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‘‘(1) EMPLOYEE DISCOUNT.—For purposes of 
this subsection, the term ‘employee discount’ means 
an employer’s offer of taxable property or services 
for sale to its employees or their families (within the 
meaning of section 302(b)) for less than the offer of 
such taxable property or services to the general pub-
lic. 
‘‘(2) EMPLOYEE DISCOUNT AMOUNT.—For pur-
poses of this subsection, the employee discount 
amount is the amount by which taxable property or 
services are sold pursuant to an employee discount 
below the amount for which such taxable property or 
services would have been sold to the general public. 
‘‘(3) TAXABLE AMOUNT.—If the employee dis-
count amount exceeds 20 percent of the price that 
the taxable property or services would have been sold 
to the general public, then the sale of such taxable 
property or services by the employer shall be deemed 
the conversion of such taxable property or services 
to personal use and tax shall be imposed on the tax-
able employee discount amount. The taxable em-
ployee discount amount shall be—
‘‘(A) the employee discount amount, minus
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‘‘(B) 20 percent of the amount for which 
said taxable property or services would have 
been sold to the general public. 
‘‘(h) SATURDAY, SUNDAY, OR LEGAL HOLIDAY.—
When the last day prescribed for performing any act re-
quired by this subtitle falls on a Saturday, Sunday, or 
legal holiday (in the jurisdiction where the return is to 
be filed), the performance of such act shall be considered 
timely if it is performed on the next day which is not a 
Saturday, Sunday, or legal holiday (in the jurisdiction 
where the return is to be filed). 
‘‘SEC. 902. TRANSITION MATTERS.
‘‘(a) INVENTORY.—
‘‘(1) QUALIFIED
INVENTORY.—Inventory held 
by a trade or business on the close of business on 
December 31, 2004, shall be qualified inventory if it 
is sold—
‘‘(A) before December 31, 2006; 
‘‘(B) by a registered person; and 
‘‘(C) subject to the tax imposed by section 
101. 
‘‘(2) COSTS.—For purposes of this section, 
qualified inventory shall have the cost that it had for 
Federal income tax purposes for the trade or busi-
ness as of December 31, 2004 (including any
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amounts capitalized by reason of section 263A of the 
Internal Revenue Code of 1986 as in effect on De-
cember 31, 2004). 
‘‘(3) TRANSITIONAL INVENTORY CREDIT.—The 
trade or business which held the qualified inventory 
on the close of business on December 31, 2004, shall 
be entitled to a transitional inventory credit equal to 
the cost of the qualified inventory (determined in ac-
cordance with paragraph (2)) times the rate of tax 
imposed by section 101. 
‘‘(4) TIMING OF CREDIT.—The credit provided 
under paragraph (3) shall be allowed with respect to 
the month when the inventory is sold subject to the 
tax imposed by this subtitle. Said credit shall be re-
ported as an intermediate and export sales credit 
and the person claiming said credit shall attach sup-
porting schedules in the form that the Secretary 
may prescribe. 
‘‘(b) WORK-IN-PROCESS.—For purposes of this sec-
tion, inventory shall include work-in-process. 
‘‘(c) QUALIFIED INVENTORY HELD BY BUSINESSES 
NOT SELLING SAID QUALIFIED INVENTORY
AT RE-
TAIL.—
‘‘(1) IN GENERAL.—Qualified inventory held by 
businesses that sells said qualified inventory not sub-
109
ject to tax pursuant to section 102(a) shall be eligi-
ble for the transitional inventory credit only if that 
business (or a business that has successor rights 
pursuant to paragraph (2)) receives certification in 
a form satisfactory to the Secretary that the quali-
fied inventory was subsequently sold subject to the 
tax imposed by this subtitle. 
‘‘(2) TRANSITIONAL INVENTORY CREDIT RIGHT 
MAY BE SOLD.—The business entitled to the transi-
tional inventory credit may sell the right to receive 
said transitional inventory credit to the purchaser of 
the qualified inventory that gave rise to the credit 
entitlement. Any purchaser of such qualified inven-
tory (or property or services into which the qualified 
inventory has been incorporated) may sell the right 
to said transitional inventory credit to a subsequent 
purchaser of said qualified inventory (or property or 
services into which the qualified inventory has been 
incorporated). 
