401 
‘‘(2) SUBSTANTIAL SALE.—A sale of assets by 
a business entity to another business entity is a sub-
stantial sale if— 
‘‘(A) more than 20 percent (in fair market 
value or in original cost) of the assets of the 
seller are sold, 
‘‘(B) the total consideration for the sale 
exceeds $1 million or 20 percent of the taxable 
receipts of the seller for the taxable year pre-
ceding the year of the sale, or 
‘‘(C) the sale satisfies other criteria estab-
lished by the Secretary to prevent distortions in 
gross profits resulting from asset sales. 
‘‘SEC. 292. SAFE HARBOR LEASES. 
‘‘(a) IN GENERAL.—In the case of a safe harbor 
lease, rental payments deemed to occur under the lease 
and interest payments deemed to be made under the leases 
shall constitute costs of business purchases, and rental in-
come and interest income deemed to be earned under the 
lease shall constitute taxable receipts. The transition basis 
deduction rules shall apply to the lessor’s adjusted basis 
in assets subject to a safe harbor lease. 
‘‘(b) SAFE HARBOR LEASE.—‘Safe harbor lease’ 
means a sale and leaseback transaction entered into pur-
suant to section 168(f)(8) of the Internal Revenue Code, 
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402 
as added by the Economic Recovery Tax Act of 1981, 
when such provision was in effect but only if such trans-
action would not be treated as a sale and leaseback for 
tax purposes but for that provision. 
‘‘SEC. 293. CARRYOVERS. 
‘‘(a) NO LOSS CARRYOVERS.—No deduction shall be 
allowed under the business tax for net operating loss 
carryovers, capital loss carryovers, or any other loss 
carryovers from the income tax under the Internal Rev-
enue Code of 1986. 
‘‘(b) NO CREDIT CARRYOVERS.—No credits shall be 
allowed under the business tax for business credit 
carryovers, minimum tax credit carryovers, or any other 
credit carryovers from the income tax under the Internal 
Revenue Code of 1986. 
‘‘SEC. 294. SECTION 481 ADJUSTMENTS. 
‘‘(a) POSITIVE NET SECTION 481 ADJUSTMENT 
AMOUNT.—If, as of January 1, 2007, a business entity 
has a positive net section 481 adjustment amount, the 
amount shall be applied to reduce the transition basis in 
accounts (for purposes of section 290) in the following 
order: 
‘‘(1) First, to reduce the category I basis (but 
not below zero), 
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403 
‘‘(2) Second, to reduce the category II basis 
(but not below zero), 
‘‘(3) Third, to reduce the unrecovered inventory 
costs. 
‘‘(b) NEGATIVE NET SECTION 481 ADJUSTMENT 
AMOUNT.—If, as of January 1, 2007, a business entity 
has a negative net section 481 adjustment amount, the 
amount shall be applied to increase category I basis for 
purposes of section 290. 
‘‘(c) SECTION 481 ADJUSTMENT.—A business enti-
ty’s net section 481 adjustment is determined by sub-
tracting— 
‘‘(1) the sum of all additional deductions to 
which a business entity would be entitled by reason 
of section 481 of the Internal Revenue Code of 1986 
for periods beginning on or after the effective date 
of the business tax with respect to changes in ac-
counting methods made before such effective date, 
from 
‘‘(2) the sum of all additional income which a 
business entity would recognize by reason of section 
481 of the Internal Revenue Code of 1986 for peri-
ods beginning on or after the effective date of the 
business tax with respect to changes in accounting 
methods made before such effective date, in each 
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404 
case assuming that the income tax under the Inter-
nal Revenue Code of 1986 remained in effect. 
‘‘Subchapter O—Rules for Administration, 
Consolidated Returns 
‘‘Sec. 301. Returns, due dates, etc. 
‘‘Sec. 302. Consolidated returns. 
‘‘SEC. 301. RETURNS, DUE DATES, ETC. 
