An Act to provide a 2-year extension of the interest equalization tax, and for other purposes
PL 89-243 (H.R.4750), enacted 10/09/1965

954 
PUBLIC LAW 89-243-OCT. 9, 1965 
[79 STAT. 
Public Law 89-243 
October 9, 1965 
^^ A C T 
[H. R. 4750] 
To provide an extension of the interest equalization tax, and for other purposes. 
Be it enacted hy the Senate and House of Representatives 
of the 
Interest Equaii- United States of America in Congress assembled. 
zation Tax Exten- 
•' 
"^ 
' 
sion Act of 1965. 
SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITLE.—This Act may be cited as the "Interest Equal-
ization Tax Extension Act of 1965". 
(b) AMENDMENT or 1954 CODE.—Except as otherwise expressly 
provided, whenever in this Act an amendment is expressed in terms of 
an amendment to a section or other provision, the reference is to a 
section or other provision of the Internal Revenue Code of 1954. 
SEC. 2. EXTENSION OF INTEREST EQUALIZATION TAX. 
26 us^c 49n 
Section 4911(d) is amended by striking out "December 31, 1965" 
and inserting in lieu thereof "July 31, 1967". 
SEC. 3. IMPOSITION OF TAX WITH RESPECT TO DEBT OBLIGATIONS 
HAVING MATURITY OF 1 TO 3 YEARS. 
(a) IMPOSITION or TAX.—The following provisions are amended by 
striking out "3 years" each place it appears and inserting in lieu 
thereof "1 year"— 
(1) section 4911(a); 
26 use 4914. 
(2) section 4914(e)(3)(D); 
(3) section 4914(e) (3) (E) (ii) I and 
26 use 4920. 
(4) sectiou 4920(a) (7) (B) (Iv). 
(b) AMOUNT OF TAX.—Section 4911(b) (2) is amended by striking 
from the table the line reading 
"At least 3 years, but less than 3i/^ years 
2.75 percent" 
and inserting in lieu thereof the following: 
"At least 1 year, but less than I14 years 
1.05 percent 
At least 11/4 years, but less than IY2 years 
1.30 percent 
At least 1^2 years, but less than 1% years 
1.50 percent 
At least 1% years, but less than 2^4 years 
1.85 percent 
At least 21^ years, but less than 2% years 
2.30 percent 
At least 2% years, but less than 3^^ years 
; 
2.75 percent". 
(c) EFFECTIVE DATE.— 
(1) GENERAL RULE.—Except as provided by paragraphs (2), 
(3), and (4), the amendments made by subsections (a) and (b) 
shall apply with respect to acquisitions of debt obligations, and 
designations described in section 4914(e) (3) (D) or 4914(e) (3) 
(E)(ii) of the Internal Revenue Code of 1954, made after 
February 10, 1965. 
(2) PREEXISTING COMMITMENTS.—Such amendments shall not 
apply to an acquisition— 
(A) made pursuant to an obligation to acquire which on 
February 10, 1965— 
(i) was unconditional, or 
(ii) was subject only to conditions contained in a for-
mal contract under which partial performance had 
occurred; or 
(B) as to which on or before February 10,1965, the acquir-
ing United States person (or, in a case where 2 or more. 
United States persons are making acquisitions as part of 
a single transaction, a majority in interest of such persons) 
had taken every action to signify approval of the acquisition 
under the procedures ordinarily employed by such person 
(or persons) in similar transactions and had sent or deposited 
48 Stat. 74. 
15 u s e 77a. 
79 STAT. ] 
PUBLIC LAW 89-243-OCT. 9, 1965 
955 
for delivery to the foreign person from whom the acquisition 
was made written evidence of such approval in the form of 
a commitment letter, memorandum of terms, draft purchase 
contract, or other document setting forth, or referring to a 
document sent by the foreign person from whom the acquisi-
tion was made which set forth, the principal terms of such 
acquisition, subject only to the execution of formal documents 
evidencing the acquisition and to customary closing condi-
tions. 
(3) PUBLIC OFFERINGS.—Such amendments shall not apply to 
an acquisition of debt obligations made on or before April 12, 
1965, if— 
(A) a registration statement (within the meaning of the 
Securities Act of 1933) was in effect with respect to the debt 
obligation acquired at the time of its acquisition ; 
(B) the registraition statement was first filed with the 
Securities and Exchange Commission on February 10, 1965, 
or within 90 days before that date; and 
(C) no amendment was filed with the Securities and Ex-
change Commission after February 10, 1965, and before the 
acquisition which had the effect of increasing the aggregate 
face amount of the debt obligations covered by the registra-
tion statement. 
(4) FORECLOSURES.—Such amendments shall not apply to an 
acquisition of debt obligations as a result of a foreclosure by a 
creditor pursuant to the terms of an instrument held by such 
creditor on February 10, 1965. 
