| The Tax Increase Prevention and Reconciliation Act of 2005 | |||||||||||||||||||||||||||||||||||
| TIPRA, H.R. 4297, Public Law 109-222 | |||||||||||||||||||||||||||||||||||
The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) was signed into law by President George W. Bush on May 17, 2006, after the Senate passed the bill on May 11, 2006, and the House of Representatives passed the bill on December 8, 2005. For a full history of all Congressional actions, see the Library of Congress web site. The full text of TIPRA was taken from the Library of Congress. H.R.4297(Enrolled as Agreed to or Passed by Both House and Senate) --H.R.4297-- H.R.4297
Begun and held at the City of Washington on Tuesday, the third day of January, two thousand and six An Act
SECTION 1. SHORT TITLE, ETC.
TITLE I--EXTENSION AND MODIFICATION OF CERTAIN PROVISIONSTITLE II--OTHER PROVISIONSTITLE III--ALTERNATIVE MINIMUM TAX RELIEFTITLE IV--CORPORATE ESTIMATED TAX PROVISIONSTITLE V--REVENUE OFFSET PROVISIONS
|
|||||||||||||||||||||||||||||||||||
'For Calendar Year: |
Applicable percentage is: |
2006 |
20 percent |
2007 |
40 percent |
2008 |
60 percent |
2009 |
80 percent. |
-
'(iv) TERMINATION- The State veterans limit for
the States specified in clause (ii) for any calendar year after 2010 is
zero.'.
-
(2) EFFECTIVE DATE- The amendments made by this
subsection shall apply to allocations of State volume limit after April
5, 2006.
SEC. 204. CAPITAL GAINS TREATMENT FOR CERTAIN SELF-CREATED MUSICAL WORKS.
-
(a) In General- Subsection (b) of section 1221 (relating to
capital asset defined) is amended by redesignating paragraph (3) as
paragraph (4) and by inserting after paragraph (2) the following new
paragraph:
-
'(3) SALE OR EXCHANGE OF SELF-CREATED MUSICAL WORKS- At
the election of the taxpayer, paragraphs (1) and (3) of subsection (a)
shall not apply to musical compositions or copyrights in musical works
sold or exchanged before January 1, 2011, by a taxpayer described in
subsection (a)(3).'.
-
(b) Limitation on Charitable Contributions- Subparagraph
(A) of section 170(e)(1) is amended by inserting '(determined without
regard to section 1221(b)(3))' after 'long-term capital gain'.
-
(c) Effective Date- The amendments made by this section
shall apply to sales and exchanges in taxable years beginning after the
date of the enactment of this Act.
SEC. 205. VESSEL TONNAGE LIMIT.
-
(a) In General- Paragraph (4) of section 1355(a) (relating
to qualifying vessel) is amended by inserting '(6,000, in the case of
taxable years beginning after December 31, 2005, and ending before
January 1, 2011)' after '10,000'.
-
(b) Effective Date- The amendment made by subsection (a) shall apply to
taxable years beginning after December 31, 2005.
SEC. 206. MODIFICATION OF SPECIAL ARBITRAGE RULE FOR CERTAIN FUNDS.
-
In the case of bonds issued after the date of the enactment of this Act
and before August 31, 2009--
-
(1) the requirement of paragraph (1) of section 648 of
the Deficit Reduction Act of 1984 (98 Stat. 941) shall be treated as
met with respect to the securities or obligations referred to in such
section if such securities or obligations are held in a fund the annual
distributions from which cannot exceed 7 percent of the average fair
market value of the assets held in such fund except to the extent
distributions are necessary to pay debt service on the bond issue, and
-
(2) paragraph (3) of such section shall be applied by
substituting 'distributions from' for 'the investment earnings of' both
places it appears.
SEC. 207. AMORTIZATION OF EXPENSES INCURRED IN CREATING OR ACQUIRING MUSIC OR MUSIC COPYRIGHTS.
-
(a) In General- Section 167(g) (relating to depreciation
under income forecast method) is amended by adding at the end the
following new paragraph:
-
'(8) SPECIAL RULES FOR CERTAIN MUSICAL WORKS AND COPYRIGHTS-
-
'(A) IN GENERAL- If an election is in effect under
this paragraph for any taxable year, then, notwithstanding paragraph
(1), any expense which--
-
'(i) is paid or incurred by the taxpayer in
creating or acquiring any applicable musical property placed in service
during the taxable year, and
-
'(ii) is otherwise properly chargeable to capital account,
-
shall be amortized ratably over the 5-year period
beginning with the month in which the property was placed in service.
The preceding sentence shall not apply to any expense which, without
regard to this paragraph, would not be allowable as a deduction.
-
'(B) EXCLUSIVE METHOD- Except as provided in this
paragraph, no depreciation or amortization deduction shall be allowed
with respect to any expense to which subparagraph (A) applies.
-
'(C) APPLICABLE MUSICAL PROPERTY- For purposes of this paragraph--
-
'(i) IN GENERAL- The term 'applicable musical
property' means any musical composition (including any accompanying
words), or any copyright with respect to a musical composition, which
is property to which this subsection applies without regard to this
paragraph.
-
'(ii) EXCEPTIONS- Such term shall not include any property--
-
'(I) with respect to which expenses are treated as qualified creative
expenses to which section 263A(h) applies,
-
'(II) to which a simplified procedure established under section
263A(j)(2) applies, or
-
'(III) which is an amortizable section 197 intangible (as defined in
section 197(c)).
-
'(D) ELECTION- An election under this paragraph
shall be made at such time and in such form as the Secretary may
prescribe and shall apply to all applicable musical property placed in
service during the taxable year for which the election applies.
-
'(E) TERMINATION- An election may not be made under this paragraph for
any taxable year beginning after December 31, 2010.'.
-
(b) Effective Date- The amendments made by this section
shall apply to expenses paid or incurred with respect to property
placed in service in taxable years beginning after December 31, 2005.
SEC. 208. MODIFICATION OF EFFECTIVE DATE OF DISREGARD OF CERTAIN CAPITAL EXPENDITURES FOR PURPOSES OF QUALIFIED SMALL ISSUE BONDS.
-
(a) In General- Section 144(a)(4)(G) is amended by striking 'September
30, 2009' and inserting 'December 31, 2006'.
-
(b) Conforming Amendment- Section 144(a)(4)(F) is amended by striking
'September 30, 2009' and inserting 'December 31, 2006'.
SEC. 209. MODIFICATION OF TREATMENT OF LOANS TO QUALIFIED CONTINUING CARE FACILITIES.
-
(a) In General- Section 7872 is amended by redesignating
subsection (h) as subsection (i) and inserting after subsection (g) the
following new subsection:
-
'(h) Exception for Loans to Qualified Continuing Care Facilities-
-
'(1) IN GENERAL- This section shall not apply for any
calendar year to any below-market loan owed by a facility which on the
last day of such year is a qualified continuing care facility, if such
loan was made pursuant to a continuing care contract and if the lender
(or the lender's spouse) attains age 62 before the close of such year.
-
'(2) CONTINUING CARE CONTRACT- For purposes of this
section, the term 'continuing care contract' means a written contract
between an individual and a qualified continuing care facility under
which--
-
'(A) the individual or individual's spouse may use a qualified
continuing care facility for their life or lives,
-
'(B) the individual or individual's spouse will be
provided with housing, as appropriate for the health of such individual
or individual's spouse--
-
'(i) in an independent living unit (which has
additional available facilities outside such unit for the provision of
meals and other personal care), and
-
'(ii) in an assisted living facility or a nursing facility, as is
available in the continuing care facility, and
-
'(C) the individual or individual's spouse will be
provided assisted living or nursing care as the health of such
individual or individual's spouse requires, and as is available in the
continuing care facility.
