(C) by inserting after paragraph (1) the 
following new paragraph: 
‘‘(2) 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 this section applies by reason of sub-
section (b)(7) 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).’’. 
(d) INCOME AND LOSS FROM INVESTMENT SERVICES 
PARTNERSHIP INTERESTS TAKEN INTO ACCOUNT IN DE-
TERMINING NET EARNINGS FROM SELF-EMPLOYMENT.— 
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(1) 
INTERNAL
REVENUE
CODE.—Section 
1402(a) is amended by striking ‘‘and’’ at the end of 
paragraph (16), by striking the period at the end of 
paragraph (17) and inserting ‘‘; and’’, and by insert-
ing after paragraph (17) the following new para-
graph: 
‘‘(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)(1) with respect to any 
entity, any amount treated as ordinary income or or-
dinary loss of such individual under section 710 with 
respect to such entity shall be taken into account in 
determining the net earnings from self-employment 
of such individual.’’. 
(2) SOCIAL SECURITY ACT.—Section 211(a) of 
the Social Security Act is amended by inserting after 
paragraph (16) the following 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)(1) of the Internal Rev-
enue Code of 1986 with respect to any entity, any 
amount treated as ordinary income or ordinary loss 
of such individual under section 710 of such Code 
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with respect to such entity shall be taken into ac-
count in determining the net earnings from self-em-
ployment of such individual.’’. 
(e) CONFORMING AMENDMENTS.— 
(1) Subsection (d) of section 731 is amended by 
inserting ‘‘section 710(b)(4) (relating to distribu-
tions of partnership property),’’ after ‘‘to the extent 
otherwise provided by’’. 
(2) Section 741 is amended by inserting ‘‘or 
section 710 (relating to special rules for partners 
providing investment management services to part-
nership)’’ before the period at the end. 
(3) The table of sections for part I of sub-
chapter K of chapter 1 is amended by adding at the 
end the following new item: 
‘‘Sec. 710. Special rules for partners providing investment management services 
to partnership.’’. 
(f) 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, 2009. 
(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 
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taxable year which includes December 31, 2009, 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.—Section 710(b) of the Internal Revenue Code 
of 1986 (as added by this section) shall apply to dis-
positions and distributions after December 31, 2009. 
(4) OTHER INCOME AND GAIN IN CONNECTION 
WITH INVESTMENT MANAGEMENT SERVICES.—Sec-
tion 710(d) of such Code (as added by this section) 
shall take effect on January 1, 2010. 
(5) PUBLICLY
TRADED
PARTNERSHIPS.—The 
amendment made by subsection (b) shall apply to 
taxable years beginning after December 31, 2009. 
Subtitle B—Tax Expenditures 
Relating to Agribusiness 
SEC. 511. ELIMINATION OF EXPENSING FOR FERTILIZER, 
ETC., OTHERWISE CHARGEABLE TO A CAP-
ITAL ACCOUNT. 
Section 180 is amended by adding at the end the fol-
lowing new subsection: 
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‘‘(d) TERMINATION.—This section shall not apply to 
taxable years beginning after December 31, 2011.’’. 
SEC. 512. ELIMINATION OF EXPENSING FOR MULTI-PERIOD 
LIVESTOCK AND CROP PRODUCTION COSTS. 
Subsection (d) of section 263A is amended by adding 
at the end the following new paragraph: 
‘‘(4) TERMINATION.—This subsection shall not 
apply to costs incurred after December 31, 2011, in 
taxable year ending after such date.’’. 
SEC. 513. REPEAL OF CAPITAL GAIN TREATMENT WITH RE-
SPECT TO THE SALE OF TIMBER. 
(a) IN GENERAL.—Paragraph (2) of section 1231(b) 
as amended by this Act, is amended— 
(1) by striking ‘‘timber and’’, and 
(2) by striking ‘‘TIMBER OR’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 514. ELIMINATION OF EXPENSING FOR TIMBER AND 
ORNAMENTAL TREES. 
