[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 347 Introduced in Senate (IS)]
110th CONGRESS
1st Session
S. 347
To amend the Fair Labor Standards Act of 1938 to provide for an
increase in the Federal minimum wage, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
January 22, 2007
Mr. Voinovich (for himself and Mr. Warner) introduced the following
bill; which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Fair Labor Standards Act of 1938 to provide for an
increase in the Federal minimum wage, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Minimum Wage Act of 2007''.
TITLE I--MINIMUM WAGE
SEC. 101. MINIMUM WAGE.
(a) In General.--Section 6(a)(1) of the Fair Labor Standards Act of
1938 (29 U.S.C. 206(a)(1)) is amended to read as follows:
``(1) except as otherwise provided in this section, not
less than--
``(A) $5.85 an hour, beginning on the 60th day
after the date of enactment of the Minimum Wage Act of
2007;
``(B) $6.55 an hour, beginning 12 months after that
60th day; and
``(C) $7.25 an hour, beginning 24 months after that
60th day;''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect 60 days after the date of enactment of this Act.
TITLE II--TAX PROVISIONS
SEC. 200. AMENDMENT OF CODE.
Except as otherwise expressly provided, whenever in this title an
amendment or repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be considered to
be made to a section or other provision of the Internal Revenue Code of
1986.
Subtitle A--Small Business Tax Relief
SEC. 201. EXTENSION OF 15-YEAR STRAIGHT-LINE COST RECOVERY FOR
QUALIFIED LEASEHOLD IMPROVEMENTS AND QUALIFIED RESTAURANT
PROPERTY.
(a) In General.--Clauses (iv) and (v) of section 168(e)(3)(E)
(relating to 15-year property) are each amended by striking ``placed in
service before January 1, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to property placed in service after December 31, 2007.
SEC. 202. CLARIFICATION OF CASH ACCOUNTING RULES FOR SMALL BUSINESS.
(a) Cash Accounting Permitted.--
(1) In general.--Section 446 of the Internal Revenue Code
of 1986 (relating to general rule for methods of accounting) is
amended by adding at the end the following new subsection:
``(g) Certain Small Business Taxpayers Permitted To Use Cash
Accounting Method Without Limitation.--
``(1) In general.--An eligible taxpayer shall not be
required to use an accrual method of accounting for any taxable
year.
``(2) Eligible taxpayer.--For purposes of this subsection,
a taxpayer is an eligible taxpayer with respect to any taxable
year if--
``(A) for all prior taxable years beginning after
December 31, 2006, the taxpayer (or any predecessor)
met the gross receipts test of section 448(c), and
``(B) the taxpayer is not subject to section 447 or
448.''.
(2) Expansion of gross receipts test.--
(A) In general.--Paragraph (3) of section 448(b) of
such Code (relating to entities with gross receipts of
not more than $5,000,000) is amended by striking
``$5,000,000'' in the text and in the heading and
inserting ``$10,000,000''.
(B) Conforming amendments.--Section 448(c) of such
Code is amended--
(i) by striking ``$5,000,000'' each place
it appears in the text and in the heading of
paragraph (1) and inserting ``$10,000,000'',
and
(ii) by adding at the end the following new
paragraph:
``(4) Inflation adjustment.--In the case of any taxable
year beginning in a calendar year after 2007, the dollar amount
contained in subsection (b)(3) and paragraph (1) of this
subsection shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, by substituting `calendar year
2006' for `calendar year 1992' in subparagraph (B)
thereof.
If any amount as adjusted under this subparagraph is not a
multiple of $100,000, such amount shall be rounded to the
nearest multiple of $100,000.''.
(b) Clarification of Inventory Rules for Small Business.--
(1) In general.--Section 471 of the Internal Revenue Code
of 1986 (relating to general rule for inventories) is amended
by redesignating subsection (c) as subsection (d) and by
inserting after subsection (b) the following new subsection:
``(c) Small Business Taxpayers Not Required To Use Inventories.--
``(1) In general.--A qualified taxpayer shall not be
required to use inventories under this section for a taxable
year.
