(B) CONFORMING
AMENDMENT.—Section
907 of such Code is amended by striking sub-
sections (b), (c)(3), (c)(4), (c)(5), and (f).
(2) SEPARATE BASKETS FOR FOREIGN OIL AND
GAS EXTRACTION INCOME AND FOREIGN OIL RELAT-
ED INCOME.—
(A) IN GENERAL.—Paragraph (1) of sec-
tion 904(d) of such Code (relating to separate
application of section with respect to certain
categories of income) is amended by striking
‘‘and’’ at the end of subparagraph (H), by re-
designating subparagraph (I) as subparagraph
(K) and by inserting after subparagraph (H)
the following new subparagraphs:
‘‘(I) foreign oil and gas extraction income,
‘‘(J) foreign oil related income, and’’.
(B) DEFINITIONS.—Paragraph (2) of sec-
tion 904(d) of such Code is amended by redes-
ignating subparagraphs (H) and (I) as subpara-
graphs (J) and (K), respectively, and by insert-
ing after subparagraph (G) the following new
subparagraphs:
‘‘(H) FOREIGN OIL AND GAS EXTRACTION
INCOME.—The term ‘foreign oil and gas extrac-
tion income’ has the meaning given such term
by section 907(c)(1). Such term shall not in-
clude any dividend from a noncontrolled section
902 corporation.
‘‘(I) FOREIGN
OIL
RELATED
INCOME.—
The term ‘foreign oil related income’ has the
meaning given such term by section 907(c)(2).
Such term shall not include any dividend from
a noncontrolled section 902 corporation and any
shipping income.’’
(C) CONFORMING
AMENDMENT.—Clause
(i) of section 904(d)(3)(F) of such Code is
amended by striking ‘‘or (E)’’ and inserting
‘‘(E), (I), or (J)’’.
(3) EFFECTIVE DATE.—
(A) IN
GENERAL.—Except as otherwise
provided in this paragraph, the amendments
made by this subsection shall apply to taxable
years beginning after December 31, 1995.
(B) DISALLOWANCE RULE.—
(i) Section 907(a) of such Code (as
amended by paragraph (1)) shall apply to
taxes paid or accrued after December 31,
1995, in taxable years ending after such
date.
(ii) In determining the amount of
taxes deemed to be paid in a taxable year
beginning after December 31, 1995, under
section 902 or 960 of such Code, section
907(a) of such Code (as amended by para-
graph (1)) shall apply to all taxes whether
paid or accrued before, on, or after Decem-
ber 31, 1995.
(C) LOSS
RULE.—Notwithstanding the
amendments made by paragraph (1)(B), section
907(c)(4) of such Code shall continue to apply
with respect to foreign oil and gas extraction
losses for taxable years beginning before Janu-
ary 1, 1996.
(D) TRANSITIONAL RULES.—
(i) Any taxes paid or accrued in a tax-
able year beginning before January 1,
1996, with respect to income which was
described in subparagraph (I) of section
904(d)(1) of such Code (as in effect on the
day before the date of the enactment of
this Act) shall be treated as taxes paid or
accrued with respect to foreign oil and gas
extraction income or foreign oil related in-
come (as the case may be) to the extent
such taxes were paid or accrued with re-
spect to such type of income.
(ii) Any unused oil and gas extraction
taxes which under section 907(f) of such
Code (as so in effect) would have been al-
lowed as a carryover to the taxpayer’s first
taxable year beginning after December 31,
1995 (determined without regard to the
limitation of paragraph (2) of such section
907(f) for such first taxable year), shall be
allowed as carryovers under section 904(c)
of such Code in the same manner as if
they were unused taxes under section
904(c) with respect to foreign oil and gas
extraction income.
(b) ELIMINATION OF DEFERRAL FOR FOREIGN OIL
AND GAS EXTRACTION INCOME.—
(1) GENERAL RULE.—Paragraph (1) of section
954(g) of the Internal Revenue Code of 1986 (defin-
ing foreign base company oil related income) is
amended to read as follows:
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘foreign oil and
gas income’ means any income of a kind which
would be taken into account in determining the
amount of—
‘‘(A) foreign oil and gas extraction income
(as defined in section 907(c)(1)), or
‘‘(B) foreign oil related income (as defined
in section 907(c)(2)).’’
(2) CONFORMING AMENDMENTS.—
(A) Subsections (a)(5), (b)(4), (b)(5), and
(b)(8) of section 954 of such Code are each
amended by striking ‘‘base company oil related
income’’ each place it appears (including in the
heading of subsection (b)(8)) and inserting ‘‘oil
and gas income’’.
(B) The subsection heading for subsection
(g) of section 954 of such Code is amended by
striking ‘‘FOREIGN BASE COMPANY OIL RE-
LATED INCOME’’ and inserting ‘‘FOREIGN OIL
AND GAS INCOME’’.
(C) Subparagraph (A) of section 954(g)(2)
of such Code is amended by striking ‘‘foreign
base company oil related income’’ and inserting
‘‘foreign oil and gas income’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years of for-
eign corporations beginning after December 31,