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

House Ways and Means Committee Summary of the Conference Report on HR 4520, the American Jobs Creation Act of 2004

October 12, 2004

108th Congress

Committee on Ways and Means

Conference Report on H.R. 4520,

The American Jobs Creation Act of 2004

Ends Sanctions and Provides Tax Benefits for Manufacturing

 Repeals FSC-ETI. Provides more than $8 billion of transition relief over three years (2004-2006).

 Provides a 9 percent tax deduction (equivalent to a 3 percent rate cut) on all domestic manufacturing activity. The deduction is available to C corporations, S corporations, partnerships, sole proprietorships, cooperatives, and estates and trusts. Includes an AMT hold harmless.



Tax Incentives for Businesses and Job Creators

 Extends enhanced section 179 expensing so that small businesses can immediately expense up to $100,000 of new investments through 2007.

 Reduces the depreciation period for restaurants and leasehold improvements from 39 years to 15 years.

 Provides 10 provisions to simplify the tax treatment of S corporations and to make it easier for businesses to qualify as S corporations.

 Enhances community revitalization incentives in economically distressed regions by enhancing eligibility criteria for Renewal Communities and the New Markets Tax Credit.

 Includes numerous other tax relief provisions, such as repeal of the 4.3-cent fuel excise tax, temporary suspension of the special occupational tax on small businesses, an elective tonnage tax system for international shipping income, and a 50 percent tax credit for railroad track maintenance.



Tax Relief for Farmers and Small Manufacturers

 Extends ethanol subsidies through 2010 and fully compensates the Highway Trust Fund for the cost of these subsidies. Creates new biodiesel tax subsidies through 2006.

 Ensures that farmers and fishermen are not hit by the Alternative Minimum Tax ( AMT ) when they use income averaging to smooth out fluctuations in their annual incomes.

 Provides several tax relief provisions for timber including: (1) capital gains treatment for outright sales of timber, (2) safe harbor rules for timber REITs, (3) expensing of reforestation costs, and (4) an election to treat timber as a sale or exchange.

 Increases the number of small manufacturers eligible for Industrial Development Bond financing by increasing the capital expenditure limit from $10 million to $20 million.

 Reduces or repeals excise taxes that create a competitive disadvantage for small manufacturers.

 Extends 50-percent bonus depreciation for small aircraft by one year.

 Provides tax incentives for small business refiners to help them comply with the Environmental Protection Agency's sulfur regulations.



Tax Reform and Simplification for U.S. Businesses

 Includes several provisions to reduce double taxation of U.S.-based companies, such as reducing the foreign tax credit (FTC) baskets from nine to two and allowing FTCs to be carried forward for 10 years instead of five.

 Repeals the 90-percent limitation on the use of FTCs against the alternative minimum tax.

 Encourages companies to reinvest foreign earnings in the United States by temporarily taxing repatriated income at 5.25 percent.



Other Provisions

 Allows taxpayers to deduct state and local sales taxes instead of state income taxes for 2004 and 2005. Taxpayers may deduct their actual sales taxes or used IRS -published tables.

 Repeals the government-run tobacco quota program. Tobacco farmers and quota holders receive transitional assistance payments over 10 years financed with assessments on tobacco companies. Program cost is capped at $10.14 billion.

 Expands the section 45 electricity production credit and allows it against the AMT .

 Two-year suspension of section 815.

 Two-year suspension of duties on ceiling fans, steam generators, and reactor vessel heads and pressures (i.e., products with absolutely no U.S. production).



The Conference Report is revenue neutral.

 Costs are offset by:

1. Reducing tax avoidance through corporate inversions and individual expatriation,

2. Shutting down abusive tax shelters,

3. Closing corporate tax loopholes,

4. Combating fuel tax evasion,

5. Clarifying the tax treatment of executive deferred compensation plans,

6. Extending IRS user fees, and

7. Extending customs user fees.

PL, P.L. 108-357, American Jobs Creation Act of 2004, Enrolled, , (October 21, 2004), Part 01 of 04, October 21, 2004 , 108th CongressH. R. 4520

One Hundred Eighth Congress of the United States of America

AT THE SECOND SESSION

Begun and held at the City of Washington on Tuesday, the twentieth day of January, two thousand and four

An Act

To amend the Internal Revenue Code of 1986 to remove impediments in such Code and make our manufacturing, service, and high-technology businesses and workers more competitive and productive both at home and abroad.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,



SECTION 1. SHORT TITLE; ETC .

(a) SHORT TITLE. --This Act may be cited as the "American Jobs Creation Act of 2004".

(b) AMENDMENT OF 1986 CODE. --Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

(c) TABLE OF CONTENTS. --The table of contents of this Act is as follows:

Sec. 1. Short title; etc.                                                          

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

Sec.    Repeal of exclusion for extraterritorial income.                           

101.                                                                               

Sec.    Deduction relating to income attributable to domestic production           

102.    activities.                                                                

                         TITLE II --BUSINESS TAX INCENTIVES                        

                       Subtitle A --Small Business Expensing                       

Sec.    2-year extension of increased expensing for small business.                

