277 
and by inserting after paragraph (2) the following 
new paragraph: 
‘‘(3) investment services partnership interests 
held by the partnership,’’. 
(4) INVESTMENT SERVICES PARTNERSHIP IN-
TERESTS; QUALIFIED CAPITAL INTERESTS.—Section 
751 of the Internal Revenue Code of 1986 is amend-
ed by adding at the end the following new sub-
section: 
‘‘(g) INVESTMENT SERVICES PARTNERSHIP INTER-
ESTS.—For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘investment serv-
ices partnership interest’ has the meaning given 
such term by section 710(c). 
‘‘(2) ADJUSTMENTS
FOR
QUALIFIED
CAPITAL 
INTERESTS.—The amount to which subsection (a) 
applies by reason of paragraph (3) thereof shall not 
include so much of such amount as is attributable 
to any portion of the investment services partnership 
interest which is a qualified capital interest (deter-
mined under rules similar to the rules of section 
710(d)). 
‘‘(3) RECOGNITION OF GAINS.—Any gain with 
respect to which subsection (a) applies by reason of 
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paragraph (3) thereof shall be recognized notwith-
standing any other provision of this title. 
‘‘(4) 
COORDINATION
WITH
INVENTORY 
ITEMS.—An investment services partnership interest 
held by the partnership shall not be treated as an 
inventory item of the partnership. 
‘‘(5) PREVENTION
OF
DOUBLE
COUNTING.— 
Under regulations or other guidance prescribed by 
the Secretary, subsection (a)(3) shall not apply with 
respect to any amount to which section 710 ap-
plies.’’. 
(c) TREATMENT
FOR
PURPOSES
OF
SECTION 
7704.—Subsection (d) of section 7704 of the Internal 
Revenue Code of 1986 is amended by adding at the end 
the following new paragraph: 
‘‘(6) INCOME FROM CERTAIN CARRIED INTER-
ESTS NOT QUALIFIED.— 
‘‘(A) IN GENERAL.—Specified carried in-
terest income shall not be treated as qualifying 
income. 
‘‘(B) SPECIFIED
CARRIED
INTEREST
IN-
COME.—For purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘speci-
fied carried interest income’ means— 
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‘‘(I) any item of income or gain 
allocated to an investment services 
partnership interest (as defined in 
section 710(c)) held by the partner-
ship, 
‘‘(II) any gain on the disposition 
of an investment services partnership 
interest (as so defined) or a partner-
ship interest to which (in the hands of 
the partnership) section 751 applies, 
and 
‘‘(III) any income or gain taken 
into account by the partnership under 
subsection (b)(4) or (e) of section 
710. 
‘‘(ii) EXCEPTION FOR QUALIFIED CAP-
ITAL
INTERESTS.—A rule similar to the 
rule of section 710(d) shall apply for pur-
poses of clause (i). 
‘‘(C) COORDINATION WITH OTHER PROVI-
SIONS.—Subparagraph (A) shall not apply to 
any item described in paragraph (1)(E) (or so 
much of paragraph (1)(F) as relates to para-
graph (1)(E)). 
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‘‘(D) SPECIAL RULES FOR CERTAIN PART-
NERSHIPS.— 
‘‘(i) CERTAIN PARTNERSHIPS OWNED 
BY REAL ESTATE INVESTMENT TRUSTS.— 
Subparagraph (A) shall not apply in the 
case of a partnership which meets each of 
the following requirements: 
‘‘(I) Such partnership is treated 
as publicly traded under this section 
solely by reason of interests in such 
partnership being convertible into in-
terests in a real estate investment 
trust which is publicly traded. 
‘‘(II) 50 percent or more of the 
capital and profits interests of such 
partnership are owned, directly or in-
directly, at all times during the tax-
able year by such real estate invest-
ment trust (determined with the ap-
plication of section 267(c)). 
‘‘(III) Such partnership meets 
the requirements of paragraphs (2), 
(3), and (4) of section 856(c). 
‘‘(ii) CERTAIN
PARTNERSHIPS
OWN-
ING OTHER PUBLICLY TRADED PARTNER-
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SHIPS.—Subparagraph (A) shall not apply 
in the case of a partnership which meets 
each of the following requirements: 
‘‘(I) Substantially all of the as-
sets of such partnership consist of in-
terests in one or more publicly traded 
partnerships (determined without re-
gard to subsection (b)(2)). 
‘‘(II) Substantially all of the in-
come of such partnership is ordinary 
income or section 1231 gain (as de-
fined in section 1231(a)(3)). 
