Page 3

Home Services FAQ Site Map Contact Us

Home
Up

Page 1
Page 2
Page 3
Page 4
Page 5
Page 6
Page 7
Page 8
Page 9
Page 10
Page 11
Page 12
Page 13
Page 14

 

American Jobs Creation Act of 2004

Back Next

Page 1 ] Page 2 ] [ Page 3 ] Page 4 ] Page 5 ] Page 6 ] Page 7 ] Page 8 ] Page 9 ] Page 10 ] Page 11 ] Page 12 ] Page 13 ] Page 14 ]

 

SEC . 333. REDUCTION OF EXCISE TAX ON FISHING TACKLE BOXES.

(a) IN GENERAL. --Subsection (a) of section 4161 (relating to sport fishing equipment) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:

"(3) 3 PERCENT RATE OF TAX FOR TACKLE BOXES. --In the case of fishing tackle boxes, paragraph (1) shall be applied by substituting '3 percent' for '10 percent'.".


(b) EFFECTIVE DATE. --The amendments made this section shall apply to articles sold by the manufacturer, producer, or importer after December 31, 2004 .



SEC . 334. SONAR DEVICES SUITABLE FOR FINDING FISH.

(a) NOT TREATED AS SPORT FISHING EQUIPMENT. --Subsection (a) of section 4162 (relating to sport fishing equipment defined) is amended by inserting "and" at the end of paragraph (8), by striking ", and" at the end of paragraph (9) and inserting a period, and by striking paragraph (10).

(b) CONFORMING AMENDMENT. --Section 4162 is amended by striking subsection (b) and by redesignating subsection (c) as subsection (b).

(c) EFFECTIVE DATE. --The amendments made this section shall apply to articles sold by the manufacturer, producer, or importer after December 31, 2004 .



SEC . 335. CHARITABLE CONTRIBUTION DEDUCTION FOR CERTAIN EXPENSES INCURRED IN SUPPORT OF NATIVE ALASKAN SUBSISTENCE WHALING.

(a) IN GENERAL. --Section 170 (relating to charitable, etc., contributions and gifts), as amended by this Act, is amended by redesignating subsection (n) as subsection (o) and by inserting after subsection (m) the following new subsection:

"(n) EXPENSES PAID BY CERTAIN WHALING CAPTAINS IN SUPPORT OF NATIVE ALASKAN SUBSISTENCE WHALING. --

"(1) IN GENERAL. --In the case of an individual who is recognized by the Alaska Eskimo Whaling Commission as a whaling captain charged with the responsibility of maintaining and carrying out sanctioned whaling activities and who engages in such activities during the taxable year, the amount described in paragraph (2) (to the extent such amount does not exceed $10,000 for the taxable year) shall be treated for purposes of this section as a charitable contribution.

 

"(2) AMOUNT DESCRIBED. --

 

"(A) IN GENERAL. --The amount described in this paragraph is the aggregate of the reasonable and necessary whaling expenses paid by the taxpayer during the taxable year in carrying out sanctioned whaling activities.

 

"(B) WHALING EXPENSES. --For purposes of subparagraph (A), the term 'whaling expenses' includes expenses for --

 

"(i) the acquisition and maintenance of whaling boats, weapons, and gear used in sanctioned whaling activities,

 

"(ii) the supplying of food for the crew and other provisions for carrying out such activities, and

 

"(iii) storage and distribution of the catch from such activities.

 

"(3) SANCTIONED WHALING ACTIVITIES. --For purposes of this subsection, the term 'sanctioned whaling activities' means subsistence bowhead whale hunting activities conducted pursuant to the management plan of the Alaska Eskimo Whaling Commission.

 

"(4) SUBSTANTIATION OF EXPENSES. --The Secretary shall issue guidance requiring that the taxpayer substantiate the whaling expenses for which a deduction is claimed under this subsection, including by maintaining appropriate written records with respect to the time, place, date, amount, and nature of the expense, as well as the taxpayer's eligibility for such deduction, and that (to the extent provided by the Secretary) such substantiation be provided as part of the taxpayer's return of tax.".


