118 STAT. 1653 PUBLIC LAW 108–357—OCT. 22, 2004 SEC. 904. INCREASE IN WITHHOLDING FROM SUPPLEMENTAL WAGE PAYMENTS IN EXCESS OF $1,000,000. (a) IN GENERAL.—If an employer elects under Treasury Regula tion 31.3402(g)–1 to determine the amount to be deducted and withheld from any supplemental wage payment by using a flat percentage rate, the rate to be used in determining the amount to be so deducted and withheld shall not be less than 28 percent (or the corresponding rate in effect under section 1(i)(2) of the Internal Revenue Code of 1986 for taxable years beginning in the calendar year in which the payment is made). (b) SPECIAL RULE FOR LARGE PAYMENTS.— (1) IN GENERAL.—Notwithstanding subsection (a), if the supplemental wage payment, when added to all such payments previously made by the employer to the employee during the calendar year, exceeds $1,000,000, the rate used with respect to such excess shall be equal to the maximum rate of tax in effect under section 1 of such Code for taxable years begin ning in such calendar year. (2) AGGREGATION.—All persons treated as a single employer under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986 shall be treated as a single employer for purposes of this subsection. (c) CONFORMING AMENDMENT.—Section 13273 of the Revenue Reconciliation Act of 1993 (Public Law 103–66) is repealed. (d) EFFECTIVE DATE.—The provisions of, and the amendment made by, this section shall apply to payments made after December 31, 2004. SEC. 905. TREATMENT OF SALE OF STOCK ACQUIRED PURSUANT TO EXERCISE OF STOCK OPTIONS TO COMPLY WITH CON FLICT OF INTEREST REQUIREMENTS. (a) IN GENERAL.—Section 421 (relating to general rules for certain stock options) is amended by adding at the end the following new subsection: ‘‘(d) CERTAIN SALES TO COMPLY WITH CONFLICT OF INTEREST REQUIREMENTS.—If— ‘‘(1) a share of stock is transferred to an eligible person (as defined in section 1043(b)(1)) pursuant to such person’s exercise of an option to which this part applies, and ‘‘(2) such share is disposed of by such person pursuant to a certificate of divestiture (as defined in section 1043(b)(2)), such disposition shall be treated as meeting the requirements of section 422(a)(1) or 423(a)(1), whichever is applicable.’’. (b) EFFECTIVE DATE.—The amendment made by this section shall apply to sales after the date of the enactment of this Act. SEC. 906. APPLICATION OF BASIS RULES TO NONRESIDENT ALIENS. (a) IN GENERAL.—Section 72 (relating to annuities and certain proceeds of endowment and life insurance contracts) is amended by redesignating subsection (w) as subsection (x) and by inserting after subsection (v) the following new subsection: ‘‘(w) APPLICATION OF BASIS RULES TO NONRESIDENT ALIENS.— ‘‘(1) IN GENERAL.—Notwithstanding any other provision of this section, for purposes of determining the portion of any distribution which is includible in gross income of a distributee who is a citizen or resident of the United States, the investment 26 USC 421 note. 107 Stat. 542.
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