[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4351 Engrossed in House (EH)]
110th CONGRESS
1st Session
H. R. 4351
_______________________________________________________________________
AN ACT
To amend the Internal Revenue Code of 1986 to provide individuals
temporary relief from the alternative minimum tax, 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, ETC.
(a) Short Title.--This Act may be cited as the ``AMT Relief Act of
2007''.
(b) Reference.--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 for this Act is as
follows:
Sec. 1. Short title, etc.
TITLE I--INDIVIDUAL TAX RELIEF
Sec. 101. Extension of alternative minimum tax relief for nonrefundable
personal credits.
Sec. 102. Extension of increased alternative minimum tax exemption
amount.
Sec. 103. Increase of AMT refundable credit amount for individuals with
long-term unused credits for prior year
minimum tax liability, etc.
Sec. 104. Refundable child credit.
TITLE II--REVENUE PROVISIONS
Subtitle A--Nonqualified Deferred Compensation From Certain Tax
Indifferent Parties
Sec. 201. Nonqualified deferred compensation from certain tax
indifferent parties.
Subtitle B--Codification of Economic Substance Doctrine
Sec. 211. Codification of economic substance doctrine.
Sec. 212. Penalties for underpayments.
Subtitle C--Other Provisions
Sec. 221. Delay in application of worldwide allocation of interest.
Sec. 222. Modification of penalty for failure to file partnership
returns.
Sec. 223. Penalty for failure to file S corporation returns.
Sec. 224. Increase in minimum penalty on failure to file a return of
tax.
Sec. 225. Time for payment of corporate estimated taxes.
TITLE I--INDIVIDUAL TAX RELIEF
SEC. 101. EXTENSION OF ALTERNATIVE MINIMUM TAX RELIEF FOR NONREFUNDABLE
PERSONAL CREDITS.
(a) In General.--Paragraph (2) of section 26(a) (relating to
special rule for taxable years 2000 through 2006) is amended--
(1) by striking ``or 2006'' and inserting ``2006, or
2007'', and
(2) by striking ``2006'' in the heading thereof and
inserting ``2007''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.
SEC. 102. EXTENSION OF INCREASED ALTERNATIVE MINIMUM TAX EXEMPTION
AMOUNT.
(a) In General.--Paragraph (1) of section 55(d) (relating to
exemption amount) is amended--
(1) by striking ``($62,550 in the case of taxable years
beginning in 2006)'' in subparagraph (A) and inserting
``($66,250 in the case of taxable years beginning in 2007)'',
and
(2) by striking ``($42,500 in the case of taxable years
beginning in 2006)'' in subparagraph (B) and inserting
``($44,350 in the case of taxable years beginning in 2007)''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.
SEC. 103. INCREASE OF AMT REFUNDABLE CREDIT AMOUNT FOR INDIVIDUALS WITH
LONG-TERM UNUSED CREDITS FOR PRIOR YEAR MINIMUM TAX
LIABILITY, ETC.
(a) In General.--Paragraph (2) of section 53(e) is amended to read
as follows:
``(2) AMT refundable credit amount.--For purposes of
paragraph (1), the term `AMT refundable credit amount' means,
with respect to any taxable year, the amount (not in excess of
the long-term unused minimum tax credit for such taxable year)
equal to the greater of--
``(A) 50 percent of the long-term unused minimum
tax credit for such taxable year, or
``(B) the amount (if any) of the AMT refundable
credit amount determined under this paragraph for the
taxpayer's preceding taxable year.''.
(b) Treatment of Certain Underpayments, Interest, and Penalties
Attributable to the Treatment of Incentive Stock Options.--Section 53
is amended by adding at the end the following new subsection:
``(f) Treatment of Certain Underpayments, Interest, and Penalties
Attributable to the Treatment of Incentive Stock Options.--
``(1) Abatement.--Any underpayment of tax outstanding on
the date of the enactment of this subsection which is
attributable to the application of section 56(b)(3) for any
taxable year ending before January 1, 2007 (and any interest or
penalty with respect to such underpayment which is outstanding
on such date of enactment), is hereby abated. No credit shall
be allowed under this section with respect to any amount abated
under this paragraph.
``(2) Increase in credit for certain interest and penalties
already paid.--Any interest or penalty paid before the date of
the enactment of this subsection which would (but for such
payment) have been abated under paragraph (1) shall be treated
for purposes of this section as an amount of adjusted net
minimum tax imposed for the taxable year of the underpayment to
which such interest or penalty relates.''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2006.
(2) Abatement.--Section 53(f)(1) of the Internal Revenue
Code of 1986, as added by subsection (b), shall take effect on
the date of the enactment of this Act.
