Working Taxpayer Fairness Restoration Act - Amends the Internal Revenue Code, with respect to the refundability of the child tax credit, to accelerate the increase to the 15 percent rate.
Limits, to fair market value immediately following a transaction, the importation of net built-in loss by a corporation.
Prohibits an allocation of any decrease in the adjusted basis of partnership property to stock in a corporation which is a partner in the partnership.
Repeals part V (Financial Asset Securitization Investment Trusts) of subchapter M (Regulated Investment Companies and Real Estate Investment Trusts).
Expands the definition of a disqualified debt instrument with respect to deduction disallowance on certain debt instruments of corporations.
Expands the authority to disallow deductions, credits, or other allowances under provisions disallowing such benefits due to acquisitions made to evade or avoid income tax.
Amends provisions affecting passive foreign investment companies to state that the term "qualified portion" (of a shareholder's holding period) does not include any period if there is only a remote likelihood of an inclusion in gross income under subpart F (Controlled Foreign Income).
Adds to the definition of the term "real estate investment trust" by stating that such term includes a corporation, trust, or association which is not a controlled entity.
Directs the Secretary to establish a program requiring the payment of user fees, until September 30, 2013, for: (1) requests to the Internal Revenue Service for ruling letters, opinion letters, and determination letters; and (2) other similar requests.
[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1162 Placed on Calendar Senate (PCS)]
Calendar No. 118
108th CONGRESS
1st Session
S. 1162
To amend the Internal Revenue Code of 1986 to accelerate the increase
in the refundability of the child tax credit, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 2, 2003
Mrs. Lincoln (for herself, Ms. Snowe, Mr. Warner, Mr. Rockefeller, Ms.
Collins, Mr. Reed, Mr. Jeffords, Mr. Bingaman, Ms. Landrieu, Mr.
Johnson, Mr. Harkin, Mr. Kennedy, Mr. Pryor, Mrs. Clinton, Mr. Corzine,
Mr. Durbin, Mr. Breaux, Mr. Edwards, Mr. Lieberman, Mr. Reid, Mr.
Schumer, Mr. Lautenberg, Mr. Kerry, Mr. Graham of Florida, Mr. Baucus,
Mr. Sarbanes, Ms. Mikulski, Mrs. Murray, Mr. Leahy, Mr. Nelson of
Nebraska, Mr. Nelson of Florida, Mr. Levin, Mr. Carper, Mr. Hollings,
Mr. Biden, Mr. Specter, Ms. Cantwell, Mr. Daschle, Ms. Stabenow, Mr.
Dodd, Mr. Conrad, Mr. Voinovich, Mr. Akaka, Mr. Dorgan, Mr. Chafee, Mr.
Kohl, Mrs. Feinstein, Mrs. Boxer, and Mr. Bayh) introduced the
following bill; which was read the first time
June 3, 2003
Read the second time and placed on the calendar
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to accelerate the increase
in the refundability of the child tax credit, 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.
This Act may be cited as the ``Working Taxpayer Fairness
Restoration Act''.
TITLE I--ACCELERATION OF INCREASE IN REFUNDABILITY OF THE CHILD TAX
CREDIT
SEC. 101. ACCELERATION OF INCREASE IN REFUNDABILITY OF THE CHILD TAX
CREDIT.
(a) In General.--Section 24(d)(1)(B)(i) of the Internal Revenue
Code of 1986 (relating to portion of credit refundable) is amended by
striking ``(10 percent in the case of taxable years beginning before
January 1, 2005)''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2002.
TITLE II--REVENUE PROVISIONS
Subtitle A--Enron-Related Tax Shelter Provisions
SEC. 201. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN LOSSES.
(a) In General.--Section 362 of the Internal Revenue Code of 1986
(relating to basis to corporations) is amended by adding at the end the
following new subsection:
``(e) Limitations on Built-In Losses.--
``(1) Limitation on importation of built-in losses.--
``(A) In general.--If in any transaction described
in subsection (a) or (b) there would (but for this
subsection) be an importation of a net built-in loss,
the basis of each property described in subparagraph
(B) which is acquired in such transaction shall
(notwithstanding subsections (a) and (b)) be its fair
market value immediately after such transaction.
