,i #aacth ,,congress #b;d ,session ,h4 ,r4 #eheg ,,in ,,the ,,house ,,of ,,representatives ,december #aa1 #bjad ,mr4 ,delaney introduced the following bill2 which was referred to the ,committee on ,ways and ,means1 and in addition to the ,committee on ,transportation and ,infrastructure1 for a period to be subsequently determined by the ,speaker1 in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned ,a ,,bill ,to eliminate the incentive for corporations to continue to hold accumulated earnings offshore1 to invest in domestic infrastructure1 to provide for international tax reform1 and for other purposes4 #a4 ,short title2 etc 7a7 ,short title ,this ,act may be cited as the ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad4 7b7 ,amendment of #aihf ,code ,except as otherwise expressly provided1 whenever in this ,act an amendment or repeal is expressed in terms of an amendment to1 or repeal of1 a section or other provision1 the reference shall be considered to be made to a section or other provision of the ,internal ,revenue ,code of #aihf4 7c7 ,table of contents ,the table of contents for this ,act is as follows3 ,sec4 #a4 ,short title2 etc4 ,title ,i--,deemed repatriation and investment in domestic infrastructure ,sec4 #aja4 ,elimination of incentive for corporations to continue to hold accumulated earnings offshore4 ,sec4 #ajb4 ,american ,infrastructure ,fund4 ,sec4 #ajc4 ,dedication of remaining revenues to highway trust fund4 ,sec4 #ajd4 ,highway ,trust ,fund ,solvency ,commission4 ,title ,,ii--,deadline for international tax reform ,sec4 #bja4 #ah-month deadline for international tax reform4 ,title ,,iii--,fallback international tax reform ,sec4 #cjj4 ,general effective date of title4 ,subtitle ,a--,reform of taxation of income earned by controlled foreign corporations ,part ,i--,general provisions ,sec4 #cja4 ,modifications to subpart ,f income4 ,part ,,ii--,foreign tax credit limitations ,sec4 #caa4 ,reform of foreign tax credit limitation4 ,sec4 #cab4 ,denial of credit and deduction for foreign taxes with respect to excluded subpart ,f income4 ,part ,,iii--,expense disallowance ,sec4 #cba4 ,disallowance of deduction for expenses allocable to exempt income of a controlled foreign corporation4 ,part ,,iv--,other provisions relating to subpart ,f ,subpart ,a--,previously deferred foreign income ,sec4 #cca4 ,treatment of previously deferred foreign income4 ,subpart ,b--,other provisions ,sec4 #ccf4 ,elimination of #cj-;day requirement4 ,sec4 #ccg4 ,modification of definition of ,united ,states shareholder4 ,subtitle ,b--,reform of foreign tax credit provisions ,sec4 #cda4 ,repeal of section #ijb indirect foreign tax credits2 foreign tax credit related to subpart ,f income4 ,sec4 #cdb4 ,repeal of rule suspending foreign taxes and credits until related income is taken into account4 ,i ,deemed repatriation and investment in domestic infrastructure #aja4 ,elimination of incentive for corporations to continue to hold accumulated earnings offshore 7a7 ,in general ,section #ife is amended to read as follows3 #ife4 ,elimination of incentive to hold accumulated earnings and profits offshore 7a7 ,treatment of deferred foreign income as subpart ,f income ,in the case of the last taxable year of a deferred foreign income corporation which begins before ,january #a1 #bjae1 the subpart ,f income of such foreign corporation 7as otherwise determined for such taxable year under section #ieb7 shall be increased by the accumulated post-#aihf deferred foreign income of such corporation determined as of the close of such taxable year4 7b7 ,reduction in amounts included in gross income of ,united ,states shareholders of specified foreign corporations with deficits in earnings and profits 7#a7 ,in general ,in the case of a taxpayer which is a ,united ,states shareholder with respect to at least one deferred foreign income corporation and at least one ,e,p deficit foreign corporation1 the amount which would 7but for this subsection7 be taken into account under section #iea7;a77#a7 by reason of subsection 7a7 as such ,united ,states shareholder's pro rata share of the subpart ,f income of each deferred foreign income corporation shall be reduced 7but not below zero7 by the amount of such ,united ,states shareholder's aggregate foreign ,e,p deficit which is allocated under paragraph 7#b7 to such deferred foreign income corporation4 7#b7 ,allocation of aggregate foreign ,e,p deficit ,the aggregate foreign ,e,p deficit of any ,united ,states shareholder shall be allocated among the deferred foreign income corporations of such ,united ,states shareholder in an amount which bears the same proportion to such aggregate as-- 7,a7 such ,united ,states shareholder's pro rata share of the accumulated post-#aihf deferred foreign income of each such deferred foreign income corporation1 bears to 7,b7 the aggregate of such ,united ,states shareholder's pro rata share of the accumulated post-#aihf deferred foreign income of all deferred foreign income corporations of such ,united ,states shareholder4 7#c7 ,definitions related to ,e,p deficits ,for purposes of this subsection-- 7,a7 ,aggregate foreign ,e,p deficit ,the term aggregate foreign ,e,p deficit means1 with respect to any ,united ,states shareholder1 the aggregate of such shareholder's pro rata shares of the specified ,e,p deficits of the ,e,p deficit foreign corporations of such shareholder4 7,b7 ,e,p deficit foreign corporation ,the term ,e,p deficit foreign corporation means1 with respect to any taxpayer1 any specified foreign corporation with respect to which such taxpayer is a ,united ,states shareholder1 if-- 7i7 such specified foreign corporation has a deficit in post-#aihf earnings and profits1 and 7ii7 as of the date of the introduction of ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad-- 7,i7 such corporation was a specified foreign corporation1 and 7,,ii7 such taxpayer was a ,united ,states shareholder of such corporation4 7,c7 ,specified ,e,p deficit ,the term specified ,e,p deficit means1 with respect to any ,e,p deficit foreign corporation1 the amount of the deficit referred to in subparagraph 7,b74 7c7 ,deduction for portion of included income ,in the case of a ,united ,states shareholder of a deferred foreign income corporation1 there shall be allowed as a deduction for the taxable year in which an amount is included in the gross income of such ,united ,states shareholder under section #iea7;a77#a7 by reason of this section an amount equal to #ge percent of the amount so included in gross income4 7d7 ,deferred foreign income corporation2 accumulated post-#aihf deferred foreign income ,for purposes of this section-- 7#a7 ,deferred foreign income corporation ,the term deferred foreign income corporation means1 with respect to any ,united ,states shareholder1 any specified foreign corporation of such ,united ,states shareholder which has accumulated post-#aihf deferred foreign income 7as of the close of the taxable year referred to in subsection 7a77 greater than zero4 7#b7 ,accumulated post-#aihf deferred foreign income ,the term accumulated post-#aihf deferred foreign income means the post-#aihf earnings and profits except to the extent such earnings-- 7,a7 are attributable to income of the specified foreign corporation which is effectively connected with the conduct of a trade or business within the ,united ,states and subject to tax under this chapter1 7,b7 if distributed1 would-- 7i7 in the case of a controlled foreign corporation1 be excluded from the gross income of a ,united ,states shareholder under section #iei1 or 7ii7 in the case of any passive foreign investment company 7as defined in section #abig7 other than a controlled foreign corporation1 be treated as a distribution which is not a dividend1 or 7,c7 in the case of any passive foreign investment company 7as so defined71 is properly attributable to an unreversed inclusion of a ,united ,states person under section #abif4 ,to the extent provided in regulations or other guidance prescribed by the ,secretary1 in the case of any controlled foreign corporation which has shareholders which are not ,united ,states shareholders1 accumulated post-#aihf deferred foreign income shall be appropriately reduced by amounts which would be described in subparagraph 7,b77i7 if such shareholders were ,united ,states shareholders4 ,such regulations or other guidance may provide a similar rule for purposes of subparagraph 7,b77ii7 and 7,c74 7#c7 ,post-#aihf earnings and profits ,the term post-#aihf earnings and profits means the earnings and profits of the foreign corporation 7computed in accordance with sections #ifd7;a7 and #ihf7 accumulated in taxable years beginning after ,december #ca1 #aihf1 and determined-- 7,a7 as of the close the taxable year referred to in subsection 7a71 and 7,b7 without diminution by reason of dividends distributed during such taxable year4 7e7 ,specified foreign corporation 7#a7 ,in general ,for purposes of this section1 the term specified foreign corporation means-- 7,a7 any controlled foreign corporation1 and 7,b7 any section #ijb corporation 7as defined in section #iji7;d77#e774 7#b7 ,application to section #ijb corporations ,for purposes of section #iea1 a section #ijb corporation 7as so defined7 shall be treated as a controlled foreign corporation solely for purposes of taking into account the subpart ,f income of such corporation under subsection 7a7 7and for purposes of applying subsection 7f774 7f7 ,determinations of pro rata share ,for purposes of this section1 the determination of any ,united ,states shareholder's pro rata share of any amount with respect to any specified foreign corporation shall be determined under rules similar to the rules of section #iea7;a77#b7 by treating such amount in the same manner as subpart ,f income 7and by treating such specified foreign corporation as a controlled foreign corporation74 7g7 ,disallowance of foreign tax credit1 etc 7#a7 ,in general ,no credit shall be allowed under section #ija for the applicable percentage of any taxes paid or accrued 7or treated as paid or accrued7 with respect to any amount for which a deduction is allowed under this section4 7#b7 ,applicable percentage ,for purposes of this subsection1 the term applicable percentage means the percentage specified in subsection 7c74 7#c7 ,denial of deduction ,no deduction shall be allowed under this chapter for any tax for which credit is not allowable under section #ija by reason of paragraph 7#a7 7determined by treating the taxpayer as having elected the benefits of subpart ,a of part ,,iii of subchapter ,n74 7#d7 ,coordination with section #gh ,section #gh shall not apply to any tax for which credit is not allowable under section #ija by reason of paragraph 7#a74 7h7 ,election ,to ,pay ,liability in ,installments 7#a7 ,in general ,in the case of a ,united ,states shareholder of a deferred foreign income corporation1 such ,united ,states shareholder may elect to pay the net tax liability under this section in #h installments of the following amounts3 7,a7 #h percent of the net tax liability in the case of each of the first #e of such installments1 7,b7 #ae percent of the net tax liability in the case of the #fth such installment1 7,c7 #bj percent of the net tax liability in the case of the #gth such installment1 and 7,d7 #be percent of the net tax liability in the case of the #hth such installment4 7#b7 ,date for payment of installments ,if an election is made under paragraph 7#a71 the first installment shall be paid on the due date 7determined without regard to any extension of time for filing the return7 for the return of tax for the taxable year described in subsection 7b7 and each succeeding installment shall be paid on the due date 7as so determined7 for the return of tax for the taxable year following the taxable year with respect to which the preceding installment was made4 7#c7 ,acceleration of payment ,if there is an addition to tax for failure to pay timely assessed with respect to any installment required under this subsection1 a liquidation or sale of substantially all the assets of the taxpayer 7including in a title #aa or similar case71 a cessation of business by the taxpayer1 or any similar circumstance1 then the unpaid portion of all remaining installments shall be due on the date of such event 7or in the case of a title #aa or similar case1 the day before the petition is filed74 ,the preceding sentence shall not apply to the sale of substantially all the assets of a taxpayer to a buyer if such buyer enters into an agreement with the ,secretary under which such buyer is liable for the remaining installments due under this subsection in the same manner as if such buyer were the taxpayer4 7#d7 ,proration of deficiency to installments ,if an election is made under paragraph 7#a7 to pay the net tax liability under this section in installments and a deficiency has been assessed with respect to such net tax liability1 the deficiency shall be prorated to the installments payable under paragraph 7#a74 ,the part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as1 and as a part of1 such installment4 ,the part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the ,secretary4 ,this subsection shall not apply if the deficiency is due to negligence1 to intentional disregard of rules and regulations1 or to fraud with intent to evade tax4 7#e7 ,election ,any election under paragraph 7#a7 shall be made not later than the due date for the return of tax for the taxable year described in subsection 7a7 and shall be made in such manner as the ,secretary may provide4 7#f7 ,net tax liability under this section ,for purposes of this subsection-- 7,a7 ,in general ,the net tax liability under this section with respect to any ,united ,states shareholder is the excess 7if any7 of-- 7i7 such taxpayer's net income tax for the taxable year described in subsection 7a71 over 7ii7 such taxpayer's net income tax for such taxable year determined without regard to this section4 7,b7 ,net income tax ,the term net income tax means the regular tax liability reduced by the credits allowed under subparts ,a1 ,b1 and ,d of part ,,iv of subchapter ,a4 7i7 ,inclusion of ,deferred ,foreign ,income ,under ,this ,section ,not ,to ,trigger ,recapture of ,overall ,foreign ,loss ,for purposes of section #ijd7;f77#a71 in the case of a ,united ,states shareholder of a deferred foreign income corporation1 such ,united ,states shareholder's taxable income from sources without the ,united ,states shall be determined without regard to this section4 7j7 ,regulations ,the ,secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section4 4 7b7 ,clerical amendment ,the table of sections for subpart ,f of part ,,iii of subchapter ,n of chapter #a of such ,code is amended by striking the item relating to section #ife and inserting the following3 ,sec4 #ife4 ,elimination of incentive to hold accumulated earnings and profits offshore4 4 #ajb4 ,american ,infrastructure ,fund 7a7 ,american ,infrastructure ,fund 7#a7 ,in general ,there is established a wholly owned ,government corporation-- 7,a7 which shall be called the ,american ,infrastructure ,fund 7referred to in this ,act as the ,,aif72 7,b7 which shall be headed by the ,board of ,trustees established under subsection 7b72 7,c7 which may have separate subaccounts or subsidiaries for funds used to make loans1 bond guarantees1 and equity investments under this section2 7,d7 which shall be available to the ,,aif to pay for the costs of carrying out this section1 including the compensation of the ,board and other employees of the ,,aif2 and 7,e7 the funds of which may be invested by the ,board in such manner as the ,board determines appropriate4 7#b7 ,deposits to aif ,all funds received from bond issuances1 loan payments1 bond guarantee fees1 and any other funds received in carrying out this section shall be held by ,,aif4 7#c7 ,limitations ,the charter of the ,,aif shall limit its activities to those activities described as the mission of the ,board under subsection 7b77#b74 7#d7 ,oversight ,the ,,aif shall register with the ,securities and ,exchange ,commission and the ,chairman shall report to ,congress annually as to whether the ,,aif is fulfilling the mission of the ,board under subsection 7b77#b74 7#e7 ,treatment of aif 7,a7 ,accounts ,title #ca1 ,united ,states ,code1 is amended in each of sections #iajg7;c77#c7 and #iajh7;d77#b7-- 7i7 by inserting the ,american ,infrastructure ,fund1 after the ,regional ,banks for ,cooperatives12 and 7ii7 by striking those banks and inserting those entities4 7,b7 ,bonds ,section #adi7;b77#c77;,a77i7 is amended by inserting ,american ,infrastructure ,fund1 after ,federal ,home ,loan ,mortgage ,corporation14 7b7 ,board of trustees 7#a7 ,in general ,there is established a ,board of ,trustees of the ,,aif 7referred to in this subsection as the ,board71 which shall be composed of #i members who-- 7,a7 have substantial experience in bond guarantees or municipal credit2 and 7,b7 to the greatest extent practicable1 have extensive experience working with municipal credit1 risk management1 and infrastructure finance4 7#b7 ,mission ,the mission of the ,board is-- 7,a7 to operate the ,,aif and its subsidiaries to be a low cost provider of bond guarantees1 loans1 and equity investments to ,state and local governments and infrastructure providers for urban and rural infrastructure projects that-- 7i7 provide a positive economic impact2 and 7ii7 meet such other standards as the ,board may develop2 7,b7 to operate the ,,aif in a self-sustaining manner2 7,c7 to not have a profit motive1 but to seek at all times to pursue its mission of providing low cost bond guarantees and loans while-- 7i7 covering its costs2 7ii7 maintaining such reserves as may be needed2 and 7iii7 applying prudent underwriting standards2 7,d7 to only consider projects put forth by ,state and local governments and not to seek projects directly2 and 7,e7 to engage in no other activities other than those permitted under this section4 7#c7 ,membership 7,a7 ,initial members 7i7 ,appointment ,not later than #aej days after the date of the enactment of this ,act1 the ,president shall appoint1 with the advice and consent of the ,senate1 as members of the ,board-- 7,i7 #b individuals from a list of at least #e individuals selected by the ,speaker of the ,house of ,representatives2 7,,ii7 #b individuals from a list of at least #e individuals selected by the ,minority ,leader of the ,house of ,representatives2 7,,iii7 #b individuals from a list of at least #e individuals selected by the ,majority ,leader of the ,senate2 7,,iv7 #b individuals from a list of at least #e individuals selected by the ,minority ,leader of the ,senate2 and 7,v7 #a individual selected at will by the ,president4 7ii7 ,submission of lists ,each of the lists described in clause 7i7 shall be submitted to the ,president not later than #ij days after the date of the enactment of this ,act4 ,if any of such lists are submitted after the date required under this clause1 the ,president may appoint the #b members of the ,board who were to be selected from such list at will4 7,b7 ,staggered terms ,the members of the ,board appointed pursuant to subparagraph 7,a77i7 shall serve staggered terms1 with #b each of the initial members of the ,board serving for terms of #e1 #f1 #g1 and #h years1 respectively1 and the initial ,chair selected under subparagraph 7,d7 serving for #i years4 ,the decision of which ,board members1 other than the ,chair1 serve for which initial terms shall be made by the members of the ,board drawing lots4 7,c7 ,additional members 7i7 ,in general ,except as provided in subparagraph 7,a71 if the term of a member of the ,board expires or otherwise becomes vacant1 the ,president shall appoint a replacement for such member1 with the advice and consent of the ,senate1 from among a list of at least #e individuals submitted by the ,board4 7ii7 ,term of service 7,i7 ,in general ,each member of the ,board appointed to replace a member whose term is expiring shall serve for a #g-year term4 7,,ii7 ,vacancies ,any member of the ,board appointed to fill a vacancy occurring before the expiration of the term to which that member's predecessor was appointed shall be appointed only for the remainder of the term4 7,d7 ,chair ,the members of the ,board shall choose #a member to serve as the ,chair of the ,board for a term of #g years1 except that the initial ,chair shall serve for a term of #i years1 pursuant to subsection 7,b74 7,e7 ,continuation of service ,each member of the ,board may continue to serve after the expiration of the term of office to which that member was appointed until a successor has been appointed4 7,f7 ,conflicts of interest ,no member of the ,board may have a financial interest in1 or be employed by1 a ,qualified ,infrastructure ,project 7,,qip7 related to assistance provided under this section4 ,owning municipal credit of any ,state or local government or owning the securities of a diversified company that engages in infrastructure activities1 provided those activities constitute less than #bj percent of the company's revenues1 or investing in broadly held investment funds shall not be deemed to create a conflict of interest4 ,the ,board may issue regulations to define terms used under this subparagraph4 7#d7 ,compensation ,the members of the ,board shall be compensated at an amount to be set by the ,board1 but under no circumstances may such compensation be higher than the rate prescribed for level ,,iv of the ,executive ,schedule under section #ecae of title #e1 ,united ,states ,code4 7#e7 ,staff ,the ,board shall employ and set compensation for such staff as the ,board determines as is necessary to carry out the activities and mission of the ,,aif1 and such staff may be paid without regard to the provisions of chapter #ea and subchapter ,,iii of chapter #ec1 ,united ,states ,code1 relating to classification and ,general ,schedule pay rates4 7#f7 ,procedures ,the ,board shall establish such procedures as are necessary to carry out this section4 7#g7 ,corporate governance standards 7,a7 ,board committees generally ,the ,board shall maintain all of the committees required to be maintained by the board of directors of an issuer listed on the ,new ,york ,stock ,exchange as of the date of the enactment of this section4 7,b7 ,risk management committee ,the ,board shall maintain a risk management committee1 which shall-- 7i7 employ additional staff who are certified by the ,board as having significant and relevant experience in insurance underwriting and credit risk management2 and 7ii7 establish the risk management policies used by the ,board4 7,c7 ,standards ,the ,board shall1 to the extent practicable1 follow all standards with respect to corporate governance that are required to be followed by the board of directors of an issuer listed on the ,new ,york ,stock ,exchange as of the date of the enactment of this section4 7#h7 ,biennial reports ,not less frequently than once every #b years1 the ,board shall produce a report that describes1 of the materials1 goods1 and products that were used to construct1 or to support the construction of1 qualified infrastructure projects 7as described in subsection 7c77 and received financing from the ,american ,infrastructure ,fund within the most recent #b calendar years1 the percentage of such materials1 goods1 and products that were created1 sourced1 or manufactured in the ,united ,states4 7c7 ,infrastructure investment 7#a7 ,entities eligible for assistance ,the ,,aif may provide assistance to ,state and local government entities1 nonprofit infrastructure providers1 private parties1 and public-private partnerships 7referred to in this section as eligible entities7 to help finance qualified infrastructure projects 7referred to in this subsection as ,q,i,ps74 7#b7 ,forms of assistance ,the ,,aif may-- 7,a7 provide bond guarantees to debt issued by eligible entities2 7,b7 make loans1 including subordinated loans1 to eligible entities2 and 7,c7 make equity investments in ,q,i,ps4 7#c7 ,qualified infrastructure projects ,a project qualifies as a ,,qip under this section if-- 7,a7 the project is sponsored by a ,state or local government2 7,b7 the infrastructure is1 or will be1 owned by a ,state or local government2 7,c7 the project involves the construction1 maintenance1 improvement1 or repair of a transportation1 energy1 water1 communications1 or educational facility2 7,d7 the recipient of bond guarantees1 loans1 equity investments1 or any other innovative financing technique authorized under this ,act provides written assurances prescribed by the ,,aif that the project will be performed in compliance with the requirements of all ,federal laws that would otherwise apply to similar projects to which the ,united ,states is a party2 and 7,e7 in the case of a public transportation capital project as defined in section #ecjb of title #di1 ,united ,states ,code1 the recipient of bond guarantees1 loans1 equity investments1 or any other innovative financing technique authorized under this ,act complies with the grant requirements of section #ecji of such title4 7#d7 ,application for assistance 7,a7 ,in general ,a ,state or local government that wishes to receive a loan or bond guarantee under this section shall submit an application to the ,board in such form and manner and containing such information as the ,board may require4 7,b7 ,requirement for public sponsorship of private entities ,a private entity may only receive a bond guarantee1 loan1 or equity investment under this section if the ,state or local government for the jurisdiction in which the nonprofit infrastructure provider or private partner is located submits an application pursuant to subparagraph 7,a7 on behalf of such nonprofit infrastructure provider or private partner4 7#e7 ,limitations on single state awards 7,a7 ,annual limitation ,the ,board shall set an annual limit1 as a percentage of total assistance provided under this section during a year1 on the amount of assistance a single ,state 7including local governments and other infrastructure providers within such ,state7 may receive in assistance provided under this section4 7,b7 ,cumulative limitation ,the ,board shall set a limit1 as a percentage of total assistance provided under this section outstanding at any one time1 on the amount of assistance a single ,state 7including local governments and other infrastructure providers within such ,state7 may receive in assistance provided under this section4 7#f7 ,loan specifications ,loans made under this section shall have such maturity and carry such interest rate as the ,board determines appropriate4 7#g7 ,bond guarantee ,the ,board shall charge such fees for ,bond guarantees made under this section as the ,board determines appropriate4 7#h7 ,equity investments ,with respect to a ,,qip1 the amount of an equity investment made by the ,,aif in such ,,qip may not exceed #bj percent of the total cost of the ,,qip4 7#i7 ,public-private partnership requirements ,at least #ce percent of the assistance provided under this section shall be provided to ,q,i,ps for which at least #aj percent of the financing for such ,q,i,ps comes from private debt or equity4 7#aj7 ,prohibition on principal forgiveness ,with respect to a loan made under this section1 the ,board may not forgive any amount of principal on such loan4 7d7 ,definitions ,for purposes of this section3 7#a7 ,infrastructure provider ,the term infrastructure provider means an entity that seeks to finance a ,,qip4 7#b7 ,secretary ,the term ,secretary means the ,secretary of the ,treasury4 7#c7 ,state ,the term ,state means each of the several ,states1 the ,district of ,columbia1 any territory or possession of the ,united ,states1 and each federally recognized ,indian tribe4 7e7 ,appropriation ,out of money in the ,treasury not otherwise appropriated1 there is hereby appropriated #ej1jjj1jjj1jjj to the ,american ,infrastructure ,fund4 ,amounts appropriated under this subsection shall remain available without fiscal year limitation4 #ajc4 ,dedication of remaining revenues to highway trust fund 7a7 ,in general ,section #iejc7;f7 is amended by redesignating paragraph 7#e7 as paragraph 7#f7 and by inserting after paragraph 7#d7 the following new paragraph3 7#e7 ,appropriation of revenues attributable to section #ife 7,a7 ,initial appropriation ,out of money in the ,treasury not otherwise appropriated1 there is hereby appropriated #ajj1jjj1jjj1jjj to the ,highway ,trust ,fund4 7,b7 ,remaining revenues 7i7 ,in general ,out of money in the ,treasury not otherwise appropriated1 there are hereby appropriated to the ,highway ,trust ,fund the excess of-- 7,i7 amounts equivalent to the aggregate net tax liabilities under section #ife 7as defined in such section7 received in the ,treasury1 over 7,,ii7 #aej1jjj1jjj1jjj4 7ii7 ,additional transfers only after revenues equaling initial transfers have been received in the ,treasury ,for purposes of applying section #ifja to clause 7i71 no transfer shall be made under clause 7i7 until the ,secretary estimates that the amount described in clause 7i77,i7 has exceeded the amount described in clause 7i77,,ii74 4 7b7 ,transfers to ,mass ,transit ,account ,section #iejc7;e77#b7 of such ,code is amended by striking the mass transit portion and inserting 1 #bj percent of the amounts appropriated to the ,highway ,trust ,fund under subsection 7f77#e71 and the mass transit portion4 #ajd4 ,highway ,trust ,fund ,solvency ,commission 7a7 ,establishment ,there is established in the legislative branch a commission to be known as the ,highway ,trust ,fund ,solvency ,commission 7in this section referred to as the ,commission74 7b7 ,duty of the ,commission ,not later than #a year after the initial meeting of the ,commission1 the ,commission shall transmit to ,congress a written report that includes recommendations and proposed legislation for achieving long-term solvency of the ,highway ,trust ,fund4 7c7 ,members 7#a7 ,number and appointment ,the ,commission shall be composed of #i members4 ,of the members of the ,commission-- 7,a7 #a member shall be appointed by the ,president of the ,united ,states2 7,b7 #a member shall be appointed by the chairman of the ,committee on ,finance of the ,senate2 7,c7 #a member shall be appointed by the ranking minority member of the ,committee on ,finance of the ,senate2 7,d7 #a member shall be appointed by the chairman of the ,committee on ,ways and ,means of the ,house of ,representatives2 7,e7 #a member shall be appointed by the ranking minority member of the ,committee on ,ways and ,means of the ,house of ,representatives2 7,f7 #a member shall be appointed by the chairman of the ,committee on ,environment and ,public ,works of the ,senate2 7,g7 #a member shall be appointed by the ranking minority member of the ,committee on ,environment and ,public ,works of the ,senate2 7,h7 #a member shall be appointed by the chairman of the ,committee on ,transportation and ,infrastructure of the ,house of ,representatives2 and 7,i7 #a member shall be appointed by the ranking minority member of the ,committee on ,transportation and ,infrastructure of the ,house of ,representatives4 7#b7 ,timing of appointments ,each of the appointments made under paragraph 7#a7 shall be made not later than #de days after the date of the enactment of this ,act4 7#c7 ,terms2 vacancies ,each member shall be appointed for the life of the ,commission1 and a vacancy in the ,commission shall be filled in the manner in which the original appointment was made4 7#d7 ,compensation 7,a7 ,in general ,members of the ,commission shall serve without pay4 7,b7 ,travel expenses ,each member shall receive travel expenses1 including per diem in lieu of subsistence1 in accordance with applicable provisions under subchapter ,i of chapter #eg of title #e1 ,united ,states ,code4 7d7 ,operation and powers of the ,commission 7#a7 ,chair ,the chairperson of the ,commission shall be elected by the members of the ,commission4 7#b7 ,meetings ,the ,commission shall meet not later than #cj days after the members of the ,commission have been appointed1 and at such times thereafter as the chairperson shall determine4 7#c7 ,rules of procedure ,the chairperson shall1 with the approval of a majority of the members of the ,commission1 establish written rules of procedure for the ,commission1 which shall include a quorum requirement to conduct the business of the ,commission4 7#d7 ,hearings ,the ,commission may1 for the purpose of carrying out this section1 hold hearings1 sit and act at times and places1 take testimony1 and receive evidence as the ,commission considers appropriate4 7#e7 ,obtaining official data ,the ,commission may secure directly from any department or agency of the ,united ,states1 including the ,congressional ,budget ,office and the ,government ,accountability ,office1 any information or technical assistance necessary to enable it to carry out this section4 ,upon request of the chairperson of the ,commission1 the head of that department or agency shall furnish that information or technical assistance to the ,commission4 7#f7 ,contract authority ,the ,commission may contract with and compensate government and private agencies or persons for any purpose necessary to enable it to carry out this section4 7#g7 ,mails ,the ,commission may use the ,united ,states mails in the same manner and under the same conditions as other departments and agencies of the ,united ,states4 7e7 ,personnel 7#a7 ,director ,the ,commission shall have a ,director who shall be appointed by the ,commission4 ,the ,director shall be paid at a rate of pay equivalent to the annual rate of basic pay for a comparable position paid under the ,executive ,schedule1 subject to the approval of the chairperson of the ,commission4 7#b7 ,staff ,the ,director may appoint and fix the pay of additional staff as the ,director considers appropriate4 7#c7 ,experts and consultants ,the ,commission may procure temporary and intermittent services under section #caji7;b7 of title #e1 ,united ,states ,code1 but at rates for individuals not to exceed the daily equivalent of the annual rate of basic pay for a comparable position paid under the ,executive ,schedule4 7#d7 ,staff of ,federal agencies ,upon request of the ,commission1 the head of any ,federal department or agency may detail1 without reimbursement1 any of the personnel of that department or agency to the ,commission to assist it in carrying out its duties under this section4 7#e7 ,administrative support services ,upon the request of the ,commission1 the ,administrator of ,general ,services shall provide to the ,commission1 on a reimbursable basis1 the administrative support services necessary for the ,commission to carry out its responsibilities under this section4 7f7 ,termination ,the ,commission shall terminate not later than #fj days after the submission of the report described in subsection 7b74 7g7 ,authorization of appropriations ,there is authorized to be appropriated such sums as may be necessary to carry out this section4 ,,ii ,deadline for international tax reform #bja4 #ah-month deadline for international tax reform ,notwithstanding any provision of title ,,iii1 the provisions of1 and amendments made by1 title ,,iii shall not take effect if a bill which reforms the corporate international tax system by eliminating the incentive to hold earnings in low-tax foreign jurisdictions is enacted into law during the #ah-month period which begins on the date of the enactment of this ,act4 ,,iii ,fallback international tax reform #cjj4 ,general effective date of title ,for purposes of this title1 the term applicable date means the date which is #ah months after the date of the enactment of this ,act4 ,a ,reform of taxation of income earned by controlled foreign corporations ,i ,general provisions #cja4 ,modifications to subpart ,f income 7a7 ,in general ,subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by striking sections #ieb through #ief and inserting the following3 #ieb4 ,subpart ,f income defined 7a7 ,in general ,for purposes of this subpart1 the term subpart ,f income means1 with respect to any controlled foreign corporation1 the sum of-- 7#a7 the inclusion percentage of the corporation's modified active income1 plus 7#b7 #ajj percent of the corporation's modified nonactive income4 7b7 ,modified active income 7#a7 ,in general ,the term modified active income means1 with respect to any controlled foreign corporation1 the excess 7if any7 of-- 7,a7 the corporation's active foreign market income1 over 7,b7 the amount of the reduction under subsection 7e7 for deductions properly allocable to such income4 7#b7 ,reduction for certain losses 7,a7 ,in general ,the modified active income determined under paragraph 7#a7 for any taxable year shall be reduced 7but not below zero7-- 7i7 first by any active foreign market loss for any prior taxable year1 and 7ii7 then by any qualified loss for such taxable year 7or for any prior taxable year to the extent provided in subsection 7c77#c77;,b774 7,b7 ,limitation ,an active foreign market loss or qualified loss for any prior taxable year shall only be taken into account under subparagraph 7,a7-- 7i7 if the prior taxable year is a taxable year which begins on or after the applicable date 7as defined in section #cjj of the ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad71 and for which the controlled foreign corporation was a controlled foreign corporation1 and 7ii7 to the extent such loss has not been previously taken into account under this subsection4 7#c7 ,active foreign market loss ,the term active foreign market loss means1 with respect to any taxable year1 the amount by which the amount determined under paragraph 7#a77;,b7 exceeds the amount determined under paragraph 7#a77;,a74 7c7 ,modified nonactive income 7#a7 ,in general ,the term modified nonactive income means1 with respect to any controlled foreign corporation1 the excess 7if any7 of-- 7,a7 the corporation's gross income determined without regard to active foreign market income1 over 7,b7 the amount of the reduction under subsection 7e7 for deductions properly allocable to such gross income4 7#b7 ,reduction for qualified losses ,the amount determined under paragraph 7#a7 for any taxable year shall be reduced 7but not below zero7 by any qualified loss for any prior taxable year beginning on or after the applicable date 7as defined in section #cjj of the ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad71 for which the controlled foreign corporation was a controlled foreign corporation1 but only to the extent such loss has not been previously taken into account under subsection 7b77#b7 or this subsection4 7#c7 ,qualified loss ,for purposes of this section-- 7,a7 ,in general ,the term qualified loss means1 with respect to any taxable year1 the amount by which the amount determined under paragraph 7#a77;,b7 exceeds the amount determined under paragraph 7#a77;,a74 7,b7 ,ordering rule for losses carried from prior taxable years ,in the case of any qualified losses carried to a taxable year from #a or more prior taxable years1 such losses shall be taken into account-- 7i7 first under paragraph 7#b71 and 7ii7 then under subsection 7b77#b77;,b7 to the extent such losses exceed the amount determined under paragraph 7#a74 7d7 ,inclusion percentage ,for purposes of this section-- 7#a7 ,in general ,the term inclusion percentage means #bj percent increased by the number of percentage points 7if any7 determined under paragraph 7#b74 7#b7 ,additional inclusion for earnings not subject to ,,oecd average foreign tax ,the number of percentage points determined under this paragraph with respect to any controlled foreign corporation for any taxable year1 is the number of percentage points 7not less than zero nor more than #ae7 which bears the same ratio to #ae as-- 7,a7 the number of percentage points by which #be percent exceeds the aggregate foreign rate of tax imposed on the modified active income of such controlled foreign corporation for such taxable year1 bears to 7,b7 #be4 7e7 ,exclusion of ,united ,states income ,for purposes of this subpart1 any item of income of the controlled foreign corporation which is effectively connected with the conduct by such corporation of a trade or business within the ,united ,states shall not be taken into account in computing the subpart ,f income of such corporation unless such item is exempt from taxation 7or is subject to a reduced rate of tax7 pursuant to a treaty obligation of the ,united ,states4 ,for purposes of this subsection1 any exemption 7or reductions7 with respect to the tax imposed by section #hhd shall not be taken into account4 7f7 ,deductions ,for purposes of subsections 7b77#a77;,b7 and 7c77#a77;,b71 the active foreign market income1 and gross income other than active foreign market income1 of a controlled foreign corporation shall each be reduced1 under regulations prescribed by the ,secretary1 by any deductions 7including taxes7 of such corporation properly allocable to items of income taken into account in computing such income4 #iec4 ,active foreign market income 7a7 ,active foreign market income defined ,for purposes of this subpart1 the term active foreign market income means1 with respect to any controlled foreign corporation1 the aggregate of all items of income which are-- 7#a7 attributable to economically significant activities with respect to a qualified trade or business1 and 7#b7 derived in connection with-- 7,a7 property which is sold1 exchanged1 or otherwise disposed of for use1 consumption1 or disposition outside of the ,united ,states1 or 7,b7 services which are provided outside of the ,united ,states with respect to persons or property located outside of the ,united ,states4 7b7 ,treatment of passive income 7#a7 ,in general ,except as otherwise provided in this subsection1 the term active foreign market income shall not include the passive income 7as defined in section #ied7 of a controlled foreign corporation4 7#b7 ,active foreign market income includes certain income ,the term active foreign market income shall include-- 7,a7 if the controlled foreign corporation or a qualified business unit of the corporation is an eligible controlled foreign corporation 7as defined in section #ied7;c771 any item of income of the corporation or unit which is qualified banking or financing income 7as so defined71 7,b7 if the controlled foreign corporation or a qualified business unit of the corporation is a qualifying insurance company 7as defined in section #ied7;d77 or a qualifying insurance company branch 7as so defined71 any item of income of the corporation or unit which is qualified insurance income 7as so defined71 7,c7 any item of income which is rents or royalties derived from the ownership and operation 7including leasing7 of real or personal property which is not treated as passive income under section #ied7;a77#b77;,a71 and 7,d7 in the case of a regular dealer in property which is property described in section #ied7;a77#a77;,b71 forward contracts1 option contracts1 or similar financial instruments 7including notional principal contracts and all instruments referenced to commodities71 any item of income from any transaction 7including hedging transactions and transactions involving physical settlement7 entered into in the ordinary course of such dealer's trade or business as such a dealer4 7#c7 ,gain or loss from sales of stock in other ,c,f,cs ,if a controlled foreign corporation sells1 exchanges1 or otherwise disposes of stock in another controlled foreign corporation which is a related person to the selling corporation-- 7,a7 gain from such sale1 exchange1 or disposition shall be treated as active foreign market income to the extent that such gain would have been excluded from gross income under section #abjc if the selling corporation were a ,united ,states shareholder in the other controlled foreign corporation1 and 7,b7 loss from such sale1 exchange1 or disposition shall not be allowed to the extent such loss would have been disallowed under section #abac if the selling corporation were a ,united ,states shareholder in the other controlled foreign corporation4 7#d7 ,gain or loss from sales of interests in #be-percent owned partnerships 7,a7 ,in general 7i7 ,portion treated as active foreign market income ,in the case of any sale or exchange by a controlled foreign corporation of an interest in a partnership with respect to which such corporation is a #be-percent owner1 gain or loss on such sale shall be taken into account in determining active foreign market income in the amount which bears the same ratio to the amount of such gain or loss as the controlled foreign corporation's distributable share of the active foreign market income from the partnership over the applicable period bears to the controlled foreign corporation's distributable share of gross income from the partnership over such period4 ,the ,secretary shall prescribe such regulations as may be appropriate to prevent abuse of the purposes of this paragraph1 including regulations providing for coordination of this paragraph with the provisions of subchapter ,k4 7ii7 ,applicable period ,for purposes of this subparagraph1 the term applicable period means1 with respect to any interest in a partnership1 the shorter of the #c-taxable year period immediately preceding the taxable year of the sale or exchange or the controlled foreign corporation's holding period in the interest4 ,in no event shall the applicable period include any portion of any taxable year beginning before the applicable date 7as defined in section #cjj of the ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad74 7,b7 #be-,percent owner ,for purposes of this paragraph1 the term #be-percent owner means a controlled foreign corporation which owns directly #be percent or more of the capital or profits interest in a partnership4 ,for purposes of the preceding sentence1 if a controlled foreign corporation is a shareholder or partner of a corporation or a partnership1 the controlled foreign corporation shall be treated as owning directly its proportionate share of any capital or profits interest in any partnership held directly or indirectly by such corporation or partnership4 ,if a controlled foreign corporation is treated as owning a capital or profits interest in a partnership under constructive ownership rules similar to the rules of section #ieh7;b71 the controlled foreign corporation shall be treated as owning such interest directly for purposes of this subparagraph4 7c7 ,treatment of insurance income 7#a7 ,in general ,except as otherwise provided in this subsection1 the term active foreign market income shall not include the insurance income 7as defined in section #iee7;a77 of a controlled foreign corporation4 7#b7 ,active foreign market income includes exempt insurance income ,the term active foreign market income shall include exempt insurance income 7as defined in section #iee7;c77 shall be treated as active foreign market income4 7d7 ,treatment of income from property used1 consumed1 or disposed of in the ,united ,states ,for purposes of subsection 7a77#b77;,a7-- 7#a7 ,in general ,the term active foreign market income shall not include income derived in connection with property which is sold1 exchanged1 or otherwise disposed of to any person if it was reasonable for the controlled foreign corporation 7or a related person7 to expect that-- 7,a7 such property would be used1 consumed1 or disposed of in the ,united ,states1 or 7,b7 such property would be used in the manufacture or production of1 or as a component part in1 other property which would be used1 consumed1 or disposed of in the ,united ,states4 7#b7 ,chain of related persons ,if-- 7,a7 property is ultimately used1 consumed1 or disposed of as described in subparagraph 7,a7 or 7,b7 of paragraph 7#a71 and 7,b7 all sales1 exchanges1 or dispositions of such property 7or of the other property described in paragraph 7#a77;,b77 before the sale for use1 consumption1 or disposition in the ,united ,states are between related persons1 then1 for purposes of paragraph 7#a71 there shall be deemed to have been a reasonable expectation that the property 7or the other property described in paragraph 7#a77;,b77 would be used1 consumed1 or disposed of in the ,united ,states4 7#c7 ,exception for property subsequently exported ,paragraphs 7#a7 and 7#b7 shall not apply with respect to property which1 after entry into the ,united ,states is-- 7,a7 sold1 leased1 rented1 or licensed by the controlled foreign corporation or a related person for direct use1 consumption1 or disposition outside the ,united ,states1 or 7,b7 used by the controlled foreign corporation or a related person as a component in other property which is so sold1 leased1 rented1 or licensed4 7#d7 ,related person defined ,for purposes of this subsection1 the term related person has the meaning given such term under section #ied7;b74 7e7 ,economically significant activities ,for purposes of this section1 the term economically significant activities means1 with respect to any item of income1 activities-- 7#a7 performed outside the ,united ,states1 7#b7 performed by officers or employees of the controlled foreign corporation which are part of the management and operational functions of the corporation1 and 7#c7 which make a substantial contribution to the production of such item of income4 7f7 ,qualified trade or business ,for purposes of this section-- 7#a7 ,in general ,the term qualified trade or business means any trade or business which consists of-- 7,a7 manufacturing1 producing1 growing1 or extracting property outside of the ,united ,states1 or 7,b7 providing services outside of the ,united ,states4 7#b7 ,special rule for substantial contributions to manufacturing and services ,if a trade or business consists of making a substantial contribution through the activities of the officers and employees of the controlled foreign corporation to a qualified trade or business which is described in subparagraph 7,a7 or 7,b7 of paragraph 7#a7 of another person1 then the trade or business shall be treated as a qualified trade or business described in subparagraph 7,a7 or 7,b7 of paragraph 7#a71 whichever is applicable4 #ied4 ,definition of passive income 7a7 ,passive income 7#a7 ,in general ,for purposes of this part1 the term passive income means the portion of the gross income which consists of3 7,a7 ,dividends1 etc ,dividends1 interest1 royalties1 rents1 and annuities4 7,b7 ,certain property transactions ,the excess of gains over losses from the sale or exchange of property-- 7i7 which gives rise to income described in subparagraph 7,a7 7after application of paragraph 7#b77;,a77 other than property which gives rise to income not treated as passive income by reason of subsection 7c7 or 7d7 for the taxable year1 7ii7 which is an interest in a trust1 partnership1 or ,,remic1 or 7iii7 which does not give rise to any income4 ,gains and losses from the sale or exchange of any property which1 in the hands of the controlled foreign corporation1 is property described in section #abba7;a77#a7 shall not be taken into account under this subparagraph4 7,c7 ,commodities transactions ,the excess of gains over losses from transactions 7including futures1 forward1 and similar transactions7 in any commodities4 ,this subparagraph shall not apply to gains or losses which-- 7i7 arise out of commodity hedging transactions 7as defined in paragraph 7#e77;,a771 7ii7 are active business gains or losses from the sale of commodities1 but only if substantially all of the controlled foreign corporation's commodities are property described in paragraph 7#a71 7#b71 or 7#h7 of section #abba7;a71 or 7iii7 are foreign currency gains or losses 7as defined in section #ihh7;b77 attributable to any section #ihh transactions4 7,d7 ,foreign currency gains ,the excess of foreign currency gains over foreign currency losses 7as defined in section #ihh7;b77 attributable to any section #ihh transactions4 ,this subparagraph shall not apply in the case of any transaction1 other than a borrowing1 directly related to the business needs of the controlled foreign corporation4 7,e7 ,income equivalent to interest ,any income equivalent to interest1 including income from commitment fees 7or similar amounts7 for loans actually made4 7,f7 ,income from notional principal contracts 7i7 ,in general ,net income from notional principal contracts4 7ii7 ,coordination with other categories of passive income ,any item of income1 gain1 deduction1 or loss from a notional principal contract entered into for purposes of hedging any item described in any preceding subparagraph shall not be taken into account for purposes of this subparagraph but shall be taken into account under such other subparagraph4 7,g7 ,payments in lieu of dividends ,payments in lieu of dividends which are made pursuant to an agreement to which section #ajeh applies4 7,h7 ,personal service contracts 7i7 ,amounts received under a contract under which the corporation is to furnish personal services if-- 7,i7 some person other than the corporation has the right to designate 7by name or by description7 the individual who is to perform the services1 or 7,,ii7 the individual who is to perform the services is designated 7by name or by description7 in the contract1 and 7ii7 amounts received from the sale or other disposition of such a contract4 ,this subparagraph shall apply with respect to amounts received for services under a particular contract only if at some time during the taxable year #be percent or more in value of the outstanding stock of the corporation is owned1 directly or indirectly1 by or for the individual who has performed1 is to perform1 or may be designated 7by name or by description7 as the one to perform1 such services4 7#b7 ,exception for certain amounts 7,a7 ,rents and royalties derived in active business ,passive income shall not include rents and royalties which are derived in the active conduct of a trade or business and which are received from a person other than a related person4 ,for purposes of the preceding sentence1 rents derived from leasing an aircraft or vessel in foreign commerce shall not fail to be treated as derived in the active conduct of a trade or business if1 as determined under regulations prescribed by the ,secretary1 the active leasing expenses are not less than #aj percent of the profit on the lease4 7,b7 ,exception for dealers ,except as provided by regulations1 in the case of a regular dealer in property which is property described in paragraph 7#a77;,b71 forward contracts1 option contracts1 or similar financial instruments 7including notional principal contracts and all instruments referenced to commodities71 there shall not be taken into account in computing passive income any item of income1 gain1 deduction1 or loss from any transaction 7including hedging transactions and transactions involving physical settlement7 entered into in the ordinary course of such dealer's trade or business as such a dealer4 7#c7 ,look-thru rule for certain partnership sales 7,a7 ,in general ,in the case of any sale or exchange by a controlled foreign corporation of an interest in a partnership with respect to which such corporation is a #be-percent owner1 gain or loss on such sale shall be treated as being described in paragraph 7#a77;,b77ii7 in the amount which bears the same ratio to the amount of such gain or loss as the controlled foreign corporation's distributable share of passive income from the partnership over the applicable period 7as defined in section #iec7;b77#d77;,a77ii77 bears to the controlled foreign corporation's distributable share of gross income from the partnership over such period4 ,the ,secretary shall prescribe such regulations as may be appropriate to prevent abuse of the purposes of this paragraph1 including regulations providing for the coordination of this paragraph with the provisions of subchapter ,k4 7,b7 #be-,percent owner ,for purposes of this paragraph1 the term #be-percent owner has the meaning given such term under section #iec7;b77#d77;,b74 7#d7 ,definition and special rules relating to commodity transactions 7,a7 ,commodity hedging transactions ,for purposes of paragraph 7#a77;,c77i71 the term commodity hedging transaction means any transaction with respect to a commodity if such transaction-- 7i7 is a hedging transaction as defined in section #abba7;b77#b71 determined-- 7,i7 without regard to subparagraph 7,a77ii7 thereof1 7,,ii7 by applying subparagraph 7,a77i7 thereof by substituting ordinary property or property described in section #abca7;b7 for ordinary property1 and 7,,iii7 by substituting controlled foreign corporation for taxpayer each place it appears1 and 7ii7 is clearly identified as such in accordance with section #abba7;a77#g74 7,b7 ,treatment of dealer activities under paragraph 7#a77;c7 ,commodities with respect to which gains and losses are not taken into account under paragraph 7#b77;,b7 in computing a controlled foreign corporation's passive income shall not be taken into account in applying the substantially all test under paragraph 7#a77;,c77ii7 to such corporation4 7,c7 ,regulations ,the ,secretary shall prescribe such regulations as are appropriate to carry out the purposes of paragraph 7#a77;,c7 in the case of transactions involving related persons4 7b7 ,related person defined ,for purposes of this section1 a person is a related person with respect to a controlled foreign corporation1 if-- 7#a7 such person is an individual1 corporation1 partnership1 trust1 or estate which controls1 or is controlled by1 the controlled foreign corporation1 or 7#b7 such person is a corporation1 partnership1 trust1 or estate which is controlled by the same person or persons which control the controlled foreign corporation4 ,for purposes of the preceding sentence1 control means1 with respect to a corporation1 the ownership1 directly or indirectly1 of stock possessing more than #ej percent of the total voting power of all classes of stock entitled to vote or of the total value of stock of such corporation4 ,in the case of a partnership1 trust1 or estate1 control means the ownership1 directly or indirectly1 of more than #ej percent 7by value7 of the beneficial interests in such partnership1 trust1 or estate4 ,for purposes of this subsection1 rules similar to the rules of section #ieh shall apply4 7c7 ,special rule for income derived in the active conduct of banking1 financing1 or similar businesses 7#a7 ,in general ,for purposes of subsection 7a77#a71 passive income shall not include qualified banking or financing income of an eligible controlled foreign corporation4 7#b7 ,eligible controlled foreign corporation ,for purposes of this subsection1 the term eligible controlled foreign corporation means any controlled foreign corporation if-- 7,a7 more than #hj percent of the gross income of the controlled foreign corporation is derived directly from the active and regular conduct of a lending1 finance1 or financial services business from transactions with customers which are located outside the ,united ,states and are not related persons1 or 7,b7 it is a regulated financial institution4 7#c7 ,qualified banking or financing income ,for purposes of this subsection-- 7,a7 ,in general ,the term qualified banking or financing income means income of an eligible controlled foreign corporation which-- 7i7 is derived in the active conduct of a banking1 financing1 or similar business by such eligible controlled foreign corporation1 7ii7 is derived from one or more transactions-- 7,i7 with customers located in a country other than the ,united ,states1 and 7,,ii7 substantially all of the activities in connection with which are conducted directly by the corporation in its home country1 and 7iii7 is treated as earned by such corporation in its home country for purposes of such country's tax laws4 7,b7 ,income derived from customers to include certain investment income ,for purposes of subparagraph 7,a71 in the case of a regulated financial institution1 income derived from customers includes income derived from-- 7i7 reserves that are required to be held pursuant to banking regulations1 7ii7 deposits placed with the central bank 7or equivalent thereof7 in the corporation's home country1 and 7iii7 investments in debt instruments issued by the home country4 7,c7 ,substantial activity requirement for cross border income ,the term qualified banking or financing income shall not include income derived from #a or more transactions with customers located in a country other than the home country of the eligible controlled foreign corporation unless such corporation conducts substantial activity with respect to a banking1 financing1 or similar business in its home country4 7,d7 ,direct conduct of activities ,for purposes of subparagraph 7,a77ii77,,ii71 an activity shall be treated as conducted directly by an eligible controlled foreign corporation in its home country if the activity is performed by employees of a related person and-- 7i7 the related person is a resident subject to tax under the laws of the home country of the corporation to which subparagraph 7,a77ii77,,ii7 is being applied1 7ii7 the activity is performed in such home country1 and 7iii7 the related person is compensated on an arm's-length basis for the performance of the activity by its employees and such compensation is treated as earned by such person in such home country for purposes of the home country's tax laws4 7#d7 ,lending1 finance1 or financial services business ,for purposes of this subsection1 except as provided in regulations1 the term lending1 finance1 or financial services business means the business of-- 7,a7 making loans1 7,b7 purchasing1 selling1 discounting1 or negotiating on a regular basis accounts receivable1 notes1 or installment obligations1 7,c7 engaging in leasing 7including entering into leases and purchasing1 servicing1 and disposing of leases and leased assets71 7,d7 issuing letters of credit or providing guarantees1 7,e7 providing charge and credit card services1 7,f7 performing trust services1 including as a fiduciary1 agent1 or custodian1 other than trust services provided by a broker or dealer in stock1 securities1 or other financial instruments1 7,g7 arranging interest rate or currency futures1 forwards1 options1 or notional principal contracts for1 or entering into such transactions with1 customers1 7,h7 providing traveler's check and money order services for customers1 7,i7 providing correspondent bank services for customers1 7,j7 engaging in hedging activities directly related to an activity described in any other subparagraph of this paragraph1 7,k7 underwriting issues of stock1 debt1 or other securities for customers1 7,l7 providing financial1 investment advisory1 or investment management services1 7,m7 purchasing or selling stock1 debt instruments1 interest rate or currency futures1 or other securities or derivative financial products 7including notional principal contracts7 from or to customers and holding such stock1 debt instruments1 futures1 or other securities or products as inventory for sale to customers1 unless such stock1 debt instruments1 futures1 or other securities or products are not held in a dealer capacity1 7,n7 effecting transactions in securities for customers as a securities broker1 or 7,o7 rendering services or making facilities available in connection with activities described in subparagraphs 7,a7 through 7,n7 carried on by-- 7i7 the corporation rendering services or making facilities available1 or 7ii7 another corporation which is a member of the same affiliated group 7as defined in section #aejd1 but determined without regard to section #aejd7;b77#c774 7#e7 ,other definitions ,for purposes of this subsection-- 7,a7 ,customer ,the term customer means1 with respect to any controlled foreign corporation1 any person which has a customer relationship with such corporation and which is acting in its capacity as such4 7,b7 ,home country ,except as provided in regulations1 the term home country means1 with respect to any entity1 the country with respect to which the entity is a resident for purposes of the country's income tax laws4 7,c7 ,located ,except as provided in regulations1 for purposes of paragraph 7#c77;,a7-- 7i7 if a customer is a natural person1 the customer is considered to be located in the country in which the customer is physically located when entering into the transaction1 and 7ii7 if a customer is not a natural person1 the customer is considered to be located in the country from which the customer enters into the transaction4 7,d7 ,qualified business unit ,the term qualified business unit has the meaning given such term by section #ihi7;a74 7,e7 ,regulated financial institution ,except as provided in regulations1 the term regulated financial institution means a controlled foreign corporation which-- 7i7 is engaged in the active conduct of a banking business and is an institution licensed to do business as a bank in the ,united ,states 7or is any other corporation not so licensed which is specified by the ,secretary in regulations71 or 7ii7 satisfies each of the following conditions3 7,i7 ,the corporation is directly or indirectly wholly owned by a domestic corporation that is a bank 7as defined in section #eha7 or a depository institution holding company 7as defined in section #c7w77#a7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahac7w77#a7774 7,,ii7 ,the corporation is subject to bank regulatory supervision in a jurisdiction the central bank of which 7or equivalent thereof7 is a member of the ,basel ,committee on ,banking ,supervision4 7,,iii7 ,the corporation is licensed and regulated in such jurisdiction as a bank4 7#f7 ,separate application to qualified business units 7,a7 ,in general ,if a controlled foreign corporation has #a or more qualified business units-- 7i7 this subsection shall be applied separately to each such unit in the same manner as if it were a controlled foreign corporation1 and 7ii7 if any such unit is treated as an eligible controlled foreign corporation after application of clause 7i71 the qualified banking or financing income of such unit shall be treated as qualified banking or financing income of the controlled foreign corporation of which such unit is a part4 7,b7 ,determinations made separately ,for purposes of the separate application of this subsection to a controlled foreign corporation and its qualified business units-- 7i7 in the case of the controlled foreign corporation1 only activities and items of income1 deduction1 gain1 or loss and activities of such corporation not properly allocable or attributable to any qualified business unit of such corporation shall be taken into account1 and 7ii7 in the case of a qualified business unit1 only activities and items of income1 deduction1 gain1 or loss and activities properly allocable or attributable to such unit shall be taken into account4 7,c7 ,home country ,for purposes of this subsection1 except as provided in regulations1 notwithstanding paragraph 7#e77;,b71 the home country with respect to any qualified business unit treated as a controlled foreign corporation under subparagraph 7,a7 shall be the country in which such unit maintains its principal office4 7#g7 ,anti-abuse rules ,for purposes of applying this subsection-- 7,a7 there shall be disregarded any item of income1 gain1 loss1 or deduction with respect to any transaction or series of transactions one of the principal purposes of which is qualifying income or gain for the exclusion under this section1 including any transaction or series of transactions a principal purpose of which is the acceleration or deferral of any item in order to claim the benefits of such exclusion through the application of this subsection1 7,b7 there shall be disregarded any item of income1 gain1 loss1 or deduction of an entity which is not engaged in regular and continuous transactions with customers which are not related persons1 7,c7 there shall be disregarded any item of income1 gain1 loss1 or deduction with respect to any transaction or series of transactions utilizing1 or doing business with-- 7i7 one or more entities in order to satisfy any home country requirement under this subsection1 or 7ii7 a special purpose entity or arrangement1 including a securitization1 financing1 or similar entity or arrangement1 if one of the principal purposes of such transaction or series of transactions is qualifying income or gain for the exclusion under this subsection1 and 7,d7 a related person1 an officer1 a director1 or an employee with respect to any controlled foreign corporation which would otherwise be treated as a customer of such corporation with respect to any transaction shall not be so treated if a principal purpose of such transaction is to satisfy any requirement of this subsection4 7#h7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection and subsection 7a77#a77;,b77i74 7d7 ,special rule for income derived in the active conduct of insurance business 7#a7 ,in general ,for purposes of subsection 7a77#a71 passive income shall not include qualified insurance income of a qualifying insurance company4 7#b7 ,qualified insurance income ,for purposes of this subsection1 the term qualified insurance income means income of a qualifying insurance company which is-- 7,a7 received from a person other than a related person and derived from the investments made by a qualifying insurance company or a qualifying insurance company branch of its reserves allocable to exempt contracts or of #hj percent of its unearned premiums from exempt contracts 7as both are determined in the manner prescribed under paragraph 7#d771 or 7,b7 received from a person other than a related person and derived from investments made by a qualifying insurance company or a qualifying insurance company branch of an amount of its assets allocable to exempt contracts equal to-- 7i7 in the case of property1 casualty1 or health insurance contracts1 one-third of its premiums earned on such insurance contracts during the taxable year 7as defined in section #hcb7;b77#d771 and 7ii7 in the case of life insurance or annuity contracts1 #aj percent of the reserves described in subparagraph 7,a7 for such contracts4 7#c7 ,principles for determining qualified insurance income ,except as provided by the ,secretary1 for purposes of subparagraphs 7,a7 and 7,b7 of paragraph 7#b7-- 7,a7 in the case of any contract which is a separate account-type contract 7including any variable contract not meeting the requirements of section #hag71 income credited under such contract shall be allocable only to such contract1 and 7,b7 income not allocable under subparagraph 7,a7 shall be allocated ratably among contracts not described in subparagraph 7,a74 7#d7 ,methods for determining unearned premiums and reserves ,for purposes of paragraph 7#b77;,a7-- 7,a7 ,property and casualty contracts ,the unearned premiums and reserves of a qualifying insurance company or a qualifying insurance company branch with respect to property1 casualty1 or health insurance contracts shall be determined using the same methods and interest rates which would be used if such company or branch were subject to tax under subchapter ,l1 except that-- 7i7 the interest rate determined for the functional currency of the company or branch1 and which1 except as provided by the ,secretary1 is calculated in the same manner as the ,federal mid-term rate under section #abgd7;d71 shall be substituted for the applicable ,federal interest rate1 and 7ii7 such company or branch shall use the appropriate foreign loss payment pattern4 7,b7 ,life insurance and annuity contracts 7i7 ,in general ,except as provided in clause 7ii71 the amount of the reserve of a qualifying insurance company or qualifying insurance company branch for any life insurance or annuity contract shall be equal to the greater of-- 7,i7 the net surrender value of such contract 7as defined in section #hjg7;e77#a77;,a771 or 7,,ii7 the reserve determined under paragraph 7#e74 7ii7 ,ruling request1 etc ,the amount of the reserve under clause 7i7 shall be the foreign statement reserve for the contract 7less any catastrophe1 deficiency1 equalization1 or similar reserves71 if1 pursuant to a ruling request submitted by the taxpayer or as provided in published guidance1 the ,secretary determines that the factors taken into account in determining the foreign statement reserve provide an appropriate means of measuring income4 7,c7 ,limitation on reserves ,in no event shall the reserve determined under this paragraph for any contract as of any time exceed the amount which would be taken into account with respect to such contract as of such time in determining foreign statement reserves 7less any catastrophe1 deficiency1 equalization1 or similar reserves74 7#e7 ,amount of reserve ,the amount of the reserve determined under this paragraph with respect to any contract shall be determined in the same manner as it would be determined if the qualifying insurance company or qualifying insurance company branch were subject to tax under subchapter ,l1 except that in applying such subchapter-- 7,a7 the interest rate determined for the functional currency of the company or branch1 and which1 except as provided by the ,secretary1 is calculated in the same manner as the ,federal mid-term rate under section #abgd7;d71 shall be substituted for the applicable ,federal interest rate1 7,b7 the highest assumed interest rate permitted to be used in determining foreign statement reserves shall be substituted for the prevailing ,state assumed interest rate1 and 7,c7 tables for mortality and morbidity which reasonably reflect the current mortality and morbidity risks in the company's or branch's home country shall be substituted for the mortality and morbidity tables otherwise used for such subchapter4 ,the ,secretary may provide that the interest rate and mortality and morbidity tables of a qualifying insurance company may be used for #a or more of its qualifying insurance company branches when appropriate4 7#f7 ,definitions ,for purposes of this section1 any term used in this subsection which is also used in section #iee7;c7 shall have the meaning given such term under section #iee7;c74 #iee4 ,definition of insurance income 7a7 ,insurance income 7#a7 ,in general ,for purposes of section #iec7;c71 the term insurance income means the gross income which-- 7,a7 is attributable to the issuing 7or reinsuring7 of an insurance or annuity contract1 and 7,b7 is of a kind that would be subject to tax under subchapter ,l of this chapter if such income were the income of a domestic insurance company4 7#b7 ,exception ,such term shall not include any exempt insurance income 7as defined in subsection 7c774 7b7 ,special rules for determination of gross income and allocable deductions ,for purposes of determining gross income under subsection 7a7 and deductions allocable to insurance income under section #ieb7;e71 the following rules shall apply3 7#a7 ,certain deductions not allowed ,the following provisions of subchapter ,l shall not apply3 7,a7 ,the small life insurance company deduction4 7,b7 ,section #hje7;a77#e7 7relating to operations loss deduction74 7,c7 ,section #hcb7;c77#e7 7relating to certain capital losses74 7#b7 ,special rules for amounts included in income ,the items referred to in-- 7,a7 section #hjc7;a77#a7 7relating to gross amount of premiums and other considerations71 7,b7 section #hjc7;a77#b7 7relating to net decrease in reserves71 7,c7 section #hje7;a77#b7 7relating to net increase in reserves71 and 7,d7 section #hcb7;b77#d7 7relating to premiums earned on insurance contracts71 shall be taken into account only to the extent they are in respect of any reinsurance or the issuing of any insurance or annuity contract described in subsection 7a77#a74 7#c7 ,treatment of reserves ,reserves for any insurance or annuity contract shall be determined in the same manner as under section #ied7;d74 7c7 ,exempt insurance income ,for purposes of this section-- 7#a7 ,exempt insurance income defined 7,a7 ,in general ,the term exempt insurance income means income derived by a qualifying insurance company which-- 7i7 is attributable to the issuing 7or reinsuring7 of an exempt contract by such company or a qualifying insurance company branch of such company1 and 7ii7 is treated as earned by such company or branch in its home country for purposes of such country's tax laws4 7,b7 ,exception for certain arrangements ,such term shall not include income attributable to the issuing 7or reinsuring7 of an exempt contract as the result of any arrangement whereby another corporation receives a substantially equal amount of premiums or other consideration in respect of issuing 7or reinsuring7 a contract which is not an exempt contract4 7,c7 ,determinations made separately ,for purposes of this subsection and section #ied7;d71 the exempt insurance income and exempt contracts of a qualifying insurance company or any qualifying insurance company branch of such company shall be determined separately for such company and each such branch by taking into account-- 7i7 in the case of the qualifying insurance company1 only items of income1 deduction1 gain1 or loss1 and activities of such company not properly allocable or attributable to any qualifying insurance company branch of such company1 and 7ii7 in the case of a qualifying insurance company branch1 only items of income1 deduction1 gain1 or loss and activities properly allocable or attributable to such branch4 7#b7 ,exempt contract 7,a7 ,in general ,the term exempt contract means an insurance or annuity contract issued or reinsured by a qualifying insurance company or qualifying insurance company branch in connection with property in1 liability arising out of activity in1 or the lives or health of residents of1 a country other than the ,united ,states4 7,b7 ,minimum non-related income required ,no contract of a qualifying insurance company or of a qualifying insurance company branch shall be treated as an exempt contract unless such company or branch derives more than #cj percent of its net written premiums from exempt contracts 7determined without regard to this subparagraph7 with respect to which no policyholder1 insured1 annuitant1 or beneficiary is a related person 7as defined in section #ied7;b774 7,c7 ,substantial activity requirements ,a contract issued by a qualifying insurance company or qualifying insurance company branch shall not be treated as an exempt contract unless such company or branch1 as the case may be-- 7i7 conducts substantial activity with respect to an insurance business in its home country1 and 7ii7 performs in its home country substantially all of the activities necessary to give rise to the income generated by such contract4 7#c7 ,qualifying insurance company 7,a7 ,in general ,the term qualifying insurance company means any controlled foreign corporation-- 7i7 which-- 7,i7 is subject to regulation as an insurance 7or reinsurance7 company by its home country1 and is licensed1 authorized1 or regulated by the applicable insurance regulatory body for its home country to sell insurance1 reinsurance1 or annuity contracts to persons other than related persons 7within the meaning of section #ied7;b77 in such home country1 and 7,,ii7 is engaged in the insurance business and would be subject to tax under subchapter ,l if it were a domestic corporation1 7ii7 which derives more than #ej percent of its aggregate net written premiums from the issuance or reinsurance by such controlled foreign corporation and each of its qualifying insurance company branches of contracts with respect to which no policyholder1 insured1 annuitant1 or beneficiary is a related person 7as defined in section #ied7;b771 except that in the case of a branch1 such premiums shall only be taken into account to the extent such premiums are treated as earned by such branch in its home country for purposes of such country's tax laws1 7iii7 more than #ej percent of the gross receipts of which for the taxable year-- 7,i7 consist of premiums for insurance or reinsurance in connection with property1 liability1 or the lives or health of individuals1 and 7,,ii7 are treated as earned by such controlled foreign corporation in its home country for purposes of such country's tax laws1 and 7iv7 the applicable insurance liabilities of which constitute more than #ce percent of its total assets as reported on the company's applicable financial statement for the year with which or in which the taxable year ends4 7,b7 ,applicable insurance liabilities ,for purposes of subparagraph 7,a77iv71 the term applicable insurance liabilities means-- 7i7 loss and loss adjustment expenses1 7ii7 unearned premiums1 and 7iii7 reserves 7other than any catastrophe1 deficiency1 equalization1 or similar reserves7 for life and health insurance risks and life and health insurance claims with respect to contracts providing coverage for mortality or morbidity risks 7not to exceed the amount of such reserve that is required to be reported to the home country insurance regulatory body74 7,c7 ,applicable financial statement ,for purposes of subparagraph 7,a77iv71 the term applicable financial statement means a statement for financial reporting purposes which-- 7i7 is made on the basis of generally accepted accounting principles1 7ii7 is made on the basis of international financial reporting standards1 but only if there is no statement that meets the requirement of clause 7i71 or 7iii7 except as otherwise provided by the ,secretary in regulations1 is the annual statement which is required to be filed with the home country insurance regulatory body1 but only if there is no statement which meets the requirements of clause 7i7 or 7ii74 7,d7 ,regulations ,the ,secretary shall prescribe such regulations as necessary to carry out the purposes of this paragraph4 7#d7 ,qualifying insurance company branch ,the term qualifying insurance company branch means a qualified business unit 7within the meaning of section #ihi7;a77 of a controlled foreign corporation if-- 7,a7 such unit is licensed1 authorized1 or regulated by the applicable insurance regulatory body for its home country to sell insurance1 reinsurance1 or annuity contracts to persons other than related persons 7within the meaning of section #ied7;b77 in such home country1 and 7,b7 such controlled foreign corporation is a qualifying insurance company1 determined under paragraph 7#c7 as if such unit were a qualifying insurance company branch4 7#e7 ,life insurance or annuity contract ,for purposes of this section and section #ied1 the determination of whether a contract issued by a controlled foreign corporation or a qualifying insurance company branch is a life insurance contract or an annuity contract shall be made without regard to sections #gb7s71 #aja7;f71 #hag7;h71 and #ggjb if-- 7,a7 such contract is regulated as a life insurance or annuity contract by the corporation's or branch's home country1 and 7,b7 no policyholder1 insured1 annuitant1 or beneficiary with respect to the contract is a ,united ,states person4 7#f7 ,home country ,for purposes of this subsection1 except as provided in regulations-- 7,a7 ,controlled foreign corporation ,the term home country means1 with respect to a controlled foreign corporation1 the country in which such corporation is created or organized4 7,b7 ,qualifying insurance company branch ,the term home country means1 with respect to a qualifying insurance company branch1 the country in which the principal office of such branch is located and in which such branch is licensed1 authorized1 or regulated by the applicable insurance regulatory body to sell insurance1 reinsurance1 or annuity contracts to persons other than related persons 7as defined in section #ied7;b77 in such country4 7#g7 ,anti-abuse rules ,for purposes of applying this subsection and section #ied7;d7-- 7,a7 the rules of section #ied7;c77#g7 7other than subparagraph 7,b7 thereof7 shall apply1 7,b7 there shall be disregarded any item of income1 gain1 loss1 or deduction of1 or derived from1 an entity which is not engaged in regular and continuous transactions with persons which are not related persons1 7,c7 there shall be disregarded any change in the method of computing reserves a principal purpose of which is the acceleration or deferral of any item in order to claim the benefits of this subsection or section #ied7;d71 7,d7 a contract of insurance or reinsurance shall not be treated as an exempt contract 7and premiums from such contract shall not be taken into account for purposes of paragraph 7#b77;,b7 or 7#c77 if-- 7i7 any policyholder1 insured1 annuitant1 or beneficiary is a resident of the ,united ,states and such contract was marketed to such resident and was written to cover a risk outside the ,united ,states1 or 7ii7 the contract covers risks located within and without the ,united ,states and the qualifying insurance company or qualifying insurance company branch does not maintain such contemporaneous records1 and file such reports1 with respect to such contract as the ,secretary may require1 7,e7 the ,secretary may prescribe rules for the allocation of contracts 7and income from contracts7 among #b or more qualifying insurance company branches of a qualifying insurance company in order to clearly reflect the income of such branches1 and 7,f7 premiums from a contract shall not be taken into account for purposes of paragraph 7#b77;,b7 or 7#c7 if such contract reinsures a contract issued or reinsured by a related person 7as defined in section #ied7;b774 7#h7 ,coordination with section #ief7;a7 7,a7 ,in general ,in determining insurance income for purposes of section #ief7;a71 exempt insurance income shall not include income derived from exempt contracts which cover risks other than applicable home country risks4 7,b7 ,applicable home country risks ,for purposes of subparagraph 7,a71 the term applicable home country risks means risks in connection with property in1 liability arising out of activity in1 or the lives or health of residents of1 the home country of the qualifying insurance company or qualifying insurance company branch1 as the case may be1 issuing or reinsuring the contract covering the risks4 7#i7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection and section #ied7;d74 7#aj7 ,cross reference ,for treatment of certain investment income derived by qualifying insurance companies1 see section #ied7;d74 #ief4 ,special rule for certain captive insurance companies 7a7 ,treatment as controlled foreign corporations and ,united ,states shareholders 7#a7 ,in general ,for purposes only of taking into account related person insurance income-- 7,a7 the term ,united ,states shareholder means1 with respect to any foreign corporation1 a ,united ,states person 7as defined in section #ieg7;c77 who owns 7within the meaning of section #ieh7;a77 any stock of the foreign corporation1 7,b7 the term controlled foreign corporation has the meaning given to such term by section #ieg7;a7 determined by substituting #be percent or more for more than #ej percent1 and 7,c7 the pro rata share referred to in section #iea7;a77#a7 shall be determined under paragraph 7#e7 of this subsection4 7#b7 ,related person insurance income ,for purposes of this subsection1 the term related person insurance income means any insurance income 7within the meaning of section #iee7;a77 attributable to a policy of insurance or reinsurance with respect to which the person 7directly or indirectly7 insured is a ,united ,states shareholder in the foreign corporation or a related person to such a shareholder4 7#c7 ,exceptions 7,a7 ,corporations not held by insured ,paragraph 7#a7 shall not apply to any foreign corporation if at all times during the taxable year of such foreign corporation-- 7i7 less than #bj percent of the total combined voting power of all classes of stock of such corporation entitled to vote1 and 7ii7 less than #bj percent of the total value of such corporation1 is owned 7directly or indirectly under the principles of section #hhc7;c77#d77 by persons who are 7directly or indirectly7 insured under any policy of insurance or reinsurance issued by such corporation or who are related persons to any such person4 7,b7 ,de minimis exception ,paragraph 7#a7 shall not apply to any foreign corporation for a taxable year of such corporation if the related person insurance income 7determined on a gross basis7 of such corporation for such taxable year is less than #bj percent of its insurance income 7as so determined7 for such taxable year4 7,c7 ,election to treat income as effectively connected ,paragraph 7#a7 shall not apply to any foreign corporation for any taxable year if-- 7i7 such corporation elects 7at such time and in such manner as the ,secretary may prescribe7-- 7,i7 to treat its related person insurance income for such taxable year as income effectively connected with the conduct of a trade or business in the ,united ,states1 and 7,,ii7 to waive all benefits 7other than with respect to section #hhd7 with respect to related person insurance income granted by the ,united ,states under any treaty between the ,united ,states and any foreign country1 and 7ii7 such corporation meets such requirements as the ,secretary shall prescribe to ensure that the tax imposed by this chapter on such income is paid4 ,an election under this subparagraph made for any taxable year shall not be effective if the corporation 7or any predecessor thereof7 was a disqualified corporation for the taxable year for which the election was made or for any prior taxable year beginning after #aihf4 7,d7 ,special rules for subparagraph 7,c7 7i7 ,period during which election in effect 7,i7 ,in general ,except as provided in subclause 7,,ii71 any election under subparagraph 7,c7 shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the ,secretary4 7,,ii7 ,termination ,if a foreign corporation which made an election under subparagraph 7,c7 for any taxable year is a disqualified corporation for any subsequent taxable year1 such election shall not apply to any taxable year beginning after such subsequent taxable year4 7ii7 ,exemption from tax imposed by section #dcga ,the tax imposed by section #dcga shall not apply with respect to any related person insurance income treated as effectively connected with the conduct of a trade or business within the ,united ,states under subparagraph 7,c74 7,e7 ,disqualified corporation ,for purposes of this paragraph the term disqualified corporation means1 with respect to any taxable year1 any foreign corporation which is a controlled foreign corporation at any time during such taxable year 7determined without regard to this subsection7 but only if a ,united ,states shareholder 7determined without regard to this subsection7 owns 7within the meaning of section #ieh7;a77 stock in such corporation at some time during such taxable year4 7#d7 ,treatment of mutual insurance companies ,in the case of a mutual insurance company-- 7,a7 this subsection shall apply1 7,b7 policyholders of such company shall be treated as shareholders1 and 7,c7 appropriate adjustments in the application of this subpart shall be made under regulations prescribed by the ,secretary4 7#e7 ,determination of pro rata share 7,a7 ,in general ,the pro rata share determined under this paragraph for any ,united ,states shareholder is the lesser of-- 7i7 the amount which would be determined under paragraph 7#b7 of section #iea7;a7 if-- 7,i7 only related person insurance income were taken into account1 7,,ii7 stock owned 7within the meaning of section #ieh7;a77 by ,united ,states shareholders on the last day of the taxable year were the only stock in the foreign corporation1 and 7,,iii7 only distributions received by ,united ,states shareholders were taken into account under subparagraph 7,b7 of such paragraph 7#b71 or 7ii7 the amount which would be determined under paragraph 7#b7 of section #iea7;a7 if the entire earnings and profits of the foreign corporation for the taxable year were subpart ,f income4 7,b7 ,coordination with other provisions ,the ,secretary shall prescribe regulations providing for such modifications to the provisions of this subpart as may be necessary or appropriate by reason of subparagraph 7,a74 7#f7 ,related person ,for purposes of this subsection-- 7,a7 ,in general ,except as provided in subparagraph 7,b71 the term related person has the meaning given such term by section #ied7;b74 7,b7 ,treatment of certain liability insurance policies ,in the case of any policy of insurance covering liability arising from services performed as a director1 officer1 or employee of a corporation or as a partner or employee of a partnership1 the person performing such services and the entity for which such services are performed shall be treated as related persons4 7#g7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection1 including-- 7,a7 regulations preventing the avoidance of this subsection through cross insurance arrangements or otherwise1 and 7,b7 regulations which may provide that a person will not be treated as a ,united ,states shareholder under paragraph 7#a7 with respect to any foreign corporation if neither such person 7nor any related person to such person7 is 7directly or indirectly7 insured under any policy of insurance or reinsurance issued by such foreign corporation4 7b7 ,election by ,foreign ,insurance ,company ,to ,be ,treated as ,domestic ,corporation 7#a7 ,in general ,if-- 7,a7 a foreign corporation is a controlled foreign corporation 7as defined in section #ieg7;a7 by substituting #be percent or more for more than #ej percent and by using the definition of ,united ,states shareholder under subsection 7a77#a77;,b771 7,b7 such foreign corporation would qualify under part ,i or ,,ii of subchapter ,l for the taxable year if it were a domestic corporation1 7,c7 such foreign corporation meets such requirements as the ,secretary shall prescribe to ensure that the taxes imposed by this chapter on such foreign corporation are paid1 and 7,d7 such foreign corporation makes an election to have this paragraph apply and waives all benefits to such corporation granted by the ,united ,states under any treaty1 for purposes of this title1 such corporation shall be treated as a domestic corporation4 7#b7 ,period during which election is in effect 7,a7 ,in general ,except as provided in subparagraph 7,b71 an election under paragraph 7#a7 shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the ,secretary4 7,b7 ,termination ,if a corporation which made an election under paragraph 7#a7 for any taxable year fails to meet the requirements of subparagraphs 7,a71 7,b71 and 7,c7 of paragraph 7#a7 for any subsequent taxable year1 such election shall not apply to any taxable year beginning after such subsequent taxable year4 7#c7 ,effect of election 7,a7 ,in general ,for purposes of section #cfg1 any foreign corporation making an election under paragraph 7#a7 shall be treated as transferring 7as of the #ast day of the #ast taxable year to which such election applies7 all of its assets to a domestic corporation in connection with an exchange to which section #ced applies4 7,b7 ,exception for pre-#aihh earnings and profits 7i7 ,in general ,earnings and profits of the foreign corporation accumulated in taxable years beginning before ,january #a1 #aihh1 shall not be included in the gross income of the persons holding stock in such corporation by reason of subparagraph 7,a74 7ii7 ,treatment of distributions ,for purposes of this title1 any distribution made by a corporation to which an election under paragraph 7#a7 applies out of earnings and profits accumulated in taxable years beginning before ,january #a1 #aihh1 shall be treated as a distribution made by a foreign corporation4 7iii7 ,certain rules to continue to apply to pre-#aihh earnings ,section #hhd to the extent the foreign corporation reinvested #aihg earnings and profits in ,united ,states assets shall be applied without regard to paragraph 7#a71 except that1 in the case of a corporation to which an election under paragraph 7#a7 applies1 only earnings and profits accumulated in taxable years beginning before ,january #a1 #aihh1 shall be taken into account4 7#d7 ,effect of termination ,for purposes of section #cfg1 if-- 7,a7 an election is made by a corporation under paragraph 7#a7 for any taxable year1 and 7,b7 such election ceases to apply for any subsequent taxable year1 such corporation shall be treated as a domestic corporation transferring 7as of the #ast day of such subsequent taxable year7 all of its property to a foreign corporation in connection with an exchange to which section #ced applies4 7#e7 ,additional tax on corporation making election 7,a7 ,in general ,if a corporation makes an election under paragraph 7#a71 the amount of tax imposed by this chapter for the #ast taxable year to which such election applies shall be increased by the amount determined under subparagraph 7,b74 7,b7 ,amount of tax ,the amount of tax determined under this paragraph shall be equal to the lesser of-- 7i7 #c_/d of #a percent of the aggregate amount of capital and accumulated surplus of the corporation as of ,december #ca1 #aihg1 or 7ii7 #a1ejj1jjj4 4 7b7 ,treatment of certain excluded subpart ,f income as previously taxed income ,section #iei7;g71 as added by section #cca1 is amended to read as follows3 7g7 ,special rules for nontaxed portion of certain income ,for purposes of this section-- 7#a7 ,in general ,a ,united ,states shareholder's pro rata share of the excludable portion of the controlled foreign corporation's subpart ,f income shall be treated as an amount which has been included in gross income under section #iea7;a74 7#b7 ,ordering rule ,notwithstanding subsection 7c71 for purposes of subsections 7a7 and 7b71 section #caf7;a7 shall be applied by applying paragraph 7#b7 thereof and then paragraph 7#a7 thereof-- 7,a7 first to the deductible portion 7as defined in section #ife7;c77#c77 of the increase in subpart ,f income described in section #ife7;a77#a7 included in the gross income of ,united ,states shareholders under section #iea7;a77#a7 7after application of section #ife7;a77#b77;,a771 7,b7 second to the excludable portion of the controlled foreign corporation's subpart ,f income1 and 7,c7 then to the amounts described in paragraphs 7#a71 7#b71 or 7#c7 of subsection 7c7 in accordance with the provisions of subsection 7c74 7#c7 ,definitions ,for purposes of this subsection-- 7,a7 ,deductible portion ,the term deductible portion has the meaning given such term by section #ife7;c77#c74 7,b7 ,excludable portion ,the term excludable portion means1 with respect to the subpart ,f income of a controlled foreign corporation1 so much of such controlled foreign corporation's modified active income as is not taken into account in computing subpart ,f income under section #ieb7;a77#a74 4 7c7 ,gains and losses from the sale of ,,cfc stock 7#a7 ,gains 7,a7 ,in general ,part ,i of subchapter ,p of chapter #a is amended by adding at the end the following new section3 #abjc4 ,gains from sales or exchanges of stock in controlled foreign corporations 7a7 ,in general ,in the case of a ,united ,states shareholder 7as defined in section #iea71 there shall be excluded from gross income an amount equal to the applicable portion of the amount of any gain recognized from the sale or exchange of stock in a controlled foreign corporation4 7b7 ,applicable portion ,for purposes of this section-- 7#a7 ,in general ,the term applicable portion means the amount which bears the same ratio to the gain recognized from such sale or exchange as-- 7,a7 the shareholder's pro rata share 7determined under section #iea7;a77#b77 of the excludable portion of the aggregate subpart ,f income of the controlled foreign corporation for the applicable period1 bears to 7,b7 the sum of the amount determined under subparagraph 7,a7 plus the shareholder's pro rata share 7determined under section #iea7;a77#b77 of the aggregate subpart ,f income of the controlled foreign corporation for the applicable period4 7#b7 ,excludable portion ,for purposes of this section1 the term excludable portion has the meaning given such term by section #iei7;g77#c77;,b74 7#c7 ,applicable period ,the term applicable period means1 with respect to any stock1 the shorter of the #c-taxable year period immediately preceding the taxable year of the sale or exchange or the shareholder's holding period in the stock4 ,in no event shall the applicable period include any portion of any taxable year beginning before the applicable date 7as defined in section #cjj of the ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad74 4 7,b7 ,clerical amendment ,the table of sections for part ,i of subchapter ,p of chapter #a is amended by adding at the end the following new item3 ,sec4 #abjc4 ,gains from sales or exchanges of stock in controlled foreign corporations4 4 7#b7 ,losses 7,a7 ,in general ,part ,,ii of subchapter ,p of chapter #a is amended by adding at the end the following new section3 #abac4 ,losses from sales or exchanges of stock in controlled foreign corporations 7a7 ,in general ,in the case of a ,united ,states shareholder 7as defined in section #iea71 any loss from the sale or exchange of stock in a controlled foreign corporation shall be reduced 7but not below zero7 by an amount equal to the shareholder's aggregate pro rata share 7determined under section #iea7;a77#b77 of the excludable portion of the subpart ,f income of the controlled foreign corporation during the shareholder's holding period in the stock4 7b7 ,excludable portion ,for purposes of this section1 the term excludable portion has the meaning given such term by section #iei7;g77#c77;,b74 4 7,b7 ,clerical amendment ,the table of sections for part ,i of subchapter ,p of chapter #a is amended by adding at the end the following new item3 ,sec4 #abac4 ,losses from sales or exchanges of stock in controlled foreign corporations4 4 7d7 ,repeal of ordinary income treatment for gains from the sale of stock in certain foreign corporations 7#a7 ,in general ,part ,,iv of subchapter ,p of chapter #a is amended by striking section #abdh4 7#b7 ,conforming amendments 7,a7 ,section 7a7 is amended by striking paragraph 7#aa74 7,b7 ,section #cch7;h7 is amended-- 7i7 in paragraph 7#f77;,b77ii71 by striking or described in section #abdh7;e71 and 7ii7 in paragraph 7#af71 by striking the second sentence4 7,c7 ,section #gea is amended-- 7i7 in subsection 7c71 by striking stock in certain foreign corporations 7as described in section #abdh711 and 7ii7 by striking subsection 7e7 and redesignating subsection 7f7 as subsection 7e74 7,d7 ,section #hfe7k7 is amended to read as follows3 7k7 ,cross reference ,for sourcing of income from certain foreign currency transactions1 see section #ihh4 4 7,e7 ,section #ijd7;h77#g7 is amended by striking or as a dividend under section #abdh4 7,f7 ,section #iea7;a77#b7 is amended by striking the last sentence thereof4 7,g7 ,section #ifd is amended by striking subsection 7e74 7,h7 ,section #ihi7;b7 is amended by striking paragraph 7#b7 and by redesignating paragraphs 7#c7 and 7#d7 as paragraphs 7#b7 and 7#c71 respectively4 7e7 ,coordination with amounts included in gross income of ,united ,states shareholders 7#a7 ,in general ,paragraph 7#a7 of section #iea7;a7 is amended by striking such taxable year of the corporation ends-- and all that follows through the end period and inserting3 such taxable year of the corporation ends1 the shareholder's pro rata share 7determined under paragraph 7#b77 of the corporation's subpart ,f income for such taxable year44 7#b7 ,conforming amendments 7,a7 ,section #iea7;a7 is amended-- 7i7 by striking paragraph 7#a77;,a77i7 in paragraph 7#b7 and inserting paragraph 7#a71 and 7ii7 by striking paragraph 7#c74 7,b7 ,subparagraph 7,a7 of section #eab7;b77#ag7 is amended by striking #iea7;a77#a77;,a7 and inserting #iea7;a77#a74 7,c7 ,section #hea7;b7 is amended by striking #iea7;a77#a77;,a77i7 in the first sentence following paragraph 7#c7 and inserting #iea7;a77#a74 7,d7 ,section #iei7;a7 is amended-- 7i7 by striking shall not1 when and all that follows through such shareholder and inserting shall not1 when actually distributed to such shareholder1 and 7ii7 by striking and the rules of subsection 7f7 shall apply for purposes of paragraph 7#b7 of this subsection4 7,e7 ,section #iei7;c7 is amended by adding at the end the following3 ,references in this subsection and subsection 7f7 to section #iea7;a77#a77;,b7 shall be treated as references to such provisions as in effect on the day before the enactment of the ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad44 7,f7 ,section #iei7;e7 is amended by striking #iea7;a77#a77;,a7 and inserting #iea7;a77#a74 7,g7 ,section #ihi7;b77#c7 is amended by striking #iea7;a77#a77;,a7 and inserting #iea7;a77#a74 7,h7 ,section #abih7;b7 is amended by striking paragraph 7#h74 7f7 ,application of anti-,loss importation rules ,section #cfb7;e77#a77;,b7 is amended by adding at the end the following new sentence3 ,for purposes of clause 7i71 except as provided under regulations1 a controlled foreign corporation shall be considered to be subject to tax under this subtitle44 7g7 ,other conforming amendments 7#a7 ,sections #afc7;e77#c77;,b77i7 and #bfg7;a77#c77;,b77i7 are each amended by striking and qualified deficits under section #ieb7;c77#a77;,b7 and inserting and loss carryforwards under sections #ieb7;d7 and #iec7;b74 7#b7 ,section #cjd7;b77#e77;,b77ii7 is amended by striking #iec7;c7 and inserting #ief7;a74 7#c7 ,section #cee7;g77#b77;,b77ii77,i7 is amended by striking section #ied7;h77#d7 and inserting section #ied7;c77#d74 7#d7 ,section #eab7;b77#ag7 is amended by striking #iec and inserting section #iee4 7#e7 ,section #hfd7;d77#h7 is amended by striking or section #ief7;b77#c74 7#f7 ,section #hfd7;d77#e77;,a7 is amended-- 7,a7 by striking clause 7iii7 and redesignating clause 7iv7 as clause 7iii71 and 7,b7 by striking #ied7;c77#c77;,a7 in clause 7iii7 7as redesignated by subparagraph 7,a77 and inserting #ied7;a77#c77;,a74 7#g7 ,section #hfd7;d77#g77;,b7 is amended by striking foreign base company income 7as defined in section #ied7;a71 determined without regard to section #ied7;b77#c77;,a77 and inserting passive income 7as defined in section #ied7;a774 7#h7 ,section #hha7;c77#e77;,a77iii7 is amended by striking #ied7;c77#c77;,a7 and inserting #ied7;a77#c77;,a74 7#i7 ,section #hhd7;d77#b77;,d7 is amended by striking #iec7;c77#c77;,c7 and inserting #ief7;a77#c77;,c74 7#aj7 ,section #hih7;b77#c7 is amended-- 7,a7 by striking #iec7;c77#b7 and inserting #ief7;a77#b71 and 7,b7 by striking #iec7;c77#a7 and inserting #ief7;a77#a74 7#aa7 ,section #icf7;h77#e7 is amended-- 7,a7 by inserting 7as in effect on the day before the enactment of the ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad7 after section #ied in the last sentence of subparagraph 7,b77ii71 and 7,b7 in subparagraph 7,f77iv77,,ii7-- 7i7 by inserting 7as in effect on the day before the enactment of the ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad7 after section #ied1 and 7ii7 by inserting 7as so in effect7 after section #ied7;a74 7#ab7 ,section #ieg7;b7 is amended-- 7,a7 by striking income described in section #iec7;a7 and inserting income described in section #iee7;a71 and 7,b7 by striking contracts described in section #iec7;a77#a7 and inserting contracts described in section #iee7;a77#a74 7#ac7 ,section #ieh7;b7 is amended-- 7,a7 by striking #ief7;c77#b71 before and #ieg1 7,b7 by striking to treat the stock of a domestic corporation as owned by a ,united ,states shareholder of the controlled foreign corporation for purposes of section #ief7;c77#b711 and 7,c7 by striking the last sentence4 7#ad7 ,section #ifd7;b7 is amended by striking sections #ieb1 #iee1 and #ief and inserting section #ieb4 7#ae7 ,section #ifd7;e77#b7 is amended by striking #ied7;c77#c77;,a7 and inserting #ied7;a77#c77;,a74 7#af7 7,a7 ,part ,,iii of subchapter ,n of chapter #a is amended by striking subpart ,g4 7,b7 ,section #hfe7;e77#b77;,a7 is amended by striking the last sentence4 7,c7 ,the table of subparts for part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to subpart ,g4 7#ag7 ,section #iii7;c7 is amended-- 7,a7 by striking 1 #ieb7;a77#c7 in paragraph 7#a71 and 7,b7 by striking 1 the addition to subpart ,f income under section #ieb7;a77#c71 in paragraph 7#b74 7#ah7 ,section #abif7;f77#b7 is amended-- 7,a7 by striking foreign personal holding company income described in section #ied7;c77#a77;,a7 in subparagraph 7,a7 and inserting passive income 7as defined in section #ied7;a771 and 7,b7 by striking foreign personal holding company income so described and inserting such passive income4 7#ai7 ,section #abig7;b7 is amended to read as follows3 7b7 ,passive income 7#a7 ,in general ,except as provided in paragraph 7#b71 the term passive income means any income received or accrued by any foreign corporation which is of a kind which would be passive income as defined in section #ied if the foreign corporation were a controlled foreign corporation4 7#b7 ,exception ,except as provided in regulations1 the term passive income does not include any income which is interest1 a dividend1 or a rent or royalty1 which is received or accrued from a related person 7within the meaning of section #ied7;b77 to the extent that such amount is properly allocable 7under regulations prescribed by the ,secretary7 to income of such related person which is not passive income4 4 7#bj7 ,section #bjeg7;e77#b77;,d77ii7 is amended by striking section #ied7;c77#a7 and inserting section #ied7;a77#a74 7#ba7 ,the following sections are amended by striking #ied7;d77#c7 each place it appears and inserting #ied7;b73 7,a7 ,section #hfa7;c77#b77;,b74 7,b7 ,section #ieh7;b74 7,c7 ,section #ihh7;a77#c77;,c74 7,d7 ,subsections 7d77#c77;,a7 and 7e77#b77;,b77i7 of section #abih4 7,e7 ,section #adga7;e77#b74 7,f7 ,section #caba7z77#b74 7#bb7 ,the table of sections for subpart ,f of part ,,iii of subchapter #a is amended by striking the items relating to sections #ieb through #ief and inserting the following3 ,sec4 #ieb4 ,subpart ,f income defined4 ,sec4 #iec4 ,active foreign market income4 ,sec4 #ied4 ,definition of passive income4 ,sec4 #iee4 ,definition of insurance income4 ,sec4 #ief4 ,special rule for certain captive insurance companies4 4 7h7 ,effective dates 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to taxable years of foreign corporations beginning on or after the applicable date1 and to taxable years of ,united ,states shareholders with or within which such taxable years of foreign corporations end4 7#b7 ,gains and losses from the sale of ,,cfc stock2 ,repeal of section #abdh ,the amendments made by subsections 7c7 and 7d7 shall apply to sales or exchanges on or after the applicable date4 ,,ii ,foreign tax credit limitations #caa4 ,reform of foreign tax credit limitation 7a7 ,in general ,subsection 7d7 of section #ijd is amended to read as follows3 7d7 ,separate application of section with respect to certain categories of income 7#a7 ,in general ,the provisions of subsections 7a71 7b71 and 7c7 and section #ijg and #ifj shall be applied separately with respect to-- 7,a7 amounts included under section #iea7;a7 which are attributable to active foreign market income 7as defined in section #iec71 7,b7 passive category income1 and 7,c7 income other than income described in either of the preceding subparagraphs4 7#b7 ,definitions and special rules 7,a7 ,passive category income 7i7 ,in general ,the term passive category income means-- 7,i7 ,united ,states taxpayer passive income described in subparagraph 7,b71 and 7,,ii7 income which is included in gross income of the taxpayer under section #iea7;a77#a7 to the extent such income is attributable to passive income 7as defined in section #ied7;a774 7ii7 ,exception for high-taxed income ,passive category income shall not include any high-taxed income4 7iii7 ,clarification of application of section #hfd7;d77#f7 ,in determining whether any income is passive category income1 the rules of section #hfd7;d77#f7 shall apply only in the case of income of a controlled foreign corporation4 7,b7 ,united ,states taxpayer passive income ,united ,states taxpayer passive income described in this subparagraph is income received or accrued by the taxpayer which is of a kind that would be passive income as defined under section #ied7;a7 if such taxpayer were a controlled foreign corporation4 7,c7 ,treatment of financial services income and companies 7i7 ,in general ,financial services income which is not active foreign market category income shall be treated as income described in paragraph 7#a77;,c7 in the case of-- 7,i7 a member of a financial services group1 and 7,,ii7 any other person if such person is predominantly engaged in the active conduct of a banking1 insurance1 financing1 or similar business4 7ii7 ,financial services group ,the term financial services group means any affiliated group 7as defined in section #aejd7;a7 without regard to paragraphs 7#b7 and 7#c7 of section #aejd7;b77 which is predominantly engaged in the active conduct of a banking1 insurance1 financing1 or similar business4 ,in determining whether such a group is so engaged1 there shall be taken into account only the income of members of the group that are-- 7,i7 ,united ,states corporations1 or 7,,ii7 controlled foreign corporations in which such ,united ,states corporations own1 directly or indirectly1 at least #hj percent of the total voting power and value of the stock4 7iii7 ,pass-thru entities ,the ,secretary shall by regulation specify for purposes of this subparagraph the treatment of financial services income received or accrued by partnerships and by other pass-thru entities which are not members of a financial services group4 7,d7 ,financial services income 7i7 ,in general ,except as otherwise provided in this subparagraph1 the term financial services income means any income which is received or accrued by any person predominantly engaged in the active conduct of a banking1 insurance1 financing1 or similar business1 and which is-- 7,i7 described in clause 7ii71 or 7,,ii7 ,united ,states taxpayer passive income 7determined without regard to subparagraph 7,a77ii774 7ii7 ,general description of financial services income ,income is described in this clause if such income is-- 7,i7 derived in the active conduct of a banking1 financing1 or similar business1 7,,ii7 derived from the investment by an insurance company of its unearned premiums or reserves ordinary and necessary for the proper conduct of its insurance business1 or 7,,iii7 of a kind which would be insurance income as defined in section #iee7;a74 7,e7 ,high-taxed income ,the term high-taxed income means any income which 7but for this subparagraph7 would be passive category income if the sum of-- 7i7 the foreign income taxes paid or accrued by the taxpayer with respect to such income1 and 7ii7 the foreign income taxes deemed paid by the taxpayer with respect to such income under section #ifj1 exceeds the highest rate of tax specified in section #a or #aa 7whichever applies7 multiplied by the amount of such income 7determined with regard to section #gh74 ,for purposes of the preceding sentence1 the term foreign income taxes means any income1 war profits1 or excess profits tax imposed by any foreign country or possession of the ,united ,states4 7,f7 ,treatment of income tax base differences 7i7 ,in general ,in the case of taxable years beginning after ,december #ca1 #bjjf1 tax imposed under the law of a foreign country or possession of the ,united ,states on an amount which does not constitute income under ,united ,states tax principles shall be treated as imposed on income described in paragraph 7#a77;,c74 7ii7 ,special rules for years after #bjjf and before the applicable date ,in the case of taxable years beginning after ,december #ca1 #bjjf1 and on or before the applicable date 7as defined in section #cjj of the ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad71 tax imposed under the law of a foreign country or possession of the ,united ,states on an amount which does not constitute income under ,united ,states tax principles shall be treated as imposed on income described in paragraph 7#a77;,b7 7as in effect for taxable years beginning the day before such applicable date74 7iii7 ,special rule for years before #bjjg 7,i7 ,in general ,in the case of taxes paid or accrued in taxable years beginning after ,december #ca1 #bjjd1 and before ,january #a1 #bjjg1 a taxpayer may elect to treat tax imposed under the law of a foreign country or possession of the ,united ,states on an amount which does not constitute income under ,united ,states tax principles as tax imposed on income described in subparagraph 7,c7 or 7,i7 of paragraph 7#a7 7as in effect for taxable years beginning in #bjjf74 7,,ii7 ,revocation ,any such election shall apply to the taxable year for which made and all subsequent taxable years described in subclause 7,i7 unless revoked with the consent of the ,secretary4 7,g7 ,transition rules for certain carryforwards and carrybacks ,for purposes of paragraph 7#a7-- 7i7 in the case of any taxes carried from any taxable year beginning before the applicable date 7as defined in section #cjj of the ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad71 to any taxable year beginning on or after such date-- 7,i7 if such taxes were treated as attributable to income described in paragraph 7#a77;,a7 7as in effect for taxable years beginning the day before such applicable date71 such taxes shall be treated as attributable to income described in paragraph 7#a77;,b71 and 7,,ii7 if such taxes were treated as attributable to income described in paragraph 7#a77;,b7 7as in effect for taxable years beginning the day before such applicable date71 such taxes shall be treated as attributable to income described in paragraph 7#a77;,c71 and 7ii7 the ,secretary may by regulations provide for the allocation of any carryback of taxes with respect to income from a taxable year beginning on or after such applicable date1 to a taxable year beginning before such date for purposes of allocating such income among the separate categories in effect for the taxable year to which carried4 7#c7 ,controlled foreign corporation2 ,united ,states shareholder ,for purposes of this subsection-- 7,a7 ,controlled foreign corporation ,the term controlled foreign corporation has the meaning given such term by section #ieg 7taking into account section #ief7;a774 7,b7 ,united ,states shareholder ,the term ,united ,states shareholder has the meaning given such term by section #iea7;b7 7taking into account section #ief7;a774 7#d7 ,separate application to items resourced under treaties 7,a7 ,in general ,if-- 7i7 without regard to any treaty obligation of the ,united ,states1 any item of income would be treated as derived from sources within the ,united ,states1 7ii7 under a treaty obligation of the ,united ,states1 such item would be treated as arising from sources outside the ,united ,states1 and 7iii7 the taxpayer chooses the benefits of such treaty obligation1 subsections 7a71 7b71 and 7c7 of this section and sections #ijg and #ifj shall be applied separately with respect to each such item4 7,b7 ,coordination with other provisions ,this paragraph shall not apply to any item of income to which subsection 7h77#aj7 or section #hfe7;h7 applies4 7,c7 ,regulations ,the ,secretary may issue such regulations as may be necessary or appropriate to carry out the purposes of this paragraph1 including regulations which provide that related items of income may be aggregated for purposes of this paragraph4 7#e7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate for the purposes of this subsection1 including preventing the manipulation of the character of income the effect of which is to avoid the purposes of this subsection4 4 7b7 ,application of per country limitation ,section #ijd is amended by inserting after subsection 7d7 the following new subsection3 7e7 ,limitations applied on a per country basis ,the provisions of subsections 7a71 7b71 7c71 and 7d7 and sections #ijg and #ifj shall be applied separately with respect to each foreign country or possession with respect to which taxes described in section #ija7;b7 are paid or accrued4 4 7c7 ,effective date ,the amendment made by this section shall apply to taxable years beginning on or after the applicable date4 #cab4 ,denial of credit and deduction for foreign taxes with respect to excluded subpart ,f income 7a7 ,in general ,section #ija is amended by redesignating subsection 7n7 as subsection 7o7 and by inserting after subsection 7m7 the following3 7n7 ,denial of foreign tax credit and deduction with respect to excluded subpart ,f income 7#a7 ,in general ,notwithstanding section #ifj7;b71 no credit shall be allowed under subsection 7a7 for any income1 war profits1 or excess profits taxes paid or accrued 7or deemed paid or accrued under section #ifj7 with respect to the excludable portion of subpart ,f income or any distribution received by a ,united ,states shareholder 7as defined in section #iea7;b77 which is properly attributable to such excludable portion4 ,no deduction shall be allowed to a taxpayer under this chapter for any tax for which a credit is not allowable by reason of the preceding sentence4 7#b7 ,excludable portion ,the term excludable portion has the meaning given such term by section #iei7;g77#c77;,b74 7#c7 ,coordination with section #gh ,section #gh shall not apply to any tax which is not allowable as a credit under this section by reason of this subsection4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning on or after the applicable date1 and to taxable years of ,united ,states shareholders with or within which such taxable years of foreign corporations end4 ,,iii ,expense disallowance #cba4 ,disallowance of deduction for expenses allocable to exempt income of a controlled foreign corporation 7a7 ,in general ,part ,,ix of subchapter ,b of chapter #a is amended by adding at the end the following3 #bfe;,a4 ,expenses allocable to exempt income of a controlled foreign corporation 7a7 ,in general ,in the case of a ,united ,states shareholder of a controlled foreign corporation for any taxable year1 no deduction shall be allowed under this chapter for-- 7#a7 the disallowed portion of any allocable ,,cfc interest1 or 7#b7 expenses directly allocable to the excludable portion of subpart ,f income 7as defined in section #iei7;g77#c77;,b774 7b7 ,disallowed portion ,for purposes of this section-- 7#a7 ,in general ,the term disallowed portion means1 with respect to any allocable ,,cfc interest in connection with a controlled foreign corporation1 the exclusion percentage of the amount which bears the same ratio to the amount of such interest as-- 7,a7 the corporation's modified active income 7as defined in section #ieb7 for the applicable taxable year1 bears to 7,b7 the corporation's current earnings and profits4 7#b7 ,current earnings and profits ,for purposes of this subsection-- 7,a7 ,in general ,the term current earnings and profits means the earnings and profits of the controlled foreign corporation for the applicable taxable year1 without diminution by reason of distributions made during the taxable year4 7,b7 ,special rule for determining earnings and profits ,earnings and profits of any controlled foreign corporation shall be determined without regard to paragraphs 7#d71 7#e71 and 7#f7 of section #cab7n74 ,under regulations1 the preceding sentence shall not apply to the extent it would increase earnings and profits by an amount which was previously distributed by the controlled foreign corporation4 7#c7 ,exclusion percentage ,the term exclusion percentage means1 with respect to any controlled foreign corporation for any taxable year1 the number of percentage points by which #ajj percent exceeds the inclusion percentage determined under section #ieb7;d7 with respect to such controlled foreign corporation for such taxable year4 7c7 ,definitions and special rules ,for purposes of this section-- 7#a7 ,allocable ,,cfc interest ,the term allocable ,,cfc interest means any interest expense paid or accrued during the taxable year by a ,united ,states shareholder of a controlled foreign corporation which under section #hfa1 and subsection 7e7 or 7f7 of section #hfd 7whichever is applicable71 is apportioned to income of the controlled foreign corporation4 7#b7 ,applicable taxable year ,the term applicable taxable year means1 with respect to any controlled foreign corporation1 the taxable year of such corporation which ends with or within the taxable year of the ,united ,states shareholder described in subsection 7a74 7#c7 ,united ,states shareholder2 controlled foreign corporation ,the term ,united ,states shareholder has the meaning given such term by section #iea7;b7 and the term controlled foreign corporation shall have the meaning given such term by section #ieg7;a74 7#d7 ,special rule for members of an affiliated group ,if a ,united ,states shareholder to which subsection 7a7 applies is a domestic corporation which is a member of a group all members of which are treated as a single corporation under subsection 7e7 or 7f7 of section #hfd1 whichever is applicable1 all domestic corporations which are members of such group shall be treated as a single corporation for purposes of this section4 7#e7 ,special rules 7,a7 ,coordination with other provisions ,except as provided in regulations1 this section shall be applied before any other provision of this chapter limiting the deductibility of any allocable ,,cfc interest4 7,b7 ,separate application to income in separate baskets ,this section shall be applied separately with respect to the categories of income under section #ijd7;d77#a74 7d7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section1 including regulations providing-- 7#a7 for the sharing of information between shareholders if necessary to carry out the provisions of this section1 7#b7 for directly associating interest or other expenses disallowed under this section with income of a controlled foreign corporation and for coordinating this section with other provisions of this chapter limiting the deductibility of interest or other expenses1 and 7#c7 for the proper application of this section with respect to the taxpayer's share of net operating losses of a controlled foreign corporation4 4 7b7 ,conforming amendment ,the table of sections for part ,,ix of subchapter ,b of chapter #a is amended by inserting after the item relating to section #bfe the following3 ,sec4 #bfe;,a4 ,expense allocable to exempt income of a controlled foreign corporation4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning on or after the applicable date1 and to taxable years of ,united ,states shareholders with or within which such taxable years of foreign corporations end4 ,,iv ,other provisions relating to subpart ,f ,a ,previously deferred foreign income #cca4 ,treatment of previously deferred foreign income 7a7 ,in general ,subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by adding at the end the following new section3 #iff4 ,inclusion of previously deferred foreign income 7a7 ,inclusion as subpart ,f income 7#a7 ,in general ,subject to the provisions of paragraph 7#b71 the subpart ,f income 7determined under section #ieb without regard to this section7 of a controlled foreign corporation for its last taxable year beginning before the applicable date 7as defined in section #cjj of the ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad71 shall be increased by the accumulated deferred foreign income of the corporation4 7#b7 ,inclusion only to apply to domestic corporations ,in the case of any increase in subpart ,f income of a controlled foreign corporation by reason of paragraph 7#a7-- 7,a7 notwithstanding section #iea7;a77#a71 the inclusion in gross income under such section of a ,united ,states shareholder's pro rata portion 7as determined under section #iea7;a77#b77 of such increased subpart ,f income shall only apply if the ,united ,states shareholder is a domestic corporation1 and 7,b7 there shall be allowed as a deduction for the taxable year of such ,united ,states shareholder in which such increased subpart ,f income is included in such shareholder's gross income under section #iea7;a77#a7 an amount equal to the applicable percentage of the amount of the income so included4 7b7 ,accumulated deferred foreign income ,for purposes of this section-- 7#a7 ,in general ,the term accumulated deferred foreign income means the excess of-- 7,a7 the undistributed earnings of the controlled foreign corporation1 over 7,b7 the undistributed ,u4,s4 earnings of such controlled foreign corporation4 7#b7 ,undistributed earnings 7,a7 ,in general ,the term undistributed earnings means the earnings and profits of the controlled foreign corporation described in section #iei7;c77#c71 determined-- 7i7 as of the close of the taxable year described in subsection 7a77#a71 7ii7 without diminution by reason of distributions made during such taxable year1 and 7iii7 without regard to this section4 7,b7 ,special rule for current year distributions ,for purposes of this chapter1 any determination with respect to the treatment of distributions described in subparagraph 7,a77ii7 shall be made after the application of this section to the earnings and profits described in subparagraph 7,a74 7#c7 ,undistributed ,u4,s4 earnings ,the term undistributed ,u4,s4 earnings has the meaning given the term post-#aihf undistributed ,u4,s4 earnings in section #bde7;a77#e7 7as in effect for taxable years beginning the day before the applicable date 7as defined in section #cjj of the ,infrastructure and ,global ,tax ,competitiveness ,act of #bjad771 determined-- 7,a7 without regard to post-#aihf each place it appears in the matter before subparagraph 7,a71 and 7,b7 without regard to the last sentence thereof4 7c7 ,disallowance of foreign tax credit1 etc 7#a7 ,in general ,no credit shall be allowed under section #ija to a ,united ,states shareholder of a controlled foreign corporation for any taxes paid or accrued 7or treated as paid or accrued7 with respect to the deductible portion of-- 7,a7 the increased subpart ,f income of the corporation included in the gross income of the shareholder under subsection 7a77#b77;,a71 or 7,b7 any distribution received by the shareholder which is properly attributable to such increased subpart ,f income4 7#b7 ,denial of deduction ,no deduction shall be allowed under this chapter to a ,united ,states shareholder of a controlled foreign corporation for any tax for which a credit is not allowable under section #ija by reason of paragraph 7#a74 7#c7 ,deductible portion ,for purposes of this subsection1 the term deductible portion means1 with respect to the increased subpart ,f income of the corporation included in the gross income of the shareholder under subsection 7a77#b77;,a71 the applicable percentage of such income with respect to which a deduction is allowable under subsection 7a77#b77;,b74 7#d7 ,coordination with section #gh ,section #gh shall not apply to the portion of any tax for which credit is not allowable under section #ija by reason of paragraph 7#a74 7d7 ,applicable percentage ,for purposes of this section1 the term applicable percentage means the percentage which is equal to the ratio of-- 7#a7 the excess of-- 7,a7 the highest rate of tax in effect under section #aa7;b7 for the taxable year of the ,united ,states shareholder described in subsection 7a77#b77;,b71 over 7,b7 #bj percent1 to 7#b7 the highest rate of tax in effect under section #aa7;b7 for the taxable year of the ,united ,states shareholder described in subsection 7a77#b77;,b74 ,the percentage determined under the preceding sentence shall be rounded to the nearest whole percentage point4 7e7 ,election ,to pay liability in installments 7#a7 ,in general ,in the case of a ,united ,states shareholder with respect to one or more controlled foreign corporations to which subsection 7a7 applies1 such ,united ,states shareholder may elect to pay the net tax liability under this section in #b or more 7but not exceeding #h7 equal installments4 7#b7 ,date for payment of installments ,if an election is made under paragraph 7#a71 the due date for the first installment shall be the due date 7determined without regard to any extension of time for filing the return7 for the return of tax for the taxable year described in subsection 7a77#b77;,b7 and the due date for each succeeding installment shall be the due date 7as so determined7 for the return of tax for the taxable year following the taxable year with respect to which the preceding installment was made4 7#c7 ,acceleration of payment ,if there is-- 7,a7 an assessment of an addition to tax for failure to pay timely with respect to any installment required under this subsection1 7,b7 a liquidation or sale of substantially all the assets of the taxpayer 7including in a title #aa or similar case71 7,c7 a cessation of business by the taxpayer1 or 7,d7 any similar circumstance1 then the unpaid portion of all remaining installments shall be due on the date of such event 7or in the case of a title #aa or similar case1 the day before the petition is filed74 7#d7 ,proration of deficiency to installments ,if an election is made under paragraph 7#a7 to pay the net tax liability under this section in installments and a deficiency has been assessed1 the deficiency shall be prorated to the installments payable under paragraph 7#a74 ,the part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as1 and as a part of1 such installment4 ,the part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the ,secretary4 ,this paragraph shall not apply if the deficiency is due to negligence1 to intentional disregard of rules and regulations1 or to fraud with intent to evade tax4 7#e7 ,rules relating to interest 7,a7 ,in general ,in the case of any net tax liability prorated to an installment under this subsection1 the last date prescribed for payment of the tax for purposes of section #ffja7;a7 shall be the last date for payment of the installment rather than the last date for payment of tax for the taxable year in which the net tax liability arose4 7,b7 ,special rules for deficiencies 7i7 ,interest payable for entire period ,subparagraph 7,a7 shall not apply to any deficiency prorated to an installment under paragraph 7#d74 7ii7 ,payment of interest attributable to prior periods ,in the case of a deficiency to which paragraph 7#d7 applies1 interest with respect to such deficiency which is assigned under paragraph 7#d7 to any installment the date for payment of which has arrived on or before the date of the assessment of the deficiency1 shall be paid upon notice and demand from the ,secretary4 7#f7 ,period of assessment ,notwithstanding section #feja1 the period for assessing the net tax liability under this section for which an election is made under paragraph 7#a7 shall not expire before the due date for the last installment4 7#g7 ,election ,any election under paragraph 7#a7 shall be made not later than the due date for the return of tax for the taxable year of the ,united ,states shareholder described in subsection 7a77#b77;,b7 and shall be made in such manner as the ,secretary may provide4 7#h7 ,net tax liability under this section ,for purposes of this subsection-- 7,a7 ,in general ,the net tax liability under this section with respect to any ,united ,states shareholder is the excess 7if any7 of-- 7i7 such taxpayer's net income tax for the taxable year1 over 7ii7 such taxpayer's net income tax for such taxable year determined without regard to this section4 7,b7 ,net income tax ,the term net income tax means the net income tax 7as defined in section #ch7;c77#a77 reduced by the credit allowed under section #ch4 7,c7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary for the determination under this subsection of the net tax liability under this section in the case of any pass-thru entity4 7f7 ,regulations ,the ,secretary shall promulgate such regulations as necessary to carry out the purposes of this section1 including regulations for the application of this section to pass-through entities all or part of which are owned by #a or more domestic corporations4 4 7b7 ,ordering rule for purposes of treatment of previously taxed income 7#a7 ,in general ,section #iei is amended by adding at the end the following new subsection3 7g7 ,special ordering rule ,notwithstanding subsection 7c71 for purposes of subsections 7a7 and 7b71 section #caf7;a7 shall be applied by applying paragraph 7#b7 thereof and then paragraph 7#a7 thereof-- 7#a7 first to the deductible portion 7as defined in section #ife7;c77#c77 of the increase in subpart ,f income described in section #ife7;a77#a7 included in the gross income of ,united ,states shareholders under section #iea7;a77#a7 7after application of section #ife7;a77#b77;,a771 and 7#b7 then to amounts described in paragraphs 7#a71 7#b71 or 7#c7 of subsection 7c74 4 7#b7 ,conforming amendment ,section #iei7;c7 is amended by inserting except as provided in subsection 7g71 after subsections 7a7 and 7b714 7c7 ,conforming amendments 7#a7 ,clause 7vi7 of section #ef7;g77#d77;,c7 is amended-- 7,a7 by inserting or section #iff7;a77#b7 after section #ife1 and 7,b7 by inserting and inclusions after certain distributions in the heading thereof4 7#b7 ,paragraph 7#c7 of section #bde7;a7 is amended-- 7,a7 by striking post-#aihf in subparagraph 7,a71 and 7,b7 by striking total post-#aihf in subparagraph 7,b74 7#c7 ,paragraph 7#d7 of section #bde7;a7 is amended to read as follows3 7#d7 ,undistributed earnings ,the term undistributed earnings means the amount of the earnings and profits of the controlled foreign corporation 7computed in accordance with sections #ifd7;a7 and #ihf7-- 7,a7 as of the close of the taxable year of the controlled foreign corporation in which the dividend is distributed1 and 7,b7 without diminution by reason of dividends distributed during such taxable year4 4 7#d7 ,paragraph 7#e7 of section #bde7;a7 is amended-- 7,a7 by striking post-#aihf both places it appears in the matter preceding subparagraph 7,a71 and 7,b7 by striking ,post-#aihf undistributed in the heading thereof and inserting ,undistributed4 7#e7 ,paragraph 7#f7 of section #bde7;a7 is amended-- 7,a7 by striking beginning after ,december #ca1 #aihf and inserting which is after the first taxable year of such corporation1 and 7,b7 by striking post-#aihf both places it appears4 7#f7 ,paragraph 7#b7 of section #ffja7;b7 is amended-- 7,a7 by striking section #faef7;a7 in the matter preceding subparagraph 7,a7 and inserting section #ife7;d77#a7 or #faef7;a71 and 7,b7 by striking section #faef7;b7 in subparagraph 7,a7 and inserting section #ife7;d77#b7 or #faef7;b71 as the case may be4 7#g7 ,the table of sections for subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to section #ife and inserting the following3 ,sec4 #ife4 ,inclusion of previously deferred foreign income4 4 7d7 ,effective date 7#a7 ,in general ,except as provided in paragraph 7#b71 the amendments made by this section shall apply to the last taxable year of foreign corporations beginning before the applicable date1 and to taxable years of ,united ,states shareholders with or within which such taxable years of foreign corporations end4 7#b7 ,conforming amendments related to section #bde ,the amendments made by paragraphs 7#b71 7#c71 7#d71 and 7#e7 of subsection 7c7 shall apply to taxable years of foreign corporations beginning on or after the applicable date1 and to taxable years of ,united ,states shareholders with or within which such taxable years of foreign corporations end4 ,b ,other provisions #ccf4 ,elimination of #cj-;day requirement 7a7 ,in general ,section #iea7;a77#a7 is amended by striking for an uninterrupted period of #cj days or more and inserting at any time4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years of foreign corporations beginning on or after the applicable date1 and to taxable years of ,united ,states shareholders with or within which such taxable years of foreign corporations end4 #ccg4 ,modification of definition of ,united ,states shareholder 7a7 ,in general ,section #iea7;b7 is amended by inserting 1 or #aj percent or more of the total value of shares of all classes of stock of such foreign corporation after such foreign corporation4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years of foreign corporations beginning on or after the applicable date1 and to taxable years of ,united ,states shareholders with or within which such taxable years of foreign corporations end4 ,b ,reform of foreign tax credit provisions #cda4 ,repeal of section #ijb indirect foreign tax credits2 foreign tax credit related to subpart ,f income 7a7 ,repeal of section #ijb indirect foreign tax credits ,subpart ,a of part ,,iii of subchapter ,n of chapter #a is amended by striking section #ijb4 7b7 ,foreign tax credit related to subpart ,f income 7#a7 ,in general ,section #ifj is amended by redesignating subsections 7b7 and 7c7 as subsections 7c7 and 7d71 respectively1 and by striking subsection 7a7 and inserting the following3 7a7 ,determination of credit on current year basis ,for purposes of this subpart1 if there is included in the gross income of a domestic corporation any amount under section #iea7;a7 with respect to any controlled foreign corporation with respect to which such domestic corporation is a ,united ,states shareholder1 such domestic corporation shall be deemed to have paid so much of such foreign corporation's foreign income taxes as are properly attributable to the amount so included4 7b7 ,treatment of foreign taxes not previously deemed paid ,for purposes of this subpart-- 7#a7 ,in general ,if any portion of a distribution from a controlled foreign corporation received by a domestic corporation is excluded from gross income under section #iei7;a71 such domestic corporation shall be deemed to have paid so much of such foreign corporation's foreign income taxes as are properly attributable to the amount so excluded to the extent such taxes were not deemed paid by the domestic corporation under this section for any prior taxable year4 7#b7 ,taxes of lower-tier ,c,f,cs ,if a controlled foreign corporation receives a distribution any portion of which is described in section #iei7;b7 from another controlled foreign corporation1 such foreign corporation shall be deemed to have paid so much of such other foreign corporation's foreign income taxes as are properly attributable to the amount so described to the extent such taxes were not deemed paid by a domestic corporation under this section for any prior taxable year4 4 7#b7 ,application with respect to foreign tax credit limitation ,section #ifj7;c71 as redesignated by paragraph 7#a71 is amended by adding at the end the following new paragraph3 7#f7 ,application with respect to foreign tax credit limitation ,this subsection shall be applied separately with respect to each category of income described in section #ijd7;d77#a74 4 7#c7 ,conforming amendments 7,a7 ,section #ifj is amended by striking subsection 7d71 as redesignated by paragraph 7#a71 and inserting the following3 7d7 ,foreign income taxes ,for purposes of this section1 the term foreign income taxes means any income1 war profits1 or excess profits taxes paid or accrued by a foreign corporation to any foreign country or possession of the ,united ,states4 7e7 ,regulations ,the ,secretary shall provide such regulations as may be necessary or appropriate to carry out the provisions of this section1 including rules for the application of this section to domestic partnerships with partners that are domestic corporations4 4 7,b7 ,section #ifj is amended by striking the heading and inserting ,deemed paid credit for subpart ,f inclusions4 7c7 ,modification to section #gh gross ,up ,section #gh is amended to read as follows3 #gh4 ,amounts received from certain foreign corporations by domestic corporations choosing foreign tax credit ,if a domestic corporation which is a ,united ,states shareholder chooses to have the benefits of subpart ,a of part ,,iii of subchapter ,n 7relating to foreign tax credits7 for any taxable year1 an amount equal to the taxes deemed to be paid by such corporation under section #ifj for such taxable year-- 7#a7 shall be treated as an amount included in the gross income under section #iea7;a71 and 7#b7 for purposes of section #ijd1 shall be deemed to be attributable to the same category of income described in section #ijd7;d77#a7 as the income which gave rise to the taxes deemed paid by such corporation4 4 7d7 ,conforming amendments 7#a7 ,subclause 7,,iii7 of section #ef7;g77#d77;,c77iii7 is amended by inserting as in effect before its repeal after section #ijb4 7#b7 ,sections #ece7;b77#a7 and #ede7;b77#a7 are each amended by striking section #ijb7;a7 or #ifj7;a77#a7 and inserting section #ifj4 7#c7 ,subparagraph 7,b7 of section #had7;f77#a7 is repealed4 7#d7 ,subsection 7a7 of section #ija is amended by striking sections #ijb and #ifj and inserting section #ifj4 7#e7 ,paragraph 7#b7 of section #ija7;e7 is amended by striking but is not limited to-- and all that follows through that portion and inserting but is not limited to that portion4 7#f7 ,subsection 7f7 of section #ija is amended by striking sections #ijb and #ifj and inserting section #ifj4 7#g7 ,subparagraph 7,a7 of section #ija7;j77#a7 is amended by striking #ijb or4 7#h7 ,subparagraph 7,a7 of section #ijd7;h77#aj7 is amended by striking sections #ijb1 #ijg1 and #ifj and inserting sections #ijg and #ifj4 7#i7 ,subsection 7k7 of section #ijd is amended to read as follows3 7k7 ,cross reference ,for modification of limitation under subsection 7a7 for purposes of determining the amount of credit which can be taken against the alternative minimum tax1 see section #ei7;a74 4 7#aj7 ,paragraph 7#a7 of section #ije7;c7 is amended by striking the last sentence4 7#aa7 ,subclause 7,i7 of section #ije7;c77#b77;,b7 is amended by striking #ijb or4 7#ab7 ,subsection 7a7 of section #ijf is amended by striking 7or deemed1 under section #ijb1 paid or accrued during the taxable year74 7#ac7 ,subsection 7b7 of section #ijf is amended by striking paragraphs 7#d7 and 7#e74 7#ad7 ,subparagraph 7,b7 of section #ijg7;b77#b7 is amended by striking #ijb or4 7#ae7 ,paragraph 7#c7 of section #ijg7;c7 is amended-- 7,a7 by striking subparagraph 7,a7 and redesignating subparagraphs 7,b7 and 7,c7 as subparagraphs 7,a7 and 7,b71 respectively1 and 7,b7 by striking section #ifj7;a7 in subparagraph 7,a7 7as so redesignated7 and inserting section #ifj4 7#af7 ,paragraph 7#e7 of section #ijg7;c7 is amended by striking #ijb or4 7#ag7 ,clause 7i7 of section #ijg7;f77#b77;,b7 is amended by striking #ijb or4 7#ah7 ,subsection 7a7 of section #ijh is amended by striking #ijb or4 7#ai7 ,paragraph 7#a7 of section #ieh7;a7 is amended by striking #ifj7;a77#a7 and inserting #ifj4 7#bj7 ,subparagraph 7,b7 of section #fjch7;c77#a7 is amended by striking sections #ijb 7relating to foreign tax credit for corporate stockholder in foreign corporation7 and #ifj 7relating to special rules for foreign tax credit7 and inserting section #ifj4 7#ba7 ,paragraph 7#d7 of section #fjch7;c7 is amended by striking subparagraph 7,c74 7#bb7 ,the table of sections for subpart ,a of part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to section #ijb4 7#bc7 ,the table of sections for part ,,ii of subchapter ,b of chapter #a is amended by striking ,dividends in the item relating to section #gh and inserting ,amounts4 7#bd7 ,the table of sections for subpart ,f of part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to section #ifj and inserting the following3 ,sec4 #ifj4 ,deemed paid credit for subpart ,f inclusions4 4 7e7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning on or after the applicable date1 and to taxable years of ,united ,states shareholders with or within which such taxable years of foreign corporations end4 #cdb4 ,repeal of rule suspending foreign taxes and credits until related income is taken into account 7a7 ,in general ,subpart ,a of part ,,iii of subchapter ,n of chapter #a is amended by striking section #iji4 7b7 ,conforming amendments 7#a7 ,section #ija7m77#a77;,b7 is amended by striking a section #ijb corporation 7as defined in section #iji7;d77#e77 and inserting a controlled foreign corporation 7as defined in section #ieg7;a774 7#b7 ,the table of sections of subpart ,a of part ,,iii of subchapter ,n of chapter #a is amended by striking the item relating to section #iji4 7c7 ,effective date ,the amendments made by this section shall apply to foreign taxes paid or accrued in taxable years beginning on or after the applicable date4