(b) EFFECTIVE DATE. --The amendments made by subsection (a) shall apply to contributions made after December 31, 2004 .



SEC . 336. MODIFICATION OF DEPRECIATION ALLOWANCE FOR AIRCRAFT.

(a) AIRCRAFT TREATED AS QUALIFIED PROPERTY. --

(1) IN GENERAL. --Paragraph (2) of section 168(k) is amended by redesignating subparagraphs (C) through (F) as subparagraphs (D) through (G), respectively, and by inserting after subparagraph (B) the following new subparagraph:

"(C) CERTAIN AIRCRAFT. --The term 'qualified property' includes property --

 

"(i) which meets the requirements of clauses (ii) and (iii) of subparagraph (A),

 

"(ii) which is an aircraft which is not a transportation property (as defined in subparagraph (B)(iii)) other than for agricultural or firefighting purposes,

 

"(iii) which is purchased and on which such purchaser, at the time of the contract for purchase, has made a nonrefundable deposit of the lesser of --

 

"(I) 10 percent of the cost, or

 

"(II) $100,000, and

 

"(iv) which has --

 

"(I) an estimated production period exceeding 4 months, and

 

"(II) a cost exceeding $200,000.".


(2) PLACED IN SERVICE DATE. --Clause (iv) of section 168(k)(2)(A) is amended by striking "subparagraph (B)" and inserting "subparagraphs (B) and (C)".

(b) CONFORMING AMENDMENTS. --

(1) Section 168(k)(2)(B) is amended by adding at the end the following new clause:

"(iv) APPLICATION OF SUBPARAGRAPH. --This subparagraph shall not apply to any property which is described in subparagraph (C).".


(2) Section 168(k)(4)(A)(ii) is amended by striking "paragraph (2)(C)" and inserting "paragraph (2)(D)".

(3) Section 168(k)(4)(B)(iii) is amended by inserting "and paragraph (2)(C)" after "of this paragraph)".

(4) Section 168(k)(4)(C) is amended by striking "subparagraphs (B) and (D)" and inserting "subparagraphs (B), (C), and (E)".

(5) Section 168(k)(4)(D) is amended by striking "Paragraph (2)(E)" and inserting "Paragraph (2)(F)".

(c) EFFECTIVE DATE. --The amendments made by this section shall take effect as if included in the amendments made by section 101 of the Job Creation and Worker Assistance Act of 2002.



SEC . 337. MODIFICATION OF PLACED IN SERVICE RULE FOR BONUS DEPRECIATION PROPERTY.

(a) IN GENERAL. --Subclause (II) of section 168(k)(2)(E)(iii) (relating to syndication), as amended by the Working Families Tax Relief Act of 2004 and as redesignated by this Act, is amended by inserting before the comma at the end the following: "(or, in the case of multiple units of property subject to the same lease, within 3 months after the date the final unit is placed in service, so long as the period between the time the first unit is placed in service and the time the last unit is placed in service does not exceed 12 months)".

(b) EFFECTIVE DATE. --The amendment made by this section shall apply to property sold after June 4, 2004.



SEC . 338. EXPENSING OF CAPITAL COSTS INCURRED IN COMPLYING WITH ENVIRONMENTAL PROTECTION AGENCY SULFUR REGULATIONS.

(a) IN GENERAL. --Part VI of subchapter B of chapter 1 (relating to itemized deductions for individuals and corporations) is amended by inserting after section 179A the following new section:



" SEC . 179B. DEDUCTION FOR CAPITAL COSTS INCURRED IN COMPLYING WITH ENVIRONMENTAL PROTECTION AGENCY SULFUR REGULATIONS.

"(a) ALLOWANCE OF DEDUCTION. --In the case of a small business refiner (as defined in section 45H(c)(1)) which elects the application of this section, there shall be allowed as a deduction an amount equal to 75 percent of qualified capital costs (as defined in section 45H(c)(2)) which are paid or incurred by the taxpayer during the taxable year.

"(b) REDUCED PERCENTAGE. --In the case of a small business refiner with average daily domestic refinery runs for the 1-year period ending on December 31, 2002, in excess of 155,000 barrels, the number of percentage points described in subsection (a) shall be reduced (not below zero) by the product of such number (before the application of this subsection) and the ratio of such excess to 50,000 barrels.

