State Of New York et al v. Mnuchin et al

Filing 47

DECLARATION of Owen T. Conroy in Support re: 44 CROSS MOTION for Summary Judgment .. Document filed by State Of Connecticut, State Of New York, State of Maryland, State of New Jersey. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13, # 14 Exhibit 14, # 15 Exhibit 15, # 16 Exhibit 16, # 17 Exhibit 17, # 18 Exhibit 18, # 19 Exhibit 19, # 20 Exhibit 20, # 21 Exhibit 21, # 22 Exhibit 22, # 23 Exhibit 23, # 24 Exhibit 24, # 25 Exhibit 25, # 26 Exhibit 26, # 27 Exhibit 27, # 28 Exhibit 28, # 29 Exhibit 29, # 30 Exhibit 30, # 31 Exhibit 31, # 32 Exhibit 32, # 33 Exhibit 33, # 34 Exhibit 34, # 35 Exhibit 35, # 36 Exhibit 36, # 37 Exhibit 37, # 38 Exhibit 38, # 39 Exhibit 39, # 40 Exhibit 40, # 41 Exhibit 41, # 42 Exhibit 42, # 43 Exhibit 43, # 44 Exhibit 44, # 45 Exhibit 45, # 46 Exhibit 46, # 47 Exhibit 47, # 48 Exhibit 48, # 49 Exhibit 49, # 50 Exhibit 50, # 51 Exhibit 51, # 52 Exhibit 52, # 53 Exhibit 53, # 54 Exhibit 54, # 55 Exhibit 55, # 56 Exhibit 56, # 57 Exhibit 57, # 58 Exhibit 58, # 59 Exhibit 59, # 60 Exhibit 60, # 61 Exhibit 61, # 62 Exhibit 62, # 63 Exhibit 63, # 64 Exhibit 64, # 65 Exhibit 65, # 66 Exhibit 66, # 67 Exhibit 67, # 68 Exhibit 68, # 69 Exhibit 69, # 70 Exhibit 70, # 71 Exhibit 71, # 72 Exhibit 72, # 73 Exhibit 73, # 74 Exhibit 74, # 75 Exhibit 75, # 76 Exhibit 76, # 77 Exhibit 77, # 78 Exhibit 78, # 79 Exhibit 79, # 80 Exhibit 80, # 81 Exhibit 81, # 82 Exhibit 82, # 83 Exhibit 83, # 84 Exhibit 84, # 85 Exhibit 85, # 86 Exhibit 86, # 87 Exhibit 87, # 88 Exhibit 88, # 89 Exhibit 89, # 90 Exhibit 90, # 91 Exhibit 91, # 92 Exhibit 92, # 93 Exhibit 93, # 94 Exhibit 94, # 95 Exhibit 95, # 96 Exhibit 96, # 97 Exhibit 97, # 98 Exhibit 98, # 99 Exhibit 99, # 100 Exhibit 100, # 101 Exhibit 101, # 102 Exhibit 102, # 103 Exhibit 103, # 104 Exhibit 104, # 105 Exhibit 105, # 106 Exhibit 106)(Conroy, Owen)

Exhibit 74

PUBLIC LAW 109–135—DEC. 21, 2005

119 STAT. 2615

(H) APPLICATION OF EGTRRA SUNSET.—The amendments
made by this paragraph (and each part thereof) shall be subject
to title IX of the Economic Growth and Tax Relief Reconciliation
Act of 2001 in the same manner as the provisions of such
Act to which such amendment (or part thereof) relates.
(4) Subsection (b) of section 1335 of the Energy Policy
Act of 2005 is amended by striking paragraphs (1), (2), and
(3). The Internal Revenue Code of 1986 shall be applied and
administered as if the amendments made such paragraphs
had never been enacted.
(j) AMENDMENT RELATED TO SECTION 1341.—Paragraph (6) of
section 30B(h) is amended by adding at the end the following
sentence: ‘‘For purposes of subsection (g), property to which this
paragraph applies shall be treated as of a character subject to
an allowance for depreciation.’’.
(k) AMENDMENT RELATED TO SECTION 1342.—Paragraph (2)
of section 30C(e) is amended by adding at the end the following
sentence: ‘‘For purposes of subsection (d), property to which this
paragraph applies shall be treated as of a character subject to
an allowance for depreciation.’’.
(l) AMENDMENTS RELATED TO SECTION 1351.—
(1) Paragraph (6) of section 41(f) (relating to special rules)
is amended by adding at the end the following:
‘‘(C) FOREIGN RESEARCH.—For purposes of subsection
(a)(3), amounts paid or incurred for any energy research
conducted outside the United States, the Commonwealth
of Puerto Rico, or any possession of the United States
shall not be taken into account.
‘‘(D) DENIAL OF DOUBLE BENEFIT.—Any amount taken
into account under subsection (a)(3) shall not be taken
into account under paragraph (1) or (2) of subsection (a).’’.
(2) Clause (ii) of section 41(b)(3)(C) is amended by striking
‘‘(other than an energy research consortium)’’.
(m) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraphs (2)
and (3), the amendments made by this section shall take effect
as if included in the provisions of the Energy Policy Act of
2005 to which they relate.
(2) REPEAL OF PUBLIC UTILITY HOLDING COMPANY ACT OF
1935.—The amendments made by subsection (a) shall not apply
with respect to any transaction ordered in compliance with
the Public Utility Holding Company Act of 1935 before its
repeal.
(3) COORDINATION OF PERSONAL CREDITS.—The amendments made by subsection (i)(3) shall apply to taxable years
beginning after December 31, 2005.

26 USC 23 note.

Ante, p. 1033.
Applicability.