‘‘(a) IN GENERAL.—Until subtitle F is amended to 
reflect the adoption of this chapter, the rules of subtitle 
F relating to C corporations shall apply to business enti-
ties with respect to— 
‘‘(1) returns and records; 
‘‘(2) time and place for paying tax; 
‘‘(3) assessment of taxes; 
‘‘(4) collections and liens; 
‘‘(5) abatements, credits, and refunds; 
‘‘(6) interest on underpayments and overpay-
ments; 
‘‘(7) additions to tax and penalties; 
‘‘(8) closing agreements and compromises; 
‘‘(9) crimes; 
‘‘(10) judicial proceedings; 
‘‘(11) discovery of liability and enforcement; 
and 
‘‘(12) estimated taxes. 
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405 
‘‘(b) INDIVIDUALS ENGAGING IN BUSINESS ACTIVI-
TIES.—Under rules prescribed by the Secretary, individ-
uals engaging in business activities on their own or with 
their spouses shall be permitted to file their business tax 
returns with their individual tax returns and shall be sub-
ject to estimated tax rules for individual income tax re-
turns. 
‘‘SEC. 302. CONSOLIDATED RETURNS. 
‘‘(a) IN GENERAL.—Business entities may file con-
solidated returns of business tax if they would have been 
permitted to file consolidated returns under section 1501 
of the Internal Revenue Code and such section were ap-
plied by treating each business entity as a corporation and 
its owners or partners as shareholders. 
‘‘(b) FINANCIAL
INSTITUTIONS.—Financial inter-
mediation businesses may be included in consolidated re-
turns, but each financial intermediation business must 
compute its gross profits separately. 
‘‘(c) INTERCOMPANY TRANSACTIONS.—In computing 
the gross profits of a consolidated group, intercompany 
transactions can be taken into account, or at the election 
of the filer, be disregarded (except in the case of trans-
actions with financial intermediation businesses). 
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406 
‘‘Subchapter P—Definitions and Rules of 
Application 
‘‘Sec. 310. Definitions. 
‘‘Sec. 311. Rules of application. 
‘‘SEC. 310. DEFINITIONS. 
‘‘(a) IN GENERAL.—When used in this chapter, 
where not otherwise distinctly expressed or manifestly in-
compatible with the intent thereof— 
‘‘(1) USA INCOME
TAX.—‘USA Income Tax’ 
and ‘Simplified USA Tax’ for individuals mean the 
tax imposed by chapter 1. 
‘‘(2) INTERNAL REVENUE CODE OF 1986.—‘In-
ternal Revenue Code of 1986’ means the Internal 
Revenue Code of 1986 as in effect immediately be-
fore the enactment of the Simplified USA Tax. 
‘‘(3) UNITED STATES.—‘United States’ means 
the States and the District of Columbia. 
‘‘(b) TERMS DEFINED IN CHAPTER 2.—If a term 
that is used but not defined in this chapter or in section 
7701 is defined in chapter 1, the definition in chapter 1 
shall apply except if manifestly incompatible with the in-
tent of the provision in which the term is used. 
‘‘SEC. 311. RULES OF APPLICATION. 
‘‘(a) DEFINITIONS.—Any definition included in this 
chapter shall apply for all purposes of this chapter un-
less— 
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407 
‘‘(1) such definition is limited to the purposes 
of a particular chapter, section, or subsection, or 
‘‘(2) the definition clearly would not be applica-
ble in a particular context. 
‘‘(b) INTERPRETATIONS CONSISTENT WITH INTER-
NAL REVENUE CODE OF 1986.—Terms not defined in this 
chapter or elsewhere in this title, but defined in the Inter-
nal Revenue Code of 1986, shall be interpreted in a man-
ner consistent with the Internal Revenue Code of 1986, 
except to the extent such interpretation would be incon-
sistent with the principles and purposes of this chapter.’’ 
(b) The amendments made by this section shall be 
effective on January 1, 2008, except to the extent other-
wise specifically provided in the text of such amendments. 
SEC. 302. REPEAL OF CHAPTER 6. 
Chapter 6 of the Code (relating to consolidated re-
turns) is repealed as of January 1, 2008. 
TITLE IV—DEFERRED 
COMPENSATION PLANS 
SEC. 401. PROVISIONS SAVED. 
