H. R. 2488—94 
the date of original issue (without regard to the period 
held by the company). 
‘‘(ii) Any interest includible in gross income 
(including amounts recognized as ordinary income in 
respect of original issue discount or market discount 
or acquisition discount under part V of subchapter 
P and such other amounts as regulations may provide) 
on an obligation which is in registered form; except 
that this clause shall not apply to— 
‘‘(I) any interest on an obligation issued by 
a corporation or partnership if the regulated 
investment company is a 10-percent shareholder 
in such corporation or partnership, and 
‘‘(II) any interest which is treated as not being 
portfolio interest under the rules of subsection 
(h)(4). 
‘‘(iii) Any interest referred to in subsection (i)(2)(A) 
(without regard to the trade or business of the regu-
lated investment company). 
‘‘(iv) Any interest-related dividend includable in 
gross income with respect to stock of another regulated 
investment company. 
Such term includes any interest derived by the regulated 
investment company from sources outside the United 
States other than interest that is subject to a tax imposed 
by a foreign jurisdiction if the amount of such tax is reduced 
(or eliminated) by a treaty with the United States. 
‘‘(F) 10-PERCENT SHAREHOLDER.—For purposes of this 
paragraph, the term ‘10-percent shareholder’ has the 
meaning given such term by subsection (h)(3)(B). 
‘‘(2) SHORT-TERM CAPITAL GAIN DIVIDENDS.— 
‘‘(A) IN GENERAL.—Except as provided in subparagraph 
(B), no tax shall be imposed under paragraph (1)(A) of 
subsection (a) on any short-term capital gain dividend 
received from a regulated investment company. 
‘‘(B) EXCEPTION
FOR
ALIENS
TAXABLE
UNDER
SUB-
SECTION (a)(2).—Subparagraph (A) shall not apply in the 
case of any nonresident alien individual subject to tax 
under subsection (a)(2). 
‘‘(C) SHORT-TERM
CAPITAL
GAIN
DIVIDEND.—For pur-
poses of this paragraph, a short-term capital gain dividend 
is any dividend (or part thereof) which is designated by 
the regulated investment company as a short-term capital 
gain dividend in a written notice mailed to its shareholders 
not later than 60 days after the close of its taxable year. 
If the aggregate amount so designated with respect to 
a taxable year of the company (including amounts so des-
ignated with respect to dividends paid after the close of 
the taxable year described in section 855) is greater than 
the qualified short-term gain of the company for such tax-
able year, the portion of each distribution which shall be 
a short-term capital gain dividend shall be only that portion 
of the amounts so designated which such qualified short- 
term gain bears to the aggregate amount so designated. 
‘‘(D) QUALIFIED
SHORT-TERM
GAIN.—For purposes of 
subparagraph (C), the term ‘qualified short-term gain’ 
means the excess of the net short-term capital gain of 
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H. R. 2488—95 
the regulated investment company for the taxable year 
over the net long-term capital loss (if any) of such company 
for such taxable year. For purposes of this subparagraph— 
‘‘(i) the net short-term capital gain of the regulated 
investment company shall be computed by treating 
any short-term capital gain dividend includible in gross 
income with respect to stock of another regulated 
investment company as a short-term capital gain, and 
‘‘(ii) the excess of the net short-term capital gain 
for a taxable year over the net long-term capital loss 
for a taxable year (to which an election under section 
4982(e)(4) does not apply) shall be determined without 
regard to any net capital loss or net short-term capital 
loss attributable to transactions after October 31 of 
such year, and any such net capital loss or net short- 
term capital loss shall be treated as arising on the 
first day of the next taxable year. 
To the extent provided in regulations, clause (ii) shall apply 
also for purposes of computing the taxable income of the 
regulated investment company.’’. 
(2) FOREIGN CORPORATIONS.—Section 881 (relating to tax 
on income of foreign corporations not connected with United 
States business) is amended by redesignating subsection (e) 
as subsection (f ) and by inserting after subsection (d) the 
following new subsection: 
‘‘(e) TAX NOT TO APPLY TO CERTAIN DIVIDENDS OF REGULATED 
INVESTMENT COMPANIES.— 
‘‘(1) INTEREST-RELATED DIVIDENDS.— 
‘‘(A) IN GENERAL.—Except as provided in subparagraph 
(B), no tax shall be imposed under paragraph (1) of sub-
section (a) on any interest-related dividend (as defined 
in section 871(k)(1)) received from a regulated investment 
company. 
‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply— 
‘‘(i) to any dividend referred to in section 
871(k)(1)(B), and 
‘‘(ii) to any interest-related dividend received by 
a controlled foreign corporation (within the meaning 
of section 957(a)) to the extent such dividend is attrib-
utable to interest received by the regulated investment 
company from a person who is a related person (within 
the meaning of section 864(d)(4)) with respect to such 
controlled foreign corporation. 
‘‘(C) TREATMENT
OF
DIVIDENDS
RECEIVED
BY
CON-
TROLLED FOREIGN CORPORATIONS.—The rules of subsection 
(c)(5)(A) shall apply to any interest-related dividend 
received by a controlled foreign corporation (within the 
meaning of section 957(a)) to the extent such dividend 
is attributable to interest received by the regulated invest-
ment company which is described in clause (ii) of section 
871(k)(1)(E) (and not described in clause (i), (iii), or the 
last sentence of such section). 
‘‘(2) SHORT-TERM CAPITAL GAIN DIVIDENDS.—No tax shall 
be imposed under paragraph (1) of subsection (a) on any short- 
term capital gain dividend (as defined in section 871(k)(2)) 
received from a regulated investment company.’’. 
(3) WITHHOLDING TAXES.— 
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H. R. 2488—96 
(A) Section 1441(c) (relating to exceptions) is amended 
by adding at the end the following new paragraph: 
‘‘(12) CERTAIN
DIVIDENDS
RECEIVED
FROM
REGULATED 
INVESTMENT COMPANIES.— 
‘‘(A) IN
GENERAL.—No tax shall be required to be 
deducted and withheld under subsection (a) from any 
amount 
exempt 
from 
the 
tax 
imposed 
by 
section 
871(a)(1)(A) by reason of section 871(k). 
‘‘(B) SPECIAL RULE.—For purposes of subparagraph (A), 
clause (i) of section 871(k)(1)(B) shall not apply to any 
dividend unless the regulated investment company knows 
that such dividend is a dividend referred to in such clause. 
A similar rule shall apply with respect to the exception 
contained in section 871(k)(2)(B).’’. 
(B) Section 1442(a) (relating to withholding of tax on 
foreign corporations) is amended— 
(i) by striking ‘‘and the reference in section 
1441(c)(10)’’ and inserting ‘‘the reference in section 
1441(c)(10)’’, and 
(ii) by inserting before the period at the end the 
following: ‘‘, and the references in section 1441(c)(12) 
to sections 871(a) and 871(k) shall be treated as refer-
ring to sections 881(a) and 881(e) (except that for pur-
poses 
of 
applying 
subparagraph 
(A) 
of 
section 
1441(c)(12), as so modified, clause (ii) of section 
881(e)(1)(B) shall not apply to any dividend unless 
the regulated investment company knows that such 
dividend is a dividend referred to in such clause)’’. 
(b) ESTATE TAX TREATMENT OF INTEREST IN CERTAIN REGU-
LATED INVESTMENT COMPANIES.—Section 2105 (relating to property 
without the United States for estate tax purposes) is amended 
by adding at the end the following new subsection: 
‘‘(d) STOCK IN A RIC.— 
‘‘(1) IN GENERAL.—For purposes of this subchapter, stock 
in a regulated investment company (as defined in section 851) 
owned by a nonresident not a citizen of the United States 
shall not be deemed property within the United States in 
the proportion that, at the end of the quarter of such investment 
company’s taxable year immediately preceding a decedent’s date 
of death (or at such other time as the Secretary may designate 
in regulations), the assets of the investment company that 
were qualifying assets with respect to the decedent bore to 
the total assets of the investment company. 