26 USC 30B.

26 USC 23 note.

SEC. 403. AMENDMENTS RELATED TO THE AMERICAN JOBS CREATION
ACT OF 2004.

(a) AMENDMENTS RELATED TO SECTION 102 OF THE ACT.—
(1) Paragraph (1) of section 199(b) is amended by striking
‘‘the employer’’ and inserting ‘‘the taxpayer’’.
(2) Paragraph (2) of section 199(b) is amended to read
as follows:
‘‘(2) W–2 WAGES.—For purposes of this section, the term
‘W–2 wages’ means, with respect to any person for any taxable
year of such person, the sum of the amounts described in

VerDate 14-DEC-2004

20:40 Jan 23, 2006

Jkt 049139

PO 00135

Frm 00039

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

APPS24

PsN: PUBL135

119 STAT. 2616

paragraphs (3) and (8) of section 6051(a) paid by such person
with respect to employment of employees by such person during
the calendar year ending during such taxable year. Such term
shall not include any amount which is not properly included
in a return filed with the Social Security Administration on
or before the 60th day after the due date (including extensions)
for such return.’’.
(3) Subparagraph (B) of section 199(c)(1) is amended by
inserting ‘‘and’’ at the end of clause (i), by striking clauses
(ii) and (iii), and by inserting after clause (i) the following:
‘‘(ii) other expenses, losses, or deductions (other
than the deduction allowed under this section), which
are properly allocable to such receipts.’’.
(4) Paragraph (2) of section 199(c) is amended to read
as follows:
‘‘(2) ALLOCATION METHOD.—The Secretary shall prescribe
rules for the proper allocation of items described in paragraph
(1) for purposes of determining qualified production activities
income. Such rules shall provide for the proper allocation of
items whether or not such items are directly allocable to
domestic production gross receipts.’’.
(5) Subparagraph (A) of section 199(c)(4) is amended by
striking clauses (ii) and (iii) and inserting the following new
clauses:
‘‘(ii) in the case of a taxpayer engaged in the active
conduct of a construction trade or business, construction of real property performed in the United States
by the taxpayer in the ordinary course of such trade
or business, or
‘‘(iii) in the case of a taxpayer engaged in the
active conduct of an engineering or architectural services trade or business, engineering or architectural
services performed in the United States by the taxpayer in the ordinary course of such trade or business
with respect to the construction of real property in
the United States.’’.
(6) Subparagraph (B) of section 199(c)(4) is amended by
striking ‘‘and’’ at the end of clause (i), by striking the period
at the end of clause (ii) and inserting ‘‘, or’’, and by adding
at the end the following:
‘‘(iii) the lease, rental, license, sale, exchange, or
other disposition of land.’’.
(7) Paragraph (4) of section 199(c) is amended by adding
at the end the following new subparagraphs:
‘‘(C) SPECIAL RULE FOR CERTAIN GOVERNMENT CONTRACTS.—Gross receipts derived from the manufacture or
production of any property described in subparagraph
(A)(i)(I) shall be treated as meeting the requirements of
subparagraph (A)(i) if—
‘‘(i) such property is manufactured or produced
by the taxpayer pursuant to a contract with the Federal
Government, and
‘‘(ii) the Federal Acquisition Regulation requires
that title or risk of loss with respect to such property
be transferred to the Federal Government before the
manufacture or production of such property is complete.

26 USC 199.

Regulations.

VerDate 14-DEC-2004

20:40 Jan 23, 2006

PUBLIC LAW 109–135—DEC. 21, 2005

Jkt 049139

PO 00135

Frm 00040

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

APPS24

PsN: PUBL135

PUBLIC LAW 109–135—DEC. 21, 2005

119 STAT. 2617

‘‘(D) PARTNERSHIPS OWNED BY EXPANDED AFFILIATED
GROUPS.—For purposes of this paragraph, if all of the
interests in the capital and profits of a partnership are
owned by members of a single expanded affiliated group
at all times during the taxable year of such partnership,
the partnership and all members of such group shall be
treated as a single taxpayer during such period.’’.
(8) Paragraph (1) of section 199(d) is amended to read
as follows:
‘‘(1) APPLICATION OF SECTION TO PASS-THRU ENTITIES.—
‘‘(A) PARTNERSHIPS AND S CORPORATIONS.—In the case
of a partnership or S corporation—
‘‘(i) this section shall be applied at the partner
or shareholder level,
‘‘(ii) each partner or shareholder shall take into
account such person’s allocable share of each item
described in subparagraph (A) or (B) of subsection
(c)(1) (determined without regard to whether the items
described in such subparagraph (A) exceed the items
described in such subparagraph (B)), and
‘‘(iii) each partner or shareholder shall be treated
for purposes of subsection (b) as having W–2 wages
for the taxable year in an amount equal to the lesser
of—
‘‘(I) such person’s allocable share of the W–
2 wages of the partnership or S corporation for
the taxable year (as determined under regulations
prescribed by the Secretary), or
‘‘(II) 2 times 9 percent of so much of such
person’s qualified production activities income as
is attributable to items allocated under clause (ii)
for the taxable year.
‘‘(B) TRUSTS AND ESTATES.—In the case of a trust or
estate—
‘‘(i) the items referred to in subparagraph (A)(ii)
(as determined therein) and the W–2 wages of the
trust or estate for the taxable year, shall be apportioned between the beneficiaries and the fiduciary (and
among the beneficiaries) under regulations prescribed
by the Secretary, and
‘‘(ii) for purposes of paragraph (2), adjusted gross
income of the trust or estate shall be determined as
provided in section 67(e) with the adjustments
described in such paragraph.
‘‘(C) REGULATIONS.—The Secretary may prescribe rules
requiring or restricting the allocation of items and wages
under this paragraph and may prescribe such reporting
requirements as the Secretary determines appropriate.’’.
(9) Paragraph (3) of section 199(d) is amended to read
as follows:
‘‘(3) AGRICULTURAL AND HORTICULTURAL COOPERATIVES.—
‘‘(A) DEDUCTION ALLOWED TO PATRONS.—Any person
who receives a qualified payment from a specified agricultural or horticultural cooperative shall be allowed for the
taxable year in which such payment is received a deduction
under subsection (a) equal to the portion of the deduction