``(2) Treatment of taxpayers not using inventories.--If a
qualified taxpayer does not use inventories with respect to any
property for any taxable year beginning after December 31,
2006, such property shall be treated as a material or supply
which is not incidental.
``(3) Qualified taxpayer.--For purposes of this subsection,
the term `qualified taxpayer' means--
``(A) any eligible taxpayer (as defined in section
446(g)(2)), and
``(B) any taxpayer described in section
448(b)(3).''.
(2) Conforming amendments.--
(A) Subpart D of part II of subchapter E of chapter
1 of such Code is amended by striking section 474.
(B) The table of sections for subpart D of part II
of subchapter E of chapter 1 of such Code is amended by
striking the item relating to section 474.
(c) Effective Date and Special Rules.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.
(2) Change in method of accounting.--In the case of any
taxpayer changing the taxpayer's method of accounting for any
taxable year under the amendments made by this section--
(A) such change shall be treated as initiated by
the taxpayer;
(B) such change shall be treated as made with the
consent of the Secretary of the Treasury; and
(C) the net amount of the adjustments required to
be taken into account by the taxpayer under section 481
of the Internal Revenue Code of 1986 shall be taken
into account over a period (not greater than 4 taxable
years) beginning with such taxable year.
SEC. 203. EXTENSION OF WORK OPPORTUNITY TAX CREDIT TO QUALIFIED
RESTAURANT EMPLOYEES.
(a) In General.--Section 51(d)(1) is amended by striking ``or'' at
the end of subparagraph (H), by striking the period at the end of
subparagraph (I) and inserting ``, or'', and by adding at the end the
following new subparagraph:
``(J) a qualified restaurant employee.''.
(b) Qualified Restaurant Employee.--Section 51(d) is amended by
redesignating paragraphs (11) through (13) as paragraphs (12) through
(14), respectively, and by inserting after paragraph (10) the following
new paragraph:
``(11) Qualified restaurant employee.--
``(A) In general.--The term `qualified restaurant
employee' means any individual--
``(i) who performs services in a restaurant
where tipping is not customary,
``(ii) who is not exempt under the Fair
Labor Standards Act and earns at least the
Federal minimum wage, and
``(iii) who is certified by the employer
during the hiring process as having attained
age 16 but not 20 on the hiring date.
``(B) Special rule for determining amount of
credit.--For purposes of applying this subpart to wages
paid or incurred to any qualified restaurant employee,
subsection (b)(3) shall be applied by substituting
`$3,000' for `$6,000'.''.
(c) Special Rule for Certifications.--Subparagraph (A) of section
51(d)(14), as redesignated by subsection (b), is amended by inserting
``, other than an individual described in paragraph (11),'' after ``An
individual''.
(d) Nonqualifying Rehires.--Paragraph (2) of section 51(i) is
amended to read as follows:
``(2) Nonqualifying rehires.--
``(A) In general.--No wages shall be taken into
account under subsection (a) with respect to any
individual, other than an individual described in
subsection (d)(11), if, prior to the hiring date of
such individual, such individual had been employed by
the employer at any time.
``(B) Qualified restaurant employees.--In the case
of an individual described in subsection (d)(11), no
wages shall be taken into account under subsection (a)
if, prior to the hiring date of such individual, such
individual had been employed by the employer within the
prior 90 day period.''.
(e) Minimum Employment Periods.--Section 51(i)(3) is amended by
adding at the end the following new subparagraph:
``(C) Nonapplication to qualified restaurant
employees.--Subparagraphs (A) and (B) shall not apply
to an individual described in subsection (d)(11).''.
(f) Effective Date.--The amendments made by this section shall
apply to individuals who begin work for the employer after the date of
the enactment of this Act.
