Suggested resolution:

1. Change in 12.2.4.2.5 [over.ics.ref] paragraph 1 as follows:

   When a parameter of type “reference to cv T” binds directly (9.5.4 [dcl.init.ref]) to an argument expression:

   • If the argument expression has a type D that is a derived class of the parameter type T, the implicit conversion sequence is a derived-to-base conversion from D to T (12.2.4.2 [over.best.ics]).
   • ...

2. Change in 12.2.4.3 [over.ics.rank] bullet 4.5 as follows:

   • ...
   • If class B is derived directly or indirectly from class A and class C is derived directly or indirectly from B,
     • conversion of C* to B* is better than conversion of C* to A*, [Example 10: ... —end example]
     • binding of an expression of type C to a reference to type B is better than binding an expression of type C to a reference to type A,
     • conversion of A::* to B::* is better than conversion of A::* to C::*,
     • conversion of C to B is better than conversion of C to A,
     • conversion of B* to A* is better than conversion of C* to A*,
     • binding of an expression of type B to a reference to type A is better than binding an expression of type C to a reference to type A,
     • conversion of B::* to C::* is better than conversion of A::* to C::*, and
     • conversion of B to A is better than conversion of C to A.
     [ Note: ... ]

(From submission #733.)

The derived-to-base tiebreaker rules in 12.2.4.3 [over.ics.rank] paragraph 4 should apply regardless of whether one destination type is a reference and the other one is not. Major implementations agree.