest and the amount
of the policyholder’s share of the increase for the taxable year
in policy cash values (within the meaning of section
805(a)(4)(F)) of life insurance policies and annuity and endow-
ment contracts to which section 264(f) applies,’’.
H. R. 2014—168
(B) Subparagraph (B) of section 807(b)(1) is amended by
striking ‘‘interest,’’ and inserting ‘‘interest and the amount of
the policyholder’s share of the increase for the taxable year
in policy cash values (within the meaning of section
805(a)(4)(F)) of life insurance policies and annuity and endow-
ment contracts to which section 264(f) applies,’’.
(3) Paragraph (1) of section 812(d) is amended by striking
‘‘and’’ at the end of subparagraph (B), by striking the period
at the end of subparagraph (C) and inserting ‘‘, and’’, and
by adding at the end the following new subparagraph:
‘‘(D) the increase for any taxable year in the policy
cash values (within the meaning of section 805(a)(4)(F))
of life insurance policies and annuity and endowment con-
tracts to which section 264(f) applies.’’.
(4) Subparagraph (B) of section 832(b)(5) is amended by
striking ‘‘and’’ at the end of clause (i), by striking the period
at the end of clause (ii) and inserting ‘‘, and’’, and by adding
at the end the following new clause:
‘‘(iii) the increase for the taxable year in policy
cash values (within the meaning of section 805(a)(4)(F))
of life insurance policies and annuity and endowment
contracts to which section 264(f) applies.’’.
(c) CONFORMING AMENDMENT.—Subparagraph (A) of section
265(b)(4) is amended by inserting ‘‘, section 264,’’ before ‘‘and section
291’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to contracts issued after June 8, 1997, in taxable years
ending after such date. For purposes of the preceding sentence,
any material increase in the death benefit or other material change
in the contract shall be treated as a new contract but the addition
of covered lives shall be treated as a new contract only with respect
to such additional covered lives. For purposes of this subsection,
an increase in the death benefit under a policy or contract issued
in connection with a lapse described in section 501(d)(2) of the
Health Insurance Portability and Accountability Act of 1996 shall
not be treated as a new contract.
SEC. 1085. IMPROVED ENFORCEMENT OF THE APPLICATION OF THE
EARNED INCOME CREDIT.
(a) RESTRICTIONS ON AVAILABILITY OF EARNED INCOME CREDIT
FOR TAXPAYERS WHO IMPROPERLY CLAIMED CREDIT IN PRIOR YEAR.—
(1) IN GENERAL.—Section 32 is amended by redesignating
subsections (k) and (l) as subsections (l) and (m), respectively,
and by inserting after subsection (j) the following new sub-
section:
‘‘(k) RESTRICTIONS ON TAXPAYERS WHO IMPROPERLY CLAIMED
CREDIT IN PRIOR YEAR.—
‘‘(1) TAXPAYERS MAKING PRIOR FRAUDULENT OR RECKLESS
CLAIMS.—
‘‘(A) IN GENERAL.—No credit shall be allowed under
this section for any taxable year in the disallowance period.
‘‘(B) DISALLOWANCE
PERIOD.—For purposes of para-
graph (1), the disallowance period is—
‘‘(i) the period of 10 taxable years after the most
recent taxable year for which there was a final deter-
mination that the taxpayer’s claim of credit under this
section was due to fraud, and
H. R. 2014—169
‘‘(ii) the period of 2 taxable years after the most
recent taxable year for which there was a final deter-
mination that the taxpayer’s claim of credit under this
section was due to reckless or intentional disregard
of rules and regulations (but not due to fraud).
‘‘(2) TAXPAYERS MAKING IMPROPER PRIOR CLAIMS.—In the
case of a taxpayer who is denied credit under this section
for any taxable year as a result of the deficiency procedures
under subchapter B of chapter 63, no credit shall be allowed
under this section for any subsequent taxable year unless the
taxpayer provides such information as the Secretary may
require to demonstrate eligibility for such credit.’’.
(2) DUE DILIGENCE REQUIREMENT ON INCOME TAX RETURN
PREPARERS.—Section 6695 is amended by adding at the end
the following new subsection:
‘‘(g) FAILURE TO BE DILIGENT
IN DETERMINING ELIGIBILITY
FOR EARNED INCOME CREDIT.—Any person who is an income tax
return preparer with respect to any return or claim for refund
who fails to comply with due diligence requirements imposed by
the Secretary by regulations with respect to determining eligibility
for, or the amount of, the credit allowable by section 32 shall
pay a penalty of $100 for each such failure.’’.
(3) EXTENSION PROCEDURES APPLICABLE TO MATHEMATICAL
OR CLERICAL ERRORS.—Paragraph (2) of section 6213(g) (relating
to the definition of mathematical or clerical errors) is amended
by striking ‘‘and’’ at the end of subparagraph (H), by striking
the period at the end of subparagraph (I) and inserting ‘‘,
and’’, and by inserting after subparagraph (I) the following
new subparagraph:
‘‘(J) an omission of information required by section
32(k)(2) (relating to taxpayers making improper prior
claims of earned income credit).’’.
(b) INCREASE
IN
NET
LOSS
DISREGARDED
FOR
MODIFIED
ADJUSTED GROSS INCOME.—Section 32(c)(5)(B)(iv) is amended by
striking ‘‘50 percent’’ and inserting ‘‘75 percent’’.
(c) WORKFARE PAYMENTS NOT INCLUDED IN EARNED INCOME.—
Section 32(c)(2)(B) is amended by striking ‘‘and’’ at the end of
clause (iii), by striking the period at the end of clause (iv) and
inserting ‘‘, and’’, and by adding at the end the following new
clause:
‘‘(v) no amount described in subparagraph (A)
received for service performed in work activities as
defined in paragraph (4) or (7) of section 407(d) of
the Social Security Act to which the taxpayer is
assigned under any State program under part A of
title IV of such Act, but only to the extent such amount
is subsidized under such State program.’’.
(d) CERTAIN NONTAXABLE INCOME INCLUDED
IN MODIFIED
ADJUSTED GROSS INCOME.—Section 32(c)(5)(B) is amended—
(1) by striking ‘‘and’’ at the end of clause (iii),
(2) by striking the period at the end of clause (iv)(III),
(3) by inserting after clause (iv)(III) the following new
clauses:
‘‘(v) interest received or accrued during the taxable
year which is exempt from tax imposed by this chapter,
and
H. R. 2014—170
‘‘(vi) amounts received as a pension or annuity,
and any distributions or payments received from an
individual retirement plan, by the taxpayer during the
taxable year to the extent not included in gross
income.’’, and
(4) by adding at the end the following new sentence:
‘‘Clause (vi) shall not include any amount which is not includ-
ible in gross income by reason of section 402(c), 403(a)(4),
403(b), 408(d) (3), (4), or (5), or 457(e)(10).’’.
(e) EFFECTIVE DATES.—
(1) The amendments made by subsection (a) shall apply
to taxable years beginning after December 31, 1996.
(2) The amendments made by subsections (b), (c), and
(d) shall apply to taxable years beginning after December 31,
1997.
SEC. 1086. LIMITATION ON PROPERTY FOR WHICH INCOME FORECAST
METHOD MAY BE USED.
(a) LIMITATION.—Subsection (g) of section 167 is amended by
adding at the end the following new paragraph:
‘‘(6) LIMITATION ON PROPERTY FOR WHICH INCOME FORECAST
METHOD MAY BE USED.—The depreciation deduction allowable
under this section may be determined under the income forecast
method or any similar method only with respect to—
‘‘(A) property described in paragraph (3) or (4) of sec-
tion 168(f),
‘‘(B) copyrights,
‘‘(C) books,
‘‘(D) patents, and
‘‘(E) other property specified in regulations.
Such methods may not be used with respect to any amortizable
section 197 intangible (as defined in section 197(c)).’’.
(b) DEPRECIATION PERIOD FOR RENT-TO-OWN PROPERTY.—
(1) IN
GENERAL.—Subparagraph (A) of section 168(e)(3)
(relating to 3-year property) is amended by striking ‘‘and’’ at
the end of clause (i), by striking the period at the end of
clause (ii) and inserting ‘‘, and’’, and by adding at the end
the following new clause:
‘‘(iii) any qualified rent-to-own property.’’.
(2) 4-YEAR
CLASS
LIFE.—The table contained in section
168(g)(3)(B) is amended by inserting before the first item the
following new item:
‘‘(A)(iii) .................................................................................................
4 ’’.
(3) DEFINITION
OF
QUALIFIED
RENT-TO-OWN
PROPERTY.—
Subsection (i) of section 168 is amended by adding at the
end the following new paragraph:
‘‘(14) QUALIFIED RENT-TO-OWN PROPERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified rent-to-own
property’ means property held by a rent-to-own dealer for
purposes of being subject to a rent-to-own contract.
‘‘(B) RENT-TO-OWN
DEALER.—The term ‘rent-to-own
dealer’ means a person that, in the ordinary course of
business, regularly enters into rent-to-own contracts with
customers for the use of consumer property, if a substantial
portion of those contracts terminate and the property is
returned to such person before the receipt of all payments
H. R. 2014—171
required to transfer ownership of the property from such
person to the customer.
‘‘(C) CONSUMER PROPERTY.—The term ‘consumer prop-
erty’ means tangible personal property of a type generally
used within the home for personal use.
‘‘(D) RENT-TO-OWN CONTRACT.—The term ‘rent-to-own
contract’ means any lease for the use of consumer property
between a rent-to-own dealer and a customer who is an
individual which—
‘‘(i) is titled ‘Rent-to-Own Agreement’ or ‘Lease
Agreement with Ownership Option,’ or uses other simi-
lar language,
‘‘(ii) provides for level (or decreasing where no
payment is less than 40 percent of the largest pay-
ment), regular periodic payments (for a payment period
which is a week or month),
‘‘(iii) provides that legal title to such property
remains with the rent-to-own dealer until the customer
makes all the payments described in clause (ii) or
early purchase payments required under the contract
to acquire legal title to the item of property,
‘‘(iv) provides a beginning date and a maximum
period of time for which the contract may be in effect
that does not exceed 156 weeks or 36 months from
such beginning date (including renewals or options
to extend),
‘‘(v) provides for payments within the 156-week
or 36-month period that, in the aggregate, generally
exceed the normal retail price of the consumer property
plus interest,
‘‘(vi) provides for payments under the contract that,
in the aggregate, do not exceed $10,000 per item of
consumer property,
‘‘(vii) provides that the customer does not have
any legal obligation to make all the payments referred
to in clause (ii) set forth under the contract, and that
at the end of each payment period the customer may
either continue to use the consumer property by mak-
ing the payment for the next payment period or return
such property to the rent-to-own dealer in good working
order, in which case the customer does not incur any
further obligations under the contract and is not enti-
tled to a return of any payments previously made
under the contract, and
‘‘(viii) provides that the customer has no right
to sell, sublease, mortgage, pawn, pledge, encumber,
or otherwise dispose of the consumer property until
all the payments stated in the contract have been
made.’’.
(c) EFFECTIVE DATE.—The amendment made by this section
shall apply to property placed in service after the date of the
enactment of this Act.
H. R. 2014—172
SEC. 1087. EXPANSION OF REQUIREMENT THAT INVOLUNTARILY CON-
VERTED PROPERTY BE REPLACED WITH PROPERTY
ACQUIRED FROM AN UNRELATED PERSON.
(a) IN GENERAL.—Subsection (i) of section 1033 is amended
to read as follows:
‘‘(i) REPLACEMENT PROPERTY MUST BE ACQUIRED FROM UNRE-
LATED PERSON IN CERTAIN CASES.—
‘‘(1) IN GENERAL.—If the property which is involuntarily
converted is held by a taxpayer to which this subsection applies,
subsection (a) shall not apply if the replacement property or
stock is acquired from a related person. The preceding sentence
shall not apply to the extent that the related person acquired
the replacement property or stock from an unrelated person
during the period applicable under subsection (a)(2)(B).
‘‘(2) TAXPAYERS TO WHICH SUBSECTION APPLIES.—This sub-
section shall apply to—
‘‘(A) a C corporation,
‘‘(B) a partnership in which 1 or more C corporations
own, directly or indirectly (determined in accordance with
section 707(b)(3)), more than 50 percent of the capital
interest, or profits interest, in such partnership at the
time of the involuntary conversion, and
‘‘(C) any other taxpayer if, with respect to property
which is involuntarily converted during the taxable year,
the aggregate of the amount of realized gain on such prop-
erty on which there is realized gain exceeds $100,000.
In the case of a partnership, subparagraph (C) shall apply
with respect to the partnership and with respect to each part-
ner. A similar rule shall apply in the case of an S corporation
and its shareholders.
‘‘(3) RELATED
PERSON.—For purposes of this subsection,
a person is related to another person if the person bears a
relationship to the other person described in section 267(b)
or 707(b)(1).’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to involuntary conversions occurring after June 8, 1997.
SEC. 1088. TREATMENT OF EXCEPTION FROM INSTALLMENT SALES
RULES FOR SALES OF PROPERTY BY A MANUFACTURER
TO A DEALER.
(a) IN GENERAL.—Paragraph (2) of section 811(c) of the Tax
Reform Act of 1986 is hereby repealed.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by this section
shall apply to taxable years beginning more than 1 year after
the date of the enactment of this Act.
(2) COORDINATION WITH SECTION 481.—In the case of any
taxpayer required by this section to change its method of
accounting for any taxable year—
(A) such changes shall be treated as initiated by the
taxpayer,
(B) such changes shall be treated as made with the
consent of the Secretary of the Treasury, and
(C) the net amount of the adjustments required to
be taken into account under section 481(a) of the Internal
Revenue Code of 1986 shall be taken into account ratably
over the 4 taxable year period beginning with the first
H. R. 2014—173
taxable year beginning after the date of the enactment
of this Act.
SEC. 1089. LIMITATIONS ON CHARITABLE REMAINDER TRUST ELIGI-
BILITY FOR CERTAIN TRUSTS.
(a) LIMITATION ON NONCHARITABLE DISTRIBUTIONS.—
(1) IN GENERAL.—Paragraphs (1)(A) and (2)(A) of section
664(d) (relating to charitable remainder trusts) are each amend-
ed by inserting ‘‘nor more than 50 percent’’ after ‘‘not less
than 5 percent’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply to transfers in trust after June 18, 1997.
(b) MINIMUM CHARITABLE BENEFIT.—
(1) CHARITABLE REMAINDER ANNUITY TRUSTS.—Paragraph
(1) of section 664(d) is amended by striking ‘‘and’’ at the end
of subparagraph (B), by striking the period at the end of
subparagraph (C), and by adding at the end the following
new subparagraph:
‘‘(D) the value (determined under section 7520) of such
remainder interest is at least 10 percent of the initial
net fair market value of all property placed in the trust.’’
(2) CHARITABLE REMAINDER UNITRUSTS.—Paragraph (2) of
section 664(d) is amended by striking ‘‘and’’ at the end of
subparagraph (B), by striking the period at the end of subpara-
graph (C), and by adding at the end the following new subpara-
graph:
‘‘(D) with respect to each contribution of property to
the trust, the value (determined under section 7520) of
such remainder interest in such property is at least 10
percent of the net fair market value of such property as
of the date such property is contributed to the trust.’’.
(3) VOID OR REFORMED TRUST.—Paragraph (3) of section
2055(e) is amended by adding at the end the following new
subparagraph:
‘‘(J) VOID OR REFORMED TRUST IN CASES OF INSUFFI-
CIENT REMAINDER INTERESTS.—In the case of a trust that
would qualify (or could be reformed to qualify pursuant
to subparagraph (B)) but for failure to satisfy the require-
ment of paragraph (1)(D) or (2)(D) of section 664(d), such
trust may be—
‘‘(i) declared null and void ab initio, or
‘‘(ii) changed by reformation, amendment, or other-
wise to meet such requirement by reducing the payout
rate or the duration (or both) of any noncharitable
beneficiary’s interest to the extent necessary to satisfy
such requirement,
pursuant to a proceeding that is commenced within the
period required in subparagraph (C)(iii). In a case described
in clause (i), no deduction shall be allowed under this
title for any transfer to the trust and any transactions
entered into by the trust prior to being declared void shall
be treated as entered into by the transferor.’’.
(4) SEVERANCE
OF
CERTAIN
ADDITIONAL
CONTRIBU-
TIONS.—Subsection (d) of section 664 is amended by adding
at the end the following new paragraph:
‘‘(4) SEVERANCE OF CERTAIN ADDITIONAL CONTRIBUTIONS.—
If—
H. R. 2014—174
‘‘(A) any contribution is made to a trust which before
the contribution is a charitable remainder unitrust, and
‘‘(B) such contribution would (but for this paragraph)
result in such trust ceasing to be a charitable unitrust
by reason of paragraph (2)(D),
such contribution shall be treated as a transfer to a separate
trust under regulations prescribed by the Secretary.’’.
(5) CONFORMING
AMENDMENT.—Section 2055(e)(3)(G) is
amended by inserting ‘‘(or other proceeding pursuant to
subparagraph (J)’’ after ‘‘reformation’’.
(6) EFFECTIVE DATES.—
(A) IN GENERAL.—Except as otherwise provided in this
paragraph, the amendments made by this subsection shall
apply to transfers in trust after July 28, 1997.
(B) SPECIAL
RULE
FOR
CERTAIN
DECEDENTS.—The
amendments made by this subsection shall not apply to
transfers in trust under the terms of a will (or other testa-
mentary instrument) executed on or before July 28, 1997,
if the decedent—
(i) dies before January 1, 1999, without having
republished the will (or amended such instrument)
by codicil or otherwise, or
(ii) was on July 28, 1997, under a mental disability
to change the disposition of his property and did not
regain his competence to dispose of such property
before the date of his death.
