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PL 109-222 Tax Increase Prevention and Reconciliation Act of 2005

PL 109-222 Tax Increase Prevention and Reconciliation Act of 2005

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120 STAT. 345PUBLIC LAW 109–222—MAY 17, 2006
Public Law 109–222109th CongressAn Act
To provide for reconciliation pursuant to section 201(b) of the concurrent resolutionon the budget for fiscal year 2006.
 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) S
HORT
T
ITLE
.—This Act may be cited as the ‘‘Tax IncreasePrevention and Reconciliation Act of 2005’’.(b) A
MENDMENT OF
1986 C
ODE
.—Except as otherwise expresslyprovided, whenever in this Act an amendment or repeal is expressedin terms of an amendment to, or repeal of, a section or otherprovision, the reference shall be considered to be made to a sectionor other provision of the Internal Revenue Code of 1986.(c) T
ABLE OF
C
ONTENTS
.—The table of contents for this Actis as follows:
Sec.1.Short title, etc.TITLE I—EXTENSION AND MODIFICATION OF CERTAIN PROVISIONSSec.101.Increased expensing for small business.Sec.102.Capital gains and dividends rates.Sec.103.Controlled foreign corporations.TITLE II—OTHER PROVISIONSSec.201.Clarification of taxation of certain settlement funds.Sec.202.Modification of active business definition under section 355.Sec.203.Veterans’ mortgage bonds.Sec.204.Capital gains treatment for certain self-created musical works.Sec.205.Vessel tonnage limit.Sec.206.Modification of special arbitrage rule for certain funds.Sec.207.Amortization of expenses incurred in creating or acquiring music or musiccopyrights.Sec.208.Modification of effective date of disregard of certain capital expendituresfor purposes of qualified small issue bonds.Sec.209.Modification of treatment of loans to qualified continuing care facilities.TITLE III—ALTERNATIVE MINIMUM TAX RELIEFSec.301.Increase in alternative minimum tax exemption amount for 2006.Sec.302.Allowance of nonrefundable personal credits against regular and alter-native minimum tax liability.TITLE IV—CORPORATE ESTIMATED TAX PROVISIONSSec.401.Time for payment of corporate estimated taxes.TITLE V—REVENUE OFFSET PROVISIONSSec.501.Application of earnings stripping rules to partners which are corpora-tions.Sec.502.Reporting of interest on tax-exempt bonds.Sec.503.5-year amortization of geological and geophysical expenditures for certainmajor integrated oil companies.Sec.504.Application of FIRPTA to regulated investment companies.
26 USC 1
et. seq.
26 USC 1 note.Tax IncreasePrevention andReconciliationAct of 2005.May 17, 2006[H.R. 4297]
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120 STAT. 346PUBLIC LAW 109222MAY 17, 2006
Sec.505.Treatment of distributions attributable to FIRPTA gains.Sec.506.Prevention of avoidance of tax on investments of foreign persons inUnited States real property through wash sale transactions.Sec.507.Section 355 not to apply to distributions involving disqualified investmentcompanies.Sec.508.Loan and redemption requirements on pooled financing requirements.Sec.509.Partial payments required with submission of offers-in-compromise.Sec.510.Increase in age of minor children whose unearned income is taxed as if parent’s income.Sec.511.Imposition of withholding on certain payments made by government enti-ties.Sec.512.Conversions to Roth IRAs.Sec.513.Repeal of FSC/ETI binding contract relief.Sec.514.Only wages attributable to domestic production taken into account in de-termining deduction for domestic production.Sec.515.Modification of exclusion for citizens living abroad.Sec.516.Tax involvement of accommodation parties in tax shelter transactions.
TITLE I—EXTENSION AND MODIFICA-TION OF CERTAIN PROVISIONS
SEC. 101. INCREASED EXPENSING FOR SMALL BUSINESS.
Subsections (b)(1), (b)(2), (b)(5), (c)(2), and (d)(1)(A)(ii) of section179 (relating to election to expense certain depreciable businessassets) are each amended by striking ‘‘2008’’ and inserting ‘‘2010’’.
SEC. 102. CAPITAL GAINS AND DIVIDENDS RATES.
Section 303 of the Jobs and Growth Tax Relief ReconciliationAct of 2003 is amended by striking ‘‘December 31, 2008’’ andinserting ‘‘December 31, 2010’’.
SEC. 103. CONTROLLED FOREIGN CORPORATIONS.