(a) IN GENERAL.—Paragraph (5) of section 263A(c) 
is amended by striking ‘‘This section’’ and inserting ‘‘In 
the case of costs incurred before January 1, 2012, in tax-
able year ending after such date, this section’’. 
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(b) CONFORMING AMENDMENT.—Subparagraph (B) 
of section 448(d)(1) is amended by inserting before the 
period at the end the following: ‘‘(as in effect on the day 
before the date of the enactment of the Tax Equity and 
Middle Class Fairness Act of 2011)’’. 
SEC. 515. ELIMINATION OF AMORTIZATION OF REFOREST-
ATION EXPENDITURES. 
Section 194 is amended by adding at the end the fol-
lowing new subsection: 
‘‘(e) TERMINATION.—This section shall not apply 
with respect to expenditures paid or incurred after Decem-
ber 31, 2011.’’. 
SEC. 516. REPEAL OF TAX EXPENDITURE FOR HORSE 
BREEDERS. 
(a) IN GENERAL.—Clause (i) of section 168(e)(3) is 
amended to read as follows: 
‘‘(i) any race horse which is more 
than 2 years old at the time it is placed in 
service,’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to property placed in service after 
the date of the enactment of this Act. 
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Subtitle C—Other Business Tax 
Expenditures 
SEC. 521. TERMINATION OF $25,000 EXEMPTION FROM PAS-
SIVE LOSS RULES FOR RENTAL REAL ESTATE 
ACTIVITIES. 
(a) IN GENERAL.—Section 469 is amended by strik-
ing subsection (i). 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 522. ELIMINATION OF DEDUCTION FOR CERTAIN 
MEAL AND ENTERTAINMENT EXPENSES. 
(a) IN GENERAL.—Paragraph (1) of section 274(n) 
is amended— 
(1) by striking ‘‘The amount allowable as a de-
duction’’ and inserting ‘‘No deduction shall be al-
lowed’’, and 
(2) by striking ‘‘activity,’’ and all that follows 
through the period at the end and inserting ‘‘activ-
ity.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 523. STATE AND LOCAL BONDS CONVERTED TO DI-
RECT SUBSIDY BONDS. 
(a) TERMINATION
OF TAX EXEMPT STATUS
OF 
STATE AND LOCAL BONDS.—Section 103 is amended by 
adding at the end the following new subsection: 
‘‘(d) TERMINATION.—This section shall not apply to 
any obligations issued after December 31, 2011.’’. 
(b) STATE AND LOCAL BONDS TREATED AS BUILD 
AMERICA BONDS.— 
(1) IN
GENERAL.—Paragraph (1) of section 
54AA(d) is amended— 
(A) by striking subparagraph (B) and by 
inserting ‘‘and’’ at the end of subparagraph 
(A), and 
(B) in subparagraph (A) by inserting ‘‘(de-
termined without regard to subsection (d) 
thereof)’’ after ‘‘section 103’’. 
(2) DIRECT SUBSIDY.— 
(A) Subsection (g) of section 54AA is 
amended to read as follows: 
‘‘(g) DIRECT SUBSIDY FOR BUILD AMERICA BONDS 
ISSUED AFTER 2011.— 
‘‘(1) IN GENERAL.—In the case of build Amer-
ica bonds issued after December 31, 2011, no credit 
shall be allowed under this section with respect to 
such bond. 
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‘‘(2) CROSS REFERENCE.—For the credit to the 
issuer of build America bonds, see section 6431.’’. 
(B) Section 6431 is amended— 
(i) by striking ‘‘In the case of a quali-
fied bond issued before January 1, 2011,’’ 
in subsection (a) and inserting ‘‘In the 
case of any build America bond (as defined 
in section 54AA(d)) issued after December 
31, 2011,’’, 
(ii) by striking subsections (e) and (f), 
and 
(iii) 
by 
striking 
‘‘QUALIFIED 
BONDS’’ in the heading thereof and insert-
ing ‘‘BUILD AMERICA BONDS’’. 
(3) PRIVATE
ACTIVITY
BONDS
INCLUDED.— 
Paragraph (1) of section 54AA(d) of such Code is 
amended by striking ‘‘(other than a private activity 
bond)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to obligations issued after Decem-
ber 31, 2011. 
