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‘‘(3) MARKET-MAKING OR DEALER SERVICES.— 
‘Market-making or dealer services’ means services 
provided by a person who— 
‘‘(A) regularly purchases financial instru-
ments from or sells financial instruments to 
customers in the ordinary course of a trade or 
business, 
‘‘(B) regularly offers to enter into, assume, 
offset, assign, or otherwise terminate positions 
in financial instruments with customers in the 
ordinary course of a trade or business. 
‘‘SEC. 242. GENERAL RULE FOR TAXATION. 
‘‘(a) IN GENERAL.—In the case of a financial inter-
mediation business, gross profits shall be computed by— 
‘‘(1) substituting financial receipts for taxable 
receipts, and 
‘‘(2) including financial expenses as business 
purchases. 
‘‘(b) DEFINITIONS.— 
‘‘(1) FINANCIAL
RECEIPTS.—‘Financial re-
ceipts’ means all receipts other than amounts re-
ceived as contributions to capital. 
‘‘(2) FINANCIAL
EXPENSES.—‘Financial ex-
penses’ include—
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‘‘(A) payments for principal and interest 
that is properly allocable to the provision of fi-
nancial intermediation services, 
‘‘(B) the cost of and payments under fi-
nancial instruments (other than financial in-
struments in the person subject to the tax im-
posed under this chapter and any person re-
lated to such person), 
‘‘(C) claims and cash surrender values paid 
in connection with insurance or reinsurance 
services, and 
‘‘(D) amounts paid for reinsurance. 
‘‘(3) FINANCIAL INSTRUMENT.—‘Financial in-
strument’ means any— 
‘‘(A) share of stock in a corporation, 
‘‘(B) equity ownership in any widely held 
or publicly traded partnership, trust, or other 
business entity, 
‘‘(C) note, bond, debenture, or other evi-
dence of indebtedness, 
‘‘(D) interest rate, currency, or equity no-
tional principal contract, 
‘‘(E) evidence or interest in, or a derivative 
financial instrument in, any financial instru-
ment described in subparagraph (A), (B), (C),
336 
or (D), or any currency, including any option, 
forward contract, short position, and any simi-
lar financial instrument in such a financial in-
strument or currency, and 
‘‘(F) a position which— 
‘‘(i) is not a financial instrument de-
scribed in subparagraph (A), (B), (C), (D) 
or (E), 
‘‘(ii) is a hedge with respect to such 
a financial instrument, and 
‘‘(iii) is clearly identified in the deal-
er’s records as being described in this sub-
paragraph before the close of the day on 
which it was acquired or entered into. 
‘‘(c) INTERNATIONAL MATTERS.—For purposes of 
this section in the case of a financial intermediation busi-
ness with activity in and outside the United States— 
‘‘(1) INCLUSION REGARDLESS OF SOURCE.— 
‘‘(A) Financial receipts shall be determined 
without regard to whether they are received for 
property or service provided in or outside the 
United States, except that financial receipts do 
not include amounts that— 
‘‘(i) are not taxable receipts (as deter-
mined without regard to this section), but
337 
‘‘(ii) would have been taxable receipts 
(as determined without regard to this sec-
tion) if they had been received for services 
or property in the United States. 
‘‘(B) Financial expenses shall be deter-
mined without regard to whether they are re-
ceived for property or services acquired in or 
outside the United States. 
‘‘(2) ALLOCATION.—Under regulations pre-
scribed by the Secretary, gross profits (as deter-
mined without regard to this paragraph) shall be re-
duced by the amount of financial intermediation 
gross profit attributable to financial intermediation 
activity provided outside the United States. 
‘‘(3) GROSS PROFIT ATTRIBUTABLE TO FINAN-
CIAL INTERMEDIATION ACTIVITY.—‘Gross profits at-
tributable to financial intermediation activity’ means 
the excess of— 
‘‘(A) gross profits as determined under 
this section (but without regard to paragraph 
(2)), over 
‘‘(B) gross profits as determined without 
regard to this subchapter.
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‘‘SEC. 243. SPECIAL RULES FOR BANKS. 
‘‘(a) IN GENERAL.—In the case of a bank, gross prof-
its shall be determined in accordance with section 242, ex-
cept that— 
‘‘(1) FINANCIAL RECEIPTS.—Financial receipts 
shall include only— 
‘‘(A) taxable receipts (as determined with-
out regard to this subchapter), 
‘‘(B) interest on loans made or acquired by 
the bank, 
‘‘(C) gain on the sale of loans, 
‘‘(D) discount points received, and 
‘‘(E) any explicit fees for financial or fidu-
ciary services not included in subparagraphs 
(A) through (E). 
‘‘(2) FINANCIAL
EXPENSES.—Financial ex-
penses shall include only— 
‘‘(A) interest paid to depositors and on 
other funds borrowed by the bank, and 
‘‘(B) reasonable additions to reserves for 
bad debts. 
‘‘(3) FORECLOSURE PROPERTY.—Gross profits 
shall properly take into account proceeds from the 
operation or sale of foreclosure property. 
‘‘(b) BANK.—