VerDate 14-DEC-2004

20:40 Jan 23, 2006

Jkt 049139

PO 00135

Frm 00041

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

26 USC 199.

APPS24

PsN: PUBL135

119 STAT. 2618

allowed under subsection (a) to such cooperative which
is—
‘‘(i) allowed with respect to the portion of the qualified production activities income to which such payment is attributable, and
‘‘(ii) identified by such cooperative in a written
notice mailed to such person during the payment period
described in section 1382(d).
‘‘(B) COOPERATIVE DENIED DEDUCTION FOR PORTION OF
QUALIFIED PAYMENTS.—The taxable income of a specified
agricultural or horticultural cooperative shall not be
reduced under section 1382 by reason of that portion of
any qualified payment as does not exceed the deduction
allowable under subparagraph (A) with respect to such
payment.
‘‘(C) TAXABLE INCOME OF COOPERATIVES DETERMINED
WITHOUT REGARD TO CERTAIN DEDUCTIONS.—For purposes
of this section, the taxable income of a specified agricultural
or horticultural cooperative shall be computed without
regard to any deduction allowable under subsection (b)
or (c) of section 1382 (relating to patronage dividends,
per-unit retain allocations, and nonpatronage distributions).
‘‘(D) SPECIAL RULE FOR MARKETING COOPERATIVES.—
For purposes of this section, a specified agricultural or
horticultural cooperative described in subparagraph (F)(ii)
shall be treated as having manufactured, produced, grown,
or extracted in whole or significant part any qualifying
production property marketed by the organization which
its patrons have so manufactured, produced, grown, or
extracted.
‘‘(E) QUALIFIED PAYMENT.—For purposes of this paragraph, the term ‘qualified payment’ means, with respect
to any person, any amount which—
‘‘(i) is described in paragraph (1) or (3) of section
1385(a),
‘‘(ii) is received by such person from a specified
agricultural or horticultural cooperative, and
‘‘(iii) is attributable to qualified production activities income with respect to which a deduction is
allowed to such cooperative under subsection (a).
‘‘(F) SPECIFIED AGRICULTURAL OR HORTICULTURAL
COOPERATIVE.—For purposes of this paragraph, the term
‘specified agricultural or horticultural cooperative’ means
an organization to which part I of subchapter T applies
which is engaged—
‘‘(i) in the manufacturing, production, growth, or
extraction in whole or significant part of any agricultural or horticultural product, or
‘‘(ii) in the marketing of agricultural or horticultural products.’’.
(10) Clause (i) of section 199(d)(4)(B) is amended—
(A) by striking ‘‘50 percent’’ and inserting ‘‘more than
50 percent’’, and
(B) by striking ‘‘80 percent’’ and inserting ‘‘at least
80 percent’’.

26 USC 199.

VerDate 14-DEC-2004

20:40 Jan 23, 2006

PUBLIC LAW 109–135—DEC. 21, 2005

Jkt 049139

PO 00135

Frm 00042

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

APPS24

PsN: PUBL135

PUBLIC LAW 109–135—DEC. 21, 2005

119 STAT. 2619

(11)(A) Paragraph (6) of section 199(d) is amended to read
as follows:
‘‘(6) COORDINATION WITH MINIMUM TAX.—For purposes of
determining alternative minimum taxable income under section
55—
‘‘(A) qualified production activities income shall be
determined without regard to any adjustments under sections 56 through 59, and
‘‘(B) in the case of a corporation, subsection (a)(1)(B)
shall be applied by substituting ‘alternative minimum taxable income’ for ‘taxable income’.’’.
(B) Paragraph (2) of section 199(a) is amended by striking
‘‘subsections (d)(1) and (d)(6)’’ and inserting ‘‘subsection (d)(1)’’.
(12) Subsection (d) of section 199 is amended by redesignating paragraph (7) as paragraph (8) and by inserting after
paragraph (6) the following new paragraph:
‘‘(7) UNRELATED BUSINESS TAXABLE INCOME.—For purposes
of determining the tax imposed by section 511, subsection
(a)(1)(B) shall be applied by substituting ‘unrelated business
taxable income’ for ‘taxable income’.’’.
(13) Paragraph (8) of section 199(d), as redesignated by
paragraph (12), is amended by inserting ‘‘, including regulations
which prevent more than 1 taxpayer from being allowed a
deduction under this section with respect to any activity
described in subsection (c)(4)(A)(i)’’ before the period at the
end.
(14) Clauses (i)(II) and (ii)(II) of section 56(d)(1)(A) are
each amended by striking ‘‘such deduction’’ and inserting ‘‘such
deduction and the deduction under section 199’’.
(15) Clause (i) of section 163(j)(6)(A) is amended by striking
‘‘and’’ at the end of subclause (II), by redesignating subclause
(III) as subclause (IV), and by inserting after subclause (II)
the following new subclause:
‘‘(III) any deduction allowable under section
199, and’’.
(16) Paragraph (2) of section 170(b) is amended by redesignating subparagraphs (C) and (D) as subparagraphs (D) and
(E), respectively, and by inserting after subparagraph (B) the
following new subparagraph:
‘‘(C) section 199,’’.
(17) Subsection (d) of section 172 is amended by adding
at the end the following new paragraph:
‘‘(7) MANUFACTURING DEDUCTION.—The deduction under
section 199 shall not be allowed.’’.
(18) Paragraph (1) of section 613A(d) is amended by
redesignating subparagraphs (B), (C), and (D) as subparagraphs
(C), (D), and (E), respectively, and by inserting after subparagraph (A) the following new subparagraph:
‘‘(B) any deduction allowable under section 199,’’.
(19) Subsection (e) of section 102 of the American Jobs
Creation Act of 2004 is amended to read as follows:
‘‘(e) EFFECTIVE DATE.—
‘‘(1) IN GENERAL.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2004.
‘‘(2) APPLICATION TO PASS-THRU ENTITIES, ETC.—In determining the deduction under section 199 of the Internal Revenue
Code of 1986 (as added by this section), items arising from