"(c) BASIS REDUCTION. --

"(1) IN GENERAL. --For purposes of this title, the basis of any property shall be reduced by the portion of the cost of such property taken into account under subsection (a).

 

"(2) ORDINARY INCOME RECAPTURE. --For purposes of section 1245, the amount of the deduction allowable under subsection (a) with respect to any property which is of a character subject to the allowance for depreciation shall be treated as a deduction allowed for depreciation under section 167.".


"(d) COORDINATION WITH OTHER PROVISIONS. --Section 280B shall not apply to amounts which are treated as expenses under this section.".

(b) CONFORMING AMENDMENTS. --

(1) Section 263(a)(1), as amended by this Act, is amended by striking "or" at the end of subparagraph (G), by striking the period at the end of subparagraph (H) and inserting ", or", and by adding at the end the following new subparagraph:

"(I) expenditures for which a deduction is allowed under section 179B.".


(2) Section 263A(c)(3) is amended by inserting "179B," after "section".

(3) Section 312(k)(3)(B) is amended by striking "or 179A" each place it appears in the heading and text and inserting "179A, or 179B".

(4) Section 1016(a) is amended by striking "and" at the end of paragraph (28), by striking the period at the end of paragraph (29) and inserting ", and", and by inserting after paragraph (29) the following new paragraph:

"(30) to the extent provided in section 179B(c).".

(5) Paragraphs (2)(C) and (3)(C) of section 1245(a) are each amended by inserting "179B," after "179A,".

(6) The table of sections for part VI of subchapter B of chapter 1, as amended by this Act, is amended by inserting after the item relating to section 179A the following new item:

"Sec. 179B. Deduction for capital costs incurred in complying with Environmental Protection Agency sulfur regulations.".


(c) EFFECTIVE DATE. --The amendment made by this section shall apply to expenses paid or incurred after December 31, 2002 , in taxable years ending after such date.



SEC . 339. CREDIT FOR PRODUCTION OF LOW SULFUR DIESEL FUEL .

(a) IN GENERAL. --Subpart D of part IV of subchapter A of chapter 1 (relating to business-related credits), as amended by this Act, is amended by inserting after section 45G the following new section:



" SEC . 45H. CREDIT FOR PRODUCTION OF LOW SULFUR DIESEL FUEL .

"(a) IN GENERAL. --For purposes of section 38, the amount of the low sulfur diesel fuel production credit determined under this section with respect to any facility of a small business refiner is an amount equal to 5 cents for each gallon of low sulfur diesel fuel produced during the taxable year by such small business refiner at such facility.

"(b) MAXIMUM CREDIT. --

"(1) IN GENERAL. --The aggregate credit determined under subsection (a) for any taxable year with respect to any facility shall not exceed --

 

"(A) 25 percent of the qualified capital costs incurred by the small business refiner with respect to such facility, reduced by

 

"(B) the aggregate credits determined under this section for all prior taxable years with respect to such facility.

 

"(2) REDUCED PERCENTAGE. --In the case of a small business refiner with average daily domestic refinery runs for the 1-year period ending on December 31, 2002 , in excess of 155,000 barrels, the number of percentage points described in paragraph (1) shall be reduced (not below zero) by the product of such number (before the application of this paragraph) and the ratio of such excess to 50,000 barrels.


"(c) DEFINITIONS AND SPECIAL RULE. --For purposes of this section --

"(1) SMALL BUSINESS REFINER. --The term 'small business refiner' means, with respect to any taxable year, a refiner of crude oil --

 

"(A) with respect to which not more than 1,500 individuals are engaged in the refinery operations of the business on any day during such taxable year, and

 

"(B) the average daily domestic refinery run or average retained production of which for all facilities of the taxpayer for the 1-year period ending on December 31, 2002 , did not exceed 205,000 barrels.

