[111th Congress Public Law 226]
[From the U.S. Government Printing Office]
[[Page 124 STAT. 2389]]
Public Law 111-226
111th Congress
An Act
To modernize the air traffic control system, improve the safety,
reliability, and availability of transportation by air in the United
States, provide for modernization of the air traffic control system,
reauthorize the Federal Aviation Administration, and for other
purposes. <<NOTE: Aug. 10, 2010 - [H.R. 1586]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
short title
Section 1. This Act <<NOTE: 26 USC 1 note.>> may be cited as the
``______Act of____''.
TITLE I
EDUCATION JOBS FUND
education jobs funds
Sec. 101. There are authorized to be appropriated and there are
appropriated out of any money in the Treasury not otherwise obligated
for necessary expenses for an Education Jobs Fund, $10,000,000,000:
Provided, That the amount under this heading shall be administered under
the terms and conditions of sections 14001 through 14013 and title XV of
division A of the American Recovery and Reinvestment Act of 2009 (Public
Law 111-5) except as follows:
(1) Allocation of funds.--
(A) Funds appropriated under this heading shall be
available only for allocation by the Secretary of
Education (in this heading referred to as the Secretary)
in accordance with subsections (a), (b), (d), (e), and
(f) of section 14001 of division A of Public Law 111-5
and subparagraph (B) of this paragraph, except that the
amount reserved under such subsection (b) shall not
exceed $1,000,000 and such subsection (f) shall be
applied by substituting one year for two years.
(B) Prior to allocating funds to States under
section 14001(d) of division A of Public Law 111-5, the
Secretary shall allocate 0.5 percent to the Secretary of
the Interior for schools operated or funded by the
Bureau of Indian Affairs on the basis of the schools'
respective needs for activities consistent with this
heading under such terms and conditions as the Secretary
of the Interior may determine.
[[Page 124 STAT. 2390]]
(2) Reservation.--A State that receives an allocation of
funds appropriated under this heading may reserve not more than
2 percent for the administrative costs of carrying out its
responsibilities with respect to those funds.
(3) Awards to local educational agencies.--
(A) Except as specified in paragraph (2), an
allocation of funds to a State shall be used only for
awards to local educational agencies for the support of
elementary and secondary education in accordance with
paragraph (5) for the 2010-2011 school year (or, in the
case of reallocations made under section 14001(f) of
division A of Public Law 111-5, for the 2010-2011 or the
2011-2012 school year).
(B) Funds used to support elementary and secondary
education shall be distributed through a State's primary
elementary and secondary funding formulae or based on
local educational agencies' relative shares of funds
under part A of title I of the Elementary and Secondary
Education Act of 1965 (20 U.S.C. 6311 et seq.) for the
most recent fiscal year for which data are available.
(C) Subsections (a) and (b) of section 14002 of
division A of Public Law 111-5 shall not apply to funds
appropriated under this heading.
(4) Compliance with education reform assurances.--For
purposes of awarding funds appropriated under this heading, any
State that has an approved application for Phase II of the State
Fiscal Stabilization Fund that was submitted in accordance with
the application notice published in the Federal Register on
November 17, 2009 (74 Fed. Reg. 59142) shall be deemed to be in
compliance with subsection (b) and paragraphs (2) through (5) of
subsection (d) of section 14005 of division A of Public Law 111-
5.
(5) Requirement to use funds to retain or create education
jobs.--Notwithstanding section 14003(a) of division A of Public
Law 111-5, funds awarded to local educational agencies under
paragraph (3)--
(A) may be used only for compensation and benefits
and other expenses, such as support services, necessary
to retain existing employees, to recall or rehire former
employees, and to hire new employees, in order to
provide early childhood, elementary, or secondary
educational and related services; and
(B) may not be used for general administrative
expenses or for other support services expenditures as
those terms were defined by the National Center for
Education Statistics in its Common Core of Data as of
the date of enactment of this Act.
(6) Prohibition on use of funds for rainy-day funds or debt
retirement.--A State that receives an allocation may not use
such funds, directly or indirectly, to--
(A) establish, restore, or supplement a rainy-day
fund;
(B) supplant State funds in a manner that has the
effect of establishing, restoring, or supplementing a
rainy-day fund;
(C) reduce or retire debt obligations incurred by
the State; or
[[Page 124 STAT. 2391]]
(D) supplant State funds in a manner that has the
effect of reducing or retiring debt obligations incurred
by the State.
(7) Deadline for award.--The Secretary shall award funds
appropriated under this heading not later than 45 days after the
date of the enactment of this Act to States that have submitted
applications meeting the requirements applicable to funds under
this heading. The Secretary shall not require information in
applications beyond what is necessary to determine compliance
with applicable provisions of law.
(8) <<NOTE: Deadline. Applicability.>> Alternate
distribution of funds.--If, within 30 days after the date of the
enactment of this Act, a Governor has not submitted an
approvable application, the Secretary shall provide for funds
allocated to that State to be distributed to another entity or
other entities in the State (notwithstanding section 14001(e) of
division A of Public Law 111-5) for support of elementary and
secondary education, under such terms and conditions as the
Secretary may establish, provided that all terms and conditions
that apply to funds appropriated under this heading shall apply
to such funds distributed to such entity or entities. No
distribution shall be made to a State under this paragraph,
however, unless the Secretary has determined (on the basis of
such information as may be available) that the requirements of
clauses (i), (ii), or (iii) of paragraph 10(A) are likely to be
met, notwithstanding the lack of an application from the
Governor of that State.
(9) Local educational agency application.--Section 442 of
the General Education Provisions Act shall not apply to a local
educational agency that has previously submitted an application
to the State under title XIV of division A of Public Law 111-5.
The assurances provided under that application shall continue to
apply to funds awarded under this heading.
