Jumpstart Our Business Strength (JOBS) Act

5-11-04
Bill Passed Senate With Amendment 92-5

Calendar No. 381

108th CONGRESS
1st Session

S. 1637

[Report No. 108-192]
To amend the Internal Revenue Code of 1986 to comply with the World Trade Organization rulings on the FSC/ETI benefit in a manner that preserves jobs and production activities in the United States, to reform and simplify the international taxation rules of the United States, and for other purposes.

IN THE SENATE OF THE UNITED STATES

September 18, 2003
Mr. FRIST (for Mr. GRASSLEY) (for himself, Mr. BAUCUS, Mr. HATCH, Mr. GRAHAM of Florida, Mr. SMITH, Mr. DASCHLE, Mrs. MURRAY, Ms. CANTWELL, and Mr. CHAFEE) introduced the following bill; which was read twice and referred to the Committee on Finance

November 7, 2003
Reported by Mr. GRASSLEY, with an amendment

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

(a) SHORT TITLE- This Act may be cited as the `Jumpstart Our Business Strength (JOBS) Act'.

(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-

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

TITLE I--PROVISIONS RELATING TO REPEAL OF EXCLUSION FOR EXTRATERRITORIAL INCOME

Sec. 101. Repeal of exclusion for extraterritorial income.

Sec. 102. Deduction relating to income attributable to United States production activities.

TITLE II--INTERNATIONAL TAX PROVISIONS

Subtitle A--International Tax Reform

Sec. 201. 20-year foreign tax credit carryover; 1-year foreign tax credit carryback.

Sec. 202. Look-thru rules to apply to dividends from noncontrolled section 902 corporations.

Sec. 203. Foreign tax credit under alternative minimum tax.

Sec. 204. Recharacterization of overall domestic loss.

Sec. 205. Interest expense allocation rules.

Sec. 206. Determination of foreign personal holding company income with respect to transactions in commodities.

Subtitle B--International Tax Simplification

Sec. 211. Repeal of foreign personal holding company rules and foreign investment company rules.

Sec. 212. Expansion of de minimis rule under subpart F.

Sec. 213. Attribution of stock ownership through partnerships to apply in determining section 902 and 960 credits.

Sec. 214. Application of uniform capitalization rules to foreign persons.

Sec. 215. Repeal of withholding tax on dividends from certain foreign corporations.

Sec. 216. Repeal of special capital gains tax on aliens present in the United States for 183 days or more.

Subtitle C--Additional International Tax Provisions

Sec. 221. Active leasing income from aircraft and vessels.

Sec. 222. Look-thru treatment of payments between related controlled foreign corporations under foreign personal holding company income rules.

Sec. 223. Look-thru treatment for sales of partnership interests.

Sec. 224. Election not to use average exchange rate for foreign tax paid other than in functional currency.

Sec. 225. Treatment of income tax base differences.

Sec. 226. Modification of exceptions under subpart F for active financing.

Sec. 227. United States property not to include certain assets of controlled foreign corporation.

Sec. 228. Provide equal treatment for interest paid by foreign partnerships and foreign corporations.

Sec. 229. Clarification of treatment of certain transfers of intangible property.

Sec. 230. Modification of the treatment of certain REIT distributions attributable to gain from sales or exchanges of United States real property interests.

Sec. 231. Toll tax on excess qualified foreign distribution amount.

Sec. 232. Exclusion of income derived from certain wagers on horse races and dog races from gross income of nonresident alien individuals.

Sec. 233. Limitation of withholding tax for Puerto Rico corporations.

Sec. 234. Report on WTO dispute settlement panels and the appellate body.

Sec. 235. Study of impact of international tax laws on taxpayers other than large corporations.

Sec. 236. Consultative role for Senate Committee on Finance in connection with the review of proposed tax treaties.

TITLE III--DOMESTIC MANUFACTURING AND BUSINESS PROVISIONS

Subtitle A--General Provisions

Sec. 301. Expansion of qualified small-issue bond program.

Sec. 302. Expensing of broadband Internet access expenditures.

Sec. 303. Exemption of natural aging process in determination of production period for distilled spirits under section 263A.

Sec. 304. Modification of active business definition under section 355.

Sec. 305. Exclusion of certain indebtedness of small business investment companies from acquisition indebtedness.

Sec. 306. Modified taxation of imported archery products.

Sec. 307. Modification to cooperative marketing rules to include value added processing involving animals.

Sec. 308. Extension of declaratory judgment procedures to farmers' cooperative organizations.

Sec. 309. Temporary suspension of personal holding company tax.

Sec. 310. Increase in section 179 expensing.

Sec. 311. Three-year carryback of net operating losses.

Subtitle B--Manufacturing Relating to Films

Sec. 321. Special rules for certain film and television productions.

Sec. 322. Modification of application of income forecast method of depreciation.

