102 
lessee has the right to acquire the property for 50 percent 
or less of its fair market value at the end of the lease 
term. 
‘‘(b) GENERAL RULE.—Financing leases shall be 
taxed in the method set forth in this section. 
‘‘(c) DETERMINATION OF PRINCIPAL AND INTEREST 
COMPONENTS
OF FINANCING LEASE.—The Secretary 
shall promulgate rules for disaggregating the principal 
and interest components of a financing lease. The prin-
cipal amount shall be determined to the extent possible 
by examination of the contemporaneous sales price or 
prices of property the same or similar as the leased prop-
erty. 
‘‘(d) ALTERNATIVE METHOD.—In the event that con-
temporaneous sales prices or property the same or similar 
as the leased property are not available, the principal and 
interest components of a financing lease shall be 
disaggregated using the applicable interest rate (as de-
fined in section 512) plus 4 percent. 
‘‘(e) PRINCIPAL COMPONENT.—The principal compo-
nent of the financing lease shall be subject to tax as if 
a purchase in the amount of the principal component had 
been made on the day on which said lease was executed. 
‘‘(f) INTEREST COMPONENT.—The financial inter-
mediation services amount with respect to the interest 
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component of the financing lease shall be subject to tax 
under this subtitle. 
‘‘(g) COORDINATION.—If the principal component 
and financial intermediation services amount with respect 
to the interest component of a lease have been taxed pur-
suant to this section, then the gross lease or rental pay-
ments shall not be subject to additional tax. 
‘‘SEC. 805. BASIC INTEREST RATE. 
‘‘For purposes of this chapter, the basic interest rate 
with respect to a debt instrument, investment, financing 
lease, or account shall be the applicable interest rate (as 
determined in section 512). For debt instruments, invest-
ments, or accounts of contractually fixed interest, the ap-
plicable interest rate of the month of issuance shall apply. 
For debt instruments, investments, or accounts of variable 
interest rates and which have no reference interest rate, 
the applicable interest shall be the Federal short-term in-
terest rate for each month. For debt instruments, invest-
ments, or accounts of variable interest rates and which 
have a reference interest rate, the applicable interest shall 
be the applicable interest rate for the reference interest 
rate for each month. 
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‘‘SEC. 806. FOREIGN FINANCIAL INTERMEDIATION SERV-
ICES. 
‘‘(a) SPECIAL RULES RELATING TO INTERNATIONAL 
FINANCIAL
INTERMEDIATION
SERVICES.—Financial 
intermediation services shall be deemed as used or con-
sumed within the United States if the person (or any re-
lated party as defined in section 205(e)) purchasing the 
services is a resident of the United States. 
‘‘(b) DESIGNATION OF TAX REPRESENTATIVE.—Any 
person that provides financial intermediation services to 
United States residents must, as a condition of lawfully 
providing such services, designate, in a form prescribed 
by the Secretary, a tax representative for purposes of this 
subtitle. The tax representative shall be responsible for en-
suring that the taxes imposed by this subtitle are collected 
and remitted and shall be jointly and severally liable for 
collecting and remitting these taxes. The Secretary may 
require reasonable bond of the tax representative. The 
Secretary or a sales tax administering authority may bring 
an action seeking a temporary restraining order, an in-
junction, or such other order as may be appropriate to 
enforce this section. 
‘‘(c) CROSS REFERENCES.—For definition of person, 
see section 901. 
‘‘CHAPTER 9—ADDITIONAL MATTERS 
‘‘Sec. 901. Additional matters. 
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‘‘Sec. 902. Transition matters. 
‘‘Sec. 903. Wages to be reported to Social Security Administration. 
‘‘Sec. 904. Trust Fund revenue. 
‘‘Sec. 905. Withholding of tax on nonresident aliens and foreign corporations. 
‘‘SEC. 901. ADDITIONAL MATTERS. 
‘‘(a) 
INTANGIBLE
PROPERTY
ANTIAVOIDANCE 
RULE.—Notwithstanding section 2(a)(14)(a)(i), the sale 
of a copyright or trademark shall be treated as the sale 
of taxable services (within the meaning of section 101(a)) 
if the substance of the sales of copyright or trademark 
constituted the sale of the services that produced the copy-
righted material or the trademark. 
‘‘(b) DE MINIMIS PAYMENTS.—Up to $400 of gross 
payments per calendar year shall be exempt from the tax 
imposed by section 101 if— 
‘‘(1) made by a person not in connection with 
a trade or business at any time during such calendar 
year prior to making said gross payments, and 
‘‘(2) made to purchase any taxable property or 
service which is imported into the United States by 
such person for use or consumption by such person 
in the United States. 
