I 
109TH CONGRESS 
1ST SESSION H. R. 4297 
To provide for reconciliation pursuant to section 201(b) of the concurrent 
resolution on the budget for fiscal year 2006. 
IN THE HOUSE OF REPRESENTATIVES 
NOVEMBER 10, 2005 
Mr. THOMAS introduced the following bill; which was referred to the 
Committee on Ways and Means 
A BILL 
To provide for reconciliation pursuant to section 201(b) of 
the concurrent resolution on the budget for fiscal year 2006. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. AMENDMENT OF 1986 CODE, ETC. 
(a) 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.
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Amendment of 1986 Code, etc. 
TITLE I—EXTENSIONS OF CERTAIN PROVISIONS THROUGH 2006 
Sec. 101. Allowance of nonrefundable personal credits against regular and min-
imum tax liability. 
Sec. 102. State and local general sales taxes. 
Sec. 103. Research credit. 
Sec. 104. Qualified tuition and related expenses. 
Sec. 105. Certain expenses of elementary and secondary school teachers. 
Sec. 106. Qualified Zone Academy Bonds. 
Sec. 107. Tax incentives for business activities on Indian reservations. 
Sec. 108. Deduction for corporate donations of computer technology and equip-
ment. 
Sec. 109. Availability of medical savings accounts. 
Sec. 110. 15-year cost recovery for leasehold improvements. 
Sec. 111. 15-year cost recovery for restaurant improvements. 
Sec. 112. Taxable income limit on percentage depletion for oil and natural gas 
produced from marginal properties. 
Sec. 113. District of Columbia Enterprise Zone. 
Sec. 114. Possession tax credit with respect to American Samoa. 
Sec. 115. Parity in the application of certain limits to mental health benefits. 
Sec. 116. Authority for undercover operations. 
TITLE II—OTHER EXTENSIONS AND MODIFICATIONS 
Sec. 201. Work opportunity credit and welfare-to-work credit. 
Sec. 202. Expensing of environmental remediation costs. 
Sec. 203. Controlled foreign corporations. 
TITLE III—EXTENSIONS OF CERTAIN PROVISIONS THROUGH 2010 
Sec. 301. Saver’s credit. 
Sec. 302. Increased expensing for small business. 
Sec. 303. Capital gains and dividends rates.
TITLE I—EXTENSIONS OF CER-
TAIN PROVISIONS THROUGH 
2006 
SEC. 101. ALLOWANCE OF NONREFUNDABLE PERSONAL 
CREDITS AGAINST REGULAR AND MINIMUM 
TAX LIABILITY. 
(a) IN GENERAL.—Paragraph (2) of section 26(a) 
(relating to special rule for taxable years 2000 through 
2005) is amended— 
(1) in the text by striking ‘‘or 2005’’ and in-
serting ‘‘2005, or 2006’’, and 
(2) in the heading by striking ‘‘2005’’ and in-
serting ‘‘2006’’. 
(b) CONFORMING PROVISIONS.— 
(1) Subsection (i) of section 904 (relating to co-
ordination with nonrefundable personal credits) is 
amended by striking ‘‘or 2005’’ and inserting ‘‘2005, 
or 2006’’. 
(2) The amendments made by sections 201(b), 
202(f), and 618(b) of the Economic Growth and Tax 
Relief Reconciliation Act of 2001 shall not apply to 
taxable years beginning during 2006. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2005.
SEC. 102. STATE AND LOCAL GENERAL SALES TAXES. 
(a) IN
GENERAL.—Subparagraph (I) of section 
164(b)(5) (relating to application of paragraph) is amend-
ed by striking ‘‘January 1, 2006’’ and inserting ‘‘January 
1, 2007’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2005. 
SEC. 103. RESEARCH CREDIT. 
(a) EXTENSION.— 
(1) IN GENERAL.—Subparagraph (B) of section 
41(h)(1) (relating to termination) is amended by 
striking ‘‘December 31, 2005’’ and inserting ‘‘De-
cember 31, 2006’’. 
(2) CONFORMING AMENDMENT.—Subparagraph 
(D) of section 45C(b)(1) (relating to special rule) is 
amended by striking ‘‘December 31, 2005’’ and in-
serting ‘‘December 31, 2006’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred after 
December 31, 2005. 
