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H.R. 4213 (111th): Unemployment Compensation Extension Act of 2010

The text of the bill below is as of Dec 7, 2009 (Introduced).

Source: GPO

I

111th CONGRESS

1st Session

H. R. 4213

IN THE HOUSE OF REPRESENTATIVES

December 7, 2009

introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to extend certain expiring provisions, and for other purposes.

1.

Short title; amendment of 1986 Code; table of contents

(a)

Short title

This Act may be cited as the Tax Extenders Act of 2009.

(b)

Amendment of 1986 Code

Except as otherwise expressly provided, whenever in this Act an amendment 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 provision of the Internal Revenue Code of 1986.

(c)

Table of contents

The table of contents for this Act is as follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.

Title I—General provisions

Subtitle A—Individual tax relief

Sec. 101. Deduction of State and local sales taxes.

Sec. 102. Additional standard deduction for State and local real property taxes.

Sec. 103. Above-the-line deduction for qualified tuition and related expenses.

Sec. 104. Deduction for certain expenses of elementary and secondary school teachers.

Subtitle B—Business tax relief

Sec. 111. Research credit.

Sec. 112. Exceptions for active financing income.

Sec. 113. Look-thru treatment of payments between related controlled foreign corporations under foreign personal holding company rules.

Sec. 114. 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.

Sec. 115. 7-year recovery period for motorsports entertainment complexes.

Sec. 116. Railroad track maintenance credit.

Sec. 117. Special expensing rules for certain film and television productions.

Sec. 118. Expensing of environmental remediation costs.

Sec. 119. Mine rescue team training credit.

Sec. 120. Election to expense advanced mine safety equipment.

Sec. 121. Employer wage credit for employees who are active duty members of the uniformed services.

Sec. 122. 5-year depreciation for farming business machinery and equipment.

Sec. 123. Treatment of certain dividends and assets of regulated investment companies.

Sec. 124. Look-thru of certain regulated investment company stock in determining gross estate of nonresidents.

Sec. 125. RIC qualified investment entity treatment under FIRPTA.

Sec. 126. Suspension of limitation on percentage depletion for oil and gas from marginal wells.

Subtitle C—Charitable provisions

Sec. 131. Contributions of capital gain real property made for conservation purposes.

Sec. 132. Enhanced charitable deduction for contributions of food inventory.

Sec. 133. Enhanced charitable deduction for contributions of book inventories to public schools.

Sec. 134. Enhanced charitable deduction for corporate contributions of computer technology and equipment for educational purposes.

Sec. 135. Tax-free distributions from individual retirement plans for charitable purposes.

Sec. 136. Modification of tax treatment of certain payments to controlling exempt organizations.

Sec. 137. Exclusion of gain or loss on sale or exchange of certain brownfield sites from unrelated business taxable income.

Sec. 138. Basis adjustment to stock of S corporations making charitable contributions of property.

Subtitle D—Miscellaneous provisions

Sec. 141. Indian employment tax credit.

Sec. 142. Accelerated depreciation for business property on an Indian reservation.

Sec. 143. Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.

Sec. 144. Temporary increase in limit on cover over of rum excise taxes to Puerto Rico and the Virgin Islands.

Sec. 145. American Samoa economic development credit.

Title II—Community assistance provisions

Sec. 201. Empowerment zone tax incentives.

Sec. 202. Renewal community tax incentives.

Sec. 203. New markets tax credit.

Sec. 204. Tax incentives for investment in the District of Columbia.

Sec. 205. Tax incentives for New York Liberty Zone.

Sec. 206. Tax incentives for the Gulf Opportunity Zone.

Sec. 207. Election for refundable low-income housing credit for 2010.

Title III—Disaster relief provisions

Sec. 301. Deductibility of personal casualty losses attributable to federally declared disasters.

Sec. 302. Expensing of certain qualified disaster expenses.

Sec. 303. 5-year carryback of net operating losses attributable to Federally declared disasters.

Sec. 304. Waiver of certain mortgage revenue bond requirements for residences located in Federally declared disaster areas.

Sec. 305. Expensing and special depreciation allowance for qualified disaster assistance property.

Title IV—Energy provisions

Sec. 401. Incentives for biodiesel and renewable diesel.

Sec. 402. Alternative motor vehicle credit for heavy hybrids.

Sec. 403. Alternative fuel credit for natural gas and liquified petroleum gas.

Sec. 404. Special rule for sales or dispositions to implement FERC or State electric restructuring policy for qualified electric utilities.

Title V—Foreign account tax compliance

Subtitle A—Increased disclosure of beneficial owners

Sec. 501. Reporting on certain foreign accounts.

Sec. 502. Repeal of certain foreign exceptions to registered bond requirements.

Subtitle B—Under reporting with respect to foreign assets

Sec. 511. Disclosure of information with respect to foreign financial assets.

Sec. 512. Penalties for underpayments attributable to undisclosed foreign financial assets.

Sec. 513. Modification of statute of limitations for significant omission of income in connection with foreign assets.

Subtitle C—Other disclosure provisions

Sec. 521. Reporting of activities with respect to passive foreign investment companies.

Sec. 522. Secretary permitted to require financial institutions to file certain returns related to withholding on foreign transfers electronically.

Subtitle D—Provisions related to foreign trusts

Sec. 531. Clarifications with respect to foreign trusts which are treated as having a United States beneficiary.

Sec. 532. Presumption that foreign trust has United States beneficiary.

Sec. 533. Uncompensated use of trust property.

Sec. 534. Reporting requirement of United States owners of foreign trusts.

Sec. 535. Minimum penalty with respect to failure to report on certain foreign trusts.

Subtitle E—Substitute dividends and dividend equivalent payments received by foreign persons treated as dividends

Sec. 541. Substitute dividends and dividend equivalent payments received by foreign persons treated as dividends.

Title VI—Other revenue provisions

Subtitle A—Partnership interests held by partners providing services

Sec. 601. Partnership interests transferred in connection with performance of services.

Sec. 602. Income of partners for performing investment management services treated as ordinary income received for performance of services.

Subtitle B—Time for payment of corporate estimated taxes

Sec. 611. Time for payment of corporate estimated taxes.

Subtitle C—Tax Expenditure Study

Sec. 621. Findings.

Sec. 622. Study of extended tax expenditures.

I

General provisions

A

Individual tax relief

101.

Deduction of State and local sales taxes

(a)

In general

Subparagraph (I) of section 164(b)(5) is amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2009.

102.

Additional standard deduction for State and local real property taxes

(a)

In general

Subparagraph (C) of section 63(c)(1) is amended by striking or 2009 and inserting , 2009, or 2010.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2009.

103.

Above-the-line deduction for qualified tuition and related expenses

(a)

In general

Subsection (e) of section 222 is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2009.

104.

Deduction for certain expenses of elementary and secondary school teachers

(a)

In general

Subparagraph (D) of section 62(a)(2) is amended by striking or 2009 and inserting 2009, or 2010.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2009.

B

Business tax relief

111.

Research credit

(a)

In general

Subparagraph (B) of section 41(h)(1) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Conforming amendment

Subparagraph (D) of section 45C(b)(1) is amended by striking December 31, 2009 and inserting December 31, 2010.

(c)

Effective date

The amendment made by this section shall apply to amounts paid or incurred after December 31, 2009.

112.

Exceptions for active financing income

(a)

In general

Sections 953(e)(10) and 954(h)(9) are each amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Conforming amendment

Section 953(e)(10) is amended by striking December 31, 2009 and inserting December 31, 2010.

(c)

Effective date

The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2009, and to taxable years of United States shareholders with or within which any such taxable year of such foreign corporation ends.

113.

Look-thru treatment of payments between related controlled foreign corporations under foreign personal holding company rules

(a)

In general

Subparagraph (C) of section 954(c)(6) is amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendment made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2009, and to taxable years of United States shareholders with or within which any such taxable year of such foreign corporation ends.

114.

15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements

(a)

In general

Clauses (iv), (v), and (ix) of section 168(e)(3)(E) are each amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendments made by this section shall apply to property placed in service after December 31, 2009.

115.

7-year recovery period for motorsports entertainment complexes

(a)

In general

Subparagraph (D) of section 168(i)(15) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to property placed in service after December 31, 2009.

116.

Railroad track maintenance credit

(a)

In general

Subsection (f) of section 45G is amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendment made by this section shall apply to expenditures paid or incurred in taxable years beginning after December 31, 2009.

117.

Special expensing rules for certain film and television productions

(a)

In general

Subsection (f) of section 181 is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to productions commencing after December 31, 2009.

118.

Expensing of environmental remediation costs

(a)

In general

Subsection (h) of section 198 is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to expenditures paid or incurred after December 31, 2009.

119.

Mine rescue team training credit

(a)

In general

Subsection (e) of section 45N is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2009.

120.

Election to expense advanced mine safety equipment

(a)

In general

Subsection (g) of section 179E is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to property placed in service after December 31, 2009.

121.

Employer wage credit for employees who are active duty members of the uniformed services

(a)

In general

Subsection (f) of section 45P is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to payments made after December 31, 2009.

122.

5-year depreciation for farming business machinery and equipment

(a)

In general

Clause (vii) of section 168(e)(3)(B) is amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendment made by this section shall apply to property placed in service after December 31, 2009.

123.

Treatment of certain dividends and assets of regulated investment companies

(a)

In general

Paragraphs (1)(C) and (2)(C) of section 871(k) are each amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2009.

124.

Look-thru of certain regulated investment company stock in determining gross estate of nonresidents

(a)

In general

Paragraph (3) of section 2105(d) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to estates of decedents dying after December 31, 2009.

125.

RIC qualified investment entity treatment under FIRPTA

(a)

In general

Clause (ii) of section 897(h)(4)(A) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to distributions made after December 31, 2009.

126.

Suspension of limitation on percentage depletion for oil and gas from marginal wells

(a)

In general

Clause (ii) of section 613A(c)(6)(H) is amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2009.

C

Charitable provisions

131.

