To reduce the tax on Patriot employers, and for other purposes.

1. Adds SEC. __. REDUCED TAXES FOR PATRIOT EMPLOYERS at the end of title IV

   Adds a section

   In S. 2020 · Placed on Calendar Senate

   (d) Effective Date.--The amendments made by this section shall apply to amounts paid or accrued during the period beginning after December 31, 2006, and before January 1, 2008, and properly allocable to such period, with respect to mortgage insurance contracts issued after December 31, 2006.

   Inserted: SEC. __. REDUCED TAXES FOR PATRIOT EMPLOYERS.

   Inserted: (a) In General.--Subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new section:

   Inserted: "SEC. 45N. REDUCTION IN TAX OF PATRIOT EMPLOYERS.

   Inserted: "(a) In General.--In the case of any taxable year beginning after December 31, 2005, and before January 1, 2011, with respect to which a taxpayer is certified by the Secretary as a Patriot employer, the Patriot employer credit determined under this section for purposes of section 38 shall be equal to 1 percent of the taxable income of the taxpayer which is properly allocable to all trades or businesses with respect to which the taxpayer is certified as a Patriot employer for the taxable year.

   Inserted: "(b) Patriot Employer.--For purposes of subsection (a), the term 'Patriot employer' means, with respect to any taxable year, any taxpayer which--

   Inserted: "(1) maintains its headquarters in the United States if the taxpayer has ever been headquartered in the United States,

   Inserted: "(2) pays at least 60 percent of each employee's health care premiums,

   Inserted: "(3) if such taxpayer employs at least 50 employees on average during the taxable year--

   Inserted: "(A) maintains or increases the number of full-time workers in the United States relative to the number of full-time workers outside of United States,

   Inserted: "(B) compensates each employee of the taxpayer at an hourly rate (or equivalent thereof) not less than an amount equal to the Federal poverty level for a family of three for the calendar year in which the taxable year begins divided by 2,080,

   Inserted: "(C) provides either a defined benefit plan or a defined contribution plan which fully matches at least 5 percent of each employee's contributions to the plan, and

   Inserted: "(D) provides full differential salary and insurance benefits for all National Guard and Reserve employees who are called for active duty, and

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   Inserted: "(4) if such taxpayer employs less than 50 employees on average during the taxable year, either--

   Inserted: "(A) compensates each employee of the taxpayer at an hourly rate (or equivalent thereof) not less than an amount equal to the Federal poverty level for a family of 3 for the calendar year in which the taxable year begins divided by 2,080, or

   Inserted: "(B) provides either a defined benefit plan or a defined contribution plan which fully matches at least 5 percent of each employee's contributions to the plan.".

   Inserted: (b) Allowance as General Business Credit.--Section 38(b) is amended by striking "and" at the end of paragraph (25), by striking the period at the end of paragraph (26) and inserting ", and", and by adding at the end the following:

   Inserted: "(27) the Patriot employer credit determined under section 45N.".

   Inserted: (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

   Inserted: SEC. __. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE TO DUAL CAPACITY TAXPAYERS.

   Inserted: (a) In General.--Section 901 (relating to credit for taxes of foreign countries and of possessions of the United States) is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:

   Inserted: "(m) Special Rules Relating To Dual Capacity Taxpayers.--

   Inserted: "(1) General rule.--Notwithstanding any other provision of this chapter, any amount paid or accrued by a dual capacity taxpayer to a foreign country or possession of the United States for any period shall not be considered a tax--

   Inserted: "(A) if, for such period, the foreign country or possession does not impose a generally applicable income tax, or

   Inserted: "(B) to the extent such amount exceeds the amount (determined in accordance with regulations) which--

   Inserted: "(i) is paid by such dual capacity taxpayer pursuant to the generally applicable income tax imposed by the country or possession, or

   Inserted: "(ii) would be paid if the generally applicable income tax imposed by the country or possession were applicable to such dual capacity taxpayer.

   Inserted: Nothing in this paragraph shall be construed to imply the proper treatment of any such amount not in excess of the amount determined under subparagraph (B).

   Inserted: "(2) Dual capacity taxpayer.--For purposes of this subsection, the term 'dual capacity taxpayer' means, with respect to any foreign country or possession of the United States, a person who--

   Inserted: "(A) is subject to a levy of such country or possession, and

   Inserted: "(B) receives (or will receive) directly or indirectly a specific economic benefit (as determined in accordance with regulations) from such country or possession.

