H. R. 4520—224
on what constitutes a change in ownership or effective control
for purposes of section 409A of the Internal Revenue Code of 1986,
as added by this section.
(f) GUIDANCE RELATING TO TERMINATION OF CERTAIN EXISTING
ARRANGEMENTS.—Not later than 60 days after the date of the
enactment of this Act, the Secretary of the Treasury shall issue
guidance providing a limited period during which a nonqualified
deferred compensation plan adopted before December 31, 2004,
may, without violating the requirements of paragraphs (2), (3),
and (4) of section 409A(a) of the Internal Revenue Code of 1986
(as added by this section), be amended—
(1) to provide that a participant may terminate participa-
tion in the plan, or cancel an outstanding deferral election
with regard to amounts deferred after December 31, 2004,
but only if amounts subject to the termination or cancellation
are includible in income of the participant as earned (or, if
later, when no longer subject to substantial risk of forfeiture),
and
(2) to conform to the requirements of such section 409A
with regard to amounts deferred after December 31, 2004.
SEC. 886. EXTENSION OF AMORTIZATION OF INTANGIBLES TO SPORTS
FRANCHISES.
(a) IN GENERAL.—Section 197(e) (relating to exceptions to defi-
nition of section 197 intangible) is amended by striking paragraph
(6) and by redesignating paragraphs (7) and (8) as paragraphs
(6) and (7), respectively.
(b) CONFORMING AMENDMENTS.—
(1)(A) Section 1056 (relating to basis limitation for player
contracts transferred in connection with the sale of a franchise)
is repealed.
(B) The table of sections for part IV of subchapter O of
chapter 1 is amended by striking the item relating to section
1056.
(2) Section 1245(a) (relating to gain from disposition of
certain depreciable property) is amended by striking paragraph
(4).
(3) Section 1253 (relating to transfers of franchises, trade-
marks, and trade names) is amended by striking subsection
(e).
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to property
acquired after the date of the enactment of this Act.
(2) SECTION
1245.—The amendment made by subsection
(b)(2) shall apply to franchises acquired after the date of the
enactment of this Act.
SEC. 887. MODIFICATION OF CONTINUING LEVY ON PAYMENTS TO FED-
ERAL VENDORS.
(a) IN GENERAL.—Section 6331(h) (relating to continuing levy
on certain payments) is amended by adding at the end the following
new paragraph:
‘‘(3) INCREASE IN LEVY FOR CERTAIN PAYMENTS.—Paragraph
(1) shall be applied by substituting ‘100 percent’ for ‘15 percent’
in the case of any specified payment due to a vendor of goods
or services sold or leased to the Federal Government.’’.
H. R. 4520—225
(b) EFFECTIVE DATE.—The amendment made by this section
shall take effect on the date of the enactment of this Act.
SEC. 888. MODIFICATION OF STRADDLE RULES.
(a) RULES RELATING TO IDENTIFIED STRADDLES.—
(1) IN GENERAL.—Subparagraph (A) of section 1092(a)(2)
(relating to special rule for identified straddles) is amended
to read as follows:
‘‘(A) IN GENERAL.—In the case of any straddle which
is an identified straddle—
‘‘(i) paragraph (1) shall not apply with respect
to identified positions comprising the identified
straddle,
‘‘(ii) if there is any loss with respect to any identi-
fied position of the identified straddle, the basis of
each of the identified offsetting positions in the identi-
fied straddle shall be increased by an amount which
bears the same ratio to the loss as the unrecognized
gain with respect to such offsetting position bears to
the aggregate unrecognized gain with respect to all
such offsetting positions, and
‘‘(iii) any loss described in clause (ii) shall not
otherwise be taken into account for purposes of this
title.’’.
