108TH CONGRESS 
2D SESSION 
H. R. 4520 
AN ACT 
To amend the Internal Revenue Code of 1986 to remove 
impediments in such Code and make our manufacturing, 
service, and high-technology businesses and workers more 
competitive and productive both at home and abroad. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘American Jobs Creation Act of 2004’’. 
(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 
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.—The table of contents of 
this Act is as follows: 
Sec. 1. Short title; etc. 
TITLE I—END SANCTIONS AND REDUCE CORPORATE TAX RATES 
FOR DOMESTIC MANUFACTURING AND SMALL CORPORATIONS 
Sec. 101. Repeal of exclusion for extraterritorial income. 
Sec. 102. Reduced corporate income tax rate for domestic production activities 
income. 
Sec. 103. Reduced corporate income tax rate for small corporations. 
TITLE II—JOB CREATION TAX INCENTIVES FOR 
MANUFACTURERS, SMALL BUSINESSES, AND FARMERS 
Subtitle A—Small Business Expensing 
Sec. 201. 2-year extension of increased expensing for small business. 
Subtitle B—Depreciation 
Sec. 211. Recovery period for depreciation of certain leasehold improvements 
and restaurant property. 
Sec. 212. Modification of depreciation allowance for aircraft. 
Sec. 213. Modification of placed in service rule for bonus depreciation property. 
Subtitle C—S Corporation Reform and Simplification 
Sec. 221. Members of family treated as 1 shareholder. 
Sec. 222. Increase in number of eligible shareholders to 100. 
Sec. 223. Expansion of bank S corporation eligible shareholders to include 
IRAs. 
Sec. 224. Disregard of unexercised powers of appointment in determining po-
tential current beneficiaries of ESBT. 
Sec. 225. Transfer of suspended losses incident to divorce, etc.
Sec. 226. Use of passive activity loss and at-risk amounts by qualified sub-
chapter S trust income beneficiaries. 
Sec. 227. Exclusion of investment securities income from passive income test 
for bank S corporations. 
Sec. 228. Treatment of bank director shares. 
Sec. 229. Relief from inadvertently invalid qualified subchapter S subsidiary 
elections and terminations. 
Sec. 230. Information returns for qualified subchapter S subsidiaries. 
Sec. 231. Repayment of loans for qualifying employer securities. 
Subtitle D—Alternative Minimum Tax Relief 
Sec. 241. Foreign tax credit under alternative minimum tax. 
Sec. 242. Expansion of exemption from alternative minimum tax for small cor-
porations. 
Sec. 243. Income averaging for farmers not to increase alternative minimum 
tax. 
Subtitle E—Restructuring of Incentives for Alcohol Fuels, Etc. 
Sec. 251. Reduced rates of tax on gasohol replaced with excise tax credit; re-
peal of other alcohol-based fuel incentives; etc. 
Sec. 252. Alcohol fuel subsidies borne by general fund. 
Subtitle F—Stock Options and Employee Stock Purchase Plan Stock Options 
Sec. 261. Exclusion of incentive stock options and employee stock purchase 
plan stock options from wages. 
Subtitle G—Incentives to Reinvest Foreign Earnings in United States 
Sec. 271. Incentives to reinvest foreign earnings in United States. 
Subtitle H—Other Incentive Provisions 
Sec. 281. Special rules for livestock sold on account of weather-related condi-
tions. 
Sec. 282. Payment of dividends on stock of cooperatives without reducing pa-
tronage dividends. 
Sec. 283. Capital gain treatment under section 631(b) to apply to outright 
sales by landowners. 
Sec. 284. Distributions from publicly traded partnerships treated as qualifying 
income of regulated investment companies. 
Sec. 285. Improvements related to real estate investment trusts. 
Sec. 286. Treatment of certain dividends of regulated investment companies. 
Sec. 287. Taxation of certain settlement funds. 
Sec. 288. Expansion of human clinical trials qualifying for orphan drug credit. 
Sec. 289. Simplification of excise tax imposed on bows and arrows. 
Sec. 290. Repeal of excise tax on fishing tackle boxes. 
Sec. 291. Sonar devices suitable for finding fish. 
Sec. 292. Income tax credit to distilled spirits wholesalers for cost of carrying 
Federal excise taxes on bottled distilled spirits. 
Sec. 293. Suspension of occupational taxes relating to distilled spirits, wine, 
and beer. 
Sec. 294. Modification of unrelated business income limitation on investment in 
certain small business investment companies.
Sec. 295. Election to determine taxable income from certain international ship-
ping activities using per ton rate. 
Sec. 296. Charitable contribution deduction for certain expenses incurred in 
support of Native Alaskan subsistence whaling. 
TITLE III—TAX REFORM AND SIMPLIFICATION FOR UNITED 
STATES BUSINESSES 
Sec. 301. Interest expense allocation rules. 
