mined without regard to any section 197 
intangible within the meaning of section 
197(d)), and 
‘‘(ii) more than half of the contributed 
capital of the partnership is attributable to 
contributions of property by one or more 
persons in exchange for interests in the 
partnership which (in the hands of such 
persons) constitute property held for the 
production of income. 
‘‘(B) SPECIAL RULES FOR DETERMINING 
IF PROPERTY HELD FOR THE PRODUCTION OF 
INCOME.—Except as otherwise provided by the 
Secretary, for purposes of determining whether 
any interest in a partnership constitutes prop-
erty held for the production of income under 
subparagraph (A)(ii)— 
‘‘(i) any election under subsection (e) 
or (f) of section 475 shall be disregarded, 
and 
‘‘(ii) paragraph (5)(B) shall not apply. 
‘‘(C) ANTIABUSE
RULES.—The Secretary 
may issue regulations or other guidance which 
prevent the avoidance of the purposes of sub-
paragraph (A), including regulations or other 
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guidance which treat convertible and contingent 
debt (and other debt having the attributes of 
equity) as a capital interest in the partnership. 
‘‘(D) CONTROLLED
GROUPS
OF
ENTI-
TIES.— 
‘‘(i) IN GENERAL.—In the case of a 
controlled group of entities, if an interest 
in the partnership received in exchange for 
a contribution to the capital of the part-
nership by any member of such controlled 
group would (in the hands of such mem-
ber) constitute property not held for the 
production of income, then any interest in 
such partnership held by any member of 
such group shall be treated for purposes of 
subparagraph (A) as constituting (in the 
hands of such member) property not held 
for the production of income. 
‘‘(ii) CONTROLLED GROUP OF ENTI-
TIES.—For purposes of clause (i), the term 
‘controlled group of entities’ means a con-
trolled group of corporations as defined in 
section 1563(a)(1), applied without regard 
to subsections (a)(4) and (b)(2) of section 
1563. A partnership or any other entity 
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(other than a corporation) shall be treated 
as a member of a controlled group of enti-
ties if such entity is controlled (within the 
meaning of section 954(d)(3)) by members 
of such group (including any entity treated 
as a member of such group by reason of 
this sentence). 
‘‘(4) SPECIFIED
ASSET.—The term ‘specified 
asset’ means securities (as defined in section 
475(c)(2) without regard to the last sentence there-
of), real estate held for rental or investment, inter-
ests in partnerships, commodities (as defined in sec-
tion 475(e)(2)), cash or cash equivalents, or options 
or derivative contracts with respect to any of the 
foregoing. 
‘‘(5) RELATED PERSONS.— 
‘‘(A) IN
GENERAL.—A person shall be 
treated as related to another person if the rela-
tionship between such persons is described in 
section 267(b) or 707(b). 
‘‘(B) ATTRIBUTION
OF
PARTNER
SERV-
ICES.—Any service described in paragraph (2) 
which is provided by a partner of a partnership 
shall be treated as also provided by such part-
nership. 
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‘‘(d) EXCEPTION
FOR CERTAIN CAPITAL INTER-
ESTS.— 
‘‘(1) IN GENERAL.—In the case of any portion 
of an investment services partnership interest which 
is a qualified capital interest, all items of gain and 
loss (and any dividends) which are allocated to such 
qualified capital interest shall not be taken into ac-
count under subsection (a) if— 
‘‘(A) allocations of items are made by the 
partnership to such qualified capital interest in 
the same manner as such allocations are made 
to other qualified capital interests held by part-
ners who do not provide any services described 
in subsection (c)(2) and who are not related to 
the partner holding the qualified capital inter-
est, and 
‘‘(B) the allocations made to such other in-
terests are significant compared to the alloca-
tions made to such qualified capital interest. 
‘‘(2) AUTHORITY TO PROVIDE EXCEPTIONS TO 
ALLOCATION
REQUIREMENTS.—To the extent pro-
vided by the Secretary in regulations or other guid-
ance— 
‘‘(A) ALLOCATIONS TO PORTION OF QUALI-
FIED CAPITAL INTEREST.—Paragraph (1) may 
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be applied separately with respect to a portion 
of a qualified capital interest. 
‘‘(B) NO OR INSIGNIFICANT ALLOCATIONS 
TO NONSERVICE PROVIDERS.—In any case in 
which the requirements of paragraph (1)(B) are 
not satisfied, items of gain and loss (and any 
dividends) shall not be taken into account under 
subsection (a) to the extent that such items are 
properly allocable under such regulations or 
other guidance to qualified capital interests. 
‘‘(C) ALLOCATIONS
TO
SERVICE
PRO-
VIDERS’ QUALIFIED CAPITAL INTERESTS WHICH 
ARE LESS THAN OTHER ALLOCATIONS.—Alloca-
tions shall not be treated as failing to meet the 
requirement of paragraph (1)(A) merely be-
cause the allocations to the qualified capital in-
terest represent a lower return than the alloca-
tions made to the other qualified capital inter-
ests referred to in such paragraph. 
‘‘(3) SPECIAL RULE FOR CHANGES IN SERVICES 
AND CAPITAL CONTRIBUTIONS.—In the case of an 
interest in a partnership which was not an invest-
ment services partnership interest and which, by 
reason of a change in the services with respect to as-
sets held (directly or indirectly) by the partnership 
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or by reason of a change in the capital contributions 
to such partnership, becomes an investment services 
partnership interest, the qualified capital interest of 
the holder of such partnership interest immediately 
after such change shall not, for purposes of this sub-
section, be less than the fair market value of such 
interest 
(determined 
immediately 
before 
such 
change). 
‘‘(4) SPECIAL
RULE
FOR
TIERED
PARTNER-
SHIPS.—Except as otherwise provided by the Sec-
retary, in the case of tiered partnerships, all items 
which are allocated in a manner which meets the re-
quirements of paragraph (1) to qualified capital in-
terests in a lower-tier partnership shall retain such 
character to the extent allocated on the basis of 
qualified capital interests in any upper-tier partner-
ship. 
‘‘(5) 
EXCEPTION
FOR
NO-SELF-CHARGED 
CARRY
AND
MANAGEMENT
FEE
PROVISIONS.—Ex-
cept as otherwise provided by the Secretary, an in-
terest shall not fail to be treated as satisfying the 
requirement of paragraph (1)(A) merely because the 
allocations made by the partnership to such interest 
do not reflect the cost of services described in sub-
section (c)(2) which are provided (directly or indi-
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rectly) to the partnership by the holder of such in-
terest (or a related person). 
‘‘(6) SPECIAL RULE FOR DISPOSITIONS.—In the 
case of any investment services partnership interest 
any portion of which is a qualified capital interest, 
subsection (b) shall not apply to so much of any 
gain or loss as bears the same proportion to the en-
tire amount of such gain or loss as— 
‘‘(A) the distributive share of gain or loss 
that would have been allocated to the qualified 
capital interest (consistent with the require-
ments of paragraph (1)) if the partnership had 
sold all of its assets at fair market value imme-
diately before the disposition, bears to 
‘‘(B) the distributive share of gain or loss 
that would have been so allocated to the invest-
ment services partnership interest of which such 
qualified capital interest is a part. 
‘‘(7) QUALIFIED CAPITAL INTEREST.—For pur-
poses of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
capital interest’ means so much of a partner’s 
interest in the capital of the partnership as is 
attributable to— 
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‘‘(i) the fair market value of any 
money or other property contributed to the 
partnership in exchange for such interest 
(determined without regard to section 
752(a)), 
‘‘(ii) any amounts which have been in-
cluded in gross income under section 83 
with respect to the transfer of such inter-
est, and 
‘‘(iii) the excess (if any) of— 
‘‘(I) any items of income and 
gain taken into account under section 
702 with respect to such interest, over 
‘‘(II) any items of deduction and 
loss so taken into account. 
‘‘(B) ADJUSTMENT TO QUALIFIED CAPITAL 
INTEREST.— 
‘‘(i) DISTRIBUTIONS
AND
LOSSES.— 
The qualified capital interest shall be re-
duced by distributions from the partner-
ship with respect to such interest and by 
the excess (if any) of the amount described 
in subparagraph (A)(iii)(II) over the 
amount 
described 
in 
subparagraph 
(A)(iii)(I). 
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‘‘(ii) SPECIAL RULE FOR CONTRIBU-
TIONS OF PROPERTY.—In the case of any 
contribution of property described in sub-
paragraph (A)(i) with respect to which the 
fair market value of such property is not 
equal to the adjusted basis of such prop-
erty immediately before such contribution, 
proper adjustments shall be made to the 
qualified capital interest to take into ac-
count such difference consistent with such 
regulations or other guidance as the Sec-
retary may provide. 
‘‘(C) TECHNICAL
TERMINATIONS, 
ETC., 
DISREGARDED.—No increase or decrease in the 
qualified capital interest of any partner shall re-
sult from a termination, merger, consolidation, 
or division described in section 708, or any 
similar transaction. 
