Title II — Anti-looting

“(f)

“(1) In this subsection—

“(A) the terms “change in control transaction”, “control person”, and “target firm” have the meanings given those terms in section 3 of the Stop Wall Street Looting Act; and

“(B) the term protected period means the shorter of—

“(i) the 8-year period beginning on the date on which a change in control transaction closed; or

“(ii) the period beginning on the date on which a change in control transaction closed and ending on the earliest subsequent date on which a public offering of a controlling share of the common equity securities of the target firm occurs.

“(2) For purposes of this section, the debtor is presumed to have made a transfer or incurred an obligation described in subparagraphs (A) and (B) of subsection (a)(1) if—

“(A) the transfer is made to or obligation is incurred by a target firm or an affiliate in connection with a change in control transaction; or

“(B) the transfer is made to a target firm or an affiliate by, or obligation is incurred by a target firm or an affiliate from, a control person, an affiliate, or an insider during a protected period.

“(3) For the purposes of this section, a court shall, in analyzing related transactions, link together as a single transaction any interrelated yet formally distinct steps in an integrated transaction (commonly known as the “step transaction doctrine”).”

“VIII Surtax on certain amounts received by investment firms

“59B. Surtax on certain amounts received by investment firms from controlled target firms

“(a) Imposition of tax

“(1) In general—If one or more applicable payments are included in the gross income of a taxpayer for any taxable year, then there is hereby imposed on the taxpayer for the taxable year a tax equal to the applicable percentage of the aggregate amount of such payments. Such tax shall be in addition to any other tax imposed by this subtitle.

“(2) Applicable percentage—For purposes of this subsection, the term applicable percentage means 100 percent, minus the highest rate of tax under section 1 or 11 (whichever is applicable) for the taxable year.

“(b) Applicable payment—For purposes of this section—

“(1) In general—The term applicable payment means any amount paid or incurred by an applicable entity (or any person related within the meaning of section 267(b) or 707(b) to such entity) to any other person which, at the time such amount is paid or incurred, is an applicable controlling entity. An amount shall be treated as an applicable payment without regard to whether it is paid or incurred to the taxpayer including it in gross income and to which subsection (a) applies.

“(2) Exceptions—Such term shall not include any of the following:

“(A) Interest—Any amount paid or incurred which is treated as interest for purposes of this chapter.

“(B) Distributions of property with respect to stock—Any distribution of property (as defined in section 317(a)) to which section 301(a) applies.

“(c) Definitions relating to entities—For purposes of this section—

“(1) Applicable entity—The term applicable entity means any person—

“(A) which is engaged in the active conduct of a trade or business, and

“(B) with respect to which any other person conducts activities in connection with an applicable trade or business.

“(2) Applicable controlling entity—The term applicable controlling entity means, with respect to any applicable entity, any person—

“(A) which is engaged in an applicable trade or business some or all of the activities of which are conducted in connection with the applicable entity, and

“(B) which controls (or is related within the meaning of section 267(b) or 707(b) to a person which controls) the applicable entity.

“(3) Applicable trade or business—The term applicable trade or business means any activity conducted on a regular, continuous, and substantial basis which, regardless of whether the activity is conducted in one or more entities, consists, in whole or in part, of—

“(A) raising or returning capital, and

“(B) either—

“(i) investing in or disposing of specified assets (or identifying specified assets for such investing or disposition), or

“(ii) developing specified assets.

“(4) Specified asset—The term specified asset means—

“(A) securities (as defined in section 475(c)(2) but without regard to the phrase “widely held or publicly traded” in subparagraph (B) thereof and without regard to the last sentence thereof), and

“(B) real estate held for rental or investment.

“(d) Rules and definitions relating to ownership attribution and control—For purposes of this section—

“(1) Constructive ownership rules used in determining related party—In determining whether persons are related within the meaning of section 267(b) or 707(b), the constructive ownership rules of section 318 shall apply in lieu of the constructive ownership rules which would otherwise apply, except that in applying such rules the term stock shall include capital, profits, or other beneficial interests in persons other than corporations.

“(2) Control

“(A) Corporations—In the case of a corporation, the term control has the meaning given such term by section 304(c) (without regard to paragraph (3)(B) thereof).

“(B) Other entities—In the case of a person other than a corporation, such term means the ownership, directly or indirectly, of at least 50 percent of the capital, profits, or other beneficial interests in the person.

“(e) Regulations—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section, including regulations—

“(1) providing for such adjustments to the application of this section as are necessary to prevent the avoidance of the purposes of this section, including through the use of unrelated persons, or conduit transactions, and

“(2) modifying the constructive ownership rules under section 318 to the extent necessary to apply such rules to capital, profits, or other beneficial interests as well as stock.”

“(10) Modification of limitation for certain businesses owned by private firms

“(A) In general—In the case of a taxpayer which is an applicable entity controlled by an applicable controlling entity (or any person related within the meaning of section 267(b) or 707(b) to such entity) at any time during the taxable year—

“(i) if the ratio of debt to equity of the taxpayer as of the close of the taxable year (or on any other day during the taxable year as the Secretary may prescribe in regulations) exceeds 1, then paragraph (1) shall be applied by substituting “___ percent” for “30 percent”, and

“(ii) in the case of the election under paragraph (7)(B) to treat any trade or business of the taxpayer as an electing real property trade or business—

“(I) the taxpayer may not make any such election during such taxable year, and

“(II) any such election of the taxpayer in effect as of the close of the taxable year preceding such taxable year with respect to a trade or business shall be revoked, effective for such taxable year and all succeeding taxable years.

“(B) Ratio of debt to equity—For purposes of this paragraph, the term ratio of debt to equity means, with respect to any taxpayer, the ratio which the total indebtedness of the taxpayer bears to the sum of the taxpayer's money and all other assets reduced (but not below zero) by such total indebtedness. For purposes of the preceding sentence—

“(i) the amount taken into account with respect to any asset shall be the adjusted basis thereof for purposes of determining gain,

“(ii) the amount taken into account with respect to any indebtedness with original issue discount shall be its issue price plus the portion of the original issue discount previously accrued as determined under the rules of section 1272 (determined without regard to subsection (a)(7) or (b)(4) thereof), and

“(iii) there shall be such other adjustments as the Secretary may by regulations prescribe.

“(C) Coordination with depreciation rules—If the alternative depreciation system under section 168(g) applies to property by reason of an election under paragraph (7)(B) which is revoked under subparagraph (A)(ii)(II), then the depreciation deduction under section 167(a) with respect to such property for the taxable year of revocation and all succeeding taxable years shall be determined under section 168 in the same manner as if such revocation were a change in use of the property under section 168(i)(5) and the regulations thereunder.

“(D) Definitions and rules—For purposes of this paragraph—

“(i) any term used in this paragraph which is also used in section 59B shall have the same meaning as when used in such section, and

“(ii) the constructive ownership rules of section 318 shall apply in the same manner as such rules apply for purposes of section 59B.”