 

"(2) QUALIFIED CAPITAL COSTS. --The term 'qualified capital costs' means, with respect to any facility, those costs paid or incurred during the applicable period for compliance with the applicable EPA regulations with respect to such facility, including expenditures for the construction of new process operation units or the dismantling and reconstruction of existing process units to be used in the production of low sulfur diesel fuel, associated adjacent or offsite equipment (including tankage, catalyst, and power supply), engineering, construction period interest, and sitework.

 

"(3) APPLICABLE EPA REGULATIONS. --The term 'applicable EPA regulations' means the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency.

 

"(4) APPLICABLE PERIOD. --The term 'applicable period' means, with respect to any facility, the period beginning on January 1, 2003 , and ending on the earlier of the date which is 1 year after the date on which the taxpayer must comply with the applicable EPA regulations with respect to such facility or December 31, 2009 .

 

"(5) LOW SULFUR DIESEL FUEL . --The term 'low sulfur diesel fuel' means diesel fuel with a sulfur content of 15 parts per million or less.


"(d) REDUCTION IN BASIS. --For purposes of this subtitle, if a credit is determined under this section for any expenditure with respect to any property, the increase in basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so determined.

"(e) SPECIAL RULE FOR DETERMINATION OF REFINERY RUNS. --For purposes this section and section 179B(b), in the calculation of average daily domestic refinery run or retained production, only refineries which on April 1, 2003 , were refineries of the refiner or a related person (within the meaning of section 613A(d)(3)), shall be taken into account.

"(f) CERTIFICATION. --

"(1) REQUIRED. --No credit shall be allowed unless, not later than the date which is 30 months after the first day of the first taxable year in which the low sulfur diesel fuel production credit is determined with respect to a facility, the small business refiner obtains certification from the Secretary, after consultation with the Administrator of the Environmental Protection Agency, that the taxpayer's qualified capital costs with respect to such facility will result in compliance with the applicable EPA regulations.

 

"(2) CONTENTS OF APPLICATION. --An application for certification shall include relevant information regarding unit capacities and operating characteristics sufficient for the Secretary, after consultation with the Administrator of the Environmental Protection Agency, to determine that such qualified capital costs are necessary for compliance with the applicable EPA regulations.

 

"(3) REVIEW PERIOD. --Any application shall be reviewed and notice of certification, if applicable, shall be made within 60 days of receipt of such application. In the event the Secretary does not notify the taxpayer of the results of such certification within such period, the taxpayer may presume the certification to be issued until so notified.

 

"(4) STATUTE OF LIMITATIONS. --With respect to the credit allowed under this section --

 

"(A) the statutory period for the assessment of any deficiency attributable to such credit shall not expire before the end of the 3-year period ending on the date that the review period described in paragraph (3) ends with respect to the taxpayer, and

 

"(B) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.


"(g) COOPERATIVE ORGANIZATIONS. --

"(1) APPORTIONMENT OF CREDIT. --

 

"(A) IN GENERAL. --In the case of a cooperative organization described in section 1381(a), any portion of the credit determined under subsection (a) for the taxable year may, at the election of the organization, be apportioned among patrons eligible to share in patronage dividends on the basis of the quantity or value of business done with or for such patrons for the taxable year.

 

"(B) FORM AND EFFECT OF ELECTION. --An election under subparagraph (A) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year.

 

"(2) TREATMENT OF ORGANIZATIONS AND PATRONS. --

 

"(A) ORGANIZATIONS. --The amount of the credit not apportioned to patrons pursuant to paragraph (1) shall be included in the amount determined under subsection (a) for the taxable year of the organization.

 

"(B) PATRONS. --The amount of the credit apportioned to patrons pursuant to paragraph (1) shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.

 

"(3) SPECIAL RULE. --If the amount of a credit which has been apportioned to any patron under this subsection is decreased for any reason --

 

"(A) such amount shall not increase the tax imposed on such patron, and

 

"(B) the tax imposed by this chapter on such organization shall be increased by such amount.

 

The increase under subparagraph (B) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.".


(b) CREDIT MADE PART OF GENERAL BUSINESS CREDIT. --Subsection (b) of section 38 (relating to general business credit), as amended by this Act, is amended by striking "plus" at the end of paragraph (16), by striking the period at the end of paragraph (17) and inserting ", plus", and by inserting after paragraph (17) the following new paragraph:

"(18) the low sulfur diesel fuel production credit determined under section 45H(a).".


