‘‘(3) PERIOD OF ELECTION.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), an election under paragraph
(1) shall apply to the taxable year for which
made and all subsequent taxable years unless
revoked.
‘‘(B) TERMINATION.—If a corporation
which made an election under paragraph (1) for
any taxable year fails to meet the requirements
of subparagraph (A) or (B) of paragraph (2)
for any subsequent taxable year, such election
shall not apply to any taxable year beginning
after such subsequent taxable year.
‘‘(4) SPECIAL RULES.—
‘‘(A) 
REQUIREMENTS.—This 
subsection
shall not apply to an applicable foreign corpora-
tion unless such corporation meets such re-
quirements as the Secretary shall prescribe to
ensure that the taxes imposed by this chapter
on such corporation are paid.
‘‘(B) EFFECT
OF
ELECTION
OR
TERMI-
NATION.—
‘‘(i) ELECTION.—For purposes of sec-
tion 367, a foreign corporation making an
election under this subsection shall be
treated as transferring (as of the first day
of the first taxable year to which the elec-
tion applies) all of its assets to a domestic
corporation in connection with an exchange
to which section 354 applies.
‘‘(ii) TERMINATION.—For purposes of
section 367, if—
‘‘(I) an election is made by a cor-
poration under paragraph (1) for any
taxable year, and
‘‘(II) such election ceases to
apply for any subsequent taxable year,
such corporation shall be treated as a domestic
corporation transferring (as of the 1st day of
such subsequent taxable year) all of its property
to a foreign corporation in connection with an
exchange to which section 354 applies.
‘‘(C) ELIGIBILITY
FOR
ELECTION.—The
Secretary may by regulation designate one or
more classes of corporations which may not
make the election under this subsection.
‘‘(f) RULES RELATING TO ALLOCATIONS OF QUALI-
FYING FOREIGN TRADE INCOME FROM SHARED PART-
NERSHIPS.—If—
‘‘(1) a partnership maintains a separate ac-
count for transactions (to which this subpart ap-
plies) with each partner,
‘‘(2) distributions to each partner with respect
to such transactions are based on the amounts in
the separate account maintained with respect to
such partner, and
‘‘(3) such partnership meets such other require-
ments as the Secretary may by regulations prescribe,
then such partnership shall allocate to each partner items
of income, gain, loss, and deduction (including qualifying
foreign trade income) from any transaction to which this
subpart applies on the basis of such separate account.’’
SEC. 4. TECHNICAL AND CONFORMING AMENDMENTS.
(1) 
The 
second 
sentence 
of 
section
56(g)(4)(B)(i) is amended by inserting before the
period ‘‘or under section 114’’.
(2) Section 275(a) is amended—
(A) by striking ‘‘or’’ at the end of para-
graph (4)(A), by striking the period at the end
of paragraph (4)(B) and inserting ‘‘, or’’, and
by adding at the end of paragraph (4) the fol-
lowing new subparagraph:
‘‘(C) such taxes are paid or accrued with
respect to qualifying foreign trade income (as
defined in section 941).’’, and
(B) by adding at the end the following the
following new sentence: ‘‘A rule similar to the
rule of section 943(d) shall apply for purposes
of paragraph (4)(C).’’
(3) Paragraph (3) of section 864(e) is
amended—
(A) by striking ‘‘For purposes of’’ and in-
serting:
‘‘(A) IN GENERAL.—For purposes of’’, and
(B) by adding at the end the following new
subparagraph:
‘‘(B) 
ASSETS
PRODUCING
EXEMPT
EXTRATERRITORIAL INCOME.—For purposes of
allocating and apportioning any interest ex-
pense, there shall not be taken into account any
qualifying foreign trade property (as defined in
section 943(a)) which is located outside the
United States (as defined in section 943(b)(2))
and which is held by the taxpayer for lease or
rental in the ordinary course of trade or busi-
ness for use by the lessee outside the United
States (as so defined).’’
(4) Section 999(c)(1) is amended by inserting
‘‘941(a)(5),’’ after ‘‘908(a),’’.
(5) The table of sections for part III of sub-
chapter B of chapter 1 is amended by inserting be-
fore the item relating to section 115 the following
new item:
‘‘Sec. 114. Extraterritorial income.’’
(6) The table of subparts for part III of sub-
chapter N of chapter 1 is amended by striking the
item relating to subpart E and inserting the fol-
lowing new item:
‘‘Subpart E. Qualifying foreign trade income.’’
SEC. 5. EFFECTIVE DATE.
(a) IN GENERAL.—The amendments made by this
Act shall apply to transactions after September 30, 2000.
(b) NO NEW FSCS.—No corporation may elect after
September 30, 2000, to be a FSC (as defined in section
922 of the Internal Revenue Code of 1986, as in effect
before the amendments made by this Act).
(c) TRANSITION PERIOD FOR EXISTING FOREIGN
SALES CORPORATIONS.—Except as provided in subsection
(d)—
(1) IN GENERAL.—In the case of any trans-
action in the ordinary course of trade or business in-
volving a FSC (as so defined) in existence on Sep-
tember 30, 2000, and at all times thereafter, the
amendments made by this Act shall not apply to—
(A) transactions by the FSC before Janu-
ary 1, 2002, and
(B) transactions by the FSC after Decem-
ber 31, 2001, pursuant to a binding contract
(by the FSC) in effect on September 30, 2000,
and at all times thereafter.
(2) ELECTION TO HAVE AMENDMENTS APPLY
EARLIER.—A taxpayer may elect to have the amend-
ments made by this Act apply to any transaction by
a FSC to which such amendments would apply but
for the application of paragraph (1). Such election
shall be effective for the taxable year for which made
and all subsequent taxable years, and, once made,
may be revoked only with the consent of the Sec-
retary of the Treasury.
(d) CONSISTENT TREATMENT REQUIRED.—If, but
for this subsection, the amendments made by this Act
would apply to some but not all of the transactions in the
ordinary course of trade or business by related parties in-
volving the same property, such parties shall elect, at such
time and in such manner as the Secretary of the Treasury
shall prescribe, whether to have such amendments apply
to all or none of such transactions.
Æ