   Inserted: "(3) Generally applicable income tax.--For purposes of this subsection--

   Inserted: "(A) In general.--The term 'generally applicable income tax' means an income tax (or a series of income taxes) which is generally imposed under the laws of a foreign country or possession on income derived from the conduct of a trade or business within such country or possession.

   Inserted: "(B) Exceptions.--Such term shall not include a tax unless it has substantial application, by its terms and in practice, to--

   Inserted: "(i) persons who are not dual capacity taxpayers, and

   Inserted: "(ii) persons who are citizens or residents of the foreign country or possession."

   Inserted: (b) Effective Date.--

   Inserted: (1) In general.--The amendments made by this section shall apply to taxes paid or accrued in taxable years beginning after the date of the enactment of this Act.

   Inserted: (2) Contrary treaty obligations upheld.--The amendments made by this section shall not apply to the extent contrary to any treaty obligation of the United States.

   Inserted: SEC. __. RULES RELATING TO FOREIGN OIL AND GAS INCOME.

   Inserted: (a) Separate Basket for Foreign Tax Credit.--

   Inserted: (1) Separate basket.--

   Inserted: (A) Years before 2007.--Paragraph (1) of section 904(d) (relating to separate application of section with respect to certain categories of income), as in effect for years beginning before 2007, is amended by striking "and" at the end of subparagraph (H), by redesignating subparagraph (I) as subparagraph (J), and by inserting after subparagraph (H) the following new subparagraph:

   Inserted: "(I) foreign oil and gas income, and".

   Inserted: (B) 2007 and after.--Paragraph (1) of section 904(d), as in effect for years beginning after 2006, is amended by striking "and" at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ", and", and by adding at the end the following:

   Inserted: "(C) foreign oil and gas income."

   Inserted: (2) Definition.--

   Inserted: (A) Years before 2007.--Paragraph (2) of section 904(d), as in effect for years beginning before 2007, is amended by redesignating subparagraphs (H) and (I) as subparagraphs (I) and (J), respectively, and by inserting after subparagraph (G) the following new subparagraph:

   Inserted: "(H) Foreign oil and gas income.--The term 'foreign oil and gas income' has the meaning given such term by section 954(g)."

   Inserted: (B) 2007 and after.--Section 904(d)(2), as in effect for years after 2006, is amended by redesignating subparagraphs (J) and (K) as subparagraphs (K) and (L) and by inserting after subparagraph (I) the following:

   Inserted: "(J) Foreign oil and gas income.--For purposes of this section--

   Inserted: "(i) In general.--The term 'foreign oil and gas income' has the meaning given such term by section 954(g).

   Inserted: "(ii) Coordination.--Passive category income and general category income shall not include foreign oil and gas income (as so defined)."

   Inserted: (3) Conforming amendments.--

   Inserted: (A) Section 904(d)(3)(F)(i) is amended by striking "or (E)" and inserting "(E), or (I)".

   Inserted: (B) Section 907(a) is hereby repealed.

   Inserted: (C) Section 907(c)(4) is hereby repealed.

   Inserted: (D) Section 907(f) is hereby repealed.

   Inserted: (4) Effective dates.--

   Inserted: (A) In general.--The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

   Inserted: (B) Years after 2006.--The amendments made by paragraphs (1)(B) and (2)(B) shall apply to taxable years beginning after December 31, 2006.

   Inserted: (C) Transitional rules.--

   Inserted: (i) Separate basket treatment.--Any taxes paid or accrued in a taxable year beginning on or before the date of the enactment of this Act, with respect to income which was described in subparagraph (I) of section 904(d)(1) of such Code (as in effect on the day before the date of the enactment of this Act), shall be treated as taxes paid or accrued with respect to foreign oil and gas income to the extent the taxpayer establishes to the satisfaction of the Secretary of the Treasury that such taxes were paid or accrued with respect to foreign oil and gas income.

   Inserted: (ii) Carryovers.--Any unused oil and gas extraction taxes which under section 907(f) of such Code (as so in effect) would have been allowable as a carryover to the taxpayer's first taxable year beginning after the date of the enactment of this Act (without regard to the limitation of paragraph (2) of such section 907(f) for first taxable year) shall be allowed as carryovers under section 904(c) of such Code in the same manner as if such taxes were unused taxes under such section 904(c) with respect to foreign oil and gas extraction income.

   Inserted: (iii) Losses.--The amendment made by paragraph (3)(C) shall not apply to foreign oil and gas extraction losses arising in taxable years beginning on or before the date of the enactment of this Act.

