H. R. 4297
One Hundred Ninth Congress
of the
United States of America 
AT THE SECOND SESSION 
Begun and held at the City of Washington on Tuesday, 
the third day of January, two thousand and six 
An Act 
To provide for reconciliation pursuant to section 201(b) of the concurrent resolution 
on the budget for fiscal year 2006.
Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITLE.—This Act may be cited as the ‘‘Tax Increase 
Prevention and Reconciliation Act of 2005’’. 
(b) AMENDMENT OF 1986 CODE.—Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed 
in terms of an amendment to, or repeal of, a section or other 
provision, the reference shall be considered to be made to a section 
or other provision of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—The table of contents for this Act 
is as follows:
Sec. 1. Short title, etc. 
TITLE I—EXTENSION AND MODIFICATION OF CERTAIN PROVISIONS 
Sec. 101. Increased expensing for small business. 
Sec. 102. Capital gains and dividends rates. 
Sec. 103. Controlled foreign corporations. 
TITLE II—OTHER PROVISIONS 
Sec. 201. Clarification of taxation of certain settlement funds. 
Sec. 202. Modification of active business definition under section 355. 
Sec. 203. Veterans’ mortgage bonds. 
Sec. 204. Capital gains treatment for certain self-created musical works. 
Sec. 205. Vessel tonnage limit. 
Sec. 206. Modification of special arbitrage rule for certain funds. 
Sec. 207. Amortization of expenses incurred in creating or acquiring music or music 
copyrights. 
Sec. 208. Modification of effective date of disregard of certain capital expenditures 
for purposes of qualified small issue bonds. 
Sec. 209. Modification of treatment of loans to qualified continuing care facilities. 
TITLE III—ALTERNATIVE MINIMUM TAX RELIEF 
Sec. 301. Increase in alternative minimum tax exemption amount for 2006. 
Sec. 302. Allowance of nonrefundable personal credits against regular and alter-
native minimum tax liability. 
TITLE IV—CORPORATE ESTIMATED TAX PROVISIONS 
Sec. 401. Time for payment of corporate estimated taxes. 
TITLE V—REVENUE OFFSET PROVISIONS 
Sec. 501. Application of earnings stripping rules to partners which are corpora-
tions. 
Sec. 502. Reporting of interest on tax-exempt bonds. 
Sec. 503. 5-year amortization of geological and geophysical expenditures for certain 
major integrated oil companies. 
Sec. 504. Application of FIRPTA to regulated investment companies.
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Sec. 505. Treatment of distributions attributable to FIRPTA gains. 
Sec. 506. Prevention of avoidance of tax on investments of foreign persons in 
United States real property through wash sale transactions. 
Sec. 507. Section 355 not to apply to distributions involving disqualified investment 
companies. 
Sec. 508. Loan and redemption requirements on pooled financing requirements. 
Sec. 509. Partial payments required with submission of offers-in-compromise. 
Sec. 510. Increase in age of minor children whose unearned income is taxed as if 
parent’s income. 
Sec. 511. Imposition of withholding on certain payments made by government enti-
ties. 
Sec. 512. Conversions to Roth IRAs. 
Sec. 513. Repeal of FSC/ETI binding contract relief. 
Sec. 514. Only wages attributable to domestic production taken into account in de-
termining deduction for domestic production. 
Sec. 515. Modification of exclusion for citizens living abroad. 
Sec. 516. Tax involvement of accommodation parties in tax shelter transactions.
TITLE I—EXTENSION AND MODIFICA-
TION OF CERTAIN PROVISIONS 
SEC. 101. INCREASED EXPENSING FOR SMALL BUSINESS. 
Subsections (b)(1), (b)(2), (b)(5), (c)(2), and (d)(1)(A)(ii) of section 
179 (relating to election to expense certain depreciable business 
assets) are each amended by striking ‘‘2008’’ and inserting ‘‘2010’’. 
SEC. 102. CAPITAL GAINS AND DIVIDENDS RATES. 
Section 303 of the Jobs and Growth Tax Relief Reconciliation 
Act of 2003 is amended by striking ‘‘December 31, 2008’’ and 
inserting ‘‘December 31, 2010’’. 
SEC. 103. CONTROLLED FOREIGN CORPORATIONS. 
(a) SUBPART F EXCEPTION FOR ACTIVE FINANCING.— 
(1) EXEMPT INSURANCE INCOME.—Paragraph (10) of section 
953(e) (relating to application) is amended— 
(A) by striking ‘‘January 1, 2007’’ and inserting 
‘‘January 1, 2009’’, and 
(B) by striking ‘‘December 31, 2006’’ and inserting 
‘‘December 31, 2008’’. 
(2) EXCEPTION
TO
TREATMENT
AS
FOREIGN
PERSONAL 
HOLDING COMPANY INCOME.—Paragraph (9) of section 954(h) 
(relating to application) is amended by striking ‘‘January 1, 
2007’’ and inserting ‘‘January 1, 2009’’. 