(a) S
UBPART
F E
XCEPTION FOR
A
CTIVE
F
INANCING
.—(1) E
XEMPT INSURANCE INCOME
.—Paragraph (10) of section953(e) (relating to application) is amended—(A) by striking ‘‘January 1, 2007’’ and insertingJanuary 1, 2009’, and(B) by striking ‘‘December 31, 2006’’ and inserting‘‘December 31, 2008’’.(2) E
XCEPTION TO TREATMENT AS FOREIGN PERSONALHOLDING COMPANY INCOME
.—Paragraph (9) of section 954(h)(relating to application) is amended by striking ‘January 1,2007’and inserting ‘January 1, 2009’.(b) L
OOK
-T
HROUGH
T
REATMENT OF
P
AYMENTS
B
ETWEEN
R
ELATED
C
ONTROLLED
F
OREIGN
C
ORPORATIONS
U
NDER THE
F
OREIGN
P
ERSONAL
H
OLDING
C
OMPANY
R
ULES
.—(1) I
N GENERAL
.—Subsection (c) of section 954 (relatingto foreign personal holding company income) is amended byadding at the end the following new paragraph:‘‘(6) L
OOK
-
THRU RULE FOR RELATED CONTROLLED FOREIGNCORPORATIONS
.—‘‘(A) I
N GENERAL
.—For purposes of this subsection, divi-dends, interest, rents, and royalties received or accruedfrom a controlled foreign corporation which is a relatedperson shall not be treated as foreign personal holdingcompany income to the extent attributable or properly allo-cable (determined under rules similar to the rules of sub-paragraphs (C) and (D) of section 904(d)(3)) to incomeof the related person which is not subpart F income. For
26 USC 1 note.26 USC 179.
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120 STAT. 347PUBLIC LAW 109–222—MAY 17, 2006
purposes of this subparagraph, interest shall include fac-toring income which is treated as income equivalent tointerest for purposes of paragraph (1)(E). The Secretaryshall prescribe such regulations as may be appropriateto prevent the abuse of the purposes of this paragraph.‘‘(B) A
PPLICATION
.—Subparagraph (A) shall apply totaxable years of foreign corporations beginning afterDecember 31, 2005, and before January 1, 2009, and totaxable years of United States shareholders with or withinwhich such taxable years of foreign corporations end.’’.(2) E
FFECTIVE DATE
.—The amendment made by this sub-section shall apply to taxable years of foreign corporationsbeginning after December 31, 2005, and to taxable years of United States shareholders with or within which such taxableyears of foreign corporations end.
TITLE II—OTHER PROVISIONS
SEC. 201. CLARIFICATION OF TAXATION OF CERTAIN SETTLEMENTFUNDS.
(a) I
N
G
ENERAL
.—Subsection (g) of section 468B (relating toclarification of taxation of certain funds) is amended to read asfollows:‘‘(g) C
LARIFICATION OF
T
AXATION OF
C
ERTAIN
F
UNDS
.—‘‘(1) I
N GENERAL
.—Except as provided in paragraph (2),nothing in any provision of law shall be construed as providingthat an escrow account, settlement fund, or similar fund isnot subject to current income tax. The Secretary shall prescriberegulations providing for the taxation of any such account orfund whether as a grantor trust or otherwise.‘‘(2) E
XEMPTION FROM TAX FOR CERTAIN SETTLEMENTFUNDS
.—An escrow account, settlement fund, or similar fundshall be treated as beneficially owned by the United Statesand shall be exempt from taxation under this subtitle if—‘‘(A) it is established pursuant to a consent decreeentered by a judge of a United States District Court,‘‘(B) it is created for the receipt of settlement paymentsas directed by a government entity for the sole purposeof resolving or satisfying one or more claims assertingliability under the Comprehensive EnvironmentalResponse, Compensation, and Liability Act of 1980,‘‘(C) the authority and control over the expenditureof funds therein (including the expenditure of contributionsthereto and any net earnings thereon) is with such govern-ment entity, and‘‘(D) upon termination, any remaining funds will bedisbursed to such government entity for use in accordancewith applicable law.For purposes of this paragraph, the term ‘government entity’means the United States, any State or political subdivisionthereof, the District of Columbia, any possession of the UnitedStates, and any agency or instrumentality of any of the fore-going.‘‘(3) T
ERMINATION
.—Paragraph (2) shall not apply toaccounts and funds established after December 31, 2010.’.
Regulations.26 USC 468B.26 USC 954 note.
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