II 
Calendar No. 591 
108TH CONGRESS 
2D SESSION 
H. R. 4520 
IN THE SENATE OF THE UNITED STATES 
JUNE 18, 2004 
Received 
JUNE 21, 2004 
Read twice and placed on the calendar 
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,
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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.
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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.
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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.
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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.
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Sec. 632. Minimum holding period for foreign tax credit on withholding taxes 
on income other than dividends. 
Sec. 633. Disallowance of certain partnership loss transfers. 
Sec. 634. No reduction of basis under section 734 in stock held by partnership 
in corporate partner. 
Sec. 635. Repeal of special rules for FASITs. 
Sec. 636. Limitation on transfer of built-in losses on REMIC residuals. 
Sec. 637. Clarification of banking business for purposes of determining invest-
ment of earnings in United States property. 
Sec. 638. Alternative tax for certain small insurance companies. 
Sec. 639. Denial of deduction for interest on underpayments attributable to 
nondisclosed reportable transactions. 
Sec. 640. Clarification of rules for payment of estimated tax for certain deemed 
asset sales. 
Sec. 641. Recognition of gain from the sale of a principal residence acquired 
in a like-kind exchange within 5 years of sale. 
Sec. 642. Prevention of mismatching of interest and original issue discount de-
ductions and income inclusions in transactions with related for-
eign persons. 
Sec. 643. Exclusion from gross income for interest on overpayments of income 
tax by individuals. 
Sec. 644. Deposits made to suspend running of interest on potential underpay-
ments. 
Sec. 645. Partial payment of tax liability in installment agreements. 
Sec. 646. Affirmation of consolidated return regulation authority. 
PART III—LEASING 
Sec. 647. Reform of tax treatment of certain leasing arrangements. 
Sec. 648. Limitation on deductions allocable to property used by governments 
or other tax-exempt entities. 
Sec. 649. Effective date. 
Subtitle C—Reduction of Fuel Tax Evasion 
Sec. 651. Exemption from certain excise taxes for mobile machinery. 
Sec. 652. Taxation of aviation-grade kerosene. 
Sec. 653. Dye injection equipment. 
Sec. 654. Authority to inspect on-site records. 
Sec. 655. Registration of pipeline or vessel operators required for exemption of 
bulk transfers to registered terminals or refineries. 
Sec. 656. Display of registration. 
Sec. 657. Penalties for failure to register and failure to report. 
Sec. 658. Collection from customs bond where importer not registered. 
Sec. 659. Modifications of tax on use of certain vehicles. 
Sec. 660. Modification of ultimate vendor refund claims with respect to farm-
ing. 
Sec. 661. Dedication of revenues from certain penalties to the Highway Trust 
Fund. 
Sec. 662. Taxable fuel refunds for certain ultimate vendors. 
Sec. 663. Two-party exchanges. 
Sec. 664. Simplification of tax on tires. 
Subtitle D—Nonqualified Deferred Compensation Plans 
Sec. 671. Treatment of nonqualified deferred compensation plans.
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Subtitle E—Other Revenue Provisions 
Sec. 681. Qualified tax collection contracts. 
Sec. 682. Treatment of charitable contributions of patents and similar property. 
Sec. 683. Increased reporting for noncash charitable contributions. 
Sec. 684. Donations of motor vehicles, boats, and aircraft. 
Sec. 685. Extension of amortization of intangibles to sports franchises. 
Sec. 686. Modification of continuing levy on payments to Federal venders. 
Sec. 687. Modification of straddle rules. 
Sec. 688. Addition of vaccines against hepatitis A to list of taxable vaccines. 
Sec. 689. Addition of vaccines against influenza to list of taxable vaccines. 
Sec. 690. Extension of IRS user fees. 
Sec. 691. COBRA fees. 
TITLE VII—MARKET REFORM FOR TOBACCO GROWERS 
Sec. 701. Short title. 
Sec. 702. Effective date. 
Subtitle A—Termination of Federal Tobacco Quota and Price Support 
Programs 
Sec. 711. Termination of tobacco quota program and related provisions. 
Sec. 712. Termination of tobacco price support program and related provisions. 