(b) LOOK-THROUGH
TREATMENT
OF
PAYMENTS
BETWEEN 
RELATED CONTROLLED FOREIGN CORPORATIONS UNDER THE FOREIGN 
PERSONAL HOLDING COMPANY RULES.— 
(1) IN GENERAL.—Subsection (c) of section 954 (relating 
to foreign personal holding company income) is amended by 
adding at the end the following new paragraph: 
‘‘(6) LOOK-THRU RULE FOR RELATED CONTROLLED FOREIGN 
CORPORATIONS.— 
‘‘(A) IN GENERAL.—For purposes of this subsection, divi-
dends, interest, rents, and royalties received or accrued 
from a controlled foreign corporation which is a related 
person shall not be treated as foreign personal holding 
company income to the extent attributable or properly allo-
cable (determined under rules similar to the rules of sub-
paragraphs (C) and (D) of section 904(d)(3)) to income 
of the related person which is not subpart F income. For
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purposes of this subparagraph, interest shall include fac-
toring income which is treated as income equivalent to 
interest for purposes of paragraph (1)(E). The Secretary 
shall prescribe such regulations as may be appropriate 
to prevent the abuse of the purposes of this paragraph. 
‘‘(B) APPLICATION.—Subparagraph (A) shall apply to 
taxable years of foreign corporations beginning after 
December 31, 2005, and before January 1, 2009, and to 
taxable years of United States shareholders with or within 
which such taxable years of foreign corporations end.’’. 
(2) EFFECTIVE DATE.—The amendment made by this sub-
section shall apply to taxable years of foreign corporations 
beginning after December 31, 2005, and to taxable years of 
United States shareholders with or within which such taxable 
years of foreign corporations end. 
TITLE II—OTHER PROVISIONS 
SEC. 201. CLARIFICATION OF TAXATION OF CERTAIN SETTLEMENT 
FUNDS. 
(a) IN GENERAL.—Subsection (g) of section 468B (relating to 
clarification of taxation of certain funds) is amended to read as 
follows: 
‘‘(g) CLARIFICATION OF TAXATION OF CERTAIN FUNDS.— 
‘‘(1) IN GENERAL.—Except as provided in paragraph (2), 
nothing in any provision of law shall be construed as providing 
that an escrow account, settlement fund, or similar fund is 
not subject to current income tax. The Secretary shall prescribe 
regulations providing for the taxation of any such account or 
fund whether as a grantor trust or otherwise. 
‘‘(2) EXEMPTION
FROM
TAX
FOR
CERTAIN
SETTLEMENT 
FUNDS.—An escrow account, settlement fund, or similar fund 
shall be treated as beneficially owned by the United States 
and shall be exempt from taxation under this subtitle if— 
‘‘(A) it is established pursuant to a consent decree 
entered by a judge of a United States District Court, 
‘‘(B) it is created for the receipt of settlement payments 
as directed by a government entity for the sole purpose 
of resolving or satisfying one or more claims asserting 
liability 
under 
the 
Comprehensive 
Environmental 
Response, Compensation, and Liability Act of 1980, 
‘‘(C) the authority and control over the expenditure 
of funds therein (including the expenditure of contributions 
thereto and any net earnings thereon) is with such govern-
ment entity, and 
‘‘(D) upon termination, any remaining funds will be 
disbursed to such government entity for use in accordance 
with applicable law. 
For purposes of this paragraph, the term ‘government entity’ 
means the United States, any State or political subdivision 
thereof, the District of Columbia, any possession of the United 
States, and any agency or instrumentality of any of the fore-
going. 
‘‘(3) TERMINATION.—Paragraph (2) shall not apply to 
accounts and funds established after December 31, 2010.’’.
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(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to accounts and funds established after the date of 
the enactment of this Act. 
SEC. 202. MODIFICATION OF ACTIVE BUSINESS DEFINITION UNDER 
SECTION 355. 
Subsection (b) of section 355 (defining active conduct of a trade 
or business) is amended by adding at the end the following new 
paragraph: 
‘‘(3) SPECIAL RULE RELATING TO ACTIVE BUSINESS REQUIRE-
MENT.— 
‘‘(A) IN GENERAL.—In the case of any distribution made 
after the date of the enactment of this paragraph and 
on or before December 31, 2010, a corporation shall be 
treated as meeting the requirement of paragraph (2)(A) 
if and only if such corporation is engaged in the active 
conduct of a trade or business. 
‘‘(B) 
AFFILIATED
GROUP
RULE.—For 
purposes 
of 
subparagraph (A), all members of such corporation’s sepa-
rate affiliated group shall be treated as one corporation. 
For purposes of the preceding sentence, a corporation’s 
separate affiliated group is the affiliated group which would 
be determined under section 1504(a) if such corporation 
were the common parent and section 1504(b) did not apply. 