‘‘(8) TREATMENT OF CERTAIN LOANS.— 
‘‘(A) PROCEEDS OF PARTNERSHIP LOANS 
NOT TREATED AS QUALIFIED CAPITAL INTER-
EST OF SERVICE PROVIDING PARTNERS.—For 
purposes of this subsection, an investment serv-
ices partnership interest shall not be treated as 
a qualified capital interest to the extent that 
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such interest is acquired in connection with the 
proceeds of any loan or other advance made or 
guaranteed, directly or indirectly, by any other 
partner or the partnership (or any person re-
lated to any such other partner or the partner-
ship). The preceding sentence shall not apply to 
the extent the loan or other advance is repaid 
before January 1, 2013 unless such repayment 
is made with the proceeds of a loan or other ad-
vance described in the preceding sentence. 
‘‘(B) REDUCTION
IN
ALLOCATIONS
TO 
QUALIFIED
CAPITAL
INTERESTS
FOR
LOANS 
FROM
NONSERVICE-PROVIDING
PARTNERS
TO 
THE PARTNERSHIP.—For purposes of this sub-
section, any loan or other advance to the part-
nership made or guaranteed, directly or indi-
rectly, by a partner not providing services de-
scribed in subsection (c)(2) to the partnership 
(or any person related to such partner) shall be 
taken into account in determining the qualified 
capital interests of the partners in the partner-
ship. 
‘‘(e) OTHER INCOME
AND GAIN
IN CONNECTION 
WITH INVESTMENT MANAGEMENT SERVICES.— 
‘‘(1) IN GENERAL.—If— 
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‘‘(A) a person performs (directly or indi-
rectly) investment management services for any 
investment entity, 
‘‘(B) such person holds (directly or indi-
rectly) a disqualified interest with respect to 
such entity, and 
‘‘(C) the value of such interest (or pay-
ments thereunder) is substantially related to 
the amount of income or gain (whether or not 
realized) from the assets with respect to which 
the investment management services are per-
formed, any income or gain with respect to such 
interest shall be treated as ordinary income. 
Rules similar to the rules of subsections (a)(5) 
and (d) shall apply for purposes of this sub-
section. 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) DISQUALIFIED INTEREST.— 
‘‘(i) IN
GENERAL.—The term ‘dis-
qualified interest’ means, with respect to 
any investment entity— 
‘‘(I) any interest in such entity 
other than indebtedness, 
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‘‘(II) convertible or contingent 
debt of such entity, 
‘‘(III) any option or other right 
to acquire property described in sub-
clause (I) or (II), and 
‘‘(IV) any derivative instrument 
entered into (directly or indirectly) 
with such entity or any investor in 
such entity. 
‘‘(ii) EXCEPTIONS.—Such term shall 
not include— 
‘‘(I) a partnership interest, 
‘‘(II) except as provided by the 
Secretary, any interest in a taxable 
corporation, and 
‘‘(III) except as provided by the 
Secretary, stock in an S corporation. 
‘‘(B) TAXABLE CORPORATION.—The term 
‘taxable corporation’ means— 
‘‘(i) a domestic C corporation, or 
‘‘(ii) a foreign corporation substan-
tially all of the income of which is— 
‘‘(I) effectively connected with 
the conduct of a trade or business in 
the United States, or 
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‘‘(II) subject to a comprehensive 
foreign income tax (as defined in sec-
tion 457A(d)(2)). 
‘‘(C) INVESTMENT
MANAGEMENT
SERV-
ICES.—The term ‘investment management serv-
ices’ means a substantial quantity of any of the 
services described in subsection (c)(2). 
‘‘(D) INVESTMENT ENTITY.—The term ‘in-
vestment entity’ means any entity which, if it 
were a partnership, would be an investment 
partnership. 
‘‘(f) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as is necessary or ap-
propriate to carry out the purposes of this section, includ-
ing regulations or other guidance to— 
‘‘(1) provide modifications to the application of 
this section (including treating related persons as 
not related to one another) to the extent such modi-
fication is consistent with the purposes of this sec-
tion, and 
‘‘(2) coordinate this section with the other pro-
visions of this title. 
‘‘(g) CROSS REFERENCE.—For 40 percent penalty on 
certain underpayments due to the avoidance of this sec-
tion, see section 6662.’’. 
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(b) APPLICATION OF SECTION 751 TO INDIRECT DIS-
POSITIONS OF INVESTMENT SERVICES PARTNERSHIP IN-
TERESTS.— 
(1) IN
GENERAL.—Subsection (a) of section 
751 of the Internal Revenue Code of 1986 is amend-
ed by striking ‘‘or’’ at the end of paragraph (1), by 
inserting ‘‘or’’ at the end of paragraph (2), and by 
inserting after paragraph (2) the following new 
paragraph: 
‘‘(3) investment services partnership interests 
held by the partnership,’’. 
(2) CERTAIN
DISTRIBUTIONS
TREATED
AS 
SALES OR EXCHANGES.—Subparagraph (A) of sec-
tion 751(b)(1) of the Internal Revenue Code of 1986 
is amended by striking ‘‘or’’ at the end of clause (i), 
by inserting ‘‘or’’ at the end of clause (ii), and by 
inserting after clause (ii) the following new clause: 
‘‘(iii) investment services partnership 
interests held by the partnership,’’. 
(3) APPLICATION OF SPECIAL RULES IN THE 
CASE OF TIERED PARTNERSHIPS.—Subsection (f) of 
section 751 of the Internal Revenue Code of 1986 
is amended by striking ‘‘or’’ at the end of paragraph 
(1), by inserting ‘‘or’’ at the end of paragraph (2), 
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and by inserting after paragraph (2) the following 
new paragraph: 
‘‘(3) investment services partnership interests 
held by the partnership,’’. 
(4) INVESTMENT SERVICES PARTNERSHIP IN-
TERESTS; QUALIFIED CAPITAL INTERESTS.—Section 
751 of the Internal Revenue Code of 1986 is amend-
ed by adding at the end the following new sub-
section: 
‘‘(g) INVESTMENT SERVICES PARTNERSHIP INTER-
ESTS.—For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘investment serv-
ices partnership interest’ has the meaning given 
such term by section 710(c). 
‘‘(2) ADJUSTMENTS
FOR
QUALIFIED
CAPITAL 
INTERESTS.—The amount to which subsection (a) 
applies by reason of paragraph (3) thereof shall not 
include so much of such amount as is attributable 
to any portion of the investment services partnership 
interest which is a qualified capital interest (deter-
mined under rules similar to the rules of section 
710(d)). 
‘‘(3) RECOGNITION OF GAINS.—Any gain with 
respect to which subsection (a) applies by reason of 
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paragraph (3) thereof shall be recognized notwith-
standing any other provision of this title. 
‘‘(4) 
COORDINATION
WITH
INVENTORY 
ITEMS.—An investment services partnership interest 
held by the partnership shall not be treated as an 
inventory item of the partnership. 
‘‘(5) PREVENTION
OF
DOUBLE
COUNTING.— 
Under regulations or other guidance prescribed by 
the Secretary, subsection (a)(3) shall not apply with 
respect to any amount to which section 710 ap-
plies.’’. 
(c) TREATMENT
FOR
PURPOSES
OF
SECTION 
7704.—Subsection (d) of section 7704 of the Internal 
Revenue Code of 1986 is amended by adding at the end 
the following new paragraph: 
‘‘(6) INCOME FROM CERTAIN CARRIED INTER-
ESTS NOT QUALIFIED.— 
‘‘(A) IN GENERAL.—Specified carried in-
terest income shall not be treated as qualifying 
income. 
‘‘(B) SPECIFIED
CARRIED
INTEREST
IN-
COME.—For purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘speci-
fied carried interest income’ means— 
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‘‘(I) any item of income or gain 
allocated to an investment services 
partnership interest (as defined in 
section 710(c)) held by the partner-
ship, 
‘‘(II) any gain on the disposition 
of an investment services partnership 
interest (as so defined) or a partner-
ship interest to which (in the hands of 
the partnership) section 751 applies, 
and 
‘‘(III) any income or gain taken 
into account by the partnership under 
subsection (b)(4) or (e) of section 
710. 
‘‘(ii) EXCEPTION FOR QUALIFIED CAP-
ITAL
INTERESTS.—A rule similar to the 
rule of section 710(d) shall apply for pur-
poses of clause (i). 
‘‘(C) COORDINATION WITH OTHER PROVI-
SIONS.—Subparagraph (A) shall not apply to 
any item described in paragraph (1)(E) (or so 
much of paragraph (1)(F) as relates to para-
graph (1)(E)). 
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‘‘(D) SPECIAL RULES FOR CERTAIN PART-
NERSHIPS.— 
‘‘(i) CERTAIN PARTNERSHIPS OWNED 
BY REAL ESTATE INVESTMENT TRUSTS.— 
Subparagraph (A) shall not apply in the 
case of a partnership which meets each of 
the following requirements: 
‘‘(I) Such partnership is treated 
as publicly traded under this section 
solely by reason of interests in such 
partnership being convertible into in-
terests in a real estate investment 
trust which is publicly traded. 
‘‘(II) Fifty percent or more of 
the capital and profits interests of 
such partnership are owned, directly 
or indirectly, at all times during the 
taxable year by such real estate in-
vestment trust (determined with the 
application of section 267(c)). 