‘‘(E) 
TRANSITIONAL
RULE.—Subpara-
graph (A) shall not apply to any taxable year 
of the partnership beginning before the date 
which is 10 years after January 1, 2014.’’. 
(d) IMPOSITION
OF
PENALTY
ON
UNDERPAY-
MENTS.— 
(1) IN
GENERAL.—Subsection (b) of section 
6662 of the Internal Revenue Code of 1986 is 
amended by inserting after paragraph (7) the fol-
lowing new paragraph: 
‘‘(8) The application of section 710(e) or the 
regulations or other guidance prescribed under sec-
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282 
tion 710(h) to prevent the avoidance of the purposes 
of section 710.’’. 
(2) AMOUNT OF PENALTY.— 
(A) IN GENERAL.—Section 6662 of the In-
ternal Revenue Code of 1986 is amended by 
adding at the end the following new subsection: 
‘‘(k) INCREASE IN PENALTY IN CASE OF PROPERTY 
TRANSFERRED FOR INVESTMENT MANAGEMENT SERV-
ICES.—In the case of any portion of an underpayment to 
which this section applies by reason of subsection (b)(8), 
subsection (a) shall be applied with respect to such portion 
by substituting ‘40 percent’ for ‘20 percent’.’’. 
(B) CONFORMING AMENDMENT.—Subpara-
graph (B) of section 6662A(e)(2) is amended 
by striking ‘‘or (i)’’ and inserting ‘‘, (i), or (k)’’. 
(3) SPECIAL RULES FOR APPLICATION OF REA-
SONABLE CAUSE EXCEPTION.—Subsection (c) of sec-
tion 6664 is amended— 
(A) by redesignating paragraphs (3) and 
(4) as paragraphs (4) and (5), respectively; 
(B) by striking ‘‘paragraph (3)’’ in para-
graph (5)(A), as so redesignated, and inserting 
‘‘paragraph (4)’’; and 
(C) by inserting after paragraph (2) the 
following new paragraph: 
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283 
‘‘(3) SPECIAL RULE FOR UNDERPAYMENTS AT-
TRIBUTABLE TO INVESTMENT MANAGEMENT SERV-
ICES.— 
‘‘(A) IN
GENERAL.—Paragraph (1) shall 
not apply to any portion of an underpayment to 
which section 6662 applies by reason of sub-
section (b)(8) unless— 
‘‘(i) the relevant facts affecting the 
tax treatment of the item are adequately 
disclosed, 
‘‘(ii) there is or was substantial au-
thority for such treatment, and 
‘‘(iii) the taxpayer reasonably believed 
that such treatment was more likely than 
not the proper treatment. 
‘‘(B) RULES
RELATING
TO
REASONABLE 
BELIEF.—Rules similar to the rules of sub-
section (d)(3) shall apply for purposes of sub-
paragraph (A)(iii).’’. 
(e) INCOME AND LOSS FROM INVESTMENT SERVICES 
PARTNERSHIP INTERESTS TAKEN INTO ACCOUNT IN DE-
TERMINING NET EARNINGS FROM SELF-EMPLOYMENT.— 
(1) INTERNAL REVENUE CODE.— 
(A) IN GENERAL.—Section 1402(a) of the 
Internal Revenue Code of 1986 is amended by 
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284 
striking ‘‘and’’ at the end of paragraph (16), by 
striking the period at the end of paragraph (17) 
and inserting ‘‘; and’’, and by inserting after 
paragraph (17) the following new paragraph: 
‘‘(18) notwithstanding the preceding provisions 
of this subsection, in the case of any individual en-
gaged in the trade or business of providing services 
described in section 710(c)(2) with respect to any 
entity, investment services partnership income or 
loss (as defined in subsection (m)) of such individual 
with respect to such entity shall be taken into ac-
count in determining the net earnings from self-em-
ployment of such individual.’’. 
(B) INVESTMENT SERVICES PARTNERSHIP 
INCOME OR LOSS.—Section 1402 of the Inter-
nal Revenue Code is amended by adding at the 
end the following new subsection: 
‘‘(m) INVESTMENT SERVICES PARTNERSHIP INCOME 
OR LOSS.—For purposes of subsection (a)— 
‘‘(1) IN GENERAL.—The term ‘investment serv-
ices partnership income or loss’ means, with respect 
to any investment services partnership interest (as 
defined in section 710(c)), the net of— 
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285 
‘‘(A) the amounts treated as ordinary in-
come or ordinary loss under subsections (b) and 
(e) of section 710 with respect to such interest, 
‘‘(B) all items of income, gain, loss, and 
deduction allocated to such interest, and 
‘‘(C) the amounts treated as realized from 
the sale or exchange of property other than a 
capital asset under section 751 with respect to 
such interest. 