SEC. 104. REFUNDABLE CHILD CREDIT.
(a) Modification of Threshold Amount.--Clause (i) of section
24(d)(1)(B) is amended by inserting ``($8,500 in the case of taxable
years beginning in 2008)'' after ``$10,000''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2007.
TITLE II--REVENUE PROVISIONS
Subtitle A--Nonqualified Deferred Compensation From Certain Tax
Indifferent Parties
SEC. 201. NONQUALIFIED DEFERRED COMPENSATION FROM CERTAIN TAX
INDIFFERENT PARTIES.
(a) In General.--Subpart B of part II of subchapter E of chapter 1
(relating to taxable year for which items of gross income included) is
amended by inserting after section 457 the following new section:
``SEC. 457A. NONQUALIFIED DEFERRED COMPENSATION FROM CERTAIN TAX
INDIFFERENT PARTIES.
``(a) In General.--Any compensation which is deferred under a
nonqualified deferred compensation plan of a nonqualified entity shall
be taken into account for purposes of this chapter when there is no
substantial risk of forfeiture of the rights to such compensation.
``(b) Nonqualified Entity.--For purposes of this section, the term
`nonqualified entity' means--
``(1) any foreign corporation unless substantially all of
its income is--
``(A) effectively connected with the conduct of a
trade or business in the United States, or
``(B) subject to a comprehensive foreign income
tax, and
``(2) any partnership unless substantially all of its
income is allocated to persons other than--
``(A) foreign persons with respect to whom such
income is not subject to a comprehensive foreign income
tax, and
``(B) organizations which are exempt from tax under
this title.
``(c) Ascertainability of Amounts of Compensation.--
``(1) In general.--If the amount of any compensation is not
ascertainable at the time that such compensation is otherwise
to be taken into account under subsection (a)--
``(A) such amount shall be so taken into account
when ascertainable, and
``(B) the tax imposed under this chapter for the
taxable year in which such compensation is taken into
account under subparagraph (A) shall be increased by
the sum of--
``(i) the amount of interest determined
under paragraph (2), and
``(ii) an amount equal to 20 percent of the
amount of such compensation.
``(2) Interest.--For purposes of paragraph (1)(B)(i), the
interest determined under this paragraph for any taxable year
is the amount of interest at the underpayment rate under
section 6621 plus 1 percentage point on the underpayments that
would have occurred had the deferred compensation been
includible in gross income for the taxable year in which first
deferred or, if later, the first taxable year in which such
deferred compensation is not subject to a substantial risk of
forfeiture.
``(d) Other Definitions and Special Rules.--For purposes of this
section--
``(1) Substantial risk of forfeiture.--
``(A) In general.--The rights of a person to
compensation shall be treated as subject to a
substantial risk of forfeiture only if such person's
rights to such compensation are conditioned upon the
future performance of substantial services by any
individual.
``(B) Exception for compensation based on gain
recognized on an investment asset.--
``(i) In general.--To the extent provided
in regulations prescribed by the Secretary, if
compensation is determined solely by reference
to the amount of gain recognized on the
disposition of an investment asset, such
compensation shall be treated as subject to a
substantial risk of forfeiture until the date
of such disposition.
``(ii) Investment asset.--For purposes of
clause (i), the term `investment asset' means
any single asset (other than an investment fund
or similar entity)--
``(I) acquired directly by an
investment fund or similar entity,
``(II) with respect to which such
entity does not (nor does any person
related to such entity) participate in
the active management of such asset (or
if such asset is an interest in an
entity, in the active management of the
activities of such entity), and
``(III) substantially all of any
gain on the disposition of which (other
than such deferred compensation) is
allocated to investors in such entity.
``(iii) Coordination with special rule for
short-term deferrals of compensation.--
Paragraph (3)(B) shall not apply to any
compensation to which clause (i) applies.
``(2) Comprehensive foreign income tax.--The term
`comprehensive foreign income tax' means, with respect to any
foreign person, the income tax of a foreign country if--
``(A) such person is eligible for the benefits of a
comprehensive income tax treaty between such foreign
country and the United States, or
``(B) such person demonstrates to the satisfaction
of the Secretary that such foreign country has a
comprehensive income tax.
Such term shall not include any tax unless such tax includes
rules for the deductibility of deferred compensation which are
similar to the rules of this title.
``(3) Nonqualified deferred compensation plan.--
``(A) In general.--The term `nonqualified deferred
compensation plan' has the meaning given such term
under section 409A(d), except that such term shall
include any plan that provides a right to compensation
based on the appreciation in value of a specified
number of equity units of the service recipient.
