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H.R. 5893 (111th): Investing in American Jobs and Closing Tax Loopholes Act of 2010


The text of the bill below is as of Jul 28, 2010 (Introduced). The bill was not enacted into law.


I

111th CONGRESS

2d Session

H. R. 5893

IN THE HOUSE OF REPRESENTATIVES

July 28, 2010

(for himself, Mr. Rangel, Mr. Stark, Mr. McDermott, Mr. Lewis of Georgia, Mr. Becerra, Mr. Pascrell, Mr. Crowley, Ms. Berkley, Mr. Meek of Florida, Mr. Davis of Illinois, Mr. Etheridge, Mr. Higgins, Mr. Garamendi, Mrs. Dahlkemper, Mr. Kagen, Mr. Perriello, Ms. Kilroy, Mr. McMahon, Mr. Kissell, and Mr. Carney) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on the Budget, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 to create jobs through increased investment in infrastructure, to eliminate loopholes which encourage companies to move operations offshore, and for other purposes.

1.

Short title; amendment of 1986 Code; table of contents

(a)

Short title

This Act may be cited as the Investing in American Jobs and Closing Tax Loopholes Act of 2010.

(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—Infrastructure incentives

Sec. 101. Extension of Build America Bonds.

Sec. 102. Exempt-facility bonds for sewage and water supply facilities.

Sec. 103. Extension of exemption from alternative minimum tax treatment for certain tax-exempt bonds.

Sec. 104. Extension and additional allocations of recovery zone bond authority.

Sec. 105. Allowance of new markets tax credit against alternative minimum tax.

Sec. 106. Extension of tax-exempt eligibility for loans guaranteed by Federal home loan banks.

Sec. 107. Extension of temporary small issuer rules for allocation of tax-exempt interest expense by financial institutions.

Title II—Emergency Fund for Job Creation and Assistance

Sec. 201. Extension of the Emergency Fund for Job Creation and Assistance.

Title III—Foreign provisions

Sec. 301. Rules to prevent splitting foreign tax credits from the income to which they relate.

Sec. 302. Denial of foreign tax credit with respect to foreign income not subject to United States taxation by reason of covered asset acquisitions.

Sec. 303. Separate application of foreign tax credit limitation, etc., to items resourced under treaties.

Sec. 304. Limitation on the amount of foreign taxes deemed paid with respect to section 956 inclusions.

Sec. 305. Special rule with respect to certain redemptions by foreign subsidiaries.

Sec. 306. Modification of affiliation rules for purposes of rules allocating interest expense.

Sec. 307. Termination of special rules for interest and dividends received from persons meeting the 80-percent foreign business requirements.

Sec. 308. Source rules for income on guarantees.

Sec. 309. Limitation on extension of statute of limitations for failure to notify Secretary of certain foreign transfers.

Title IV—Budgetary provisions

Sec. 401. Paygo compliance.

Sec. 402. Time for payment of corporate estimated taxes.

I

Infrastructure incentives

101.

Extension of Build America Bonds

(a)

In general

Subparagraph (B) of section 54AA(d)(1) is amended by striking January 1, 2011 and inserting January 1, 2013.

(b)

Extension of payments to issuers

(1)

In general

Section 6431 is amended—

(A)

by striking January 1, 2011 in subsection (a) and inserting January 1, 2013; and

(B)

by striking January 1, 2011 in subsection (f)(1)(B) and inserting a particular date.

(2)

Conforming amendments

Subsection (g) of section 54AA is amended—

(A)

by striking January 1, 2011 and inserting January 1, 2013; and

(B)

by striking qualified bonds issued before 2011 in the heading and inserting certain qualified bonds.

(c)

Reduction in percentage of payments to issuers

Subsection (b) of section 6431 is amended—

(1)

by striking The Secretary and inserting the following:

(1)

In general

The Secretary

;

(2)

by striking 35 percent and inserting the applicable percentage; and

(3)

by adding at the end the following new paragraph:

(2)

Applicable percentage

For purposes of this subsection, the term applicable percentage means the percentage determined in accordance with the following table:

In the case of a qualified bond issued during calendar year:The applicable percentage is:
2009 or 201035 percent
201132 percent
201230 percent.

.