``(B) Property described.--For purposes of
subparagraph (A), property is described in this
subparagraph if--
``(i) gain or loss with respect to such
property is not subject to tax under this
subtitle in the hands of the transferor
immediately before the transfer, and
``(ii) gain or loss with respect to such
property is subject to such tax in the hands of
the transferee immediately after such transfer.
In any case in which the transferor is a partnership,
the preceding sentence shall be applied by treating
each partner in such partnership as holding such
partner's proportionate share of the property of such
partnership.
``(C) Importation of net built-in loss.--For
purposes of subparagraph (A), there is an importation
of a net built-in loss in a transaction if the
transferee's aggregate adjusted bases of property
described in subparagraph (B) which is transferred in
such transaction would (but for this paragraph) exceed
the fair market value of such property immediately
after such transaction.
``(2) Limitation on transfer of built-in losses in section
351 transactions.--
``(A) In general.--If--
``(i) property is transferred by a
transferor in any transaction which is
described in subsection (a) and which is not
described in paragraph (1) of this subsection,
and
``(ii) the transferee's aggregate adjusted
bases of such property so transferred would
(but for this paragraph) exceed the fair market
value of such property immediately after such
transaction,
then, notwithstanding subsection (a), the transferee's
aggregate adjusted bases of the property so transferred
shall not exceed the fair market value of such property
immediately after such transaction.
``(B) Allocation of basis reduction.--The aggregate
reduction in basis by reason of subparagraph (A) shall
be allocated among the property so transferred in
proportion to their respective built-in losses
immediately before the transaction.
``(C) Exception for transfers within affiliated
group.--Subparagraph (A) shall not apply to any
transaction if the transferor owns stock in the
transferee meeting the requirements of section
1504(a)(2). In the case of property to which
subparagraph (A) does not apply by reason of the
preceding sentence, the transferor's basis in the stock
received for such property shall not exceed its fair
market value immediately after the transfer.''.
(b) Comparable Treatment Where Liquidation.--Paragraph (1) of
section 334(b) of the Internal Revenue Code of 1986 (relating to
liquidation of subsidiary) is amended to read as follows:
``(1) In general.--If property is received by a corporate
distributee in a distribution in a complete liquidation to
which section 332 applies (or in a transfer described in
section 337(b)(1)), the basis of such property in the hands of such
distributee shall be the same as it would be in the hands of the
transferor; except that the basis of such property in the hands of such
distributee shall be the fair market value of the property at the time
of the distribution--
``(A) in any case in which gain or loss is
recognized by the liquidating corporation with respect
to such property, or
``(B) in any case in which the liquidating
corporation is a foreign corporation, the corporate
distributee is a domestic corporation, and the
corporate distributee's aggregate adjusted bases of
property described in section 362(e)(1)(B) which is
distributed in such liquidation would (but for this
subparagraph) exceed the fair market value of such
property immediately after such liquidation.''.
(c) Effective Date.--The amendments made by this section shall
apply to transactions after February 13, 2003.
SEC. 202. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK HELD BY
PARTNERSHIP IN CORPORATE PARTNER.
(a) In General.--Section 755 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(c) No Allocation of Basis Decrease to Stock of Corporate
Partner.--In making an allocation under subsection (a) of any decrease
in the adjusted basis of partnership property under section 734(b)--
``(1) no allocation may be made to stock in a corporation
(or any person which is related (within the meaning of section
267(b) or 707(b)(1)) to such corporation) which is a partner in
the partnership, and
``(2) any amount not allocable to stock by reason of
paragraph (1) shall be allocated under subsection (a) to other
partnership property.
Gain shall be recognized to the partnership to the extent that the
amount required to be allocated under paragraph (2) to other
partnership property exceeds the aggregate adjusted basis of such other
property immediately before the allocation required by paragraph
(2).''.
