II

106TH CONGRESS

1ST SESSION S. 1164

To amend the Internal Revenue Code of 1986 to simplify certain rules

relating to the taxation of United States business operating abroad,

and for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 27, 1999

Mr. HATCH (for himself, Mr. BAUCUS, and Mr. MACK) introduced the

following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to simplify

certain rules relating to the taxation of United States

business operating abroad, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;

4 TABLE OF CONTENTS.

5 (a) SHORT TITLE.—This Act may be cited as the

6 ‘‘International Tax Simplification for American Competi7 tiveness Act of 1999’’.

8 (b) AMENDMENT OF 1986 CODE.—Except as other9 wise expressly provided, whenever in this Act an amend-
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1 ment or repeal is expressed in terms of an amendment

2 to, or repeal of, a section or other provision, the reference

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986.

5 (c) TABLE OF CONTENTS.—The table of contents for

6 this Act is as follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.

TITLE I—TREATMENT OF CONTROLLED FOREIGN CORPORATIONS

Sec. 101. Permanent subpart F exemption for active financing income.

Sec. 102. Study of proper treatment of European Union under same country

exceptions.

Sec. 103. Expansion of de minimis rule under subpart F.

Sec. 104. Subpart F earnings and profits determined under generally accepted

accounting principles.

Sec. 105. Clarification of treatment of pipeline transportation income.

Sec. 106. Subpart F treatment of income from transmission of high voltage

electricity.

Sec. 107. Look-through treatment for sales of partnership interests.

Sec. 108. Effective date.

TITLE II—PROVISIONS RELATING TO FOREIGN TAX CREDIT

Sec. 201. Extension of period to which excess foreign taxes may be carried.

Sec. 202. Recharacterization of overall domestic loss.

Sec. 203. Special rules relating to financial services income.

Sec. 204. Look-thru rules to apply to dividends from noncontrolled section 902

corporations.

Sec. 205. Application of look-thru rules to foreign tax credit.

Sec. 206. Ordering rules for foreign tax credit carryovers.

Sec. 207. Repeal of limitation of foreign tax credit under alternative minimum

tax.

Sec. 208. Repeal of special rules for applying foreign tax credit in case of foreign oil and gas income.

TITLE III—OTHER PROVISIONS

Sec. 301. Deduction for dividends received from certain foreign corporations.

Sec. 302. Application of uniform capitalization rules to foreign persons.

Sec. 303. Treatment of military property of foreign sales corporations.

Sec. 304. United States property not to include certain assets acquired by dealers in ordinary course of trade or business.

Sec. 305. Treatment of certain dividends of regulated investment companies.

Sec. 306. Regulatory authority to exclude certain preliminary agreements from

definition of intangible property.

Sec. 307. Airline mileage awards to certain foreign persons.

Sec. 308. Repeal of reduction of subpart F income of export trade corporations.

Sec. 309. Study of interest allocation.
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Sec. 310. Interest payments deductible where disqualified guarantee has economic effect.

Sec. 311. Modifications of reporting requirements for certain foreign owned corporations.

1 TITLE I—TREATMENT OF CON2 TROLLED FOREIGN COR3 PORATIONS

4 SEC. 101. PERMANENT SUBPART F EXEMPTION FOR ACTIVE

5 FINANCING INCOME.

6 (a) BANKING, FINANCING, OR SIMILAR BUSI7 NESSES.—Section 954(h) (relating to special rule for in8 come derived in the active conduct of banking, financing,

9 or similar businesses) is amended by striking paragraph

10 (9).

11 (b) INSURANCE BUSINESSES.—Section 953(e) (defin12 ing exempt insurance income) is amended by striking

13 paragraph (10) and by redesignating paragraph (11) as

14 paragraph (10).

15 (c) EFFECTIVE DATE.—The amendments made by

16 this section shall apply to taxable years of a foreign cor17 poration beginning after December 31, 1999, and to tax18 able years of United States shareholders with or within

19 which such taxable years of such foreign corporation end.

20 SEC. 102. STUDY OF PROPER TREATMENT OF EUROPEAN

21 UNION UNDER SAME COUNTRY EXCEPTIONS.

22 (a) STUDY.—The Secretary of the Treasury or the

23 Secretary’s delegate shall conduct a study on the feasi-
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1 bility of treating all countries included in the European

2 Union as 1 country for purposes of applying the same

3 country exceptions under subpart F of part III of sub4 chapter N of chapter 1 of the Internal Revenue Code of

5 1986. Such study shall include consideration of methods

6 of ensuring that taxpayers are subject to a substantial ef7 fective rate of foreign tax in such countries if such treat8 ment is adopted.

9 (b) REPORT.—Not later than 6 months after the date

10 of the enactment of this Act, the Secretary of the Treasury

11 shall report to the Committee on Ways and Means of the

12 House of Representatives and the Committee on Finance

13 of the Senate the results of the study conducted under

14 subsection (a), including recommendations (if any) for leg15 islation.

16 SEC. 103. EXPANSION OF DE MINIMIS RULE UNDER SUB17 PART F.

18 (a) IN GENERAL.—Subparagraph (A) of section

19 954(b)(3) (relating to de minimis, etc., rules) is

20 amended—

21 (1) by striking ‘‘5 percent’’ in clause (i) and in22 serting ‘‘10 percent’’, and

23 (2) by striking ‘‘$1,000,000’’ in clause (ii) and

24 inserting ‘‘$2,000,000’’.

25 (b) TECHNICAL AMENDMENTS.—
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1 (1) Clause (ii) of section 864(d)(5)(A) is

2 amended by striking ‘‘5 percent or $1,000,000’’ and

3 inserting ‘‘10 percent or $2,000,000’’.

4 (2) Clause (i) of section 881(c)(5)(A) is amend5 ed by striking ‘‘5 percent or $1,000,000’’ and insert6 ing ‘‘10 percent or $2,000,000’’.

7 SEC. 104. SUBPART F EARNINGS AND PROFITS DETER8 MINED UNDER GENERALLY ACCEPTED AC9 COUNTING PRINCIPLES.

10 (a) IN GENERAL.—Section 964(a) (relating to earn11 ings and profits) is amended by striking ‘‘rules substan12 tially similar to those applicable to domestic corporations,

13 under regulations prescribed by the Secretary’’ and insert14 ing ‘‘generally accepted accounting principles in the

15 United States’’.

16 (b) EFFECTIVE DATE.—The amendment made by

17 subsection (a) shall apply to distributions during, and the

18 determination of the inclusion under section 951 of the

19 Internal Revenue Code of 1986 with respect to, taxable

20 years of foreign corporations beginning after December

21 31, 1999.

