Page:United States Statutes at Large Volume 118.djvu/1550

 118 STAT. 1520 PUBLIC LAW 108–357—OCT. 22, 2004 (b) REPORT.—Not later than June 30, 2005, the Secretary shall submit to the Congress a report of the study conducted under this section, including specific recommendations as to how to improve the provisions of such Code applicable to earnings strip ping. TITLE V—DEDUCTION OF STATE AND LOCAL GENERAL SALES TAXES SEC. 501. DEDUCTION OF STATE AND LOCAL GENERAL SALES TAXES IN LIEU OF STATE AND LOCAL INCOME TAXES. (a) IN GENERAL.—Subsection (b) of section 164 (relating to definitions and special rules) is amended by adding at the end the following: ‘‘(5) GENERAL SALES TAXES.—For purposes of subsection (a)— ‘‘(A) ELECTION TO DEDUCT STATE AND LOCAL SALES TAXES IN LIEU OF STATE AND LOCAL INCOME TAXES.— ‘‘(i) IN GENERAL.—At the election of the taxpayer for the taxable year, subsection (a) shall be applied— ‘‘(I) without regard to the reference to State and local income taxes, and ‘‘(II) as if State and local general sales taxes were referred to in a paragraph thereof. ‘‘(B) DEFINITION OF GENERAL SALES TAX.—The term ‘general sales tax’ means a tax imposed at one rate with respect to the sale at retail of a broad range of classes of items. ‘‘(C) SPECIAL RULES FOR FOOD, ETC.—In the case of items of food, clothing, medical supplies, and motor vehicles— ‘‘(i) the fact that the tax does not apply with respect to some or all of such items shall not be taken into account in determining whether the tax applies with respect to a broad range of classes of items, and ‘‘(ii) the fact that the rate of tax applicable with respect to some or all of such items is lower than the general rate of tax shall not be taken into account in determining whether the tax is imposed at one rate. ‘‘(D) ITEMS TAXED AT DIFFERENT RATES.—Except in the case of a lower rate of tax applicable with respect to an item described in subparagraph (C), no deduction shall be allowed under this paragraph for any general sales tax imposed with respect to an item at a rate other than the general rate of tax. ‘‘(E) COMPENSATING USE TAXES.—A compensating use tax with respect to an item shall be treated as a general sales tax. For purposes of the preceding sentence, the term ‘compensating use tax’ means, with respect to any item, a tax which— ‘‘(i) is imposed on the use, storage, or consumption of such item, and ‘‘(ii) is complementary to a general sales tax, but only if a deduction is allowable under this paragraph