‘‘(C) TRANSITION
RULE.—Subparagraph (A) shall not 
apply to any distribution pursuant to a transaction which 
is— 
‘‘(i) made pursuant to an agreement which was 
binding on the date of the enactment of this paragraph 
and at all times thereafter, 
‘‘(ii) described in a ruling request submitted to 
the Internal Revenue Service on or before such date, 
or 
‘‘(iii) described on or before such date in a public 
announcement or in a filing with the Securities and 
Exchange Commission. 
The preceding sentence shall not apply if the distributing 
corporation elects not to have such sentence apply to dis-
tributions of such corporation. Any such election, once 
made, shall be irrevocable. 
‘‘(D) SPECIAL RULE FOR CERTAIN PRE-ENACTMENT DIS-
TRIBUTIONS.—For purposes of determining the continued 
qualification under paragraph (2)(A) of distributions made 
on or before the date of the enactment of this paragraph 
as a result of an acquisition, disposition, or other restruc-
turing after such date and on or before December 31, 
2010, such distribution shall be treated as made on the 
date of such acquisition, disposition, or restructuring for 
purposes of applying subparagraphs (A) through (C) of 
this paragraph.’’. 
SEC. 203. VETERANS’ MORTGAGE BONDS. 
(a) EXPANSION OF DEFINITION OF VETERANS ELIGIBLE FOR STATE 
HOME LOAN PROGRAMS FUNDED BY QUALIFIED VETERANS’ MORT-
GAGE BONDS.— 
(1) IN GENERAL.—Paragraph (4) of section 143(l) (defining 
qualified veteran) is amended to read as follows:
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‘‘(4) QUALIFIED VETERAN.—For purposes of this subsection, 
the term ‘qualified veteran’ means— 
‘‘(A) in the case of the States of Alaska, Oregon, and 
Wisconsin, any veteran— 
‘‘(i) who served on active duty, and 
‘‘(ii) who applied for the financing before the date 
25 years after the last date on which such veteran 
left active service, and 
‘‘(B) in the case of any other State, any veteran— 
‘‘(i) who served on active duty at some time before 
January 1, 1977, and 
‘‘(ii) who applied for the financing before the later 
of— 
‘‘(I) the date 30 years after the last date on 
which such veteran left active service, or 
‘‘(II) January 31, 1985.’’. 
(2) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to bonds issued on or after the date of 
the enactment of this Act. 
(b) REVISION OF STATE VETERANS LIMIT.— 
(1) IN
GENERAL.—Subparagraph (B) of section 143(l)(3) 
(relating to volume limitation) is amended— 
(A) by redesignating clauses (i) and (ii) as subclauses 
(I) and (II), respectively, and moving such clauses 2 ems 
to the right, 
(B) by amending the matter preceding subclause (I), 
as designated by subparagraph (A), to read as follows: 
‘‘(B) STATE VETERANS LIMIT.— 
‘‘(i) IN GENERAL.—In the case of any State to which 
clause (ii) does not apply, the State veterans limit 
for any calendar year is the amount equal to—’’, and 
(C) by adding at the end the following new clauses: 
‘‘(ii) ALASKA, OREGON, AND WISCONSIN.—In the case 
of the following States, the State veterans limit for 
any calendar year is the amount equal to— 
‘‘(I) $25,000,000 for the State of Alaska, 
‘‘(II) $25,000,000 for the State of Oregon, and 
‘‘(III) $25,000,000 for the State of Wisconsin. 
‘‘(iii) PHASEIN.—In the case of calendar years 
beginning before 2010, clause (ii) shall be applied by 
substituting for each of the dollar amounts therein 
an amount equal to the applicable percentage of such 
dollar amount. For purposes of the preceding sentence, 
the applicable percentage shall be determined in 
accordance with the following table:
‘‘For Calendar Year: 
Applicable percentage 
is: 
2006 .............................................................
20 percent 
2007 .............................................................
40 percent 
2008 .............................................................
60 percent 
2009 .............................................................
80 percent. 
‘‘(iv) TERMINATION.—The State veterans limit for 
the States specified in clause (ii) for any calendar 
year after 2010 is zero.’’.
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(2) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to allocations of State volume limit after 
April 5, 2006. 
SEC. 204. CAPITAL GAINS TREATMENT FOR CERTAIN SELF-CREATED 
MUSICAL WORKS. 
(a) IN GENERAL.—Subsection (b) of section 1221 (relating to 
capital asset defined) is amended by redesignating paragraph (3) 
as paragraph (4) and by inserting after paragraph (2) the following 
new paragraph: 
‘‘(3) SALE
OR
EXCHANGE
OF
SELF-CREATED
MUSICAL 
WORKS.—At the election of the taxpayer, paragraphs (1) and 
(3) of subsection (a) shall not apply to musical compositions 
or copyrights in musical works sold or exchanged before 
January 1, 2011, by a taxpayer described in subsection (a)(3).’’. 
