REPEAL OF EXCLUSION FOR EXTRATERRITORIAL INCOME.

SEC. 101. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL INCOME.(a) In General.—Section 114 is hereby repealed.(b) Conforming Amendments.—(1) Subpart E of part III of subchapter N of chapter 1 (relating to qualifying foreign trade income) is hereby repealed.(2) The table of subparts for such part III is amended by striking the item relating to subpart E.(3) The table of sections for part III of subchapter B of chapter 1 is amended by striking the item relating to section 114.(4) The second sentence of section 56(g)(4)(B)(i) is amended by striking “114 or”.(5) Section 275(a) is amended—(A) by inserting “or” at the end of paragraph (4)(A), by striking “or” at the end of paragraph (4)(B) and inserting a period, and by striking subparagraph (C), and(B) by striking the last sentence.(6) Paragraph (3) of section 864(e) is amended—(A) by striking:“(3) Tax-exempt assets not taken into account.—“(A) In general.—For purposes of”; and inserting:“(3) Tax-exempt assets not taken into account.—For purposes of”, and(B) by striking subparagraph (B).(7) Section 903 is amended by striking “114, 164(a),” and inserting “164(a)”.(8) Section 999(c)(1) is amended by striking “941(a)(5),”.(c) Effective Date.—The amendments made by this section shall apply to transactions after December 31, 2004.(d) Transitional Rule for 2005 and 2006.—(1) In general.—In the case of transactions during 2005 or 2006, the amount includible in gross income by reason of the amendments made by this section shall not exceed the applicable percentage of the amount which would have been so included but for this subsection.(2) Applicable percentage.—For purposes of paragraph (1), the applicable percentage shall be as follows:(A) For 2005, the applicable percentage shall be 20 percent.(B) For 2006, the applicable percentage shall be 40 percent.(e) Revocation of Election To Be Treated as Domestic Corporation.—If, during the 1-year period beginning on the date of the enactment of this Act, a corporation for which an election is in effect under section 943(e) of the Internal Revenue Code of 1986 revokes such election, no gain or loss shall be recognized with respect to property treated as transferred under clause (ii) of section 943(e)(4)(B) of such Code to the extent such property—(1) was treated as transferred under clause (i) thereof, or118 STAT. 1424(2) was acquired during a taxable year to which such election applies and before May 1, 2003, in the ordinary course of its trade or business.The Secretary of the Treasury (or such Secretary’s delegate) may prescribe such regulations as may be necessary to prevent the abuse of the purposes of this subsection. (f) Binding Contracts.—The amendments made by this section shall not apply to any transaction in the ordinary course of a trade or business which occurs pursuant to a binding contract—(1) which is between the taxpayer and a person who is not a related person (as defined in section 943(b)(3) of such Code, as in effect on the day before the date of the enactment of this Act), and(2) which is in effect on September 17, 2003, and at all times thereafter.For purposes of this subsection, a binding contract shall include a purchase option, renewal option, or replacement option which is included in such contract and which is enforceable against the seller or lessor.