(b) Effective Date.--The amendment made by this section shall apply
to distributions after February 13, 2003.
SEC. 203. REPEAL OF SPECIAL RULES FOR FASITS.
(a) In General.--Part V of subchapter M of chapter 1 of the
Internal Revenue Code of 1986 (relating to financial asset
securitization investment trusts) is hereby repealed.
(b) Conforming Amendments.--
(1) Paragraph (6) of section 56(g) of the Internal Revenue
Code of 1986 is amended by striking ``REMIC, or FASIT'' and
inserting ``or REMIC''.
(2) Clause (ii) of section 382(l)(4)(B) of such Code is
amended by striking ``a REMIC to which part IV of subchapter M
applies, or a FASIT to which part V of subchapter M applies,''
and inserting ``or a REMIC to which part IV of subchapter M
applies,''.
(3) Paragraph (1) of section 582(c) of such Code is amended
by striking ``, and any regular interest in a FASIT,''.
(4) Subparagraph (E) of section 856(c)(5) of such Code is
amended by striking the last sentence.
(5) Paragraph (5) of section 860G(a) of such Code is
amended by adding ``and'' at the end of subparagraph (B), by
striking ``, and'' at the end of subparagraph (C) and inserting
a period, and by striking subparagraph (D).
(6) Subparagraph (C) of section 1202(e)(4) of such Code is
amended by striking ``REMIC, or FASIT'' and inserting ``or
REMIC''.
(7) Subparagraph (C) of section 7701(a)(19) of such Code is
amended by adding ``and'' at the end of clause (ix), by
striking ``, and'' at the end of clause (x) and inserting a
period, and by striking clause (xi).
(8) The table of parts for subchapter M of chapter 1 of
such Code is amended by striking the item relating to part V.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall take effect on February
14, 2003.
(2) Exception for existing fasits.--The amendments made by
this section shall not apply to any FASIT in existence on the
date of the enactment of this Act to the extent that regular
interests issued by the FASIT before such date continue to
remain outstanding in accordance with the original terms of
issuance of such interests.
SEC. 204. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON
CONVERTIBLE DEBT.
(a) In General.--Paragraph (2) of section 163(l) of the Internal
Revenue Code of 1986 is amended by striking ``or a related party'' and
inserting ``or equity held by the issuer (or any related party) in any
other person''.
(b) Exception for Certain Instruments Issued By Dealers In
Securities.--Section 163(l) of the Internal Revenue Code of 1986 is
amended by redesignating paragraphs (4) and (5) as paragraphs (5) and
(6) and by inserting after paragraph (3) the following new paragraph:
``(4) Exception for certain instruments issued by dealers
in securities.--For purposes of this subsection, the term
`disqualified debt instrument' does not include indebtedness
issued by a dealer in securities (or a related party) which is
payable in, or by reference to, equity (other than equity of
the issuer or a related party) held by such dealer in its
capacity as a dealer in securities. For purposes of this
paragraph, the term `dealer in securities' has the meaning
given such term by section 475.''.
(c) Conforming Amendment.--Paragraph (3) of section 163(l) of the
Internal Revenue Code of 1986 is amended by striking ``or a related
party'' in the material preceding subparagraph (A) and inserting ``or
any other person''.
(d) Effective Date.--The amendments made by this section shall
apply to debt instruments issued after February 13, 2003.
SEC. 205. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER SECTION
269.
(a) In General.--Subsection (a) of section 269 of the Internal
Revenue Code of 1986 (relating to acquisitions made to evade or avoid
income tax) is amended to read as follows:
``(a) In General.--If--
``(1)(A) any person acquires stock in a corporation, or
``(B) any corporation acquires, directly or indirectly,
property of another corporation and the basis of such property,
in the hands of the acquiring corporation, is determined by
reference to the basis in the hands of the transferor
corporation, and
``(2) the principal purpose for which such acquisition was
made is evasion or avoidance of Federal income tax by securing
the benefit of a deduction, credit, or other allowance,
then the Secretary may disallow such deduction, credit, or other
allowance.''.
(b) Effective Date.--The amendment made by this section shall apply
to stock and property acquired after February 13, 2003.
SEC. 206. MODIFICATIONS OF CERTAIN RULES RELATING TO CONTROLLED FOREIGN
CORPORATIONS.
(a) Limitation on Exception From PFIC Rules for United States
Shareholders of Controlled Foreign Corporations.--Paragraph (2) of
section 1297(e) of the Internal Revenue Code of 1986 (relating to
passive investment company) is amended by adding at the end the
following flush sentence:
``Such term shall not include any period if there is only a
remote likelihood of an inclusion in gross income under section
951(a)(1)(A)(i) of subpart F income of such corporation for
such period.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years on controlled foreign corporation beginning after
February 13, 2003, and to taxable years of United States shareholder in
which or with which such taxable years of controlled foreign
corporations end.
SEC. 207. CONTROLLED ENTITIES INELIGIBLE FOR REIT STATUS.
(a) In General.--Subsection (a) of section 856 of the Internal
Revenue Code of 1986 (relating to definition of real estate investment
trust) is amended by striking ``and'' at the end of paragraph (6), by
redesignating paragraph (7) as paragraph (8), and by inserting after
paragraph (6) the following new paragraph:
``(7) which is not a controlled entity (as defined in
subsection (l)); and''.
(b) Controlled Entity.--Section 856 of the Internal Revenue Code of
1986 is amended by adding at the end the following new subsection:
``(l) Controlled Entity.--
``(1) In general.--For purposes of subsection (a)(7), an
entity is a controlled entity if, at any time during the
taxable year, one person (other than a qualified entity)--
``(A) in the case of a corporation, owns stock--
``(i) possessing at least 50 percent of the
total voting power of the stock of such
corporation, or
``(ii) having a value equal to at least 50
percent of the total value of the stock of such
corporation, or
``(B) in the case of a trust, owns beneficial
interests in the trust which would meet the
requirements of subparagraph (A) if such interests were
stock.
``(2) Qualified entity.--For purposes of paragraph (1), the
term `qualified entity' means--
``(A) any real estate investment trust, and
``(B) any partnership in which one real estate
investment trust owns at least 50 percent of the
capital and profits interests in the partnership.
``(3) Attribution rules.--For purposes of this paragraphs
(1) and (2)--
``(A) In general.--Rules similar to the rules of
subsections (d)(5) and (h)(3) shall apply; except that
section 318(a)(3)(C) shall not be applied under such
rules to treat stock owned by a qualified entity as
being owned by a person which is not a qualified
entity.
``(B) Stapled entities.--A group of entities which
are stapled entities (as defined in section 269B(c)(2))
shall be treated as one person.
``(4) Exception for certain new reits.--
``(A) In general.--The term `controlled entity'
shall not include an incubator REIT.
``(B) Incubator reit.--A corporation shall be
treated as an incubator REIT for any taxable year
during the eligibility period if it meets all the
following requirements for such year:
``(i) The corporation elects to be treated
as an incubator REIT.
``(ii) The corporation has only voting
common stock outstanding.
``(iii) Not more than 50 percent of the
corporation's real estate assets consist of
mortgages.
``(iv) From not later than the beginning of
the last half of the second taxable year, at
least 10 percent of the corporation's capital
is provided by lenders or equity investors who
are unrelated to the corporation's largest
shareholder.
``(v) The corporation annually increases
the value of its real estate assets by at least
10 percent.
``(vi) The directors of the corporation
adopt a resolution setting forth an intent to
engage in a going public transaction.
No election may be made with respect to any REIT if an
election under this subsection was in effect for any
predecessor of such REIT.
``(C) Eligibility period.--
``(i) In general.--The eligibility period
(for which an incubator REIT election can be
made) begins with the REIT's second taxable
year and ends at the close of the REIT's third
taxable year, except that the REIT may, subject
to clauses (ii), (iii), and (iv), elect to
extend such period for an additional 2 taxable
years.