``(B) Exception for short-term deferrals.--
Compensation shall not be treated as deferred for
purposes of this section if the service provider
receives payment of such compensation not later than 12
months after the end of the taxable year of the service
recipient during which the right to the payment of such
compensation is no longer subject to a substantial risk
of forfeiture.
``(4) Exception for certain compensation with respect to
effectively connected income.--In the case a foreign
corporation with income which is taxable under section 882,
this section shall not apply to compensation which, had such
compensation had been paid in cash on the date that such
compensation ceased to be subject to a substantial risk of
forfeiture, would have been deductible by such foreign
corporation against such income.
``(5) Application of rules.--Rules similar to the rules of
paragraphs (5) and (6) of section 409A(d) shall apply.
``(e) Regulations.--The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of this
section, including regulations disregarding a substantial risk of
forfeiture in cases where necessary to carry out the purposes of this
section.''.
(b) Conforming Amendment.--Section 26(b)(2) is amended by striking
``and'' at the end of subparagraph (S), by striking the period at the
end of subparagraph (T) and inserting ``, and'', and by adding at the
end the following new subparagraph:
``(U) section 457A(c)(1)(B) (relating to
ascertainability of amounts of compensation).''.
(c) Clerical Amendment.--The table of sections of subpart B of part
II of subchapter E of chapter 1 is amended by inserting after the item
relating to section 457 the following new item:
``Sec. 457A. Nonqualified deferred compensation from certain tax
indifferent parties.''.
(d) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
amounts deferred which are attributable to services performed
after December 31, 2007.
(2) Application to existing deferrals.--In the case of any
amount deferred to which the amendments made by this section do
not apply solely by reason of the fact that the amount is
attributable to services performed before January 1, 2008, to
the extent such amount is not includible in gross income in a
taxable year beginning before 2017, such amounts shall be
includible in gross income in the later of--
(A) the last taxable year beginning before 2017, or
(B) the taxable year in which there is no
substantial risk of forfeiture of the rights to such
compensation (determined in the same manner as
determined for purposes of section 457A of the Internal
Revenue Code of 1986, as added by this section).
(3) Accelerated payments.--No later than 60 days after the
date of the enactment of this Act, the Secretary shall issue
guidance providing a limited period of time during which a
nonqualified deferred compensation arrangement attributable to
services performed on or before December 31, 2007, may, without
violating the requirements of section 409A(a) of the Internal
Revenue Code of 1986, be amended to conform the date of
distribution to the date the amounts are required to be
included in income.
(4) Certain back-to-back arrangements.--If the taxpayer is
also a service recipient and maintains one or more nonqualified
deferred compensation arrangements for its service providers
under which any amount is attributable to services performed on
or before December 31, 2007, the guidance issued under
paragraph (3) shall permit such arrangements to be amended to
conform the dates of distribution under such arrangement to the
date amounts are required to be included in the income of such
taxpayer under this subsection.
(5) Accelerated payment not treated as material
modification.--Any amendment to a nonqualified deferred
compensation arrangement made pursuant to paragraph (3) or (4)
shall not be treated as a material modification of the
arrangement for purposes of section 409A of the Internal
Revenue Code of 1986.
Subtitle B--Codification of Economic Substance Doctrine
SEC. 211. CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.
(a) In General.--Section 7701 is amended by redesignating
subsection (p) as subsection (q) and by inserting after subsection (o)
the following new subsection:
``(p) Clarification of Economic Substance Doctrine.--
``(1) Application of doctrine.--In the case of any
transaction to which the economic substance doctrine is
relevant, such transaction shall be treated as having economic
substance only if--
``(A) the transaction changes in a meaningful way
(apart from Federal income tax effects) the taxpayer's
economic position, and
``(B) the taxpayer has a substantial purpose (apart
from Federal income tax effects) for entering into such
transaction.
``(2) Special rule where taxpayer relies on profit
potential.--
``(A) In general.--The potential for profit of a
transaction shall be taken into account in determining
whether the requirements of subparagraphs (A) and (B)
of paragraph (1) are met with respect to the
transaction only if the present value of the reasonably
expected pre-tax profit from the transaction is
substantial in relation to the present value of the
expected net tax benefits that would be allowed if the
transaction were respected.
``(B) Treatment of fees and foreign taxes.--Fees
and other transaction expenses and foreign taxes shall
be taken into account as expenses in determining pre-
tax profit under subparagraph (A).
``(3) State and local tax benefits.--For purposes of
paragraph (1), any State or local income tax effect which is
related to a Federal income tax effect shall be treated in the
same manner as a Federal income tax effect.