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SEC. 524. 28-PERCENT RATE FOR EXPANDED DIRECT SUB-
SIDY BUILD AMERICA BONDS. 
Subsection (b) of section 6431 is amended by insert-
ing ‘‘(28 percent in the case of obligations issued after 
December 31, 2011)’’ after ‘‘35 percent’’. 
TITLE VI—INTERNATIONAL TAX 
EXPENDITURES 
SEC. 601. ALLOCATION OF EXPENSES AND TAXES ON BASIS 
OF REPATRIATION OF FOREIGN INCOME. 
(a) IN GENERAL.—Part III of subchapter N of chap-
ter 1 is amended by inserting after subpart G the following 
new subpart: 
‘‘Subpart H—Special Rules for Allocation of Foreign- 
Related Interest Deductions and Foreign Tax Credits 
‘‘Sec. 975. Deductions allocated to deferred foreign income may not offset 
United States source income. 
‘‘Sec. 976. Amount of foreign taxes computed on overall basis. 
‘‘Sec. 977. Application of subpart. 
‘‘SEC. 975. INTEREST DEDUCTIONS ALLOCATED TO DE-
FERRED FOREIGN INCOME MAY NOT OFFSET 
UNITED STATES SOURCE INCOME. 
‘‘(a) CURRENT YEAR DEDUCTIONS.—For purposes 
of this chapter, foreign-related interest deductions for any 
taxable year— 
‘‘(1) shall be taken into account for such tax-
able year only to the extent that such deductions are 
allocable to currently-taxed foreign income, and 
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‘‘(2) to the extent not so allowed, shall be taken 
into account in subsequent taxable years as provided 
in subsection (b). 
Foreign-related interest deductions shall be allocated to 
currently-taxed foreign income in the same proportion 
which currently-taxed foreign income bears to the sum of 
currently-taxed foreign income and deferred foreign in-
come. 
‘‘(b) INTEREST DEDUCTIONS RELATED TO REPATRI-
ATED DEFERRED FOREIGN INCOME.— 
‘‘(1) IN GENERAL.—If there is repatriated for-
eign income for a taxable year, the portion of the 
previously deferred interest deductions allocated to 
the repatriated foreign income shall be taken into 
account for the taxable year as a deduction for inter-
est expense allocated to income from sources outside 
the United States. Any such amount shall not be in-
cluded in foreign-related interest deductions for pur-
poses of applying subsection (a) to such taxable 
year. 
‘‘(2) PORTION OF PREVIOUSLY DEFERRED IN-
TEREST DEDUCTIONS.—For purposes of paragraph 
(1), the portion of the previously deferred interest 
deductions allocated to repatriated foreign income 
is— 
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‘‘(A) the amount which bears the same 
proportion to such deductions, as 
‘‘(B) the repatriated income bears to the 
previously deferred foreign income. 
‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur-
poses of this section— 
‘‘(1) FOREIGN-RELATED
INTEREST
DEDUC-
TIONS.—The term ‘foreign-related interest deduc-
tions’ means the total amount of deductions for in-
terest expenses which would be allocated or appor-
tioned to gross income from sources without the 
United States for the taxable year if both the cur-
rently-taxed foreign income and deferred foreign in-
come were taken into account. 
‘‘(2) CURRENTLY-TAXED
FOREIGN
INCOME.— 
The term ‘currently-taxed foreign income’ means the 
amount of gross income from sources without the 
United States for the taxable year (determined with-
out regard to repatriated foreign income for such 
year). 
‘‘(3) DEFERRED FOREIGN INCOME.—The term 
‘deferred foreign income’ means the excess of— 
‘‘(A) the amount that would be includible 
in gross income under subpart F of this part 
for the taxable year if— 
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‘‘(i) all controlled foreign corporations 
were treated as one controlled foreign cor-
poration, and 
‘‘(ii) all earnings and profits of all 
controlled foreign corporations were sub-
part F income (as defined in section 952), 
over 
‘‘(B) the sum of— 
‘‘(i) all dividends received during the 
taxable year from controlled foreign cor-
porations, plus 
‘‘(ii) amounts includible in gross in-
come under section 951(a). 