(d)

Current refundings permitted

Subsection (g) of section 54AA is amended by adding at the end the following new paragraph:

(3)

Treatment of current refunding bonds

(A)

In general

For purposes of this subsection, the term qualified bond includes any bond (or series of bonds) issued to refund a qualified bond if—

(i)

the average maturity date of the issue of which the refunding bond is a part is not later than the average maturity date of the bonds to be refunded by such issue,

(ii)

the amount of the refunding bond does not exceed the outstanding amount of the refunded bond, and

(iii)

the refunded bond is redeemed not later than 90 days after the date of the issuance of the refunding bond.

(B)

Applicable percentage

In the case of a refunding bond referred to in subparagraph (A), the applicable percentage with respect to such bond under section 6431(b) shall be the lowest percentage specified in paragraph (2) of such section.

(C)

Determination of average maturity

For purposes of subparagraph (A)(i), average maturity shall be determined in accordance with section 147(b)(2)(A).

.

(e)

Clarification related to levees and flood control projects

Subparagraph (A) of section 54AA(g)(2) is amended by inserting (including capital expenditures for levees and other flood control projects) after capital expenditures.

102.

Exempt-facility bonds for sewage and water supply facilities

(a)

Bonds for water and sewage facilities exempt from volume cap on private activity bonds

(1)

In general

Paragraph (3) of section 146(g) is amended by inserting (4), (5), after (2),.

(2)

Conforming amendment

Paragraphs (2) and (3)(B) of section 146(k) are both amended by striking (4), (5), (6), and inserting (6).

(b)

Tax-Exempt issuance by Indian tribal governments

(1)

In general

Subsection (c) of section 7871 is amended by adding at the end the following new paragraph:

(4)

Exception for bonds for water and sewage facilities

Paragraph (2) shall not apply to an exempt facility bond 95 percent or more of the net proceeds (as defined in section 150(a)(3)) of which are to be used to provide facilities described in paragraph (4) or (5) of section 142(a).

.

(2)

Conforming amendment

Paragraph (2) of section 7871(c) is amended by striking paragraph (3) and inserting paragraphs (3) and (4).

(c)

Effective date

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

103.

Extension of exemption from alternative minimum tax treatment for certain tax-exempt bonds

(a)

In general

Clause (vi) of section 57(a)(5)(C) is amended—

(1)

by striking January 1, 2011 in subclause (I) and inserting January 1, 2012; and

(2)

by striking and 2010 in the heading and inserting , 2010, and 2011.

(b)

Adjusted current earnings

Clause (iv) of section 56(g)(4)(B) is amended—

(1)

by striking January 1, 2011 in subclause (I) and inserting January 1, 2012; and

(2)

by striking and 2010 in the heading and inserting , 2010, and 2011.

(c)

Effective date

The amendments made by this section shall apply to obligations issued after December 31, 2010.

104.

Extension and additional allocations of recovery zone bond authority

(a)

Extension of recovery zone bond authority

Section 1400U–2(b)(1) and section 1400U–3(b)(1)(B) are each amended by striking January 1, 2011 and inserting January 1, 2012.

(b)

Additional allocations of recovery zone bond authority based on unemployment

Section 1400U–1 is amended by adding at the end the following new subsection:

(c)

Allocation of 2010 recovery zone bond limitations based on unemployment

(1)

In general

The Secretary shall allocate the 2010 national recovery zone economic development bond limitation and the 2010 national recovery zone facility bond limitation among the States in the proportion that each such State’s 2009 unemployment number bears to the aggregate of the 2009 unemployment numbers for all of the States.

(2)

Minimum allocation

The Secretary shall adjust the allocations under paragraph (1) for each State to the extent necessary to ensure that no State (prior to any reduction under paragraph (3)) receives less than 0.9 percent of the 2010 national recovery zone economic development bond limitation and 0.9 percent of the 2010 national recovery zone facility bond limitation.

(3)

Allocations by States

(A)

In general

Each State with respect to which an allocation is made under paragraph (1) shall reallocate such allocation among the counties and large municipalities (as defined in subsection (a)(3)(B)) in such State in the proportion that each such county’s or municipality’s 2009 unemployment number bears to the aggregate of the 2009 unemployment numbers for all the counties and large municipalities (as so defined) in such State.

(B)

2010 allocation reduced by amount of previous allocation

Each State shall reduce (but not below zero)—

(i)

the amount of the 2010 national recovery zone economic development bond limitation allocated to each county or large municipality (as so defined) in such State by the amount of the national recovery zone economic development bond limitation allocated to such county or large municipality under subsection (a)(3)(A) (determined without regard to any waiver thereof), and

(ii)

the amount of the 2010 national recovery zone facility bond limitation allocated to each county or large municipality (as so defined) in such State by the amount of the national recovery zone facility bond limitation allocated to such county or large municipality under subsection (a)(3)(A) (determined without regard to any waiver thereof).