‘‘(III) Such partnership meets 
the requirements of paragraphs (2), 
(3), and (4) of section 856(c). 
‘‘(ii) CERTAIN
PARTNERSHIPS
OWN-
ING OTHER PUBLICLY TRADED PARTNER-
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SHIPS.—Subparagraph (A) shall not apply 
in the case of a partnership which meets 
each of the following requirements: 
‘‘(I) Substantially all of the as-
sets of such partnership consist of in-
terests in one or more publicly traded 
partnerships (determined without re-
gard to subsection (b)(2)). 
‘‘(II) Substantially all of the in-
come of such partnership is ordinary 
income or section 1231 gain (as de-
fined in section 1231(a)(3)). 
‘‘(E) 
TRANSITIONAL
RULE.—Subpara-
graph (A) shall not apply to any taxable year 
of the partnership beginning before the date 
which is 10 years after January 1, 2013.’’. 
(d) IMPOSITION
OF
PENALTY
ON
UNDERPAY-
MENTS.— 
(1) IN
GENERAL.—Subsection (b) of section 
6662 of the Internal Revenue Code of 1986 is 
amended by inserting after paragraph (7) the fol-
lowing new paragraph: 
‘‘(8) The application of section 710(e) or the 
regulations or other guidance prescribed under sec-
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srobinson on DSK4SPTVN1PROD with BILLS
tion 710(h) to prevent the avoidance of the purposes 
of section 710.’’. 
(2) AMOUNT OF PENALTY.— 
(A) IN GENERAL.—Section 6662 of the In-
ternal Revenue Code of 1986 is amended by 
adding at the end the following new subsection: 
‘‘(k) INCREASE IN PENALTY IN CASE OF PROPERTY 
TRANSFERRED FOR INVESTMENT MANAGEMENT SERV-
ICES.—In the case of any portion of an underpayment to 
which this section applies by reason of subsection (b)(8), 
subsection (a) shall be applied with respect to such portion 
by substituting ‘40 percent’ for ‘20 percent’.’’. 
(B) CONFORMING AMENDMENT.—Subpara-
graph (B) of section 6662A(e)(2) is amended 
by striking ‘‘or (i)’’ and inserting ‘‘, (i), or (k)’’. 
(3) SPECIAL RULES FOR APPLICATION OF REA-
SONABLE CAUSE EXCEPTION.—Subsection (c) of sec-
tion 6664 is amended— 
(A) by redesignating paragraphs (3) and 
(4) as paragraphs (4) and (5), respectively; 
(B) by striking ‘‘paragraph (3)’’ in para-
graph (5)(A), as so redesignated, and inserting 
‘‘paragraph (4)’’; and 
(C) by inserting after paragraph (2) the 
following new paragraph: 
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‘‘(3) SPECIAL RULE FOR UNDERPAYMENTS AT-
TRIBUTABLE TO INVESTMENT MANAGEMENT SERV-
ICES.— 
‘‘(A) IN
GENERAL.—Paragraph (1) shall 
not apply to any portion of an underpayment to 
which section 6662 applies by reason of sub-
section (b)(8) unless— 
‘‘(i) the relevant facts affecting the 
tax treatment of the item are adequately 
disclosed, 
‘‘(ii) there is or was substantial au-
thority for such treatment, and 
‘‘(iii) the taxpayer reasonably believed 
that such treatment was more likely than 
not the proper treatment. 
‘‘(B) RULES
RELATING
TO
REASONABLE 
BELIEF.—Rules similar to the rules of sub-
section (d)(3) shall apply for purposes of sub-
paragraph (A)(iii).’’. 
(e) INCOME AND LOSS FROM INVESTMENT SERVICES 
PARTNERSHIP INTERESTS TAKEN INTO ACCOUNT IN DE-
TERMINING NET EARNINGS FROM SELF-EMPLOYMENT.— 
(1) INTERNAL REVENUE CODE.— 
(A) IN GENERAL.—Section 1402(a) of the 
Internal Revenue Code of 1986 is amended by 
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srobinson on DSK4SPTVN1PROD with BILLS
striking ‘‘and’’ at the end of paragraph (16), by 
striking the period at the end of paragraph (17) 
and inserting ‘‘; and’’, and by inserting after 
paragraph (17) the following new paragraph: 
‘‘(18) notwithstanding the preceding provisions 
of this subsection, in the case of any individual en-
gaged in the trade or business of providing services 
described in section 710(c)(2) with respect to any 
entity, investment services partnership income or 
loss (as defined in subsection (m)) of such individual 
with respect to such entity shall be taken into ac-
count in determining the net earnings from self-em-
ployment of such individual.’’. 
(B) INVESTMENT SERVICES PARTNERSHIP 
INCOME OR LOSS.—Section 1402 of the Inter-
nal Revenue Code is amended by adding at the 
end the following new subsection: 
‘‘(m) INVESTMENT SERVICES PARTNERSHIP INCOME 
OR LOSS.—For purposes of subsection (a)— 
‘‘(1) IN GENERAL.—The term ‘investment serv-
ices partnership income or loss’ means, with respect 
to any investment services partnership interest (as 
defined in section 710(c)), the net of— 
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‘‘(A) the amounts treated as ordinary in-
come or ordinary loss under subsections (b) and 
(e) of section 710 with respect to such interest, 
‘‘(B) all items of income, gain, loss, and 
deduction allocated to such interest, and 
‘‘(C) the amounts treated as realized from 
the sale or exchange of property other than a 
capital asset under section 751 with respect to 
such interest. 
‘‘(2) EXCEPTION FOR QUALIFIED CAPITAL IN-
TERESTS.—A rule similar to the rule of section 
710(d) shall apply for purposes of applying para-
graph (1)(B)(ii).’’. 
(2) SOCIAL SECURITY ACT.—Section 211(a) of 
the Social Security Act is amended by striking 
‘‘and’’ at the end of paragraph (15), by striking the 
period at the end of paragraph (16) and inserting ‘‘; 
and’’, and by inserting after paragraph (16) the fol-
lowing new paragraph: 
‘‘(17) Notwithstanding the preceding provisions 
of this subsection, in the case of any individual en-
gaged in the trade or business of providing services 
described in section 710(c)(2) of the Internal Rev-
enue Code of 1986 with respect to any entity, invest-
ment services partnership income or loss (as defined 
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in section 1402(m) of such Code) shall be taken into 
account in determining the net earnings from self- 
employment of such individual.’’. 
(f) CONFORMING AMENDMENTS.— 
(1) Subsection (d) of section 731 of the Inter-
nal Revenue Code of 1986 is amended by inserting 
‘‘section 710(b)(4) (relating to distributions of part-
nership property),’’ after ‘‘to the extent otherwise 
provided by’’. 
(2) Section 741 of the Internal Revenue Code 
of 1986 is amended by inserting ‘‘or section 710 (re-
lating to special rules for partners providing invest-
ment management services to partnerships)’’ before 
the period at the end. 
(3) The table of sections for part I of sub-
chapter K of chapter 1 of the Internal Revenue Code 
of 1986 is amended by adding at the end the fol-
lowing new item: 
‘‘Sec. 710. Special rules for partners providing investment management services 
to partnerships.’’. 
(g) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years ending after 
December 31, 2012. 
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(2) PARTNERSHIP TAXABLE YEARS WHICH IN-
CLUDE
EFFECTIVE
DATE.—In applying section 
710(a) of the Internal Revenue Code of 1986 (as 
added by this section) in the case of any partnership 
taxable year which includes January 1, 2013, the 
amount of the net income referred to in such section 
shall be treated as being the lesser of the net income 
for the entire partnership taxable year or the net in-
come determined by only taking into account items 
attributable to the portion of the partnership taxable 
year which is after such date. 
(3) DISPOSITIONS
OF
PARTNERSHIP
INTER-
ESTS.— 
(A) IN GENERAL.—Section 710(b) of such 
Code (as added by this section) shall apply to 
dispositions and distributions after December 
31, 2012. 
(B) INDIRECT DISPOSITIONS.—The amend-
ments made by subsection (b) shall apply to 
transactions after December 31, 2012. 
(4) OTHER INCOME AND GAIN IN CONNECTION 
WITH INVESTMENT MANAGEMENT SERVICES.—Sec-
tion 710(e) of such Code (as added by this section) 
shall take effect on January 1, 2013. 
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Subtitle C—Dual Capacity 
Taxpayers 
SEC. 221. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 
APPLICABLE TO DUAL CAPACITY TAXPAYERS. 
(a) IN GENERAL.—Section 901 of the Internal Rev-
enue Code of 1986 (relating to credit for taxes of foreign 
countries and of possessions of the United States) is 
amended by redesignating subsection (n) as subsection (o) 
and by inserting after subsection (m) the following new 
subsection: 
‘‘(n) SPECIAL RULES RELATING TO DUAL CAPACITY 
TAXPAYERS.— 
‘‘(1) GENERAL
RULE.—Notwithstanding any 
other provision of this chapter, any amount paid or 
accrued by a dual capacity taxpayer or any member 
of the worldwide affiliated group of which such dual 
capacity taxpayer is also a member to any foreign 
country or to any possession of the United States 
for any period shall not be considered a tax to the 
extent such amount exceeds the amount (determined 
in accordance with regulations) which would have 
been required to be paid if the taxpayer were not a 
dual capacity taxpayer. 