‘‘(4) PREVIOUSLY
DEFERRED
FOREIGN
IN-
COME.—The term ‘previously deferred foreign in-
come’ means the aggregate amount of deferred for-
eign income for all prior taxable years to which this 
part applies, determined as of the beginning of the 
taxable year, reduced by the repatriated foreign in-
come for all such prior taxable years. 
‘‘(5) REPATRIATED
FOREIGN
INCOME.—The 
term ‘repatriated foreign income’ means the amount 
included in gross income on account of distributions 
out of previously deferred foreign income. 
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‘‘(6) PREVIOUSLY
DEFERRED
INTEREST
DE-
DUCTIONS.—The term ‘previously deferred interest 
deductions’ means the aggregate amount of foreign- 
related interest deductions not taken into account 
under subsection (a) for all prior taxable years (de-
termined as of the beginning of the taxable year), 
reduced by any amounts taken into account under 
subsection (b) for such prior taxable years. 
‘‘(7) 
TREATMENT
OF
CERTAIN
FOREIGN 
TAXES.— 
‘‘(A) PAID BY CONTROLLED FOREIGN COR-
PORATION.—Section 78 shall not apply for pur-
poses of determining currently-taxed foreign in-
come and deferred foreign income. 
‘‘(B) PAID BY TAXPAYER.—For purposes 
of determining currently-taxed foreign income, 
gross income from sources without the United 
States shall be reduced by the aggregate 
amount of taxes described in the applicable 
paragraph of section 901(b) which are paid by 
the taxpayer (without regard to sections 902 
and 960) during the taxable year. 
‘‘(8) COORDINATION
WITH
SECTION 976.—In 
determining currently-taxed foreign income and de-
ferred foreign income, the amount of deemed foreign 
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tax credits shall be determined with regard to sec-
tion 976. 
‘‘SEC. 976. AMOUNT OF FOREIGN TAXES COMPUTED ON 
OVERALL BASIS. 
‘‘(a) CURRENT YEAR ALLOWANCE.—For purposes of 
this chapter, the amount taken into account as foreign in-
come taxes for any taxable year shall be an amount which 
bears the same ratio to the total foreign income taxes for 
that taxable year as— 
‘‘(1) the currently-taxed foreign income for such 
taxable year, bears to 
‘‘(2) the sum of the currently-taxed foreign in-
come and deferred foreign income for such year. 
The portion of the total foreign income taxes for any tax-
able year not taken into account under the preceding sen-
tence for a taxable year shall only be taken into account 
as provided in subsection (b) (and shall not be taken into 
account for purposes of applying sections 902 and 960). 
‘‘(b) ALLOWANCE RELATED TO REPATRIATED DE-
FERRED FOREIGN INCOME.— 
‘‘(1) IN GENERAL.—If there is repatriated for-
eign income for any taxable year, the portion of the 
previously deferred foreign income taxes paid or ac-
crued during such taxable year shall be taken into 
account for the taxable year as foreign taxes paid or 
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accrued. Any such taxes so taken into account shall 
not be included in foreign income taxes for purposes 
of applying subsection (a) to such taxable year. 
‘‘(2) PORTION OF PREVIOUSLY DEFERRED FOR-
EIGN INCOME TAXES.—For purposes of paragraph 
(1), the portion of the previously deferred foreign in-
come taxes allocated to repatriated deferred foreign 
income is— 
‘‘(A) the amount which bears the same 
proportion to such taxes, as 
‘‘(B) the repatriated deferred income bears 
to the previously deferred foreign income. 
‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur-
poses of this section— 
‘‘(1) PREVIOUSLY DEFERRED FOREIGN INCOME 
TAXES.—The term ‘previously deferred foreign in-
come taxes’ means the aggregate amount of total 
foreign income taxes not taken into account under 
subsection (a) for all prior taxable years (determined 
as of the beginning of the taxable year), reduced by 
any amounts taken into account under subsection 
(b) for such prior taxable years. 