``(4) Financial accounting benefits.--For purposes of
paragraph (1)(B), achieving a financial accounting benefit
shall not be taken into account as a purpose for entering into
a transaction if such transaction results in a Federal income
tax benefit.
``(5) Definitions and special rules.--For purposes of this
subsection--
``(A) Economic substance doctrine.--The term
`economic substance doctrine' means the common law
doctrine under which tax benefits under subtitle A with
respect to a transaction are not allowable if the
transaction does not have economic substance or lacks a
business purpose.
``(B) Exception for personal transactions of
individuals.--In the case of an individual, paragraph
(1) shall apply only to transactions entered into in
connection with a trade or business or an activity
engaged in for the production of income.
``(C) Other common law doctrines not affected.--
Except as specifically provided in this subsection, the
provisions of this subsection shall not be construed as
altering or supplanting any other rule of law, and the
requirements of this subsection shall be construed as
being in addition to any such other rule of law.
``(D) Determination of application of doctrine not
affected.--The determination of whether the economic
substance doctrine is relevant to a transaction shall
be made in the same manner as if this subsection had
never been enacted.
``(6) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this subsection. Such regulations may include
exemptions from the application of this subsection.''.
(b) Effective Date.--The amendments made by this section shall
apply to transactions entered into after the date of the enactment of
this Act.
SEC. 212. PENALTIES FOR UNDERPAYMENTS.
(a) Penalty for Underpayments Attributable to Transactions Lacking
Economic Substance.--
(1) In general.--Subsection (b) of section 6662 is amended
by inserting after paragraph (5) the following new paragraph:
``(6) Any disallowance of claimed tax benefits by reason of
a transaction lacking economic substance (within the meaning of
section 7701(p)) or failing to meet the requirements of any
similar rule of law.''.
(2) Increased penalty for nondisclosed transactions.--
Section 6662 is amended by adding at the end the following new
subsection:
``(i) Increase in Penalty in Case of Nondisclosed Noneconomic
Substance Transactions.--
``(1) In general.--To the extent that a portion of the
underpayment to which this section applies is attributable to
one or more nondisclosed noneconomic substance transactions,
subsection (a) shall be applied with respect to such portion by
substituting `40 percent' for `20 percent'.
``(2) Nondisclosed noneconomic substance transactions.--For
purposes of this subsection, the term `nondisclosed noneconomic
substance transaction' means any portion of a transaction
described in subsection (b)(6) with respect to which the
relevant facts affecting the tax treatment are not adequately
disclosed in the return nor in a statement attached to the
return.
``(3) Special rule for amended returns.--Except as provided
in regulations, in no event shall any amendment or supplement
to a return of tax be taken into account for purposes of this
subsection if the amendment or supplement is filed after the
earlier of the date the taxpayer is first contacted by the
Secretary regarding the examination of the return or such other
date as is specified by the Secretary.''.
(3) Conforming amendment.--Subparagraph (B) of section
6662A(e)(2) is amended--
(A) by striking ``section 6662(h)'' and inserting
``subsection (h) or (i) of section 6662'', and
(B) by striking ``gross valuation misstatement
penalty'' in the heading and inserting ``certain
increased underpayment penalties''.
(b) Reasonable Cause Exception Not Applicable to Noneconomic
Substance Transactions, Tax Shelters, and Certain Large Corporations.--
Subsection (c) of section 6664 is amended--
(1) by redesignating paragraphs (2) and (3) as paragraphs
(3) and (4), respectively,
(2) by striking ``paragraph (2)'' in paragraph (4), as so
redesignated, and inserting ``paragraph (3)'', and
(3) by inserting after paragraph (1) the following new
paragraph:
``(2) Exception for noneconomic substance transactions, tax
shelters, and certain large corporations.--Paragraph (1) shall
not apply--
``(A) to any portion of an underpayment which is
attributable to one or more tax shelters (as defined in
section 6662(d)(2)(C)) or transactions described in
section 6662(b)(6), and
``(B) to any taxpayer if such taxpayer is a
specified large corporation (as defined in section
6662(d)(2)(D)(ii)).''.
(c) Application of Penalty for Erroneous Claim for Refund or Credit
to Noneconomic Substance Transactions.--Section 6676 is amended by
redesignating subsection (c) as subsection (d) and inserting after
subsection (b) the following new subsection:
``(c) Noneconomic Substance Transactions Treated as Lacking
Reasonable Basis.--For purposes of this section, any excessive amount
which is attributable to any transaction described in section
6662(b)(6) shall not be treated as having a reasonable basis.''.
