shall be made without regard to sections 72(s),
101(f), 817(h), and 7702 if—
‘‘(A) such contract is regulated as a life in-
surance or annuity contract by the corpora-
tion’s or unit’s home country; and
‘‘(B) no policyholder, insured, annuitant,
or beneficiary with respect to the contract is a
United States person.
‘‘(6) HOME
COUNTRY.—For purposes of this
subsection, except as provided in regulations—
‘‘(A) CONTROLLED
FOREIGN
CORPORA-
TION.—The term ‘home country’ means, with
respect to a controlled foreign corporation, the
country in which such corporation is created or
organized.
‘‘(B) QUALIFIED
BUSINESS
UNIT.—The
term ‘home country’ means, with respect to a
qualified business unit (as defined in section
989(a)), the country in which the principal of-
fice of such unit is located and in which such
unit is licensed, authorized, or regulated by the
applicable insurance regulatory body to sell in-
surance, reinsurance, or annuity contracts to
persons other than related persons (as defined
in section 954(d)(3)) in such country.
‘‘(7) ANTI-ABUSE RULES.—For purposes of ap-
plying this subsection and section 954(i)—
‘‘(A) the rules of section 954(h)(7) (other
than subparagraph (B) thereof) shall apply;
‘‘(B) there shall be disregarded any item of
income, gain, loss, or deduction of, or derived
from, an entity which is not engaged in regular
and continuous transactions with persons which
are not related persons;
‘‘(C) there shall be disregarded any change
in the method of computing reserves a principal
purpose of which is the acceleration or deferral
of any item in order to claim the benefits of
this subsection or section 954(i);
‘‘(D) a contract of insurance or reinsur-
ance shall not be treated as an exempt contract
(and premiums from such contract shall not be
taken into account for purposes of paragraph
(2)(B) or (3)) if—
‘‘(i) any policyholder, insured, annu-
itant, or beneficiary is a resident of the
United States and such contract was mar-
keted to such resident and was written to
cover a risk outside the United States; or
‘‘(ii) the contract covers risks located
within and without the United States and
the qualifying insurance company or quali-
fying insurance company branch does not
maintain such contemporaneous records,
and file such reports, with respect to such
contract as the Secretary may require;
‘‘(E) the Secretary may prescribe rules for
the allocation of contracts (and income from
contracts) among 2 or more qualifying insur-
ance company branches of a qualifying insur-
ance company in order to clearly reflect the in-
come of such branches; and
‘‘(F) premiums from a contract shall not
be taken into account for purposes of para-
graph (2)(B) or (3) if such contract reinsures
a contract issued or reinsured by a related per-
son (as defined in section 954(d)(3)).
For purposes of subparagraph (D), the determina-
tion of where risks are located shall be made under
the principles of section 953.
‘‘(8) COORDINATION WITH SUBSECTION (c).—
In determining insurance income for purposes of
subsection (c), exempt insurance income shall not in-
clude income derived from exempt contracts which
cover risks other than applicable home country risks.
‘‘(9) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary or ap-
propriate to carry out the purposes of this sub-
section and section 954(i).
‘‘(10) APPLICATION.—This subsection and sec-
tion 954(i) shall apply only to the first taxable year
of a foreign corporation beginning after December
31, 1998, and before January 1, 2000, and to tax-
able years of United States shareholders with or
within which such taxable year of such foreign cor-
poration ends.
‘‘(11) CROSS REFERENCE.—
‘‘For income exempt from foreign personal hold-
ing company income, see section 954(i).’’.
(2) EXEMPTION
FROM
FOREIGN
PERSONAL
HOLDING COMPANY INCOME.—Section 954 (defining
foreign base company income) is amended by adding
at the end the following new subsection:
‘‘(i) SPECIAL RULE FOR INCOME DERIVED IN THE
ACTIVE CONDUCT OF INSURANCE BUSINESS.—
‘‘(1) IN GENERAL.—For purposes of subsection
(c)(1), foreign personal holding company income
shall not include qualified insurance income of a
qualifying insurance company.
‘‘(2) QUALIFIED
INSURANCE
INCOME.—The
term ‘qualified insurance income’ means income of a
qualifying insurance company which is—
‘‘(A) received from a person other than a
related person (within the meaning of sub-
section (d)(3)) and derived from the invest-
ments made by a qualifying insurance company
or a qualifying insurance company branch of its
reserves allocable to exempt contracts or of 80
percent of its unearned premiums from exempt
contracts (as both are determined in the man-
ner prescribed under paragraph (4)), or
‘‘(B) received from a person other than a
related person (within the meaning of sub-
section (d)(3)) and derived from investments
made by a qualifying insurance company or a
qualifying insurance company branch of an
amount of its assets allocable to exempt con-
tracts equal to—
‘‘(i) in the case of property, casualty,
or health insurance contracts, one-third of
its premiums earned on such insurance
contracts during the taxable year (as de-
fined in section 832(b)(4)); and
‘‘(ii) in the case of life insurance or
annuity contracts, 10 percent of the re-
serves described in subparagraph (A) for
such contracts.
‘‘(3) PRINCIPLES
FOR
DETERMINING
INSUR-
ANCE
INCOME.—Except as provided by the Sec-
retary, for purposes of subparagraphs (A) and (B)
of paragraph (2)—
‘‘(A) in the case of any contract which is
a separate account-type contract (including any
variable contract not meeting the requirements
of section 817), income credited under such
contract shall be allocable only to such contract;
and
‘‘(B) income not allocable under subpara-
graph (A) shall be allocated ratably among con-
tracts not described in subparagraph (A).
‘‘(4) METHODS FOR DETERMINING UNEARNED
PREMIUMS AND RESERVES.—For purposes of para-
graph (2)(A)—
‘‘(A) PROPERTY
AND
CASUALTY
CON-
TRACTS.—The unearned premiums and reserves
of a qualifying insurance company or a qualify-
ing insurance company branch with respect to
property, casualty, or health insurance con-
‘‘(ii) the reserve determined under
paragraph (5).
‘‘(C) LIMITATION
ON
RESERVES.—In no
event shall the reserve determined under this
paragraph for any contract as of any time ex-
ceed the amount which would be taken into ac-
count with respect to such contract as of such
time in determining foreign statement reserves
(less any catastrophe, deficiency, equalization,
or similar reserves).
‘‘(5) AMOUNT OF RESERVE.—The amount of
the reserve determined under this paragraph with
respect to any contract shall be determined in the
same manner as it would be determined if the quali-
fying insurance company or qualifying insurance
company branch were subject to tax under sub-
chapter L, except that in applying such sub-
chapter—
‘‘(A) the interest rate determined for the
functional currency of the company or branch,
and which, except as provided by the Secretary,
is calculated in the same manner as the Federal
mid-term rate under section 1274(d), shall be
substituted for the applicable Federal interest
rate;
‘‘(B) the highest assumed interest rate
permitted to be used in determining foreign
statement reserves shall be substituted for the
prevailing State assumed interest rate; and
‘‘(C) tables for mortality and morbidity
which reasonably reflect the current mortality
and morbidity risks in the company’s or
branch’s home country shall be substituted for
the mortality and morbidity tables otherwise
used for such subchapter.
The Secretary may provide that the interest rate
and mortality and morbidity tables of a qualifying
insurance company may be used for 1 or more of its
qualifying insurance company branches when appro-
priate.
‘‘(6) DEFINITIONS.—For purposes of this sub-
section, any term used in this subsection which is
also used in section 953(e) shall have the meaning
given such term by section 953.’’.
(3) RESERVES.—Section 953(b) is amended by
redesignating paragraph (3) as paragraph (4) and
by inserting after paragraph (2) the following new
paragraph:
‘‘(3) Reserves for any insurance or annuity con-
tract shall be determined in the same manner as
under section 954(i).’’.
(c) 
SPECIAL
RULES
FOR
DEALERS.—Section
954(c)(2)(C) is amended to read as follows:
‘‘(C) EXCEPTION FOR DEALERS.—Except
as provided by regulations, in the case of a reg-
ular dealer in property which is property de-
scribed in paragraph (1)(B), forward contracts,
option contracts, or similar financial instru-
ments (including notional principal contracts
and all instruments referenced to commodities),
there shall not be taken into account in comput-
ing foreign personal holding company income—
‘‘(i) any item of income, gain, deduc-
tion, or loss (other than any item described
in subparagraph (A), (E), or (G) of para-
graph (1)) from any transaction (including
hedging transactions) entered into in the
ordinary course of such dealer’s trade or
business as such a dealer; and
‘‘(ii) if such dealer is a dealer in secu-
rities (within the meaning of section 475),
any interest or dividend or equivalent
amount described in subparagraph (E) or
(G) of paragraph (1) from any transaction
(including any hedging transaction or
transaction 
described 
in 
section
956(c)(2)(J)) entered into in the ordinary
course of such dealer’s trade or business as
such a dealer in securities, but only if the
income from the transaction is attributable
to activities of the dealer in the country
under the laws of which the dealer is cre-
ated or organized (or in the case of a
qualified business unit described in section
989(a), is attributable to activities of the
unit in the country in which the unit both
maintains its principal office and conducts
substantial business activity).’’.
(d) EXEMPTION FROM FOREIGN BASE COMPANY
SERVICES INCOME.—Paragraph (2) of section 954(e) is
amended by inserting ‘‘or’’ at the end of subparagraph
(A), by striking ‘‘, or’’ at the end of subparagraph (B)
and inserting a period, by striking subparagraph (C), and
by adding at the end the following new flush sentence:
‘‘Paragraph (1) shall also not apply to income which
is exempt insurance income (as defined in section
953(e)) or which is not treated as foreign personal
holding income by reason of subsection (c)(2)(C)(ii),
(h), or (i).’’.
(e) EXEMPTION FOR GAIN.—Section 954(c)(1)(B)(i)
(relating to net gains from certain property transactions)
is amended by inserting ‘‘other than property which gives
rise to income not treated as foreign personal holding com-
pany income by reason of subsection (h) or (i) for the tax-
able year’’ before the comma at the end.
Subtitle B—Generalized System of
Preferences
SEC. 311. EXTENSION OF GENERALIZED SYSTEM OF PREF-
ERENCES.
(a) EXTENSION OF DUTY-FREE TREATMENT UNDER
SYSTEM.—Section 505 of the Trade Act of 1974 (29
U.S.C. 2465) is amended by striking ‘‘June 30, 1998’’ and
inserting ‘‘February 29, 2000’’.
(b) RETROACTIVE APPLICATION FOR CERTAIN LIQ-
UIDATIONS AND RELIQUIDATIONS.—
(1) IN GENERAL.—Notwithstanding section 514
of the Tariff Act of 1930 or any other provision of
law, and subject to paragraph (2), any entry—
(A) of an article to which duty-free treat-
ment under title V of the Trade Act of 1974
would have applied if such title had been in ef-
fect during the period beginning on July 1,
1998, and ending on the day before the date of
the enactment of this Act; and
(B) that was made after June 30, 1998,
and before the date of the enactment of this
Act,
shall be liquidated or reliquidated as free of duty,
and the Secretary of the Treasury shall refund any
duty paid with respect to such entry. As used in this
subsection, the term ‘‘entry’’ includes a withdrawal
from warehouse for consumption.
(2) REQUESTS.—Liquidation or reliquidation
may be made under paragraph (1) with respect to
an entry only if a request therefor is filed with the
Customs Service, within 180 days after the date of
the enactment of this Act, that contains sufficient
information to enable the Customs Service—
(A) to locate the entry; or
(B) to reconstruct the entry if it cannot be
located.