(b) LIMITATION
ON
CHARITABLE
CONTRIBUTIONS.—Subpara-
graph (A) of section 170(e)(1) is amended by inserting ‘‘(determined 
without regard to section 1221(b)(3))’’ after ‘‘long-term capital gain’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to sales and exchanges in taxable years beginning 
after the date of the enactment of this Act. 
SEC. 205. VESSEL TONNAGE LIMIT. 
(a) IN GENERAL.—Paragraph (4) of section 1355(a) (relating 
to qualifying vessel) is amended by inserting ‘‘(6,000, in the case 
of taxable years beginning after December 31, 2005, and ending 
before January 1, 2011)’’ after ‘‘10,000’’. 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to taxable years beginning after December 31, 2005. 
SEC. 206. MODIFICATION OF SPECIAL ARBITRAGE RULE FOR CERTAIN 
FUNDS. 
In the case of bonds issued after the date of the enactment 
of this Act and before August 31, 2009— 
(1) the requirement of paragraph (1) of section 648 of 
the Deficit Reduction Act of 1984 (98 Stat. 941) shall be treated 
as met with respect to the securities or obligations referred 
to in such section if such securities or obligations are held 
in a fund the annual distributions from which cannot exceed 
7 percent of the average fair market value of the assets held 
in such fund except to the extent distributions are necessary 
to pay debt service on the bond issue, and 
(2) paragraph (3) of such section shall be applied by sub-
stituting ‘‘distributions from’’ for ‘‘the investment earnings of’’ 
both places it appears. 
SEC. 207. AMORTIZATION OF EXPENSES INCURRED IN CREATING OR 
ACQUIRING MUSIC OR MUSIC COPYRIGHTS. 
(a) IN GENERAL.—Section 167(g) (relating to depreciation under 
income forecast method) is amended by adding at the end the 
following new paragraph: 
‘‘(8) SPECIAL RULES FOR CERTAIN MUSICAL WORKS AND COPY-
RIGHTS.— 
‘‘(A) IN
GENERAL.—If an election is in effect under 
this paragraph for any taxable year, then, notwithstanding 
paragraph (1), any expense which—
H. R. 4297—7
‘‘(i) is paid or incurred by the taxpayer in creating 
or acquiring any applicable musical property placed 
in service during the taxable year, and 
‘‘(ii) is otherwise properly chargeable to capital 
account, 
shall be amortized ratably over the 5-year period beginning 
with the month in which the property was placed in service. 
The preceding sentence shall not apply to any expense 
which, without regard to this paragraph, would not be 
allowable as a deduction. 
‘‘(B) EXCLUSIVE METHOD.—Except as provided in this 
paragraph, no depreciation or amortization deduction shall 
be allowed with respect to any expense to which subpara-
graph (A) applies. 
‘‘(C) APPLICABLE MUSICAL PROPERTY.—For purposes of 
this paragraph— 
‘‘(i) IN
GENERAL.—The term ‘applicable musical 
property’ means any musical composition (including 
any accompanying words), or any copyright with 
respect to a musical composition, which is property 
to which this subsection applies without regard to this 
paragraph. 
‘‘(ii) EXCEPTIONS.—Such term shall not include any 
property— 
‘‘(I) with respect to which expenses are treated 
as qualified creative expenses to which section 
263A(h) applies, 
‘‘(II) to which a simplified procedure estab-
lished under section 263A(j)(2) applies, or 
‘‘(III) which is an amortizable section 197 
intangible (as defined in section 197(c)). 
‘‘(D) ELECTION.—An election under this paragraph 
shall be made at such time and in such form as the Sec-
retary may prescribe and shall apply to all applicable 
musical property placed in service during the taxable year 
for which the election applies. 
‘‘(E) TERMINATION.—An election may not be made 
under this paragraph for any taxable year beginning after 
December 31, 2010.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to expenses paid or incurred with respect to property 
placed in service in taxable years beginning after December 31, 
2005. 
SEC. 208. MODIFICATION OF EFFECTIVE DATE OF DISREGARD OF CER-
TAIN CAPITAL EXPENDITURES FOR PURPOSES OF QUALI-
FIED SMALL ISSUE BONDS. 
(a) IN GENERAL.—Section 144(a)(4)(G) is amended by striking 
‘‘September 30, 2009’’ and inserting ‘‘December 31, 2006’’. 
(b) CONFORMING AMENDMENT.—Section 144(a)(4)(F) is amended 
by striking ‘‘September 30, 2009’’ and inserting ‘‘December 31, 
2006’’. 
SEC. 209. MODIFICATION OF TREATMENT OF LOANS TO QUALIFIED 
CONTINUING CARE FACILITIES. 
