elect, in accordance with regulations prescribed by the Secretary or his delegate, to be treated as a partnership for the taxable years during the election period, if all the shareholders owning stock in such corporation at any time on or after the first day of the election period and on or before the date of the election consent to the election. For purposes of this section, the term 'election period' means the period beginning with the taxable year with respect to which an election is made under this subsection and ending with the close of the third taxable year following such taxable year. "(b) QUALIFICATIONS.-The election described in subsection (a) may not be made by a domestic corporation unless at all times on or after the first day of the election period and on or before the date of election— "(1) no shareholder of such corporation is a nonresident alien or a foreign partnership; "(2) such corporation is not a corporation which was a party to a reorganization described in section 368 (b), or a corporation to which section 355 (or so much of section 356 as relates to section 355) applies and such corporation has not received a distribution under section 332 (relating to liquidations of subsidiaries) except in a case in which the basis of the assets distributed is determined under section 334 (b) (2); "(3) such corporation has only one class of stock; and "(4) no more than 80 percent of the stock of such corporation is owned by persons who formerly owned the business of such corporation as an unincorporated enterprise taxable as a domestic corporation under section 1361. "(c) PARTNERSHIP PROVISIONS APPLICABLE.-Under regulations prescribed by the Secretary or his delegate, a domestic corporation making the election under subsection (a) shall for the election period be considered a partnership for purposes of this subtitle (except chapter 2 thereof) and shall be subject to subchapter K (sec. 701 and following, relating to partnerships) with respect to formation, operation, distribution, liquidation, sale of an interest, and any other purpose; and each shareholder of such corporation shall for the election period be considered a partner owning an interest in the partnership in the proportion which shares owned by such shareholder bear to the total number of outstanding shares of such corporation. "(d) ELECTION IRREVOCABLE.-Except as provided in subsections (e) and (g), the election described in subsection (a) by a domestic corporation shall during the election period be irrevocable with respect to "(1) the electing corporation and its shareholders; and "(2) any corporate successor to the business of the electing corporation and the shareholders of such successor. "(e) CHANGE OF OWNERSHIP.-In the first year during the election period in which the shareholders who consented to the election described in subsection (a) own 80 percent or less of the stock of a corporation described in subsection (d), such corporation shall not be treated as a partnership for such year or for the remaining taxable years in the election period, unless such corporation makes a new election in accordance with the provisions of subsection (a). "(f) CONSTRUCTIVE OWNERSHIP.-For purposes of subsections (b) (4) and (e), the ownership of a stock interest shall be determined in accordance with the rules for constructive ownership of stock provided in section 267 (c) other than paragraph (3) thereof. "(g) DISQUALIFICATION.-If, during the election period, a corporation described in subsection (d) issues stock of a different class than that outstanding, the election described in subsection (a) shall be deemed never to have been made and the corporation shall be liable for all taxes due (except penalties) and such taxes may be assessed and collected as if no return had been filed. "(h) CROSS REFERENCE. "For period of limitations or assessment and collection of tax where no return has been filed, see section 6501." (b) ELECTION PERIOD FOR PARTNERSHIP AND PROPRIETORSHIPS ELECTING TO BE TAXED AS CORPORATIONS. (1) Section 1361 (a) of such Code (relating to unincorporated business enterprises electing to be taxed as domestic corporations) is amended by striking out "for such year and subsequent years" and inserting in lieu thereof "for the taxable years during the election period. For purposes of this section, the term 'election period' means the period beginning with the taxable year with respect to which an election under this subsection is made and ending with the close of the third taxable year following such taxable year". (2) Section 1361 (b) of such Code (relating to qualifications for unincorporated business enterprises electing to be taxed as domestic corporations) is amended by striking out paragraph (4) and inserting in lieu thereof the following new paragraph: "(4) no proprietor or partners, having more than 80 percent interest in the profits or capital of such enterprise, formerly owned stock in a corporation which was treated as a partnership under section 1371 and which carried on the business of such enterprise." (3) Section 1361 (c) of such Code (relating to application of corporate provisions) is amended (A) by striking out "shall, except as provided in subsection (m), be considered" and inserting in lieu thereof "shall, except as provided in subsection (m), for the election period, be considered"; and (B) by striking out "shall be considered a shareholder" and inserting in lieu thereof "shall, for the election period, be considered a shareholder". (4) Section 1361 (e) of such Code (relating to irrevocability of election) is amended by striking out "shall be irrevocable" and inserting in lieu thereof "shall, during the election period, be irrevocable". (5) Section 1361 (f) of such Code (relating