SEC. 1090. EXPANDED SSA RECORDS FOR TAX ENFORCEMENT.
(a) EXPANSION
OF COORDINATED ENFORCEMENT EFFORTS
OF
IRS AND HHS OFFICE OF CHILD SUPPORT ENFORCEMENT.—
(1) 
STATE
REPORTING
OF
SSN
OF
CHILD.—Section
454A(e)(4)(D) of the Social Security Act (42 U.S.C. 654a(e)(4)(D))
is amended by striking ‘‘the birth date of any child’’ and insert-
ing ‘‘the birth date and, beginning not later than October 1,
1999, the social security number, of any child’’.
(2) FEDERAL CASE REGISTRY OF CHILD SUPPORT ORDERS.—
Section 453(h) of such Act (42 U.S.C. 653(h)) is amended—
(A) in paragraph (2), by adding at the end the following:
‘‘Beginning not later than October 1, 1999, the information
referred to in paragraph (1) shall include the names and
social security numbers of the children of such individ-
uals.’’; and
(B) by adding at the end the following:
‘‘(3) ADMINISTRATION OF FEDERAL TAX LAWS.—The Secretary
of the Treasury shall have access to the information described
in paragraph (2) for the purpose of administering those sections
of the Internal Revenue Code of 1986 which grant tax benefits
based on support or residence of children.’’.
(3) COORDINATION BETWEEN SECRETARIES.—The Secretary
of the Treasury and the Secretary of Health and Human Serv-
ices shall consult regarding the implementation issues resulting
from the amendments made by this subsection, including
interim deadlines for States that may be able before October
1, 1999, to provide the data required by such amendments.
The Secretaries shall report to Congress on the results of such
consultation.
H. R. 2014—175
(4) EFFECTIVE DATE.—The amendments made by this sub-
section shall take effect on October 1, 1998.
(b) REQUIRED SUBMISSION OF SSN’S ON APPLICATIONS.—
(1) IN GENERAL.—Section 205(c)(2) of the Social Security
Act (42 U.S.C. 405(c)(2)) is amended—
(A) in subparagraph (B)(ii), by adding at the end the
following new sentence: ‘‘With respect to an application
for a social security account number for an individual who
has not attained the age of 18 before such application,
such evidence shall include the information described in
subparagraph (C)(ii).’’,
(B) in the second sentence of subparagraph (C)(ii),
insert ‘‘the Commissioner of Social Security and’’ after
‘‘available to’’, and
(C) by adding at the end the following new subpara-
graph:
‘‘(H) The Commissioner of Social Security shall share with
the Secretary of the Treasury the information obtained by the
Commissioner pursuant to the second sentence of subparagraph
(B)(ii) and to subparagraph (C)(ii) for the purpose of administering
those sections of the Internal Revenue Code of 1986 which grant
tax benefits based on support or residence of children.’’.
(2) EFFECTIVE DATES.—
(A) The amendment made by paragraph (1)(A) shall
apply to applications made after the date which is 180
days after the date of the enactment of this Act.
(B) The amendments made by subparagraphs (B) and
(C) of paragraph (1) shall apply to information obtained
on, before, or after the date of the enactment of this Act.
SEC. 1091. MODIFICATION OF ESTIMATED TAX SAFE HARBORS.
(a) IN GENERAL.—Clause (i) of section 6654(d)(1)(C) (relating
to limitation on use of preceding year’s tax) is amended to read
as follows:
‘‘(i) IN
GENERAL.—If the adjusted gross income
shown on the return of the individual for the preceding
taxable year beginning in any calendar year exceeds
$150,000, clause (ii) of subparagraph (B) shall be
applied by substituting the applicable percentage for
‘100 percent’. For purposes of the preceding sentence,
the applicable percentage shall be determined in
accordance with the following table:
The
applicable
‘‘If the preceding taxable year begins in:
percentage is:
1998, 1999, or 2000 ..........................................................................
105
2001 ...................................................................................................
112
2002 or thereafter .............................................................................
110.
This clause shall not apply in the case of a preceding
taxable year beginning in calendar year 1997.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply with respect to any installment payment for taxable
years beginning after December 31, 1997.
H. R. 2014—176
TITLE XI—SIMPLIFICATION AND OTHER
FOREIGN-RELATED PROVISIONS
Subtitle A—General Provisions
SEC. 1101. CERTAIN INDIVIDUALS EXEMPT FROM FOREIGN TAX
CREDIT LIMITATION.
(a) GENERAL RULE.—Section 904 (relating to limitations on
foreign tax credit) is amended by redesignating subsection (j) as
subsection (k) and by inserting after subsection (i) the following
new subsection:
‘‘(j) CERTAIN INDIVIDUALS EXEMPT.—
‘‘(1) IN GENERAL.—In the case of an individual to whom
this subsection applies for any taxable year—
‘‘(A) the limitation of subsection (a) shall not apply,
‘‘(B) no taxes paid or accrued by the individual during
such taxable year may be deemed paid or accrued under
subsection (c) in any other taxable year, and
‘‘(C) no taxes paid or accrued by the individual during
any other taxable year may be deemed paid or accrued
under subsection (c) in such taxable year.
‘‘(2) INDIVIDUALS TO WHOM SUBSECTION APPLIES.—This sub-
section shall apply to an individual for any taxable year if—
‘‘(A) the entire amount of such individual’s gross
income for the taxable year from sources without the
United States consists of qualified passive income,
‘‘(B) the amount of the creditable foreign taxes paid
or accrued by the individual during the taxable year does
not exceed $300 ($600 in the case of a joint return), and
‘‘(C) such individual elects to have this subsection apply
for the taxable year.
‘‘(3) DEFINITIONS.—For purposes of this subsection—
‘‘(A) QUALIFIED PASSIVE INCOME.—The term ‘qualified
passive income’ means any item of gross income if—
‘‘(i) such item of income is passive income (as
defined in subsection (d)(2)(A) without regard to clause
(iii) thereof), and
‘‘(ii) such item of income is shown on a payee
statement furnished to the individual.
‘‘(B) CREDITABLE FOREIGN TAXES.—The term ‘creditable
foreign taxes’ means any taxes for which a credit is allow-
able under section 901; except that such term shall not
include any tax unless such tax is shown on a payee
statement furnished to such individual.
‘‘(C) PAYEE STATEMENT.—The term ‘payee statement’
has the meaning given to such term by section 6724(d)(2).
‘‘(D) ESTATES AND TRUSTS NOT ELIGIBLE.—This sub-
section shall not apply to any estate or trust.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 1997.
SEC. 1102. EXCHANGE RATE USED IN TRANSLATING FOREIGN TAXES.
(a) ACCRUED TAXES TRANSLATED BY USING AVERAGE RATE FOR
YEAR TO WHICH TAXES RELATE.—
H. R. 2014—177
(1) IN GENERAL.—Subsection (a) of section 986 (relating
to translation of foreign taxes) is amended to read as follows:
‘‘(a) FOREIGN INCOME TAXES.—
‘‘(1) TRANSLATION OF ACCRUED TAXES.—
‘‘(A) IN
GENERAL.—For purposes of determining the
amount of the foreign tax credit, in the case of a taxpayer
who takes foreign income taxes into account when accrued,
the amount of any foreign income taxes (and any adjust-
ment thereto) shall be translated into dollars by using
the average exchange rate for the taxable year to which
such taxes relate.
‘‘(B) EXCEPTION
FOR
CERTAIN
TAXES.—Subparagraph
(A) shall not apply to any foreign income taxes—
‘‘(i) paid after the date 2 years after the close
of the taxable year to which such taxes relate, or
‘‘(ii) paid before the beginning of the taxable year
to which such taxes relate.
‘‘(C) EXCEPTION
FOR
INFLATIONARY
CURRENCIES.—
Subparagraph (A) shall not apply to any foreign income
taxes the liability for which is denominated in any inflation-
ary currency (as determined under regulations).
‘‘(D) CROSS REFERENCE.—
‘‘For adjustments where tax is not paid within 2 years, see section
905(c).
‘‘(2) TRANSLATION OF TAXES TO WHICH PARAGRAPH (1) DOES
NOT APPLY.—For purposes of determining the amount of the
foreign tax credit, in the case of any foreign income taxes
to which subparagraph (A) of paragraph (1) does not apply—
‘‘(A) such taxes shall be translated into dollars using
the exchange rates as of the time such taxes were paid
to the foreign country or possession of the United States,
and
‘‘(B) any adjustment to the amount of such taxes shall
be translated into dollars using—
‘‘(i) except as provided in clause (ii), the exchange
rate as of the time when such adjustment is paid
to the foreign country or possession, or
‘‘(ii) in the case of any refund or credit of foreign
income taxes, using the exchange rate as of the time
of the original payment of such foreign income taxes.
‘‘(3) FOREIGN INCOME TAXES.—For purposes of this sub-
section, the term ‘foreign income taxes’ means any income,
war profits, or excess profits taxes paid or accrued to any
foreign country or to any possession of the United States.’’.
(2) ADJUSTMENT WHEN NOT PAID WITHIN 2 YEARS AFTER
YEAR TO WHICH TAXES RELATE.—Subsection (c) of section 905
is amended to read as follows:
‘‘(c) ADJUSTMENTS TO ACCRUED TAXES.—
‘‘(1) IN GENERAL.—If—
‘‘(A) accrued taxes when paid differ from the amounts
claimed as credits by the taxpayer,
‘‘(B) accrued taxes are not paid before the date 2 years
after the close of the taxable year to which such taxes
relate, or
‘‘(C) any tax paid is refunded in whole or in part,
the taxpayer shall notify the Secretary, who shall redetermine
the amount of the tax for the year or years affected. The
H. R. 2014—178
Secretary may prescribe adjustments to the pools of post-1986
foreign income taxes and the pools of post-1986 undistributed
earnings under sections 902 and 960 in lieu of the redetermina-
tion under the preceding sentence.
‘‘(2) SPECIAL RULE FOR TAXES NOT PAID WITHIN 2 YEARS.—
‘‘(A) IN GENERAL.—Except as provided in subparagraph
(B), in making the redetermination under paragraph (1),
no credit shall be allowed for accrued taxes not paid before
the date referred to in subparagraph (B) of paragraph
(1).
‘‘(B) TAXES
SUBSEQUENTLY
PAID.—Any such taxes if
subsequently paid—
‘‘(i) shall be taken into account—
‘‘(I) in the case of taxes deemed paid under
section 902 or section 960, for the taxable year
in which paid (and no redetermination shall be
made under this section by reason of such pay-
ment), and
‘‘(II) in any other case, for the taxable year
to which such taxes relate, and
‘‘(ii) shall be translated as provided in section
986(a)(2)(A).
‘‘(3) ADJUSTMENTS.—The amount of tax (if any) due on
any redetermination under paragraph (1) shall be paid by the
taxpayer on notice and demand by the Secretary, and the
amount of tax overpaid (if any) shall be credited or refunded
to the taxpayer in accordance with subchapter B of chapter
66 (section 6511 et seq.).
‘‘(4) BOND REQUIREMENTS.—In the case of any tax accrued
but not paid, the Secretary, as a condition precedent to the
allowance of the credit provided in this subpart, may require
the taxpayer to give a bond, with sureties satisfactory to and
approved by the Secretary, in such sum as the Secretary may
require, conditioned on the payment by the taxpayer of any
amount of tax found due on any such redetermination. Any
such bond shall contain such further conditions as the Secretary
may require.
‘‘(5) OTHER SPECIAL RULES.—In any redetermination under
paragraph (1) by the Secretary of the amount of tax due from
the taxpayer for the year or years affected by a refund, the
amount of the taxes refunded for which credit has been allowed
under this section shall be reduced by the amount of any
tax described in section 901 imposed by the foreign country
or possession of the United States with respect to such refund;
but no credit under this subpart, or deduction under section
164, shall be allowed for any taxable year with respect to
any such tax imposed on the refund. No interest shall be
assessed or collected on any amount of tax due on any redeter-
mination by the Secretary, resulting from a refund to the
taxpayer, for any period before the receipt of such refund,
except to the extent interest was paid by the foreign country
or possession of the United States on such refund for such
period.’’.
(b) AUTHORITY TO USE AVERAGE RATES.—
(1) IN GENERAL.—Subsection (a) of section 986 (as amended
by subsection (a)) is amended by redesignating paragraph (3)
H. R. 2014—179
as paragraph (4) and inserting after paragraph (2) the following
new paragraph:
‘‘(3) AUTHORITY TO PERMIT USE OF AVERAGE RATES.—To
the extent prescribed in regulations, the average exchange rate
for the period (specified in such regulations) during which the
taxes or adjustment is paid may be used instead of the exchange
rate as of the time of such payment.’’.
(2) DETERMINATION OF AVERAGE RATES.—Subsection (c) of
section 989 is amended by striking ‘‘and’’ at the end of para-
graph (4), by striking the period at the end of paragraph (5)
and inserting ‘‘, and’’, and by adding at the end thereof the
following new paragraph:
‘‘(6) setting forth procedures for determining the average
exchange rate for any period.’’.
(3) CONFORMING AMENDMENTS.—Subsection (b) of section
989 is amended by striking ‘‘weighted’’ each place it appears.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by subsections
(a)(1) and (b) shall apply to taxes paid or accrued in taxable
years beginning after December 31, 1997.
(2) SUBSECTION (a)(2).—The amendment made by subsection
(a)(2) shall apply to taxes which relate to taxable years begin-
ning after December 31, 1997.
SEC. 1103. ELECTION TO USE SIMPLIFIED SECTION 904 LIMITATION
FOR ALTERNATIVE MINIMUM TAX.
(a) GENERAL RULE.—Subsection (a) of section 59 (relating to
alternative minimum tax foreign tax credit) is amended by adding
at the end thereof the following new paragraph:
‘‘(3) ELECTION TO USE SIMPLIFIED SECTION 904 LIMITATION.—
‘‘(A) IN GENERAL.—In determining the alternative mini-
mum tax foreign tax credit for any taxable year to which
an election under this paragraph applies—
‘‘(i) subparagraph (B) of paragraph (1) shall not
apply, and
‘‘(ii) the limitation of section 904 shall be based
on the proportion which—
‘‘(I) the taxpayer’s taxable income (as deter-
mined for purposes of the regular tax) from sources
without the United States (but not in excess of
the taxpayer’s entire alternative minimum taxable
income), bears to
‘‘(II) the taxpayer’s entire alternative mini-
mum taxable income for the taxable year.
‘‘(B) ELECTION.—
‘‘(i) IN GENERAL.—An election under this paragraph
may be made only for the taxpayer’s first taxable year
which begins after December 31, 1997, and for which
the taxpayer claims an alternative minimum tax for-
eign tax credit.
‘‘(ii) ELECTION REVOCABLE ONLY WITH CONSENT.—
An election under this paragraph, once made, shall
apply to the taxable year for which made and all
subsequent taxable years unless revoked with the con-
sent of the Secretary.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 1997.
H. R. 2014—180
SEC. 1104. TREATMENT OF PERSONAL TRANSACTIONS BY INDIVIDUALS
UNDER FOREIGN CURRENCY RULES.
(a) GENERAL RULE.—Subsection (e) of section 988 (relating to
application to individuals) is amended to read as follows:
‘‘(e) APPLICATION TO INDIVIDUALS.—
‘‘(1) IN GENERAL.—The preceding provisions of this section
shall not apply to any section 988 transaction entered into
by an individual which is a personal transaction.
‘‘(2) EXCLUSION FOR CERTAIN PERSONAL TRANSACTIONS.—
If—
‘‘(A) nonfunctional currency is disposed of by an
individual in any transaction, and
‘‘(B) such transaction is a personal transaction,
no gain shall be recognized for purposes of this subtitle by
reason of changes in exchange rates after such currency was
acquired by such individual and before such disposition. The
preceding sentence shall not apply if the gain which would
otherwise be recognized on the transaction exceeds $200.
‘‘(3) PERSONAL TRANSACTIONS.—For purposes of this sub-
section, the term ‘personal transaction’ means any transaction
entered into by an individual, except that such term shall
not include any transaction to the extent that expenses properly
allocable to such transaction meet the requirements of—
‘‘(A) section 162 (other than traveling expenses
described in subsection (a)(2) thereof), or
‘‘(B) section 212 (other than that part of section 212
dealing with expenses incurred in connection with taxes).’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 1997.
SEC. 1105. FOREIGN TAX CREDIT TREATMENT OF DIVIDENDS FROM
NONCONTROLLED SECTION 902 CORPORATIONS.
(a) SEPARATE BASKET ONLY TO APPLY TO PRE-2003 EARNINGS.—
(1) IN
GENERAL.—Subparagraph (E) of section 904(d)(1)
is amended to read as follows:
‘‘(E) in the case of a corporation, dividends from non-
controlled section 902 corporations out of earnings and
profits accumulated in taxable years beginning before Janu-
ary 1, 2003,’’.
(2) AGGREGATION OF NON-PFICS.—Subparagraph (E) of sec-
tion 904(d)(2) (relating to noncontrolled section 902 corpora-
tions) is amended by adding at the end the following new
clause:
‘‘(iv) ALL NON-PFICS TREATED AS ONE.—All noncon-
trolled section 902 corporations which are not passive
foreign investment companies (as defined in section
1297) shall be treated as one noncontrolled section
902 corporation for purposes of paragraph (1).’’.
(3) CONFORMING AMENDMENTS.—Subparagraphs (C)(iii)(II)
and (D) of section 904(d)(2) are each amended by inserting
‘‘out of earnings and profits accumulated in taxable years begin-
ning before January 1, 2003’’ after ‘‘corporation’’.