22 SEC. 105. CLARIFICATION OF TREATMENT OF PIPELINE

23 TRANSPORTATION INCOME.

24 Section 954(g)(1) (defining foreign base company oil

25 related income) is amended by striking ‘‘or’’ at the end
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1 of subparagraph (A), by striking the period at the end

2 of subparagraph (B) and inserting ‘‘, or’’, and by inserting

3 after subparagraph (B) the following new subparagraph:

4 ‘‘(C) the pipeline transportation of oil or

5 gas within such foreign country.’’

6 SEC. 106. SUBPART F TREATMENT OF INCOME FROM

7 TRANSMISSION OF HIGH VOLTAGE ELEC8 TRICITY.

9 Section 954(e) (relating to foreign base company

10 services income) is amended by adding at the end the fol11 lowing new paragraph:

12 ‘‘(3) EXCEPTION FOR INCOME FROM TRANS13 MISSION OF HIGH VOLTAGE ELECTRICITY.—The

14 term ‘foreign base company services income’ does

15 not include income derived in connection with the

16 performance of services which are related to the

17 transmission of high voltage electricity.’’

18 SEC. 107. LOOK-THROUGH TREATMENT FOR SALES OF

19 PARTNERSHIP INTERESTS.

20 (a) IN GENERAL.—Section 954(c) (defining foreign

21 personal holding company income) is amended by adding

22 at the end the following new paragraph:

23 ‘‘(4) LOOK-THROUGH RULE FOR CERTAIN

24 PARTNERSHIP SALES.—
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1 ‘‘(A) IN GENERAL.—In the case of any

2 sale by a controlled foreign corporation of an

3 interest in a partnership with respect to which

4 such corporation is a 10-percent owner, such

5 corporation shall be treated for purposes of this

6 subsection as selling the proportionate share of

7 the assets of the partnership attributable to

8 such interest.

9 ‘‘(B) 10-PERCENT OWNER.—For purposes

10 of this paragraph, the term ‘10-percent owner’

11 means a controlled foreign corporation which

12 owns 10 percent or more of the capital or prof13 its interest in the partnership. The constructive

14 ownership rules of section 958(b) shall apply

15 for purposes of the preceding sentence.’’

16 (b) CONFORMING AMENDMENT.—Section

17 954(c)(1)(B)(ii) is amended by inserting ‘‘except as pro18 vided in paragraph (4),’’ before ‘‘which’’.

19 SEC. 108. EFFECTIVE DATE.

20 Except as otherwise provided in this title, the amend21 ments made by this title shall apply to taxable years of

22 controlled foreign corporations beginning after December

23 31, 1999, and taxable years of United States shareholders

24 with or within which such taxable years of controlled for25 eign corporations end.
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1 TITLE II—PROVISIONS RELAT2 ING TO FOREIGN TAX CREDIT

3 SEC. 201. EXTENSION OF PERIOD TO WHICH EXCESS FOR4 EIGN TAXES MAY BE CARRIED.

5 (a) GENERAL RULE.—Section 904(c) (relating to

6 carryback and carryover of excess tax paid) is amended

7 by striking ‘‘in the first, second, third, fourth, or fifth’’

8 and inserting ‘‘in any of the first 10’’.

9 (b) EXCESS EXTRACTION TAXES.—Paragraph (1) of

10 section 907(f) is amended by striking ‘‘in the first, second,

11 third, fourth, or fifth’’ and inserting ‘‘in any of the first

12 10’’.

13 (c) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to excess foreign taxes arising in

15 taxable years beginning after December 31, 1999.

16 SEC. 202. RECHARACTERIZATION OF OVERALL DOMESTIC

17 LOSS.

18 (a) GENERAL RULE.—Section 904 is amended by re19 designating subsections (g), (h), (i), (j), and (k) as sub20 sections (h), (i), (j), (k), and (l) respectively, and by in21 serting after subsection (f) the following new subsection:

22 ‘‘(g) RECHARACTERIZATION OF OVERALL DOMESTIC

23 LOSS.—

24 ‘‘(1) GENERAL RULE.—For purposes of this

25 subpart, in the case of any taxpayer who sustains an
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1 overall domestic loss for any taxable year beginning

2 after December 31, 1999, that portion of the tax3 payer’s taxable income from sources within the

4 United States for each succeeding taxable year

5 which is equal to the lesser of—

6 ‘‘(A) the amount of such loss (to the extent

7 not used under this paragraph in prior taxable

8 years), or

9 ‘‘(B) 50 percent of the taxpayer’s taxable

10 income from sources within the United States

11 for such succeeding taxable year,

12 shall be treated as income from sources without the

13 United States (and not as income from sources with14 in the United States).

15 ‘‘(2) OVERALL DOMESTIC LOSS DEFINED.—For

16 purposes of this subsection and section 936—

17 ‘‘(A) IN GENERAL.—The term ‘overall do18 mestic loss’ means any domestic loss to the ex19 tent such loss offsets taxable income from

20 sources without the United States for the tax21 able year or for any preceding taxable year by

22 reason of a carryback. For purposes of the pre23 ceding sentence, the term ‘domestic loss’ means

24 the amount by which the gross income for the

25 taxable year from sources within the United
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1 States is exceeded by the sum of the deductions

2 properly apportioned or allocated thereto (deter3 mined without regard to any carryback from a

4 subsequent taxable year).

5 ‘‘(B) TAXPAYER MUST HAVE ELECTED

6 FOREIGN TAX CREDIT FOR YEAR OF LOSS.—

7 The term ‘overall domestic loss’ shall not in8 clude any loss for any taxable year unless the

9 taxpayer chose the benefits of this subpart for

10 such taxable year.

11 ‘‘(3) CHARACTERIZATION OF SUBSEQUENT IN12 COME.—

13 ‘‘(A) IN GENERAL.—Any income from

14 sources within the United States that is treated

15 as income from sources without the United

16 States under paragraph (1) shall be allocated

17 among and increase the income categories in

18 proportion to the loss from sources within the

19 United States previously allocated to those in20 come categories.

21 ‘‘(B) INCOME CATEGORY.—For purposes of

22 this paragraph, the term ‘income category’ has

23 the meaning given such term by subsection

24 (f)(5)(E)(i).
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1 ‘‘(4) COORDINATION WITH SUBSECTION (f).—

2 The Secretary shall prescribe such regulations as

3 may be necessary to coordinate the provisions of this

4 subsection with the provisions of subsection (f).’’

5 (b) CONFORMING AMENDMENTS.—

6 (1) Section 535(d)(2) is amended by striking

7 ‘‘section 904(g)(6)’’ and inserting ‘‘section

8 904(h)(6)’’.

9 (2) Subparagraph (A) of section 936(a)(2) is

10 amended by striking ‘‘section 904(f)’’ and inserting

11 ‘‘subsections (f) and (g) of section 904’’.

12 (c) EFFECTIVE DATE.—The amendments made by

13 this section shall apply to losses for taxable years begin14 ning after December 31, 1999.

15 SEC. 203. SPECIAL RULES RELATING TO FINANCIAL SERV16 ICES INCOME.

17 (a) EXCEPTION FOR INTEREST ON CERTAIN SECURI18 TIES.—Section 904(d)(2)(B) (relating to high withholding

19 tax interest) is amended by redesignating clause (iii) as

20 clause (iv) and by inserting after clause (ii) the following

21 new clause:

22 ‘‘(iii) EXCEPTION FOR INTEREST ON

23 DEALER PROPERTY.—The term ‘high with24 holding tax interest’ shall not include any

25 interest on a security (within the meaning
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1 of section 475(c)(2)) which is received or

2 accrued by a person that holds the security

3 in connection with the holder’s activities as

4 a dealer in securities (within the meaning

5 of section 475(c)(1)).’’

6 (b) FINANCIAL SERVICES INCOME IN EXCESS OF 80

7 PERCENT OF GROSS INCOME.—Section 904(d)(2)(C) (re8 lating to financial services income) is amended by adding

9 at the end the following new clause:

10 ‘‘(iv) INCOME EXCEEDING 80 PERCENT

11 OF GROSS INCOME.—If the financial serv12 ices income (as defined in clause (i)) of

13 any person exceeds 80 percent of gross in14 come, the entire gross income for the tax15 able year shall be treated as financial serv16 ices income.’’

17 (c) EXCEPTION FOR INCOME ON DEALER PROP18 ERTY.—Subsection 904(g) (relating to source rules in case

19 of United States-owned foreign corporations) is amended

20 by redesignating paragraph (11) as paragraph (12) and

21 by adding after paragraph (10) the following new para22 graph:

23 ‘‘(11) EXCEPTION FOR INCOME ON DEALER

24 PROPERTY.—Paragraph (1) shall not apply to any

25 amount derived from a United States-owned foreign
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1 corporation that is derived from income on a secu2 rity (within the meaning of section 475(c)(2)) which

3 is received or accrued by a person that holds the se4 curity in connection with the holder’s activities as a

5 dealer in securities (within the meaning of section

6 475(c)(1)).’’

7 (d) EFFECTIVE DATES.—

8 (1) IN GENERAL.—The amendments made by

9 this section shall apply to taxable years beginning

10 after December 31, 1999.

11 (2) DEEMED PAID CREDITS.—In the case of

12 any credit under section 901 of the Internal Revenue

13 Code of 1986 by reason of section 902 or 960 of

14 such Code, the amendments made by this section

15 shall apply to taxable years of foreign corporations

16 beginning after December 31, 1999, and to taxable

17 years of United States shareholders in such corpora18 tions with or within which such taxable years of for19 eign corporations end.

20 SEC. 204. LOOK-THRU RULES TO APPLY TO DIVIDENDS

21 FROM NONCONTROLLED SECTION 902 COR22 PORATIONS.

23 (a) IN GENERAL.—Section 904(d)(4) (relating to

24 look-thru rules apply to dividends from noncontrolled sec25 tion 902 corporations) is amended to read as follows:
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1 ‘‘(4) LOOK-THRU APPLIES TO DIVIDENDS FROM

2 CONTROLLED SECTION 902 CORPORATIONS.—

3 ‘‘(A) IN GENERAL.—For purposes of this

4 subsection, any dividend from a noncontrolled

5 section 902 corporation with respect to the tax6 payer shall be treated as income in a separate

7 category in proportion to the ratio of—

8 ‘‘(i) the portion of earnings and prof9 its attributable to income in such category,

10 to

11 ‘‘(ii) the total amount of earnings and

12 profits.

13 ‘‘(B) SPECIAL RULES.—For purposes of

14 this paragraph—

15 ‘‘(i) IN GENERAL.—Rules similar to

16 the rules of paragraph (3)(F) shall apply.

17 ‘‘(ii) EARNINGS AND PROFITS.—

18 ‘‘(I) IN GENERAL.—The rules of

19 section 316 shall apply.

20 ‘‘(II) REGULATIONS.—The Sec21 retary may prescribe regulations re22 garding the treatment of distributions

23 out of earnings and profits for periods

24 before the taxpayer’s acquisition of
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1 the stock to which the distributions

2 relate.’’

3 (b) CONFORMING AMENDMENTS.—

4 (1) Subparagraph (E) of section 904(d)(1), as

5 in effect both before and after the amendments

6 made by section 1105 of the Taxpayer Relief Act of

7 1997, is hereby repealed.

8 (2) Section 904(d)(2)(C)(iii), as so in effect, is

9 amended by striking subclause (II) and by redesig10 nating subclause (III) as subclause (II).

11 (3) The last sentence of section 904(d)(2)(D),

12 as so in effect, is amended to read as follows: ‘‘Such

13 term does not include any financial services income.’’

14 (4) Section 904(d)(2)(E) is amended by strik15 ing clauses (ii) and (iv) and by redesignating clause

16 (iii) as clause (ii).

17 (5) Section 904(d)(3)(F) is amended by strik18 ing ‘‘(D), or (E)’’ and inserting ‘‘or (D)’’.

19 (6) Section 864(d)(5)(A)(i) is amended by

20 striking ‘‘(C)(iii)(III)’’ and inserting ‘‘(C)(iii)(II)’’.

21 (c) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to taxable years beginning after

23 December 31, 1999.
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1 SEC. 205. APPLICATION OF LOOK-THRU RULES TO FOREIGN

2 TAX CREDIT.

3 (a) INTEREST, RENTS, AND ROYALTIES.—

4 (1) NONCONTROLLED SECTION 902 CORPORA5 TION.—Section 904(d)(4)(A), as amended by section

6 204, is amended to read as follows:

7 ‘‘(A) IN GENERAL.—For purposes of this

8 subsection—

9 ‘‘(i) any applicable dividend shall be

10 treated as income in a separate category in

11 proportion to the ratio of—

12 ‘‘(I) the portion of the earnings

13 and profits attributable to income in

14 such category, to

15 ‘‘(II) the total amount of earn16 ings and profits, and

17 ‘‘(ii) any interest, rent, or royalty

18 which is received or accrued from a non19 controlled section 902 corporation with re20 spect to the taxpayer shall be treated as

21 income in a separate category to the extent

22 it is properly allocable (under regulations

23 prescribed by the Secretary) to income of

24 such corporation in such category.’’

25 (2) PARTNERSHIPS.—Section 904(d)(6)(C) (re26 lating to regulations) is amended—
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1 (A) by inserting ‘‘or (4)(A)(ii)’’ after

2 ‘‘paragraph (3)(C)’’, and

3 (B) by inserting ‘‘or noncontrolled section

4 902 corporations, whichever is applicable’’ after

5 ‘‘controlled foreign corporations’’.

6 (3) CONFORMING AMENDMENT.—The heading

7 for section 904(d)(4), as amended by section 204, is

8 amended by inserting ‘‘, INTEREST, RENTS, OR ROY9 ALTIES’’ after ‘‘DIVIDENDS’’.

10 (b) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to taxable years beginning after

12 December 31, 1999.

13 SEC. 206. ORDERING RULES FOR FOREIGN TAX CREDIT

14 CARRYOVERS.

15 (a) IN GENERAL.—Section 904(c) (relating to

16 carryback and carryover of excess tax paid), as amended

17 by section 201, is amended to read as follows:

18 ‘‘(c) CARRYBACK AND CARRYOVER OF EXCESS TAX

19 PAID.—

20 ‘‘(1) IN GENERAL.—If the sum of—

21 ‘‘(A) the foreign tax credit carryovers

22 under this subsection to a taxable year, plus

23 ‘‘(B) the amount of all taxes paid to for24 eign countries or possessions of the United

25 States for the taxable year and for which the
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1 taxpayer elects to have the benefits of this sub2 part apply,

3 exceeds the limitation under subsection (a), such ex4 cess (to the extent attributable to the taxes de5 scribed in subparagraph (B)) shall be a foreign tax

6 credit carryback to each of the 2 preceding taxable

7 years and a foreign tax credit carryforward to each

8 of the 10 following taxable years.

9 ‘‘(2) ORDERING RULES.—For purposes of any

10 provision of the title where it is necessary to ascer11 tain the extent to which the credits to which this

12 subpart applies are used in a taxable year or as a

13 carryback or carryforward, such taxes shall be treat14 ed as used—

15 ‘‘(A) first from carryovers to such taxable

16 year,

17 ‘‘(B) then from credits arising in such tax18 able year, and

19 ‘‘(C) finally from carrybacks to such tax20 able year.

21 ‘‘(3) LIMITATIONS ON CARRYOVERS.—

22 ‘‘(A) CREDIT ONLY.—A credit may be car23 ried to a taxable year under this subsection only

24 if the taxpayer chooses for such taxable year to

25 have the benefits of this subpart apply to taxes
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1 paid or accrued to foreign countries or any pos2 sessions of the United States. Any amount so

3 carried may be availed of only as a credit and

4 not a deduction.

5 ‘‘(B) LIMITATION TO APPLY.—The amount

6 of the credit carryforward or carryback to a

7 taxable year (the ‘carryover year’) from a tax8 able year under this subsection shall not exceed

9 the excess (if any) of—

10 ‘‘(i) the limitation under subsection

11 (a) for the carryover year, over

12 ‘‘(ii) the sum of—

13 ‘‘(I) the credits arising in the

14 carryover year, plus

15 ‘‘(II) carryforwards and

16 carrybacks to the carryover year from

17 taxable years earlier than the taxable

18 year from which the credit is being

19 carried (whether or not the taxpayer

20 chooses to have the benefits of this

21 subpart apply with respect to such

22 earlier taxable year).’’

23 (b) EFFECTIVE DATE.—The amendment made by

24 this section applies to taxable years beginning after De25 cember 31, 1999.
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1 SEC. 207. REPEAL OF LIMITATION OF FOREIGN TAX CREDIT

2 UNDER ALTERNATIVE MINIMUM TAX.

3 (a) IN GENERAL.—Section 59(a) (relating to alter4 native minimum tax foreign tax credit) is amended by

5 striking paragraph (2) and by redesignating paragraphs

6 (3) and (4) as paragraphs (2) and (3), respectively.

7 (b) CONFORMING AMENDMENT.—Section

8 53(d)(1)(B)(i)(II) is amended by striking ‘‘and if section

9 59(a)(2) did not apply’’.

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to taxable years beginning after

12 December 31, 1999.

13 SEC. 208. REPEAL OF SPECIAL RULES FOR APPLYING FOR14 EIGN TAX CREDIT IN CASE OF FOREIGN OIL

15 AND GAS INCOME.

16 (a) IN GENERAL.—Section 907 (relating to special

17 rules in case of foreign oil and gas income) is repealed.

18 (b) CONFORMING AMENDMENTS.—

19 (1) Each of the following provisions are amend20 ed by striking ‘‘907,’’:

21 (A) Section 245(a)(10).

22 (B) Section 865(h)(1)(B).

23 (C) Section 904(d)(1).

24 (D) Section 904(g)(10)(A).

25 (2) Section 904(f)(5)(E)(iii) is amended by in26 serting ‘‘, as in effect before its repeal by the Inter-
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1 national Tax Simplification for American Competi2 tiveness Act of 1999’’ after ‘‘section 907(c)(4)(B)’’.

3 (3) Section 954(g)(1) is amended by inserting

4 ‘‘, as in effect before its repeal by the International

5 Tax Simplification for American Competitiveness

6 Act of 1999’’ after ‘‘907(c)’’.

7 (4) Section 6501(i) is amended—

8 (A) by striking ‘‘, or under section 907(f)

9 (relating to carryback and carryover of dis10 allowed oil and gas extraction taxes)’’, and

11 (B) by striking ‘‘or 907(f)’’.

12 (5) The table of sections for subpart A of part

13 III of subchapter N of chapter 1 is amended by

14 striking the item relating to section 907.

15 (c) EFFECTIVE DATE.—The amendments made by

16 this section shall apply to taxable years beginning after

17 December 31, 1999.

18 TITLE III—OTHER PROVISIONS

19 SEC. 301. DEDUCTION FOR DIVIDENDS RECEIVED FROM

20 CERTAIN FOREIGN CORPORATIONS.

21 (a) CONSTRUCTIVE OWNERSHIP RULES TO APPLY IN

22 DETERMINING 80-PERCENT OWNERSHIP.—Section 245

23 (a)(5) (relating to post-1986 undistributed U.S. earnings)

24 is amended by adding at the end the following flush sen25 tence:
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1 ‘‘Section 318(a) shall apply for purposes of subpara2 graph (B).’’

3 (b) DIVIDENDS TO INCLUDE SUBPART F DISTRIBU4 TIONS.—Section 245(a) (relating to dividends from 10-

5 percent owned foreign corporations) is amended by adding

6 at the end the following new paragraph:

7 ‘‘(12) SUBPART F INCLUSIONS TREATED AS

8 DIVIDENDS.—For purposes of this subsection, the

9 term ‘dividend’ shall include any amount the tax10 payer is required to include in gross income for the

11 taxable year under section 951(a).’’

12 (c) EFFECTIVE DATE.—The amendments made by

13 this section shall apply to taxable years beginning after

14 December 31, 1999.

15 SEC. 302. APPLICATION OF UNIFORM CAPITALIZATION

16 RULES TO FOREIGN PERSONS.

17 (a) IN GENERAL.—Section 263A(c) (relating to ex18 ceptions) is amended by adding at the end the following

19 new paragraph:

20 ‘‘(7) FOREIGN PERSONS.—This section shall

21 apply to any taxpayer who is not a United States

22 person only for purposes of applying sections

23 871(b)(1) and 882(a)(1).’’

24 (b) EFFECTIVE DATE.—The amendment made by

25 subsection (a) shall apply to taxable years beginning after
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1 December 31, 1999. Section 481 of the Internal Revenue

2 Code of 1986 shall not apply to any change in a method

3 of accounting by reason of such amendment.

4 SEC. 303. TREATMENT OF MILITARY PROPERTY OF FOR5 EIGN SALES CORPORATIONS.

6 (a) IN GENERAL.—Section 923(a) (defining exempt

7 foreign trade income) is amended by striking paragraph

8 (5) and by redesignating paragraph (6) as paragraph (5).

9 (b) EFFECTIVE DATE.—The amendment made by

10 this section shall apply to taxable years beginning after

11 December 31, 1999.

12 SEC. 304. UNITED STATES PROPERTY NOT TO INCLUDE

13 CERTAIN ASSETS ACQUIRED BY DEALERS IN

14 ORDINARY COURSE OF TRADE OR BUSINESS.

15 (a) IN GENERAL.—Section 956(c)(2) (relating to ex16 ceptions from property treated as United States property)

17 is amended by striking ‘‘and’’ at the end of subparagraph

18 (J), by striking the period at the end of subparagraph (K)

19 and inserting ‘‘; and’’, and by adding at the end the fol20 lowing new subparagraph:

21 ‘‘(L) securities acquired and held by a con22 trolled foreign corporation in the ordinary

23 course of its business as a dealer in securities

24 if (i) the dealer accounts for the securities as

25 securities held primarily for sale to customers
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1 in the ordinary course of business, and (ii) the

2 dealer disposes of the securities (or such securi3 ties mature while held by the dealer) within a

4 period consistent with the holding of securities

5 for sale to customers in the ordinary course of

6 business.’’

7 (b) CONFORMING AMENDMENT.—Section 956(c)(2)

8 is amended by striking ‘‘and (K)’’ in the last sentence and

9 inserting ‘‘, (K), and (L)’’.

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to taxable years of foreign corpora12 tions beginning after December 31, 1999, and to taxable

13 years of United States shareholders or with or within

14 which such taxable years of foreign corporations end.

15 SEC. 305. TREATMENT OF CERTAIN DIVIDENDS OF REGU16 LATED INVESTMENT COMPANIES.

17 (a) TREATMENT OF CERTAIN DIVIDENDS.—

18 (1) NONRESIDENT ALIEN INDIVIDUALS.—Sec19 tion 871 (relating to tax on nonresident alien indi20 viduals) is amended by redesignating subsection (k)

21 as subsection (l) and by inserting after subsection (j)

22 the following new subsection:

23 ‘‘(k) EXEMPTION FOR CERTAIN DIVIDENDS OF REG24 ULATED INVESTMENT COMPANIES.—

25 ‘‘(1) INTEREST-RELATED DIVIDENDS.—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 subparagraph (B), no tax shall be imposed

3 under paragraph (1)(A) of subsection (a) on

4 any interest-related dividend received from a

5 regulated investment company.

6 ‘‘(B) EXCEPTIONS.—Subparagraph (A)

7 shall not apply—

8 ‘‘(i) to any interest-related dividend

9 received from a regulated investment com10 pany by a person to the extent such divi11 dend is attributable to interest (other than

12 interest described in subparagraph (E) (i)

13 or (iii)) received by such company on in14 debtedness issued by such person or by any

15 corporation or partnership with respect to

16 which such person is a 10-percent share17 holder,

18 ‘‘(ii) to any interest-related dividend

19 with respect to stock of a regulated invest20 ment company unless the person who

21 would otherwise be required to deduct and

22 withhold tax from such dividend under

23 chapter 3 receives a statement (which

24 meets requirements similar to the require25 ments of subsection (h)(5)) that the bene-
26

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1 ficial owner of such stock is not a United

2 States person, and

3 ‘‘(iii) to any interest-related dividend

4 paid to any person within a foreign coun5 try (or any interest-related dividend pay6 ment addressed to, or for the account of,

7 persons within such foreign country) dur8 ing any period described in subsection

9 (h)(6) with respect to such country.

10 Clause (iii) shall not apply to any dividend with

11 respect to any stock which was acquired on or

12 before the date of the publication of the Sec13 retary’s determination under subsection (h)(6).

14 ‘‘(C) INTEREST-RELATED DIVIDEND.—For

15 purposes of this paragraph, an interest-related

16 dividend is any dividend (or part thereof) which

17 is designated by the regulated investment com18 pany as an interest-related dividend in a writ19 ten notice mailed to its shareholders not later

20 than 60 days after the close of its taxable year.