‘‘SEC. 903. WAGES TO BE REPORTED TO SOCIAL SECURITY 
ADMINISTRATION. 
‘‘(a) IN GENERAL.—Employers shall submit such in-
formation to the Social Security Administration as is re-
quired by the Social Security Administration to calculate 
Social Security benefits under title II of the Social Secu-
110
rity Act, including wages paid, in a form prescribed by 
the Secretary. A copy of the employer submission to the 
Social Security Administration relating to each employee 
shall be provided to each employee by the employer. 
‘‘(b) WAGES.—For purposes of this section, the term 
‘wages’ means all cash remuneration for employment (in-
cluding tips to an employee by third parties provided that 
the employer or employee maintains records documenting 
such tips) including self-employment income; except that 
such term shall not include—
‘‘(1) any insurance benefits received (including 
death benefits); 
‘‘(2) pension or annuity benefits received; 
‘‘(3) tips received by an employee over $5,000 
per year; and 
‘‘(4) benefits received under a government enti-
tlement program (including Social Security benefits 
and unemployment compensation benefits). 
‘‘(c) SELF-EMPLOYMENT INCOME.—For purposes of 
subsection (b), the term ‘self-employment income’ means 
gross payments received for taxable property or services 
minus the sum of—
‘‘(1) gross payments made for taxable property 
or services (without regard to whether tax was paid
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pursuant to section 101 on such taxable property or 
services), and 
‘‘(2) wages paid by the self-employed person to 
employees of the self-employed person. 
‘‘SEC. 904. TRUST FUND REVENUE. 
‘‘(a) SECRETARY TO MAKE ALLOCATION OF SALES 
TAX REVENUE.—The Secretary shall allocate the revenue 
received by virtue of the tax imposed by section 101 in 
accordance with this section. The revenue shall be allo-
cated among—
‘‘(1) the general revenue, 
‘‘(2) the old-age and survivors insurance trust 
fund, 
‘‘(3) the disability insurance trust fund, 
‘‘(4) the hospital insurance trust fund, and 
‘‘(5) the Federal supplementary medical insur-
ance trust fund. 
‘‘(b) GENERAL RULE.—
‘‘(1) GENERAL REVENUE.—The proportion of 
total revenue allocated to the general revenue shall 
be the same proportion as the rate in section 
101(b)(4) bears to the combined Federal tax rate 
percentage (as defined in section 101(b)(3)). 
‘‘(2) The amount of revenue allocated to the 
old-age and survivors insurance and disability insur-
112
ance trust funds shall be the same proportion as the 
old-age, survivors and disability insurance rate (as 
defined in subsection (d)) bears to the combined 
Federal tax rate percentage (as defined in section 
101(b)(3)). 
‘‘(3) The amount of revenue allocated to the 
hospital insurance and Federal supplementary med-
ical insurance trust funds shall be the same propor-
tion as the hospital insurance rate (as defined in 
subsection (e)) bears to the combined Federal tax 
rate percentage (as defined in section 101(b)(3)). 
‘‘(c) CALENDAR YEAR 2005.—Notwithstanding sub-
section (b), the revenue allocation pursuant to subsection 
(a) for calendar year 2005 shall be as follows: 
‘‘(1) 64.83 percent of total revenue to general 
revenue; 
‘‘(2) 27.43 percent of total revenue to the old-
age and survivors insurance and disability insurance 
trust funds, and 
‘‘(3) 7.74 percent of total revenue to the hos-
pital insurance and Federal supplementary medical 
insurance trust funds. 
‘‘(d) OLD-AGE, SURVIVORS AND DISABILITY INSUR-
ANCE RATE.—The old-age, survivors and disability insur-
ance rate shall be determined by the Social Security Ad-
113
ministration. The old-age, survivors and disability insur-
ance rate shall be that sales tax rate which is necessary 
to raise the same amount of revenue that would have been 
raised by imposing a 12.4 percent tax on the Social Secu-
rity wage base (including self-employment income) as de-
termined in accordance with chapter 21 of the Internal 
Revenue Code most recently in effect prior to the enact-
ment of this Act. The rate shall be determined using actu-
arially sound methodology and announced at least 6 
months prior to the beginning of the Calendar year for 
which it applies. 