SEC. 104. QUALIFIED TUITION AND RELATED EXPENSES. 
(a) IN GENERAL.—Subsection (e) of section 222 (re-
lating to termination) is amended by striking ‘‘December 
31, 2005’’ and inserting ‘‘December 31, 2006’’.
(b) LIMITATIONS.—Paragraph (2) of section 222(b) 
(relating to applicable dollar limit) is amended by striking 
subparagraphs (A) and (B), by redesignating subpara-
graph (C) as subparagraph (B), and by inserting before 
subparagraph (B) (as so redesignated) the following: 
‘‘(A) 2006.—In the case of a taxable year 
beginning in 2006, the applicable dollar amount 
shall be equal to— 
‘‘(i) in the case of a taxpayer whose 
adjusted gross income for the taxable year 
does not exceed $65,000 ($130,000 in the 
case of a joint return), $4,000, 
‘‘(ii) in the case of a taxpayer not de-
scribed in clause (i) whose adjusted gross 
income for the taxable year does not ex-
ceed $80,000 ($160,000 in the case of a 
joint return), $2,000, and 
‘‘(iii) in the case of any other tax-
payer, zero.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to payments made in taxable years 
beginning after December 31, 2005.
SEC. 105. CERTAIN EXPENSES OF ELEMENTARY AND SEC-
ONDARY SCHOOL TEACHERS. 
(a) IN GENERAL.—Subparagraph (D) of section 
62(a)(2) (relating to certain expenses of elementary and 
secondary school teachers) is amended by striking ‘‘or 
2005’’ and inserting ‘‘2005, or 2006’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to expenses paid or incurred in 
taxable years beginning after December 31, 2005. 
SEC. 106. QUALIFIED ZONE ACADEMY BONDS. 
(a) 
IN
GENERAL.—Paragraph 
(1) 
of 
section 
1397E(e) (relating to national limit) is amended by strik-
ing ‘‘and 2005’’ and inserting ‘‘2005, and 2006’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to obligations issued after De-
cember 31, 2005. 
SEC. 107. TAX INCENTIVES FOR BUSINESS ACTIVITIES ON 
INDIAN RESERVATIONS. 
(a) INDIAN EMPLOYMENT TAX CREDIT.— 
(1) IN
GENERAL.—Subsection (f) of section 
45A (relating to termination) is amended by striking 
‘‘December 31, 2005’’ and inserting ‘‘December 31, 
2006’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to taxable years begin-
ning after December 31, 2005.
(b) ACCELERATED DEPRECIATION
FOR BUSINESS 
PROPERTY ON INDIAN RESERVATIONS.— 
(1) IN
GENERAL.—Paragraph (8) of section 
168(j) (relating to termination) is amended by strik-
ing ‘‘December 31, 2005’’ and inserting ‘‘December 
31, 2006’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply with respect to prop-
erty placed in service after December 31, 2005. 
SEC. 108. DEDUCTION FOR CORPORATE DONATIONS OF 
COMPUTER TECHNOLOGY AND EQUIPMENT. 
(a) IN GENERAL.—Subparagraph (G) of section 
170(e)(6) (relating to termination) is amended by striking 
‘‘December 31, 2005’’ and inserting ‘‘December 31, 
2006’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to contributions made in taxable 
years beginning after December 31, 2005. 
SEC. 109. AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS. 
(a) IN GENERAL.—Paragraphs (2) and (3)(B) of sec-
tion 220(i) (defining cut-off year) are each amended by 
striking ‘‘2005’’ each place it appears in the text and 
headings and inserting ‘‘2006’’. 
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 220(j) is amend-
ed— 
(A) in the text by striking ‘‘or 2004’’ each 
place it appears and inserting ‘‘2004, or 2005’’, 
and 
(B) in the heading by striking ‘‘OR 2004’’ 
and inserting ‘‘2004, OR 2005’’. 
