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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
[Strike out all after the enacting clause and insert the part printed
in italic]
_______________________________________________________________________
A BILL
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.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
<DELETED>SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF
CONTENTS.</DELETED>
<DELETED> (a) Short Title.--This Act may be cited as the ``Jumpstart
Our Business Strength (JOBS) Act''.</DELETED>
<DELETED> (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.</DELETED>
<DELETED> (c) Table of Contents.--</DELETED>
<DELETED>Sec. 1. Short title; amendment of 1986 Code; table of
contents.
<DELETED>TITLE I--PROVISIONS RELATING TO REPEAL OF EXCLUSION FOR
EXTRATERRITORIAL INCOME
<DELETED>Sec. 101. Repeal of exclusion for extraterritorial income.
<DELETED>Sec. 102. Deduction relating to income attributable to United
States production activities.
<DELETED>TITLE II--INTERNATIONAL TAX PROVISIONS
<DELETED>Subtitle A--International Tax Reform
<DELETED>Sec. 201. 20-year foreign tax credit carryforward.
<DELETED>Sec. 202. Look-thru rules to apply to dividends from
noncontrolled section 902 corporations.
<DELETED>Sec. 203. Foreign tax credit under alternative minimum tax.
<DELETED>Sec. 204. Recharacterization of overall domestic loss.
<DELETED>Sec. 205. Interest expense allocation rules.
<DELETED>Sec. 206. Determination of foreign personal holding company
income with respect to transactions in
commodities.
<DELETED>Subtitle B--International Tax Simplification
<DELETED>Sec. 211. Repeal of foreign personal holding company rules and
foreign investment company rules.
<DELETED>Sec. 212. Expansion of de minimis rule under subpart F.
<DELETED>Sec. 213. Attribution of stock ownership through partnerships
to apply in determining section 902 and 960
credits.
<DELETED>Sec. 214. Application of uniform capitalization rules to
foreign persons.
<DELETED>Sec. 215. Repeal of withholding tax on dividends from certain
foreign corporations.
<DELETED>Sec. 216. Repeal of special capital gains tax on aliens
present in the United States for 183 days
or more.
<DELETED>TITLE I--PROVISIONS RELATING TO REPEAL OF EXCLUSION FOR
EXTRATERRITORIAL INCOME</DELETED>
<DELETED>SEC. 101. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL
INCOME.</DELETED>
<DELETED> (a) In General.--Section 114 is hereby repealed.</DELETED>
<DELETED> (b) Conforming Amendments.--</DELETED>
<DELETED> (1)(A) Subpart E of part III of subchapter N of
chapter 1 (relating to qualifying foreign trade income) is
hereby repealed.</DELETED>
<DELETED> (B) The table of subparts for such part III is
amended by striking the item relating to subpart E.</DELETED>
<DELETED> (2) The table of sections for part III of
subchapter B of chapter 1 is amended by striking the item
relating to section 114.</DELETED>
<DELETED> (3) The second sentence of section 56(g)(4)(B)(i)
is amended by striking ``or under section 114''.</DELETED>
<DELETED> (4) Section 275(a) is amended--</DELETED>
<DELETED> (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</DELETED>
<DELETED> (B) by striking the last
sentence.</DELETED>
<DELETED> (5) Paragraph (3) of section 864(e) is amended--
</DELETED>
<DELETED> (A) by striking:</DELETED>
<DELETED> ``(3) Tax-exempt assets not taken into account.--
</DELETED>
<DELETED> ``(A) In general.--For purposes of''; and
inserting:</DELETED>
<DELETED> ``(3) Tax-exempt assets not taken into account.--
For purposes of'', and</DELETED>
<DELETED> (B) by striking subparagraph
(B).</DELETED>
<DELETED> (6) Section 903 is amended by striking ``114,
164(a),'' and inserting ``164(a)''.</DELETED>
<DELETED> (7) Section 999(c)(1) is amended by striking
``941(a)(5),''.</DELETED>
<DELETED> (c) Effective Date.--</DELETED>
<DELETED> (1) In general.--The amendments made by this
section shall apply to transactions occurring after the date of
the enactment of this Act.</DELETED>
<DELETED> (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--</DELETED>
<DELETED> (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</DELETED>
<DELETED> (B) which is in effect on September 17,
2003, and at all times thereafter.</DELETED>
<DELETED> (d) Revocation of Section 943(e) Elections.--</DELETED>
<DELETED> (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)--
</DELETED>
<DELETED> (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</DELETED>
<DELETED> (B) if the corporation does revoke such
election--</DELETED>
<DELETED> (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</DELETED>
<DELETED> (ii) no gain or loss shall be
recognized on such transfer.</DELETED>
<DELETED> (2) Exception.--Subparagraph (B)(ii) of paragraph
(1) shall not apply to gain on any asset held by the revoking
corporation if--</DELETED>
<DELETED> (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,</DELETED>
<DELETED> (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</DELETED>
<DELETED> (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).</DELETED>
<DELETED> (e) General Transition.--</DELETED>
<DELETED> (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.</DELETED>
<DELETED> (2) Current fsc/eti beneficiary.--The term
``current FSC/ETI beneficiary'' means any corporation which
entered into one or more transactions during its taxable year
beginning in calendar year 2002 with respect to which FSC/ETI
benefits were allowable.</DELETED>
<DELETED> (3) Transition amount.--For purposes of this
subsection--</DELETED>
<DELETED> (A) In general.--The transition amount
applicable to any current FSC/ETI beneficiary for any
taxable year is the phaseout percentage of the base
period amount.</DELETED>
<DELETED> (B) Phaseout percentage.--</DELETED>
<DELETED> (i) In general.--In the case of a
taxpayer using the calendar year as its taxable
year, the phaseout percentage shall be
determined under the following table:</DELETED>
<DELETED> The phaseout
<DELETED> Years: percentage is:
<DELETED> 2004......