Subtitle B--Revenue Offset Provisions
SEC. 211. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.
(a) In General.--Section 7701 is amended by redesignating
subsection (p) as subsection (q) and by inserting after subsection (o)
the following new subsection:
``(p) Clarification of Economic Substance Doctrine; etc.--
``(1) General rules.--
``(A) In general.--In any case in which a court
determines that the economic substance doctrine is
relevant for purposes of this title to a transaction
(or series of transactions), such transaction (or
series of transactions) shall have economic substance
only if the requirements of this paragraph are met.
``(B) Definition of economic substance.--For
purposes of subparagraph (A)--
``(i) In general.--A transaction has
economic substance only if--
``(I) the transaction changes in a
meaningful way (apart from Federal tax
effects) the taxpayer's economic
position, and
``(II) the taxpayer has a
substantial nontax purpose for entering
into such transaction and the
transaction is a reasonable means of
accomplishing such purpose.
In applying subclause (II), a purpose of
achieving a financial accounting benefit shall
not be taken into account in determining
whether a transaction has a substantial nontax
purpose if the origin of such financial
accounting benefit is a reduction of income
tax.
``(ii) Special rule where taxpayer relies
on profit potential.--A transaction shall not
be treated as having economic substance by
reason of having a potential for profit
unless--
``(I) the present value of the
reasonably expected pre-tax profit from
the transaction is substantial in
relation to the present value of the
expected net tax benefits that would be
allowed if the transaction were
respected, and
``(II) the reasonably expected pre-
tax profit from the transaction exceeds
a risk-free rate of return.
``(C) Treatment of fees and foreign taxes.--Fees
and other transaction expenses and foreign taxes shall
be taken into account as expenses in determining pre-
tax profit under subparagraph (B)(ii).
``(2) Special rules for transactions with tax-indifferent
parties.--
``(A) Special rules for financing transactions.--
The form of a transaction which is in substance the
borrowing of money or the acquisition of financial
capital directly or indirectly from a tax-indifferent
party shall not be respected if the present value of
the deductions to be claimed with respect to the
transaction is substantially in excess of the present
value of the anticipated economic returns of the person
lending the money or providing the financial capital. A
public offering shall be treated as a borrowing, or an
acquisition of financial capital, from a tax-
indifferent party if it is reasonably expected that at
least 50 percent of the offering will be placed with
tax-indifferent parties.
``(B) Artificial income shifting and basis
adjustments.--The form of a transaction with a tax-
indifferent party shall not be respected if--
``(i) it results in an allocation of income
or gain to the tax-indifferent party in excess
of such party's economic income or gain, or
``(ii) it results in a basis adjustment or
shifting of basis on account of overstating the
income or gain of the tax-indifferent party.
``(3) Definitions and special rules.--For purposes of this
subsection--
``(A) Economic substance doctrine.--The term
`economic substance doctrine' means the common law
doctrine under which tax benefits under subtitle A with
respect to a transaction are not allowable if the
transaction does not have economic substance or lacks a
business purpose.
``(B) Tax-indifferent party.--The term `tax-
indifferent party' means any person or entity not
subject to tax imposed by subtitle A. A person shall be
treated as a tax-indifferent party with respect to a
transaction if the items taken into account with
respect to the transaction have no substantial impact
on such person's liability under subtitle A.
``(C) Exception for personal transactions of
individuals.--In the case of an individual, this
subsection shall apply only to transactions entered
into in connection with a trade or business or an
activity engaged in for the production of income.
``(D) Treatment of lessors.--In applying paragraph
(1)(B)(ii) to the lessor of tangible property subject
to a lease--
``(i) the expected net tax benefits with
respect to the leased property shall not
include the benefits of--
``(I) depreciation,
``(II) any tax credit, or
``(III) any other deduction as
provided in guidance by the Secretary,
and
``(ii) subclause (II) of paragraph
(1)(B)(ii) shall be disregarded in determining
whether any of such benefits are allowable.
