(B) by striking subparagraph (C) and in-
serting the following new subparagraphs: 
‘‘(C) is required to pay a penalty under 
section 6662B with respect to any noneconomic 
substance transaction, or 
‘‘(D) is required to pay a penalty under 
section 6662(h) with respect to any transaction 
and would (but for section 6662A(e)(2)(C)) 
have been subject to penalty under section 
6662A at a rate prescribed under section 
6662A(c) or under section 6662B,’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for part II of subchapter A of chapter 68 is amended by 
inserting after the item relating to section 6662A the fol-
lowing new item: 
‘‘6662B. Penalty for understatements attributable to transactions lacking eco-
nomic substance, etc.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transactions entered into after 
the date of the enactment of this Act. 
SEC. 223. DENIAL OF DEDUCTION FOR INTEREST ON UN-
DERPAYMENTS 
ATTRIBUTABLE 
TO 
NON-
ECONOMIC SUBSTANCE TRANSACTIONS. 
(a) IN GENERAL.—Section 163(m) (relating to inter-
est on unpaid taxes attributable to nondisclosed reportable 
transactions) is amended— 
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(1) by striking ‘‘attributable’’ and all that fol-
lows and inserting the following: ‘‘attributable to— 
‘‘(1) the portion of any reportable transaction 
understatement (as defined in section 6662A(b)) 
with respect to which the requirement of section 
6664(d)(2)(A) is not met, or 
‘‘(2) any noneconomic substance transaction 
understatement (as defined in section 6662B(c)).’’, 
and 
(2) by inserting ‘‘And Noneconomic Substance 
Transactions’’ in the heading thereof after ‘‘Trans-
actions’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transactions after the date of 
the enactment of this Act in taxable years ending after 
such date. 
Subtitle D—Provisions Relating to 
Oil and Gas 
SEC. 231. ELIMINATION OF AMORTIZATION OF GEOLOGI-
CAL AND GEOPHYSICAL EXPENDITURES FOR 
MAJOR INTEGRATED OIL COMPANIES. 
(a) IN GENERAL.—Section 167(h) is amended by 
adding at the end the following new paragraph: 
‘‘(5) NONAPPLICATION TO MAJOR INTEGRATED 
OIL
COMPANIES.—This subsection shall not apply 
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with respect to any expenses paid or incurred for 
any taxable year by any integrated oil company (as 
defined in section 291(b)(4)) which has an average 
daily worldwide production of crude oil of at least 
500,000 barrels for such taxable year.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect as if included in the amend-
ment made by section 1329(a) of the Energy Policy Act 
of 2005. 
SEC. 232. REVALUATION OF LIFO INVENTORIES OF LARGE 
INTEGRATED OIL COMPANIES. 
(a) GENERAL RULE.—Notwithstanding any other 
provision of law, if a taxpayer is an applicable integrated 
oil company for its last taxable year ending in calendar 
year 2005, the taxpayer shall— 
(1) increase, effective as of the close of such 
taxable year, the value of each historic LIFO layer 
of inventories of crude oil, natural gas, or any other 
petroleum product (within the meaning of section 
4611) by the layer adjustment amount, and 
(2) decrease its cost of goods sold for such tax-
able year by the aggregate amount of the increases 
under paragraph (1). 
If the aggregate amount of the increases under paragraph 
(1) exceed the taxpayer’s cost of goods sold for such tax-
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able year, the taxpayer’s gross income for such taxable 
year shall be increased by the amount of such excess. 
(b) LAYER ADJUSTMENT AMOUNT.—For purposes of 
this section— 
(1) IN GENERAL.—The term ‘‘layer adjustment 
amount’’ means, with respect to any historic LIFO 
layer, the product of— 
(A) $18.75, and 
(B) the number of barrels of crude oil (or 
in the case of natural gas or other petroleum 
products, the number of barrel-of-oil equiva-
lents) represented by the layer. 
(2) BARREL-OF-OIL
EQUIVALENT.—The term 
‘‘barrel-of-oil equivalent’’ has the meaning given 
such term by section 29(d)(5) (as in effect before its 
redesignation by the Energy Tax Incentives Act of 
2005). 
(c) APPLICATION OF REQUIREMENT.— 
(1) NO CHANGE IN METHOD OF ACCOUNTING.— 
Any adjustment required by this section shall not be 
treated as a change in method of accounting. 