Contributions of capital gain real property made for conservation purposes

(a)

In general

Clause (vi) of section 170(b)(1)(E) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Contributions by certain corporate farmers and ranchers

Clause (iii) of section 170(b)(2)(B) is amended by striking December 31, 2009 and inserting December 31, 2010.

(c)

Effective date

The amendments made by this section shall apply to contributions made in taxable years beginning after December 31, 2009.

132.

Enhanced charitable deduction for contributions of food inventory

(a)

In general

Clause (iv) of section 170(e)(3)(C) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to contributions made after December 31, 2009.

133.

Enhanced charitable deduction for contributions of book inventories to public schools

(a)

In general

Clause (iv) of section 170(e)(3)(D) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to contributions made after December 31, 2009.

134.

Enhanced charitable deduction for corporate contributions of computer technology and equipment for educational purposes

(a)

In general

Subparagraph (G) of section 170(e)(6) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to contributions made in taxable years beginning after December 31, 2009.

135.

Tax-free distributions from individual retirement plans for charitable purposes

(a)

In general

Subparagraph (F) of section 408(d)(8) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to distributions made in taxable years beginning after December 31, 2009.

136.

Modification of tax treatment of certain payments to controlling exempt organizations

(a)

In general

Clause (iv) of section 512(b)(13)(E) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to payments received or accrued after December 31, 2009.

137.

Exclusion of gain or loss on sale or exchange of certain brownfield sites from unrelated business taxable income

(a)

In general

Subparagraph (K) of section 512(b)(19) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to property acquired after December 31, 2009.

138.

Basis adjustment to stock of S corporations making charitable contributions of property

(a)

In general

Paragraph (2) of section 1367(a) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to contributions made in taxable years beginning after December 31, 2009.

D

Miscellaneous provisions

141.

Indian employment tax credit

(a)

In general

Subsection (f) of section 45A is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2009.

142.

Accelerated depreciation for business property on an Indian reservation

(a)

In general

Paragraph (8) of section 168(j) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to property placed in service after December 31, 2009.

143.

Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico

(a)

In general

Subparagraph (C) of section 199(d)(8) is amended—

(1)

by striking first 4 taxable years and inserting first 5 taxable years, and

(2)

by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2009.

144.

Temporary increase in limit on cover over of rum excise taxes to Puerto Rico and the Virgin Islands

(a)

In general

Paragraph (1) of section 7652(f) is amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendment made by this section shall apply to distilled spirits brought into the United States after December 31, 2009.

145.

American Samoa economic development credit

(a)

In general

Subsection (d) of section 119 of division A of the Tax Relief and Health Care Act of 2006 is amended—

(1)

by striking first 4 taxable years and inserting first 5 taxable years, and

(2)

by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2009.

II

Community assistance provisions

201.

Empowerment zone tax incentives

(a)

In general

Clause (i) of section 1391(d)(1)(A) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Increased exclusion of gain on stock of empowerment zone businesses

Subparagraph (C) of section 1202(a)(2) is amended—

(1)

by striking December 31, 2014 and inserting December 31, 2015, and

(2)

by striking 2014 in the heading and inserting 2015.

(c)

Effective date

The amendments made by this section shall apply to periods after December 31, 2009.

202.

Renewal community tax incentives

(a)

In general

Subsection (b) of section 1400E is amended—

(1)

by striking December 31, 2009 in paragraphs (1)(A) and (3) and inserting December 31, 2010, and

(2)

by striking January 1, 2010 in paragraph (3) and inserting January 1, 2011.

(b)

Zero-Percent capital gains rate

(1)

Acquisition dates

Paragraphs (2)(A)(i), (3)(A), (4)(A)(i), and (4)(B)(i) of section 1400F(b) are each amended by striking January 1, 2010 and inserting January 1, 2011.

(2)

Limitation on period of gains

Paragraph (2) of section 1400F(c) is amended—

(A)

by striking December 31, 2014 and inserting December 31, 2015, and

(B)

by striking 2014 in the heading and inserting 2015.

(3)

Clerical amendment

Subsection (d) of section 1400F is amended by striking and December 31, 2014 for December 31, 2014.

(c)

Commercial revitalization deduction

Subsection (g) of section 1400I is amended by striking December 31, 2009 and inserting December 31, 2010.

(d)

Increased expensing under section 179

Subparagraph (A) of section 1400J(b)(1) is amended by striking January 1, 2010 and inserting January 1, 2011.

(e)

Effective dates

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to periods after December 31, 2009.

(2)

Acquisitions

The amendments made by subsection (b)(1) and (d) shall apply to acquisitions after December 31, 2009.

(3)

Commercial revitalization deduction

The amendment made by subsection (c) shall apply to building placed in service after December 31, 2009.

203.

New markets tax credit

(a)

In general

Subparagraph (F) of section 45D(f)(1) is amended by inserting and 2010 after 2009.

(b)

Carryover of unused limitation

Paragraph (3) of section 45D(f) is amended by striking 2014 and inserting 2015.

(c)

Effective date

The amendments made by this section shall apply to calendar years beginning after 2009.

204.

Tax incentives for investment in the District of Columbia

(a)

In general

Subsection (f) of section 1400 is amended by striking December 31, 2009 each place it appears and inserting December 31, 2010.

(b)

Tax-Exempt DC empowerment zone bonds

Subsection (b) of section 1400A is amended by striking December 31, 2009 and inserting December 31, 2010.

(c)

Zero-Percent capital gains rate

(1)

Acquisition dates

Paragraphs (2)(A)(i), (3)(A), (4)(A)(i), and (4)(B)(i)(I) of section 1400B(b) are each amended by striking January 1, 2010 and inserting January 1, 2011.

(2)

Limitation on period of zero-percent capital gains

(A)

In general

Paragraph (2) of section 1400B(e) is amended—

(i)

by striking December 31, 2014 and inserting December 31, 2015, and

(ii)

by striking 2014 in the heading and inserting 2015.

(B)

Interests in partnership and s corporations

Paragraph (2) of section 1400B(g) is amended by striking December 31, 2014 and inserting December 31, 2015.

(d)

First-Time homebuyer credit

Subsection (i) of section 1400C is amended by striking January 1, 2010 and inserting January 1, 2011.

(e)

Effective dates

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to periods after December 31, 2009.

(2)

Tax-exempt DC empowerment zone bonds

The amendment made by subsection (b) shall apply to bonds issued after December 31, 2009.

(3)

Acquisition dates for zero-percent capital gains rate

The amendments made by subsection (c)(1) shall apply to property acquired or substantially improved after December 31, 2009.

(4)

First-time homebuyer credit

The amendment made by subsection (d) shall apply to property purchased after December 31, 2009.

205.

Tax incentives for New York Liberty Zone

(a)

Bonus depreciation for nonresidential real property and residential rental property

Subparagraph (A) of section 1400L(b)(2) is amended by striking December 31, 2009 in the last sentence and inserting December 31, 2010.

(b)

Tax-Exempt bond financing

Subparagraph (D) of section 1400L(d)(2) is amended by striking January 1, 2010 and inserting January 1, 2011.

(c)

Effective dates

(1)

Bonus depreciation

The amendment made by subsection (a) shall apply to property placed in service after December 31, 2009.

(2)

Tax-exempt bond financing

The amendment made by subsection (b) shall apply to bonds issued after December 31, 2009.

206.

Tax incentives for the Gulf Opportunity Zone

(a)

Work opportunity tax credit for core disaster area

Paragraph (1) of section 201(b) of the Katrina Emergency Tax Relief Act of 2005 is amended by striking 4-year and inserting 5-year .

(b)

Increase in rehabilitation credit

Subsection (h) of section 1400N is amended by striking December 31, 2009 and inserting December 31, 2010.

(c)

Effective dates

(1)

Work opportunity tax credit

The amendment made by subsection (a) shall apply to individuals hired on or after August 28, 2009.

(2)

Rehabilitation credit

The amendment made by subsection (b) shall apply to amounts paid or incurred after December 31, 2009.

207.

Election for refundable low-income housing credit for 2010

(a)

In general

Section 42 is amended by redesignating subsection (n) as subsection (o) and by inserting after subsection (m) the following new subsection:

(n)

Election for refundable credits

(1)

In general

The housing credit agency of each State shall be allowed a credit in an amount equal to such State’s 2010 low-income housing refundable credit election amount which shall be payable by the Secretary as provided in paragraph (5).

(2)

2010 low-income housing refundable credit election amount

For purposes of this subsection, the term 2010 low-income housing refundable credit election amount means, with respect to any State, such amount as the State may elect which does not exceed 85 percent of the product of—

(A)

the sum of—

(i)

100 percent of the State housing credit ceiling for 2010 which is attributable to amounts described in clauses (i) and (iii) of subsection (h)(3)(C), and

(ii)

40 percent of the State housing credit ceiling for 2010 which is attributable to amounts described in clauses (ii) and (iv) of such subsection, multiplied by

(B)

10.

(3)

Coordination with non-refundable credit

For purposes of this section, the amounts described in clauses (i) through (iv) of subsection (h)(3)(C) with respect to any State for 2010 shall each be reduced by so much of such amount as is taken into account in determining the amount of the credit allowed with respect to such State under paragraph (1).

(4)

Special rule for basis

Basis of a qualified low-income building shall not be reduced by the amount of any payment made under this subsection.

(5)

Payment of credit; use to finance low-income buildings

The Secretary shall pay to the housing credit agency of each State an amount equal to the credit allowed under paragraph (1). Rules similar to the rules of subsections (c) and (d) of section 1602 of the American Recovery and Reinvestment Tax Act of 2009 shall apply with respect to any payment made under this paragraph, except that such subsection (d) shall be applied by substituting January 1, 2012 for January 1, 2011.

.

(b)

Conforming amendment

Section 1324(b)(2) of title 31, United States Code, is amended by inserting 42(n), after 36A,.

III

Disaster relief provisions

301.

