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through the end of the paragraph and inserting ‘‘(14), (15),
or (16) of section 142(a), and’’.
(d) EFFECTIVE DATE.—The amendments made by this
section apply to bonds issued after the date of the enactment
of this Act.
SEC. 5309. TAX TREATMENT OF STATE OWNERSHIP OF RAIL-
ROAD REAL ESTATE INVESTMENT TRUST.
(a) IN GENERAL.—If a State owns all of the out-
standing stock of a corporation—
(1) which is a real estate investment trust on the
date of the enactment of this Act,
(2) which is a non-operating class III railroad,
and
(3) substantially all of the activities of which
consist of the ownership, leasing, and operation by
such corporation of facilities, equipment, and other
property used by the corporation or other persons for
railroad transportation and for economic development
purposes for the benefit of the State and its citizens,
then, to the extent such activities are of a type which are
an essential governmental function within the meaning of
section 115 of the Internal Revenue Code of 1986, income
derived from such activities by the corporation shall be
treated as accruing to the State for purposes of section 115
of such Code.
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(b) GAIN OR LOSS NOT RECOGNIZED ON CONVER-
SION.—Notwithstanding section 337(d) of the Internal Rev-
enue Code of 1986—
(1) no gain or loss shall be recognized under sec-
tion 336 or 337 of such Code, and
(2) no change in basis of the property of such
corporation shall occur,
because of any change of status of a corporation to a tax-
exempt entity by reason of the application of subsection (a).
(c) TAX-EXEMPT FINANCING.—
(1) IN GENERAL.—Any obligation issued by a
corporation described in subsection (a) at least 95
percent of the net proceeds (as defined in section
150(a) of the Internal Revenue Code of 1986) of which
are to be used to provide for the acquisition, construc-
tion, or improvement of railroad transportation in-
frastructure (including railroad terminal facilities)—
(A) shall be treated as a State or local bond
(within the meaning of section 103(c) of such
Code), and
(B) shall not be treated as a private activ-
ity bond (within the meaning of section
103(b)(1) of such Code) solely by reason of the
ownership or use of such railroad transportation
infrastructure by the corporation.
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(2) NO
INFERENCE.—Except as provided in
paragraph (1), nothing in this subsection shall be
construed to affect the treatment of the private use of
proceeds or property financed with obligations issued
by the corporation for purposes of section 103 of the
Internal Revenue Code of 1986 and part IV of sub-
chapter B of such Code.
(d) DEFINITIONS.—For purposes of this section:
(1) REAL
ESTATE
INVESTMENT
TRUST.—The
term ‘‘real estate investment trust’’ has the meaning
given such term by section 856(a) of the Internal Rev-
enue Code of 1986.
(2) NON-OPERATING CLASS III RAILROAD.—The
term ‘‘non-operating class III railroad’’ has the
meaning given such term by part A of subtitle IV of
title 49, United States Code (49 U.S.C. 10101 et seq.),
and the regulations thereunder.
(3) STATE.—The term ‘‘State’’ includes—
(A) the District of Columbia and any pos-
session of the United States, and
(B) any authority, agency, or public cor-
poration of a State.
(e) APPLICABILITY.—
(1) IN GENERAL.—Except as provided in para-
graph (2), this section shall apply on and after the
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date on which a State becomes the owner of all of the
outstanding stock of a corporation described in sub-
section (a) through action of such corporation’s board
of directors.
(2) EXCEPTION.—This section shall not apply to
any State which—
(A) becomes the owner of all of the voting
stock of a corporation described in subsection (a)
after December 31, 2003, or
(B) becomes the owner of all of the out-
standing stock of a corporation described in sub-
section (a) after December 31, 2006.
SEC. 5310. INCENTIVES FOR THE INSTALLATION OF ALTER-
NATIVE FUEL REFUELING STATIONS.
(a) IN GENERAL.—Subpart B of part IV of subchapter
A of chapter 1 (relating to foreign tax credit, etc.) is amend-
ed by adding at the end the following new section:
‘‘SEC. 30B. ALTERNATIVE FUEL VEHICLE REFUELING PROP-
ERTY CREDIT.
‘‘(a) CREDIT ALLOWED.—There shall be allowed as a
credit against the tax imposed by this chapter for the tax-
able year an amount equal to 50 percent of the cost of any
qualified alternative fuel vehicle refueling property placed
in service by the taxpayer during the taxable year.
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‘‘(b) LIMITATION.—The credit allowed under sub-
section (a) with respect to any alternative fuel vehicle re-
fueling property shall not exceed—
‘‘(1) $30,000 in the case of a property of a char-
acter subject to an allowance for depreciation, and
‘‘(2) $1,000 in any other case.
