H. R. 2488—85 
or in a bank holding company registered as such with the 
Federal Reserve System— 
‘‘(i) which are held by an individual solely by rea-
son of status as a director of such bank or company 
or its controlled subsidiary; and 
‘‘(ii) which are subject to an agreement pursuant 
to which the holder is required to dispose of the shares 
of stock upon termination of the holder’s status as 
a director at the same price as the individual acquired 
such shares of stock. 
‘‘(3) DISTRIBUTIONS.—A distribution (not in part or full 
payment in exchange for stock) made by the corporation with 
respect to qualifying director shares shall be includible as ordi-
nary income of the holder and deductible to the corporation 
as an expense in computing taxable income under section 
1363(b) in the year such distribution is received.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 1361(b)(1) is amended by inserting ‘‘, except 
as provided in subsection (f ),’’ before ‘‘which does not’’. 
(2) Section 1366(a) is amended by adding at the end the 
following: 
‘‘(3) ALLOCATION WITH RESPECT TO QUALIFYING DIRECTOR 
SHARES.—The holders of qualifying director shares (as defined 
in section 1361(f )) shall not, with respect to such shares of 
stock, be allocated any of the items described in paragraph 
(1).’’. 
(3) Section 1373(a) is amended by striking ‘‘and’’ at the 
end of paragraph (1), by striking the period at the end of 
paragraph (2) and inserting ‘‘, and’’, and adding at the end 
the following: 
‘‘(3) no amount of an expense deductible under this sub-
chapter by reason of section 1361(f )(3) shall be apportioned 
or allocated to such income.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 1999. 
TITLE IX—INTERNATIONAL TAX RELIEF 
SEC. 901. INTEREST ALLOCATION RULES. 
(a) ELECTION TO ALLOCATE INTEREST ON A WORLDWIDE BASIS.— 
Subsection (e) of section 864 (relating to rules for allocating interest, 
etc.) is amended by redesignating paragraphs (6) and (7) as para-
graphs (7) and (8), respectively, and by inserting after paragraph 
(5) the following new paragraph: 
‘‘(6) ELECTION TO ALLOCATE INTEREST ON A WORLDWIDE 
BASIS.— 
‘‘(A) IN GENERAL.—Except as provided in this para-
graph, this subsection shall be applied by treating a world-
wide affiliated group for which an election under this para-
graph is in effect as an affiliated group solely for purposes 
of allocating and apportioning interest expense of each 
domestic corporation which is a member of such group. 
‘‘(B) WORLDWIDE AFFILIATED GROUP.—For purposes of 
this paragraph, the term ‘worldwide affiliated group’ means 
the group of corporations which consists of— 
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H. R. 2488—86 
‘‘(i) all corporations in an affiliated group (as 
defined in section 1504 without regard to paragraphs 
(2) and (4) of section 1504(b)), and 
‘‘(ii) all foreign corporations (other than a FSC, 
as defined in section 922(a)) with respect to which 
corporations described in clause (i) own stock meeting 
the ownership requirements of section 957(a). 
For purposes of clause (ii), ownership shall be determined 
under section 958; except that paragraphs (3) and (4) of 
section 318(a) shall not apply for purposes of section 958(b). 
‘‘(C) TREATMENT OF WORLDWIDE AFFILIATED GROUP.— 
For purposes of applying paragraph (1), the taxable income 
of the domestic members of a worldwide affiliated group 
from sources outside the United States shall be determined 
by allocating and apportioning the interest expense of such 
domestic members to such income in an amount equal 
to the excess (if any) of— 
‘‘(i) the total interest expense of the worldwide 
affiliated group multiplied by the ratio which the for-
eign assets of the worldwide affiliated group bears 
to all the assets of the worldwide affiliated group, 
over 
‘‘(ii) the interest expense of all foreign corporations 
which are members of the worldwide affiliated group 
to the extent such interest expense of such foreign 
corporations would have been allocated and appor-
tioned to foreign source income if this subsection were 
applied to a group consisting of all the foreign corpora-
tions in such worldwide affiliated group. 