   Inserted: (b) Elimination of Deferral for Foreign Oil and Gas Extraction Income.--

   Inserted: (1) General rule.--Paragraph (1) of section 954(g) (defining foreign base company oil related income) is amended to read as follows:

   Inserted: "(1) In general.--Except as otherwise provided in this subsection, the term 'foreign oil and gas income' means any income of a kind which would be taken into account in determining the amount of--

   Inserted: "(A) foreign oil and gas extraction income (as defined in section 907(c)), or

   Inserted: "(B) foreign oil related income (as defined in section 907(c))."

   Inserted: (2) Conforming amendments.--

   Inserted: (A) Subsections (a)(5), (b)(5), and (b)(6) of section 954, and section 952(c)(1)(B)(ii)(I), are each amended by striking "base company oil related income" each place it appears (including in the heading of subsection (b)(8)) and inserting "oil and gas income".

   Inserted: (B) Subsection (b)(4) of section 954 is amended by striking "base company oil-related income" and inserting "oil and gas income".

   Inserted: (C) The subsection heading for subsection (g) of section 954 is amended by striking "Foreign Base Company Oil Related Income" and inserting "Foreign Oil and Gas Income".

   Inserted: (D) Subparagraph (A) of section 954(g)(2) is amended by striking "foreign base company oil related income" and inserting "foreign oil and gas income".

   Inserted: (3) Effective date.--The amendments made by this subsection shall apply to taxable years of foreign corporations beginning after the date of the enactment of this Act, and to taxable years of United States shareholders ending with or within such taxable years of foreign corporations.

   Inserted: SEC. __. MODIFICATION OF CREDIT FOR PRODUCING FUEL FROM A NONCONVENTIONAL SOURCE.

   Inserted: (a) Taxable Years Ending Before 2006.--

   Inserted: (1) Modification of phaseout.--

   Inserted: (A) In general.--Section 29(b)(1)(A) is amended by inserting "the calendar year preceding" before "the calendar year".

   Inserted: (B) Conforming amendments.--Section 29(b)((2) is amended--

   Inserted: (i) by striking "The" and inserting "With respect to any calendar year, the", and

   Inserted: (ii) by striking "for the calendar year in which the sale occurs" and inserting "for such calendar year".

   Inserted: (2) No inflation adjustment for the credit amount in 2005.--Section 29(b)(2), as amended by paragraph (1), is amended by adding at the end the following new sentence: "This paragraph shall not apply with respect to the $3 amount in subsection (a) for calendar year 2005 and the amount in effect under subsection (a) for sales in such calendar year shall be the amount which was in effect for sales in calendar year 2004.".

   Inserted: (b) Taxable Years Ending After 2005.--

   Inserted: (1) Modification of phaseout.--

   Inserted: (A) In general.--Section 45K(b)(1)(A) is amended by inserting "the calendar year preceding" before "the calendar year".

   Inserted: (B) Conforming amendments.--Section 45K(b)((2) is amended--

   Inserted: (i) by striking "The" and inserting "With respect to any calendar year, the", and

   Inserted: (ii) by striking "for the calendar year in which the sale occurs" and inserting "for such calendar year".

   Inserted: (2) No inflation adjustment for the credit amount in 2005, 2006, and 2007.--Section 45K(b)(2), as amended by paragraph (1), is amended by adding at the end the following new sentence: "This paragraph shall not apply with respect to the $3 amount in subsection (a) for calendar years 2005, 2006, and 2007 and the amount in effect under subsection (a) for sales in each such calendar year shall be the amount which was in effect for sales in calendar year 2004.".

   Inserted: (3) Treatment of coke and coke gas.--

   Inserted: (A) Nonapplication of phaseout.--Section 45K(g)(2) is amended by adding at the end the following new subparagraph:

   Inserted: "(D) Nonapplication of phaseout.--Subsection (b)(1) shall not apply.".

   Inserted: (B) Application of inflation adjust- ment.--Section 45K(g)(2)(B) is amended by inserting "and the last sentence of subsection (b)(2) shall not apply.".

   Inserted: (C) Clarification of qualifying facility.--Section 45K(g)(1) is amended by inserting "(other than from petroleum based products)" after "coke or coke gas".

   Inserted: (c) Effective Date.--The amendments made by this section shall apply to fuel sold after December 31, 2004.

   Original wording

   At the end of title IV, insert the following:

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As printed