‘‘(2) DUAL
CAPACITY
TAXPAYER.—For pur-
poses of this subsection, the term ‘dual capacity tax-
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payer’ means, with respect to any foreign country or 
possession of the United States, a person who— 
‘‘(A) is subject to a levy of such country or 
possession, and 
‘‘(B) receives (or will receive) directly or 
indirectly a specific economic benefit (as deter-
mined in accordance with regulations) from 
such country or possession. 
‘‘(3) REGULATIONS.—The Secretary may issue 
such regulations or other guidance as is necessary or 
appropriate to carry out the purposes of this sub-
section.’’. 
(b) CONTRARY TREATY OBLIGATIONS UPHELD.— 
The amendments made by this section shall not apply to 
the extent contrary to any treaty obligation of the United 
States. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts that, if such amounts 
were an amount of tax paid or accrued, would be consid-
ered paid or accrued in taxable years beginning after De-
cember 31, 2012. 
SEC. 222. SEPARATE BASKET TREATMENT TAXES PAID ON 
FOREIGN OIL AND GAS INCOME. 
(a) SEPARATE BASKET FOR FOREIGN TAX CRED-
IT.—Paragraph (1) of section 904(d) of the Internal Rev-
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enue Code of 1986 is amended by striking ‘‘and’’ at the 
end of subparagraph (A), by striking the period at the 
end of subparagraph (B) and inserting ‘‘, and’’, and by 
adding at the end the following: 
‘‘(C) combined foreign oil and gas income 
(as defined in section 907(b)(1)).’’. 
(b) COORDINATION.—Section 904(d)(2) of such Code 
is amended by redesignating subparagraphs (J) and (K) 
as subparagraphs (K) and (L) and by inserting after sub-
paragraph (I) the following: 
‘‘(J) COORDINATION WITH COMBINED FOR-
EIGN OIL AND GAS INCOME.—For purposes of 
this section, passive category income and gen-
eral category income shall not include combined 
foreign oil and gas income (as defined in section 
907(b)(1)).’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 907(a) is hereby repealed. 
(2) Section 907(c)(4) is hereby repealed. 
(3) Section 907(f) is hereby repealed. 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2012. 
(2) TRANSITIONAL RULES.— 
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(A) CARRYOVERS.—Any unused foreign oil 
and gas taxes which under section 907(f) of 
such Code (as in effect before the amendment 
made by subsection (c)(3)) would have been al-
lowable as a carryover to the taxpayer’s first 
taxable year beginning after December 31, 
2012 (without regard to the limitation of para-
graph (2) of such section 907(f) for first tax-
able year) shall be allowed as carryovers under 
section 904(c) of such Code in the same man-
ner as if such taxes were unused taxes under 
such section 904(c) with respect to foreign oil 
and gas extraction income. 
(B) LOSSES.—The amendment made by 
subsection (c)(2) shall not apply to foreign oil 
and gas extraction losses arising in taxable 
years beginning on or before the date of the en-
actment of this Act. 
Subtitle D—Close Exclusion of 
Foreign-Earned Income Loophole 
SEC. 231. REPEAL OF FOREIGN EARNED INCOME EXCLU-
SION. 
(a) IN GENERAL.—Subsection (a) of section 911 of 
the Internal Revenue Code of 1986 is amended by striking 
‘‘for any taxable year—’’ and all that follows through the 
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end and inserting ‘‘for any taxable year the housing cost 
amount of such individual.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Subsection (f) of section 86 of such Code is 
amended by inserting ‘‘and’’ at the end of paragraph 
(2), by striking ‘‘, and’’ at the end of paragraph (3) 
and inserting a period, and by striking paragraph 
(4). 
(2) Section 1401(a) of such Code is amended 
by striking paragraph (11). 
(3)(A) Clause (i) of section 1411(a)(1)(B) of 
such Code is amended by striking ‘‘modified’’. 
(B) Section 1411 of such Code is amended 
by striking subsection (d) and by redesignating 
subsection (e) as subsection (d). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
Subtitle E—Close S Corporation 
Loophole 
SEC. 241. EMPLOYMENT TAX TREATMENT OF PROFES-
SIONAL SERVICE BUSINESSES. 
(a) IN GENERAL.—Section 1402 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subsection: 
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‘‘(m) SPECIAL RULES FOR PROFESSIONAL SERVICE 
BUSINESSES.— 
‘‘(1) SHAREHOLDERS PROVIDING SERVICES TO 
SPECIFIED S CORPORATIONS.— 
‘‘(A) IN GENERAL.—In the case of an ap-
plicable shareholder who provides substantial 
services with respect to a professional service 
business referred to in subparagraph (C) of a 
specified S corporation— 
‘‘(i) such shareholder shall be treated 
as engaged in the trade or business of such 
professional service business with respect 
to items of income or loss described in sec-
tion 1366 which are attributable to such 
business, and 
‘‘(ii) such shareholder’s net earnings 
from self-employment shall include such 
shareholder’s pro rata share of such items 
of income or loss, except that in computing 
such pro rata share of such items the ex-
ceptions provided in subsection (a) shall 
apply. 
‘‘(B) TREATMENT OF FAMILY MEMBERS.— 
Except as otherwise provided by the Secretary, 
the applicable shareholder’s pro rata share of 
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items referred to in subparagraph (A) shall be 
increased by the pro rata share of such items 
of each member of such applicable shareholder’s 
family 
(within 
the 
meaning 
of 
section 
318(a)(1)) who does not provide substantial 
services with respect to such professional serv-
ice business. 
‘‘(C) SPECIFIED
S
CORPORATION.—For 
purposes of this subsection, the term ‘specified 
S corporation’ means— 
‘‘(i) any S corporation which is a 
partner in a partnership which is engaged 
in a professional service business if sub-
stantially all of the activities of such S cor-
poration are performed in connection with 
such partnership, and 
‘‘(ii) any other S corporation which is 
engaged in a professional service business 
if 75 percent or more of the gross income 
of such business is attributable to service 
of 3 or fewer shareholders of such corpora-
tion. 
‘‘(D) APPLICABLE
SHAREHOLDER.—For 
purposes of this paragraph, the term ‘applicable 
shareholder’ means any shareholder whose 
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modified adjusted gross income for the taxable 
year exceeds— 
‘‘(i) in the case of a shareholder mak-
ing a joint return under section 6013 or a 
surviving spouse (as defined in section 
2(a)), $250,000, 
‘‘(ii) in the case of a married share-
holder (as defined in section 7703) filing a 
separate return, half of the dollar amount 
determined under clause (i), and 
‘‘(iii) in any other case, $200,000. 
‘‘(2) PARTNERS.— 
‘‘(A) IN
GENERAL.—In the case of any 
partnership which is engaged in a professional 
service business, subsection (a)(13) shall not 
apply to any applicable partner who provides 
substantial services with respect to such profes-
sional service business. 
‘‘(B) APPLICABLE
PARTNER.—For pur-
poses of this paragraph, the term ‘applicable 
partner’ means any partner whose modified ad-
justed gross income for the taxable year ex-
ceeds— 
‘‘(i) in the case of a partner making 
a joint return under section 6013 or a sur-
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viving spouse (as defined in section 2(a)), 
$250,000, 
‘‘(ii) in the case of a married partner 
(as defined in section 7703) filing a sepa-
rate return, half of the dollar amount de-
termined under clause (i), and 
‘‘(iii) in any other case, $200,000. 
‘‘(3) PROFESSIONAL SERVICE BUSINESS.—For 
purposes of this subsection, the term ‘professional 
service business’ means any trade or business (or 
portion thereof) providing services in the fields of 
health, law, lobbying, engineering, architecture, ac-
counting, actuarial science, performing arts, con-
sulting, athletics, investment advice or management, 
or brokerage services. 
‘‘(4) MODIFIED
ADJUSTED
GROSS
INCOME.— 
For purposes of this subsection, the term ‘modified 
adjusted gross income’ means adjusted gross in-
come— 
‘‘(A) determined without regard to any de-
duction allowed under section 164(f), and 
‘‘(B) increased by the amount excluded 
from gross income under section 911(a)(1). 
‘‘(5) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary or ap-
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propriate to carry out the purposes of this sub-
section, including regulations which prevent the 
avoidance of the purposes of this subsection through 
tiered entities or otherwise. 
‘‘(6) CROSS REFERENCE.—For employment tax 
treatment of wages paid to shareholders of S cor-
porations, see subtitle C.’’. 
