I 
111TH CONGRESS 
2D SESSION 
H. R. 5962 
To amend the Internal Revenue Code of 1986 to reduce the maximum 
corporate income tax rate and to offset the revenue cost by repealing 
certain corporate tax benefits. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 29, 2010 
Mr. MAFFEI introduced the following bill; which was referred to the 
Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to reduce 
the maximum corporate income tax rate and to offset 
the revenue cost by repealing certain corporate tax bene-
fits. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘American Business Competitiveness Act of 2010’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment 
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to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.— 
Sec. 1. Short title; amendment of 1986 code. 
TITLE I—CORPORATE INCOME TAX RATE REDUCTION 
Sec. 101. Reduction in top corporate marginal rate. 
TITLE II—PROVISIONS RELATED TO FOREIGN SOURCE INCOME 
Sec. 201. Allocation of expenses and taxes on basis of repatriation of foreign 
income. 
Sec. 202. Repeal of worldwide allocation of interest. 
Sec. 203. Limitation on treaty benefits for certain deductible payments. 
TITLE III—MODIFICATION OF ACCOUNTING RULES 
Sec. 301. Repeal of last-in, first-out method of inventory. 
Sec. 302. Repeal of lower of cost or market method of inventory. 
Sec. 303. Special rule for service providers on accrual method not applicable to 
C corporations. 
TITLE IV—MODIFICATION TO EXPENSING AND DEPRECIATION 
RULES 
Sec. 401. Small business expensing provisions made permanent. 
Sec. 402. Amortization of goodwill and other intangibles. 
TITLE V—CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE 
Sec. 501. Codification of economic substance doctrine. 
TITLE VI—MODIFICATIONS TO DEDUCTIONS FOR DIVIDENDS 
RECEIVED 
Sec. 601. Modifications to deductions for dividends received. 
TITLE VII—OTHER PROVISIONS 
Sec. 701. Recognition of ordinary income on sale or exercise of stock option in 
S corporation with an ESOP. 
Sec. 702. Treatment of securities of a controlled corporation exchanged for as-
sets in certain reorganizations. 
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(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2010, except that the amendments made 
by subsection (c) shall take effect on January 1, 2011. 
TITLE II—PROVISIONS RELATED 
TO FOREIGN SOURCE INCOME 
SEC. 201. 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 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. DEDUCTIONS ALLOCATED TO DEFERRED FOR-
EIGN INCOME MAY NOT OFFSET UNITED 
STATES SOURCE INCOME. 
‘‘(a) CURRENT YEAR DEDUCTIONS.—For purposes 
of this chapter, foreign-related 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 deductions shall be allocated to currently- 
taxed foreign income in the same proportion which cur-
rently-taxed foreign income bears to the sum of currently- 
taxed foreign income and deferred foreign income. 
‘‘(b) DEDUCTIONS RELATED TO REPATRIATED DE-
FERRED FOREIGN INCOME.— 
‘‘(1) IN GENERAL.—If there is repatriated for-
eign income for a taxable year, the portion of the 
previously deferred deductions allocated to the repa-
triated foreign income shall be taken into account 
for the taxable year as a deduction allocated to in-
come from sources outside the United States. Any 
such amount shall not be included in foreign-related 
deductions for purposes of applying subsection (a) to 
such taxable year. 
‘‘(2) PORTION OF PREVIOUSLY DEFERRED DE-
DUCTIONS.—For purposes of paragraph (1), the por-
tion of the previously deferred deductions allocated 
to repatriated foreign income is— 
‘‘(A) the amount which bears the same 
proportion to such deductions, as 
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‘‘(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
DEDUCTIONS.—The 
term ‘foreign-related deductions’ means the total 
amount of deductions and expenses which would be 
allocated or apportioned to gross income from 
sources without the United States for the taxable 
year if both the currently-taxed foreign income and 
deferred foreign income 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— 
‘‘(i) all controlled foreign corporations 
were treated as one controlled foreign cor-
poration, and 
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‘‘(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. 
‘‘(6) PREVIOUSLY
DEFERRED
DEDUCTIONS.— 
The term ‘previously deferred deductions’ means the 
aggregate amount of foreign-related deductions not 
taken into account under subsection (a) for all prior 
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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. 
‘‘(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 
tax credits shall be determined with regard to sec-
tion 976. 
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‘‘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 
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. 
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‘‘(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-
able year (determined without regard to section 
904(c)) plus the increase in foreign income taxes 
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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).’’. 
(b) CLERICAL AMENDMENT.—The table of subparts 
for part III of subpart N of chapter 1 is amended by in-
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serting after the item relating to subpart G the following 
new item: 
‘‘SUBPART H. SPECIAL RULES FOR ALLOCATION OF FOREIGN-RELATED 
DEDUCTIONS AND FOREIGN TAX CREDITS’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2010. 