Sec. 713. Continuation of liability and no net loss assessments to prevent losses 
on price support loans. 
Subtitle B—Transitional Payments to Tobacco Quota Holders and Active 
Producers of Tobacco 
Sec. 721. Definitions of active tobacco producer and quota holder. 
Sec. 722. Payments to tobacco quota holders. 
Sec. 723. Transition payments for active producers of quota tobacco. 
Sec. 724. Resolution of disputes. 
Sec. 725. Source of funds for payments. 
TITLE VIII—TRADE PROVISIONS 
Sec. 801. Ceiling fans. 
Sec. 802. Certain steam generators, and certain reactor vessel heads, used in 
nuclear facilities.
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TITLE I—END SANCTIONS AND 
REDUCE 
CORPORATE 
TAX 
RATES FOR DOMESTIC MANU-
FACTURING AND SMALL COR-
PORATIONS 
SEC. 101. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL 
INCOME. 
(a) IN GENERAL.—Section 114 is hereby repealed. 
(b) CONFORMING AMENDMENTS.— 
(1) Subpart E of part III of subchapter N of 
chapter 1 (relating to qualifying foreign trade in-
come) is hereby repealed. 
(2) The table of subparts for such part III is 
amended by striking the item relating to subpart E. 
(3) The table of sections for part III of sub-
chapter B of chapter 1 is amended by striking the 
item relating to section 114. 
(4) 
The 
second 
sentence 
of 
section 
56(g)(4)(B)(i) is amended by striking ‘‘114 or’’. 
(5) Section 275(a) is amended— 
(A) by inserting ‘‘or’’ at the end of para-
graph (4)(A), by striking ‘‘or’’ at the end of 
paragraph (4)(B) and inserting a period, and 
by striking subparagraph (C), and 
(B) by striking the last sentence.
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(6) Paragraph (3) of section 864(e) is amend-
ed— 
(A) by striking: 
‘‘(3) TAX-EXEMPT
ASSETS
NOT
TAKEN
INTO 
ACCOUNT.— 
‘‘(A) IN GENERAL.—For purposes of’’; and 
inserting: 
‘‘(3) TAX-EXEMPT
ASSETS
NOT
TAKEN
INTO 
ACCOUNT.—For purposes of’’, and 
(B) by striking subparagraph (B). 
(7) Section 903 is amended by striking ‘‘114, 
164(a),’’ and inserting ‘‘164(a)’’. 
(8) Section 999(c)(1) is amended by striking 
‘‘941(a)(5),’’. 
(c) EFFECTIVE DATE.—Except as provided in sub-
section (d), the amendments made by this section shall 
apply to transactions after December 31, 2004. 
(d) TRANSITIONAL RULE FOR 2005 AND 2006.— 
(1) IN GENERAL.—In the case of transactions 
during 2005 or 2006, the amount includible in gross 
income by reason of the amendments made by this 
section shall not exceed the applicable percentage of 
the amount which would have been so included but 
for this subsection.
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(2) APPLICABLE PERCENTAGE.—For purposes 
of paragraph (1), the applicable percentage shall be 
as follows: 
(A) For 2005, the applicable percentage 
shall be 20 percent. 
(B) For 2006, the applicable percentage 
shall be 40 percent. 
(e) REVOCATION OF ELECTION TO BE TREATED AS 
DOMESTIC CORPORATION.—If, during the 1-year period 
beginning on the date of the enactment of this Act, a cor-
poration for which an election is in effect under section 
943(e) of the Internal Revenue Code of 1986 revokes such 
election, no gain or loss shall be recognized with respect 
to property treated as transferred under clause (ii) of sec-
tion 943(e)(4)(B) of such Code to the extent such prop-
erty— 
(1) was treated as transferred under clause (i) 
thereof, or 
(2) was acquired during a taxable year to which 
such election applies and before May 1, 2003, in the 
ordinary course of its trade or business. 
The Secretary of the Treasury (or such Secretary’s dele-
gate) may prescribe such regulations as may be necessary 
to prevent the abuse of the purposes of this subsection.