‘‘(2) EXCEPTION FOR QUALIFIED CAPITAL IN-
TERESTS.—A rule similar to the rule of section 
710(d) shall apply for purposes of applying para-
graph (1)(B)(ii).’’. 
(2) SOCIAL SECURITY ACT.—Section 211(a) of 
the Social Security Act is amended by striking 
‘‘and’’ at the end of paragraph (15), by striking the 
period at the end of paragraph (16) and inserting ‘‘; 
and’’, and by inserting after paragraph (16) the fol-
lowing new paragraph: 
‘‘(17) Notwithstanding the preceding provisions 
of this subsection, in the case of any individual en-
gaged in the trade or business of providing services 
described in section 710(c)(2) of the Internal Rev-
enue Code of 1986 with respect to any entity, invest-
ment services partnership income or loss (as defined 
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in section 1402(m) of such Code) shall be taken into 
account in determining the net earnings from self- 
employment of such individual.’’. 
(f) CONFORMING AMENDMENTS.— 
(1) Subsection (d) of section 731 of the Inter-
nal Revenue Code of 1986 is amended by inserting 
‘‘section 710(b)(4) (relating to distributions of part-
nership property),’’ after ‘‘to the extent otherwise 
provided by’’. 
(2) Section 741 of the Internal Revenue Code 
of 1986 is amended by inserting ‘‘or section 710 (re-
lating to special rules for partners providing invest-
ment management services to partnerships)’’ before 
the period at the end. 
(3) The table of sections for part I of sub-
chapter K of chapter 1 of the Internal Revenue Code 
of 1986 is amended by adding at the end the fol-
lowing new item: 
‘‘Sec. 710. Special rules for partners providing investment management services 
to partnerships.’’. 
(g) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years ending after 
December 31, 2013. 
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287 
(2) PARTNERSHIP TAXABLE YEARS WHICH IN-
CLUDE
EFFECTIVE
DATE.—In applying section 
710(a) of the Internal Revenue Code of 1986 (as 
added by this section) in the case of any partnership 
taxable year which includes January 1, 2014, the 
amount of the net income referred to in such section 
shall be treated as being the lesser of the net income 
for the entire partnership taxable year or the net in-
come determined by only taking into account items 
attributable to the portion of the partnership taxable 
year which is after such date. 
(3) DISPOSITIONS
OF
PARTNERSHIP
INTER-
ESTS.— 
(A) IN GENERAL.—Section 710(b) of such 
Code (as added by this section) shall apply to 
dispositions and distributions after December 
31, 2013. 
(B) INDIRECT DISPOSITIONS.—The amend-
ments made by subsection (b) shall apply to 
transactions after December 31, 2013. 
(4) OTHER INCOME AND GAIN IN CONNECTION 
WITH INVESTMENT MANAGEMENT SERVICES.—Sec-
tion 710(e) of such Code (as added by this section) 
shall take effect on January 1, 2014. 
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288 
Subtitle C—Close Loophole for 
Corporate Jet Depreciation 
SEC. 421. GENERAL AVIATION AIRCRAFT TREATED AS 7- 
YEAR PROPERTY. 
(a) IN GENERAL.—Subparagraph (C) of section 
168(e)(3) of the Internal Revenue Code of 1986 (relating 
to classification of certain property) is amended by strik-
ing ‘‘and’’ at the end of clause (iv), by redesignating clause 
(v) as clause (vi), and by inserting after clause (iv) the 
following new clause: 
‘‘(v) any general aviation aircraft, and’’. 
(b) CLASS LIFE.—Paragraph (3) of section 168(g) 
Internal Revenue Code of 1986 is amended by inserting 
after subparagraph (E) the following new subparagraph: 
‘‘(F) General aviation aircraft. In the case 
of any general aviation aircraft, the recovery 
period used for purposes of paragraph (2) shall 
be 12 years.’’. 
(c) GENERAL AVIATION AIRCRAFT.—Subsection (i) 
of section 168 Internal Revenue Code of 1986 is amended 
by inserting after paragraph (19) the following new para-
graph: 
‘‘(20) GENERAL
AVIATION
AIRCRAFT.—The 
term ‘general aviation aircraft’ means any airplane 
or helicopter (including airframes and engines) not 
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used in commercial or contract carrying of pas-
sengers or freight, but which primarily engages in 
the carrying of passengers.’’. 