(10) Maintenance of effort.--
(A) Except as provided in paragraph (8), the
Secretary shall not allocate funds to a State under
paragraph (1) unless the Governor of the State provides
an assurance to the Secretary that--
(i) for State fiscal year 2011, the State will
maintain State support for elementary and
secondary education (in the aggregate or on the
basis of expenditures per pupil) and for public
institutions of higher education (not including
support for capital projects or for research and
development or tuition and fees paid by students)
at not less than the level of such support for
each of the two categories, respectively, for
State fiscal year 2009;
(ii) for State fiscal year 2011, the State
will maintain State support for elementary and
secondary education and for public institutions of
higher education (not including support for
capital projects or for research and development
or tuition and fees paid by students) at a
percentage of the total revenues available to the
State that is equal to or greater than the
percentage provided for each of the two
categories, respectively, for State fiscal year
2010; or
[[Page 124 STAT. 2392]]
(iii) in the case of a State in which State
tax collections for calendar year 2009 were less
than State tax collections for calendar year 2006,
for State fiscal year 2011 the State will maintain
State support for elementary and secondary
education (in the aggregate) and for public
institutions of higher education (not including
support for capital projects or for research and
development or tuition and fees paid by
students)--
(I) at not less than the level of
such support for each of the two
categories, respectively, for State
fiscal year 2006; or
(II) at a percentage of the total
revenues available to the State that is
equal to or greater than the percentage
provided for each of the two categories,
respectively, for State fiscal year
2006.
(B) Section 14005(d)(1) and subsections (a) through
(c) of section 14012 of division A of Public Law 111-5
shall not apply to funds appropriated under this
heading.
(11) Additional requirements for the state of texas.--The
following <<NOTE: Applicability.>> requirements shall apply to
the State of Texas:
(A) Notwithstanding paragraph (3)(B), funds used to
support elementary and secondary education shall be
distributed based on local educational agencies'
relative shares of funds under part A of title I of the
Elementary and Secondary Education Act of 1965 (20
U.S.C. 6311 et seq.) for the most recent fiscal year
which data are available. Funds distributed pursuant to
this paragraph shall be used to supplement and not
supplant State formula funding that is distributed on a
similar basis to part A of title I of the Elementary and
Secondary Education Act of 1965 (20 U.S.C. 6311 et
seq.).
(B) The Secretary shall not allocate funds to the
State of Texas under paragraph (1) unless the Governor
of the State provides an assurance to the Secretary that
the State will for fiscal years 2011, 2012, and 2013
maintain State support for elementary and secondary
education at a percentage of the total revenues
available to the State that is equal to or greater than
the percentage provided for such purpose for fiscal year
2011 prior to the enactment of this Act.
(C) Notwithstanding paragraph (8), no distribution
shall be made to the State of Texas or local education
agencies therein unless the Governor of Texas makes an
assurance to the Secretary that the requirements in
paragraphs (11)(A) and (11)(B) will be met,
notwithstanding the lack of an application from the
Governor of Texas.
[[Page 124 STAT. 2393]]
TITLE II
STATE FISCAL RELIEF AND OTHER PROVISIONS; REVENUE OFFSETS
Subtitle A--State Fiscal Relief and Other Provisions
extension of arra increase in fmap
Sec. 201. Section 5001 of the American Recovery and Reinvestment Act
of 2009 (Public Law 111-5) <<NOTE: 42 USC 1396d note.>> is amended--
(1) in subsection (a)(3), by striking ``first calendar
quarter'' and inserting ``first 3 calendar quarters'';
(2) in subsection (b)--
(A) in paragraph (1), by striking ``paragraph (2)''
and inserting ``paragraphs (2) and (3)''; and
(B) by adding at the end the following:
``(3) Phase-down of general increase.--
``(A) Second quarter of fiscal year 2011.--For each
State, for the second quarter of fiscal year 2011, the
FMAP percentage increase for the State under paragraph
(1) or (2) (as applicable) shall be 3.2 percentage
points.
``(B) Third quarter of fiscal year 2011.--For each
State, for the third quarter of fiscal year 2011, the
FMAP percentage increase for the State under paragraph
(1) or (2) (as applicable) shall be 1.2 percentage
points.'';
(3) in subsection (c)--
(A) in paragraph (2)(B), by striking ``July 1,
2010'' and inserting ``January 1, 2011'';
(B) in paragraph (3)(B)(i), by striking ``July 1,
2010'' and inserting ``January 1, 2011'' each place it
appears; and
(C) in paragraph (4)(C)(ii), by striking ``the 3-
consecutive-month period beginning with January 2010''
and inserting ``any 3-consecutive-month period that
begins after December 2009 and ends before January
2011'';
(4) in subsection (e), by adding at the end the following:
``Notwithstanding paragraph <<NOTE: Effective date. Applicability.>>
(5), effective for payments made on or after January 1, 2010, the
increases in the FMAP for a State under this section shall apply to
payments under title XIX of such Act that are attributable to
expenditures for medical assistance provided to nonpregnant childless
adults made eligible under a State plan under such title (including
under any waiver under such title or under section 1115 of such Act (42
U.S.C. 1315)) who would have been eligible for child health assistance
or other health benefits under eligibility standards in effect as of
December 31, 2009, of a waiver of the State child health plan under the
title XXI of such Act.'';
(5) in subsection (g)--
(A) in paragraph (1), by striking ``September 30,
2011'' and inserting ``March 31, 2012'';
(B) in paragraph (2), by inserting ``of such Act''
after ``1923''; and
(C) by adding at the end the following:
``(3) <<NOTE: Time period. Deadline.>> Certification by
chief executive officer.--No additional Federal funds shall be
paid to a State as a result of this section with respect to a
calendar quarter occurring during the period beginning on
January 1, 2011, and ending on June
[[Page 124 STAT. 2394]]
30, 2011, unless, not later than 45 days after the date of
enactment of this paragraph, the chief executive officer of the
State certifies that the State will request and use such
additional Federal funds.''; and
(6) in subsection (h)(3), by striking ``December 31, 2010''
and inserting ``June 30, 2011''.
treatment of certain drugs for computation of medicaid amp
Sec. 202. Effective as if included in the enactment of Public Law
111-148, section 1927(k)(1)(B)(i)(IV) of the Social Security Act (42
U.S.C. 1396r-8(k)(1)(B)(i)(IV)), as amended by section 2503(a)(2)(B) of
Public Law 111-148 and section 1101(c)(2) of Public Law 111-
152, <<NOTE: 42 USC 1396r-8 note.>> is amended by adding at the end the
following: ``, unless the drug is an inhalation, infusion, instilled,
implanted, or injectable drug that is not generally dispensed through a
retail community pharmacy; and''.
sunset of temporary increase in benefits under the supplemental
nutrition assistance program
Sec. 203. Section 101(a) of title I of division A of Public Law 111-
5 (123 Stat. 120), as amended by section 4262 of this Act, is amended by
striking paragraph (2) and inserting the following:
``(2) Termination.--The authority provided by this
subsection shall terminate after March 31, 2014.''.