(b) APPLICATION OF LOOK-THRU RULES TO DIVIDENDS OF NON-
CONTROLLED SECTION 902 CORPORATIONS ATTRIBUTABLE TO POST-
2002 EARNINGS.—Section 904(d) is amended by redesignating para-
graphs (4) and (5) as paragraphs (5) and (6), respectively, and
by inserting after paragraph (3) the following new paragraph:
H. R. 2014—181
‘‘(4) LOOK-THRU
APPLIES
TO
DIVIDENDS
FROM
NONCON-
TROLLED SECTION 902 CORPORATIONS.—
‘‘(A) IN GENERAL.—For purposes of this subsection, any
applicable dividend shall be treated as income in a separate
category in proportion to the ratio of—
‘‘(i) the portion of the earnings and profits
described in subparagraph (B)(ii) attributable to
income in such category, to
‘‘(ii) the total amount of such earnings and profits.
‘‘(B) APPLICABLE DIVIDEND.—For purposes of subpara-
graph (A), the term ‘applicable dividend’ means any divi-
dend—
‘‘(i) from a noncontrolled section 902 corporation
with respect to the taxpayer, and
‘‘(ii) paid out of earnings and profits accumulated
in taxable years beginning after December 31, 2002.
‘‘(C) SPECIAL RULES.—
‘‘(i) IN
GENERAL.—Rules similar to the rules of
paragraph (3)(F) shall apply for purposes of this para-
graph.
‘‘(ii) EARNINGS AND PROFITS.—For purposes of this
paragraph and paragraph (1)(E)—
‘‘(I) IN
GENERAL.—The rules of section 316
shall apply.
‘‘(II) REGULATIONS.—The Secretary may pre-
scribe regulations regarding the treatment of dis-
tributions out of earnings and profits for periods
prior to the taxpayer’s acquisition of such stock.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2002.
Subtitle B—Treatment of Controlled
Foreign Corporations
SEC. 1111. GAIN ON CERTAIN STOCK SALES BY CONTROLLED FOREIGN
CORPORATIONS TREATED AS DIVIDENDS.
(a) GENERAL RULE.—Section 964 (relating to miscellaneous
provisions) is amended by adding at the end thereof the following
new subsection:
‘‘(e) GAIN ON CERTAIN STOCK SALES BY CONTROLLED FOREIGN
CORPORATIONS TREATED AS DIVIDENDS.—
‘‘(1) IN GENERAL.—If a controlled foreign corporation sells
or exchanges stock in any other foreign corporation, gain recog-
nized on such sale or exchange shall be included in the gross
income of such controlled foreign corporation as a dividend
to the same extent that it would have been so included under
section 1248(a) if such controlled foreign corporation were a
United States person. For purposes of determining the amount
which would have been so includible, the determination of
whether such other foreign corporation was a controlled foreign
corporation shall be made without regard to the preceding
sentence.
‘‘(2) SAME COUNTRY EXCEPTION NOT APPLICABLE.—Clause
(i) of section 954(c)(3)(A) shall not apply to any amount treated
as a dividend by reason of paragraph (1).
H. R. 2014—182
‘‘(3) CLARIFICATION
OF
DEEMED
SALES.—For purposes of
this subsection, a controlled foreign corporation shall be treated
as having sold or exchanged any stock if, under any provision
of this subtitle, such controlled foreign corporation is treated
as having gain from the sale or exchange of such stock.’’.
(b) AMENDMENT
OF SECTION 904(d).—Clause (i) of section
904(d)(2)(E) is amended by striking ‘‘and except as provided in
regulations, the taxpayer was a United States shareholder in such
corporation’’.
(c) EFFECTIVE DATES.—
(1) The amendment made by subsection (a) shall apply
to gain recognized on transactions occurring after the date
of the enactment of this Act.
(2) The amendment made by subsection (b) shall apply
to distributions after the date of the enactment of this Act.
SEC. 1112. MISCELLANEOUS MODIFICATIONS TO SUBPART F.
(a) SECTION 1248 GAIN TAKEN INTO ACCOUNT IN DETERMINING
PRO RATA SHARE.—
(1) IN GENERAL.—Paragraph (2) of section 951(a) (defining
pro rata share of subpart F income) is amended by adding
at the end thereof the following new sentence: ‘‘For purposes
of subparagraph (B), any gain included in the gross income
of any person as a dividend under section 1248 shall be treated
as a distribution received by such person with respect to the
stock involved.’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply to dispositions after the date of the enactment
of this Act.
(b) BASIS ADJUSTMENTS IN STOCK HELD BY FOREIGN CORPORA-
TION.—
(1) IN GENERAL.—Section 961 (relating to adjustments to
basis of stock in controlled foreign corporations and of other
property) is amended by adding at the end thereof the following
new subsection:
‘‘(c) BASIS ADJUSTMENTS IN STOCK HELD BY FOREIGN CORPORA-
TION.—Under regulations prescribed by the Secretary, if a United
States shareholder is treated under section 958(a)(2) as owning
any stock in a controlled foreign corporation which is actually
owned by another controlled foreign corporation, adjustments simi-
lar to the adjustments provided by subsections (a) and (b) shall
be made to the basis of such stock in the hands of such other
controlled foreign corporation, but only for the purposes of determin-
ing the amount included under section 951 in the gross income
of such United States shareholder (or any other United States
shareholder who acquires from any person any portion of the
interest of such United States shareholder by reason of which
such shareholder was treated as owning such stock, but only to
the extent of such portion, and subject to such proof of identity
of such interest as the Secretary may prescribe by regulations).’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply for purposes of determining inclusions for taxable
years of United States shareholders beginning after December
31, 1997.
(c) CLARIFICATION OF TREATMENT OF BRANCH TAX EXEMPTIONS
OR REDUCTIONS.—
H. R. 2014—183
(1) IN GENERAL.—Subsection (b) of section 952 is amended
by adding at the end thereof the following new sentence: ‘‘For
purposes of this subsection, any exemption (or reduction) with
respect to the tax imposed by section 884 shall not be taken
into account.’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply to taxable years beginning after December 31,
1986.
SEC. 1113. INDIRECT FOREIGN TAX CREDIT ALLOWED FOR CERTAIN
LOWER TIER COMPANIES.
(a) SECTION 902 CREDIT.—
(1) IN GENERAL.—Subsection (b) of section 902 (relating
to deemed taxes increased in case of certain 2nd and 3rd
tier foreign corporations) is amended to read as follows:
‘‘(b) DEEMED TAXES INCREASED IN CASE OF CERTAIN LOWER
TIER CORPORATIONS.—
‘‘(1) IN GENERAL.—If—
‘‘(A) any foreign corporation is a member of a qualified
group, and
‘‘(B) such foreign corporation owns 10 percent or more
of the voting stock of another member of such group from
which it receives dividends in any taxable year,
such foreign corporation shall be deemed to have paid the
same proportion of such other member’s post-1986 foreign
income taxes as would be determined under subsection (a)
if such foreign corporation were a domestic corporation.
‘‘(2) QUALIFIED GROUP.—For purposes of paragraph (1), the
term ‘qualified group’ means—
‘‘(A) the foreign corporation described in subsection
(a), and
‘‘(B) any other foreign corporation if—
‘‘(i) the domestic corporation owns at least 5 per-
cent of the voting stock of such other foreign corpora-
tion indirectly through a chain of foreign corporations
connected through stock ownership of at least 10 per-
cent of their voting stock,
‘‘(ii) the foreign corporation described in subsection
(a) is the first tier corporation in such chain, and
‘‘(iii) such other corporation is not below the sixth
tier in such chain.
The term ‘qualified group’ shall not include any foreign corpora-
tion below the third tier in the chain referred to in clause
(i) unless such foreign corporation is a controlled foreign cor-
poration (as defined in section 957) and the domestic corpora-
tion is a United States shareholder (as defined in section 951(b))
in such foreign corporation. Paragraph (1) shall apply to those
taxes paid by a member of the qualified group below the third
tier only with respect to periods during which it was a controlled
foreign corporation.’’.
(2) CONFORMING AMENDMENTS.—
(A) Subparagraph (B) of section 902(c)(3) is amended
by adding ‘‘or’’ at the end of clause (i) and by striking
clauses (ii) and (iii) and inserting the following new clause:
‘‘(ii) the requirements of subsection (b)(2) are met
with respect to such foreign corporation.’’.
H. R. 2014—184
(B) Subparagraph (B) of section 902(c)(4) is amended
by striking ‘‘3rd foreign corporation’’ and inserting ‘‘sixth
tier foreign corporation’’.
(C) The heading for paragraph (3) of section 902(c)
is amended by striking ‘‘WHERE DOMESTIC CORPORATION
ACQUIRES 10 PERCENT OF FOREIGN CORPORATION’’ and insert-
ing ‘‘WHERE FOREIGN CORPORATION FIRST QUALIFIES’’.
(D) Paragraph (3) of section 902(c) is amended by strik-
ing ‘‘ownership’’ each place it appears.
(b) SECTION 960 CREDIT.—Paragraph (1) of section 960(a) (relat-
ing to special rules for foreign tax credits) is amended to read
as follows:
‘‘(1) DEEMED PAID CREDIT.—For purposes of subpart A of
this part, if there is included under section 951(a) in the gross
income of a domestic corporation any amount attributable to
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, then, except to the extent provided
in regulations, section 902 shall be applied as if the amount
so included were a dividend paid by such foreign corporation
(determined by applying section 902(c) in accordance with sec-
tion 904(d)(3)(B)).’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to taxes of foreign corporations for taxable years
of such corporations beginning after the date of enactment
of this Act.
(2) SPECIAL RULE.—In the case of any chain of foreign
corporations described in clauses (i) and (ii) of section
902(b)(2)(B) of the Internal Revenue Code of 1986 (as amended
by this section), no liquidation, reorganization, or similar trans-
action in a taxable year beginning after the date of the enact-
ment of this Act shall have the effect of permitting taxes
to be taken into account under section 902 of the Internal
Revenue Code of 1986 which could not have been taken into
account under such section but for such transaction.
Subtitle C—Treatment of Passive Foreign
Investment Companies
SEC. 1121. UNITED STATES SHAREHOLDERS OF CONTROLLED FOREIGN
CORPORATIONS NOT SUBJECT TO PFIC INCLUSION.
Section 1296 is amended by adding at the end the following
new subsection:
‘‘(e) EXCEPTION FOR UNITED STATES SHAREHOLDERS OF CON-
TROLLED FOREIGN CORPORATIONS.—
‘‘(1) IN GENERAL.—For purposes of this part, a corporation
shall not be treated with respect to a shareholder as a passive
foreign investment company during the qualified portion of
such shareholder’s holding period with respect to stock in such
corporation.
‘‘(2) QUALIFIED PORTION.—For purposes of this subsection,
the term ‘qualified portion’ means the portion of the sharehold-
er’s holding period—
‘‘(A) which is after December 31, 1997, and
H. R. 2014—185
‘‘(B) during which the shareholder is a United States
shareholder (as defined in section 951(b)) of the corporation
and the corporation is a controlled foreign corporation.
‘‘(3) NEW HOLDING PERIOD IF QUALIFIED PORTION ENDS.—
‘‘(A) IN GENERAL.—Except as provided in subparagraph
(B), if the qualified portion of a shareholder’s holding period
with respect to any stock ends after December 31, 1997,
solely for purposes of this part, the shareholder’s holding
period with respect to such stock shall be treated as begin-
ning as of the first day following such period.
‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply
if such stock was, with respect to such shareholder, stock
in a passive foreign investment company at any time before
the qualified portion of the shareholder’s holding period
with respect to such stock and no election under section
1298(b)(1) is made.’’.
SEC. 1122. ELECTION OF MARK TO MARKET FOR MARKETABLE STOCK
IN PASSIVE FOREIGN INVESTMENT COMPANY.
(a) IN GENERAL.—Part VI of subchapter P of chapter 1 is
amended by redesignating subpart C as subpart D, by redesignating
sections 1296 and 1297 as sections 1297 and 1298, respectively,
and by inserting after subpart B the following new subpart:
‘‘Subpart C—Election of Mark to Market For
Marketable Stock
‘‘Sec. 1296. Election of mark to market for marketable stock.
‘‘SEC. 1296. ELECTION OF MARK TO MARKET FOR MARKETABLE STOCK.
‘‘(a) GENERAL RULE.—In the case of marketable stock in a
passive foreign investment company which is owned (or treated
under subsection (g) as owned) by a United States person at the
close of any taxable year of such person, at the election of such
person—
‘‘(1) If the fair market value of such stock as of the close
of such taxable year exceeds its adjusted basis, such United
States person shall include in gross income for such taxable
year an amount equal to the amount of such excess.
‘‘(2) If the adjusted basis of such stock exceeds the fair
market value of such stock as of the close of such taxable
year, such United States person shall be allowed a deduction
for such taxable year equal to the lesser of—
‘‘(A) the amount of such excess, or
‘‘(B) the unreversed inclusions with respect to such
stock.
‘‘(b) BASIS ADJUSTMENTS.—
‘‘(1) IN GENERAL.—The adjusted basis of stock in a passive
foreign investment company—
‘‘(A) shall be increased by the amount included in
the gross income of the United States person under sub-
section (a)(1) with respect to such stock, and
‘‘(B) shall be decreased by the amount allowed as a
deduction to the United States person under subsection
(a)(2) with respect to such stock.
‘‘(2) SPECIAL RULE FOR STOCK CONSTRUCTIVELY OWNED.—
In the case of stock in a passive foreign investment company
H. R. 2014—186
which the United States person is treated as owning under
subsection (g)—
‘‘(A) the adjustments under paragraph (1) shall apply
to such stock in the hands of the person actually holding
such stock but only for purposes of determining the subse-
quent treatment under this chapter of the United States
person with respect to such stock, and
‘‘(B) similar adjustments shall be made to the adjusted
basis of the property by reason of which the United States
person is treated as owning such stock.
‘‘(c) CHARACTER AND SOURCE RULES.—
‘‘(1) ORDINARY TREATMENT.—
‘‘(A) GAIN.—Any amount included in gross income
under subsection (a)(1), and any gain on the sale or other
disposition of marketable stock in a passive foreign invest-
ment company (with respect to which an election under
this section is in effect), shall be treated as ordinary income.
‘‘(B) LOSS.—Any—
‘‘(i) amount allowed as a deduction under sub-
section (a)(2), and
‘‘(ii) loss on the sale or other disposition of market-
able stock in a passive foreign investment company
(with respect to which an election under this section
is in effect) to the extent that the amount of such
loss does not exceed the unreversed inclusions with
respect to such stock,
shall be treated as an ordinary loss. The amount so treated
shall be treated as a deduction allowable in computing
adjusted gross income.
‘‘(2) SOURCE.—The source of any amount included in gross
income under subsection (a)(1) (or allowed as a deduction under
subsection (a)(2)) shall be determined in the same manner
as if such amount were gain or loss (as the case may be)
from the sale of stock in the passive foreign investment com-
pany.
‘‘(d) UNREVERSED INCLUSIONS.—For purposes of this section,
the term ‘unreversed inclusions’ means, with respect to any stock
in a passive foreign investment company, the excess (if any) of—
‘‘(1) the amount included in gross income of the taxpayer
under subsection (a)(1) with respect to such stock for prior
taxable years, over
‘‘(2) the amount allowed as a deduction under subsection
(a)(2) with respect to such stock for prior taxable years.
The amount referred to in paragraph (1) shall include any amount
which would have been included in gross income under subsection
(a)(1) with respect to such stock for any prior taxable year but
for section 1291.
‘‘(e) MARKETABLE STOCK.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘marketable stock’ means—
‘‘(A) any stock which is regularly traded on—
‘‘(i) a national securities exchange which is reg-
istered with the Securities and Exchange Commission
or the national market system established pursuant
to section 11A of the Securities and Exchange Act
of 1934, or
H. R. 2014—187
‘‘(ii) any exchange or other market which the Sec-
retary determines has rules adequate to carry out the
purposes of this part,
‘‘(B) to the extent provided in regulations, stock in
any foreign corporation which is comparable to a regulated
investment company and which offers for sale or has
outstanding any stock of which it is the issuer and which
is redeemable at its net asset value, and
‘‘(C) to the extent provided in regulations, any option
on stock described in subparagraph (A) or (B).
‘‘(2) SPECIAL
RULE
FOR
REGULATED
INVESTMENT
COMPA-
NIES.—In the case of any regulated investment company which
is offering for sale or has outstanding any stock of which
it is the issuer and which is redeemable at its net asset value,
all stock in a passive foreign investment company which it
owns directly or indirectly shall be treated as marketable stock
for purposes of this section. Except as provided in regulations,
similar treatment as marketable stock shall apply in the case
of any other regulated investment company which publishes
net asset valuations at least annually.
‘‘(f) TREATMENT OF CONTROLLED FOREIGN CORPORATIONS WHICH
ARE SHAREHOLDERS IN PASSIVE FOREIGN INVESTMENT COMPANIES.—
In the case of a foreign corporation which is a controlled foreign
corporation and which owns (or is treated under subsection (g)
as owning) stock in a passive foreign investment company—
‘‘(1) this section (other than subsection (c)(2)) shall apply
to such foreign corporation in the same manner as if such
corporation were a United States person, and
‘‘(2) for purposes of subpart F of part III of subchapter
N—
‘‘(A) any amount included in gross income under sub-
section (a)(1) shall be treated as foreign personal holding
company income described in section 954(c)(1)(A), and
‘‘(B) any amount allowed as a deduction under sub-
section (a)(2) shall be treated as a deduction allocable to
foreign personal holding company income so described.