21 If the aggregate amount so designated with re22 spect to a taxable year of the company (includ23 ing amounts so designated with respect to divi24 dends paid after the close of the taxable year

25 described in section 855) is greater than the
27

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1 qualified net interest income of the company for

2 such taxable year, the portion of each distribu3 tion which shall be an interest-related dividend

4 shall be only that portion of the amounts so

5 designated which such qualified net interest in6 come bears to the aggregate amount so des7 ignated.

8 ‘‘(D) QUALIFIED NET INTEREST IN9 COME.—For purposes of subparagraph (C), the

10 term ‘qualified net interest income’ means the

11 qualified interest income of the regulated in12 vestment company reduced by the deductions

13 properly allocable to such income.

14 ‘‘(E) QUALIFIED INTEREST INCOME.—For

15 purposes of subparagraph (D), the term ‘quali16 fied interest income’ means the sum of the fol17 lowing amounts derived by the regulated invest18 ment company from sources within the United

19 States:

20 ‘‘(i) Any amount includible in gross

21 income as original issue discount (within

22 the meaning of section 1273) on an obliga23 tion payable 183 days or less from the date

24 of original issue (without regard to the pe25 riod held by the company).
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1 ‘‘(ii) Any interest includible in gross

2 income (including amounts recognized as

3 ordinary income in respect of original issue

4 discount or market discount or acquisition

5 discount under part V of subchapter P and

6 such other amounts as regulations may

7 provide) on an obligation which is in reg8 istered form; except that this clause shall

9 not apply to—

10 ‘‘(I) any interest on an obligation

11 issued by a corporation or partnership

12 if the regulated investment company

13 is a 10-percent shareholder in such

14 corporation or partnership, and

15 ‘‘(II) any interest which is treat16 ed as not being portfolio interest

17 under the rules of subsection (h)(4).

18 ‘‘(iii) Any interest referred to in sub19 section (i)(2)(A) (without regard to the

20 trade or business of the regulated invest21 ment company).

22 ‘‘(iv) Any interest-related dividend in23 cludable in gross income with respect to

24 stock of another regulated investment com25 pany.
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1 ‘‘(F) 10-PERCENT SHAREHOLDER.—For

2 purposes of this paragraph, the term ‘10-per3 cent shareholder’ has the meaning given such

4 term by subsection (h)(3)(B).

5 ‘‘(2) SHORT-TERM CAPITAL GAIN DIVIDENDS.—

6 ‘‘(A) IN GENERAL.—Except as provided in

7 subparagraph (B), no tax shall be imposed

8 under paragraph (1)(A) of subsection (a) on

9 any short-term capital gain dividend received

10 from a regulated investment company.

11 ‘‘(B) EXCEPTION FOR ALIENS TAXABLE

12 UNDER SUBSECTION (a)(2).—Subparagraph (A)

13 shall not apply in the case of any nonresident

14 alien individual subject to tax under subsection

15 (a)(2).

16 ‘‘(C) SHORT-TERM CAPITAL GAIN DIVI17 DEND.—For purposes of this paragraph, a

18 short-term capital gain dividend is any dividend

19 (or part thereof) which is designated by the reg20 ulated investment company as a short-term cap21 ital gain dividend in a written notice mailed to

22 its shareholders not later than 60 days after the

23 close of its taxable year. If the aggregate

24 amount so designated with respect to a taxable

25 year of the company (including amounts so des-
30

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1 ignated with respect to dividends paid after the

2 close of the taxable year described in section

3 855) is greater than the qualified short-term

4 gain of the company for such taxable year, the

5 portion of each distribution which shall be a

6 short-term capital gain dividend shall be only

7 that portion of the amounts so designated

8 which such qualified short-term gain bears to

9 the aggregate amount so designated.

10 ‘‘(D) QUALIFIED SHORT-TERM GAIN.—For

11 purposes of subparagraph (C), the term ‘quali12 fied short-term gain’ means the excess of the

13 net short-term capital gain of the regulated in14 vestment company for the taxable year over the

15 net long-term capital loss (if any) of such com16 pany for such taxable year. For purposes of this

17 subparagraph—

18 ‘‘(i) the net short-term capital gain of

19 the regulated investment company shall be

20 computed by treating any short-term cap21 ital gain dividend includible in gross in22 come with respect to stock of another regu23 lated investment company as a short-term

24 capital gain, and
31

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1 ‘‘(ii) the excess of the net short-term

2 capital gain for a taxable year over the net

3 long-term capital loss for a taxable year (to

4 which an election under section 4982(e)(4)

5 does not apply) shall be determined with6 out regard to any net capital loss or net

7 short-term capital loss attributable to

8 transactions after October 31 of such year,

9 and any such net capital loss or net short10 term capital loss shall be treated as arising

11 on the 1st day of the next taxable year.

12 To the extent provided in regulations, clause

13 (ii) shall apply also for purposes of computing

14 the taxable income of the regulated investment

15 company.’’

16 (2) FOREIGN CORPORATIONS.—Section 881 (re17 lating to tax on income of foreign corporations not

18 connected with United States business) is amended

19 by redesignating subsection (e) as subsection (f) and

20 by inserting after subsection (d) the following new

21 subsection:

22 ‘‘(e) TAX NOT TO APPLY TO CERTAIN DIVIDENDS

23 OF REGULATED INVESTMENT COMPANIES.—

24 ‘‘(1) INTEREST-RELATED DIVIDENDS.—
32

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1 ‘‘(A) IN GENERAL.—Except as provided in

2 subparagraph (B), no tax shall be imposed

3 under paragraph (1) of subsection (a) on any

4 interest-related dividend (as defined in section

5 871(k)(1)) received from a regulated investment

6 company.

7 ‘‘(B) EXCEPTION.—Subparagraph (A)

8 shall not apply—

9 ‘‘(i) to any dividend referred to in sec10 tion 871(k)(1)(B), and

11 ‘‘(ii) to any interest-related dividend

12 received by a controlled foreign corporation

13 (within the meaning of section 957(a)) to

14 the extent such dividend is attributable to

15 interest received by the regulated invest16 ment company from a person who is a re17 lated person (within the meaning of section

18 864(d)(4)) with respect to such controlled

19 foreign corporation.

20 ‘‘(C) TREATMENT OF DIVIDENDS RE21 CEIVED BY CONTROLLED FOREIGN CORPORA22 TIONS.—The rules of subsection (c)(5)(A) shall

23 apply to any interest-related dividend received

24 by a controlled foreign corporation (within the

25 meaning of section 957(a)) to the extent such
33

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1 dividend is attributable to interest received by

2 the regulated investment company which is de3 scribed in clause (ii) of section 871(k)(1)(E)

4 (and not described in clause (i) or (iii) of such

5 section).

6 ‘‘(2) SHORT-TERM CAPITAL GAIN DIVIDENDS.—

7 No tax shall be imposed under paragraph (1) of sub8 section (a) on any short-term capital gain dividend

9 (as defined in section 871(k)(2)) received from a

10 regulated investment company.’’

11 (3) WITHHOLDING TAXES.—

12 (A) Section 1441(c) (relating to excep13 tions) is amended by adding at the end the fol14 lowing new paragraph:

15 ‘‘(12) CERTAIN DIVIDENDS RECEIVED FROM

16 REGULATED INVESTMENT COMPANIES.—

17 ‘‘(A) IN GENERAL.—No tax shall be re18 quired to be deducted and withheld under sub19 section (a) from any amount exempt from the

20 tax imposed by section 871(a)(1)(A) by reason

21 of section 871(k).

22 ‘‘(B) SPECIAL RULE.—For purposes of

23 subparagraph (A), clause (i) of section

24 871(k)(1)(B) shall not apply to any dividend

25 unless the regulated investment company knows
34

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1 that such dividend is a dividend referred to in

2 such clause. A similar rule shall apply with re3 spect to the exception contained in section

4 871(k)(2)(B).’’

5 (B) Section 1442(a) (relating to with6 holding of tax on foreign corporations) is

7 amended—

8 (i) by striking ‘‘and the reference in

9 section 1441(c)(10)’’ and inserting ‘‘the

10 reference in section 1441(c)(10)’’, and

11 (ii) by inserting before the period at

12 the end the following: ‘‘, and the references

13 in section 1441(c)(12) to sections 871(a)

14 and 871(k) shall be treated as referring to

15 sections 881(a) and 881(e) (except that for

16 purposes of applying subparagraph (A) of

17 section 1441(c)(12), as so modified, clause

18 (ii) of section 881(e)(1)(B) shall not apply

19 to any dividend unless the regulated invest20 ment company knows that such dividend is

21 a dividend referred to in such clause)’’.

22 (b) ESTATE TAX TREATMENT OF INTEREST IN CER23 TAIN REGULATED INVESTMENT COMPANIES.—Section

24 2105 (relating to property without the United States for
35

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1 estate tax purposes) is amended by adding at the end the

2 following new subsection:

3 ‘‘(d) STOCK IN A RIC.—

4 ‘‘(1) IN GENERAL.—For purposes of this sub5 chapter, stock in a regulated investment company

6 (as defined in section 851) owned by a nonresident

7 not a citizen of the United States shall not be

8 deemed property within the United States in the

9 proportion that, at the end of the quarter of such in10 vestment company’s taxable year immediately pre11 ceding a decedent’s date of death (or at such other

12 time as the Secretary may designate in regulations),

13 the assets of the investment company that were

14 qualifying assets with respect to the decedent bore

15 to the total assets of the investment company.

16 ‘‘(2) QUALIFYING ASSETS.—For purposes of

17 this subsection, qualifying assets with respect to a

18 decedent are assets that, if owned directly by the de19 cedent, would have been—

20 ‘‘(A) amounts, deposits, or debt obligations

21 described in subsection (b) of this section,

22 ‘‘(B) debt obligations described in the last

23 sentence of section 2104(c), or

24 ‘‘(C) other property not within the United

25 States.’’
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1 (c) TREATMENT OF REGULATED INVESTMENT COM2 PANIES UNDER SECTION 897.—

3 (1) Paragraph (1) of section 897(h) is amended

4 by striking ‘‘REIT’’ each place it appears and in5 serting ‘‘qualified investment entity’’.

6 (2) Paragraphs (2) and (3) of section 897(h)

7 are amended to read as follows:

8 ‘‘(2) SALE OF STOCK IN DOMESTICALLY CON9 TROLLED ENTITY NOT TAXED.—The term ‘United

10 States real property interest’ does not include any

11 interest in a domestically controlled qualified invest12 ment entity.

13 ‘‘(3) DISTRIBUTIONS BY DOMESTICALLY CON14 TROLLED QUALIFIED INVESTMENT ENTITIES.—In

15 the case of a domestically controlled qualified invest16 ment entity, rules similar to the rules of subsection

17 (d) shall apply to the foreign ownership percentage

18 of any gain.’’

19 (3) Subparagraphs (A) and (B) of section

20 897(h)(4) are amended to read as follows:

21 ‘‘(A) QUALIFIED INVESTMENT ENTITY.—

22 The term ‘qualified investment entity’ means

23 any real estate investment trust and any regu24 lated investment company.
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1 ‘‘(B) DOMESTICALLY CONTROLLED.—The

2 term ‘domestically controlled qualified invest3 ment entity’ means any qualified investment en4 tity in which at all times during the testing pe5 riod less than 50 percent in value of the stock

6 was held directly or indirectly by foreign per7 sons.’’

8 (4) Subparagraphs (C) and (D) of section

9 897(h)(4) are each amended by striking ‘‘REIT’’

10 and inserting ‘‘qualified investment entity’’.

11 (5) The subsection heading for subsection (h) of

12 section 897 is amended by striking ‘‘REITS’’ and

13 inserting ‘‘CERTAIN INVESTMENT ENTITIES’’.

14 (d) EFFECTIVE DATE.—

15 (1) IN GENERAL.—Except as otherwise pro16 vided in this subsection, the amendments made by

17 this section shall apply to dividends with respect to

18 taxable years of regulated investment companies be19 ginning after the date of the enactment of this Act.

20 (2) ESTATE TAX TREATMENT.—The amend21 ment made by subsection (b) shall apply to estates

22 of decedents dying after the date of the enactment

23 of this Act.

24 (3) CERTAIN OTHER PROVISIONS.—The amend25 ments made by subsection (c) (other than paragraph
38

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1 (1) thereof) shall take effect on the date of the en2 actment of this Act.

3 SEC. 306. REGULATORY AUTHORITY TO EXCLUDE CERTAIN

4 PRELIMINARY AGREEMENTS FROM DEFINI5 TION OF INTANGIBLE PROPERTY.

6 (a) IN GENERAL.—Section 936(h)(3)(B) (defining

7 intangible property) is amended by adding at the end the

8 following new sentence: ‘‘The Secretary shall by regulation

9 provide that such term shall not include any preliminary

10 agreement which is not legally enforceable.’’

11 (b) EFFECTIVE DATE.—The amendment made by

12 this section shall apply to agreements entered into after

13 the date of the enactment of this Act.

14 SEC. 307. AIRLINE MILEAGE AWARDS TO CERTAIN FOREIGN

15 PERSONS.

16 (a) IN GENERAL.—The last sentence of section

17 4261(e)(3)(C) (relating to regulations) is amended by in18 serting ‘‘and mileage awards which are issued to individ19 uals whose mailing addresses on record with the person

20 providing the right to air transportation are outside the

21 United States’’ before the period at the end thereof.

22 (b) EFFECTIVE DATE.—The amendment made by

23 this section shall apply to amounts paid, and benefits pro24 vided, after December 31, 1997.
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1 SEC. 308. REPEAL OF REDUCTION OF SUBPART F INCOME

2 OF EXPORT TRADE CORPORATIONS.

3 (a) IN GENERAL.—Subpart G of part III of sub4 chapter N of chapter 1 (relating to export trade corpora5 tions) is repealed.

6 (b) TREATMENT OF CERTAIN ACTUAL DISTRIBU7 TIONS.—

8 (1) IN GENERAL.—For purposes of applying

9 sections 959 and 960(b) of the Internal Revenue

10 Code of 1986, in the case of any actual distribution

11 of export trade income made after December 31,

12 1986, by an export trade corporation (or former ex13 port trade corporation that was an export trade cor14 poration on December 31, 1986), notwithstanding

15 any other provision of chapter 1 of such Code, the

16 earnings and profits attributable to amounts which

17 have been included in the gross income of a United

18 States shareholder under section 951(a) of such

19 Code shall be treated as including an amount equal

20 to the amount of export trade income that was in21 cluded in gross income as a dividend. If a distribu22 tion is excluded from gross income by application of

23 this subsection, the amount of such distribution shall

24 be treated as an amount described in section

25 951(a)(2)(B) of such Code that reduces the amount
40

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1 described in section 951(a)(2)(A) of such Code for

2 the taxable year.

3 (2) DEFINITIONS.—For purposes of this

4 subsection—

5 (A) EXPORT TRADE CORPORATION.—The

6 term ‘‘export trade corporation’’ has the mean7 ing given such term by section 971(a) of the In8 ternal Revenue Code of 1986 (as in effect be9 fore the amendment made by subsection (a)).

10 (B) EXPORT TRADE INCOME.—The term

11 ‘‘export trade income’’ has the meaning given

12 such term by section 971(b) of the Internal

13 Revenue Code of 1986 (as so in effect).

14 (c) CONFORMING AMENDMENTS.—

15 (1) Section 865(e)(2)(A) is amended by striking

16 the last sentence.

17 (2) Section 1297(b)(2)(D) is amended by strik18 ing ‘‘or export trade income of an export trade cor19 poration (as defined in section 971)’’.

20 (3) The table of parts for part III of subchapter

21 N of chapter 1 is amended by striking the item re22 lating to subpart G.

23 (d) EFFECTIVE DATE.—The amendments made by

24 this section shall apply to taxable years beginning after

25 December 31, 1999.
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1 SEC. 309. STUDY OF INTEREST ALLOCATION.

2 (a) STUDY.—The Secretary of the Treasury or the

3 Secretary’s delegate shall conduct a study of the rules

4 under section 864(e) of the Internal Revenue Code of

5 1986 for allocating interest expense of members of an af6 filiated group. Such study shall include an analysis of the

7 effect of such rules, including the effects such rules have

8 on different industries.

9 (b) REPORT.—Not later than 6 months after the date

10 of the enactment of this Act, the Secretary of the Treasury

11 shall report to the Committee on Ways and Means of the

12 House of Representatives and the Committee on Finance

13 of the Senate the results of the study conducted under

14 subsection (a), including recommendations (if any) for leg15 islation.

16 SEC. 310. INTEREST PAYMENTS DEDUCTIBLE WHERE DIS17 QUALIFIED GUARANTEE HAS ECONOMIC EF18 FECT.

19 (a) IN GENERAL.—Section 163(j)(6)(D)(ii) (relating

20 to exceptions to disqualified guarantee) is amended by

21 striking ‘‘or’’ at the end of subclause (I), by striking the

22 period at the end of subclause (II) and inserting ‘‘, or’’,

23 and by inserting after subclause (II) the following new

24 subclause:

25 ‘‘(III) if, in the case of a guar26 antee by a foreign person, the tax-
42

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1 payer establishes to the satisfaction of

2 the Secretary that the loan giving rise

3 to the indebtedness would have been

4 made by the unrelated person without

5 regard to the guarantee and that the

6 guarantee resulted in a reduction in

7 the interest payable on the loan.’’

8 (b) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to guarantees issued on and after

10 the date of the enactment of this Act.

11 SEC. 311. MODIFICATIONS OF REPORTING REQUIREMENTS

12 FOR CERTAIN FOREIGN OWNED CORPORA13 TIONS.

14 (a) DE MINIMIS EXCEPTION.—Section 6038A(b) (re15 lating to required information) is amended by adding at

16 the end the following new flush sentence:

17 ‘‘The Secretary shall not require the reporting corporation

18 to report any information with respect to any foreign per19 son which is a related person if the aggregate value of

20 the transactions between the corporation and the related

21 person (and any person related to such person) during the

22 taxable year does not exceed $5,000,000.’’

23 (b) TIME FOR PROVIDING TRANSLATIONS OF SPE24 CIFIC DOCUMENTS.—Notwithstanding Internal Revenue

25 Service Regulation § 1.6038A–3(f)(2), a taxpayer shall
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1 have at least 60 days to provide translations of specific

2 documents it is requested to translate. Nothing in this

3 subsection shall limit the right of a taxpayer to file a writ4 ten request for an extension of time to comply with the

5 request.

6 (c) EFFECTIVE DATES.—

7 (1) EXCEPTION.—The amendment made by

8 subsection (a) shall apply to taxable years beginning

9 after December 31, 1999.

10 (2) TRANSLATIONS.—Subsection (b) shall apply

11 to requests made by the Internal Revenue Service

12 after December 31, 1999.

Æ