(d) Special Understatement Reduction Rule for Certain Large
Corporations.--
(1) In general.--Paragraph (2) of section 6662(d) is
amended by adding at the end the following new subparagraph:
``(D) Special reduction rule for certain large
corporations.--
``(i) In general.--In the case of any
specified large corporation--
``(I) subparagraph (B) shall not
apply, and
``(II) the amount of the
understatement under subparagraph (A)
shall be reduced by that portion of the
understatement which is attributable to
any item with respect to which the
taxpayer has a reasonable belief that
the tax treatment of such item by the
taxpayer is more likely than not the
proper tax treatment of such item.
``(ii) Specified large corporation.--
``(I) In general.--For purposes of
this subparagraph, the term `specified
large corporation' means any
corporation with gross receipts in
excess of $100,000,000 for the taxable
year involved.
``(II) Aggregation rule.--All
persons treated as a single employer
under section 52(a) shall be treated as
one person for purposes of subclause
(I).''.
(2) Conforming amendment.--Subparagraph (C) of section
6662(d)(2) is amended by striking ``Subparagraph (B)'' and
inserting ``Subparagraphs (B) and (D)(i)(II)''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
Subtitle C--Other Provisions
SEC. 221. DELAY IN APPLICATION OF WORLDWIDE ALLOCATION OF INTEREST.
(a) In General.--Paragraphs (5)(D) and (6) of section 864(f) are
each amended by striking ``December 31, 2008'' and inserting ``December
31, 2017''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2008.
SEC. 222. MODIFICATION OF PENALTY FOR FAILURE TO FILE PARTNERSHIP
RETURNS.
(a) Extension of Time Limitation.--Subsection (a) of section 6698
(relating to general rule) is amended by striking ``5 months'' and
inserting ``12 months''.
(b) Increase in Penalty Amount.--Paragraph (1) of section 6698(b)
is amended by striking ``$50'' and inserting ``$100''.
(c) Effective Date.--The amendments made by this section shall
apply to returns required to be filed after the date of the enactment
of this Act.
SEC. 223. PENALTY FOR FAILURE TO FILE S CORPORATION RETURNS.
(a) In General.--Part I of subchapter B of chapter 68 (relating to
assessable penalties) is amended by adding at the end the following new
section:
``SEC. 6699A. FAILURE TO FILE S CORPORATION RETURN.
``(a) General Rule.--In addition to the penalty imposed by section
7203 (relating to willful failure to file return, supply information,
or pay tax), if any S corporation required to file a return under
section 6037 for any taxable year--
``(1) fails to file such return at the time prescribed
therefor (determined with regard to any extension of time for
filing), or
``(2) files a return which fails to show the information
required under section 6037,
such S corporation shall be liable for a penalty determined under
subsection (b) for each month (or fraction thereof) during which such
failure continues (but not to exceed 12 months), unless it is shown
that such failure is due to reasonable cause.
``(b) Amount Per Month.--For purposes of subsection (a), the amount
determined under this subsection for any month is the product of--
``(1) $100, multiplied by
``(2) the number of persons who were shareholders in the S
corporation during any part of the taxable year.
``(c) Assessment of Penalty.--The penalty imposed by subsection (a)
shall be assessed against the S corporation.
``(d) Deficiency Procedures Not To Apply.--Subchapter B of chapter
63 (relating to deficiency procedures for income, estate, gift, and
certain excise taxes) shall not apply in respect of the assessment or
collection of any penalty imposed by subsection (a).''.
(b) Clerical Amendment.--The table of sections for part I of
subchapter B of chapter 68 is amended by adding at the end the
following new item:
``Sec. 6699A. Failure to file S corporation return.''.
(c) Effective Date.--The amendments made by this section shall
apply to returns required to be filed after the date of the enactment
of this Act.
SEC. 224. INCREASE IN MINIMUM PENALTY ON FAILURE TO FILE A RETURN OF
TAX.
(a) In General.--Subsection (a) of section 6651 is amended by
striking ``$100'' in the last sentence and inserting ``$150''.
(b) Effective Date.--The amendment made by this section shall apply
to returns the due date for the filing of which (including extensions)
is after December 31, 2007.
SEC. 225. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.
The percentage under subparagraph (B) of section 401(1) of the Tax
Increase Prevention and Reconciliation Act of 2005 in effect on the
date of the enactment of this Act is increased by 52.5 percentage
points.
Passed the House of Representatives December 12, 2007.
Attest:
Clerk.
110th CONGRESS
1st Session
H. R. 4351
_______________________________________________________________________
AN ACT
To amend the Internal Revenue Code of 1986 to provide individuals
temporary relief from the alternative minimum tax, and for other
purposes.