‘‘(g) STOCK OWNED THROUGH CERTAIN FOREIGN ENTITIES.—
Except as provided in regulations—
‘‘(1) IN GENERAL.—For purposes of this section, stock owned,
directly or indirectly, by or for a foreign partnership or foreign
trust or foreign estate shall be considered as being owned
proportionately by its partners or beneficiaries. Stock consid-
ered to be owned by a person by reason of the application
of the preceding sentence shall, for purposes of applying such
sentence, be treated as actually owned by such person.
‘‘(2) TREATMENT OF CERTAIN DISPOSITIONS.—In any case
in which a United States person is treated as owning stock
in a passive foreign investment company by reason of paragraph
(1)—
‘‘(A) any disposition by the United States person or
by any other person which results in the United States
person being treated as no longer owning such stock, and
‘‘(B) any disposition by the person owning such stock,
shall be treated as a disposition by the United States person
of the stock in the passive foreign investment company.
H. R. 2014—188
‘‘(h) COORDINATION WITH SECTION 851(b).—For purposes of
paragraphs (2) and (3) of section 851(b), any amount included
in gross income under subsection (a) shall be treated as a dividend.
‘‘(i) STOCK ACQUIRED FROM A DECEDENT.—In the case of stock
of a passive foreign investment company which is acquired by
bequest, devise, or inheritance (or by the decedent’s estate) and
with respect to which an election under this section was in effect
as of the date of the decedent’s death, notwithstanding section
1014, the basis of such stock in the hands of the person so acquiring
it shall be the adjusted basis of such stock in the hands of the
decedent immediately before his death (or, if lesser, the basis which
would have been determined under section 1014 without regard
to this subsection).
‘‘(j) COORDINATION WITH SECTION 1291 FOR FIRST YEAR
OF
ELECTION.—
‘‘(1) TAXPAYERS
OTHER
THAN
REGULATED
INVESTMENT
COMPANIES.—
‘‘(A) IN GENERAL.—If the taxpayer elects the application
of this section with respect to any marketable stock in
a corporation after the beginning of the taxpayer’s holding
period in such stock, and if the requirements of subpara-
graph (B) are not satisfied, section 1291 shall apply to—
‘‘(i) any distributions with respect to, or disposition
of, such stock in the first taxable year of the taxpayer
for which such election is made, and
‘‘(ii) any amount which, but for section 1291, would
have been included in gross income under subsection
(a) with respect to such stock for such taxable year
in the same manner as if such amount were gain
on the disposition of such stock.
‘‘(B) 
REQUIREMENTS.—The 
requirements 
of 
this
subparagraph are met if, with respect to each of such
corporation’s taxable years for which such corporation was
a passive foreign investment company and which begin
after December 31, 1986, and included any portion of the
taxpayer’s holding period in such stock, such corporation
was treated as a qualified electing fund under this part
with respect to the taxpayer.
‘‘(2) SPECIAL RULES FOR REGULATED INVESTMENT COMPA-
NIES.—
‘‘(A) IN GENERAL.—If a regulated investment company
elects the application of this section with respect to any
marketable stock in a corporation after the beginning of
the taxpayer’s holding period in such stock, then, with
respect to such company’s first taxable year for which
such company elects the application of this section with
respect to such stock—
‘‘(i) section 1291 shall not apply to such stock
with respect to any distribution or disposition during,
or amount included in gross income under this section
for, such first taxable year, but
‘‘(ii) such regulated investment company’s tax
under this chapter for such first taxable year shall
be increased by the aggregate amount of interest which
would have been determined under section 1291(c)(3)
if section 1291 were applied without regard to this
subparagraph.
H. R. 2014—189
Clause (ii) shall not apply if for the preceding taxable
year the company elected to mark to market the stock
held by such company as of the last day of such preceding
taxable year.
‘‘(B) DISALLOWANCE
OF
DEDUCTION.—No deduction
shall be allowed to any regulated investment company
for the increase in tax under subparagraph (A)(ii).
‘‘(k) ELECTION.—This section shall apply to marketable stock
in a passive foreign investment company which is held by a United
States person only if such person elects to apply this section with
respect to such stock. Such an election shall apply to the taxable
year for which made and all subsequent taxable years unless—
‘‘(1) such stock ceases to be marketable stock, or
‘‘(2) the Secretary consents to the revocation of such elec-
tion.
‘‘(l) TRANSITION RULE FOR INDIVIDUALS BECOMING SUBJECT TO
UNITED STATES TAX.—If any individual becomes a United States
person in a taxable year beginning after December 31, 1997, solely
for purposes of this section, the adjusted basis (before adjustments
under subsection (b)) of any marketable stock in a passive foreign
investment company owned by such individual on the first day
of such taxable year shall be treated as being the greater of its
fair market value on such first day or its adjusted basis on such
first day.’’.
(b) COORDINATION WITH INTEREST CHARGE, ETC.—
(1) Paragraph (1) of section 1291(d) is amended by adding
at the end the following new flush sentence:
‘‘Except as provided in section 1296(j), this section also shall
not apply if an election under section 1296(k) is in effect for
the taxpayer’s taxable year.’’.
(2) The subsection heading for subsection (d) of section
1291 is amended by striking ‘‘SUBPART B’’ and inserting ‘‘SUB-
PARTS B AND C’’.
(3) Subparagraph (A) of section 1291(a)(3) is amended to
read as follows:
‘‘(A) HOLDING PERIOD.—The taxpayer’s holding period
shall be determined under section 1223; except that—
‘‘(i) for purposes of applying this section to an
excess distribution, such holding period shall be treated
as ending on the date of such distribution, and
‘‘(ii) if section 1296 applied to such stock with
respect to the taxpayer for any prior taxable year,
such holding period shall be treated as beginning on
the first day of the first taxable year beginning after
the last taxable year for which section 1296 so
applied.’’.
(c) TREATMENT
OF MARK-TO-MARKET GAIN UNDER SECTION
4982.—
(1) Subsection (e) of section 4982 is amended by adding
at the end thereof the following new paragraph:
‘‘(6) TREATMENT
OF
GAIN
RECOGNIZED
UNDER
SECTION
1296.—For purposes of determining a regulated investment
company’s ordinary income—
‘‘(A) notwithstanding paragraph (1)(C), section 1296
shall be applied as if such company’s taxable year ended
on October 31, and
H. R. 2014—190
‘‘(B) any ordinary gain or loss from an actual disposi-
tion of stock in a passive foreign investment company dur-
ing the portion of the calendar year after October 31 shall
be taken into account in determining such regulated invest-
ment company’s ordinary income for the following calendar
year.
In the case of a company making an election under paragraph
(4), the preceding sentence shall be applied by substituting
the last day of the company’s taxable year for October 31.’’.
(2) Subsection (b) of section 852 is amended by adding
at the end thereof the following new paragraph:
‘‘(10) SPECIAL RULE FOR CERTAIN LOSSES ON STOCK IN PAS-
SIVE FOREIGN INVESTMENT COMPANY.—To the extent provided
in regulations, the taxable income of a regulated investment
company (other than a company to which an election under
section 4982(e)(4) applies) shall be computed without regard
to any net reduction in the value of any stock of a passive
foreign investment company with respect to which an election
under section 1296(k) is in effect occurring after October 31
of the taxable year, and any such reduction shall be treated
as occurring on the first day of the following taxable year.’’.
(3) Subsection (c) of section 852 is amended by inserting
after ‘‘October 31 of such year’’ the following: ‘‘, without regard
to any net reduction in the value of any stock of a passive
foreign investment company with respect to which an election
under section 1296(k) is in effect occurring after October 31
of such year,’’.
(d) CONFORMING AMENDMENTS.—
(1) Sections 532(b)(4) and 542(c)(10) are each amended
by striking ‘‘section 1296’’ and inserting ‘‘section 1297’’.
(2) Subsection (f) of section 551 is amended by striking
‘‘section 1297(b)(5)’’ and inserting ‘‘section 1298(b)(5)’’.
(3) Subsections (a)(1) and (d) of section 1293 are each
amended by striking ‘‘section 1297(a)’’ and inserting ‘‘section
1298(a)’’.
(4) Paragraph (3) of section 1297(b), as redesignated by
subsection (a), is hereby repealed.
(5) The table of sections for subpart D of part VI of sub-
chapter P of chapter 1, as redesignated by subsection (a), is
amended to read as follows:
‘‘Sec. 1297. Passive foreign investment company.
‘‘Sec. 1298. Special rules.’’.
(6) The table of subparts for part VI of subchapter P
of chapter 1 is amended by striking the last item and inserting
the following new items:
‘‘Subpart C. Election of mark to market for marketable stock.
‘‘Subpart D. General provisions.’’.
(e) CLARIFICATION OF GAIN RECOGNITION ELECTION.—The last
sentence of section 1298(b)(1), as so redesignated, is amended by
inserting ‘‘(determined without regard to the preceding sentence)’’
after ‘‘investment company’’.
SEC. 1123. VALUATION OF ASSETS FOR PASSIVE FOREIGN INVESTMENT
COMPANY DETERMINATION.
(a) IN GENERAL.—Section 1297, as redesignated by section 1122,
is amended by adding at the end the following new subsection:
‘‘(e) METHODS FOR MEASURING ASSETS.—
H. R. 2014—191
‘‘(1) DETERMINATION
USING
VALUE.—The determination
under subsection (a)(2) shall be made on the basis of the value
of the assets of a foreign corporation if—
‘‘(A) such corporation is a publicly traded corporation
for the taxable year, or
‘‘(B) paragraph (2) does not apply to such corporation
for the taxable year.
‘‘(2) DETERMINATION USING ADJUSTED BASES.—The deter-
mination under subsection (a)(2) shall be based on the adjusted
bases (as determined for the purposes of computing earnings
and profits) of the assets of a foreign corporation if such corpora-
tion is not described in paragraph (1)(A) and such corporation—
‘‘(A) is a controlled foreign corporation, or
‘‘(B) elects the application of this paragraph.
An election under subparagraph (B), once made, may be revoked
only with the consent of the Secretary.
‘‘(3) PUBLICLY TRADED CORPORATION.—For purposes of this
subsection, a foreign corporation shall be treated as a publicly
traded corporation if the stock in the corporation is regularly
traded on—
‘‘(A) a national securities exchange which is registered
with the Securities and Exchange Commission or the
national market system established pursuant to section
11A of the Securities and Exchange Act of 1934, or
‘‘(B) any exchange or other market which the Secretary
determines has rules adequate to carry out the purposes
of this subsection.’’.
(b) CONFORMING AMENDMENTS.—Section 1297(a), as redesig-
nated by section 1122, is amended—
(1) by striking ‘‘(by value)’’ and inserting ‘‘(as determined
in accordance with subsection (e))’’, and
(2) by striking the last two sentences.
SEC. 1124. EFFECTIVE DATE.
The amendments made by this subtitle shall apply to—
(1) taxable years of United States persons beginning after
December 31, 1997, and
(2) taxable years of foreign corporations ending with or
within such taxable years of United States persons.
Subtitle D—Repeal of Excise Tax on
Transfers to Foreign Entities
SEC. 1131. REPEAL OF EXCISE TAX ON TRANSFERS TO FOREIGN ENTI-
TIES; RECOGNITION OF GAIN ON CERTAIN TRANSFERS
TO FOREIGN TRUSTS AND ESTATES.
(a) REPEAL OF EXCISE TAX.—Chapter 5 (relating to transfers
to avoid income tax) is hereby repealed.
(b) RECOGNITION OF GAIN ON CERTAIN TRANSFERS TO FOREIGN
TRUSTS
AND ESTATES.—Subpart F of part I of subchapter J of
chapter 1 is amended by adding at the end the following new
section:
H. R. 2014—192
‘‘SEC. 684. RECOGNITION OF GAIN ON CERTAIN TRANSFERS TO CER-
TAIN FOREIGN TRUSTS AND ESTATES.
‘‘(a) IN GENERAL.—Except as provided in regulations, in the
case of any transfer of property by a United States person to
a foreign estate or trust, for purposes of this subtitle, such transfer
shall be treated as a sale or exchange for an amount equal to
the fair market value of the property transferred, and the transferor
shall recognize as gain the excess of—
‘‘(1) the fair market value of the property so transferred,
over
‘‘(2) the adjusted basis (for purposes of determining gain)
of such property in the hands of the transferor.
‘‘(b) EXCEPTION.—Subsection (a) shall not apply to a transfer
to a trust by a United States person to the extent that any person
is treated as the owner of such trust under section 671.
‘‘(c) TREATMENT OF TRUSTS WHICH BECOME FOREIGN TRUSTS.—
If a trust which is not a foreign trust becomes a foreign trust,
such trust shall be treated for purposes of this section as having
transferred, immediately before becoming a foreign trust, all of
its assets to a foreign trust.’’.
(b) OTHER ANTI-AVOIDANCE PROVISIONS REPLACING REPEALED
EXCISE TAX.—
(1) GAIN RECOGNITION ON EXCHANGES INVOLVING FOREIGN
PERSONS.—Section 1035 is amended by redesignating subsection
(c) as subsection (d) and by inserting after subsection (b) the
following new subsection:
‘‘(c) EXCHANGES INVOLVING FOREIGN PERSONS.—To the extent
provided in regulations, subsection (a) shall not apply to any
exchange having the effect of transferring property to any person
other than a United States person.’’.
(2) TRANSFERS
TO
FOREIGN
CORPORATIONS.—Section 367
is amended by adding at the end the following new subsection:
‘‘(f) OTHER TRANSFERS.—To the extent provided in regulations,
if a United States person transfers property to a foreign corporation
as paid-in surplus or as a contribution to capital (in a transaction
not otherwise described in this section), such transfer shall be
treated as a sale or exchange for an amount equal to the fair
market value of the property transferred, and the transferor shall
recognize as gain the excess of—
‘‘(1) the fair market value of the property so transferred,
over
‘‘(2) the adjusted basis (for purposes of determining gain)
of such property in the hands of the transferor.’’.
(3) CERTAIN TRANSFERS TO PARTNERSHIPS.—Section 721 is
amended by adding at the end the following new subsection:
‘‘(c) REGULATIONS RELATING TO CERTAIN TRANSFERS TO PART-
NERSHIPS.—The Secretary may provide by regulations that sub-
section (a) shall not apply to gain realized on the transfer of property
to a partnership if such gain, when recognized, will be includible
in the gross income of a person other than a United States person.’’.
(4) REPEAL OF U.S. SOURCE TREATMENT OF DEEMED ROYAL-
TIES.—Subparagraph (C) of section 367(d)(2) is amended to
read as follows:
‘‘(C) 
AMOUNTS
RECEIVED
TREATED
AS
ORDINARY
INCOME.—For purposes of this chapter, any amount
included in gross income by reason of this subsection shall
be treated as ordinary income.’’.
H. R. 2014—193
(5) TRANSFERS OF INTANGIBLES TO PARTNERSHIPS.—
(A) Subsection (d) of section 367 is amended by adding
at the end the following new paragraph:
‘‘(3) REGULATIONS RELATING TO TRANSFERS OF INTANGIBLES
TO PARTNERSHIPS.—The Secretary may provide by regulations
that the rules of paragraph (2) also apply to the transfer
of intangible property by a United States person to a partner-
ship in circumstances consistent with the purposes of this sub-
section.’’.
(B) Section 721 is amended by adding at the end the
following new subsection:
‘‘(d) TRANSFERS OF INTANGIBLES.—
‘‘For regulatory authority to treat intangibles transferred to a
partnership as sold, see section 367(d)(3).’’.
(c) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) Subsection (h) of section 814 is amended by striking
‘‘or 1491’’.
(2) Section 1057 (relating to election to treat transfer to
foreign trust, etc., as taxable exchange) is hereby repealed.
(3) Section 6422 is amended by striking paragraph (5)
and by redesignating paragraphs (6) through (13) as paragraphs
(5) through (12), respectively.
(4) The table of chapters for subtitle A is amended by
striking the item relating to chapter 5.
(5) The table of sections for part IV of subchapter O of
chapter 1 is amended by striking the item relating to section
1057.
(6) The table of sections for subpart F of part I of sub-
chapter J of chapter 1 is amended by adding at the end the
following new item:
‘‘Sec. 684. Recognition of gain on certain transfers to certain foreign trusts
and estates.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall take effect on the date of the enactment of this Act.
Subtitle E—Information Reporting
SEC. 1141. CLARIFICATION OF APPLICATION OF RETURN REQUIRE-
MENT TO FOREIGN PARTNERSHIPS.
(a) IN GENERAL.—Section 6031 (relating to return of partner-
ship income) is amended by adding at the end the following new
subsection:
‘‘(e) FOREIGN PARTNERSHIPS.—
‘‘(1) EXCEPTION FOR FOREIGN PARTNERSHIP.—Except as pro-
vided in paragraph (2), the preceding provisions of this section
shall not apply to a foreign partnership.
‘‘(2) CERTAIN
FOREIGN
PARTNERSHIPS
REQUIRED
TO
FILE
RETURN.—Except as provided in regulations prescribed by the
Secretary, this section shall apply to a foreign partnership
for any taxable year if for such year, such partnership has—
‘‘(A) gross income derived from sources within the
United States, or
‘‘(B) gross income which is effectively connected with
the conduct of a trade or business within the United States.
H. R. 2014—194
The Secretary may provide simplified filing procedures for for-
eign partnerships to which this section applies.’’.
(b) SANCTION FOR FAILURE BY FOREIGN PARTNERSHIP TO COM-
PLY WITH SECTION 6031 TO INCLUDE DENIAL OF DEDUCTIONS.—
Subsection (f) of section 6231 is amended—
(1) by striking ‘‘LOSSES AND’’ in the heading and inserting
‘‘DEDUCTIONS, LOSSES, AND’’, and
(2) by striking ‘‘loss or’’ each place it appears and inserting
‘‘deduction, loss, or’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after the date of the enact-
ment of this Act.
