Text: H.R.5982 — 111th Congress (2009-2010)

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Introduced in House (07/30/2010)


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[Congressional Bills 111th Congress]
[From the U.S. Government Printing Office]
[H.R. 5982 Introduced in House (IH)]

111th CONGRESS
  2d Session
                                H. R. 5982

 To amend the Internal Revenue Code of 1986 to repeal the expansion of 
   certain information reporting requirements to corporations and to 
payments for property, to eliminate loopholes which encourage companies 
          to move operations offshore, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 30, 2010

 Mr. Levin (for himself, Mr. Owens, Mr. Murphy of New York, Mr. Stark, 
 Mr. Lewis of Georgia, Mr. Blumenauer, Mr. Pascrell, Ms. Berkley, Mr. 
Crowley, Mr. Van Hollen, Mr. Davis of Illinois, Mr. Arcuri, Mr. Barrow, 
Mr. Garamendi, Ms. Giffords, Mr. Hill, Mr. Kratovil, Mr. Perriello, Mr. 
  Kind, Mr. Israel, Ms. Chu, and Ms. Kosmas) 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; which was considered and failed of passage

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to repeal the expansion of 
   certain information reporting requirements to corporations and to 
payments for property, to eliminate loopholes which encourage companies 
          to move operations offshore, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Small Business Tax 
Relief 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--REPEAL OF CERTAIN INFORMATION REPORTING REQUIREMENTS

Sec. 101. Repeal of expansion of certain information reporting 
                            requirements to corporations and to 
                            payments for property.
                      TITLE II--REVENUE PROVISIONS

                     Subtitle A--Foreign Provisions

Sec. 201. Rules to prevent splitting foreign tax credits from the 
                            income to which they relate.
Sec. 202. Denial of foreign tax credit with respect to foreign income 
                            not subject to United States taxation by 
                            reason of covered asset acquisitions.
Sec. 203. Separate application of foreign tax credit limitation, etc., 
                            to items resourced under treaties.
Sec. 204. Limitation on the amount of foreign taxes deemed paid with 
                            respect to section 956 inclusions.
Sec. 205. Special rule with respect to certain redemptions by foreign 
                            subsidiaries.
Sec. 206. Modification of affiliation rules for purposes of rules 
                            allocating interest expense.
Sec. 207. Termination of special rules for interest and dividends 
                            received from persons meeting the 80-
                            percent foreign business requirements.
Sec. 208. Source rules for income on guarantees.
Sec. 209. Limitation on extension of statute of limitations for failure 
                            to notify Secretary of certain foreign 
                            transfers.
                  Subtitle B--Other Revenue Provisions

Sec. 211. Required minimum 10-year term, etc., for grantor retained 
                            annuity trusts.
Sec. 212. Crude tall oil ineligible for cellulosic biofuel producer 
                            credit.
Sec. 213. Increase in information return penalties.
Sec. 214. Treatment of securities of a controlled corporation exchanged 
                            for assets in certain reorganizations.
                      TITLE III--PAYGO COMPLIANCE

Sec. 301. Paygo compliance.

     TITLE I--REPEAL OF CERTAIN INFORMATION REPORTING REQUIREMENTS

SEC. 101. REPEAL OF EXPANSION OF CERTAIN INFORMATION REPORTING 
              REQUIREMENTS TO CORPORATIONS AND TO PAYMENTS FOR 
              PROPERTY.

    Section 9006 of the Patient Protection and Affordable Care Act is 
repealed. Each provision of law amended by such section is amended to 
read as such provision would read if such section had never been 
enacted.

                      TITLE II--REVENUE PROVISIONS

                     Subtitle A--Foreign Provisions

SEC. 201. 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:

``SEC. 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).

SEC. 202. 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.

SEC. 203. 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.

SEC. 204. 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.

SEC. 205. 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.

SEC. 206. 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.

SEC. 207. 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.

SEC. 208. 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.

SEC. 209. 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.

                  Subtitle B--Other Revenue Provisions

SEC. 211. REQUIRED MINIMUM 10-YEAR TERM, ETC., FOR GRANTOR RETAINED 
              ANNUITY TRUSTS.