(d) EFFECTIVE DATE.—This section shall be effec-
tive for property placed in service after December 31, 
2013. 
Subtitle D—Repeal Oil Subsidies 
SEC. 431. REPEAL OF DEDUCTION FOR INTANGIBLE DRILL-
ING AND DEVELOPMENT COSTS IN THE CASE 
OF OIL AND GAS WELLS. 
(a) IN GENERAL.—Section 263(c) of the Internal 
Revenue Code of 1986 (relating to intangible drilling and 
development costs) is amended by adding at the end the 
following new sentence: ‘‘This subsection shall not apply 
in the case of oil and gas wells with respect to amounts 
paid or incurred after December 31, 2013.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to amounts paid or incurred after 
December 31, 2013. 
SEC. 
432. 
REPEAL 
OF 
DEDUCTION 
FOR 
TERTIARY 
INJECTANTS. 
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
itemized deductions for individuals and corporations) is 
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290 
amended by striking section 193 (relating to tertiary 
injectants). 
(b) CLERICAL AMENDMENT.—The table of sections 
for part VI of subchapter B of chapter 1 of the Internal 
Revenue Code of 1986 is amended by striking the item 
relating to section 193. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred after 
December 31, 2013. 
SEC. 433. REPEAL OF PERCENTAGE DEPLETION FOR OIL 
AND GAS WELLS. 
(a) IN GENERAL.—Section 613A of the Internal Rev-
enue Code of 1986 (relating to limitation on percentage 
depletion in the case of oil and gas wells) is amended to 
read as follows: 
‘‘SEC. 613A. PERCENTAGE DEPLETION NOT ALLOWED IN 
CASE OF OIL AND GAS WELLS. 
‘‘The allowance for depletion under section 611 with 
respect to any oil and gas well shall be computed without 
regard to section 613.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
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SEC. 434. SECTION 199 DEDUCTION NOT ALLOWED WITH 
RESPECT TO OIL, NATURAL GAS, OR PRIMARY 
PRODUCTS THEREOF. 
(a) IN GENERAL.—Subparagraph (B) of section 
199(c)(4) of the Internal Revenue Code of 1986 (relating 
to income attributable to domestic production activities) 
is amended— 
(1) by striking ‘‘or’’ at the end of clause (ii), 
(2) by striking the period at the end of clause 
(iii) and inserting in lieu thereof ‘‘, or’’, and 
(3) by adding at the end thereof the following 
new clause: 
‘‘(iv) the production, refining, proc-
essing, transportation, or distribution of 
oil, natural gas, or any primary product 
(within the meaning of subsection (d)(9)) 
thereof.’’. 
(b) CONFORMING AMENDMENT.—Paragraph (9) of 
section 199(d) is amended to read as follows: 
‘‘(9) PRIMARY PRODUCT.—For purposes of sub-
section (c)(4)(B)(iv), the term ‘primary product’ has 
the same meaning as when used in section 
927(a)(2)(C) as in effect before its repeal.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
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SEC. 435. REPEAL OIL AND GAS WORKING INTEREST EX-
CEPTION TO PASSIVE ACTIVITY RULES. 
(a) IN GENERAL.—Paragraph (3) of section 469(c) 
of the Internal Revenue Code of 1986 (relating to passive 
activity defined) is amended by adding at the end thereof 
the following new subparagraph— 
‘‘(C) TERMINATION.—Subparagraph (A) 
shall not apply for any taxable year beginning 
after December 31 2013.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
SEC. 436. REPEAL ENHANCED OIL RECOVERY CREDIT. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1of the Internal Revenue Code of 
1986 (relating to business related credits) is amended by 
striking section 43 (relating to enhanced oil recovery cred-
it). 
(b) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by strik-
ing the item relating to section 43. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
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293 
SEC. 437. UNIFORM SEVEN-YEAR AMORTIZATION FOR GEO-
LOGICAL AND GEOPHYSICAL EXPENDITURES. 
(a) IN GENERAL.—Paragraph (1) of section 167(h) 
of the Internal Revenue Code of 1986 (relating to amorti-
zation of geological and geophysical expenditures) is 
amended by striking ‘‘24-month’’ and inserting in lieu 
thereof ‘‘7-year’’. 
(b) CONFORMING AMENDMENTS.—Section 167(h) is 
amended— 
(1) by striking ‘‘24-month’’ in paragraph (4) 
and inserting in lieu thereof ‘‘7-year’’, and 
(2) by striking paragraph (5). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred after 
December 31, 2013. 