SEC. 1142. CONTROLLED FOREIGN PARTNERSHIPS SUBJECT TO
INFORMATION REPORTING COMPARABLE TO INFORMA-
TION REPORTING FOR CONTROLLED FOREIGN COR-
PORATIONS.
(a) IN GENERAL.—So much of section 6038 (relating to informa-
tion with respect to certain foreign corporations) as precedes para-
graph (2) of subsection (a) is amended to read as follows:
‘‘SEC. 6038. INFORMATION REPORTING WITH RESPECT TO CERTAIN
FOREIGN CORPORATIONS AND PARTNERSHIPS.
‘‘(a) REQUIREMENT.—
‘‘(1) IN GENERAL.—Every United States person shall fur-
nish, with respect to any foreign business entity which such
person controls, such information as the Secretary may pre-
scribe relating to—
‘‘(A) the name, the principal place of business, and
the nature of business of such entity, and the country
under whose laws such entity is incorporated (or organized
in the case of a partnership);
‘‘(B) in the case of a foreign corporation, its post-1986
undistributed earnings (as defined in section 902(c));
‘‘(C) a balance sheet for such entity listing assets,
liabilities, and capital;
‘‘(D) transactions between such entity and—
‘‘(i) such person,
‘‘(ii) any corporation or partnership which such
person controls, and
‘‘(iii) any United States person owning, at the time
the transaction takes place—
‘‘(I) in the case of a foreign corporation, 10
percent or more of the value of any class of stock
outstanding of such corporation, and
‘‘(II) in the case of a foreign partnership, at
least a 10-percent interest in such partnership;
and
‘‘(E)(i) in the case of a foreign corporation, a description
of the various classes of stock outstanding, and a list show-
ing the name and address of, and number of shares held
by, each United States person who is a shareholder of
record owning at any time during the annual accounting
period 5 percent or more in value of any class of stock
outstanding of such foreign corporation, and
‘‘(ii) 
information 
comparable 
to 
the 
information
described in clause (i) in the case of a foreign partnership.
H. R. 2014—195
The Secretary may also require the furnishing of any other
information which is similar or related in nature to that speci-
fied in the preceding sentence or which the Secretary deter-
mines to be appropriate to carry out the provisions of this
title.’’.
(b) DEFINITIONS.—
(1) IN GENERAL.—Subsection (e) of section 6038 (relating
to definitions) is amended—
(A) by redesignating paragraphs (1) and (2) as para-
graphs (2) and (4), respectively,
(B) by inserting before paragraph (2) (as so redesig-
nated) the following new paragraph:
‘‘(1) FOREIGN BUSINESS ENTITY.—The term ‘foreign business
entity’ means a foreign corporation and a foreign partnership.’’,
and
(C) by inserting after paragraph (2) (as so redesignated)
the following new paragraph:
‘‘(3) PARTNERSHIP-RELATED DEFINITIONS.—
‘‘(A) CONTROL.—A person is in control of a partnership
if such person owns directly or indirectly more than a
50 percent interest in such partnership.
‘‘(B) 50-PERCENT INTEREST.—For purposes of subpara-
graph (A), a 50-percent interest in a partnership is—
‘‘(i) an interest equal to 50 percent of the capital
interest, or 50 percent of the profits interest, in such
partnership, or
‘‘(ii) to the extent provided in regulations, an
interest to which 50 percent of the deductions or losses
of such partnership are allocated.
For purposes of the preceding sentence, rules similar to
the rules of section 267(c) (other than paragraph (3)) shall
apply.
‘‘(C) 10-PERCENT INTEREST.—A 10-percent interest in
a partnership is an interest which would be described
in subparagraph (B) if ‘10 percent’ were substituted for
‘50 percent’ each place it appears.’’.
(2) CLERICAL
AMENDMENT.—The paragraph heading for
paragraph (2) of section 6038(e) (as so redesignated) is amended
by inserting ‘‘OF CORPORATION’’ after ‘‘CONTROL’’.
(c) MODIFICATION OF SANCTIONS ON PARTNERSHIPS AND COR-
PORATIONS FOR FAILURE TO FURNISH INFORMATION.—
(1) IN GENERAL.—Subsection (b) of section 6038 is amend-
ed—
(A) by striking ‘‘$1,000’’ each place it appears and
inserting ‘‘$10,000’’, and
(B) by striking ‘‘$24,000’’ in paragraph (2) and inserting
‘‘$50,000’’.
(d) REPORTING BY 10-PERCENT PARTNERS.—Subsection (a) of
section 6038 is amended by adding at the end the following new
paragraph:
‘‘(5) INFORMATION REQUIRED FROM 10-PERCENT PARTNER OF
CONTROLLED FOREIGN PARTNERSHIP.—In the case of a foreign
partnership which is controlled by United States persons hold-
ing at least 10-percent interests (but not by any one United
States person), the Secretary may require each United States
person who holds a 10-percent interest in such partnership
to furnish information relating to such partnership, including
H. R. 2014—196
information relating to such partner’s ownership interests in
the partnership and allocations to such partner of partnership
items.’’.
(e) TECHNICAL AMENDMENTS.—
(1) The following provisions of section 6038 are each amend-
ed by striking ‘‘foreign corporation’’ each place it appears and
inserting ‘‘foreign business entity’’:
(A) Paragraphs (2) and (3) of subsection (a).
(B) Subsection (b).
(C) Subsection (c) other than paragraph (1)(B) thereof.
(D) Subsection (d).
(E) Subsection (e)(4) (as redesignated by subsection
(b)).
(2) Subparagraph (B) of section 6038(c)(1) is amended by
inserting ‘‘in the case of a foreign business entity which is
a foreign corporation,’’ after ‘‘(B)’’.
(3) Paragraph (8) of section 318(b) is amended by striking
‘‘6038(d)(1)’’ and inserting ‘‘6038(d)(2)’’.
(4) Paragraph (4) of section 901(k) is amended by striking
‘‘foreign corporation’’ and inserting ‘‘foreign corporation or part-
nership’’.
(5) The table of sections for subpart A of part III of sub-
chapter A of chapter 61 is amended by striking the item relating
to section 6038 and inserting the following new item:
‘‘Sec. 6038. Information reporting with respect to certain foreign corpora-
tions and partnerships.’’.
(f) EFFECTIVE DATE.—The amendments made by this section
shall apply to annual accounting periods beginning after the date
of the enactment of this Act.
SEC. 1143. MODIFICATIONS RELATING TO RETURNS REQUIRED TO BE
FILED 
BY 
REASON 
OF 
CHANGES 
IN 
OWNERSHIP
INTERESTS IN FOREIGN PARTNERSHIP.
(a) NO RETURN REQUIRED UNLESS CHANGES INVOLVE 10-PER-
CENT INTEREST IN PARTNERSHIP.—
(1) IN GENERAL.—Subsection (a) of section 6046A (relating
to returns as to interests in foreign partnerships) is amended
by adding at the end the following new sentence: ‘‘Paragraphs
(1) and (2) shall apply to any acquisition or disposition only
if the United States person directly or indirectly holds at least
a 10-percent interest in such partnership either before or after
such acquisition or disposition, and paragraph (3) shall apply
to any change only if the change is equivalent to at least
a 10-percent interest in such partnership.’’.
(2) 10-PERCENT INTEREST.—Section 6046A is amended by
redesignating subsection (d) as subsection (e) and by inserting
after subsection (c) the following new subsection:
‘‘(d) 10-PERCENT INTEREST.—For purposes of subsection (a), a
10-percent interest in a partnership is an interest described in
section 6038(e)(3)(C).’’.
(b) MODIFICATION OF PENALTY ON FAILURE TO REPORT CHANGES
IN OWNERSHIP INTERESTS IN FOREIGN CORPORATIONS AND PARTNER-
SHIPS.—Subsection (a) of section 6679 (relating to failure to file
returns, etc., with respect to foreign corporations or foreign partner-
ships) is amended to read as follows:
‘‘(a) CIVIL PENALTY.—
H. R. 2014—197
‘‘(1) IN GENERAL.—In addition to any criminal penalty pro-
vided by law, any person required to file a return under section
6035, 6046, or 6046A who fails to file such return at the
time provided in such section, or who files a return which
does not show the information required pursuant to such sec-
tion, shall pay a penalty of $10,000, unless it is shown that
such failure is due to reasonable cause.
‘‘(2) INCREASE
IN
PENALTY
WHERE
FAILURE
CONTINUES
AFTER
NOTIFICATION.—If any failure described in paragraph
(1) continues for more than 90 days after the day on which
the Secretary mails notice of such failure to the United States
person, such person shall pay a penalty (in addition to the
amount required under paragraph (1)) of $10,000 for each 30-
day period (or fraction thereof) during which such failure contin-
ues after the expiration of such 90-day period. The increase
in any penalty under this paragraph shall not exceed $50,000.
‘‘(3) REDUCED PENALTY FOR RETURNS RELATING TO FOREIGN
PERSONAL
HOLDING
COMPANIES.—In the case of a return
required under section 6035, paragraph (1) shall be applied
by substituting ‘$1,000’ for ‘$10,000’, and paragraph (2) shall
not apply.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to transfers and changes after the date of the enactment
of this Act.
SEC. 1144. TRANSFERS OF PROPERTY TO FOREIGN PARTNERSHIPS
SUBJECT TO INFORMATION REPORTING COMPARABLE
TO INFORMATION REPORTING FOR SUCH TRANSFERS TO
FOREIGN CORPORATIONS.
(a) IN GENERAL.—Paragraph (1) of section 6038B(a) (relating
to notice of certain transfers to foreign corporations) is amended
to read as follows:
‘‘(1) transfers property to—
‘‘(A) a foreign corporation in an exchange described
in section 332, 351, 354, 355, 356, or 361, or
‘‘(B) a foreign partnership in a contribution described
in section 721 or in any other contribution described in
regulations prescribed by the Secretary,’’.
(b) EXCEPTIONS.—Section 6038B is amended by redesignating
subsection (b) as subsection (c) and by inserting after subsection
(a) the following new subsection:
‘‘(b) EXCEPTIONS FOR CERTAIN TRANSFERS TO FOREIGN PARTNER-
SHIPS; SPECIAL RULE.—
‘‘(1) EXCEPTIONS.—Subsection (a)(1)(B) shall apply to a
transfer by a United States person to a foreign partnership
only if—
‘‘(A) the United States person holds (immediately after
the transfer) directly or indirectly at least a 10-percent
interest (as defined in section 6046A(d)) in the partnership,
or
‘‘(B) the value of the property transferred (when added
to the value of the property transferred by such person
or any related person to such partnership or a related
partnership during the 12-month period ending on the
date of the transfer) exceeds $100,000.
H. R. 2014—198
For purposes of the preceding sentence, the value of any trans-
ferred property is its fair market value at the time of its
transfer.
‘‘(2) SPECIAL RULE.—If by reason of an adjustment under
section 482 or otherwise, a contribution described in subsection
(a)(1) is deemed to have been made, such contribution shall
be treated for purposes of this section as having been made
not earlier than the date specified by the Secretary.’’.
(c) MODIFICATION OF PENALTY APPLICABLE TO FOREIGN COR-
PORATIONS AND PARTNERSHIPS.—
(1) IN
GENERAL.—Paragraph (1) of section 6038B(b) is
amended by striking ‘‘equal to’’ and all that follows and insert-
ing ‘‘equal to 10 percent of the fair market value of the property
at the time of the exchange (and, in the case of a contribution
described in subsection (a)(1)(B), such person shall recognize
gain as if the contributed property had been sold for such
value at the time of such contribution).’’.
(2) LIMIT ON PENALTY.—Section 6038B(b) is amended by
adding at the end the following new paragraph:
‘‘(3) LIMIT ON PENALTY.—The penalty under paragraph (1)
with respect to any exchange shall not exceed $100,000 unless
the failure with respect to such exchange was due to intentional
disregard.’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to transfers made after the date of the enactment
of this Act.
(2) ELECTION OF RETROACTIVE EFFECT.—Section 1494(c) of
the Internal Revenue Code of 1986 shall not apply to any
transfer after August 20, 1996, if all applicable reporting
requirements under section 6038B of such Code (as amended
by this section) are satisfied. The Secretary of the Treasury
or his delegate may prescribe simplified reporting requirements
under the preceding sentence.
SEC. 1145. EXTENSION OF STATUTE OF LIMITATIONS FOR FOREIGN
TRANSFERS.
(a) IN GENERAL.—Paragraph (8) of section 6501(c) (relating
to failure to notify Secretary under section 6038B) is amended
to read as follows:
‘‘(8) FAILURE TO NOTIFY SECRETARY OF CERTAIN FOREIGN
TRANSFERS.—In the case of any information which is required
to be reported to the Secretary under section 6038, 6038A,
6038B, 6046, 6046A, or 6048, the time for assessment of any
tax imposed by this title with respect to any event or period
to which such information relates shall not expire before the
date which is 3 years after the date on which the Secretary
is furnished the information required to be reported under
such section.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to information the due date for the reporting of which
is after the date of the enactment of this Act.
H. R. 2014—199
SEC. 1146. INCREASE IN FILING THRESHOLDS FOR RETURNS AS TO
ORGANIZATION 
OF 
FOREIGN 
CORPORATIONS 
AND
ACQUISITIONS OF STOCK IN SUCH CORPORATIONS.
(a) IN GENERAL.—Subsection (a) of section 6046 (relating to
returns as to organization or reorganization of foreign corporations
and as to acquisitions of their stock) is amended to read as follows:
‘‘(a) REQUIREMENT OF RETURN.—
‘‘(1) IN GENERAL.—A return complying with the require-
ments of subsection (b) shall be made by—
‘‘(A) each United States citizen or resident who becomes
an officer or director of a foreign corporation if a United
States person (as defined in section 7701(a)(30)) meets
the stock ownership requirements of paragraph (2) with
respect to such corporation,
‘‘(B) each United States person—
‘‘(i) who acquires stock which, when added to any
stock owned on the date of such acquisition, meets
the stock ownership requirements of paragraph (2)
with respect to a foreign corporation, or
‘‘(ii) who acquires stock which, without regard to
stock owned on the date of such acquisition, meets
the stock ownership requirements of paragraph (2)
with respect to a foreign corporation,
‘‘(C) each person (not described in subparagraph (B))
who is treated as a United States shareholder under section
953(c) with respect to a foreign corporation, and
‘‘(D) each person who becomes a United States person
while meeting the stock ownership requirements of para-
graph (2) with respect to stock of a foreign corporation.
In the case of a foreign corporation with respect to which
any person is treated as a United States shareholder under
section 953(c), subparagraph (A) shall be treated as including
a reference to each United States person who is an officer
or director of such corporation.
‘‘(2) STOCK
OWNERSHIP
REQUIREMENTS.—A person meets
the stock ownership requirements of this paragraph with
respect to any corporation if such person owns 10 percent
or more of—
‘‘(A) the total combined voting power of all classes
of stock of such corporation entitled to vote, or
‘‘(B) the total value of the stock of such corporation.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall take effect on January 1, 1998.
Subtitle F—Determination of Foreign or
Domestic Status of Partnerships
SEC. 1151. DETERMINATION OF FOREIGN OR DOMESTIC STATUS OF
PARTNERSHIPS.
(a) IN GENERAL.—Paragraph (4) of section 7701(a) is amended
by inserting before the period ‘‘unless, in the case of a partnership,
the Secretary provides otherwise by regulations’’.
(b) EFFECTIVE DATE.—Any regulations issued with respect to
the amendment made by subsection (a) shall apply to partnerships
created or organized after the date determined under section 7805(b)
H. R. 2014—200
of the Internal Revenue Code of 1986 (without regard to paragraph
(2) thereof) with respect to such regulations.
Subtitle G—Other Simplification
Provisions
SEC. 1161. TRANSITION RULE FOR CERTAIN TRUSTS.
(a) IN GENERAL.—Paragraph (3) of section 1907(a) of the Small
Business Job Protection Act of 1996 is amended by adding at
the end the following flush sentence:
‘‘To the extent prescribed in regulations by the Secretary of
the Treasury or his delegate, a trust which was in existence
on August 20, 1996 (other than a trust treated as owned by
the grantor under subpart E of part I of subchapter J of
chapter 1 of the Internal Revenue Code of 1986), and which
was treated as a United States person on the day before the
date of the enactment of this Act may elect to continue to
be treated as a United States person notwithstanding section
7701(a)(30)(E) of such Code.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall take effect as if included in the amendments made by section
1907(a) of the Small Business Job Protection Act of 1996.
SEC. 1162. REPEAL OF STOCK AND SECURITIES SAFE HARBOR
REQUIREMENT THAT PRINCIPAL OFFICE BE OUTSIDE
THE UNITED STATES.
(a) IN GENERAL.—The last sentence of clause (ii) of section
864(b)(2)(A) (relating to stock or securities) is amended by striking
‘‘, or in the case of a corporation’’ and all that follows and inserting
a period.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 1997.
SEC. 1163. MISCELLANEOUS CLARIFICATIONS.
(a) ATTRIBUTION OF DEEMED PAID FOREIGN TAXES TO PRIOR
DISTRIBUTIONS.—Subparagraph (B) of section 902(c)(2) is amended
by striking ‘‘deemed paid with respect to’’ and inserting ‘‘attributable
to’’.
(b) FINANCIAL SERVICES INCOME DETERMINED WITHOUT REGARD
TO HIGH-TAXED INCOME.—Subclause (II) of section 904(d)(2)(C)(i)
is amended by striking ‘‘subclause (I)’’ and inserting ‘‘subclauses
(I) and (III)’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall take effect on the date of the enactment of this Act.