(2) IDENTIFIED STRADDLE.—Section 1092(a)(2)(B) (defining
identified straddle) is amended—
(A) by striking clause (ii) and inserting the following:
‘‘(ii) to the extent provided by regulations, the
value of each position of which (in the hands of the
taxpayer immediately before the creation of the
straddle) is not less than the basis of such position
in the hands of the taxpayer at the time the straddle
is created, and’’, and
(B) by adding at the end the following new flush sen-
tence:
‘‘The Secretary shall prescribe regulations which specify
the proper methods for clearly identifying a straddle as
an identified straddle (and the positions comprising such
straddle), which specify the rules for the application of
this section for a taxpayer which fails to properly identify
the positions of an identified straddle, and which specify
the ordering rules in cases where a taxpayer disposes of
less than an entire position which is part of an identified
straddle.’’.
(3) UNRECOGNIZED
GAIN.—Section 1092(a)(3) (defining
unrecognized gain) is amended by redesignating subparagraph
(B) as subparagraph (C) and by inserting after subparagraph
(A) the following new subparagraph:
‘‘(B) SPECIAL
RULE
FOR
IDENTIFIED
STRADDLES.—For
purposes of paragraph (2)(A)(ii), the unrecognized gain with
respect to any identified offsetting position shall be the
excess of the fair market value of the position at the
time of the determination over the fair market value of
the position at the time the taxpayer identified the position
as a position in an identified straddle.’’.
H. R. 4520—226
(4) 
CONFORMING
AMENDMENT.—Section 
1092(c)(2) 
is
amended by striking subparagraph (B) and by redesignating
subparagraph (C) as subparagraph (B).
(b) PHYSICALLY SETTLED POSITIONS.—Section 1092(d) (relating
to definitions and special rules) is amended by adding at the end
the following new paragraph:
‘‘(8) SPECIAL RULES FOR PHYSICALLY SETTLED POSITIONS.—
For purposes of subsection (a), if a taxpayer settles a position
which is part of a straddle by delivering property to which
the position relates (and such position, if terminated, would
result in a realization of a loss), then such taxpayer shall
be treated as if such taxpayer—
‘‘(A) terminated the position for its fair market value
immediately before the settlement, and
‘‘(B) sold the property so delivered by the taxpayer
at its fair market value.’’.
(c) REPEAL OF STOCK EXCEPTION.—
(1) IN GENERAL.—Paragraph (3) of section 1092(d) (relating
to definitions and special rules) is amended to read as follows:
‘‘(3) SPECIAL RULES FOR STOCK.—For purposes of paragraph
(1)—
‘‘(A) IN GENERAL.—In the case of stock, the term ‘per-
sonal property’ includes stock only if—
‘‘(i) such stock is of a type which is actively traded
and at least 1 of the positions offsetting such stock
is a position with respect to such stock or substantially
similar or related property, or
‘‘(ii) such stock is of a corporation formed or availed
of to take positions in personal property which offset
positions taken by any shareholder.
‘‘(B) RULE FOR APPLICATION.—For purposes of deter-
mining whether subsection (e) applies to any transaction
with respect to stock described in subparagraph (A)(ii),
all includible corporations of an affiliated group (within
the meaning of section 1504(a)) shall be treated as 1 tax-
payer.’’.
(2) 
CONFORMING
AMENDMENT.—Section 
1258(d)(1) 
is
amended by striking ‘‘; except that the term ‘personal property’
shall include stock’’.
(d) HOLDING PERIOD FOR DIVIDEND EXCLUSION.—The last sen-
tence of section 246(c) is amended by inserting: ‘‘, other than a
qualified covered call option to which section 1092(f) applies’’ before
the period at the end.
(e) EFFECTIVE DATE.—The amendments made by this section
shall apply to positions established on or after the date of the
enactment of this Act.
SEC. 889. ADDITION OF VACCINES AGAINST HEPATITIS A TO LIST OF
TAXABLE VACCINES.
(a) IN GENERAL.—Paragraph (1) of section 4132(a) (defining
taxable vaccine) is amended by redesignating subparagraphs (I),
(J), (K), and (L) as subparagraphs (J), (K), (L), and (M), respectively,
and by inserting after subparagraph (H) the following new subpara-
graph:
‘‘(I) Any vaccine against hepatitis A.’’.
