A bill to amend the Internal Revenue Code of 1954 with respect to the taxation of interests in entities holding financial instruments.

[AI summary unavailable — showing source text] Amends the Internal Revenue Code to create a new type of entity, known as a debt holding company, which must elect such treatment and meet certain specified requirements. Imposes a tax on the adjustable taxable income of such debt holding company at the maximum corporate rate. Provides the following adjustments in arriving at taxable income: (1) an unlimited carryback of net operating losses of debt holding companies; (2) a deduction for certain amounts paid to holders of residual interests; (3) disallowance of the dividends received deduction for corporations; and (4) exclusion of all items of income, gain, loss, or deduction relating to prohibited transactions. Requires the amortization of the organizational expenses over the period of the qualified financial instrument held by the debt holding company with the longest maturity. Requires that substantially all of the assets of a debt holding company must consist of qualified financial instruments or permitted investments. Provides that all the interests in a debt holding company must be either "regular interests" or "residual interests." Defines a "regular interest" as an interest in a debt holding company the terms of which are …