CERTAIN CUSTOMER RECEIVABLES INELIGIBLE FOR MARK TO MARKET TREATMENT.

SEC. 7003. CERTAIN CUSTOMER RECEIVABLES INELIGIBLE FOR MARK TO MARKET TREATMENT. (a) Certain Receivables Not Eligible for Mark to Market.— Section 475(c) (relating to definitions) is amended by adding at the end the following new paragraph: “(4) Special rules for certain receivables.— “(A) In general.— Paragraph (2)(C) shall not include any nonfinancial customer paper. (B) Nonfinancial customer paper.— For purposes of subparagraph (A), the term ‘nonfinancial customer paper’ means any receivable which— “(i) is a note, bond, debenture, or other evidence of indebtedness; “(ii) arises out of the sale of nonfinancial goods or services by a person the principal activity of which is the selling or providing of nonfinancial goods or services; and “(iii) is held by such person (or a person who bears a relationship to such person described in section 267(b) or 707(b)) at all times since issue.”. (b) Regulations.— Section 475(g) is amended by striking “and” at the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting “, and”, and by adding at the end the following new paragraph: “(3) to prevent the use by taxpayers of subsection (c)(4)to avoid the application of this section to a receivable that 112 STAT. 833is inventory in the hands of the taxpayer (or a person who bears a relationship to the taxpayer described in sections 267(b)of 707(b)).”. (c) Effective Date.— (1) In general.— The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act. (2) Change in method of accounting.— In the case of any taxpayer required by the amendments made by this section to change its method of accounting for its first taxable year ending after the date of the enactment of this Act— (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 ratably over the 4-taxable-year period beginning with such first taxable year.