I

104TH CONGRESS

1ST SESSION H. R. 1629

To amend the Internal Revenue Code of 1986 with respect to treatment

of corporations, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 12, 1995

Mr. SANDERS (for himself, Ms. NORTON, and Mr. OWENS) introduced the following bill; which was referred to the Committee on Ways and Means,

and in addition to the Committees on Banking and Financial Services

and International Relations, for a period to be subsequently determined

by the Speaker, in each case for consideration of such provisions as fall

within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 with respect

to treatment of corporations, 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 AND TABLE OF CONTENTS.

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

5 ‘‘Come Home, Corporate America, Act of 1995’’.

6 (b) TABLE OF CONTENTS.—The table of contents for

7 this Act is as follows:

Sec. 1. Short title and table of contents.

Sec. 2. Elimination of credit for foreign taxes and allowance of deduction for

such taxes.
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Sec. 3. Use of formulaic approach under section 482.

Sec. 4. Disposition of stock in domestic corporations by 10-percent foreign

shareholders.

Sec. 5. Portfolio debt.

Sec. 6. Termination of exclusion of certain income of citizens or residents of

United States living abroad.

Sec. 7. Elimination of exclusion of certain income of foreign sales corporations.

Sec. 8. Repeal of deferral of income of controlled foreign corporations.

Sec. 9. Extension of statute of limitations for certain foreign-related deficiencies.

Sec. 10. Reduction of outstanding loan, guarantee, and insurance authority of

the Export-Import Bank of the United States.

Sec. 11. Abolition of Overseas Private Investment Corporation.

1 SEC. 2. ELIMINATION OF CREDIT FOR FOREIGN TAXES AND

2 ALLOWANCE OF DEDUCTION FOR SUCH

3 TAXES.

4 (a) IN GENERAL.—Section 901 of the Internal Reve5 nue Code of 1986 (relating to taxes of foreign countries

6 and of possessions of the United States) is amended by

7 redesignating subsection (k) as subsection (l) and by in8 serting after subsection (j) the following new subsection:

9 ‘‘(k) TERMINATION OF FOREIGN TAX CREDIT.—

10 ‘‘(1) IN GENERAL.—No credit shall be allowed

11 under subsection (a) for any income, war profits, or

12 excess profits taxes paid or accrued (or deemed paid

13 under section 902 or 960) for any taxable year be14 ginning after the date of the enactment of this sub15 section.

16 ‘‘(2) TAXES ALLOWED AS DEDUCTION.—Section

17 275(a)(4) shall not apply to any tax for which credit

18 is not allowable by reason of this subsection.’’
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to taxable years beginning after

3 the date of the enactment of this Act.

4 SEC. 3. USE OF FORMULAIC APPROACH UNDER SECTION

5 482.

6 Not later than January 1, 1996, the Secretary of the

7 Treasury or his delegate shall prescribe regulations under

8 section 482 of the Internal Revenue Code of 1986 which

9 use a formulaic approach to clearly reflect income of mul10 tinational corporations.

11 SEC. 4. DISPOSITION OF STOCK IN DOMESTIC CORPORA12 TIONS BY 10-PERCENT FOREIGN SHAREHOLD13 ERS.

14 (a) GENERAL RULE.—Subpart D of part II of sub15 chapter N of chapter 1 of the Internal Revenue Code of

16 1986 (relating to miscellaneous provisions) is amended by

17 adding at the end the following new section:

18 ‘‘SEC. 899. DISPOSITION OF STOCK IN DOMESTIC CORPORA19 TIONS BY 10-PERCENT FOREIGN SHAREHOLD20 ERS.

21 ‘‘(a) GENERAL RULE.—

22 ‘‘(1) TREATMENT AS EFFECTIVELY CONNECTED

23 WITH UNITED STATES TRADE OR BUSINESS.—For

24 purposes of this title, if any nonresident alien indi25 vidual or foreign corporation is a 10-percent share-
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1 holder in any domestic corporation, any gain or loss

2 of such individual or foreign corporation from the

3 disposition of any stock in such domestic corporation

4 shall be taken into account—

5 ‘‘(A) in the case of a nonresident alien in6 dividual, under section 871(b)(1), or

7 ‘‘(B) in the case of a foreign corporation,

8 under section 882(a)(1),

9 as if the taxpayer were engaged during the taxable

10 year in a trade or business within the United States

11 through a permanent establishment in the United

12 States and as if such gain or loss were effectively

13 connected with such trade or business and attrib14 utable to such permanent establishment. Notwith15 standing section 865, any such gain or loss shall be

16 treated as from sources in the United States.

17 ‘‘(2) 26-PERCENT MINIMUM TAX ON NON18 RESIDENT ALIEN INDIVIDUALS.—

19 ‘‘(A) IN GENERAL.—In the case of any

20 nonresident alien individual, the amount deter21 mined under section 55(b)(1)(A) shall not be

22 less than 26 percent of the lesser of—

23 ‘‘(i) the individual’s alternative mini24 mum taxable income (as defined in section

25 55(b)(2)) for the taxable year, or
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1 ‘‘(ii) the individual’s net taxable stock

2 gain for the taxable year.

3 ‘‘(B) NET TAXABLE STOCK GAIN.—For

4 purposes of subparagraph (A), the term ‘net

5 taxable stock gain’ means the excess of—

6 ‘‘(i) the aggregate gains for the tax7 able year from dispositions of stock in do8 mestic corporations with respect to which

9 such individual is a 10-percent share10 holder, over

11 ‘‘(ii) the aggregate of the losses for

12 the taxable year from dispositions of such

13 stock.

14 ‘‘(C) COORDINATION WITH SECTION

15 897(a)(2).—Section 897(a)(2)(A) shall not apply

16 to any nonresident alien individual for any tax17 able year for which such individual has a net

18 taxable stock gain, but the amount of such net

19 taxable stock gain shall be increased by the

20 amount of such individual’s net United States

21 real property gain (as defined in section

22 897(a)(2)(B)) for such taxable year.

23 ‘‘(b) 10-PERCENT SHAREHOLDER.—
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1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the term ‘10-percent shareholder’ means any

3 person who at any time during the shorter of—

4 ‘‘(A) the period beginning on January 1,

5 1995, and ending on the date of the disposition,

6 or

7 ‘‘(B) the 5-year period ending on the date

8 of the disposition,

9 owned 10 percent or more (by vote or value) of the

10 stock in the domestic corporation.

11 ‘‘(2) CONSTRUCTIVE OWNERSHIP.—

12 ‘‘(A) IN GENERAL.—Section 318(a) (relat13 ing to constructive ownership of stock) shall

14 apply for purposes of paragraph (1).

15 ‘‘(B) MODIFICATIONS.—For purposes of

16 subparagraph (A)—

17 ‘‘(i) paragraph (2)(C) of section

18 318(a) shall be applied by substituting ‘10

19 percent’ for ‘50 percent’, and

20 ‘‘(ii) paragraph (3)(C) of section

21 318(a) shall be applied—

22 ‘‘(I) by substituting ‘10 percent’

23 for ‘50 percent’, and

24 ‘‘(II) in any case where such

25 paragraph would not apply but for
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1 subclause (I), by considering a cor2 poration as owning the stock (other

3 than stock in such corporation) owned

4 by or for any shareholder of such cor5 poration in that proportion which the

6 value of the stock which such share7 holder owns in such corporation bears

8 to the value of all stock in such cor9 poration.

10 ‘‘(3) TREATMENT OF STOCK HELD BY CERTAIN

11 PARTNERSHIPS.—

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

13 section, if—

14 ‘‘(i) a partnership is a 10-percent

15 shareholder in any domestic corporation,

16 and

17 ‘‘(ii) 10 percent or more of the capital

18 or profits interests in such partnership is

19 held (directly or indirectly) by nonresident

20 alien individuals or foreign corporations,

21 each partner in such partnership who is not

22 otherwise a 10-percent shareholder in such cor23 poration shall, with respect to the stock in such

24 corporation held by the partnership, be treated
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1 as a 10-percent shareholder in such corpora2 tion.

3 ‘‘(B) EXCEPTION.—

4 ‘‘(i) IN GENERAL.—Subparagraph (A)

5 shall not apply with respect to stock in a

6 domestic corporation held by any partner7 ship if, at all times during the 5-year pe8 riod ending on the date of the disposition

9 involved—

10 ‘‘(I) the aggregate bases of the

11 stock and securities in such domestic

12 corporation held by such partnership

13 were less than 25 percent of the part14 nership’s net adjusted asset cost, and

15 ‘‘(II) the partnership did not own

16 50 percent or more (by vote or value)

17 of the stock in such domestic corpora18 tion.

19 The Secretary may by regulations dis20 regard any failure to meet the require21 ments of subclause (I) where the partner22 ship normally met such requirements dur23 ing such 5-year period.
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1 ‘‘(ii) NET ADJUSTED ASSET COST.—

2 For purposes of clause (i), the term ‘net

3 adjusted asset cost’ means—

4 ‘‘(I) the aggregate bases of all of

5 the assets of the partnership other

6 than cash and cash items, reduced by

7 ‘‘(II) the portion of the liabilities

8 of the partnership not allocable (on a

9 proportionate basis) to assets excluded

10 under subclause (I).

11 ‘‘(C) EXCEPTION NOT TO APPLY TO 50-

12 PERCENT PARTNERS.—Subparagraph (B) shall

13 not apply in the case of any partner owning (di14 rectly or indirectly) more than 50 percent of the

15 capital or profits interests in the partnership at

16 any time during the 5-year period ending on the

17 date of the disposition.

18 ‘‘(D) SPECIAL RULES.—For purposes of

19 subparagraphs (B) and (C)—

20 ‘‘(i) TREATMENT OF PREDE21 CESSORS.—Any reference to a partnership

22 or corporation shall be treated as including

23 a reference to any predecessor thereof.

24 ‘‘(ii) PARTNERSHIP NOT IN EXIST25 ENCE.—If any partnership was not in ex-
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1 istence throughout the entire 5-year period

2 ending on the date of the disposition, only

3 the portion of such period during which

4 the partnership (or any predecessor) was

5 in existence shall be taken into account.

6 ‘‘(E) OTHER PASS-THRU ENTITIES;

7 TIERED ENTITIES.—Rules similar to the rules

8 of the preceding provisions of this paragraph

9 shall also apply in the case of any pass-thru en10 tity other than a partnership and in the case of

11 tiered partnerships and other entities.

12 ‘‘(c) COORDINATION WITH NONRECOGNITION PROVI13 SIONS; ETC.—

14 ‘‘(1) COORDINATION WITH NONRECOGNITION

15 PROVISIONS.—

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

17 subparagraph (B), any nonrecognition provision

18 shall apply for purposes of this section to a

19 transaction only in the case of—

20 ‘‘(i) an exchange of stock in a domes21 tic corporation for other property the sale

22 of which would be subject to taxation

23 under this chapter, or

24 ‘‘(ii) a distribution with respect to

25 which gain or loss would not be recognized
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1 under section 336 if the sale of the distrib2 uted property by the distributee would be

3 subject to tax under this chapter.

4 ‘‘(B) REGULATIONS.—The Secretary shall

5 prescribe regulations (which are necessary or

6 appropriate to prevent the avoidance of Federal

7 income taxes) providing—

8 ‘‘(i) the extent to which nonrecogni9 tion provisions shall, and shall not, apply

10 for purposes of this section, and

11 ‘‘(ii) the extent to which—

12 ‘‘(I) transfers of property in a re13 organization, and

14 ‘‘(II) changes in interests in, or

15 distributions from, a partnership,

16 trust, or estate,

17 shall be treated as sales of property at fair

18 market value.

19 ‘‘(C) NONRECOGNITION PROVISION.—For

20 purposes of this paragraph, the term ‘non21 recognition provision’ means any provision of

22 this title for not recognizing gain or loss.

23 ‘‘(2) CERTAIN OTHER RULES MADE APPLICA24 BLE.—For purposes of this section, rules similar to
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1 the rules of subsections (g) and (j) of section 897

2 shall apply.

3 ‘‘(d) CERTAIN INTEREST TREATED AS STOCK.—For

4 purposes of this section—

5 ‘‘(1) any option or other right to acquire stock

6 in a domestic corporation,

7 ‘‘(2) the conversion feature of any debt instru8 ment issued by a domestic corporation, and

9 ‘‘(3) to the extent provided in regulations, any

10 other interest in a domestic corporation other than

11 an interest solely as creditor,

12 shall be treated as stock in such corporation.

13 ‘‘(e) TREATMENT OF CERTAIN GAIN AS A DIVI14 DEND.—In the case of any gain which would be subject

15 to tax by reason of this section but for a treaty and which

16 results from any distribution in liquidation or redemption,

17 for purposes of this subtitle, such gain shall be treated

18 as a dividend to the extent of the earnings and profits

19 of the domestic corporation attributable to the stock.

20 Rules similar to the rules of section 1248(c) (determined

21 without regard to paragraph (2)(D) thereof) shall apply

22 for purposes of the preceding sentence.

23 ‘‘(f) REGULATIONS.—The Secretary shall prescribe

24 such regulations as may be appropriate to carry out the

25 purposes of this section, including—
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1 ‘‘(1) regulations coordinating the provisions of

2 this section with the provisions of section 897, and

3 ‘‘(2) regulations aggregating stock held by a

4 group of persons acting together.’’

5 (b) WITHHOLDING OF TAX.—Subchapter A of chap6 ter 3 of such Code is amended by adding at the end the

7 following new section:

8 ‘‘SEC. 1447. WITHHOLDING OF TAX ON CERTAIN STOCK

9 DISPOSITIONS.

10 ‘‘(a) GENERAL RULE.—Except as otherwise provided

11 in this section, in the case of any disposition of stock in

12 a domestic corporation by a foreign person who is a 10-

13 percent shareholder in such corporation, the withholding

14 agent shall deduct and withhold a tax equal to 10 percent

15 of the amount realized on the disposition.

16 ‘‘(b) EXCEPTIONS.—

17 ‘‘(1) STOCK WHICH IS NOT REGULARLY TRAD18 ED.—In the case of a disposition of stock which is

19 not regularly traded, a withholding agent shall not

20 be required to deduct and withhold any amount

21 under subsection (a) if—

22 ‘‘(A) the transferor furnishes to such with23 holding agent an affidavit by such transferor

24 stating, under penalty of perjury, that section
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1 899 does not apply to such disposition be2 cause—

3 ‘‘(i) the transferor is not a foreign

4 person, or

5 ‘‘(ii) the transferor is not a 10-percent

6 shareholder, and

7 ‘‘(B) such withholding agent does not

8 know (or have reason to know) that such affida9 vit is not correct.

10 ‘‘(2) STOCK WHICH IS REGULARLY TRADED.—

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

12 subparagraph (B), a withholding agent shall

13 not be required to deduct and withhold any

14 amount under subsection (a) with respect to

15 any disposition of regularly traded stock if such

16 withholding agent does not know (or have rea17 son to know) that section 899 applies to such

18 disposition.

19 ‘‘(B) SPECIAL RULE WHERE SUBSTANTIAL

20 DISPOSITION.—If—

21 ‘‘(i) there is a disposition of regularly

22 traded stock in a corporation, and

23 ‘‘(ii) the amount of stock involved in

24 such disposition constitutes 1 percent or
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1 more (by vote or value) of the stock in

2 such corporation,

3 subparagraph (A) shall not apply but para4 graph (1) shall apply as if the disposition in5 volved stock which was not regularly traded.

6 ‘‘(C) NOTIFICATION BY FOREIGN PER7 SON.—If section 899 applies to any disposition

8 by a foreign person of regularly traded stock,

9 such foreign person shall notify the withholding

10 agent that section 899 applies to such disposi11 tion.

12 ‘‘(3) NONRECOGNITION TRANSACTIONS.—A

13 withholding agent shall not be required to deduct

14 and withhold any amount under subsection (a) in

15 any case where gain or loss is not recognized by rea16 son of section 899(c) (or the regulations prescribed

17 under such section).

18 ‘‘(c) SPECIAL RULE WHERE NO WITHHOLDING.—

19 If—

20 ‘‘(1) there is no amount deducted and withheld

21 under this section with respect to any disposition to

22 which section 899 applies, and

23 ‘‘(2) the foreign person does not pay the tax

24 imposed by this subtitle to the extent attributable to

25 such disposition on the date prescribed therefor,
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1 for purposes of determining the amount of such tax, the

2 foreign person’s basis in the stock disposed of shall be

3 treated as zero or such other amount as the Secretary may

4 determine (and, for purposes of section 6501, the

5 underpayment of such tax shall be treated as due to a

6 willful attempt to evade such tax).

7 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur8 poses of this section—

9 ‘‘(1) WITHHOLDING AGENT.—The term ‘with10 holding agent’ means—

11 ‘‘(A) the last United States person to have

12 the control, receipt, custody, disposal, or pay13 ment of the amount realized on the disposition,

14 or

15 ‘‘(B) if there is no such United States per16 son, the person prescribed in regulations.

17 ‘‘(2) FOREIGN PERSON.—The term ‘foreign per18 son’ means any person other than a United States

19 person.

20 ‘‘(3) REGULARLY TRADED STOCK.—The term

21 ‘regularly traded stock’ means any stock of a class

22 which is regularly traded on an established securities

23 market.

24 ‘‘(4) AUTHORITY TO PRESCRIBE REDUCED

25 AMOUNT.—At the request of the person making the
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1 disposition or the withholding agent, the Secretary

2 may prescribe a reduced amount to be withheld

3 under this section if the Secretary determines that

4 to substitute such reduced amount will not jeopard5 ize the collection of the tax imposed by section

6 871(b)(1) or 882(a)(1).

7 ‘‘(5) OTHER TERMS.—Except as provided in

8 this section, terms used in this section shall have the

9 same respective meanings as when used in section

10 899.

11 ‘‘(6) CERTAIN RULES MADE APPLICABLE.—

12 Rules similar to the rules of section 1445(e) shall

13 apply for purposes of this section.

14 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

15 such regulations as may be appropriate to carry out the

16 purposes of this section, including regulations coordinat17 ing the provisions of this section with the provisions of

18 sections 1445 and 1446.’’

19 (c) EXCEPTION FROM BRANCH PROFITS TAX.—Sub20 paragraph (C) of section 884(d)(2) of such Code is amend21 ed to read as follows:

22 ‘‘(C) gain treated as effectively connected

23 with the conduct of a trade or business within

24 the United States under—
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1 ‘‘(i) section 897 in the case of the dis2 position of a United States real property

3 interest described in section

4 897(c)(1)(A)(ii), or

5 ‘‘(ii) section 899,’’.

6 (d) REPORTS WITH RESPECT TO CERTAIN DIS7 TRIBUTIONS.—Paragraph (2) of section 6038B(a) of such

8 Code (relating to notice of certain transfers to foreign per9 son) is amended by striking ‘‘section 336’’ and inserting

10 ‘‘section 302, 331, or 336’’.

11 (e) CLERICAL AMENDMENTS.—

12 (1) The table of sections for subpart D of part

13 II of subchapter N of chapter 1 of such Code is

14 amended by adding at the end the following new

15 item:

‘‘Sec. 899. Dispositions of stock in domestic corporations by 10-

percent foreign shareholders.’’

16 (2) The table of sections for subchapter A of

17 chapter 3 of such Code is amended by adding at the

18 end the following new item:

‘‘Sec. 1447. Withholding of tax on certain stock dispositions.’’

19 (f) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to dispositions after December 31,

21 1995, except that section 1447 of such Code (as added

22 by this section) shall not apply to any disposition before

23 July 1, 1996.
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1 SEC. 5. PORTFOLIO DEBT.

2 (a) IN GENERAL.—Section 871(h)(3) of the Internal

3 Revenue Code of 1986 (relating to tax on nonresident

4 alien individuals) is amended to read as follows:

5 ‘‘(3) PORTFOLIO INTEREST TO INCLUDE ONLY

6 INTEREST ON GOVERNMENT OBLIGATIONS.—The

7 term ‘portfolio interest’ shall include only interest

8 paid on an obligation issued by a governmental en9 tity.’’

10 (b) CONFORMING AMENDMENTS.—

11 (1) Section 881(c)(3) of such Code is amend12 ed—

13 (A) in subparagraph (A), by adding ‘‘or’’

14 at the end, and

15 (B) by striking subparagraph (B) and re16 designating subparagraph (C) as subparagraph

17 (B).

18 (2) Section 881(c)(4) of such Code is amend19 ed—

20 (A) by striking ‘‘section 871(h)(4)’’ and in21 serting ‘‘section 871(h)(3) or (4)’’, and

22 (B) in the heading, by striking ‘‘CONTIN23 GENT’’.

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

25 this section shall apply to interest received after December
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1 31, 1995, with respect to obligations issued after such

2 date.

3 SEC. 6. TERMINATION OF EXCLUSION OF CERTAIN INCOME

4 OF CITIZENS OR RESIDENTS OF UNITED

5 STATES LIVING ABROAD.

6 (a) IN GENERAL.—Section 911 of the Internal Reve7 nue Code of 1986 (relating to citizens or residents of the

8 United States living abroad) is amended by redesignating

9 subsection (f) as subsection (g) and by inserting after sub10 section (e) the following new subsection:

11 ‘‘(f) TERMINATION.—This section shall not apply to

12 any taxable year beginning after December 31, 1995.’’

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

14 this section shall apply to taxable years beginning after

15 December 31, 1995.

16 SEC. 7. ELIMINATION OF EXCLUSION OF CERTAIN INCOME

17 OF FOREIGN SALES CORPORATIONS.

18 (a) IN GENERAL.—Section 921 of the Internal Reve19 nue Code of 1986 (relating to exempt foreign trade income

20 excluded from gross income) is amended by adding at the

21 end the following new subsection:

22 ‘‘(e) TERMINATION.—This section shall not apply to

23 any taxable year beginning after December 31, 1995.’’
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to taxable years beginning after

3 December 31, 1995.

4 SEC. 8. REPEAL OF DEFERRAL OF INCOME OF CON5 TROLLED FOREIGN CORPORATIONS.

6 (a) GENERAL RULE.—Subpart F of part III of sub7 chapter N of chapter 1 of the Internal Revenue Code of

8 1986 is amended by striking sections 952, 953, and 954

9 and inserting the following new sections:

10 ‘‘SEC. 952. SUBPART F INCOME.

11 ‘‘(a) GENERAL RULE.—For purposes of this subpart,

12 the term ‘subpart F income’ means the earnings and prof13 its of the controlled foreign corporation for the taxable

14 year computed with the following adjustments:

15 ‘‘(1) There shall be excluded the amount of the

16 earnings and profits which are attributable to in17 come from sources within the United States which

18 is effectively connected with the conduct by the con19 trolled foreign corporation of a trade or business

20 within the United States, except to the extent such

21 income is exempt from taxation (or subject to a re22 duced rate of tax) pursuant to a treaty obligation of

23 the United States. For purposes of the preceding

24 sentence, income described in paragraph (2) or (3)
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1 of section 921(d) shall be treated as derived from

2 sources within the United States.

3 ‘‘(2) In determining earnings and profits (or

4 the deficit in earnings and profits), the amount of

5 any illegal bribe, kickback, or other payment (within

6 the meaning of section 162(c), except as otherwise

7 provided in this paragraph) shall not be taken into

8 account to decrease such earnings and profits or to

9 increase such deficit. The payments referred to in

10 the preceding sentence include payments which

11 would be unlawful under the Foreign Corrupt Prac12 tices Act of 1977 if the payor were a United States

13 person.

14 ‘‘(3) Under regulations prescribed by the Sec15 retary, there shall be excluded any part of any earn16 ings and profits if it is established to the satisfaction

17 of the Secretary that such part could not have been

18 distributed by the controlled foreign corporation to

19 United States shareholders who own (within the

20 meaning of section 958(a)) stock of such controlled

21 foreign corporation because of currency or other re22 strictions or limitations imposed under the laws of

23 any foreign country.

24 ‘‘(4) Earnings and profits shall be determined

25 without regard to paragraphs (4), (5), and (6) of
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1 section 312(n). Under regulations, the preceding

2 sentence shall not apply to the extent it would in3 crease earnings and profits by an amount which was

4 previously distributed by the controlled foreign cor5 poration.

6 Except as provided in this subsection and section

7 312(k)(4), the earnings and profits of any foreign corpora8 tion, and the deficit and earnings and profits of any for9 eign corporation for any taxable year shall be determined

10 according to rules similar to those applicable to domestic

11 corporations, under regulations prescribed by the Sec12 retary.

13 ‘‘(b) CERTAIN DEFICITS MAY BE TAKEN INTO AC14 COUNT.—

15 ‘‘(1) TREATMENT OF CERTAIN PRIOR YEAR

16 DEFICITS.—

17 ‘‘(A) IN GENERAL.—The amount included

18 in the gross income of any United States share19 holder under section 951(a)(1)(A)(i) for any

20 taxable year with respect to any controlled for21 eign corporation shall be reduced by the amount

22 of such shareholder’s pro rata share of any

23 qualified deficit of such controlled foreign cor24 poration.
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1 ‘‘(B) QUALIFIED DEFICIT.—For purposes

2 of this paragraph—

3 ‘‘(i) IN GENERAL.—The term ‘quali4 fied deficit’ means any deficit in the earn5 ings and profits of the controlled foreign

6 corporation for any prior taxable year

7 which began after December 31, 1995, and

8 for which such corporation was a con9 trolled foreign corporation, but only to the

10 extent such deficit has not previously been

11 taken into account under this paragraph.

12 ‘‘(ii) SPECIAL RULE FOR DEFICITS

13 BEFORE 1996.—The term ‘qualified deficit’

14 includes any deficit in earnings and profits

15 for any taxable year beginning before Jan16 uary 1, 1996, to the extent that such defi17 cit qualified as a qualified deficit under

18 subsection (c)(1)(B) of this section (as in

19 effect on the day before the date of the en20 actment of this subsection); except that

21 any such deficit may be taken into account

22 under this paragraph only to offset

23 amounts attributable to the same activity

24 as the activity giving rise to such deficit.
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1 ‘‘(C) PRO RATA SHARE.—For purposes of

2 this paragraph, the shareholder’s pro rata share

3 of any deficit shall be determined under rules

4 similar to the rules of section 951(a)(2) for

5 whichever of the following yields the smallest

6 share:

7 ‘‘(i) the close of the taxable year, or

8 ‘‘(ii) the close of the taxable year in

9 which the deficit arose.

10 ‘‘(2) CERTAIN DEFICITS OF MEMBER OF THE

11 SAME CHAIN OF CORPORATIONS MAY BE TAKEN

12 INTO ACCOUNT.—

13 ‘‘(A) IN GENERAL.—A controlled foreign

14 corporation may elect to reduce the amount of

15 its subpart F income for any taxable year by

16 the amount of any deficit in earnings and prof17 its of a qualified chain member for a taxable

18 year ending with (or within) the taxable year of

19 such controlled foreign corporation. To the ex20 tent any deficit reduces subpart F income

21 under the preceding sentence, such deficit shall

22 not be taken into account under paragraph (1).

23 ‘‘(B) QUALIFIED CHAIN MEMBER.—For

24 purposes of this paragraph, the term ‘qualified

25 chain member’ means, with respect to any con-
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1 trolled foreign corporation, any other corpora2 tion which is created or organized under the

3 laws of the same foreign country as the con4 trolled foreign corporation but only if—

5 ‘‘(i) all the stock of such other cor6 poration (other than directors’ qualifying

7 shares) is owned at all times during the

8 taxable year in which the deficit arose (di9 rectly or through 1 or more corporations

10 other than the common parent) by such

11 controlled foreign corporation, or

12 ‘‘(ii) all the stock of such controlled

13 foreign corporation (other than directors’

14 qualifying shares) is owned at all times

15 during the taxable year in which the deficit

16 arose (directly or through 1 or more cor17 porations other than the common parent)

18 by such other corporation.

19 ‘‘(C) COORDINATION.—This paragraph

20 shall be applied after paragraph (1).

21 ‘‘(3) DETERMINATION OF DEFICIT.—In deter22 mining the amount of any deficit in earnings and

23 profits, the adjustments set forth in subsection (a)

24 shall apply.
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1 ‘‘SEC. 953. SPECIAL RULES FOR CERTAIN INSURANCE COM2 PANIES.

3 ‘‘(a) SPECIAL RULE FOR CERTAIN CAPTIVE INSUR4 ANCE COMPANIES.—

5 ‘‘(1) IN GENERAL.—For purposes only of tak6 ing into account subpart F income which is attrib7 utable to related person insurance income—

8 ‘‘(A) the term ‘United States shareholder’

9 means, with respect to any foreign corporation,

10 a United States person (as defined in section

11 957(c)) who owns (within the meaning of sec12 tion 958(a)) any stock of the foreign corpora13 tion,

14 ‘‘(B) the term ‘controlled foreign corpora15 tion’ has the meaning given to such term by

16 section 957(a) determined by substituting ‘25

17 percent or more’ for ‘more than 50 percent’,

18 and

19 ‘‘(C) the pro rata share referred to in sec20 tion 951(a)(1)(A)(i) shall be determined under

21 paragraph (5) of this subsection.

22 ‘‘(2) RELATED PERSON INSURANCE INCOME.—

23 For purposes of this subsection, the term ‘related

24 person insurance income’ means any insurance in25 come (within the meaning of subsection (c)) attrib26 utable to a policy of insurance or reinsurance with
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1 respect to which the person (directly or indirectly)

2 insured is a United States shareholder in the foreign

3 corporation or a related person to such a share4 holder.

5 ‘‘(3) EXCEPTIONS.—

6 ‘‘(A) CORPORATIONS NOT HELD BY

7 INSUREDS.—Paragraph (1) shall not apply to

8 any foreign corporation if at all times during

9 the taxable year of such foreign corporation—

10 ‘‘(i) less than 20 percent of the total

11 combined voting power of all classes of

12 stock of such corporation entitled to vote,

13 and

14 ‘‘(ii) less than 20 percent of the total

15 value of such corporation,

16 is owned (directly or indirectly) under the prin17 ciples of section 883(c)(4) by persons who are

18 (directly or indirectly) insured under any policy

19 of insurance or reinsurance issued by such cor20 poration or who are related persons to any such

21 person.

22 ‘‘(B) DE MINIMIS EXCEPTION.—Paragraph

23 (1) shall not apply to any foreign corporation

24 for a taxable year of such corporation if the re25 lated person insurance income (determined on a
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1 gross basis) of such corporation for such tax2 able year is less than 20 percent of its insur3 ance income (as so determined) for such taxable

4 year determined without regard to those provi5 sions of subsection (c)(1) which limit insurance

6 income to income from countries other than the

7 country in which the corporation was created or

8 organized.

9 ‘‘(C) ELECTION TO TREAT INCOME AS EF10 FECTIVELY CONNECTED.—Paragraph (1) shall

11 not apply to any foreign corporation for any

12 taxable year if—

13 ‘‘(i) such corporation elects (at such

14 time and in such manner as the Secretary

15 may prescribe)—

16 ‘‘(I) to treat its related person in17 surance income for such taxable year

18 as income effectively connected with

19 the conduct of a trade or business in

20 the United States, and

21 ‘‘(II) to waive all benefits (other

22 than with respect to section 884) with

23 respect to related person insurance in24 come granted by the United States
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1 under any treaty between the United

2 States and any foreign country, and

3 ‘‘(ii) such corporation meets such re4 quirements as the Secretary shall prescribe

5 to ensure that the tax imposed by this

6 chapter on such income is paid.

7 An election under this subparagraph made for

8 any taxable year shall not be effective if the

9 corporation (or any predecessor thereof) was a

10 disqualified corporation for the taxable year for

11 which the election was made or for any prior

12 taxable year beginning after 1986.

13 ‘‘(D) SPECIAL RULES FOR SUBPARAGRAPH

14 (C).—

15 ‘‘(i) PERIOD DURING WHICH ELEC16 TION IN EFFECT.—

17 ‘‘(I) IN GENERAL.—Except as

18 provided in subclause (II), any elec19 tion under subparagraph (C) shall

20 apply to the taxable year for which

21 made and all subsequent taxable years

22 unless revoked with the consent of the

23 Secretary.

24 ‘‘(II) TERMINATION.—If a for25 eign corporation which made an elec-
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1 tion under subparagraph (C) for any

2 taxable year is a disqualified corpora3 tion for any subsequent taxable year,

4 such election shall not apply to any

5 taxable year beginning after such sub6 sequent taxable year.

7 ‘‘(ii) EXEMPTION FROM TAX IMPOSED

8 BY SECTION 4371.—The tax imposed by

9 section 4371 shall not apply with respect

10 to any related person insurance income

11 treated as effectively connected with the

12 conduct of a trade or business within the

13 United States under subparagraph (C).

14 ‘‘(E) DISQUALIFIED CORPORATION.—For

15 purposes of this paragraph the term ‘disquali16 fied corporation’ means, with respect to any

17 taxable year, any foreign corporation which is a

18 controlled foreign corporation for an uninter19 rupted period of 30 days or more during such

20 taxable year (determined without regard to this

21 subsection) but only if a United States share22 holder (determined without regard to this sub23 section) owns (within the meaning of section

24 958(a)) stock in such corporation at some time

25 during such taxable year.
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1 ‘‘(4) TREATMENT OF MUTUAL INSURANCE COM2 PANIES.—In the case of a mutual insurance com3 pany—

4 ‘‘(A) this subsection shall apply,

5 ‘‘(B) policyholders of such company shall

6 be treated as shareholders, and

7 ‘‘(C) appropriate adjustments in the appli8 cation of this subpart shall be made under reg9 ulations prescribed by the Secretary.

10 ‘‘(5) DETERMINATION OF PRO RATA SHARE.—

11 ‘‘(A) IN GENERAL.—The pro rata share

12 determined under this paragraph for any

13 United States shareholder is the lesser of—

14 ‘‘(i) the amount which would be deter15 mined under paragraph (2) of section

16 951(a) if—

17 ‘‘(I) only related person insur18 ance income were taken into account,

19 ‘‘(II) stock owned (within the

20 meaning of section 958(a)) by United

21 States shareholders on the last day of

22 the taxable year were the only stock

23 in the foreign corporation, and

24 ‘‘(III) only distributions received

25 by United States shareholders were
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1 taken into account under subpara2 graph (B) of such paragraph (2), or

3 ‘‘(ii) the amount which would be de4 termined under paragraph (2) of section

5 951(a) on the basis of the entire subpart

6 F income of the foreign corporation for the

7 taxable year.

8 ‘‘(B) COORDINATION WITH OTHER PROVI9 SIONS.—The Secretary shall prescribe regula10 tions providing for such modifications to the

11 provisions of this subpart as may be necessary

12 or appropriate by reason of subparagraph (A).

13 ‘‘(6) RELATED PERSON.—For purposes of this

14 subsection—

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

16 subparagraph (B), the term ‘related person’ has

17 the meaning given such term by section 964(a).

18 ‘‘(B) TREATMENT OF CERTAIN LIABILITY

19 INSURANCE POLICIES.—In the case of any pol20 icy of insurance covering liability arising from

21 services performed as a director, officer, or em22 ployee of a corporation or as a partner or em23 ployee of a partnership, the person performing

24 such services and the entity for which such
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1 services are performed shall be treated as relat2 ed persons.

3 ‘‘(7) COORDINATION WITH SECTION 1248.—For

4 purposes of section 1248, if any person is (or would

5 be but for paragraph (3)) treated under paragraph

6 (1) as a United States shareholder with respect to

7 any foreign corporation which would be taxed under

8 subchapter L if it were a domestic corporation and

9 which is (or would be but for paragraph (3)) treated

10 under paragraph (1) as a controlled foreign corpora11 tion—

12 ‘‘(A) such person shall be treated as meet13 ing the stock ownership requirements of section

14 1248(a)(2) with respect to such foreign cor15 poration, and

16 ‘‘(B) such foreign corporation shall be

17 treated as a controlled foreign corporation.

18 ‘‘(8) REGULATIONS.—The Secretary shall pre19 scribe such regulations as may be necessary to carry

20 out the purposes of this subsection, including—

21 ‘‘(A) regulations preventing the avoidance

22 of this subsection through cross insurance ar23 rangements or otherwise, and

24 ‘‘(B) regulations which may provide that a

25 person will not be treated as a United States
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•HR 1629 IH

1 shareholder under paragraph (1) with respect

2 to any foreign corporation if neither such per3 son (nor any related person to such person) is

4 (directly or indirectly) insured under any policy

5 of insurance or reinsurance issued by such for6 eign corporation.

7 ‘‘(b) ELECTION BY FOREIGN INSURANCE COMPANY

8 TO BE TREATED AS DOMESTIC CORPORATION.—

9 ‘‘(1) IN GENERAL.—If—

10 ‘‘(A) a foreign corporation is a controlled

11 foreign corporation (as defined in section

12 957(a) by substituting ‘25 percent or more’ for

13 ‘more than 50 percent’ and by using the defini14 tion of United States shareholder under sub15 section (a)(1)(A) of this section),

16 ‘‘(B) such foreign corporation would qual17 ify under part I or II of subchapter L for the

18 taxable year if it were a domestic corporation,

19 ‘‘(C) such foreign corporation meets such

20 requirements as the Secretary shall prescribe to

21 ensure that the taxes imposed by this chapter

22 on such foreign corporation are paid, and

23 ‘‘(D) such foreign corporation makes an

24 election to have this paragraph apply and
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1 waives all benefits to such corporation granted

2 by the United States under any treaty,

3 for purposes of this title, such corporation shall be

4 treated as a domestic corporation.

5 ‘‘(2) PERIOD DURING WHICH ELECTION IS IN

6 EFFECT.—

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

8 subparagraph (B), an election under paragraph

9 (1) shall apply to the taxable year for which

10 made and all subsequent taxable years unless

11 revoked with the consent of the Secretary.

12 ‘‘(B) TERMINATION.—If a corporation

13 which made an election under paragraph (1) for

14 any taxable year fails to meet the requirements

15 of subparagraph (A), (B), or (C) of paragraph

16 (1) for any subsequent taxable year, such elec17 tion shall not apply to any taxable year begin18 ning after such subsequent taxable year.

19 ‘‘(3) TREATMENT OF LOSSES.—If any corpora20 tion treated as a domestic corporation under this

21 subsection is treated as a member of an affiliated

22 group for purposes of chapter 6 (relating to consoli23 dated returns), any loss of such corporation shall be

24 treated as a dual consolidated loss for purposes of
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1 section 1503(d) without regard to paragraph (2)(B)

2 thereof.

3 ‘‘(4) EFFECT OF ELECTION.—

4 ‘‘(A) IN GENERAL.—For purposes of sec5 tion 367, any foreign corporation making an

6 election under paragraph (1) shall be treated as

7 transferring (as the 1st day of the 1st taxable

8 year to which such election applies) all of its as9 sets to a domestic corporation in connection

10 with an exchange to which section 354 applies.

11 ‘‘(B) EXCEPTION FOR PRE-1988 EARNINGS

12 AND PROFIT.—

13 ‘‘(i) IN GENERAL.—Earnings and

14 profits of the foreign corporation accumu15 lated in taxable years beginning before

16 January 1, 1988, shall not be included in

17 the gross income of the persons holding

18 stock in such corporation by reason of sub19 paragraph (A).

20 ‘‘(ii) TREATMENT OF DISTRIBU21 TIONS.—For purposes of this title, any dis22 tribution made by a corporation to which

23 an election under paragraph (1) applies

24 out of earnings and profits accumulated in

25 taxable years beginning before January 1,
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1 1988, shall be treated as a distribution

2 made by a foreign corporation.

3 ‘‘(iii) CERTAIN RULES TO CONTINUE

4 TO APPLY TO PRE-1988 EARNINGS.—The

5 provisions specified in clause (iv) shall be

6 applied without regard to paragraph (1),

7 except that, in the case of a corporation to

8 which an election under paragraph (1) ap9 plies, only earnings and profits accumu10 lated in taxable years beginning before

11 January 1, 1988, shall be taken into ac12 count.

13 ‘‘(iv) SPECIFIED PROVISIONS.—The

14 provisions specified in this clause are:

15 ‘‘(I) Section 1248 (relating to

16 gain from certain sales or exchanges

17 of stock in certain foreign corpora18 tions).

19 ‘‘(II) This subpart to the extent

20 such subpart relates to earnings in21 vested in United States property or

22 amounts referred to in clause (ii) or

23 (iii) of section 951(a)(1)(A).

24 ‘‘(III) Section 884 to the extent

25 the foreign corporation reinvested
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1 1987 earnings and profits in United

2 States assets.

3 ‘‘(5) EFFECT OF TERMINATION.—For purposes

4 of section 367, if—

5 ‘‘(A) an election is made by a corporation

6 under paragraph (1) for any taxable year, and

7 ‘‘(B) such election ceases to apply for any

8 subsequent taxable year,

9 such corporation shall be treated as a domestic cor10 poration transferring (as of the 1st day of such sub11 sequent taxable year) all of its property to a foreign

12 corporation in connection with an exchange to which

13 section 354 applies.

14 ‘‘(6) ADDITIONAL TAX ON CORPORATION MAK15 ING ELECTION.—

16 ‘‘(A) IN GENERAL.—If a corporation

17 makes an election under paragraph (1), the

18 amount of tax imposed by this chapter for the

19 1st taxable year to which such election applies

20 shall be increased by the amount determined

21 under subparagraph (B).

22 ‘‘(B) AMOUNT OF TAX.—The amount of

23 tax determined under this paragraph shall be

24 equal to the lesser of—
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‘‘(i) 3 1 ⁄4 of 1 percent of the aggregate

2 amount of capital and accumulated surplus

3 of the corporation as of December 31,

4 1987, or

5 ‘‘(ii) $1,500,000.

6 ‘‘(c) INSURANCE INCOME DEFINED.—For purposes

7 of this section, the term ‘insurance income’ means any in8 come which—

9 ‘‘(1) is attributable to the issuing (or reinsur10 ing) of any insurance or annuity contract—

11 ‘‘(A) in connection with property in, liabil12 ity arising out of activity in, or in connection

13 with the lives or health of residents of, a coun14 try other than the country under the laws of

15 which the controlled foreign corporation is cre16 ated or organized, or

17 ‘‘(B) in connection with risks not described

18 in subparagraph (A) as the result of any ar19 rangement whereby another corporation receives

20 a substantially equal amount of premiums or

21 other consideration in respect of issuing (or re22 insuring) a contract described in subparagraph

23 (A), and

24 ‘‘(2) would (subject to the modifications pro25 vided by paragraphs (1) and (2) of subsection (d))
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1 be taxed under subchapter L of this chapter if such

2 income were the income of a domestic insurance

3 company.

4 ‘‘(d) SPECIAL RULES.—In determining the amount

5 of insurance income—

6 ‘‘(1) The following provisions of subchapter L

7 shall not apply:

8 ‘‘(A) The small life insurance company de9 duction.

10 ‘‘(B) Section 805(a)(5) (relating to oper11 ations loss deduction).

12 ‘‘(C) Section 832(c)(5) (relating to certain

13 capital losses).

14 ‘‘(2) The items referred to in—

15 ‘‘(A) section 803(a)(1) (relating to gross

16 amount of premiums and other considerations),

17 ‘‘(B) section 803(a)(2) (relating to net de18 crease in reserves),

19 ‘‘(C) section 805(a)(2) (relating to net in20 crease in reserves), and

21 ‘‘(D) section 832(b)(4) (relating to pre22 miums earned on insurance contracts),

23 shall be taken into account only to the extent they

24 are in respect of any reinsurance or the issuing of
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1 any insurance or annuity contract described in sub2 section (a)(1).

3 ‘‘(3) All items of income, expenses, losses, and

4 deductions shall be properly allocated or apportioned

5 under regulations prescribed by the Secretary.’’

6 (b) REPEAL OF EXPORT TRADE CORPORATION PRO7 VISIONS.—Subpart G of part III of subchapter N of chap8 ter 1 of such Code (relating to export trade corporations)

9 is hereby repealed.

10 (c) CONFORMING AMENDMENTS TO SUBPART F.—

11 (1) Subparagraph (A) of section 955(a)(1) of

12 such Code is amended by inserting ‘‘(as in effect for

13 taxable years beginning before 1987)’’ after ‘‘section

14 954(b)(2)’’.

15 (2) Subsection (b) of section 955 of such Code

16 is amended by striking ‘‘within the meaning of sec17 tion 954(d)(3)’’ and inserting ‘‘within the meaning

18 of section 964(a)’’.

19 (3) Paragraph (2) of section 956(c) of such

20 Code is amended—

21 (A) by striking ‘‘section 953(a)(1)’’ in sub22 paragraph (E) and inserting ‘‘section

23 953(c)(1)’’, and

24 (B) by inserting ‘‘(as in effect on the day

25 before the date of the enactment of this par-
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1 enthetical) or under section 952(a)(1)’’ after

2 ‘‘section 952(b)’’ in subparagraph (H).

3 (4) Subsection (b) of section 957 of such Code

4 is amended—

5 (A) by striking ‘‘income described in sec6 tion 953(a)’’ and inserting ‘‘subpart F income

7 attributable to income described in section

8 953(c)’’, and

9 (B) by striking ‘‘section 953(a)(1)’’ and in10 serting ‘‘section 953(c)(1)’’.

11 (5) Subsection (b) of section 958 of such Code

12 is amended—

13 (A) by striking ‘‘954(d)(3), 956(b)(2), and

14 957’’ and inserting ‘‘956(b)(2), 957, and

15 964(a)’’, and

16 (B) by striking ‘‘954(d)(3)’’ the second

17 place it appears and inserting ‘‘964(a)’’.

18 (6) Subsection (b) of section 959 of such Code

19 is amended by striking ‘‘be also included in the gross

20 income’’ and inserting ‘‘be also included in the sub21 part F income’’.

22 (7) Subsection (a) of section 964 of such Code

23 is amended to read as follows:
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1 ‘‘(a) RELATED PERSON.—For purposes of this part,

2 a person is a related person with respect to a controlled

3 foreign corporation, if—

4 ‘‘(1) such person is an individual, corporation,

5 partnership, trust, or estate which controls, or is

6 controlled by, the controlled foreign corporation, or

7 ‘‘(2) such person is a corporation, partnership,

8 trust, or estate which is controlled by the same per9 son or persons which control the controlled foreign

10 corporation.

11 For purposes of the preceding sentence, control means,

12 with respect to a corporation, the ownership, directly or

13 indirectly, of stock possessing more than 50 percent of the

14 total voting power of all classes of stock entitled to vote

15 or of the total value of stock of such corporation. In the

16 case of a partnership, trust, or estate, control means the

17 ownership, directly or indirectly, more than 50 percent (by

18 value) of the beneficial interests in such partnership, trust,

19 or estate. For purposes of this paragraph, rules similar

20 to the rules of section 958 shall apply.’’

21 (8) Section 964 of such Code is amended by

22 striking subsection (b).

23 (9) The table of sections for subpart F of part

24 III of subchapter N of chapter 1 of such Code is
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1 amended by striking the items relating to sections

2 952, 953 and 954 and inserting the following:

‘‘Sec. 952. Subpart F income.

‘‘Sec. 953. Special rules for certain insurance companies.’’

3 (f) OTHER CONFORMING AMENDMENTS.—

4 (1) Paragraph (2) of section 552(c) of such

5 Code is amended—

6 (A) by amending subparagraph (A) to read

7 as follows:

8 ‘‘(A) is received from a related person

9 which (i) is a corporation created or organized

10 under the laws of the same foreign country

11 under the laws of which the foreign corporation

12 involved was created or organized, and (ii) has

13 a substantial part of its assets used in its trade

14 or business located in such same foreign coun15 try, and’’, and

16 (B) by striking ‘‘954(d)(3)’’ and inserting

17 ‘‘964(a)’’.

18 (2) Subparagraph (B) of section 861(c)(2) of

19 such Code is amended by striking ‘‘954(d)(3)’’ and

20 inserting ‘‘964(a)’’.

21 (3) Subparagraph (A) of section 864(d)(5) of

22 such Code is amended by striking clauses (ii), (iii),

23 and (iv).
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1 (4) Subparagraph (A) of section 881(c)(5) of

2 such Code is hereby repealed.

3 (5) Subparagraph (D) of section 884(d)(2) of

4 such Code is amended by striking ‘‘953(c)(3)(C)’’

5 and inserting ‘‘953(a)(3)(C)’’.

6 (6) Subparagraph (A) of section 898(b)(3) of

7 such Code is amended—

8 (A) by striking ‘‘953(c)(2)’’ and inserting

9 ‘‘953(a)(2)’’, and

10 (B) by striking ‘‘953(c)(1) and inserting

11 ‘‘953(a)(1)’’.

12 (7) Clause (i) of section 904(d)(2)(A) of such

13 Code is amended by inserting ‘‘, as in effect on the

14 day before the date of the repeal of such section’’

15 after ‘‘section 954(c)’’.

16 (8) Subclause (III) of section 904(d)(2)(C)(ii)

17 of such Code is amended by striking ‘‘953(a)’’ and

18 inserting ‘‘953(c)’’.

19 (9) Subparagraph (D) of section 904(d)(2) of

20 such Code is amended—

21 (A) by inserting ‘‘, as in effect on the day

22 before the date of the repeal of such section’’

23 after ‘‘954(f)’’, and

24 (B) by inserting ‘‘or passive income’’ be25 fore the period at the end thereof.
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1 (10) Subparagraph (H) of section 904(d)(2) of

2 such Code is amended by striking ‘‘954(d)(3)’’ and

3 inserting ‘‘964(a)’’.

4 (11) Subparagraph (E) of section 904(d)(3) of

5 such Code is hereby repealed.

6 (12) Subparagraph (C) of section 988(a)(3) of

7 such Code is amended by striking ‘‘954(d)(3)’’ and

8 inserting ‘‘964(a)’’.

9 (13) Subsection (c) of section 999 of such Code

10 is amended—

11 (A) by striking ‘‘, 952(a)(3),’’ in para12 graph (1), and

13 (B) by striking ‘‘, the addition to subpart

14 F income under section 952(a)(3),’’ in para15 graph (2).

16 (14) Subsection (a) of section 6046 of such

17 Code is amended by striking ‘‘953(c)’’ and inserting

18 ‘‘953(a)’’.

19 (15) The table of subparts for part III of sub20 chapter M of chapter 1 of such Code is amended by

21 striking the item relating to subpart G.

22 (g) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to taxable years of controlled for24 eign corporations beginning after December 31, 1995, and

25 to the taxable years of United States shareholders with
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1 which (or in which) such taxable years of controlled for2 eign corporations end.

3 SEC. 9. EXTENSION OF STATUTE OF LIMITATIONS FOR CER4 TAIN FOREIGN–RELATED DEFICIENCIES.

5 (a) GENERAL RULE—Subsection (c) of section 6501

6 of the Internal Revenue Code of 1986 (relating to limita7 tions on assessment and collection) is amended by adding

8 at the end thereof the following new paragraph:

9 ‘‘(10) CERTAIN FOREIGN-RELATED DEFI10 CIENCIES.—

11 ‘‘(A) IN GENERAL.—If, before the expira12 tion of the time prescribed by this section for

13 the assessment of any foreign-related deficiency

14 (determined with regard to extensions under

15 paragraph (4))—

16 ‘‘(i) the Secretary determines that

17 such deficiency cannot be accurately as18 sessed before the expiration of such period

19 by reason of delay or other actions of the

20 taxpayer which prevented the timely as21 sessment of such deficiency, and

22 ‘‘(ii) The Secretary sends by certified

23 or registered mail a notice of such deter24 mination to the taxpayer,
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1 the Secretary may extend the period during

2 which such deficiency may be assessed by an

3 additional period of not more than 3 years. Not

4 more than 1 extension may be made under the

5 preceding sentence with respect to any defi6 ciency.

7 ‘‘(B) FOREIGN-RELATED DEFICIENCY.—

8 For purposes of subparagraph (A), the term

9 ‘foreign-related deficiency’ means—

10 ‘‘(i) any deficiency of a domestic cor11 poration which is 25-percent foreign-owned

12 to the extent such deficiency is attributable

13 to a transaction directly or indirectly with

14 a related party who is a foreign person,

15 and

16 ‘‘(ii) any deficiency of a foreign cor17 poration with respect to the taxes imposed

18 pursuant to sections 882 and 884.

19 ‘‘(C) JUDICIAL PROCEEDINGS.—

20 ‘‘(i) REVIEW.—Notwithstanding any

21 law or rule of law, any taxpayer to which

22 a notice of a determination under subpara23 graph (A) has been mailed shall have the

24 right to begin a proceeding to review such

25 determination not later than the 90th day
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1 after the day on which such notice was

2 mailed. If such a proceeding is not begun

3 on or before such 90th day, such deter4 mination by the Secretary shall be binding

5 and shall not be reviewed by any court.

6 ‘‘(ii) JURISDICTION.—The United

7 States district court for the district in

8 which the taxpayer resides or is found

9 shall have jurisdiction to hear any proceed10 ing brought under clause (i). Any order or

11 other determination in such a proceeding

12 shall be treated as a final order which may

13 be appealed.

14 ‘‘(iii) SUSPENSION OF STATUTE OF

15 LIMITATIONS.—If the taxpayer brings a

16 proceeding under clause (i), the running of

17 any period of limitations under this section

18 or section 6531 with respect to the defi19 ciency to which the proceeding relates shall

20 be suspended for the period beginning on

21 the date on which the notice under sub22 paragraph (A) was mailed and ending on

23 the date on which there is a final deter24 mination in the proceeding. In no event

25 shall any such period expire before the
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1 90th day after the day on which there is

2 a final determination in such proceeding.

3 ‘‘(D) DEFINITIONS.—For purposes of this

4 paragraph, the terms ‘25-percent foreign5 owned’, ‘foreign person’, and ‘related party’

6 have the respective meanings given such terms

7 by section 6038A(c).’’

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

9 subsection (a) shall apply to any deficiency—

10 (1) for any taxable year ending after the date

11 of the enactment of this Act, or

12 (2) any taxable year ending on or before such

13 date of enactment if the period during which such

14 deficiency may be assessed under section 6501 of the

15 Internal Revenue Code of 1986 (determined without

16 regard to the amendments made by subsection (a))

17 has not expired before such date of the enactment.

18 SEC. 10. REDUCTION OF OUTSTANDING LOAN, GUARANTEE,

19 AND INSURANCE AUTHORITY OF THE EX20 PORT-IMPORT BANK OF THE UNITED STATES.

21 (a) IN GENERAL.—Section 6(a) of the Export-Import

22 Bank Act of 1945 (12 U.S.C. 635e(a)) is amended by

23 striking ‘‘$75,000,000,000’’ and inserting

24 ‘‘$37,500,000,000’’.
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1 (b) AUTHORITY TO IMPOSE FINANCING FEES BASED

2 ON CREDIT RISK.—Section 2 of the Export-Import Bank

3 Act of 1945 (12 U.S.C. 635) is amended by adding at

4 the end the following:

5 ‘‘(f) IMPOSITION OF FINANCING FEES BASED ON

6 CREDIT RISK.—The Bank shall charge and collect a fee

7 for the provision of a guarantee, the provision of insur8 ance, the extension of credit, or the participation of the

9 Bank in an extension of credit, under this Act, which shall

10 be—

11 ‘‘(1) based on the credit risk associated with

12 the transaction involved; and

13 ‘‘(2) not less than the fee that would be

14 charged for similar purposes in an arms-length

15 transaction in the private sector.’’.

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

17 this section shall take effect on October 1, 1995.

18 SEC. 11. ABOLITION OF OVERSEAS PRIVATE INVESTMENT

19 CORPORATION.

20 (a) ABOLITION.—The Overseas Private Investment

21 Corporation is abolished, effective October 1, 1995.

22 (b) ADMINISTRATION OF EXISTING OBLIGATIONS.—

23 The Secretary of State shall carry out the functions per24 formed on September 30, 1995, by the Overseas Private

25 Investment Corporation only for purposes of administering
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1 insurance, reinsurance, financing, and other contracts or

2 agreements issued or entered into by the Corporation that

3 are effective on October 1, 1995. Such functions shall ter4 minate when all such insurance, reinsurance, financing,

5 and other contracts or agreements expire.

6 (c) TERMINATION OF PROVISIONS.—Title IV of chap7 ter 2 of part I of the Foreign Assistance Act of 1961 (22

8 U.S.C. 2191 and following) shall cease to be effective on

9 October 1, 1995, except that such title shall continue in

10 effect with respect to the functions performed by the Sec11 retary of State under subsection (b).

12 (d) TERMINATION OF AFFAIRS.—The Director of the

13 Office of Management and Budget shall take the nec14 essary steps to terminate the affairs of the Overseas Pri15 vate Investment Corporation.

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