``(ii) Going public transaction.--A REIT
may not elect to extend the eligibility period
under clause (i) unless it enters into an
agreement with the Secretary that if it does
not engage in a going public transaction by the
end of the extended eligibility period, it
shall pay Federal income taxes for the 2 years
of the extended eligibility period as if it had
not made an incubator REIT election and had
ceased to qualify as a REIT for those 2 taxable
years.
``(iii) Returns, interest, and notice.--
``(I) Returns.--In the event the
corporation ceases to be treated as a
REIT by operation of clause (ii), the
corporation shall file any appropriate
amended returns reflecting the change
in status within 3 months of the close
of the extended eligibility period.
``(II) Interest.--Interest shall be
payable on any tax imposed by reason of
clause (ii) for any taxable year but,
unless there was a finding under
subparagraph (D), no substantial
underpayment penalties shall be
imposed.
``(III) Notice.--The corporation
shall, at the same time it files its
returns under subclause (I), notify its
shareholders and any other persons
whose tax position is, or may
reasonably be expected to be, affected
by the change in status so they also
may file any appropriate amended
returns to conform their tax treatment
consistent with the corporation's loss
of REIT status.
``(IV) Regulations.--The Secretary
shall provide appropriate regulations
setting forth transferee liability and
other provisions to ensure collection
of tax and the proper administration of
this provision.
``(iv) Clauses (ii) and (iii) shall not
apply if the corporation allows its incubator
REIT status to lapse at the end of the initial
2-year eligibility period without engaging in a
going public transaction if the corporation is
not a controlled entity as of the beginning of
its fourth taxable year. In such a case, the
corporation's directors may still be liable for
the penalties described in subparagraph (D)
during the eligibility period.
``(D) Special penalties.--If the Secretary
determines that an incubator REIT election was filed
for a principal purpose other than as part of a
reasonable plan to undertake a going public
transaction, an excise tax of $20,000 shall be imposed
on each of the corporation's directors for each taxable
year for which an election was in effect.
``(E) Going public transaction.--For purposes of
this paragraph, a going public transaction means--
``(i) a public offering of shares of the
stock of the incubator REIT;
``(ii) a transaction, or series of
transactions, that results in the stock of the
incubator REIT being regularly traded on an
established securities market and that results
in at least 50 percent of such stock being held
by shareholders who are unrelated to persons
who held such stock before it began to be so
regularly traded; or
``(iii) any transaction resulting in
ownership of the REIT by 200 or more persons
(excluding the largest single shareholder) who
in the aggregate own at least 50 percent of the
stock of the REIT.
For the purposes of this subparagraph, the rules of
paragraph (3) shall apply in determining the ownership
of stock.
``(F) Definitions.--The term `established
securities market' shall have the meaning set forth in
the regulations under section 897.''.
(c) Conforming Amendment.--Paragraph (2) of section 856(h) of the
Internal Revenue Code of 1986 is amended by striking ``and (6)'' each
place it appears and inserting ``, (6), and (7)''.
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years ending after May 8, 2003.
(2) Exception for existing controlled entities.--The
amendments made by this section shall not apply to any entity
which is a controlled entity (as defined in section 856(l) of
the Internal Revenue Code of 1986, as added by this section) as
of May 8, 2003, which is a real estate investment trust for the
taxable year which includes such date, and which has
significant business assets or activities as of such date. For
purposes of the preceding sentence, an entity shall be treated
as such a controlled entity on May 8, 2003, if it becomes such
an entity after such date in a transaction--
(A) made pursuant to a written agreement which was
binding on such date and at all times thereafter, or
(B) described on or before such date in a filing
with the Securities and Exchange Commission required
solely by reason of the transaction.
Subtitle B--Extension of Internal Revenue Service User Fees
SEC. 211. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.
(a) In General.--Chapter 77 of the Internal Revenue Code of 1986
(relating to miscellaneous provisions) is amended by adding at the end
the following new section:
``SEC. 7528. INTERNAL REVENUE SERVICE USER FEES.