``(4) Other common law doctrines not affected.--Except as
specifically provided in this subsection, the provisions of
this subsection shall not be construed as altering or
supplanting any other rule of law, and the requirements of this
subsection shall be construed as being in addition to any such
other rule of law.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this subsection. Such regulations may include
exemptions from the application of this subsection.''.
(b) Effective Date.--The amendments made by this section shall
apply to transactions entered into after the date of the enactment of
this Act.
SEC. 212. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS
LACKING ECONOMIC SUBSTANCE, ETC.
(a) In General.--Subchapter A of chapter 68 is amended by inserting
after section 6662A the following new section:
``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO TRANSACTIONS
LACKING ECONOMIC SUBSTANCE, ETC.
``(a) Imposition of Penalty.--If a taxpayer has an noneconomic
substance transaction understatement for any taxable year, there shall
be added to the tax an amount equal to 40 percent of the amount of such
understatement.
``(b) Reduction of Penalty for Disclosed Transactions.--Subsection
(a) shall be applied by substituting `20 percent' for `40 percent' with
respect to the portion of any noneconomic substance transaction
understatement with respect to which the relevant facts affecting the
tax treatment of the item are adequately disclosed in the return or a
statement attached to the return.
``(c) Noneconomic Substance Transaction Understatement.--For
purposes of this section--
``(1) In general.--The term `noneconomic substance
transaction understatement' means any amount which would be an
understatement under section 6662A(b)(1) if section 6662A were
applied by taking into account items attributable to
noneconomic substance transactions rather than items to which
section 6662A would apply without regard to this paragraph.
``(2) Noneconomic substance transaction.--The term
`noneconomic substance transaction' means any transaction if--
``(A) there is a lack of economic substance (within
the meaning of section 7701(p)(1)) for the transaction
giving rise to the claimed benefit or the transaction
was not respected under section 7701(p)(2), or
``(B) the transaction fails to meet the
requirements of any similar rule of law.
``(d) Rules Applicable to Compromise of Penalty.--
``(1) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which this section
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(2) Applicable rules.--The rules of paragraphs (2) and
(3) of section 6707A(d) shall apply for purposes of paragraph
(1).
``(e) Coordination With Other Penalties.--Except as otherwise
provided in this part, the penalty imposed by this section shall be in
addition to any other penalty imposed by this title.
``(f) Cross References.--
``(1) For coordination of penalty with
understatements under section 6662 and other
special rules, see section 6662A(e).
``(2) For reporting of penalty imposed under
this section to the Securities and Exchange
Commission, see section 6707A(e).''.
(b) Coordination With Other Understatements and Penalties.--
(1) The second sentence of section 6662(d)(2)(A) is amended
by inserting ``and without regard to items with respect to
which a penalty is imposed by section 6662B'' before the period
at the end.
(2) Subsection (e) of section 6662A is amended--
(A) in paragraph (1), by inserting ``and
noneconomic substance transaction understatements''
after ``reportable transaction understatements'' both
places it appears,
(B) in paragraph (2)(A), by inserting ``and a
noneconomic substance transaction understatement''
after ``reportable transaction understatement'',
(C) in paragraph (2)(B), by inserting ``6662B or''
before ``6663'',
(D) in paragraph (2)(C)(i), by inserting ``or
section 6662B'' before the period at the end,
(E) in paragraph (2)(C)(ii), by inserting ``and
section 6662B'' after ``This section'',
(F) in paragraph (3), by inserting ``or noneconomic
substance transaction understatement'' after
``reportable transaction understatement'', and
(G) by adding at the end the following new
paragraph:
``(4) Noneconomic substance transaction understatement.--
For purposes of this subsection, the term `noneconomic
substance transaction understatement' has the meaning given
such term by section 6662B(c).''.