‘‘(c) DE MINIMIS SALES.—Up to $1,200 per calendar 
year of gross payments shall be exempt from the tax im-
posed by section 101 if received— 
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‘‘(1) by a person not in connection with a trade 
or business during such calendar year prior to the 
receipt of said gross payments; and 
‘‘(2) in connection with a casual or isolated 
sale. 
‘‘(d) DE MINIMIS SALE OF FINANCIAL INTERMEDI-
ATION SERVICES.—Up to $10,000 per calendar year of 
gross payments received by a person from the sale of fi-
nancial intermediation services (as determined in accord-
ance with section 801) shall be exempt from the tax im-
posed by section 101. The exemption provided by this sub-
section is in addition to other exemptions afforded by this 
chapter. The exemption provided by this subsection shall 
not be available to large sellers (as defined in section 
501(e)(3)). 
‘‘(e) PROXY BUYING TAXABLE.—If a registered per-
son provides taxable property or services to a person either 
as a gift, prize, reward, or as remuneration for employ-
ment, and such taxable property or services were not pre-
viously subject to tax pursuant to section 101, then the 
provision of such taxable property or services by the reg-
istered person shall be deemed the conversion of such tax-
able property or services to personal use subject to tax 
pursuant to section 103(c) at the tax inclusive fair market 
value of such taxable property or services. 
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107 
‘‘(f) SUBSTANCE OVER FORM.—The substance of a 
transaction will prevail over its form if the transaction has 
no bona fide economic purpose and is designed to evade 
tax imposed by this subtitle. 
‘‘(g) CERTAIN EMPLOYEE DISCOUNTS TAXABLE.— 
‘‘(1) EMPLOYEE DISCOUNT.—For purposes of 
this subsection, the term ‘employee discount’ means 
an employer’s offer of taxable property or services 
for sale to its employees or their families (within the 
meaning of section 302(b)) for less than the offer of 
such taxable property or services to the general pub-
lic. 
‘‘(2) EMPLOYEE DISCOUNT AMOUNT.—For pur-
poses of this subsection, the employee discount 
amount is the amount by which taxable property or 
services are sold pursuant to an employee discount 
below the amount for which such taxable property or 
services would have been sold to the general public. 
‘‘(3) TAXABLE AMOUNT.—If the employee dis-
count amount exceeds 20 percent of the price that 
the taxable property or services would have been sold 
to the general public, then the sale of such taxable 
property or services by the employer shall be deemed 
the conversion of such taxable property or services 
to personal use and tax shall be imposed on the tax-
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108 
able employee discount amount. The taxable em-
ployee discount amount shall be— 
‘‘(A) the employee discount amount, minus 
‘‘(B) 20 percent of the amount for which 
said taxable property or services would have 
been sold to the general public. 
‘‘(h) SATURDAY, SUNDAY, OR LEGAL HOLIDAY.— 
When the last day prescribed for performing any act re-
quired by this subtitle falls on a Saturday, Sunday, or 
legal holiday (in the jurisdiction where the return is to 
be filed), the performance of such act shall be considered 
timely if it is performed on the next day which is not a 
Saturday, Sunday, or legal holiday (in the jurisdiction 
where the return is to be filed). 
‘‘SEC. 902. TRANSITION MATTERS. 
‘‘(a) INVENTORY.— 
‘‘(1) QUALIFIED
INVENTORY.—Inventory held 
by a trade or business on the close of business on 
December 31, 2008, shall be qualified inventory if it 
is sold— 
‘‘(A) before December 31, 2009; 
‘‘(B) by a registered person; and 
‘‘(C) subject to the tax imposed by section 
101. 
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109 
‘‘(2) COSTS.—For purposes of this section, 
qualified inventory shall have the cost that it had for 
Federal income tax purposes for the trade or busi-
ness as of December 31, 2008 (including any 
amounts capitalized by reason of section 263A of the 
Internal Revenue Code of 1986 as in effect on De-
cember 31, 2008). 
‘‘(3) TRANSITIONAL INVENTORY CREDIT.—The 
trade or business which held the qualified inventory 
on the close of business on December 31, 2008, shall 
be entitled to a transitional inventory credit equal to 
the cost of the qualified inventory (determined in ac-
cordance with paragraph (2)) times the rate of tax 
imposed by section 101. 
