I
107TH CONGRESS
1ST SESSION
H. R. 666
To amend the Internal Revenue Code of 1986 to apply the look-thru rules
for purposes of the foreign tax credit limitation to dividends from foreign
corporations not controlled by a domestic corporation.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 14, 2001
Mr. SAM JOHNSON of Texas (for himself and Mr. MATSUI) introduced the
following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to apply
the look-thru rules for purposes of the foreign tax credit
limitation to dividends from foreign corporations not con-
trolled by a domestic corporation.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. LOOK-THRU RULES TO APPLY TO DIVIDENDS
FROM NONCONTROLLED SECTION 902 COR-
PORATIONS.
(a) IN GENERAL.—Section 904(d)(4) of the Internal
Revenue Code of 1986 (relating to application of look-thru
rules to dividends from noncontrolled section 902 corpora-
tions) is amended to read as follows:
‘‘(4) LOOK-THRU APPLIES TO DIVIDENDS FROM
NONCONTROLLED SECTION 902 CORPORATIONS.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, any dividend from a noncontrolled
section 902 corporation with respect to the tax-
payer shall be treated as income in a separate
category in proportion to the ratio of—
‘‘(i) the portion of earnings and prof-
its attributable to income in such category,
to
‘‘(ii) the total amount of earnings and
profits.
‘‘(B) SPECIAL
RULES.—For purposes of
this paragraph—
‘‘(i) IN
GENERAL.—Rules similar to
the rules of paragraph (3)(F) shall apply;
except that the term ‘separate category’
shall include the category of income de-
scribed in paragraph (1)(I).
‘‘(ii) EARNINGS AND PROFITS.—
‘‘(I) IN GENERAL.—The rules of
section 316 shall apply.
‘‘(II) REGULATIONS.—The Sec-
retary may prescribe regulations re-
garding the treatment of distributions
out of earnings and profits for periods
before the taxpayer’s acquisition of
the stock to which the distributions
relate.
‘‘(iii) DIVIDENDS NOT ALLOCABLE TO
SEPARATE CATEGORY.—The portion of any
dividend from a noncontrolled section 902
corporation which is not treated as income
in a separate category under subparagraph
(A) shall be treated as a dividend to which
subparagraph (A) does not apply.
‘‘(iv) LOOK-THRU WITH RESPECT TO
CARRYFORWARDS OF CREDIT.—Rules simi-
lar to subparagraph (A) also shall apply to
any carryforward under subsection (c)
from a taxable year beginning before Janu-
ary 1, 2001, of tax allocable to a dividend
from a noncontrolled section 902 corpora-
tion with respect to the taxpayer.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (E) of section 904(d)(1) of
such Code, as in effect both before and after the
amendments made by section 1105 of the Taxpayer
Relief Act of 1997, is hereby repealed.
(2) Section 904(d)(2)(C)(iii) of such Code, as
so in effect, is amended by striking subclause (II)
and by redesignating subclause (III) as subclause
(II).
(3) The last sentence of section 904(d)(2)(D) of
such Code, as so in effect, is amended to read as fol-
lows: ‘‘Such term does not include any financial
services income.’’.
(4) Section 904(d)(2)(E) of such Code is
amended by striking clauses (ii) and (iv) and by re-
designating clause (iii) as clause (ii).
(5) Section 904(d)(3)(F) of such Code is
amended by striking ‘‘(D), or (E)’’ and inserting ‘‘or
(D)’’.
(6) Section 864(d)(5)(A)(i) of such Code is
amended by striking ‘‘(C)(iii)(III)’’ and inserting
‘‘(C)(iii)(II)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
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