foreign 
corporation’s 
commodities 
are 
property described in paragraph (1), (2) or 
(8) of section 1221(a), or’’. 
(b) DEFINITION AND SPECIAL RULES.—Subsection 
(c) of section 954 is amended by adding after paragraph 
(4) the following new paragraph: 
‘‘(5) DEFINITION AND SPECIAL RULES RELAT-
ING TO COMMODITY TRANSACTIONS.—
‘‘(A) 
COMMODITY
HEDGING
TRANS-
ACTIONS.—For 
purposes 
of 
paragraph 
(1)(C)(i), the term ‘commodity hedging trans-
action’ means any transaction with respect to a 
commodity if such transaction—
‘‘(i) is a hedging transaction as de-
fined in section 1221(b)(2), determined—
‘‘(I) without regard to subpara-
graph (A)(ii) thereof, 
‘‘(II) by applying subparagraph 
(A)(i) thereof by substituting ‘ordi-
nary property or property described in 
section 1231(b)’ for ‘ordinary prop-
erty’, and 
‘‘(III) by substituting ‘controlled 
foreign corporation’ for ‘taxpayer’ 
each place it appears, and
‘‘(ii) is clearly identified as such in ac-
cordance with section 1221(a)(7). 
‘‘(B) REGULATIONS.—The Secretary shall 
prescribe such regulations as are appropriate to 
carry out the purposes of paragraph (1)(C) in 
the case of transactions involving related par-
ties.’’
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to commodity hedging transactions 
entered into on or after the date of enactment of this Act. 
SEC. 106. REPEAL OF CFC RULES ON FOREIGN BASE COM-
PANY SALES AND SERVICES INCOME. 
(a) IN GENERAL.—Subsection (a) of section 954 (re-
lating to foreign base company income) is amended by 
striking paragraphs (2) and (3) and by redesignating 
paragraphs (4) and (5) as paragraphs (2) and (3), respec-
tively. 
(b) CERTAIN SALES.—Paragraph (1) of section 
954(c) is amended by adding at the end the following new 
subparagraph: 
‘‘(H) CERTAIN
SALES.—Income (whether 
in the form of profits, commissions, fees, or 
otherwise) derived in connection with the pur-
chase of personal property from a related per-
son and its sale to any person, the sale of per-
sonal property to any person on behalf of a re-
lated person, the purchase of personal property 
from any person and its sale to a related per-
son, or the purchase of personal property from 
any person on behalf of a related person 
where—
‘‘(i) the property which is purchased 
(or in the case of property sold on behalf 
of a related person, the property which is 
sold) is manufactured, produced, grown, or 
extracted in the United States, and 
‘‘(ii) the property is sold for use, con-
sumption, or disposition in the United 
States, or, in the case of property pur-
chased on behalf of a related person, is 
purchased for use, consumption, or disposi-
tion in the United States.’’
(c) CONFORMING AMENDMENTS.—
(1) Clause (iii) of section 952(c)(1)(B) is 
amended by striking subclauses (III) and (IV) and 
by redesignating subclauses (V) and (VI) as sub-
clauses (III) and (IV), respectively. 
(2) Section 953(c)(6)(A) is amended by striking 
‘‘section 
954(d)(3)’’ 
and 
inserting 
‘‘section 
954(b)(9)’’.
(3) Subsection (b) of section 954 is amended by 
adding at the end the following new paragraph: 
‘‘(9) RELATED
PERSON
DEFINED.—For pur-
poses of this subsection, a person is a related person 
with respect to a controlled foreign corporation if—
‘‘(A) such person is an individual, corpora-
tion, partnership, trust, or estate which con-
trols, or is controlled by, the controlled foreign 
corporation, or 
‘‘(B) such person is a corporation, partner-
ship, trust, or estate which is controlled by the 
same person or persons which control the con-
trolled foreign corporation. 
For purposes of the preceding sentence, control 
means, with respect to a corporation, the ownership, 
directly or indirectly, of stock possessing more than 
50 percent of the total voting power of all classes of
stock entitled to vote or of the total value of stock 
of such corporation. In the case of a partnership, 
trust, or estate, control means the ownership, di-
rectly or indirectly, of more than 50 percent (by 
value) of the beneficial interests in such partnership, 
trust, or estate. For purposes of this paragraph, 
rules similar to the rules of section 958 shall apply.’’
(4) Paragraph (5) of section 954(b) is amended 
by striking ‘‘the foreign base company sales income, 
the foreign base company services income,’’. 
(5) Section 954 is amended by striking sub-
sections (d) and (e). 
(6) 
Sections 
552(c)(2), 
861(c)(2)(B), 
904(d)(2)(H), 
953(e), 
955(b), 
958(b), 
971(f), 
988(e)(3)(C), 
1297(b)(2), 
1298(d)(3), 
and 
1298(e)(2)(B) are each amended by striking 
‘‘954(d)(3)’’ each place it appears and inserting 
‘‘954(b)(9)’’. 
SEC. 107. LOOK-THRU TREATMENT OF PAYMENTS BE-
TWEEN 
RELATED 
CONTROLLED 
FOREIGN 
CORPORATIONS UNDER FOREIGN PERSONAL 
HOLDING COMPANY INCOME RULES. 
Subsection (c) of section 954 is amended by adding 
after paragraph (3) the following new paragraph: 
‘‘(4) LOOK-THRU IN THE CASE OF RELATED 
CONTROLLED
FOREIGN
CORPORATIONS.—For pur-
poses of this subsection, dividends, interest, rents, 
and royalties received from a controlled foreign cor-
poration which is a related person (as defined in 
subsection (b)(9)) shall not be treated as foreign 
personal holding company income to the extent at-
tributable (determined under rules similar to the