S 2380 ISCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to modernize the application of the subpart F rules to computer software, to expand the subpart F de minimis rule, and to extend certain expiring provisions.CommentsClose CommentsPermalink

November 16, 2007

Mr. SMITH (for himself and Ms. CANTWELL) introduced the following bill; which was read twice and referred to the Committee on FinanceCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to modernize the application of the subpart F rules to computer software, to expand the subpart F de minimis rule, and to extend certain expiring provisions.CommentsClose CommentsPermalink

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

SECTION 1. MODERNIZATION OF APPLICATION OF SUBPART F RULES TO RENTS AND ROYALTIES FROM COMPUTER SOFTWARE.

(a) In General- Section 954(c)(2) of the Internal Revenue Code of 1986 (relating to exceptions from definition of foreign personal holding income) is amended by adding at the end the following new subparagraph:CommentsClose CommentsPermalink





`(D) RENTS AND ROYALTIES DERIVED IN ACTIVE COMPUTER SOFTWARE BUSINESS-CommentsClose CommentsPermalink





`(i) IN GENERAL- Foreign personal holding company income shall not include rents and royalties which are attributable to computer software which--CommentsClose CommentsPermalink





`(I) is leased or licensed for use outside the United States, andCommentsClose CommentsPermalink





`(II) was developed or marketed by the controlled foreign corporation or a related person (within the meaning of subsection (d)(3)).CommentsClose CommentsPermalink





`(ii) DEVELOPMENT AND MARKETING- For purposes of clause (i), a person shall be treated as--CommentsClose CommentsPermalink





`(I) developing computer software if the person creates, produces, or adds value to the computer software, including by adapting, customizing, or localizing such software or by integrating such software with other computer software created or produced by such person, andCommentsClose CommentsPermalink





`(II) marketing computer software if the person engages in sales, marketing, promotional, maintenance, or support activities, or performs other significant services, with respect to the leasing or licensing of such software.'.CommentsClose CommentsPermalink





(b) Effective Date- The amendment made by this section shall apply to taxable years of controlled foreign corporations beginning after December 31, 2007, and to taxable years of United States shareholders with or within such taxable years of such foreign corporations end.CommentsClose CommentsPermalink

SEC. 2. EXPANSION OF DE MINIMIS RULE UNDER SUBPART F.

(a) In General- Clause (ii) of section 954(b)(3)(A) of the Internal Revenue Code of 1986 (relating to de minimis, etc., rules) is amended by striking `$1,000,000' and inserting `$5,000,000'.CommentsClose CommentsPermalink





(b) Technical Amendments-CommentsClose CommentsPermalink





(1) Clause (ii) of section 864(d)(5)(A) of the Internal Revenue Code of 1986 is amended by striking `$1,000,000' and inserting `$5,000,000'.CommentsClose CommentsPermalink





(2) Clause (i) of section 881(c)(5)(A) of such Code is amended by striking `$1,000,000' and inserting `$5,000,000'.CommentsClose CommentsPermalink





(c) Effective Date- The amendments made by this section shall apply to taxable years of controlled foreign corporations beginning after December 31, 2007, and to taxable years of United States shareholders with or within such taxable years of such foreign corporations end.CommentsClose CommentsPermalink

SEC. 3. PERMANENT EXTENSION OF LOOK-THRU RULE FOR RELATED CONTROLLED FOREIGN CORPORATIONS.

Section 954(c)(6)(B) of the Internal Revenue Code of 1986 (relating to application of look-thru rule for related controlled foreign corporations) is amended by striking `and before January 1, 2009,'.CommentsClose CommentsPermalink

SEC. 4. PERMANENT EXTENSION OF SUBPART F EXCEPTIONS FOR ACTIVE FINANCING.

(a) Exempt Insurance Income- Section 953(e)(10) of the Internal Revenue Code of 1986 (relating to application of exception for exempt insurance income) is amended--CommentsClose CommentsPermalink





(1) by striking `and before January 1, 2009,', andCommentsClose CommentsPermalink





(2) by striking the last sentence.CommentsClose CommentsPermalink





(b) Special Rule for Income Derived in the Active Conduct of Banking, Financing, or Similar Businesses- Section 954(h)(9) of the Internal Revenue Code of 1986 (relating to application) is amended by striking `and before January 1, 2009,'.CommentsClose CommentsPermalink