-
The Secretary shall issue guidance which limits such
term to contracts which provide only facilities, care, and services
described in this paragraph.
-
'(3) QUALIFIED CONTINUING CARE FACILITY-
-
'(A) IN GENERAL- For purposes of this section, the term 'qualified
continuing care facility' means 1 or more facilities--
-
'(i) which are designed to provide services under continuing care
contracts,
-
'(ii) which include an independent living unit, plus an assisted living
or nursing facility, or both, and
-
'(iii) substantially all of the independent living unit residents of
which are covered by continuing care contracts.
-
'(B) NURSING HOMES EXCLUDED- The term 'qualified
continuing care facility' shall not include any facility which is of a
type which is traditionally considered a nursing home.
-
'(4) TERMINATION- This subsection shall not apply to any calendar year
after 2010.'.
-
(b) Conforming Amendments-
-
(1) Section 7872(g) is amended by adding at the end the following new
paragraph:
-
'(6) SUSPENSION OF APPLICATION- Paragraph (1) shall not apply for any
calendar year to which subsection (h) applies.'.
-
(2) Section 142(d)(2)(B) is amended by striking 'Section 7872(g)' and
inserting 'Subsections (g) and (h) of section 7872'.
-
(c) Effective Date- The amendment made by this section
shall apply to calendar years beginning after December 31, 2005, with
respect to loans made before, on, or after such date.
TITLE III--ALTERNATIVE MINIMUM TAX RELIEF
SEC. 301. INCREASE IN ALTERNATIVE MINIMUM TAX EXEMPTION AMOUNT FOR 2006.
-
(a) In General- Section 55(d)(1) (relating to exemption amount for
taxpayers other than corporations) is amended--
-
(1) by striking '$58,000' and all that follows through '2005' in
subparagraph (A) and inserting '$62,550 in the case of
taxable years beginning in 2006', and
-
(2) by striking '$40,250' and all that follows through '2005' in
subparagraph (B) and inserting '$42,500 in the case of
taxable years beginning in 2006'.
-
(b) Effective Date- The amendments made by this section shall apply to
taxable years beginning after December 31, 2005.
SEC. 302. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST REGULAR AND ALTERNATIVE MINIMUM TAX LIABILITY.
-
(a) In General- Paragraph (2) of section 26(a) is amended--
-
(1) by striking '2005' in the heading thereof and inserting '2006', and
-
(2) by striking 'or 2005' and inserting '2005, or 2006'.
-
(b) Effective Date- The amendments made by this section shall apply to
taxable years beginning after December 31, 2005.
TITLE IV--CORPORATE ESTIMATED TAX PROVISIONS
SEC. 401. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.
-
Notwithstanding section 6655 of the Internal Revenue Code of 1986--
-
(1) in the case of a corporation with assets of not
less than $1,000,000,000 (determined as of the end of the preceding
taxable year)--
-
(A) the amount of any required installment of
corporate estimated tax which is otherwise due in July, August, or
September of 2006 shall be 105 percent of such amount,
-
(B) the amount of any required installment of
corporate estimated tax which is otherwise due in July, August, or
September of 2012 shall be 106.25 percent of such amount,
-
(C) the amount of any required installment of
corporate estimated tax which is otherwise due in July, August, or
September of 2013 shall be 100.75 percent of such amount, and
-
(D) the amount of the next required installment
after an installment referred to in subparagraph (A), (B), or (C) shall
be appropriately reduced to reflect the amount of the increase by
reason of such subparagraph,
-
(2) 20.5 percent of the amount of any required
installment of corporate estimated tax which is otherwise due in
September 2010 shall not be due until October 1, 2010, and
-
(3) 27.5 percent of the amount of any required
installment of corporate estimated tax which is otherwise due in
September 2011 shall not be due until October 1, 2011.
TITLE V--REVENUE OFFSET PROVISIONS
SEC. 501. APPLICATION OF EARNINGS STRIPPING RULES TO PARTNERS WHICH ARE CORPORATIONS.
-
(a) In General- Section 163(j) (relating to limitation on
deduction for interest on certain indebtedness) is amended by
redesignating paragraph (8) as paragraph (9) and by inserting after
paragraph (7) the following new paragraph:
-
'(8) TREATMENT OF CORPORATE PARTNERS- Except to the
extent provided by regulations, in applying this subsection to a
corporation which owns (directly or indirectly) an interest in a
partnership--
-
'(A) such corporation's distributive share of
interest income paid or accrued to such partnership shall be treated as
interest income paid or accrued to such corporation,
-
'(B) such corporation's distributive share of
interest paid or accrued by such partnership shall be treated as
interest paid or accrued by such corporation, and
-
'(C) such corporation's share of the liabilities of such partnership
shall be treated as liabilities of such corporation.'.
-
(b) Additional Regulatory Authority- Section 163(j)(9)
(relating to regulations), as redesignated by subsection (a), is
amended by striking 'and' at the end of subparagraph (B), by striking
the period at the end of subparagraph (C) and inserting ', and', and by
adding at the end the following new subparagraph:
-
'(D) regulations providing for the reallocation of
shares of partnership indebtedness, or distributive shares of the
partnership's interest income or interest expense.'.
-
(c) Effective Date- The amendments made by this section
shall apply to taxable years beginning on or after the date of the
enactment of this Act.
SEC. 502. REPORTING OF INTEREST ON TAX-EXEMPT BONDS.
-
(a) In General- Section 6049(b)(2) (relating to exceptions)
is amended by striking subparagraph (B) and by redesignating
subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively.
-
(b) Conforming Amendment- Section 6049(b)(2)(C), as
redesignated by subsection (a), is amended by striking 'subparagraph
(C)' and inserting 'subparagraph (B)'.
-
(c) Effective Date- The amendments made by this section shall apply to
interest paid after December 31, 2005.
SEC. 503. 5-YEAR AMORTIZATION OF GEOLOGICAL AND GEOPHYSICAL EXPENDITURES FOR CERTAIN MAJOR INTEGRATED OIL COMPANIES.
-
(a) In General- Section 167(h) (relating to amortization of
geological and geophysical expenditures) is amended by adding at the
end the following new paragraph:
-
'(5) SPECIAL RULE FOR MAJOR INTEGRATED OIL COMPANIES-
-
'(A) IN GENERAL- In the case of a major integrated
oil company, paragraphs (1) and (4) shall be applied by substituting
'5-year' for '24 month'.
-
'(B) MAJOR INTEGRATED OIL COMPANY- For purposes of
this paragraph, the term 'major integrated oil company' means, with
respect to any taxable year, a producer of crude oil--
-
'(i) which has an average daily worldwide production of crude oil of at
least 500,000 barrels for the taxable year,
-
'(ii) which had gross receipts in excess of $1,000,000,000 for its last
taxable year ending during calendar year 2005, and
-
'(iii) to which subsection (c) of section 613A does not apply by reason
of paragraph (4) of section 613A(d), determined--
-
'(I) by substituting '15 percent' for '5 percent' each place it occurs
in paragraph (3) of section 613A(d), and
-
'(II) without regard to whether subsection (c) of section 613A does not
apply by reason of paragraph (2) of section 613A(d).
-
For purposes of clauses (i) and (ii), all persons
treated as a single employer under subsections (a) and (b) of section
52 shall be treated as 1 person and, in case of a short taxable year,
the rule under section 448(c)(3)(B) shall apply.'.