Deductibility of personal casualty losses attributable to federally declared disasters

(a)

In general

Subclause (I) of section 165(h)(3)(B)(i) is amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Extension of $500 limitation

Paragraph (1) of section 165(h) is amended by striking December 31, 2009 and inserting December 31, 2010.

(c)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to losses attributable to disasters occurring after December 31, 2009.

(2)

Extension of $500 limitation

The amendment made by subsection (b) shall apply to taxable years beginning after December 31, 2009.

302.

Expensing of certain qualified disaster expenses

(a)

In general

Subparagraph (A) of section 198A(b)(2) is amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendment made by this section shall apply to expenditures on account of disasters occurring after December 31, 2009.

303.

5-year carryback of net operating losses attributable to Federally declared disasters

(a)

In general

Subclause (I) of section 172(j)(1)(A)(i) is amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendment made by this section shall apply to losses attributable to disasters occurring after December 31, 2009.

304.

Waiver of certain mortgage revenue bond requirements for residences located in Federally declared disaster areas

(a)

In general

Paragraph (11) of section 143(k) is amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Special rule for residences destroyed in Federally declared disaster areas

Paragraph (13) of section 143(k), as redesignated under subsection (c), is amended by striking January 1, 2010 in subparagraphs (A)(i) and (B)(i) and inserting January 1, 2011.

(c)

Technical amendment

Subsection (k) of section 143 is amended by redesignating the second paragraph (12) (relating to special rules for residences destroyed in Federally declared disasters) as paragraph (13).

(d)

Effective dates

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to bonds issued after December 31, 2009.

(2)

Residences destroyed in Federally declared disaster areas

The amendments made by subsection (b) shall apply with respect to disasters occurring after December 31, 2009.

(3)

Technical amendment

The amendment made by subsection (c) shall take effect as if included in section 709 of the Tax Extenders and Alternative Minimum Tax Relief Act of 2008.

305.

Expensing and special depreciation allowance for qualified disaster assistance property

(a)

In general

Subclause (I) of section 168(n)(2)(A)(ii) is amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendment made by this section shall apply to disasters occurring after December 31, 2009.

IV

Energy provisions

401.

Incentives for biodiesel and renewable diesel

(a)

Credits for biodiesel and renewable diesel used as fuel

Subsection (g) of section 40A is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Excise tax credits and payments for biodiesel and renewable diesel fuel mixtures

(1)

Paragraph (6) of section 6426(c) is amended by striking December 31, 2009 and inserting December 31, 2010.

(2)

Subparagraph (B) of section 6427(e)(6) is amended by striking December 31, 2009 and inserting December 31, 2010.

(c)

Effective date

The amendments made by this section shall apply to sales and uses after December 31, 2009.

402.

Alternative motor vehicle credit for heavy hybrids

(a)

In general

Paragraph (3) of section 30B(k) is amended by striking December 31, 2009 and inserting December 31, 2010.

(b)

Effective date

The amendment made by this section shall apply to property purchased after December 31, 2009.

403.

Alternative fuel credit for natural gas and liquified petroleum gas

(a)

In general

Paragraph (5) of section 6426(d) is amended by striking after December 31, 2009 and all that follows and inserting

after—

(A)

September 30, 2014, in the case of liquefied hydrogen,

(B)

December 31, 2010, in the case of—

(i)

compressed or liquified natural gas, and

(ii)

liquified petroleum gas (other than for use as fuel in a forklift), and

(C)

December 31, 2009, in any other case.

.

(b)

Payment authority

Paragraph (6) of section 6427(e) is amended by striking and at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting a comma and by adding at the end the following new subparagraphs:

(E)

any alternative fuel (as so defined) involving compressed or liquified natural gas sold or used after December 31, 2010, and

(F)

any alternative fuel (as so defined) involving liquified petroleum gas (other than for use as fuel in a forklift) sold or used after December 31, 2010.

.

(c)

Conforming amendment

Subparagraph (C) of section 6427(e)(6) is amended by inserting (E), or (F) after subparagraph (D).

(d)

Effective date

The amendments made by this section shall apply to fuel sold or used after December 31, 2009.

404.

Special rule for sales or dispositions to implement FERC or State electric restructuring policy for qualified electric utilities

(a)

In general

Paragraph (3) of section 451(i) is amended by striking January 1, 2010 and inserting January 1, 2011.

(b)

Effective date

The amendment made by this section shall apply to dispositions after December 31, 2009.

V

Foreign account tax compliance

A

Increased disclosure of beneficial owners

501.

Reporting on certain foreign accounts

(a)

In general

The Internal Revenue Code of 1986 is amended by inserting after chapter 3 the following new chapter:

4

Taxes To enforce reporting on certain foreign accounts

Sec. 1471. Withholdable payments to foreign financial institutions.

Sec. 1472. Withholdable payments to other foreign entities.

Sec. 1473. Definitions.

Sec. 1474. Special rules.

1471.

Withholdable payments to foreign financial institutions

(a)

In general

In the case of any withholdable payment to a foreign financial institution which does not meet the requirements of subsection (b), the withholding agent with respect to such payment shall deduct and withhold from such payment a tax equal to 30 percent of the amount of such payment.

(b)

Reporting requirements, etc

(1)

In general

The requirements of this subsection are met with respect to any foreign financial institution if an agreement is in effect between such institution and the Secretary under which such institution agrees—

(A)

to obtain such information regarding each holder of each account maintained by such institution as is necessary to determine which (if any) of such accounts are United States accounts,

(B)

to comply with such verification and due diligence procedures as the Secretary may require with respect to the identification of United States accounts,

(C)

in the case of any United States account maintained by such institution, to report on an annual basis the information described in subsection (c) with respect to such account,

(D)

to deduct and withhold a tax equal to 30 percent of—

(i)

any passthru payment which is made by such institution to a recalcitrant account holder or another foreign financial institution which does not meet the requirements of this subsection, and

(ii)

in the case of any passthru payment which is made by such institution to a foreign financial institution which has in effect an election under paragraph (3) with respect to such payment, so much of such payment as is allocable to accounts held by recalcitrant account holders or foreign financial institutions which do not meet the requirements of this subsection,

(E)

to comply with requests by the Secretary for additional information with respect to any United States account maintained by such institution, and

(F)

in any case in which any foreign law would (but for a waiver described in clause (i)) prevent the reporting of any information referred to in this subsection or subsection (c) with respect to any United States account maintained by such institution—

(i)

to attempt to obtain a valid and effective waiver of such law from each holder of such account, and

(ii)

if a waiver described in clause (i) is not obtained from each such holder within a reasonable period of time, to close such account.

Any agreement entered into under this subsection may be terminated by the Secretary upon a determination by the Secretary that the foreign financial institution is out of compliance with such agreement.
(2)

Financial institutions deemed to meet requirements in certain cases

A foreign financial institution may be treated by the Secretary as meeting the requirements of this subsection if—

(A)

such institution—

(i)

complies with such procedures as the Secretary may prescribe to ensure that such institution does not maintain United States accounts, and

(ii)

meets such other requirements as the Secretary may prescribe with respect to accounts of other foreign financial institutions maintained by such institution, or

(B)

such institution is a member of a class of institutions with respect to which the Secretary has determined that the application of this section is not necessary to carry out the purposes of this section.

(3)

Election to be withheld upon rather than withhold on payments to recalcitrant account holders and nonparticipating foreign financial institutions

In the case of a foreign financial institution which meets the requirements of this subsection and such other requirements as the Secretary may provide and which elects the application of this paragraph—

(A)

the requirements of paragraph (1)(D) shall not apply,

(B)

the withholding tax imposed under subsection (a) shall apply with respect to any withholdable payment to such institution to the extent such payment is allocable to accounts held by recalcitrant account holders or foreign financial institutions which do not meet the requirements of this subsection, and

(C)

the agreement described in paragraph (1) shall—

(i)

require such institution to notify the withholding agent with respect to each such payment of the institution’s election under this paragraph and such other information as may be necessary for the withholding agent to determine the appropriate amount to deduct and withhold from such payment, and

(ii)

include a waiver of any right under any treaty of the United States with respect to any amount deducted and withheld pursuant to an election under this paragraph.

To the extent provided by the Secretary, the election under this paragraph may be made with respect to certain classes or types of accounts of the foreign financial institution.
(c)

Information required To be reported on United States accounts

(1)

In general

The agreement described in subsection (b) shall require the foreign financial institution to report the following with respect to each United States account maintained by such institution:

(A)

The name, address, and TIN of each account holder which is a specified United States person and, in the case of any account holder which is a United States owned foreign entity, the name, address, and TIN of each substantial United States owner of such entity.

(B)

The account number.

(C)

The account balance or value (determined at such time and in such manner as the Secretary may provide).

(D)

The gross receipts and gross withdrawals or payments from the account (determined for such period and in such manner as the Secretary may provide).

(2)

Election to be subject to same reporting as United States financial institutions

In the case of a foreign financial institution which elects the application of this paragraph—

(A)

subparagraphs (C) and (D) of paragraph (1) shall not apply, and

(B)

the agreement described in subsection (b) shall require such foreign financial institution to report such information with respect to each United States account maintained by such institution as such institution would be required to report under sections 6041, 6042, 6045, and 6049 if—

(i)

such institution were a United States person, and

(ii)

each holder of such account which is a specified United States person or United States owned foreign entity were a natural person and citizen of the United States.

An election under this paragraph shall be made at such time, in such manner, and subject to such conditions as the Secretary may provide.
(3)

Separate requirements for qualified intermediaries

In the case of a foreign financial institution which is treated as a qualified intermediary by the Secretary for purposes of section 1441 and the regulations issued thereunder, the requirements of this section shall be in addition to any reporting or other requirements imposed by the Secretary for purposes of such treatment.

(d)

Definitions

For purposes of this section—

(1)

United States account

(A)

In general

The term United States account means any financial account which is held by one or more specified United States persons or United States owned foreign entities.

