Page:United States Statutes at Large Volume 100 Part 3.djvu/1015

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2823

ment of this Act) unless (in the case of a treaty entered into after the date of the enactment of this Act) such treaty by specific reference to such section 904(g) clearly expresses the intent to override the provisions of such section. (5) TRANSITIONAL RULE RELATED TO SECTION I25(bx5) OF THE

ACT.—For purposes of section 1250t)X5) of the Tax Reform Act of 1984 (relating to separate application of section 904 in case of income covered by transitional rules), any carryover under section 904(c) of the Internal Revenue Code of 1954 allowed to a taxpayer which was incorporated on August 31, 1962, attributable to taxes paid or accrued in taxable years beginning in 1981, 1982, 1983, or 1984, with respect to amounts included in gross income under section 951 of such Code in respect of a controlled foreign corporation which was incorporated on May 27, 1977, shall be treated as taxes paid or accrued on income separately treated under such section 1250t)X5). (b) AMENDMENTS RELATED TO SECTION 122 OF THE ACT.— (1) TREATMENT OF SUBPART F AND FOREIGN PERSONAL HOLDING

COMPANY INCLUSIONS.—Subparagraph (C) of section 904(d)(3) (relating to exception where designated corporation has small amount of separate limitation interest) is amended by adding at the end thereof the following new sentence: "The preceding sentence shall not apply to any amount includible in gross income under section 551 or 951." (2) TREATMENT OF INTEREST AND DIVIDENDS FROM MEMBERS OF SAME AFFIUATED GROUP.—Paragraph (3) of section 904(d) (relat-

ing to certain amounts attributable to United States-owned foreign corporations, etc., treated as interest) is amended by striking out subparagraph (J), by redesignating subparagraph (I) as subparagraph (J), and by inserting after subparagraph (H) the following new subparagraph: "(I) INTEREST AND DIVIDENDS FROM MEMBERS OF SAME AFFIUATED GROUP.—For purposes of this paragraph, divi-

dends and interest received or accrued by the designated payor corporation from another member of the same affiliated group (determined under section 1504 without regard to subsection (b)(3) thereof) shall be treated as separate limitation interest if (and only if) such amounts are attributable (directly or indirectly) to separate limitation interest of any other member of such group." (3) TREATMENT OF INTEREST FROM DESIGNATED PAYOR CORPORA-

TION.—Paragraph (2) of section 904(d) is amended by inserting at the end thereof the following: "For purposes of this subsection, interest (after the operation of section 904(d)(3)) received from a designated payor corporation described in section 904(d)(3)(E)(iii) by a taxpayer which owns directly or indirectly less than 10 percent of the voting stock of such designated payor corporation shall be treated as interest described in subparagraph (A) to the extent such interest would have been so treated had such taxpayer received it from other than a designated payor corporation." (4) DEFINITION OF DESIGNATED PAYOR CORPORATION.—

(A) IN GENERAL.—Subparagraph (E) of section 904(d)(3) (defining designated payor corporation) is amended by striking out "and' at the end of clause (ii), by striking out the period at the end of clause (iii) and inserting in lieu thereof ', and", and by adding at the end thereof the following:

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