,,ii  #aae? ,,congress  #a/ ,session    
,s4 #ehf  ,,9 ,,! ,,s5ate ,,( ,,!       
,,unit$ ,,/ates  ,m>* #i1 #bjag,mr4     
,s&]s 7= himself & ,mr4 ,s*atz7         
introduc$ ! foll[+ bill2 :i* 0 read     
twice & ref]r$ to ! ,committee on       
,f9ance  ,a ,,bill  ,to am5d ! ,int]nal 
,rev5ue ,code ( #aihf to modify !       
treatm5t ( =eign corporations1 & = o!r  
purposes4  #a4 ,%ort title ,?is ,act may
 be cit$ z ! ,corporate ,tax ,dodg+     
,prev5tion ,act4  #b4 ,def]ral ( ,active
 ,income ( ,controll$ ,=eign            
,corporations  7a7 ,9 g5]al ,section    
#ieb ( ! ,int]nal ,rev5ue ,code ( #aihf 
is am5d$ by add+ at ! end ! foll[+ new  
subsection3  7e7 ,special ,application (
 ,subp>t  7#a7 ,9 g5]al ,= taxable ye>s 
beg9n+ aft] ,decemb] #ca1 #bjag1 not)/&+
 any o!r provision ( ?is subp>t1 ! t]m  
subp>t ,f income means1 9 ! case ( any  
controll$ =eign corporation1 ! income ( 
su* corporation d]iv$ f any =eign       
c\ntry4  7#b7 ,applicable rules ,rules  
simil> to ! rules "u ! la/ s5t5ce (     

subsection 7a7 & subsection 7d7 %all    
apply to ?is subsection4  4  7b7        
,treatm5t ( previ\sly def]r$ =eign      
income  7#a7 ,9 g5]al ,section #ife ( ! 
,int]nal ,rev5ue ,code ( #aihf is am5d$ 
to read z foll[s3  #ife4 ,inclusion (   
previ\sly def]r$ =eign income  7a7      
,inclusion z subp>t ,f income ,! subp>t 
,f income 7det]m9$ "u section #ieb )\t  
reg>d to ?is section7 ( a controll$     
=eign corporation = its la/ taxable ye> 
beg9n+ be=e ,janu>y #a1 #bjah1 %all be  
increas$ by ! accumulat$ def]r$ =eign   
income ( ! corporation4  7b7 ,accumulat$
 def]r$ =eign income ,= purposes ( ?is  
section-- 7#a7 ,9 g5]al ,! t]m          
accumulat$ def]r$ =eign income means !  
excess (--  7,a7 ! undi/ribut$ e>n+s ( !
 controll$ =eign corporation1 ov]  7,b7 
! undi/ribut$ ,u4,s4 e>n+s ( su*        
controll$ =eign corporation4  7#b7      
,undi/ribut$ e>n+s  7,a7 ,9 g5]al ,! t]m
 undi/ribut$ e>n+s means ! e>n+s &      
pr(its ( ! controll$ =eign corporation  
describ$ 9 section #iei7;c77#c71        

det]m9$--  7i7 z ( ! close ( ! taxable  
ye> describ$ 9 subsection 7a77#a71  7ii7
 )\t dim9ution by reason ( di/ributions 
made dur+ su* taxable ye>1 &  7iii7 )\t 
reg>d to ?is section4  7,b7 ,special    
rule = curr5t ye> di/ributions ,=       
purposes ( ?is *apt]1 any det]m9ation ) 
respect to ! treatm5t ( di/ributions    
describ$ 9 subp>agraph 7,a77ii7 %all be 
made aft] ! application ( ?is section to
 ! e>n+s & pr(its describ$ 9 subp>agraph
 7,a74  7#c7 ,undi/ribut$ ,u4,s4 e>n+s  
,! t]m undi/ribut$ ,u4,s4 e>n+s has !   
mean+ giv5 ! t]m po/-#aihf undi/ribut$  
,u4,s4 e>n+s 9 section #bde7;a77#e7 7z 9
 effect = taxable ye>s beg9n+ be=e      
#bjah71 det]m9$-- 7,a7 )\t reg>d to     
po/-#aihf ea* place x appe>s 9 ! matt]  
be=e subp>agraph 7,a71 &  7,b7 )\t reg>d
 to ! la/ s5t5ce !re(4  7c7 ,election   
,to pay liability 9 in/allm5ts  7#a7 ,9 
g5]al ,9 ! case ( a ,unit$ ,/ates       
%>ehold] ) respect to "o or m controll$ 
=eign corporations to :i* subsection 7a7
 applies1 su* ,unit$ ,/ates %>ehold] may