Subtitle B--Revenue Offsets
rules to prevent splitting foreign tax credits from the income to which
they relate
Sec. 211. (a) In General.--Subpart A of part III of subchapter N of
chapter 1 of the Internal Revenue Code of 1986 is amended by adding at
the end the following new section:
``SEC. 909. <<NOTE: 26 USC 909.>> SUSPENSION OF TAXES AND CREDITS
UNTIL RELATED INCOME TAKEN INTO ACCOUNT.
``(a) In General.--If there is a foreign tax credit splitting event
with respect to a foreign income tax paid or accrued by the taxpayer,
such tax shall not be taken into account for purposes of this title
before the taxable year in which the related income is taken into
account under this chapter by the taxpayer.
``(b) Special Rules With Respect to Section 902 Corporations.--If
there is a foreign tax credit splitting event with respect to a foreign
income tax paid or accrued by a section 902 corporation, such tax shall
not be taken into account--
``(1) for purposes of section 902 or 960, or
``(2) for purposes of determining earnings and profits under
section 964(a),
before the taxable year in which the related income is taken into
account under this chapter by such section 902 corporation or a domestic
corporation which meets the ownership requirements of subsection (a) or
(b) of section 902 with respect to such section 902 corporation.
``(c) Special Rules.--For purposes of this section--
``(1) Application to partnerships, etc.--In the case of a
partnership, subsections (a) and (b) shall be applied at the
partner level. Except as otherwise provided by the Secretary,
[[Page 124 STAT. 2395]]
a rule similar to the rule of the preceding sentence shall apply
in the case of any S corporation or trust.
``(2) Treatment of foreign taxes after suspension.--In the
case of any foreign income tax not taken into account by reason
of subsection (a) or (b), except as otherwise provided by the
Secretary, such tax shall be so taken into account in the
taxable year referred to in such subsection (other than for
purposes of section 986(a)) as a foreign income tax paid or
accrued in such taxable year.
``(d) Definitions.--For purposes of this section--
``(1) Foreign tax credit splitting event.--There is a
foreign tax credit splitting event with respect to a foreign
income tax if the related income is (or will be) taken into
account under this chapter by a covered person.
``(2) Foreign income tax.--The term `foreign income tax'
means any income, war profits, or excess profits tax paid or
accrued to any foreign country or to any possession of the
United States.
``(3) Related income.--The term `related income' means, with
respect to any portion of any foreign income tax, the income
(or, as appropriate, earnings and profits) to which such portion
of foreign income tax relates.
``(4) Covered person.--The term `covered person' means, with
respect to any person who pays or accrues a foreign income tax
(hereafter in this paragraph referred to as the `payor')--
``(A) any entity in which the payor holds, directly
or indirectly, at least a 10 percent ownership interest
(determined by vote or value),
``(B) any person which holds, directly or
indirectly, at least a 10 percent ownership interest
(determined by vote or value) in the payor,
``(C) any person which bears a relationship to the
payor described in section 267(b) or 707(b), and
``(D) any other person specified by the Secretary
for purposes of this paragraph.
``(5) Section 902 corporation.--The term `section 902
corporation' means any foreign corporation with respect to which
one or more domestic corporations meets the ownership
requirements of subsection (a) or (b) of section 902.
``(e) Regulations.--The Secretary may issue such regulations or
other guidance as is necessary or appropriate to carry out the purposes
of this section, including regulations or other guidance which
provides--
``(1) appropriate exceptions from the provisions of this
section, and
``(2) for the proper application of this section with
respect to hybrid instruments.''.
(b) Clerical Amendment.--The table of sections for subpart A of part
III of subchapter N of chapter 1 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new item:
``Sec. 909. Suspension of taxes and credits until related income taken
into account.''.
(c) <<NOTE: 26 USC 909 note.>> Effective Date.--The amendments made
by this section shall apply to--
[[Page 124 STAT. 2396]]
(1) foreign income taxes (as defined in section 909(d) of
the Internal Revenue Code of 1986, as added by this section)
paid or accrued in taxable years beginning after December 31,
2010; and
(2) foreign income taxes (as so defined) paid or accrued by
a section 902 corporation (as so defined) in taxable years
beginning on or before such date (and not deemed paid under
section 902(a) or 960 of such Code on or before such date), but
only for purposes of applying sections 902 and 960 with respect
to periods after such date.
Section 909(b)(2) of the Internal Revenue Code of 1986, as added by this
section, shall not apply to foreign income taxes described in paragraph
(2).
denial of foreign tax credit with respect to foreign income not subject
to united states taxation by reason of covered asset acquisitions
Sec. 212. (a) In General.--Section 901 of the Internal Revenue Code
of 1986 <<NOTE: 26 USC 901.>> is amended by redesignating subsection
(m) as subsection (n) and by inserting after subsection (l) the
following new subsection:
``(m) <<NOTE: Definitions.>> Denial of Foreign Tax Credit With
Respect to Foreign Income Not Subject to United States Taxation by
Reason of Covered Asset Acquisitions.--
``(1) In general.--In the case of a covered asset
acquisition, the disqualified portion of any foreign income tax
determined with respect to the income or gain attributable to
the relevant foreign assets--
``(A) shall not be taken into account in determining
the credit allowed under subsection (a), and
``(B) in the case of a foreign income tax paid by a
section 902 corporation (as defined in section
909(d)(5)), shall not be taken into account for purposes
of section 902 or 960.
``(2) Covered asset acquisition.--For purposes of this
section, the term `covered asset acquisition' means--
``(A) a qualified stock purchase (as defined in
section 338(d)(3)) to which section 338(a) applies,
``(B) any transaction which--
``(i) is treated as an acquisition of assets
for purposes of this chapter, and
``(ii) is treated as the acquisition of stock
of a corporation (or is disregarded) for purposes
of the foreign income taxes of the relevant
jurisdiction,
``(C) any acquisition of an interest in a
partnership which has an election in effect under
section 754, and
``(D) to the extent provided by the Secretary, any
other similar transaction.