(a) IN GENERAL.—Except as otherwise provided in 
this title, the sections contained in subchapter D of chap-
ter 1 of the Code (relating to deferred compensation, etc.) 
are hereby saved as chapter 3. 
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408 
(b) LIMITATIONS
ON CHAPTER 3.—The following 
new section is inserted before section 401 of the Code (as 
saved by subsection (a)): 
‘‘SEC. 400. EFFECT OF CHAPTER 3. 
‘‘(a) IN GENERAL.—The provisions of chapter 3 (sec-
tions 401 through 420) are included in this subtitle for 
purposes of cross-reference and for purposes of deter-
mining whether plans are exempt from the business tax 
and whether contributions to plans are deductible or ex-
cludable from gross income under chapter 1. 
‘‘(b) EFFECT
ON BUSINESS TAX DEDUCTIONS.— 
Notwithstanding any provision to the contrary in this 
chapter, no provision of this chapter shall cause any 
amount to be treated as a cost of business purchase or 
to otherwise be deducted from gross receipts for purposes 
of computing the Simplified USA for Tax Businesses 
under chapter 2. 
‘‘(c) NO CREDITS.—Notwithstanding any provision 
to the contrary in this chapter, no provision of this chapter 
shall result in a tax credit against any tax imposed by 
chapter 1 or chapter 2. 
‘‘(d) EFFECT OF FAILURE TO COMPLY WITH PROVI-
SIONS.—A failure to comply with applicable provisions in 
this chapter could cause a plan to lose its exemption from 
the business tax and, thereby subject certain business ac-
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409 
tivities of the plan to the business tax and/or result in 
the constructive distribution of plan assets to plan partici-
pants.’’ 
(c) SECTION 408A SUSPERSEDED BY SECTION 30.— 
Section 408A is repealed. 
SEC. 402. CLERICAL AMENDMENTS. 
(a) TABLE OF SECTIONS.—The table of sections for 
subpart A of part 1 of chapter 3 of the USA Tax Code 
(formerly subchapter D of chapter 1 of the Code) is 
amended by inserting at the beginning of the table: 
‘‘CHAPTER 3—DEFERRED COMPENSATION, 
ETC’’. 
(b) RENUMBERING OF CHAPTERS.— 
(1) RENUMBER CHAPTERS.—Chapters 2 and 3 
of the Code are renumbered 4 and 5 respectively. 
Such renumbering shall be reflected in all tables and 
headings in the Code. 
(2) CROSS REFERENCES.—Any cross reference 
to chapter 2 or 3 of the Code contained in any provi-
sion of the Code that is not amended by this Act or 
in any other statute shall be treated as a reference 
to such chapter as renumbered by paragraph (1). 
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410 
TITLE V—REPEAL OF ESTATE 
AND GIFT TAXES 
SEC. 501. REPEAL OF GRATUITOUS TRANSFER TAXES. 
Subtitle B of the Code (relating to estate and gift 
taxes) is repealed. 
SEC. 502. EFFECTIVE DATE. 
Section 501 shall apply to— 
(1) gifts made after December 31, 2007; 
(2) the estates of decedents dying after Decem-
ber 31, 2007; and 
(3) generating skipping transfers (within the 
meaning of subchapter B of chapter 13 as in effect 
before its repeal by this Act) occurring after Decem-
ber 31, 2007. 
TITLE VI—TECHNICAL AND AD-
MINISTRATIVE CHANGES: EF-
FECTIVE DATES 
SEC. 601. USA TAX CODE. 
(a) REDESIGNATION OF THE CODE.—The Internal 
Revenue Title enacted August 16, 1954, and as heretofore 
and hereby amended may be cited as the ‘‘USA Tax 
Code’’. The USA Tax Code, as hereinafter amended, may 
be cited as the ‘‘USA Tax Code, as amended’’. 
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411 
(b) REFERENCES IN LAWS, ETC.—Except where in-
appropriate, any reference in any law, Executive order, or 
other document— 
(1) to the Internal Revenue Code of 1954 or 
the Internal Revenue Code of 1986 shall include a 
reference to the USA Tax Code or the USA Tax 
Code, as amended, 
(2) to the USA Tax Code or the USA Tax 
Code, as amended, shall include a reference, with re-
spect to periods before January 1, 2008, to the In-
ternal Revenue Code of 1954 or the Internal Rev-
enue Code of 1986. 
SEC. 602. REVISIONS TO THE CODE. 
Not later than January 1, 2009, the Secretary shall 
submit to Congress proposed changes in the USA Tax 
Code that— 
(1) eliminate cross-references to the Internal 
Revenue Code of 1986 (except with respect to tran-
sition issues) and insert provisions similar to the 
cross-referenced sections of the Internal Revenue 
Code of 1986, 
(2) revise subtitles C through J of the USA 
Tax Code to fully reflect the amendments to subtitle 
A of the Code made by this Act and the repeal of 
subtitle B, 
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(3) include statutory definitions or rules in 
cases where the Secretary concludes that the defini-
tions or rules cannot or should not be addressed by 
regulation, 
(4) revise chapter 4 of the USA Tax Code (as 
renumbered by section 402 of this Act) (relating to 
the self-employment tax) to conform to changes 
made by this Act, and 
(5) revise chapter 5 of the USA Tax Code (as 
renumbered by section 402 of this Act) (relating to 
withholding on nonresident aliens and foreign cor-
porations) to reflect changes made in this Act. 
SEC. 603. APPLICATION OF SUBTITLE F. 
Until such time as subtitle F of the Code is amended 
to reflect the amendments made by this Act, the provisions 
of subtitle F shall be treated as generally applying to the 
Simplified USA Tax— 
(1) without regard to specific cross references, 
(2) without regard to provisions relating to 
partnerships, and 
(3) as if the business tax under chapter 2 were 
the corporate income tax and all business entities 
were corporations (except for purposes of collection, 
in which case the owners of noncorporate entities 
shall be obligated for taxes owned by the entities to 
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413 
the same extent as they would if the entity owed the 
tax prior to the amendment of the Code). 
SEC. 604. CLERICAL AMENDMENT. 
The portion of the table at the beginning of the Code 
listing subtitles and chapters of subtitle A is amended to 
read as follows: 
‘‘Subtitle A. Simplified USA Tax. 
‘‘Subtitle B. [deleted]. 
‘‘Subtitle C. Employment Taxes. 
‘‘Subtitle D. Miscellaneous Excise Taxes. 
‘‘Subtitle E. Alcohol, Tobacco and Certain Other Excise Taxes. 
‘‘Subtitle F. Procedure and Administration. 
‘‘Subtitle G. The Joint Committee on Taxation. 
‘‘Subtitle H. Financing of Presidential Election Campaigns. 
‘‘Subtitle I. Trust Fund Code. 
‘‘Subtitle K. Group Health Plan Requirements. 
‘‘Subtitle A—Simplified USA Tax 
‘‘CHAPTER 1. SIMPLIFIED USA TAX FOR INDIVIDUALS. 
‘‘CHAPTER 2. SIMPLIFIED USA TAX FOR BUSINESSES. 
‘‘CHAPTER 3. DEFERRED COMPENSATION PLANS. 
‘‘CHAPTER 4. TAX ON SELF-EMPLOYMENT INCOME. 
‘‘CHAPTER 5. WITHHOLDING OF TAX ON NONRESIDENT ALIENS AND 
FOREIGN CORPORATIONS.’’ 
SEC. 605. EFFECTIVE DATES. 
(a) IN GENERAL.—Except as otherwise provided in 
this Act, the amendments made by this Act shall be effec-
tive on January 1, 2008, with respect to tax years begin-
ning on such date. 
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414 
(b) SPECIAL RULES FOR BUSINESSES WITH 52–53 
WEEK YEAR.—If a business uses a 52–53 week taxable 
year the amendments made by this Act shall apply to the 
business with respect to its tax year beginning in the last 
week in December except with respect to any transactions 
occurring during 2007 that were structured to take advan-
tage of the application of this Act to such business at a 
time when this Act did not apply to other businesses or 
to individuals. 
Æ 
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