‘‘(4) TIMING OF CREDIT.—The credit provided 
under paragraph (3) shall be allowed with respect to 
the month when the inventory is sold subject to the 
tax imposed by this subtitle. Said credit shall be re-
ported as an intermediate and export sales credit 
and the person claiming said credit shall attach sup-
porting schedules in the form that the Secretary 
may prescribe. 
‘‘(b) WORK-IN-PROCESS.—For purposes of this sec-
tion, inventory shall include work-in-process. 
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110 
‘‘(c) QUALIFIED INVENTORY HELD BY BUSINESSES 
NOT SELLING SAID QUALIFIED INVENTORY
AT RE-
TAIL.— 
‘‘(1) IN GENERAL.—Qualified inventory held by 
businesses that sells said qualified inventory not sub-
ject to tax pursuant to section 102(a) shall be eligi-
ble for the transitional inventory credit only if that 
business (or a business that has successor rights 
pursuant to paragraph (2)) receives certification in 
a form satisfactory to the Secretary that the quali-
fied inventory was subsequently sold subject to the 
tax imposed by this subtitle. 
‘‘(2) TRANSITIONAL INVENTORY CREDIT RIGHT 
MAY BE SOLD.—The business entitled to the transi-
tional inventory credit may sell the right to receive 
said transitional inventory credit to the purchaser of 
the qualified inventory that gave rise to the credit 
entitlement. Any purchaser of such qualified inven-
tory (or property or services into which the qualified 
inventory has been incorporated) may sell the right 
to said transitional inventory credit to a subsequent 
purchaser of said qualified inventory (or property or 
services into which the qualified inventory has been 
incorporated). 
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111 
‘‘SEC. 903. WAGES TO BE REPORTED TO SOCIAL SECURITY 
ADMINISTRATION. 
‘‘(a) IN GENERAL.—Employers shall submit such in-
formation to the Social Security Administration as is re-
quired by the Social Security Administration to calculate 
Social Security benefits under title II of the Social Secu-
rity Act, including wages paid, in a form prescribed by 
the Secretary. A copy of the employer submission to the 
Social Security Administration relating to each employee 
shall be provided to each employee by the employer. 
‘‘(b) WAGES.—For purposes of this section, the term 
‘wages’ means all cash remuneration for employment (in-
cluding tips to an employee by third parties provided that 
the employer or employee maintains records documenting 
such tips) including self-employment income; except that 
such term shall not include— 
‘‘(1) any insurance benefits received (including 
death benefits); 
‘‘(2) pension or annuity benefits received; 
‘‘(3) tips received by an employee over $5,000 
per year; and 
‘‘(4) benefits received under a government enti-
tlement program (including Social Security benefits 
and unemployment compensation benefits). 
‘‘(c) SELF-EMPLOYMENT INCOME.—For purposes of 
subsection (b), the term ‘self-employment income’ means 
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112 
gross payments received for taxable property or services 
minus the sum of— 
‘‘(1) gross payments made for taxable property 
or services (without regard to whether tax was paid 
pursuant to section 101 on such taxable property or 
services), and 
‘‘(2) wages paid by the self-employed person to 
employees of the self-employed person. 
‘‘SEC. 904. TRUST FUND REVENUE. 
‘‘(a) SECRETARY TO MAKE ALLOCATION OF SALES 
TAX REVENUE.—The Secretary shall allocate the revenue 
received by virtue of the tax imposed by section 101 in 
accordance with this section. The revenue shall be allo-
cated among— 
‘‘(1) the general revenue, 
‘‘(2) the old-age and survivors insurance trust 
fund, 
‘‘(3) the disability insurance trust fund, 
‘‘(4) the hospital insurance trust fund, and 
‘‘(5) the Federal supplementary medical insur-
ance trust fund. 
‘‘(b) GENERAL RULE.— 
‘‘(1) GENERAL REVENUE.—The proportion of 
total revenue allocated to the general revenue shall 
be the same proportion as the rate in section 
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113 
101(b)(4) bears to the combined Federal tax rate 
percentage (as defined in section 101(b)(3)). 
‘‘(2) The amount of revenue allocated to the 
old-age and survivors insurance and disability insur-
ance trust funds shall be the same proportion as the 
old-age, survivors and disability insurance rate (as 
defined in subsection (d)) bears to the combined 
Federal tax rate percentage (as defined in section 
101(b)(3)). 
‘‘(3) The amount of revenue allocated to the 
hospital insurance and Federal supplementary med-
ical insurance trust funds shall be the same propor-
tion as the hospital insurance rate (as defined in 
subsection (e)) bears to the combined Federal tax 
rate percentage (as defined in section 101(b)(3)). 