-
(b) Effective Date- The amendment made by this section
shall apply to amounts paid or incurred after the date of the enactment
of this Act.
SEC. 504. APPLICATION OF FIRPTA TO REGULATED INVESTMENT COMPANIES.
-
(a) In General- Subclause (II) of section 897(h)(4)(A)(i)
(defining qualified investment entity) is amended by inserting 'which
is a United States real property holding corporation or which would be
a United States real property holding corporation if the exceptions
provided in subsections (c)(3) and (h)(2) did not apply to interests in
any real estate investment trust or regulated investment company' after
'regulated investment company'.
-
(b) Effective Date- The amendment made by this section
shall take effect as if included in the provisions of section 411 of
the American Jobs Creation Act of 2004 to which it relates.
SEC. 505. TREATMENT OF DISTRIBUTIONS ATTRIBUTABLE TO FIRPTA GAINS.
-
(a) Qualified Investment Entity-
-
(1) IN GENERAL- Section 897(h)(1) is amended--
-
(A) by striking 'a nonresident alien individual or
a foreign corporation' in the first sentence and inserting 'a
nonresident alien individual, a foreign corporation, or other qualified
investment entity',
-
(B) by striking 'such nonresident alien individual
or foreign corporation' in the first sentence and inserting 'such
nonresident alien individual, foreign corporation, or other qualified
investment entity', and
-
(C) by striking the second sentence and inserting
the following new sentence: 'Notwithstanding the preceding sentence,
any distribution by a qualified investment entity to a nonresident
alien individual or a foreign corporation with respect to any class of
stock which is regularly traded on an established securities market
located in the United States shall not be treated as gain recognized
from the sale or exchange of a United States real property interest if
such individual or corporation did not own more than 5 percent of such
class of stock at any time during the 1-year period ending on the date
of such distribution.'.
-
(2) EXCEPTION TO TERMINATION OF APPLICATION OF SECTION
897 RULES TO REGULATED INVESTMENT COMPANIES- Clause (ii) of section
897(h)(4)(A) is amended by adding at the end the following new
sentence: 'Notwithstanding the preceding sentence, an entity described
in clause (i)(II) shall be treated as a qualified investment entity for
purposes of applying paragraphs (1) and (5) and section 1445 with
respect to any distribution by the entity to a nonresident alien
individual or a foreign corporation which is attributable directly or
indirectly to a distribution to the entity from a real estate
investment trust.'.
-
(b) Withholding on Distributions Treated as Gain From
United States Real Property Interests- Section 1445(e) (relating to
special rules for distributions, etc. by corporations, partnerships,
trusts, or estates) is amended by redesignating paragraph (6) as
paragraph (7) and by inserting after paragraph (5) the following new
paragraph:
-
'(6) DISTRIBUTIONS BY REGULATED INVESTMENT COMPANIES
AND REAL ESTATE INVESTMENT TRUSTS- If any portion of a distribution
from a qualified investment entity (as defined in section 897(h)(4)) to
a nonresident alien individual or a foreign corporation is treated
under section 897(h)(1) as gain realized by such individual or
corporation from the sale or exchange of a United States real property
interest, the qualified investment entity shall deduct and withhold
under subsection (a) a tax equal to 35 percent (or, to the extent
provided in regulations, 15 percent (20 percent in the case of taxable
years beginning after December 31, 2010)) of the amount so treated.'.
-
(c) Treatment of Certain Distributions as Dividends-
-
(1) IN GENERAL- Section 852(b)(3) (relating to capital gains) is
amended by adding at the end the following new subparagraph:
-
'(E) CERTAIN DISTRIBUTIONS- In the case of a
distribution to which section 897 does not apply by reason of the
second sentence of section 897(h)(1), the amount of such distribution
which would be included in computing long-term capital gains for the
shareholder under subparagraph (B) or (D) (without regard to this
subparagraph)--
-
'(i) shall not be included in computing such shareholder's long-term
capital gains, and
-
'(ii) shall be included in such shareholder's gross income as a
dividend from the regulated investment company.'.
-
(2) CONFORMING AMENDMENT- Section 871(k)(2) (relating
to short-term capital gain dividends) is amended by adding at the end
the following new subparagraph:
-
'(E) CERTAIN DISTRIBUTIONS- In the case of a
distribution to which section 897 does not apply by reason of the
second sentence of section 897(h)(1), the amount which would be treated
as a short-term capital gain dividend to the shareholder (without
regard to this subparagraph)--
-
'(i) shall not be treated as a short-term capital gain dividend, and
-
'(ii) shall be included in such shareholder's gross income as a
dividend from the regulated investment company.'.
-
(d) Effective Dates- The amendments made by this section
shall apply to taxable years of qualified investment entities beginning
after December 31, 2005, except that no amount shall be required to be
withheld under section 1441, 1442, or 1445 of the Internal Revenue Code
of 1986 with respect to any distribution before the date of the
enactment of this Act if such amount was not otherwise required to be
withheld under any such section as in effect before such amendments.
SEC. 506. PREVENTION OF AVOIDANCE OF TAX ON INVESTMENTS OF FOREIGN PERSONS IN UNITED STATES REAL PROPERTY THROUGH WASH SALE TRANSACTIONS.
-
(a) In General- Section 897(h) (relating to special rules
for certain investment entities) is amended by adding at the end the
following new paragraph:
-
'(5) TREATMENT OF CERTAIN WASH SALE TRANSACTIONS-
-
'(A) IN GENERAL- If an interest in a domestically
controlled qualified investment entity is disposed of in an applicable
wash sale transaction, the taxpayer shall, for purposes of this
section, be treated as having gain from the sale or exchange of a
United States real property interest in an amount equal to the portion
of the distribution described in subparagraph (B) with respect to such
interest which, but for the disposition, would have been treated by the
taxpayer as gain from the sale or exchange of a United States real
property interest under paragraph (1).
-
'(B) APPLICABLE WASH SALES TRANSACTION- For purposes of this
paragraph--
-
'(i) IN GENERAL- The term 'applicable wash
sales transaction' means any transaction (or series of transactions)
under which a nonresident alien individual, foreign corporation, or
qualified investment entity--
-
'(I) disposes of an interest in a
domestically controlled qualified investment entity during the 30-day
period preceding the ex-dividend date of a distribution which is to be
made with respect to the interest and any portion of which, but for the
disposition, would have been treated by the taxpayer as gain from the
sale or exchange of a United States real property interest under
paragraph (1), and
-
'(II) acquires, or enters into a contract
or option to acquire, a substantially identical interest in such entity
during the 61-day period beginning with the 1st day of the 30-day
period described in subclause (I).
-
For purposes of subclause (II), a nonresident
alien individual, foreign corporation, or qualified investment entity
shall be treated as having acquired any interest acquired by a person
related (within the meaning of section 267(b) or 707(b)(1)) to the
individual, corporation, or entity, and any interest which such person
has entered into any contract or option to acquire.
-
'(ii) APPLICATION TO SUBSTITUTE DIVIDEND AND SIMILAR PAYMENTS-
Subparagraph (A) shall apply to--
-
'(I) any substitute dividend payment (within the meaning of section
861), or
-
'(II) any other similar payment specified
in regulations which the Secretary determines necessary to prevent
avoidance of the purposes of this paragraph.
-
The portion of any such payment treated by the
taxpayer as gain from the sale or exchange of a United States real
property interest under subparagraph (A) by reason of this clause shall
be equal to the portion of the distribution such payment is in lieu of
which would have been so treated but for the transaction giving rise to
such payment.