‘‘(c) QUALIFIED ALTERNATIVE FUEL VEHICLE RE-
FUELING PROPERTY.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the term ‘qualified alternative fuel vehicle
refueling property’ has the meaning given to such
term by section 179A(d), but only with respect to any
fuel at least 85 percent of the volume of which consists
of ethanol, natural gas, compressed natural gas, lique-
fied natural gas, and hydrogen.
‘‘(2) RESIDENTIAL PROPERTY.—In the case of
any property installed on property which is used as
the principal residence (within the meaning of section
121) of the taxpayer, paragraph (1) of section
179A(d) shall not apply.
‘‘(d) APPLICATION WITH OTHER CREDITS.—The cred-
it allowed under subsection (a) for any taxable year shall
not exceed the excess (if any) of—
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‘‘(1) the regular tax for the taxable year reduced
by the sum of the credits allowable under subpart A
and sections 27, 29, and 30, over
‘‘(2) the tentative minimum tax for the taxable
year.
‘‘(e) CARRYFORWARD ALLOWED.—
‘‘(1) IN GENERAL.—If the credit amount allow-
able under subsection (a) for a taxable year exceeds
the amount of the limitation under subsection (d) for
such taxable year, such excess shall be allowed as a
credit carryforward for each of the 20 taxable years
following the unused credit year.
‘‘(2) RULES.—Rules similar to the rules of sec-
tion 39 shall apply with respect to the credit
carryforward under paragraph (1).
‘‘(f) SPECIAL RULES.—For purposes of this section—
‘‘(1) BASIS REDUCTION.—The basis of any prop-
erty shall be reduced by the portion of the cost of such
property taken into account under subsection (a).
‘‘(2) NO DOUBLE BENEFIT.—No deduction shall
be allowed under section 179A with respect to any
property with respect to which a credit is allowed
under subsection (a).
‘‘(3) PROPERTY USED BY TAX-EXEMPT ENTITY.—
In the case of any qualified alternative fuel vehicle re-
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fueling property the use of which is described in para-
graph (3) or (4) of section 50(b) and which is not
subject to a lease, the person who sold such property
to the person or entity using such property shall be
treated as the taxpayer that placed such property in
service, but only if such person clearly discloses to
such person or entity in a document the amount of
any credit allowable under subsection (a) with respect
to such property (determined without regard to sub-
section (d)).
‘‘(4) PROPERTY USED OUTSIDE UNITED STATES,
ETC., NOT QUALIFIED.—No credit shall be allowable
under subsection (a) with respect to any property re-
ferred to in section 50(b)(1) or with respect to the
portion of the cost of any property taken into account
under section 179.
‘‘(5) ELECTION NOT TO TAKE CREDIT.—No credit
shall be allowed under subsection (a) for any property
if the taxpayer elects not to have this section apply
to such property.
‘‘(6) RECAPTURE RULES.—Rules similar to the
rules of section 179A(e)(4) shall apply.
‘‘(g) REGULATIONS.—The Secretary shall prescribe
such regulations as necessary to carry out the provisions
of this section.
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‘‘(h) TERMINATION.—This section shall not apply to
any property placed in service after December 31, 2009.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1016(a) is amended by striking
‘‘and’’ at the end of paragraph (30), by striking the
period at the end of paragraph (31) and inserting ‘‘,
and’’, and by adding at the end the following new
paragraph:
‘‘(32) 
to 
the 
extent 
provided 
in 
section
30B(f)(1).’’.
(2) Section 55(c)(2) is amended by inserting
‘‘30B(d),’’ after ‘‘30(b)(3),’’.
(3) Section 6501(m) is amended by inserting
‘‘30B(f)(5),’’ after ‘‘30(d)(4),’’.
(4) The table of sections for subpart B of part IV
of subchapter A of chapter 1 is amended by inserting
after the item relating to section 30A the following
new item:
‘‘Sec. 30B Alternative fuel vehicle refueling property credit.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to property placed in service after the
date of the enactment of this Act, in taxable years ending
after such date.
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SEC. 5311. MODIFICATION OF RECAPTURE RULES FOR AM-
ORTIZABLE SECTION 197 INTANGIBLES.
(a) IN GENERAL.—Subsection (b) of section 1245 is
amended by adding at the end the following new paragraph:
‘‘(9) DISPOSITION OF AMORTIZABLE SECTION 197
INTANGIBLES.—
‘‘(A) IN GENERAL.—If a taxpayer disposes
of more than 1 amortizable section 197 intan-
gible (as defined in section 197(c)) in a trans-
action or a series of related transactions, all such
amortizable 197 intangibles shall be treated as 1
section 1245 property for purposes of this sec-
tion.
‘‘(B) EXCEPTION.—Subparagraph (A) shall
not apply to any amortizable section 197 intan-
gible (as so defined) with respect to which the
adjusted basis exceeds the fair market value.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to dispositions of property after the date
of the enactment of this Act.