(B)

Exception for certain accounts held by individuals

Unless the foreign financial institution elects to not have this subparagraph apply, such term shall not include any depository account maintained by such financial institution if—

(i)

each holder of such account is a natural person, and

(ii)

with respect to each holder of such account, the aggregate value of all depository accounts held (in whole or in part) by such holder and maintained by the same financial institution which maintains such account does not exceed $50,000.

To the extent provided by the Secretary, financial institutions which are members of the same expanded affiliated group shall be treated for purposes of clause (ii) as a single financial institution.
(C)

Elimination of duplicative reporting requirements

Such term shall not include any financial account in a foreign financial institution if—

(i)

such account is held by another financial institution which meets the requirements of subsection (b), or

(ii)

the holder of such account is otherwise subject to information reporting requirements which the Secretary determines would make the reporting required by this section with respect to United States accounts duplicative.

(2)

Financial account

The term financial account means, with respect to any financial institution—

(A)

any depository account maintained by such financial institution,

(B)

any custodial account maintained by such financial institution, and

(C)

except as otherwise provided by the Secretary, any equity or debt interest in such financial institution (other than interests which are regularly traded on an established securities market).

Any equity or debt interest which constitutes a financial account under subparagraph (C) with respect to any financial institution shall be treated for purposes of this section as maintained by such financial institution.
(3)

United States owned foreign entity

The term United States owned foreign entity means any foreign entity which has one or more substantial United States owners.

(4)

Foreign financial institution

The term foreign financial institution means any financial institution which is a foreign entity. Except as otherwise provided by the Secretary, such term shall not include a financial institution which is organized under the laws of any possession of the United States.

(5)

Financial institution

Except as otherwise provided by the Secretary, the term financial institution means any entity that—

(A)

accepts deposits in the ordinary course of a banking or similar business,

(B)

is engaged in the business of holding financial assets for the account of others, or

(C)

is engaged (or holding itself out as being engaged) primarily in the business of investing, reinvesting, or trading in securities (as defined in section 475(c)(2) without regard to the last sentence thereof), partnership interests, commodities (as defined in section 475(e)(2)), or any interest (including a futures or forward contract or option) in such securities, partnership interests, or commodities.

(6)

Recalcitrant account holder

The term recalcitrant account holder means any account holder which—

(A)

fails to comply with reasonable requests for the information referred to in subsection (b)(1)(A) or (c)(1)(A), or

(B)

fails to provide a waiver described in subsection (b)(1)(F) upon request.

(7)

Passthru payment

The term passthru payment means any withholdable payment or other payment which is attributable to a withholdable payment.

(e)

Affiliated groups

(1)

In general

The requirements of subsections (b) and (c)(1) shall apply—

(A)

with respect to United States accounts maintained by the foreign financial institution, and

(B)

except as otherwise provided by the Secretary, with respect to United States accounts maintained by each other foreign financial institution (other than any foreign financial institution which meets the requirements of subsection (b)) which is a member of the same expanded affiliated group as such foreign financial institution.

(2)

Expanded affiliated group

For purposes of this section, the term expanded affiliated group means an affiliated group as defined in section 1504(a), determined—

(A)

by substituting more than 50 percent for at least 80 percent each place it appears, and

(B)

without regard to paragraphs (2) and (3) of section 1504(b).

A partnership or any other entity (other than a corporation) shall be treated as a member of an expanded affiliated group 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).
(f)

Exception for certain payments

Subsection (a) shall not apply to any payment if the beneficial owner of such payment is—

(1)

any foreign government, any political subdivision of a foreign government, or any wholly owned agency or instrumentality of any one or more of the foregoing,

(2)

any international organization or any wholly owned agency or instrumentality thereof,

(3)

any foreign central bank of issue, or

(4)

any other class of persons identified by the Secretary for purposes of this subsection as posing a low risk of tax evasion.

1472.

Withholdable payments to other foreign entities

(a)

In general

In the case of any withholdable payment to a non-financial foreign entity, if—

(1)

the beneficial owner of such payment is such entity or any other non-financial foreign entity, and

(2)

the requirements of subsection (b) are not met with respect to such beneficial owner,

then the withholding agent with respect to such payment shall deduct and withhold from such payment a tax equal to 30 percent of the amount of such payment.
(b)

Requirements for waiver of withholding

The requirements of this subsection are met with respect to the beneficial owner of a payment if—

(1)

such beneficial owner or the payee provides the withholding agent with either—

(A)

a certification that such beneficial owner does not have any substantial United States owners, or

(B)

the name, address, and TIN of each substantial United States owner of such beneficial owner,

(2)

the withholding agent does not know, or have reason to know, that any information provided under paragraph (1) is incorrect, and

(3)

the withholding agent reports the information provided under paragraph (1)(B) to the Secretary in such manner as the Secretary may provide.

(c)

Exceptions

Subsection (a) shall not apply to—

(1)

except as otherwise provided by the Secretary, any payment beneficially owned by—

(A)

any corporation the stock of which is regularly traded on an established securities market,

(B)

any corporation which is a member of the same expanded affiliated group (as defined in section 1471(e)(2) without regard to the last sentence thereof) as a corporation described in subparagraph (A),

(C)

any entity which is organized under the laws of a possession of the United States and which is wholly owned by one or more bona fide residents (as defined in section 937(a)) of such possession,

(D)

any foreign government, any political subdivision of a foreign government, or any wholly owned agency or instrumentality of any one or more of the foregoing,

(E)

any international organization or any wholly owned agency or instrumentality thereof,

(F)

any foreign central bank of issue, or

(G)

any other class of persons identified by the Secretary for purposes of this subsection, and

(2)

any class of payments identified by the Secretary for purposes of this subsection as posing a low risk of tax evasion.

(d)

Non-Financial foreign entity

For purposes of this section, the term non-financial foreign entity means any foreign entity which is not a financial institution (as defined in section 1471(d)(5)).

1473.

Definitions

For purposes of this chapter—

(1)

Withholdable payment

Except as otherwise provided by the Secretary—

(A)

In general

The term withholdable payment means—

(i)

any payment of interest (including any original issue discount), dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits, and income, if such payment is from sources within the United States, and

(ii)

any gross proceeds from the sale or other disposition of any property of a type which can produce interest or dividends from sources within the United States.

(B)

Exception for income connected with United States business

Such term shall not include any item of income which is taken into account under section 871(b)(1) or 882(a)(1) for the taxable year.

(C)

Special rule for sourcing interest paid by foreign branches of domestic financial institutions

Subparagraph (B) of section 861(a)(1) shall not apply.

(2)

Substantial United States owner

(A)

In general

The term substantial United States owner means—

(i)

with respect to any corporation, any specified United States person which owns, directly or indirectly, more than 10 percent of the stock of such corporation (by vote or value),

(ii)

with respect to any partnership, any specified United States person which owns, directly or indirectly, more than 10 percent of the profits interests or capital interests in such partnership, and

(iii)

in the case of a trust—

(I)

any specified United States person treated as an owner of any portion of such trust under subpart E of part I of subchapter J of chapter 1, and

(II)

to the extent provided by the Secretary in regulations or other guidance, any specified United States person which holds, directly or indirectly, more than 10 percent of the beneficial interests of such trust.

(B)

Special rule for investment vehicles

In the case of any financial institution described in section 1471(d)(5)(C), clauses (i), (ii), and (iii) of subparagraph (A) shall be applied by substituting 0 percent for 10 percent.

(3)

Specified United States person

Except as otherwise provided by the Secretary, the term specified United States person means any United States person other than—

(A)

any corporation the stock of which is regularly traded on an established securities market,

(B)

any corporation which is a member of the same expanded affiliated group (as defined in section 1471(e)(2) without regard to the last sentence thereof) as a corporation the stock of which is regularly traded on an established securities market,

(C)

any organization exempt from taxation under section 501(a) or an individual retirement plan,

(D)

the United States or any wholly owned agency or instrumentality thereof,

(E)

any State, the District of Columbia, any possession of the United States, any political subdivision of any of the foregoing, or any wholly owned agency or instrumentality of any one or more of the foregoing,

(F)

any bank (as defined in section 581),

(G)

any real estate investment trust (as defined in section 856),

(H)

any regulated investment company (as defined in section 851),

(I)

any common trust fund (as defined in section 584(a)), and

(J)

any trust which—

(i)

is exempt from tax under section 664(c), or

(ii)

is described in section 4947(a)(1).

(4)

Withholding agent

The term withholding agent means all persons, in whatever capacity acting, having the control, receipt, custody, disposal, or payment of any withholdable payment.

(5)

Foreign entity

The term foreign entity means any entity which is not a United States person.

1474.

Special rules

(a)

Liability for withheld tax

Every person required to deduct and withhold any tax under this chapter is hereby made liable for such tax and is hereby indemnified against the claims and demands of any person for the amount of any payments made in accordance with the provisions of this chapter.

(b)

Credits and refunds

(1)

In general

Except as provided in paragraph (2), the determination of whether any tax deducted and withheld under this chapter results in an overpayment by the beneficial owner of the payment to which such tax is attributable shall be made as if such tax had been deducted and withheld under subchapter A of chapter 3.

(2)

Special rule where foreign financial institution is beneficial owner of payment

(A)

In general

In the case of any tax properly deducted and withheld under section 1471 from a specified financial institution payment—

(i)

if the foreign financial institution referred to in subparagraph (B) with respect to such payment is entitled to a reduced rate of tax with respect to such payment by reason of any treaty obligation of the United States—

(I)

the amount of any credit or refund with respect to such tax shall not exceed the amount of credit or refund attributable to such reduction in rate, and

(II)

no interest shall be allowed or paid with respect to such credit or refund, and

(ii)

if such foreign financial institution is not so entitled, no credit or refund shall be allowed or paid with respect to such tax.

(B)

Specified financial institution payment

The term specified financial institution payment means any payment if the beneficial owner of such payment is a foreign financial institution.

(3)

Requirement to identify substantial United States owners

No credit or refund shall be allowed or paid with respect to any tax properly deducted and withheld under this chapter unless the beneficial owner of the payment provides the Secretary such information as the Secretary may require to determine whether such beneficial owner is a United States owned foreign entity (as defined in section 1471(d)(3)) and the identity of any substantial United States owners of such entity.