    (a) In General.--Subsection (b) of section 2702 is amended--
            (1) by redesignating paragraphs (1), (2) and (3) as 
        subparagraphs (A), (B), and (C), respectively, and by moving 
        such subparagraphs (as so redesignated) 2 ems to the right;
            (2) by striking ``For purposes of'' and inserting the 
        following:
            ``(1) In general.--For purposes of'';
            (3) by striking ``paragraph (1) or (2)'' in paragraph 
        (1)(C) (as so redesignated) and inserting ``subparagraph (A) or 
        (B)''; and
            (4) by adding at the end the following new paragraph:
            ``(2) Additional requirements with respect to grantor 
        retained annuities.--For purposes of subsection (a), in the 
        case of an interest described in paragraph (1)(A) (determined 
        without regard to this paragraph) which is retained by the 
        transferor, such interest shall be treated as described in such 
        paragraph only if--
                    ``(A) the right to receive the fixed amounts 
                referred to in such paragraph is for a term of not less 
                than 10 years,
                    ``(B) such fixed amounts, when determined on an 
                annual basis, do not decrease relative to any prior 
                year during the first 10 years of the term referred to 
                in subparagraph (A), and
                    ``(C) the remainder interest has a value greater 
                than zero determined as of the time of the transfer.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transfers made after the date of the enactment of this Act.

SEC. 212. CRUDE TALL OIL INELIGIBLE FOR CELLULOSIC BIOFUEL PRODUCER 
              CREDIT.

    (a) In General.--Clause (iii) of section 40(b)(6)(E) is amended--
            (1) by striking ``or'' at the end of subclause (I);
            (2) by striking the period at the end of subclause (II) and 
        inserting ``, or'';
            (3) by adding at the end the following new subclause:
                                    ``(III) such fuel has an acid 
                                number greater than 25.''; and
            (4) by striking ``unprocessed'' in the heading and 
        inserting ``certain''.
    (b) Effective Date.--The amendment made by this section shall apply 
to fuels sold or used on or after January 1, 2010.

SEC. 213. INCREASE IN INFORMATION RETURN PENALTIES.

    (a) Failure To File Correct Information Returns.--
            (1) In general.--Subsections (a)(1), (b)(1)(A), and 
        (b)(2)(A) of section 6721 are each amended by striking ``$50'' 
        and inserting ``$100''.
            (2) Aggregate annual limitation.--Subsections (a)(1), 
        (d)(1)(A), and (e)(3)(A) of section 6721 are each amended by 
        striking ``$250,000'' and inserting ``$1,500,000''.
    (b) Reduction Where Correction Within 30 Days.--
            (1) In general.--Subparagraph (A) of section 6721(b)(1) is 
        amended by striking ``$15'' and inserting ``$30''.
            (2) Aggregate annual limitation.--Subsections (b)(1)(B) and 
        (d)(1)(B) of section 6721 are each amended by striking 
        ``$75,000'' and inserting ``$250,000''.
    (c) Reduction Where Correction On or Before August 1.--
            (1) In general.--Subparagraph (A) of section 6721(b)(2) is 
        amended by striking ``$30'' and inserting ``$60''.
            (2) Aggregate annual limitation.--Subsections (b)(2)(B) and 
        (d)(1)(C) of section 6721 are each amended by striking 
        ``$150,000'' and inserting ``$500,000''.
    (d) Aggregate Annual Limitations for Persons With Gross Receipts of 
Not More Than $5,000,000.--
            (1) In general.--Paragraph (1) of section 6721(d) is 
        amended--
                    (A) by striking ``$100,000'' in subparagraph (A) 
                and inserting ``$500,000'';
                    (B) by striking ``$25,000'' in subparagraph (B) and 
                inserting ``$75,000''; and
                    (C) by striking ``$50,000'' in subparagraph (C) and 
                inserting ``$200,000''.
            (2) Technical amendment.--Paragraph (1) of section 6721(d) 
        is amended by striking ``such taxable year'' and inserting 
        ``such calendar year''.
    (e) Penalty in Case of Intentional Disregard.--Paragraph (2) of 
section 6721(e) is amended by striking ``$100'' and inserting ``$250''.
    (f) Adjustment for Inflation.--Section 6721 is amended by adding at 
the end the following new subsection:
    ``(f) Adjustment for Inflation.--
            ``(1) In general.--In the case of any calendar year 
        beginning after 2014, each of the dollar amounts under 
        subsections (a), (b), (d) (other than paragraph (2)(A) 
        thereof), and (e) shall be increased by such dollar amount 
        multiplied by the cost-of-living adjustment determined under 
        section 1(f)(3) determined by substituting `calendar year 2011' 
        for `calendar year 1992' in subparagraph (B) thereof.
            ``(2) Additional adjustments made only every fifth year.--
        Notwithstanding paragraph (1), in the case of any calendar year 
        beginning after 2015 (other than every fifth calendar after 
        2015), each increase determined under paragraph (1) shall not 
        exceed the amount of such increase determined for the preceding 
        year.
            ``(3) Rounding.--If any amount adjusted under paragraph 
        (1)--
                    ``(A) is not less than $75,000 and is not a 
                multiple of $500, such amount shall be rounded to the 
                next lowest multiple of $500, and
                    ``(B) is not described in subparagraph (A) and is 
                not a multiple of $10, such amount shall be rounded to 
                the next lowest multiple of $10.''.
    (g) Failure To Furnish Correct Payee Statements.--Section 6722 is 
amended to read as follows:

``SEC. 6722. FAILURE TO FURNISH CORRECT PAYEE STATEMENTS.

    ``(a) Imposition of Penalty.--
            ``(1) General rule.--In the case of each failure described 
        in paragraph (2) by any person with respect to a payee 
        statement, such person shall pay a penalty of $100 for each 
        statement with respect to which such a failure occurs, but the 
        total amount imposed on such person for all such failures 
        during any calendar year shall not exceed $1,500,000.
            ``(2) Failures subject to penalty.--For purposes of 
        paragraph (1), the failures described in this paragraph are--
                    ``(A) any failure to furnish a payee statement on 
                or before the date prescribed therefor to the person to 
                whom such statement is required to be furnished, and
                    ``(B) any failure to include all of the information 
                required to be shown on a payee statement or the 
                inclusion of incorrect information.
    ``(b) Reduction Where Correction in Specified Period.--
            ``(1) Correction within 30 days.--If any failure described 
        in subsection (a)(2) is corrected on or before the day 30 days 
        after the required filing date--
                    ``(A) the penalty imposed by subsection (a) shall 
                be $30 in lieu of $100, and
                    ``(B) the total amount imposed on the person for 
                all such failures during any calendar year which are so 
                corrected shall not exceed $250,000.
            ``(2) Failures corrected on or before august 1.--If any 
        failure described in subsection (a)(2) is corrected after the 
        30th day referred to in paragraph (1) but on or before August 1 
        of the calendar year in which the required filing date occurs--
                    ``(A) the penalty imposed by subsection (a) shall 
                be $60 in lieu of $100, and
                    ``(B) the total amount imposed on the person for 
                all such failures during the calendar year which are so 
                corrected shall not exceed $500,000.
    ``(c) Exception for De Minimis Failures.--
            ``(1) In general.--If--
                    ``(A) a payee statement is furnished to the person 
                to whom such statement is required to be furnished,
                    ``(B) there is a failure described in subsection 
                (a)(2)(B) (determined after the application of section 
                6724(a)) with respect to such statement, and
                    ``(C) such failure is corrected on or before August 
                1 of the calendar year in which the required filing 
                date occurs,
        for purposes of this section, such statement shall be treated 
        as having been furnished with all of the correct required 
        information.
            ``(2) Limitation.--The number of payee statements to which 
        paragraph (1) applies for any calendar year shall not exceed 
        the greater of--
                    ``(A) 10, or
                    ``(B) one-half of 1 percent of the total number of 
                payee statements required to be filed by the person 
                during the calendar year.
    ``(d) Lower Limitations for Persons With Gross Receipts of Not More 
Than $5,000,000.--
            ``(1) In general.--If any person meets the gross receipts 
        test of paragraph (2) with respect to any calendar year, with 
        respect to failures during such calendar year--
                    ``(A) subsection (a)(1) shall be applied by 
                substituting `$500,000' for `$1,500,000',
                    ``(B) subsection (b)(1)(B) shall be applied by 
                substituting `$75,000' for `$250,000', and
                    ``(C) subsection (b)(2)(B) shall be applied by 
                substituting `$200,000' for `$500,000'.
            ``(2) Gross receipts test.--A person meets the gross 
        receipts test of this paragraph if such person meets the gross 
        receipts test of section 6721(d)(2).
    ``(e) Penalty in Case of Intentional Disregard.--If 1 or more 
failures to which subsection (a) applies are due to intentional 
disregard of the requirement to furnish a payee statement (or the 
correct information reporting requirement), then, with respect to each 
such failure--
            ``(1) subsections (b), (c), and (d) shall not apply,
            ``(2) the penalty imposed under subsection (a)(1) shall be 
        $250, or, if greater--
                    ``(A) in the case of a payee statement other than a 
                statement required under section 6045(b), 6041A(e) (in 
                respect of a return required under section 6041A(b)), 
                6050H(d), 6050J(e), 6050K(b), or 6050L(c), 10 percent 
                of the aggregate amount of the items required to be 
                reported correctly, or
                    ``(B) in the case of a payee statement required 
                under section 6045(b), 6050K(b), or 6050L(c), 5 percent 
                of the aggregate amount of the items required to be 
                reported correctly, and
            ``(3) in the case of any penalty determined under paragraph 
        (2)--
                    ``(A) the $1,500,000 limitation under subsection 
                (a) shall not apply, and
                    ``(B) such penalty shall not be taken into account 
                in applying such limitation to penalties not determined 
                under paragraph (2).
    ``(f) Adjustment for Inflation.--
            ``(1) In general.--In the case of any calendar year 
        beginning after 2014, each of the dollar amounts under 
        subsections (a), (b), (d)(1), and (e) shall be increased by 
        such dollar amount multiplied by the cost-of-living adjustment 
        determined under section 1(f)(3) determined by substituting 
        `calendar year 2011' for `calendar year 1992' in subparagraph 
        (B) thereof.
            ``(2) Additional adjustments made only every fifth year.--
        Notwithstanding paragraph (1), in the case of any calendar year 
        beginning after 2015 (other than every fifth calendar after 
        2015), each increase determined under paragraph (1) shall not 
        exceed the amount of such increase determined for the preceding 
        year.
            ``(3) Rounding.--If any amount adjusted under paragraph 
        (1)--
                    ``(A) is not less than $75,000 and is not a 
                multiple of $500, such amount shall be rounded to the 
                next lowest multiple of $500, and
                    ``(B) is not described in subparagraph (A) and is 
                not a multiple of $10, such amount shall be rounded to 
                the next lowest multiple of $10.''.
    (h) Effective Date.--The amendments made by this section shall 
apply with respect to information returns required to be filed on or 
after January 1, 2011.