-
'(iii) EXCEPTION WHERE DISTRIBUTION ACTUALLY
RECEIVED- A transaction shall not be treated as an applicable wash
sales transaction if the nonresident alien individual, foreign
corporation, or qualified investment entity receives the distribution
described in clause (i)(I) with respect to either the interest which
was disposed of, or acquired, in the transaction.
-
'(iv) EXCEPTION FOR CERTAIN PUBLICLY TRADED
STOCK- A transaction shall not be treated as an applicable wash sales
transaction if it involves the disposition of any class of stock in a
qualified investment entity which is regularly traded on an established
securities market within the United States but only if the nonresident
alien individual, foreign corporation, or qualified investment entity
did not own more than 5 percent of such class of stock at any time
during the 1-year period ending on the date of the distribution
described in clause (i)(I).'.
-
(b) No Withholding Required- Section 1445(b) (relating to
exemptions) is amended by adding at the end the following new
paragraph:
-
'(8) APPLICABLE WASH SALES TRANSACTIONS- No person
shall be required to deduct and withhold any amount under subsection
(a) with respect to a disposition which is treated as a disposition of
a United States real property interest solely by reason of section
897(h)(5).'.
-
(c) Effective Date- The amendments made by this section
shall apply to taxable years beginning after December 31, 2005, except
that such amendments shall not apply to any distribution, or substitute
dividend payment, occurring before the date that is 30 days after the
date of the enactment of this Act.
SEC. 507. SECTION 355 NOT TO APPLY TO DISTRIBUTIONS INVOLVING DISQUALIFIED INVESTMENT COMPANIES.
-
(a) In General-
-
Section 355 (relating to distributions of stock and
securities of a controlled corporation) is amended by adding at the end
the following new subsection:
-
'(g) Section Not to Apply to Distributions Involving Disqualified
Investment Corporations-
-
'(1) IN GENERAL- This section (and so much of section
356 as relates to this section) shall not apply to any distribution
which is part of a transaction if--
-
'(A) either the distributing corporation or
controlled corporation is, immediately after the transaction, a
disqualified investment corporation, and
-
'(B) any person holds, immediately after the
transaction, a 50-percent or greater interest in any disqualified
investment corporation, but only if such person did not hold such an
interest in such corporation immediately before the transaction.
-
'(2) DISQUALIFIED INVESTMENT CORPORATION- For purposes of this
subsection--
-
'(A) IN GENERAL- The term 'disqualified investment
corporation' means any distributing or controlled corporation if the
fair market value of the investment assets of the corporation is--
-
'(i) in the case of distributions after the end
of the 1-year period beginning on the date of the enactment of this
subsection, 2/3 or more of the fair market value of all assets of the
corporation, and
-
'(ii) in the case of distributions during such
1-year period, 3/4 or more of the fair market value of all assets of
the corporation.
-
'(B) INVESTMENT ASSETS-
-
'(i) IN GENERAL- Except as otherwise provided in this subparagraph, the
term 'investment assets' means--
-
'(I) cash,
-
'(II) any stock or securities in a corporation,
-
'(III) any interest in a partnership,
-
'(IV) any debt instrument or other evidence of indebtedness,
-
'(V) any option, forward or futures contract, notional principal
contract, or derivative,
-
'(VI) foreign currency, or
-
'(VII) any similar asset.
-
'(ii) EXCEPTION FOR ASSETS USED IN ACTIVE
CONDUCT OF CERTAIN FINANCIAL TRADES OR BUSINESSES- Such term shall not
include any asset which is held for use in the active and regular
conduct of--
-
'(I) a lending or finance business (within the meaning of section
954(h)(4)),
-
'(II) a banking business through a bank (as
defined in section 581), a domestic building and loan association
(within the meaning of section 7701(a)(19)), or any similar institution
specified by the Secretary, or
-
'(III) an insurance business if the conduct
of the business is licensed, authorized, or regulated by an applicable
insurance regulatory body.
-
This clause shall only apply with respect to any
business if substantially all of the income of the business is derived
from persons who are not related (within the meaning of section 267(b)
or 707(b)(1)) to the person conducting the business.
-
'(iii) EXCEPTION FOR SECURITIES MARKED TO
MARKET- Such term shall not include any security (as defined in section
475(c)(2)) which is held by a dealer in securities and to which section
475(a) applies.
-
'(iv) STOCK OR SECURITIES IN A 20-PERCENT CONTROLLED ENTITY-
-
'(I) IN GENERAL- Such term shall not
include any stock and securities in, or any asset described in
subclause (IV) or (V) of clause (i) issued by, a corporation which is a
20-percent controlled entity with respect to the distributing or
controlled corporation.
-
'(II) LOOK-THRU RULE- The distributing or
controlled corporation shall, for purposes of applying this subsection,
be treated as owning its ratable share of the assets of any 20-percent
controlled entity.
-
'(III) 20-PERCENT CONTROLLED ENTITY- For
purposes of this clause, the term '20-percent controlled entity' means,
with respect to any distributing or controlled corporation, any
corporation with respect to which the distributing or controlled
corporation owns directly or indirectly stock meeting the requirements
of section 1504(a)(2), except that such section shall be applied by
substituting '20 percent' for '80 percent' and without regard to stock
described in section 1504(a)(4).
-
'(v) INTERESTS IN CERTAIN PARTNERSHIPS-
-
'(I) IN GENERAL- Such term shall not
include any interest in a partnership, or any debt instrument or other
evidence of indebtedness, issued by the partnership, if 1 or more of
the trades or businesses of the partnership are (or, without regard to
the 5-year requirement under subsection (b)(2)(B), would be) taken into
account by the distributing or controlled corporation, as the case may
be, in determining whether the requirements of subsection (b) are met
with respect to the distribution.
-
'(II) LOOK-THRU RULE- The distributing or
controlled corporation shall, for purposes of applying this subsection,
be treated as owning its ratable share of the assets of any partnership
described in subclause (I).
-
'(3) 50-PERCENT OR GREATER INTEREST- For purposes of this subsection--
-
'(A) IN GENERAL- The term '50-percent or greater interest' has the
meaning given such term by subsection (d)(4).
-
'(B) ATTRIBUTION RULES- The rules of section 318
shall apply for purposes of determining ownership of stock for purposes
of this paragraph.
-
'(4) TRANSACTION- For purposes of this subsection, the term
'transaction' includes a series of transactions.
-
'(5) REGULATIONS- The Secretary shall prescribe such
regulations as may be necessary to carry out, or prevent the avoidance
of, the purposes of this subsection, including regulations--
-
'(A) to carry out, or prevent the avoidance of, the purposes of this
subsection in cases involving--
-
'(i) the use of related persons, intermediaries, pass-thru entities,
options, or other arrangements, and
-
'(ii) the treatment of assets unrelated to the
trade or business of a corporation as investment assets if, prior to
the distribution, investment assets were used to acquire such unrelated
assets,
-
'(B) which in appropriate cases exclude from the
application of this subsection a distribution which does not have the
character of a redemption which would be treated as a sale or exchange
under section 302, and
-
'(C) which modify the application of the attribution rules applied for
purposes of this subsection.'.
-
(b) Effective Dates-
-
(1) IN GENERAL- The amendments made by this section shall apply to
distributions after the date of the enactment of this Act.
-
(2) TRANSITION RULE- The amendments made by this
section shall not apply to any distribution pursuant to a transaction
which is--
-
(A) made pursuant to an agreement which was binding on such date of
enactment and at all times thereafter,
-
(B) described in a ruling request submitted to the Internal Revenue
Service on or before such date, or
-
(C) described on or before such date in a public announcement or in a
filing with the Securities and Exchange Commission.