``(3) Disqualified portion.--For purposes of this section--
``(A) In general.--The term `disqualified portion'
means, with respect to any covered asset acquisition,
for any taxable year, the ratio (expressed as a
percentage) of--
``(i) the aggregate basis differences (but not
below zero) allocable to such taxable year under
subparagraph (B) with respect to all relevant
foreign assets, divided by
[[Page 124 STAT. 2397]]
``(ii) the income on which the foreign income
tax referred to in paragraph (1) is determined
(or, if the taxpayer fails to substantiate such
income to the satisfaction of the Secretary, such
income shall be determined by dividing the amount
of such foreign income tax by the highest marginal
tax rate applicable to such income in the relevant
jurisdiction).
``(B) Allocation of basis difference.--For purposes
of subparagraph (A)(i)--
``(i) In general.--The basis difference with
respect to any relevant foreign asset shall be
allocated to taxable years using the applicable
cost recovery method under this chapter.
``(ii) Special rule for disposition of
assets.--Except as otherwise provided by the
Secretary, in the case of the disposition of any
relevant foreign asset--
``(I) the basis difference allocated
to the taxable year which includes the
date of such disposition shall be the
excess of the basis difference with
respect to such asset over the aggregate
basis difference with respect to such
asset which has been allocated under
clause (i) to all prior taxable years,
and
``(II) no basis difference with
respect to such asset shall be allocated
under clause (i) to any taxable year
thereafter.
``(C) Basis difference.--
``(i) In general.--The term `basis difference'
means, with respect to any relevant foreign asset,
the excess of--
``(I) the adjusted basis of such
asset immediately after the covered
asset acquisition, over
``(II) the adjusted basis of such
asset immediately before the covered
asset acquisition.
``(ii) Built-in loss assets.--In the case of a
relevant foreign asset with respect to which the
amount described in clause (i)(II) exceeds the
amount described in clause (i)(I), such excess
shall be taken into account under this subsection
as a basis difference of a negative amount.
``(iii) Special rule for section 338
elections.--In the case of a covered asset
acquisition described in paragraph (2)(A), the
covered asset acquisition shall be treated for
purposes of this subparagraph as occurring at the
close of the acquisition date (as defined in
section 338(h)(2)).
``(4) Relevant foreign assets.--For purposes of this
section, the term `relevant foreign asset' means, with respect
to any covered asset acquisition, any asset (including any
goodwill, going concern value, or other intangible) with respect
to such acquisition if income, deduction, gain, or loss
attributable to such asset is taken into account in determining
the foreign income tax referred to in paragraph (1).
``(5) Foreign income tax.--For purposes of this section, the
term `foreign income tax' means any income, war profits, or
excess profits tax paid or accrued to any foreign country or to
any possession of the United States.
[[Page 124 STAT. 2398]]
``(6) Taxes allowed as a deduction, etc.--Sections 275 and
78 shall not apply to any tax which is not allowable as a credit
under subsection (a) by reason of this subsection.
``(7) Regulations.--The Secretary may issue such regulations
or other guidance as is necessary or appropriate to carry out
the purposes of this subsection, including to exempt from the
application of this subsection certain covered asset
acquisitions, and relevant foreign assets with respect to which
the basis difference is de minimis.''.
(b) <<NOTE: 26 USC 901 note.>> Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to covered asset
acquisitions (as defined in section 901(m)(2) of the Internal
Revenue Code of 1986, as added by this section) after December
31, 2010.
(2) Transition rule.--The amendments made by this section
shall not apply to any covered asset acquisition (as so defined)
with respect to which the transferor and the transferee are not
related if such acquisition is--
(A) made pursuant to a written agreement which was
binding on January 1, 2011, and at all times thereafter,
(B) described in a ruling request submitted to the
Internal Revenue Service on or before July 29, 2010, or
(C) described on or before January 1, 2011, in a
public announcement or in a filing with the Securities
and Exchange Commission.
(3) Related persons.--For purposes of this subsection, a
person shall be treated as related to another person if the
relationship between such persons is described in section 267 or
707(b) of the Internal Revenue Code of 1986.
separate application of foreign tax credit limitation, etc., to items
resourced under treaties
Sec. 213. (a) In General.--Subsection (d) of section 904 of the
Internal Revenue Code of 1986 <<NOTE: 26 USC 904.>> is amended by
redesignating paragraph (6) as paragraph (7) and by inserting after
paragraph (5) the following new paragraph:
``(6) Separate application to items resourced under
treaties.--
``(A) In general.--If--
``(i) without regard to any treaty obligation
of the United States, any item of income would be
treated as derived from sources within the United
States,
``(ii) under a treaty obligation of the United
States, such item would be treated as arising from
sources outside the United States, and
``(iii) the taxpayer chooses the benefits of
such treaty obligation,
subsections (a), (b), and (c) of this section and
sections 902, 907, and 960 shall be applied separately
with respect to each such item.
``(B) Coordination with other provisions.--This
paragraph shall not apply to any item of income to which
subsection (h)(10) or section 865(h) applies.
``(C) Regulations.--The Secretary may issue such
regulations or other guidance as is necessary or
appropriate
[[Page 124 STAT. 2399]]
to carry out the purposes of this paragraph, including
regulations or other guidance which provides that
related items of income may be aggregated for purposes
of this paragraph.''.
(b) <<NOTE: 26 USC 904 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after the date of
the enactment of this Act.
limitation on the amount of foreign taxes deemed paid with respect to
section 956 inclusions
Sec. 214. (a) In General.--Section 960 of the Internal Revenue Code
of 1986 <<NOTE: 26 USC 960.>> is amended by adding at the end the
following new subsection:
``(c) Limitation With Respect to Section 956 Inclusions.--
``(1) In general.--If there is included under section
951(a)(1)(B) in the gross income of a domestic corporation any
amount attributable to the earnings and profits of a foreign
corporation which is a member of a qualified group (as defined
in section 902(b)) with respect to the domestic corporation, the
amount of any foreign income taxes deemed to have been paid
during the taxable year by such domestic corporation under
section 902 by reason of subsection (a) with respect to such
inclusion in gross income shall not exceed the amount of the
foreign income taxes which would have been deemed to have been
paid during the taxable year by such domestic corporation if
cash in an amount equal to the amount of such inclusion in gross
income were distributed as a series of distributions (determined
without regard to any foreign taxes which would be imposed on an
actual distribution) through the chain of ownership which begins
with such foreign corporation and ends with such domestic
corporation.
