of this section the State or political subdivision may not 
impose.’’. 
(c) EFFECTIVE DATE OF SUBSECTION (a) AMEND-
MENTS.—The amendments made by subsection (a) shall 
apply with respect to the imposition, assessment, and col-
lection of taxes for taxable periods beginning on or after 
the first day of the first calendar year that begins after 
the date of the enactment of the Business Activity Tax 
Simplification Act of 2006. 
SEC. 103. JURISDICTIONAL STANDARD FOR STATE AND 
LOCAL NET INCOME TAXES AND OTHER BUSI-
NESS ACTIVITY TAXES. 
(a) IN GENERAL.—No taxing authority of a State 
shall have power to impose, assess, or collect a net income 
tax or other business activity tax on any person relating 
to such person’s activities in interstate commerce unless 
such person has a physical presence in the State during 
the taxable period with respect to which the tax is im-
posed. 
(b) REQUIREMENTS FOR PHYSICAL PRESENCE.—For 
the purposes of subsection (a), a person has a physical 
presence in a State only if such person’s business activities 
in the State include any of the following, collectively and 
on more than 21 days in the aggregate, during such per-
son’s taxable year: 
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(1) Being an individual physically in the State, 
or assigning one or more employees to be in the 
State, except that the following shall be excluded in 
determining whether such 21-day limit has been ex-
ceeded: 
(A) Activities in connection with a possible 
or an actual purchase of goods or services, for 
consumption by the person’s business. 
(B) Gathering news and covering events 
for print, broadcast, or other distribution 
through the media. 
(C) Meeting government officials for pur-
poses other than selling goods or services, for 
consumption by such government. 
(D) Merely attending educational or train-
ing conferences, seminars or other similar func-
tions. 
(E) Participating in charitable activities. 
(2) Using the services of an agent (excluding an 
employee) to establish or maintain the market in the 
State, if such agent does not perform business serv-
ices in the State for any other person during such 
taxable year. 
(3) The leasing or owning of tangible personal 
property or of real property in the State, except that 
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the following shall be excluded in determining wheth-
er such 21-day limit has been exceeded: 
(A) Tangible personal property located in 
the State for purposes of being assembled, man-
ufactured, processed, or tested by another per-
son for the benefit of the owner or lessee, or 
used to furnish a service to the owner or lessee 
by another person. 
(B) Marketing or promotional materials 
distributed in the State. 
(C) Any property to the extent used ancil-
lary to an activity excluded from the computa-
tion of the 21-day period based on paragraph 
(1) or (2). 
(c) TAXABLE PERIODS NOT CONSISTING
OF
A 
YEAR.—If the taxable period for which the tax is imposed 
is not a year, then any requirements expressed in days 
for establishing physical presence under this subtitle shall 
be adjusted pro rata accordingly. 
(d) EXCEPTIONS.— 
(1) DOMESTIC BUSINESS ENTITIES AND INDI-
VIDUALS
DOMICILED
IN, OR
RESIDENTS
OF, THE 
STATE.—Subsection (a) does not apply with respect 
to— 
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(A) a person (other than an individual) 
that is incorporated or formed under the laws 
of the State (or domiciled in the State) in which 
the tax is imposed; or 
(B) an individual who is domiciled in, or a 
resident of, the State in which the tax is im-
posed. 
(2) TAXATION OF PARTNERS AND SIMILAR PER-
SONS.—This section shall not be construed to modify 
or affect any State business activity tax liability of 
an owner or beneficiary of an entity that is a part-
nership, an S corporation (as defined in section 
1361 of the Internal Revenue Code of 1986 (26 
U.S.C. 1361)), a limited liability company, a trust, 
an estate, or any other similar entity, if the entity 
has a physical presence in the State in which the tax 
is imposed. 
(3) PRESERVATION OF AUTHORITY.—This sec-
tion shall not be construed to modify, affect, or su-
persede the authority of a State to bring an enforce-
ment action against a person or entity that may be 
engaged in an illegal activity, a sham transaction, or 
any perceived or actual abuse in its business activi-
ties if such enforcement action— 
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(A) is of a kind customarily used by the 
State; and 
(B) does not modify, affect, or supersede 
the operation of any provision of this subtitle or 
of any other Federal law. 
(4) CERTAIN ACTIVITIES.—With respect to the 
following, subsection (b) shall be read by sub-
stituting ‘‘at least one day’’ for ‘‘more than 21 days 
in the aggregate’’: 
(A) The sale within a State of tangible 
personal property, if delivery of the property 
originates and is completed within the State. 
(B) The performance of services that phys-
ically affect real property within a State. 
(5) EXCEPTION
RELATING
TO
CERTAIN
PER-
FORMANCES AND SPORTING EVENTS.—With respect 
to the taxation of the following, subsection (b) shall 
be read by substituting ‘‘at least one day’’ for ‘‘more 
than 21 days in the aggregate’’: 
(A) A live performance in a State, before 
a live audience of more than 100 individuals. 
(B) A live sporting event in a State before 
more than 100 spectators present at the event. 
(e) RULE OF CONSTRUCTION.—This section shall not 
be construed to modify, affect, or supersede the operation 
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of title I of the Act entitled ‘‘An Act relating to the power 
of the States to impose net income taxes on income derived 
from interstate commerce, and authorizing studies by con-
gressional committees of matters pertaining thereto’’, ap-
proved September 14, 1959 (15 U.S.C. 381 et seq.). 
SEC. 104. DEFINITIONS. 
The following definitions apply in this subtitle: 
(1) NET INCOME TAX.—The term ‘‘net income 
tax’’ has the meaning given that term for the pur-
poses of the Act entitled ‘‘An Act relating to the 
power of the States to impose net income taxes on 
income derived from interstate commerce, and au-
thorizing studies by congressional committees of 
matters pertaining thereto’’, approved September 
14, 1959 (15 U.S.C. 381 et seq.). 
