I
107TH CONGRESS
2D SESSION
H. R. 5103
To amend the Internal Revenue Code of 1986 to simplify certain rules
relating to the taxation of United States businesses operating abroad,
and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 11, 2002
Mr. LEVIN (for himself and Mr. MATSUI) 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 simplify
certain rules relating to the taxation of United States
businesses operating abroad, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;
TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘International Tax Simplification, Fairness, and Competi-
tiveness Act of 2002’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents for
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. Expansion of de minimis rule under subpart F.
Sec. 102. Look-through treatment for sales of partnership interests.
Sec. 103. Repeal of foreign personal holding company rules and foreign invest-
ment company rules.
Sec. 104. Study of proper treatment of European Union under same country
exceptions.
Sec. 105. 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. Application of look-thru rules to foreign tax credit.
Sec. 205. Attribution of stock ownership through partnerships to apply in de-
termining section 902 and 960 credits.
Sec. 206. Study of whether to repeal special rules in section 907 on 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. United States property not to include certain assets acquired by deal-
ers in ordinary course of trade or business.
Sec. 304. Treatment of certain dividends of regulated investment companies.
Sec. 305. Airline mileage awards to certain foreign persons.
Sec. 306. Election not to use average exchange rate for foreign tax paid other
than in functional currency.
Sec. 307. Repeal of special capital gains tax on aliens present in the United
States for 183 days or more.
Sec. 308. Repeal of withholding tax on dividends from certain foreign corpora-
tions.
TITLE I—TREATMENT OF CON-
TROLLED 
FOREIGN 
COR-
PORATIONS
SEC. 101. EXPANSION OF DE MINIMIS RULE UNDER SUB-
PART F.
(a) 
IN
GENERAL.—Clause 
(ii) 
of 
section
954(b)(3)(A) (relating to de minimis, etc., rules) is
amended 
by 
striking 
‘‘$1,000,000’’ 
and 
inserting
‘‘$5,000,000’’.
(b) TECHNICAL AMENDMENTS.—
(1) Clause (ii) of section 864(d)(5)(A) is
amended by striking ‘‘$1,000,000’’ and inserting
‘‘$5,000,000’’.
(2) Clause (i) of section 881(c)(5)(A) is amend-
ed 
by 
striking 
‘‘$1,000,000’’ 
and 
inserting
‘‘$5,000,000’’.
SEC. 102. LOOK-THROUGH TREATMENT FOR SALES OF
PARTNERSHIP INTERESTS.
(a) IN GENERAL.—Section 954(c) (defining foreign
personal holding company income) is amended by adding
at the end the following new paragraph:
‘‘(4) LOOK-THROUGH
RULE
FOR
CERTAIN
PARTNERSHIP SALES.—
‘‘(A) IN
GENERAL.—In the case of any
sale by a controlled foreign corporation of an
interest in a partnership with respect to which
such corporation is a 25-percent owner, such
corporation shall be treated for purposes of this
subsection as selling the proportionate share of
the assets of the partnership attributable to
such interest.
‘‘(B) 25-PERCENT OWNER.—For purposes
of this paragraph, the term ‘25-percent owner’
means a controlled foreign corporation which
owns 25 percent or more of the capital or prof-
its interest in the partnership. The constructive
ownership rules of section 958(b) shall apply
for purposes of the preceding sentence.’’
(b) 
CONFORMING
AMENDMENT.—Section
954(c)(1)(B)(ii) is amended by inserting ‘‘except as pro-
vided in paragraph (4),’’ before ‘‘which’’.
SEC. 103. REPEAL OF FOREIGN PERSONAL HOLDING COM-
PANY RULES AND FOREIGN INVESTMENT
COMPANY RULES.
(a) GENERAL RULE.—The following provisions are
hereby repealed:
(1) Part III of subchapter G of chapter 1 (re-
lating to foreign personal holding companies).
(2) Section 1246 (relating to gain on foreign in-
vestment company stock).
(3) Section 1247 (relating to election by foreign
investment companies to distribute income cur-
rently).
(b) EXEMPTION OF FOREIGN CORPORATIONS FROM
PERSONAL HOLDING COMPANY RULES.—
(1) IN
GENERAL.—Subsection (c) of section
542 (relating to exceptions) is amended—
(A) by striking paragraph (5) and insert-
ing the following:
‘‘(5) a foreign corporation,’’,
(B) by striking paragraphs (7) and (10)
and by redesignating paragraphs (8) and (9) as
paragraphs (7) and (8), respectively,
(C) by inserting ‘‘and’’ at the end of para-
graph (7) (as so redesignated), and
(D) by striking ‘‘; and’’ at the end of para-
graph (8) (as so redesignated) and inserting a
period.
(2) TREATMENT OF INCOME FROM PERSONAL
SERVICE
CONTRACTS.—Paragraph (1) of section
954(c) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(H) PERSONAL SERVICE CONTRACTS.—
‘‘(i) Amounts received under a con-
tract under which the corporation is to fur-
nish personal services; if some person other
than the corporation has the right to des-
ignate (by name or by description) the in-
dividual who is to perform the services, or
if the individual who is to perform the
services is designated (by name or by de-
scription) in the contract; and
‘‘(ii) amounts received from the sale
or other disposition of such a contract.
This subparagraph shall apply with respect to
amounts received for services under a particular
contract only if at some time during the taxable
year 25 percent or more in value of the out-
standing stock of the corporation is owned, di-
rectly or indirectly, by or for the individual who
has performed, is to perform, or may be des-
ignated (by name or by description) as the one
to perform, such services.’’
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 171(c) is
amended—
(A) by striking ‘‘, or by a foreign personal
holding company, as defined in section 552’’,
and
(B) by striking ‘‘, or a foreign personal
holding company’’.
(2) Paragraph (2) of section 245(a) is amended
by striking ‘‘foreign personal holding company or’’
(3) Section 312 is amended by striking sub-
section (j).
(4) Subsection (m) of section 312 is amended
by striking ‘‘, a foreign investment company (within
the meaning of section 1246(b)), or a foreign per-
sonal holding company (within the meaning of sec-
tion 552)’’.
(5) Subsection (e) of section 443 is amended by
striking paragraph (3) and by redesignating para-
graphs (4) and (5) as paragraphs (3) and (4), re-
spectively.
(6) Subparagraph (B) of section 465(c)(7) is
amended to by adding ‘‘or’’ at the end of clause (i),
by striking clause (ii), and by redesignating clause
(iii) as clause (ii).
(7) Paragraph (1) of section 543(b) is amended
by inserting ‘‘and’’ at the end of subparagraph (A),
by striking ‘‘, and’’ at the end of subparagraph (B)
and inserting a period, and by striking subparagraph
(C).
(8) Paragraph (1) of section 562(b) is amended
by striking ‘‘or a foreign personal holding company
described in section 552’’.
(9) Section 563 is amended—
(A) by striking subsection (c),
(B) by redesignating subsection (d) as sub-
section (c), and
(C) by striking ‘‘subsection (a), (b), or (c)’’
in subsection (c) (as so redesignated) and in-
serting ‘‘subsection (a) or (b)’’.
(10) Subsection (d) of section 751 is amended
by adding ‘‘and’’ at the end of paragraph (2), by
striking paragraph (3), by redesignating paragraph
(4) as paragraph (3), and by striking ‘‘paragraph
(1), (2), or (3)’’ in paragraph (3) (as so redesig-
nated) and inserting paragraph (1) or (2)’’.
(11) Paragraph (2) of section 864(d) is amend-
ed by striking subparagraph (A) and by redesig-
nating subparagraphs (B) and (C) as subparagraphs
(A) and (B), respectively.
(12)(A) Subparagraph (A) of section 898(b)(1)
is amended to read as follows:
‘‘(A) which is treated as a controlled for-
eign corporation for any purpose under subpart
F of part III of this subchapter, and’’.