(c)

Confidentiality of information

(1)

In general

For purposes of this chapter, rules similar to the rules of section 3406(f) shall apply.

(2)

Disclosure of list of participating foreign financial institutions permitted

The identity of a foreign financial institution which meets the requirements of section 1471(b) shall not be treated as return information for purposes of section 6103.

(d)

Coordination with other withholding provisions

The Secretary shall provide for the coordination of this chapter with other withholding provisions under this title, including providing for the proper crediting of amounts deducted and withheld under this chapter against amounts required to be deducted and withheld under such other provisions.

(e)

Treatment of withholding under agreements

Any tax deducted and withheld pursuant to an agreement described in section 1471(b) shall be treated for purposes of this title as a tax deducted and withheld by a withholding agent under section 1471(a).

(f)

Regulations

The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this chapter.

.

(b)

Special rule for interest on overpayments

Subsection (e) of section 6611 is amended by adding at the end the following new paragraph:

(4)

Certain withholding taxes

In the case of any overpayment resulting from tax deducted and withheld under chapter 3 or 4, paragraphs (1), (2), and (3) shall be applied by substituting 180 days for 45 days each place it appears.

.

(c)

Conforming amendments

(1)

Section 6414 is amended by inserting or 4 after chapter 3.

(2)

Paragraph (1) of section 6501(b) is amended by inserting 4, after chapter 3,.

(3)

Paragraph (2) of section 6501(b) is amended—

(A)

by inserting 4, after chapter 3, in the text thereof, and

(B)

by striking taxes and tax imposed by chapter 3 in the heading thereof and inserting and withholding taxes.

(4)

Paragraph (3) of section 6513(b) is amended—

(A)

by inserting or 4 after chapter 3, and

(B)

by inserting or 1474(b) after section 1462.

(5)

Subsection (c) of section 6513 is amended by inserting 4, after chapter 3,.

(6)

Paragraph (1) of section 6724(d) is amended by inserting under chapter 4 or after filed with the Secretary in the last sentence thereof.

(7)

Paragraph (2) of section 6724(d) is amended by inserting or 4 after chapter 3.

(8)

The table of chapters of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

Chapter 4. Taxes To enforce reporting on certain foreign accounts.

.

(d)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to payments made after December 31, 2012.

(2)

Grandfathered treatment of outstanding obligations

The amendments made by this section shall not require any amount to be deducted or withheld from any payment under any obligation outstanding on the date which is 2 years after the date of the enactment of this Act.

(3)

Interest on overpayments

The amendment made by subsection (b) shall apply—

(A)

in the case of such amendment’s application to paragraph (1) of section 6611(e) of the Internal Revenue Code of 1986, to returns the due date for which (determined without regard to extensions) is after the date of the enactment of this Act,

(B)

in the case of such amendment’s application to paragraph (2) of such section, to claims for credit or refund of any overpayment filed after the date of the enactment of this Act (regardless of the taxable period to which such refund relates), and

(C)

in the case of such amendment’s application to paragraph (3) of such section, to refunds paid after the date of the enactment of this Act (regardless of the taxable period to which such refund relates).

502.

Repeal of certain foreign exceptions to registered bond requirements

(a)

Repeal of exception to denial of deduction for interest on non-Registered bonds

(1)

In general

Paragraph (2) of section 163(f) is amended by striking subparagraph (B) and by redesignating subparagraph (C) as subparagraph (B).

(2)

Conforming amendments

(A)

Subparagraph (A) of section 163(f)(2) is amended by inserting or at the end of clause (ii), by striking , or at the end of clause (iii) and inserting a period, and by striking clause (iv).

(B)

Subparagraph (B) of section 163(f)(2), as redesignated by paragraph (1), is amended—

(i)

by striking , and subparagraph (B), in the matter preceding clause (i), and

(ii)

by amending clause (i) to read as follows:

(i)

such obligation is of a type which the Secretary has determined by regulations to be used frequently in avoiding Federal taxes, and

.

(C)

Sections 165(j)(2)(A) and 1287(b)(1) are each amended by striking except that clause (iv) of subparagraph (A), and subparagraph (B), of such section shall not apply.

(b)

Repeal of treatment as portfolio debt

(1)

In general

Paragraph (2) of section 871(h) is amended to read as follows:

(2)

Portfolio interest

For purposes of this subsection, the term portfolio interest means any interest (including original issue discount) which—

(A)

would be subject to tax under subsection (a) but for this subsection, and

(B)

is paid on an obligation—

(i)

which is in registered form, and

(ii)

with respect to which—

(I)

the United States person who would otherwise be required to deduct and withhold tax from such interest under section 1441(a) receives a statement (which meets the requirements of paragraph (5)) that the beneficial owner of the obligation is not a United States person, or

(II)

the Secretary has determined that such a statement is not required in order to carry out the purposes of this subsection.

.

(2)

Conforming amendments

(A)

Section 871(h)(3)(A) is amended by striking subparagraph (A) or (B) of.

(B)

Paragraph (2) of section 881(c) is amended to read as follows:

(2)

Portfolio interest

For purposes of this subsection, the term portfolio interest means any interest (including original issue discount) which—

(A)

would be subject to tax under subsection (a) but for this subsection, and

(B)

is paid on an obligation—

(i)

which is in registered form, and

(ii)

with respect to which—

(I)

the person who would otherwise be required to deduct and withhold tax from such interest under section 1442(a) receives a statement which meets the requirements of section 871(h)(5) that the beneficial owner of the obligation is not a United States person, or

(II)

the Secretary has determined that such a statement is not required in order to carry out the purposes of this subsection.

.

(c)

Dematerialized book entry systems treated as registered form

Paragraph (3) of section 163(f) is amended by inserting , except that a dematerialized book entry system shall be treated as a book entry system described in such section before the period at the end.

(d)

Repeal of exception to requirement that Treasury obligations be in registered form

(1)

In general

Subsection (g) of section 3121 of title 31, United States Code, is amended by striking paragraph (2) and by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively.

(2)

Conforming amendments

Paragraph (1) of section 3121(g) of such title is amended—

(A)

by adding or at the end of subparagraph (A),

(B)

by striking ; or at the end of subparagraph (B) and inserting a period, and

(C)

by striking subparagraph (C).

(e)

Preservation of exception for excise tax purposes

Paragraph (1) of section 4701(b) is amended to read as follows:

(1)

Registration-required obligation

(A)

In general

The term registration-required obligation has the same meaning as when used in section 163(f), except that such term shall not include any obligation which—

(i)

is required to be registered under section 149(a), or

(ii)

is described in subparagraph (B).

(B)

Certain obligations not included

An obligation is described in this subparagraph if—

(i)

there are arrangements reasonably designed to ensure that such obligation will be sold (or resold in connection with the original issue) only to a person who is not a United States person,

(ii)

interest on such obligation is payable only outside the United States and its possessions, and

(iii)

on the face of such obligation there is a statement that any United States person who holds such obligation will be subject to limitations under the United States income tax laws.

.

(f)

Effective date

The amendments made by this section shall apply to obligations issued after the date which is 2 years after the date of the enactment of this Act.

B

Under reporting with respect to foreign assets

511.

Disclosure of information with respect to foreign financial assets

(a)

In general

Subpart A of part III of subchapter A of chapter 61 is amended by inserting after section 6038C the following new section:

6038D.

Information with respect to foreign financial assets

(a)

In general

Any individual who, during any taxable year, holds any interest in a specified foreign financial asset shall attach to such person’s return of tax imposed by subtitle A for such taxable year the information described in subsection (c) with respect to each such asset if the aggregate value of all such assets exceeds $50,000 (or such higher dollar amount as the Secretary may prescribe).

(b)

Specified foreign financial assets

For purposes of this section, the term specified foreign financial asset means—

(1)

any financial account (as defined in section 1471(d)(2)) maintained by a foreign financial institution (as defined in section 1471(d)(4)), and

(2)

any of the following assets which are not held in an account maintained by a financial institution (as defined in section 1471(d)(5))—

(A)

any stock or security issued by a person other than a United States person,

(B)

any financial instrument or contract held for investment that has an issuer or counterparty which is other than a United States person, and

(C)

any interest in a foreign entity (as defined in section 1473).

(c)

Required information

The information described in this subsection with respect to any asset is:

(1)

In the case of any account, the name and address of the financial institution in which such account is maintained and the number of such account.

(2)

In the case of any stock or security, the name and address of the issuer and such information as is necessary to identify the class or issue of which such stock or security is a part.

(3)

In the case of any other instrument, contract, or interest—

(A)

such information as is necessary to identify such instrument, contract, or interest, and

(B)

the names and addresses of all issuers and counterparties with respect to such instrument, contract, or interest.

(4)

The maximum value of the asset during the taxable year.

(d)

Penalty for failure To disclose

(1)

In general

If any individual fails to furnish the information described in subsection (c) with respect to any taxable year at the time and in the manner described in subsection (a), such person shall pay a penalty of $10,000.

(2)

Increase in penalty where failure continues after notification

If any failure described in paragraph (1) continues for more than 90 days after the day on which the Secretary mails notice of such failure to the individual, such individual shall pay a penalty (in addition to the penalties under paragraph (1)) of $10,000 for each 30-day period (or fraction thereof) during which such failure continues after the expiration of such 90-day period. The penalty imposed under this paragraph with respect to any failure shall not exceed $50,000.

(e)

Presumption that value of specified foreign financial assets exceeds dollar threshold

If—

(1)

the Secretary determines that an individual has an interest in one or more specified foreign financial assets, and

(2)

such individual does not provide sufficient information to demonstrate the aggregate value of such assets,

then the aggregate value of such assets shall be treated as being in excess of $50,000 (or such higher dollar amount as the Secretary prescribes for purposes of subsection (a)) for purposes of assessing the penalties imposed under this section.
(f)

Application to certain entities

To the extent provided by the Secretary in regulations or other guidance, the provisions of this section shall apply to any domestic entity which is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets, in the same manner as if such entity were an individual.