``(2) Authority to prevent abuse.--The
Secretary <<NOTE: Regulations. Guidelines.>> shall issue such
regulations or other guidance as is necessary or appropriate to
carry out the purposes of this subsection, including regulations
or other guidance which prevent the inappropriate use of the
foreign corporation's foreign income taxes not deemed paid by
reason of paragraph (1).''.
(b) <<NOTE: 26 USC 960 note.>> Effective Date.--The amendment made
by this section shall apply to acquisitions of United States property
(as defined in section 956(c) of the Internal Revenue Code of 1986)
after December 31, 2010.
special rule with respect to certain redemptions by foreign subsidiaries
Sec. 215. (a) In General.--Paragraph (5) of section 304(b) of the
Internal Revenue Code of 1986 <<NOTE: 26 USC 304.>> is amended by
redesignating subparagraph (B) as subparagraph (C) and by inserting
after subparagraph (A) the following new subparagraph:
``(B) Special rule in case of foreign acquiring
corporation.--In the case of any acquisition to which
subsection (a) applies in which the acquiring
corporation is a foreign corporation, no earnings and
profits shall be taken into account under paragraph
(2)(A) (and subparagraph (A) shall not apply) if more
than 50 percent of the dividends arising from such
acquisition (determined without regard to this
subparagraph) would neither--
[[Page 124 STAT. 2400]]
``(i) be subject to tax under this chapter for
the taxable year in which the dividends arise, nor
``(ii) be includible in the earnings and
profits of a controlled foreign corporation (as
defined in section 957 and without regard to
section 953(c)).''.
(b) <<NOTE: 26 USC 304 note.>> Effective Date.--The amendments made
by this section shall apply to acquisitions after the date of the
enactment of this Act.
modification of affiliation rules for purposes of rules allocating
interest expense
Sec. 216. (a) In General.--Subparagraph (A) of section 864(e)(5) of
the Internal Revenue Code of 1986 <<NOTE: 26 USC 864.>> is amended by
adding at the end the following: ``Notwithstanding the preceding
sentence, a foreign corporation shall be treated as a member of the
affiliated group if--
``(i) more than 50 percent of the gross income
of such foreign corporation for the taxable year
is effectively connected with the conduct of a
trade or business within the United States, and
``(ii) at least 80 percent of either the vote
or value of all outstanding stock of such foreign
corporation is owned directly or indirectly by
members of the affiliated group (determined with
regard to this sentence).''.
(b) <<NOTE: 26 USC 864 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after the date of
the enactment of this Act.
termination of special rules for interest and dividends received from
persons meeting the 80-percent foreign business requirements
Sec. 217. (a) In General.--Paragraph (1) of section 861(a) of the
Internal Revenue Code of 1986 <<NOTE: 26 USC 861.>> is amended by
striking subparagraph (A) and by redesignating subparagraphs (B) and (C)
as subparagraphs (A) and (B), respectively.
(b) Grandfather Rule With Respect To Withholding on Interest and
Dividends Received From Persons Meeting the 80-percent Foreign Business
Requirements.--
(1) In general.--Subparagraph (B) of section 871(i)(2) of
the Internal Revenue Code of 1986 <<NOTE: 26 USC 871.>> is
amended to read as follows:
``(B) The active foreign business percentage of--
``(i) any dividend paid by an existing 80/20
company, and
``(ii) any interest paid by an existing 80/20
company.''.
(2) Definitions and special rules.--Section 871 of such Code
is amended by redesignating subsections (l) and (m) as
subsections (m) and (n), respectively, and by inserting after
subsection (k) the following new subsection:
``(l) Rules Relating to Existing 80/20 Companies.--For purposes of
this subsection and subsection (i)(2)(B)--
``(1) Existing 80/20 company.--
``(A) In general.--The term `existing 80/20 company'
means any corporation if--
[[Page 124 STAT. 2401]]
``(i) such corporation met the 80-percent
foreign business requirements of section 861(c)(1)
(as in effect before the date of the enactment of
this subsection) for such corporation's last
taxable year beginning before January 1, 2011,
``(ii) such corporation meets the 80-percent
foreign business requirements of subparagraph (B)
with respect to each taxable year after the
taxable year referred to in clause (i), and
``(iii) there has not been an addition of a
substantial line of business with respect to such
corporation after the date of the enactment of
this subsection.
``(B) Foreign business requirements.--
``(i) In general.--Except as provided in
clause (iv), a corporation meets the 80-percent
foreign business requirements of this subparagraph
if it is shown to the satisfaction of the
Secretary that at least 80 percent of the gross
income from all sources of such corporation for
the testing period is active foreign business
income.
``(ii) Active foreign business income.--For
purposes of clause (i), the term `active foreign
business income' means gross income which--
``(I) is derived from sources
outside the United States (as determined
under this subchapter), and
``(II) is attributable to the active
conduct of a trade or business in a
foreign country or possession of the
United States.
``(iii) Testing period.--For purposes of this
subsection, the term `testing period' means the 3-
year period ending with the close of the taxable
year of the corporation preceding the payment (or
such part of such period as may be applicable). If
the corporation has no gross income for such 3-
year period (or part thereof), the testing period
shall be the taxable year in which the payment is
made.
``(iv) Transition rule.--In the case of a
taxable year for which the testing period includes
1 or more taxable years beginning before January
1, 2011--
``(I) a corporation meets the 80-
percent foreign business requirements of
this subparagraph if and only if the
weighted average of--
``(aa) the percentage of the
corporation's gross income from
all sources that is active
foreign business income (as
defined in subparagraph (B) of
section 861(c)(1) (as in effect
before the date of the enactment
of this subsection)) for the
portion of the testing period
that includes taxable years
beginning before January 1,
2011, and
``(bb) the percentage of the
corporation's gross income from
all sources that is active
foreign business income (as
defined in clause (ii) of this
subparagraph) for the portion of
the testing period, if any, that
includes taxable years beginning
on or after January 1, 2011,
is at least 80 percent, and
[[Page 124 STAT. 2402]]
``(II) the active foreign business
percentage for such taxable year shall
equal the weighted average percentage
determined under subclause (I).