(3) Subsection (e) of section 6707A is amended--
(A) by striking ``or'' at the end of subparagraph
(B), and
(B) by striking subparagraph (C) and inserting the
following new subparagraphs:
``(C) is required to pay a penalty under section
6662B with respect to any noneconomic substance
transaction, or
``(D) is required to pay a penalty under section
6662(h) with respect to any transaction and would (but
for section 6662A(e)(2)(C)) have been subject to
penalty under section 6662A at a rate prescribed under
section 6662A(c) or under section 6662B,''.
(c) Clerical Amendment.--The table of sections for part II of
subchapter A of chapter 68 is amended by inserting after the item
relating to section 6662A the following new item:
``Sec. 6662B. Penalty for understatements attributable to transactions
lacking economic substance, etc.''.
(d) Effective Date.--The amendments made by this section shall
apply to transactions entered into after the date of the enactment of
this Act.
SEC. 213. APPLICATION OF RULES TREATING INVERTED CORPORATIONS AS
DOMESTIC CORPORATIONS TO CERTAIN TRANSACTIONS OCCURRING
AFTER MARCH 20, 2002.
(a) In General.--Section 7874(b) (relating to inverted corporations
treated as domestic corporations) is amended to read as follows:
``(b) Inverted Corporations Treated as Domestic Corporations.--
``(1) In general.--Notwithstanding section 7701(a)(4), a
foreign corporation shall be treated for purposes of this title
as a domestic corporation if such corporation would be a
surrogate foreign corporation if subsection (a)(2) were applied
by substituting `80 percent' for `60 percent'.
``(2) Special rule for certain transactions occurring after
march 20, 2002.--
``(A) In general.--If--
``(i) paragraph (1) does not apply to a
foreign corporation, but
``(ii) paragraph (1) would apply to such
corporation if, in addition to the substitution
under paragraph (1), subsection (a)(2) were
applied by substituting `March 20, 2002' for
`March 4, 2003' each place it appears,
then paragraph (1) shall apply to such corporation but
only with respect to taxable years of such corporation
beginning after December 31, 2006.
``(B) Special rules.--Subject to such rules as the
Secretary may prescribe, in the case of a corporation
to which paragraph (1) applies by reason of this
paragraph--
``(i) the corporation shall be treated, as
of the close of its last taxable year beginning
before January 1, 2007, as having transferred
all of its assets, liabilities, and earnings
and profits to a domestic corporation in a
transaction with respect to which no tax is
imposed under this title,
``(ii) the bases of the assets transferred
in the transaction to the domestic corporation
shall be the same as the bases of the assets in
the hands of the foreign corporation, subject
to any adjustments under this title for built-
in losses,
``(iii) the basis of the stock of any
shareholder in the domestic corporation shall
be the same as the basis of the stock of the
shareholder in the foreign corporation for
which it is treated as exchanged, and
``(iv) the transfer of any earnings and
profits by reason of clause (i) shall be
disregarded in determining any deemed dividend
or foreign tax creditable to the domestic
corporation with respect to such transfer.
``(C) Regulations.--The Secretary may prescribe
such regulations as may be necessary or appropriate to
carry out this paragraph, including regulations to
prevent the avoidance of the purposes of this
paragraph.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2006.
SEC. 214. MODIFICATION OF COLLECTION DUE PROCESS PROCEDURES FOR
EMPLOYMENT TAX LIABILITIES.
(a) In General.--Section 6330(f) (relating to jeopardy and State
refund collection) is amended--
(1) by striking ``; or'' at the end of paragraph (1) and
inserting a comma,
(2) by adding ``or'' at the end of paragraph (2), and
(3) by inserting after paragraph (2) the following new
paragraph:
``(3) the Secretary has served a levy in connection with
the collection of taxes under chapter 21, 22, 23, or 24,''.
(b) Effective Date.--The amendments made by this section shall
apply to levies issued after December 31, 2006.
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