‘‘(D) ASSETS AND INTEREST EXPENSE OF FOREIGN COR-
PORATIONS.— 
‘‘(i) IN GENERAL.—For purposes of subparagraph 
(C), only the applicable percentage of the interest 
expense and assets of a foreign corporation described 
in subparagraph (B)(ii) shall be taken into account. 
‘‘(ii) APPLICABLE
PERCENTAGE.—For purposes of 
this paragraph, the term ‘applicable percentage’ means, 
with respect to any foreign corporation, the percentage 
equal to the ratio which the value of the stock in 
such corporation taken into account under subpara-
graph (B)(ii) (without regard to stock considered as 
owned under section 958(b)) bears to the aggregate 
value of all stock in such corporation. 
‘‘(E) ELECTION.—An election under this paragraph with 
respect to any worldwide affiliated group may be made 
only by the common parent of the affiliated group referred 
to in subparagraph (B)(i) and may be made only for the 
first taxable year beginning after December 31, 2001, in 
which a worldwide affiliated group exists which includes 
such affiliated group and at least one corporation described 
in subparagraph (B)(ii). Such an election, once made, shall 
apply to such common parent and all other corporations 
which are members of such worldwide affiliated group for 
such taxable year and all subsequent years unless revoked 
with the consent of the Secretary.’’. 
(b) ELECTION
TO
ALLOCATE
INTEREST
WITHIN
FINANCIAL 
INSTITUTION GROUPS
AND SUBSIDIARY GROUPS.—Section 864 is 
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H. R. 2488—87 
amended by redesignating subsection (f ) as subsection (g) and by 
inserting after subsection (e) the following new subsection: 
‘‘(f ) ELECTION TO APPLY SUBSECTION (e) ON BASIS OF FINANCIAL 
INSTITUTION GROUP AND SUBSIDIARY GROUPS.— 
‘‘(1) IN GENERAL.—In the case of a worldwide affiliated 
group for which an election under subsection (e)(6) is in effect, 
subsection (e) shall be applied— 
‘‘(A) by treating an electing financial institution group 
as if it were a separate worldwide affiliated group, and 
‘‘(B) by treating each electing subsidiary group as if 
it were a separate worldwide affiliated group for purposes 
of allocating interest expense with respect to qualified 
indebtedness of members of an electing subsidiary group. 
Subsection (e) shall apply to any such electing group in the 
same manner as subsection (e) applies to the pre-election world-
wide affiliated group of which such electing group is a part. 
‘‘(2) ELECTING
FINANCIAL
INSTITUTION
GROUP.—For pur-
poses of this subsection— 
‘‘(A) IN GENERAL.—The term ‘electing financial institu-
tion group’ means any group of corporations if— 
‘‘(i) such group consists only of all of the financial 
corporations in the pre-election worldwide affiliated 
group, and 
‘‘(ii) an election under this paragraph is in effect 
for such group of corporations. 
‘‘(B) FINANCIAL CORPORATION.— 
‘‘(i) IN GENERAL.—The term ‘financial corporation’ 
means any corporation if at least 80 percent of its 
gross 
income 
is 
income 
described 
in 
section 
904(d)(2)(C)(ii) and the regulations thereunder which 
is derived from transactions with unrelated persons. 
‘‘(ii) INCOME FROM RELATED FINANCIAL CORPORA-
TIONS.—Dividend income, and income described in sec-
tion 904(d)(2)(C)(ii) and the regulations thereunder, 
which is derived directly or indirectly from a financial 
corporation (as defined in clause (i) without regard 
to this clause) which is not an unrelated person shall 
be treated as income described in clause (i). 
‘‘(iii) BANK
HOLDING
COMPANIES.—To the extent 
provided in regulations prescribed by the Secretary, 
a bank holding company (within the meaning of section 
2(a) of the Bank Holding Company Act of 1956) shall 
be treated as a corporation meeting the requirements 
of clause (i). 
‘‘(iv) ANTIABUSE
RULE.—For purposes of this 
subparagraph, there shall be disregarded any item of 
income or gain from a transaction or series of trans-
actions a principal purpose of which is the qualification 
of any corporation as a financial corporation. 
‘‘(C) EFFECT OF CERTAIN TRANSACTIONS.—Rules similar 
to the rules of paragraph (3)(D) shall apply to transactions 
between any member of the electing financial institution 
group and any member of the pre-election worldwide affili-
ated group (other than a member of the electing financial 
institution group). 
‘‘(D) ELECTION.—An election under this paragraph with 
respect to any financial institution group may be made 
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H. R. 2488—88 
only by the common parent of the pre-election worldwide 
affiliated group and may be made only for the first taxable 
year beginning after December 31, 2001, in which such 
affiliated group includes one or more financial corporations 
described in subparagraph (B). Such an election, once made, 
shall apply to such taxable year and all subsequent years 
unless revoked with the consent of the Secretary. 
‘‘(3) ELECTING SUBSIDIARY GROUPS.— 
‘‘(A) IN GENERAL.—The term ‘electing subsidiary group’ 
means any group of corporations if— 
‘‘(i) such group consists only of corporations in 
the pre-election worldwide affiliated group, 
‘‘(ii) such group includes— 
‘‘(I) a domestic corporation (which is not the 
common parent of the pre-election worldwide affili-
ated group or a member of an electing financial 
institution group) which incurs interest expense 
with respect to qualified indebtedness, and 
‘‘(II) every other corporation (other than a 
member of an electing financial institution group) 
which is in the pre-election worldwide affiliated 
group and which would be a member of an affili-
ated group having such domestic corporation as 
the common parent, and 
‘‘(iii) an election under this paragraph is in effect 
for such group. 
‘‘(B) EQUALIZATION RULE.—All interest expense of a 
domestic corporation which is a member of a pre-election 
worldwide affiliated group (other than subsidiary group 
interest expense) shall be treated as allocated to foreign 
source income to the extent such expense does not exceed 
the excess (if any) of— 
‘‘(i) the interest expense of the pre-election world-
wide affiliated group (including subsidiary group 
interest expense) which would (but for any election 
under this paragraph) be allocated to foreign source 
income, over 
‘‘(ii) the subsidiary group interest expense allocated 
to foreign source income. 
For purposes of the preceding sentence, the subsidiary 
group interest expense is the interest expense to which 
subsection (e) applies separately by reason of paragraph 
(1)(B). 
‘‘(C) QUALIFIED INDEBTEDNESS.—For purposes of this 
subsection, the term ‘qualified indebtedness’ means any 
indebtedness of a domestic corporation— 
‘‘(i) which is held by an unrelated person, and 
‘‘(ii) which is not guaranteed (or otherwise sup-
ported) by any corporation which is a member of the 
pre-election worldwide affiliated group other than a 
corporation which is a member of the electing sub-
sidiary group. 
‘‘(D) EFFECT OF CERTAIN TRANSACTIONS ON QUALIFIED 
INDEBTEDNESS.—In the case of a corporation which is a 
member of an electing subsidiary group, to the extent that 
such corporation— 
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H. R. 2488—89 
‘‘(i) distributes dividends or makes other distribu-
tions with respect to its stock after the date of the 
enactment of this paragraph to any member of the 
pre-election worldwide affiliated group (other than to 
a member of the electing subsidiary group) in excess 
of the greater of— 
‘‘(I) its average annual dividend (expressed as 
a percentage of current earnings and profits) 
during the 5-taxable-year period ending with the 
taxable year preceding the taxable year, or 
‘‘(II) 25 percent of its average annual earnings 
and profits for such 5 taxable year period, or 
‘‘(ii) deals with any person in any manner not 
clearly reflecting the income of the corporation (as 
determined under principles similar to the principles 
of section 482), 
except as provided by the Secretary, an amount of qualified 
indebtedness equal to the excess distribution or the under-
statement or overstatement of income, as the case may 
be, shall be recharacterized (for the taxable year and subse-
quent taxable years) for purposes of this subsection as 
indebtedness which is not qualified indebtedness. If a cor-
poration has not been in existence for 5 taxable years, 
this subparagraph shall be applied with respect to the 
period it was in existence. 
‘‘(E) ELECTION.—An election under this paragraph with 
respect to any electing subsidiary group may be made 
only by the common parent of the pre-election worldwide 
affiliated group. Such an election, once made, shall apply 
to the taxable year for which made and the 4 succeeding 
taxable years unless revoked with the consent of the Sec-
retary. No election may be made under this paragraph 
if the effect of the election would be to have the same 
member of the pre-election worldwide affiliated group 
included in more than one electing subsidiary group. 
‘‘(4) PRE-ELECTION
WORLDWIDE
AFFILIATED
GROUP.—For 
purposes of this subsection, the term ‘pre-election worldwide 
affiliated group’ means, with respect to a corporation, the world-
wide affiliated group of which such corporation would (but 
for an election under this subsection) be a member for purposes 
of applying subsection (e). 
‘‘(5) UNRELATED PERSON.—For purposes of this subsection, 
the term ‘unrelated person’ means any person not bearing 
a relationship specified in section 267(b) or 707(b)(1) to the 
corporation. 
‘‘(6) REGULATIONS.—The Secretary shall prescribe such 
regulations as may be appropriate to carry out this subsection 
and subsection (e), including regulations— 
‘‘(A) providing for the direct allocation of interest 
expense in other circumstances where such allocation would 
be appropriate to carry out the purposes of this subsection, 
‘‘(B) preventing assets or interest expense from being 
taken into account more than once, and 
‘‘(C) dealing with changes in members of any group 
(through acquisitions or otherwise) treated under this sub-
section as an affiliated group for purposes of subsection 
(e).’’. 
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H. R. 2488—90 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2001. 
SEC. 902. LOOK-THRU RULES TO APPLY TO DIVIDENDS FROM NONCON-
TROLLED SECTION 902 CORPORATIONS. 
(a) IN GENERAL.—Section 904(d)(4) (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
NONCON-
TROLLED SECTION 902 CORPORATIONS.— 
‘‘(A) IN GENERAL.—For purposes of this subsection, any 
dividend from a noncontrolled section 902 corporation with 
respect to the taxpayer shall be treated as income in a 
separate category in proportion to the ratio of— 
‘‘(i) the portion of earnings and profits 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 
described in paragraph (1)(I). 
‘‘(ii) EARNINGS AND PROFITS.— 
‘‘(I) IN
GENERAL.—The rules of section 316 
shall apply. 
‘‘(II) REGULATIONS.—The Secretary may pre-
scribe regulations regarding the treatment of dis-
tributions 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 CAT-
EGORY.—The portion of any dividend from a noncon-
trolled section 902 corporation which is not treated 
as income in a separate category under subparagraph 
(A) shall be treated as a dividend to which subpara-
graph (A) does not apply. 
‘‘(iv) LOOK-THRU WITH RESPECT TO CARRYFORWARDS 
OF CREDIT.—Rules similar to subparagraph (A) also 
shall apply to any carryforward under subsection (c) 
from a taxable year beginning before January 1, 2002, 
of tax allocable to a dividend from a noncontrolled 
section 902 corporation with respect to the taxpayer.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Subparagraph (E) of section 904(d)(1), 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), 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), as so in effect, 
is amended to read as follows: ‘‘Such term does not include 
any financial services income.’’. 
(4) Section 904(d)(2)(E) is amended by striking clauses 
(ii) and (iv) and by redesignating clause (iii) as clause (ii). 
(5) Section 904(d)(3)(F) is amended by striking ‘‘(D), or 
(E)’’ and inserting ‘‘or (D)’’. 
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H. R. 2488—91 
(6) 
Section 
864(d)(5)(A)(i) 
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, 2001. 
SEC. 903. CLARIFICATION OF TREATMENT OF PIPELINE TRANSPOR-
TATION INCOME. 
(a) IN GENERAL.—Section 954(g)(1) (defining foreign base com-
pany oil related income) is amended by striking ‘‘or’’ at the end 
of subparagraph (A), by striking the period at the end of subpara-
graph (B) and inserting ‘‘, or’’, and by inserting after subparagraph 
(B) the following new subparagraph: 
‘‘(C) the pipeline transportation of oil or gas within 
such foreign country.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to taxable years of controlled foreign corporations begin-
ning after December 31, 2001, and taxable years of United States 
shareholders with or within which such taxable years of controlled 
foreign corporations end. 
SEC. 904. SUBPART F TREATMENT OF INCOME FROM TRANSMISSION 
OF HIGH VOLTAGE ELECTRICITY. 
(a) IN GENERAL.—Paragraph (2) of section 954(e) (relating to 
foreign base company services income) is amended by striking ‘‘or’’ 
at the end of subparagraph (A), by striking the period at the 
end of subparagraph (B) and inserting ‘‘, or’’, and by inserting 
after subparagraph (B) the following new subparagraph: 
‘‘(C) the transmission of high voltage electricity.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to taxable years of controlled foreign corporations begin-
ning after December 31, 2001, and taxable years of United States 
shareholders with or within which such taxable years of controlled 
foreign corporations end. 
SEC. 905. RECHARACTERIZATION OF OVERALL DOMESTIC LOSS. 
(a) GENERAL RULE.—Section 904 is amended by redesignating 
subsections (g), (h), (i), ( j), and (k) as subsections (h), (i), ( j), 
(k), and (l), respectively, and by inserting after subsection (f ) the 
following new subsection: 
‘‘(g) RECHARACTERIZATION OF OVERALL DOMESTIC LOSS.— 
‘‘(1) GENERAL
RULE.—For purposes of this subpart and 
section 936, in the case of any taxpayer who sustains an overall 
domestic loss for any taxable year beginning after December 
31, 2005, that portion of the taxpayer’s taxable income from 
sources within the United States for each succeeding taxable 
year which is equal to the lesser of— 
‘‘(A) the amount of such loss (to the extent not used 
under this paragraph in prior taxable years), or 
‘‘(B) 50 percent of the taxpayer’s taxable income from 
sources within the United States for such succeeding tax-
able year, 
shall be treated as income from sources without the United 
States (and not as income from sources within the United 
States). 
‘‘(2) OVERALL DOMESTIC LOSS DEFINED.—For purposes of 
this subsection— 
‘‘(A) IN
GENERAL.—The term ‘overall domestic loss’ 
means any domestic loss to the extent such loss offsets 
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H. R. 2488—92 
taxable income from sources without the United States 
for the taxable year or for any preceding taxable year 
by reason of a carryback. For purposes of the preceding 
sentence, the term ‘domestic loss’ means the amount by 
which the gross income for the taxable year from sources 
within the United States is exceeded by the sum of the 
deductions properly apportioned or allocated thereto (deter-
mined without regard to any carryback from a subsequent 
taxable year). 
‘‘(B) TAXPAYER
MUST
HAVE
ELECTED
FOREIGN
TAX 
CREDIT
FOR
YEAR
OF
LOSS.—The term ‘overall domestic 
loss’ shall not include any loss for any taxable year unless 
the taxpayer chose the benefits of this subpart for such 
taxable year. 
‘‘(3) CHARACTERIZATION OF SUBSEQUENT INCOME.— 
‘‘(A) IN
GENERAL.—Any income from sources within 
the United States that is treated as income from sources 
without the United States under paragraph (1) shall be 
allocated among and increase the income categories in 
proportion to the loss from sources within the United States 
previously allocated to those income categories. 
‘‘(B) INCOME CATEGORY.—For purposes of this para-
graph, the term ‘income category’ has the meaning given 
such term by subsection (f )(5)(E)(i). 
‘‘(4) COORDINATION WITH SUBSECTION (f ).—The Secretary 
shall prescribe such regulations as may be necessary to coordi-
nate the provisions of this subsection with the provisions of 
subsection (f ).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 535(d)(2) is amended by striking ‘‘section 
904(g)(6)’’ and inserting ‘‘section 904(h)(6)’’. 