``(2) Active foreign business percentage.--Except as
provided in paragraph (1)(B)(iv), the term `active foreign
business percentage' means, with respect to any existing 80/20
company, the percentage which--
``(A) the active foreign business income of such
company for the testing period, is of
``(B) the gross income of such company for the
testing period from all sources.
``(3) Aggregation rules.--For
purposes <<NOTE: Applicability.>> of applying paragraph (1)
(other than subparagraphs (A)(i) and (B)(iv) thereof) and
paragraph (2)--
``(A) In general.--The corporation referred to in
paragraph (1)(A) and all of such corporation's
subsidiaries shall be treated as one corporation.
``(B) Subsidiaries.--For purposes of subparagraph
(A), the term `subsidiary' means any corporation in
which the corporation referred to in subparagraph (A)
owns (directly or indirectly) stock meeting the
requirements of section 1504(a)(2) (determined by
substituting `50 percent' for `80 percent' each place it
appears and without regard to section 1504(b)(3)).
``(4) Regulations.--The Secretary may issue such regulations
or other guidance as is necessary or appropriate to carry out
the purposes of this section, including regulations or other
guidance which provide for the proper application of the
aggregation rules described in paragraph (3).''.
(c) Conforming Amendments.--
(1) Section 861 of the Internal Revenue Code of
1986 <<NOTE: 26 USC 861.>> is amended by striking subsection
(c) and by redesignating subsections (d), (e), and (f) as
subsections (c), (d), and (e), respectively.
(2) Paragraph (9) of section 904(h) of such Code <<NOTE: 26
USC 904.>> is amended to read as follows:
``(9) Treatment of certain domestic corporations.--In the
case of any dividend treated as not from sources within the
United States under section 861(a)(2)(A), the corporation paying
such dividend shall be treated for purposes of this subsection
as a United States-owned foreign corporation.''.
(3) Subsection (c) of section 2104 of such Code <<NOTE: 26
USC 2104.>> is amended in the last sentence by striking ``or to
a debt obligation of a domestic corporation'' and all that
follows and inserting a period.
(d) <<NOTE: 26 USC 861 note.>> 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, 2010.
(2) Grandfather rule for outstanding debt obligations.--
(A) In general.--The amendments made by this section
shall not apply to payments of interest on obligations
issued before the date of the enactment of this Act.
(B) Exception for related party debt.--Subparagraph
(A) shall not apply to any interest which is payable
[[Page 124 STAT. 2403]]
to a related person (determined under rules similar to
the rules of section 954(d)(3)).
(C) Significant modifications treated as new
issues.--For purposes of subparagraph (A), a significant
modification of the terms of any obligation (including
any extension of the term of such obligation) shall be
treated as a new issue.
limitation on extension of statute of limitations for failure to notify
secretary of certain foreign transfers
Sec. 218. (a) In General.--Paragraph (8) of section 6501(c) of the
Internal Revenue Code of 1986 <<NOTE: 26 USC 6501.>> is amended--
(1) by striking ``In the case of any information'' and
inserting the following:
``(A) In general.--In the case of any information'';
and
(2) by adding at the end the following:
``(B) Application to failures due to reasonable
cause.--If the failure to furnish the information
referred to in subparagraph (A) is due to reasonable
cause and not willful neglect, subparagraph (A) shall
apply only to the item or items related to such
failure.''.
(b) <<NOTE: 26 USC 6501 note.>> Effective Date.--The amendments
made by this section shall take effect as if included in section 513 of
the Hiring Incentives to Restore Employment Act.
elimination of advance refundability of earned income credit
Sec. 219. (a) In General.--The following provisions of the Internal
Revenue Code of 1986 are repealed:
(1) <<NOTE: 26 USC 3507.>> Section 3507.
(2) <<NOTE: 26 USC 32.>> Subsection (g) of section 32.
(3) <<NOTE: 26 USC 6051.>> Paragraph (7) of section
6051(a).
(b) Conforming Amendments.--
(1) Section 6012(a) of the Internal Revenue Code of 1986 is
amended <<NOTE: 26 USC 6012.>> by striking paragraph (8) and by
redesignating paragraph (9) as paragraph (8).
(2) Section 6302 of such Code <<NOTE: 26 USC 6302.>> is
amended by striking subsection (i).
(3) The table of sections for chapter 25 of such Code is
amended by striking the item relating to section 3507.
(c) <<NOTE: 26 USC 32 note.>> Effective Date.--The repeals and
amendments made by this section shall apply to taxable years beginning
after December 31, 2010.
TITLE III
RESCISSIONS
Sec. 301. There is rescinded from accounts under the heading
``Department of Agriculture--Rural Development'', $122,000,000, to be
derived from the unobligated balances of funds that were provided for
such accounts in prior appropriation Acts (other than Public Law 111-5)
and that were designated by the Congress in such Acts as an emergency
requirement pursuant to a concurrent
[[Page 124 STAT. 2404]]
resolution on the budget or the Balanced Budget and Emergency Deficit
Control Act of 1985.
Sec. 302. Of the funds made available for ``Department of
Commerce--National Telecommunications and Information Administration--
Broadband Technology Opportunities Program'' in title II of division A
of Public Law 111-5, $302,000,000 are rescinded.