TITLE IV—REVENUE OFFSET
SEC. 401. TREATMENT OF CERTAIN DEDUCTIBLE LIQUIDAT-
ING DISTRIBUTIONS OF REGULATED INVEST-
MENT COMPANIES AND REAL ESTATE IN-
VESTMENT TRUSTS.
(a) IN GENERAL.—Section 332 (relating to complete
liquidations of subsidiaries) is amended by adding at the
end the following new subsection:
‘‘(c) DEDUCTIBLE LIQUIDATING DISTRIBUTIONS OF
REGULATED INVESTMENT COMPANIES
AND REAL ES-
TATE INVESTMENT TRUSTS.—If a corporation receives a
distribution from a regulated investment company or a
real estate investment trust which is considered under sub-
section (b) as being in complete liquidation of such com-
pany or trust, then, notwithstanding any other provision
of this chapter, such corporation shall recognize and treat
as a dividend from such company or trust an amount
equal to the deduction for dividends paid allowable to such
company or trust by reason of such distribution.’’.
(b) CONFORMING AMENDMENTS.—
(1) The material preceding paragraph (1) of
section 332(b) is amended by striking ‘‘subsection
(a)’’ and inserting ‘‘this section’’.
(2) Paragraph (1) of section 334(b) is amended
by striking ‘‘section 332(a)’’ and inserting ‘‘section
332’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after May 21,
1998.
TITLE V—TECHNICAL
CORRECTIONS
SEC. 501. DEFINITIONS; COORDINATION WITH OTHER TI-
TLES.
(a) DEFINITIONS.—For purposes of this title—
(1) 1986 
CODE.—The term ‘‘1986 Code’’
means the Internal Revenue Code of 1986.
(2) 1998 ACT.—The term ‘‘1998 Act’’ means
the Internal Revenue Service Restructuring and Re-
form Act of 1998 (Public Law 105–206).
(3) 1997 ACT.—The term ‘‘1997 Act’’ means
the Taxpayer Relief Act of 1997 (Public Law 105–
34).
(b) COORDINATION WITH OTHER TITLES.—For pur-
poses of applying the amendments made by any title of
this Act other than this title, the provisions of this title
shall be treated as having been enacted immediately before
the provisions of such other titles.
SEC. 502. AMENDMENTS RELATED TO INTERNAL REVENUE
SERVICE RESTRUCTURING AND REFORM ACT
OF 1998.
(a) AMENDMENT RELATED TO SECTION 1101 OF
1998 ACT.—Paragraph (5) of section 6103(h) of the 1986
Code, as added by section 1101(b) of the 1998 Act, is
redesignated as paragraph (6).
(b) AMENDMENT RELATED TO SECTION 3001 OF
1998 ACT.—Paragraph (2) of section 7491(a) of the 1986
Code is amended by adding at the end the following flush
sentence:
‘‘Subparagraph (C) shall not apply to any qualified
revocable trust (as defined in section 645(b)(1)) with
respect to liability for tax for any taxable year end-
ing after the date of the decedent’s death and before
the 
applicable 
date 
(as 
defined 
in 
section
645(b)(2)).’’.
(c) AMENDMENTS RELATED TO SECTION 3201 OF
1998 ACT.—
(1) Section 7421(a) of the 1986 Code is amend-
ed by striking ‘‘6015(d)’’ and inserting ‘‘6015(e)’’.
(2) Subparagraph (A) of section 6015(e)(3) is
amended by striking ‘‘of this section’’ and inserting
‘‘of subsection (b) or (f)’’.
(d) AMENDMENT RELATED TO SECTION 3301 OF
1998 ACT.—Paragraph (2) of section 3301(c) of the 1998
Act is amended by striking ‘‘The amendments’’ and insert-
ing ‘‘Subject to any applicable statute of limitation not
having expired with regard to either a tax underpayment
or a tax overpayment, the amendments’’.
(e) AMENDMENT RELATED TO SECTION 3401 OF
1998 ACT.—Section 3401(c) of the 1998 Act is amend-
ed—
(1) in paragraph (1), by striking ‘‘7443(b)’’
and inserting ‘‘7443A(b)’’; and
(2) in paragraph (2), by striking ‘‘7443(c)’’ and
inserting ‘‘7443A(c)’’.