(c) DENIAL OF DOUBLE BENEFIT. --Section 280C (relating to certain expenses for which credits are allowable) is amended by adding at the end the following new subsection:

"(d) LOW SULFUR DIESEL FUEL PRODUCTION CREDIT. --No deduction shall be allowed for that portion of the expenses otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for the taxable year under section 45H(a).".

(d) BASIS ADJUSTMENT. --Section 1016(a) (relating to adjustments to basis), as amended by this Act, is amended by striking "and" at the end of paragraph (29), by striking the period at the end of paragraph (30) and inserting ", and", and by inserting after paragraph (30) the following new paragraph:

"(31) in the case of a facility with respect to which a credit was allowed under section 45H, to the extent provided in section 45H(d).".


(e) DEDUCTION FOR CERTAIN UNUSED BUSINESS CREDITS. --Section 196(c) (defining qualified business credits), as amended by this Act, is amended by striking "and" at the end of paragraph (10), by striking the period at the end of paragraph (11) and inserting ", and", and by adding after paragraph (11) the following new paragraph:

"(12) the low sulfur diesel fuel production credit determined under section 45H(a).".


(e) CLERICAL AMENDMENT. --The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by this Act, is amended by inserting after the item relating to section 45G the following new item:

"Sec. 45H. Credit for production of low sulfur diesel fuel.".


(f) EFFECTIVE DATE. --The amendments made by this section shall apply to expenses paid or incurred after December 31, 2002 , in taxable years ending after such date.



SEC . 340. EXPANSION OF QUALIFIED SMALL-ISSUE BOND PROGRAM.

(a) IN GENERAL. --Section 144(a)(4) (relating to $10,000,000 limit in certain cases) is amended by adding at the end the following new subparagraph:

"(G) ADDITIONAL CAPITAL EXPENDITURES NOT TAKEN INTO ACCOUNT. --With respect to bonds issued after September 30, 2009 , in addition to any capital expenditure described in subparagraph (C), capital expenditures of not to exceed $10,000,000 shall not be taken into account for purposes of applying subparagraph (A)(ii).".


(b) CONFORMING AMENDMENT. --Subparagraph (F) of section 144(a)(4) is amended by adding at the end the following new sentence: "This subparagraph shall not apply to bonds issued after September 30, 2009 .".



SEC . 341. OIL AND GAS FROM MARGINAL WELLS.

(a) IN GENERAL. --Subpart D of part IV of subchapter A of chapter 1 (relating to business credits), as amended by this Act, is amended by inserting after section 45H the following:



" SEC . 45I. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL WELLS.

"(a) GENERAL RULE. --For purposes of section 38, the marginal well production credit for any taxable year is an amount equal to the product of --

"(1) the credit amount, and

 

"(2) the qualified credit oil production and the qualified natural gas production which is attributable to the taxpayer.


"(b) CREDIT AMOUNT. --For purposes of this section --

"(1) IN GENERAL. --The credit amount is --

 

"(A) $3 per barrel of qualified crude oil production, and

 

"(B) 50 cents per 1,000 cubic feet of qualified natural gas production.

 

"(2) REDUCTION AS OIL AND GAS PRICES INCREASE. --

 

"(A) IN GENERAL. --The $3 and 50 cents amounts under paragraph (1) shall each be reduced (but not below zero) by an amount which bears the same ratio to such amount (determined without regard to this paragraph) as --

 

"(i) the excess (if any) of the applicable reference price over $15 ($1.67 for qualified natural gas production), bears to

 

"(ii) $3 ($0.33 for qualified natural gas production).

 

The applicable reference price for a taxable year is the reference price of the calendar year preceding the calendar year in which the taxable year begins.

 

"(B) INFLATION ADJUSTMENT. --In the case of any taxable year beginning in a calendar year after 2005, each of the dollar amounts contained in subparagraph (A) shall be increased to an amount equal to such dollar amount multiplied by the inflation adjustment factor for such calendar year (determined under section 43(b)(3)(B) by substituting '2004' for '1990').