 elect to pay ! net tax liability "u ?is
 section 9 #b or m 7b n exce$+ #h7 equal
 in/allm5ts4  7#b7 ,date = paym5t (     
in/allm5ts ,if an election is made "u   
p>agraph 7#a71 ! due date = ! fir/      
in/allm5t %all be ! due date 7det]m9$   
)\t reg>d to any ext5sion ( "t = fil+ ! 
return7 = ! return ( tax = ! taxable ye>
 ( su* ,unit$ ,/ates %>ehold] 9 :i* !   
increase 9 subp>t ,f income "u          
subsection 7a7 is includ$ 9 su*         
%>ehold]'s gross income "u section      
#iea7;a77#a7 & ! due date = ea* succe$+ 
in/allm5t %all be ! due date 7z s       
det]m9$7 = ! return ( tax = ! taxable   
ye> foll[+ ! taxable ye> ) respect to   
:i* ! prec$+ in/allm5t 0 made4  7#c7    
,accel]ation ( paym5t ,if !re is-- 7,a7 
an assessm5t ( an addition to tax =     
failure to pay timely ) respect to any  
in/allm5t requir$ "u ?is subsection1    
7,b7 a liquidation or sale (            
sub/antially all ! assets ( ! taxpay]   
7includ+ 9 a title #aa or simil> case71 
7,c7 a cessation ( bus9ess by ! taxpay]1

 or  7,d7 any simil> circum/ance1  !n ! 
unpaid portion ( all rema9+ in/allm5ts  
%all be due on ! date ( su* ev5t 7or 9 !
 case ( a title #aa or simil> case1 !   
day be=e ! petition is fil$74  7#d7     
,proration ( defici5cy to in/allm5ts ,if
 an election is made "u p>agraph 7#a7 to
 pay ! net tax liability "u ?is section 
9 in/allm5ts & a defici5cy has be5      
assess$1 ! defici5cy %all be prorat$ to 
! in/allm5ts payable "u p>agraph 7#a74  
,! "p ( ! defici5cy s prorat$ to any    
in/allm5t ! date = paym5t ( :i* has n   
arriv$ %all be collect$ at ! same "t z1 
& z a "p (1 su* in/allm5t4 ,! "p ( !    
defici5cy s prorat$ to any in/allm5t !  
date = paym5t ( :i* has arriv$ %all be  
paid ^u notice & dem& f ! ,secret>y4    
,?is p>agraph %all n apply if !         
defici5cy is due to neglig5ce1 to       
int5tional disreg>d ( rules &           
regulations1 or to fraud ) int5t to     
evade tax4  7#e7 ,rules relat+ to int]e/
  7,a7 ,9 g5]al ,9 ! case ( any net tax 
liability prorat$ to an in/allm5t "u ?is

 subsection1 ! la/ date prescrib$ =     
paym5t ( ! tax = purposes ( section     
#ffja7;a7 %all be ! la/ date = paym5t ( 
! in/allm5t r ?an ! la/ date = paym5t ( 
tax = ! taxable ye> 9 :i* ! net tax     
liability arose4  7,b7 ,special rules = 
defici5cies  7i7 ,int]e/ payable =      
entire p]iod ,subp>agraph 7,a7 %all n   
apply to any defici5cy prorat$ to an    
in/allm5t "u p>agraph 7#d74  7ii7       
,paym5t ( int]e/ attributable to prior  
p]iods ,9 ! case ( a defici5cy to :i*   
p>agraph 7#d7 applies1 int]e/ ) respect 
to su* defici5cy :i* is assign$ "u      
p>agraph 7#d7 to any in/allm5t ! date = 
paym5t ( :i* has arriv$ on or be=e !    
date ( ! assessm5t ( ! defici5cy1 %all  
be paid ^u notice & dem& f ! ,secret>y4 
7#f7 ,p]iod ( assessm5t ,not)/&+ section
 #feja1 ! p]iod = assess+ ! net tax     
liability "u ?is section = :i* an       
election is made "u p>agraph 7#a7 %all n
 expire be=e ! due date = ! la/         
in/allm5t4  7#g7 ,election ,any election
 "u p>agraph 7#a7 %all be made n lat]   