(g)

Reasonable cause exception

No penalty shall be imposed by this section on any failure which is shown to be due to reasonable cause and not due to willful neglect. The fact that a foreign jurisdiction would impose a civil or criminal penalty on the taxpayer (or any other person) for disclosing the required information is not reasonable cause.

(h)

Regulations

The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance which provide appropriate exceptions from the application of this section in the case of—

(1)

classes of assets identified by the Secretary, including any assets with respect to which the Secretary determines that disclosure under this section would be duplicative of other disclosures,

(2)

nonresident aliens, and

(3)

bona fide residents of any possession of the United States.

.

(b)

Clerical amendment

The table of sections for subpart A of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6038C the following new item:

Sec. 6038D. Information with respect to foreign financial assets.

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

512.

Penalties for underpayments attributable to undisclosed foreign financial assets

(a)

In general

Section 6662 is amended—

(1)

in subsection (b), by inserting after paragraph (5) the following new paragraph:

(6)

Any undisclosed foreign financial asset understatement.

, and

(2)

by adding at the end the following new subsection:

(i)

Undisclosed foreign financial asset understatement

(1)

In general

For purposes of this section, the term undisclosed foreign financial asset understatement means, for any taxable year, the portion of the understatement for such taxable year which is attributable to any transaction involving an undisclosed foreign financial asset.

(2)

Undisclosed foreign financial asset

For purposes of this subsection, the term undisclosed foreign financial asset means, with respect to any taxable year, any asset with respect to which information was required to be provided under section 6038, 6038B, 6038D, 6046A, or 6048 for such taxable year but was not provided by the taxpayer as required under the provisions of those sections.

(3)

Increase in penalty for undisclosed foreign financial asset understatements

In the case of any portion of an underpayment which is attributable to any undisclosed foreign financial asset understatement, subsection (a) shall be applied with respect to such portion by substituting 40 percent for 20 percent.

.

(b)

Effective Date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

513.

Modification of statute of limitations for significant omission of income in connection with foreign assets

(a)

Extension of statute of limitations

(1)

In general

Paragraph (1) of section 6501(e) is amended by redesignating subparagraphs (A) and (B) as subparagraphs (B) and (C), respectively, and by inserting before subparagraph (B) (as so redesignated) the following new subparagraph:

(A)

General rule

If the taxpayer omits from gross income an amount properly includible therein and—

(i)

such amount is in excess of 25 percent of the amount of gross income stated in the return, or

(ii)

such amount—

(I)

is attributable to one or more assets with respect to which information is required to be reported under section 6038D (or would be so required if such section were applied without regard to the dollar threshold specified in subsection (a) thereof and without regard to any exceptions provided pursuant to subsection (h)(1) thereof), and

(II)

is in excess of $5,000,

the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time within 6 years after the return was filed.

.

(2)

Conforming amendments

(A)

Subparagraph (B) of section 6501(e)(1), as redesignated by paragraph (1), is amended by striking all that precedes clause (i) and inserting the following:

(B)

Determination of gross income

For purposes of subparagraph (A)—

.

(B)

Paragraph (2) of section 6229(c) is amended by striking which is in excess of 25 percent of the amount of gross income stated in its return and inserting and such amount is described in clause (i) or (ii) of section 6501(e)(1)(A).

(b)

Additional reports subject to extended period

Paragraph (8) of section 6501(c) is amended—

(1)

by inserting pursuant to an election under section 1295(b) or before under section 6038,

(2)

by inserting 1298(f), before 6038, and

(3)

by inserting 6038D, after 6038B,.

(c)

Clarifications related to failure To disclose foreign transfers

Paragraph (8) of section 6501(c) is amended by striking event and inserting tax return, event,.

(d)

Effective date

The amendments made by this section shall apply to—

(1)

returns filed after the date of the enactment of this Act; and

(2)

returns filed on or before such date if the period specified in section 6501 of the Internal Revenue Code of 1986 (determined without regard to such amendments) for assessment of such taxes has not expired as of such date.

C

Other disclosure provisions

521.

Reporting of activities with respect to passive foreign investment companies

(a)

In general

Section 1298 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

(f)

Reporting requirement

Except as otherwise provided by the Secretary, each United States person who is a shareholder of a passive foreign investment company shall file an annual report containing such information as the Secretary may require.

.

(b)

Conforming amendment

Subsection (e) of section 1291 is amended by striking , (d), and (f) and inserting and (d).

(c)

Effective date

The amendments made by this section take effect on the date of the enactment of this Act.

522.

Secretary permitted to require financial institutions to file certain returns related to withholding on foreign transfers electronically

(a)

In general

Subsection (e) of section 6011 is amended by adding at the end the following new paragraph:

(3)

Special rule for returns filed by financial institutions with respect to withholding on foreign transfers

Paragraph (2)(A) shall not apply to any return filed by a financial institution (as defined in section 1471(d)(5)) with respect to tax for which such institution is made liable under section 1461 or 1474(a).

.

(b)

Conforming amendment

Subsection (c) of section 6724 is amended by inserting or with respect to a return described in section 6011(e)(3).

(c)

Effective date

The amendment made by this section shall apply to returns the due date for which (determined without regard to extensions) is after the date of the enactment of this Act.

D

Provisions related to foreign trusts

531.

Clarifications with respect to foreign trusts which are treated as having a United States beneficiary

(a)

In general

Paragraph (1) of section 679(c) is amended by adding at the end the following:

For purposes of subparagraph (A), an amount shall be treated as accumulated for the benefit of a United States person even if the United States person’s interest in the trust is contingent on a future event.

.

(b)

Clarification regarding discretion To identify beneficiaries

Subsection (c) of section 679 is amended by adding at the end the following new paragraph:

(4)

Special rule in case of discretion to identify beneficiaries

For purposes of paragraph (1)(A), if any person has the discretion (by authority given in the trust agreement, by power of appointment, or otherwise) of making a distribution from the trust to, or for the benefit of, any person, such trust shall be treated as having a beneficiary who is a United States person unless—

(A)

the terms of the trust specifically identify the class of persons to whom such distributions may be made, and

(B)

none of those persons are United States persons during the taxable year.

.

(c)

Clarification that certain agreements and understandings are terms of the trust

Subsection (c) of section 679, as amended by subsection (b), is amended by adding at the end the following new paragraph:

(5)

Certain agreements and understandings treated as terms of the trust

For purposes of paragraph (1)(A), if any United States person who directly or indirectly transfers property to the trust is directly or indirectly involved in any agreement or understanding (whether written, oral, or otherwise) that may result in the income or corpus of the trust being paid or accumulated to or for the benefit of a United States person, such agreement or understanding shall be treated as a term of the trust.

.

532.

Presumption that foreign trust has United States beneficiary

(a)

In general

Section 679 is amended by redesignating subsection (d) as subsection (e) and inserting after subsection (c) the following new subsection:

(d)

Presumption that foreign trust has United States beneficiary

If a United States person directly or indirectly transfers property to a foreign trust (other than a trust described in section 6048(a)(3)(B)(ii)), the Secretary may treat such trust as having a United States beneficiary for purposes of applying this section to such transfer unless such person—

(1)

submits such information to the Secretary as the Secretary may require with respect to such transfer, and

(2)

demonstrates to the satisfaction of the Secretary that such trust satisfies the requirements of subparagraphs (A) and (B) of subsection (c)(1).

.

(b)

Effective date

The amendments made by this section shall apply to transfers of property after the date of the enactment of this Act.

533.

Uncompensated use of trust property

(a)

In general

Paragraph (1) of section 643(i) is amended—

(1)

by striking directly or indirectly to and inserting (or permits the use of any other trust property) directly or indirectly to or by, and

(2)

by inserting (or the fair market value of the use of such property) after the amount of such loan.

(b)

Exception for compensated use

Paragraph (2) of section 643(i) is amended by adding at the end the following new subparagraph:

(E)

Exception for compensated use of property

In the case of the use of any trust property other than a loan of cash or marketable securities, paragraph (1) shall not apply to the extent that the trust is paid the fair market value of such use within a reasonable period of time of such use.

.

(c)

Application to grantor trusts

Subsection (c) of section 679, as amended by section 531, is amended by adding at the end the following new paragraph:

(6)

Uncompensated use of trust property treated as a payment

For purposes of this subsection, a loan of cash or marketable securities (or the use of any other trust property) directly or indirectly to or by any United States person (whether or not a beneficiary under the terms of the trust) shall be treated as paid or accumulated for the benefit of a United States person. The preceding sentence shall not apply to the extent that the United States person repays the loan at a market rate of interest (or pays the fair market value of the use of such property) within a reasonable period of time.

.

(d)

Conforming amendments

Paragraph (3) of section 643(i) is amended—

(1)

by inserting (or use of property) after If any loan,

(2)

by inserting or the return of such property before shall be disregarded, and

(3)

by striking regarding loan principal in the heading thereof.

(e)

Effective date

The amendments made by this section shall apply to loans made, and uses of property, after the date of the enactment of this Act.

534.

Reporting requirement of United States owners of foreign trusts

(a)

In general

Paragraph (1) of section 6048(b) is amended by inserting shall submit such information as the Secretary may prescribe with respect to such trust for such year and before shall be responsible to ensure.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

535.

Minimum penalty with respect to failure to report on certain foreign trusts

(a)

In general

Subsection (a) of section 6677 is amended—

(1)

by inserting the greater of $10,000 or before 35 percent, and

(2)

by striking the last sentence and inserting the following: At such time as the gross reportable amount with respect to any failure can be determined by the Secretary, any subsequent penalty imposed under this subsection with respect to such failure shall be reduced as necessary to assure that the aggregate amount of such penalties do not exceed the gross reportable amount (and to the extent that such aggregate amount already exceeds the gross reportable amount the Secretary shall refund such excess to the taxpayer).

(b)

Effective date

The amendments made by this section shall apply to notices and returns required to be filed after December 31, 2009.

