paragraph (C) and by inserting after subparagraph (A) 
the following new subparagraph: 
‘‘(B) SPECIAL RULE IN CASE OF FOREIGN 
ACQUIRING CORPORATION.—In the case of any 
acquisition to which subsection (a) applies in 
which the acquiring corporation is a foreign 
corporation, no earnings and profits shall be 
taken into account under paragraph (2)(A) 
(and subparagraph (A) shall not apply) if more 
than 50 percent of the dividends arising from 
such acquisition (determined without regard to 
this subparagraph) would neither— 
‘‘(i) be subject to tax under this chap-
ter for the taxable year in which the divi-
dends arise, nor 
‘‘(ii) be includible in the earnings and 
profits of a controlled foreign corporation 
(as defined in section 957 and without re-
gard to section 953(c)).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to acquisitions after December 31, 
2010. 
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SEC. 206. MODIFICATION OF AFFILIATION RULES FOR PUR-
POSES OF RULES ALLOCATING INTEREST EX-
PENSE. 
(a) IN GENERAL.—Subparagraph (A) of section 
864(e)(5) is amended by adding at the end the following: 
‘‘Notwithstanding the preceding sentence, a foreign cor-
poration shall be treated as a member of the affiliated 
group if— 
‘‘(i) more than 50 percent of the gross 
income of such foreign corporation for the 
taxable year is effectively connected with 
the conduct of a trade or business within 
the United States, and 
‘‘(ii) at least 80 percent of either the 
vote or value of all outstanding stock of 
such foreign corporation is owned directly 
or indirectly by members of the affiliated 
group (determined with regard to this sen-
tence).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 207. TERMINATION OF SPECIAL RULES FOR INTEREST 
AND DIVIDENDS RECEIVED FROM PERSONS 
MEETING THE 80-PERCENT FOREIGN BUSI-
NESS REQUIREMENTS. 
(a) IN GENERAL.—Paragraph (1) of section 861(a) 
is amended by striking subparagraph (A) and by redesig-
nating subparagraphs (B) and (C) as subparagraphs (A) 
and (B), respectively. 
(b) GRANDFATHER RULE WITH RESPECT TO WITH-
HOLDING ON INTEREST AND DIVIDENDS RECEIVED FROM 
PERSONS MEETING THE 80-PERCENT FOREIGN BUSI-
NESS REQUIREMENTS.— 
(1) IN GENERAL.—Subparagraph (B) of section 
871(i)(2) is amended to read as follows: 
‘‘(B) The active foreign business percent-
age of— 
‘‘(i) any dividend paid by an existing 
80/20 company, and 
‘‘(ii) any interest paid by an existing 
80/20 company.’’. 
(2) DEFINITIONS AND SPECIAL RULES.—Sec-
tion 871 is amended by redesignating subsections (l) 
and (m) as subsections (m) and (n), respectively, 
and by inserting after subsection (k) the following 
new subsection: 
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‘‘(l) RULES RELATING TO EXISTING 80/20 COMPA-
NIES.—For purposes of this subsection and subsection 
(i)(2)(B)— 
‘‘(1) EXISTING 80/20 COMPANY.— 
‘‘(A) IN GENERAL.—The term ‘existing 80/ 
20 company’ means any corporation if— 
‘‘(i) such corporation met the 80-per-
cent foreign business requirements of sec-
tion 861(c)(1) (as in effect before the date 
of the enactment of this subsection) for 
such corporation’s last taxable year begin-
ning before January 1, 2011, 
‘‘(ii) such corporation meets the 80- 
percent foreign business requirements of 
subparagraph (B) with respect to each tax-
able year after the taxable year referred to 
in clause (i), and 
‘‘(iii) there has not been an addition 
of a substantial line of business with re-
spect to such corporation after the date of 
the enactment of this subsection. 
‘‘(B) 
FOREIGN
BUSINESS
REQUIRE-
MENTS.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (iv), a corporation meets 
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the 80-percent foreign business require-
ments of this subparagraph if it is shown 
to the satisfaction of the Secretary that at 
least 80 percent of the gross income from 
all sources of such corporation for the test-
ing period is active foreign business in-
come. 
‘‘(ii) ACTIVE FOREIGN BUSINESS IN-
COME.—For purposes of clause (i), the 
term ‘active foreign business income’ 
means gross income which— 
‘‘(I) is derived from sources out-
side the United States (as determined 
under this subchapter), and 
‘‘(II) is attributable to the active 
conduct of a trade or business in a 
foreign country or possession of the 
United States. 
‘‘(iii) TESTING
PERIOD.—For pur-
poses of this subsection, the term ‘testing 
period’ means the 3-year period ending 
with the close of the taxable year of the 
corporation preceding the payment (or 
such part of such period as may be appli-
cable). If the corporation has no gross in-
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come for such 3-year period (or part there-
of), the testing period shall be the taxable 
year in which the payment is made. 
‘‘(iv) TRANSITION RULE.—In the case 
of a taxable year for which the testing pe-
riod includes 1 or more taxable years be-
ginning before January 1, 2011— 
‘‘(I) a corporation meets the 80- 
percent foreign business requirements 
of this subparagraph if and only if the 
weighted average of— 
‘‘(aa) the percentage of the 
corporation’s gross income from 
all sources that is active foreign 
business income (as defined in 
subparagraph 
(B) 
of 
section 
861(c)(1) (as in effect before the 
date of the enactment of this 
subsection)) for the portion of 
the testing period that includes 
taxable years beginning before 
January 1, 2011, and 
‘‘(bb) the percentage of the 
corporation’s gross income from 
all sources that is active foreign 
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business income (as defined in 
clause (ii) of this subparagraph) 
for the portion of the testing pe-
riod, if any, that includes taxable 
years beginning on or after Janu-
ary 1, 2011, 
is at least 80 percent, and 
‘‘(II) the active foreign business 
percentage for such taxable year shall 
equal the weighted average percentage 
determined under subclause (I). 
‘‘(2) ACTIVE
FOREIGN
BUSINESS
PERCENT-
AGE.—Except as provided in paragraph (1)(B)(iv), 
the term ‘active foreign business percentage’ means, 
with respect to any existing 80/20 company, the per-
centage which— 
‘‘(A) the active foreign business income of 
such company for the testing period, is of 
‘‘(B) the gross income of such company for 
the testing period from all sources. 
‘‘(3) AGGREGATION RULES.—For purposes of 
applying paragraph (1) (other than subparagraphs 
(A)(i) and (B)(iv) thereof) and paragraph (2)— 
‘‘(A) IN
GENERAL.—The corporation re-
ferred to in paragraph (1)(A) and all of such 
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corporation’s subsidiaries shall be treated as 
one corporation. 
‘‘(B) SUBSIDIARIES.—For purposes of sub-
paragraph (A), the term ‘subsidiary’ means any 
corporation in which the corporation referred to 
in subparagraph (A) owns (directly or indi-
rectly) stock meeting the requirements of sec-
tion 1504(a)(2) (determined by substituting ‘50 
percent’ for ‘80 percent’ each place it appears 
and without regard to section 1504(b)(3)). 
‘‘(4) REGULATIONS.—The Secretary may issue 
such regulations or other guidance as is necessary or 
appropriate to carry out the purposes of this section, 
including regulations or other guidance which pro-
vide for the proper application of the aggregation 
rules described in paragraph (3).’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 861 is amended by striking sub-
section (c) and by redesignating subsections (d), (e), 
and (f) as subsections (c), (d), and (e), respectively. 
(2) Paragraph (9) of section 904(h) is amended 
to read as follows: 
‘‘(9) TREATMENT OF CERTAIN DOMESTIC COR-
PORATIONS.—In the case of any dividend treated as 
not from sources within the United States under 
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section 861(a)(2)(A), the corporation paying such 
dividend shall be treated for purposes of this sub-
section as a United States-owned foreign corpora-
tion.’’. 
(3) Subsection (c) of section 2104 is amended 
in the last sentence by striking ‘‘or to a debt obliga-
tion of a domestic corporation’’ and all that follows 
and inserting a period. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to taxable years beginning after Decem-
ber 31, 2010. 
(2) GRANDFATHER
RULE
FOR
OUTSTANDING 
DEBT OBLIGATIONS.— 
(A) IN GENERAL.—The amendments made 
by this section shall not apply to payments of 
interest on obligations issued before the date of 
the enactment of this Act. 
(B) EXCEPTION
FOR
RELATED
PARTY 
DEBT.—Subparagraph (A) shall not apply to 
any interest which is payable to a related per-
son (determined under rules similar to the rules 
of section 954(d)(3)). 
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(C) SIGNIFICANT MODIFICATIONS TREAT-
ED AS NEW ISSUES.—For purposes of subpara-
graph (A), a significant modification of the 
terms of any obligation (including any extension 
of the term of such obligation) shall be treated 
as a new issue. 
SEC. 208. SOURCE RULES FOR INCOME ON GUARANTEES. 
(a) AMOUNTS
SOURCED
WITHIN
THE
UNITED 
STATES.—Subsection (a) of section 861 is amended by 
adding at the end the following new paragraph: 
‘‘(9) GUARANTEES.—Amounts received, directly 
or indirectly, from— 
‘‘(A) a noncorporate resident or domestic 
corporation for the provision of a guarantee of 
any indebtedness of such resident or corpora-
tion, or 
‘‘(B) any foreign person for the provision 
of a guarantee of any indebtedness of such per-
son, if such amount is connected with income 
which is effectively connected (or treated as ef-
fectively connected) with the conduct of a trade 
or business in the United States.’’. 
(b) AMOUNTS SOURCED WITHOUT
THE UNITED 
STATES.—Subsection (a) of section 862 is amended by 
striking ‘‘and’’ at the end of paragraph (7), by striking 
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the period at the end of paragraph (8) and inserting ‘‘; 
and’’, and by adding at the end the following new para-
graph: 
‘‘(9) amounts received, directly or indirectly, 
from a foreign person for the provision of a guar-
antee of indebtedness of such person other than 
amounts which are derived from sources within the 
United States as provided in section 861(a)(9).’’. 
(c) CONFORMING AMENDMENT.—Clause (ii) of sec-
tion 864(c)(4)(B) is amended by striking ‘‘dividends or in-
terest’’ and inserting ‘‘dividends, interest, or amounts re-
ceived for the provision of guarantees of indebtedness’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to guarantees issued after the date 
of the enactment of this Act. 
SEC. 209. LIMITATION ON EXTENSION OF STATUTE OF LIMI-
TATIONS FOR FAILURE TO NOTIFY SEC-
RETARY OF CERTAIN FOREIGN TRANSFERS. 
(a) IN GENERAL.—Paragraph (8) of section 6501(c) 
is amended— 
(1) by striking ‘‘In the case of any information’’ 
and inserting the following: 
‘‘(A) IN GENERAL.—In the case of any in-
formation’’; and 
(2) by adding at the end the following: 
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‘‘(B) APPLICATION TO FAILURES DUE TO 
REASONABLE CAUSE.—If the failure to furnish 
the information referred to in subparagraph (A) 
is due to reasonable cause and not willful ne-
glect, subparagraph (A) shall apply only to the 
item or items related to such failure.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect as if included in section 513 
of the Hiring Incentives to Restore Employment Act. 
Subtitle B—Other Revenue 
Provisions 
SEC. 211. REQUIRED MINIMUM 10-YEAR TERM, ETC., FOR 
GRANTOR RETAINED ANNUITY TRUSTS. 
(a) IN GENERAL.—Subsection (b) of section 2702 is 
amended— 
(1) by redesignating paragraphs (1), (2) and 
(3) as subparagraphs (A), (B), and (C), respectively, 
and by moving such subparagraphs (as so redesig-
nated) 2 ems to the right; 
(2) by striking ‘‘For purposes of’’ and inserting 
the following: 
‘‘(1) IN GENERAL.—For purposes of’’; 
(3) by striking ‘‘paragraph (1) or (2)’’ in para-
graph (1)(C) (as so redesignated) and inserting 
‘‘subparagraph (A) or (B)’’; and 
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