?an ! due date = ! return ( tax = !     
taxable ye> ( su* ,unit$ ,/ates %>ehold]
 9 :i* ! increase 9 subp>t ,f income "u 
subsection 7a7 is includ$ 9 su*         
%>ehold]'s gross income "u section      
#iea7;a77#a7 & %all be made 9 su* mann] 
z ! ,secret>y may provide4  7#h7 ,net   
tax liability "u ?is section ,= purposes
 ( ?is subsection-- 7,a7 ,9 g5]al ,! net
 tax liability "u ?is section ) respect 
to any ,unit$ ,/ates %>ehold] is !      
excess 7if any7 (--  7i7 su* taxpay]'s  
net income tax = ! taxable ye>1 ov]     
7ii7 su* taxpay]'s net income tax = su* 
taxable ye> det]m9$ )\t reg>d to ?is    
section4  7,b7 ,net income tax ,! t]m   
net income tax means ! net income tax 7z
 def9$ 9 section #ch7;c77#a77 r$uc$ by !
 cr$it all[$ "u section #ch4  7,c7      
,regulations ,! ,secret>y %all prescribe
 su* regulations z may be necess>y = !  
det]m9ation "u ?is subsection ( ! net   
tax liability "u ?is section 9 ! case ( 
any pass-?ru entity4  7d7 ,regulations  
,! ,secret>y %all promulgate su*        

regulations z necess>y to c>ry out !    
purposes ( ?is section1 includ+         
regulations = ! application ( ?is       
section to pass-?r\gh entities all or "p
 ( :i* are own$ by "o or m dome/ic      
corporations4  4  7#b7 ,con=m+ am5dm5ts 
7,a7 ,section #ef7;g77#d77;,c7 ( !      
,int]nal ,rev5ue ,code ( #aihf is am5d$ 
by /rik+ clause 7vi74  7,b7 ,p>agraph   
7#c7 ( section #bde7;a7 ( su* ,code is  
am5d$--  7i7 by /rik+ po/-#aihf 9       
subp>agraph 7,a71 &  7ii7 by /rik+ total
 po/-#aihf 9 subp>agraph 7,b74  7,c7    
,p>agraph 7#d7 ( section #bde7;a7 ( su* 
,code is am5d$ to read z foll[s3  7#d7  
,undi/ribut$ e>n+s ,! t]m undi/ribut$   
e>n+s means ! am\nt ( ! e>n+s & pr(its (
 ! controll$ =eign corporation 7comput$ 
9 accordance ) sections #ifd7;a7 &      
#ihf7--  7,a7 z ( ! close ( ! taxable   
ye> ( ! controll$ =eign corporation 9   
:i* ! divid5d is di/ribut$1 &  7,b7 )\t 
dim9ution by reason ( divid5ds di/ribut$
 dur+ su* taxable ye>4  4  7,d7         
,p>agraph 7#e7 ( section #bde7;a7 ( su* 

,code is am5d$--  7i7 by /rik+ po/-#aihf
 bo? places x appe>s 9 ! matt] prec$+   
subp>agraph 7,a71 &  7ii7 by /rik+      
,po/-#aihf undi/ribut$ 9 ! head+ !re( & 
ins]t+ ,undi/ribut$4  7,e7 ,p>agraph    
7#f7 ( section #bde7;a7 ( su* ,code is  
am5d$--  7i7 by /rik+ beg9n+ aft]       
,decemb] #ca1 #aihf & ins]t+ :i* is aft]
 ! fir/ taxable ye> ( su* corporation1 &
  7ii7 by /rik+ po/-#aihf bo? places x  
appe>s4  7,f7 ,p>agraph 7#b7 ( section  
#ffja7;b7 ( su* ,code is am5d$--  7i7 by
 /rik+ section #faef7;a7 9 ! matt]      
prec$+ subp>agraph 7,a7 & ins]t+ section
 #ife7;c77#a7 or #faef7;a71 &  7ii7 by  
/rik+ section #faef7;b7 9 subp>agraph   
7,a7 & ins]t+ section #ife7;c77#b7 or   
#faef7;b71 z ! case may be4  7,g7 ,!    
table ( sections = subp>t ,f ( "p ,,iii 
( sub*apt] ,n ( *apt] #a ( su* ,code is 
am5d$ by /rik+ ! item relat+ to section 
#ife & ins]t+ ! foll[+3  ,sec4 #ife4    
,inclusion ( previ\sly def]r$ =eign     
income4  4  7#c7 ,effective date ,!     
am5dm5ts made by ?is subsection %all    

apply to taxable ye>s beg9n+ aft]       
,decemb] #ca1 #bjag4  #c4 ,modifications
 ( =eign tax cr$it rules applicable to  
l>ge integrat$ oil companies :i* are    
dual capacity taxpay]s  7a7 ,9 g5]al    
,section #ija ( ! ,int]nal ,rev5ue ,code
 ( #aihf is am5d$ by r$esignat+         
subsection 7n7 z subsection 7o7 & by    
ins]t+ aft] subsection 7m7 ! foll[+ new 
subsection3  7n7 ,special rules relat+  
to l>ge integrat$ oil companies :i* are 
dual capacity taxpay]s  7#a7 ,g5]al rule
 ,not)/&+ any o!r provision ( ?is *apt]1
 any am\nt paid or accru$ by a dual     
capacity taxpay] :i* is a l>ge integrat$
 oil company to a =eign c\ntry or       
possession ( ! ,unit$ ,/ates = any p]iod
 %all n be consid]$ a tax--  7,a7 if1 = 
su* p]iod1 ! =eign c\ntry or possession 
does n impose a g5]ally applicable      
income tax1 or  7,b7 to ! ext5t su*     
am\nt exce$s ! am\nt 7det]m9$ 9         
accordance ) regulations7 :i*--  7i7 is 
paid by su* dual capacity taxpay]       
pursuant to ! g5]ally applicable income 

tax impos$ by ! c\ntry or possession1 or
  7ii7 w\ld be paid if ! g5]ally        
applicable income tax impos$ by ! c\ntry
 or possession 7 applicable to su* dual 
capacity taxpay]4  ,no?+ 9 ?is p>agraph 
%all be con/ru$ to imply ! prop]        
treatm5t ( any su* am\nt n 9 excess ( ! 
am\nt det]m9$ "u subp>agraph 7,b74  7#b7
 ,dual capacity taxpay] ,= purposes (   
?is subsection1 ! t]m dual capacity     
taxpay] means1 ) respect to any =eign   
c\ntry or possession ( ! ,unit$ ,/ates1 
a p]son :o--  7,a7 is subject to a levy 
( su* c\ntry or possession1 &  7,b7     
receives 7or w receive7 directly or     
indirectly a specific economic b5efit 7z
 det]m9$ 9 accordance ) regulations7 f  
su* c\ntry or possession4  7#c7 ,g5]ally
 applicable income tax ,= purposes ( ?is
 subsection--  7,a7 ,9 g5]al ,! t]m     
g5]ally applicable income tax means an  
income tax 7or a s]ies ( income taxes7  
:i* is g5]ally impos$ "u ! laws ( a     
=eign c\ntry or possession on income    
d]iv$ f ! conduct ( a trade or bus9ess  

)9 su* c\ntry or possession4  7,b7      
,exceptions ,su* t]m %all n include a   
tax unless x has sub/antial application1
 by its t]ms & 9 practice1 to--  7i7    
p]sons :o are n dual capacity taxpay]s1 
&  7ii7 p]sons :o are citiz5s or        
resid5ts ( ! =eign c\ntry or possession4
  7#d7 ,l>ge integrat$ oil company ,=   
purposes ( ?is subsection1 ! t]m l>ge   
integrat$ oil company means1 ) respect  
to any taxable ye>1 an integrat$ oil    
company 7z def9$ 9 section #bia7;b77#d77
 :i*--  7,a7 _h gross receipts 9 excess 
( #a1jjj1jjj1jjj = su* taxable ye>1 &   
7,b7 has an av]age daily worldwide      
production ( crude oil ( at lea/        
#ejj1jjj b>rels = su* taxable ye>4  4   
7b7 ,effective date  7#a7 ,9 g5]al ,!   
am5dm5ts made by ?is section %all apply 
to taxes paid or accru$ 9 taxable ye>s  
beg9n+ aft] ! date ( ! enactm5t ( ?is   
,act4  7#b7 ,contr>y treaty obligations 
upheld ,! am5dm5ts made by ?is section  
%all n apply to ! ext5t contr>y to any  
treaty obligation ( ! ,unit$ ,/ates4    

#d4 ,re9/itution ( p] c\ntry =eign tax  
cr$it  7a7 ,9 g5]al ,subsection 7a7 (   
section #ijd ( ! ,int]nal ,rev5ue ,code 
( #aihf is am5d$ to read z foll[s3  7a7 
,limitation ,! am\nt ( ! cr$it 9 respect
 ( ! tax paid or accru$ to any =eign    
c\ntry or possession ( ! ,unit$ ,/ates  
%all n exce$ ! same proportion ( ! tax  
aga9/ :i* su* cr$it is tak5 :i* !       
taxpay]'s taxable income f s\rces )9 su*
 c\ntry or possession 7b n 9 excess ( ! 
taxpay]'s entire taxable income7 be>s to
 su* taxpay]'s entire taxable income = !
 same taxable ye>4  4  7b7 ,effective   
date ,! am5dm5t made by ?is section %all
 apply to taxable ye>s beg9n+ aft]      
,decemb] #ca1 #bjag4  #e4 ,treatm5t (   
=eign corporations manag$ & controll$ 9 
! ,unit$ ,/ates z dome/ic corporations  
7a7 ,9 g5]al ,section #ggja ( ! ,int]nal
 ,rev5ue ,code ( #aihf is am5d$ by      
r$esignat+ subsection 7p7 z subsection  
7q7 & by ins]t+ aft] subsection 7o7 !   
foll[+ new subsection3  7p7 ,c]ta9      
corporations manag$ & controll$ 9 !     

,unit$ ,/ates treat$ z dome/ic = income 
tax  7#a7 ,9 g5]al ,not)/&+ subsection  
7a77#d71 9 ! case ( a corporation       
describ$ 9 p>agraph 7#b7 if--  7,a7 !   
corporation w\ld n o!rwise be treat$ z a
 dome/ic corporation = purposes ( ?is   
title1 b  7,b7 ! managem5t & control ( !
 corporation occurs1 directly or        
indirectly1 prim>ily )9 ! ,unit$ ,/ates1
  !n1 solely = purposes ( *apt] #a 7&   
any o!r provision ( ?is title relat+ to 
*apt] #a71 ! corporation %all be treat$ 
z a dome/ic corporation4  7#b7          
,corporation describ$  7,a7 ,9 g5]al ,a 
corporation is describ$ 9 ?is p>agraph  
if-- 7i7 ! /ock ( su* corporation is    
regul>ly trad$ on an e/abli%$ securities
 m>ket1 or  7ii7 ! aggregate gross      
assets ( su* corporation 7or any        
pr$ecessor !re(71 includ+ assets "u     
managem5t = inve/ors1 :e!r held directly
 or indirectly1 at any "t dur+ ! taxable
 ye> or any prec$+ taxable ye> is       
#ej1jjj1jjj or m4  7,b7 ,g5]al exception
 ,a corporation %all n be treat$ z      

describ$ 9 ?is p>agraph if--  7i7 su*   
corporation 0 treat$ z a corporation    
describ$ 9 ?is p>agraph 9 a prec$+      
taxable ye>1  7ii7 su* corporation--    
7,i7 is n regul>ly trad$ on an e/abli%$ 
securities m>ket1 &  7,,ii7 has1 & is   
reasonably expect$ to cont9ue to h1     
aggregate gross assets 7includ+ assets  
"u managem5t = inve/ors1 :e!r held      
directly or indirectly7 ( less ?an      
#ej1jjj1jjj1 &  7iii7 ! ,secret>y grants
 a waiv] to su* corporation "u ?is      
subp>agraph4  7#c7 ,managem5t & control 
7,a7 ,9 g5]al ,! ,secret>y %all         
prescribe regulations = purposes (      
det]m9+ cases 9 :i* ! managem5t &       
control ( a corporation is to be treat$ 
z occurr+ prim>ily )9 ! ,unit$ ,/ates4  
7,b7 ,executive (fic]s & s5ior managem5t
 ,su* regulations %all provide t--  7i7 
! managem5t & control ( a corporation   
%all be treat$ z occurr+ prim>ily )9 !  
,unit$ ,/ates if sub/antially all ( !   
executive (fic]s & s5ior managem5t ( !  
corporation :o ex]cise day-to-day       

responsibility = mak+ decisions involv+ 
/rategic1 f9ancial1 & op]ational        
policies ( ! corporation are locat$     
prim>ily )9 ! ,unit$ ,/ates1 &  7ii7    
individuals :o are n executive (fic]s & 
s5ior managem5t ( ! corporation 7includ+
 individuals :o are (fic]s or employees 
( o!r corporations 9 ! same *a9 (       
corporations z ! corporation7 %all be   
treat$ z executive (fic]s & s5ior       
managem5t if su* individuals ex]cise !  
day-to-day responsibilities ( !         
corporation describ$ 9 clause 7i74  7,c7
 ,corporations prim>ily hold+ inve/m5t  
assets ,su* regulations %all also       
provide t ! managem5t & control ( a     
corporation %all be treat$ z occurr+    
prim>ily )9 ! ,unit$ ,/ates if--  7i7 ! 
assets ( su* corporation 7directly or   
indirectly7 consi/ prim>ily ( assets be+
 manag$ on behalf ( inve/ors1 &  7ii7   
decisions ab\t h[ to inve/ ! assets are 
made 9 ! ,unit$ ,/ates4  4  7b7         
,effective date ,! am5dm5ts made by ?is 
section %all apply to taxable ye>s      