SEC. 508. LOAN AND REDEMPTION REQUIREMENTS ON POOLED FINANCING REQUIREMENTS.
-
(a) Strengthened Reasonable Expectation Requirement-
Subparagraph (A) of section 149(f)(2) (relating to reasonable
expectation requirement) is amended to read as follows:
-
'(A) IN GENERAL- The requirements of this paragraph are met with
respect to an issue if the issuer reasonably expects that--
-
'(i) as of the close of the 1-year period
beginning on the date of issuance of the issue, at least 30 percent of
the net proceeds of the issue (as of the close of such period) will
have been used directly or indirectly to make or finance loans to
ultimate borrowers, and
-
'(ii) as of the close of the 3-year period
beginning on such date of issuance, at least 95 percent of the net
proceeds of the issue (as of the close of such period) will have been
so used.'.
-
(b) Written Loan Commitment and Redemption Requirements-
Section 149(f) (relating to treatment of certain pooled financing
bonds) is amended by redesignating paragraphs (4) and (5) as paragraphs
(6) and (7), respectively, and by inserting after paragraph (3) the
following new paragraphs:
-
'(4) WRITTEN LOAN COMMITMENT REQUIREMENT-
-
'(A) IN GENERAL- The requirement of this paragraph
is met with respect to an issue if the issuer receives prior to
issuance written loan commitments identifying the ultimate potential
borrowers of at least 30 percent of the net proceeds of such issue.
-
'(B) EXCEPTION- Subparagraph (A) shall not apply with respect to any
issuer which--
-
'(i) is a State (or an integral part of a
State) issuing pooled financing bonds to make or finance loans to
subordinate governmental units of such State, or
-
'(ii) is a State-created entity providing
financing for water-infrastructure projects through the
federally-sponsored State revolving fund program.
-
'(5) REDEMPTION REQUIREMENT- The requirement of this
paragraph is met if to the extent that less than the percentage of the
proceeds of an issue required to be used under clause (i) or (ii) of
paragraph (2)(A) is used by the close of the period identified in such
clause, the issuer uses an amount of proceeds equal to the excess of--
-
'(A) the amount required to be used under such clause, over
-
'(B) the amount actually used by the close of such period,
-
to redeem outstanding bonds within 90 days after the end of such
period.'.
-
(c) Elimination of Disregard of Pooled Bonds in Determining
Eligibility for Small Issuer Exception to Arbitrage Rebate- Section
148(f)(4)(D)(ii) (relating to aggregation of issuers) is amended by
striking subclause (II) and by redesignating subclauses (III) and (IV)
as subclauses (II) and (III), respectively.
-
(d) Conforming Amendments-
-
(1) Section 149(f)(1) is amended by striking 'paragraphs (2) and (3)'
and inserting 'paragraphs (2), (3), (4), and (5)'.
-
(2) Section 149(f)(7)(B), as redesignated by subsection
(b), is amended by striking 'paragraph (4)(A)' and inserting 'paragraph
(6)(A)'.
-
(3) Section 54(l)(2) is amended by striking 'section 149(f)(4)(A)' and
inserting 'section 149(f)(6)(A)'.
-
(e) Effective Date- The amendments made by this section
shall apply to bonds issued after the date of the enactment of this
Act.
SEC. 509. PARTIAL PAYMENTS REQUIRED WITH SUBMISSION OF OFFERS-IN-COMPROMISE.
-
(a) In General- Section 7122 (relating to compromises) is
amended by redesignating subsections (c) and (d) as subsections (d) and
(e), respectively, and by inserting after subsection (b) the following
new subsection:
-
'(c) Rules for Submission of Offers-in-Compromise-
-
'(1) PARTIAL PAYMENT REQUIRED WITH SUBMISSION-
-
'(A) LUMP-SUM OFFERS-
-
'(i) IN GENERAL- The submission of any lump-sum
offer-in-compromise shall be accompanied by the payment of 20 percent
of the amount of such offer.
-
'(ii) LUMP-SUM OFFER-IN-COMPROMISE- For
purposes of this section, the term 'lump-sum offer-in-compromise' means
any offer of payments made in 5 or fewer installments.
-
'(B) PERIODIC PAYMENT OFFERS-
-
'(i) IN GENERAL- The submission of any periodic
payment offer-in-compromise shall be accompanied by the payment of the
amount of the first proposed installment.
-
'(ii) FAILURE TO MAKE INSTALLMENT DURING
PENDENCY OF OFFER- Any failure to make an installment (other than the
first installment) due under such offer-in-compromise during the period
such offer is being evaluated by the Secretary may be treated by the
Secretary as a withdrawal of such offer-in-compromise.
-
'(2) RULES OF APPLICATION-
-
'(A) USE OF PAYMENT- The application of any payment
made under this subsection to the assessed tax or other amounts imposed
under this title with respect to such tax may be specified by the
taxpayer.
-
'(B) APPLICATION OF USER FEE- In the case of any
assessed tax or other amounts imposed under this title with respect to
such tax which is the subject of an offer-in-compromise to which this
subsection applies, such tax or other amounts shall be reduced by any
user fee imposed under this title with respect to such
offer-in-compromise.
-
'(C) WAIVER AUTHORITY- The Secretary may issue
regulations waiving any payment required under paragraph (1) in a
manner consistent with the practices established in accordance with the
requirements under subsection (d)(3).'.
-
(b) Additional Rules Relating to Treatment of Offers-
-
(1) UNPROCESSABLE OFFER IF PAYMENT REQUIREMENTS ARE NOT
MET- Paragraph (3) of section 7122(d) (relating to standards for
evaluation of offers), as redesignated by subsection (a), is amended by
striking '; and' at the end of subparagraph (A) and inserting a comma,
by striking the period at the end of subparagraph (B) and inserting ',
and', and by adding at the end the following new subparagraph:
-
'(C) any offer-in-compromise which does not meet
the requirements of subparagraph (A)(i) or (B)(i), as the case may be,
of subsection (c)(1) may be returned to the taxpayer as
unprocessable.'.
-
(2) DEEMED ACCEPTANCE OF OFFER NOT REJECTED WITHIN
CERTAIN PERIOD- Section 7122, as amended by subsection (a), is amended
by adding at the end the following new subsection:
-
'(f) Deemed Acceptance of Offer Not Rejected Within Certain
Period- Any offer-in-compromise submitted under this section shall be
deemed to be accepted by the Secretary if such offer is not rejected by
the Secretary before the date which is 24 months after the date of the
submission of such offer. For purposes of the preceding sentence, any
period during which any tax liability which is the subject of such
offer-in-compromise is in dispute in any judicial proceeding shall not
be taken into account in determining the expiration of the 24-month
period.'.
-
(c) Conforming Amendment- Section 6159(f) is amended by striking
'section 7122(d)' and inserting 'section 7122(e)'.
-
(d) Effective Date- The amendments made by this section
shall apply to offers-in-compromise submitted on and after the date
which is 60 days after the date of the enactment of this Act.
SEC. 510. INCREASE IN AGE OF MINOR CHILDREN WHOSE UNEARNED INCOME IS TAXED AS IF PARENT'S INCOME.
-
(a) In General- Section 1(g)(2)(A) (relating to child to
whom subsection applies) is amended by striking 'age 14' and inserting
'age 18'.