(2) UNDERPAYMENTS OF ESTIMATED TAX.—No 
addition to the tax shall be made under section 6655 
of the Internal Revenue Code of 1986 (relating to 
failure by corporation to pay estimated tax) with re-
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spect to any underpayment of an installment re-
quired to be paid with respect to the taxable year 
described in subsection (a) to the extent such under-
payment was created or increased by this section. 
(d) APPLICABLE INTEGRATED OIL COMPANY.—For 
purposes of this section, the term ‘‘applicable integrated 
oil company’’ means an integrated oil company (as defined 
in section 291(b)(4) of the Internal Revenue Code of 
1986) 
which 
had 
gross 
receipts 
in 
excess 
of 
$1,000,000,000 for its last taxable year ending during cal-
endar year 2005. For purposes of this subsection, all per-
sons treated as a single employer under subsections (a) 
and (b) of section 52 of the Internal Revenue Code of 
1986 shall be treated as 1 person and, in the case of a 
short taxable year, the rule under section 448(c)(3)(B) 
shall apply. 
Subtitle E—Uniform Definition of 
Child 
SEC. 241. REPEAL OF UNIFORM DEFINITION OF CHILD AND 
RESTORATION OF PRIOR RULE. 
(a) IN GENERAL.—Title II of the Working Families 
Tax Relief Act of 2004 (relating to uniform definition of 
child), and the amendments made by such title, are hereby 
repealed. 
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(b) ADMINISTRATION OF INTERNAL REVENUE CODE 
OF 1986.—The Internal Revenue Code of 1986 shall be 
applied and administered as if the provisions, and amend-
ments, specified in subsection (a) had never been enacted. 
(c) 
CONFORMING
AMENDMENT.—Section 
32(c)(2)(A), as added by section 102 of this Act, is 
amended to read as follows: 
‘‘(2) QUALIFYING CHILD.— 
‘‘(A) IN GENERAL.—The term ‘qualifying 
child’ means any individual if— 
‘‘(i) the taxpayer is allowed a deduc-
tion under section 151 (determined without 
regard to paragraphs (1)(A) and (2) of 
subsection (c) and subsection 152(e)), with 
respect to such individual for the taxable 
year, and 
‘‘(ii) such individual bears a relation-
ship to the taxpayer described in para-
graph (1), (2), or (3) of section 152(a). ’’. 
(d) EFFECTIVE DATE.—This section shall apply to 
taxable years beginning after December 31, 2006. 
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Subtitle F—Other Revenue 
Provisions 
SEC. 251. INFLATION ADJUSTMENT OF TAX ON DISTILLED 
SPIRITS, BEER, WINE, AND TOBACCO. 
(a) DISTILLED SPIRITS.—Section 5001 is amended 
by redesignating subsection (c) as subsection (d) and by 
inserting after subsection (b) the following new subsection: 
‘‘(c) ADJUSTMENT
OF TAX RATES
FOR INFLA-
TION.—In the case of any calendar year beginning after 
2006, each of the rates of tax in subsection (a), and the 
dollar amount in section 5010(a)(1)(A), shall be increased 
by an amount equal to— 
‘‘(1) such rate of tax or dollar amount (as the 
case may be), multiplied by 
‘‘(2) the cost-of-living adjustment determined 
under section 1(f)(3) for the calendar year in which 
the taxable year begins, by substituting ‘calendar 
year 2005’ for ‘calendar year 1992’ in subparagraph 
(B) thereof.’’. 
(b) WINE.—Section 5041 is amended by adding at 
the end the following new subsection: 
‘‘(g) ADJUSTMENT
OF TAX RATES
FOR INFLA-
TION.—In the case of any calendar year beginning after 
2006, each of the rates of tax in subsection (b) shall be 
increased by an amount equal to— 
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‘‘(1) such rate of tax, multiplied by 
‘‘(2) the cost-of-living adjustment determined 
under section 1(f)(3) for the calendar year in which 
the taxable year begins, by substituting ‘calendar 
year 2005’ for ‘calendar year 1992’ in subparagraph 
(B) thereof.’’. 