(2) Subparagraph (A) of section 220(j)(4) is 
amended by striking ‘‘and 2004’’ and inserting 
‘‘2004, and 2005’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
(d) TIME FOR FILING REPORTS, ETC.— 
(1) The report required by section 220(j)(4) of 
the Internal Revenue Code of 1986 to be made on 
August 1, 2005, shall be treated as timely if made 
before the close of the 90-day period beginning on 
the date of the enactment of this Act. 
(2) The determination and publication required 
by section 220(j)(5) of such Code with respect to 
calendar year 2005 shall be treated as timely if 
made before the close of the 120-day period begin-
ning on the date of the enactment of this Act. If the 
determination under the preceding sentence is that
2005 is a cut-off year under section 220(i) of such 
Code, the cut-off date under such section 220(i) 
shall be the last day of such 120-day period. 
SEC. 110. 15-YEAR COST RECOVERY FOR LEASEHOLD IM-
PROVEMENTS. 
(a) 
IN
GENERAL.—Clause 
(iv) 
of 
section 
168(e)(3)(E) (relating to 15-year property) is amended by 
striking ‘‘January 1, 2006’’ and inserting ‘‘January 1, 
2007’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to property placed in service 
after December 31, 2005. 
SEC. 111. 15-YEAR COST RECOVERY FOR RESTAURANT IM-
PROVEMENTS. 
(a) IN GENERAL.—Clause (v) of section 168(e)(3)(E) 
(relating to 15-year property) is amended by striking 
‘‘January 1, 2006’’ and inserting ‘‘January 1, 2007’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to property placed in service 
after December 31, 2005. 
SEC. 112. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLE-
TION FOR OIL AND NATURAL GAS PRODUCED 
FROM MARGINAL PROPERTIES. 
(a) IN GENERAL.—Subparagraph (H) of section 
613A(c)(6) (relating to oil and natural gas produced from
marginal properties) is amended by striking ‘‘January 1, 
2006’’ and inserting ‘‘January 1, 2007’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2005. 
SEC. 113. DISTRICT OF COLUMBIA ENTERPRISE ZONE. 
(a) PERIOD
FOR WHICH DESIGNATION APPLICA-
BLE.—Subsection (f) of section 1400 (relating to time for 
which designation applicable) is amended by striking ‘‘De-
cember 31, 2005’’ both places it appears and inserting 
‘‘December 31, 2006’’. 
(b) 
TAX-EXEMPT
ECONOMIC
DEVELOPMENT 
BONDS.—Subsection (b) of section 1400A (relating to pe-
riod of applicability) is amended by striking ‘‘December 
31, 2005’’ and inserting ‘‘December 31, 2006’’. 
(c) ZERO PERCENT CAPITAL GAINS RATE.— 
(1) IN
GENERAL.—Subsection (b) of section 
1400B (relating to DC Zone Asset) is amended by 
striking ‘‘January 1, 2006’’ each place it appears 
and inserting ‘‘January 1, 2007’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Paragraph (2) of section 1400B(e) (re-
lating to gain before 1998 and after 2010 not 
qualified) is amended—
(i) by striking ‘‘December 31, 2010’’ 
and inserting ‘‘December 31, 2011’’, and 
(ii) by striking ‘‘2010’’ in the heading 
and inserting ‘‘2011’’. 
(B) Paragraph (2) of section 1400B(g) 
(relating to sales and exchanges of interests in 
partnerships and S corporations which are DC 
Zone businesses) is amended by striking ‘‘De-
cember 31, 2010’’ and inserting ‘‘December 31, 
2011’’. 
(C) Subsection (d) of section 1400F (relat-
ing to certain rules to apply) is amended by 
striking ‘‘December 31, 2010’’ and inserting 
‘‘December 31, 2011’’. 
(d) FIRST-TIME HOMEBUYER CREDIT FOR DISTRICT 
OF COLUMBIA.—Subsection (i) of section 1400C (relating 
to application of section) is amended by striking ‘‘January 
1, 2006’’ and inserting ‘‘January 1, 2007’’. 
(e) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall take effect on January 1, 2006. 
(2) TAX-EXEMPT
ECONOMIC
DEVELOPMENT 
BONDS.—The amendment made by subsection (b)
shall apply to obligations issued after the date of the 
enactment of this Act. 