E

Substitute dividends and dividend equivalent payments received by foreign persons treated as dividends

541.

Substitute dividends and dividend equivalent payments received by foreign persons treated as dividends

(a)

In general

Section 871 is amended by redesignating subsection (l) as subsection (m) and by inserting after subsection (k) the following new subsection:

(l)

Treatment of dividend equivalent payments

(1)

In general

For purposes of this section, sections 881 and 4948(a), and chapters 3 and 4, a dividend equivalent shall be treated as a dividend from sources within the United States.

(2)

Dividend equivalent

For purposes of this subsection, the term dividend equivalent means—

(A)

any substitute dividend,

(B)

any payment made pursuant to a specified notional principal contract that (directly or indirectly) is contingent upon, or determined by reference to, the payment of a dividend from sources within the United States, and

(C)

any other payment determined by the Secretary to be substantially similar to a payment described in subparagraph (A) or (B).

(3)

Specified notional principal contract

For purposes of this subsection, the term specified notional principal contract means—

(A)

any notional principal contract if—

(i)

in connection with entering into such contract, any long party transfers the underlying security,

(ii)

in connection with the termination of such contract, any short party transfers the underlying security to any long party,

(iii)

the underlying security is not readily tradable on an established securities market,

(iv)

in connection with entering into such contract, the underlying security is posted as collateral by any short party to the contract, or

(v)

such contract is identified by the Secretary as a specified notional principal contract,

(B)

in the case of payments made after the date which is 2 years after the date of the enactment of this subsection, any notional principal contract unless the Secretary determines that such contract is of a type which does not have the potential for tax avoidance.

(4)

Definitions

For purposes of paragraph (3)(A)—

(A)

Long party

The term long party means, with respect to any underlying security of any notional principal contract, any party to the contract which is entitled to receive any payment pursuant to such contract which is contingent upon, or determined by reference to, the payment of a dividend from sources within the United States with respect to such underlying security.

(B)

Short party

The term short party means, with respect to any underlying security of any notional principal contract, any party to the contract which is not a long party with respect to such underlying security.

(C)

Underlying security

The term underlying security means, with respect to any notional principal contract, the security with respect to which the dividend referred to in paragraph (2)(B) is paid. For purposes of this paragraph, any index or fixed basket of securities shall be treated as a single security.

(5)

Payments determined on gross basis

For purposes of this subsection, the term payment includes any gross amount which is used in computing any net amount which is transferred to or from the taxpayer.

(6)

Prevention of over-withholding

In the case of any chain of dividend equivalents one or more of which is subject to tax under this section or section 881, the Secretary may reduce such tax, but only to the extent that the taxpayer can establish that such tax has been paid with respect to another dividend equivalent in such chain. For purposes of this paragraph, a dividend shall be treated as a dividend equivalent.

(7)

Coordination with chapters 3 and 4

For purposes of chapters 3 and 4, each person that is a party to any contract or other arrangement that provides for the payment of a dividend equivalent shall be treated as having control of such payment.

.

(b)

Effective date

The amendments made by this section shall apply to payments made on or after the date that is 90 days after the date of the enactment of this Act.

VI

Other revenue provisions

A

Partnership interests held by partners providing services

601.

Partnership interests transferred in connection with performance of services

(a)

Modification to election To include partnership interest in gross income in year of transfer

Subsection (c) of section 83 is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph:

(4)

Partnership interests

Except as provided by the Secretary, in the case of any transfer of an interest in a partnership in connection with the provision of services to (or for the benefit of) such partnership—

(A)

the fair market value of such interest shall be treated for purposes of this section as being equal to the amount of the distribution which the partner would receive if the partnership sold (at the time of the transfer) all of its assets at fair market value and distributed the proceeds of such sale (reduced by the liabilities of the partnership) to its partners in liquidation of the partnership, and

(B)

the person receiving such interest shall be treated as having made the election under subsection (b)(1) unless such person makes an election under this paragraph to have such subsection not apply.

.

(b)

Conforming amendment

Paragraph (2) of section 83(b) is amended by inserting or subsection (c)(4)(B) after paragraph (1) .

(c)

Effective date

The amendments made by this section shall apply to interests in partnerships transferred after the date of the enactment of this Act.

602.

Income of partners for performing investment management services treated as ordinary income received for performance of services

(a)

In general

Part I of subchapter K of chapter 1 is amended by adding at the end the following new section:

710.

Special rules for partners providing investment management services to partnership

(a)

Treatment of distributive share of partnership items

For purposes of this title, in the case of an investment services partnership interest—

(1)

In general

Notwithstanding section 702(b)—

(A)

any net income with respect to such interest for any partnership taxable year shall be treated as ordinary income, and

(B)

any net loss with respect to such interest for such year, to the extent not disallowed under paragraph (2) for such year, shall be treated as an ordinary loss.

All items of income, gain, deduction, and loss which are taken into account in computing net income or net loss shall be treated as ordinary income or ordinary loss (as the case may be).
(2)

Treatment of losses

(A)

Limitation

Any net loss with respect to such interest shall be allowed for any partnership taxable year only to the extent that such loss does not exceed the excess (if any) of—

(i)

the aggregate net income with respect to such interest for all prior partnership taxable years, over

(ii)

the aggregate net loss with respect to such interest not disallowed under this subparagraph for all prior partnership taxable years.

(B)

Carryforward

Any net loss for any partnership taxable year which is not allowed by reason of subparagraph (A) shall be treated as an item of loss with respect to such partnership interest for the succeeding partnership taxable year.

(C)

Basis adjustment

No adjustment to the basis of a partnership interest shall be made on account of any net loss which is not allowed by reason of subparagraph (A).

(D)

Prior partnership years

Any reference in this paragraph to prior partnership taxable years shall only include prior partnership taxable years to which this section applies.

(3)

Net income and loss

For purposes of this section—

(A)

Net income

The term net income means, with respect to any investment services partnership interest for any partnership taxable year, the excess (if any) of—

(i)

all items of income and gain taken into account by the holder of such interest under section 702 with respect to such interest for such year, over

(ii)

all items of deduction and loss so taken into account.

(B)

Net loss

The term net loss means, with respect to such interest for such year, the excess (if any) of the amount described in subparagraph (A)(ii) over the amount described in subparagraph (A)(i).

(b)

Dispositions of partnership interests

(1)

Gain

Any gain on the disposition of an investment services partnership interest shall be treated as ordinary income and shall be recognized notwithstanding any other provision of this subtitle.

(2)

Loss

Any loss on the disposition of an investment services partnership interest shall be treated as an ordinary loss to the extent of the excess (if any) of—

(A)

the aggregate net income with respect to such interest for all partnership taxable years, over

(B)

the aggregate net loss with respect to such interest allowed under subsection (a)(2) for all partnership taxable years.

(3)

Disposition of portion of interest

In the case of any disposition of an investment services partnership interest, the amount of net loss which otherwise would have (but for subsection (a)(2)(C)) applied to reduce the basis of such interest shall be disregarded for purposes of this section for all succeeding partnership taxable years.

(4)

Distributions of partnership property

In the case of any distribution of property by a partnership with respect to any investment services partnership interest held by a partner—

(A)

the excess (if any) of—

(i)

the fair market value of such property at the time of such distribution, over

(ii)

the adjusted basis of such property in the hands of the partnership,

shall be taken into account as an increase in such partner’s distributive share of the taxable income of the partnership (except to the extent such excess is otherwise taken into account in determining the taxable income of the partnership),
(B)

such property shall be treated for purposes of subpart B of part II as money distributed to such partner in an amount equal to such fair market value, and

(C)

the basis of such property in the hands of such partner shall be such fair market value.

Subsection (b) of section 734 shall be applied without regard to the preceding sentence.
(5)

Application of section 751

In applying section 751(a), an investment services partnership interest shall be treated as an inventory item.

(c)

Investment services partnership interest

For purposes of this section—

(1)

In general

The term investment services partnership interest means any interest in a partnership which is held (directly or indirectly) by any person if it was reasonably expected (at the time that such person acquired such interest) that such person (or any person related to such person) would provide (directly or indirectly) a substantial quantity of any of the following services with respect to assets held (directly or indirectly) by the partnership:

(A)

Advising as to the advisability of investing in, purchasing, or selling any specified asset.

(B)

Managing, acquiring, or disposing of any specified asset.

(C)

Arranging financing with respect to acquiring specified assets.

(D)

Any activity in support of any service described in subparagraphs (A) through (C).

For purposes of this paragraph, the term specified asset means securities (as defined in section 475(c)(2) without regard to the last sentence thereof), real estate held for rental or investment, interests in partnerships, commodities (as defined in section 475(e)(2)), or options or derivative contracts with respect to any of the foregoing.
(2)

Exception for certain capital interests

(A)

In general

In the case of any portion of an investment services partnership interest which is a qualified capital interest, all items of income, gain, loss, and deduction which are allocated to such qualified capital interest shall not be taken into account under subsection (a) if—

(i)

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 partners who do not provide any services described in paragraph (1) and who are not related to the partner holding the qualified capital interest, and

(ii)

the allocations made to such other interests are significant compared to the allocations made to such qualified capital interest.

(B)

Special rule for no or insignificant allocations to nonservice providers

To the extent provided by the Secretary in regulations or other guidance, in any case in which the requirements of subparagraph (A)(ii) are not satisfied, items of income, gain, loss, and deduction 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)

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 entire amount of such gain or loss as—

(i)

the distributive share of gain or loss that would have been allocable to the qualified capital interest under subparagraph (A) if the partnership sold all of its assets immediately before the disposition, bears to

(ii)

the distributive share of gain or loss that would have been so allocable to the investment services partnership interest of which such qualified capital interest is a part.

(D)

Qualified capital interest

For purposes of this paragraph, the term qualified capital interest means so much of a partner’s interest in the capital of the partnership as is attributable to—

(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 included in gross income under section 83 with respect to the transfer of such interest, 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 for taxable years to which this section applies, over

(II)

any items of deduction and loss so taken into account.