(c) BEER.—Section 5041 is amended by adding at 
the end the following new subsection: 
‘‘(d) ADJUSTMENT
OF TAX RATES
FOR INFLA-
TION.—In the case of any calendar year beginning after 
2006, each of the rates of tax in subsection (a) shall be 
increased by an amount equal to— 
‘‘(1) such rate of tax, multiplied by 
‘‘(2) the cost-of-living adjustment determined 
under section 1(f)(3) for the calendar year in which 
the taxable year begins, by substituting ‘calendar 
year 2005’ for ‘calendar year 1992’ in subparagraph 
(B) thereof.’’. 
(d) TOBACCO PRODUCTS.—Section 5701 is amended 
by adding at the end the following new subsection: 
‘‘(i) ADJUSTMENT OF TAX RATES FOR INFLATION.— 
In the case of any calendar year beginning after 2006, 
each of the rates of tax in subsections (a), (b), (c), (d), 
(e), (f), and (g) shall be increased by an amount equal 
to— 
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‘‘(1) such rate of tax or dollar amount (as the 
case may be), multiplied by 
‘‘(2) the cost-of-living adjustment determined 
under section 1(f)(3) for the calendar year in which 
the taxable year begins, by substituting ‘calendar 
year 2005’ for ‘calendar year 1992’ in subparagraph 
(B) thereof.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to years beginning after December 
31, 2006. 
SEC. 252. TERMINATION OF VARIOUS EXCLUSIONS, EXEMP-
TIONS, DEDUCTIONS, AND CREDITS. 
(a) IN GENERAL.—Subchapter C of chapter 90 (re-
lating to provisions affecting more than one subtitle) is 
amended by adding at the end the following new section: 
‘‘SEC. 7875. TERMINATION OF CERTAIN PROVISIONS. 
‘‘The following provisions shall not apply to taxable 
years beginning after December 31, 2005: 
‘‘(1) Section 44 (relating to credit for expendi-
tures to provide access to disabled individuals). 
‘‘(2) Section 62(a)(2)(D) (relating to deduction 
for certain expenses of elementary and secondary 
school teachers). 
‘‘(3) Section 67 (relating to 2-percent floor on 
miscellaneous itemized deductions). 
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‘‘(4) Section 74(c) (relating to exclusion of cer-
tain employee achievement awards). 
‘‘(5) Section 79 (relating to exclusion of group- 
term life insurance purchased for employees). 
‘‘(6) Section 104(a)(1) (relating to exclusion of 
workmen’s compensation). 
‘‘(7) Section 104(a)(2) (relating to exclusion of 
damages for physical injuries and sickness). 
‘‘(8) Section 107 (relating to exclusion of rental 
value of parsonages). 
‘‘(9) Section 119 (relating to exclusion of meals 
or lodging furnished for the convenience of the em-
ployer). 
‘‘(10) Section 125 (relating to exclusion of cafe-
teria plan benefits). 
‘‘(11) Section 132 (relating to certain fringe 
benefits), except with respect to subsection (a)(5) 
thereof (relating to exclusion of qualified transpor-
tation fringe). 
‘‘(12) Section 163(h)(4)(A)(i)(II) (relating to 
definition of qualified residence). 
‘‘(13) Section 165(d) (relating to deduction for 
wagering losses). 
‘‘(14) Section 217 (relating to deduction for 
moving expenses). 
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‘‘(15) Section 454 (relating to deferral of tax 
on obligations issued at discount). 
‘‘(16) Section 501(c)(9) (relating to tax-exempt 
status of voluntary employees’ beneficiary associa-
tions). 
‘‘(17) Section 911 (relating to exclusion of 
earned income of citizens or residents of the United 
States living abroad). 
‘‘(18) Section 912 (relating to exemption for 
certain allowances).’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subchapter C of chapter 90 is amended by adding 
at the end the following new item: 
‘‘Sec. 7875. Termination of certain provisions.’’. 
SEC. 
253. 
TERMINATION 
OF 
VARIOUS 
PREFERENTIAL 
TREATMENTS. 
(a) IN GENERAL.—Section 7875, as added by section 
106, is amended— 
(1) by inserting ‘‘(or transactions in the case of 
sections referred to in paragraphs (21), (22), (23), 
(24), and (27))’’ after ‘‘taxable years beginning’’, 
and 
(2) by adding at the end the following new 
paragraphs: 
‘‘(19) Section 43 (relating to enhanced oil re-
covery credit). 
