401
‘‘(b) NO CREDIT CARRYOVERS.—No credits shall be
allowed under the business tax for business credit
carryovers, minimum tax credit carryovers, or any other
credit carryovers from the income tax under the Internal
Revenue Code of 1986.
‘‘SEC. 294. SECTION 481 ADJUSTMENTS.
‘‘(a) POSITIVE NET SECTION 481 ADJUSTMENT
AMOUNT.—If, as of January 1, 2002, a business entity
has a positive net section 481 adjustment amount, the
amount shall be applied to reduce the transition basis in
accounts (for purposes of section 290) in the following
order:
‘‘(1) First, to reduce the category I basis (but
not below zero),
‘‘(2) Second, to reduce the category II basis
(but not below zero),
‘‘(3) Third, to reduce the unrecovered inventory
costs.
‘‘(b) NEGATIVE NET SECTION 481 ADJUSTMENT
AMOUNT.—If, as of January 1, 2002, a business entity
has a negative net section 481 adjustment amount, the
amount shall be applied to increase category I basis for
purposes of section 290.
402
‘‘(c) SECTION 481 ADJUSTMENT.—A business enti-
ty’s net section 481 adjustment is determined by
subtracting—
‘‘(1) the sum of all additional deductions to
which a business entity would be entitled by reason
of section 481 of the Internal Revenue Code of 1986
for periods beginning on or after the effective date
of the business tax with respect to changes in ac-
counting methods made before such effective date,
from
‘‘(2) the sum of all additional income which a
business entity would recognize by reason of section
481 of the Internal Revenue Code of 1986 for peri-
ods beginning on or after the effective date of the
business tax with respect to changes in accounting
methods made before such effective date,
in each case assuming that the income tax under the In-
ternal Revenue Code of 1986 remained in effect.
‘‘Subchapter O—Rules for Administration,
Consolidated Returns
‘‘Sec. 301. Returns, due dates, etc.
‘‘Sec. 302. Consolidated returns.
‘‘SEC. 301. RETURNS, DUE DATES, ETC.
‘‘(a) IN GENERAL.—Until subtitle F is amended to
reflect the adoption of this chapter, the rules of subtitle
403
F relating to C corporations shall apply to business enti-
ties with respect to—
‘‘(1) returns and records;
‘‘(2) time and place for paying tax;
‘‘(3) assessment of taxes;
‘‘(4) collections and liens;
‘‘(5) abatements, credits, and refunds;
‘‘(6) interest on underpayments and overpay-
ments;
‘‘(7) additions to tax and penalties;
‘‘(8) closing agreements and compromises;
‘‘(9) crimes;
‘‘(10) judicial proceedings;
‘‘(11) discovery of liability and enforcement;
and
‘‘(12) estimated taxes.
‘‘(b) INDIVIDUALS ENGAGING IN BUSINESS ACTIVI-
TIES.—Under rules prescribed by the Secretary, individ-
uals engaging in business activities on their own or with
their spouses shall be permitted to file their business tax
returns with their individual tax returns and shall be sub-
ject to estimated tax rules for individual income tax re-
turns.
404
‘‘SEC. 302. CONSOLIDATED RETURNS.
‘‘(a) IN GENERAL.—Business entities may file con-
solidated returns of business tax if they would have been
permitted to file consolidated returns under section 1501
of the Internal Revenue Code and such section were ap-
plied by treating each business entity as a corporation and
its owners or partners as shareholders.
‘‘(b) FINANCIAL
INSTITUTIONS.—Financial inter-
mediation businesses may be included in consolidated re-
turns, but each financial intermediation business must
compute its gross profits separately.
‘‘(c) INTERCOMPANY TRANSACTIONS.—In computing
the gross profits of a consolidated group, intercompany
transactions can be taken into account, or at the election
of the filer, be disregarded (except in the case of trans-
actions with financial intermediation businesses).
‘‘Subchapter P—Definitions and Rules of
Application
‘‘Sec. 310. Definitions.
‘‘Sec. 311. Rules of application.
‘‘SEC. 310. DEFINITIONS.
‘‘(a) IN GENERAL.—When used in this chapter,
where not otherwise distinctly expressed or manifestly in-
compatible with the intent thereof—
405
‘‘(1) USA INCOME
TAX.—‘USA Income Tax’
and ‘Simplified USA Tax’ for individuals mean the
tax imposed by chapter 1.
‘‘(2) INTERNAL REVENUE CODE OF 1986.—‘In-
ternal Revenue Code of 1986’ means the Internal
Revenue Code of 1986 as in effect immediately be-
fore the enactment of the Simplified USA Tax.
‘‘(3) UNITED STATES.—‘United States’ means
the States and the District of Columbia.
‘‘(b) TERMS DEFINED IN CHAPTER 2.—If a term
that is used but not defined in this chapter or in section
7701 is defined in chapter 1, the definition in chapter 1
shall apply except if manifestly incompatible with the in-
tent of the provision in which the term is used.
‘‘SEC. 311. RULES OF APPLICATION.
‘‘(a) DEFINITIONS.—Any definition included in this
chapter shall apply for all purposes of this chapter
unless—
‘‘(1) such definition is limited to the purposes
of a particular chapter, section, or subsection, or
‘‘(2) the definition clearly would not be applica-
ble in a particular context.
‘‘(b) INTERPRETATIONS CONSISTENT WITH INTER-
NAL REVENUE CODE OF 1986.—Terms not defined in this
chapter or elsewhere in this title, but defined in the Inter-
406
nal Revenue Code of 1986, shall be interpreted in a man-
ner consistent with the Internal Revenue Code of 1986,
except to the extent such interpretation would be incon-
sistent with the principles and purposes of this chapter.’’
(b) The amendments made by this section shall be
effective on January 1, 2002, except to the extent other-
wise specifically provided in the text of such amendments.
SEC. 302. REPEAL OF CHAPTER 6.
Chapter 6 of the Code (relating to consolidated re-
turns) is repealed as of January 1, 2002.
TITLE IV—DEFERRED
COMPENSATION PLANS
SEC. 401. PROVISIONS SAVED.
(a) IN GENERAL.—Except as otherwise provided in
this title, the sections contained in subchapter D of chap-
ter 1 of the Code (relating to deferred compensation, etc.)
are hereby saved as chapter 3.
(b) LIMITATIONS
ON CHAPTER 3.—The following
new section is inserted before section 401 of the Code (as
saved by subsection (a)):
‘‘SEC. 400. EFFECT OF CHAPTER 3.
‘‘(a) IN GENERAL.—The provisions of chapter 3 (sec-
tions 401 through 420) are included in this subtitle for
purposes of cross-reference and for purposes of deter-
mining whether plans are exempt from the business tax