SEC. 114. POSSESSION TAX CREDIT WITH RESPECT TO 
AMERICAN SAMOA. 
(a) IN GENERAL.—Subparagraph (A) of section 
936(j)(8) (relating to special rules for certain possessions) 
is amended by inserting before the period at the end the 
following: ‘‘(before January 1, 2007, in the case of Amer-
ican Samoa)’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2005. 
SEC. 115. PARITY IN THE APPLICATION OF CERTAIN LIMITS 
TO MENTAL HEALTH BENEFITS. 
(a) IN GENERAL.—Paragraph (3) of section 9812(f) 
(relating to application of section) is amended by striking 
‘‘December 31, 2005’’ and inserting ‘‘December 31, 
2006’’. 
(b) EFFECTIVE DATES.—The amendment made by 
subsection (a) shall take effect on the date of the enact-
ment of this Act. 
SEC. 116. AUTHORITY FOR UNDERCOVER OPERATIONS. 
Paragraph (6) of section 7608(c) (relating to applica-
tion of section) is amended by striking ‘‘January 1, 2006’’ 
both places is appears and inserting ‘‘January 1, 2007’’.
TITLE II—OTHER EXTENSIONS 
AND MODIFICATIONS 
SEC. 201. WORK OPPORTUNITY CREDIT AND WELFARE-TO- 
WORK CREDIT. 
(a) EXTENSION OF WORK OPPORTUNITY CREDIT.— 
Paragraph (4) of section 51(c) (relating to termination) 
is amended by striking ‘‘December 31, 2005’’ and insert-
ing ‘‘December 31, 2007’’. 
(b) CONSOLIDATION OF WORK OPPORTUNITY CRED-
IT WITH WELFARE-TO-WORK CREDIT.— 
(1) IN
GENERAL.—Paragraph (1) of section 
51(d) (relating to members of targeted groups) is 
amended by striking ‘‘or’’ at the end of subpara-
graph (G), by striking the period at the end of sub-
paragraph (H) and inserting ‘‘, or’’, and by adding 
at the end the following new subparagraph: 
‘‘(I) a long-term family assistance recipi-
ent.’’ 
(2) LONG-TERM
FAMILY
ASSISTANCE
RECIPI-
ENT.—Subsection (d) of section 51 (relating to 
members of targeted groups) is amended by redesig-
nating paragraphs (10) through (12) as paragraphs 
(11) through (13), respectively, and by inserting 
after paragraph (9) the following new paragraph:
‘‘(10) LONG-TERM FAMILY ASSISTANCE RECIPI-
ENT.—The term ‘long-term family assistance recipi-
ent’ means any individual who is certified by the 
designated local agency— 
‘‘(A) as being a member of a family receiv-
ing assistance under a IV–A program (as de-
fined in paragraph (2)(B)) for at least the 18- 
month period ending on the hiring date, 
‘‘(B)(i) as being a member of a family re-
ceiving such assistance for 18 months beginning 
after August 5, 1997, and 
‘‘(ii) as having a hiring date which is not 
more than 2 years after the end of the earliest 
such 18-month period, or 
‘‘(C)(i) as being a member of a family 
which ceased to be eligible for such assistance 
by reason of any limitation imposed by Federal 
or State law on the maximum period such as-
sistance is payable to a family, and 
‘‘(ii) as having a hiring date which is not 
more than 2 years after the date of such ces-
sation.’’ 
(3) REPEAL OF SEPARATE WELFARE-TO-WORK 
CREDIT.—
(A) IN GENERAL.—Section 51A is hereby 
repealed. 
(B) CLERICAL AMENDMENT.—The table of 
sections for subpart F of part IV of subchapter 
A of chapter 1 is amended by striking the item 
relating to section 51A. 
(c) REPEAL OF INCOME TEST FOR EX-FELONS.— 
Paragraph (4) of section 51(d) (relating to qualified ex- 
felon) is amended— 
(1) by inserting ‘‘and’’ at the end of subpara-
graph (A), and 
(2) by striking ‘‘, and’’ at the end of subpara-
graph (B) and all that follows through the end of 
the paragraph and inserting a period. 