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‘‘(20) Section 263(c) (relating to intangible 
drilling and development costs in the case of oil and 
gas wells and geothermal wells). 
‘‘(21) Section 382(l)(5) (relating to exception 
from net operating loss limitations for corporations 
in bankruptcy proceeding). 
‘‘(22) Section 451(i) (relating to special rules 
for sales or dispositions to implement Federal En-
ergy Regulatory Commission or State electric re-
structuring policy). 
‘‘(23) Section 453A (relating to special rules for 
nondealers), but only with respect to the dollar limi-
tation under subsection (b)(1) thereof and sub-
section (b)(3) thereof (relating to exception for per-
sonal use and farm property). 
‘‘(24) Section 460(e)(1) (relating to special 
rules for long-term home construction contracts or 
other short-term construction contracts). 
‘‘(25) Section 613A (relating to percentage de-
pletion in case of oil and gas wells). 
‘‘(26) Section 616 (relating to development 
costs). 
‘‘(27) Sections 861(a)(6), 862(a)(6), 863(b)(2), 
863(b)(3), and 865(b) (relating to inventory prop-
erty sales source rule exception).’’. 
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(b) FULL TAX RATE
ON NUCLEAR DECOMMIS-
SIONING RESERVE FUND.—Subparagraph (B) of section 
468A(e)(2) is amended to read as follows: 
‘‘(B) RATE OF TAX.—For purposes of sub-
paragraph (A), the rate set forth in this sub-
paragraph is 35 percent.’’. 
(c) DEFERRAL OF ACTIVE INCOME OF CONTROLLED 
FOREIGN CORPORATIONS.—Section 952 (relating to sub-
part F income defined) is amended by adding at the end 
the following new subsection: 
‘‘(e) SPECIAL APPLICATION OF SUBPART.— 
‘‘(1) IN GENERAL.—For taxable years begin-
ning after December 31, 2005, notwithstanding any 
other provision of this subpart, the term ‘subpart F 
income’ means, in the case of any controlled foreign 
corporation, the income of such corporation derived 
from any foreign country. 
‘‘(2) APPLICABLE RULES.—Rules similar to the 
rules under the last sentence of subsection (a) and 
subsection (d) shall apply to this subsection.’’. 
(d) DEFERRAL OF ACTIVE FINANCING INCOME.— 
Section 953(e)(10) is amended— 
(1) by striking ‘‘2006’’ and inserting ‘‘2005’’, 
and 
(2) by striking ‘‘2007’’ and inserting ‘‘2006’’. 
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(e) DEPRECIATION ON EQUIPMENT IN EXCESS OF 
ALTERNATIVE
DEPRECIATION
SYSTEM.—Section 
168(g)(1) (relating to alternative depreciation system) is 
amended by striking ‘‘and’’ at the end of subparagraph 
(D), by adding ‘‘and’’ at the end of subparagraph (E), 
and by inserting after subparagraph (E) the following new 
subparagraph: 
‘‘(F) notwithstanding subsection (a), any 
tangible property placed in service after Decem-
ber 31, 2005,’’. 
(f) EFFECTIVE DATE.—The amendments made by 
subsections (b), (c), and (d) shall apply to taxable years 
beginning after December 31, 2005. 
TITLE III—TECHNICAL AND CON-
FORMING 
AMENDMENTS; 
SUNSET 
SEC. 301. TECHNICAL AND CONFORMING AMENDMENTS. 
The Secretary of the Treasury or the Secretary’s del-
egate shall not later than 90 days after the date of the 
enactment of this Act, submit to the Committee on Ways 
and Means of the House of Representatives and the Com-
mittee on Finance of the Senate a draft of any technical 
and conforming changes in the Internal Revenue Code of 
1986 which are necessary to reflect throughout such Code 
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the purposes of the provisions of, and amendments made 
by, this Act. 
SEC. 302. SUNSET. 
(a) IN GENERAL.—All provisions of, and amend-
ments made by, this Act shall not apply to taxable years 
beginning after December 31, 2010. 
(b) APPLICATION OF CODE.—The Internal Revenue 
Code of 1986 shall be applied and administered to taxable 
years described in subsection (a) as if the provisions of, 
and amendments made by, this Act had never been en-
acted. 
Æ 
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