beg9n+ on or aft] ! date :i* is #b ye>s 
aft] ! date ( ! enactm5t ( ?is ,act4    
#f4 ,re/rictions on d$uction = int]e/   
exp5se ( memb]s ( f9ancial report+ gr\ps
 ) excess dome/ic indebt$ness  7a7 ,9   
g5]al ,section #afc ( ! ,int]nal ,rev5ue
 ,code ( #aihf is am5d$ by r$esignat+   
subsection 7n7 z subsection 7o7 & by    
ins]t+ aft] subsection 7m7 ! foll[+ new 
subsection3  7n7 ,re/riction on d$uction
 = int]e/ exp5se ( memb]s ( f9ancial    
report+ gr\ps ) excess dome/ic          
indebt$ness  7#a7 ,9 g5]al ,9 ! case (  
any corporation :i* is a memb] ( an     
applicable f9ancial report+ gr\p !      
common p>5t ( :i* is a =eign            
corporation1 ! d$uction all[$ "u ?is    
*apt] = int]e/ paid or accru$ by !      
corporation dur+ ! taxable ye> %all n   
exce$ ! applicable limitation = !       
taxable ye>4  7#b7 ,c>ry=w>d ,any am\nt 
disall[$ "u p>agraph 7#a7 = any taxable 
ye> %all be treat$ z int]e/ paid or     
accru$ 9 ! succe$+ taxable ye>4  7#c7   
,applicable limitation ,= purposes ( ?is

 subsection-- 7,a7 ,9 g5]al ,!          
applicable limitation ) respect to a    
taxpay] = any taxable ye> is ! sum (--  
7i7 ! great] (-- 7,i7 ! taxpay]'s       
allocable %>e ( ! applicable f9ancial   
report+ gr\p's net int]e/ exp5se = !    
taxable ye>1 or  7,,ii7 #aj p]c5t ( !   
taxpay]'s adju/$ taxable income = !     
taxable ye>1 plus  7ii7 ! excess        
limitation c>ry=w>ds to ! taxable ye> f 
any prec$+ taxable ye>4  7,b7           
,limitation n less ?an includible int]e/
 ,! applicable limitation "u subp>agraph
 7,a7 = any taxable ye> %all n be less  
?an ! am\nt ( int]e/ includible 9 !     
gross income ( ! taxpay] = ! taxable    
ye>4  7,c7 ,excess limitation c>ry=w>d  
,if ! applicable limitation ( a taxpay] 
= any taxable ye> 7det]m9$ )\t reg>d to 
c>ry=w>ds "u subp>agraph 7,a77ii77      
exce$s ! int]e/ paid or accru$ by !     
taxpay] dur+ ! taxable ye>1 su* excess  
%all be an excess limitation c>ry=w>d to
 ! #a/ succe$+ taxable ye> & ! #bnd &   
#crd succe$+ taxable ye>s to ! ext5t n  

previ\sly tak5 into acc\nt "u ?is       
p>agraph4  7#d7 ,allocable %>e ( net    
int]e/ exp5se ,= purposes ( ?is         
subsection-- 7,a7 ,9 g5]al ,a taxpay]'s 
allocable %>e ( an applicable f9ancial  
report+ gr\p's net int]e/ exp5se = any  
taxable ye> %all be ! am\nt 7n less ?an 
z]o7 :i* be>s ! same ratio to su* net   
int]e/ exp5se z--  7i7 ! net e>n+s ( !  
taxpay]1 be>s to  7ii7 ! aggregate net  
e>n+s ( all memb]s ( ! applicable       
f9ancial report+ gr\p4  7,b7 ,net e>n+s 
,! t]m net e>n+s means1 ) respect to any
 taxpay]1 ! e>n+s ( ! taxpay]-- 7i7     
comput$ )\t reg>d to any r$uction       
all[able =--  7,i7 net int]e/ exp5se1   
7,,ii7 taxes1 or  7,,iii7 depreciation1 
amortization1 or depletion1 &  7ii7     
comput$ ) su* o!r adju/m5ts z !         
,secret>y may by regulations prescribe4 
7,c7 ,burd5 on taxpay] ,if a taxpay]    
elects n to compute its allocable %>e1  
or fails to e/abli% to ! satisfaction ( 
! ,secret>y ! am\nt ( its allocable %>e1
 = any taxable ye>1 ! allocable %>e %all

 be z]o4  7#e7 ,net int]e/ exp5se & net 
e>n+s det]m9ations ,= purposes ( ?is    
subsection-- 7,a7 ,net int]e/ exp5se    
,any det]m9ation ( net int]e/ exp5se =  
any taxable ye> %all be made--  7i7 on !
 basis ( ! applicable f9ancial /atem5t (
 ! applicable f9ancial report+ gr\p = ! 
la/ f9ancial report+ ye> end+ ) or )9 ! 
taxable ye>1 &  7ii7 "u ,unit$ ,/ates   
tax pr9ciples4  7,b7 ,net e>n+s ,any    
det]m9ation ( net e>n+s = any taxable   
ye> %all be made on ! basis ( !         
applicable f9ancial /atem5t ( !         
applicable f9ancial report+ gr\p = ! la/
 f9ancial report+ ye> end+ ) or )9 !    
taxable ye>4  7,c7 ,applicable f9ancial 
/atem5t ,! t]m applicable f9ancial      
/atem5t means a /atem5t = f9ancial      
report+ purposes :i* is made on ! basis 
(-- 7i7 g5]ally accept$ acc\nt+         
pr9ciples1  7ii7 int]national f9ancial  
report+ /&>ds1 or  7iii7 any o!r me?od  
specifi$ by ! ,secret>y 9 regulations4  
,a /atem5t "u clause 7ii7 or 7iii7 may  
be us$ z an applicable f9ancial /atem5t 