‘‘(c) CALENDAR YEAR 2009.—Notwithstanding sub-
section (b), the revenue allocation pursuant to subsection 
(a) for calendar year 2009 shall be as follows: 
‘‘(1) 64.83 percent of total revenue to general 
revenue; 
‘‘(2) 27.43 percent of total revenue to the old- 
age and survivors insurance and disability insurance 
trust funds, and 
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114 
‘‘(3) 7.74 percent of total revenue to the hos-
pital insurance and Federal supplementary medical 
insurance trust funds. 
‘‘(d) OLD-AGE, SURVIVORS AND DISABILITY INSUR-
ANCE RATE.—The old-age, survivors and disability insur-
ance rate shall be determined by the Social Security Ad-
ministration. The old-age, survivors and disability insur-
ance rate shall be that sales tax rate which is necessary 
to raise the same amount of revenue that would have been 
raised by imposing a 12.4 percent tax on the Social Secu-
rity wage base (including self-employment income) as de-
termined in accordance with chapter 21 of the Internal 
Revenue Code most recently in effect prior to the enact-
ment of this Act. The rate shall be determined using actu-
arially sound methodology and announced at least 6 
months prior to the beginning of the Calendar year for 
which it applies. 
‘‘(e) HOSPITAL INSURANCE RATE.—The hospital in-
surance rate shall be determined by the Social Security 
Administration. The hospital insurance rate shall be that 
sales tax rate which is necessary to raise the same amount 
of revenue that would have been raised by imposing a 2.9 
percent tax on the Medicare wage base (including self-em-
ployment income) as determined in accordance with chap-
ter 21 of the Internal Revenue Code most recently in effect 
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115 
prior to the enactment of this Act. The rate shall be deter-
mined using actuarially sound methodology and an-
nounced at least 6 months prior to the beginning of the 
calendar year for which it applies. 
‘‘(f) ASSISTANCE.—The Secretary shall provide such 
technical assistance as the Social Security Administration 
shall require to determine the old-age, survivors and dis-
ability insurance rate and the hospital insurance rate. 
‘‘(g) FURTHER ALLOCATIONS.— 
‘‘(1) OLD-AGE, SURVIVORS AND DISABILITY IN-
SURANCE.—The Secretary shall allocate revenue re-
ceived because of the old-age, survivors and dis-
ability insurance rate to the old-age and survivors 
insurance trust fund and the disability insurance 
trust fund in accordance with law or, in the absence 
of other statutory provision, in the same proportion 
that the old-age and survivors insurance trust fund 
receipts bore to the sum of the old-age and survivors 
insurance trust fund receipts and the disability in-
surance trust fund receipts in calendar year 2008 
(taking into account only receipts pursuant to chap-
ter 21 of the Internal Revenue Code). 
‘‘(2) HOSPITAL
INSURANCE.—The Secretary 
shall allocate revenue received because of the hos-
pital insurance rate to the hospital insurance trust 
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116 
fund and the Federal supplementary medical insur-
ance trust fund in accordance with law or, in the ab-
sence of other statutory provision, in the same pro-
portion that hospital insurance trust fund receipts 
bore to the sum of the hospital insurance trust fund 
receipts and Federal supplementary medical insur-
ance trust fund receipts in calendar year 2008 (tak-
ing into account only receipts pursuant to chapter 
21 of the Internal Revenue Code). 
‘‘SEC. 905. WITHHOLDING OF TAX ON NONRESIDENT ALIENS 
AND FOREIGN CORPORATIONS. 
‘‘(a) IN GENERAL.—All persons, in whatever capacity 
acting (including lessees or mortgagors or real or personal 
property, fiduciaries, employers, and all officers and em-
ployees of the United States) having control, receipt, cus-
tody, disposal, or payment of any income to the extent 
such income constitutes gross income from sources within 
the United States of any nonresident alien individual, for-
eign partnership, or foreign corporation shall deduct and 
withhold from that income a tax equal to 23 percent there-
of. 
‘‘(b) EXCEPTION.—No tax shall be required to be de-
ducted from interest on portfolio debt investments. 
‘‘(c) TREATY COUNTRIES.—In the case of payments 
to nonresident alien individuals, foreign partnerships, or 
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117 
foreign corporations that have a residence in (or the na-
tionality of a country) that has entered into a tax treaty 
with the United States, then the rate of withholding tax 
prescribed by the treaty shall govern.’’. 
SEC. 202. CONFORMING AND TECHNICAL AMENDMENTS. 
(a) REPEALS.—The following provisions of the Inter-
nal Revenue Code of 1986 are repealed: 
(1) Subchapter A of chapter 61 of subtitle D 
(as redesignated by section 104) (relating to infor-
mation and returns). 