(d) 
RETURNS.— 
(1) FIRST RETURN PERIOD.—Notwithstanding any provision of 
section 6011 (d) (1) of the Internal Revenue Code of 1954, the first ^ ^ta^ s^43. 
period for which returns shall be made under such section 6011 
(d) (1) with respect to acquisitions made subject to tax by this 
section shall be the period commencing February 11, 1965, and 
ending at the close of the calendar quarter in which the enactment 
of this Act occurs. 
(2) TIME FOR FILING FIRST RETURNS.—Notwithstanding any 
provision of section 6076 of the Internal Revenue Code of 1954, ^e use 6o76. 
the first return with respect to acquisitions made subject to tax by 
this section shall be filed on or before the last day of the first 
month following the close of the calendar quai-ter in which the 
enactment of this Act occurs, or at such later time as may be pro-
vided in regulations prescribed by the Secretary or his delegate. 
(e) CONFORMING AMENDMENTS.— 
(1) Effective as provided in paragraph (2), section 4931 is 26 use 4931. 
amended— 
(A) by striking out subsection (c) and redesignating sub-
sections (d) and (e) as subsections (c) and (d), resoectively; 
(B) by striking out "subsection (b) or (c)" each place it 
appears m subsection (a) and inserting in lieu thereof "sub-
section (b)"; 
(C) by striking out ", and the tax imposed under subsec-
tion (c)," each place it appears in the subsection herein 
redesignated as subsection (c); and 
(D) by striking out "3 YEARS" in the heading to subsection 
(b) and inserting in lieu thereof "1 YEAR". 
(2) Executive Order 11198, issued February 10, 1965, shall not 
be affected by the amendments made by this section and shall 
continue to apply as though such amendments had not been made. 
30 F . R. 1929. 
26 use 1504. 
956 
PUBLIC LAW 89-243-OCT. 9, 1965 
[79 STAT. 
The amendments made by this subsection shall take effect only 
at such time as may be provided in a modification hereafter made 
(in accordance with section 4931 of the Internal Revenue Code of 
78 Stat. 839. 
1954) iu such Executive order. 
26 use 4931. 
•' 
SEC. 4. OTHER AMENDMENTS. 
(a) CERTAIN EXPORT LEASES.— 
26 use 4914. 
(^1) Section 4914(c) is amended by redesignating paragraph (6) 
as paragraph (7) and by inserting after paragraph (5) the fol-
lowing new paragraph: 
2
6 use 4911. 
"(6) CERTAIN EXPORT LEASES.—The tax imposed by section 4911 
shall not apply to the acquisition from a foreign obligor by a 
United States person of a debt obligation of such obligor arising 
out of a lease of personal property to such obligor by such United 
States person if— 
" (A) at least 30 percent of the value of the property subject 
to the lease, or 60 percent of the actual value of the debt obli-
gation arising out of such lease, is attributable to the use 
of tangible personal property which was manufactured, pro-
duced, grown, or extracted in the United States by such 
United States person (or by one or more includible corpora-
^8 A Stat.^3 69. 
tious iu au affiliated group, as defined in section 1504, of which 
oa T
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- ,cn^ 
^^^^ person is a member), or to the performance of services 
pursuant to the terms of the lease by such United States per-
son (or by one or more such corporations) with respect to 
such personal property, or to both, and 
"(B) at least 50 percent of the value of the property subject 
to lease, or 100 percent of the actual value of the debt obliga-
tion arising out of such lease, is attributable to the use of tan-
gible personal property which was manufactured, produced, 
grown, or extracted in the United States, or to the perform-
ance of services pursuant to the terms of the lease by United 
States persons, or to both." 
(2) Section 4914(b) (6) is amended by inserting "or lease" after 
"sale". 
(3) Section 4914(j)(l) is amended— 
(A) by striking out "or (5)" in subparagraph (A) and 
inserting in lieu thereof "(5), or (6)"; 
(B) by striking out "or (5)" in subparagraph (D) and in-
serting in lieu thereof "(5), or (6)"; and 
(C) by striking out "or (3)" in clause (iii) in subpara-
graph (A) and inserting in lieu thereof "(3), or (6)" and by 
inserting after the word "sale" in such clause the words "or 
lease". 
(4) Paragraph (1) of the subsection of section 4931 redesig-
nated as subsection (c) by section 3(e) of this Act is amended— 
(A) by inserting "or lease" after "sale" each phice it ap-
pears; 
(B) by inserting after "loan" in subparagraph (A) the fol-
lowing: ", amount paid, or other consideration given to ac-
quire such debt obligation"; 
(C) by inserting "or leasing" after "selling" in subpara-
graph ( B ) ; and 
(D) by adding at the end of such paragraph (after and 
below subparagraph (B)) the following new sentence: 
"For purposes of the preceding sentence, the acquisition by a 
wholly-owned subsidiary of a commercial bank of a debt obli-
gation arising out of a lease made by such subsidiary shall be 
treated as the acquisition of a debt obligation by a commercial 
bank." 
79 STAT. ] 
PUBLIC LAW 89-243-OCT. 9, 1965 
957 
(b) SALES OF FOREIGN BRANCHES.— 
(1) Section 4914(g) (1) is amended— 
^ 
H J*|^- 8^\3. 
(A) by striking out "or" at the end of subparagraph ( A ) ; 
(B) by striking out the period at the end of subparagraph 
(B) and inserting in lieu thereof "; or"; and 
(C) by adding at the end thereof the following new sub-
paragraph : 
"(C) as part or all of the purchase price in a sale by such 
United States person of substantially all of the assets of a 
branch of such United States person located outside the 
United States." 
(2) Section 4914(g) (2) is amended to read as follow^s: 
"(2) LIMITATIONS.—Subparagraphs (A) and (B) of paragraph 
(1) shall not apply to the acquisition of a debt obligation if any 
of the stock sold or surrendered in connection with its acquisition 
was originally acquired with the intent to sell or surrender. Sub-
paragraph (C) of paragraph (1) shall not apply to the acquisition 
of a debt obligation if any of the assets sold had been transferred 
to the branch for the purpose of sale (other than sale in the ordi-
nary course of its trade or business)." 
(3) The heading of section 4914(g) is amended by inserting 
"OR SALE OF FOREIGN BRANCH" after "SUBSIDIARY". 
(4) Section 4914(b) (10) is amended to read as follows: 
" (10) ACQUISITIONS OF DEBT OBLIGATIONS ON SALE OR LIQUIDATION 
OF WHOLLY OW^NED FOREIGN SUBSIDIARIES O
R SALE OF FOREIGN 
BRANCHES.—Of debt obligations acquired in connection with the 
sale or liquidation of a w^holly owned foreign corporation or the 
sale of a foreign branch, to the extent provided in subsection (g)." 
(c) CONSTRUCTION LOANS.— 
(1) Section 4914(h) is amended to read as follows: 
"(h) 
CERTAIN DEBT OBLIGATIONS SECURED BY UNITED STATES 
MORTGAGES, ETC.— 
"(1) I N GENERAL.—The tax imposed by section 4911 shall not 
26 use 4911. 
apply to the acquisition from a foreign obligor by a United States 
person of— 
"(A) a debt obligation of such foreign obligor which is 
secured by real property located in the United States, to the 
extent that such debt obligation— 
"(i) is a part of the purchase price of such real prop-
erty (or of such real property and related personal 
property), or 
"(ii) arises out of a loan made by such United States 
person to the foreign obligor the proceeds of which are 
concurrently used as part of the purchase price of such 
real property (or of such real property and related per-
sonal property); or 
"(B) a debt obligation of such foreign obligor which is 
secured by real property located in the United States on which 
improvements are under construction by the obligor, if such 
debt obligation arises out of a loan made by such United 
States person all the proceeds of w^hich are used— 
" (i) to finance the construction of such improvements, 
or 
" (ii) to repay all or any part of a loan made to finance 
such construction, if the construction loan has qualified 
(or w^ould have qualified) under paragraph (2) (B) and 
such repayment occurs within 5 years after such con-
struction loan is made. 
958 
PUBLIC LAW 89-243-OCT. 9, 1965 
[79 STAT. 
"(2) LIMITATIONS.—Paragraph (1) shall apply to the acquisi-
tion of a debt obligation only if— 
"(A) in the case of the sale of property referred to in 
paragraph (1) (A)— 
" (i) the seller is a United States person, and 
"(ii) at least 25 percent of the purchase price of the 
property sold is, at the time of such sale, paid in United 
States currency to such L^^nited States person by the for-
eign obligor from funds not obtained from United States 
persons for the purpose of purchasing such property; or 
"(B) in the case of the construction of improvements 
referred to in paragraph (1) (B)— 
" (i) at the time any proceeds of the loan out of which 
such debt obligation arises are advanced, an amount 
equal to at least one-third of the amount of such advance, 
plus one-third of the amount of any previous advances 
of such proceeds, has been expended for such construc-
tion by the foreign obligor in United States currency 
from funds not obtained from United States persons 
for the purpose of financing such construction, and 
"(ii) not less than 85 percent of the cost of such con-
struction attributable to property or services is attrib-
utable to property grown, extracted, manufactured, or 
produced in the United States, or to services performed 
by United States persons, or to both. 
" (3) RELATED PERSONAL PROPERTY.—For purposes of paragraph 
(1) (A), the term 'related personal property' means personal prop-
erty which is sold in connection with the sale of real property for 
use in the operation of such real property." 
o! f
r
o
^
A
' fr^h 
(2) Section 4914(b) (11) is amended to read as follows: 
26 u s e 4914. 
t ^ / ; ^ \ * 
\
/
\
/ 
(11) ACQUISITIONS OF CERTAIN DEBT OBLIGATIONS SECURED BY 
REAL PROPERTY IN THE UNITED STATES.—Of debt obligations secured 
by real property in the United States, to the extent provided in 
subsection (h)." 
(d) STUDENT LOANS.—Section 4914(b) is amended by adding at the 
end thereof the following new paragraph: 
"(13) STUDENT LOANS.—Of debt obligations which arise out of 
loans to a foreign obligor registered as a full-time student at an 
68Astat.^42. 
cducational institution (as defined in section 151(e)(4)) in the 
United States, to the extent that the acquisition by the acquiring 
person of such debt obligations with a period remaining to 
maturity of 1 year or more from such obligor in any calendar 
year does not exceed $2,500." 
(e) TANGIBLE PROPERTY HELD FOR PERSONAL USE.—Section 4914 (b) 
is amended by adding at the end thereof (after the new paragraph 
added by subsection (d) of this section) the following new paragrapn: 
"(14) TANGIBLE PROPERTY HELD FOR PERSONAL USE.—Of debt 
obligations arising out of the sale of tangible property located 
outside the United States which was held for his personal use by 
the person acquiring such obligation." 
(f) 
CERTAIN FOREIGN BRANCHES ENGAGED IN THE COMMERCIAL 
BANKING 
BUSINESS 
W H I C H 
ARE MEMBERS 
OF FOREIGN 
STOCK 
EXCHANGES.— 
(1) Section 4914(b)(2) is amended by adding at the end 
thereof (after and below subparagraph (B)) the following new 
sentence: 
"Stock or debt obligations acquired by a foreign branch of a 
corporation, in connection with its banking business, shall be 
26 use 151. 
79 STAT. ] 
PUBLIC LAW 89-243-OCT. 9, 1965 
959 
considered debt obligations described in subparagraph (A) of the 
preceding sentence if— 
"(i) such branch is engaged in the commercial banking 
business and is also a member of a foreign stock exchange 
all the members of which on June 29, 1965, were banks, 
"(ii) on July 18, 1963, such branch was so engaged and 
was such a member, 
"(iii) such stock or debt obligations would not (but for 
this sentence) be excludable under the preceding sentence, and 
"(iv) at the time of such acquisition, such branch does 
not hold stock and debt obligations described in clause (iii) 
which have an adjusted basis in excess of 3 percent of the 
deposits of the customers (other than deposits of United 
States persons engaged in the commercial banking business 
and members of an affiliated group (determined under sec-
tion 48(c)(3)(C)) of which such a United States person 
^^^gc^T" 
is a member) of such branch payable in the currency of 
the country in which such branch is located."" 
(2) Section 4914(j)(2) is amended by adding at the end 
26 use 49M. 
thereof the following new sentence: "For purposes of this 
chapter, if, after July 18, 1963, a United States person sells or 
otherwise disposes of stock or a debt obligation to the acquisition 
of which the last sentence of subsection (b) (2) applied, such 
person shall not, with respect to that stock or debt obligation, be 
considered a United States person." 
(3) The amendments made by this subsection shall apply to 
acquisitions made after July 18,1963. • 
(g) 
CERTAIN CURRENT DESIGNATIONS BY INSURANCE COMPANIES.— 
Section 4914(e) (3) (B) is amended to read as follows: 
"(B) 
CURRENT DESIGNATIONS TO MAINTAIN FUND.— 
"(i) I N GENERAL.—To the extent permitted by sub-
paragraph (E), stock of a foreign issuer or a debt obli-
gation of a foreign obligor acquired by an insurance com-
pany after July 18, 1963, may be designated as part of 
a fund of assets described in paragraph (2), if such desig-
nation is made before the expiration of 30 days after the 
date of such acquisition and the company continues to 
own the stock or debt obligation until the time the desig-
nation is made; except that any such stock or debt obli-
gation acquired before the initial desi^ation of assets 
to the fund is actually made as provided in subparagraph 
(A) (ii) may be designated under this clause at the time 
of such initial designation without regard to such 30-day 
and continued ownership requirements. 
"(ii) 
CERTAIN DEBT OBLIGATIONS HAVING MATURITY OF 
LESS THAN 3 YEARS.—^A debt obligation having a period 
remaining to maturity (on the date of acquisition) of at 
least 1 year but less than 3 years, which is acquired dur-
ing the period beginning February 11, 1965, and ending 
on the date of the enactment of the Interest Equalization 
Tax Extension Act of 1965, may be designated as part 
of a fund of assets described in paragraph (2) on or 
before the 30th day after the date of such enactment 
(or at such later time as the Secretary or his delegate 
may by regulations prescribe) without regard to the 
30-day and continued ownership requirements provided 
in clause (i).'* 
960 
PUBLIC LAW 89-243-OCT. 9, 1965 
[79 STAT. 
78 Stat. 813. 
26 use 4914 
(h) ACQUISITIONS BY CERTAIN TAX-EXEMPT ORGANIZATIONS.— 
(1) Section 4914(f) is amended by adding at the end thereof 
(after and below paragraph (2)) the following new sentence: 
"For purposes of this subsection, stock or debt obligations acquired 
as a result of the investment or reinvestment of such contributions or 
fees which consist of insurance premiums (other than premiums paid 
to a mutual insurance company or association described in section 
ae'uscT^so^^^' 
501(c) (15)) paid by the members of such local organizations shall 
be treated as held exclusively for the benefit of such members if pri-
marily so held, notwithstanding that such stock or debt obligations 
may, under certain contingencies, be used for the benefit of other 
members of such United States person." 
(2) The amendment made by paragraph (1) shall apply with 
respect to acquisitions of stock and debt obligations made after 
July 18, 1963: 
(i) EXCLUSION FOR INVESTMENTS IN LESS DEVELOPED COUNTRY 
26 use 4916. 
PARTNERSHIPS.—Section 4916(c) (1) is amended by adding at the end 
i hereof the following new sentence: "A foreign partnership, as defined 
26^sc^*77^V' 
in section 7701(a) (2) and (5), the assets and gross income of which, 
for the applicable periods set forth in paragraph (3), satisfy the re-
quirements of subparagraph (A) or (B) of the first sentence of this 
paragraph, shall be treated as a less developed country corporation for 
purposes of this section." 
(]) NOTICE or ACQUISITION FOR EXCLUSION OF ORIGINAL OR NEW 
26 use 4917. 
ISSUES.—Section 4917 is amended— 
(1) by adding at the end of subsection (a) the following new 
sentence: "In the case of acquisitions of debt obligations having a 
period remaining to maturity of 1 year or more but less than 3 
years made during the period beginning February 11, 1965, and 
ending with the date of the enactment of the Interest Equalization 
Tax Extension Act of 1965, the notice of acquisition may be filed 
within such period following the date of such enactment as the 
Secretary or his delegate may prescribe by regulations."; and 
(2) by adding at the end of such section the following new 
subsection: 
"(d) REDUCTION OF EXCLUSION IN CASE OF LATE FILING OF CERTAIN 
NOTICES OF ACQUISITION.—If, with respect to an acquisition after the 
date of the enactment of the Interest Equalization Tax Extension Act 
of 1965 of stock or a debt obligation which is all or part of an original 
or new issue to which an Executive order issued under subsection (a) 
is applicable (other than an Executive order which is applicable to a 
limited aggregate amount of such issues), the notice of acquisition 
required by subsection (a) is not filed on or before the last day (includ-
ing extensions of time) specified in the regulations prescribed by the 
Secretary or his delegate under such subsection, the exclusion provided 
by such Executive order shall not apply to 5 percent of such acquisi-
tion for each 30-day period or fraction thereof after such last day 
during which such failure continues, except that in no event shall such 
exclusion be reduced under this subsection by more than 25 percent of 
such acquisition." 
(k) CONSIDERATION OF TREATY VIOLATIONS IN CONNECTION W I T H 
EXCLUSION FOR ORIGINAL OR NEW ISSUES.—Section 4917 is amended 
by adding after subsection (d) (as added by subsection (j) of this 
section) the following new subsection: 
"(e) 
FULFILLMENT OF TREATY OBLIGATIONS.—In 
determining 
whether to issue an Executive order under subsection (a) with respect 
to a foreign country, and in determining whether to revoke or modify 
an Executive order issued under subsection (a) with respect to a 
foreign country (whether issued before or after the enactment of this 
79 STAT. ] 
PUBLIC LAW 89-243-OCT. 9, 1965 
961 
subsection), the President may take into account whether such foreign 
country is according privileges to United States persons in conformity 
with treaties of friendship, commerce, and navigation between the 
United States and such foreign country." 
(1) CREDIT OR REFUND FOR SALES OF STOCK BY DEALERS TO FOREIGN 
PERSONS.— 
(1) Section 4919(a)(3) is amended to read as follows: 
26U?C49?9 
"(3) CERTAIN STOCK.—Consist of stock— 
"(A) acquired by a dealer in the ordinary course of his 
business and sold by him on the day of purchase or on either 
of the two succeeding business days to— 
"(i) persons other than United States persons, or 
"(ii) another dealer who resells it on the same or the 
next business day to persons other than United States 
persons; or 
"(B) acquired by a dealer in the ordinary course of his 
business to cover short sales made by him on the day of pur-
chase or on either of the two preceding business days to— 
"(i) persons other than United States persons, or 
"(ii) another dealer who resold it on the same or the 
next business day to persons other than United States 
persons." 
(2) Section 4919(b) (3) is amended by striking out the head-
ing and inserting in lieu thereof "CERTAIN SALES BY DEALERS.—". 
(3) Section 4919(b) (3) (B) is amended— 
(A) by striking out "with respect to a debt obligation sold 
in a transaction" and inserting in lieu thereof "with respect 
to a sale"; 
(B) by striking out "a debt obligation" each place it 
appears in clauses (i) and (ii) and in the matter which fol-
lows and inserting in lieu thereof "stock or a debt obliga-
tion"; 
(C) by striking out "such debt obligation" each place it 
appears in the matter which follows clause (ii) and inserting 
in lieu thereof "such stock or debt obligation"; and 
(D) by inserting "or (a)(3)" after "subsection (a)(2)" 
each place it appears. 
(m) 
COMMERCIAL FINANCING.— 
(1) Section 4920(a) is amended by inserting after paragraph 
^^ ^^^ '*^2°-
(5) the following new paragraph: 
"(5A) 
CERTAIN COMMERCIAL FINANCING BRANCHES NOT TREATED 
AS DOMESTIC CORPORATIONS.—The term 'domestic corporation' 
does not include a branch office of such a corporation located out-
side the United States if— 
"(A) such corporation is primarily engaged in the trade or 
business of acquiring debt obligations (i) arising out of the 
sale of tangible personal property produced, manufactured, 
or assembled by one or more includible corporations in an 
affiliated group (determined under section 48(c)(3)(C) 
H^l^^'^^'^• 
except that clause (i) of such section shall not apply) of 
which such acquiring corporation is a member and (ii) aris-
ing out of the sale of tangible personal property received as 
part or all of the consideration in sales of tangible personal 
property described in clause (i); 
"(B) such office is primarily engaged in the trade or busi-
26 use 48. 
962 
PUBLIC LAW 89-243-OCT. 9, 1965 
[79 STAT. 
ness of acquiring debt obligations described in subparagraph 
(A) which are repayable exclusively in one or more currencies 
other than United States currency; 
"(C) such office was located outside the United States on 
February 10,1965, and was regularly engaged in the trade or 
business of acquiring debt obligations described in subpara-
graph (B) for a period of not less than 12 consecutive months 
before February 10, 1965; 
"(D) such office maintains separate books and records rea-
sonably reflecting the assets and liabilities properly attribut-
able to such office; and 
"(E) there is in effect an election that such branch office 
be treated as a foreign corporation for purposes of this 
chapter. 
For purposes of this paragraph, a corporation or a branch office 
shall be treated as primarily engaged in the trade or business 
described in subparagraph (A) during the taxable year if at least 
90 percent of the face amount of the debt obligations acquired by 
such corporation or branch office during such taxable year consists 
of debt obligations described in subparagraph (A) and if through-
out such taxable year such corporation or branch office is 
exclusively engaged in the trade or business of acquiring debt 
obligations (whether or not described in subparagraph (A)) and 
servicing debt obligations arising out of sales of tangible personal 
property described in subparagraph (A). 
The election under 
this paragraph shall be made by such corporation in accordance 
with regulations prescribed by the Secretary or his delegate. A 
separate election may be made Avith respect to each branch office 
of such corporation except that, for purposes of this paragraph, 
all branch offices of such corporation located in a country shall be 
treated as a single branch office. Such election shall be effective 
as of February 10,1965, and shall remain in effect until revoked 
in accordance with such regulations. If, at any time, such cor-
poration ceases to meet the requirements of subparagraph (A), 
all elections made by such corporation under this paragraph 
shall be deemed revoked. If, at any time, a branch office (within 
the meaning of this paragraph) ceases to meet the requirements 
of subparagraph (B) or (D), the election with respect to such 
office shall thereupon be deemed revoked. When an election is 
revoked, a new election under subparagraph (E) may be made 
subject to such conditions and limitations as may be prescribed by 
the Secretary or his delegate." 
(2) (A) Sec^^ion 4920(a) (5) is amended by adding at the end 
thereof the following new sentence: "A corporation or partner-
ship making an election under this paragraph or paragraph (5A) 
with respect to a branch office located outside the U n i t ^ States 
shall not, at any time, execute a certificate of American owner-
ship (within, the meaning of section 4918) either with respect to 
stock or a debt obligation of a foreign issuer or obligor held by 
such branch office at the time the election is made with respect to 
such branch office or with respect to stock or a debt obligation of 
a foreign issuer or obligor acquired by such branch office while 
the election with respect to such branch office is in effect." 
78 Stat. 835. 
26 use 4920. 
26 use 4918. 
79 STAT. ] 
PUBLIC LAW 89-243-OCT. 9, 1965 
963 
(B) The amendment made by subparagraph (A) — 
(i) insofar as it relates to elections made under section 
4920(a) (5), shall apply to dispositions made after June 28, 
^s ^ta^ ss^^ 
1965; and 
(ii) insofar as it relates to elections made under section 
4920(a) (5A), shall apply to dispositions made after Feb-
ruary 10,1965. 
(3) Section 4912(b) (2) (B) is amended— 
' ' "^^ ^'''^^ 
(A) by strikmg out "section 4920(a) (5) ( E ) " and insert-
ing in lieu thereof "paragraph (5) or (5A) of section 4920 
(a)"; and 
(B) by inserting "(including, in the case of a transfer 
to a branch office described in section 4920 (a) (5A), a transfer 
made for consideration)" after "money or other property" 
where it first appears. 
(n) FOREIGN STOCK ISSUES TREATED AS DOMESTIC.—Section 4920 is 
amended— 
(1) by striking out paragraph (8) of subsection (a), 
(2) by redesignating subsections (b) and (c) as subsections 
(c) and (d), respectively, and 
(3) by inserting after subsection (a) the following new sub-
section : 
"(b) FOREIGN STOCK ISSUES TREATED AS DOMESTIC.— 
"(1) I N GENERAL.—For purposes of this chapter, a foreign 
corporation (other than a company registered under the Invest-
ment Company Act of 1940) shall not be considered a foreign 
1
5 use so^a.'s i 
issuer with respect to any class of its stock if— 
"(A) as of the corporation's latest record date before 
July 19, 1963, more than 65 percent of such class of stock 
was held of record by United States persons, or 
"(B) the class of stock had its principal market during 
the calendar year 1962 on one or more national securities 
exchanges registered with the Securities and Exchange Com-
mission, and, as of the corporation's latest record date before 
July 19, 1963, more than 50 percent of such class of stock 
was held of record by United States persons. 
"(2) CLASS OF STOCK DEFINED.—For purposes of this subsec-
tion, the term 'class of stock' means all shares of stock of a corpo-
ration issued and outstanding as of the corporation's latest record 
date before July 19, 1963, which are identical with respect to the 
rights and interest such shares represent in the control, profits, 
and assets of the corporation. 
Such term also includes additional 
shares possessing rights and interests identical with the rights 
and interests of shares described in the preceding sentence if such 
additional shares shall have been— 
" (A) issued on or before November 10,1964; 
"(B) issued after November 10,1964, pursuant to a written 
commitment made by such corporation on or before such date; 
"(C) issued after November 10,1964, to a shareholder with 
respect to or in exchange solely for shares described in this 
paragraph; or 
" (D) issued after November 10,1964, and if— 
"(i) such corporation was actively engaged in a trade 
or business on July 19,1963; 
964 
PUBLIC LAW 89-243-OCT. 9, 1965 
[79 STAT. 
" (ii) shares of such class were held of record by more 
than 250 shareholders on the corporation's latest record 
date before July 19,1963; 
"(iii) the percentage of shares of such class held of 
record by United States persons as of the corporation's 
latest record date before the issuance of such additional 
shares is not less than the percentage required to be held 
by United States persons as of the latest record date 
before July 19, 1963, in order for the class of stock to 
qualify under paragraph (1); 
"(iv) all such additional shares are shares which, if 
acquired by United States persons at the time of original 
issuance, would have been excluded from the tax imposed 
26 us^c49n 
^y section 4911 by reason of section 4914(a) (6), 4916, 
4914, 4916, 4917. 
or 4917, or are shares exchanged in a reorganization 
6
8
A Stat. 120. 
described in section 368(a) (1) (B) for shares of a domes-
tic corporation which was engaged in the active conduct 
of a trade or business (other than as a dealer in securities) 
immediately before the date of such exchange; and 
"(v) at least 15 days before the date such additional 
shares are issued (or, m the case of an issue occurring on 
or before the 60th day after the date of the enactment 
of this sentence, within such period as may be prescribed 
by the Secretary or his delegate by reflations), the 
issuing corporation files (in accordance with regulations 
prescribed by the Secretary or his delegate) a notice of 
intent to issue such shares. 
For purposes of subparagraph (D), the issuance of an option or 
similar right to acquire stock, or of any debt obligation convertible 
into stock, shall be treated as the issuance of the stock which may 
be obtained on the exercise of such option or similar right or the 
conversion of such debt obligation." 
(o) 
COMMERCIAL. BANK LOANS.— 
Ante, p. 955. 
(1) Paragraph (2) of the subsection of section 4981 redesig-
nated as subsection (c) by section 3(e) of this Act is amended by 
striking out "(other than banks)" each place it appears and 
inserting in lieu thereof "(other than United States persons 
engaged in the commercial banking business and members of an 
76 Stat. 969. 
affiliated group (determined under section 48(c)(3)(C)) of 
^^ 
^^' 
which such a United States person is a member)". 
78 Stat. 839. 
(2) The last sentence of section 4931(c) (as enacted on Sep-
tember 2, 1964) is amended by striking out ", except that, for 
26 use 4918. 
such purposcs, the provisions of section 4918 shall not apply". 
(p) 
DEDUCTIBILITY OF INTEREST EQUALIZATION T A X . — 
78 Stat. 845. 
(1) Sectiou 263(a)(8) is amended to read as follows: 
26 use 263. 
tj^^^ Except as provided in subsection (d), any amount paid 
as tax under section 4911 (relating to imposition of interest 
equalization tax)." 
(2) Section 263 is amended by adding at the end thereof the 
following new subsection: 
" ( d ) 
REIMBURSEMENT 
OF 
INTEREST 
EQUALIZATION 
T A X . — T h e 
ol^J^f^\'^o^'o^^%' deductiou allowed by section 162(a) or 212 (whichever is appropriate) 
" '""^ ""^ '^ 
shall include any amount paid or accrued in the taxable year or a 
preceding taxable year as tax under section 4911 (relating to imposi-
tion of interest equalization tax) to the extent that anv amount attrib-
utable to the amount paid or accrued as tax is included in gross income 
26 use 162, 212. 
68A Stat. 61. 
26 u s e 171. 
30 F, R. 1929. 
79 STAT. ] 
PUBLIC LAW 89-243-OCT. 9, 1965 
965 
for the taxable year. Under regulations prescribed by the Secretary 
or his delegate, the preceding sentence shall not apply with respect 
to any amount attributable to that part of the tax so paid or accrued 
which is attributable to an amount for which a deduction has been 
claimed for the taxable year or a preceding taxable year under section 
171 (relating to amortization of bond premium)." 
(3) The amendments made by this subsection shall apply to 
taxable years ending after September 2, 1964. 
(q) EFFECTIVE DATE.—Except as otherwise specifically provided 
in this section and in the amendments made by this section, such 
amendments shall apply with respect to acquisitions of stock and debt 
obligations made after February 10, 1965. Executive Order 11198, 
issued February 10,1965, to the extent it is inconsistent with the amend-
ments made by this section, shall be deemed modified by such amend-
ments. 
SEC. 5. PREEXISTING COMMITMENTS. 
(a) 
CERTAIN COMMITMENTS EXISTING ON OR BEFORE JULY 
18, 
1963.—Section 2(c) (2) (B) of the Interest Equalization Tax Act is 
^s stau 84L 
amended to read as follows: 
note. 
"(B) as to which on or before July 18, 1963, the acquiring 
United States person (or, in a case where 2 or more United 
States persons are making acquisitions as part of a single 
transaction, a majority in interest of such persons) had taken 
every action to signify approval of the acquisition under the 
procedures ordinarily employed by such person (or persons) 
m similar transactions, subject only to the execution of formal 
documents evidencing the acquisition and to customary 
closing conditions, and the acquiring United States person 
(or persons) — 
''(i) had sent or deposited for delivery to the foreign 
person from whom the acquisition was made written 
evidence of such approval in the form of a commitment 
letter, memorandum of terms, draft purchase contract, or 
other document setting forth, or referring to a document 
sent by the foreign person from whom the acquisition was 
made which set forth, the principal terms of such acquisi-
tion, or 
" (ii) had received from the foreign person from whom 
the acquisition was made a memorandum of terms, draft 
purchase contract, or other document setting forth, or 
referring to a document sent by the acquiring United 
States person (or persons) which set forth, the principal 
terms of such acquisition;". 
(b) 
CERTAIN DEBT OBLIGATIONS OF FORMER LESS DEVELOPED COUN-
TRIES.—The tax imposed by section 4911 of the Internal Revenue Code 
of 1954 shall not apply to the acquisition by a United States person 
^^ ^^^-1°^^-
of a debt obligation issued by the government of a foreign country 
which has been designated as an economically less developed country 
under an Executive order of the President in effect for purposes of 
the tax imposed by section 4911, but with respect to which such 
designation has been terminated before the enactment of this Act, if, 
prior to such acquisition, the Secretary of State has certified to the 
Secretary of the Treasury or his delegate that— 
(1) the government of such foreign country had, on or before 
April 6, 1965, communicated to the United States Department of 
State its intention to issue such debt obligation; 
68 Stat. 454. 
7 u s e 1701-
966 
PUBLIC LAW 89-243-OCT. 9, 1965 
[79 STAT. 
(2) the government of such foreign country had, on or before 
April 6,1965, commenced negotiations with United States persons 
relative to the issuance of such debt obligation; and 
26us^c49'?i 
(^) exemption from the tax imposed by section 4911 of the 
Internal Revenue Code of 1954 on the acquisition of such debt 
obligation by a United States person is in the best interests of 
the United States. 
SEC. 6. USE OF FOREIGN CURRENCIES OWNED BY THE UNITED 
STATES. 
(a) Under the direction of the President, the Secretary of the Treas-
ury shall periodically ascertain, by country, the amount of funds re-
quired by the United States Government to pay its obligations in 
foreign countries, including obligations payable in foreign currencies. 
(b) Every international agreement (6ther than an agreement 
entered into pursuanJt to title I of the Agricultural Trade Development 
and Assistance Act of 1954, as amended (Public Law 480, 83d Con-
gress)) hereafter entered into, or hereafter amended or extended, be-
1709." 
tween the United States and any foreign country under which cur-
rency of such country accrues or will accrue for the use of the United 
States shall include provisions that such currency may be used for 
paying United States obligations in such country which may be paid 
in such currency, and if not needed for such purpose may be used, 
or converted to other forei^ currencies or to dollars for use, in paying 
United States obligations in any foreign country, in such amounts as 
the Secretary of the Treasury considers necessary for the requirements 
of the United States. 
grfr^onai°c'o'^' 
(^) ^he Secretary of the Treasury shall submit a report annually 
to the Senate Committee on Finance and the House Committee on 
Ways and Means which shows, by executive agencies and by countries, 
(1) the expenditures in dollars and in foreign currencies made during 
the preceding fiscal year in paying the obligations of the United States 
in foreign countries, (2) the amounts of foreign currencies available 
for the use of the United States at the close of such year, and (3) the 
amounts of foreign currencies convertible to other foreign currencies 
or to dollars at the close of such year. 
(d) This section shall terminate at the time when the tax imposed 
by section 4911 of the Internal Revenue Code of 1954 terminates. 
Approved October 9, 1965, 6:25 a.m. 
mittees.