Source: http://taxtv.com/code/00647-USCODE-2011-title26-subtitleA-chap1-subchapN-partIII-subpartD-sec936/
Timestamp: 2017-06-28 19:08:16
Document Index: 142229091

Matched Legal Cases: ['§936', '§936', '§936', '§10', '§1901', '§701', '§201', '§201', '§213', '§201', '§306', '§474', '§712', '§801', '§6', '§231', '§701', '§1231', '§1812', '§1002', '§6132', '§227', '§11704', '§13227', '§1601', '§402', '§11', '§2701', '§1704', '§1704', '§1601', '§13227', '§13227', '§13227', '§1012', '§1012', '§6132', '§1012', '§1012', '§1231', '§1002', '§1012', '§1231', '§1231', '§701', '§1231', '§1275', '§1231', '§1812', '§1231', '§1012', '§231', '§1231', '§1231', '§712', '§801', '§474', '§474', '§213', '§213', '§201', '§201', '§213', '§701', '§701', '§1901', '§1012', '§2', '§2', '§2', '§6252', '§936']

IRC §936. Puerto Rico and possession tax credit - TaxTV.com
IRC §936. Puerto Rico and possession tax credit
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(A) the taxable income, from sources without the United States, from—
(3) Credit not allowed against certain taxes
(A) section 59A (relating to environmental tax),
(B) section 531 (relating to the tax on accumulated earnings),
(C) section 541 (relating to personal holding company tax), or
(D) section 13 (relating to recoveries of foreign expropriation losses).
(4) Limitations on credit for active business income
(i) 60 percent of the sum of—
(I) the aggregate amount of the possession corporation’s qualified possession wages for such taxable year, plus
(II) the allocable employee fringe benefit expenses of the possession corporation for the taxable year.
(I) 15 percent of the depreciation allowances for the taxable year with respect to short-life qualified tangible property,
(II) 40 percent of the depreciation allowances for the taxable year with respect to medium-life qualified tangible property, and
(III) 65 percent of the depreciation allowances for the taxable year with respect to long-life qualified tangible property.
(iii) If the possession corporation does not have an election to use the method described in subsection (h)(5)(C)(ii) (relating to profit split) in effect for the taxable year, the amount of qualified possession income taxes for the taxable year allocable to nonsheltered income.
(B) Election to take reduced credit
(I) subparagraph (A), and the provisions of subsection (i), shall not apply to such possession corporation for such taxable year, and
(II) the credit determined under paragraph (1) for such taxable year with respect to income referred to in subparagraph (A) thereof shall be the applicable percentage of the credit which would otherwise have been determined under such paragraph with respect to such income.
40. (iii) Election
(II) Period of election
(III) Affiliated groups
(b) Amounts received in United States
(c) Treatment of certain foreign taxes
(2) Qualified possession source investment income
The term “qualified possession source investment income” means gross income which—
(A) is from sources within a possession of the United States in which a trade or business is actively conducted, and
(B) the taxpayer establishes to the satisfaction of the Secretary is attributable to the investment in such possession (for use therein) of funds derived from the active conduct of a trade or business in such possession, or from such investment,
(3) Carryover basis property
(B) Exception for possessions corporations, etc.
(4) Investment in qualified Caribbean Basin countries
(i) for investment, consistent with the goals and purposes of the Caribbean Basin Economic Recovery Act, in—
(I) active business assets in a qualified Caribbean Basin country, or
(II) development projects in a qualified Caribbean Basin country, and
(ii) in accordance with a specific authorization granted by the Commissioner of Financial Institutions of Puerto Rico pursuant to regulations issued by such Commissioner.
(B) Qualified Caribbean Basin country
(i) the person in whose trade or business such investment is made (or such other recipient of the investment) and the financial institution or such Bank certify to the Secretary and the Commissioner of Financial Institutions of Puerto Rico that the proceeds of the loan will be promptly used to acquire active business assets or to make other authorized expenditures, and
(ii) the financial institution (or the Government Development Bank for Puerto Rico or the Puerto Rico Economic Development Bank) and the recipient of the investment funds agree to permit the Secretary and the Commissioner of Financial Institutions of Puerto Rico to examine such of their books and records as may be necessary to ensure that the requirements of this paragraph are met.
(D) Requirement for investment in Caribbean Basin countries
(ii) Qualified Caribbean Basin country investment
(I) the income from such investment is treated as qualified possession source investment income by reason of subparagraph (A), and
(II) such investment is not (directly or indirectly) a refinancing of a prior investment (whether or not such prior investment was a qualified Caribbean Basin country investment).
(1) Period of election
(A) may be revoked for any taxable year beginning before the expiration of the 9th taxable year following the taxable year for which such election first applies only with the consent of the Secretary; and
(B) may be revoked for any taxable year beginning after the expiration of such 9th taxable year without the consent of the Secretary.
(f) Limitation on credit for DISC’s and FSC’s
(1) for which it is a DISC or former DISC, or
(2) in which it owns at any time stock in a—
(A) DISC or former DISC, or
(B) former FSC.
(g) Exception to accumulated earnings tax
(1) For purposes of section 535, the term “accumulated taxable income” shall not include taxable income entitled to the credit under subsection (a).
(2) For purposes of section 537, the term “reasonable needs of the business” includes assets which produce income eligible for the credit under subsection (a).
(h) Tax treatment of intangible property income
(A) Income attributable to shareholders
(B) Exclusion from the income of an electing corporation
(2) Foreign shareholders; shareholders not subject to tax
(i) who is not a United States person, or
(ii) who is not subject to tax under this title on intangible property income which would be allocated to such shareholder (but for this subparagraph).
(B) Treatment of nonallocated intangible property income
(i) shall be treated as income from sources within the United States, and
(ii) shall not be taken into account under subsection (a)(2).
(3) Intangible property income
(vi) any similar item,
(C) Exclusion of reasonable profit
(D) Related person
(II) the related person and such person are members of the same controlled group of corporations.
(E) Controlled group of corporations
(i) “more than 10 percent” shall be substituted for “at least 80 percent” and “more than 50 percent” each place either appears in section 1563(a), and
(ii) the determination shall be made without regard to subsections (a)(4), (b)(2), and (e)(3)(C) of section 1563.
(4) Distributions to meet qualification requirements
(i) if the condition of subsection (a)(2)(A) is not satisfied, that portion of the gross income for the period described in subsection (a)(2)(A)—
(I) which was not derived from sources within a possession, and
(II) which exceeds the amount of such income for such period which would enable such corporation to satisfy the condition of subsection (a)(2)(A),
(ii) if the condition of subsection (a)(2)(B) is not satisfied, that portion of the gross income for such period—
(I) which was not derived from the active conduct of a trade or business within a possession, and
(II) which exceeds the amount of such income for such period which would enable such corporation to satisfy the conditions of subsection (a)(2)(B), or
(iii) if neither of such conditions is satisfied, that portion of the gross income which exceeds the amount of gross income for such period which would enable such corporation to satisfy the conditions of subparagraphs (A) and (B) of subsection (a)(2).
(C) Distribution denied in case of fraud or willful neglect
(i) Requirement of significant business presence
(III) with respect to purchases and sales by an electing corporation of all goods not produced in whole or in part by any member of the affiliated group and sold by the electing corporation to persons other than members of the affiliated group, no less than 65 percent of the total direct labor costs of the affiliated group in connection with all purchases and sales of such goods sold during the taxable year by such electing corporation is incurred by such electing corporation and is compensation for services performed in the possession.
(I) An electing corporation which produces a product or renders a type of service in a possession on the date of the enactment of this clause is not required to meet the significant business presence test in a possession with respect to such product or type of service for its taxable years beginning before January 1, 1986.
(II) For purposes of this subparagraph, the costs incurred by an electing corporation or any other member of the affiliated group in connection with contract manufacturing by a person other than a member of the affiliated group, or in connection with a similar arrangement thereto, shall be treated as direct labor costs of the affiliated group and shall not be treated as production costs incurred by the electing corporation in the possession or as direct material costs or as compensation for services performed in the possession, except to the extent as may be otherwise provided in regulations prescribed by the Secretary.
(I) an appropriate transitional (but not in excess of three taxable years) significant business presence test for commencement in a possession of operations with respect to products or types of service after the date of the enactment of this clause and not described in subparagraph (B)(iii)(I),
(II) a significant business presence test for other appropriate cases, consistent with the tests specified in subparagraph (B)(ii),
(III) rules for the definition of a product or type of service, and
(IV) rules for treating components produced in whole or in part by a related person as materials, and the costs (including direct labor costs) related thereto as a cost of materials, where there is an independent resale price for such components or where otherwise consistent with the intent of the substantial business presence tests.
(C) Methods of computation of taxable income
(I) Payment of cost sharing
If an election of this method is in effect, the electing corporation must make a payment for its share of the cost (if any) of product area research which is paid or accrued by the affiliated group during that taxable year. Such share shall not be less than the same proportion of 110 percent of the cost of such product area research which the amount of “possession sales” bears to the amount of “total sales” of the affiliated group. The cost of product area research paid or accrued solely by the electing corporation in a taxable year (excluding amounts paid directly or indirectly to or on behalf of related persons and excluding amounts paid under any cost sharing agreements with related persons) will reduce (but not below zero) the amount of the electing corporation’s cost sharing payment under this method for that year. In the case of intangible property described in subsection (h)(3)(B)(i) which the electing corporation is treated as owning under subclause (II), in no event shall the payment required under this subclause be less than the inclusion or payment which would be required under section 367(d)(2)(A)(ii) or section 482 if the electing corporation were a foreign corporation.
(a) Product area research
For purposes of this section, the term “product area research” includes (notwithstanding any provision to the contrary) the research, development and experimental costs, losses, expenses and other related deductions—including amounts paid or accrued for the performance of research or similar activities by another person; qualified research expenses within the meaning of section 41(b); amounts paid or accrued for the use of, or the right to use, research or any of the items specified in subsection (h)(3)(B)(i); and a proper allowance for amounts incurred for the acquisition of any of the items specified in subsection (h)(3)(B)(i)—which are properly apportioned or allocated to the same product area as that in which the electing corporation conducts its activities, and a ratable part of any such costs, losses, expenses and other deductions which cannot definitely be allocated to a particular product area.
(c) Possession sales
(d) Total sales
(e) Product area
(III) Payment provisions
(a) The cost sharing payment determined under subparagraph (C)(i)(I) for any taxable year shall be made to the person or persons specified in subparagraph (C)(i)(IV)(a) not later than the time prescribed by law for filing the electing corporation’s return for such taxable year (including any extensions thereof). If all or part of such payment is not timely made, the amount of the cost sharing payment required to be paid shall be increased by the amount of interest that would have been due under section 6601(a) had the portion of the cost sharing payment that is not timely made been an amount of tax imposed by this title and had the last date prescribed for payment been the due date of the electing corporations 1 return (determined without regard to any extension thereof). The amount by which a cost sharing payment determined under subparagraph (C)(i)(I) is increased by reason of the preceding sentence shall not be treated as a cost sharing payment or as interest. If failure to make timely payment is due in whole or in part to fraud or willful neglect, the electing corporation shall be deemed to have revoked the election made under subparagraph (A) on the first day of the taxable year for which the cost sharing payment was required.
(b) For purposes of this title, any tax of a foreign country or possession of the United States which is paid or accrued with respect to the payment or receipt of a cost sharing payment determined under subparagraph (C)(i)(I) or of an amount of increase referred to in subparagraph (C)(i)(III)(a) shall not be treated as income, war profits, or excess profits taxes paid or accrued to a foreign country or possession of the United States, and no deduction shall be allowed under this title with respect to any amounts of such tax so paid or accrued.
(a) The amount of the cost sharing payment determined under subparagraph (C)(i)(I), and any increase in the amount thereof in accordance with subparagraph (C)(i)(III)(a), shall not be treated as income of the recipient, but shall reduce the amount of the deductions (and the amount of reductions in earnings and profits) otherwise allowable to the appropriate domestic member or members (other than an electing corporation) of the affiliated group, or, if there is no such domestic member, to the foreign member or members of such affiliated group as the Secretary may provide under regulations.
(b) If an election of this method is in effect, the electing corporation shall determine its intercompany pricing under the appropriate section 482 method, provided, however, that an electing corporation shall not be denied use of the resale price method for purposes of such intercompany pricing merely because the reseller adds more than an insubstantial amount to the value of the product by the use of intangible property.
(c) The amount of qualified research expenses, within the meaning of section 41, of any member of the controlled group of corporations (as defined in section 41(f)) of which the electing corporation is a member shall not be affected by the cost sharing payment required under this method.
(ii) Profit split
(II) Computation of combined taxable income
(III) Division of combined taxable income
(IV) Covered sales
(D) Unrelated person
(E) Electing corporation
(F) Time and manner of election; revocation
(ii) Manner of making election
(iii) Revocation
(I) Except as provided in subparagraph (F)(iii)(II), an election may be revoked for any taxable year only with the consent of the Secretary.
(II) An election shall be deemed revoked for the year in which the electing corporation is deemed to have revoked such election under subparagraph (B)(i) or (C)(i)(III)(a).
(iv) Aggregation
(I) Where more than one electing corporation in the affiliated group produces any product or renders any services in the same product area, all such electing corporations must elect to compute their taxable income under the same method under subparagraph (C).
(II) All electing corporations in the same affiliated group that produce any products or render any services in the same product area may elect, subject to such terms and conditions as the Secretary may prescribe by regulations, to compute their taxable income from export sales under a different method from that used for all other sales and services. For this purpose, export sales means all sales by the electing corporation of products to foreign persons for use or consumption outside the United States and its possessions, provided such products are manufactured or produced in the possession within the meaning of subsection (d)(1)(A) of section 954, and further provided (except to the extent otherwise provided by regulations) the income derived by such foreign person on resale of such products (in the same state or in an altered state) is not included in foreign base company income for purposes of section 954(a).
(III) All members of an affiliated group must consent to an election under this subsection at such time and in such manner as shall be prescribed by the Secretary by regulations.
(6) Treatment of certain sales made after July 1, 1982
(C) Paragraph does not affect eligibility
(7) Section 864(e)(1) not to apply
(i) Definitions and special rules relating to limitations of subsection (a)(4)
(1) Qualified possession wages
(B) Limitation on amount of wages taken into account
(ii) Treatment of part-time employees, etc.
(I) any employee is not employed by the possession corporation on a substantially full-time basis at all times during the taxable year, or
(II) the principal place of employment of any employee with the possession corporation is not within a possession at all times during the taxable year,
(C) Treatment of certain employees
The term “qualified possession wages” shall not include any wages paid to employees who are assigned by the employer to perform services for another person, unless the principal trade or business of the employer is to make employees available for temporary periods to other persons in return for compensation. All possession corporations treated as 1 corporation under paragraph (5) shall be treated as 1 employer for purposes of the preceding sentence.
Except as provided in clause (ii), the term “wages” has the meaning given to such term by subsection (b) of section 3306 (determined without regard to any dollar limitation contained in such section). For purposes of the preceding sentence, such subsection (b) shall be applied as if the term “United States” included all possessions of the United States.
(ii) Special rule for agricultural labor and railway labor
In any case to which subparagraph (A) or (B) of paragraph (1) of section (h) applies, the term “wages” has the meaning given to such term by section (h)(2).
(2) Allocable employee fringe benefit expenses
(i) the aggregate amount of the possession corporation’s qualified possession wages for such taxable year, bears to
(ii) the aggregate amount of the wages paid or incurred by such possession corporation during such taxable year.
(B) Expenses taken into account
(i) employer contributions under a stock bonus, pension, profit-sharing, or annuity plan,
(ii) employer-provided coverage under any accident or health plan for employees, and
(iii) the cost of life or disability insurance provided to employees.
(3) Treatment of possession taxes
(A) Amount of credit for possession corporations not using profit split
(I) the increase in the tax liability of the possession corporation under this chapter for the taxable year by reason of subsection (a)(4)(A) (without regard to clause (iii) thereof), bears to
(II) the tax liability of the possession corporation under this chapter for the taxable year determined without regard to the credit allowable under this section.
(ii) Limitation on amount of taxes taken into account
(B) Deduction for possession corporations using profit split
(i) the increase in the tax liability of the possession corporation under this chapter for the taxable year by reason of subsection (a)(4)(A), bears to
(C) Possession income taxes
For purposes of this paragraph, the term “possession income taxes” means any taxes of a possession of the United States which are treated as not being income, war profits, or excess profits taxes paid or accrued to a possession of the United States by reason of subsection (c).
(4) Depreciation rules
(A) Depreciation allowances
(B) Categories of property
(i) Qualified tangible property
(ii) Short-life qualified tangible property
(iii) Medium-life qualified tangible property
The term “medium-life qualified tangible property” means any qualified tangible property to which section 168 applies and which is 7-year property or 10-year property for purposes of such section.
(iv) Long-life qualified tangible property
(v) Transitional rule
(5) Election to compute credit on consolidated basis
(6) Possession corporation
(2) Transition rules for active business income credit
(A) Economic activity credit
(i) with respect to a possession other than Puerto Rico, and
(ii) to which subsection (a)(4)(B) does not apply,
(B) Special rule for reduced credit
(ii) Election irrevocable after 1997
(C) Economic activity credit for Puerto Rico
(3) Additional restricted credit
(i) the credit under subsection (a)(1)(A) shall be allowed for the period beginning with the first taxable year after the last taxable year to which subparagraph (A) or (B) of paragraph (2), whichever is appropriate, applied and ending with the last taxable year beginning before January 1, 2006, except that
(ii) the aggregate amount of taxable income taken into account under subsection (a)(1)(A) for any such taxable year shall not exceed the adjusted base period income of such claimant.
(B) Coordination with subsection (a)(4)
(4) Adjusted base period income
(B) Inflation-adjusted possession income
(i) the possession income of such corporation for such base period year, plus
(ii) such possession income multiplied by the inflation adjustment percentage for such base period year.
(C) Inflation adjustment percentage
(i) the CPI for 1995, exceeds
(ii) the CPI for the calendar year in which the base period year for which the determination is being made ends.
(D) Increase in inflation adjustment percentage for growth during base years
(i) 5 percentage points in the case of a taxable year ending during the 1-year period ending on October 13, 1995;
(ii) 10.25 percentage points in the case of a taxable year ending during the 1-year period ending on October 13, 1994;
(iii) 15.76 percentage points in the case of a taxable year ending during the 1-year period ending on October 13, 1993;
(iv) 21.55 percentage points in the case of a taxable year ending during the 1-year period ending on October 13, 1992; and
(v) 27.63 percentage points in the case of a taxable year ending during the 1-year period ending on October 13, 1991.
(5) Base period year
(i) one taxable year for which the corporation had the largest inflation-adjusted possession income, and
(ii) one taxable year for which the corporation had the smallest inflation-adjusted possession income.
(B) Corporations not having significant possession income throughout 5-year period
(I) the term “base period year” means the first taxable year ending on or after October 14, 1995, but
(II) the amount of possession income for such year which is taken into account under paragraph (4) shall be the amount which would be determined if such year were a short taxable year ending on September 30, 1995.
(iii) Significant possession income
(C) Election to use one base period year
(I) only the last taxable year of the corporation ending in calendar year 1992, or
(II) a deemed taxable year which includes the first ten months of calendar year 1995.
(ii) Base period income for 1995
(D) Acquisitions and dispositions
(6) Possession income
(7) Short years
(8) Special rules for certain possessions
(B) Applicable possession
(9) Existing credit claimant
(i)(I) which was actively conducting a trade or business in a possession on October 13, 1995, and
(II) with respect to which an election under this section is in effect for the corporation’s taxable year which includes October 13, 1995, or
(ii) which acquired all of the assets of a trade or business of a corporation which—
(I) satisfied the requirements of subclause (I) of clause (i) with respect to such trade or business, and
(II) satisfied the requirements of subclause (II) of clause (i).
(B) New lines of business prohibited
(C) Binding contract exception
(10) Separate application to each possession
(A) whether a taxpayer is an existing credit claimant, and
(Added Pub. L. 94–455, title X, §10 (b), Oct. 4, 1976, 90 Stat. 1643; amended Pub. L. 94–455, title XIX, §1901(b)(37)(B), Oct. 4, 1976, 90 Stat. 1803; Pub. L. 95–600, title VII, §701(u)(11)(A), (B), Nov. 6, 1978, 92 Stat. 2917; Pub. L. 97–248, title II, §201(d)(8)(B), formerly §201(c)(8)(B), §213(a), Sept. 3, 1982, 96 Stat. 420, 452, renumbered §201(d)(8)(B), Pub. L. 97–448, title III, §306(a)(1)(A)(i), Jan. 12, 1983, 96 Stat. 2400; Pub. L. 98–369, div. A, title IV, §474(r)(22), title VII, §712(g), title VIII, §801(d)(11), July 18, 1984, 98 Stat. 843, 947, 997; Pub. L. 99–499, title V, §6(b)(1)(B), Oct. 17, 1986, 100 Stat. 1770; Pub. L. 99– 4, title II, §231(d)(3)(G), title VII, §701(e)(4)(I), title XII, §§1231(a)–(d), (f), 1275(a)(1), title XVIII, §1812(c)(4)(C), Oct. 22, 1986, 100 Stat. 2179, 2343, 2561–2563, 2598, 2835; Pub. L. 100–647, title I, §§1002(h)(3), 1012(h)(2)(B), (j), (n)(4), (5), title VI, §6132(a), Nov. 10, 1988, 102 Stat. 3370, 3502, 3 2, 3 5, 3721; Pub. L. 101–382, title II, §227(a), Aug. 20, 1990, 104 Stat. 661; Pub. L. 101–508, title XI, §11704(a)(11), Nov. 5, 1990, 104 Stat. 1388– 8; Pub. L. 103–66, title XIII, §13227(a), (b), Aug. 10, 1993, 107 Stat. 489, 490; Pub. L. 104–188, title I, §§1601(a), 1704(t)(37), (80), Aug. 20, 1996, 110 Stat. 1827, 1889, 1891; Pub. L. 108–357, title IV, §402(b)(2), Oct. 22, 2004, 118 Stat. 1492; Pub. L. 110–172, §11(g)(12), Dec. 29, 2007, 121 Stat. 2490.)
The date of the enactment of the Tax Reform Act of 1986, referred to in subsecs. (d)(3)(B) and (i)(4)(B)(v), is the date of enactment of Pub. L. 99– 4, which was approved Oct. 22, 1986.
The Caribbean Basin Economic Recovery Act, referred to in subsec. (d)(4)(A)(i), (B), is title II of Pub. L. 98–67, Aug. 5, 1983, 97 Stat. 384, which is classified principally to chapter 15 (§2701 et seq.) of Title 19, Customs Duties. Section 212 of that Act is classified to section 2702 of Title 19. For complete classification of this Act to the Code, see Short Title note set out under section 2701 of Title 19 and Tables.
The date of the enactment of this subparagraph, referred to in subsec. (h)(3)(A), means the date of enactment of Pub. L. 97–248, which was approved Sept. 3, 1982.
The date of the enactment of this clause, referred to in subsec. (h)(5)(B)(iii)(I), (iv), means the date of enactment of Pub. L. 97–248, which was approved Sept. 3, 1982.
Section 230 of the Social Security Act, referred to in subsec. (i)(1)(B)(i), is classified to section 430 of Title 42, The Public Health and Welfare.
2007—Subsec. (f)(2)(B). Pub. L. 110–172 struck out “FSC or” before “former FSC”.
2004—Subsec. (a)(2)(A). Pub. L. 108–357 substituted “subsections (f) and (g) of section 904” for “section 904(f)”.
1996—Subsec. (a)(4)(A)(ii)(I). Pub. L. 104–188, §1704(t)(80), which directed that subcl. (I) be amended by substituting “depreciation” for “deprecation”, could not be executed, because the word “deprecation” did not appear in text.
Subsec. (b). Pub. L. 104–188, §1704(t)(37), substituted “subparagraphs (D)(ii)” for “subparagraphs (D)(ii)(I)”.
Subsec. (j). Pub. L. 104–188, §1601(a), added subsec. (j).
1993—Subsec. (a)(1). Pub. L. 103–66, §13227(a)(1), substituted “Except as otherwise provided in this section” for “Except as provided in paragraph (3)”.
Subsec. (a)(4). Pub. L. 103–66, §13227(a)(2), added par. (4).
Subsec. (i). Pub. L. 103–66, §13227(b), added subsec. (i).
1990—Subsec. (d)(4)(D). Pub. L. 101–382 added subpar. (D).
Subsec. (e)(1). Pub. L. 101–508 substituted “subsection (a)(2)” for “subsection (a)(1)” wherever appearing.
1988—Subsec. (d)(3)(B). Pub. L. 100–647, §1012(j), inserted “(as in effect on the day before the date of the enactment of the Tax Reform Act of 1986)” after “section 957(c)”.
Subsec. (d)(4)(A)(ii). Pub. L. 100–647, §1012(n)(5)(A), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “in accordance with a specific authorization granted by the Government Development Bank for Puerto Rico pursuant to regulations issued by the Secretary of the Treasury of Puerto Rico.”
Subsec. (d)(4)(B). Pub. L. 100–647, §6132(a), inserted “and the Virgin Islands” after “274(h)(6)(A)”.
Subsec. (d)(4)(C)(i), (ii). Pub. L. 100–647, §1012(n)(5)(B), substituted “Commissioner of Financial Institutions of Puerto Rico” for “Secretary of the Treasury of Puerto Rico”.
Subsec. (h)(5)(C)(i)(I). Pub. L. 100–647, §1012(n)(4), amended directory language of Pub. L. 99– 4, §1231(a)(1), see 1986 Amendment note below.
Subsec. (h)(5)(C)(i)(IV)(c). Pub. L. 100–647, §1002(h)(3), substituted “section 41” and “section 41(f)” for “section 30” and “section 30(f)”, respectively.
Subsec. (h)(7), (8). Pub. L. 100–647, §1012(h)(2)(B), added par. (7) and redesignated former par. (7) as (8).
1986—Subsec. (a)(2)(B). Pub. L. 99– 4, §1231(d)(1), substituted “75 percent” for “65 percent”.
Subsec. (a)(2)(C). Pub. L. 99– 4, §1231(d)(2), struck out subpar. (C), transitional rule, which read as follows: “In applying subparagraph (B) with respect to taxable years beginning after December 31, 1982, and before January 1, 1985, the following percentage shall be substituted for ‘65 percent’:
“For taxable years beginning
Subsec. (a)(3). Pub. L. 99–499 in par. (3), as amended by Pub. L. 99– 4, added subpar. (A) and redesignated former subpars. (A) to (C) as (B) to (D), respectively.
Pub. L. 99– 4, §701(e)(4)(I), struck out subpar. (A) which read “section 56 (relating to corporate minimum tax),”, and redesignated subpars. (B), (C), and (E) as (A), (B), and (C), respectively.
Subsec. (b). Pub. L. 99– 4, §1231(b), inserted at end “This subsection shall not apply to any amount described in subsection (a)(1)(A)(i) received from a person who is not a related person (within the meaning of subsection (h)(3) but without regard to subparagraphs (D)(ii)(I) and (E)(i) thereof) with respect to the domestic corporation.”
Subsec. (d)(1). Pub. L. 99– 4, §1275(a)(1), substituted “and the Virgin Islands” for “, but does not include the Virgin Islands of the United States”.
Subsec. (d)(4). Pub. L. 99– 4, §1231(c), added par. (4).
Subsec. (h)(3)(D)(ii). Pub. L. 99– 4, §1812(c)(4)(C), amended cl. (ii) generally. Prior to amendment, cl. (ii), special rules, read as follows: “For purposes of clause (i)—
“(I) section 267(b) and section 707(b)(1) shall be applied by substituting ‘10 percent’ for ‘50 percent’, and
“(II) section 267(b)(3) shall be applied without regard to whether a person was a personal holding company or a foreign personal holding company.”
Subsec. (h)(5)(C)(i)(I). Pub. L. 99– 4, §1231(a)(1), as amended by Pub. L. 100–647, §1012(n)(4), in introductory provisions, substituted “the same proportion of 110 percent of the cost” for “the same proportion of the cost”, and inserted at end of material relating to payment of cost sharing “In the case of intangible property described in subsection (h)(3)(B)(i) which the electing corporation is treated as owning under subclause (II), in no event shall the payment required under this subclause be less than the inclusion or payment which would be required under section 367(d)(2)(A)(ii) or section 482 if the electing corporation were a foreign corporation.”
Subsec. (h)(5)(C)(i)(I)(a). Pub. L. 99– 4, §231(d)(3)(G), substituted “section 41(b)” for “section 30(b)”.
Subsec. (h)(5)(C)(ii)(II). Pub. L. 99– 4, §1231(f), substituted “all products and types of services, within such product area, produced or rendered” for “all products produced and types of service rendered”.
Pub. L. 99– 4, §1231(a)(2), substituted “the third and fourth sentences thereof, but substituting ‘120 percent’ for ‘110 percent’ in the second sentence thereof)” for “the third sentence thereof)”.
1984—Subsec. (a)(2)(C). Pub. L. 98–369, §712(g), substituted in table heading “The percentage is” for “The percentage tax is”.
Subsec. (f). Pub. L. 98–369, §801(d)(11), amended subsec. (f) generally, substituting in heading “Limitation on credit for DISC’s and FSC’s” for “DISC or former DISC corporation ineligible for credit”, and in text striking out reference to section 992(a) and inserting provision disallowing a credit to a corporation for a taxable year in which it owns at any time stock in a FSC or former FSC.
Subsec. (h)(5)(C)(i)(I)(a). Pub. L. 98–369, §474(r)(22)(A), substituted “section 30(b)” for “section 44F(b)”.
Subsec. (h)(5)(C)(i)(IV)(c). Pub. L. 98–369, §474(r)(22)(B), substituted “section 30” for “section 44F” and “section 30(f)” for “section 44F(f)”.
1982—Subsec. (a)(2)(B). Pub. L. 97–248, §213(a)(1)(A), substituted “65 percent” for “50 percent”.
Subsec. (a)(2)(C). Pub. L. 97–248, §213(a)(1)(B), added subpar. (C).
Subsec. (a)(3)(A). Pub. L. 97–248, §201(d)(8)(B), formerly §201(c)(8)(B), substituted “(relating to corporate minimum tax)” for “(relating to minimum tax)”.
Subsec. (h). Pub. L. 97–248, §213(a)(2), added subsec. (h).
1978—Subsec. (a). Pub. L. 95–600, §701(u)(11)(A), reworked provisions of par. (1) into introductory text, substituting reference to par. (3) for reference to par. (2), and subpars. (A) and (B), inserted introductory text of par. (2), redesignated former subpars. (A) and (B) of par. (1) as subpars. (A) and (B) of par. (2), and redesignated former par. (2) as (3).
Subsec. (d). Pub. L. 95–600, §701(u)(11)(B), substituted in heading “Definitions and special rules” for “Definitions” and added par. (3).
1976—Subsec. (a)(2)(D). Pub. L. 94–455, §1901(b)(37)(B), struck out subpar. (D) relating to war loss recoveries.
Amendment by Pub. L. 108–357 applicable to losses for taxable years beginning after Dec. 31, 2006, see section 402(c) of Pub. L. 108–357, set out as a note under section 535 of this title.
Amendment by section 1601(a) of Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1995, except as otherwise provided, see section 1601(c) of Pub. L. 104–188, set out as an Effective Date note under section 30A of this title.
Amendment by Pub. L. 103–66 applicable to taxable years beginning after Dec. 31, 1993, see section 13227(f) of Pub. L. 103–66, set out as a note under section 56 of this title.
Section 227(b) of Pub. L. 101–382 provided that: “The amendment made by subsection (a) [amending this section] shall apply to calendar years after 1989.”
Amendment by sections 1002(h)(3) and 1012(h)(2)(B), (j), (n)(4), (5) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99– 4, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Section 6132(b) of Pub. L. 100–647 provided that: “The amendment made by this section [amending this section] shall apply to investments made after the date of the enactment of this Act [Nov. 10, 1988].”
Amendment by section 231(d)(3)(G) of Pub. L. 99– 4 applicable to taxable years beginning after Dec. 31, 1985, see section 231(g) of Pub. L. 99– 4, set out as a note under section 41 of this title.
Amendment by section 701(e)(4)(I) of Pub. L. 99– 4 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 701(f) of Pub. L. 99– 4, set out as an Effective Date note under section 55 of this title.
Section 1231(g) of Pub. L. 99– 4, as amended by Pub. L. 100–647, title I, §1012(n)(1)–(3), Nov. 10, 1988, 102 Stat. 3 4, provided that:
“(1) In general.—Except as provided in paragraphs (2) and (3), the amendments made by this section [amending this section and sections 367 and 482 of this title] shall apply to taxable years beginning after December 31, 1986.
“(2) Special rule for transfer of intangibles.—
“(A) In general.—The amendments made by subsection (e) [amending sections 367 and 482 of this title] shall apply to taxable years beginning after December 31, 1986, but only with respect to transfers after November 16, 1985, or licenses granted after such date (or before such date with respect to property not in existence or owned by the taxpayer on such date). In the case of any transfer (or license) which is not to a foreign person, the preceding sentence shall be applied by substituting ‘August 16, 1986’ for ‘November 16, 1985’.
“(B) Special rule for section 936.—For purposes of section 936(h)(5)(C) of the Internal Revenue Code of 1986 the amendments made by subsection (e) shall apply to taxable years beginning after December 31, 1986, without regard to when the transfer (or license), if any, was made.
“(3) Subsection (f).—The amendment made by subsection (f) [amending this section] shall apply to taxable years beginning after December 31, 1982.
“(4) Transitional rule.—In the case of a corporation—
“(A) with respect to which an election under section 936 of the Internal Revenue Code of 1986 (relating to possessions tax credit) is in effect,
“(B) which produced an end-product form in Puerto Rico on or before September 3, 1982,
“(C) which began manufacturing a component of such product in Puerto Rico in its taxable year beginning in 1983, and
“(D) with respect to which a Puerto Rican tax exemption was granted on June 27, 1983,
“(5) Transitional rule for increase in gross income test.—
“(i) a corporation fails to meet the requirements of subparagraph (B) of section 936(a)(2) of the Internal Revenue Code of 1986 (as amended by subsection (d)(1)) for any taxable year beginning in 1987 or 1988,
“(ii) such corporation would have met the requirements of such subparagraph (B) if such subparagraph had been applied without regard to the amendment made by subsection (d)(1), and
“(iii) 75 percent or more of the gross income of such corporation for such taxable year (or, in the case of a taxable year beginning in 1988, for the period consisting of such taxable year and the preceding taxable year) was derived from the active conduct of a trade or business within a possession of the United States, such corporation shall nevertheless be treated as meeting the requirements of such subparagraph (B) for such taxable year if it elects to reduce the amount of the qualified possession source investment income for the taxable year by the amount of the shortfall determined under subparagraph (B) of this paragraph.
“(B) Determination of shortfall.—The shortfall determined under this subparagraph for any taxable year is an amount equal to the excess of—
“(i) 75 percent of the gross income of the corporation for the 3-year period (or part thereof) referred to in section 936(a)(2)(A) of such Code, over
“(ii) the amount of the gross income of such corporation for such period (or part thereof) which was derived from the active conduct of a trade or business within a possession of the United States.
“(C) Special rule.—Any income attributable to the investment of the amount not treated as qualified possession source investment income under subparagraph (A) shall not be treated as qualified possession source investment income for any taxable year.”
Amendment by section 1275(a)(1) of Pub. L. 99– 4 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Pub. L. 99– 4, set out as a note under section 931 of this title.
Amendment by section 1812(c)(4)(C) of Pub. L. 99– 4 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99– 4, set out as a note under section 48 of this title.
Amendment by section 474(r)(22) of Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of Pub. L. 98–369, set out as a note under section 21 of this title.
Amendment by section 712(g) of Pub. L. 98–369 effective as if included in the provision of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97–248, to which such amendment relates, see section 715 of Pub. L. 98–369, set out as a note under section 31 of this title.
Amendment by section 801(d)(11) of Pub. L. 98–369 applicable to transactions after Dec. 31, 1984, in taxable years ending after such date, see section 805(a)(1) of Pub. L. 98–369, as amended, set out as a note under section 245 of this title.
Amendment by section 201(d)(8)(B) of Pub. L. 97–248 applicable to taxable years beginning after Dec. 31, 1982, see section 201(e)(1) of Pub. L. 97–248, set out as a note under section 5 of this title.
Section 213(e) of Pub. L. 97–248, as amended by Pub. L. 99– 4, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:
“(1) In general.—Except as provided in paragraphs (2) and (3), the amendments made by this section [amending this section and sections 246, 367, and 934 of this title] shall apply to taxable years beginning after December 31, 1982.
“(2) Certain sales made after july 1, 1982.—Paragraph (6) of section 936(h) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], and so much of section 934 to which such paragraph applies by reason of section 934(e)(4) of such Code, shall apply to taxable years ending after July 1, 1982.
“(3) Certain transfers of intangibles made after august 14, 1982.—Subsection (d) [amending section 367 of this title] shall apply to taxable years ending after August 14, 1982.”
Section 701(u)(11)(C) of Pub. L. 95–600, as amended by Pub. L. 99– 4, §2, Oct. 22, 1986, 100 Stat. 2095, provided that: “The amendments made by this paragraph [amending this section] shall apply as if included in section 936 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] at the time of its addition by section 10 (b) of the Tax Reform Act of 1976 [Oct. 4, 1976].”
Section applicable to taxable years beginning after Dec. 31, 1975, except that qualified possession source investment income as defined in subsec. (d)(2) of this section shall include income from any source outside the United States if the taxpayer establishes to the satisfaction of the Secretary of the Treasury or his delegate that the income from such sources was earned before Oct. 1, 1976, see section 10 (i) of Pub. L. 94–455, set out as an Effective Date of 1976 Amendment note under section 27 of this title.
For applicability of amendment by section 701(e)(4)(I) of Pub. L. 99– 4 notwithstanding any treaty obligation of the United States in effect on Oct. 22, 1986, with provision that for such purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in the provision of Pub. L. 99– 4 to which such amendment relates, see section 1012(aa)(2), (4) of Pub. L. 100–647, set out as a note under section 861 of this title.
Section 441(a) of Pub. L. 98–369, as amended by Pub. L. 99– 4, §2, Oct. 22, 1986, 100 Stat. 2095; Pub. L. 100–647, title VI, §6252(b)(1), Nov. 10, 1988, 102 Stat. 3752, which directed Secretary of the Treasury to submit a report to Congress each fourth calendar year on the operation and effect of sections 936 and 934(b) of this title, terminated, effective May 15, 2000, pursuant to section 3003 of Pub. L. 104–66, as amended, set out as a note under section 1113 of Title 31, Money and Finance. See, also, page 142 of House Document No. 103–7.
1 So in original. Probably should be “corporation’s”.
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