‘‘(B) includes any interest held, directly or 
indirectly, through— 
‘‘(i) a regulated investment company, 
exchange traded fund, or other pooled in-
vestment, or 
‘‘(ii) any derivative financial instru-
ment or other contractual arrangement 
with respect to such interest (including any 
financial instrument or other contract 
which seeks to replicate any financial re-
turn with respect to such interest). 
‘‘(3) PEOPLE’S
REPUBLIC
OF
CHINA.—The 
term ‘People’s Republic of China’ includes Special 
Administrative Regions, including Hong Kong and 
Macau, but does not include Taiwan.’’. 
(b) NET PRC SECURITIES GAIN SUBJECT TO HIGH-
EST RATE OF INCOME TAX.— 
(1) INDIVIDUALS.—Section 1 of such Code is 
amended by adding at the end the following sub-
section: 
‘‘(k) NET PRC SECURITIES GAIN SUBJECT
TO 
HIGHEST RATE OF INCOME TAX.— 
‘‘(1) IN
GENERAL.—The tax imposed under 
subsections (a), (b), (c), (d), and (e) shall be in-
creased by the product of— 
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‘‘(A) the highest rate of tax in effect under 
such subsection, multiplied by 
‘‘(B) the net PRC securities gain of the 
taxpayer for the taxable year. 
‘‘(2) PREVENTION OF DOUBLE TAXATION.—For 
purposes of subsections (a), (b), (c), (d) and (e), 
taxable income (determined without regard to this 
paragraph) shall be reduced by the net PRC securi-
ties gain of the taxpayer for the taxable year. 
‘‘(3) NET
PRC
SECURITIES
GAIN.—For pur-
poses of this subsection, the term ‘net PRC securi-
ties gain’ means the excess (if any) of— 
‘‘(A) the taxpayer’s aggregate gains on the 
dispositions of disqualified PRC securities for 
the taxable year, over 
‘‘(B) the taxpayer’s aggregate losses on the 
dispositions of disqualified PRC securities for 
such taxable year.’’. 
(2) CORPORATIONS.—Section 11(b) of such 
Code is amended to read as follows: 
‘‘(b) AMOUNT OF TAX.—The amount of the tax im-
posed by subsection (a) shall be the sum of— 
‘‘(1) 21 percent of the excess (if any) of— 
‘‘(A) taxable income, over 
‘‘(B) net PRC securities gain, plus 
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‘‘(2) the product of— 
‘‘(A) the highest rate of tax in effect under 
section 1, multiplied by 
‘‘(B) the lesser of taxable income or net 
PRC securities gain (as defined in section 
1(k)(3)).’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for part IV of subchapter P of chapter 1 of the Internal 
Revenue Code of 1986 is amended by adding at the end 
the following new item: 
‘‘Sec. 1261. Gains from disposition of disqualified PRC securities.’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to dispositions after the date 
which is 6 months after the date of the enactment 
of this Act. 
(2) APPLICATION TO FIRST TAXABLE YEAR.— 
For purposes of determining net PRC securities gain 
with respect to any taxable year which includes the 
date which is 6 months after the date of the enact-
ment of this Act, only dispositions of disqualified 
PRC securities (as defined in section 1261(b)(1) of 
the Internal Revenue Code of 1986, as amended by 
this section) after such date shall be taken into ac-
count. 
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(e) ELECTION TO PAY TAX LIABILITY ATTRIB-
UTABLE TO DISPOSITIONS MADE IN ANTICIPATION OF IN-
CREASED TAX IN INSTALLMENTS.— 
(1) IN GENERAL.—In the case of any taxpayer 
which has a net PRC tax liability for any taxable 
year, such taxpayer may elect to pay such liability 
in 3 equal installments. 
(2) DATE FOR PAYMENT OF INSTALLMENTS.— 
If an election is made under paragraph (1), the first 
installment shall be paid on the due date (deter-
mined without regard to any extension of time for 
filing the return) for the return of tax for the tax-
able year referred to in paragraph (1) and each suc-
ceeding installment shall be paid on the due date (as 
so determined) for the return of tax for the taxable 
year following the taxable year with respect to which 
the preceding installment was made. 
(3) ACCELERATION OF PAYMENT.—If there is 
an addition to tax for failure to timely pay any in-
stallment required under this subsection, a liquida-
tion or sale of substantially all the assets of the tax-
payer (including in a title 11 or similar case), a ces-
sation of business by the taxpayer, or any similar 
circumstance, then the unpaid portion of all remain-
ing installments shall be due on the date of such 
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event (or in the case of a title 11 or similar case, 
the day before the petition is filed). The preceding 
sentence shall not apply to the sale of substantially 
all the assets of a taxpayer to a buyer if such buyer 
enters into an agreement with the Secretary under 
which such buyer is liable for the remaining install-
ments due under this subsection in the same manner 
as if such buyer were the taxpayer. 
(4) PRORATION OF DEFICIENCY TO INSTALL-
MENTS.—If an election is made under paragraph (1) 
to pay the net PRC tax liability in installments and 
a deficiency has been assessed with respect to such 
liability, the deficiency shall be prorated to the in-
stallments payable under paragraph (1). The part of 
the deficiency so prorated to any installment the 
date for payment of which has not arrived shall be 
collected at the same time as, and as a part of, such 
installment. The part of the deficiency so prorated 
to any installment the date for payment of which 
has arrived shall be paid upon notice and demand 
from the Secretary. This subsection shall not apply 
if the deficiency is due to negligence, to intentional 
disregard of rules and regulations, or to fraud with 
intent to evade tax. 
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(5) ELECTION.—Any election under paragraph 
(1) shall be made not later than the due date for the 
return of tax for the taxable year referred to in 
paragraph (1) and shall be made in such manner as 
the Secretary shall provide. 
(6) NET PRC TAX LIABILITY.—For purposes of 
this subsection— 
(A) IN
GENERAL.—The term ‘‘net PRC 
tax liability’’ means, with respect to any tax-
payer for any taxable year, the excess (if any) 
of— 
(i) such taxpayer’s net income tax for 
such taxable year, over 
(ii) such taxpayer’s net income tax for 
such taxable year determined without re-
gard to any gains or losses from the dis-
position of disqualified PRC securities (as 
defined in section 1261(b)(1) of the Inter-
nal Revenue Code of 1986, as added by 
this section) during the 6-month period be-
ginning on the date of the enactment of 
this Act. 
(B) NET INCOME TAX.—The term ‘‘net in-
come tax’’ means the regular tax liability re-
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duced by the credits allowed under subparts A, 
B, and D of part IV of subchapter A. 
(7) INSTALLMENTS
TREATED
AS
TAX.—For 
purposes of subtitle F of the Internal Revenue Code 
of 1986, any installment due under this subsection 
shall be treated in the same manner as tax except 
as otherwise provided in this subsection. 
SEC. 3. DENIAL OF FOREIGN TAX CREDIT FOR INCOME AT-
TRIBUTABLE TO DISPOSITION OF DISQUALI-
FIED PRC SECURITIES. 
(a) IN GENERAL.—Section 901 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection 
(n) as subsection (o) and by inserting after subsection (m) 
the following new subsection: 
‘‘(n) DENIAL OF FOREIGN TAX CREDIT WITH RE-
SPECT TO INCOME ATTRIBUTABLE TO DISPOSITION OF 
DISQUALIFIED PRC SECURITIES.—No credit shall be al-
lowed under subsection (a) with respect to any foreign in-
come tax on income attributable to gain from the disposi-
tion of a disqualified PRC security (as defined in section 
1261(b)(1)).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to dispositions after the date which 
is 6 months after the date of the enactment of this Act. 
Æ 
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