SEC. 202. REPEAL OF WORLDWIDE ALLOCATION OF INTER-
EST. 
(a) IN GENERAL.—Section 864 is amended by strik-
ing subsection (f) and by redesignating subsection (g) as 
subsection (f). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2010. 
SEC. 203. LIMITATION ON TREATY BENEFITS FOR CERTAIN 
DEDUCTIBLE PAYMENTS. 
(a) IN GENERAL.—Section 894 (relating to income 
affected by treaty) is amended by adding at the end the 
following new subsection: 
‘‘(d) LIMITATION ON TREATY BENEFITS FOR CER-
TAIN DEDUCTIBLE PAYMENTS.— 
‘‘(1) IN GENERAL.—In the case of any deduct-
ible related-party payment, any withholding tax im-
posed under chapter 3 (and any tax imposed under 
subpart A or B of this part) with respect to such 
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payment may not be reduced under any treaty of the 
United States unless any such withholding tax would 
be reduced under a treaty of the United States if 
such payment were made directly to the foreign par-
ent corporation. 
‘‘(2) 
DEDUCTIBLE
RELATED-PARTY
PAY-
MENT.—For purposes of this subsection, the term 
‘deductible related-party payment’ means any pay-
ment made, directly or indirectly, by any person to 
any other person if the payment is allowable as a de-
duction under this chapter and both persons are 
members of the same foreign controlled group of en-
tities. 
‘‘(3) FOREIGN CONTROLLED GROUP OF ENTI-
TIES.—For purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘foreign 
controlled group of entities’ means a controlled 
group of entities the common parent of which 
is a foreign corporation. 
‘‘(B) CONTROLLED GROUP OF ENTITIES.— 
The term ‘controlled group of entities’ means a 
controlled group of corporations as defined in 
section 1563(a)(1), except that— 
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‘‘(i) ‘more than 50 percent’ shall be 
substituted for ‘at least 80 percent’ each 
place it appears therein, and 
‘‘(ii) the determination shall be made 
without regard to subsections (a)(4) and 
(b)(2) of section 1563. 
A partnership or any other entity (other than a 
corporation) shall be treated as a member of a 
controlled group of entities if such entity is con-
trolled 
(within 
the 
meaning 
of 
section 
954(d)(3)) by members of such group (includ-
ing any entity treated as a member of such 
group by reason of this sentence). 
‘‘(4) FOREIGN
PARENT
CORPORATION.—For 
purposes of this subsection, the term ‘foreign parent 
corporation’ means, with respect to any deductible 
related-party payment, the common parent of the 
foreign controlled group of entities referred to in 
paragraph (3)(A). 
‘‘(5) REGULATIONS.—The Secretary may pre-
scribe such regulations or other guidance as are nec-
essary or appropriate to carry out the purposes of 
this subsection, including regulations or other guid-
ance which provide for— 
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‘‘(A) the treatment of two or more persons 
as members of a foreign controlled group of en-
tities if such persons would be the common par-
ent of such group if treated as one corporation, 
and 
‘‘(B) the treatment of any member of a 
foreign controlled group of entities as the com-
mon parent of such group if such treatment is 
appropriate taking into account the economic 
relationships among such entities.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to payments made after the date 
of the enactment of this Act. 
TITLE III—MODIFICATION OF 
ACCOUNTING RULES 
SEC. 301. REPEAL OF LAST-IN, FIRST-OUT METHOD OF IN-
VENTORY. 
(a) IN GENERAL.—Subpart D of part II of sub-
chapter E of chapter 1 is amended by striking sections 
472 (relating to last-in, first-out inventories), 473 (relat-
ing to qualified liquidations of LIFO inventories), and 474 
(relating to simplified dollar-value LIFO method for cer-
tain small businesses). 
(b) CONFORMING AMENDMENTS.— 
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(1)(A) Section 312(n) is amended by striking 
paragraph (4) and by redesignating paragraphs (5) 
through (8) as paragraphs (4) through (7), respec-
tively. 
(B) Section 312(n)(7), as redesignated by sub-
paragraph (A), is amended— 
(i) by striking ‘‘paragraphs (4) and (6)’’ in 
subparagraph (A) and inserting ‘‘paragraph 
(5)’’, and 
(ii) by striking ‘‘paragraph (5)’’ in sub-
paragraph (B) and inserting ‘‘paragraph (4)’’. 
(C) Section 56(g)(4)(D) is amended by striking 
clause (iii) and by redesignating clause (iv) as clause 
(iii). 
(2) Section 1363 is amended by striking sub-
section (d). 
(c) EFFECTIVE DATE.— 
(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) CHANGE IN METHOD OF ACCOUNTING.—In 
the case of any taxpayer required by the amend-
ments made by this section to change its method of 
accounting for its first taxable year beginning after 
the date of the enactment of this Act— 
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