Subtitle H—Other Provisions
SEC. 1171. TREATMENT OF COMPUTER SOFTWARE AS FSC EXPORT
PROPERTY.
(a) IN GENERAL.—Subparagraph (B) of section 927(a)(2) (relat-
ing to property excluded from eligibility as FSC export property)
is amended by inserting ‘‘, and other than computer software
(whether or not patented)’’ before ‘‘, for commercial or home use’’.
H. R. 2014—201
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to gross receipts attributable to periods after December
31, 1997, in taxable years ending after such date.
SEC. 1172. ADJUSTMENT OF DOLLAR LIMITATION ON SECTION 911
EXCLUSION.
(a) GENERAL RULE.—Paragraph (2) of section 911(b) is amended
by—
(1) by striking ‘‘of $70,000’’ in subparagraph (A) and insert-
ing ‘‘equal to the exclusion amount for the calendar year in
which such taxable year begins’’, and
(2) by adding at the end the following new subparagraph:
‘‘(D) EXCLUSION AMOUNT.—
‘‘(i) IN GENERAL.—The exclusion amount for any
calendar year is the exclusion amount determined in
accordance with the following table (as adjusted by
clause (ii)):
‘‘For calendar year—
The exclusion
amount is—
1998 ...................................................................................................
$72,000
1999 ...................................................................................................
74,000
2000 ...................................................................................................
76,000
2001 ...................................................................................................
78,000
2002 and thereafter ..........................................................................
80,000.
‘‘(ii) INFLATION ADJUSTMENT.—In the case of any
taxable year beginning in a calendar year after 2007,
the $80,000 amount in clause (i) shall be increased
by an amount equal to the product of—
‘‘(I) such dollar amount, and
‘‘(II) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substitut-
ing ‘2006’ for ‘1992’ in subparagraph (B) thereof.
If any increase determined under the preceding sen-
tence is not a multiple of $100, such increase shall
be rounded to the next lowest multiple of $100.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 1997.
SEC. 1173. UNITED STATES PROPERTY NOT TO INCLUDE CERTAIN
ASSETS ACQUIRED BY DEALERS IN ORDINARY COURSE
OF TRADE OR BUSINESS.
(a) IN GENERAL.—Section 956(c)(2) is amended by striking ‘‘and’’
at the end of subparagraph (H), by striking the period at the
end of subparagraph (I) and inserting a semicolon, and by adding
at the end the following new subparagraphs:
‘‘(J) deposits of cash or securities made or received
on commercial terms in the ordinary course of a United
States or foreign person’s business as a dealer in securities
or in commodities, but only to the extent such deposits
are made or received as collateral or margin for (i) a
securities loan, notional principal contract, options contract,
forward contract, or futures contract, or (ii) any other finan-
cial transaction in which the Secretary determines that
it is customary to post collateral or margin; and
‘‘(K) an obligation of a United States person to the
extent the principal amount of the obligation does not
H. R. 2014—202
exceed the fair market value of readily marketable securi-
ties sold or purchased pursuant to a sale and repurchase
agreement or otherwise posted or received as collateral
for the obligation in the ordinary course of its business
by a United States or foreign person which is a dealer
in securities or commodities.
For purposes of subparagraphs (J) and (K), the term ‘dealer
in securities’ has the meaning given such term by section
475(c)(1), and the term ‘dealer in commodities’ has the meaning
given such term by section 475(e), except that such term shall
include a futures commission merchant.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years of foreign corporations beginning after
December 31, 1997, and to taxable years of United States sharehold-
ers with or within which such taxable years of foreign corporations
end.
SEC. 1174. TREATMENT OF NONRESIDENT ALIENS ENGAGED IN INTER-
NATIONAL TRANSPORTATION SERVICES.
(a) SOURCING RULES.—
(1) IN GENERAL.—Section 861(a)(3) is amended by adding
at the end the following new flush sentence:
‘‘In addition, except for purposes of sections 79 and 105 and
subchapter D, compensation for labor or services performed
in the United States shall not be deemed to be income from
sources within the United States if the labor or services are
performed by a nonresident alien individual in connection with
the individual’s temporary presence in the United States as
a regular member of the crew of a foreign vessel engaged
in transportation between the United States and a foreign
country or a possession of the United States.’’.
(2) TRANSPORTATION INCOME.—Subparagraph (B) of section
863(c)(2) is amended by adding at the end the following flush
sentence:
‘‘In the case of transportation income derived from, or
in connection with, a vessel, this subparagraph shall only
apply if the taxpayer is a citizen or resident alien.’’.
(b) PRESENCE IN UNITED STATES.—
(1) IN GENERAL.—Paragraph (7) of section 7701(b) is amend-
ed by adding at the end the following new subparagraph:
‘‘(D) CREW
MEMBERS
TEMPORARILY
PRESENT.—An
individual who is temporarily present in the United States
on any day as a regular member of the crew of a foreign
vessel engaged in transportation between the United States
and a foreign country or a possession of the United States
shall not be treated as present in the United States on
such day unless such individual otherwise engages in any
trade or business in the United States on such day.’’.
(2) CONFORMING AMENDMENT.—Subparagraph (A) of section
7701(b)(7) is amended by striking ‘‘or (C)’’ and inserting ‘‘,
(C), or (D)’’.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by this section
shall apply to remuneration for services performed in taxable
years beginning after December 31, 1997.
(2) PRESENCE.—The amendment made by subsection (b)
shall apply to taxable years beginning after December 31, 1997.
H. R. 2014—203
SEC. 1175. EXEMPTION FOR ACTIVE FINANCING INCOME.
(a) EXEMPTION FROM FOREIGN PERSONAL HOLDING COMPANY
INCOME.—Section 954 is amended by adding at the end the following
new subsection:
‘‘(h) SPECIAL RULE FOR INCOME DERIVED IN THE ACTIVE CON-
DUCT OF BANKING, FINANCING, OR SIMILAR BUSINESSES.—
‘‘(1) IN GENERAL.—For purposes of subsection (c)(1), foreign
personal holding company income shall not include income
which is—
‘‘(A) derived in the active conduct by a controlled for-
eign corporation of a banking, financing, or similar busi-
ness, but only if the corporation is predominantly engaged
in the active conduct of such business,
‘‘(B) received from a person other than a related person
(within the meaning of subsection (d)(3)) and derived from
the investments made by a qualifying insurance company
of its reserves or of 80 percent of its unearned premiums
(as both are determined in the manner prescribed under
paragraph (4)), or
‘‘(C) received from a person other than a related person
(within the meaning of subsection (d)(3)) and derived from
investments made by a qualifying insurance company of
an amount of its assets equal to—
‘‘(i) in the case of contracts regulated in the country
in which sold as property, casualty, or health insurance
contracts, one-third of its premiums earned on such
insurance contracts during the taxable year (as defined
in section 832(b)(4)), and
‘‘(ii) in the case of contracts regulated in the coun-
try in which sold as life insurance or annuity contracts,
the greater of—
‘‘(I) 10 percent of the reserves described in
subparagraph (B) for such contracts, or
‘‘(II) in the case of a qualifying insurance com-
pany which is a start-up company, $10,000,000.
‘‘(2) PRINCIPLES FOR DETERMINING APPLICABLE INCOME.—
‘‘(A) BANKING AND FINANCING INCOME.—The determina-
tion as to whether income is described in paragraph (1)(A)
shall be made—
‘‘(i) except as provided in clause (ii), in accordance
with the applicable principles of section 904(d)(2)(C)(ii),
except that such income shall include income from
all leases entered into in the ordinary course of the
active conduct of a banking, financing, or similar busi-
ness, and
‘‘(ii) in the case of a corporation described in para-
graph (3)(B), in accordance with the applicable prin-
ciples of section 1296(b) (as in effect on the day before
the enactment of the Taxpayer Relief Act of 1997)
for determining what is not passive income.
‘‘(B) INSURANCE INCOME.—Under rules prescribed by
the Secretary, for purposes of paragraphs (1) (B) and (C)—
‘‘(i) in the case of contracts which are separate
account-type contracts (including variable contracts not
meeting the requirements of section 817), only income
specifically allocable to such contracts shall be taken
into account, and
H. R. 2014—204
‘‘(ii) in the case of other contracts, income not
allocable under clause (i) shall be allocated ratably
among such contracts.
‘‘(C) LOOK-THRU RULES.—The Secretary shall prescribe
regulations consistent with the principles of section
904(d)(3) which provide that dividends, interest, income
equivalent to interest, rents, or royalties received or
accrued from a related person (within the meaning of sub-
section (d)(3)) shall be subject to look-thru treatment for
purposes of this subsection.
‘‘(3) PREDOMINANTLY ENGAGED.—For purposes of paragraph
(1)(A), a corporation shall be deemed predominantly engaged
in the active conduct of a banking, financing, or similar business
only if—
‘‘(A) more than 70 percent of its gross income is derived
from such business from transactions with persons which
are not related persons (as defined in subsection (d)(3))
and which are located within the country under the laws
of which the controlled foreign corporation is created or
organized, or
‘‘(B) the corporation is—
‘‘(i) engaged in the active conduct of a banking
or securities business (within the meaning of section
1296(b), as in effect before the enactment of the Tax-
payer Relief Act of 1997), or
‘‘(ii) a qualified bank affiliate or a qualified securi-
ties affiliate (within the meaning of the proposed regu-
lations under such section 1296(b)).
‘‘(4) METHODS FOR DETERMINING UNEARNED PREMIUMS AND
RESERVES.—For purposes of paragraph (1)(B)—
‘‘(A) 
PROPERTY
AND
CASUALTY
CONTRACTS.—The
unearned premiums and reserves of a qualifying insurance
company with respect to property, casualty, or health insur-
ance contracts shall be determined using the same methods
and interest rates which would be used if such company
were subject to tax under subchapter L.
‘‘(B) LIFE INSURANCE AND ANNUITY CONTRACTS.—The
reserves of a qualifying insurance company with respect
to life insurance or annuity contracts shall be determined
under the method described in paragraph (5) which such
company elects to apply for purposes of this paragraph.
Such election shall be made at such time and in such
manner as the Secretary may prescribe and, once made,
shall be irrevocable without the consent of the Secretary.
‘‘(C) LIMITATION ON RESERVES.—In no event shall the
reserve determined under this paragraph for any contract
as of any time exceed the amount which would be taken
into account with respect to such contract as of such time
in determining foreign annual statement reserves (less any
catastrophe or deficiency reserves).
‘‘(5) METHODS.—The methods described in this paragraph
are as follows:
‘‘(A) U.S. METHOD.—The method which would apply
if the qualifying insurance company were subject to tax
under subchapter L, except that the interest rate used
shall be an interest rate determined for the foreign country
in which such company is created or organized and which
H. R. 2014—205
is calculated in the same manner as the Federal mid-
term rate under section 1274(d).
‘‘(B) FOREIGN METHOD.—A preliminary term method,
except that the interest rate used shall be the interest
rate determined for the foreign country in which such
company is created or organized and which is calculated
in the same manner as the Federal mid-term rate under
section 1274(d). If a qualifying insurance company uses
such a preliminary term method with respect to contracts
insuring risks located in such foreign country, such method
shall apply if such company elects the method under this
clause.
‘‘(C) CASH SURRENDER VALUE.—A method under which
reserves are equal to the net surrender value (as defined
in section 807(e)(1)(A)) of the contract.
‘‘(6) DEFINITIONS.—For purposes of this subsection—
‘‘(A) TERMS RELATING TO INSURANCE COMPANIES.—
‘‘(i) QUALIFYING INSURANCE COMPANY.—The term
‘qualifying insurance company’ means any entity
which—
‘‘(I) is subject to regulation as an insurance
company under the laws of its country of incorpora-
tion,
‘‘(II) realizes at least 50 percent of its net
written premiums from the insurance or reinsur-
ance of risks located within the country in which
such entity is created or organized, and
‘‘(III) is engaged in the active conduct of an
insurance business and would be subject to tax
under subchapter L if it were a domestic corpora-
tion.
‘‘(ii) START-UP COMPANY.—A qualifying insurance
company shall be treated as a start-up company if
such company (and any predecessor) has not been
engaged in the active conduct of an insurance business
for more than 5 years as of the beginning of the taxable
year of such company.
‘‘(B) LOCATED.—For purposes of paragraph (3)(A)—
‘‘(i) IN
GENERAL.—A person shall be treated as
located—
‘‘(I) except as provided in subclause (II), within
the country in which it maintains an office or
other fixed place of business through which it
engages in a trade or business and by which the
transaction is effected, or
‘‘(II) in the case of a natural person, within
the country in which such person is physically
located when such person enters into a transaction.
‘‘(ii) SPECIAL
RULE
FOR
QUALIFIED
BUSINESS
UNITS.—Gross income derived by a corporation’s quali-
fied business unit (within the meaning of section
989(a)) from transactions with persons which are not
related persons (as defined in subsection (d)(3)) and
which are located in the country in which the qualified
business unit both maintains its principal office and
conducts substantial business activity shall be treated
as derived from transactions with persons which are
H. R. 2014—206
not related persons (as defined in subsection (d)(3))
and which are located within the country under the
laws of which the controlled foreign corporation is cre-
ated or organized.
‘‘(7) ANTI-ABUSE RULES.—For purposes of applying this sub-
section, there shall be disregarded any item of income, gain,
loss, or deduction with respect to any transaction or series
of transactions one of the principal purposes of which is qualify-
ing income or gain for the exclusion under this section, includ-
ing any change in the method of computing reserves or any
other transaction or series of transactions a principal purpose
of which is the acceleration or deferral of any item in order
to claim the benefits of such exclusion through the application
of this subsection.
‘‘(8) COORDINATION
WITH
SECTION
953.—This subsection
shall not apply to investment income allocable to contracts
that insure related party risks or risks located in a foreign
country other than the country in which the qualifying insur-
ance comapny is created or organized.
‘‘(9) APPLICATION.—This subsection shall apply to the first
full taxable year of a foreign corporation beginning after Decem-
ber 31, 1997, and before January 1, 1999, and to taxable
years of United States shareholders with or within which such
taxable year of such foreign corporation ends.’’.
(b) EXEMPTION
FROM
FOREIGN
BASE
COMPANY
SERVICES
INCOME.—Paragraph (2) of section 954(e) is amended by striking
‘‘or’’ at the end of subparagraph (A), by striking the period at
the end of subparagraph (B) and inserting ‘‘, or’’, and by adding
at the end the following:
‘‘(C) in the case of taxable years described in subsection
(h)(8), the active conduct by a controlled foreign corporation
of a banking, financing, insurance, or similar business,
but only if the corporation is predominantly engaged in
the active conduct of such business (within the meaning
of subsection (h)(3)) or is a qualifying insurance company.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to the first full taxable year of a foreign corporation
beginning after December 31, 1997, and before January 1, 1999,
and to taxable years of United States shareholders with or within
which such taxable year of such foreign corporation ends.
TITLE 
XII—SIMPLIFICATION 
PROVI-
SIONS 
RELATING 
TO 
INDIVIDUALS
AND BUSINESSES
Subtitle A—Provisions Relating to
Individuals
SEC. 1201. BASIC STANDARD DEDUCTION AND MINIMUM TAX EXEMP-
TION AMOUNT FOR CERTAIN DEPENDENTS.
(a) BASIC STANDARD DEDUCTION.—
(1) IN GENERAL.—Paragraph (5) of section 63(c) (relating
to limitation on basic standard deduction in the case of certain
dependents) is amended by striking ‘‘shall not exceed’’ and
H. R. 2014—207
all that follows and inserting ‘‘shall not exceed the greater
of—
‘‘(A) $500, or
‘‘(B) the sum of $250 and such individual’s earned
income.’’.
(2) CONFORMING
AMENDMENT.—Paragraph (4) of section
63(c) is amended—
(A) by striking ‘‘(5)(A)’’ in the material preceding
subparagraph (A) and inserting ‘‘(5)’’, and
(B) by striking ‘‘by substituting’’ and all that follows
in subparagraph (B) and inserting ‘‘by substituting for ‘cal-
endar year 1992’ in subparagraph (B) thereof—
‘‘(i) ‘calendar year 1987’ in the case of the dollar
amounts contained in paragraph (2) or (5)(A) or sub-
section (f), and
‘‘(ii) ‘calendar year 1997’ in the case of the dollar
amount contained in paragraph (5)(B).’’.
(b) MINIMUM TAX EXEMPTION AMOUNT.—
(1) IN GENERAL.—Subsection (j) of section 59 is amended
to read as follows:
‘‘(j) TREATMENT OF UNEARNED INCOME OF MINOR CHILDREN.—
‘‘(1) IN GENERAL.—In the case of a child to whom section
1(g) applies, the exemption amount for purposes of section
55 shall not exceed the sum of—
‘‘(A) such child’s earned income (as defined in section
911(d)(2)) for the taxable year, plus
‘‘(B) $5,000.
‘‘(2) INFLATION ADJUSTMENT.—In the case of any taxable
year beginning in a calendar year after 1998, the dollar amount
in paragraph (1)(B) shall be increased by an amount equal
to the product of—
‘‘(A) such dollar amount, and
‘‘(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting ‘1997’ for ‘1992’
in subparagraph (B) thereof.
If any increase determined under the preceding sentence is
not a multiple of $50, such increase shall be rounded to the
nearest multiple of $50.’’.
(2) CONFORMING
AMENDMENT.—Clause (iv) of section
6103(e)(1)(A) is amended by striking ‘‘or 59(j)’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 1997.
SEC. 1202. INCREASE IN AMOUNT OF TAX EXEMPT FROM ESTIMATED
TAX REQUIREMENTS.
(a) IN GENERAL.—Paragraph (1) of section 6654(e) (relating
to exception where tax is small amount) is amended by striking
‘‘$500’’ and inserting ‘‘$1,000’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 1997.