to change in ownership) is amended (A) by inserting after "In any year" the following: "during the election period"; and (B) by striking out "subsequent years" and inserting in lieu thereof "the remaining taxable years in the election period". (6) Section 1361 (h) of such Code (relating to imposition of taxes) is amended by striking out "shall be subject" and inserting in lieu thereof "shall, for the taxable years in the election period, be subject". (7) Section 1361 (j) of such Code (relating to computation of taxable income) is amended by inserting after "taxable income" the following: "for the taxable years in the election period". (8) Section 1361 (k) of such Code (relating to distributions other than in liquidation) is amended by striking out "a distribution with" and inserting in lieu thereof "a distribution during the election period with". (9) Section 1361 (1) of such Code (relating to distributions in liquidation) is amended by inserting after "A distribution" the following: "during the election period". (c) TECHNICAL AMENDMENTS.— (1) Section 1504 (b) of such Code (relating to definition of includible corporation) is amended by adding at the end thereof the following new paragraph: "(8) Corporations treated as partnerships under section 1371." (2) The table of subchapters for chapter 1 of such Code is amended by striking out "SUBCHAPTER R. Election of certain partnerships and proprietorships as to taxable status." and inserting in lieu thereof "SUBCHAPTER R. Election of certain partnerships, proprietorships, and corporations as to taxable status." (d) EFFECTIVE DATE.-The amendments made by subsections (a) and (c) shall apply to taxable years beginning after December 31, 1957. The amendments made by subsection (b) shall apply to taxable years beginning after December 31, 1953, and ending after August 16, 1954. SEC. 7. INCREASE OF MINIMUM ACCUMULATED EARNINGS CREDIT. (a) AMENDMENT OF SECTION 535 (c).-Sections 535 (c) (2) (relating to minimum accumulated earnings credit) and 535 (c) (3) (relating to accumulated earnings credit of holding and investment companies) are amended by striking out "$60,000" and inserting in lieu thereof "$100,000". (b) EFFECTIVE DATE.-The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 1957. SEC. 8. ESTABLISHMENT OF PRECEDENTS BINDING IN APPLICATION OF THE INTERNAL REVENUE LAWS. (a) PRECEDENTS BINDING ON SECRETARY OF THE TREASURY.-Subchapter A of chapter 80 of the Internal Revenue Code of 1954 (relating to application of internal revenue laws) is amended by inserting at the end thereof the following new section: "SEC. 7810. PRECEDENTS BINDING ON THE SECRETARY. "(a) ORDER IN WHICH PRECEDENTS ARE BINDING. "(1) COURT RENDERING DECISION.-The Secretary or his delegate, in formulating rules and regulations under the internal revenue laws, in making determinations with respect to taxpayers, and in otherwise administering and enforcing the internal revenue laws shall be bound by a precedent of— "(A) the Supreme Court of the United States; "(B) a United States court of appeals, if there is no precedent of the Supreme Court of the United States; and "(C) the Tax Court of the United States, if there is no precedent of of the Supreme Court of the United States or a United States court of appeals. "(2) TIME OF DECISION.-If on the date on which this section is enacted there are two or more conflicting precedents of United States courts of appeals and no precedent of the Supreme Court of the United States with respect to the matter on which the precedents of such United States courts of apeals are in conflict, the Secretary or his delegate shall be bound by the most recent of such conflicting precedents. "(b) EFFECT OF CONFLICTING DECISIONS OR PRECEDENTS.— "(1) TAX Court of the UNITED STATES.-If the decision of a case by the Tax Court of the United States is adverse to the Secretary or his delegate and conflicts with a precedent which is binding on the Secretary or his delegate as provided in subsection (a), the Attorney General shall appeal the case upon which such adverse decision is based to the appropriate United States court of appeals. "(2) UNITED STATES COURTS OF APPEALS.-If the decision of a case by a United States court of appeals is adverse to the Secretary or his delegate and is in conflict with a precedent which is binding on the Secretary or his delegate as provided in subsection (a), the Attorney General shall petition the Supreme Court of the United States to review, by a writ of certiorari, the case on which such adverse decision is based. "(c) PRECEDENT.-For purposes of this section, the term 'precedent' means the whole or any part of a decision of the Supreme Court of the United States, a United States court of appeals, or the Tax Court of the United States of a case or any aspect thereof (whether arising under the Internal Revenue Code of 1954, the Internal Revenue Code of 1939, or prior internal revenue laws) which case or aspect thereof is factually similar to, and as to which there is no relevant distinction from, a matter as to which the Secretary or his delegate is formulating rules and regulations, making a determination with respect to a taxpayer, or administering or enforcing under the internal revenue laws; except that no decision or any part thereof shall be a precedent unless such decision is a final decision and until no further action (such as a petition for a new trial, appeal, request for review, or request for a rehearing) can be taken as to the case with respect to which such final decision is made." (b) TECHNICAL AMENDMENT.-The table of sections for subchapter A of chapter 80 of the Internal Revenue Code of 1954 is amended by adding at the end thereof the following: "Sec. 7810. Precedents binding on the Secretary." |