The qualified capital interest shall be reduced by distributions from the partnership with respect to such interest for taxable years to which this section applies and by the excess (if any) of the amount described in clause (iii)(II) over the amount described in clause (iii)(I).
(E)

Treatment of certain loans

(i)

Proceeds of partnership loans not treated as qualified capital interest of service providing partners

For purposes of this paragraph, an investment services partnership interest shall not be treated as a qualified capital interest to the extent that 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 related to any such other partner or the partnership).

(ii)

Reduction in allocations to qualified capital interests for loans from nonservice providing partners to the partnership

For purposes of this paragraph, any loan or other advance to the partnership made or guaranteed, directly or indirectly, by a partner not providing services described in paragraph (1) 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 partnership.

(3)

Related persons

A person shall be treated as related to another person if the relationship between such persons would result in a disallowance of losses under section 267 or 707(b).

(d)

Other income and gain in connection with investment management services

(1)

In general

If—

(A)

a person performs (directly or indirectly) investment management services for any entity,

(B)

such person holds (directly or indirectly) a disqualified interest with respect to such entity, and

(C)

the value of such interest (or payments 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 performed,

any income or gain with respect to such interest shall be treated as ordinary income. Rules similar to the rules of subsection (c)(2) shall apply for purposes of this subsection.
(2)

Definitions

For purposes of this subsection—

(A)

Disqualified interest

(i)

In general

The term disqualified interest means, with respect to any entity—

(I)

any interest in such entity other than indebtedness,

(II)

convertible or contingent debt of such entity,

(III)

any option or other right to acquire property described in subclause (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 substantially all of the income of which is—

(I)

effectively connected with the conduct of a trade or business in the United States, or

(II)

subject to a comprehensive foreign income tax (as defined in section 457A(d)(2)).

(C)

Investment management services

The term investment management services means a substantial quantity of any of the services described in subsection (c)(1).

(e)

Regulations

The Secretary shall prescribe such regulations or other guidance as is necessary or appropriate to carry out the purposes of this section, including 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 modification is consistent with the purposes of this section,

(2)

prevent the avoidance of the purposes of this section, and

(3)

coordinate this section with the other provisions of this title.

(f)

Cross reference

For 40 percent penalty on certain underpayments due to the avoidance of this section, see section 6662.

.

(b)

Income from investment services partnership interests not treated as qualifying income of publicly traded partnerships

Subsection (d) of section 7704 is amended by adding at the end the following new paragraph:

(6)

Income from investment services partnership interests not qualified

(A)

In general

Items of income and gain shall not be treated as qualifying income if such items are treated as ordinary income by reason of the application of section 710 (relating to special rules for partners providing investment management services to partnership).

(B)

Special rules for certain partnerships

(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 interests in a real estate investment trust which is publicly traded.

(II)

50 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 investment 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 owning other publicly traded partnerships

Subparagraph (A) shall not apply in the case of a partnership which meets each of the following requirements:

(I)

Substantially all of the assets of such partnership consist of interests in one or more publicly traded partnerships (determined without regard to subsection (b)(2)).

(II)

Substantially all of the income of such partnership is ordinary income or section 1231 gain (as defined in section 1231(a)(3)).

(C)

Transitional rule

In the case of a partnership which is a publicly traded partnership on the date of the enactment of this paragraph, subparagraph (A) shall not apply to any taxable year of the partnership beginning before the date which is 10 years after the date of the enactment of this paragraph.

.

(c)

Imposition of penalty on underpayments

(1)

In general

Subsection (b) of section 6662, as amended by section 512, is amended by inserting after paragraph (6) the following new paragraph:

(7)

The application of subsection (d) of section 710 or the regulations prescribed under section 710(e) to prevent the avoidance of the purposes of section 710.

.

(2)

Amount of penalty

(A)

In general

Section 6662, as amended by section 512, is amended by adding at the end the following new subsection:

(j)

Increase in penalty in case of property transferred for investment management services

In the case of any portion of an underpayment to which this section applies by reason of subsection (b)(7), subsection (a) shall be applied with respect to such portion by substituting 40 percent for 20 percent.

.

(B)

Conforming amendments

Subparagraph (B) of section 6662A(e)(2) is amended—

(i)

by striking section 6662(h) and inserting subsection (h) or (i) of section 6662, and

(ii)

by striking gross valuation misstatement penalty in the heading and inserting certain increased underpayment penalties.

(3)

Special rules for application of reasonable cause exception

Subsection (c) of section 6664 is amended—

(A)

by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively,

(B)

by striking paragraph (2) in paragraph (4), as so redesignated, and inserting paragraph (3), and

(C)

by inserting after paragraph (1) the following new paragraph:

(2)

Special rule for underpayments attributable to investment management services

(A)

In general

Paragraph (1) shall not apply to any portion of an underpayment to which this section applies by reason of subsection (b)(7) unless—

(i)

the relevant facts affecting the tax treatment of the item are adequately disclosed,

(ii)

there is or was substantial authority 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 subsection (d)(3) shall apply for purposes of subparagraph (A)(iii).

.

(d)

Income and loss from investment services partnership interests taken into account in determining net earnings from self-Employment

(1)

Internal Revenue Code

Section 1402(a) is amended by 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 engaged in the trade or business of providing services described in section 710(c)(1) with respect to any entity, any amount treated as ordinary income or ordinary loss of such individual under section 710 with respect to such entity shall be taken into account in determining the net earnings from self-employment of such individual.

.

(2)

Social Security Act

Section 211(a) of the Social Security Act is amended by inserting after paragraph (16) the following new paragraph:

(17)

Notwithstanding the preceding provisions of this subsection, in the case of any individual engaged in the trade or business of providing services described in section 710(c)(1) of the Internal Revenue Code of 1986 with respect to any entity, any amount treated as ordinary income or ordinary loss of such individual under section 710 of such Code with respect to such entity shall be taken into account in determining the net earnings from self-employment of such individual.

.

(e)

Conforming amendments

(1)

Subsection (d) of section 731 is amended by inserting section 710(b)(4) (relating to distributions of partnership property), after to the extent otherwise provided by.

(2)

Section 741 is amended by inserting or section 710 (relating to special rules for partners providing investment management services to partnership) before the period at the end.

(3)

The table of sections for part I of subchapter K of chapter 1 is amended by adding at the end the following new item:

Sec. 710. Special rules for partners providing investment management services to partnership.

.

(f)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years ending after December 31, 2009.

(2)

Partnership taxable years which include 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 December 31, 2009, 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 income 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 interests

Section 710(b) of the Internal Revenue Code of 1986 (as added by this section) shall apply to dispositions and distributions after December 31, 2009.

(4)

Other income and gain in connection with investment management services

Section 710(d) of such Code (as added by this section) shall take effect on January 1, 2010.

(5)

Publicly traded partnerships

The amendment made by subsection (b) shall apply to taxable years beginning after December 31, 2009.

B

Time for payment of corporate estimated taxes

611.

Time for payment of corporate estimated taxes

The percentage under paragraph (1) of section 202(b) of the Corporate Estimated Tax Shift Act of 2009 in effect on the date of the enactment of this Act is increased by 26.5 percentage points.

C

Tax Expenditure Study

621.

Findings

Congress finds the following:

(1)

Currently, the aggregate cost of Federal tax expenditures rivals, or even exceeds, the amount of total Federal discretionary spending.

(2)

Given the escalating public debt, a critical examination of this use of taxpayer dollars is essential.

(3)

Additionally, tax expenditures can complicate the Internal Revenue Code of 1986 for taxpayers and complicate tax administration for the Internal Revenue Service.

(4)

To facilitate a better understanding of tax expenditures in the future, it is constructive for legislation extending these provisions to include a study of such provisions.   

622.

Study of extended tax expenditures

(a)

In general

Not later than November 30, 2010, the Chief of Staff of the Joint Committee on Taxation, in consultation with the Comptroller General of the United States, shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report on each tax expenditure (as defined in section 3(3) of the Congressional Budget Impoundment Control Act of 1974 (2 U.S.C. 622(3)) extended by this Act.

(b)

Rolling submission of reports

The Chief of Staff of the Joint Committee on Taxation shall initially submit the reports for each such tax expenditure enacted in subtitle B of title I (relating to business tax relief) and title IV (relating to energy provisions) in order of the tax expenditure incurring the least aggregate cost to the greatest aggregate cost (determined by reference to the cost estimate of this Act by the Joint Committee on Taxation). Thereafter, such reports may be submitted in such order as the Chief of Staff determines appropriate.

(c)

Contents of report

Such reports shall contain the following:

(1)

An explanation of the tax expenditure and any relevant economic, social, or other context under which it was first enacted.

(2)

A description of the intended purpose of the tax expenditure.

(3)

An analysis of the overall success of the tax expenditure in achieving such purpose, and evidence supporting such analysis.

(4)

An analysis of the extent to which further extending the tax expenditure, or making it permanent, would contribute to achieving such purpose.

(5)

A description of the direct and indirect beneficiaries of the tax expenditure, including identifying any unintended beneficiaries.

(6)

An analysis of whether the tax expenditure is the most cost-effective method for achieving the purpose for which it was intended, and a description of any more cost-effective methods through which such purpose could be accomplished.

(7)

A description of any unintended effects of the tax expenditure that are useful in understanding the tax expenditure’s overall value.

(8)

An analysis of how the tax expenditure could be modified to better achieve its original purpose.

(9)

A brief description of any interactions (actual or potential) with other tax expenditures or direct spending programs in the same or related budget function worthy of further study.

(10)

A description of any unavailable information the staff of the Joint Committee on Taxation may need to complete a more thorough examination and analysis of the tax expenditure, and what must be done to make such information available.

(d)

Minimum analysis by deadline

In the event the Chief of Staff of the Joint Committee on Taxation concludes it will not be feasible to complete all reports by the date specified in subsection (a), at a minimum, the reports for each tax expenditure enacted in subtitle B of title I (relating to business tax relief) and title IV (relating to energy provisions) shall be completed by such date.