‘‘(2) TOTAL
FOREIGN
INCOME
TAXES.—The 
term ‘total foreign income taxes’ means the sum of 
foreign income taxes paid or accrued during the tax-
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able year (determined without regard to section 
904(c)) plus the increase in foreign income taxes 
that would be paid or accrued during the taxable 
year under sections 902 and 960 if— 
‘‘(A) all controlled foreign corporations 
were treated as one controlled foreign corpora-
tion, and 
‘‘(B) all earnings and profits of all con-
trolled foreign corporations were subpart F in-
come (as defined in section 952). 
‘‘(3) FOREIGN INCOME TAXES.—The term ‘for-
eign income taxes’ means any income, war profits, or 
excess profits taxes paid by the taxpayer to any for-
eign country or possession of the United States. 
‘‘(4) CURRENTLY-TAXED FOREIGN INCOME AND 
DEFERRED
FOREIGN
INCOME.—The terms ‘cur-
rently-taxed foreign income’ and ‘deferred foreign in-
come’ have the meanings given such terms by sec-
tion 975(c)). 
‘‘SEC. 977. APPLICATION OF SUBPART. 
‘‘This subpart— 
‘‘(1) shall be applied before subpart A, and 
‘‘(2) shall be applied separately with respect to 
the categories of income specified in section 
904(d)(1).’’. 
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(b) CLERICAL AMENDMENT.—The table of subparts 
for part III of subpart N of chapter 1 is amended by in-
serting after the item relating to subpart G the following 
new item: 
‘‘SUBPART H. SPECIAL RULES FOR ALLOCATION OF FOREIGN-RELATED 
INTEREST DEDUCTIONS AND FOREIGN TAX CREDITS.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2011. 
SEC. 602. EXCESS INCOME FROM TRANSFERS OF INTANGI-
BLES TO LOW-TAXED AFFILIATES TREATED 
AS SUBPART F INCOME. 
(a) IN GENERAL.—Subsection (a) of section 954 is 
amended by inserting after paragraph (3) the following 
new paragraph: 
‘‘(4) the foreign base company excess intangible 
income for the taxable year (determined under sub-
section (f) and reduced as provided in subsection 
(b)(5)), and’’. 
(b) FOREIGN BASE COMPANY EXCESS INTANGIBLE 
INCOME.—Section 954 is amended by inserting after sub-
section (e) the following new subsection: 
‘‘(f) FOREIGN BASE COMPANY EXCESS INTANGIBLE 
INCOME.—For purposes of subsection (a)(4) and this sub-
section— 
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‘‘(1) FOREIGN BASE COMPANY EXCESS INTAN-
GIBLE INCOME DEFINED.— 
‘‘(A) IN
GENERAL.—The term ‘foreign 
base company excess intangible income’ means, 
with respect to any covered intangible, the ex-
cess of— 
‘‘(i) the sum of— 
‘‘(I) gross income from the sale, 
lease, license, or other disposition of 
property in which such covered intan-
gible is used directly or indirectly, and 
‘‘(II) gross income from the pro-
vision of services related to such cov-
ered intangible or in connection with 
property in which such covered intan-
gible is used directly or indirectly, 
over 
‘‘(ii) 115 percent of the costs properly 
allocated and apportioned to the gross in-
come taken into account under clause (i) 
other than expenses for interest and taxes 
and any expenses which are not directly al-
locable to such gross income. 
‘‘(B) SAME COUNTRY INCOME NOT TAKEN 
INTO ACCOUNT.—If— 
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‘‘(i) the sale, lease, license, or other 
disposition of the property referred to in 
subparagraph (A)(i)(I) is for use, con-
sumption, or disposition in the country 
under the laws of which the controlled for-
eign corporation is created or organized, or 
‘‘(ii) the services referred to in sub-
paragraph (A)(i)(II) are performed in such 
country, 
the gross income from such sale, lease, license, 
or other disposition, or provision of services, 
shall not be taken into account under subpara-
graph (A)(i). 