‘‘(e) HOSPITAL INSURANCE RATE.—The hospital in-
surance rate shall be determined by the Social Security 
Administration. The hospital insurance rate shall be that 
sales tax rate which is necessary to raise the same amount 
of revenue that would have been raised by imposing a 2.9 
percent tax on the Medicare wage base (including self-em-
ployment income) as determined in accordance with chap-
ter 21 of the Internal Revenue Code most recently in effect 
prior to the enactment of this Act. The rate shall be deter-
mined using actuarially sound methodology and an-
nounced at least 6 months prior to the beginning of the 
calendar year for which it applies. 
‘‘(f) ASSISTANCE.—The Secretary shall provide such 
technical assistance as the Social Security Administration
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shall require to determine the old-age, survivors and dis-
ability insurance rate and the hospital insurance rate. 
‘‘(g) FURTHER ALLOCATIONS.—
‘‘(1) OLD-AGE, SURVIVORS AND DISABILITY IN-
SURANCE.—The Secretary shall allocate revenue re-
ceived because of the old-age, survivors and dis-
ability insurance rate to the old-age and survivors 
insurance trust fund and the disability insurance 
trust fund in accordance with law or, in the absence 
of other statutory provision, in the same proportion 
that the old-age and survivors insurance trust fund 
receipts bore to the sum of the old-age and survivors 
insurance trust fund receipts and the disability in-
surance trust fund receipts in calendar year 2004 
(taking into account only receipts pursuant to chap-
ter 21 of the Internal Revenue Code). 
‘‘(2) HOSPITAL
INSURANCE.—The Secretary 
shall allocate revenue received because of the hos-
pital insurance rate to the hospital insurance trust 
fund and the Federal supplementary medical insur-
ance trust fund in accordance with law or, in the ab-
sence of other statutory provision, in the same pro-
portion that hospital insurance trust fund receipts 
bore to the sum of the hospital insurance trust fund 
receipts and Federal supplementary medical insur-
115
ance trust fund receipts in calendar year 2004 (tak-
ing into account only receipts pursuant to chapter 
21 of the Internal Revenue Code). 
‘‘SEC. 905. WITHHOLDING OF TAX ON NONRESIDENT ALIENS 
AND FOREIGN CORPORATIONS. 
‘‘(a) IN GENERAL.—All persons, in whatever capacity 
acting (including lessees or mortgagors or real or personal 
property, fiduciaries, employers, and all officers and em-
ployees of the United States) having control, receipt, cus-
tody, disposal, or payment of any income to the extent 
such income constitutes gross income from sources within 
the United States of any nonresident alien individual, for-
eign partnership, or foreign corporation shall deduct and 
withhold from that income a tax equal to 23 percent there-
of. 
‘‘(b) EXCEPTION.—No tax shall be required to be de-
ducted from interest on portfolio debt investments. 
‘‘(c) TREATY COUNTRIES.—In the case of payments 
to nonresident alien individuals, foreign partnerships, or 
foreign corporations that have a residence in (or the na-
tionality of a country) that has entered into a tax treaty 
with the United States, then the rate of withholding tax 
prescribed by the treaty shall govern.’’.
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SEC. 202. CONFORMING AND TECHNICAL AMENDMENTS. 
‘‘(a) REPEALS.—The following provisions of the In-
ternal Revenue Code of 1986 are repealed: 
(1) Subchapter A of chapter 61 of subtitle D 
(as redesignated by section 104) (relating to infor-
mation and returns). 
(2) Sections 6103 through 6116 of subchapter 
B of chapter 61 of subtitle D (as so redesignated). 
(3) Section 6157 (relating to unemployment 
taxes). 
(4) Section 6163 (relating to estate taxes). 
(5) Section 6164 (relating to corporate taxes). 
(6) Section 6166 (relating to estate taxes). 
(7) Section 6167 (relating to foreign expropria-
tion losses). 
(8) Sections 6201, 6205 and 6207 (relating to 
assessments). 
(9) Subchapter C of chapter 63 of subtitle D 
(as so redesignated) (relating to tax treatment of 
partnership items). 
(10) Section 6305 (relating to collections of cer-
tain liabilities). 
(11) Sections 6314, 6315, 6316, and 6317 (re-
lating to payments of repealed taxes).
(12) Sections 6324, 6324A and 6324B (relat-
ing to liens for estate and gift taxes).