``(a) General Rule.--The Secretary shall establish a program
requiring the payment of user fees for--
``(1) requests to the Internal Revenue Service for ruling
letters, opinion letters, and determination letters, and
``(2) other similar requests.
``(b) Program Criteria.--
``(1) In general.--The fees charged under the program
required by subsection (a)--
``(A) shall vary according to categories (or
subcategories) established by the Secretary,
``(B) shall be determined after taking into account
the average time for (and difficulty of) complying with
requests in each category (and subcategory), and
``(C) shall be payable in advance.
``(2) Exemptions, etc.--
``(A) In general.--The Secretary shall provide for
such exemptions (and reduced fees) under such program
as the Secretary determines to be appropriate.
``(B) Exemption for certain requests regarding
pension plans.--The Secretary shall not require payment
of user fees under such program for requests for
determination letters with respect to the qualified
status of a pension benefit plan maintained solely by 1
or more eligible employers or any trust which is part
of the plan. The preceding sentence shall not apply to
any request--
``(i) made after the later of--
``(I) the fifth plan year the
pension benefit plan is in existence,
or
``(II) the end of any remedial
amendment period with respect to the
plan beginning within the first 5 plan
years, or
``(ii) made by the sponsor of any prototype
or similar plan which the sponsor intends to
market to participating employers.
``(C) Definitions and special rules.--For purposes
of subparagraph (B)--
``(i) Pension benefit plan.--The term
`pension benefit plan' means a pension, profit-
sharing, stock bonus, annuity, or employee
stock ownership plan.
``(ii) Eligible employer.--The term
`eligible employer' means an eligible employer
(as defined in section 408(p)(2)(C)(i)(I))
which has at least 1 employee who is not a
highly compensated employee (as defined in
section 414(q)) and is participating in the
plan. The determination of whether an employer
is an eligible employer under subparagraph (B)
shall be made as of the date of the request
described in such subparagraph.
``(iii) Determination of average fees
charged.--For purposes of any determination of
average fees charged, any request to which
subparagraph (B) applies shall not be taken
into account.
``(3) Average fee requirement.--The average fee charged
under the program required by subsection (a) shall not be less
than the amount determined under the following table:
Average
``Category Fee
Employee plan ruling and opinion.............. $250
Exempt organization ruling.................... $350
Employee plan determination................... $300
Exempt organization determination............. $275
Chief counsel ruling.......................... $200.
``(c) Termination.--No fee shall be imposed under this section with
respect to requests made after September 30, 2013.''.
(b) Conforming Amendments.--
(1) The table of sections for chapter 77 of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new item:
``Sec. 7528. Internal Revenue Service
user fees.''.
(2) Section 10511 of the Revenue Act of 1987 is repealed.
(3) Section 620 of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is repealed.
(c) Limitations.--Notwithstanding any other provision of law, any
fees collected pursuant to section 7528 of the Internal Revenue Code of
1986, as added by subsection (a), shall not be expended by the Internal
Revenue Service unless provided by an appropriations Act.
(d) Effective Date.--The amendments made by this section shall
apply to requests made after the date of the enactment of this Act.
Calendar No. 118
108th CONGRESS
1st Session
S. 1162
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to accelerate the increase
in the refundability of the child tax credit, and for other purposes.
_______________________________________________________________________
June 3, 2003
Read the second time and placed on the calendar
Introduced in Senate
Sponsor introductory remarks on measure. (CR S7189-7190)
Introduced in the Senate. Read the first time. Placed on Senate Legislative Calendar under Read the First Time.
Read the second time. Placed on Senate Legislative Calendar under General Orders. Calendar No. 118.
Motion to proceed to consideration of measure made in Senate. (consideration: CR S9089-9090)
Motion to table the motion to proceed to the measure made in Senate.
Motion to proceed to consideration of measure tabled in Senate by Yea-Nay Vote. 51 - 45. Record Vote Number: 266. (consideration: CR S9094-9095)
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