‘‘(4) The corporation has in effect an election 
to be treated as an IRIC. 
‘‘(b) ELECTION.—An election to be treated as an 
IRIC shall apply to the taxable year for which made and 
all subsequent taxable years until terminated. Such elec-
tion shall be made for any taxable year not later than the 
due date (with extensions) for the return of tax imposed 
by this subtitle for the taxable year. 
‘‘(c) PERMITTED ASSETS.—For purposes of sub-
section (a)(2), an IRIC may hold— 
‘‘(1) an amount of cash and cash equivalents 
reasonably necessary or appropriate for the corpora-
tion to conduct its normal affairs, and 
‘‘(2) such other assets as are incidental to the 
corporation’s conduct of its normal affairs or other-
wise allowed by the Secretary. 
‘‘(d) TERMINATION.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), if a corporation fails to meet the require-
ments of subsection (a) at any time during the tax-
able year, the corporation shall not be treated as an 
IRIC for such taxable year. 
‘‘(2) INADVERTENT FAILURE.— 
‘‘(A) IN GENERAL.—A corporation which 
fails to meet the requirements of subsection (a) 
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for any taxable year shall nevertheless be con-
sidered to have satisfied the requirements of 
such subsection for such taxable year if— 
‘‘(i) the failure was due to reasonable 
cause and not due to willful neglect, 
‘‘(ii) no later than 30 days after the 
discovery of the event causing such failure, 
the corporation meets the requirements of 
subsection (a), 
‘‘(iii) in the case of a failure to meet 
the requirements of subsection (a)(3) for 
any period, the failure was caused by per-
sons not described therein holding, in the 
aggregate, less than 1 percent of the stock 
(by value) of the corporation, and 
‘‘(iv) the corporation pays the addi-
tional tax imposed by reason of subpara-
graph (B). 
‘‘(B) IMPOSITION OF ADDITIONAL TAX ON 
CERTAIN FAILURES.—In the case of a failure 
described in subparagraph (A)(iii) for any tax-
able year, the tax imposed by section 998A(a) 
on the IRIC shall be equal to the sum of— 
‘‘(i) the tax determined under such 
section (without regard to this subpara-
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graph) on amounts received by the IRIC 
for the taxable year other than amounts so 
received which are attributable to stock 
held by persons not described in subsection 
(a)(3) for the period so held, plus 
‘‘(ii) 100 percent of the amounts re-
ceived which are so attributable. 
The Secretary shall prescribe rules for the prop-
er allocation of deductions to amounts described 
in this subparagraph. 
‘‘SEC. 998A. TAXATION OF IRICS. 
‘‘(a) IN GENERAL.—In the case of an IRIC, there 
shall be imposed, in lieu of the tax imposed by section 11, 
a tax equal to 30 percent of the excess of— 
‘‘(1) the amounts received by the IRIC which 
(before the application of any treaty) would be sub-
ject to tax under section 871(a) if received by a non-
resident alien individual, over 
‘‘(2) the deductions properly allocable to such 
amounts (other than deductions allowed under sec-
tions 163, 172, 243, and such other provisions as 
the Secretary may prescribe in regulations to pre-
vent abuse). 
‘‘(b) TREATIES.— 
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‘‘(1) IN
GENERAL.—In the case of a treaty 
IRIC, subsection (a) shall be applied by substituting 
‘15 percent’ for ‘30 percent’. 
‘‘(2) TREATY IRIC.—For purposes of paragraph 
(1), the term ‘treaty IRIC’ means an IRIC— 
‘‘(A) all the outstanding stock of which is 
held by persons resident in a country that has 
in effect with the United States an income tax 
treaty pursuant to which such persons would, 
by reason of section 894(a), be subject to tax 
under section 871(a) on dividends at a rate not 
greater than 15 percent, and 
‘‘(B) which elects to be a treaty IRIC. 
Rules similar to the rules of section 998(b) shall 
apply to an election under subparagraph (B). 
‘‘SEC. 998B. OTHER RULES. 
‘‘(a) COORDINATION WITH SUBCHAPTER M.—Except 
as provided in subsection (e), an IRIC shall not be treated 
as a regulated investment company for purposes of this 
title. 
‘‘(b) NO CARRYOVERS.— 
‘‘(1) 
CARRYOVERS
TO
IRIC
YEARS.—No 
carryforward, and no carryback, arising for a tax-
able year for which the corporation is not an IRIC 
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may be carried to a taxable year for which such cor-
poration is an IRIC. 
‘‘(2) CARRYOVERS
FROM
IRIC
YEARS.—No 
carryforward, and no carryback, shall arise for a 
taxable year for which a corporation is an IRIC. 
‘‘(c) CERTAIN TAXES NOT TO APPLY.—Sections 55, 
531, and 541 shall not apply to an IRIC. 
‘‘(d) CREDITS NOT ALLOWED.—No credits under 
this chapter shall be allowed to an IRIC. 
‘‘(e) REDEMPTIONS.—In applying section 302(b)(5), 
an IRIC shall be treated as a publicly offered regulated 
investment company. 
‘‘(f) RELIANCE ON CERTIFICATION.— 
‘‘(1) RELIANCE.—With respect to the require-
ment in sections 998(a)(3) and 998A(b)(2)(A), a 
corporation may rely on the certification of its share-
holders, unless or until such time that the corpora-
tion has reason to know that the certification is false 
or is no longer true. 
‘‘(2) REDEMPTION
UPON
FALSE
CERTIFI-
CATION.—If a corporation has reason to know that 
the certification made by one of its shareholders is 
false or is no longer true, the corporation must re-
deem the stock held by such shareholder as soon as 
reasonably practicable (and in no case more than 30 
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days after the corporation obtains such reason to 
know). Failure to redeem such stock in a timely 
manner shall result in the corporation failing the re-
quirement of section 998(a)(3) or 998A(b)(2)(A), 
whichever is applicable. 
‘‘(3) CERTIFICATION
BY
CERTAIN
INSTITU-
TIONS.—For purposes of this subsection, a certifi-
cation with regard to a person which is made by an 
institution described in section 871(h)(5)(B) in a 
form satisfactory to the Secretary under section 
871(h) shall be deemed to be a certification by such 
person.’’. 
(b) CLERICAL AMENDMENT.—The table of parts for 
subchapter N of chapter 1 of the Internal Revenue Code 
of 1986 is amended by redesignating the item relating to 
part V as relating to part VI and inserting after the item 
relating to part IV the following new item: 
‘‘Part V—International regulated investment companies’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
Æ 
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