(2) Subparagraph (A) of section 936(a)(2) is amended by 
striking ‘‘section 904(f )’’ and inserting ‘‘subsections (f ) and (g) 
of section 904’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to losses for taxable years beginning after December 
31, 2005. 
SEC. 906. TREATMENT OF MILITARY PROPERTY OF FOREIGN SALES 
CORPORATIONS. 
(a) IN GENERAL.—Section 923(a) (defining exempt foreign trade 
income) is amended by striking paragraph (5) and by redesignating 
paragraph (6) as paragraph (5). 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to taxable years beginning after December 31, 2001. 
SEC. 907. TREATMENT OF CERTAIN DIVIDENDS OF REGULATED 
INVESTMENT COMPANIES. 
(a) TREATMENT OF CERTAIN DIVIDENDS.— 
(1) NONRESIDENT ALIEN INDIVIDUALS.—Section 871 (relating 
to tax on nonresident alien individuals) is amended by redesig-
nating subsection (k) as subsection (l) and by inserting after 
subsection ( j) the following new subsection: 
‘‘(k) EXEMPTION FOR CERTAIN DIVIDENDS OF REGULATED INVEST-
MENT COMPANIES.— 
‘‘(1) INTEREST-RELATED DIVIDENDS.— 
‘‘(A) IN GENERAL.—Except as provided in subparagraph 
(B), no tax shall be imposed under paragraph (1)(A) of 
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H. R. 2488—93 
subsection (a) on any interest-related dividend received 
from a regulated investment company. 
‘‘(B) EXCEPTIONS.—Subparagraph (A) shall not apply— 
‘‘(i) to any interest-related dividend received from 
a regulated investment company by a person to the 
extent such dividend is attributable to interest (other 
than interest described in clause (i), (iii), or the last 
sentence of subparagraph (E)) received by such com-
pany on indebtedness issued by such person or by 
any corporation or partnership with respect to which 
such person is a 10-percent shareholder, 
‘‘(ii) to any interest-related dividend with respect 
to stock of a regulated investment company unless 
the person who would otherwise be required to deduct 
and withhold tax from such dividend under chapter 
3 receives a statement (which meets requirements 
similar to the requirements of subsection (h)(5)) that 
the beneficial owner of such stock is not a United 
States person, and 
‘‘(iii) to any interest-related dividend paid to any 
person within a foreign country (or any interest-related 
dividend payment addressed to, or for the account of, 
persons within such foreign country) during any period 
described in subsection (h)(6) with respect to such 
country. 
Clause (iii) shall not apply to any dividend with respect 
to any stock the holding period of which begins on or 
before the date of the publication of the Secretary’s deter-
mination under subsection (h)(6). 
‘‘(C) INTEREST-RELATED
DIVIDEND.—For purposes of 
this paragraph, an interest-related dividend is any dividend 
(or part thereof) which is designated by the regulated 
investment company as an interest-related dividend in a 
written notice mailed to its shareholders not later than 
60 days after the close of its taxable year. If the aggregate 
amount so designated with respect to a taxable year of 
the company (including amounts so designated with respect 
to dividends paid after the close of the taxable year 
described in section 855) is greater than the qualified net 
interest income of the company for such taxable year, the 
portion of each distribution which shall be an interest- 
related dividend shall be only that portion of the amounts 
so designated which such qualified net interest income 
bears to the aggregate amount so designated. 
‘‘(D) QUALIFIED NET INTEREST INCOME.—For purposes 
of subparagraph (C), the term ‘qualified net interest income’ 
means the qualified interest income of the regulated invest-
ment company reduced by the deductions properly allocable 
to such income. 
‘‘(E) QUALIFIED
INTEREST
INCOME.—For purposes of 
subparagraph (D), the term ‘qualified interest income’ 
means the sum of the following amounts derived by the 
regulated investment company from sources within the 
United States: 
‘‘(i) Any amount includible in gross income as 
original issue discount (within the meaning of section 
1273) on an obligation payable 183 days or less from 
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