 

"(C) REFERENCE PRICE. --For purposes of this paragraph, the term 'reference price' means, with respect to any calendar year --

 

"(i) in the case of qualified crude oil production, the reference price determined under section 29(d)(2)(C), and

 

"(ii) in the case of qualified natural gas production, the Secretary's estimate of the annual average wellhead price per 1,000 cubic feet for all domestic natural gas.


"(c) QUALIFIED CRUDE OIL AND NATURAL GAS PRODUCTION. --For purposes of this section --

"(1) IN GENERAL. --The terms 'qualified crude oil production' and 'qualified natural gas production' mean domestic crude oil or natural gas which is produced from a qualified marginal well.

 

"(2) LIMITATION ON AMOUNT OF PRODUCTION WHICH MAY QUALIFY. --

 

"(A) IN GENERAL. --Crude oil or natural gas produced during any taxable year from any well shall not be treated as qualified crude oil production or qualified natural gas production to the extent production from the well during the taxable year exceeds 1,095 barrels or barrel-of-oil equivalents (as defined in section 29(d)(5)).

 

"(B) PROPORTIONATE REDUCTIONS. --

 

"(i) SHORT TAXABLE YEARS. --In the case of a short taxable year, the limitations under this paragraph shall be proportionately reduced to reflect the ratio which the number of days in such taxable year bears to 365.

 

"(ii) WELLS NOT IN PRODUCTION ENTIRE YEAR. --In the case of a well which is not capable of production during each day of a taxable year, the limitations under this paragraph applicable to the well shall be proportionately reduced to reflect the ratio which the number of days of production bears to the total number of days in the taxable year.

 

"(3) DEFINITIONS. --

 

"(A) QUALIFIED MARGINAL WELL . --The term 'qualified marginal well' means a domestic well --

 

"(i) the production from which during the taxable year is treated as marginal production under section 613A(c)(6), or

 

"(ii) which, during the taxable year --

 

"(I) has average daily production of not more than 25 barrel-of-oil equivalents (as so defined), and

 

"(II) produces water at a rate not less than 95 percent of total well effluent.

 

"(B) CRUDE OIL , ETC . --The terms 'crude oil', 'natural gas', 'domestic', and 'barrel' have the meanings given such terms by section 613A(e).


"(d) OTHER RULES. --

"(1) PRODUCTION ATTRIBUTABLE TO THE TAXPAYER. --In the case of a qualified marginal well in which there is more than one owner of operating interests in the well and the crude oil or natural gas production exceeds the limitation under subsection (c)(2), qualifying crude oil production or qualifying natural gas production attributable to the taxpayer shall be determined on the basis of the ratio which taxpayer's revenue interest in the production bears to the aggregate of the revenue interests of all operating interest owners in the production.

 

"(2) OPERATING INTEREST REQUIRED. --Any credit under this section may be claimed only on production which is attributable to the holder of an operating interest.

 

"(3) PRODUCTION FROM NONCONVENTIONAL SOURCES EXCLUDED. --In the case of production from a qualified marginal well which is eligible for the credit allowed under section 29 for the taxable year, no credit shall be allowable under this section unless the taxpayer elects not to claim the credit under section 29 with respect to the well.".


(b) CREDIT TREATED AS BUSINESS CREDIT. --Section 38(b), as amended by this Act, is amended by striking "plus" at the end of paragraph (17), by striking the period at the end of paragraph (18) and inserting ", plus", and by inserting after paragraph (18) the following:

"(19) the marginal oil and gas well production credit determined under section 45I(a).".


(c) CARRYBACK. --Subsection (a) of section 39 (relating to carryback and carryforward of unused credits generally) is amended by adding at the end the following:

"(3) 5-YEAR CARRYBACK FOR MARGINAL OIL AND GAS WELL PRODUCTION CREDIT. --Notwithstanding subsection (d), in the case of the marginal oil and gas well production credit --

 

"(A) this section shall be applied separately from the business credit (other than the marginal oil and gas well production credit),

 

"(B) paragraph (1) shall be applied by substituting '5 taxable years' for '1 taxable years' in subparagraph (A) thereof, and

 

"(C) paragraph (2) shall be applied --

 

"(i) by substituting '25 taxable years' for '21 taxable years' in subparagraph (A) thereof, and

 

"(ii) by substituting '24 taxable years' for '20 taxable years' in subparagraph (B) thereof.".