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(f) BINDING CONTRACTS.—The amendments made 
by this section shall not apply to any transaction in the 
ordinary course of a trade or business which occurs pursu-
ant to a binding contract— 
(1) which is between the taxpayer and a person 
who is not a related person (as defined in section 
943(b)(3) of such Code, as in effect on the day be-
fore the date of the enactment of this Act), and 
(2) which is in effect on January 14, 2002, and 
at all times thereafter. 
For purposes of this subsection, a binding contract shall 
include a purchase option, renewal option, or replacement 
option which is included in such contract and which is en-
forceable against the seller or lessor. 
SEC. 102. REDUCED CORPORATE INCOME TAX RATE FOR 
DOMESTIC 
PRODUCTION 
ACTIVITIES 
IN-
COME. 
(a) LIMITATION ON TAX ON QUALIFIED PRODUCTION 
ACTIVITIES INCOME.—Section 11 is amended by redesig-
nating subsections (c) and (d) as subsections (d) and (e), 
respectively, and by inserting after subsection (b) the fol-
lowing new subsection: 
‘‘(c) LIMITATION ON TAX ON QUALIFIED PRODUC-
TION ACTIVITIES INCOME.—
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‘‘(1) IN GENERAL.—If a corporation has quali-
fied production activities income for any taxable 
year, the tax imposed by this section shall not exceed 
the sum of— 
‘‘(A) a tax computed at the rates and in 
the manner as if this subsection had not been 
enacted on the taxable income reduced by the 
amount of qualified production activities in-
come, plus 
‘‘(B) a tax equal to 32 percent (34 percent 
in the case of taxable years beginning before 
January 1, 2007) of the qualified production 
activities income (or, if less, taxable income). 
‘‘(2) QUALIFIED
PRODUCTION
ACTIVITIES
IN-
COME.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
production activities income’ for any taxable 
year means an amount equal to the excess (if 
any) of— 
‘‘(i) the taxpayer’s domestic produc-
tion gross receipts for such taxable year, 
over 
‘‘(ii) the sum of— 
‘‘(I) the cost of goods sold that 
are allocable to such receipts,
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‘‘(II) other deductions, expenses, 
or losses directly allocable to such re-
ceipts, and 
‘‘(III) a ratable portion of other 
deductions, expenses, and losses that 
are not directly allocable to such re-
ceipts or another class of income. 
‘‘(B) ALLOCATION
METHOD.—The Sec-
retary shall prescribe rules for the proper allo-
cation of items of income, deduction, expense, 
and loss for purposes of determining income at-
tributable to domestic production activities. 
‘‘(3) 
DOMESTIC
PRODUCTION
GROSS
RE-
CEIPTS.—For purposes of this subsection, the term 
‘domestic production gross receipts’ means the gross 
receipts of the taxpayer which are derived from— 
‘‘(A) any lease, rental, license, sale, ex-
change, or other disposition of— 
‘‘(i) qualifying production property 
which was manufactured, produced, grown, 
or extracted in whole or in significant part 
by the taxpayer within the United States, 
or 
‘‘(ii) any qualified film produced by 
the taxpayer, or
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‘‘(B) construction, engineering, or architec-
tural services performed in the United States 
for construction projects in the United States. 
‘‘(4) QUALIFYING
PRODUCTION
PROPERTY.— 
For purposes of this subsection, the term ‘qualifying 
production property’ means— 
‘‘(A) tangible personal property, 
‘‘(B) any computer software, and 
‘‘(C) any property described in section 
168(f)(4). 
‘‘(5) QUALIFIED FILM.—For purposes of this 
subsection— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
film’ means any property described in section 
168(f)(3) if not less than 50 percent of the 
total compensation relating to the production of 
such property is compensation for services per-
formed in the United States by actors, produc-
tion personnel, directors, and producers. 
‘‘(B) EXCEPTION.—Such term does not in-
clude property with respect to which records are 
required to be maintained under section 2257 
of title 18, United States Code. 
‘‘(6) RELATED PERSONS.—For purposes of this 
subsection—
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‘‘(A) IN
GENERAL.—The term ‘domestic 
production gross receipts’ shall not include any 
gross receipts of the taxpayer derived from 
property leased, licensed, or rented by the tax-
payer for use by any related person. 