(b) CONFORMING AMENDMENT.—Section 211 of the 
Social Security Act is amended by adding at the end the 
following new subsection: 
‘‘(l) SPECIAL RULES FOR PROFESSIONAL SERVICE 
BUSINESSES.— 
‘‘(1) SHAREHOLDERS PROVIDING SERVICES TO 
SPECIFIED S CORPORATIONS.— 
‘‘(A) IN GENERAL.—In the case of an ap-
plicable shareholder who provides substantial 
services with respect to a professional service 
business referred to in subparagraph (C) of a 
specified S corporation— 
‘‘(i) such shareholder shall be treated 
as engaged in the trade or business of such 
professional service business with respect 
to items of income or loss described in sec-
tion 1366 of the Internal Revenue Code of 
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1986 which are attributable to such busi-
ness, and 
‘‘(ii) such shareholder’s net earnings 
from self-employment shall include such 
shareholder’s pro rata share of such items 
of income or loss, except that in computing 
such pro rata share of such items the ex-
ceptions provided in subsection (a) shall 
apply. 
‘‘(B) TREATMENT OF FAMILY MEMBERS.— 
Except as otherwise provided by the Secretary 
of the Treasury, the applicable shareholder’s 
pro rata share of items referred to in subpara-
graph (A) shall be increased by the pro rata 
share of such items of each member of such ap-
plicable shareholder’s family (within the mean-
ing of section 318(a)(1) of the Internal Revenue 
Code of 1986) who does not provide substantial 
services with respect to such professional serv-
ice business. 
‘‘(C) SPECIFIED
S
CORPORATION.—For 
purposes of this subsection, the term ‘specified 
S corporation’ means— 
‘‘(i) any S corporation (as defined in 
section 1361(a) of the Internal Revenue 
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Code of 1986) which is a partner in a 
partnership which is engaged in a profes-
sional service business if substantially all 
of the activities of such S corporation are 
performed in connection with such partner-
ship, and 
‘‘(ii) any other S corporation (as so 
defined) which is engaged in a professional 
service business if 75 percent or more of 
the gross income of such business is attrib-
utable to service of 3 or fewer shareholders 
of such corporation. 
‘‘(D) APPLICABLE
SHAREHOLDER.—For 
purposes of this paragraph, the term ‘applicable 
shareholder’ means any shareholder whose 
modified adjusted gross income for the taxable 
year exceeds— 
‘‘(i) in the case of a shareholder mak-
ing a joint return under section 6013 of 
the Internal Revenue Code of 1986 or a 
surviving spouse (as defined in section 2(a) 
of such Code), $250,000, 
‘‘(ii) in the case of a married share-
holder (as defined in section 7703 of such 
Code) filing a separate return, half of the 
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dollar amount determined under clause (i), 
and 
‘‘(iii) in any other case, $200,000. 
‘‘(2) PARTNERS.— 
‘‘(A) IN
GENERAL.—In the case of any 
partnership which is engaged in a professional 
service business, subsection (a)(12) shall not 
apply to any applicable partner who provides 
substantial services with respect to such profes-
sional service business. 
‘‘(B) APPLICABLE
PARTNER.—For pur-
poses of this paragraph, the term ‘applicable 
partner’ means any partner whose modified ad-
justed gross income for the taxable year ex-
ceeds— 
‘‘(i) in the case of a partner making 
a joint return under section 6013 of the 
Internal Revenue Code of 1986 or a sur-
viving spouse (as defined in section 2(a) of 
such Code), $250,000, 
‘‘(ii) in the case of a married partner 
(as defined in section 7703 of such Code) 
filing a separate return, half of the dollar 
amount determined under clause (i), and 
‘‘(iii) in any other case, $200,000. 
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‘‘(3) PROFESSIONAL SERVICE BUSINESS.—For 
purposes of this subsection, the term ‘professional 
service business’ means any trade or business (or 
portion thereof) providing services in the fields of 
health, law, lobbying, engineering, architecture, ac-
counting, actuarial science, performing arts, con-
sulting, athletics, investment advice or management, 
or brokerage services. 
‘‘(4) MODIFIED
ADJUSTED
GROSS
INCOME.— 
For purposes of this subsection, the term ‘modified 
adjusted gross income’ means adjusted gross income 
as determined under section 62 of the Internal Rev-
enue Code of 1986— 
‘‘(A) determined without regard to any de-
duction allowed under section 164(f) of such 
Code, and 
‘‘(B) increased by the amount excluded 
from gross income under section 911(a)(1) of 
such Code.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2012. 
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Subtitle F—Limitation on Mortgage 
Interest 
Deduction 
With 
Re-
spect to Boats 
SEC. 251. MORTGAGE INTEREST DEDUCTION ALLOWED 
WITH RESPECT TO BOATS ONLY IF BOAT IS 
USED AS THE PRINCIPAL RESIDENCE OF THE 
TAXPAYER. 
(a) 
IN
GENERAL.—Subclause 
(ii) 
of 
section 
163(h)(4)(A) of the Internal Revenue Code of 1986 is 
amended by inserting ‘‘(other than a boat)’’ after ‘‘1 other 
residence of the taxpayer’’. 
(b) EFFECTIVE DATE.— 
(1) IN
GENERAL.—The amendment made by 
this section shall apply to indebtedness incurred 
after the date of the enactment of this Act. 
(2) SPECIAL RULE FOR REFINANCINGS.—For 
purposes of this subsection, indebtedness resulting 
from the refinancing of indebtedness shall be treated 
as incurred on the date the refinanced indebtedness 
was incurred (taking into account the application of 
this paragraph in the case of multiple refinancings) 
but only to the extent the indebtedness resulting 
from such refinancing does not exceed the refi-
nanced indebtedness. 
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TITLE III—ENDING CORPORATE 
SUBSIDIES 
Subtitle A—End Fossil Fuel 
Subsidies 
SEC. 301. TERMINATION OF VARIOUS TAX EXPENDITURES 
RELATING TO FOSSIL FUELS. 
(a) IN GENERAL.—Subchapter C of chapter 90 of the 
Internal Revenue Code of 1986 is amended by adding at 
the end the following new section: 
‘‘SEC. 7875. TERMINATION OF CERTAIN PROVISIONS RELAT-
ING TO FOSSIL FUEL INCENTIVES. 
‘‘(a) IN GENERAL.—The following provisions shall 
not apply to taxable years beginning after the date of the 
enactment of the Balancing Act: 
‘‘(1) Section 43 (relating to enhanced oil recov-
ery credit). 
‘‘(2) Section 45I (relating to credit for pro-
ducing oil and natural gas from marginal wells). 
‘‘(3) Section 45K (relating to credit for pro-
ducing fuel from a nonconventional source). 
‘‘(4) 
Section 
193 
(relating 
to 
tertiary 
injectants). 
‘‘(5) Section 199(d)(9) (relating to special rule 
for taxpayers with oil related qualified production 
activities income). 
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‘‘(6) Section 461(i)(2) (relating to special rule 
for spudding of oil or natural gas wells). 
‘‘(7) Section 469(c)(3) (relating to working in-
terests in oil and natural gas property). 
‘‘(8) Section 613A (relating to limitations on 
percentage depletion in case of oil and natural gas 
wells). 
‘‘(9) Section 617 (relating to deduction and re-
capture of certain mining exploration expenditures). 
‘‘(10) Section 7704(d)(1)(E) (relating to quali-
fying income). 
‘‘(b) PROVISIONS RELATING
TO PROPERTY.—The 
following provisions shall not apply to property placed in 
service after the date of the enactment of the Balancing 
Act: 
‘‘(1) Subparagraphs (C)(iii) and (E)(viii) of 
section 168(e)(3) (relating to classification of certain 
property). 
‘‘(2) Section 169 (relating to amortization of 
pollution control facilities) with respect to any at-
mospheric pollution control facility. 
‘‘(3) Section 179C (relating to election to ex-
pense certain refineries). 
‘‘(c) PROVISIONS RELATING
TO COSTS
AND EX-
PENSES.—The following provisions shall not apply to costs 
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or expenses paid or incurred after the date of the enact-
ment of the Balancing Act: 
‘‘(1) Section 179B (relating to deduction for 
capital costs incurred in complying with Environ-
mental Protection Agency sulfur regulations). 
‘‘(2) Section 198 (relating to expensing of envi-
ronmental remediation costs). 
‘‘(3) Section 263(c) (relating to intangible drill-
ing and development costs) with respect to costs in 
the case of oil and natural gas wells. 
‘‘(4) Section 468 (relating to special rules for 
mining and solid waste reclamation and closing 
costs). 
‘‘(d) 5-YEAR CARRYBACK FOR MARGINAL OIL AND 
NATURAL GAS WELL PRODUCTION CREDIT.—Section 
39(a)(3) (relating to 5-year carryback for marginal oil and 
natural gas well production credit) shall not apply to cred-
its determined in taxable years beginning after the date 
of the enactment of the Balancing Act. 
‘‘(e) CREDIT
FOR CARBON DIOXIDE SEQUESTRA-
TION.—Section 45Q (relating to credit for carbon dioxide 
sequestration) shall not apply to carbon dioxide captured 
after the date of the enactment of the Balancing Act. 
‘‘(f) ALLOCATED CREDITS.—No new credits shall be 
certified under section 48A (relating to qualifying ad-
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vanced coal project credit) or section 48B (relating to 
qualifying gasification project credit) after the date of the 
enactment of the Balancing Act. 