(d) CLERICAL AMENDMENT. --The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by this Act, is amended by inserting after section 45H the following:


PL, P.L. 108-357, American Jobs Creation Act of 2004, Enrolled, , (October 21, 2004), Part 02 of 04

This document is divided into multiple parts. To reach other parts, please use READ. You have reached Part 02

"Sec. 45I. Credit for producing oil and gas from marginal wells.".


(e) EFFECTIVE DATE. --The amendments made by this section shall apply to production in taxable years beginning after December 31, 2004 .



TITLE IV --TAX REFORM AND SIMPLIFICATION FOR UNITED STATES BUSINESSES



SEC . 401. INTEREST EXPENSE ALLOCATION RULES.

(a) ELECTION TO ALLOCATE ON WORLDWIDE BASIS. --Section 864 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

"(f) ELECTION TO ALLOCATE INTEREST, ETC . ON WORLDWIDE BASIS. --For purposes of this subchapter, at the election of the worldwide affiliated group --

"(1) ALLOCATION AND APPORTIONMENT OF INTEREST EXPENSE. --

 

"(A) IN GENERAL. --The taxable income of each domestic corporation which is a member of a worldwide affiliated group shall be determined by allocating and apportioning interest expense of each member as if all members of such group were a single corporation.

 

"(B) TREATMENT OF WORLDWIDE AFFILIATED GROUP. --The taxable income of the domestic members of a worldwide affiliated group from sources outside the United States shall be determined by allocating and apportioning the interest expense of such domestic members to such income in an amount equal to the excess (if any) of --

 

"(i) the total interest expense of the worldwide affiliated group multiplied by the ratio which the foreign assets of the worldwide affiliated group bears to all the assets of the worldwide affiliated group, over

 

"(ii) the interest expense of all foreign corporations which are members of the worldwide affiliated group to the extent such interest expense of such foreign corporations would have been allocated and apportioned to foreign source income if this subsection were applied to a group consisting of all the foreign corporations in such worldwide affiliated group.

 

"(C) WORLDWIDE AFFILIATED GROUP. --For purposes of this paragraph, the term 'worldwide affiliated group' means a group consisting of --

 

"(i) the includible members of an affiliated group (as defined in section 1504(a), determined without regard to paragraphs (2) and (4) of section 1504(b)), and

 

"(ii) all controlled foreign corporations in which such members in the aggregate meet the ownership requirements of section 1504(a)(2) either directly or indirectly through applying paragraph (2) of section 958(a) or through applying rules similar to the rules of such paragraph to stock owned directly or indirectly by domestic partnerships, trusts, or estates.

 

"(2) ALLOCATION AND APPORTIONMENT OF OTHER EXPENSES. --Expenses other than interest which are not directly allocable or apportioned to any specific income producing activity shall be allocated and apportioned as if all members of the affiliated group were a single corporation. For purposes of the preceding sentence, the term 'affiliated group' has the meaning given such term by section 1504 (determined without regard to paragraph (4) of section 1504(b)).

 

"(3) TREATMENT OF TAX-EXEMPT ASSETS; BASIS OF STOCK IN NONAFFILIATED 10-PERCENT OWNED CORPORATIONS. --The rules of paragraphs (3) and (4) of subsection (e) shall apply for purposes of this subsection, except that paragraph (4) shall be applied on a worldwide affiliated group basis.

 

"(4) TREATMENT OF CERTAIN FINANCIAL INSTITUTIONS. --

 

"(A) IN GENERAL. --For purposes of paragraph (1), any corporation described in subparagraph (B) shall be treated as an includible corporation for purposes of section 1504 only for purposes of applying this subsection separately to corporations so described.