‘‘(2) EXCEPTION BASED ON EFFECTIVE FOR-
EIGN INCOME TAX RATE.— 
‘‘(A) IN GENERAL.—Foreign base company 
excess intangible income shall not include the 
applicable percentage of any item of income re-
ceived by a controlled foreign corporation if the 
taxpayer establishes to the satisfaction of the 
Secretary that such income was subject to an 
effective rate of income tax imposed by a for-
eign country in excess of 10 percent. 
‘‘(B) 
APPLICABLE
PERCENTAGE.—For 
purposes of subparagraph (A), the term ‘appli-
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cable percentage’ means the ratio (expressed as 
a percentage), not greater than 100 percent, 
of— 
‘‘(i) the number of percentage points 
by which the effective rate of income tax 
referred to in subparagraph (A) exceeds 10 
percentage points, over 
‘‘(ii) 25 percentage points. 
‘‘(C) TREATMENT OF LOSSES IN DETER-
MINING EFFECTIVE RATE OF FOREIGN INCOME 
TAX.—For purposes of determining the effective 
rate of income tax imposed by any foreign 
country— 
‘‘(i) such effective rate shall be deter-
mined without regard to any losses carried 
to the relevant taxable year, and 
‘‘(ii) to the extent the income with re-
spect to such intangible reduces losses in 
the relevant taxable year, such effective 
rate shall be treated as being the effective 
rate which would have been imposed on 
such income without regard to such losses. 
‘‘(3) COVERED
INTANGIBLE.—The term ‘cov-
ered intangible’ means, with respect to any con-
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trolled foreign corporation, any intangible property 
(as defined in section 936(h)(3)(B))— 
‘‘(A) which is sold, leased, licensed, or oth-
erwise transferred (directly or indirectly) to 
such controlled foreign corporation from a re-
lated person, or 
‘‘(B) with respect to which such controlled 
foreign corporation and one or more related 
persons has (directly or indirectly) entered into 
any shared risk or development agreement (in-
cluding any cost sharing agreement). 
‘‘(4) RELATED
PERSON.—The term ‘related 
person’ has the meaning given such term in sub-
section (d)(3).’’. 
(c) SEPARATE BASKET FOR FOREIGN TAX CRED-
IT.—Subsection (d) of section 904 is amended by redesig-
nating paragraph (7) as paragraph (8) and by inserting 
after paragraph (6) the following new paragraph: 
‘‘(6) SEPARATE
APPLICATION
TO
FOREIGN 
BASE COMPANY EXCESS INTANGIBLE INCOME.— 
‘‘(A) IN GENERAL.—Subsections (a), (b), 
and (c) of this section and sections 902, 907, 
and 960 shall be applied separately with respect 
to each item of income which is taken into ac-
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count under section 954(a)(4) as foreign base 
company excess intangible income. 
‘‘(B) REGULATIONS.—The Secretary may 
issue such regulations or other guidance as is 
necessary or appropriate to carry out the pur-
poses of this subsection, including regulations 
or other guidance which provides that related 
items of income may be aggregated for pur-
poses of this paragraph.’’. 
(d) CONFORMING AMENDMENTS.— 
(1) Paragraph (4) of section 954(b) is amended 
by inserting ‘‘foreign base company excess intangible 
income described in subsection (a)(4) or’’ before 
‘‘foreign base company oil-related income’’ in the 
last sentence thereof. 
(2) Subsection (b) of section 954 is amended by 
adding at the end the following new paragraph: 
‘‘(7) FOREIGN BASE COMPANY EXCESS INTAN-
GIBLE INCOME NOT TREATED AS ANOTHER KIND OF 
BASE COMPANY INCOME.—Income of a corporation 
which is foreign base company excess intangible in-
come shall not be considered foreign base company 
income of such corporation under paragraph (2), 
(3), or (5) of subsection (a).’’. 
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(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 603. LIMITATIONS ON INCOME SHIFTING THROUGH IN-
TANGIBLE PROPERTY TRANSFERS. 