Subtitle C--Manufacturing Relating to Timber

Sec. 331. Expensing of certain reforestation expenditures.

Sec. 332. Election to treat cutting of timber as a sale or exchange.

Sec. 333. Capital gain treatment under section 631(b) to apply to outright sales by landowners.

Sec. 334. Modification of safe harbor rules for timber REITS.

TITLE IV--ADDITIONAL PROVISIONS

Subtitle A--Provisions Designed To Curtail Tax Shelters

Sec. 401. Clarification of economic substance doctrine.

Sec. 402. Penalty for failing to disclose reportable transaction.

Sec. 403. Accuracy-related penalty for listed transactions and other reportable transactions having a significant tax avoidance purpose.

Sec. 404. Penalty for understatements attributable to transactions lacking economic substance, etc.

Sec. 405. Modifications of substantial understatement penalty for nonreportable transactions.

Sec. 406. Tax shelter exception to confidentiality privileges relating to taxpayer communications.

Sec. 407. Disclosure of reportable transactions.

Sec. 408. Modifications to penalty for failure to register tax shelters.

Sec. 409. Modification of penalty for failure to maintain lists of investors.

Sec. 410. Modification of actions to enjoin certain conduct related to tax shelters and reportable transactions.

Sec. 411. Understatement of taxpayer's liability by income tax return preparer.

Sec. 412. Penalty on failure to report interests in foreign financial accounts.

Sec. 413. Frivolous tax submissions.

Sec. 414. Regulation of individuals practicing before the Department of Treasury.

Sec. 415. Penalty on promoters of tax shelters.

Sec. 416. Statute of limitations for taxable years for which required listed transactions not reported.

Sec. 417. Denial of deduction for interest on underpayments attributable to nondisclosed reportable and noneconomic substance transactions.

Sec. 418. Authorization of appropriations for tax law enforcement.

Subtitle B--Other Corporate Governance Provisions

Sec. 421. Affirmation of consolidated return regulation authority.

Sec. 422. Signing of corporate tax returns by chief executive officer.

Sec. 423. Denial of deduction for certain fines, penalties, and other amounts.

Sec. 424. Disallowance of deduction for punitive damages.

Sec. 425. Increase in criminal monetary penalty limitation for the underpayment or overpayment of tax due to fraud.

Subtitle C--Enron-Related Tax Shelter Provisions

Sec. 431. Limitation on transfer or importation of built-in losses.

Sec. 432. No reduction of basis under section 734 in stock held by partnership in corporate partner.

Sec. 433. Repeal of special rules for FASITs.

Sec. 434. Expanded disallowance of deduction for interest on convertible debt.

Sec. 435. Expanded authority to disallow tax benefits under section 269.

Sec. 436. Modification of interaction between subpart F and passive foreign investment company rules.

Subtitle D--Provisions To Discourage Expatriation

Sec. 441. Tax treatment of inverted corporate entities.

Sec. 442. Imposition of mark-to-market tax on individuals who expatriate.

Sec. 443. Excise tax on stock compensation of insiders of inverted corporations.

Sec. 444. Reinsurance of United States risks in foreign jurisdictions.

Sec. 445. Reporting of taxable mergers and acquisitions.

Subtitle E--International Tax

Sec. 451. Clarification of banking business for purposes of determining investment of earnings in United States property.

Sec. 452. Prohibition on nonrecognition of gain through complete liquidation of holding company.

Sec. 453. Prevention of mismatching of interest and original issue discount deductions and income inclusions in transactions with related foreign persons.

Sec. 454. Effectively connected income to include certain foreign source income.

Sec. 455. Recapture of overall foreign losses on sale of controlled foreign corporation.

Sec. 456. Minimum holding period for foreign tax credit on withholding taxes on income other than dividends.

Subtitle F--Other Revenue Provisions

Part I--Financial Instruments

Sec. 461. Treatment of stripped interests in bond and preferred stock funds, etc.

Sec. 462. Application of earnings stripping rules to partnerships and S corporations.

Sec. 463. Recognition of cancellation of indebtedness income realized on satisfaction of debt with partnership interest.

Sec. 464. Modification of straddle rules.

Sec. 465. Denial of installment sale treatment for all readily tradeable debt.

Part II--Corporations and Partnerships

Sec. 466. Modification of treatment of transfers to creditors in divisive reorganizations.

Sec. 467. Clarification of definition of nonqualified preferred stock.

Sec. 468. Modification of definition of controlled group of corporations.

Sec. 469. Mandatory basis adjustments in connection with partnership distributions and transfers of partnership interests.

Part III--Depreciation and Amortization

Sec. 471. Extension of amortization of intangibles to sports franchises.

Sec. 472. Services contracts treated in the same manner as leases for rules relating to tax-exempt use of property.

Sec. 473. Class lives for utility grading costs.

Sec. 474. Expansion of limitation on depreciation of certain passenger automobiles.