SEC. 1203. TREATMENT OF CERTAIN REIMBURSED EXPENSES OF
RURAL MAIL CARRIERS.
(a) IN GENERAL.—Section 162 (relating to trade or business
expenses) is amended by redesignating subsection (o) as subsection
(p) and by inserting after subsection (n) the following new sub-
section:
H. R. 2014—208
‘‘(o) TREATMENT OF CERTAIN REIMBURSED EXPENSES OF RURAL
MAIL CARRIERS.—
‘‘(1) GENERAL RULE.—In the case of any employee of the
United States Postal Service who performs services involving
the collection and delivery of mail on a rural route and who
receives qualified reimbursements for the expenses incurred
by such employee for the use of a vehicle in performing such
services—
‘‘(A) the amount allowable as a deduction under this
chapter for the use of a vehicle in performing such services
shall be equal to the amount of such qualified reimburse-
ments; and
‘‘(B) such qualified reimbursements shall be treated
as paid under a reimbursement or other expense allowance
arrangement for purposes of section 62(a)(2)(A) (and section
62(c) shall not apply to such qualified reimbursements).
‘‘(2) DEFINITION OF QUALIFIED REIMBURSEMENTS.—For pur-
poses of this subsection, the term ‘qualified reimbursements’
means the amounts paid by the United States Postal Service
to employees as an equipment maintenance allowance under
the 1991 collective bargaining agreement between the United
States Postal Service and the National Rural Letter Carriers’
Association. Amounts paid as an equipment maintenance allow-
ance by such Postal Service under later collective bargaining
agreements that supersede the 1991 agreement shall be consid-
ered qualified reimbursements if such amounts do not exceed
the amounts that would have been paid under the 1991 agree-
ment, adjusted for changes in the Consumer Price Index (as
defined in section 1(f)(5)) since 1991.’’.
(b) TECHNICAL AMENDMENT.—Section 6008 of the Technical
and Miscellaneous Revenue Act of 1988 is hereby repealed.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 1997.
SEC. 1204. TREATMENT OF TRAVELING EXPENSES OF CERTAIN FED-
ERAL EMPLOYEES ENGAGED IN CRIMINAL INVESTIGA-
TIONS.
(a) IN GENERAL.—Subsection (a) of section 162 is amended
by adding at the end the following new sentence: ‘‘The preceding
sentence shall not apply to any Federal employee during any period
for which such employee is certified by the Attorney General (or
the designee thereof) as traveling on behalf of the United States
in temporary duty status to investigate, or provide support services
for the investigation of, a Federal crime.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to amounts paid or incurred with respect to taxable
years ending after the date of the enactment of this Act.
SEC. 1205. PAYMENT OF TAX BY COMMERCIALLY ACCEPTABLE MEANS.
(a) GENERAL RULE.—Section 6311 is amended to read as follows:
‘‘SEC. 6311. PAYMENT OF TAX BY COMMERCIALLY ACCEPTABLE MEANS.
‘‘(a) AUTHORITY TO RECEIVE.—It shall be lawful for the Sec-
retary to receive for internal revenue taxes (or in payment for
internal revenue stamps) any commercially acceptable means that
the Secretary deems appropriate to the extent and under the condi-
tions provided in regulations prescribed by the Secretary.
H. R. 2014—209
‘‘(b) ULTIMATE LIABILITY.—If a check, money order, or other
method of payment, including payment by credit card, debit card,
or charge card so received is not duly paid, or is paid and subse-
quently charged back to the Secretary, the person by whom such
check, or money order, or other method of payment has been ten-
dered shall remain liable for the payment of the tax or for the
stamps, and for all legal penalties and additions, to the same
extent as if such check, money order, or other method of payment
had not been tendered.
‘‘(c) LIABILITY OF BANKS AND OTHERS.—If any certified, treasur-
er’s, or cashier’s check (or other guaranteed draft), or any money
order, or any other means of payment that has been guaranteed
by a financial institution (such as a credit card, debit card, or
charge card transaction which has been guaranteed expressly by
a financial institution) so received is not duly paid, the United
States shall, in addition to its right to exact payment from the
party originally indebted therefor, have a lien for—
‘‘(1) the amount of such check (or draft) upon all assets
of the financial institution on which drawn,
‘‘(2) the amount of such money order upon all the assets
of the issuer thereof, or
‘‘(3) the guaranteed amount of any other transaction upon
all the assets of the institution making such guarantee,
and such amount shall be paid out of such assets in preference
to any other claims whatsoever against such financial institution,
issuer, or guaranteeing institution, except the necessary costs and
expenses of administration and the reimbursement of the United
States for the amount expended in the redemption of the circulating
notes of such financial institution.
‘‘(d) PAYMENT BY OTHER MEANS.—
‘‘(1) AUTHORITY
TO
PRESCRIBE
REGULATIONS.—The Sec-
retary shall prescribe such regulations as the Secretary deems
necessary to receive payment by commercially acceptable
means, including regulations that—
‘‘(A) specify which methods of payment by commercially
acceptable means will be acceptable,
‘‘(B) specify when payment by such means will be
considered received,
‘‘(C) identify types of nontax matters related to pay-
ment by such means that are to be resolved by persons
ultimately liable for payment and financial intermediaries,
without the involvement of the Secretary, and
‘‘(D) ensure that tax matters will be resolved by the
Secretary, 
without 
the 
involvement 
of 
financial
intermediaries.
‘‘(2) AUTHORITY TO ENTER INTO CONTRACTS.—Notwithstand-
ing section 3718(f) of title 31, United States Code, the Secretary
is authorized to enter into contracts to obtain services related
to receiving payment by other means where cost beneficial
to the Government. The Secretary may not pay any fee or
provide any other consideration under such contracts.
‘‘(3) SPECIAL
PROVISIONS
FOR
USE
OF
CREDIT
CARDS.—If
use of credit cards is accepted as a method of payment of
taxes pursuant to subsection (a)—
‘‘(A) a payment of internal revenue taxes (or a payment
for internal revenue stamps) by a person by use of a credit
card shall not be subject to section 161 of the Truth in
H. R. 2014—210
Lending Act (15 U.S.C. 1666), or to any similar provisions
of State law, if the error alleged by the person is an
error relating to the underlying tax liability, rather than
an error relating to the credit card account such as a
computational error or numerical transposition in the credit
card transaction or an issue as to whether the person
authorized payment by use of the credit card,
‘‘(B) a payment of internal revenue taxes (or a payment
for internal revenue stamps) shall not be subject to section
170 of the Truth in Lending Act (15 U.S.C. 1666i), or
to any similar provisions of State law,
‘‘(C) a payment of internal revenue taxes (or a payment
for internal revenue stamps) by a person by use of a debit
card shall not be subject to section 908 of the Electronic
Fund Transfer Act (15 U.S.C. 1693f), or to any similar
provisions of State law, if the error alleged by the person
is an error relating to the underlying tax liability, rather
than an error relating to the debit card account such as
a computational error or numerical transposition in the
debit card transaction or an issue as to whether the person
authorized payment by use of the debit card,
‘‘(D) the term ‘creditor’ under section 103(f) of the
Truth in Lending Act (15 U.S.C. 1602(f)) shall not include
the Secretary with respect to credit card transactions in
payment of internal revenue taxes (or payment for internal
revenue stamps), and
‘‘(E) notwithstanding any other provision of law to
the contrary, in the case of payment made by credit card
or debit card transaction of an amount owed to a person
as the result of the correction of an error under section
161 of the Truth in Lending Act (15 U.S.C. 1666) or section
908 of the Electronic Fund Transfer Act (15 U.S.C. 1693f),
the Secretary is authorized to provide such amount to
such person as a credit to that person’s credit card or
debit card account through the applicable credit card or
debit card system.
‘‘(e) CONFIDENTIALITY OF INFORMATION.—
‘‘(1) IN GENERAL.—Except as otherwise authorized by this
subsection, no person may use or disclose any information
relating to credit or debit card transactions obtained pursuant
to section 6103(k)(8) other than for purposes directly related
to the processing of such transactions, or the billing or collection
of amounts charged or debited pursuant thereto.
‘‘(2) EXCEPTIONS.—
‘‘(A) Debit or credit card issuers or others acting on
behalf of such issuers may also use and disclose such
information for purposes directly related to servicing an
issuer’s accounts.
‘‘(B) Debit or credit card issuers or others directly
involved in the processing of credit or debit card trans-
actions or the billing or collection of amounts charged or
debited thereto may also use and disclose such information
for purposes directly related to—
‘‘(i) statistical risk and profitability assessment;
‘‘(ii) transferring receivables, accounts, or interest
therein;
‘‘(iii) auditing the account information;
H. R. 2014—211
‘‘(iv) complying with Federal, State, or local law;
and
‘‘(v) properly authorized civil, criminal, or regu-
latory investigation by Federal, State, or local authori-
ties.
‘‘(3) PROCEDURES.—Use and disclosure of information under
this paragraph shall be made only to the extent authorized
by written procedures promulgated by the Secretary.
‘‘(4) CROSS REFERENCE.—
‘‘For provision providing for civil damages for violation of para-
graph (1), see section 7431.’’.
(b) CLERICAL AMENDMENT.—The table of sections for subchapter
B of chapter 64 is amended by striking the item relating to section
6311 and inserting the following:
‘‘Sec. 6311. Payment of tax by commercially acceptable means.’’.
(c) AMENDMENTS TO SECTIONS 6103 AND 7431 WITH RESPECT
TO DISCLOSURE AUTHORIZATION.—
(1) Subsection (k) of section 6103 (relating to confidentiality
and disclosure of returns and return information) is amended
by adding at the end the following new paragraph:
‘‘(8) DISCLOSURE OF INFORMATION TO ADMINISTER SECTION
6311.—The Secretary may disclose returns or return information
to financial institutions and others to the extent the Secretary
deems necessary for the administration of section 6311. Disclo-
sures of information for purposes other than to accept payments
by checks or money orders shall be made only to the extent
authorized by written procedures promulgated by the Sec-
retary.’’.
(2) Section 7431 (relating to civil damages for unauthorized
disclosure of returns and return information) is amended by
adding at the end the following new subsection:
‘‘(g) SPECIAL RULE FOR INFORMATION OBTAINED UNDER SECTION
6103(k)(8).—For purposes of this section, any reference to section
6103 shall be treated as including a reference to section 6311(e).’’.
(3) Section 6103(p)(3)(A) is amended by striking ‘‘or (6)’’
and inserting ‘‘(6), or (8)’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall take effect on the day 9 months after the date of the enactment
of this Act.
Subtitle B—Provisions Relating to
Businesses Generally
SEC. 1211. MODIFICATIONS TO LOOK-BACK METHOD FOR LONG-TERM
CONTRACTS.
(a) LOOK-BACK METHOD NOT TO APPLY IN CERTAIN CASES.—
Subsection (b) of section 460 (relating to percentage of completion
method) is amended by adding at the end the following new para-
graph:
‘‘(6) ELECTION TO HAVE LOOK-BACK METHOD NOT APPLY IN
DE MINIMIS CASES.—
‘‘(A) AMOUNTS TAKEN INTO ACCOUNT AFTER COMPLETION
OF
CONTRACT.—Paragraph (1)(B) shall not apply with
respect to any taxable year (beginning after the taxable
year in which the contract is completed) if—
H. R. 2014—212
‘‘(i) the cumulative taxable income (or loss) under
the contract as of the close of such taxable year, is
within
‘‘(ii) 10 percent of the cumulative look-back taxable
income (or loss) under the contract as of the close
of the most recent taxable year to which paragraph
(1)(B) applied (or would have applied but for subpara-
graph (B)).
‘‘(B) DE
MINIMIS
DISCREPANCIES.—Paragraph (1)(B)
shall not apply in any case to which it would otherwise
apply if—
‘‘(i) the cumulative taxable income (or loss) under
the contract as of the close of each prior contract year,
is within
‘‘(ii) 10 percent of the cumulative look-back income
(or loss) under the contract as of the close of such
prior contract year.
‘‘(C) DEFINITIONS.—For purposes of this paragraph—
‘‘(i) CONTRACT
YEAR.—The term ‘contract year’
means any taxable year for which income is taken
into account under the contract.
‘‘(ii) LOOK-BACK INCOME OR LOSS.—The look-back
income (or loss) is the amount which would be the
taxable income (or loss) under the contract if the alloca-
tion method set forth in paragraph (2)(A) were used
in determining taxable income.
‘‘(iii) DISCOUNTING NOT APPLICABLE.—The amounts
taken into account after the completion of the contract
shall be determined without regard to any discounting
under the 2nd sentence of paragraph (2).
‘‘(D) CONTRACTS TO WHICH PARAGRAPH APPLIES.—This
paragraph shall only apply if the taxpayer makes an elec-
tion under this subparagraph. Unless revoked with the
consent of the Secretary, such an election shall apply to
all long-term contracts completed during the taxable year
for which election is made or during any subsequent taxable
year.’’.
(b) MODIFICATION OF INTEREST RATE.—
(1) IN
GENERAL.—Subparagraph (C) of section 460(b)(2)
is amended by striking ‘‘the overpayment rate established by
section 6621’’ and inserting ‘‘the adjusted overpayment rate
(as defined in paragraph (7))’’.
(2) ADJUSTED OVERPAYMENT RATE.—Subsection (b) of sec-
tion 460 is amended by adding at the end the following new
paragraph:
‘‘(7) ADJUSTED OVERPAYMENT RATE.—
‘‘(A) IN GENERAL.—The adjusted overpayment rate for
any interest accrual period is the overpayment rate in
effect under section 6621 for the calendar quarter in which
such interest accrual period begins.
‘‘(B) INTEREST
ACCRUAL
PERIOD.—For purposes of
subparagraph (A), the term ‘interest accrual period’ means
the period—
‘‘(i) beginning on the day after the return due
date for any taxable year of the taxpayer, and
‘‘(ii) ending on the return due date for the following
taxable year.
H. R. 2014—213
For purposes of the preceding sentence, the term ‘return
due date’ means the date prescribed for filing the return
of the tax imposed by this chapter (determined without
regard to extensions).’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to contracts
completed in taxable years ending after the date of the enact-
ment of this Act.
(2) SUBSECTION (b).—The amendments made by subsection
(b) shall apply for purposes of section 167(g) of the Internal
Revenue Code of 1986 to property placed in service after
September 13, 1995.
SEC. 1212. MINIMUM TAX TREATMENT OF CERTAIN PROPERTY AND
CASUALTY INSURANCE COMPANIES.
(a) IN GENERAL.—Clause (i) of section 56(g)(4)(B) (relating to
inclusion of items included for purposes of computing earnings
and profits) is amended by adding at the end the following new
sentence: ‘‘In the case of any insurance company taxable under
section 831(b), this clause shall not apply to any amount not
described in section 834(b).’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 1997.
SEC. 1213. QUALIFIED LESSEE CONSTRUCTION ALLOWANCES FOR
SHORT-TERM LEASES.
(a) IN GENERAL.—Part III of subchapter B of chapter 1 is
amended by inserting after section 109 the following new section:
‘‘SEC. 110. QUALIFIED LESSEE CONSTRUCTION ALLOWANCES FOR
SHORT-TERM LEASES.
‘‘(a) IN GENERAL.—Gross income of a lessee does not include
any amount received in cash (or treated as a rent reduction) by
a lessee from a lessor—
‘‘(1) under a short-term lease of retail space, and
‘‘(2) for the purpose of such lessee’s constructing or improv-
ing qualified long-term real property for use in such lessee’s
trade or business at such retail space,
but only to the extent that such amount does not exceed the
amount expended by the lessee for such construction or improve-
ment.
‘‘(b) CONSISTENT TREATMENT BY LESSOR.—Qualified long-term
real property constructed or improved in connection with any
amount excluded from a lessee’s income by reason of subsection
(a) shall be treated as nonresidential real property of the lessor
(including for purposes of section 168(i)(8)(B)).
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED
LONG-TERM
REAL
PROPERTY.—The term
‘qualified long-term real property’ means nonresidential real
property which is part of, or otherwise present at, the retail
space referred to in subsection (a) and which reverts to the
lessor at the termination of the lease.
‘‘(2) SHORT-TERM
LEASE.—The term ‘short-term lease’
means a lease (or other agreement for occupancy or use) of
retail space for 15 years or less (as determined under the
rules of section 168(i)(3)).
H. R. 2014—214
‘‘(3) RETAIL
SPACE.—The term ‘retail space’ means real
property leased, occupied, or otherwise used by a lessee in
its trade or business of selling tangible personal property or
services to the general public.
‘‘(d) INFORMATION
REQUIRED
TO
BE
FURNISHED
TO
SEC-
RETARY.—Under regulations, the lessee and lessor described in sub-
section (a) shall, at such times and in such manner as may be
provided in such regulations, furnish to the Secretary—
‘‘(1) information concerning the amounts received (or treat-
ed as a rent reduction) and expended as described in subsection
(a), and
‘‘(2) any other information which the Secretary deems nec-
essary to carry out the provisions of this section.’’.
(b) TREATMENT AS INFORMATION RETURN.—Subparagraph (A)
of section 6724(d)(1)(A) is amended by striking ‘‘or’’ at the end
of clause (vii), by adding ‘‘or’’ at the end of clause (viii), and by
adding at the end the following new clause:
‘‘(ix) section 110(d) (relating to qualified lessee
construction allowances for short-term leases),’’.
(c) CROSS REFERENCE.—Paragraph (8) of section 168(i) (relating
to treatment of leasehold improvements) is amended by adding
at the end the following new subparagraph:
‘‘(C) CROSS REFERENCE.—
‘‘For treatment of qualified long-term real property constructed
or improved in connection with cash or rent reduction from lessor
to lessee, see section 110(b).’’.