(a) CLARIFICATION OF DEFINITION OF INTANGIBLE 
ASSET.—Clause (vi) of section 936(h)(3)(B) is amended 
by inserting ‘‘(including any section 197 intangible de-
scribed in subparagraph (A), (B), or (C)(i) of subsection 
(d)(1) of such section)’’ after ‘‘item’’. 
(b) CLARIFICATION
OF
ALLOWABLE
VALUATION 
METHODS.— 
(1) FOREIGN
CORPORATIONS.—Paragraph (2) 
of section 367(d) is amended by adding at the end 
the following new subparagraph: 
‘‘(D) REGULATORY AUTHORITY.—For pur-
poses of the last sentence of subparagraph (A), 
the Secretary may require— 
‘‘(i) the valuation of transfers of in-
tangible property on an aggregate basis, or 
‘‘(ii) the valuation of such a transfer 
on the basis of the realistic alternatives to 
such a transfer, 
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in any case in which the Secretary determines 
that such basis is the most reliable means of 
valuation of such transfers.’’. 
(2) ALLOCATION AMONG TAXPAYERS.—Section 
482 is amended by adding at the end the following: 
‘‘For purposes of the preceding sentence, the Sec-
retary may require the valuation of transfers of in-
tangible property on an aggregate basis or the valu-
ation of such a transfer on the basis of the realistic 
alternatives to such a transfer, in any case in which 
the Secretary determines that such basis is the most 
reliable means of valuation of such transfers.’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to transfers in taxable years 
beginning after December 31, 2011. 
(2) NO INFERENCE.—Nothing in the amend-
ment made by subsection (a) shall be construed to 
create any inference with respect to the application 
of section 936(h)(3) of the Internal Revenue Code of 
1986, or the authority of the Secretary of the Treas-
ury to provide regulations for such application, on or 
before the date of the enactment of such amend-
ment. 
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SEC. 604. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 
APPLICABLE TO DUAL CAPACITY TAXPAYERS. 
(a) IN GENERAL.—Section 901 is amended by redes-
ignating 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 to a foreign 
country or possession of the United States for any 
period with respect to combined foreign oil and gas 
income (as defined in section 907(b)(1)) shall not be 
considered a tax to the extent such amount exceeds 
the amount (determined in accordance with regula-
tions) which would have 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-
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mined in accordance with regulations) from 
such country or possession.’’. 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxes paid or accrued in 
taxable years beginning after December 31, 2011. 
(2) 
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. 
TITLE VII—TAX EXPENDITURE 
STUDY 
SEC. 701. STUDY OF EXTENDED TAX EXPENDITURES. 
(a) IN GENERAL.—Not later than 180 days after the 
date of the enactment of this Act, the Comptroller General 
of the United States, in consultation with the Secretary 
of the Treasury, shall submit to Congress a report on each 
tax expenditure (as defined in section 3(3) of the Congres-
sional Budget Impoundment Control Act of 1974 (2 
U.S.C. 622(3)) not terminated or modified by this Act. 
(b) CONTENTS OF REPORT.—Such reports shall con-
tain the following: 
(1) An explanation of the tax expenditure and 
any relevant economic, social, or other context under 
which it was first enacted. 
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(2) A description of the intended purpose of the 
tax expenditure. 
(3) An analysis of the overall success of the tax 
expenditure in achieving such purpose, and evidence 
supporting such analysis. 
(4) An analysis of the extent to which further 
extending the tax expenditure, or making it perma-
nent, would contribute to achieving such purpose. 
(5) A description of the direct and indirect 
beneficiaries of the tax expenditure, including identi-
fying any unintended beneficiaries. 
(6) An analysis of whether the tax expenditure 
is the most cost-effective method for achieving the 
purpose for which it was intended, and a description 
of any more cost-effective methods through which 
such purpose could be accomplished. 
(7) A description of any unintended effects of 
the tax expenditure that are useful in understanding 
the tax expenditure’s overall value. 
(8) An analysis of how the tax expenditure 
could be modified to better achieve its original pur-
pose or if such tax expenditure should be eliminated. 
Æ 
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