I
106TH CONGRESS
1ST SESSION
H. R. 3102
To amend the Internal Revenue Code of 1986 to eliminate foreign base
company shipping income from foreign base company income.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 19, 1999
Mr. WELLER (for himself, Mr. FOLEY, Mr. CRANE, Mrs. BIGGERT, and Mr.
SHIMKUS) introduced the following bill; which was referred to the Com-
mittee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to eliminate
foreign base company shipping income from foreign base
company income.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. ELIMINATION OF FOREIGN BASE COMPANY
SHIPPING INCOME AS FOREIGN BASE COM-
PANY INCOME.
(a) ELIMINATION OF FOREIGN BASE COMPANY SHIP-
PING INCOME.—Section 954 of the Internal Revenue Code
of 1986 (relating to foreign base company income) is
amended—
(1) by striking paragraph (4) of subsection (a)
(relating to foreign base company shipping income),
and
(2) by striking subsection (f) (relating to for-
eign base company shipping income).
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (D) of section 904(d)(2) (re-
lating to the definition of shipping income for pur-
poses of the foreign tax credit) is amended to read
as follows:
‘‘(D) SHIPPING INCOME.—
‘‘(i) IN
GENERAL.—The term ‘ship-
ping income’ means income derived from,
or in connection with, the use (or hiring or
leasing for use) of any aircraft or vessel in
foreign commerce, or from, or in connec-
tion with, the performance of services di-
rectly related to the use of any such air-
craft, or vessel, or from the sale, exchange,
or other disposition of any such aircraft or
vessel.
‘‘(ii) SPECIAL RULES.—
‘‘(I) Such term includes divi-
dends and interest received from a
foreign corporation in respect of which
taxes are deemed paid under section
902 (other than dividends from a non-
controlled section 902 corporation out
of earnings and profits accumulated
in taxable years beginning before Jan-
uary 1, 2003) and gain from the sale,
exchange, or other disposition of stock
or obligations of such a foreign cor-
poration to the extent that such divi-
dends, interest, and gains are attrib-
utable to shipping income.
‘‘(II) Such term includes that
portion of the distributive share of the
income of a partnership attributable
to shipping income.
‘‘(III) Such term includes any in-
come derived from a space or ocean
activity 
(as 
defined 
in 
section
863(d)(2)).
‘‘(IV) Such term does not in-
clude, except as provided in subclause
(I), any dividend or interest income
which is foreign personal holding com-
pany income as defined in section
954(c).
‘‘(V) Such term does not include
financial services income.’’
(2) Sections 952(c)(1)(B)(iii) of such Code is
amended by striking subclause (I) and redesignating
subclauses (II) through (VI) as subclauses (I)
through (V), respectively.
(3) Section 953 of such Code is amended—
(A) by striking ‘‘954(i)’’ and inserting
‘‘954(h)’’ in subsections (b)(3) and (e) each
place it appears, and
(B) by striking ‘‘954(h)(7)’’ and inserting
‘‘954(g)(7)’’ in subsection (e)(7)(A).
(4) Section 954 of such Code is amended—
(A) in subsection (a) by inserting ‘‘and’’ at
the end of paragraph (3) and redesignating
paragraph (5) as paragraph (4),
(B) in subsection (b)—
(i) by striking ‘‘the foreign base ship-
ping income,’’ in paragraph (5),
(ii) by striking paragraphs (6) and
(7), and
(iii) by redesignating paragraph (8) as
paragraph (6), and
(C) by redesignating subsections (g), (h),
and (i) as subsections (f), (g), and (h), respec-
tively.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 1999, and to taxable
years of United States shareholders (within the meaning
of section 951(b) of the Internal Revenue Code of 1986)
within which or with which such taxable years of such for-
eign corporations end.
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