by a gr\p only if !re is no /atem5t ( ! 
gr\p "u any prec$+ clause4  7#f7        
,applicable f9ancial report+ gr\p ,=    
purposes ( ?is subsection-- 7,a7 ,9     
g5]al ,! t]m applicable f9ancial report+
 gr\p means1 ) respect to any           
corporation1 a gr\p ( :i* su*           
corporation is a memb] & :i* files an   
applicable f9ancial /atem5t4  7,b7      
,exception = gr\ps ) m9imal dome/ic net 
int]e/ exp5se ,su* t]m %all n include a 
gr\p if ! aggregate net int]e/ exp5se = 
:i* a d$uction is all[able to all memb]s
 ( ! gr\p "u ?is *apt] 7det]m9$ )\t     
reg>d to ?is subsection or any o!r      
limitation on d$uctibility ( int]e/ "u  
?is *apt]7 is less ?an #e1jjj1jjj4  7,c7
 ,exception = c]ta9 f9ancial entities ,a
 corporation :i* is describ$ 9 section  
#hfd7;f77#d77;,b71 or is treat$ z       
describ$ 9 section #hfd7;f77#d77;,b7 by 
reason ( p>agraph 7#d77;,c7 or 7#e77;,a7
 ( section #hfd7;f7 7)\t reg>d to :e!r  
an election is made "u su* p>agraph     
7#e77;,a771 %all n be treat$ z a memb] (

 an applicable f9ancial report+ gr\p (  
:i* x is o!rwise a memb] & ?is          
subsection %all n apply to su*          
corporation4  7#g7 ,o!r def9itions &    
rules ,= purposes ( ?is subsection--    
7,a7 ,adju/$ taxable income ,! t]m      
adju/$ taxable income has ! mean+ giv5  
su* t]m by subsection 7j77#f77;,a74     
7,b7 ,net int]e/ exp5se ,! t]m net      
int]e/ exp5se has ! mean+ giv5 su* t]m  
by subsection 7j77#f77;,b74  7,c7       
,treatm5t ( affiliat$ gr\p ,all memb]s (
 ! same affiliat$ gr\p 7)9 ! mean+ (    
section #aejd7;a77 %all be treat$ z "o  
taxpay]4  7#h7 ,regulations ,! ,secret>y
 %all prescribe su* regulations z may be
 necess>y to c>ry out ! purposes ( ?is  
section1 includ+ regulations provid+--  
7,a7 = ! coord9ation ( ! application (  
?is subsection & o!r provisions ( ?is   
*apt] relat+ to ! d$uctibility ( int]e/1
  7,b7 = ! waiv] ( c]ta9 adju/m5ts      
requir$ "u ,unit$ ,/ates tax pr9ciples 9
 appropriate cases = purposes ( apply+  
?is subsection1  7,c7 = ! det]m9ation ( 

:i* f9ancial in/itutions are eligible = 
! exception f memb]%ip 9 an applicable  
f9ancial report+ gr\p "u p>agraph       
7#f77;,c7 & ! application ( ?is         
subsection to ! o!r memb]s ( ! gr\p :i* 
are n s except$1 &  7,d7 = ! application
 ( ?is subsection 9 ! case ( pass ?ru   
entities & = ! treatm5t ( pass ?ru      
entities z corporations 9 cases :]e     
necess>y to prev5t ! avoidance ( !      
purposes ( ?is subsection4  4  7b7      
,coord9ation ) limitation on relat$ p>ty
 indebt$ness ,p>agraph 7#b7 ( section   
#afc7;j7 ( ! ,int]nal ,rev5ue ,code (   
#aihf is am5d$ by add+ at ! end ! foll[+
 new subp>agraph3  7,d7 ,coord9ation )  
limitation on excess dome/ic indebt$ness
 ,?is subsection %all n apply to any    
corporation = any taxable ye> to :i*    
subsection 7n7 applies to su*           
corporation4  4  7c7 ,effective date ,! 
am5dm5ts made by ?is section %all apply 
to taxable ye>s beg9n+ aft] ,decemb]    
#ca1 #bjag4  #g4 ,modifications to rules
 relat+ to inv]t$ corporations  7a7 ,9  

g5]al ,subsection 7b7 ( section #ghgd ( 
! ,int]nal ,rev5ue ,code ( #aihf is     
am5d$ to read z foll[s3  7b7 ,inv]t$    
corporations treat$ z dome/ic           
corporations  7#a7 ,9 g5]al ,not)/&+    
section #ggja7;a77#d71 a =eign          
corporation %all be treat$ = purposes ( 
?is title z a dome/ic corporation if--  
7,a7 su* corporation w\ld be a surrogate
 =eign corporation if subsection 7a77#b7
 7 appli$ by sub/itut+ #hj p]c5t = #fj  
p]c5t1 or  7,b7 su* corporation is an   
inv]t$ dome/ic corporation4  7#b7       
,inv]t$ dome/ic corporation ,= purposes 
( ?is subsection1 a =eign corporation   
%all be treat$ z an inv]t$ dome/ic      
corporation if1 pursuant to a plan 7or a
 s]ies ( relat$ transactions7--  7,a7 ! 
entity completes aft] ,may #h1 #bjad1 ! 
direct or indirect acquisition (--  7i7 
sub/antially all ( ! prop]ties held     
directly or indirectly by a dome/ic     
corporation1 or  7ii7 sub/antially all (
 ! assets (1 or sub/antially all ( !    
prop]ties con/itut+ a trade or bus9ess  

(1 a dome/ic p>tn]%ip1 &  7,b7 aft] !   
acquisition1 m ?an #ej p]c5t ( ! /ock   
7by vote or value7 ( ! entity is held-- 
7i7 9 ! case ( an acquisition ) respect 
to a dome/ic corporation1 by =m]        
%>ehold]s ( ! dome/ic corporation by    
reason ( hold+ /ock 9 ! dome/ic         
corporation1 or  7ii7 9 ! case ( an     
acquisition ) respect to a dome/ic      
p>tn]%ip1 by =m] p>tn]s ( ! dome/ic     
p>tn]%ip by reason ( hold+ a capital or 
pr(its int]e/ 9 ! dome/ic p>tn]%ip4     
7#c7 ,exception = corporations )        
sub/antial bus9ess activities 9 =eign   
c\ntry ( organization ,a =eign          
corporation describ$ 9 p>agraph 7#b7    
%all n be treat$ z an inv]t$ dome/ic    
corporation if aft] ! acquisition !     
exp&$ affiliat$ gr\p :i* includes !     
entity has sub/antial bus9ess activities
 9 ! =eign c\ntry 9 :i* or "u ! law (   
:i* ! entity is creat$ or organiz$ :5   
comp>$ to ! total bus9ess activities (  
su* exp&$ affiliat$ gr\p4 ,= purposes ( 
subsection 7a77#b77;,b77iii7 & ! prec$+ 

s5t5ce1 ! t]m sub/antial bus9ess        
activities %all h ! mean+ giv5 su* t]m  
"u regulations 9 effect on ,may #h1     
#bjad1 except t ! ,secret>y may issue   
regulations increas+ ! ?re%old p]c5t 9  
any ( ! te/s "u su* regulations =       
det]m9+ if bus9ess activities con/itute 
sub/antial bus9ess activities = purposes
 ( ?is p>agraph4  4  7b7 ,con=m+        
am5dm5ts  7#a7 ,clause 7i7 ( section    
#ghgd7;a77#b77;,b7 ( ! ,int]nal ,rev5ue 
,code ( #aihf is am5d$ by /rik+ aft]    
,m>* #d1 #bjjc1 & ins]t+ aft] ,m>* #d1  
#bjjc1 & be=e ,may #i1 #bjad14  7#b7    
,subsection 7c7 ( section #ghgd ( su*   
,code is am5d$--  7,a7 9 p>agraph 7#b7--
 7i7 by /rik+ subsection                
7a77#b77;,b77ii7 & ins]t+ subsections   
7a77#b77;,b77ii7 & 7b77#b77;,b71 &  7ii7
 by ins]t+ or 7b77#b77;,a7 aft]         
7a77#b77;,b77i7 9 subp>agraph 7,b71     
7,b7 9 p>agraph 7#c71 by ins]t+ or      
7b77#b77;,b71 z ! case may be1 aft]     
7a77#b77;,b77ii71  7,c7 9 p>agraph 7#e71
 by /rik+ subsection 7a77#b77;,b77ii7 & 

ins]t+ subsections 7a77#b77;,b77ii7 &   
7b77#b77;,b71 &  7,d7 9 p>agraph 7#f71  
by ins]t+ or inv]t$ dome/ic corporation1
 z ! case may be1 aft] surrogate =eign  
corporation4  7c7 ,effective date ,!    
am5dm5ts made by ?is section %all apply 
to taxable ye>s end+ aft] ,may #h1      
#bjad4