Sec. 475. Consistent amortization of periods for intangibles.

Sec. 476. Limitation on deductions allocable to property used by governments or other tax-exempt entities.

Part IV--Administrative Provisions

Sec. 481. Clarification of rules for payment of estimated tax for certain deemed asset sales.

Sec. 482. Extension of IRS user fees.

Sec. 483. Doubling of certain penalties, fines, and interest on underpayments related to certain offshore financial arrangement.

Sec. 484. Partial payment of tax liability in installment agreements.

Sec. 485. Extension of customs user fees.

Sec. 486. Deposits made to suspend running of interest on potential underpayments.

Sec. 487. Qualified tax collection contracts.

Part V--Miscellaneous Provisions

Sec. 491. Addition of vaccines against hepatitis A to list of taxable vaccines.

Sec. 492. Recognition of gain from the sale of a principal residence acquired in a like-kind exchange within 5 years of sale.

Sec. 493. Clarification of exemption from tax for small property and casualty insurance companies.

Sec. 494. Definition of insurance company for section 831.

Sec. 495. Limitations on deduction for charitable contributions of patents and similar property.

Sec. 496. Repeal of 10-percent rehabilitation tax credit.

Sec. 497. Increase in age of minor children whose unearned income is taxed as if parent's income.

TITLE I--PROVISIONS RELATING TO REPEAL OF EXCLUSION FOR EXTRATERRITORIAL INCOME

SEC. 101. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL INCOME.

(a) IN GENERAL- Section 114 is hereby repealed.

(b) CONFORMING AMENDMENTS-

(1)(A) Subpart E of part III of subchapter N of chapter 1 (relating to qualifying foreign trade income) is hereby repealed.

(B) The table of subparts for such part III is amended by striking the item relating to subpart E.

(2) The table of sections for part III of subchapter B of chapter 1 is amended by striking the item relating to section 114.

(3) The second sentence of section 56(g)(4)(B)(i) is amended by striking `or under section 114'.

(4) Section 275(a) is amended--

(A) by inserting `or' at the end of paragraph (4)(A), by striking `or' at the end of paragraph (4)(B) and inserting a period, and by striking subparagraph (C), and

(B) by striking the last sentence.

(5) Paragraph (3) of section 864(e) is amended--

(A) by striking:

`(3) TAX-EXEMPT ASSETS NOT TAKEN INTO ACCOUNT-

`(A) IN GENERAL- For purposes of'; and inserting:

`(3) TAX-EXEMPT ASSETS NOT TAKEN INTO ACCOUNT- For purposes of', and

(B) by striking subparagraph (B).

(6) Section 903 is amended by striking `114, 164(a),' and inserting `164(a)'.

(7) Section 999(c)(1) is amended by striking `941(a)(5),'.

(c) EFFECTIVE DATE-

(1) IN GENERAL- The amendments made by this section shall apply to transactions occurring after the date of the enactment of this Act.

(2) BINDING CONTRACTS- The amendments made by this section shall not apply to any transaction in the ordinary course of a trade or business which occurs pursuant to a binding contract--

(A) which is between the taxpayer and a person who is not a related person (as defined in section 943(b)(3) of such Code, as in effect on the day before the date of the enactment of this Act), and

(B) which is in effect on September 17, 2003, and at all times thereafter.

(d) REVOCATION OF SECTION 943(e) ELECTIONS-

(1) IN GENERAL- In the case of a corporation that elected to be treated as a domestic corporation under section 943(e) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of this Act)--

(A) the corporation may, during the 1-year period beginning on the date of the enactment of this Act, revoke such election, effective as of such date of enactment, and

(B) if the corporation does revoke such election--

(i) such corporation shall be treated as a domestic corporation transferring (as of such date of enactment) all of its property to a foreign corporation in connection with an exchange described in section 354 of such Code, and

(ii) no gain or loss shall be recognized on such transfer.

(2) EXCEPTION- Subparagraph (B)(ii) of paragraph (1) shall not apply to gain on any asset held by the revoking corporation if--

(A) the basis of such asset is determined in whole or in part by reference to the basis of such asset in the hands of the person from whom the revoking corporation acquired such asset,

(B) the asset was acquired by transfer (not as a result of the election under section 943(e) of such Code) occurring on or after the 1st day on which its election under section 943(e) of such Code was effective, and

(C) a principal purpose of the acquisition was the reduction or avoidance of tax (other than a reduction in tax under section 114 of such Code, as in effect on the day before the date of the enactment of this Act).

(e) GENERAL TRANSITION-

(1) IN GENERAL- In the case of a taxable year ending after the date of the enactment of this Act and beginning before January 1, 2007, for purposes of chapter 1 of such Code, a current FSC/ETI beneficiary shall be allowed a deduction equal to the transition amount determined under this subsection with respect to such beneficiary for such year.

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