<DELETED> 80
<DELETED> 2005......
<DELETED> 80
<DELETED> 2006......
<DELETED> 60.
<DELETED> (ii) Special rule for 2003.--The
phaseout percentage for 2003 shall be the
amount that bears the same ratio to 100 percent
as the number of days after the date of the
enactment of this Act bears to 365.</DELETED>
<DELETED> (iii) Special rule for fiscal year
taxpayers.--In the case of a taxpayer not using
the calendar year as its taxable year, the
phaseout percentage is the weighted average of
the phaseout percentages determined under the
preceding provisions of this paragraph with
respect to calendar years any portion of which
is included in the taxpayer's taxable year. The
weighted average shall be determined on the
basis of the respective portions of the taxable
year in each calendar year.</DELETED>
<DELETED> (4) Base period amount.--For purposes of this
subsection, the base period amount is the aggregate FSC/ETI
benefits for the taxpayer's taxable year beginning in calendar
year 2002.</DELETED>
<DELETED> (5) FSC/ETI benefit.--For purposes of this
subsection, the term ``FSC/ETI benefit'' means--</DELETED>
<DELETED> (A) amounts excludable from gross income
under section 114 of such Code, and</DELETED>
<DELETED> (B) the exempt foreign trade income of
related foreign sales corporations from property
acquired from the taxpayer (determined without regard
to section 923(a)(5) of such Code (relating to special
rule for military property), as in effect on the day
before the date of the enactment of the FSC Repeal and
Extraterritorial Income Exclusion Act of
2000).</DELETED>
<DELETED>In determining the FSC/ETI benefit there shall be
excluded any amount attributable to a transaction with respect
to which the taxpayer is the lessor unless the leased property
was manufactured or produced in whole or in part by the
taxpayer.</DELETED>
<DELETED> (6) Special rule for farm cooperatives.--
Determinations under this subsection with respect to an
organization described in section 943(g)(1) of such Code, as in
effect on the day before the date of the enactment of this Act,
shall be made at the cooperative level and the purposes of this
subsection shall be carried out in a manner similar to section
250(h) of such Code, as added by this Act. Such determinations
shall be in accordance with such requirements and procedures as
the Secretary may prescribe.</DELETED>
<DELETED> (7) Certain rules to apply.--Rules similar to the
rules of section 41(f) of such Code shall apply for purposes of
this subsection.</DELETED>
<DELETED> (8) Coordination with binding contract rule.--The
deduction determined under paragraph (1) for any taxable year
shall be reduced by the phaseout percentage of any FSC/ETI
benefit realized for the taxable year by reason of subsection
(c)(2), except that for purposes of this paragraph the phaseout
percentage for 2003 shall be treated as being equal to 100
percent.</DELETED>
<DELETED> (9) Special rule for taxable year which includes
date of enactment.--In the case of a taxable year which
includes the date of the enactment of this Act, the deduction
allowed under this subsection to any current FSC/ETI
beneficiary shall in no event exceed--</DELETED>
<DELETED> (A) 100 percent of such beneficiary's base
period amount for calendar year 2003, reduced
by</DELETED>
<DELETED> (B) the aggregate FSC/ETI benefits of such
beneficiary with respect to transactions occurring
during the portion of the taxable year ending on the
date of the enactment of this Act.</DELETED>
<DELETED>SEC. 102. DEDUCTION RELATING TO INCOME ATTRIBUTABLE TO UNITED
STATES PRODUCTION ACTIVITIES.</DELETED>
<DELETED> (a) In General.--Part VIII of subchapter B of chapter 1
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