(C)

Waiver of suballocations

A county or municipality may waive any portion of an allocation made under this paragraph. A county or municipality shall be treated as having waived any portion of an allocation made under this paragraph which has not been allocated to a bond issued before May 1, 2011. Any allocation waived (or treated as waived) under this subparagraph may be used or reallocated by the State.

(D)

Special rule for a municipality in a county

In the case of any large municipality any portion of which is in a county, such portion shall be treated as part of such municipality and not part of such county.

(4)

2009 unemployment number

For purposes of this subsection, the term 2009 unemployment number means, with respect to any State, county or municipality, the number of individuals in such State, county, or municipality who were determined to be unemployed by the Bureau of Labor Statistics for December 2009.

(5)

2010 national limitations

(A)

Recovery zone economic development bonds

The 2010 national recovery zone economic development bond limitation is $10,000,000,000. Any allocation of such limitation under this subsection shall be treated for purposes of section 1400U–2 in the same manner as an allocation of national recovery zone economic development bond limitation.

(B)

Recovery zone facility bonds

The 2010 national recovery zone facility bond limitation is $15,000,000,000. Any allocation of such limitation under this subsection shall be treated for purposes of section 1400U–3 in the same manner as an allocation of national recovery zone facility bond limitation.

.

(c)

Authority of State To waive certain 2009 allocations

Subparagraph (A) of section 1400U–1(a)(3) is amended by adding at the end the following: A county or municipality shall be treated as having waived any portion of an allocation made under this subparagraph which has not been allocated to a bond issued before May 1, 2011. Any allocation waived (or treated as waived) under this subparagraph may be used or reallocated by the State..

105.

Allowance of new markets tax credit against alternative minimum tax

(a)

In general

Subparagraph (B) of section 38(c)(4) is amended by redesignating clauses (v) through (ix) as clauses (vi) through (x), respectively, and by inserting after clause (iv) the following new clause:

(v)

the credit determined under section 45D, but only with respect to credits determined with respect to qualified equity investments (as defined in section 45D(b)) initially made before January 1, 2012,

.

(b)

Effective date

The amendments made by this section shall apply to credits determined with respect to qualified equity investments (as defined in section 45D(b) of the Internal Revenue Code of 1986) initially made after March 15, 2010.

106.

Extension of tax-exempt eligibility for loans guaranteed by Federal home loan banks

Clause (iv) of section 149(b)(3)(A) is amended by striking December 31, 2010 and inserting December 31, 2011.

107.

Extension of temporary small issuer rules for allocation of tax-exempt interest expense by financial institutions

(a)

In general

Clauses (i), (ii), and (iii) of section 265(b)(3)(G) are each amended by striking or 2010 and inserting , 2010, or 2011.

(b)

Conforming amendment

Subparagraph (G) of section 265(b)(3) is amended by striking and 2010 in the heading and inserting , 2010, and 2011.

(c)

Effective date

The amendments made by this section shall apply to obligations issued after December 31, 2010.

II

Emergency Fund for Job Creation and Assistance

201.

Extension of the Emergency Fund for Job Creation and Assistance

(a)

In general

Section 403(c) of the Social Security Act (42 U.S.C. 603(c)) is amended—

(1)

in paragraph (1), by striking Emergency Contingency Fund for State Temporary Assistance for Needy Families Programs and inserting Emergency Fund for Job Creation and Assistance;

(2)

in paragraph (2)(A), by inserting , and for fiscal year 2011, such sums as may be necessary to carry out this subsection before for payment;

(3)

by striking paragraph (2)(B) and inserting the following:

(B)

Availability and use of funds

(i)

Fiscal years 2009 and 2010

The amounts appropriated to the Emergency Fund under subparagraph (A) for fiscal year 2009 shall remain available through fiscal year 2010 and shall be used to make grants to States in each of fiscal years 2009 and 2010 in accordance with paragraph (3), except that the amounts shall remain available through fiscal year 2011 to make grants and payments to States in accordance with paragraph (3)(C) to cover expenditures to subsidize employment positions held by individuals placed in the positions before fiscal year 2011.

(ii)

Fiscal year 2011

Subject to clause (iii), the amounts appropriated to the Emergency Fund under subparagraph (A) for fiscal year 2011 shall remain available through fiscal year 2012 and shall be used to make grants to States based on expenditures in fiscal year 2011 for benefits and services provided in fiscal year 2011 in accordance with the requirements of paragraph (3).

(iii)

Reservation of funds

Of the amounts appropriated to the Emergency Fund under subparagraph (A) for fiscal year 2011, $500,000 shall be placed in reserve for use in fiscal year 2012, and shall be used to award grants for any expenditures described in this subsection incurred by States after September 30, 2011.

;

(4)

in paragraph (2)(C), by striking 2010 and inserting 2012;

(5)

in paragraph (3)—

(A)

in clause (i) of each of subparagraphs (A), (B), and (C), by striking year 2009 or 2010 and inserting years 2009 through 2011; and

(B)

in subparagraph (C), by adding at the end the following:

(iv)

Limitation on expenditures for subsidized employment

An expenditure for subsidized employment shall be taken into account under clause (ii) only if the expenditure is used to subsidize employment for—

(I)

a member of a needy family (without regard to whether the family is receiving assistance under the State program funded under this part); or

(II)

an individual who has exhausted (or, within 60 days, will exhaust) all rights to receive unemployment compensation under Federal and State law, and who is a member of a needy family.

;

(6)

by striking paragraph (5) and inserting the following:

(5)

Limitations on payments

(A)

Fiscal years 2009 and 2010

The total amount payable to a single State under subsection (b) and this subsection for fiscal years 2009 and 2010 combined shall not exceed 50 percent of the annual State family assistance grant.

(B)

Fiscal year 2011

The total amount payable to a single State under subsection (b) and this subsection for fiscal year 2011 shall not exceed 30 percent of the annual State family assistance grant.

; and

(7)

in paragraph (6), by inserting or for expenditures described in paragraph (3)(C)(iv) before the period.

(b)

Conforming amendments

Section 2101 of division B of the American Recovery and Reinvestment Act of 2009 (Public Law 111–5) is amended—

(1)

in subsection (a)(2)—

(A)

by striking 2010 and inserting 2011; and

(B)

by striking all that follows repealed and inserting a period; and

(2)

in subsection (d)(1), by striking 2010 and inserting 2011.

(c)

Program guidance

The Secretary of Health and Human Services shall issue program guidance, without regard to the requirements of section 553 of title 5, United States Code, which ensures that the funds provided under the amendments made by this section to a jurisdiction for subsidized employment do not support any subsidized employment position the annual salary of which is greater than, at State option—

(1)

200 percent of the poverty line (within the meaning of section 673(2) of the Omnibus Budget Reconciliation Act of 1981, including any revision required by such section 673(2)) for a family of 4; or

(2)

the median wage in the jurisdiction.

III

Foreign provisions

301.

Rules to prevent splitting foreign tax credits from the income to which they relate

(a)

In general

Subpart A of part III of subchapter N of chapter 1 is amended by adding at the end the following new section:

909.

Suspension of taxes and credits until related income taken into account

(a)

In general

If there is a foreign tax credit splitting event with respect to a foreign income tax paid or accrued by the taxpayer, such tax shall not be taken into account for purposes of this title before the taxable year in which the related income is taken into account under this chapter by the taxpayer.

(b)

Special rules with respect to section 902 corporations

If there is a foreign tax credit splitting event with respect to a foreign income tax paid or accrued by a section 902 corporation, such tax shall not be taken into account—

(1)

for purposes of section 902 or 960, or

(2)

for purposes of determining earnings and profits under section 964(a),

before the taxable year in which the related income is taken into account under this chapter by such section 902 corporation or a domestic corporation which meets the ownership requirements of subsection (a) or (b) of section 902 with respect to such section 902 corporation.
(c)

Special rules

For purposes of this section—

(1)

Application to partnerships, etc

In the case of a partnership, subsections (a) and (b) shall be applied at the partner level. Except as otherwise provided by the Secretary, a rule similar to the rule of the preceding sentence shall apply in the case of any S corporation or trust.

(2)

Treatment of foreign taxes after suspension

In the case of any foreign income tax not taken into account by reason of subsection (a) or (b), except as otherwise provided by the Secretary, such tax shall be so taken into account in the taxable year referred to in such subsection (other than for purposes of section 986(a)) as a foreign income tax paid or accrued in such taxable year.

(d)

Definitions

For purposes of this section—

(1)

Foreign tax credit splitting event

There is a foreign tax credit splitting event with respect to a foreign income tax if the related income is (or will be) taken into account under this chapter by a covered person.

(2)

Foreign income tax

The term foreign income tax means any income, war profits, or excess profits tax paid or accrued to any foreign country or to any possession of the United States.

(3)

Related income

The term related income means, with respect to any portion of any foreign income tax, the income (or, as appropriate, earnings and profits) to which such portion of foreign income tax relates.

(4)

Covered person

The term covered person means, with respect to any person who pays or accrues a foreign income tax (hereafter in this paragraph referred to as the payor)—

(A)

any entity in which the payor holds, directly or indirectly, at least a 10 percent ownership interest (determined by vote or value),

(B)

any person which holds, directly or indirectly, at least a 10 percent ownership interest (determined by vote or value) in the payor,

(C)

any person which bears a relationship to the payor described in section 267(b) or 707(b), and

(D)

any other person specified by the Secretary for purposes of this paragraph.

(5)

Section 902 corporation

The term section 902 corporation means any foreign corporation with respect to which one or more domestic corporations meets the ownership requirements of subsection (a) or (b) of section 902.

(e)

Regulations

The Secretary may issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this section, including regulations or other guidance which provides—

(1)

appropriate exceptions from the provisions of this section, and

(2)

for the proper application of this section with respect to hybrid instruments.

.

(b)

Clerical amendment

The table of sections for subpart A of part III of subchapter N of chapter 1 is amended by adding at the end the following new item:

Sec. 909. Suspension of taxes and credits until related income taken into account.

.

(c)

Effective date

The amendments made by this section shall apply to—

(1)

foreign income taxes (as defined in section 909(d) of the Internal Revenue Code of 1986, as added by this section) paid or accrued after December 31, 2010; and

(2)

foreign income taxes (as so defined) paid or accrued by a section 902 corporation (as so defined) on or before such date (and not deemed paid under section 902(a) or 960 of such Code on or before such date), but only for purposes of applying sections 902 and 960 with respect to periods after such date.

Section 909(b)(2) of the Internal Revenue Code of 1986, as added by this section, shall not apply to foreign income taxes described in paragraph (2).
302.

Denial of foreign tax credit with respect to foreign income not subject to United States taxation by reason of covered asset acquisitions

(a)

In general

Section 901 is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:

(m)

Denial of foreign tax credit with respect to foreign income not subject to United States taxation by reason of covered asset acquisitions

(1)

In general

In the case of a covered asset acquisition, the disqualified portion of any foreign income tax determined with respect to the income or gain attributable to the relevant foreign assets—

(A)

shall not be taken into account in determining the credit allowed under subsection (a), and

(B)

in the case of a foreign income tax paid by a section 902 corporation (as defined in section 909(d)(5)), shall not be taken into account for purposes of section 902 or 960.

(2)

Covered asset acquisition

For purposes of this section, the term covered asset acquisition means—

(A)

a qualified stock purchase (as defined in section 338(d)(3)) to which section 338(a) applies,

(B)

any transaction which—

(i)

is treated as an acquisition of assets for purposes of this chapter, and

(ii)

is treated as the acquisition of stock of a corporation (or is disregarded) for purposes of the foreign income taxes of the relevant jurisdiction,

(C)

any acquisition of an interest in a partnership which has an election in effect under section 754, and

(D)

to the extent provided by the Secretary, any other similar transaction.

(3)

Disqualified portion

For purposes of this section—

(A)

In general

The term disqualified portion means, with respect to any covered asset acquisition, for any taxable year, the ratio (expressed as a percentage) of—

(i)

the aggregate basis differences (but not below zero) allocable to such taxable year under subparagraph (B) with respect to all relevant foreign assets, divided by

(ii)

the income on which the foreign income tax referred to in paragraph (1) is determined (or, if the taxpayer fails to substantiate such income to the satisfaction of the Secretary, such income shall be determined by dividing the amount of such foreign income tax by the highest marginal tax rate applicable to such income in the relevant jurisdiction).

(B)

Allocation of basis difference

For purposes of subparagraph (A)(i)—

(i)

In general

The basis difference with respect to any relevant foreign asset shall be allocated to taxable years using the applicable cost recovery method under this chapter.

(ii)

Special rule for disposition of assets

Except as otherwise provided by the Secretary, in the case of the disposition of any relevant foreign asset—

(I)

the basis difference allocated to the taxable year which includes the date of such disposition shall be the excess of the basis difference with respect to such asset over the aggregate basis difference with respect to such asset which has been allocated under clause (i) to all prior taxable years, and

(II)

no basis difference with respect to such asset shall be allocated under clause (i) to any taxable year thereafter.

(C)

Basis difference

(i)

In general

The term basis difference means, with respect to any relevant foreign asset, the excess of—

(I)

the adjusted basis of such asset immediately after the covered asset acquisition, over

(II)

the adjusted basis of such asset immediately before the covered asset acquisition.

(ii)

Built-in loss assets

In the case of a relevant foreign asset with respect to which the amount described in clause (i)(II) exceeds the amount described in clause (i)(I), such excess shall be taken into account under this subsection as a basis difference of a negative amount.

(iii)

Special rule for section 338 elections

In the case of a covered asset acquisition described in paragraph (2)(A), the covered asset acquisition shall be treated for purposes of this subparagraph as occurring at the close of the acquisition date (as defined in section 338(h)(2)).

(4)

Relevant foreign assets

For purposes of this section, the term relevant foreign asset means, with respect to any covered asset acquisition, any asset (including any goodwill, going concern value, or other intangible) with respect to such acquisition if income, deduction, gain, or loss attributable to such asset is taken into account in determining the foreign income tax referred to in paragraph (1).

(5)

Foreign income tax

For purposes of this section, the term foreign income tax means any income, war profits, or excess profits tax paid or accrued to any foreign country or to any possession of the United States.

(6)

Taxes allowed as a deduction, etc

Sections 275 and 78 shall not apply to any tax which is not allowable as a credit under subsection (a) by reason of this subsection.

(7)

Regulations

The Secretary may issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this subsection, including to exempt from the application of this subsection certain covered asset acquisitions, and relevant foreign assets with respect to which the basis difference is de minimis.

.

(b)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to covered asset acquisitions (as defined in section 901(m)(2) of the Internal Revenue Code of 1986, as added by this section) after December 31, 2010.

(2)

Transition rule

The amendments made by this section shall not apply to any covered asset acquisition (as so defined) with respect to which the transferor and the transferee are not related if such acquisition is—

(A)

made pursuant to a written agreement which was binding on May 20, 2010, and at all times thereafter,

(B)

described in a ruling request submitted to the Internal Revenue Service on or before such date; or

(C)

described on or before such date in a public announcement or in a filing with the Securities and Exchange Commission.

(3)

Related persons

For purposes of this subsection, a person shall be treated as related to another person if the relationship between such persons is described in section 267 or 707(b) of the Internal Revenue Code of 1986.

303.

Separate application of foreign tax credit limitation, etc., to items resourced under treaties

(a)

In general

Subsection (d) of section 904 is amended by redesignating paragraph (6) as paragraph (7) and by inserting after paragraph (5) the following new paragraph:

(6)

Separate application to items resourced under treaties

(A)

In general

If—

(i)

without regard to any treaty obligation of the United States, any item of income would be treated as derived from sources within the United States,

(ii)

under a treaty obligation of the United States, such item would be treated as arising from sources outside the United States, and

(iii)

the taxpayer chooses the benefits of such treaty obligation,

subsections (a), (b), and (c) of this section and sections 902, 907, and 960 shall be applied separately with respect to each such item.
(B)

Coordination with other provisions

This paragraph shall not apply to any item of income to which subsection (h)(10) or section 865(h) applies.

(C)

Regulations

The Secretary may issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this paragraph, including regulations or other guidance which provides that related items of income may be aggregated for purposes of this paragraph.

.

(b)

Effective date

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

304.

Limitation on the amount of foreign taxes deemed paid with respect to section 956 inclusions

(a)

In general

Section 960 is amended by adding at the end the following new subsection:

(c)

Limitation with respect to section 956 inclusions

(1)

In general

If there is included under section 951(a)(1)(B) in the gross income of a domestic corporation any amount attributable to the earnings and profits of a foreign corporation which is a member of a qualified group (as defined in section 902(b)) with respect to the domestic corporation, the amount of any foreign income taxes deemed to have been paid during the taxable year by such domestic corporation under section 902 by reason of subsection (a) with respect to such inclusion in gross income shall not exceed the amount of the foreign income taxes which would have been deemed to have been paid during the taxable year by such domestic corporation if cash in an amount equal to the amount of such inclusion in gross income were distributed as a series of distributions (determined without regard to any foreign taxes which would be imposed on an actual distribution) through the chain of ownership which begins with such foreign corporation and ends with such domestic corporation.

(2)

Authority to prevent abuse

The Secretary shall issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which prevent the inappropriate use of the foreign corporation’s foreign income taxes not deemed paid by reason of paragraph (1).

.