Sec. 303. Of the funds appropriated in Department of Defense
Appropriations Acts, the following funds are rescinded from the
following accounts in the specified amounts:
``Aircraft Procurement, Army, 2008/2010'', $21,000,000;
``Procurement of Weapons and Tracked Combat Vehicles, Army,
2008/2010'', $21,000,000;
``Procurement of Ammunition, Army, 2008/2010'', $17,000,000;
``Other Procurement, Army, 2008/2010'', $75,000,000;
``Weapons Procurement, Navy, 2008/2010'', $26,000,000;
``Other Procurement, Navy, 2008/2010'', $42,000,000;
``Procurement, Marine Corps, 2008/2010'', $13,000,000;
``Aircraft Procurement, Air Force, 2008/2010'',
$102,000,000;
``Missile Procurement, Air Force, 2008/2010'', $28,000,000;
``Procurement of Ammunition, Air Force, 2008/2010'',
$7,000,000;
``Other Procurement, Air Force, 2008/2010'', $130,000,000;
``Procurement, Defense-Wide, 2008/2010'', $33,000,000;
``Research, Development, Test and Evaluation, Army, 2009/
2010'', $76,000,000;
``Research, Development, Test and Evaluation, Air Force,
2009/2010'', $164,000,000;
``Research, Development, Test and Evaluation, Defense-Wide,
2009/2010'', $137,000,000;
``Operation, Test and Evaluation, Defense, 2009/2010'',
$1,000,000;
``Operation and Maintenance, Army, 2010'', $154,000,000;
``Operation and Maintenance, Navy, 2010'', $155,000,000;
``Operation and Maintenance, Marine Corps, 2010'',
$25,000,000;
``Operation and Maintenance, Air Force, 2010'',
$155,000,000;
``Operation and Maintenance, Defense-Wide, 2010'',
$126,000,000;
``Operation and Maintenance, Army Reserve, 2010'',
$12,000,000;
``Operation and Maintenance, Navy Reserve, 2010'',
$6,000,000;
``Operation and Maintenance, Marine Corps Reserve, 2010'',
$1,000,000;
``Operation and Maintenance, Air Force Reserve, 2010'',
$14,000,000;
``Operation and Maintenance, Army National Guard, 2010'',
$28,000,000; and
``Operation and Maintenance, Air National Guard, 2010'',
$27,000,000.
Sec. 304. (a) Of the funds appropriated in the American Recovery and
Reinvestment Act of 2009 (Public Law 111-5), the
[[Page 124 STAT. 2405]]
following funds are rescinded from the following accounts in the
specified amounts:
``Operation and Maintenance, Army, 2009/2010'',
$113,500,000;
``Operation and Maintenance, Navy, 2009/2010'', $34,000,000;
``Operation and Maintenance, Marine Corps, 2009/2010'',
$7,000,000;
``Operation and Maintenance, Air Force, 2009/2010'',
$61,000,000;
``Operation and Maintenance, Army Reserve, 2009/2010'',
$3,500,000;
``Operation and Maintenance, Navy Reserve, 2009/2010'',
$8,000,000;
``Operation and Maintenance, Marine Corps Reserve, 2009/
2010'', $1,000,000;
``Operation and Maintenance, Air Force Reserve, 2009/2010'',
$2,000,000;
``Operation and Maintenance, Army National Guard, 2009/
2010'', $1,000,000;
``Operation and Maintenance, Air National Guard, 2009/
2010'', $2,500,000; and
``Defense Health Program, 2009/2010'', $27,000,000.
(b) Of the funds appropriated in the Supplemental Appropriations
Act, 2008 (Public Law 110-252), the following funds are rescinded from
the following account in the specified amount:
``Procurement, Marine Corps, 2009/2011'', $122,000,000.
Sec. 305. (a) Of the funds appropriated for ``Procurement of Weapons
and Tracked Combat Vehicles, Army'' in title III of division A of public
Law 111-118, $116,000,000 are rescinded.
(b) Of the funds appropriated for ``Other Procurement, Army'' in
title III of division C of Public Law 110-329, $87,000,000 are
rescinded.
Sec. 306. There are rescinded the following amounts from the
specified accounts:
(1) $20,000,000, to be derived from unobligated balances of
funds made available in prior appropriations Acts under the
heading ``Department of Energy--Nuclear Energy''.
Sec. 307. Of the unobligated balances of funds provided under the
heading ``Nuclear Regulatory Commission'' in prior appropriations Acts,
$18,000,000 is permanently rescinded.
Sec. 308. Of the funds made available for ``Department of Energy--
Title 17--Innovative Technology Loan Guarantee Program'' in title III of
division A of Public Law 111-5, $1,500,000,000 are rescinded.
Sec. 309. There are permanently rescinded from ``General Services
Administration--Real Property Activities--Federal Building Fund'',
$75,000,000 from Rental of Space and $25,000,000 from Building
Operations, to be derived from unobligated balances that were provided
in previous appropriations Acts.
Sec. 310. Of the funds made available for ``Bureau of Indian
Affairs--Indian Guaranteed Loan Program Account'' in title VII of
division A of Public Law 111-5, $6,820,000 are rescinded.
Sec. 311. Of the funds made available for ``Environmental
Protection Agency--Hazardous Substance Superfund'' in title VII of
division A of Public Law 111-5, $2,600,000 are rescinded.
[[Page 124 STAT. 2406]]
Sec. 312. Of the funds made available for ``Environmental
Protection Agency--Leaking Underground Storage Tank Trust Fund Program''
in title VII of division A of Public Law 111-5, $9,200,000 are
rescinded.
Sec. 313. Of the funds made available for transfer in title VII of
division A of Public Law 111-5, ``Environmental Protection Agency--
Environmental Programs and Management'', $10,000,000 are rescinded.
Sec. 314. Of the funds made available for ``National Park Service--
Construction'' in chapter 7 of division B of Public Law 108-324,
$4,800,000 are rescinded.
Sec. 315. Of the funds made available for ``National Park Service--
Construction'' in chapter 5 of title II of Public Law 109-234,
$6,400,000 are rescinded.
Sec. 316. Of the funds made available for ``Fish and Wildlife
Service--Construction'' in chapter 6 of title I of division B of Public
Law 110-329, $3,000,000 are rescinded.
Sec. 317. The unobligated balance of funds appropriated in the
Departments of Labor, Health and Human Services, and Education, and
Related Agencies Appropriations Act, 1995 (Public Law 103-333; 108 Stat.
2574) under the heading ``Public Health and Social Services Emergency
Fund'' is rescinded.
Sec. 318. Of the funds appropriated for the Commissioner of Social
Security under section 2201(e)(2)(B) in title II of division B of Public
Law 111-5, $47,000,000 are rescinded.