SEC. 214. TREATMENT OF SECURITIES OF A CONTROLLED CORPORATION EXCHANGED 
              FOR ASSETS IN CERTAIN REORGANIZATIONS.

    (a) In General.--Section 361 is amended by adding at the end the 
following new subsection:
    ``(d) Special Rules for Transactions Involving Section 355 
Distributions.--In the case of a reorganization described in section 
368(a)(1)(D) with respect to which stock or securities of the 
corporation to which the assets are transferred are distributed in a 
transaction which qualifies under section 355--
            ``(1) this section shall be applied by substituting `stock 
        other than nonqualified preferred stock (as defined in section 
        351(g)(2))' for `stock or securities' in subsections (a) and 
        (b)(1), and
            ``(2) the first sentence of subsection (b)(3) shall apply 
        only to the extent that the sum of the money and the fair 
        market value of the other property transferred to such 
        creditors does not exceed the adjusted bases of such assets 
        transferred (reduced by the amount of the liabilities assumed 
        (within the meaning of section 357(c))).''.
    (b) Conforming Amendment.--Paragraph (3) of section 361(b) is 
amended by striking the last sentence.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to exchanges after 
        the date of the enactment of this Act.
            (2) Transition rule.--The amendments made by this section 
        shall not apply to any exchange pursuant to a transaction which 
        is--
                    (A) made pursuant to an agreement which was binding 
                on March 15, 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.

                      TITLE III--PAYGO COMPLIANCE

SEC. 301. 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.
                                 <all>