(f) AMENDMENT RELATED TO SECTION 3433 OF
1998 ACT.—Section 7421(a) of the 1986 Code is amended
by inserting ‘‘6331(i),’’ after ‘‘6246(b),’’.
(g) AMENDMENT RELATED TO SECTION 3708 OF
1998 ACT.—Subparagraph (A) of section 6103(p)(3) of
the 1986 Code is amended by inserting ‘‘(f)(5),’’ after
‘‘(c), (e),’’.
(h) AMENDMENT RELATED TO SECTION 5001 OF
1998 ACT.—
(1) Subparagraph (B) of section 1(h)(13) of the
1986 Code is amended by striking ‘‘paragraph
(7)(A)’’ and inserting ‘‘paragraph (7)(A)(i)’’.
(2)(A) Subparagraphs (A)(i)(II), (A)(ii)(II),
and (B)(ii) of section 1(h)(13) of the 1986 Code
shall not apply to any distribution after December
31, 1997, by a regulated investment company or a
real estate investment trust with respect to—
(i) gains and losses recognized directly by
such company or trust; and
(ii) amounts properly taken into account
by such company or trust by reason of holding
(directly or indirectly) an interest in another
such company or trust to the extent that such
subparagraphs did not apply to such other com-
pany or trust with respect to such amounts.
(B) Subparagraph (A) shall not apply to any
distribution which is treated under section 852(b)(7)
or 857(b)(8) of the 1986 Code as received on De-
cember 31, 1997.
(C) For purposes of subparagraph (A), any
amount which is includible in gross income of its
shareholders 
under 
section 
852(b)(3)(D) 
or
857(b)(3)(D) of the 1986 Code after December 31,
1997, shall be treated as distributed after such date.
(D)(i) For purposes of subparagraph (A), in
the case of a qualified partnership with respect to
which a regulated investment company meets the
holding requirement of clause (iii)—
(I) the subparagraphs referred to in sub-
paragraph (A) shall not apply to gains and
losses recognized directly by such partnership
for purposes of determining such company’s
distributive share of such gains and losses; and
(II) such company’s distributive share of
such gains and losses (as so determined) shall
be treated as recognized directly by such com-
pany.
The preceding sentence shall apply only if the quali-
fied partnership provides the company with written
documentation of such distributive share as so deter-
mined.
(ii) For purposes of clause (i), the term ‘‘quali-
fied partnership’’ means, with respect to a regulated
investment company, any partnership if—
(I) the partnership is an investment com-
pany registered under the Investment Company
Act of 1940;
(II) the regulated investment company is
permitted to invest in such partnership by rea-
son of section 12(d)(1)(E) of such Act or an ex-
emptive order of the Securities and Exchange
Commission under such section; and
(III) the regulated investment company
and the partnership have the same taxable year.
(iii) A regulated investment company meets the
holding requirement of this clause with respect to a
qualified partnership if (as of January 1, 1998)—
(I) the value of the interests of the regu-
lated investment company in such partnership
is 35 percent or more of the value of such com-
pany’s total assets; or
(II) the value of the interests of the regu-
lated investment company in such partnership
and all other qualified partnerships is 90 per-
cent or more of the value of such company’s
total assets.
(i) EFFECTIVE DATE.—The amendments made by
this section shall take effect as if included in the provisions
of the 1998 Act to which they relate.
SEC. 503. AMENDMENTS RELATED TO TAXPAYER RELIEF
ACT OF 1997.
(a) AMENDMENT RELATED TO SECTION 202 OF 1997
ACT.—Paragraph (2) of section 163(h) of the 1986 Code
is amended by striking ‘‘and’’ at the end of subparagraph
(D), by striking the period at the end of subparagraph
(E) and inserting ‘‘, and’’, and by adding at the end the
following new subparagraph: