‘‘(A) IN GENERAL.—A controlled foreign
corporation may elect to reduce the amount of
its subpart F income for any taxable year by
the amount of any deficit in earnings and prof-
its of a qualified chain member for a taxable
year ending with (or within) the taxable year of
such controlled foreign corporation. To the ex-
tent any deficit reduces subpart F income
under the preceding sentence, such deficit shall
not be taken into account under paragraph (1).
‘‘(B) QUALIFIED
CHAIN
MEMBER.—For
purposes of this paragraph, the term ‘qualified
chain member’ means, with respect to any con-
trolled foreign corporation, any other corpora-
tion which is created or organized under the
laws of the same foreign country as the con-
trolled foreign corporation but only if—
‘‘(i) all the stock of such other cor-
poration (other than directors’ qualifying
shares) is owned at all times during the
taxable year in which the deficit arose (di-
rectly or through 1 or more corporations
other than the common parent) by such
controlled foreign corporation, or
‘‘(ii) all the stock of such controlled
foreign corporation (other than directors’
qualifying shares) is owned at all times
during the taxable year in which the deficit
arose (directly or through 1 or more cor-
porations other than the common parent)
by such other corporation.
‘‘(C) 
COORDINATION.—This 
paragraph
shall be applied after paragraph (1).
‘‘(3) DETERMINATION OF DEFICIT.—In deter-
mining the amount of any deficit in earnings and
profits, the adjustments set forth in subsection (a)
shall apply.’’
(b) SPECIAL RULES FOR INSURANCE COMPANIES.—
Section 953 of the Internal Revenue Code of 1986 is
amended by striking ‘‘section 952(a)(1)’’ in subsection (a)
and inserting ‘‘this section’’.
(c) REPEAL OF FOREIGN BASE COMPANY INCOME.—
Section 954 of the Internal Revenue Code of 1986 is here-
by repealed.
(d) REPEAL OF EXPORT TRADE CORPORATION PRO-
VISIONS.—Subpart G of part III of subchapter N of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
export trade corporations) is hereby repealed.
(e) CONFORMING AMENDMENTS TO SUBPART F.—
(1) Subparagraph (A) of section 955(a)(1) of
the Internal Revenue Code of 1986 is amended by
inserting ‘‘(as in effect for taxable years beginning
before 1999)’’ after ‘‘section 954(b)(2)’’.
(2) Subsection (b) of section 955 of such Code
is amended by striking ‘‘within the meaning of sec-
tion 954(d)(3)’’ and inserting ‘‘within the meaning
of section 964(a)’’.
(3) Paragraph (2) of section 956(c) of such
Code is amended by inserting ‘‘(as in effect on the
day before the date of the enactment of the Strate-
gic Transitional Employment Program Act) or under
section 952(a)(1)’’ after ‘‘section 952(b)’’ in sub-
paragraph (H).
(4) Subsection (b) of section 958 of such Code
is amended—
(A) by striking ‘‘954(d)(3), 956(b)(2), and
957’’ and inserting ‘‘956(b)(2), 957, and
964(a)’’, and
(B) by striking ‘‘954(d)(3)’’ the second
place it appears and inserting ‘‘964(a)’’.
(5) Subsection (b) of section 959 of such Code
is amended by striking ‘‘be also included in the gross
income’’ and inserting ‘‘be also included in the sub-
part F income’’.
(6) Subsection (a) of section 964 of such Code
is amended to read as follows:
‘‘(a) RELATED PERSON.—For purposes of this part,
a person is a related person with respect to a controlled
foreign corporation, if—
‘‘(1) such person is an individual, corporation,
partnership, trust, or estate which controls, or is
controlled by, the controlled foreign corporation, or
‘‘(2) such person is a corporation, partnership,
trust, or estate which is controlled by the same per-
son or persons which control the controlled foreign
corporation.
For purposes of the preceding sentence, control means,
with respect to a corporation, the ownership, directly or
indirectly, of stock possessing more than 50 percent of the
total voting power of all classes of stock entitled to vote
or of the total value of stock of such corporation. In the
case of a partnership, trust, or estate, control means the
ownership, directly or indirectly, more than 50 percent (by
value) of the beneficial interests in such partnership, trust,
or estate. For purposes of this paragraph, rules similar
to the rules of section 958 shall apply.’’
(7) Section 964 of such Code is amended by
striking subsection (b).