Sec. 319. Of the funds appropriated in part VI of subtitle I of
title II of division B of Public Law 111-5, $110,000,000 are rescinded,
to be derived only from the amount provided under section 1899K(b) of
such title.
Sec. 320. Of the funds appropriated for ``Department of Education--
Education for the Disadvantaged'' in division D of Public Law 111-117,
$50,000,000 are rescinded, to be derived only from the amount provided
for a comprehensive literacy development and education program under
section 1502 of the Elementary and Secondary Education Act of 1965.
Sec. 321. Of the funds appropriated for ``Department of Education--
Student Aid Administration'' in division D of Public Law 111-117,
$82,000,000 are rescinded.
Sec. 322. Of the funds appropriated for ``Department of Education--
Innovation and Improvement'' in division D of Public Law 111-117,
$10,700,000 are rescinded, to be derived only from the amount provided
to carry out subpart 8 of part D of title V of the Elementary and
Secondary Education Act of 1965.
Sec. 323. Of the unobligated balances available under ``Department
of Defense, Military Construction, Army'' from prior appropriations
Acts, $340,000,000 is rescinded: <<NOTE: Overseas deployments.>>
Provided, That no funds may be rescinded from amounts that were
designated by the Congress as an emergency requirement or as
appropriations for overseas deployments and other activities pursuant to
a concurrent resolution on the budget or the Balanced Budget and
Emergency Deficit Control Act of 1985.
Sec. 324. Of the unobligated balances available under ``Department
of Defense, Military Construction, Navy and Marine Corps'' from prior
appropriations Acts, $110,000,000 is rescinded: <<NOTE: Overseas
deployments.>> Provided, That no funds may be rescinded from amounts
that were designated by the Congress as an emergency requirement or as
appropriations
[[Page 124 STAT. 2407]]
for overseas deployments and other activities pursuant to a concurrent
resolution on the budget or the Balanced Budget and Emergency Deficit
Control Act of 1985.
Sec. 325. Of the unobligated balances available under ``Department
of Defense, Military Construction, Air Force'' from prior appropriations
Acts, $50,000,000 is rescinded: <<NOTE: Overseas deployments.>>
Provided, That no funds may be rescinded from amounts that were
designated by the Congress as an emergency requirement or as
appropriations for overseas deployments and other activities pursuant to
a concurrent resolution on the budget or the Balanced Budget and
Emergency Deficit Control Act of 1985.
Sec. 326. Of the funds made available for the General Operating
Expenses account of the Department of Veterans Affairs in section
2201(e)(4)(A)(ii) of division B of Public Law 111-5 (123 Stat. 454; 26
U.S.C. 6428 note), $6,100,000 are rescinded.
Sec. 327. Of the amount appropriated or otherwise made available by
title X of division A of Public Law 111-5, the American Recovery and
Reinvestment Act of 2009, under the heading `` Departmental
Administration, Information Technology Systems'' $5,000,000 is hereby
rescinded.
Sec. 328. (a) Millennium Challenge Corporation.--Of the unobligated
balances available under the heading ``Millennium Challenge
Corporation'' in title III of division H of Public Law 111-8 and under
such heading in prior Acts making appropriations for the Department of
State, foreign operations, and related programs, $50,000,000 are
rescinded.
(b) Civilian Stabilization Initiative.--
(1) Department of state.--Of the unobligated balances
available under the heading ``Department of State--
Administration of Foreign Affairs--Civilian Stabilization
Initiative'' in prior Acts making appropriations for the
Department of State, foreign operations, and related programs,
$40,000,000 are rescinded.
(2) United states agency for international development.--Of
the unobligated balances available under the heading ``United
States Agency for International Development--Funds Appropriated
to the President--Civilian Stabilization Initiative'' in prior
Acts making appropriations for the Department of State, foreign
operations, and related programs, $30,000,000 are rescinded.
Sec. 329. There are rescinded the following amounts from the
specified accounts:
(1) ``Department of Transportation--Federal Aviation
Administration--Facilities and Equipment'', $2,182,544, to be
derived from unobligated balances made available under this
heading in Public Law 108-324.
(2) ``Department of Transportation--Federal Aviation
Administration--Facilities and Equipment'', $5,705,750, to be
derived from unobligated balances made available under this
heading in Public Law 109-148.
Sec. 330. Of the unobligated balances of funds apportioned to each
State under chapter 1 of title 23, United States Code, $2,200,000,000
are permanently rescinded: <<NOTE: States.>> Provided, That such
rescission shall be distributed among the States in the same proportion
as the funds subject to such rescission were apportioned to the States
for fiscal year 2009: Provided further, That such rescission shall not
apply to the funds distributed in accordance with
[[Page 124 STAT. 2408]]
sections 130(f) and 104(b)(5) of title 23, United States Code; sections
133(d)(1) and 163 of such title, as in effect on the day before the date
of enactment of Public Law 109-59; and the first sentence of section
133(d)(3)(A) of such title: <<NOTE: States. Determination.>> Provided
further, That notwithstanding section 1132 of Public Law 110-140, in
administering the rescission required under this heading, the Secretary
of Transportation shall allow each State to determine the amount of the
required rescission to be drawn from the programs to which the
rescission applies.
TITLE IV
BUDGETARY PROVISIONS
budgetary provisions
Sec. 401. The budgetary effects of this Act, for the purpose of
complying with the Statutory Pay-As-You-Go Act of 2010, shall be
determined by reference to the latest statement titled ``Budgetary
Effects of PAYGO Legislation'' for this Act, jointly submitted for
printing in the Congressional Record by the Chairmen of the House and
Senate Budget Committees, provided that such statement has been
submitted prior to the vote on passage in the House acting first on this
conference report or amendment between the Houses.
Approved August 10, 2010.
LEGISLATIVE HISTORY--H.R. 1586:
---------------------------------------------------------------------------
CONGRESSIONAL RECORD:
Vol. 155 (2009):
Mar. 19, considered and passed
House.
Vol. 156 (2010):
Mar. 10, 11, 16-19, 22, considered
and passed Senate, amended.
Mar. 25, House concurred in Senate
amendments with an amendment.
July 29, Aug. 2, 4, 5, Senate
considered and concurred in
House amendment with an
amendment.
Aug. 10, House concurred in Senate
amendment.
<all>