(a) IN GENERAL.—Section 7872 is amended by redesignating 
subsection (h) as subsection (i) and inserting after subsection (g) 
the following new subsection:
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‘‘(h) EXCEPTION FOR LOANS TO QUALIFIED CONTINUING CARE 
FACILITIES.— 
‘‘(1) IN
GENERAL.—This section shall not apply for any 
calendar year to any below-market loan owed by a facility 
which on the last day of such year is a qualified continuing 
care facility, if such loan was made pursuant to a continuing 
care contract and if the lender (or the lender’s spouse) attains 
age 62 before the close of such year. 
‘‘(2) CONTINUING
CARE
CONTRACT.—For purposes of this 
section, the term ‘continuing care contract’ means a written 
contract between an individual and a qualified continuing care 
facility under which— 
‘‘(A) the individual or individual’s spouse may use a 
qualified continuing care facility for their life or lives, 
‘‘(B) the individual or individual’s spouse will be pro-
vided with housing, as appropriate for the health of such 
individual or individual’s spouse— 
‘‘(i) in an independent living unit (which has addi-
tional available facilities outside such unit for the 
provision of meals and other personal care), and 
‘‘(ii) in an assisted living facility or a nursing 
facility, as is available in the continuing care facility, 
and 
‘‘(C) the individual or individual’s spouse will be pro-
vided assisted living or nursing care as the health of such 
individual or individual’s spouse requires, and as is avail-
able in the continuing care facility. 
The Secretary shall issue guidance which limits such term 
to contracts which provide only facilities, care, and services 
described in this paragraph. 
‘‘(3) QUALIFIED CONTINUING CARE FACILITY.— 
‘‘(A) IN GENERAL.—For purposes of this section, the 
term ‘qualified continuing care facility’ means 1 or more 
facilities— 
‘‘(i) which are designed to provide services under 
continuing care contracts, 
‘‘(ii) which include an independent living unit, plus 
an assisted living or nursing facility, or both, and 
‘‘(iii) substantially all of the independent living 
unit residents of which are covered by continuing care 
contracts. 
‘‘(B) NURSING HOMES EXCLUDED.—The term ‘qualified 
continuing care facility’ shall not include any facility which 
is of a type which is traditionally considered a nursing 
home. 
‘‘(4) TERMINATION.—This subsection shall not apply to any 
calendar year after 2010.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 7872(g) is amended by adding at the end the 
following new paragraph: 
‘‘(6) SUSPENSION OF APPLICATION.—Paragraph (1) shall not 
apply for any calendar year to which subsection (h) applies.’’. 
(2) Section 142(d)(2)(B) is amended by striking ‘‘Section 
7872(g)’’ and inserting ‘‘Subsections (g) and (h) of section 7872’’. 
(c) EFFECTIVE DATE.—The amendment made by this section 
shall apply to calendar years beginning after December 31, 2005, 
with respect to loans made before, on, or after such date.
H. R. 4297—9
TITLE III—ALTERNATIVE MINIMUM TAX 
RELIEF 
SEC. 301. INCREASE IN ALTERNATIVE MINIMUM TAX EXEMPTION 
AMOUNT FOR 2006. 
(a) IN
GENERAL.—Section 55(d)(1) (relating to exemption 
amount for taxpayers other than corporations) is amended— 
(1) by striking ‘‘$58,000’’ and all that follows through ‘‘2005’’ 
in subparagraph (A) and inserting ‘‘$62,550 in the case of 
taxable years beginning in 2006’’, and 
(2) by striking ‘‘$40,250’’ and all that follows through ‘‘2005’’ 
in subparagraph (B) and inserting ‘‘$42,500 in the case of 
taxable years beginning in 2006’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2005. 
SEC. 302. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS 
AGAINST REGULAR AND ALTERNATIVE MINIMUM TAX 
LIABILITY. 
(a) IN GENERAL.—Paragraph (2) of section 26(a) is amended— 
(1) by striking ‘‘2005’’ in the heading thereof and inserting 
‘‘2006’’, and 
(2) by striking ‘‘or 2005’’ and inserting ‘‘2005, or 2006’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2005. 
TITLE IV—CORPORATE ESTIMATED TAX 
PROVISIONS 
SEC. 401. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES. 
Notwithstanding section 6655 of the Internal Revenue Code 
of 1986— 
(1) in the case of a corporation with assets of not less 
than $1,000,000,000 (determined as of the end of the preceding 
taxable year)— 
(A) the amount of any required installment of corporate 
estimated tax which is otherwise due in July, August, 
or September of 2006 shall be 105 percent of such amount, 
(B) the amount of any required installment of corporate 
estimated tax which is otherwise due in July, August, 
or September of 2012 shall be 106.25 percent of such 
amount, 
(C) the amount of any required installment of corporate 
estimated tax which is otherwise due in July, August, 
or September of 2013 shall be 100.75 percent of such 
amount, and 
(D) the amount of the next required installment after 
an installment referred to in subparagraph (A), (B), or 
(C) shall be appropriately reduced to reflect the amount 
of the increase by reason of such subparagraph, 
(2) 20.5 percent of the amount of any required installment 
of corporate estimated tax which is otherwise due in September 
2010 shall not be due until October 1, 2010, and
H. R. 4297—10
(3) 27.5 percent of the amount of any required installment 
of corporate estimated tax which is otherwise due in September 
2011 shall not be due until October 1, 2011. 