‘‘(B) RELATED PERSON.—For purposes of 
subparagraph (A), a person shall be treated as 
related to another person if such persons are 
treated as a single employer under subsection 
(a) or (b) of section 52 or subsection (m) or (o) 
of section 414, except that determinations 
under subsections (a) and (b) of section 52 
shall be made without regard to section 
1563(b).’’. 
(b) SPECIAL RULE RELATING
TO ELECTION TO 
TREAT CUTTING OF TIMBER AS A SALE OR EXCHANGE.— 
In the case of a corporation, any election under section 
631(a) of the Internal Revenue Code of 1986 made for 
a taxable year ending on or before the date of the enact-
ment of this Act may be revoked by the taxpayer for any 
taxable year ending after such date. For purposes of deter-
mining whether such taxpayer may make a further elec-
tion under such section, such election (and any revocation 
under this section) shall not be taken into account.
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(c) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2004. 
SEC. 103. REDUCED CORPORATE INCOME TAX RATE FOR 
SMALL CORPORATIONS. 
(a) IN GENERAL.—Subsection (b) of section 11 (re-
lating to tax imposed on corporations) is amended by re-
designating paragraph (2) as paragraph (6) and by strik-
ing paragraph (1) and inserting the following new para-
graphs: 
‘‘(1) FOR TAXABLE YEARS BEGINNING AFTER 
2012.—In the case of taxable years beginning after 
2012, the amount of the tax imposed by subsection 
(a) shall be determined in accordance with the fol-
lowing table: 
‘‘If taxable income is: 
The tax is: 
Not over $50,000 ..........................
15% of taxable income. 
Over 
$50,000 
but 
not 
over 
$75,000.
$7,500, plus 25% of the excess over 
$50,000. 
Over 
$75,000 
but 
not 
over 
$20,000,000.
$13,750, plus 32% of the excess over 
$75,000. 
Over $20,000,000 ..........................
$6,389,750, plus 35% of the excess 
over $20,000,000. 
‘‘(2) FOR TAXABLE YEARS BEGINNING IN 2011 
OR 2012.—In the case of taxable years beginning in 
2011 or 2012, the amount of the tax imposed by 
subsection (a) shall be determined in accordance 
with the following table: 
‘‘If taxable income is: 
The tax is: 
Not over $50,000 ..........................
15% of taxable income.
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‘‘If taxable income is: 
The tax is: 
Over 
$50,000 
but 
not 
over 
$75,000.
$7,500, plus 25% of the excess over 
$50,000. 
Over 
$75,000 
but 
not 
over 
$5,000,000.
$13,750, plus 32% of the excess over 
$75,000. 
Over $5,000,000 but not over 
$10,000,000.
$1,589,750, plus 34% of the excess 
over $5,000,000. 
Over $10,000,000 ..........................
$3,289,750, plus 35% of the excess 
over $10,000,000. 
‘‘(3) FOR TAXABLE YEARS BEGINNING IN 2008, 
2009, OR 2010.—In the case of taxable years begin-
ning in 2008, 2009, or 2010, the amount of the tax 
imposed by subsection (a) shall be determined in ac-
cordance with the following table: 
‘‘If taxable income is: 
The tax is: 
Not over $50,000 ..........................
15% of taxable income. 
Over 
$50,000 
but 
not 
over 
$75,000.
$7,500, plus 25% of the excess over 
$50,000. 
Over 
$75,000 
but 
not 
over 
$1,000,000.
$13,750, plus 32% of the excess over 
$75,000. 
Over $1,000,000 but not over 
$10,000,000.
$309,750, plus 34% of the excess 
over $1,000,000. 
Over $10,000,000 ..........................
$3,369,750, plus 35% of the excess 
over $10,000,000. 
‘‘(4) FOR TAXABLE YEARS BEGINNING IN 2005, 
2006, OR 2007.—In the case of taxable years begin-
ning in 2005, 2006, or 2007, the amount of the tax 
imposed by subsection (a) shall be determined in ac-
cordance with the following table: 
‘‘If taxable income is: 
The tax is: 
Not over $50,000 ..........................
15% of taxable income. 
Over 
$50,000 
but 
not 
over 
$75,000.
$7,500, plus 25% of the excess over 
$50,000. 
Over 
$75,000 
but 
not 
over 
$1,000,000.
$13,750, plus 33% of the excess over 
$75,000. 
Over $1,000,000 but not over 
$10,000,000.
$319,000, plus 34% of the excess 
over $1,000,000. 
Over $10,000,000 ..........................
$3,379,000, plus 35% of the excess 
over $10,000,000.
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‘‘(5) PHASEOUT OF LOWER RATES FOR CER-
TAIN TAXPAYERS.— 
‘‘(A) GENERAL RULE FOR YEARS BEFORE 
2013.— 
‘‘(i) IN GENERAL.—In the case of tax-
able years beginning before 2013 with re-
spect to a corporation which has taxable 
income in excess of the applicable amount 
for any taxable year, the amount of tax de-
termined under paragraph (1), (2), (3) or 
(4) for such taxable year shall be increased 
by the lesser of (I) 5 percent of such ex-
cess, or (II) the maximum increase 
amount. 
‘‘(ii) MAXIMUM INCREASE AMOUNT.— 
For purposes of clause (i)— 
‘‘In the case of any taxable year
beginning during: 
The applicable 
amount is: 
The maximum 
increase amount 
is: 
2005, 2006, or 2007 ..........................
$1,000,000 
$21,000
2008, 2009, or 2010 ..........................
$1,000,000 
$30,250
2011 or 2012 ......................................
$5,000,000 
$110,250. 
‘‘(B) HIGHER INCOME CORPORATIONS.—In 
the case of a corporation which has taxable in-
come in excess of $20,000,000 ($15,000,000 in 
the case of taxable years beginning before 
2013), the amount of the tax determined under 
the foregoing provisions of this subsection shall
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be increased by an additional amount equal to 
the lesser of (i) 3 percent of such excess, or (ii) 
$610,250 ($100,000 in the case of taxable 
years beginning before 2013).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 904(b)(3)(D)(ii) is amended to read 
as follows: 
‘‘(ii) in the case of a corporation, sec-
tion 1201(a) applies to such taxable 
year.’’. 
(2) Section 1201(a) is amended by striking 
‘‘the last 2 sentences of section 11(b)(1)’’ and in-
serting ‘‘section 11(b)(5)’’. 
(3) Section 1561(a) is amended— 
(A) by striking ‘‘the last 2 sentences of 
section 
11(b)(1)’’ 
and 
inserting 
‘‘section 
11(b)(5)’’, and 
(B) by striking ‘‘such last 2 sentences’’ 
and inserting ‘‘section 11(b)(5)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2004.
HR 4520 PCS 
(c) TRANSFERS TO HIGHWAY TRUST FUND.— 
(1) Paragraph (4) of section 9503(b) is amend-
ed by adding ‘‘or’’ at the end of subparagraph (C), 
by striking the comma at the end of subparagraph 
(D) and inserting a period, and by striking subpara-
graphs (E) and (F). 
(2) Paragraph (4) of section 9503(b), as 
amended by paragraph (1), is further amended by 
adding ‘‘or’’ at the end of subparagraph (B), by 
striking the comma at the end of subparagraph (C) 
and inserting a period, and by striking subparagraph 
(D). 
(d) CONFORMING AMENDMENTS.— 
(1) Subsection (c) of section 40 is amended to 
read as follows: 
‘‘(c) COORDINATION
WITH
EXCISE
TAX
BENE-
FITS.—The amount of the credit determined under this 
section with respect to any alcohol shall, under regulations 
prescribed by the Secretary, be properly reduced to take 
into account the benefit provided with respect to such alco-
hol under section 6427(f).’’ 
(2) Subparagraph (B) of section 40(d)(4) is 
amended by striking ‘‘under section 4041(k) or 
4081(c)’’ and inserting ‘‘under section 6427(f)’’. 
(e) EFFECTIVE DATES.—