‘‘(g) ARBITRAGE BONDS.—Section 148(b)(4) (relat-
ing to safe harbor for prepaid natural gas) shall not apply 
to obligations issued after the date of the enactment of 
the Balancing Act.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subchapter C of chapter 90 is amended by adding 
at the end the following new item: 
‘‘Sec. 7875. Termination of certain provisions.’’. 
SEC. 302. TERMINATION OF ALTERNATIVE FUEL VEHICLE 
REFUELING PROPERTY CREDIT WITH RE-
SPECT TO FOSSIL FUELS. 
(a) IN GENERAL.—Paragraph (2) of section 30C(c) 
of the Internal Revenue Code of 1986 is amended— 
(1) by striking ‘‘, natural gas, compressed nat-
ural gas, liquefied natural gas, liquefied petroleum 
gas,’’ in subparagraph (A), 
(2) by striking subparagraph (B), and 
(3) by redesignating subparagraph (C) as sub-
paragraph (B). 
(b) TECHNICAL AMENDMENT.—Paragraph (2) of 
section 30C(g) of the Internal Revenue Code of 1986 is 
amended by striking the second period. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
December 31, 2012. 
SEC. 303. UNIFORM SEVEN-YEAR AMORTIZATION FOR GEO-
LOGICAL AND GEOPHYSICAL EXPENDITURES. 
(a) IN GENERAL.—Section 167(h) of the Internal 
Revenue Code of 1986 is amended— 
(1) by striking ‘‘24-month period’’ each place it 
appears in paragraphs (1) and (4) and inserting ‘‘7- 
year period’’, and 
(2) by striking paragraph (5). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred after 
the date of the enactment of this Act. 
SEC. 304. REPEAL OF DOMESTIC MANUFACTURING DEDUC-
TION FOR HARD MINERAL MINING. 
(a) IN GENERAL.—Subparagraph (B) of section 
199(c)(4) of the Internal Revenue Code of 1986 is amend-
ed by striking ‘‘and’’ at the end of clause (ii), by striking 
the period at the end of clause (iii) and inserting ‘‘, and’’, 
and by adding at the end the following new clause: 
‘‘(iv) the mining of any hard min-
eral.’’. 
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(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 305. LIMITATION ON DEDUCTION FOR INCOME AT-
TRIBUTABLE TO DOMESTIC PRODUCTION OF 
OIL, NATURAL GAS, OR PRIMARY PRODUCTS 
THEREOF. 
(a) DENIAL OF DEDUCTION.—Paragraph (4) of sec-
tion 199(c) of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subpara-
graph: 
‘‘(E) SPECIAL
RULE
FOR
OIL, NATURAL 
GAS, AND COAL INCOME.—The term ‘domestic 
production gross receipts’ shall not include 
gross receipts from the production, refining, 
processing, transportation, or distribution of oil, 
natural gas, or coal, or any primary product 
(within the meaning of subsection (d)(9)) there-
of.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 306. TERMINATION OF LAST-IN, FIRST-OUT METHOD 
OF INVENTORY FOR OIL, NATURAL GAS, AND 
COAL COMPANIES. 
(a) IN GENERAL.—Section 472 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subsection: 
‘‘(h) TERMINATION FOR OIL, NATURAL GAS, AND 
COAL COMPANIES.—Subsection (a) shall not apply to any 
taxpayer that is in the trade or business of the production, 
refining, processing, transportation, or distribution of oil, 
natural gas, or coal for any taxable year beginning after 
December 31, 2012.’’. 
(b) ADDITIONAL TERMINATION.—Section 473 of the 
Internal Revenue Code of 1986 is amended by adding at 
the end the following new subsection: 
‘‘(h) TERMINATION FOR OIL, NATURAL GAS, AND 
COAL COMPANIES.—This section shall not apply to any 
taxpayer that is in the trade or business of the production, 
refining, processing, transportation, or distribution of oil, 
natural gas, or coal for any taxable year beginning after 
December 31, 2012.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 307. REPEAL OF PERCENTAGE DEPLETION FOR COAL 
AND HARD MINERAL FOSSIL FUELS. 
(a) IN GENERAL.—Section 613 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subsection: 
‘‘(f) TERMINATION WITH RESPECT TO COAL AND 
HARD MINERAL FOSSIL FUELS.—In the case of coal, lig-
nite, and oil shale (other than oil shale described in sub-
section (b)(5)), the allowance for depletion shall be com-
puted without reference to this section for any taxable 
year beginning after the date of the enactment of the Bal-
ancing Act.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) COAL AND LIGNITE.—Section 613(b)(4) of 
the Internal Revenue Code of 1986 is amended by 
striking ‘‘coal, lignite,’’. 
(2) OIL
SHALE.—Section 613(b)(2) of such 
Code is amended to read as follows: 
‘‘(2) 15 PERCENT.—If, from deposits in the 
United States, gold, silver, copper, and iron ore.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 308. TERMINATION OF CAPITAL GAINS TREATMENT 
FOR ROYALTIES FROM COAL. 
(a) IN GENERAL.—Subsection (c) of section 631 of 
the Internal Revenue Code of 1986 is amended— 
(1) by striking ‘‘coal (including lignite), or iron 
ore’’ and inserting ‘‘iron ore’’, 
(2) by striking ‘‘coal or iron ore’’ each place it 
appears and inserting ‘‘iron ore’’, 
(3) by striking ‘‘iron ore or coal’’ each place it 
appears and inserting ‘‘iron ore’’, and 
(4) by striking ‘‘COAL OR’’ in the heading. 
(b) CONFORMING AMENDMENT.—The heading of sec-
tion 631 of the Internal Revenue Code of 1986 is amended 
by striking ‘‘, COAL,’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to dispositions after the date of 
the enactment of this Act. 
SEC. 309. INCREASE IN OIL SPILL LIABILITY TRUST FUND 
FINANCING RATE. 
(a) IN GENERAL.—Subparagraph (B) of section 
4611(c)(2) of the Internal Revenue Code of 1986 is 
amended to read as follows: 
‘‘(B) the Oil Spill Liability Trust Fund fi-
nancing rate is— 
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‘‘(i) in the case of crude oil received 
or petroleum products entered before Jan-
uary 1, 2013, 8 cents a barrel, 
‘‘(ii) in the case of crude oil received 
or petroleum products entered after De-
cember 31, 2012, and before January 1, 
2017, 9 cents a barrel, and 
‘‘(iii) in the case of crude oil received 
or petroleum products entered after De-
cember 31, 2016, 10 cents a barrel.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to crude oil received and petroleum 
products entered after the date of the enactment of this 
Act. 
SEC. 310. DENIAL OF DEDUCTION FOR REMOVAL COSTS 
AND DAMAGES FOR CERTAIN OIL SPILLS. 
(a) IN GENERAL.—Part IX of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by adding at the end the following new section: 
‘‘SEC. 280I. EXPENSES FOR REMOVAL COSTS AND DAMAGES 
RELATING TO CERTAIN OIL SPILL LIABILITY. 
‘‘No deduction shall be allowed under this chapter for 
any amount paid or incurred with respect to any costs or 
damages for which the taxpayer is liable under section 
1002 of the Oil Pollution Act of 1990 (33 U.S.C. 2702).’’. 
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(b) CLERICAL AMENDMENT.—The table of sections 
for part IX of subchapter B of chapter 1 of such Code 
is amended by adding at the end the following new item: 
‘‘Sec. 280I. Expenses for removal costs and damages relating to certain oil spill 
liability.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to any liability arising 
in taxable years ending after the date of the enactment 
of this Act. 
SEC. 311. TAX ON CRUDE OIL AND NATURAL GAS PRO-
DUCED FROM THE OUTER CONTINENTAL 
SHELF IN THE GULF OF MEXICO. 
(a) IN GENERAL.—Subtitle E of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new chapter: 
‘‘CHAPTER 56—TAX ON SEVERANCE OF 
CRUDE OIL AND NATURAL GAS FROM 
THE OUTER CONTINENTAL SHELF IN 
THE GULF OF MEXICO 
‘‘Sec. 5896. Imposition of tax. 
‘‘Sec. 5897. Taxable crude oil or natural gas and removal price. 
‘‘Sec. 5898. Special rules and definitions. 
‘‘SEC. 5896. IMPOSITION OF TAX. 
‘‘(a) IN GENERAL.—In addition to any other tax im-
posed under this title, there is hereby imposed a tax equal 
to 13 percent of the removal price of any taxable crude 
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oil or natural gas removed from the premises during any 
taxable period. 
‘‘(b) CREDIT FOR FEDERAL ROYALTIES PAID.— 
‘‘(1) IN GENERAL.—There shall be allowed as a 
credit against the tax imposed by subsection (a) with 
respect to the production of any taxable crude oil or 
natural gas an amount equal to the aggregate 
amount of royalties paid under Federal law with re-
spect to such production. 
‘‘(2) LIMITATION.—The aggregate amount of 
credits allowed under paragraph (1) to any taxpayer 
for any taxable period shall not exceed the amount 
of tax imposed by subsection (a) for such taxable pe-
riod. 