SEC. 5312. DIESEL FUEL TAX EVASION REPORT.
Not later than 360 days after the date of the enactment
of this Act, the Commissioner of the Internal Revenue shall
report to the Committees on Finance and Environment and
Public Works of the Senate and the Committees on Ways
and Means and Transportation and Infrastructure of the
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House of Representatives on the availability of new tech-
nologies that can be employed to enhance collections of the
excise tax on diesel fuel and the plans of the Internal Rev-
enue Service to employ such technologies.
Subtitle D—Fuels-related Technical
Corrections
SEC. 5401. FUELS-RELATED TECHNICAL CORRECTIONS.
(a) AMENDMENTS RELATED TO SECTION 301 OF THE
AMERICAN JOBS CREATION ACT OF 2004.—Section 6427 is
amended—
(1) by striking subsection (f), and
(2) by striking subsection (o) and redesignating
subsection (p) as subsection (o).
(b) AMENDMENTS RELATED TO SECTION 853 OF THE
AMERICAN JOBS CREATION ACT OF 2004.—
(1) Subparagraph (C) of section 4081(a)(2) is
amended by striking ‘‘for use in commercial avia-
tion’’ and inserting ‘‘for use in commercial aviation
by a person registered for such use under section
4101’’.
(2) So much of paragraph (2) of section 4081(d)
as precedes subparagraph (A) is amended to read as
follows:
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‘‘(2) AVIATION FUELS.—The rates of tax speci-
fied in clauses (ii) and (iv) of subsection (a)(2)(A)
shall be 4.3 cents per gallon—’’.
(3) Section 6421(f)(2) is amended—
(A) by striking ‘‘noncommercial aviation
(as defined in section 4041(c)(2))’’ in subpara-
graph (A) and inserting ‘‘aviation which is not
commercial aviation (as defined in section
4083(b))’’, and
(B) by striking ‘‘aviation which is not non-
commercial aviation’’ in subparagraph (B) and
inserting ‘‘commercial aviation’’.
(c) AMENDMENT RELATED TO SECTION 9005 OF THE
TRANSPORTATION EQUITY ACT FOR THE 21ST CENTURY.—
The last sentence of paragraph (2) of section 9504(b) is
amended by striking ‘‘subparagraph (B)’’, and inserting
‘‘subparagraph (C)’’.
(d) EFFECTIVE DATES.—
(1) AMERICAN JOBS CREATION ACT OF 2004.—
The amendments made by subsections (a) and (b)
shall take effect as if included in the provisions of the
American Jobs Creation Act of 2004 to which they re-
late.
(2) TRANSPORTATION EQUITY ACT FOR THE 21ST
CENTURY.—The amendment made by subsection (c)
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shall take effect as if included in the provision of the
Transportation Equity Act for the 21st Century to
which it relates.
Subtitle E—Revenue Offset
Provisions
PART I—GENERAL PROVISIONS
SEC. 5501. TREATMENT OF CONTINGENT PAYMENT CON-
VERTIBLE DEBT INSTRUMENTS.
(a) IN GENERAL.—Section 1275(d) (relating to regula-
tion authority) is amended—
(1) by striking ‘‘The Secretary’’ and inserting
the following:
‘‘(1) IN GENERAL.—The Secretary’’, and
(2) by adding at the end the following new para-
graph:
‘‘(2) TREATMENT OF CONTINGENT PAYMENT CON-
VERTIBLE DEBT.—
‘‘(A) IN GENERAL.—In the case of a debt in-
strument which—
‘‘(i) is convertible into stock of the
issuing corporation, into stock or debt of a
related party (within the meaning of section
267(b) or 707(b)(1)), or into cash or other
property in an amount equal to the approx-
imate value of such stock or debt, and
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‘‘(ii) provides for contingent payments,
any regulations which require original issue dis-
count to be determined by reference to the com-
parable yield of a noncontingent fixed-rate debt
instrument shall be applied as if the regulations
require that such comparable yield be determined
by reference to a noncontingent fixed-rate debt
instrument which is convertible into stock.
‘‘(B) SPECIAL RULE.—For purposes of sub-
paragraph (A), the comparable yield shall be de-
termined without taking into account the yield
resulting from the conversion of a debt instru-
ment into stock.’’.
(b) CROSS REFERENCE.—Section 163(e)(6) (relating
to cross references) is amended by adding at the end the
following:
‘‘For the treatment of contingent payment con-
vertible debt, see section 1275(d)(2).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to debt instruments issued on or after
the date of the enactment of this Act.
SEC. 5502. FRIVOLOUS TAX SUBMISSIONS.
(a) CIVIL PENALTIES.—Section 6702 is amended to
read as follows: