I

104TH CONGRESS

1ST SESSION H. R. 2355

To amend the Internal Revenue Code of 1986 to allow a corporation to

elect the pooling method of determining foreign tax credits in certain

cases, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 19, 1995

Mr. BASS introduced the following bill; which was referred to the Committee

on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to allow a

corporation to elect the pooling method of determining

foreign tax credits in certain cases, 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. ELECTION OF POOLING METHOD OF DETER4 MINING FOREIGN TAX CREDIT IN CERTAIN

5 CASES.

6 (a) IN GENERAL.—Section 902(c) of the Internal

7 Revenue Code of 1986 is amended by redesignating para-
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1 graph (7) as paragraph (8) and by inserting after para2 graph (6) the following new paragraph:

3 ‘‘(7) SPECIAL RULE WHERE DOMESTIC COR4 PORATION ACQUIRES 80 PERCENT OF FOREIGN COR5 PORATION BEFORE DECEMBER 31, 1986.—

6 ‘‘(A) IN GENERAL.—For purposes of ap7 plying subsection (a), if a domestic corporation

8 elects the application of this paragraph in ac9 cordance with subparagraph (B) and if the

10 ownership requirement of subparagraph (C) is

11 met with respect to any foreign corporation, the

12 post-1986 undistributed earnings and the post13 1986 foreign income taxes of such foreign cor14 poration shall be determined by taking into ac15 count the amount of earnings and profits of the

16 foreign corporation (computed in accordance

17 with sections 964(a) and 986) accumulated in,

18 and the amount of foreign income taxes of such

19 foreign corporation paid with respect to, all pe20 riods beginning on and after the 1st day of the

21 1st taxable year in which such ownership re22 quirement is met.

23 ‘‘(B) IRREVOCABLE ELECTION.—A domes24 tic corporation shall make the election allowed
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1 under this paragraph in such manner as the

2 Secretary shall prescribe. Such election—

3 ‘‘(i) shall be made on or before the

4 due date (including extensions) for filing

5 the return of tax for the taxable year for

6 which the election is being made,

7 ‘‘(ii) shall apply to each foreign cor8 poration with respect to which the domes9 tic corporation may apply the rules of sec10 tion 902(a), and

11 ‘‘(iii) once made, shall be irrevocable

12 for all subsequent taxable years.

13 ‘‘(C) OWNERSHIP REQUIREMENT.—The

14 ownership requirement of this subparagraph is

15 met with respect to any foreign corporation if

16 the domestic corporation owns within the mean17 ing of section 958(a), or is considered as own18 ing by applying the rules of ownership of sec19 tion 958(b), 80 percent or more of the total

20 combined voting power of all classes of stock

21 entitled to vote of such foreign corporation.’’.

22 (b) EFFECTIVE DATES.—

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

24 this section shall apply with respect to taxable years

25 beginning after December 31, 1986.
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1 (2) TIME FOR FILING ELECTION WHEN RETURN

2 FILED.—For any taxable year beginning after De3 cember 31, 1986, with respect to which a domestic

4 corporation has filed a return of income tax imposed

5 under chapter 1 of the Internal Revenue Code of

6 1986 prior to the date of enactment of this Act, a

7 domestic corporation may make the election allowed

8 under section 902(c)(7) of the Internal Revenue

9 Code of 1986 within 120 days of the date of enact10 ment of this Act, but only if for such taxable year

11 any one or more of the following conditions exists:

12 (A) The period of limitations for assess13 ment and collection, as defined in section

14 6501(a) of such Code, has not expired.

15 (B) If the limitations period described in

16 paragraph (1) has been extended by agreement

17 between the Secretary and the taxpayer pursu18 ant to section 6501(c)(4) of such Code, such ex19 tended period has not expired.

20 (C) The period of limitations for filing a

21 claim for refund pursuant to section 6511(a) of

22 such Code has not expired.

23 (D) The proper amount of tax due for the

24 taxable year is the subject of a petition to the

25 Tax Court pursuant to section 6213 of such
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1 Code and a decision of the Tax Court on the

2 merits of the petition, if any, has not yet be3 come final.

4 (E) The proper amount of tax due for the

5 taxable year is the subject of a civil action for

6 refund before a Federal district pursuant to

7 section 1346(a) of title 28, United States Code,

8 or before the Federal Court of Claims pursuant

9 to section 1491(a)(1) of such title, and a deci10 sion on the merits of the refund action, if any,

11 has not yet become final.

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