TITLE V—REVENUE OFFSET 
PROVISIONS 
SEC. 501. APPLICATION OF EARNINGS STRIPPING RULES TO PARTNERS 
WHICH ARE CORPORATIONS. 
(a) IN GENERAL.—Section 163(j) (relating to limitation on deduc-
tion for interest on certain indebtedness) is amended by redesig-
nating paragraph (8) as paragraph (9) and by inserting after para-
graph (7) the following new paragraph: 
‘‘(8) TREATMENT OF CORPORATE PARTNERS.—Except to the 
extent provided by regulations, in applying this subsection to 
a corporation which owns (directly or indirectly) an interest 
in a partnership— 
‘‘(A) such corporation’s distributive share of interest 
income paid or accrued to such partnership shall be treated 
as interest income paid or accrued to such corporation, 
‘‘(B) such corporation’s distributive share of interest 
paid or accrued by such partnership shall be treated as 
interest paid or accrued by such corporation, and 
‘‘(C) such corporation’s share of the liabilities of such 
partnership shall be treated as liabilities of such corpora-
tion.’’. 
(b) ADDITIONAL
REGULATORY
AUTHORITY.—Section 163(j)(9) 
(relating to regulations), as redesignated by subsection (a), is 
amended by striking ‘‘and’’ at the end of subparagraph (B), by 
striking the period at the end of subparagraph (C) and inserting 
‘‘, and’’, and by adding at the end the following new subparagraph: 
‘‘(D) regulations providing for the reallocation of shares 
of partnership indebtedness, or distributive shares of the 
partnership’s interest income or interest expense.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning on or after the date of 
the enactment of this Act. 
SEC. 502. REPORTING OF INTEREST ON TAX-EXEMPT BONDS. 
(a) IN GENERAL.—Section 6049(b)(2) (relating to exceptions) 
is amended by striking subparagraph (B) and by redesignating 
subparagraphs (C) and (D) as subparagraphs (B) and (C), respec-
tively. 
(b) 
CONFORMING
AMENDMENT.—Section 
6049(b)(2)(C), 
as 
redesignated by subsection (a), is amended by striking ‘‘subpara-
graph (C)’’ and inserting ‘‘subparagraph (B)’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to interest paid after December 31, 2005. 
SEC. 503. 5-YEAR AMORTIZATION OF GEOLOGICAL AND GEOPHYSICAL 
EXPENDITURES FOR CERTAIN MAJOR INTEGRATED OIL 
COMPANIES. 
(a) IN GENERAL.—Section 167(h) (relating to amortization of 
geological and geophysical expenditures) is amended by adding 
at the end the following new paragraph:
H. R. 4297—11
‘‘(5) SPECIAL
RULE
FOR
MAJOR
INTEGRATED
OIL
COMPA-
NIES.— 
‘‘(A) IN GENERAL.—In the case of a major integrated 
oil company, paragraphs (1) and (4) shall be applied by 
substituting ‘5-year’ for ‘24 month’. 
‘‘(B) MAJOR INTEGRATED OIL COMPANY.—For purposes 
of this paragraph, the term ‘major integrated oil company’ 
means, with respect to any taxable year, a producer of 
crude oil— 
‘‘(i) which has an average daily worldwide produc-
tion of crude oil of at least 500,000 barrels for the 
taxable year, 
‘‘(ii) which had gross receipts in excess of 
$1,000,000,000 for its last taxable year ending during 
calendar year 2005, and 
‘‘(iii) to which subsection (c) of section 613A does 
not apply by reason of paragraph (4) of section 613A(d), 
determined— 
‘‘(I) by substituting ‘15 percent’ for ‘5 percent’ 
each place it occurs in paragraph (3) of section 
613A(d), and 
‘‘(II) without regard to whether subsection (c) 
of section 613A does not apply by reason of para-
graph (2) of section 613A(d). 
For purposes of clauses (i) and (ii), all persons treated 
as a single employer under subsections (a) and (b) of section 
52 shall be treated as 1 person and, in case of a short 
taxable year, the rule under section 448(c)(3)(B) shall 
apply.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to amounts paid or incurred after the date of the 
enactment of this Act. 
SEC. 504. APPLICATION OF FIRPTA TO REGULATED INVESTMENT 
COMPANIES. 