(b) EFFECTIVE DATE.—
H. R. 4520—227
(1) SALES, ETC.—The amendments made by subsection (a)
shall apply to sales and uses on or after the first day of
the first month which begins more than 4 weeks after the
date of the enactment of this Act.
(2) DELIVERIES.—For purposes of paragraph (1) and section
4131 of the Internal Revenue Code of 1986, in the case of
sales on or before the effective date described in such paragraph
for which delivery is made after such date, the delivery date
shall be considered the sale date.
SEC. 890. ADDITION OF VACCINES AGAINST INFLUENZA TO LIST OF
TAXABLE VACCINES.
(a) IN GENERAL.—Section 4132(a)(1) (defining taxable vaccine),
as amended by this Act, is amended by adding at the end the
following new subparagraph:
‘‘(N) Any trivalent vaccine against influenza.’’.
(b) EFFECTIVE DATE.—
(1) SALES, ETC.—The amendment made by this section
shall apply to sales and uses on or after the later of—
(A) the first day of the first month which begins more
than 4 weeks after the date of the enactment of this Act,
or
(B) the date on which the Secretary of Health and
Human Services lists any vaccine against influenza for
purposes of compensation for any vaccine-related injury
or death through the Vaccine Injury Compensation Trust
Fund.
(2) DELIVERIES.—For purposes of paragraph (1) and section
4131 of the Internal Revenue Code of 1986, in the case of
sales on or before the effective date described in such paragraph
for which delivery is made after such date, the delivery date
shall be considered the sale date.
SEC. 891. EXTENSION OF IRS USER FEES.
(a) IN GENERAL.—Section 7528(c) (relating to termination) is
amended by striking ‘‘December 31, 2004’’ and inserting ‘‘September
30, 2014’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to requests after the date of the enactment of this
Act.
SEC. 892. COBRA FEES.
(a) USE OF MERCHANDISE PROCESSING FEE.—Section 13031(f)
of the Consolidated Omnibus Budget Reconciliation Act of 1985
(19 U.S.C. 58c(f)) is amended—
(1) in paragraph (1), by aligning subparagraph (B) with
subparagraph (A); and
(2) in paragraph (2), by striking ‘‘commercial operations’’
and all that follows through ‘‘processing.’’ and inserting ‘‘cus-
toms revenue functions as defined in section 415 of the Home-
land Security Act of 2002 (other than functions performed by
the Office of International Affairs referred to in section 415(8)
of that Act), and for automation (including the Automation
Commercial Environment computer system), and for no other
purpose. To the extent that funds in the Customs User Fee
Account are insufficient to pay the costs of such customs rev-
enue functions, customs duties in an amount equal to the
amount of such insufficiency shall be available, to the extent
H. R. 4520—228
provided for in appropriations Acts, to pay the costs of such
customs revenue functions in the amount of such insufficiency,
and shall be available for no other purpose. The provisions
of the first and second sentences of this paragraph specifying
the purposes for which amounts in the Customs User Fee
Account may be made available shall not be superseded except
by a provision of law which specifically modifies or supersedes
such provisions.’’.
(b) REIMBURSEMENT OF APPROPRIATIONS FROM COBRA FEES.—
Section 13031(f)(3) of the Consolidated Omnibus Budget Reconcili-
ation Act of 1985 (19 U.S.C. 58c(f)(3)) is amended by adding at
the end the following:
‘‘(E) Nothing in this paragraph shall be construed to preclude
the use of appropriated funds, from sources other than the fees
collected under subsection (a), to pay the costs set forth in clauses
(i), (ii), and (iii) of subparagraph (A).’’.
(c) SENSE OF CONGRESS; EFFECTIVE PERIOD FOR COLLECTING
FEES; STANDARD FOR SETTING FEES.—
(1) SENSE OF CONGRESS.—The Congress finds that—
(A) the fees set forth in paragraphs (1) through (8)
of subsection (a) of section 13031 of the Consolidated Omni-
bus Budget Reconciliation Act of 1985 have been reasonably
related to the costs of providing customs services in connec-
tion with the activities or items for which the fees have
been charged under such paragraphs; and
(B) the fees collected under such paragraphs have not
exceeded, in the aggregate, the amounts paid for the costs
described in subsection (f)(3)(A) incurred in providing cus-
toms services in connection with the activities or items
for which the fees were charged under such paragraphs.