SEC. 438. REPEAL MARGINAL WELL PRODUCTION CREDIT. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1of the Internal Revenue Code of 
1986 (relating to business related credits) is amended by 
striking section 45I (relating to credit for producing oil 
and gas from marginal wells). 
(b) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by strik-
ing the item relating to section 45I. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
Subtitle E—Dual Capacity 
Taxpayers 
SEC. 441. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 
APPLICABLE TO DUAL CAPACITY TAXPAYERS. 
(a) IN GENERAL.—Section 901 of the Internal Rev-
enue Code of 1986 (relating to credit for taxes of foreign 
countries and of possessions of the United States) is 
amended by redesignating subsection (n) as subsection (o) 
and by inserting after subsection (m) the following new 
subsection: 
‘‘(n) SPECIAL RULES RELATING TO DUAL CAPACITY 
TAXPAYERS.— 
‘‘(1) GENERAL
RULE.—Notwithstanding any 
other provision of this chapter, any amount paid or 
accrued by a dual capacity taxpayer or any member 
of the worldwide affiliated group of which such dual 
capacity taxpayer is also a member to any foreign 
country or to any possession of the United States 
for any period shall not be considered a tax to the 
extent such amount exceeds the amount (determined 
in accordance with regulations) which would have 
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been required to be paid if the taxpayer were not a 
dual capacity taxpayer. 
‘‘(2) DUAL
CAPACITY
TAXPAYER.—For pur-
poses of this subsection, the term ‘dual capacity tax-
payer’ means, with respect to any foreign country or 
possession of the United States, a person who— 
‘‘(A) is subject to a levy of such country or 
possession, and 
‘‘(B) receives (or will receive) directly or 
indirectly a specific economic benefit (as deter-
mined in accordance with regulations) from 
such country or possession. 
‘‘(3) REGULATIONS.—The Secretary may issue 
such regulations or other guidance as is necessary or 
appropriate to carry out the purposes of this sub-
section.’’. 
(b) CONTRARY TREATY OBLIGATIONS UPHELD.— 
The amendments made by this section shall not apply to 
the extent contrary to any treaty obligation of the United 
States. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts that, if such amounts 
were an amount of tax paid or accrued, would be consid-
ered paid or accrued in taxable years beginning after De-
cember 31, 2013. 
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296 
SEC. 442. SEPARATE BASKET TREATMENT TAXES PAID ON 
FOREIGN OIL AND GAS INCOME. 
(a) SEPARATE BASKET FOR FOREIGN TAX CRED-
IT.—Paragraph (1) of section 904(d) of the Internal Rev-
enue Code of 1986 is amended by striking ‘‘and’’ at the 
end of subparagraph (A), by striking the period at the 
end of subparagraph (B) and inserting ‘‘, and’’, and by 
adding at the end the following: 
‘‘(C) combined foreign oil and gas income 
(as defined in section 907(b)(1)).’’. 
(b) COORDINATION.—Section 904(d)(2)of such Code 
is amended by redesignating subparagraphs (J) and (K) 
as subparagraphs (K) and (L) and by inserting after sub-
paragraph (I) the following: 
‘‘(J) COORDINATION WITH COMBINED FOR-
EIGN OIL AND GAS INCOME.—For purposes of 
this section, passive category income and gen-
eral category income shall not include combined 
foreign oil and gas income (as defined in section 
907(b)(1)).’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 907(a) is hereby repealed. 
(2) Section 907(c)(4) is hereby repealed. 
(3) Section 907(f) is hereby repealed. 
(d) EFFECTIVE DATES.— 
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(1) IN GENERAL.—The amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2013. 
(2) TRANSITIONAL RULES.— 
(A) CARRYOVERS.—Any unused foreign oil 
and gas taxes which under section 907(f) of 
such Code (as in effect before the amendment 
made by subsection (c)(3)) would have been al-
lowable as a carryover to the taxpayer’s first 
taxable year beginning after December 31, 
2013 (without regard to the limitation of para-
graph (2) of such section 907(f) for first tax-
able year) shall be allowed as carryovers under 
section 904(c) of such Code in the same man-
ner as if such taxes were unused taxes under 
such section 904(c) with respect to foreign oil 
and gas extraction income. 
(B) LOSSES.—The amendment made by 
subsection (c)(2) shall not apply to foreign oil 
and gas extraction losses arising in taxable 
years beginning on or before the date of the en-
actment of this Act. 
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298 
Subtitle F—Repeal of 
Sequestration 
SEC. 451. REPEAL OF SEQUESTRATION. 
Section 251A of the Balanced Budget and Emer-
gency Deficit Control Act of 1985 is repealed. 
Æ 
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