201.                                                                               

                             Subtitle B --Depreciation                             

Sec.    Recovery period for depreciation of certain leasehold improvements and     

211.    restaurant property.                                                       

                       Subtitle C --Community Revitalization                       

Sec.    Modification of targeted areas and low-income communities for new markets  

221.    tax credit.                                                                

Sec.    Expansion of designated renewal community area based on 2000 census data.  

222.                                                                               

Sec.    Modification of income requirement for census tracts within high migration 

223.    rural counties.                                                            

                Subtitle D --S Corporation Reform and Simplification               

Sec.    Members of family treated as 1 shareholder.                                

231.                                                                               

Sec.    Increase in number of eligible shareholders to 100.                        

232.                                                                               

Sec.    Expansion of bank S corporation eligible shareholders to include IRAs.     

233.                                                                               

Sec.    Disregard of unexercised powers of appointment in determining potential    

234.    current beneficiaries of ESBT.                                             

Sec.    Transfer of suspended losses incident to divorce, etc.                     

235.                                                                               

Sec.    Use of passive activity loss and at-risk amounts by qualified subchapter S 

236.    trust income beneficiaries.                                                

Sec.    Exclusion of investment securities income from passive income test for bank

237.    S corporations.                                                            

Sec.    Relief from inadvertently invalid qualified subchapter S subsidiary        

238.    elections and terminations.                                                

Sec.    Information returns for qualified subchapter S subsidiaries.               

239.                                                                               

Sec.    Repayment of loans for qualifying employer securities.                     

240.                                                                               

                       Subtitle E --Other Business Incentives                      

Sec.    Phaseout of 4.3-cent motor fuel excise taxes on railroads and inland       

241.    waterway transportation which remain in general fund.                      

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

242.                                                                               

Sec.    Improvements related to real estate investment trusts.                     

243.                                                                               

Sec.    Special rules for certain film and television productions.                 

244.                                                                               

Sec.    Credit for maintenance of railroad track.                                  

245.                                                                               

Sec.    Suspension of occupational taxes relating to distilled spirits, wine, and  

246.    beer.                                                                      

Sec.    Modification of unrelated business income limitation on investment in      

247.    certain small business investment companies.                               

Sec.    Election to determine corporate tax on certain international shipping      

248.    activities using per ton rate.                                             

     Subtitle F --Stock Options and Employee Stock Purchase Plan Stock Options     

Sec.    Exclusion of incentive stock options and employee stock purchase plan stock

251.    options from wages.                                                        

           TITLE 
III
 --TAX RELIEF FOR AGRICULTURE 
AND
 SMALL MANUFACTURERS          

                 Subtitle A --Volumetric Ethanol Excise Tax Credit                 

Sec.    Alcohol and biodiesel excise tax credit and extension of alcohol fuels     

301.    income tax credit.                                                         

Sec.    Biodiesel income tax credit.                                               

302.                                                                               

Sec.    Information reporting for persons claiming certain tax benefits.           

303.                                                                               

                        Subtitle B --Agricultural Incentives                       

Sec.    Special rules for livestock sold on account of weather-related conditions. 

311.                                                                               

Sec.    Payment of dividends on stock of cooperatives without reducing patronage   

312.    dividends.                                                                 

Sec.    Apportionment of small ethanol producer credit.                            

313.                                                                               

Sec.    Coordinate farmers and fishermen income averaging and the alternative      

314.    minimum tax.                                                               

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

315.    landowners.                                                                

Sec.    Modification to cooperative marketing rules to include value added         

316.    processing involving animals.                                              

Sec.    Extension of declaratory judgment procedures to farmers' cooperative       

317.    organizations.                                                             

Sec.    Certain expenses of rural letter carriers.                                 

318.                                                                               

Sec.    Treatment of certain income of cooperatives.                               

319.                                                                               

Sec.    Exclusion for payments to individuals under National Health Service Corps  

320.    loan repayment program and certain State loan repayment programs.          

Sec.    Modification of safe harbor rules for timber REITs.                        

321.                                                                               

Sec.    Expensing of certain reforestation expenditures.                           

322.                                                                               

                  Subtitle C --Incentives for Small Manufacturers                  

Sec.    Net income from publicly traded partnerships treated as qualifying income  

331.    of regulated investment companies.                                         

Sec.    Simplification of excise tax imposed on bows and arrows.                   

332.                                                                               

Sec.    Reduction of excise tax on fishing tackle boxes.                           

333.                                                                               

Sec.    Sonar devices suitable for finding fish.                                   

334.                                                                               

Sec.    Charitable contribution deduction for certain expenses incurred in support 

335.    of Native Alaskan subsistence whaling.                                     

Sec.    Modification of depreciation allowance for aircraft.                       

336.                                                                               

Sec.    Modification of placed in service rule for bonus depreciation property.    

337.                                                                               

Sec.    Expensing of capital costs incurred in complying with Environmental        

338.    Protection Agency sulfur regulations.                                      

Sec.    Credit for production of low sulfur diesel fuel.                           

339.                                                                               

Sec.    Expansion of qualified small-issue bond program.                           

340.                                                                               

Sec.    Oil and gas from marginal wells.