‘‘(c) TAX PAID BY PRODUCER.—The tax imposed by 
this section shall be paid by the producer of the taxable 
crude oil or natural gas. 
‘‘SEC. 5897. TAXABLE CRUDE OIL OR NATURAL GAS AND RE-
MOVAL PRICE. 
‘‘(a) TAXABLE CRUDE OIL OR NATURAL GAS.—For 
purposes of this chapter, the term ‘taxable crude oil or 
natural gas’ means crude oil or natural gas which is pro-
duced from Federal submerged lands on the outer Conti-
nental Shelf in the Gulf of Mexico pursuant to a lease 
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entered into with the United States which authorizes the 
production. 
‘‘(b) REMOVAL PRICE.—For purposes of this chap-
ter— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘removal price’ 
means— 
‘‘(A) in the case of taxable crude oil, the 
amount for which a barrel of such crude oil is 
sold, and 
‘‘(B) in the case of taxable natural gas, the 
amount per 1,000 cubic feet for which such 
natural gas is sold. 
‘‘(2) SALES BETWEEN RELATED PERSONS.—In 
the case of a sale between related persons, the re-
moval price shall not be less than the constructive 
sales price for purposes of determining gross income 
from the property under section 613. 
‘‘(3) OIL
OR
NATURAL
GAS
REMOVED
FROM 
PROPERTY BEFORE SALE.—If crude oil or natural 
gas is removed from the property before it is sold, 
the removal price shall be the constructive sales 
price for purposes of determining gross income from 
the property under section 613. 
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‘‘(4) REFINING BEGUN ON PROPERTY.—If the 
manufacture or conversion of crude oil into refined 
products begins before such oil is removed from the 
property— 
‘‘(A) such oil shall be treated as removed 
on the day such manufacture or conversion be-
gins, and 
‘‘(B) the removal price shall be the con-
structive sales price for purposes of determining 
gross income from the property under section 
613. 
‘‘(5) PROPERTY.—The term ‘property’ has the 
meaning given such term by section 614. 
‘‘SEC. 5898. SPECIAL RULES AND DEFINITIONS. 
‘‘(a) ADMINISTRATIVE REQUIREMENTS.— 
‘‘(1) WITHHOLDING AND DEPOSIT OF TAX.— 
The Secretary shall provide for the withholding and 
deposit of the tax imposed under section 5896 on a 
quarterly basis. 
‘‘(2) RECORDS AND INFORMATION.—Each tax-
payer liable for tax under section 5896 shall keep 
such records, make such returns, and furnish such 
information (to the Secretary and to other persons 
having an interest in the taxable crude oil or natural 
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gas) with respect to such oil as the Secretary may 
by regulations prescribe. 
‘‘(3) TAXABLE PERIODS; RETURN OF TAX.— 
‘‘(A) TAXABLE PERIOD.—Except as pro-
vided by the Secretary, each calendar year shall 
constitute a taxable period. 
‘‘(B) RETURNS.—The Secretary shall pro-
vide for the filing, and the time for filing, of the 
return of the tax imposed under section 5896. 
‘‘(b) DEFINITIONS.—For purposes of this chapter— 
‘‘(1) PRODUCER.—The term ‘producer’ means 
the holder of the economic interest with respect to 
the crude oil or natural gas. 
‘‘(2) CRUDE OIL.—The term ‘crude oil’ includes 
crude oil condensates and natural gasoline. 
‘‘(3) PREMISES AND CRUDE OIL PRODUCT.— 
The terms ‘premises’ and ‘crude oil product’ have 
the same meanings as when used for purposes of de-
termining gross income from the property under sec-
tion 613. 
‘‘(c) ADJUSTMENT OF REMOVAL PRICE.—In deter-
mining the removal price of oil or natural gas from a prop-
erty in the case of any transaction, the Secretary may ad-
just the removal price to reflect clearly the fair market 
value of oil or natural gas removed. 
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‘‘(d) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this chapter.’’. 
(b) DEDUCTIBILITY OF TAX.—The first sentence of 
section 164(a) is amended by inserting after paragraph 
(6) the following new paragraph: 
‘‘(7) The tax imposed by section 5896(a) (after 
application of section 5896(b)) on the severance of 
crude oil or natural gas from the outer Continental 
Shelf in the Gulf of Mexico.’’. 
(c) CLERICAL AMENDMENT.—The table of chapters 
for subtitle E is amended by adding at the end the fol-
lowing new item: 
‘‘CHAPTER 56. Tax on severance of crude oil and natural gas 
from the outer Continental Shelf in the Gulf of 
Mexico.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to crude oil or natural gas removed 
after December 31, 2012. 
Subtitle B—Ending Excessive Cor-
porate Tax Deductions for Stock 
Options 
SEC. 331. CONSISTENT TREATMENT OF STOCK OPTIONS BY 
CORPORATIONS. 
(a) CONSISTENT TREATMENT FOR WAGE DEDUC-
TION.— 
(1) IN GENERAL.—Section 83(h) is amended— 
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(A) by striking ‘‘In the case of’’ and in-
serting: 
‘‘(1) IN GENERAL.—In the case of’’, and 
(B) by adding at the end the following new 
paragraph: 
‘‘(2) STOCK OPTIONS.—In the case of property 
transferred to a person in connection with a stock 
option, any deduction related to such stock option 
shall be allowed only under section 162(q) and para-
graph (1) shall not apply.’’. 
(2) TREATMENT OF COMPENSATION PAID WITH 
STOCK OPTIONS.—Section 162 is amended by redes-
ignating subsection (q) as subsection (r) and by in-
serting after subsection (p) the following new sub-
section: 
‘‘(q) TREATMENT OF COMPENSATION PAID WITH 
STOCK OPTIONS.— 
‘‘(1) IN GENERAL.—In the case of compensa-
tion for personal services that is paid with stock op-
tions, the deduction under subsection (a)(1) shall 
not exceed the amount the taxpayer has treated as 
compensation cost with respect to such stock options 
for the purpose of ascertaining income, profit, or 
loss in a report or statement to shareholders, part-
ners, or other proprietors (or to beneficiaries), and 
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shall be taken into account in the same period that 
such compensation cost is recognized for such pur-
pose. 
‘‘(2) 
SPECIAL
RULES
FOR
CONTROLLED 
GROUPS.—The Secretary may prescribe rules for the 
application of paragraph (1) in cases where the 
stock option is granted by— 
‘‘(A) a parent or subsidiary corporation 
(within the meaning of section 424) of the tax-
payer, or 
‘‘(B) another corporation.’’. 
(b) CONSISTENT TREATMENT FOR RESEARCH TAX 
CREDIT.—Section 41(b)(2)(D) is amended by inserting at 
the end the following new clause: 
‘‘(iv) SPECIAL RULE FOR STOCK OP-
TIONS.—The amount which may be treated 
as wages for any taxable year in connec-
tion with the issuance of a stock option 
shall not exceed the amount allowed for 
such taxable year as a compensation de-
duction under section 162(q) with respect 
to such stock option.’’. 
(c) APPLICATION OF AMENDMENTS.—The amend-
ments made by this section shall apply to stock options 
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exercised after the date of the enactment of this Act, ex-
cept that— 
(1) such amendments shall not apply to stock 
options that were granted before such date and that 
vested in taxable periods beginning on or before 
June 15, 2005, 
(2) for stock options that were granted before 
such date of enactment and vested during taxable 
periods beginning after June 15, 2005, and ending 
before such date of enactment, a deduction under 
section 162(q) of the Internal Revenue Code of 1986 
(as added by subsection (a)(2)) shall be allowed in 
the first taxable period of the taxpayer that ends 
after such date of enactment, 
(3) for public entities reporting as small busi-
ness issuers and for non-public entities required to 
file public reports of financial condition, paragraphs 
(1) and (2) shall be applied by substituting ‘‘Decem-
ber 15, 2005’’ for ‘‘June 15, 2005’’, and 
(4) no deduction shall be allowed under section 
83(h) or section 162(q) of such Code with respect to 
any stock option the vesting date of which is 
changed to accelerate the time at which the option 
may be exercised in order to avoid the applicability 
of such amendments. 
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SEC. 332. APPLICATION OF EXECUTIVE PAY DEDUCTION 
LIMIT. 
(a) IN GENERAL.—Subparagraph (D) of section 
162(m)(4) of the Internal Revenue Code of 1986 is 
amended to read as follows: 
‘‘(D) STOCK
OPTION
COMPENSATION.— 
The term ‘applicable employee remuneration’ 
shall include any compensation deducted under 
subsection (q), and such compensation shall not 
qualify as performance-based compensation 
under subparagraph (C).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to stock options exercised or grant-
ed after the date of the enactment of this Act. 
Subtitle C—Reduce Deduction of 
Corporate Meals and Entertain-
ment 
SEC. 341. REDUCTION IN BUSINESS MEALS AND ENTER-
TAINMENT TAX DEDUCTION. 
(a) IN GENERAL.—Section 274(n)(1) of the Internal 
Revenue Code of 1986 (relating to only 50 percent of meal 
and entertainment expenses allowed as deduction) is 
amended by striking ‘‘50 percent’’ and inserting ‘‘25 per-
cent’’. 