(a) IN
GENERAL.—Subclause (II) of section 897(h)(4)(A)(i) 
(defining qualified investment entity) is amended by inserting 
‘‘which is a United States real property holding corporation or 
which would be a United States real property holding corporation 
if the exceptions provided in subsections (c)(3) and (h)(2) did not 
apply to interests in any real estate investment trust or regulated 
investment company’’ after ‘‘regulated investment company’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall take effect as if included in the provisions of section 411 
of the American Jobs Creation Act of 2004 to which it relates. 
SEC. 505. TREATMENT OF DISTRIBUTIONS ATTRIBUTABLE TO FIRPTA 
GAINS. 
(a) QUALIFIED INVESTMENT ENTITY.— 
(1) IN GENERAL.—Section 897(h)(1) is amended— 
(A) by striking ‘‘a nonresident alien individual or a 
foreign corporation’’ in the first sentence and inserting 
‘‘a nonresident alien individual, a foreign corporation, or 
other qualified investment entity’’, 
(B) by striking ‘‘such nonresident alien individual or 
foreign corporation’’ in the first sentence and inserting 
‘‘such nonresident alien individual, foreign corporation, or 
other qualified investment entity’’, and
H. R. 4297—12
(C) by striking the second sentence and inserting the 
following new sentence: ‘‘Notwithstanding the preceding 
sentence, any distribution by a qualified investment entity 
to a nonresident alien individual or a foreign corporation 
with respect to any class of stock which is regularly traded 
on an established securities market located in the United 
States shall not be treated as gain recognized from the 
sale or exchange of a United States real property interest 
if such individual or corporation did not own more than 
5 percent of such class of stock at any time during the 
1-year period ending on the date of such distribution.’’. 
(2) EXCEPTION TO TERMINATION OF APPLICATION OF SECTION 
897 RULES TO REGULATED INVESTMENT COMPANIES.—Clause (ii) 
of section 897(h)(4)(A) is amended by adding at the end the 
following new sentence: ‘‘Notwithstanding the preceding sen-
tence, an entity described in clause (i)(II) shall be treated 
as a qualified investment entity for purposes of applying para-
graphs (1) and (5) and section 1445 with respect to any distribu-
tion by the entity to a nonresident alien individual or a foreign 
corporation which is attributable directly or indirectly to a 
distribution to the entity from a real estate investment trust.’’. 
(b) WITHHOLDING ON DISTRIBUTIONS TREATED AS GAIN FROM 
UNITED
STATES
REAL
PROPERTY
INTERESTS.—Section 1445(e) 
(relating to special rules for distributions, etc. by corporations, 
partnerships, trusts, or estates) is amended by redesignating para-
graph (6) as paragraph (7) and by inserting after paragraph (5) 
the following new paragraph: 
‘‘(6) DISTRIBUTIONS BY REGULATED INVESTMENT COMPANIES 
AND REAL ESTATE INVESTMENT TRUSTS.—If any portion of a 
distribution from a qualified investment entity (as defined in 
section 897(h)(4)) to a nonresident alien individual or a foreign 
corporation is treated under section 897(h)(1) as gain realized 
by such individual or corporation from the sale or exchange 
of a United States real property interest, the qualified invest-
ment entity shall deduct and withhold under subsection (a) 
a tax equal to 35 percent (or, to the extent provided in regula-
tions, 15 percent (20 percent in the case of taxable years begin-
ning after December 31, 2010)) of the amount so treated.’’. 
(c) TREATMENT
OF CERTAIN DISTRIBUTIONS
AS DIVIDENDS.— 
(1) IN
GENERAL.—Section 852(b)(3) (relating to capital 
gains) is amended by adding at the end the following new 
subparagraph: 
‘‘(E) CERTAIN DISTRIBUTIONS.—In the case of a distribu-
tion to which section 897 does not apply by reason of 
the second sentence of section 897(h)(1), the amount of 
such distribution which would be included in computing 
long-term capital gains for the shareholder under subpara-
graph (B) or (D) (without regard to this subparagraph)— 
‘‘(i) shall not be included in computing such share-
holder’s long-term capital gains, and 
‘‘(ii) shall be included in such shareholder’s gross 
income as a dividend from the regulated investment 
company.’’. 
(2) CONFORMING AMENDMENT.—Section 871(k)(2) (relating 
to short-term capital gain dividends) is amended by adding 
at the end the following new subparagraph:
H. R. 4297—13
‘‘(E) CERTAIN DISTRIBUTIONS.—In the case of a distribu-
tion to which section 897 does not apply by reason of 
the second sentence of section 897(h)(1), the amount which 
would be treated as a short-term capital gain dividend 
to the shareholder (without regard to this subparagraph)— 
‘‘(i) shall not be treated as a short-term capital 
gain dividend, and 
‘‘(ii) shall be included in such shareholder’s gross 
income as a dividend from the regulated investment 
company.’’. 
