110
arose (directly or through 1 or more cor-
porations other than the common parent)
by such other corporation.
‘‘(C) 
COORDINATION.—This 
paragraph
shall be applied after paragraph (1).
‘‘(3) DETERMINATION OF DEFICIT.—In deter-
mining the amount of any deficit in earnings and
profits, the adjustments set forth in subsection (a)
shall apply.
‘‘SEC. 953. SPECIAL RULES FOR CERTAIN INSURANCE COM-
PANIES.
‘‘(a) SPECIAL RULE FOR CERTAIN CAPTIVE INSUR-
ANCE COMPANIES.—
‘‘(1) IN GENERAL.—For purposes only of tak-
ing into account subpart F income which is attrib-
utable to related person insurance income—
‘‘(A) the term ‘United States shareholder’
means, with respect to any foreign corporation,
a United States person (as defined in section
957(c)) who owns (within the meaning of sec-
tion 958(a)) any stock of the foreign corpora-
tion,
‘‘(B) the term ‘controlled foreign corpora-
tion’ has the meaning given to such term by
section 957(a) determined by substituting ‘25
111
percent or more’ for ‘more than 50 percent’,
and
‘‘(C) the pro rata share referred to in sec-
tion 951(a)(1)(A)(i) shall be determined under
paragraph (5) of this subsection.
‘‘(2) RELATED PERSON INSURANCE INCOME.—
For purposes of this subsection, the term ‘related
person insurance income’ means any insurance in-
come (within the meaning of subsection (c)) attrib-
utable to a policy of insurance or reinsurance with
respect to which the person (directly or indirectly)
insured is a United States shareholder in the foreign
corporation or a related person to such a share-
holder.
‘‘(3) EXCEPTIONS.—
‘‘(A) 
CORPORATIONS
NOT
HELD
BY
INSUREDS.—Paragraph (1) shall not apply to
any foreign corporation if at all times during
the taxable year of such foreign corporation—
‘‘(i) less than 20 percent of the total
combined voting power of all classes of
stock of such corporation entitled to vote,
and
‘‘(ii) less than 20 percent of the total
value of such corporation,
112
is owned (directly or indirectly) under the prin-
ciples of section 883(c)(4) by persons who are
(directly or indirectly) insured under any policy
of insurance or reinsurance issued by such cor-
poration or who are related persons to any such
person.
‘‘(B) DE MINIMIS EXCEPTION.—Paragraph
(1) shall not apply to any foreign corporation
for a taxable year of such corporation if the re-
lated person insurance income (determined on a
gross basis) of such corporation for such tax-
able year is less than 20 percent of its insur-
ance income (as so determined) for such taxable
year determined without regard to those provi-
sions of subsection (c)(1) which limit insurance
income to income from countries other than the
country in which the corporation was created or
organized.
‘‘(C) ELECTION TO TREAT INCOME AS EF-
FECTIVELY CONNECTED.—Paragraph (1) shall
not apply to any foreign corporation for any
taxable year if—
‘‘(i) such corporation elects (at such
time and in such manner as the Secretary
may prescribe)—
113
‘‘(I) to treat its related person in-
surance income for such taxable year
as income effectively connected with
the conduct of a trade or business in
the United States, and
‘‘(II) to waive all benefits (other
than with respect to section 884) with
respect to related person insurance in-
come granted by the United States
under any treaty between the United
States and any foreign country, and
‘‘(ii) such corporation meets such re-
quirements as the Secretary shall prescribe
to ensure that the tax imposed by this
chapter on such income is paid.
An election under this subparagraph made for
any taxable year shall not be effective if the
corporation (or any predecessor thereof) was a
disqualified corporation for the taxable year for
which the election was made or for any prior
taxable year beginning after 1986.
‘‘(D) SPECIAL RULES FOR SUBPARAGRAPH
(C).—
‘‘(i) PERIOD
DURING
WHICH
ELEC-
TION IN EFFECT.—