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(b) CONFORMING AMENDMENT.—Section 274(n) of 
the Internal Revenue Code of 1986 is amended by striking 
paragraph (3). 
(c) CLERICAL AMENDMENT.—The heading for sec-
tion 274(n) of the Internal Revenue Code of 1986 is 
amended by striking ‘‘ONLY 50 PERCENT’’ and inserting 
‘‘ONLY 25 PERCENT’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2012. 
TITLE 
IV—CLOSE 
INTER-
NATIONAL TAX SYSTEM LOOP-
HOLES 
Subtitle A—Reformation of U.S. 
International Tax System 
SEC. 401. ALLOCATION OF EXPENSES AND TAXES ON BASIS 
OF REPATRIATION OF FOREIGN INCOME. 
(a) IN GENERAL.—Part III of subchapter N of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by inserting after subpart G the following new subpart: 
‘‘Subpart H—Special Rules for Allocation of Foreign- 
Related Deductions and Foreign Tax Credits 
‘‘Sec. 975. Deductions allocated to deferred foreign income may not offset 
United States source income. 
‘‘Sec. 976. Amount of foreign taxes computed on overall basis. 
‘‘Sec. 977. Application of subpart. 
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‘‘SEC. 975. DEDUCTIONS ALLOCATED TO DEFERRED FOR-
EIGN INCOME MAY NOT OFFSET UNITED 
STATES SOURCE INCOME. 
‘‘(a) CURRENT YEAR DEDUCTIONS.—For purposes 
of this chapter, foreign-related deductions for any taxable 
year— 
‘‘(1) shall be taken into account for such tax-
able year only to the extent that such deductions are 
allocable to currently-taxed foreign income, and 
‘‘(2) to the extent not so allowed, shall be taken 
into account in subsequent taxable years as provided 
in subsection (b). 
Foreign-related deductions shall be allocated to currently 
taxed foreign income in the same proportion which cur-
rently taxed foreign income bears to the sum of currently 
taxed foreign income and deferred foreign income. 
‘‘(b) DEDUCTIONS RELATED TO REPATRIATED DE-
FERRED FOREIGN INCOME.— 
‘‘(1) IN GENERAL.—If there is repatriated for-
eign income for a taxable year, the portion of the 
previously deferred deductions allocated to the repa-
triated foreign income shall be taken into account 
for the taxable year as a deduction allocated to in-
come from sources outside the United States. Any 
such amount shall not be included in foreign-related 
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deductions for purposes of applying subsection (a) to 
such taxable year. 
‘‘(2) PORTION OF PREVIOUSLY DEFERRED DE-
DUCTIONS.—For purposes of paragraph (1), the por-
tion of the previously deferred deductions allocated 
to repatriated foreign income is— 
‘‘(A) the amount which bears the same 
proportion to such deductions, as 
‘‘(B) the repatriated income bears to the 
previously deferred foreign income. 
‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur-
poses of this section— 
‘‘(1) FOREIGN-RELATED
DEDUCTIONS.—The 
term ‘foreign-related deductions’ means the total 
amount of deductions and expenses which would be 
allocated or apportioned to gross income from 
sources without the United States for the taxable 
year if both the currently-taxed foreign income and 
deferred foreign income were taken into account. 
‘‘(2) CURRENTLY-TAXED
FOREIGN
INCOME.— 
The term ‘currently-taxed foreign income’ means the 
amount of gross income from sources without the 
United States for the taxable year (determined with-
out regard to repatriated foreign income for such 
year). 
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‘‘(3) DEFERRED FOREIGN INCOME.—The term 
‘deferred foreign income’ means the excess of— 
‘‘(A) the amount that would be includible 
in gross income under subpart F of this part 
for the taxable year if— 
‘‘(i) all controlled foreign corporations 
were treated as one controlled foreign cor-
poration, and 
‘‘(ii) all earnings and profits of all 
controlled foreign corporations were sub-
part F income (as defined in section 952), 
over 
‘‘(B) the sum of— 
‘‘(i) all dividends received during the 
taxable year from controlled foreign cor-
porations, plus 
‘‘(ii) amounts includible in gross in-
come under section 951(a). 
‘‘(4) PREVIOUSLY
DEFERRED
FOREIGN
IN-
COME.—The term ‘previously deferred foreign in-
come’ means the aggregate amount of deferred for-
eign income for all prior taxable years to which this 
part applies, determined as of the beginning of the 
taxable year, reduced by the repatriated foreign in-
come for all such prior taxable years. 
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‘‘(5) REPATRIATED
FOREIGN
INCOME.—The 
term ‘repatriated foreign income’ means the amount 
included in gross income on account of distributions 
out of previously deferred foreign income. 
‘‘(6) PREVIOUSLY
DEFERRED
DEDUCTIONS.— 
The term ‘previously deferred deductions’ means the 
aggregate amount of foreign-related deductions not 
taken into account under subsection (a) for all prior 
taxable years (determined as of the beginning of the 
taxable year), reduced by any amounts taken into 
account under subsection (b) for such prior taxable 
years. 
‘‘(7) 
TREATMENT
OF
CERTAIN
FOREIGN 
TAXES.— 
‘‘(A) PAID BY CONTROLLED FOREIGN COR-
PORATION.—Section 78 shall not apply for pur-
poses of determining currently-taxed foreign in-
come and deferred foreign income. 
‘‘(B) PAID BY TAXPAYER.—For purposes 
of determining currently-taxed foreign income, 
gross income from sources without the United 
States shall be reduced by the aggregate 
amount of taxes described in the applicable 
paragraph of section 901(b) which are paid by 
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the taxpayer (without regard to sections 902 
and 960) during the taxable year. 
‘‘(8) COORDINATION
WITH
SECTION
976.—In 
determining currently-taxed foreign income and de-
ferred foreign income, the amount of deemed foreign 
tax credits shall be determined with regard to sec-
tion 976. 
‘‘SEC. 976. AMOUNT OF FOREIGN TAXES COMPUTED ON 
OVERALL BASIS. 
‘‘(a) CURRENT YEAR ALLOWANCE.—For purposes of 
this chapter, the amount taken into account as foreign in-
come taxes for any taxable year shall be an amount which 
bears the same ratio to the total foreign income taxes for 
that taxable year as— 
‘‘(1) the currently-taxed foreign income for such 
taxable year, bears to 
‘‘(2) the sum of the currently-taxed foreign in-
come and deferred foreign income for such year. 
The portion of the total foreign income taxes for any tax-
able year not taken into account under the preceding sen-
tence for a taxable year shall only be taken into account 
as provided in subsection (b) (and shall not be taken into 
account for purposes of applying sections 902 and 960). 
‘‘(b) ALLOWANCE RELATED TO REPATRIATED DE-
FERRED FOREIGN INCOME.— 
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‘‘(1) IN GENERAL.—If there is repatriated for-
eign income for any taxable year, the portion of the 
previously deferred foreign income taxes paid or ac-
crued during such taxable year shall be taken into 
account for the taxable year as foreign taxes paid or 
accrued. Any such taxes so taken into account shall 
not be included in foreign income taxes for purposes 
of applying subsection (a) to such taxable year. 
‘‘(2) PORTION OF PREVIOUSLY DEFERRED FOR-
EIGN INCOME TAXES.—For purposes of paragraph 
(1), the portion of the previously deferred foreign in-
come taxes allocated to repatriated deferred foreign 
income is— 
‘‘(A) the amount which bears the same 
proportion to such taxes, as 
‘‘(B) the repatriated deferred income bears 
to the previously deferred foreign income. 
‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur-
poses of this section— 
‘‘(1) PREVIOUSLY DEFERRED FOREIGN INCOME 
TAXES.—The term ‘previously deferred foreign in-
come taxes’ means the aggregate amount of total 
foreign income taxes not taken into account under 
subsection (a) for all prior taxable years (determined 
as of the beginning of the taxable year), reduced by 
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any amounts taken into account under subsection 
(b) for such prior taxable years. 
‘‘(2) TOTAL
FOREIGN
INCOME
TAXES.—The 
term ‘total foreign income taxes’ means the sum of 
foreign income taxes paid or accrued during the tax-
able year (determined without regard to section 
904(c)) plus the increase in foreign income taxes 
that would be paid or accrued during the taxable 
year under sections 902 and 960 if— 
‘‘(A) all controlled foreign corporations 
were treated as one controlled foreign corpora-
tion, and 
‘‘(B) all earnings and profits of all con-
trolled foreign corporations were subpart F in-
come (as defined in section 952). 
‘‘(3) FOREIGN INCOME TAXES.—The term ‘for-
eign income taxes’ means any income, war profits, or 
excess profits taxes paid by the taxpayer to any for-
eign country or possession of the United States. 
‘‘(4) CURRENTLY-TAXED FOREIGN INCOME AND 
DEFERRED
FOREIGN
INCOME.—The terms ‘cur-
rently-taxed foreign income’ and ‘deferred foreign in-
come’ have the meanings given such terms by sec-
tion 975(c)). 
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