VerDate 14-DEC-2004

20:40 Jan 23, 2006

Jkt 049139

PO 00135

Frm 00043

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

26 USC 199.

Applicability.

26 USC 56 note.

APPS24

PsN: PUBL135

119 STAT. 2620

26 USC 1361.

26 USC 1366
note.

VerDate 14-DEC-2004

20:40 Jan 23, 2006

PUBLIC LAW 109–135—DEC. 21, 2005

a taxable year of a partnership, S corporation, estate, or trust
beginning before January 1, 2005, shall not be taken into
account for purposes of subsection (d)(1) of such section.’’.
(b) AMENDMENT RELATED TO SECTION 231 OF THE ACT.—Paragraph (1) of section 1361(c) is amended to read as follows:
‘‘(1) MEMBERS OF A FAMILY TREATED AS 1 SHAREHOLDER.—
‘‘(A) IN GENERAL.—For purposes of subsection (b)(1)(A),
there shall be treated as one shareholder—
‘‘(i) a husband and wife (and their estates), and
‘‘(ii) all members of a family (and their estates).
‘‘(B) MEMBERS OF A FAMILY.—For purposes of this
paragraph—
‘‘(i) IN GENERAL.—The term ‘members of a family’
means a common ancestor, any lineal descendant of
such common ancestor, and any spouse or former
spouse of such common ancestor or any such lineal
descendant.
‘‘(ii) COMMON ANCESTOR.—An individual shall not
be considered to be a common ancestor if, on the
applicable date, the individual is more than 6 generations removed from the youngest generation of shareholders who would (but for this subparagraph) be members of the family. For purposes of the preceding sentence, a spouse (or former spouse) shall be treated
as being of the same generation as the individual to
whom such spouse is (or was) married.
‘‘(iii) APPLICABLE DATE.—The term ‘applicable date’
means the latest of—
‘‘(I) the date the election under section 1362(a)
is made,
‘‘(II) the earliest date that an individual
described in clause (i) holds stock in the S corporation, or
‘‘(III) October 22, 2004.
‘‘(C) EFFECT OF ADOPTION, ETC.—Any legally adopted
child of an individual, any child who is lawfully placed
with an individual for legal adoption by the individual,
and any eligible foster child of an individual (within the
meaning of section 152(f)(1)(C)), shall be treated as a child
of such individual by blood.’’.
(c) AMENDMENT RELATED TO SECTION 235 OF THE ACT.—Subsection (b) of section 235 of the American Jobs Creation Act of
2004 is amended by striking ‘‘taxable years beginning’’ and inserting
‘‘transfers’’.
(d) AMENDMENTS RELATED TO SECTION 243 OF THE ACT.—
(1) Paragraph (7) of section 856(c) is amended to read
as follows:
‘‘(7) RULES OF APPLICATION FOR FAILURE TO SATISFY PARAGRAPH (4).—
‘‘(A) IN GENERAL.—A corporation, trust, or association
that fails to meet the requirements of paragraph (4) (other
than a failure to meet the requirements of paragraph
(4)(B)(iii) which is described in subparagraph (B)(i) of this
paragraph) for a particular quarter shall nevertheless be
considered to have satisfied the requirements of such paragraph for such quarter if—

Jkt 049139

PO 00135

Frm 00044

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

APPS24

PsN: PUBL135

PUBLIC LAW 109–135—DEC. 21, 2005

119 STAT. 2621

‘‘(i) following the corporation, trust, or association’s
identification of the failure to satisfy the requirements
of such paragraph for a particular quarter, a description of each asset that causes the corporation, trust,
or association to fail to satisfy the requirements of
such paragraph at the close of such quarter of any
taxable year is set forth in a schedule for such quarter
filed in accordance with regulations prescribed by the
Secretary,
‘‘(ii) the failure to meet the requirements of such
paragraph for a particular quarter is due to reasonable
cause and not due to willful neglect, and
‘‘(iii)(I) the corporation, trust, or association disposes of the assets set forth on the schedule specified
in clause (i) within 6 months after the last day of
the quarter in which the corporation, trust or association’s identification of the failure to satisfy the requirements of such paragraph occurred or such other time
period prescribed by the Secretary and in the manner
prescribed by the Secretary, or
‘‘(II) the requirements of such paragraph are otherwise met within the time period specified in subclause
(I).
‘‘(B) RULE FOR CERTAIN DE MINIMIS FAILURES.—A corporation, trust, or association that fails to meet the requirements of paragraph (4)(B)(iii) for a particular quarter shall
nevertheless be considered to have satisfied the requirements of such paragraph for such quarter if—
‘‘(i) such failure is due to the ownership of assets
the total value of which does not exceed the lesser
of—
‘‘(I) 1 percent of the total value of the trust’s
assets at the end of the quarter for which such
measurement is done, and
‘‘(II) $10,000,000, and
‘‘(ii)(I) the corporation, trust, or association, following the identification of such failure, disposes of
assets in order to meet the requirements of such paragraph within 6 months after the last day of the quarter
in which the corporation, trust or association’s identification of the failure to satisfy the requirements of
such paragraph occurred or such other time period
prescribed by the Secretary and in the manner prescribed by the Secretary, or
‘‘(II) the requirements of such paragraph are otherwise met within the time period specified in subclause
(I).
‘‘(C) TAX.—
‘‘(i) TAX IMPOSED.—If subparagraph (A) applies to
a corporation, trust, or association for any taxable year,
there is hereby imposed on such corporation, trust,
or association a tax in an amount equal to the greater
of—
‘‘(I) $50,000, or
‘‘(II) the amount determined (pursuant to regulations promulgated by the Secretary) by multiplying the net income generated by the assets

VerDate 14-DEC-2004

20:40 Jan 23, 2006

Jkt 049139

PO 00135

Frm 00045

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

Regulations.

APPS24

PsN: PUBL135

119 STAT. 2622

26 USC 856.

26 USC 856 note.

VerDate 14-DEC-2004

20:40 Jan 23, 2006

Jkt 049139

PUBLIC LAW 109–135—DEC. 21, 2005
described in the schedule specified in subparagraph (A)(i) for the period specified in clause (ii)
by the highest rate of tax specified in section 11.
‘‘(ii) PERIOD.—For purposes of clause (i)(II), the
period described in this clause is the period beginning
on the first date that the failure to satisfy the requirements of such paragraph (4) occurs as a result of
the ownership of such assets and ending on the earlier
of the date on which the trust disposes of such assets
or the end of the first quarter when there is no longer
a failure to satisfy such paragraph (4).
‘‘(iii) ADMINISTRATIVE PROVISIONS.—For purposes
of subtitle F, the taxes imposed by this subparagraph
shall be treated as excise taxes with respect to which
the deficiency procedures of such subtitle apply.’’.
(2) Subsection (m) of section 856 is amended by adding
at the end the following new paragraph:
‘‘(6) TRANSITION RULE.—
‘‘(A) IN GENERAL.—Notwithstanding paragraph (2)(C),
securities held by a trust shall not be considered securities
held by the trust for purposes of subsection (c)(4)(B)(iii)(III)
during any period beginning on or before October 22, 2004,
if such securities—
‘‘(i) are held by such trust continuously during
such period, and
‘‘(ii) would not be taken into account for purposes
of such subsection by reason of paragraph (7)(C) of
subsection (c) (as in effect on October 22, 2004) if
the amendments made by section 243 of the American
Jobs Creation Act of 2004 had never been enacted.
‘‘(B) RULE NOT TO APPLY TO SECURITIES HELD AFTER
MATURITY DATE.—Subparagraph (A) shall not apply with
respect to any security after the later of October 22, 2004,
or the latest maturity date under the contract (as in effect
on October 22, 2004) taking into account any renewal or
extension permitted under the contract if such renewal
or extension does not significantly modify any other terms
of the contract.
‘‘(C) SUCCESSORS.—If the successor of a trust to which
this paragraph applies acquires securities in a transaction
to which section 381 applies, such trusts shall be treated
as a single entity for purposes of determining the holding
period of such securities under subparagraph (A).’’.
(3) Subparagraph (E) of section 857(b)(2) is amended by
striking ‘‘section 856(c)(7)(B)(iii), and section 856(g)(1).’’ and
inserting ‘‘section 856(c)(7)(C), and section 856(g)(5)’’.
(4) Subsection (g) of section 243 of the American Jobs
Creation Act of 2004 is amended to read as follows:
‘‘(g) EFFECTIVE DATES.—
‘‘(1) SUBSECTIONS (a) AND (b).—The amendments made by
subsections (a) and (b) shall apply to taxable years beginning
after December 31, 2000.
‘‘(2) SUBSECTIONS (c) AND (e).—The amendments made by
subsections (c) and (e) shall apply to taxable years beginning
after the date of the enactment of this Act.

PO 00135

Frm 00046

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

APPS24

PsN: PUBL135

PUBLIC LAW 109–135—DEC. 21, 2005

119 STAT. 2623

‘‘(3) SUBSECTION (d).—The amendment made by subsection
(d) shall apply to transactions entered into after December
31, 2004.
‘‘(4) SUBSECTION (f).—
‘‘(A) The amendment made by paragraph (1) of subsection (f) shall apply to failures with respect to which
the requirements of subparagraph (A) or (B) of section
856(c)(7) of the Internal Revenue Code of 1986 (as added
by such paragraph) are satisfied after the date of the
enactment of this Act.
‘‘(B) The amendment made by paragraph (2) of subsection (f) shall apply to failures with respect to which
the requirements of paragraph (6) of section 856(c) of the
Internal Revenue Code of 1986 (as amended by such paragraph) are satisfied after the date of the enactment of
this Act.
‘‘(C) The amendments made by paragraph (3) of subsection (f) shall apply to failures with respect to which
the requirements of paragraph (5) of section 856(g) of the
Internal Revenue Code of 1986 (as added by such paragraph) are satisfied after the date of the enactment of
this Act.
‘‘(D) The amendment made by paragraph (4) of subsection (f) shall apply to taxable years ending after the
date of the enactment of this Act.
‘‘(E) The amendments made by paragraph (5) of subsection (f) shall apply to statements filed after the date
of the enactment of this Act.’’.
(e) AMENDMENTS RELATED TO SECTION 244 OF THE ACT.—
(1) Paragraph (2) of section 181(d) is amended by striking
the last sentence in subparagraph (A), by redesignating
subparagraph (B) as subparagraph (C), and by inserting after
subparagraph (A) the following new subparagraph:
‘‘(B) SPECIAL RULES FOR TELEVISION SERIES.—In the
case of a television series—
‘‘(i) each episode of such series shall be treated
as a separate production, and
‘‘(ii) only the first 44 episodes of such series shall
be taken into account.’’.
(2) Subparagraph (C) of section 1245(a)(2) is amended by
inserting ‘‘181,’’ after ‘‘179B,’’.
(f) AMENDMENTS RELATED TO SECTION 245 OF THE ACT.—
(1) Subsection (b) of section 45G is amended to read as
follows:
‘‘(b) LIMITATION.—
‘‘(1) IN GENERAL.—The credit allowed under subsection (a)
for any taxable year shall not exceed the product of—
‘‘(A) $3,500, multiplied by
‘‘(B) the sum of—
‘‘(i) the number of miles of railroad track owned
or leased by the eligible taxpayer as of the close of
the taxable year, and
‘‘(ii) the number of miles of railroad track assigned
for purposes of this subsection to the eligible taxpayer
by a Class II or Class III railroad which owns or
leases such railroad track as of the close of the taxable
year.

VerDate 14-DEC-2004

20:40 Jan 23, 2006

Jkt 049139

PO 00135

Frm 00047

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

26 USC 181.

APPS24

PsN: PUBL135

119 STAT. 2624

26 USC 45G.

VerDate 14-DEC-2004

20:40 Jan 23, 2006

PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(2) ASSIGNMENTS.—With respect to any assignment of a
mile of railroad track under paragraph (1)(B)(ii)—
‘‘(A) such assignment may be made only once per taxable year of the Class II or Class III railroad and shall
be treated as made as of the close of such taxable year,
‘‘(B) such mile may not be taken into account under
this section by such railroad for such taxable year, and
‘‘(C) such assignment shall be taken into account for
the taxable year of the assignee which includes the date
that such assignment is treated as effective.’’.
(2) Paragraph (2) of section 45G(c) is amended to read
as follows:
‘‘(2) any person who transports property using the rail
facilities of a Class II or Class III railroad or who furnishes
railroad-related property or services to a Class II or Class
III railroad, but only with respect to miles of railroad track
assigned to such person by such Class II or Class III railroad
for purposes of subsection (b).’’.
(g) AMENDMENTS RELATED TO SECTION 248 OF THE ACT.—
(1)(A) Subsection (d) of section 1353 is amended by striking
‘‘ownership and charter interests’’ and inserting ‘‘ownership,
charter, and operating agreement interests’’.
(B) Subsection (a) of section 1355 is amended by striking
paragraph (8).
(C) Paragraph (1) of section 1355(b) is amended to read
as follows:
‘‘(1) IN GENERAL.—Except as provided in paragraph (2),
a person is treated as operating any vessel during any period
if—
‘‘(A)(i) such vessel is owned by, or chartered (including
a time charter) to, the person, or
‘‘(ii) the person provides services for such vessel pursuant to an operating agreement, and
‘‘(B) such vessel is in use as a qualifying vessel during
such period.’’.
(D) Paragraph (3) of section 1355(d) is amended to read
as follows:
‘‘(3) the extent of a partner’s ownership, charter, or operating agreement interest in any vessel operated by the partnership shall be determined on the basis of the partner’s interest
in the partnership.’’.
(2) Paragraph (3) of section 1355(c) is amended by striking
‘‘determined—’’ and all that follows and inserting ‘‘determined
by treating all members of such group as 1 person.’’.
(3) Subsection (c) of section 1356 is amended—
(A) by striking paragraph (3), and
(B) by adding at the end of paragraph (2) the following
new flush sentence:
‘‘Such term shall not include any core qualifying activities.’’.
(4) The last sentence of section 1354(b) is amended by
inserting ‘‘on or’’ after ‘‘only if made’’.
(h) AMENDMENT RELATED TO SECTION 314 OF THE ACT.—Paragraph (2) of section 55(c) is amended by striking ‘‘regular tax’’
and inserting ‘‘regular tax liability’’.
(i) AMENDMENTS RELATED TO SECTION 322 OF THE ACT.—
(1)(A) Subparagraph (B) of section 194(b)(1) is amended
to read as follows:

Jkt 049139

PO 00135

Frm 00048

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

APPS24

PsN: PUBL135

PUBLIC LAW 109–135—DEC. 21, 2005

119 STAT. 2625

‘‘(B) DOLLAR LIMITATION.—The aggregate amount of
reforestation expenditures which may be taken into account
under subparagraph (A) with respect to each qualified
timber property for any taxable year shall not exceed—
‘‘(i) except as provided in clause (ii) or (iii), $10,000,
‘‘(ii) in the case of a separate return by a married
individual (as defined in section 7703), $5,000, and
‘‘(iii) in the case of a trust, zero.’’.
(B) Paragraph (4) of section 194(c) is amended to read
as follows:
‘‘(4) TREATMENT OF TRUSTS AND ESTATES.—The aggregate
amount of reforestation expenditures incurred by any trust
or estate shall be apportioned between the income beneficiaries
and the fiduciary under regulations prescribed by the Secretary.
Any amount so apportioned to a beneficiary shall be taken
into account as expenditures incurred by such beneficiary in
applying this section to such beneficiary.’’.
(2) Subparagraph (C) of section 1245(a)(2) is amended by
striking ‘‘or 193’’ and inserting ‘‘193, or 194’’.
(j) AMENDMENTS RELATED TO SECTION 336 OF THE ACT.—
(1) Clause (iv) of section 168(k)(2)(A) is amended by striking
‘‘subparagraphs (B) and (C)’’ and inserting ‘‘subparagraph (B)
or (C)’’.
(2) Clause (iii) of section 168(k)(4)(B) is amended by striking
‘‘and paragraph (2)(C)’’ and inserting ‘‘or paragraph (2)(C) (as
so modified)’’.
(k) AMENDMENT RELATED TO SECTION 402 OF THE ACT.—Paragraph (2) of section 904(g) is amended to read as follows:
‘‘(2) OVERALL DOMESTIC LOSS.—For purposes of this
subsection—
‘‘(A) IN GENERAL.—The term ‘overall domestic loss’
means—
‘‘(i) with respect to any qualified taxable year,
the domestic loss for such taxable year to the extent
such loss offsets taxable income from sources without
the United States for the taxable year or for any preceding qualified taxable year by reason of a carryback,
and
‘‘(ii) with respect to any other taxable year, the
domestic loss for such taxable year to the extent such
loss offsets taxable income from sources without the
United States for any preceding qualified taxable year
by reason of a carryback.
‘‘(B) DOMESTIC LOSS.—For purposes of subparagraph
(A), the term ‘domestic loss’ means the amount by which
the gross income for the taxable year from sources within
the United States is exceeded by the sum of the deductions
properly apportioned or allocated thereto (determined without regard to any carryback from a subsequent taxable
year).
‘‘(C) QUALIFIED TAXABLE YEAR.—For purposes of
subparagraph (A), the term ‘qualified taxable year’ means
any taxable year for which the taxpayer chose the benefits
of this subpart.’’.
(l) AMENDMENT RELATED TO SECTION 403 OF THE ACT.—Section
403 of the American Jobs Creation Act of 2004 is amended by
adding at the end the following new subsection:

VerDate 14-DEC-2004

20:40 Jan 23, 2006

Jkt 049139

PO 00135

Frm 00049

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

26 USC 194.

26 USC 864 note.

APPS24

PsN: PUBL135

119 STAT. 2626
Applicability.

26 USC 954.

26 USC 857 note.

VerDate 14-DEC-2004

20:40 Jan 23, 2006

PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(d) TRANSITION RULE.—If the taxpayer elects (at such time
and in such form and manner as the Secretary of the Treasury
may prescribe) to have the rules of this subsection apply—
‘‘(1) the amendments made by this section shall not apply
to taxable years beginning after December 31, 2002, and before
January 1, 2005, and
‘‘(2) in the case of taxable years beginning after December
31, 2004, clause (iv) of section 904(d)(4)(C) of the Internal
Revenue Code of 1986 (as amended by this section) shall be
applied by substituting ‘January 1, 2005’ for ‘January 1, 2003’
both places it appears.’’.
(m) AMENDMENT RELATED TO SECTION 412 OF THE ACT.—
Subparagraph (B) of section 954(c)(4) is amended by adding at
the end the following: ‘‘If a controlled foreign corporation is treated
as owning a capital or profits interest in a partnership under
constructive ownership rules similar to the rules of section 958(b),
the controlled foreign corporation shall be treated as owning such
interest directly for purposes of this subparagraph.’’.
(n) AMENDMENTS RELATED TO SECTION 413 OF THE ACT.—
(1) Subsection (b) of section 532 is amended by striking
paragraph (2) and redesignating paragraphs (3) and (4) as
paragraphs (2) and (3), respectively.
(2) Subsection (b) of section 535 is amended by adding
at the end the following new paragraph:
‘‘(10) CONTROLLED FOREIGN CORPORATIONS.—There shall be
allowed as a deduction the amount of the corporation’s income
for the taxable year which is included in the gross income
of a United States shareholder under section 951(a). In the
case of any corporation the accumulated taxable income of
which would (but for this sentence) be determined without
allowance of any deductions, the deduction under this paragraph shall be allowed and shall be appropriately adjusted
to take into account any deductions which reduced such inclusion.’’.
(3)(A) Section 6683 is repealed.
(B) The table of sections for part I of subchapter B of
chapter 68 is amended by striking the item relating to section
6683.
(o) AMENDMENT RELATED TO SECTION 415 OF THE ACT.—
Subparagraph (D) of section 904(d)(2) is amended by inserting
‘‘as in effect before its repeal’’ after ‘‘section 954(f)’’.
(p) AMENDMENTS RELATED TO SECTION 418 OF THE ACT.—
(1) The second sentence of section 897(h)(1) is amended—
(A) by striking ‘‘any distribution’’ and all that follows
through ‘‘any class of stock’’ and inserting ‘‘any distribution
by a real estate investment trust with respect to any class
of stock’’, and
(B) by striking ‘‘the taxable year’’ and inserting ‘‘the
1-year period ending on the date of the distribution’’.
(2) Subsection (c) of section 418 of the American Jobs
Creation Act of 2004 is amended to read as follows:
‘‘(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to—
‘‘(1) any distribution by a real estate investment trust
which is treated as a deduction for a taxable year of such
trust beginning after the date of the enactment of this Act,
and

Jkt 049139

PO 00135

Frm 00050

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

APPS24

PsN: PUBL135

PUBLIC LAW 109–135—DEC. 21, 2005

119 STAT. 2627

‘‘(2) any distribution by a real estate investment trust
made after such date which is treated as a deduction under
section 860 for a taxable year of such trust beginning on or
before such date.’’.
(q) AMENDMENTS RELATED TO SECTION 422 OF THE ACT.—
(1) Subparagraph (B) of section 965(a)(2) is amended by
inserting ‘‘from another controlled foreign corporation in such
chain of ownership’’ before ‘‘, but only to the extent’’.
(2) Subparagraph (A) of section 965(b)(2) is amended by
inserting ‘‘cash’’ before ‘‘dividends’’.
(3) Paragraph (3) of section 965(b) is amended by adding
at the end the following: ‘‘The Secretary may prescribe such
regulations as may be necessary or appropriate to prevent
the avoidance of the purposes of this paragraph, including
regulations which provide that cash dividends shall not be
taken into account under subsection (a) to the extent such
dividends are attributable to the direct or indirect transfer
(including through the use of intervening entities or capital
contributions) of cash or other property from a related person
(as so defined) to a controlled foreign corporation.’’.
(4) Paragraph (1) of section 965(c) is amended to read
as follows:
‘‘(1) APPLICABLE FINANCIAL STATEMENT.—The term
‘applicable financial statement’ means—
‘‘(A) with respect to a United States shareholder which
is required to file a financial statement with the Securities
and Exchange Commission (or which is included in such
a statement so filed by another person), the most recent
audited annual financial statement (including the notes
which form an integral part of such statement) of such
shareholder (or which includes such shareholder)—
‘‘(i) which was so filed on or before June 30, 2003,
and
‘‘(ii) which was certified on or before June 30,
2003, as being prepared in accordance with generally
accepted accounting principles, and
‘‘(B) with respect to any other United States shareholder, the most recent audited financial statement
(including the notes which form an integral part of such
statement) of such shareholder (or which includes such
shareholder)—
‘‘(i) which was certified on or before June 30, 2003,
as being prepared in accordance with generally
accepted accounting principles, and
‘‘(ii) which is used for the purposes of a statement
or report—
‘‘(I) to creditors,
‘‘(II) to shareholders, or
‘‘(III) for any other substantial nontax purpose.’’.
(5) Paragraph (2) of section 965(d) is amended by striking
‘‘properly allocated and apportioned’’ and inserting ‘‘directly
allocable’’.
(6) Subsection (d) of section 965 is amended by adding
at the end the following new paragraph:

VerDate 14-DEC-2004

20:40 Jan 23, 2006

Jkt 049139

PO 00135

Frm 00051

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

26 USC 965.

APPS24

PsN: PUBL135

119 STAT. 2628

26 USC 965.

Applicability.

26 USC 460 note.

VerDate 14-DEC-2004

20:40 Jan 23, 2006

PUBLIC LAW 109–135—DEC. 21, 2005

‘‘(4) COORDINATION WITH SECTION 78.—Section 78 shall not
apply to any tax which is not allowable as a credit under
section 901 by reason of this subsection.’’.
(7) The last sentence of section 965(e)(1) is amended by
inserting ‘‘which are imposed by foreign countries and possessions of the United States and are’’ after ‘‘taxes’’.
(8) Subsection (f) of section 965 is amended by inserting
‘‘on or’’ before ‘‘before the due date’’.
(r) AMENDMENTS RELATED TO SECTION 501 OF THE ACT.—
(1) Subparagraph (A) of section 164(b)(5) is amended to
read as follows:
‘‘(A) ELECTION TO DEDUCT STATE AND LOCAL SALES
TAXES IN LIEU OF STATE AND LOCAL INCOME TAXES.—At
the election of the taxpayer for the taxable year, subsection
(a) shall be applied—
‘‘(i) without regard to the reference to State and
local income taxes, and
‘‘(ii) as if State and local general sales taxes were
referred to in a paragraph thereof.’’.
(2) Clause (ii) of section 56(b)(1)(A) is amended by inserting
‘‘or clause (ii) of section 164(b)(5)(A)’’ before the period at the
end.
(s) AMENDMENTS RELATED TO SECTION 708 OF THE ACT.—Section 708 of the American Jobs Creation Act of 2004 is amended—
(1) in subsection (a), by striking ‘‘contract commencement
date’’ and inserting ‘‘construction commencement date’’, and
(2) by redesignating subsection (d) as subsection (e) and
inserting after subsection (c) the following new subsection:
‘‘(d) CERTAIN ADJUSTMENTS NOT TO APPLY.—Section 481 of
the Internal Revenue Code of 1986 shall not apply with respect
to any change in the method of accounting which is required by
this section.’’.
(t) AMENDMENT RELATED TO SECTION 710 OF THE ACT.—Clause
(i) of section 45(c)(7)(A) is amended by striking ‘‘synthetic’’.
(u) AMENDMENT RELATED TO SECTION 801 OF THE ACT.—Paragraph (3) of section 7874(a) is amended to read as follows:
‘‘(3) COORDINATION WITH SUBSECTION (b).—A corporation
which is treated as a domestic corporation under subsection
(b) shall not be treated as a surrogate foreign corporation
for purposes of paragraph (2)(A).’’.
(v) AMENDMENTS RELATED TO SECTION 804 OF THE ACT.—
(1) Subparagraph (C) of section 877(g)(2) is amended by
striking ‘‘section 7701(b)(3)(D)(ii)’’ and inserting ‘‘section
7701(b)(3)(D)’’.
(2) Subsection (n) of section 7701 is amended to read as
follows:
‘‘(n) SPECIAL RULES FOR DETERMINING WHEN AN INDIVIDUAL
IS NO LONGER A UNITED STATES CITIZEN OR LONG-TERM RESIDENT.—For purposes of this chapter—
‘‘(1) UNITED STATES CITIZENS.—An individual who would
(but for this paragraph) cease to be treated as a citizen of
the United States shall continue to be treated as a citizen
of the United States until such individual—
‘‘(A) gives notice of an expatriating act (with the requisite intent to relinquish citizenship) to the Secretary
of State, and

Jkt 049139

PO 00135

Frm 00052

Fmt 6580

Sfmt 6581

E:\PUBLAW\PUBL135.109

APPS24

PsN: PUBL135