(b)

Effective date

The amendment made by this section shall apply to acquisitions of United States property (as defined in section 956(c) of the Internal Revenue Code of 1986) after December 31, 2010.

305.

Special rule with respect to certain redemptions by foreign subsidiaries

(a)

In general

Paragraph (5) of section 304(b) is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting after subparagraph (A) the following new subparagraph:

(B)

Special rule in case of foreign acquiring corporation

In the case of any acquisition to which subsection (a) applies in which the acquiring corporation is a foreign corporation, no earnings and profits shall be taken into account under paragraph (2)(A) (and subparagraph (A) shall not apply) if more than 50 percent of the dividends arising from such acquisition (determined without regard to this subparagraph) would neither—

(i)

be subject to tax under this chapter for the taxable year in which the dividends arise, nor

(ii)

be includible in the earnings and profits of a controlled foreign corporation (as defined in section 957 and without regard to section 953(c)).

.

(b)

Effective date

The amendments made by this section shall apply to acquisitions after December 31, 2010.

306.

Modification of affiliation rules for purposes of rules allocating interest expense

(a)

In general

Subparagraph (A) of section 864(e)(5) is amended by adding at the end the following:

Notwithstanding the preceding sentence, a foreign corporation shall be treated as a member of the affiliated group if—

(i)

more than 50 percent of the gross income of such foreign corporation for the taxable year is effectively connected with the conduct of a trade or business within the United States, and

(ii)

at least 80 percent of either the vote or value of all outstanding stock of such foreign corporation is owned directly or indirectly by members of the affiliated group (determined with regard to this sentence).

.

(b)

Effective date

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

307.

Termination of special rules for interest and dividends received from persons meeting the 80-percent foreign business requirements

(a)

In general

Paragraph (1) of section 861(a) is amended by striking subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively.

(b)

Grandfather rule with respect to withholding on interest and dividends received from persons meeting the 80-Percent foreign business requirements

(1)

In general

Subparagraph (B) of section 871(i)(2) is amended to read as follows:

(B)

The active foreign business percentage of—

(i)

any dividend paid by an existing 80/20 company, and

(ii)

any interest paid by an existing 80/20 company.

.

(2)

Definitions and special rules

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

(l)

Rules relating to existing 80/20 companies

For purposes of this subsection and subsection (i)(2)(B)—

(1)

Existing 80/20 company

(A)

In general

The term existing 80/20 company means any corporation if—

(i)

such corporation met the 80-percent foreign business requirements of section 861(c)(1) (as in effect before the date of the enactment of this subsection) for such corporation’s last taxable year beginning before January 1, 2011,

(ii)

such corporation meets the 80-percent foreign business requirements of subparagraph (B) with respect to each taxable year after the taxable year referred to in clause (i), and

(iii)

there has not been an addition of a substantial line of business with respect to such corporation after the date of the enactment of this subsection.

(B)

Foreign business requirements

(i)

In general

Except as provided in clause (iv), a corporation meets the 80-percent foreign business requirements of this subparagraph if it is shown to the satisfaction of the Secretary that at least 80 percent of the gross income from all sources of such corporation for the testing period is active foreign business income.

(ii)

Active foreign business income

For purposes of clause (i), the term active foreign business income means gross income which—

(I)

is derived from sources outside the United States (as determined under this subchapter), and

(II)

is attributable to the active conduct of a trade or business in a foreign country or possession of the United States.

(iii)

Testing period

For purposes of this subsection, the term testing period means the 3-year period ending with the close of the taxable year of the corporation preceding the payment (or such part of such period as may be applicable). If the corporation has no gross income for such 3-year period (or part thereof), the testing period shall be the taxable year in which the payment is made.

(iv)

Transition rule

In the case of a taxable year for which the testing period includes 1 or more taxable years beginning before January 1, 2011—

(I)

a corporation meets the 80-percent foreign business requirements of this subparagraph if and only if the weighted average of—

(aa)

the percentage of the corporation's gross income from all sources that is active foreign business income (as defined in subparagraph (B) of section 861(c)(1) (as in effect before the date of the enactment of this subsection)) for the portion of the testing period that includes taxable years beginning before January 1, 2011, and

(bb)

the percentage of the corporation's gross income from all sources that is active foreign business income (as defined in clause (ii) of this subparagraph) for the portion of the testing period, if any, that includes taxable years beginning on or after January 1, 2011,

is at least 80 percent, and
(II)

the active foreign business percentage for such taxable year shall equal the weighted average percentage determined under subclause (I).

