graphs (J) and (K) as subparagraphs (K) and (L) and 
by inserting after subparagraph (I) the following: 
‘‘(J) FOREIGN OIL AND GAS INCOME.—For 
purposes of this section— 
‘‘(i) IN GENERAL.—The term ‘foreign 
oil and gas income’ has the meaning given 
such term by section 954(g). 
‘‘(ii) COORDINATION.—Passive cat-
egory income and general category income 
shall not include foreign oil and gas income 
(as so defined).’’ 
(c) CONFORMING AMENDMENTS.— 
(1) Section 904(d)(3)(F)(i) is amended by 
striking ‘‘or (E)’’ and inserting ‘‘(E), or (I)’’. 
(2) Section 907(a) is hereby repealed. 
(3) Section 907(c)(4) is hereby repealed. 
(4) Section 907(f) is hereby repealed. 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxable years beginning 
after the date of the enactment of this Act. 
(2) TRANSITIONAL RULES.— 
(A) SEPARATE BASKET TREATMENT.—Any 
taxes paid or accrued in a taxable year begin-
ning on or before the date of the enactment of 
VerDate Aug 31 2005 
18:10 Jan 20, 2007
Jkt 059200
PO 00000
Frm 00012
Fmt 6652
Sfmt 6201
E:\BILLS\H586.IH
H586
pwalker on PROD1PC71 with BILLS
this Act, with respect to income which was de-
scribed 
in 
subparagraph 
(B) 
of 
section 
904(d)(1) of such Code (as in effect on the day 
before the date of the enactment of this Act), 
shall be treated as taxes paid or accrued with 
respect to foreign oil and gas income to the ex-
tent the taxpayer establishes to the satisfaction 
of the Secretary of the Treasury that such 
taxes were paid or accrued with respect to for-
eign oil and gas income. 
(B) CARRYOVERS.—Any unused oil and 
gas extraction taxes which under section 907(f) 
of such Code (as so in effect) would have been 
allowable as a carryover to the taxpayer’s first 
taxable year beginning after the date of the en-
actment of this Act (without regard to the limi-
tation of paragraph (2) of such section 907(f) 
for first taxable year) shall be allowed as 
carryovers under section 904(c) of such Code in 
the same manner as if such taxes were unused 
taxes under such section 904(c) with respect to 
foreign oil and gas extraction income. 
(C) LOSSES.—The amendment made by 
subsection (c)(3) shall not apply to foreign oil 
and gas extraction losses arising in taxable 
VerDate Aug 31 2005 
18:10 Jan 20, 2007
Jkt 059200
PO 00000
Frm 00013
Fmt 6652
Sfmt 6201
E:\BILLS\H586.IH
H586
pwalker on PROD1PC71 with BILLS
years beginning on or before the date of the en-
actment of this Act. 
SEC. 10. ELIMINATION OF DEFERRAL FOR FOREIGN OIL 
AND GAS EXTRACTION INCOME. 
(a) GENERAL RULE.—Paragraph (1) of section 
954(g) (defining foreign base company oil related income) 
is amended to read as follows: 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘foreign oil and 
gas income’ means any income of a kind which 
would be taken into account in determining the 
amount of— 
‘‘(A) foreign oil and gas extraction income 
(as defined in section 907(c)), or 
‘‘(B) foreign oil related income (as defined 
in section 907(c)).’’ 
(b) CONFORMING AMENDMENTS.— 
(1) Subsections (a)(5), (b)(5), and (b)(6) of 
section 954, and section 952(c)(1)(B)(ii)(I), are each 
amended by striking ‘‘base company oil related in-
come’’ each place it appears (including in the head-
ing of subsection (b)(8)) and inserting ‘‘oil and gas 
income’’. 
VerDate Aug 31 2005 
18:10 Jan 20, 2007
Jkt 059200
PO 00000
Frm 00014
Fmt 6652
Sfmt 6201
E:\BILLS\H586.IH
H586
pwalker on PROD1PC71 with BILLS
(2) Subsection (b)(4) of section 954 is amended 
by striking ‘‘base company oil-related income’’ and 
inserting ‘‘oil and gas income’’. 
(3) The subsection heading for subsection (g) of 
section 954 is amended by striking ‘‘FOREIGN BASE 
COMPANY OIL RELATED INCOME’’ and inserting 
‘‘FOREIGN OIL AND GAS INCOME’’. 
(4) Subparagraph (A) of section 954(g)(2) is 
amended by striking ‘‘foreign base company oil re-
lated income’’ and inserting ‘‘foreign oil and gas in-
come’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after the date of the enactment of this 
Act, and to taxable years of United States shareholders 
ending with or within such taxable years of foreign cor-
porations. 
Æ 
VerDate Aug 31 2005 
18:10 Jan 20, 2007
Jkt 059200
PO 00000
Frm 00015
Fmt 6652
Sfmt 6301
E:\BILLS\H586.IH
H586
pwalker on PROD1PC71 with BILLS