Sec. 302. Recharacterization of overall domestic loss. 
Sec. 303. Reduction to 2 foreign tax credit baskets. 
Sec. 304. Look-thru rules to apply to dividends from noncontrolled section 902 
corporations. 
Sec. 305. Attribution of stock ownership through partnerships to apply in de-
termining section 902 and 960 credits. 
Sec. 306. Clarification of treatment of certain transfers of intangible property. 
Sec. 307. United States property not to include certain assets of controlled for-
eign corporation. 
Sec. 308. Election not to use average exchange rate for foreign tax paid other 
than in functional currency. 
Sec. 309. Repeal of withholding tax on dividends from certain foreign corpora-
tions. 
Sec. 310. Provide equal treatment for interest paid by foreign partnerships and 
foreign corporations. 
Sec. 311. Look-thru treatment of payments between related controlled foreign 
corporations under foreign personal holding company income 
rules. 
Sec. 312. Look-thru treatment for sales of partnership interests. 
Sec. 313. Repeal of foreign personal holding company rules and foreign invest-
ment company rules. 
Sec. 314. Determination of foreign personal holding company income with re-
spect to transactions in commodities. 
Sec. 315. Modifications to treatment of aircraft leasing and shipping income. 
Sec. 316. Modification of exceptions under subpart F for active financing. 
TITLE IV—EXTENSION OF CERTAIN EXPIRING PROVISIONS 
Sec. 401. Allowance of nonrefundable personal credits against regular and min-
imum tax liability. 
Sec. 402. Extension of research credit. 
Sec. 403. Extension of credit for electricity produced from certain renewable re-
sources. 
Sec. 404. Indian employment tax credit. 
Sec. 405. Work opportunity credit. 
Sec. 406. Welfare-to-work credit. 
Sec. 407. Certain expenses of elementary and secondary school teachers. 
Sec. 408. Extension of accelerated depreciation benefit for property on Indian 
reservations. 
Sec. 409. Charitable contributions of computer technology and equipment used 
for educational purposes. 
Sec. 410. Expensing of environmental remediation costs. 
Sec. 411. Availability of medical savings accounts. 
Sec. 412. Taxable income limit on percentage depletion for oil and natural gas 
produced from marginal properties. 
Sec. 413. Qualified zone academy bonds. 
Sec. 414. District of Columbia.
Sec. 415. Extension of certain New York Liberty Zone bond financing. 
Sec. 416. Disclosures relating to terrorist activities. 
Sec. 417. Disclosure of return information relating to student loans. 
Sec. 418. Cover over of tax on distilled spirits. 
Sec. 419. Joint review of strategic plans and budget for the Internal Revenue 
Service. 
Sec. 420. Parity in the application of certain limits to mental health benefits. 
Sec. 421. Combined employment tax reporting project. 
Sec. 422. Clean-fuel vehicles. 
TITLE V—DEDUCTION OF STATE AND LOCAL GENERAL SALES 
TAXES 
Sec. 501. Deduction of State and local general sales taxes in lieu of State and 
local income taxes. 
TITLE VI—REVENUE PROVISIONS 
Subtitle A—Provisions to Reduce Tax Avoidance Through Individual and 
Corporate Expatriation 
Sec. 601. Tax treatment of expatriated entities and their foreign parents. 
Sec. 602. Excise tax on stock compensation of insiders in expatriated corpora-
tions. 
Sec. 603. Reinsurance of United States risks in foreign jurisdictions. 
Sec. 604. Revision of tax rules on expatriation of individuals. 
Sec. 605. Reporting of taxable mergers and acquisitions. 
Sec. 606. Studies. 
Subtitle B—Provisions Relating to Tax Shelters 
PART I—TAXPAYER-RELATED PROVISIONS 
Sec. 611. Penalty for failing to disclose reportable transactions. 
Sec. 612. Accuracy-related penalty for listed transactions, other reportable 
transactions having a significant tax avoidance purpose, etc. 
Sec. 613. Tax shelter exception to confidentiality privileges relating to taxpayer 
communications. 
Sec. 614. Statute of limitations for taxable years for which required listed 
transactions not reported. 
Sec. 615. Disclosure of reportable transactions. 
Sec. 616. Failure to furnish information regarding reportable transactions. 
Sec. 617. Modification of penalty for failure to maintain lists of investors. 
Sec. 618. Penalty on promoters of tax shelters. 
Sec. 619. Modifications of substantial understatement penalty for nonreportable 
transactions. 
Sec. 620. Modification of actions to enjoin certain conduct related to tax shel-
ters and reportable transactions. 
Sec. 621. Penalty on failure to report interests in foreign financial accounts. 
Sec. 622. Regulation of individuals practicing before the Department of the 
Treasury. 
PART II—OTHER PROVISIONS 
Sec. 631. Treatment of stripped interests in bond and preferred stock funds, 
etc.