(2) Sections 6103 through 6116 of subchapter 
B of chapter 61 of subtitle D (as so redesignated). 
(3) Section 6157 (relating to unemployment 
taxes). 
(4) Section 6163 (relating to estate taxes). 
(5) Section 6164 (relating to corporate taxes). 
(6) Section 6166 (relating to estate taxes). 
(7) Section 6167 (relating to foreign expropria-
tion losses). 
(8) Sections 6201, 6205 and 6207 (relating to 
assessments). 
(9) Subchapter C of chapter 63 of subtitle D 
(as so redesignated) (relating to tax treatment of 
partnership items). 
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118 
(10) Section 6305 (relating to collections of cer-
tain liabilities). 
(11) Sections 6314, 6315, 6316, and 6317 (re-
lating to payments of repealed taxes). 
(12) Sections 6324, 6324A and 6324B (relat-
ing to liens for estate and gift taxes). 
(13) Section 6344 (relating to cross references). 
(14) Section 6411 (relating to carrybacks). 
(15) Section 6413 (relating to employment 
taxes). 
(16) Section 6414 (relating to withheld income 
taxes). 
(17) Section 6422 (relating to cross references). 
(18) Section 6425 (relating to overpayment of 
corporate estimated taxes). 
(19) Section 6504 (relating to cross references). 
(20) Section 6652 (relating to failure to file 
certain information returns). 
(21) Sections 6654 and 6655 (relating to fail-
ure to payment estimated income tax). 
(22) Section 6662 (relating to penalties). 
(23) Sections 6677 through 6711 (relating to 
income tax related penalties). 
(24) Part II of subchapter B of chapter 68 (re-
lating to certain information returns). 
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119 
(25) Part I of subchapter A of chapter 70 (re-
lating to termination of taxable year). 
(26) 
Section 
6864 
(relating 
to 
certain 
carrybacks). 
(27) Section 7103 (relating to cross references). 
(28) Section 7204 (relating to withholding 
statements). 
(29) Section 7211 (relating certain statements). 
(30) Section 7231 (relating to failure to obtain 
certain licenses). 
(31) Section 7270 (relating to insurance poli-
cies). 
(32) Section 7404 (relating to estate taxes). 
(33) Section 7404 (relating to income tax pre-
parers). 
(34) Section 7408 (relating to income tax shel-
ters). 
(35) Section 7409 (relating to 501(c)(3) organi-
zations). 
(36) Section 7427 (relating to income tax pre-
parers). 
(37) Section 7428 (relating to 501(c)(3) organi-
zations). 
(38) Section 7476 (relating to declaratory judg-
ments relating to retirement plans). 
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120 
(39) Section 7478 (relating to declaratory judg-
ments relating to certain tax-exempt obligations). 
(40) Section 7508 (relating to postponing time 
for certain actions required by the income, estate, 
and gift tax). 
(41) Section 7509 (relating to Postal Service 
payroll taxes). 
(42) Section 7512 (relating to payroll taxes). 
(43) Section 7517 (relating to estate and gift 
tax evaluation). 
(44) Section 7518 (relating to Merchant Marine 
tax incentives). 
(45) Section 7519 (relating to taxable years). 
(46) Section 7520 (relating to insurance and 
annuity valuation tables). 
(47) Section 7523 (relating to reporting Fed-
eral income and outlays on Form 1040s). 
(48) Section 7611 (relating to church income 
tax exemptions and church unrelated business in-
come tax inquiries). 
(49) Section 7654 (relating to possessions’ in-
come taxes). 
(50) Section 7655 (relating to cross references). 
(51) Section 7701(a)(16). 
(52) Section 7701(a)(19). 
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(53) Section 7701(a)(20). 
(54) Paragraphs (32) through (38) of section 
7701(a). 
(55) Paragraphs (41) through (46) of section 
7701(a). 
(56) Section 7701(b). 
(57) Subsections (e) through (m) of section 
7701. 
(58) Section 7702 (relating to life insurance 
contracts). 
(59) Section 7702A (relating to modified en-
dowment contracts). 
(60) Section 7702B (relating to long-term care 
insurance). 
(61) Section 7703 (relating to the determina-
tion of marital status). 
(62) Section 7704 (relating to publicly traded 
partnerships). 
(63) Section 7805. 
(64) Section 7851. 
(65) Section 7872. 
(66) Section 7873. 
(b) OTHER CONFORMING AND TECHNICAL AMEND-
MENTS.— 
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