(d) EFFECTIVE DATES.—The amendments made by this section 
shall apply to taxable years of qualified investment entities begin-
ning after December 31, 2005, except that no amount shall be 
required to be withheld under section 1441, 1442, or 1445 of the 
Internal Revenue Code of 1986 with respect to any distribution 
before the date of the enactment of this Act if such amount was 
not otherwise required to be withheld under any such section as 
in effect before such amendments. 
SEC. 506. PREVENTION OF AVOIDANCE OF TAX ON INVESTMENTS OF 
FOREIGN PERSONS IN UNITED STATES REAL PROPERTY 
THROUGH WASH SALE TRANSACTIONS. 
(a) IN GENERAL.—Section 897(h) (relating to special rules for 
certain investment entities) is amended by adding at the end the 
following new paragraph: 
‘‘(5) TREATMENT OF CERTAIN WASH SALE TRANSACTIONS.— 
‘‘(A) IN GENERAL.—If an interest in a domestically con-
trolled qualified investment entity is disposed of in an 
applicable wash sale transaction, the taxpayer shall, for 
purposes of this section, be treated as having gain from 
the sale or exchange of a United States real property 
interest in an amount equal to the portion of the distribu-
tion described in subparagraph (B) with respect to such 
interest which, but for the disposition, would have been 
treated by the taxpayer as gain from the sale or exchange 
of a United States real property interest under paragraph 
(1). 
‘‘(B) APPLICABLE WASH SALES TRANSACTION.—For pur-
poses of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘applicable wash sales 
transaction’ means any transaction (or series of trans-
actions) under which a nonresident alien individual, 
foreign corporation, or qualified investment entity— 
‘‘(I) disposes of an interest in a domestically 
controlled qualified investment entity during the 
30-day period preceding the ex-dividend date of 
a distribution which is to be made with respect 
to the interest and any portion of which, but for 
the disposition, would have been treated by the 
taxpayer as gain from the sale or exchange of 
a United States real property interest under para-
graph (1), and 
‘‘(II) acquires, or enters into a contract or 
option to acquire, a substantially identical interest 
in such entity during the 61-day period beginning 
with the 1st day of the 30-day period described 
in subclause (I).
H. R. 4297—14
For purposes of subclause (II), a nonresident alien 
individual, foreign corporation, or qualified investment 
entity shall be treated as having acquired any interest 
acquired by a person related (within the meaning of 
section 267(b) or 707(b)(1)) to the individual, corpora-
tion, or entity, and any interest which such person 
has entered into any contract or option to acquire. 
‘‘(ii) APPLICATION
TO
SUBSTITUTE
DIVIDEND
AND 
SIMILAR PAYMENTS.—Subparagraph (A) shall apply to— 
‘‘(I) any substitute dividend payment (within 
the meaning of section 861), or 
‘‘(II) any other similar payment specified in 
regulations which the Secretary determines nec-
essary to prevent avoidance of the purposes of 
this paragraph. 
The portion of any such payment treated by the tax-
payer as gain from the sale or exchange of a United 
States real property interest under subparagraph (A) 
by reason of this clause shall be equal to the portion 
of the distribution such payment is in lieu of which 
would have been so treated but for the transaction 
giving rise to such payment. 
‘‘(iii) EXCEPTION
WHERE
DISTRIBUTION
ACTUALLY 
RECEIVED.—A transaction shall not be treated as an 
applicable wash sales transaction if the nonresident 
alien individual, foreign corporation, or qualified 
investment entity receives the distribution described 
in clause (i)(I) with respect to either the interest which 
was disposed of, or acquired, in the transaction. 
‘‘(iv) EXCEPTION
FOR
CERTAIN
PUBLICLY
TRADED 
STOCK.—A transaction shall not be treated as an 
applicable wash sales transaction if it involves the 
disposition of any class of stock in a qualified invest-
ment entity which is regularly traded on an established 
securities market within the United States but only 
if the nonresident alien individual, foreign corporation, 
or qualified investment entity did not own more than 
5 percent of such class of stock at any time during 
the 1-year period ending on the date of the distribution 
described in clause (i)(I).’’. 
(b) NO WITHHOLDING REQUIRED.—Section 1445(b) (relating to 
exemptions) is amended by adding at the end the following new 
paragraph: 
‘‘(8) APPLICABLE WASH SALES TRANSACTIONS.—No person 
shall be required to deduct and withhold any amount under 
subsection (a) with respect to a disposition which is treated 
as a disposition of a United States real property interest solely 
by reason of section 897(h)(5).’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2005, 
except that such amendments shall not apply to any distribution, 
or substitute dividend payment, occurring before the date that 
is 30 days after the date of the enactment of this Act. 
SEC. 507. SECTION 355 NOT TO APPLY TO DISTRIBUTIONS INVOLVING 
DISQUALIFIED INVESTMENT COMPANIES. 
(a) IN GENERAL.—