(2) EFFECTIVE PERIOD; STANDARD FOR SETTING FEES.—Sec-
tion 13031(j)(3) of the Consolidated Omnibus Budget Reconcili-
ation Act of 1985 is amended to read as follows:
‘‘(3)(A) Fees may not be charged under paragraphs (9) and
(10) of subsection (a) after September 30, 2014.
‘‘(B)(i) Subject to clause (ii), Fees may not be charged under
paragraphs (1) through (8) of subsection (a) after September 30,
2014.
‘‘(ii) In fiscal year 2006 and in each succeeding fiscal year
for which fees under paragraphs (1) through (8) of subsection (a)
are authorized—
‘‘(I) the Secretary of the Treasury shall charge fees under
each such paragraph in amounts that are reasonably related
to the costs of providing customs services in connection with
the activity or item for which the fee is charged under such
paragraph, except that in no case may the fee charged under
any such paragraph exceed by more than 10 percent the amount
otherwise prescribed by such paragraph;
‘‘(II) the amount of fees collected under such paragraphs
may not exceed, in the aggregate, the amounts paid in that
fiscal year for the costs described in subsection (f)(3)(A) incurred
in providing customs services in connection with the activity
or item for which the fees are charged under such paragraphs;
‘‘(III) a fee may not be collected under any such paragraph
except to the extent such fee will be expended to pay the
costs described in subsection (f)(3)(A) incurred in providing
H. R. 4520—229
customs services in connection with the activity or item for
which the fee is charged under such paragraph; and
‘‘(IV) any fee collected under any such paragraph shall
be available for expenditure only to pay the costs described
in subsection (f)(3)(A) incurred in providing customs services
in connection with the activity or item for which the fee is
charged under such paragraph.’’.
(d) CLERICAL AMENDMENTS.—Section 13031 of the Consolidated
Omnibus Budget Reconciliation Act of 1985 is amended—
(1) in subsection (a)(5)(B), by striking ‘‘$1.75’’ and inserting
‘‘$1.75.’’;
(2) in subsection (b)—
(A) in paragraph (1)(A), by aligning clause (iii) with
clause (ii);
(B) in paragraph (7), by striking ‘‘paragraphs’’ and
inserting ‘‘paragraph’’; and
(C) in paragraph (9), by aligning subparagraph (B)
with subparagraph (A); and
(3) in subsection (e)(2), by aligning subparagraph (B) with
subparagraph (A).
(e) STUDY OF ALL FEES COLLECTED BY DEPARTMENT OF HOME-
LAND SECURITY.—The Secretary of the Treasury shall conduct a
study of all the fees collected by the Department of Homeland
Security, and shall submit to the Congress, not later than Sep-
tember 30, 2005, a report containing the recommendations of the
Secretary on—
(1) what fees should be eliminated;
(2) what the rate of fees retained should be; and
(3) any other recommendations with respect to the fees
that the Secretary considers appropriate.
SEC. 893. PROHIBITION ON NONRECOGNITION OF GAIN THROUGH
COMPLETE LIQUIDATION OF HOLDING COMPANY.
(a) IN GENERAL.—Section 332 is amended by adding at the
end the following new subsection:
‘‘(d) RECOGNITION
OF
GAIN
ON
LIQUIDATION
OF
CERTAIN
HOLDING COMPANIES.—
‘‘(1) IN
GENERAL.—In the case of any distribution to a
foreign corporation in complete liquidation of an applicable
holding company—
‘‘(A) subsection (a) and section 331 shall not apply
to such distribution, and
‘‘(B) such distribution shall be treated as a distribution
to which section 301 applies.