(2)

Active foreign business percentage

Except as provided in paragraph (1)(B)(iv), the term active foreign business percentage means, with respect to any existing 80/20 company, the percentage which—

(A)

the active foreign business income of such company for the testing period, is of

(B)

the gross income of such company for the testing period from all sources.

(3)

Aggregation rules

For purposes of applying paragraph (1) (other than subparagraphs (A)(i) and (B)(iv) thereof) and paragraph (2)—

(A)

In general

The corporation referred to in paragraph (1)(A) and all of such corporation’s subsidiaries shall be treated as one corporation.

(B)

Subsidiaries

For purposes of subparagraph (A), the term subsidiary means any corporation in which the corporation referred to in subparagraph (A) owns (directly or indirectly) stock meeting the requirements of section 1504(a)(2) (determined by substituting 50 percent for 80 percent each place it appears and without regard to section 1504(b)(3)).

(4)

Regulations

The Secretary may issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this section, including regulations or other guidance which provide for the proper application of the aggregation rules described in paragraph (3).

.

(c)

Conforming amendments

(1)

Section 861 is amended by striking subsection (c) and by redesignating subsections (d), (e), and (f) as subsections (c), (d), and (e), respectively.

(2)

Paragraph (9) of section 904(h) is amended to read as follows:

(9)

Treatment of certain domestic corporations

In the case of any dividend treated as not from sources within the United States under section 861(a)(2)(A), the corporation paying such dividend shall be treated for purposes of this subsection as a United States-owned foreign corporation.

.

(3)

Subsection (c) of section 2104 is amended in the last sentence by striking or to a debt obligation of a domestic corporation and all that follows and inserting a period.

(d)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2010.

(2)

Grandfather rule for outstanding debt obligations

(A)

In general

The amendments made by this section shall not apply to payments of interest on obligations issued before the date of the enactment of this Act.

(B)

Exception for related party debt

Subparagraph (A) shall not apply to any interest which is payable to a related person (determined under rules similar to the rules of section 954(d)(3)).

(C)

Significant modifications treated as new issues

For purposes of subparagraph (A), a significant modification of the terms of any obligation (including any extension of the term of such obligation) shall be treated as a new issue.

308.

Source rules for income on guarantees

(a)

Amounts sourced within the United States

Subsection (a) of section 861 is amended by adding at the end the following new paragraph:

(9)

Guarantees

Amounts received, directly or indirectly, from—

(A)

a noncorporate resident or domestic corporation for the provision of a guarantee of any indebtedness of such resident or corporation, or

(B)

any foreign person for the provision of a guarantee of any indebtedness of such person, if such amount is connected with income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States.

.

(b)

Amounts sourced without the United States

Subsection (a) of section 862 is amended by striking and at the end of paragraph (7), by striking the period at the end of paragraph (8) and inserting ; and, and by adding at the end the following new paragraph:

(9)

amounts received, directly or indirectly, from a foreign person for the provision of a guarantee of indebtedness of such person other than amounts which are derived from sources within the United States as provided in section 861(a)(9).

.

(c)

Conforming amendment

Clause (ii) of section 864(c)(4)(B) is amended by striking dividends or interest and inserting dividends, interest, or amounts received for the provision of guarantees of indebtedness.

(d)

Effective date

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

309.

Limitation on extension of statute of limitations for failure to notify Secretary of certain foreign transfers

(a)

In general

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

(1)

by striking In the case of any information and inserting the following:

(A)

In general

In the case of any information

; and

(2)

by adding at the end the following:

(B)

Application to failures due to reasonable cause

If the failure to furnish the information referred to in subparagraph (A) is due to reasonable cause and not willful neglect, subparagraph (A) shall apply only to the item or items related to such failure.

.

(b)

Effective date

The amendments made by this section shall take effect as if included in section 513 of the Hiring Incentives to Restore Employment Act.

IV

Budgetary provisions

401.

Paygo compliance

The budgetary effects of this Act, for the purpose of complying with the Statutory Pay-As-You-Go-Act of 2010, shall be determined by reference to the latest statement titled Budgetary Effects of PAYGO Legislation for this Act, submitted for printing in the Congressional Record by the Chairman of the House Budget Committee, provided that such statement has been submitted prior to the vote on passage.

402.

Time for payment of corporate estimated taxes

The percentage under paragraph (2) of section 561 of the Hiring Incentives to Restore Employment Act in effect on the date of the enactment of this Act is increased by 3 percentage points.