(d) INCREASE IN AGE LIMIT FOR FOOD STAMP RE-
CIPIENTS.—Clause (i) of section 51(d)(8)(A) (relating to 
qualified food stamp recipient) is amended by striking 
‘‘25’’ and inserting ‘‘35’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to individuals who begin work for 
the employer after December 31, 2005. 
SEC. 202. EXPENSING OF ENVIRONMENTAL REMEDIATION 
COSTS. 
(a) EXTENSION
OF
TERMINATION
DATE.—Sub-
section (h) of section 198 (relating to termination) is
amended by striking ‘‘December 31, 2005’’ and inserting 
‘‘December 31, 2007’’. 
(b) PETROLEUM
PRODUCTS
TREATED
AS
HAZ-
ARDOUS SUBSTANCE.—Paragraph (1) of section 198(d) 
(relating to hazardous substance) 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 new subpara-
graph: 
‘‘(C) any petroleum product (as defined in 
section 4612(a)(3)).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to expenditures paid or incurred 
after December 31, 2005. 
SEC. 203. CONTROLLED FOREIGN CORPORATIONS. 
(a) SUBPART F EXCEPTION FOR ACTIVE FINANC-
ING.— 
(1) EXEMPT INSURANCE INCOME.—Paragraph 
(10) of section 953(e) (relating to application) is 
amended— 
(A) by striking ‘‘January 1, 2007’’ and in-
serting ‘‘January 1, 2009’’, and 
(B) by striking ‘‘December 31, 2006’’ and 
inserting ‘‘December 31, 2008’’.
(2) EXCEPTION
TO
TREATMENT
AS
FOREIGN 
PERSONAL HOLDING COMPANY INCOME.—Paragraph 
(9) of section 954(h) (relating to application) is 
amended by striking ‘‘January 1, 2007’’ and insert-
ing ‘‘January 1, 2009’’. 
(b) LOOK-THROUGH TREATMENT OF PAYMENTS BE-
TWEEN RELATED CONTROLLED FOREIGN CORPORATIONS 
UNDER THE FOREIGN PERSONAL HOLDING COMPANY 
RULES.—Subsection (c) of section 954 (relating to foreign 
personal holding company income) is amended by adding 
at the end the following new paragraph: 
‘‘(6) LOOK-THRU
RULE
FOR
RELATED
CON-
TROLLED FOREIGN CORPORATIONS.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, dividends, interest, rents, and royal-
ties received or accrued from a controlled for-
eign corporation which is a related person shall 
not be treated as foreign personal holding com-
pany income to the extent attributable or prop-
erly allocable (determined under rules similar to 
the rules of subparagraphs (C) and (D) of sec-
tion 904(d)(3)) to income of the related person 
which is not subpart F income. For purposes of 
this subparagraph, interest shall include fac-
toring income which is treated as income equiv-
alent to interest for purposes of paragraph 
(1)(E). The Secretary shall prescribe such regu-
lations as may be appropriate to prevent the 
abuse of the purposes of this paragraph. 
‘‘(B) APPLICATION.—Subparagraph (A) 
shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2005, and 
before January 1, 2009, and to taxable years of 
United States shareholders with or within which 
such taxable years of foreign corporations 
end.’’. 
TITLE III—EXTENSIONS OF CER-
TAIN PROVISIONS THROUGH 
2010 
SEC. 301. SAVER’S CREDIT. 
Subsection (h) of section 25B (relating to elective de-
ferrals and IRA contributions by certain individuals) is 
amended by striking ‘‘December 31, 2006’’ and inserting 
‘‘December 31, 2010’’. 
SEC. 302. INCREASED EXPENSING FOR SMALL BUSINESS. 
Subsections (b)(1), (b)(2), (b)(5), (c)(2), and 
(d)(1)(A)(ii) of section 179(b) (relating to election to ex-
pense certain depreciable business assets) are each amend-
ed by striking ‘‘2008’’ and inserting ‘‘2011’’.
SEC. 303. CAPITAL GAINS AND DIVIDENDS RATES. 
Section 303 of the Jobs and Growth Tax Relief Rec-
onciliation Act of 2003 is amended by striking ‘‘December 
31, 2008’’ and inserting ‘‘December 31, 2010’’. 
Æ