(2) OTHER BUSINESS ACTIVITY TAX.— 
(A) The term ‘‘other business activity tax’’ 
means— 
(i) a tax imposed on or measured by 
gross receipts, gross income, or gross prof-
its; 
(ii) a business license tax; 
(iii) a business and occupation tax; 
(iv) a franchise tax; 
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(v) a single business tax or a capital 
stock tax; or 
(vi) any other tax imposed by a State 
on a business for the right to do business 
in the State or measured by the amount 
of, or economic results of, business or re-
lated activity conducted in the State. 
(B) The term ‘‘other business activity tax’’ 
does not include a sales tax, a use tax, or a 
similar tax, imposed as the result of the sale or 
acquisition of goods or services, whether or not 
denominated a tax imposed on the privilege of 
doing business. 
(3) STATE.—The term ‘‘State’’ means any of 
the several States, the District of Columbia, or any 
territory or possession of the United States, or any 
political subdivision of any of the foregoing. 
(4) TANGIBLE
PERSONAL
PROPERTY.—The 
term ‘‘tangible personal property’’ does not include 
computer software that is owned and licensed by the 
owner to another person. 
SEC. 105. EFFECTIVE DATE. 
Except as provided otherwise in this subtitle, this 
subtitle applies with respect to taxable periods beginning 
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on and after the first day of the first year that begins 
after the date of enactment of this Act. 
Subtitle B—Attorney 
Accountability 
SEC. 121. SHORT TITLE. 
This subtitle may be cited as the ‘‘Lawsuit Abuse Re-
duction Act of 2006’’. 
SEC. 122. ATTORNEY ACCOUNTABILITY. 
Rule 11(c) of the Federal Rules of Civil Procedure 
is amended— 
(1) by amending the first sentence to read as 
follows: ‘‘If a pleading, motion, or other paper is 
signed in violation of this rule, the court, upon mo-
tion or upon its own initiative, shall impose upon the 
attorney, law firm, or parties that have violated this 
subdivision or are responsible for the violation, an 
appropriate sanction, which may include an order to 
pay the other party or parties for the reasonable ex-
penses incurred as a direct result of the filing of the 
pleading, motion, or other paper, that is the subject 
of the violation, including a reasonable attorney’s 
fee.’’; 
(2) in paragraph (1)(A)— 
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(A) by striking ‘‘Rule 5’’ and all that fol-
lows through ‘‘corrected.’’ and inserting ‘‘Rule 
5.’’; and 
(B) by striking ‘‘the court may award’’ 
and inserting ‘‘the court shall award’’; and 
(3) in paragraph (2), by striking ‘‘shall be lim-
ited to what is sufficient’’ and all that follows 
through the end of the paragraph (including sub-
paragraphs (A) and (B)) and inserting ‘‘shall be suf-
ficient to deter repetition of such conduct or com-
parable conduct by others similarly situated, and to 
compensate the parties that were injured by such 
conduct. The sanction may consist of an order to 
pay to the party or parties the amount of the rea-
sonable expenses incurred as a direct result of the 
filing of the pleading, motion, or other paper that is 
the subject of the violation, including a reasonable 
attorney’s fee.’’. 
SEC. 123. APPLICABILITY OF RULE 11 TO STATE CASES AF-
FECTING INTERSTATE COMMERCE. 
In any civil action in State court, the court, upon mo-
tion, shall determine within 30 days after the filing of such 
motion whether the action substantially affects interstate 
commerce. Such court shall make such determination 
based on an assessment of the costs to the interstate econ-
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omy, including the loss of jobs, were the relief requested 
granted. If the court determines such action substantially 
affects interstate commerce, the provisions of Rule 11 of 
the Federal Rules of Civil Procedure shall apply to such 
action. 
SEC. 124. PREVENTION OF FORUM-SHOPPING. 
(a) IN GENERAL.—Subject to subsection (b), a per-
sonal injury claim filed in State or Federal court may be 
filed only in the State and, within that State, in the county 
(or if there is no State court in the county, the nearest 
county where a court of general jurisdiction is located) or 
Federal district in which— 
(1) the person bringing the claim, including an 
estate in the case of a decedent and a parent or 
guardian in the case of a minor or incompetent— 
(A) resides at the time of filing; or 
(B) resided at the time of the alleged in-
jury; 
(2) the alleged injury or circumstances giving 
rise to the personal injury claim allegedly occurred; 
(3) the defendant’s principal place of business 
is located, if the defendant is a corporation; or 
(4) the defendant resides, if the defendant is an 
individual. 
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(b) 
DETERMINATION
OF
MOST
APPROPRIATE 
FORUM.—If a person alleges that the injury or cir-
cumstances giving rise to the personal injury claim oc-
curred in more than one county (or Federal district), the 
trial court shall determine which State and county (or 
Federal district) is the most appropriate forum for the 
claim. If the court determines that another forum would 
be the most appropriate forum for a claim, the court shall 
dismiss the claim. Any otherwise applicable statute of limi-
tations shall be tolled beginning on the date the claim was 
filed and ending on the date the claim is dismissed under 
this subsection. 
(c) DEFINITIONS.—In this section: 
(1) The term ‘‘personal injury claim’’— 
(A) means a civil action brought under 
State law by any person to recover for a per-
son’s personal injury, illness, disease, death, 
mental or emotional injury, risk of disease, or 
other injury, or the costs of medical monitoring 
or surveillance (to the extent such claims are 
recognized under State law), including any de-
rivative action brought on behalf of any person 
on whose injury or risk of injury the action is 
based by any representative party, including a 
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