‘‘(2) QUALIFYING ASSETS.—For purposes of this subsection, 
qualifying assets with respect to a decedent are assets that, 
if owned directly by the decedent, would have been— 
‘‘(A) amounts, deposits, or debt obligations described 
in subsection (b) of this section, 
‘‘(B) debt obligations described in the last sentence 
of section 2104(c), or 
‘‘(C) other property not within the United States.’’. 
(c) TREATMENT OF REGULATED INVESTMENT COMPANIES UNDER 
SECTION 897.— 
(1) Paragraph (1) of section 897(h) is amended by striking 
‘‘REIT’’ each place it appears and inserting ‘‘qualified invest-
ment entity’’. 
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H. R. 2488—97 
(2) Paragraphs (2) and (3) of section 897(h) are amended 
to read as follows: 
‘‘(2) SALE OF STOCK IN DOMESTICALLY CONTROLLED ENTITY 
NOT TAXED.—The term ‘United States real property interest’ 
does not include any interest in a domestically controlled quali-
fied investment entity. 
‘‘(3) DISTRIBUTIONS BY DOMESTICALLY CONTROLLED QUALI-
FIED INVESTMENT ENTITIES.—In the case of a domestically con-
trolled qualified investment entity, rules similar to the rules 
of subsection (d) shall apply to the foreign ownership percentage 
of any gain.’’. 
(3) Subparagraphs (A) and (B) of section 897(h)(4) are 
amended to read as follows: 
‘‘(A) QUALIFIED INVESTMENT ENTITY.—The term ‘quali-
fied investment entity’ means any real estate investment 
trust and any regulated investment company. 
‘‘(B) DOMESTICALLY CONTROLLED.—The term ‘domesti-
cally controlled qualified investment entity’ means any 
qualified investment entity in which at all times during 
the testing period less than 50 percent in value of the 
stock was held directly or indirectly by foreign persons.’’. 
(4) Subparagraphs (C) and (D) of section 897(h)(4) are 
each amended by striking ‘‘REIT’’ and inserting ‘‘qualified 
investment entity’’. 
(5) The subsection heading for subsection (h) of section 
897 is amended by striking ‘‘REITS’’ and inserting ‘‘CERTAIN 
INVESTMENT ENTITIES’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided in this sub-
section, the amendments made by this section shall apply to 
dividends with respect to taxable years of regulated investment 
companies beginning after December 31, 2004. 
(2) ESTATE
TAX
TREATMENT.—The amendment made by 
subsection (b) shall apply to estates of decedents dying after 
December 31, 2004. 
(3) CERTAIN OTHER PROVISIONS.—The amendments made 
by subsection (c) (other than paragraph (1) thereof) shall take 
effect on January 1, 2005. 
SEC. 908. REPEAL OF SPECIAL RULES FOR APPLYING FOREIGN TAX 
CREDIT IN CASE OF FOREIGN OIL AND GAS INCOME. 
(a) IN GENERAL.—Section 907 (relating to special rules in case 
of foreign oil and gas income) is repealed. 
(b) CONFORMING AMENDMENTS.— 
(1) Each of the following provisions are amended by striking 
‘‘907,’’: 
(A) Section 245(a)(10). 
(B) Section 865(h)(1)(B). 
(C) Section 904(d)(1). 
(D) Section 904(g)(10)(A). 
(2) Section 904(f )(5)(E)(iii) is amended by inserting ‘‘, as 
in effect before its repeal by the Taxpayer Refund and Relief 
Act of 1999’’ after ‘‘section 907(c)(4)(B)’’. 
(3) Section 954(g)(1) is amended by inserting ‘‘, as in effect 
before its repeal by the Taxpayer Refund and Relief Act of 
1999’’ after ‘‘907(c)’’. 
(4) Section 6501(i) is amended— 
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