‘‘(2) APPLICABLE HOLDING COMPANY.—For purposes of this
subsection:
‘‘(A) IN GENERAL.—The term ‘applicable holding com-
pany’ means any domestic corporation—
‘‘(i) which is a common parent of an affiliated
group,
‘‘(ii) stock of which is directly owned by the dis-
tributee foreign corporation,
‘‘(iii) substantially all of the assets of which consist
of stock in other members of such affiliated group,
and
H. R. 4520—230
‘‘(iv) which has not been in existence at all times
during the 5 years immediately preceding the date
of the liquidation.
‘‘(B) AFFILIATED
GROUP.—For purposes of this sub-
section, the term ‘affiliated group’ has the meaning given
such term by section 1504(a) (without regard to paragraphs
(2) and (4) of section 1504(b)).
‘‘(3) COORDINATION
WITH
SUBPART
F.—If the distributee
of a distribution described in paragraph (1) is a controlled
foreign corporation (as defined in section 957), then notwith-
standing paragraph (1) or subsection (a), such distribution shall
be treated as a distribution to which section 331 applies.
‘‘(4) REGULATIONS.—The Secretary shall provide such regu-
lations as appropriate to prevent the abuse of this subsection,
including regulations which provide, for the purposes of clause
(iv) of paragraph (2)(A), that a corporation is not in existence
for any period unless it is engaged in the active conduct of
a trade or business or owns a significant ownership interest
in another corporation so engaged.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to distributions in complete liquidation occurring on
or after the date of the enactment of this Act.
SEC. 894. EFFECTIVELY CONNECTED INCOME TO INCLUDE CERTAIN
FOREIGN SOURCE INCOME.
(a) IN GENERAL.—Section 864(c)(4)(B) (relating to treatment
of income from sources without the United States as effectively
connected income) is amended by adding at the end the following
new flush sentence:
‘‘Any income or gain which is equivalent to any item of
income or gain described in clause (i), (ii), or (iii) shall
be treated in the same manner as such item for purposes
of this subparagraph.’’.
(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.
SEC. 895. RECAPTURE OF OVERALL FOREIGN LOSSES ON SALE OF
CONTROLLED FOREIGN CORPORATION.
(a) IN GENERAL.—Section 904(f)(3) (relating to dispositions) is
amending by adding at the end the following new subparagraph:
‘‘(D) APPLICATION TO CERTAIN DISPOSITIONS OF STOCK
IN CONTROLLED FOREIGN CORPORATION.—
‘‘(i) IN GENERAL.—This paragraph shall apply to
an applicable disposition in the same manner as if
it were a disposition of property described in subpara-
graph (A), except that the exception contained in
subparagraph (C)(i) shall not apply.
‘‘(ii) APPLICABLE
DISPOSITION.—For purposes of
clause (i), the term ‘applicable disposition’ means any
disposition of any share of stock in a controlled foreign
corporation in a transaction or series of transactions
if, immediately before such transaction or series of
transactions, the taxpayer owned more than 50 percent
(by vote or value) of the stock of the controlled foreign
corporation. Such term shall not include a disposition
described in clause (iii) or (iv), except that clause (i)
H. R. 4520—231
shall apply to any gain recognized on any such disposi-
tion.
‘‘(iii) EXCEPTION FOR CERTAIN EXCHANGES WHERE
OWNERSHIP
PERCENTAGE
RETAINED.—A 
disposition
shall not be treated as an applicable disposition under
clause (ii) if it is part of a transaction or series of
transactions—
‘‘(I) to which section 351 or 721 applies, or
under which the transferor receives stock in a
foreign corporation in exchange for the stock in
the controlled foreign corporation and the stock
received is exchanged basis property (as defined
in section 7701(a)(44)), and
‘‘(II) immediately after which, the transferor
owns (by vote or value) at least the same percent-
age of stock in the controlled foreign corporation
(or, if the controlled foreign corporation is not in
existence after such transaction or series of trans-
actions, in another foreign corporation stock in
which was received by the transferor in exchange
for stock in the controlled foreign corporation) as
the percentage of stock in the controlled foreign
corporation which the taxpayer owned immediately
before such transaction or series of transactions.
