An Act to amend the Internal Revenue Code of 1954 to impose a tax on acquisitions of certain foreign securities in order to equalize costs of longer-term financing in the United States and in markets abroad, and for other purposes
PL 88-563 (H.R.8000), enacted 09/02/1964

78 STAT. ] 
PUBLIC L
A
W 88-563-SEPT. 2, 1964 
809 
Public Law 88-563 
AN ACT 
To amend the Internal Revenue Code of 1954 to impose a tax on acquisitions of 
certain foreign securities in order to equalize costs of longer-term financing in 
the United States and in markets abroad, and for other purposes. 
Be it enacted 
hy the Senate 
and House 
of Representatives 
of the 
United States of America 
in Congress 
assembled, 
SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITIJS.—This Act may be cited as the "Interest Equali-
zation Tax Act". 
(b) AMENDMENT OF 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 shall 
be considered to be made to a section or other provision of the 
Internal Revenue Code of 1954. 
SEC. 2. INTEREST EQUALIZATION TAX. 
(a) IMPOSITION OF TAX.—Subtitle D 
(relating to miscellaneous 
excise taxes) is amended by adding at the end thereof the following 
new chapter: 
'CHAPTER 41—INTEREST EQUALIZATION TAX 
"SUBCHAPTER A. Acquisitions of foreign stock and debt obligations. 
"SUBCHAPTER B . Acquisitions by commercial banks. 
"Subchapter A—Acquisitions of Foreign Stock and 
Debt Obligations 
"Sec. 4911. Imposition of tax. 
"Sec. 4912. Acquisitions. 
"Sec. 4913. Limitation on tax on certain acquisitions. 
"Sec. 4914. Exclusion for certain acquisitions. 
"Sec. 4915. Exclusion for direct investments. 
"Sec. 4916. Exclusion for investments in less develoi)ed countries. 
"Sec. 4917. Exclusion for original or new issues where required 
for international monetary stability. 
"Sec. 4918. Exemption for prior American ownership. 
"Sec. 4919. Sales by underwriters and dealers to foreign persons. 
"Sec, 4920. Definitions and special rules. 
"SEC. 4911. IMPOSITION OF TAX. 
" ( a ) I N GENERAL.—There is hereby imposed, on each acquisition 
by a United States person (as defined in section 4920(a) (4)) of stock 
of a foreign issuer, or of a debt obligation of a foreign obligor (if 
such obligation has a period remaining to maturity of 3 years or more), 
a tax determined under subsection ( b j . 
" ( b ) 
A M O U N T OF T A X . — 
"(1) STOCK.—The tax imposed by subsection (a) on the ac-
quisition of stock shall be equal t o 15 percent of the actual value 
of the stock. 
" ( 2 ) 
D E B T OBLIGATIONS.—The tax imposed by subsection (a) 
on the acquisition of a debt obligation shall be equal to a percent-
age of the actual value of the debt obligation measured by the 
September 2, 1964 
[H. R. 8000] 
Interest Equal-
ization Tax Act. 
68A Stat. 3. 
26 u s e 1 et seq. 
Post, p. 837. 
810 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
period remaining to its maturity and determined in accordance 
with the following table: 
The tax, as 
"If the period remaining 
a percentage of 
to maturity is: 
actual value, is: 
"At least 3 years, but less than sy^ years 
2.75 percent 
At least Sy^ years, but less than 4% years 
3.55 percent 
At least 4ys years, but less than sy^ years 
-. 
4.35 percent 
At least 5^2 years, but less than Qy^ years 
5.10 percent 
At least Qy2 j'ears, but less than 7% years 
5.80 percent 
At least 7^2 years, but less than Sy^ years 
6.50 percent 
At least Sy^ years, but less than 9^^ years 
7.10 percent 
At least 91/^ years, but less than 10^4 years 
7.70 percent 
At least lOy^ years, but less than 11% years 
8.30 percent 
At least 11% years, but less than 13% years 
9.10 percent 
At least 13% years, but less than 16% years 
10.30 percent 
At least 16% years, but less than 18% years 
11.35 percent 
At least 18% years, but less than 21% years 
12.25 percent 
At lea?t 21% years, but less than 23% years 
13.05 percent 
At least 23% years, but less than 26% years 
13.75 percent 
At least 26% years, but less than 28% years 
14.35 percent 
28% years or more 
15.00 percent, 
" (c) 
PERSONS LIABLE FOR T A X . — 
"(1) I N GENERAL.—The tax imposed by subsection (a) shall be 
paid by the person acquiring the stock or debt obligation 
involved. 
" ( 2 ) CROSS REFERENCE.— 
"For imposition of penalty on maker of false certificate in lieu of or 
in addition to tax on acquisition in certain cases, see section 66S1. 
"(d) TERMINATION OF TAX.—The tax imposed by subsection (a) 
shall not apply to any acquisition made after December 31, 1965. 
**SEC. 4912. ACQUISITIONS. 
"(a) I N GENERAL.—For purposes of this chapter, the term 'acquisi-
tion' means any purchase, transfer, distribution, exchange, or other 
transaction by virtue of which ownership is obtained either directly or 
through a nominee, custodian, or agent. A United States person 
acting as a fiscal agent in connection with the redemption or purchase 
for retirement of stock or debt obligations (whether or not acting 
under a trust arrangement) shall not be considered to obtain owner-
ship of such stock or debt obligations. The exercise of a right to 
Post, p. 835. 
convert a debt obligation (as defined in section 4920(a)(1)) into 
stock shall be deemed an acquisition of stock from the foreign issuer 
by the person exercising such ri|»ht. Any extension or renewal of 
ail existing debt obligation requiring affirmative action of the obligee 
shall be considered the acquisition of a new debt obligation, 
(b) SPECIAL RULES.—For purposes of this chapter— 
"(1) 
CERTAIN TRANSFERS TO FOREIGN TRUSTS.—Any transfer 
(other than in a sale or exchange for full and adequate consid-
• eration) of money or other property to a foreign trust shall, if 
such trust acquires stock or debt obligations (^of one or more 
foreign issuers or obligors) the direct acquisition of which by 
the transferor would be subject to the tax imposed by section 
4911, be deemed an acquisition by the transferor (as of the time 
of such transfer) of stock of a foreign issuer in an amount equal 
to the actual value of the money or property transferred or, if 
less, the actual value of the stock or debt obligations so acquired 
by such trust. Contributions made by an employer to a foreign 
pension or profit-sharing trust established by such employer 
tor the exclusive benefit of employees (who are not owner-em-
ployees as defined in section 401(c)(3)) who perform personal 
services for such employer on a full-time basis in a foreign 
country, and contributions to a foreign pension or profit-sharing 
iit 
76 Stat. 812 
26 u s e 401. 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
811 
trust established by an employer, made by an employee who 
performs personal services for such employer on a full-time basis 
m a foreign country (and is not an owner-employee as defined 
in section 401 (c) (3)), shall not be considered under the preceding 
76 stat. 812. 
sentence as transfers which may be deemed acquisitions of stock 
^^ ^^^ ^°^' 
of a foreign issuer. 
" ( 2 ) 
C E R T A I N TRANSFERS.— 
"(A) 
TRANSFERS TO FOREIGN CORPORATIONS AND PARTNER-
SHIPS.—Any transfer of money or other property to a foreign 
corporation or a foreign partnership— 
"(i) as a contribution to the capital of such corpora-
tion or partnership, or 
"(ii) in exchange for one or more debt obligations of 
such corporation or partnership, if it is a foreign cor-
poration or partnership which is formed or availed of 
by the transferor for the principal purpose of acquiring 
(in the manner described in section 4915(c) (1^) an 
^ost, p. 826. 
interest in stock or debt obligations the direct acquisition 
of which by the transferor would be subject to the tax 
imposed by section 4911, 
shall be deemed an acquisition by the transferor of stock of 
a foreign corporation or partnership in an amount equal to 
the actual value of the money or property transferred. 
"(B) TRANSFERS TO FOREIGN BRANCHES.—If a domestic 
corporation or partnership transfers money or other prop-
erty to, or applies money or other property for the benefit of, 
a branch office of such corporation or partnership with respect 
to which there is in effect an election under section 4920(a) 
(5) (E), or if funds are borrowed by such branch office from 
a bank (as defined in section 581), other than from a branch 
26 use ssi. 
of such a bank located outside the United States lending 
such funds in the ordinary course of its business, such 
domestic corporation or partnership shall be deemed to have 
acquired stock of a foreign corporation or partnership in an 
amount equal to the actual value of the money or property 
transferred or applied, or the funds borrowed. 
" (3) ACQUISITIONS FROM DOMESTIC CORPORATION OR PARTNERSHIP 
FORMED OR AVAILED OF TO OBTAIN FUNDS FOR FOREIGN ISSUER OR 
OBLIGOR.—The acquisition of stock or a debt obligation of a domes-
tic corporation (other than a domestic corporation described in 
section 4920(a)(3)(B)), or a domestic partnership, formed or 
availed of for the principal purpose of obtaining funds (directly 
or indirectly) for a foreign issuer or obligor, shall be deemed an 
acquisition (from such foreign issuer or obligor) of stock or a 
debt obligation of such foreign issuer or obligor. 
"(4) REORGANIZATION EXCHANGES.—Any acquisition of stock 
or debt obligations of a foreign issuer or obligor in an exchange 
to which section 354,355, or 356 applies (or would, but for section 
367, apply) shall be deemed an acquisition from the foreign issuer 
26 use 354-
or obligor in exchange for its stock or for its debt obligations. ^^^' ^^^' 
For purposes of this paragraph, in determining whether section 
354, 355, or 356 applies, or would apply, to any transaction— 
"(A) such transaction shall, if it took place before the 
date of the enactment of this chapter, be treated as taking 
place on such date, and 
"(B) section 368(a) (1) (B) shall be treated as permitting 
26 use 368. 
the receipt by a United States person of money or other prop-
erty in addition to voting stock. 
812 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
-SEC. 4913. LIMITATION ON TAX ON CERTAIN ACQUISITIONS. 
"(a) 
CERTAIN SURRENDERS, EXTENSIONS, RENEWALS, AND EXER-
CISES.— 
"(1) GENERAL, RULE.—If stock or a debt obligation of a foreign 
issuer or obligor is acquired by a United States person as the 
result of— 
"(A) the surrender to the foreign obligor, for cancella-
tion, of a debt obligation of such obligor; 
"(B) the extension or renewal of an existing debt obliga-
tion requiring affirmative action of the obligee; or 
"(C) the exercise of an option or similar right to acquire 
such stock or debt obligation (or of a right to convert a debt 
obligation into stock), 
then the tax imposed on such acquisition shall not exceed the 
amount determined under paragraph (2) or (3). 
"(2) GENERAL LIMITATION.—Except in cases to which para-
graph (3) applies, the tax imposed upon an acquisition described 
in paragraph (1) shall be limited to— 
"(A) the amount of tax imposed by section 4911, less 
"(B) the amount of tax which would have been imposed 
under section 4911 if the debt obligation which was sur-
rendered, extended, or renewed, or the option or right which 
was exercised, had been acquired in a transaction subject to 
such tax immediately before such surrender, extension, re-
newal, or exercise. 
For purposes of this paragraph, a defaulted debt obligation of the 
government of a foreign country or a political subdivision there-
of (or an agency or instrumentality of such a government) which 
has been in default as to principal for at least 10 years and which 
is surrendered in exchange for another debt obligation of that 
government (or agency or instrumentality) shall be deemed to 
have an actual value and period remaining to maturity equal 
to that of the debt obligation acquired. 
"(3) 
SPECIAL LIMITATIONS.— 
"(A) 
CONVERSIONS OF DEBT OBLIGATIONS INTO STOCK.—The 
tax imposed upon an acquisition of stock pursuant to the 
exercise of a right to convert a debt obligation (as defined 
Post, p. 835. 
in section 4920(a) (1)) into stock shall be limited to— 
" (i) the amount of tax which would have been imposed 
by section 4911 if the debt obligation had been treated 
as stock at the time of its acquisition by the person ex-
ercising the right (or by a decedent from whom such 
person acquired the right by bequest or inheritance or by 
reason of such decedent's death), less 
"(ii) the amount of tax paid by the person exercising 
the right (or by such decedent) as a result of the acqui-
sition of the convertible debt obligation or, if such 
acquisition was not subject to the tax imposed by section 
4911 the amount of tax which would have been imposed 
as a result of such acquisition if such acquisition had 
been subject to such tax. 
"(B) 
EXERCISE OF CERTAIN SHAREHOLDERS' RIGHTS.—The 
tax imposed upon an acquisition of stock or a debt obliga-
tion of a foreign corporation by a United States person, 
where— 
"(i) the stock or debt obligation is acquired pursuant 
to the exercise of an option or similar right to acquire 
such stock or debt obligation which was acquired by a 
78 STAT. ] 
PUBLIC LAW 88.S6.^_SEPT. 2, 1964 
813 
shareholder of such corporation in a distribution with 
respect to its stock, and 
"(ii) such option or right is exercised within 90 days 
from the date of its distribution by such corporation, 
shall be limited to the amount of tax which would have been 
imposed by section 4911 if the price paid under such option 
or right were the actual value of the stock or debt obligation 
acquired. 
"(C) CERTAIN EMPLOYEE STOCK OFFIONS.—The tax imposed 
upon an acquisition of stock of a foreign issuer by a United 
States person pursuant to the exercise of an option or similar 
right described in section 4914(a) (8) shall be limited to the 
amount of tax which would have been imposed under section 
4911 if the price paid under such option or right were the 
actual value of the stock acquired. 
"(b) 
CERTAIN TRANSFERS W H I C H ARE DEEMED ACQUISITIONS.—The 
tax imposed upon an acquisition which is deemed to have been made 
by reason of a transfer of money or other property to a foreign tmst, 
or a foreign corporation or partnership, as described in section 4912 
(b) (1) or (2) (A), shall be limited to— 
"(1) the amount of tax imposed by section 4911, less 
"(2) the amount of tax paid by the transferor as the result of 
the transfer being otherwise taxable as an acquisition under this 
chapter. 
"(c) 
ACQUISITIONS BY CERTAIN DOMESTIC CORPORATIONS AND PART-
NERSHIPS.—If stock or a debt obligation of a forei^ issuer or obligor 
is acquired by a domestic corporation or a domestic partnership with 
funds obtained as the result of an acquisition by a United States per-
son of stock or a debt obligation of such corporation or partnership 
which under section 4912(b)(3) is deemed an acquisition by such 
person of stock or a debt obligation of a foreign issuer or obligor, the 
tax imposed upon the acquisition by the domestic corporation or the 
domestic partnership shall be limited to— 
"(1) the amount of tax imposed by section 4911, less 
" (2) the amount of tax paid by the United States person from 
whom the funds were obtained on the acquisition by such person 
which under section 4912(b) (3) is deemed an acquisition of stock 
or a debt obligation of a foreign issuer or obligor. 
'•SEC. 4914. EXCLUSION FOR CERTAIN ACQUISITIONS. 
"(a) TRANSACTIONS NOT CONSIDERED ACQUISITIONS.—The term 
'acquisition' shall not include— 
" (1) any transfer between a person and his nominee, custodian, 
or agent; 
"(2) any transfer described in section 4343(a) (relating to 
Je use 43^47' 
certain transfers by operation of law from decedents, minors, 
incompetents, financial institutions, bankrupts, successors, for-
eign governments and aliens, trustees, and survivors); 
" (3) any transfer by legacy, bequest, or inheritance to a United 
States person, or by gift to a United States person who is an 
individual; 
" (4) any distribution by a corporation of its stock or debt obli-
gations to a shareholder with respect to or in exchange for its 
stock; 
"(5) any distribution to a shareholder by a corporation of 
stock or debt obligations owned by such corporation on July 18, 
1963, in complete or partial liquidation of such corporation, to 
the extent such shareholder acquired his stock ownership in such 
corporation in a transaction other than in an acquisition excluded 
367 
814 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
from tax under subsection (b) of this section, or under section 
4915, 4916, or 4917; 
"(6) any exchange to which section S61 applies (or would, but 
26 use 361, 
for section 367, apply), where the transferor corporation was a 
domestic corporation and was engaged in the active conduct of a 
trade or business, other than as a dealer in securities, immediately 
before the date on which the assets involved are transferred to 
the acquiring corporation; 
"(7) any exercise of a right to convert indebtedness, pursuant 
to its terms, into stock, if such indebtedness is treated as stock 
Post, p. 836. 
pursuant to section 4920(a) (2) ( D ) ; or 
"(8) the grant of a stock option or similar right to a United 
States person who is an individual, for any reason connected with 
his employment by a corporation, if such option or right (A) is 
granted by the employer corporation, or its parent or subsidiary 
corporation, to purchase stock of any such corporations, and (B) 
by its terms is not transferable by such United States person 
otherwise than by will or the laws of descent and distribution, 
and is exercisable, during his lifetime, only by him. 
"(b) EXCLUDED ACQUISITIONS.—The tax imposed by section 4911 
shall not apply to the acquisition— 
"(1) T H E UNITED STATES.—Of stock or debt obligations by an 
agency or wholly owned instrumentality of the LTnited States. 
" ( 2 ) 
C O M M E R C I A L BANK LOANS.— 
" (A) Of debt obligations by a commercial bank in making 
loans in the ordinary course of its commercial banking 
business. 
' 
"(B) Of stock or debt obligations by a commercial bank 
. ^ 
through foreclosure, where such stock or debt obligations 
- • 
were held as security for loans made in the ordinary course 
of its commercial banking business. 
"(3) ACQUISITIONS REQUIRED UNDER FOREIGN LAW.—Of stock 
or debt obligations by a United States person doing business in 
a foreign country to the extent that such acquisitions are reason-
ably necessary to satisfy minimum requirements relating to hold-
ings of stock or debt obligations of foreign issuers or obligors 
imposed by the laws of such foreign country; except that if any 
of such requirements relate to the holding of insurance reserves, 
the exclusion otherwise allowable under this paragraph with re-
spect to acquisitions made by such United States person during 
any calendar year shall be reduced by the maximum amount of 
the exclusion which could be allowed under subsection (e) with 
respect to acquisitions made by such person during that year, or 
by the amount of the insurance reserves which must be held in 
order to satisfy such requirements, whichever is less. 
"(4) 
ACQUISITIONS IN LIEU OF PAYMENT OF FOREIGN TAX.—Of 
stock or debt obligations by a United States person doing business 
in a foreign country, to the extent such acquisition is made, in 
conformity with the laws of such foreign country, as a substitute 
for the payment of tax to such foreign country. 
"(5) 
ACQUISITIONS OF STOCK IN COOPERATIVE HOUSING CORPORA-
TIONS.—Of stock of a foreign corporation which entitles the holder, 
solely by reason of his ownership of such stock, to occupy for 
dwelling purposes a house, or an apartment in a building, owned 
or leased by such corporation. 
"(6) EXPORT CREDIT, ETC., TRANSACTIONS.—Of stock or debt ob-
ligations arising from the sale of property or services by United 
States persons, to the extent provided in subsection (c). 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
815 
" (7) LOANS TO ASSURE RAW MATERIALS SOURCES.—Of debt obliga-
tions by United States persons in connection with loans made to 
foreign corporations to assure raw materials sources, to the extent 
provided in subsection (d). 
"(8) 
ACQUISITIONS BY INSURANCE COMPANIES DOING BUSINESS IN 
FOREIGN COUNTRIES.—Of stock O
T debt obligations by insurance 
companies doin^ business in foreign countries, to the extent pro-
vided in subsection (e). 
"(9) 
ACQUISITIONS BY CERTAIN TAX-EXEMPT LABOR, FRATERNAL, 
AND SIMILAR ORGANIZATIONS HAVING FOREIGN BRANCHES OR CHAP-
TERS.—Of stock or debt obligations by certain tax-exempt United 
States persons operating in foreign countries through local or-
ganizations, to the extent provided in subsection (f). 
" (10) ACQUISITIONS OF DEBT OBLIGATIONS ON SALE OR LIQUIDATION 
OF WHOLLY O
W
N
E
D FOREIGN SUBSIDIARIES.—Of debt obligations ac-
quired in connection with the sales or liquidation of a wholly owned 
foreign corporation, to the extent provided in subsection (g). 
"(11) 
ACQUISITIONS OF DEBT OBLIGATIONS ARISING OUT OF PUR-
CHASE OF REAL PROPERTY L
O
C
A
T
E
D IN THE UNITED STATES. Of debt 
obligations secured by real property located in the United States 
and arising out of the purchase of such property from United 
States persons, to the extent provided in subsection (h). 
" (12) ACQUISITIONS BY UNITED STATES PERSONS RESIDING IN FOR-
EIGN COUNTRIES OF STOCK OF CERTAIN FOREIGN ISSUERS INVESTING 
EXCLUSIVELY IN THE UNITED STATES. 
O f StOck of f o r e i g n isSUCTS 
investing exclusively in the United States by United States persons 
residing in foreign countries, to the extent provided in subsection 
"(c) 
EXPORT CREDIT, ETC.. TRANSACTIONS.— 
"(1) I N GENERAL.—The tax imposed by section 4911 shall not 
apply to the acquisition from a foreign obligor of a debt obliga-
tion arising out of the sale of tangible personal property or 
services (or both) to such obligor by any United States person, 
if— 
"(A) payment of such debt obligation (or of any related 
debt obligation arising out of such sale) is guaranteed or 
insured, in whole or in part, by an agency or wholly owned 
instrumentality of the United States; or 
"(B) the United States person acquiring such debt 
obligation makes the sale in the ordinary course of his trade 
or business and not less than 85 percent of the purchase 
price is attributable to the sale of property manufactured, 
produced, grown, or extracted in the United States, or to the 
performance of services by such United States person (or by 
one or more includible corporations in an affiliated group, 
as defined in section 1504, of which such person is a mem- 
^e use 1504, 
ber), or to both. 
The term 'services', as used in this paragraph and paragraph (2), 
shall not be construed to include functions performed as an 
underwriter. 
"(2) 
ALTERNATE RULE FOR PRODUCING EXPORTERS.—The tax 
im-
posed by section 4911 shall not apply to the acquisition by a 
IJnited States person from a foreign issuer or obligor of its stock 
in payment for, or of a debt obligation arising out of, the sale of 
tangible personal property or services (or both) to such issuer 
or obligor, if 
(A) at least 30 percent of the purchase price, or 60 percent 
of the actual value of the stock or debt obligation acquired, 
is attributable to the sale of property manufactured, pro-
26 use 1504. 
816 
PUBLIC LAW 88-563-SEPT. 2, 1%4 
[78 STAT. 
duced, grown, or extracted in the United States by such 
United States person 
(or by one or more includible 
corporations in an affiliated group, as defined in section 1504, 
of which such person is a member), or to the performance of 
services by such LTnited States person (or by one or more 
such corporations), or to both, and 
"(B) at least 50 percent of the purchase price, or 100 
percent of the actual value of the stock or debt obligation 
acquired, is attributable to the sale of property manu-
factured, produced, grown, or extracted in the United States, 
or to the performance of services by United States persons, 
or to both. 
"(3) 
CERTAIN INTERESTS IN INTANGIBLE PERSONAL PROPERTY.— 
The tax imposed by section 4911 shall not apply to the acquisition 
by a United States person from a foreign issuer or obligor of its 
stock in payment for^ or of a debt obligation arising out of, the 
sale or license to such issuer or pbligor of— 
"(A) any interest in patents, inventions, models or designs 
(whether or not patented), copyrights, secret processes and 
formulas, good will, trademarks, trade brands, franchises, 
or other like property (or any combination thereof), or 
"(B) any such interest together with services to be per-
formed in connection with any such interest sold or licensed 
by such United States person (or by one or more includible 
corporations in an affiliated group, as defined in section 1504, 
of which such person is a member), 
if not less than 85 percent of the purchase price, or license fee, is 
attributable to the sale or license of any interest in property 
described in subparagraph (A) which was produced, created, or 
developed in the United States by such United States person 
(or by one or more such includible corporations), or is attributable 
to the sale or license of any interest in such property so produced, 
created, or developed and to the performance of services described 
in subparagraph (B). 
"(4) EXPORT-RELATED LOANS.—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 arising out of a loan 
made to the obligor to increase or maintain sales of tangible per-
sonal property produced, grown, or extracted in the United States 
by such United States person (or by one or more includible 
corporations in an affiliated group, as defined in section 1504, of 
which such person is a member), but only if the proceeds of the 
loan will be used by the obligor for the installation, maintenance, 
or improvement of facilities outside the United States which 
(during the period the loan is outstanding) will be used for the 
storage, handling, transportation, processing, packaging, or serv-
icing of property a substantial portion of which is tangible per-
sonal property produced, grown, or extracted in the United States 
by such person (or one or more such corporations). 
"(5) 
OTHER LOANS RELATED TO CERTAIN SALES BY UNITED STATES 
PERSONS.—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 if such debt obligation— 
"(A] was received by such United States person as all or 
part oi the purchase price provided in a contract under which 
the foreign obligor agrees to purchase for a period of 3 years 
or more ores or minerals (or derivatives thereof)— 
"(i) extracted outside the United States by such 
United States person or by one or more includible corpo-
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
817 
rations in an affiliated group (as defined in section 
48(c) (3) (C)) of which such United States person is a 
member, 
"(ii) extracted outside the United States by a corpo-
ration at least 10 percent of the total combined voting 
power of all classes of stock of which is owned, directly 
or indirectly, by such United States person, by one or 
more such includible corporations, or by domestic corpo-
rations which own, directly or indirectly, at least 50 
percent of the total combined voting power of all classes 
of stock of such United States person, 
"(iii) obtained under a contract entered into on or 
before July 18, 1963, by such United States person, by 
one or more such includible corporations, or by such 
domestic corporations, or 
" (iv) extracted outside the United States and obtained 
by such United States person, by one or more such includ-
ible corporations, or by such domestic corporations in 
exchange for similar ores or minerals (or derivatives 
thereof) described in clause (i), (ii), or (iii); or 
"(B) arises out of a loan (made by such United States 
person to such foreign obligor) the proceeds of which will be 
used by such obligor (or by a person controlled by, or 
controlling, such obligor) for the installation, maintenance, 
or improvement of facilities outside the United States which 
(during the period the loan is outstanding) will be used for 
the storage, handling, transportation, processing, or servicing 
of ores or minerals (or derivatives thereof) a substantial 
portion of which is extracted outside the United States by 
such United States person or by a corporation referred to in 
clause (i) or (ii) of subparagraph (A), is obtained under a 
contract described in clause (iii) of subparagraph (A), or is 
obtained in an exchange described in clause (iv) of subpara-
graph (A). 
"(6) CROSS REFERENCE.— 
"For loss of exclusion otherwise allowable under this subsection in 
case of certain subsequent transfers, see subsection (j). 
"(d) LOANS TO ASSURE RAW MATERIALS SOURCES.— 
"(1) GENERAL RULE.—The tax imposed by section 4911 shall 
not apply to the acquisition by a United States person of a debt 
obligation arising out of a loan made by such person to a foreign 
corporation, if— 
"(A) such foreign corporation extracts or processes ores 
or minerals the available deposits of which in the United 
States are inadequate to satisfy the needs of domestic pro-
ducers ; 
"(B) United States persons own at the time of such acqui-
sition at least 50 percent of the total combined voting power 
of all classes of stock of such foreign corporation; and 
"(C) such loan will be amortized under a contract or con-
tracts in which persons owning stock of such corporation 
(including at least one of the United States persons referred 
to in subparagraph (B)) agree to pay during the period 
remaining to maturity of such obligation, by purchasing a 
part of the production of such corporation or otherwise, a 
portion of such corporation's costs of operation and costs of 
amortizing outstanding loans. 
76 Stat. 969. 
26 use 48. 
818 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
"(2) LIMITATION.—The exclusion from tax provided by para-
graph (1) shall apply to the acquisition of any debt obligation 
of a foreign corporation only to the extent that— 
"(A) the applicable percentage of (i) the actual value of 
, 
the debt obligation acquired, plus (ii) the actual value 
(determined as of the time of such acquisition) of all other 
debt obligations representing loans which were theretofore 
made to the foreign corporation during the same calendar 
year and which are amortizable under contracts of the type 
described in paragraph (1) (C), exceeds 
"(B) the actual value of the debt obligations described 
in subparagraph (A) (ii) representing loans made by United 
States persons, to the extent that the acquisition of such 
obligations was excluded from tax under this subsection. 
As used in this paragraph with respect to the acquisition of a 
debt obligation, the term 'applicable percentage' means the 
lesser of (i) the percentage of the total combined voting power 
of all classes of stock of the foreign corporation which is owned 
by United States persons at the time of such acquisition, or (ii) 
the percentage of the corporation's operating and amortization 
costs for the calendar year which all such United States persons 
have agreed to pay (as of the time of such acquisition) under 
contracts of the type described in paragraph (1) (C). 
"(e) 
ACQUISITIONS BY INSURANCE COMPANIES DOING BUSINESS IN 
FOREIGN COUNTRIES.— 
"(1) I N GENERAL.—The tax imposed by section 4911 shall not 
apply to the acquisition of stock or a debt obligation by a United 
States person which is an insurance company subject to taxation 
76^stat°989^\'97 
u^der sectiou 802, 821, or 831, if such stock or debt obligation is 
26 use 802, ' 
designated (in accordance with paragraph (3)) as part of a fund 
821, 831. 
of assets established and maintained by such insurance company 
(in accordance with paragraph (2)) with respect to foreign 
risks insured or reinsured by such company under contracts 
(including annuity contracts) the proceeds of which are payable 
only in the currency of a foreign country. 
As used in this sub-
section, the term 'foreign risks' means risks in connection with 
property outside, or liability arising out of activity outside, or 
in connection with the lives or health of residents of countries 
other than, the United States. 
"(2) 
ESTABLISHMENT AND MAINTENANCE OF FUND OF ASSETS.— 
Each insurance company which desires to obtain the benefit of 
exclusions under this subsection shall (as a condition of entitle-
ment to any such exclusion) establish and maintain a fund (or 
funds) of assets in accordance with this paragraph and para-
graph (3). 
A life insurance company (as defined in section 
26 us^c 80?' 
801(a)) shall establish such a fund of assets separately for each 
foreign currency (other than the currency of a country which 
qualifies as a less developed country) in which the proceeds of its 
insurance contracts are payable and for which insurance reserves 
are maintained by such company, and with respect to which it 
desires to obtain the benefits of exclusions under this subsection; 
and the preceding sentence shall be applied separately to each 
such fund in determining the company's entitlement to exclude 
acquisitions of stock and debt obligations designated as a part 
thereof. An insurance company other than a life insurance com-
pany (as so defined) shall establish a single fund of assets for all 
foreign currencies (other than currencies of countries which 
qualify as less developed countries at the time of the initial 
designation) in which the proceeds of its insurance contracts are 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
819 
payable and for which insurance reserves are maintained by such 
company. 
"(3) 
DESIGNATION OF ASSETS.— 
" ( A ) 
INITIAL DESIGNATION.— 
" (i) REQUIREMENT OF INITIAL DESIGNATION.—An insur-
ance company desiring to establish a fund (or funds) 
of assets under paragraph (2) shall initially 
desig-
nate, as part or all of such fund (or funds), stock 
and debt obligations owned by it on July 18, 1963, 
as follows: First, stock of foreign issuers, and debt ob-
ligations of foreign obligors having a period remaining 
to maturity (on July 18, 1963) of 3 years or more and 
payable in foreign currency; second, if the company so 
elects, debt obligations of foreign obligors having a 
period remaining to maturity (on July 18, 1963) of less 
than 3 years and payable in foreign currency; and 
third, debt obligations of foreign obligors having a 
period remaining to maturity (on July 18, 1963) of 3 
years or more and pavable solely in United States cur-
rency. The designation under the preceding sentence 
with respect to any fund shall be made, in the order set 
forth, to the extent that the adjusted basis (within the 
meaning of section 1011) of the designated stock and 26 use ion. 
debt obligations was (on July 18, 1963) not in excess of 
110 percent of the allowable reserve applicable to such 
fund (determined in accordance with paragraph (4) 
(B) (ii)), and shall in no case include any stock or debt 
obligation described in section 4916(a). 
^°®'' P- ^27. 
"(ii) TIME AND MANNER OF INITIAL DESIGNATION.— 
Any initial designation which an insurance company is 
required to make under this subparagraph shall be made 
on or before the 30th day after the date of the enact-
ment of this chapter (or at such later time as the Secre-
tary or his delegate may by regulations prescribe) by 
the segregation on the books of such company of the stock 
or debt obligations (or both) designated, 
"(B) CURRENT DESIGNATIONS TO MAINTAIN FUND.—To the 
extent permitted bj^ subparagraph ^E), stock of a foreign 
issuer or a debt obligation of a foreign obligor acquired by 
an insurance company after July 18,1963, may be designated 
as part of a fund of assets described in paragraph (2), if such 
designation 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 designation is 
made; except that any such stock or debt obligation acquired 
before the initial designation of assets to the fund is actually 
made as provided in subparagraph (A) (ii) may be desig-
nated under this subparagraph at the time of such initial 
designation without regard to such 30-day and continued 
ownership requirements. 
"(C) ADDITIONAL DESIGNATIONS AFTER CLOSE OF YEAR.—If 
the adjusted basis of the assets held in a fund of assets de-
scribed in paragraph (2) at the close of a calendar year after 
1963 is less than 110 percent of the allowable reserve ap-
plicable to such fund at the close of such year, the insurance 
company may, to the extent permitted by subparagraph ( E ) , 
designate additional stock or debt obligations (or both) which 
were acquired during such calendar year as part of such fund, 
so long as the company still owns such stock or debt obliga-
820 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
tions at the time of designation. 
Any designation under this 
subparagraph shall be made on or before January 31 follow-
ing the close of the calendar year. Any tax paid by such 
company under section 4911 on the acquisition of the addi-
tional stock or debt obligations so designated shall constitute 
an overpayment of tax; and, under regulations prescribed 
by the Secretary or his delegate, credit or refund (without 
interest) shall be allowed or made with respect to such over-
payment. 
' ' ( D ) 
SUPPLEMENTAL REQUIRED DESIGNATIONS AFTEii CLOSE 
OF YEAR.—If during any calendar year an insurance company 
acquires stock or debt obligations which are excluded from 
the tax imposed by section 4911 under an Executive order 
Post, p. 830. 
described in section 4917, and if at the close of the calendar 
year (and after the designation of additional assets under 
subparagraph (C)) the adjusted basis of all assets in a 
fund described in paragraph (2) is less than 110 percent of 
the allowable reserve applicable to such fund, such company 
shall, to the extent permitted by subparagraph (E), designate 
as part of such fund stock and debt obligations acquired by 
it during the calendar year and owned by it at the close of 
the calendar year, as follows: First, stock, and debt obliga-
tions having a period remaining to maturity (on the date of 
acquisition) of 3 years or more and payable in foreign cur-
rency, which were excluded from the tax imposed by sec-
tion 4911 under such Executive order; ^cond, if the company 
so elects, debt obligations of foreign obligors having a period 
remaining to maturity (on the date of acquisition) of less 
than 3 years and payable in foreign currency; and third, 
debt obligations having a period remaining to maturity (on 
the date of acquisition) of 3 years or more and payable solely 
in United States currency, which were excluded from the 
tax imposed by section 4911 under such Executive order. 
The designations under this subparagraph shall be made on 
or before January 31 following the close of the calendar year. 
"(E) LIMITATIONS.— 
"(i) I N GENERAL.—Stock or a debt obligation may be 
designated under subparagraph (B), (C), or (D) as 
part of a fund of assets described in paragraph (2) only 
to the extent that, immediately after such designation, 
the adjusted basis of all the assets held in such fund 
does not exceed 110 percent of the applicable allowable 
reserve (determined in accordance with paragraph (4) 
(B) (i)). To the extent any designation of stock or a 
debt obligation exceeds the amount permitted by the pre-
ceding sentence, such designation shall be ineffective and 
the provisions of this chapter shall apply with respect 
to the acquisition of such stock or debt obligation as if 
such designation had not been made. 
"(ii) SHORT-TERM OBLIGATIONS.—No designation may 
be made under subparagraph (B) or (C) of any debt 
obligation which has a period remaining to maturity 
(on the date of acquisition) of less than 3 years. 
"(4) DETERMINATION OF RESERVES.— 
"(A) 
GENERAL RULE.—For purposes of this subsection, 
the term 'allowable reserve' means— 
"(i) in the case of a life insurance company (as de-
26 use* 8
0
1
^
* 
fined 
in section 801 ( a ^ , the items taken into account 
26 use 810.' 
under section 810(c) arising out of contracts of insurance 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1%4 
821 
and reinsurance (including annuity contracts) which 
relate to foreign risks and the proceeds of which are 
payable in a single foreign currency (other than the 
currency of a less developed country); and 
•'(ii) in the case of an insurance company other than 
a life insurance company (as so defined), the amount of 
its unearned premiums (under section 832(b)(4)) and 
unpaid losses (under section 832(b) (5)) which relate to 
26 use 832. 
foreign risks insured or reinsured under contracts pro-
viding for payment in foreign currencies (other than 
currencies of less developed countries) and which are 
taken into account in computing taxable income under 
section 832 (for such purpose treating underwriting 
income of an insurance company subject to taxation 
under section 821 as taxable income under section 832). 
^^ ^^^- ^^^• 
" ( B ) 
T I M E OF DETERMINATION.— 
"(i) I N GENERAL.—For purposes of paragraph (3) 
(other than subparagraph (A) of such paragraph), the 
determination of an allowable reserve for any calendar 
year shall be made as of the close of such year. 
"(ii) 
INITIAL DESIGNATION.—For purposes of para-
graph 
(3) (A), the determination of an allowable 
reserve shall be made as of July 18, 1963. If the insur-
ance company so elects, the determination under this 
clause may be made by computing the mean of the allow-
able reserve at the beginning and at the close of the 
calendar year 1963. 
"(5) NONRECOGNITION OF ARTIFICIAL INCREASES IN ALLOWABLE 
RESERVE.—An insurance or reinsurance contract which is entered 
into or acquired by an insurance company for the principal pur-
pose of artificially increasing the amount determined as an allow-
able reserve as provided in para^aph (4) shall not be recognized 
in computing whether an acquisition of stock or a debt obligation 
of a foreign issuer or obligor can be excluded under this subsec-
tion. 
"(f) 
ACQUISITIONS BY CERTAIN TAX-EXEMPT LABOR, FRATERNAL, 
A
N
D SIMILAR ORGANIZATIONS HAVING FOREIGN BRANCHES OR CHAP-
TERS.—The tax imposed by section 4911 shall not apply to the acqui-
sition of stock or debt obligations by a United States person which 
is described in section 501(c) and exempt from taxation under sub- 
^e use soi. 
title A, and which operates in a foreign country through a local orga-
nization or organizations, to the extent that— 
"(1) such acquisition results from the investment or reinvest-
ment of contributions or membership fees paid in the currency of 
such country b^ individuals who are members of the local organi-
zation or organizations, and 
" (2) the stock or debt obligations acquired are held exclusively 
for the benefit of the members of any of such local organizations. 
"(g) 
SALE OR LIQUIDATION OF WHOLLY OWNED FOREIGN 
SUB-
SIDIARY.— 
"(1) I N GENERAL.—The tax imposed by section 4911 shall not 
apply to the acquisition by a United States person of a debt 
obligation of a foreign obligor if the debt obligation is acquired— 
"(A) in connection with the sale by such United States per-
son (or by one or more includible corporations in an affiliated 
group, as defined in section 48(c)(3)(C), of which such 
26us^c48^' 
United States person is a member) of all of the outstanding 
stock, except for qualifying shares, of a foreign corporation; 
or 
822 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
"(B) in connection with the liquidation by such United 
States person (or by one or more such includible corpora-
tions) of a foreign corporation all of the outstanding stock 
of which, except for qualifying shares, is owned by such 
United States person (or by one or more such includible 
corporations), but only if such debt obligation had been re-
ceived by such foreign corporation as part or all of the 
purchase price in a sale of substantially all of its assets. 
"(2) LIMITATION.—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. 
"(h) 
CERTAIN DEBT OBLIGATIONS SECURED BY UNITED STATES 
MORTGAGES, ETC.— 
"(1) I N GENERAL.—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 foreign obligor which is se-
cured by real property located in the L^nited States, to the extent 
that— 
"(A) the debt obligation is a part of the purchase price 
of such real property (or of such real property and related 
personal property); or 
"(B) the debt obligation 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 
personal property). 
"(2) LIMITATION.—Paragraph (1) shall apply to the acqui-
sition of a debt obligation only if— 
"(A) the owner of the property sold is a United States 
person; and 
"(B) at least 25 percent of the purchase price of the prop-
erty sold is, at the time of such sale, paid in United States 
currency to such United States person by the foreign obligor 
from funds not obtained from United States persons for the 
purpose of purchasing such property. 
" (3) RELATED PERSONAL PROPERTY.—For purposes of paragraph 
(1), the term 'related personal property' means personal property 
which is sold in connection with the sale of real property for use 
in the operation of such real property, 
"(i) 
ACQUISITIONS or STOCK OF FOREIGN ISSUERS INVESTING EXCLU-
SIVELY IN THE UNITED STATES.— 
"(1) I N GENERAL.—The tax imposed by section 4911 shall not 
apply to the acquisition from a foreign issuer of its stock by a 
United States person who is a bona fide resident of a foreign coun-
76 Stat. 1003. 
try within the meaning of section 911(a) (1), or who at the time 
^^ ^ 
^^^" 
of such acquisition is regularly performing personal services on 
a full-time basis in a foreign country, if at the close of each calen-
dar quarter ending on or after June 30, 1963, preceding such ac-
quisition, during any part of which such foreign issuer is in 
existence— 
"(A) the assets of such foreign issuer, exclusive of money 
or deposits with persons carrying on the banking business, 
consist solely of: 
"(i) stock or debt obligations of domestic corpora-
tions (other than a corporation which has elected under 
Post, p. 836. 
section 4920(a) (3) (B) to be treated as a foreign issuer 
or obligor for purposes of this chapter); 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
823 
"(ii) debt obligations of the United States, or of any 
State or possession of the United States, or any political 
subdivision of any State or possession; or 
"(iii) debt obligations of citizens or residents of the 
United States; 
"(B) money and deposits with persons carrying on the 
banking business (other than banks as defined in section 581) 
^^ "^^ ^^^ • 
constitute less than 5 percent of the value of the assets of 
such foreign issuer; and 
"(C) less than 25 percent of each class of issued and out-
standing stock of such foreign issuer is held of record by 
United States persons. 
"(2) 
ACQUISITIONS THROUGH UNIT INVESTMENT TRUSTS.—For 
purposes of paragraph (1), an acquisition of an interest in a unit 
investment trust (within the meaning of section 4(2) of the 
Investment Company Act of 1940), or in an entity performing 
H vie SOB-^. 
similar custodial functions, shall be deemed a direct acquisition 
from the foreign issuer of the stock held by such trust or entity 
with respect to such interest and shall not be treated as an acquisi-
tion of stock issued by such trust or entity. 
"(3) 
LIMITATIONS.— 
" (A) Paragraph (1) shall apply only to that portion of the 
total acquisitions of stock of foreign issuers described in such 
paragraph (determined in the order acquired) by a United 
States person in any one calendar year that does not exceed 
$5,000. 
"(B) If, after July 30,1964, a United States person sells or 
otherwise disposes of stock the acquisition of which was ex-
cluded under paragraph (1) from the tax imposed by section 
4911, such person shall not, with respect to such stock, be con-
sidered a United States person, 
'(j) Loss OF ENTITLEMENT TO EXCLUSION IN CASE OF CERTAIN SUB-
SEQUENT TRANSFERS.— 
" (1) I N GENERAL.— 
"(A) Where an exclusion provided by paragraph (1) (B), 
(2), (3), (4), or (5) of subsection (c), or the exclusion pro-
vided by subsection (d), has applied with respect to the 
acquisition of a debt obligation by any person, but such debt 
obligation is subsequently transferred by such person (before 
the termination date specified in section 4911 (d)) to a United 
States person otherwise than— 
"(i) to any agency or wholly-owned instrumentality 
of the United States; 
"(ii) to a commercial bank acquiring the obligation 
in the ordinary course of its commercial banking busi-
ness ; 
"(iii) in the case of an exclusion provided by para-
graph (1)(B), (2), or (3) of subsection (c), to any 
transferee where the extension of credit by such person 
and the acquisition of the debt obligation related thereto 
were reasonably necessary to accomplish the sale of 
property or services out of which the debt obligation 
arose, and the terms of the debt obligation are not unrea-
sonable in light of credit practices in the business in 
which such person is engaged; or 
"(iv) in a transaction described in subsection (a) (1) 
or (2), or a transaction (other than a transfer by gift) 
described in subsection (a) (3). 
31-667 0-65—55 
824 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
then liability for the tax imposed by section 4911 (in an 
amount determined under subparagraph (D) of this para-
graph) shall be incurred by the transferor (with respect to 
such debt obligation) at the time of such subsequent transfer. 
"(B) Where the exclusion provided by paragraph (2) or 
(3) of subsection (c) has applied with respect to the acqui-
sition of stock by any person, but such stock is subsequently 
transferred by such person (before the termination date 
specified in section 4911(d)) to a United States person other-
wise than in a transaction described in subsection (a) (1) or 
(2), or a transaction (other than a transfer by gift) described 
in subsection (a) (3), then liability for the tax imposed by 
section 4911 (in an amount determined under subparagraph 
(D) of this paragraph) shall be incurred by the transferor 
(with respect to such stock) at the time of such subsequent 
transfer. 
"(C) Where the exclusion provided by subsection (f) has 
applied with respect to the acquisition of stock or a debt 
obligation by any person, but such stock or debt obligation 
is subsequently transferred by such person (before the ter-
mination dat« specified in section 4911(d)) to any United 
States person, then liability for the tax imposed by section 
4911 (in an amount determined under subparagraph (D) 
of this paragraph) shall be incurred by the transferor (with 
respect to such stock or debt obligation) at the time of such 
subsequent transfer. 
"(D) In any case where an exclusion provided by para-
graph (1)(B), (2), (3), (4), or (5) of subsection (c) or by 
subsection (d) or (f) has applied, but a subsequent transfer 
described in subparagraph (A), (B), or (C) of this para-
graph occurs and liability for the tax imposed by section 4911 
is incurred by the transieror as a result thereof, the amount 
of such tax shall be equal to the amount of tax for which the 
transferor would have been liable under such section upon 
his acquisition of the stock or debt obligation involved if 
such exclusion had not applied with respect to such ac-
quisition. 
"(2) 
UNITED STATES PERSON TREATED AS FOREIGN PERSON ON 
DISPOSITION OF CERTAIN SECURITIES.—FoT purposes of this chapter, 
if, after December 10, 1963, a United States person sells or other-
wise disposes of stock or a debt obligation which it^— 
"(A) acquired to satisfy minimum requirements imposed 
by foreign law and with respect to which it claimed an ex-
clusion under subsection (b) (3), or 
"(B) designated (or was required to designate) as part 
of a fund pf assets under subsection (e), 
such person shall not, with respect to that stock or debt obliga-
tion, be considered a United States person. 
''SEC. 4915. EXCLUSION FOR DIRECT INVESTMENTS. 
"(a) I N GENERAL.— 
"(1) EXCLUDED ACQUISITIONS.—Except as provided in subsec-
tions (c) and (d) of this section, the tax imposed by section 4911 
shall not apply to the acquisition by a United States person (A) 
of stock or a debt obligation of a foreign corporation, or of a 
debt obligation from a foreign corporation which received such 
obligation in the ordinary course of its trade or business as a 
result of the sale or rental of products manufactured or 
assembled by it or of the performance of services by it, if 
immediately after the acquisition such person (or one or more 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
825 
includible corporations in an affiliated group, as defined in 
section 1504, of which such person is a member) owns (directly 
^^ "^^ ^^^'*-
or indirectly) 10 percent or more of the total combined voting 
power of all classes of stock of such foreign corporation, or (B) 
of stock or a debt obligation of a foreign partnership if immedi-
ately after the acquisition such person owns 
(directly or 
indirectly) 10 percent or more of the profits interest in such 
foreign partnership. 
For purposes of the preceding sentence, 
stock owned (directly or indirectly) by or for a foreign corpora-
tion shall be considered as being owned proportionately by its 
shareholders, and stock owned (directly or indirectly) by or for 
a foreign partnership shall be considered as being owned propor-
tionately by its partners. 
"(2) 
OVERPAYMENT WITH RESPECT TO CERTAIN TAXABLE ACQUISI-
TIONS.—The tax paid under section 4911 on the acquisition by a 
United States person of stock or a debt obligation of a foreign 
corporation or foreign partnership, or a debt obligation from a 
foreign corporation which received such obligation in the ordi-
nary course of its trade or business as a result of the sale or 
rental of products manufactured or assembled by it or the per-
formance of services by it, shall (unless this subsection is inappli-
cable by reason of subsection (c) or (d)) constitute an over-
payment of tax if such person— 
"(A) meets the ownership requirement of paragraph (1) 
with respect to such corporation or partnership at any time 
within 12 months after the date of such acquisition, and 
"(B) holds the stock or debt obligation continuously from 
the date of such acquisition to the last day of the calendar 
year in which such ownership requirement is first met. 
Under regulations prescribed by the Secretary or his delegate, 
credit or refund (without interest) shall be allowed or made 
with respect to such overpayment. 
"(b) 
SPECIAL RULE FOR GOVERNMENT-CONTROLLED ENTERPRISES.— 
A United States person shall be considered to meet the ownership 
requirement of subsection (a) (1) with respect to a foreign corpora-
tion or a foreign partnership if— 
" (1) the government of a foreign country or any political sub-
division thereof, or an agency or instrumentality of such a 
government, directly or indirectly through such corporation or 
partnership or otherwise, restricts to less than 10 percent the 
percentage of the total combined voting power of all classes of 
stock of such corporation, or the percentage of the profits interest 
in such partnership, which may be owned by such United States 
person; 
" (2) such person owns at least 5 percent of the total combined 
voting power of so much of such stock, or at least 5 percent of so 
much of such profits interest, as is not owned by any such govern-
ment, agency, or instrumentality; 
"(3) a trade or business actively conducted in one or more 
foreign countries by such United States person (or by one or more 
corporations in an affiliated 
group, as defined in section 
48(c)(3)(C), of which such person is a member) is directly 
26 use 48^' 
related to the business carried on by such foreign corporation or 
foreign partnership; and 
" (4) such person, and one or more other United States persons 
each of which satisfies the conditions set forth in paragraphs (2) 
and (3), together meet the ownership requirement of subsection 
(a)(1). 
826 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
"(c) EXCEPTION FOR FOREIGN 
CORPORATIONS OR IT'ARTNERSHIPS 
FORMED OR AVAILED OF FOR TAX AVOIDANCE.— 
"(1) I N GENERAL.—The provisions of subsections (a) and (b) 
shall be inapplicable in any case where the foreign corporation or 
foreign partnership is formed or availed of by the United States 
person for the principal purpose of acquiring, through such 
corporation or partnership, an interest in stock or debt obligations 
(of one or more other foreign issuers or obligors) the direct 
acquisition of which by the United States person would be subject 
to the tax imposed by section 4911. 
"(2) COMMERCIAL BANKS, UNDERWRITERS, AND REQUIRED HOLD-
INGS.—For purposes of this subsection, the acquisition by a 
United States person of stock or debt obligations of a foreign 
corporation or foreign partnership which acquires stock or debt 
obligations of foreign issuers or obligors— 
"(A) in making loans in the ordinary course of its busi-
ness as a commercial bank, 
"(B) in the ordinary course of its business of underwrit-
ing and distributing securities issued by other persons, or 
"(C) to satisfy minimum requirements relating to hold-
ings of stock or debt obligations of foreign issuers or obligors 
imposed by the laws of foreign countries where such foreign 
corporation or foreign partnership is doing business, 
shall not, b^ reason of such acquisitions by the foreign corpora-
tion or foreign partnership, be considered an acquisition by the 
United States person of an interest in stock or debt obligations 
of foreign issuers or obligors. For purposes of subparagraph 
(A), any foreign corporation or foreign partnership which is 
regularly engaged in the business of accepting dejjosits from 
customers and receiving other borrowed funds in foreign curren-
cies and making loans in such currencies shall be treated as a 
commercial bank. 
"(3) 
Loss OF ENTITLEMENT TO EXCLUSION OR REFUND 
WHERE 
FOREIGN CORPORATION OR PARTNERSHIP IS AVAILED OF FOR TAX 
AVOIDANCE.—In any case where— 
"(A) the exclusion provided by subsection (a) (1) has ap-
plied with respect to the acquisition of stock or a debt obliga-
tion by a United States person, or 
"(B) a credit or refund of tax under subsection (a) (2) 
has been received by a United States person with respect to 
acquisitions of stock made during a calendar year, 
but the foreign corporation or partnership is availed of by such 
person (after the acquisition described in subparagraph (A) is 
made or the calendar year described in subparagraph (B) has 
ended, but before the termination date specified in section 4911 
(d)) for the principal purpose described in paragraph (1) of this 
subsection, then liability for the tax imposed by section 4911 shall 
be incurred by such person (with respect to such stock or debt obli-
gation) at the time the foreign corporation or partnership is so 
availed of; and the amount of such tax shall be equal (in a case 
described in subparagraph (A)) to the amount of tax for which 
such person would have been liable under such section upon his 
acquisition of the stock or debt obligations involved if such exclu-
sion had not applied to such acquisition, or (in a case described in 
subparagraph (B)) to the aggregate amount of tax for which such 
person was liable under such section upon his acquisitions of the 
stock involved. 
"(d) EXCEPTION FOR ACQUISITIONS MADE W I T H INTENT To SELL TO 
UNITED STATES PERSONS.—The provisions of subsections (a) and (b) 
76 Stat. ]1017. 
26 u s e 957. 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
827 
shall be inapplicable in any case where the acquisition of stock or debt 
obligations of the foreign corporation or foreign partnership is made 
with an intent to sell, or to offer to sell, any part of the stock or debt 
obligations acquired to United States persons. 
"SEC. 4916. EXCLUSION FOR INVESTMENTS IN LESS 
DEVELOPED 
COUNTRIES. 
"(a) GENERAL RULE.—The tax imposed by section 4911 shall not 
apply to the acquisition by a United States person of— 
" (1) a debt obligation issued or guaranteed by the government 
of a less developed country or a political subdivision thereof, 
or by an agency or instrumentality of such a government; 
"(2) stock or a debt obligation of a less developed country 
corporation; 
"(3) a debt obligation issued by an individual or partnership 
resident in a less developed country in return for money or other 
property which is used, consumed, or disposed of wholly within 
one or more less developed countries; or 
"(4) stock or a debt obligation of a foreign issuer or obligor, 
to the extent that such acquisition is required as a reinvestment 
within a less developed country by the tenns of a contract of sale 
to, or of a contract of indemnification with respect to the nationali-
zation, expropriation, or seizure by, the government of such less 
developed country or a political subdivision thereof, or an agency 
or instrumentality of such government, of property owned within 
such less developed country or such political subdivision by such 
United States person, or by a controlled foreign corporation (as 
defined in section 957) more than 50 percent of the total combined 
voting power of all classes of stock entitled to vote of which is 
owned (within the meaning of section 958) by such United States 
^e use 958. 
person, but only if such contract was entered into because the gov-
ernment of such less developed country or political subdivision, or 
such agency or instrumentality— 
"(A) has nationalized or has expropriated or seized, or 
has threatened to nationalize or to expropriate or seize, a sub-
stantial portion of the property owned within such less de-
veloped country or such political subdivision by such United 
States person or such controlled foreign corporation; or 
"(B) has taken action which has the effect of nationalizing 
or of expropriating or seizing, or of threatening to national-
ize or to expropriate or seize, a substantial portion of the 
property so owned. 
For purposes of this subsection, an instrumentality of the government 
of a less developed country or a political subdivision thereof includes 
a corporation or other entity with respect to which such government, 
or any agency of such government, owns more than 50 percent of the 
total combined voting power of all classes of stock entitled to vote or, 
in the case of a corporation or other entity not issuing shares of stock, 
has the authority to elect or appoint a majority of the board of direc-
tors or equivalent body of such corporation or other entity. 
"(b) LESS DEVELOPED COUNTRY DEFINED.—For purposes of this 
section, the term 'less developed country' means any foreign country 
(other than an area within the Sino-Soviet bloc) or any possession of 
the United States with respect to which, as of the date of an acqui-
sition referred to in subsection (a), there is in effect an Executive 
order by the President of the United States designating such country 
as an economically less developed country for purposes of the tax 
imposed by section 4911. For purposes of the preceding sentence, 
Executive Order Numbered 11071, dated December 27, 1962 (desig- „„?f,"^*^ ^"'^ 
nating certain areas as economically less developed countries for 
828 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
26 use 901-905, 
951-964. 
26 use 1248. 
Notification to 
eongress. 
76 Stat. 1013. 
26 use 955. 
26 use 956. 
purposes of subparts A and F of part I I I of subchapter N, and section 
1248 of part IV of subchapter P, of chapter 1), shall be deemed to have 
been issued and in effect, for purposes of the tax imposed by section 
4911, on July 18, 1963, and continuously thereafter until there is in 
effect the Executive order referred to in the preceding sentence. An 
overseas territory, department, province, or possession of any foreign 
country may be designated as a separate country. No designation shall 
be made under this subsection with respect to any of the following: 
Australia 
Austria 
Belgium 
Canada 
Denmark 
France 
Germany (Federal Republic) 
Hong Kong 
Italy 
Japan 
Liechtenstein 
Luxembourg 
Monaco 
Netherlands 
New Zealand 
Norway 
Republic of South Africa 
San Marino 
Spain 
Sweden 
Switzerland 
United Kingdom. 
After the President (under the first sentence of this subsection) has 
designated any foreign country as an economically less developed 
country for purposes of the tax imposed by section 4911, he shall 
not terminate such designation (either by issuing an Executive order 
for that purpose or by issuing an Executive order which has the effect 
of terminating such designation) unless, at least 30 days before such 
termination, he has notified the Senate and the House of Representa-
tives of his intention to terminate such designation. 
"(c) 
LESS DEVELOPED COUNTRY CORPORATION DEFINED.— 
"(1) I N GENERAL.—For purposes of this section, the term 'less 
developed country corporation' means a foreign corporation 
which for the applicable periods set forth in paragrajm (3)— 
"(A) meets the requirements of section 955(c) (1) or 
(2); or 
, . 
. 
., 
"(B) derives 80 percent or more of its gross income, if 
any, from sources within less developed countries, or from 
deposits in the United States with persons carrying on the 
banking business, or both, and has assets 80 percent or more 
in value of which consists of— 
"(i) money, and deposits in the United States with 
persons carrying on the banking business, 
"(ii) stock or debt obligations of any other less 
developed country corporation, 
" (iii) debt obligations of a less developed country, 
"(iv) investments which are required because of 
restrictions imposed by a less developed country, 
"(v) debt obligations described in paragraph (3) of 
subsection (a) of this section, and 
"(vi) obligations of the United States. 
In applying this paragraph the determination of whether a for-
eign country is a less developed country shall be made in accord-
ance with subsection (b) of this section. 
"(2) 
SPECIAL RULES.— 
"(A) For purposes of subparagraphs (A) and (B) of 
paragraph (1), property described in section 956(b)(1) 
(regardless of w^hen acquired), other than deposits with per-
sons carrying on the banking business, and income derived 
from such property, shall not be taken into account. 
26 use 955. 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
829 
"(B) For purposes of subparagraph (A) of paragraph 
(1), obligations of any other less developed country corpora-
tion shall be taken into account under section 955(c) (1) (B) 
(iii) without regard to the period remaining to maturity at 
76 sta^ ^
1
0
^
1
3
. 
the time of their acquisition. 
"(C) For purposes of subparagraph (B) of paragraph 
(1), deposits outside the United States (other than deposits 
in a less developed country) with persons carrying on the 
banking business, and income from such deposits, shall not 
be taken into account. 
"(3) APPLICABLE PERIODS.—The determinations required by 
subparagraphs (A) and (B) of paragraph (1) shall be made 
(A) for the annual accounting period (if any) of the foreign 
corporation immediately preceding its accounting period in which 
the acquisition involved is made, (B) for the annual accounting 
period of the foreign corporation in which such acquisition is 
made, and (C) for the next succeeding annual accounting period 
of the foreign corporation. 
"(4) 
SPECIAL RULES FOR TREATMENT or CORPORATIONS AS LESS 
D
E
V
E
L
O
P
E
D COUNTRY CORPORATIONS.—A foreign Corporation shall 
be treated as satisfying the definition in paragraph (1) with re-
spect to the acquisition by a United States person of stock or a 
debt obligation if— 
"(A) before the acquisition occurs (or, in the case of an 
acquisition occurring before or within 60 days after the 
date of the enactment of this chapter, pursuant to application 
made within such period following such date as may be pre-
scribed by the Secretary or his delegate in regulations), it 
is established to the satisfaction of the Secretary or his dele-
gate that such foreign corporation— 
" (i) has met the applicabl e requirements of paragraph 
(1) for the period (if any) referred to in paragraph 
(3) (A), and 
"(ii) may reasonably be expected to satisfy such 
requirements for the periods referred to in paragraphs 
(3) (B) and (C); or 
"(B) in the case of an acquisition occurring on or before 
December 10,1963, the applicable requirements of paragraph 
(1) are met for the annual accounting period of the forei^ 
corporation immediately preceding its accounting period m 
which the acquisition occurred. 
"(5) 
TREATMENT OF CORPORATIONS AS LESS DEVELOPED COUNTRY 
CORPORATIONS IN OTHER CASES.—A foreign corporation may also 
be treated as satisfying the definition in paragraph (1) with 
respect to the acquisition by a United States person of stock or 
a debt obligation (but subject to possible subsequent liability for 
tax under subsection (d) (1)), if— 
"(A) such corporation has met the applicable require-
ments of paragraph (1) for the period (if any) referred to 
in paragraph (3) (A), and 
"(B) such person reasonably believes that such corpora-
tion will satisfy such requirements for the periods referred 
to in paragraphs (3) (B) and (C). 
"(d) 
SUBSEQUENT LIABILITY FOR TAX IN CERTAIN CASES.— 
" (1) 
STOCK AND DEBT OBLIGATIONS OF CERTAIN CORPORATIONS.— 
Where a foreign corporation is treated under subsection (c) (5) 
as satisfying the definition in subsection (c) (1) and the exclusion 
provided by subsection (a) (2) has applied with respect to the 
acquisition of stock or a debt obligation of such corporation by 
830 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
any person, but such corporation fails to satisfy the definition 
contained in subsection (c)(1) for either of the applicable ac-
counting periods referred to in clauses (B) and (C) of subsection 
(c) (3) (and it is not treated under subsection (c) (4) as satisfy-
ing such definition), then liability for the tax imposed by section 
4911 shall be incurred by such person (with respect to such stock 
or debt obligation) as of the close of the earliest such applicable 
accounting period (ending on or before the termination date 
specified in section 4911(d)) with respect to which the corpora-
tion fails to satisfy such definition; and the amount of such tax 
shall be equal to the amount of tax for which such person would 
have been liable under such section upon the acquisition of the 
stock or debt obligation involved if such exclusion had not applied 
with respect to such acquisition. 
"(2) DEBT OBLIGATIONS ISSUED IN RETURN FOR CERTAIN PROP-
ERTY.—Where the exclusion provided by subsection (a) (3) has 
applied with respect to the acquisition by a United States person 
of a debt obligation issued in return for money or other property 
as provided in such subsection, but part or all of such money or 
property is used, consumed, or disposed of (before the termi-
nation date specified in section 4911(d)) otherwise than wholly 
within one or more less developed countries, then liability for 
the tax imposed by section 4911 shall be incurred by such person 
(with respect to such debt obligation) as of the time such money 
or property is first so used, consumed, or disposed of; and the 
amount of such tax shall be equal to the amount of tax for which 
such person would have been liable under such section upon the 
acquisition of the debt obligation involved if such exclusion had 
not applied with respect to such acquisition. 
"SEC. 4917. EXCLUSION FOR ORIGINAL OR NEW ISSUES WHERE RE-
QUIRED FOR INTERNATIONAL MONETARY STABILITY. 
"(a) I N GENERAL,—If the President of the United States shall at 
any time determine that the application of the tax imposed by section 
4911 will have such consequences for a foreign country as to imperil 
or threaten to imperil the stability of the international monetary sys-
tem, he may by Executive order specify that such tax shall not apply 
to the acquisition by a United States person of stock or a debt obliga-
tion of the government of such foreign country or a political subdi-
vision thereof, any agency or instrumentality of any such government, 
any corporation, partnership, or trust (other than a company regis-
1
5 use 8o*a%i 
tered under the Investment Company Act of 1940) organized under 
the laws of such country or any such subdivision, or any individual 
resident therein, to the extent that such stock or debt obligation is 
acquired as all or part of an original or new issue as to which there is 
filed such notice of acquisition as the Secretary or his delegate may pre-
scribe by regulations. In the case of acquisitions made during the 
period beginning July 19,1963, and ending with the date of the enact-
ment of this chapter, 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. 
"(b) 
APPLICABILITY OF EXECUTIVE ORDER.—An Executive order 
described in subsection (a) may be applicable to all such original or 
new issues or to any aggregate amount or classification thereof which 
shall be stated in such order and shall apply to acquisitions occurring 
during such period of time as shall be stated therein. If the order is 
applicable to a limited aggregate amount of such issues it shall apply 
(under regulations prescribed by the Secretary or his delegate) to 
those acquisitions as to which notice of acquisition was first filed, 
provided that in the case of any such notice the acquisition described 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
831 
in the notice is made before or within 90 days after the date of filing 
or within such longer period after such date as may be specified in such 
order. 
"(c) ORIGINAL OR NEW ISSUE.—For purposes of this section— 
"(1) stock shall be treated as part of an original or new issue 
only when it is acquired from the issuer by the United States per-
son claiming the exclusion; and 
"(2) a debt obligation shall be treated as part of an original 
or new issue only if acquired not later than 90 days after the 
date on which interest begins to accrue on such obligation, except 
that a debt obligation secured by a lien on improvements on real 
property which are under construction or are to be constructed at 
the time such obligation is issued (or if such obligation is one of 
a series, at the time the first obligation in such series is issued) shall 
be treated as part of an original or new issue if— 
"(A) such obligation is acquired not later than 90 days 
after the date on which interest begins to accrue on the total 
amount of such obligation (or if such obligation is one of a 
series, on the last issued of the obligations in such series); and 
"(B) the United States person claiming the exclusion be-
came committed to the acquisition of such obligation not 
later than 90 days after the date on which interest began 
to accrue on any part of such obligation (or, if such obligation 
is one of a series, on the first obligation issued in such series). 
"SEC. 4918. EXEMPTION FOR PRIOR AMERICAN OWNERSHIP. 
"(a) GENERAL RULE.—The tax imposed by section 4911 shall not 
apply to an acquisition of stock or a debt obligation of a foreign issuer 
or obligor if it is established in the manner provided in this section 
that the person from whom such stock or debt obligation was acquired 
was a United States person throughout the period of his ownership or 
continuously since July 18, 1963, and was a United States person 
eligible to execute a certificate of American ownership with respect to 
such acquisition. 
"(b) CERTIFICATE OF AMERICAN OWNERSHIP.—For purposes of sub-
section (a), a certificate of American ownership received in connection 
with an acquisition shall be conclusive proof for purposes of this ex-
emption of prior American ownership unless the person making such 
acquisition has actual knowledge that the certificate is false in any 
material respect. 
"(c) TRADING ON CERTAIN NATIONAL SECURITIES EXCHANGES.—For 
purposes of subsection (a), a written confirmation received from a 
member or member organization of a national securities exchange 
registered with the Securities and Exchange Commission in connection 
with an acquisition on such exchange, which does not state that such 
acquisition was made subject to a special contract, shall be conclusive 
proof for purposes of this exemption of prior American ownership 
(unless the person making such acquisition has actual knowledge 
that the confirmation is false in any material respect), if such exchange 
has in effect at the time of the acquisition rules providing that— 
"(1) any stock or debt obligation, the acquisition of which by 
any United States person would be subject to the tax imposed by 
section 4911 but for the provisions of this section, shall be sold 
in the regular market on such exchange (and not subject to a 
special contract) only if the member or member organization of 
such exchange who effects the sale of such stock or debt obligation 
as broker has in his possession (A) a certificate of American 
ownership with respect to the stock or debt obligation sold, or 
(B) a blanket certificate of American ownership with respect 
to the account for which such stock or debt obligation is sold; and 
832 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
"(2) any member or member organization of such exchange 
effecting as broker a purcha;Se of any such stock or debt obligation 
subject to a special contract (and not in the regular market) shall 
furnish the person making such an acquisition a written confirma-
tion stating that the acquisition was made subject to such special 
contract. 
" (d) TRADING IN THE OVER-THE-COUNTER MARKET.—For purposes 
of subsection (a), a written confirmation from a member or member 
organization of a national securities association registered with the 
Securities and Exchange Commission received in connection with an 
acquisition made other than on a national securities exchange described 
in subsection (c) shall be conclusive proof for purposes of this exemp-
tion of prior American ownership, unless the confirmation states that 
the acquisition was made from a person who has not executed and filed 
a certificate of American ownership with respect to the stock or debt 
obligation sold or a blanket certificate of American ownership with 
respect to the account from which the stock or debt obligation is sold 
(or the person making such acquisition has actual knowledg:e that the 
confirmation is false m any material respect), if such association has 
in effect at the time of the acquisition rules providing that any member 
or member organization of such association who effects a sale as broker 
other than on a national securities exchange of any stock or debt 
obligation, the acquisition of which by any United States person would 
be subject to the tax imposed by section 4911 but for the provisions of 
this section, must— 
"(1) have in his possession (A) a certificate of American 
ownership with respect to the stock or debt obligation sold, or 
(B) a blanket certificate of American ownership with respect to 
the account for which such stock or debt obligation is sold; or 
" (2) furnish to the person acquiring such stock or debt obliga-
tion written confirmation stating that the acquisition is from a 
person who has not executed and filed a certiificate of American 
ownership with respect to such stock or debt obligation or a 
blanket certificate of American ownership with respect to the 
account from which such stock or debt obligation is sold. 
Any member or member organization of such an association who 
acquires any stock or debt obligation for his or its own account other 
than on a national securities exchange may treat a blanket certificate 
of American ownership with respect to the seller's account as conclu-
sive proof for purposes of this exemption of prior American owner-
ship, unless such member or member organization has actual knowledge 
that such certificate is false in any material respect. 
"(e) EXECUTION, FILING, AND CONTENTS OF CERTIFICATE.—^A certi-
ficate of American ownership or blanket certificate of American 
ownership under this section must be executed and filed in such man-
ner and set forth such information as the Secretary or his delegate 
shall prescribe by regulations. 
"(f) OTHER PROOF OF EXEMPTION.—For purposes of subsection (a), 
if a person establishes, with respect to an acquisition, that there is 
reasonable cause for his inability to establish prior American owner-
ship under subsection (b), (c),or (d),he may establish prior Ameri-
can ownership for purposes of this exemption by other evidence that 
the person from whom such acquisition was made was a United 
States person eligible to execute a certificate of American ownership 
with respect to such acquisition. 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
833 
"SEC. 4919. SALES BY UNDERWRITERS AND DEALERS TO FOREIGN 
PERSONS. 
"(a) CREDIT OR REFUND.—^The tax paid under section 4911 on the 
acquisition of stock or debt obligations of a foreign issuer or obligor 
shall constitute an overpayment of tax to the extent that such stock 
or debt obligations— 
" (1) PRIVATE PLACEMENTS AND PUBLIC OFFERINGS.—Are acquired 
by an underwriter in connection with a private placement or a 
public offering by a foreign issuer or obligor (or a person or 
persons directly or indirectly controlling, controlled by, or under 
common control with such issuer or obligor) and are sold as part 
of such private placement or public offering by the underwriter 
(including sales by other underwriters who are United States 
persons participating in the placement or distribution of the stock 
or debt obligations acquired by the underwriter) to persons other 
than United States persons; 
" (2) CERTAIN DEBT OBLIGATIONS.—Consist of debt obligations— 
"(A) acquired by a dealer in the ordinary course of his 
business and sold by him, within 90 days after their purchase, 
to— 
"(i) persons other than United States persons, or 
"(ii) another dealer who resells them 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, within 90 days 
before their purchase, to— 
"H) persons other than United States persons, or 
"(ii) another dealer who resold them on the same or 
the next business day to persons other than United States 
d
persons; or 
ERTAIN STOCK. 
C o u s i s t 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 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 
purchase or on either of the two preceding business days 
to persons other than United States persons. 
Under regulations prescribed by the Secretary or his delegate, credit 
or refund (without interest) shall be allowed or made with respect 
to such overpayment. For purposes of paragraphs (2) and (3) of 
this subsection and for purposes of paragraph (3) of subsection (b), 
the day of purchase or sale of any stock or debt obligation is the day 
on which an order to purchase or to sell, as the case may be, is 
executed. 
" (b) EVIDENCE To SUPPORT CREDIT OR REFUND.— 
"(1) I N GENERAL.—Credit or refund shall be allowed to an 
underwriter or dealer under subsection (a) with respect to any 
stock or debt obligation sold by him only if the underwriter or 
dealer— 
"(A) files with the return required by section 6011(d) on 
^°^^' P- ^'^^^ 
which credit is claimed, or with the claim for refund, such 
information as the Secretary or his delegate may prescribe 
by regulations, and 
"(B) establishes that such stock or debt obligation was 
sold to a person other than a United States person. 
834 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
In any case where two or more underwriters form a group for 
the purpose of purchasing and distributing (through resale) 
stock or debt obligations of a single foreign issuer or obligor, any 
one of such underwriters may, to the extent provided by regula-
tions prescribed by the Secretary or his delegate, satisfy the 
requirements of this paragraph on behalf of all such under-
writers. 
"(2) CERTAIN SALES BY UNDERWRITERS.—For purposes of para-
graph (1) (B), in the case of a claim for credit or refund under 
subsection (a)(1) with respect to stock or a debt obligation 
acquired by an underwriter and not sold by him directly to a 
person other than a United States person, a certificate of sale to 
a foreign person (setting forth such information, and filed in 
such manner, as the Secretary or his delegate may prescribe by 
regulations), executed by the underwriter who made such sale, 
shall be conclusive proof that such stock or debt obligation was 
sold to a person other than a United States person, unless the 
underwriter relying upon the certificate has actual knowledge 
that the certificate is false in any material respect. 
"(3) 
SALES OF DEBT OBLIGATIONS BY DEALERS.— 
" (A) SALES ON NATIONAL SECURITIES EXCHANGES.—For pur-
poses of paragraph (1) (B), in the case of a claim for credit 
or refund under subsection (a) (2), the sale by a dealer of a 
debt obligation on a national securities exchange registered 
with the Securities and Exchange Commission subject to 
a special contract (and not in the regular market) shall be 
conclusive proof that such debt obligation was sold to a per-
son other than a United States person, if such exchange has 
in effect at the time of the sale rules providing that— 
"(i) a member or member organization of such ex-
change selling a debt obligation as a dealer, or effecting 
the sale as broker of a debt obligation on behalf of a 
dealer, on such exchange subject to a special contract 
(and not in the regular market) shall furnish to the 
member 
or member 
organization 
purchasing 
such 
debt obligation as a dealer, or effecting the purchase as 
broker of such debt obligation on behalf of a dealer, 
a written confirmation or comparison stating that such 
sale is being made as a dealer, or on behalf of a dealer; 
and 
"(ii) if the purchaser of such debt obligation is a 
dealer (whether or not a member or member organiza-
tion of such exchange), the terms of the contract applica-
ble to such sale shall require the purchasing dealer to 
undertake to resell such debt obligation on the day of 
purchase or the next business day to a person other than 
a United States person. 
A dealer who acquires a debt obligation in a transaction in 
which a written confirmation or comparison described in 
clause (i) is furnished shall not be entitled to a credit or 
refund under subsection (a) (2) with respect to his acquisi-
tion of such debt obligation unless he establishes that such 
debt obligation was sold by him on the day on which it was 
purchased or the next business day to a person other than a 
United States person. 
"(B) OVER-THE-COUNTER SALES.—For purposes of para-
graph (1) (B), in the case of a claim for credit or refund 
under subsection (a)(2) with respect to a debt obligation 
sold in a transaction not on a national securities exchange, a 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
835 
written confirmation furnished by a member or member 
organization of a national securities association registered 
with the Securities and Exchange Commission stating that 
such member or member organization— 
"(i) effected the purchase as broker of a debt obliga-
tion on behalf of a person other than a United States 
person, or 
"(ii) purchased a debt obligation which he resold on 
the day of purchase or the next business day to a person 
other than a United States person, 
shall be conclusive proof that such debt obligation was sold 
to a person other than a United States person (unless the 
dealer relying upon the confirmation has actual knowledge 
that the confirmation is false in any material respect), if 
such association has in effect at the time of the purchase 
rules providing that a member or member organization 
who effects a purchase of, or purchases, a debt obligation 
from a dealer who notifies such member or member organiza-
tion that such debt obligation is being sold by such dealer 
and that such dealer intends to claim a credit or refund 
under subsection (a)(2), shall furnish to such dealer a 
written confirmation stating that the purchase of such debt 
obligation was (or was not) effected by such member or 
member organization on behalf of a person other than a 
United States person, or that such debt obligation was (or 
was not) sold by such member or member organization on 
the day of purchase or the next business day to a person 
other than a United States person. 
"(4) SALES OF STOCK BY DEALERS.—For purposes of paragraph 
(1) (B), in the case of a claim for credit or refund under subsec-
tion (a) (3), the sale hj a dealer of stock on a national securities 
exchange registered with the Securities and Exchange Commis-
sion subject to a special contract (and not in the regular market) 
shall be conclusive proof that such stock was sold to a person 
other than a United States person, unless such dealer has actual 
knowledge at the time of such sale that the purchaser of such 
stock is a dealer (whether or not a member or member organiza-
tion of such exchange). 
"(c) DEFINITIONS.—For purposes of this section— 
"(1) the term 'underwriter' means any person who has pur-
chased stock or debt obligations from the issuer or obligor (or 
from a person controlling, controlled by, or under common control 
with such issuer or obligor), or from another underwriter, with 
a view to the distribution through resale of such stock or debt 
obligations; and 
"(2) the term 'dealer' means any person who is a member of 
a national securities association registered with the Securities and 
Exchange Commission and who is regularly engaged, as a mer-
chant, in purchasing stock or debt obligations and selling them 
to customers with a view to the gains and profits which may be 
derived therefrom. 
"SEC. 4920. DEFINITIONS AND SPECIAL RULES. 
" (a) I N GENERAL.—For purposes of this chapter— 
"(1) DEBT OBLIGATION.— 
"(A) I N GENERAL.—Except as provided in subparagraph 
(B), the term 'debt obligation' means— 
"(i) any indebtedness, whether or not represented by 
a bond, debenture, note, certificate, or other writing. 
836 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT.. 
whether or not secured by a mortgage, and whether or not 
bearing interest; and 
"(ii) any interest in, or any option or similar right to 
acquire, a debt obligation referred to in this subpara-
graph, whether or not such interest, option, or right is in 
writing. 
"(B) EXCEPTIONS.—The term 'debt obligation' shall not 
include any obligation which— 
" (i) is convertible by its terms into stock of the obligor, 
if it is so convertible only within a period of 5 years or 
less from the date on which interest begins to accrue 
thereon; or 
"(ii) arises out of the divorce, separate maintenance, 
or support of an individual who is a United States person. 
"(2) STOCK.—The term 'stock' means— 
" (A) any stock, share, or other capital interest in a corpora-
tion; 
"(B) any interest of a partner in a partnership; 
"(C) any interest in an investment trust; 
"(D) any indebtedness which is convertible by its terms 
into stock of the dbligor, if it is so convertible only within 
a period of 5 years or less from the date on which interest 
begins to accrue thereon; and 
"(E) any interest in, or option or similar right to acquire, 
any stock described in this paragraph. 
"(3) FOREIGN ISSUER OR OBLIGOR.—The terms 'foreign issuer', 
'foreign obligor', and 'foreign issuer or obligor' mean any issuer of 
stock or obligor of a debt obligation, as the case may be, which is— 
" (A) (i) an international organization of which the United 
States is not a member, 
"(ii) the government of a foreign country or any political 
subdivision thereof, or an agency or instrumentality of such 
a government, 
"(iii) a corporation, partnership, or estate or trust which 
is not a United States person as denned in paragraph (4); or 
"(iv) a nonresident alien individual; 
"(B) a domestic corporation which, as of July 18, 1963, 
was a management company registered under the Investment 
Companj^ Act of 1940 if— 
"(i) at least 80 percent of the value of the stock and 
debt obligations owned by such corporation on July 18, 
1963, and at least 80 percent of the value of the stock 
and debt obligations owned by such corporation at the 
end of every calendar quarter thereafter (through the 
quarter preceding the quarter in which the acquisition 
involved is made), consists of stock or debt obligations 
of foreign issuers or obligors and other debt obligations 
having an original maturity of 90 days or less; 
" (ii) such corporation elects to be treated as a foreign 
issuer or obligor for purposes of this chapter; and 
"(iii) such corporation does not materially increase 
its assets during the period from July 18, 1963, to the 
date on which such election is made through borrowing 
or through issuance or sale of its stock (other than stock 
issued or sold on or before September 16, 1963, as part 
of a public oflfering with respect to which a registration 
statement was first filed with the Securities and 
Exchange Commission on July 18, 1963, or within 90 
days before that date). 
54 Stat. 789. 
15 u s e 80a-51. 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
837 
The election under clause (ii) shall be made on or before the 
60th day after the date of the enactment of this chapter 
under regulations prescribed by the Secretary or his delegate. 
Such election shall be effective as of the date specified by the 
corporation, but not later than the date on which such election 
is made, and shall remain in effect until revoked. 
If, at the 
close of any succeeding calendar quarter, the company ceases 
to meet the requirement of clause (i), the election shall 
thereupon (with respect to quarters after such calendar 
quarter) be deemed revoked. When an election is revoked 
no further election may be made. If the assets of a foreign 
corporation are acquired by a domestic corporation in a re-
organization described in subparagraph (D) or (F) of sec-
tion 368(a) (1), the two corporations shall be considered a 
^^ "^^ ^^^• 
single domestic corporation for purposes of this sub-
paragraph. 
"(4) UNITED STATES PERSON.—The term 'United States person' 
means— 
" (A^ a citizen or resident of the United States, 
"(B) a domestic partnership, 
"(C) a domestic corporation, other than a corporation 
described in paragraph (3) (B), 
"(D) an agency or wholly-owned instrumentality of the 
United States, 
"(E) a State or political subdivision, or any agency 
or instrumentality thereof, and 
"(F) any estate or trust— 
"(i) the income of which from sources without the 
United States is includible in gross income under subtitle 
A (or would be so includible if not exempt from tax 
under section 501(a), section 521(a), or section 584(b)), 
or 
" (ii) which is situated in the Commonwealth of Puerto 
Kico or a possession of the United States. 
"(5) 
DOMESTIC 
CORPORATION; 
DOMESTIC 
PARTNERSHIP.—The 
terms 'domestic corporation' and 'domestic partnership' mean, 
respectively, a corporation or partnership created or organized 
in the United States or under the laws of the United States or of 
any State, except that such terms do not include a branch office 
of such a corporation or partnership located outside the United 
States if — 
"(A) such corporation or partnership (without regard 
to the activities of such office) is a dealer (as defined in sec-
tion 4919(c) (2)); 
"(B) such office (which is operated by employees or part-
ners of such corporation or partnership) was located outside 
the United States on July 18, 1963, and was regularly en-
gaged, as a merchant, in purchasing and selling stock or debt 
obligations of foreign issuers or obligors with a view to the 
gains and profits which may be derived therefrom, for a 
period of not less than 12 consecutive calendar months prior 
to July 18, 1963; 
"(C) all acquisitions by such branch office of stock of for-
eign issuers and debt obligations of foreign obligors are made 
in the ordinary course of its business as such a merchant or 
as an underwriter (as defined in section 4919(c) (1)); 
"(D) such office maintains separate books and records 
reasonably reflecting the assets and liabilities properly at-
tributable to such office; and 
26 u s e 501, 
521, 584. 
Ante, p. 833. 
838 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
"(E) there is in effect an election that such branch office 
be treated as a foreign corporation or foreign partnership 
for purposes of this chapter. 
The election under subparagraph (E) shall be made by such 
corporation or partnership on or before the 60th day after the 
date of the enactment of this chapter under regulations prescribed 
by the Secretary or his delegate. A separate election may be made 
with respect to each branch office of such corporation or partner-
ship. Such election shall be effective as of July 18,1963, and shall 
remain in effect until revoked in accordance with such regulations. 
If, at any time, a branch office ceases to meet the requirements of 
subparagraph (A), (C), 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. 
"(6) IJNrrED STATES; STATE.—The term 'United States' when 
used in a geographical sense includes the States, the District of 
Columbia, the Commonwealth of Puerto Rico, and the possessions 
of the United States; and the term 'State' includes the District of 
Columbia, the Commonwealth of Puerto Rico, and the possessions 
of the United States. 
"(7) PERIOD REMAINING TO MATURITY.— 
"(A) I N GENERAL.—Subject to the modifications set forth 
in subparagraph (B), the period remaining to maturity of a 
debt obligation shall be that period beginning on the date of 
its acquisition and ending on the fixed or determinable date 
when, according to its terms, the payment of principal 
becomes due. 
"(B) MODIFICATIONS.—The period remaining to maturity— 
"(i) of any interest in, or any option or similar right 
to acquire, any debt obligation shall be the period remain-
ing to maturity of that debt obligation at the time of the 
acquisition of such interest, option, or right; 
"(ii) of any debt obligation which is renewable with-
out affirmative action by the obligee, or of any interest 
in or option or similar right to acquire such a debt 
obligation, shall end on the last day of the final renewal 
period; 
"(iii) of any debt obligation which has no fixed or 
determinable date when the payment of principal becomes 
due shall be considered to be 281/^ years; 
"(iv) of any debt obligation which is payable on 
demand (including any bank deposit) shall be considered 
to be less than 3 years; and 
"(v) of a debt obligation which is subject to retire-
ment before its maturity through operation of a mf^nda-
tory sinking fund shall be determined under regulations 
prescribed by the Secretary or his delegate. 
"(8) FOREIGN STOCK ISSUES TREATED AS DOMESTIC.— 
"(A) I N GENERAL.—A foreign corporation (other than a 
company registered under the Investment Company Act of 
15 u*sc" 80a%i 
1940) shall not be considered a foreign issuer with respect to 
any class of its stock if, as of the latest record date before 
July 19,1963, more than 65 percent of such class of stock was 
held of record by United States persons. 
"(B) STOCK TRADED ON NATIONAL SECURITTFAS EXCHANGES.— 
A foreign corporation (other than a company registered 
under the Investment Company Act of 1940) shall not be 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
839 
considered a foreign issuer with respect to any class of its 
stock which is traded on one or more national securities 
exchanges registered with the Securities and Exchange Com-
mission, if the trading on such national securities exchanges 
constituted the principal market for such class of stock during 
the calendar year 1962 and if, as of the latest record date 
before July 19, 1963, more than 50 percent of such class of 
stock was neld of record by United States persons. 
"(b) SPECIAL RULE FOR FOREIGN UNDERWRITERS.—A partnership 
or corporation which is not a United States person and which partici-
pates, as an underwriter in an underwriting group that includes one or 
more United States persons, in a public offering of stock or debt obli-
gations of a foreign issuer or obligor shall, if such partnership or 
corporation so elects and subject to such terms and conditions as the 
Secretary or his delegate may prescribe by regulations, be treated 
as a United States person for purposes of this chapter with respect 
to its participation in such public offering. 
"(c) 
CROSS REFERENCE.— 
"For definition of 'acquisition', see section 4912. 
"Subchapter B—Acquisitions by Commercial Banks 
"Sec. 4931. Commercial bank loans. 
"SEC. 4931. COMMERCIAL BANK LOANS. 
" (a) STANDBY AUTHORITY.—The provisions of this section shall ap-
ply only if the President of the United States— 
"(1) determines that the acquisition of debt obligations of 
foreign obligors by commercial banks in making loans in the 
ordinary course of the commercial banking business has materially 
impaired the effectiveness of the tax imposed by section 4911, 
because such acquisitions have, directly or indirectly, replaced 
acquisitions by United States persons, other than commercial 
banks, of debt obligations of foreign obligors which are subject 
to the tax imposed by such section, and 
"(2) specifies by Executive order that the provisions of this 
section shall apply to acquisitions by commercial banks of debt 
obligations of foreign obligors, to the extent specified in such 
order. 
Such Executive order shall be effective, to the extent specified therein, 
with respect to acquisitions made during the period beginning on the 
day after the date on which the order is issued and ending on the date 
set forth in section 4911(d). 
Such Executive order may be modified 
from time to time (by Executive order), except that no such modifica-
tion shall (A) have the effect of excluding from the application of 
subsection (b) or (c) a significant class of acquisitions to which such 
subsection applied under such Executive order or any modification 
thereof, or (B) subject any acquisition made on or before the date of 
issuance of such modification to the application of subsection (b) or 
(c). 
"(b) 
DEBT OBLIGATIONS W I T H MATURITY OF 3 YEARS OR MORE, 
ETC.—During the period in which an Executive order issued under 
subsection (a) is effective, and to the extent specified in such order 
(and any modifications thereof), sections 4914(b)(2)(A), 4914(j) 
(1) (A) (ii), and 4916(c) (2) (A) shall not apply. 
Ante. pp. sis. 
"(c) 
DEBT OBLIGATIONS W I T H MATURITY FROM 1 TO 3 YEARS.— ^^'*-
During the period in which an Executive order issued under subsection 
(a) is effective, and to the extent specified in such order (and any 
modifications thereof), there is hereby imposed, on each acquisition 
by a United States person (as defined m section 4920(a) (4)) which is 
31-667 0-65—56 
840 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
a commercial bank of a debt obligation of a foreign obligor (if such 
obligation has a period remaining to maturity of 1 year or more and 
less than 3 years), a tax equal to a percentage of the actual value of 
the debt obligation measured by the period remaining to its maturity 
and determined in accordance with the following table: 
The tax, as a per-
"If the period remaining 
centage of actual 
to maturity is: 
value, is: 
At least 1 year, but less than l^/i years 
1.05 percent 
At least l^A years, but less than li^ years 
1.30 percent 
At least iy2 years, but less than 1% years 
1. 50 percent 
At least 1% years, but less than 2^4 years 
1. 85 percent 
At least 2^/4 years, but less than 2% years 
2. 30 percent 
At least 2% years, but less than 3 years 
2. 75 percent 
For purposes of this title, the tax imposed under this subsection shall 
Anil' ^' III' 
^^ treated as imposed under section 4911, except that, for such pur-
poses, the provisions of section 4918 shall not apply. 
"(d) 
EXCLUSIONS.— 
" (1) EXPORT LOANS.—The provisions of subsection (b), and the 
tax imposed under subsection (c), shall not apply with respect to 
the acquisition by a commercial bank of a debt obligation arising 
out of the sale of personal property or services (or both) if— 
"(A) not less than 85 percent of the amount of the loan is 
attributable to the sale of property manufactured, produced, 
grown, extracted, created, or developed in the United States, 
or to the performance of services by United States persons, 
or to both, and 
"(B) the extension of credit and the acquisition of the debt 
obligation related thereto are reasonably necessary to accom-
plish the sale of property or services out of which the debt 
obligation arises, and the terms of the debt obligation are not 
unreasonable in light of credit practices in the business in 
which the United States person selling such property or serv-
ices is engaged. 
"(2) FOREIGN CURRENCY LOANS BY FOREIGN BRANCHES.—The 
provisions of subsection (b), and the tax imposed under subsec-
tion (c), shall not apply to the acquisition by a commercial bank 
of a debt obligation of a foreign obligor payable in the currency 
of a foreign country if, under regulations prescribed by the Secre-
tary or his delegate— 
"(A) such bank establishes and maintains, for each of its 
branches located outside the United States, a fund of assets 
with respect to deposits payable in foreign currency to cus-
tomers (other than banks) of such branch, and 
"(B) such debt obligation is designated, to the extent per-
mitted by this paragraph, as part of a fund of assets described 
in subparagraph (A) (but only after debt obligations of 
foreign obligors payaiDle in foreign currency having a period 
remaining to maturity of less than one year held by such bank 
have been designated as part of such a fund). 
A debt obligation may be designated as part of a fund of assets 
described in subparagraph (A) only to the extent that, immedi-
ately after such designation, the adjusted basis of all the assets 
held in such fund does not exceed 110 percent of the deposits pay-
able in foreign currency to customers (other than banks) of the 
branch with respect to which such fund is maintained. 
"(3) PREEXISTING COMMITMENTS.—The provisions of subsec-
tion (b), and the tax imposed under subsection (c), shall not 
apply to the acquisition by a commercial bank of a debt obliga-
tion of a foreign obligor— 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
841 
"(A) made pursuant to an obligation to acquire which on 
August 4,1964^ 
"(i) was unconditional, or 
"(ii) was subject only to conditions contained in a 
formal contract under which partial performance had 
occurred; or 
"(B) as to which on or before August 4, 1964, the acquir-
ing commercial bank (or, in a case where 2 or more commer-
cial banks are making acquisitions as part of a single 
transaction, a majority in interest of such banks) had taken 
every action to signify approval of the acquisition under the 
procedures ordinarily employed by such bank (or banks) in 
similar transactions and 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 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 acquisition. 
"(e) 
REGULATIONS.—The Secretary or his delegate shall pre-
scribe such regulations (not inconsistent with the provisions of this 
section or of an Executive order issued under subsection (a)) as may 
be necessary to carry out the provisions of this section." 
(b) TECHNICAL AMENDMENT.—The table of chapters for subtitle 
D is amended by adding at the end thereof the following item: 
"Chapter 41. Interest equalization tax." 
(c) EFFECTIVE DATE.— 
(1) GENERAL RULE.—Except as provided by paragraphs (2), 
(3), (4), (5), (6), and (7), the amendments made by this section 
shall apply with respect to acquisitions of stock and debt obliga-
tions made after July 18,1963. 
(2) PREEXISTING COMMITMENTS.—Such amendments shall not 
apply to an acquisition— 
(A) made pursuant to an obligation to acquire which on 
July 18,1963— 
(i) was unconditional, or 
(ii) was subject only to conditions contained in a 
formal contract under which partial performance had 
occurred; 
(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) in similar transactions and 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 or 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 prin-
cipal terms of such acquisition, subject only to the execution 
of formal documents evidencing the acquisition and to 
customary closing conditions; 
842 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
(C) if, on or before July 18, 1963, the acquiring United 
States person— 
(i) had entered into a contract for the sale to the 
government of a less developed country or a political 
subdivision thereof, or an agency or instrumentality of 
such government (within the meaning of section 4916 
Ante, p. 827. 
^^^ ^ ^ Q£ property owned within such less developed coun-
try or political subdivision bv such person or by a con-
26 use 957^' 
trolled foreign corporation (as defined in section 957) 
more than 50 percent of the total combined voting power 
of all classes of stock entitled to vote of which was 
26 use 958. 
owned (within the meaning of section 958) by such 
person, or of stock or debt obligations of such a controlled 
foreign corporation which was actively engaged in the 
conduct of a trade or business within such less developed 
country; or had entered into a contract of indemnifica-
tion with respect to the nationalization, expropriation, or 
seizure of such property or of such stock or debt obliga-
tions by the government of a less developed country or 
political subdivision thereof, or an agency or instru-
mentality of such government (within the meaning of 
section 4916 (a)), or 
(ii) had sent or deposited for delivery to the govern-
ment of a less developed country or political subdivision 
thereof, or an agency or instrumentality of such govern-
ment (within the meaning of section 4916(a)), a com-
mitment letter, memorandum of terms, or other docu-
ment setting forth the principal terms of a contract 
described in clause (i), 
to the extent such acquisition is required by the terms of the 
contract as a reinvestment within such less developed country 
of amounts equal to part or all of the consideration received 
under the contract; 
(D) which would be excluded from tax under section 
4915 of the Internal Revenue Code of 1954 but for the provi-
sions of subsection (c) thereof, if (i) on or before July 18, 
1963, the acquiring United States person applied for and re-
ceived from a foreign government (or an agency or instru-
mentality thereof) authorization to make such acquisition 
and approval of the amount thereof, and (ii) such authoriza-
tion was required in order for such acquisition to be made; or 
(E) of stock in the initial capitalization of a foreign corpo-
ration which would be excluded from tax under section 4915 
of the Internal Revenue Code of 1954 but for the provisions 
of subsection (c) thereof, if at least 75 percent in interest of 
the United States persons who acquired stock in such initial 
capitalization had signified on or before July 18, 1963, to 
the person coordinating the organization of such corporation 
the intention to invest a specified amount of money through 
the purchase of such stock, which amount was equal to or 
greater than the amount ultimately so invested. 
(3) PUBLIC OFFERING.—Such amendments shall not apply to an 
acquisition made on or before September 16,1963, if— 
(A) a registration statement (within the meaning of the 
15 use 7
^
7
a 
Securities Act of 1933) was in effect with respect to the stock 
or debt obligation acquired at the time of its acquisition; 
(B) the registration statement was first filed with the 
Securities and Exchange Commission on July 18, 1963, or 
within 90 days before that date; and 
Ante, p. 836. 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
843 
(C) no amendment was filed with the Securities and Ex-
change Commission after July 18, 1963, and before the 
acquisition which had the ejffect of increasing the number of 
shares of stock or the aggregate face amount of the debt 
obligations covered by the registration statement. 
(4) INVESTMENT OF PROCEEDS OF SUBSCRIPTION OFFERING.—Such 
amendments shall not apply to an acquisition of stock or debt 
obligations of a foreign issuer or obligor by a corporation electing 
under section 4920(a) (3) (B) of the Internal Kevenue Code of 
1954 to be treated as a foreign issuer or obligor for purposes of 
chapter 41 of such Code, to the extent that the amount of con-
sideration paid for all such stock and debt obligations does not 
exceed the proceeds received by such corporation from a subscrip-
tion offering (completed on or before September 16, 1963) as to 
which a registration statement was filed with the Securities and 
Exchange Commission on July 18, 1963, or within 90 days before 
that date. 
(5) LISTED SECURITIES.—Such amendments shall not apply to 
an acquisition made on or before August 16, 1963, if the stock 
or debt obligation involved was acquired on a national securities 
exchange registered with the Securities and Exchange Commis-
sion. 
(6) OPTIONS, FORECLOSURES, AND CONVERSIONS.—Such amend-
ments shall not apply to an acquisition— 
(A) of stock pursuant to the exercise of an option or 
similar right (or a right to convert a debt obligation into 
stock), if such option or right was held on July 18, 1963, by 
the person making the acquisition or by a decedent from 
whom such person acquired the right to exercise such option 
or right by bequest or inheritance or by reason of such 
decedent's death, or 
(B) of stock or debt obligations as a result of a foreclosure 
by a creditor pursuant to the terms of an instrument held 
by such creditor on July 18,1963. 
(7) DOMESTICATION.—Such amendments shall not apply to the 
acquisition by a domestic corporation of the assets of a foreign 
corporation pursuant to a reorganization described in subpara-
graph (C), (D), or (F) of section 368(a)(1) of the Internal 
Revenue Code of 1954 if the acquisition occurs on or before the ^e use 368 
180th day after the date of the enactment of this Act and the 
foreign corporation was a management company registered under 
the Investment Company Act of 1940 from July 18, 1963, until 
the time of the acquisition. 
(8) MEANING OF TERMS.—Terms used in this subsection (except 
as specifically otherwise provided) shall have the same meaning 
as when used in chapter 41 of the Internal Revenue Code of 1954. 
SEC. 3. RETURNS. 
(a) MAKING OF RETURNS.—Section 6011 (relating to general 
26us^c6on" 
requirement of return, statement, or list) is amended by redesig-
nating subsection (d) as subsection (e), and by adding after subsec-
tion (c) the following new subsection: 
"(d) INTEREST EQUALIZATION TAX RETURNS, ETC.— 
"(1) I N GENERAL.—Every person shall make a return for each 
calendar quarter during which he incurs liability for the tax 
imposed by section 4911, or would so incur liability but for the 
provisions of section 4918. The return shall, in addition to such 
other information as the Secretary or his delegate may by regula-
tions require, include a list of all acquisitions made by such 
person during the calendar quarter which are exempt under the 
54 Stat. 789. 
15 u s e 80a«51. 
844 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
Ante, p. 831. 
provisions of section 4918, and shall, with respect to each such 
acquisition, be accompanied either (A) by a certificate of Ameri-
can ownership which complies with the provisions of section 
4918(e), or (B) in the case of an acquisition for which other 
proof of exemption is permitted under section 4918(f), by a 
statement setting forth a summary of the evidence establishing 
such exemption and the reasons for the person's inability to 
establish prior American ownership under subsection (b), (c), or 
(d) of section 4918. No return or accompanying evidence shall 
be required under this paragraph in connection with any 
acquisition with respect to which a written 
confirmation, 
furnished in accordance with the requirements described in sec-
tion 4918 (c) or (d), is treated as conclusive proof of prior 
American ownership; nor shall any such acquisition be required 
to be listed in any return made under this paragraph. 
"(2) 
INFORMATION RETURNS OF COMMERCIAL BANKS.—Every 
United States person (as defined in section 4920(a)(4)) which 
is a commercial bank shall file a return with respect to loans 
and commitments to foreign obligors at such times, in such 
manner, and setting forth such information as the Secretary or 
his delegate shall by forms and regulations prescribe. 
"(3) 
REPORTING REQUIREMENTS FOR MEMBERS OF EXCHANGES 
AND ASSOCIATIONS.—Every member or member organization of a 
national securities exchange or of a national securities associa-
tion registered with the Securities and Exchange Commission 
shall keep such records and file such information as the Secre-
tary or his delegate may by regulations prescribe in connection 
w4th acquisitions and sales effected by such member or member 
organization as a broker, and acquisitions made for the account 
of such member or member organization, of stock or debt 
obligations— 
"(A) as to which a certificate of American ownership or 
blanket certificate of American ownership is executed and 
filed with such member or member organization as prescribed 
under section 4918(e); and 
"(B) as to which a written confirmation is furnished to a 
United States person stating that the acquisition— 
"(i) in the case of a transaction on a national securi-
ties exchange, was made subject to a special contract, or 
"(ii) in the case of a transaction not on a national 
securities exchange, was from a person who had not 
filed a certificate of American ownership with respect to 
such stock or debt obligation or a blanket certificate 
of American ownership with respect to the account 
from which such stock or debt obligation was sold." 
(b) TIME FOR FILING RETURNS.—Part V of subchapter A of chap-
ter 61 (relating t/O time for filing returns and other documents) is 
amended by adding at the end thereof the following new section: 
"SEC. 6076. TIME FOR FILING INTEREST EQUALIZATION TAX RE-
TURNS. 
Ante, p, 843. 
"Each retum made under section 6011(d) (1) (relating to interest 
equalization tax) shall be filed on or before the last day of the first 
month following the period for which it is made." 
26 use 6103. 
(c) PUBLICITY OF RETURNS.—Section 6103(a) (2) (relating to pub-
lic reCjOrd and inspection) is amended by striking out "and subchapter 
B of chapter 37" and inserting in lieu thereof "subchapter B of chapter 
37, and chapter 41". 
26 u s e 6071 
6075. 
Ante, p. 843. 
26 use 26; 
26 use 1232. 
78 STAT. ] 
PUBLIC LAW 88-563-SEPT. 2, 1964 
845 
(d) CLERICAL AMENDMENT.—The table of sections for part V of 
subchapter A of chapter 61 is amended by adding at the end thereof 
the following: 
"Sec. 6076. Time for filing interest equalization tax returns," 
(e) FIRST RETURN PERIOD.—Notwithstanding any provision of sec-
tion 6011 (d) (1) of the Internal Revenue Code of 1954, the first period 
for which returns shall be made under such section 6011(d) (1) shall 
be the period commencing July 19,1963, and ending at the close of the 
calendar quarter in which the enactment of this Act occurs. 
SEC. 4. DISALLOWANCE OF DEDUCTION FOR AMOUNT PAID AS IN-
TEREST EQUALIZATION TAX. 
Section 263(a) (relating to capital expenditures) is amended by 
adding at the end thereof the following new paragraph: 
"(3) Any amount paid as tax under section 4911 (relating to 
imposition of interest equalization tax) except to the extent that 
any amount attributable to the amount paid as tax is included 
in gross income for the taxable year." 
SEC. 5. ORIGINAL ISSUE DISCOUNT. 
Section 1232 (b) (2) (relating to definition of issue price) is amended 
by inserting before the period at the end of the second sentence thereof 
the following: "increased by the amount, if any, of tax paid under 
section 4911 (and not credited, refunded, or reimbursed) on the acqui-
sition of such bond or evidence of indebtedness by the first buyer". 
SEC. 6. PENALTIES. 
(a) ASSESSABLE PENALTIES.—Subchapter B of chapter 68 (relating ^Ij^^^^ ^^''^' 
to assessable penalties) is amended by adding at the end thereof the 
following new sections: 
"SEC. 6680. FAILURE TO FILE INTEREST EQUALIZATION TAX RE-
TURNS. 
"In addition to the penalty imposed by section 7203 (relating to will-
ful failure to file return, supply information, or pay tax) any per-
son who is required under section 6011(d) (1) (relating to interest 
equalization tax returns) to file a return for any period m respect of 
which, by reason of the provisions of section 4918, he incurs no liability 
for payment of the tax imposed by section 4911 and who fails to file 
such return within the time prescribed by section 6076, shall pay a pen-
alty of $10 or 5 percent of the amount of tax for which he would incur 
liability for payment under section 4911 but for the provisions of sec-
tion 4918, whichever is the greater, for each such failure unless it is 
shown that the failure is due to reasonable cause. The penalty im-
posed by this section shall not exceed $1,000 for eaxjh failure to file 
a return. 
"SEC. 6681. FALSE EQUALIZATION TAX CERTIFICATES. 
"(a) 
FAI>SE CERTIFICATE OF AMERICAN OWNERSHIP.—In addition to 
the criminal penalty imposed by section 7241, any person who willfully 
executes a certificate of American ownership or blanket certificate of 
American ownership described in section 4918 (e) which contains a mis-
statement of material fact shall be liable to a penalty equal to 125 
percent of the amount of tax imposed by section 4911 on the acquisi-
tion of the stock or debt obligation involved which, but for the pro-
visions of section 4918, would be payable by the person acquiring the 
stock or debt obligation. 
"(b) 
LIABILITY or MEMBERS OF NATIONAL SECURITIES EXCHANGES 
AND ASSOCIATIONS.—A member or member organization of a national 
securities exchange described in section 4918(c) or a national securi-
ties association described in section 4918(d) shall be liable to a penalty 
equal to 125 percent of the amount of tax imposed by section 4911 on 
26 use 720i3. 
Ante, p. 831. 
Ante, p. 844. 
Post, p. 847. 
846 
PUBLIC LAW 88-563-SEPT. 2, 1964 
[78 STAT. 
Ante, p. 831. 
the acquisition (in a transaction subject to the rules of such exchange 
or association as described in section 4918 (c) or (d)) of stock or a debt 
obligation which but for the provisions of section 4918, would be pay-
able by the person acquiring the stock or debt obligation, if such 
member or member organization— 
"(1) willfully effects the sale of such stock or debt obligation 
or furnishes a written confirmation with respect to the purchase 
or sale of such stock or debt obligation other than in accordance 
with the requirements described in section 4918 (c) or ( d ) ; or 
" (2) has actual knowledge that— 
"(A) the certificate of American ownership or the blanket 
certificate of American ownership (referred to in section 
4918) in his possession in connection with the sale of such 
stock or debt obligation is false in any material respect; or 
"(B) the person who executed and filed the blanket cer-
tificate of American ownership in his possession was not a 
United States person at the time of sale. 
"(c) FALSE CERTIFICATE OF SALES TO FOREIGN PERSONS.—In addi-
Post, p. 847. 
^JQJ^ ^Q ^j^g criminal penalty imposed by section 7241, any person who 
willfully executes a certificate of sales to foreign persons described in 
section 4919(b)(2) which contains a misstatement of material fact 
shall be liable to a penalty equal to 125 percent of the amount of the 
tax imposed by section 4911 on the acquisition by the underwriter 
of the stock or debt obligation with respect to which such certificate 
is executed. 
"(d) 
FALSE 
CONFIRMATIONS 
OR 
COMPARISONS 
FURNISHED BY 
DEALERS.— 
"(1) MEMBERS OF NATIONAL SECURITIES EXCHANGES.—A mem-
ber or member organization of a national securities exchange 
described in section 4919(b) (3) (A) who, in a transaction subject 
to the rules of such exchange as described in such section, will-
fully furnishes a written confirmation or comparison which con-
tains a misstatement of material fact or which fails to state 
a material fact shall be liable to a penalty equal to 125 percent of 
the amount of the tax imposed by section 4911 on the acquisition 
of the debt obligation by the dealer for whose benefit such con-
firmation or comparison is furnished. 
"(2) DEALERS.—Any person who sells as a dealer a debt 
obligation in a transaction subject to the rules of a national securi-
ties exchange as described in section 4919(b) (3) (A), in which 
such sale is effected on his behalf by a member or member organi-
zation of such exchange, and who willfully fails to disclose to 
such member or member organization that such sale is being 
made by him as a dealer, shall be liable to a penalty equal to 125 
percent of the amount of the tax imposed on his acquisition of 
such debt obligation. 
"(3) MEMBERS OF NATIONAL SECURITIES ASSOCIATIONS.—A mem-
ber or member organization of a national securities association 
described in section 4919(b)(3)(B) who willfully furnishes a 
written confirmation described in such section (in a transaction 
subject to the rules of such association as described in such sec-
tion) which contains a misstatement of material fact or which 
fails to state a material fact shall be liable to a penalty equal to 
125 percent of the amount of the tax imposed by section 4911 
on the acquisition of the debt obligation by the dealer for whose 
benefit such confirmation is furnished. 
"(e) 
PENALTY TO B E IN LIEU or TAX IN CERTAIN CASES.—Unless 
the person acquiring the stock or debt obligation involved had actual 
knowledge that the certificate was false in any material respect, the 
78 STAT.] 
PUBLIC LAW 88-564-SEPT. 2, 1964 
847 
penalty under subsection (a) or (c) shall be in lieu of any tax on the 
acquisition of such stock or debt obligation under section 4911." 
(b) CRIMINAL PENALTY.—Part II of subchapter A of chapter 75 
(relating to penalties applicable to certain taxes) is amended by adding 
at the end thereof the following new section: 
"SEC. 7241. PENALTY FOR FRAUDULENT EQUALIZATION TAX CERTIFI-
CATES. 
"Any person who, on or after the date of the enactment of the 
Interest Equalization Tax Act, willfully executes a certificate of 
American ownership or blanket certificate of American ownership 
described in section 4918(e), or a certificate of sales to foreign persons 
described in section 4919(b) (2), which is known by him to be fraudu-
lent or to be false in any material respect shall be guilty of a misde-
meanor and, upon conviction thereof, shall for each offense be fined 
not more than $1,000, or imprisoned not more than 1 year, or both." 
(c) 
CLERICAL AMENDMENTS.— 
(1) The table of sections for subchapter B of chapter 68 is 
amended by adding at the end thereof the following: 
"Sec. 6680. Failure to 
file 
Interest equalization tax returns. 
"Sec. 6681. False equalization tax certificates." 
(2) The table of sections for part I I of subchapter A of chapter 
75 is amended by adding at the end thereof the following: 
"Sec. 7241. Penalty for fraudulent equalization tax certificates." 
Approved September 2, 1964. 
26 u s e 7231-
7240. 
Ante, 
p. 831. 
Public Law 88-564 
AN ACT 
To amend the District of Columbia Sales Tax Act, as amended, relating to 
certain sales to common carriers or sleeping-car companies. 
September 2, 1964 
[H. R. 8451] 
Be it enacted by the Senate and House of Representatives 
of the 
United States of America in Congress assembled, That section 114(b) 
of the District of Columbia Sales Tax Act, as amended (63 Stat. 112; 
D.C. Code, sec. 47-2601, par. 14(b)), is amended by adding at the end 
thereof the following: 
"(5) Sales to a common carrier or sleeping-car company by a cor-
poration all of whose capital stock is owned oy one or more common 
carriers or sleeping-car companies of tangible personal property, 
procured or acquired by such corporation outside the District, which 
consists of repair or replacement parts used for the maintenance or 
repair of any train operating principally without the District in the 
course of interstate commerce, or commerce between the District and 
a State, provided such sales are made in connection with the furnishing 
of terminal services pursuant to a written agreement entered into 
before January 1,1963." 
Approved September 2, 1964. 
D. 
Act, 
C. Sales Tax 
amendment.