 

"(B) DESCRIPTION. --A corporation is described in this subparagraph if --

 

"(i) such corporation is a financial institution described in section 581 or 591,

 

"(ii) the business of such financial institution is predominantly with persons other than related persons (within the meaning of subsection (d)(4)) or their customers, and

 

"(iii) such financial institution is required by State or Federal law to be operated separately from any other entity which is not such an institution.

 

"(C) TREATMENT OF BANK AND FINANCIAL HOLDING COMPANIES. --To the extent provided in regulations --

 

"(i) a bank holding company (within the meaning of section 2(a) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)),

 

"(ii) a financial holding company (within the meaning of section 2(p) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(p)), and

 

"(iii) any subsidiary of a financial institution described in section 581 or 591, or of any such bank or financial holding company, if such subsidiary is predominantly engaged (directly or indirectly) in the active conduct of a banking, financing, or similar business,

 

shall be treated as a corporation described in subparagraph (B).

 

"(5) ELECTION TO EXPAND FINANCIAL INSTITUTION GROUP OF WORLDWIDE GROUP. --

 

"(A) IN GENERAL. --If a worldwide affiliated group elects the application of this subsection, all financial corporations which --

 

"(i) are members of such worldwide affiliated group, but

 

"(ii) are not corporations described in paragraph (4)(B),

 

shall be treated as described in paragraph (4)(B) for purposes of applying paragraph (4)(A). This subsection (other than this paragraph) shall apply to any such group in the same manner as this subsection (other than this paragraph) applies to the pre-election worldwide affiliated group of which such group is a part.

 

"(B) FINANCIAL CORPORATION. --For purposes of this paragraph, the term 'financial corporation' means any corporation if at least 80 percent of its gross income is income described in section 904(d)(2)(D)(ii) and the regulations thereunder which is derived from transactions with persons who are not related (within the meaning of section 267(b) or 707(b)(1)) to the corporation. For purposes of the preceding sentence, there shall be disregarded any item of income or gain from a transaction or series of transactions a principal purpose of which is the qualification of any corporation as a financial corporation.

 

"(C) ANTI-ABUSE RULES. --In the case of a corporation which is a member of an electing financial institution group, to the extent that such corporation --

 

"(i) distributes dividends or makes other distributions with respect to its stock after the date of the enactment of this paragraph to any member of the pre-election worldwide affiliated group (other than to a member of the electing financial institution group) in excess of the greater of --

 

"(I) its average annual dividend (expressed as a percentage of current earnings and profits) during the 5-taxable-year period ending with the taxable year preceding the taxable year, or

 

"(II) 25 percent of its average annual earnings and profits for such 5-taxable-year period, or

 

"(ii) deals with any person in any manner not clearly reflecting the income of the corporation (as determined under principles similar to the principles of section 482),

 

an amount of indebtedness of the electing financial institution group equal to the excess distribution or the understatement or overstatement of income, as the case may be, shall be recharacterized (for the taxable year and subsequent taxable years) for purposes of this paragraph as indebtedness of the worldwide affiliated group (excluding the electing financial institution group). If a corporation has not been in existence for 5 taxable years, this subparagraph shall be applied with respect to the period it was in existence.

 

"(D) ELECTION. --An election under this paragraph with respect to any financial institution group may be made only by the common parent of the pre-election worldwide affiliated group and may be made only for the first taxable year beginning after December 31, 2008 , in which such affiliated group includes 1 or more financial corporations. Such an election, once made, shall apply to all financial corporations which are members of the electing financial institution group for such taxable year and all subsequent years unless revoked with the consent of the Secretary.

 

"(E) DEFINITIONS RELATING TO GROUPS. --For purposes of this paragraph --

 

"(i) PRE -ELECTION WORLDWIDE AFFILIATED GROUP. --The term 'pre-election worldwide affiliated group' means, with respect to a corporation, the worldwide affiliated group of which such corporation would (but for an election under this paragraph) be a member for purposes of applying paragraph (1).

 

"(ii) ELECTING FINANCIAL INSTITUTION GROUP. --The term 'electing financial institution group' means the group of corporations to which this subsection applies separately by reason of the application of paragraph (4)(A) and which includes financial