‘‘(iv) EXCEPTION
FOR
CERTAIN
ASSET
ACQUISI-
TIONS.—A disposition shall not be treated as an
applicable disposition under clause (ii) if it is part
of a transaction or series of transactions in which
the taxpayer (or any member of a controlled group
of corporations filing a consolidated return under sec-
tion 1501 which includes the taxpayer) acquires the
assets of a controlled foreign corporation in exchange
for the shares of the controlled foreign corporation
in a liquidation described in section 332 or a reorga-
nization described in section 368(a)(1).
‘‘(v) CONTROLLED FOREIGN CORPORATION.—For pur-
poses of this subparagraph, the term ‘controlled foreign
corporation’ has the meaning given such term by sec-
tion 957.
‘‘(vi) STOCK
OWNERSHIP.—For purposes of this
subparagraph, ownership of stock shall be determined
under the rules of subsections (a) and (b) of section
958.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to dispositions after the date of the enactment of this
Act.
SEC. 896. RECOGNITION OF CANCELLATION OF INDEBTEDNESS
INCOME REALIZED ON SATISFACTION OF DEBT WITH
PARTNERSHIP INTEREST.
(a) IN GENERAL.—Paragraph (8) of section 108(e) (relating to
general rules for discharge of indebtedness (including discharges
not in title 11 cases or insolvency)) is amended to read as follows:
‘‘(8) INDEBTEDNESS
SATISFIED
BY
CORPORATE
STOCK
OR
PARTNERSHIP INTEREST.—For purposes of determining income
of a debtor from discharge of indebtedness, if—
‘‘(A) a debtor corporation transfers stock, or
H. R. 4520—232
‘‘(B) a debtor partnership transfers a capital or profits
interest in such partnership,
to a creditor in satisfaction of its recourse or nonrecourse
indebtedness, such corporation or partnership shall be treated
as having satisfied the indebtedness with an amount of money
equal to the fair market value of the stock or interest. In
the case of any partnership, any discharge of indebtedness
income recognized under this paragraph shall be included in
the distributive shares of taxpayers which were the partners
in the partnership immediately before such discharge.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply with respect to cancellations of indebtedness occurring
on or after the date of the enactment of this Act.
SEC. 897. DENIAL OF INSTALLMENT SALE TREATMENT FOR ALL
READILY TRADABLE DEBT.
(a) IN GENERAL.—Section 453(f)(4)(B) (relating to purchaser
evidences of indebtedness payable on demand or readily tradable)
is amended by striking ‘‘is issued by a corporation or a government
or political subdivision thereof and’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to sales occurring on or after the date of the enactment
of this Act.
SEC. 898. MODIFICATION OF TREATMENT OF TRANSFERS TO CREDI-
TORS IN DIVISIVE REORGANIZATIONS.
(a) IN GENERAL.—Section 361(b)(3) (relating to treatment of
transfers to creditors) is amended by adding at the end the following
new sentence: ‘‘In the case of a reorganization described in section
368(a)(1)(D) with respect to which stock or securities of the corpora-
tion to which the assets are transferred are distributed in a trans-
action which qualifies under section 355, this paragraph shall apply
only to the extent that the sum of the money and the fair market
value of other property transferred to such creditors does not exceed
the adjusted bases of such assets transferred.’’.
(b) LIABILITIES IN EXCESS OF BASIS.—Section 357(c)(1)(B) is
amended by inserting ‘‘with respect to which stock or securities
of the corporation to which the assets are transferred are distributed
in a transaction which qualifies under section 355’’ after ‘‘section
368(a)(1)(D)’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to transfers of money or other property, or liabilities
assumed, in connection with a reorganization occurring on or after
the date of the enactment of this Act.
SEC. 899. CLARIFICATION OF DEFINITION OF NONQUALIFIED PRE-
FERRED STOCK.
(a) IN GENERAL.—Section 351(g)(3)(A) is amended by adding
at the end the following: ‘‘Stock shall not be treated as participating
in corporate growth to any significant extent unless there is a
real and meaningful likelihood of the shareholder actually partici-
pating in the earnings and growth of the corporation.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to transactions after May 14, 2003.