-
(b) Treatment of Distributions From Qualified Disability
Trusts- Section 1(g)(4) (relating to net unearned income) is amended by
adding at the end the following new subparagraph:
-
'(C) TREATMENT OF DISTRIBUTIONS FROM QUALIFIED
DISABILITY TRUSTS- For purposes of this subsection, in the case of any
child who is a beneficiary of a qualified disability trust (as defined
in section 642(b)(2)(C)(ii)), any amount included in the income of such
child under sections 652 and 662 during a taxable year shall be
considered earned income of such child for such taxable year.'.
-
(c) Conforming Amendment- Section 1(g)(2) 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 inserting
after subparagraph (B) the following new subparagraph:
-
'(C) such child does not file a joint return for the taxable year.'.
-
(d) Effective Date- The amendments made by this section shall apply to
taxable years beginning after December 31, 2005.
SEC. 511. IMPOSITION OF WITHHOLDING ON CERTAIN PAYMENTS MADE BY GOVERNMENT ENTITIES.
-
(a) In General- Section 3402 is amended by adding at the end the
following new subsection:
-
'(t) Extension of Withholding to Certain Payments Made by Government
Entities-
-
'(1) GENERAL RULE- The Government of the United States,
every State, every political subdivision thereof, and every
instrumentality of the foregoing (including multi-State agencies)
making any payment to any person providing any property or services
(including any payment made in connection with a government voucher or
certificate program which functions as a payment for property or
services) shall deduct and withhold from such payment a tax in an
amount equal to 3 percent of such payment.
-
'(2) PROPERTY AND SERVICES SUBJECT TO WITHHOLDING- Paragraph (1) shall
not apply to any payment--
-
'(A) except as provided in subparagraph (B), which
is subject to withholding under any other provision of this chapter or
chapter 3,
-
'(B) which is subject to withholding under section 3406 and from which
amounts are being withheld under such section,
-
'(C) of interest,
-
'(D) for real property,
-
'(E) to any governmental entity subject to the
requirements of paragraph (1), any tax-exempt entity, or any foreign
government,
-
'(F) made pursuant to a classified or confidential contract described
in section 6050M(e)(3),
-
'(G) made by a political subdivision of a State (or
any instrumentality thereof) which makes less than $100,000,000 of such
payments annually,
-
'(H) which is in connection with a public
assistance or public welfare program for which eligibility is
determined by a needs or income test, and
-
'(I) to any government employee not otherwise excludable with respect
to their services as an employee.
-
'(3) COORDINATION WITH OTHER SECTIONS- For purposes of
sections 3403 and 3404 and for purposes of so much of subtitle F
(except section 7205) as relates to this chapter, payments to any
person for property or services which are subject to withholding shall
be treated as if such payments were wages paid by an employer to an
employee.'.
-
(b) Effective Date- The amendment made by this section shall apply to
payments made after December 31, 2010.
SEC. 512. CONVERSIONS TO ROTH IRAS.
-
(a) Repeal of Income Limitations-
-
(1) IN GENERAL- Paragraph (3) of section 408A(c)
(relating to limits based on modified adjusted gross income) is amended
by striking subparagraph (B) and redesignating subparagraphs (C) and
(D) as subparagraphs (B) and (C), respectively.
-
(2) CONFORMING AMENDMENT- Clause (i) of section
408A(c)(3)(B) (as redesignated by paragraph (1)) is amended by striking
'except that--' and all that follows and inserting 'except that any
amount included in gross income under subsection (d)(3) shall not be
taken into account, and'.
-
(b) Rollovers to a Roth IRA From an IRA Other Than a Roth IRA-
-
(1) IN GENERAL- Clause (iii) of section 408A(d)(3)(A)
(relating to rollovers from an IRA other than a Roth IRA) is amended to
read as follows:
-
'(iii) unless the taxpayer elects not to have
this clause apply, any amount required to be included in gross income
for any taxable year beginning in 2010 by reason of this paragraph
shall be so included ratably over the 2-taxable-year period beginning
with the first taxable year beginning in 2011.'.
-
(2) CONFORMING AMENDMENTS-
-
(A) Clause (i) of section 408A(d)(3)(E) is amended to read as follows:
-
'(i) ACCELERATION OF INCLUSION-
-
'(I) IN GENERAL- The amount otherwise
required to be included in gross income for any taxable year beginning
in 2010 or the first taxable year in the 2-year period under
subparagraph (A)(iii) shall be increased by the aggregate distributions
from Roth IRAs for such taxable year which are allocable under
paragraph (4) to the portion of such qualified rollover contribution
required to be included in gross income under subparagraph (A)(i).
-
'(II) LIMITATION ON AGGREGATE AMOUNT
INCLUDED- The amount required to be included in gross income for any
taxable year under subparagraph (A)(iii) shall not exceed the aggregate
amount required to be included in gross income under subparagraph
(A)(iii) for all taxable years in the 2-year period (without regard to
subclause (I)) reduced by amounts included for all preceding taxable
years.'.
-
(B) The heading for section 408A(d)(3)(E) is amended by striking
'4-YEAR' and inserting '2-YEAR'.
-
(c) Effective Date- The amendments made by this section shall apply to
taxable years beginning after December 31, 2009.
SEC. 513. REPEAL OF FSC/ETI BINDING CONTRACT RELIEF.
-
(a) FSC Provisions- Paragraph (1) of section 5(c) of the
FSC Repeal and Extraterritorial Income Exclusion Act of 2000 is amended
by striking 'which occurs--' and all that follows and inserting 'which
occurs before January 1, 2002.'.
-
(b) ETI Provisions- Section 101 of the American Jobs Creation Act of
2004 is amended by striking subsection (f).
-
(c) Effective Date- The amendments made by this section
shall apply to taxable years beginning after the date of the enactment
of this Act.
SEC. 514. ONLY WAGES ATTRIBUTABLE TO DOMESTIC PRODUCTION TAKEN INTO ACCOUNT IN DETERMINING DEDUCTION FOR DOMESTIC PRODUCTION.
-
(a) In General- Paragraph (2) of section 199(b) (relating to W-2 wages)
is amended to read as follows:
-
'(2) W-2 WAGES- For purposes of this section--
-
'(A) IN GENERAL- The term 'W-2 wages' means, with
respect to any person for any taxable year of such person, the sum of
the amounts described in paragraphs (3) and (8) of section 6051(a) paid
by such person with respect to employment of employees by such person
during the calendar year ending during such taxable year.
-
'(B) LIMITATION TO WAGES ATTRIBUTABLE TO DOMESTIC
PRODUCTION- Such term shall not include any amount which is not
properly allocable to domestic production gross receipts for purposes
of subsection (c)(1).
-
'(C) RETURN REQUIREMENT- Such term shall not
include any amount which is not properly included in a return filed
with the Social Security Administration on or before the 60th day after
the due date (including extensions) for such return.'.
-
(b) Simplification of Rules for Determining W-2 Wages of Partners and S
Corporation Shareholders-
-
(1) IN GENERAL- Clause (iii) of section 199(d)(1)(A) is amended to read
as follows:
-
'(iii) each partner or shareholder shall be
treated for purposes of subsection (b) as having W-2 wages for the
taxable year in an amount equal to such person's allocable share of the
W-2 wages of the partnership or S corporation for the taxable year (as
determined under regulations prescribed by the Secretary).'.
-
(2) CONFORMING AMENDMENT- Paragraph (2) of section 199(a) is amended by
striking 'and subsection (d)(1)'.
-
(c) Effective Date- The amendments made by this section
shall apply to taxable years beginning after the date of the enactment
of this Act.
