II

103D CONGRESS

2D SESSION S. 2523

To amend the Internal Revenue Code of 1986 to permit certain foreign

pension plans to invest in the United States on a nontaxable basis.

IN THE SENATE OF THE UNITED STATES

OCTOBER 6 (legislative day, SEPTEMBER 12), 1994

Mr. WALLOP 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 permit

certain foreign pension plans to invest in the United

States on a nontaxable basis.

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

3 SECTION 1. TAX EXEMPTION FOR CERTAIN FOREIGN PEN4 SION PLANS INVESTING IN THE UNITED

5 STATES.

6 (a) IN GENERAL.—Section 501(c) of the Internal

7 Revenue Code of 1986 (relating to organizations exempt

8 from tax under section 501(a)) is amended by adding at

9 the end the following new paragraph:
2

•S 2523 IS

1 ‘‘(26)(A) Except as provided in subparagraph

2 (B), a trust, corporation, or fund which is formed

3 pursuant to, or as part of, a foreign pension plan—

4 ‘‘(i) which is described in section 3(2) of

5 the Employee Retirement Income Security Act

6 (29 U.S.C. 1002(2));

7 ‘‘(ii) the assets of which are segregated

8 from the assets of the employer or employers

9 maintaining the plan pursuant to the laws of

10 the foreign country in which such plan is main11 tained;

12 ‘‘(iii) the income of which is, under the

13 laws of the foreign country in which the plan is

14 maintained, exempt from tax or is subject to a

15 lower rate of taxation than is generally imposed

16 on other residents of such foreign country; and

17 ‘‘(iv) which provides benefits to a broad

18 classification of employees, not merely highly

19 compensated employees or owners.

20 If all of the assets of a trust, corporation, or fund

21 are held for the benefit of one or more foreign pen22 sion plans described in this subparagraph, such

23 trust, corporation, or fund shall be treated as de24 scribed in this subparagraph.
3

•S 2523 IS

1 ‘‘(B) The exemption provided by this paragraph

2 shall be subject to adjustment under section 896 (re3 lating to the adjustment of tax of nationals of for4 eign countries). The President shall, no later than

5 January 1, 1996, report to Congress on the extent

6 to which the President has exercised the authority

7 under that section with respect to relief from foreign

8 income taxes for plans described in section 401(a).’’

9 (b) CONFORMING AMENDMENTS.—(1) Section

10 512(a)(2) of the Internal Revenue Code of 1986 (relating

11 to the unrelated business taxable income of certain foreign

12 organizations) is amended by inserting ‘‘or section

13 501(c)(26)’’ after ‘‘section 511’’.

14 (2) Clause (ii) of section 514(c)(9)(C) of such Code

15 (relating to unrelated debt-financed income of qualified

16 trusts) is amended by inserting ‘‘or any foreign pension

17 plan described in section 501(c)(26)’’ after ‘‘section 401’’.

18 (3) Section 818(a) of such Code (relating to pension

19 plan contracts of life insurance companies) is amended by

20 striking ‘‘or’’ at the end of paragraph (5), by striking the

21 period at the end of paragraph (6) and inserting ‘‘; or’’,

22 and by adding at the end the following new paragraph:

23 ‘‘(7) entered into with trusts, corporations, or

24 funds which are formed pursuant to, or as part of,
4

•S 2523 IS

1 a foreign pension plan described in section

2 501(c)(26).’’

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

4 this section shall take effect on January 1, 1995.

Æ