123STA T . 3 4 1 PUBLIC LA W 111 –5—FE B.1 7, 2 0 0 9‘ ‘ (C)rulesfo r th e ap pl ic atio n of this su b section to part - nerships ,S corporations, an d other pass-thru entities, includin g for the allocation of deferred deductions .’ ’. (b) EF F ECTIV E DA TE. —T hea m endments made b y this section shall apply to discharges in ta x able years ending after December 31 , 20 0 8 . SEC.123 2. MODIF IC AT IO N SOF RUL ES FOR ORI G INAL ISSUE DISCOUNT ON CERTAIN H IGH Y IELD O B LIGATIONS. (a) S USP E N SI O N OF SPECIA LR ULES.—Section 1 6 3(e)( 5 ) (relating to special rules for original issue discount on certain high yield obligations) is amended by redesignating subparagraph ( F )as subparagraph ( G ) and by inserting after subparagraph (E) the follo w ing new subparagraph
‘‘(F) SUSPENSION OF APPLICATION OF PA R A G RAP H .— ‘‘(i) TE M PORAR Y SUSPENSION.—This paragraph shall not apply to any applicable high yield discount obligation issued during the period beginning on Sep- tember 1, 2008, and ending on December 31, 200 9 , in exchange (including an exchange resulting from a modification of the debt instrument) for an obligation which is not an applicable high yield discount obliga- tion and the issuer (or obligor) of which is the same as the issuer (or obligor) of such applicable high yield discount obligation. The preceding sentence shall not apply to any obligation the interest on which is interest described in section 8 7 1(h)( 4 ) (without regard to subparagraph (D) thereof) or to any obligation issued to a related person (within the meaning of section 108(e)(4)). ‘‘(ii) SUCCESSIVE APPLICATION.— A ny obligation to which clause (i) applies shall not be treated as an applicable high yield discount obligation for purposes of applying this subparagraph to any other obligation issued in exchange for such obligation. ‘‘(iii) SECRETARIAL AUTHORITY TO SUSPEN D APPLICA- TION.—The Secretary may apply this paragraph with respect to debt instruments issued in periods following the period described in clause (i) if the Secretary deter- mines that such application is appropriate in light of distressed conditions in the debt capital mar k ets.’’. (b) I NTEREST RATE U SED IN DETERMINING H IGH Y IELD OB LIGA- TIONS.—The last sentence of section 163(i)(1) is amended— (1) by inserting ‘‘(i)’’ after ‘‘regulation’’, and (2) by inserting ‘‘, or (ii) permit, on a temporary basis, a rate to be used with respect to any debt instrument which is higher than the applicable Federal rate if the Secretary determines that such rate is appropriate in light of distressed conditions in the debt capital markets’’ before the period at the end. (c) EFFECTIVE DATE.— (1) SUSPENSION.—The amendments made by subsection (a) shall apply to obligations issued after August 31, 2008, in taxable years ending after such date. (2) INTEREST RATE AUTHORITY.—The amendments made by subsection (b) shall apply to obligations issued after December 31, 2009, in taxable years ending after such date. 26USC1 6 3note.Tim e p e r io d . 26 USC 163. 26USC1 08 note.