SEC. 515. MODIFICATION OF EXCLUSION FOR CITIZENS LIVING ABROAD.
-
(a) Inflation Adjustment of Foreign Earned Income
Limitation- Clause (ii) of section 911(b)(2)(D) (relating to inflation
adjustment) is amended--
-
(1) by striking '2007' and inserting '2005', and
-
(2) by striking '2006' in subclause (II) and inserting '2004'.
-
(b) Modification of Housing Cost Amount-
-
(1) MODIFICATION OF HOUSING COST FLOOR- Clause (i) of section
911(c)(1)(B) is amended to read as follows:
-
'(i) 16 percent of the amount (computed on a
daily basis) in effect under subsection (b)(2)(D) for the calendar year
in which such taxable year begins, multiplied by'.
-
(2) MAXIMUM AMOUNT OF EXCLUSION-
-
(A) IN GENERAL- Subparagraph (A) of section
911(c)(1) is amended by inserting 'to the extent such expenses do not
exceed the amount determined under paragraph (2)' after 'the taxable
year'.
-
(B) LIMITATION- Subsection (c) of section 911 is
amended by redesignating paragraphs (2) and (3) as paragraphs (3) and
(4), respectively, and by inserting after paragraph (1) the following
new paragraph:
-
'(2) LIMITATION-
-
'(A) IN GENERAL- The amount determined under this paragraph is an
amount equal to the product of--
-
'(i) 30 percent (adjusted as may be provided
under subparagraph (B)) of the amount (computed on a daily basis) in
effect under subsection (b)(2)(D) for the calendar year in which the
taxable year of the individual begins, multiplied by
-
'(ii) the number of days of such taxable year
within the applicable period described in subparagraph (A) or (B) of
subsection (d)(1).
-
'(B) REGULATIONS- The Secretary may issue
regulations or other guidance providing for the adjustment of the
percentage under subparagraph (A)(i) on the basis of geographic
differences in housing costs relative to housing costs in the United
States.'.
-
(C) CONFORMING AMENDMENTS-
-
(i) Section 911(d)(4) is amended by striking 'and (c)(1)(B)(ii)' and
inserting ', (c)(1)(B)(ii), and (c)(2)(A)(ii)'.
-
(ii) Section 911(d)(7) is amended by striking 'subsection (c)(3)' and
inserting 'subsection (c)(4)'.
-
(c) Rates of Tax Applicable to Nonexcluded Income- Section
911 (relating to exclusion of certain income of citizens and residents
of the United States living abroad) is amended by redesignating
subsection (f) as subsection (g) and by inserting after subsection (e)
the following new subsection:
-
'(f) Determination of Tax Liability on Nonexcluded Amounts-
For purposes of this chapter, if any amount is excluded from the gross
income of a taxpayer under subsection (a) for any taxable year, then,
notwithstanding section 1 or 55--
-
'(1) the tax imposed by section 1 on the taxpayer for such taxable year
shall be equal to the excess (if any) of--
-
'(A) the tax which would be imposed by section 1
for the taxable year if the taxpayer's taxable income were increased by
the amount excluded under subsection (a) for the taxable year, over
-
'(B) the tax which would be imposed by section 1
for the taxable year if the taxpayer's taxable income were equal to the
amount excluded under subsection (a) for the taxable year, and
-
'(2) the tentative minimum tax under section 55 for such taxable year
shall be equal to the excess (if any) of--
-
'(A) the amount which would be such tentative
minimum tax for the taxable year if the taxpayer's taxable excess were
increased by the amount excluded under subsection (a) for the taxable
year, over
-
'(B) the amount which would be such tentative
minimum tax for the taxable year if the taxpayer's taxable excess were
equal to the amount excluded under subsection (a) for the taxable year.
-
For purposes of this subsection, the amount excluded under
subsection (a) shall be reduced by the aggregate amount of any
deductions or exclusions disallowed under subsection (d)(6) with
respect to such excluded amount.'.
-
(d) Effective Date- The amendments made by this section shall apply to
taxable years beginning after December 31, 2005.
SEC. 516. TAX INVOLVEMENT OF ACCOMMODATION PARTIES IN TAX SHELTER TRANSACTIONS.
-
(a) Imposition of Excise Tax-
-
(1) IN GENERAL- Chapter 42 (relating to private
foundations and certain other tax-exempt organizations) is amended by
adding at the end the following new subchapter:
'Subchapter F--Tax Shelter Transactions
-
'Sec. 4965. Excise tax on certain tax-exempt entities entering into
prohibited tax shelter transactions.
'SEC. 4965. EXCISE TAX ON CERTAIN TAX-EXEMPT ENTITIES ENTERING INTO PROHIBITED TAX SHELTER TRANSACTIONS.
-
'(a) Being a Party to and Approval of Prohibited Transactions-
-
'(1) TAX-EXEMPT ENTITY-
-
'(A) IN GENERAL- If a transaction is a prohibited
tax shelter transaction at the time any tax-exempt entity described in
paragraph (1), (2), or (3) of subsection (c) becomes a party to the
transaction, such entity shall pay a tax for the taxable year in which
the entity becomes such a party and any subsequent taxable year in the
amount determined under subsection (b)(1).
-
'(B) POST-TRANSACTION DETERMINATION- If any
tax-exempt entity described in paragraph (1), (2), or (3) of subsection
(c) is a party to a subsequently listed transaction at any time during
a taxable year, such entity shall pay a tax for such taxable year in
the amount determined under subsection (b)(1).
-
'(2) ENTITY MANAGER- If any entity manager of a
tax-exempt entity approves such entity as (or otherwise causes such
entity to be) a party to a prohibited tax shelter transaction at any
time during the taxable year and knows or has reason to know that the
transaction is a prohibited tax shelter transaction, such manager shall
pay a tax for such taxable year in the amount determined under
subsection (b)(2).
-
'(b) Amount of Tax-
-
'(1) ENTITY- In the case of a tax-exempt entity--
-
'(A) IN GENERAL- Except as provided in subparagraph
(B), the amount of the tax imposed under subsection (a)(1) with respect
to any transaction for a taxable year shall be an amount equal to the
product of the highest rate of tax under section 11, and the greater
of--
-
'(i) the entity's net income (after taking into
account any tax imposed by this subtitle (other than by this section)
with respect to such transaction) for such taxable year which--
-
'(I) in the case of a prohibited tax
shelter transaction (other than a subsequently listed transaction), is
attributable to such transaction, or
-
'(II) in the case of a subsequently listed
transaction, is attributable to such transaction and which is properly
allocable to the period beginning on the later of the date such
transaction is identified by guidance as a listed transaction by the
Secretary or the first day of the taxable year, or
-
'(ii) 75 percent of the proceeds received by the entity for the taxable
year which--
-
'(I) in the case of a prohibited tax
shelter transaction (other than a subsequently listed transaction), are
attributable to such transaction, or
-
'(II) in the case of a subsequently listed
transaction, are attributable to such transaction and which are
properly allocable to the period beginning on the later of the date
such transaction is identified by guidance as a listed transaction by
the Secretary or the first day of the taxable year.
-
'(B) INCREASE IN TAX FOR CERTAIN KNOWING
TRANSACTIONS- In the case of a tax-exempt entity which knew, or had
reason to know, a transaction was a prohibited tax shelter transaction
at the time the entity became a party to the transaction, the amount of
the tax imposed under subsection (a)(1)(A) with respect to any
transaction for a taxable year shall be the greater of--
-
'(i) 100 percent of the entity's net income
(after taking into account any tax imposed by this subtitle (other than
by this section) with respect to the prohibited tax shelter
transaction) for such taxable year which is attributable to the
prohibited tax shelter transaction, or
-
'(ii) 75 percent of the proceeds received by
the entity for the taxable year which are attributable to the
prohibited tax shelter transaction.
-
This subparagraph shall not apply to any prohibited
tax shelter transaction to which a tax-exempt entity became a party on
or before the date of the enactment of this section.
-
'(2) ENTITY MANAGER- In the case of each entity
manager, the amount of the tax imposed under subsection (a)(2) shall be
$20,000 for each approval (or other act causing participation)
described in subsection (a)(2).
-
'(c) Tax-Exempt Entity- For purposes of this section, the term
'tax-exempt entity' means an entity which is--
-
'(1) described in section 501(c) or 501(d),
-
'(2) described in section 170(c) (other than the United States),
-
'(3) an Indian tribal government (within the meaning of section
7701(a)(40)),
-
'(4) described in paragraph (1), (2), or (3) of section 4979(e),
-
'(5) a program described in section 529,
-
'(6) an eligible deferred compensation plan described
in section 457(b) which is maintained by an employer described in
section 4457(e)(1)(A), or
-
'(7) an arrangement described in section 4973(a).
-
'(d) Entity Manager- For purposes of this section, the term 'entity
manager' means--
-
'(1) in the case of an entity described in paragraph (1), (2), or (3)
of subsection (c)--
-
'(A) the person with authority or responsibility
similar to that exercised by an officer, director, or trustee of an
organization, and
-
'(B) with respect to any act, the person having authority or
responsibility with respect to such act, and
-
'(2) in the case of an entity described in paragraph
(4), (5), (6), or (7) of subsection (c), the person who approves or
otherwise causes the entity to be a party to the prohibited tax shelter
transaction.
-
'(e) Prohibited Tax Shelter Transaction; Subsequently Listed
Transaction- For purposes of this section--
-
'(1) PROHIBITED TAX SHELTER TRANSACTION-
-
'(A) IN GENERAL- The term 'prohibited tax shelter transaction' means--
-
'(i) any listed transaction, and
-
'(ii) any prohibited reportable transaction.
-
'(B) LISTED TRANSACTION- The term 'listed transaction' has the meaning
given such term by section 6707A(c)(2).
-
'(C) PROHIBITED REPORTABLE TRANSACTION- The term 'prohibited reportable
transaction' means any confidential transaction
or any transaction with contractual protection (as defined under
regulations prescribed by the Secretary) which is a reportable
transaction (as defined in section 6707A(c)(1)).
-
'(2) SUBSEQUENTLY LISTED TRANSACTION- The term 'subsequently listed
transaction' means any transaction to which a
tax-exempt entity is a party and which is determined by the Secretary
to be a listed transaction at any time after the entity has become a
party to the transaction. Such term shall not include a transaction
which is a prohibited reportable transaction at the time the entity
became a party to the transaction.
-
'(f) Regulatory Authority- The Secretary is authorized to
promulgate regulations which provide guidance regarding the
determination of the allocation of net income or proceeds of a
tax-exempt entity attributable to a transaction to various periods,
including before and after the listing of the transaction or the date
which is 90 days after the date of the enactment of this section.
-
'(g) Coordination With Other Taxes and Penalties- The tax
imposed by this section is in addition to any other tax, addition to
tax, or penalty imposed under this title.'.
-
(2) CONFORMING AMENDMENT- The table of subchapters for chapter 42 is
amended by adding at the end the following new item:
'SUBCHAPTER F. TAX SHELTER TRANSACTIONS.'.
-
(b) Disclosure Requirements-
-
(1) DISCLOSURE BY ENTITY TO THE INTERNAL REVENUE SERVICE-
-
(A) IN GENERAL- Section 6033(a) (relating to
organizations required to file) is amended by redesignating paragraph
(2) as paragraph (3) and by inserting after paragraph (1) the following
new paragraph:
-
'(2) BEING A PARTY TO CERTAIN REPORTABLE TRANSACTIONS-
Every tax-exempt entity described in section 4965(c) shall file (in
such form and manner and at such time as determined by the Secretary) a
disclosure of--
-
'(A) such entity's being a party to any prohibited tax shelter
transaction (as defined in section 4965(e)), and
-
'(B) the identity of any other party to such transaction which is known
by such tax-exempt entity.'.
-
(B) CONFORMING AMENDMENT- Section 6033(a)(1) is amended by striking
'paragraph (2)' and inserting 'paragraph (3)'.
-
(2) DISCLOSURE BY OTHER TAXPAYERS TO THE TAX-EXEMPT
ENTITY- Section 6011 (relating to general requirement of return,
statement, or list) is amended by redesignating subsection (g) as
subsection (h) and by inserting after subsection (f) the following new
subsection:
-
'(g) Disclosure of Reportable Transaction to Tax-Exempt
Entity- Any taxable party to a prohibited tax shelter transaction (as
defined in section 4965(e)(1)) shall by statement disclose to any
tax-exempt entity (as defined in section 4965(c)) which is a party to
such transaction that such transaction is such a prohibited tax shelter
transaction.'.
-
(c) Penalty for Nondisclosure-
-
(1) IN GENERAL- Section 6652(c) (relating to returns by
exempt organizations and by certain trusts) is amended by redesignating
paragraphs (3) and (4) as paragraphs (4) and (5), respectively, and by
inserting after paragraph (2) the following new paragraph:
-
'(3) DISCLOSURE UNDER SECTION 6033(a)(2)-
-
'(A) PENALTY ON ENTITIES- In the case of a failure
to file a disclosure required under section 6033(a)(2), there shall be
paid by the tax-exempt entity (the entity manager in the case of a
tax-exempt entity described in paragraph (4), (5), (6), or (7) of
section 4965(c)) $100 for each day during which such failure continues.
The maximum penalty under this subparagraph on failures with respect to
any 1 disclosure shall not exceed $50,000.
-
'(B) WRITTEN DEMAND-
-
'(i) IN GENERAL- The Secretary may make a
written demand on any entity or manager subject to penalty under
subparagraph (A) specifying therein a reasonable future date by which
the disclosure shall be filed for purposes of this subparagraph.
-
'(ii) FAILURE TO COMPLY WITH DEMAND- If any
entity or manager fails to comply with any demand under clause (i) on
or before the date specified in such demand, there shall be paid by
such entity or manager failing to so comply $100 for each day after the
expiration of the time specified in such demand during which such
failure continues. The maximum penalty imposed under this subparagraph
on all entities and managers for failures with respect to any 1
disclosure shall not exceed $10,000.
-
'(C) DEFINITIONS- Any term used in this section
which is also used in section 4965 shall have the meaning given such
term under section 4965.'.
-
(2) CONFORMING AMENDMENT- Paragraph (1) of section
6652(c) is amended by striking '6033' each place it appears in the text
and heading thereof and inserting '6033(a)(1)'.
-
(d) Effective Dates-
-
(1) IN GENERAL- Except as provided in paragraph (2),
the amendments made by this section shall apply to taxable years ending
after the date of the enactment of this Act, with respect to
transactions before, on, or after such date, except that no tax under
section 4965(a) of the Internal Revenue Code of 1986 (as added by this
section) shall apply with respect to income or proceeds that are
properly allocable to any period ending on or before the date which is
90 days after such date of enactment.
-
(2) DISCLOSURE- The amendments made by subsections (b)
and (c) shall apply to disclosures the due date for which are after the
date of the enactment of this Act.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
END