(d) CLERICAL AMENDMENT.—The table of sections for part III
of subchapter B of chapter 1 is amended by inserting after the
item relating to section 109 the following new item:
‘‘Sec. 110. Qualified lessee construction allowances for short-term leases.’’.
(e) EFFECTIVE DATE.—The amendments made by this section
shall apply to leases entered into after the date of the enactment
of this Act.
Subtitle C—Simplification Relating to
Electing Large Partnerships
PART I—GENERAL PROVISIONS
SEC. 1221. SIMPLIFIED FLOW-THROUGH FOR ELECTING LARGE PART-
NERSHIPS.
(a) GENERAL RULE.—Subchapter K (relating to partners and
partnerships) is amended by adding at the end the following new
part:
‘‘PART IV—SPECIAL RULES FOR ELECTING
LARGE PARTNERSHIPS
‘‘Sec. 771. Application of subchapter to electing large partnerships.
‘‘Sec. 772. Simplified flow-through.
‘‘Sec. 773. Computations at partnership level.
‘‘Sec. 774. Other modifications.
‘‘Sec. 775. Electing large partnership defined.
‘‘Sec. 776. Special rules for partnerships holding oil and gas properties.
‘‘Sec. 777. Regulations.
H. R. 2014—215
‘‘SEC. 771. APPLICATION OF SUBCHAPTER TO ELECTING LARGE PART-
NERSHIPS.
‘‘The preceding provisions of this subchapter to the extent
inconsistent with the provisions of this part shall not apply to
an electing large partnership and its partners.
‘‘SEC. 772. SIMPLIFIED FLOW-THROUGH.
‘‘(a) GENERAL RULE.—In determining the income tax of a part-
ner of an electing large partnership, such partner shall take into
account separately such partner’s distributive share of the partner-
ship’s—
‘‘(1) taxable income or loss from passive loss limitation
activities,
‘‘(2) taxable income or loss from other activities,
‘‘(3) net capital gain (or net capital loss)—
‘‘(A) to the extent allocable to passive loss limitation
activities, and
‘‘(B) to the extent allocable to other activities,
‘‘(4) tax-exempt interest,
‘‘(5) applicable net AMT adjustment separately computed
for—
‘‘(A) passive loss limitation activities, and
‘‘(B) other activities,
‘‘(6) general credits,
‘‘(7) low-income housing credit determined under section
42,
‘‘(8) rehabilitation credit determined under section 47,
‘‘(9) foreign income taxes,
‘‘(10) the credit allowable under section 29, and
‘‘(11) other items to the extent that the Secretary deter-
mines that the separate treatment of such items is appropriate.
‘‘(b) SEPARATE COMPUTATIONS.—In determining the amounts
required under subsection (a) to be separately taken into account
by any partner, this section and section 773 shall be applied sepa-
rately with respect to such partner by taking into account such
partner’s distributive share of the items of income, gain, loss, deduc-
tion, or credit of the partnership.
‘‘(c) TREATMENT AT PARTNER LEVEL.—
‘‘(1) IN GENERAL.—Except as provided in this subsection,
rules similar to the rules of section 702(b) shall apply to any
partner’s distributive share of the amounts referred to in sub-
section (a).
‘‘(2) INCOME OR LOSS FROM PASSIVE LOSS LIMITATION ACTIVI-
TIES.—For purposes of this chapter, any partner’s distributive
share of any income or loss described in subsection (a)(1) shall
be treated as an item of income or loss (as the case may
be) from the conduct of a trade or business which is a single
passive activity (as defined in section 469). A similar rule
shall apply to a partner’s distributive share of amounts referred
to in paragraphs (3)(A) and (5)(A) of subsection (a).
‘‘(3) INCOME OR LOSS FROM OTHER ACTIVITIES.—
‘‘(A) IN GENERAL.—For purposes of this chapter, any
partner’s distributive share of any income or loss described
in subsection (a)(2) shall be treated as an item of income
or expense (as the case may be) with respect to property
held for investment.
H. R. 2014—216
‘‘(B) DEDUCTIONS FOR LOSS NOT SUBJECT TO SECTION
67.—The deduction under section 212 for any loss described
in subparagraph (A) shall not be treated as a miscellaneous
itemized deduction for purposes of section 67.
‘‘(4) TREATMENT OF NET CAPITAL GAIN OR LOSS.—For pur-
poses of this chapter, any partner’s distributive share of any
gain or loss described in subsection (a)(3) shall be treated
as a long-term capital gain or loss, as the case may be.
‘‘(5) MINIMUM TAX TREATMENT.—In determining the alter-
native minimum taxable income of any partner, such partner’s
distributive share of any applicable net AMT adjustment shall
be taken into account in lieu of making the separate adjust-
ments provided in sections 56, 57, and 58 with respect to
the items of the partnership. Except as provided in regulations,
the applicable net AMT adjustment shall be treated, for pur-
poses of section 53, as an adjustment or item of tax preference
not specified in section 53(d)(1)(B)(ii).
‘‘(6) GENERAL CREDITS.—A partner’s distributive share of
the amount referred to in paragraph (6) of subsection (a) shall
be taken into account as a current year business credit.
‘‘(d) OPERATING RULES.—For purposes of this section—
‘‘(1) PASSIVE LOSS LIMITATION ACTIVITY.—The term ‘passive
loss limitation activity’ means—
‘‘(A) any activity which involves the conduct of a trade
or business, and
‘‘(B) any rental activity.
For purposes of the preceding sentence, the term ‘trade or
business’ includes any activity treated as a trade or business
under paragraph (5) or (6) of section 469(c).
‘‘(2) TAX-EXEMPT INTEREST.—The term ‘tax-exempt interest’
means interest excludable from gross income under section
103.
‘‘(3) APPLICABLE NET AMT ADJUSTMENT.—
‘‘(A) IN GENERAL.—The applicable net AMT adjustment
is—
‘‘(i) with respect to taxpayers other than corpora-
tions, the net adjustment determined by using the
adjustments applicable to individuals, and
‘‘(ii) with respect to corporations, the net adjust-
ment determined by using the adjustments applicable
to corporations.
‘‘(B) NET
ADJUSTMENT.—The term ‘net adjustment’
means the net adjustment in the items attributable to
passive loss activities or other activities (as the case may
be) which would result if such items were determined with
the adjustments of sections 56, 57, and 58.
‘‘(4) TREATMENT OF CERTAIN SEPARATELY STATED ITEMS.—
‘‘(A) EXCLUSION FOR CERTAIN PURPOSES.—In determin-
ing the amounts referred to in paragraphs (1) and (2)
of subsection (a), any net capital gain or net capital loss
(as the case may be), and any item referred to in subsection
(a)(11), shall be excluded.
‘‘(B) ALLOCATION RULES.—The net capital gain shall
be treated—
‘‘(i) as allocable to passive loss limitation activities
to the extent the net capital gain does not exceed
the net capital gain determined by only taking into
H. R. 2014—217
account gains and losses from sales and exchanges
of property used in connection with such activities,
and
‘‘(ii) as allocable to other activities to the extent
such gain exceeds the amount allocated under clause
(i).
A similar rule shall apply for purposes of allocating any
net capital loss.
‘‘(C) NET CAPITAL LOSS.—The term ‘net capital loss’
means the excess of the losses from sales or exchanges
of capital assets over the gains from sales or exchange
of capital assets.
‘‘(5) GENERAL CREDITS.—The term ‘general credits’ means
any credit other than the low-income housing credit, the
rehabilitation credit, the foreign tax credit, and the credit allow-
able under section 29.
‘‘(6) FOREIGN
INCOME
TAXES.—The term ‘foreign income
taxes’ means taxes described in section 901 which are paid
or accrued to foreign countries and to possessions of the United
States.
‘‘(e) SPECIAL RULE FOR UNRELATED BUSINESS TAX.—In the case
of a partner which is an organization subject to tax under section
511, such partner’s distributive share of any items shall be taken
into account separately to the extent necessary to comply with
the provisions of section 512(c)(1).
‘‘(f) SPECIAL RULES FOR APPLYING PASSIVE LOSS LIMITATIONS.—
If any person holds an interest in an electing large partnership
other than as a limited partner—
‘‘(1) paragraph (2) of subsection (c) shall not apply to such
partner, and
‘‘(2) such partner’s distributive share of the partnership
items allocable to passive loss limitation activities shall be
taken into account separately to the extent necessary to comply
with the provisions of section 469.
The preceding sentence shall not apply to any items allocable to
an interest held as a limited partner.
‘‘SEC. 773. COMPUTATIONS AT PARTNERSHIP LEVEL.
‘‘(a) GENERAL RULE.—
‘‘(1) TAXABLE INCOME.—The taxable income of an electing
large partnership shall be computed in the same manner as
in the case of an individual except that—
‘‘(A) the items described in section 772(a) shall be
separately stated, and
‘‘(B) the modifications of subsection (b) shall apply.
‘‘(2) ELECTIONS.—All elections affecting the computation
of the taxable income of an electing large partnership or the
computation of any credit of an electing large partnership shall
be made by the partnership; except that the election under
section 901, and any election under section 108, shall be made
by each partner separately.
‘‘(3) LIMITATIONS, ETC.—
‘‘(A) IN GENERAL.—Except as provided in subparagraph
(B), all limitations and other provisions affecting the com-
putation of the taxable income of an electing large partner-
ship or the computation of any credit of an electing large
H. R. 2014—218
partnership shall be applied at the partnership level (and
not at the partner level).
‘‘(B) 
CERTAIN
LIMITATIONS
APPLIED
AT
PARTNER
LEVEL.—The following provisions shall be applied at the
partner level (and not at the partnership level):
‘‘(i) Section 68 (relating to overall limitation on
itemized deductions).
‘‘(ii) Sections 49 and 465 (relating to at risk limita-
tions).
‘‘(iii) Section 469 (relating to limitation on passive
activity losses and credits).
‘‘(iv) Any other provision specified in regulations.
‘‘(4) COORDINATION WITH OTHER PROVISIONS.—Paragraphs
(2) and (3) shall apply notwithstanding any other provision
of this chapter other than this part.
‘‘(b) MODIFICATIONS TO DETERMINATION OF TAXABLE INCOME.—
In determining the taxable income of an electing large partnership—
‘‘(1) CERTAIN
DEDUCTIONS
NOT
ALLOWED.—The following
deductions shall not be allowed:
‘‘(A) The deduction for personal exemptions provided
in section 151.
‘‘(B) The net operating loss deduction provided in sec-
tion 172.
‘‘(C) The additional itemized deductions for individuals
provided in part VII of subchapter B (other than section
212 thereof).
‘‘(2) CHARITABLE DEDUCTIONS.—In determining the amount
allowable under section 170, the limitation of section 170(b)(2)
shall apply.
‘‘(3) COORDINATION WITH SECTION 67.—In lieu of applying
section 67, 70 percent of the amount of the miscellaneous
itemized deductions shall be disallowed.
‘‘(c) SPECIAL RULES FOR INCOME FROM DISCHARGE OF INDEBTED-
NESS.—If an electing large partnership has income from the dis-
charge of any indebtedness—
‘‘(1) such income shall be excluded in determining the
amounts referred to in section 772(a), and
‘‘(2) in determining the income tax of any partner of such
partnership—
‘‘(A) such income shall be treated as an item required
to be separately taken into account under section 772(a),
and
‘‘(B) the provisions of section 108 shall be applied with-
out regard to this part.
‘‘SEC. 774. OTHER MODIFICATIONS.
‘‘(a) TREATMENT OF CERTAIN OPTIONAL ADJUSTMENTS, ETC.—
In the case of an electing large partnership—
‘‘(1) computations under section 773 shall be made without
regard to any adjustment under section 743(b) or 108(b), but
‘‘(2) a partner’s distributive share of any amount referred
to in section 772(a) shall be appropriately adjusted to take
into account any adjustment under section 743(b) or 108(b)
with respect to such partner.
‘‘(b) CREDIT RECAPTURE DETERMINED AT PARTNERSHIP LEVEL.—
‘‘(1) IN GENERAL.—In the case of an electing large partner-
ship—
H. R. 2014—219
‘‘(A) any credit recapture shall be taken into account
by the partnership, and
‘‘(B) the amount of such recapture shall be determined
as if the credit with respect to which the recapture is
made had been fully utilized to reduce tax.
‘‘(2) METHOD OF TAKING RECAPTURE INTO ACCOUNT.—An
electing large partnership shall take into account a credit recap-
ture by reducing the amount of the appropriate current year
credit to the extent thereof, and if such recapture exceeds
the amount of such current year credit, the partnership shall
be liable to pay such excess.
‘‘(3) DISPOSITIONS NOT TO TRIGGER RECAPTURE.—No credit
recapture shall be required by reason of any transfer of an
interest in an electing large partnership.
‘‘(4) CREDIT RECAPTURE.—For purposes of this subsection,
the term ‘credit recapture’ means any increase in tax under
section 42(j) or 50(a).
‘‘(c) PARTNERSHIP NOT TERMINATED
BY REASON
OF CHANGE
IN OWNERSHIP.—Subparagraph (B) of section 708(b)(1) shall not
apply to an electing large partnership.
‘‘(d) PARTNERSHIP ENTITLED TO CERTAIN CREDITS.—The follow-
ing shall be allowed to an electing large partnership and shall
not be taken into account by the partners of such partnership:
‘‘(1) The credit provided by section 34.
‘‘(2) Any credit or refund under section 852(b)(3)(D).
‘‘(e) TREATMENT OF REMIC RESIDUALS.—For purposes of apply-
ing section 860E(e)(6) to any electing large partnership—
‘‘(1) all interests in such partnership shall be treated as
held by disqualified organizations,
‘‘(2) in lieu of applying subparagraph (C) of section
860E(e)(6), the amount subject to tax under section 860E(e)(6)
shall be excluded from the gross income of such partnership,
and
‘‘(3) subparagraph (D) of section 860E(e)(6) shall not apply.
‘‘(f) SPECIAL RULES FOR APPLYING CERTAIN INSTALLMENT SALE
RULES.—In the case of an electing large partnership—
‘‘(1) the provisions of sections 453(l)(3) and 453A shall
be applied at the partnership level, and
‘‘(2) in determining the amount of interest payable under
such sections, such partnership shall be treated as subject
to tax under this chapter at the highest rate of tax in effect
under section 1 or 11.
‘‘SEC. 775. ELECTING LARGE PARTNERSHIP DEFINED.
‘‘(a) GENERAL RULE.—For purposes of this part—
‘‘(1) IN
GENERAL.—The term ‘electing large partnership’
means, with respect to any partnership taxable year, any part-
nership if—
‘‘(A) the number of persons who were partners in such
partnership in the preceding partnership taxable year
equaled or exceeded 100, and
‘‘(B) such partnership elects the application of this
part.
To the extent provided in regulations, a partnership shall cease
to be treated as an electing large partnership for any partner-
ship taxable year if in such taxable year fewer than 100 persons
were partners in such partnership.
H. R. 2014—220
‘‘(2) ELECTION.—The election under this subsection shall
apply to the taxable year for which made and all subsequent
taxable years unless revoked with the consent of the Secretary.
‘‘(b) SPECIAL RULES
FOR CERTAIN SERVICE PARTNERSHIPS.—
‘‘(1) CERTAIN
PARTNERS
NOT
COUNTED.—For purposes of
this section, the term ‘partner’ does not include any individual
performing substantial services in connection with the activities
of the partnership and holding an interest in such partnership,
or an individual who formerly performed substantial services
in connection with such activities and who held an interest
in such partnership at the time the individual performed such
services.
‘‘(2) EXCLUSION.—For purposes of this part, an election
under subsection (a) shall not be effective with respect to any
partnership if substantially all the partners of such partner-
ship—
‘‘(A) are individuals performing substantial services
in connection with the activities of such partnership or
are personal service corporations (as defined in section
269A(b)) the owner-employees (as defined in section
269A(b)) of which perform such substantial services,
‘‘(B) are retired partners who had performed such
substantial services, or
‘‘(C) are spouses of partners who are performing (or
had previously performed) such substantial services.
‘‘(3) SPECIAL
RULE
FOR
LOWER
TIER
PARTNERSHIPS.—For
purposes of this subsection, the activities of a partnership shall
include the activities of any other partnership in which the
partnership owns directly an interest in the capital and profits
of at least 80 percent.
‘‘(c) EXCLUSION OF COMMODITY POOLS.—For purposes of this
part, an election under subsection (a) shall not be effective with
respect to any partnership the principal activity of which is the
buying and selling of commodities (not described in section 1221(1)),
or options, futures, or forwards with respect to such commodities.
‘‘(d) SECRETARY MAY RELY
ON TREATMENT
ON RETURN.—If,
on the partnership return of any partnership, such partnership
is treated as an electing large partnership, such treatment shall
be binding on such partnership and all partners of such partnership
but not on the Secretary.
‘‘SEC. 776. SPECIAL RULES FOR PARTNERSHIPS HOLDING OIL AND
GAS PROPERTIES.
‘‘(a) COMPUTATION OF PERCENTAGE DEPLETION.—In the case
of an electing large partnership, except as provided in subsection
(b)—
‘‘(1) the allowance for depletion under section 611 with
respect to any partnership oil or gas property shall be computed
at the partnership level without regard to any provision of
section 613A requiring such allowance to be computed sepa-
rately by each partner,
‘‘(2) such allowance shall be determined without regard
to the provisions of section 613A(c) limiting the amount of
production for which percentage depletion is allowable and
without regard to paragraph (1) of section 613A(d), and
‘‘(3) paragraph (3) of section 705(a) shall not apply.
‘‘(b) TREATMENT OF CERTAIN PARTNERS.—