Page:United States Statutes at Large Volume 100 Part 3.djvu/1022

 100 STAT. 2830

PUBLIC LAW 99-514—OCT. 22, 1986

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"(A) the total combined voting power of all classes of stock of such corporation entitled to vote, and bf "(B) the total value of the stock of the corporation, is held directly (or indirectly through applying paragraphs (2) f' and (3) of section 958(a) and paragraph (4) of section 318(a)) by United States persons (as defined in section 7701(a)(30))." (k) AMENDMENT RELATED TO SECTION 137 OF THE ACT.—Subsection

(e) of section 954 (defining foreign base company services income) is amended to read as follows: "(e) FOREIGN BASE COMPANY SERVICES INCOME.—

"(1) IN GENERAL.—For purposes of subsection (a)(3), the term 'foreign base company services income' means income (whether in the form of compensation, commissions, fees, or otherwise) derived in connection with the performance of technical, managerial, engineering, architectural, scientific, skilled, industrial, commercial, or like services which— "(A) are performed for or on behalf of any related person (within the meaning of subsection (d)(3)), and "(B) are performed outside the country under the laws of which the controlled foreign corporation is created or organized. "(2) EXCEPTION.—Parg^aph (1) shall not apply to income derived in connection with the performance of services which are directly related to— "(A) the sale or exchange by the controlled foreign corporation of property manufactured, produced, grown, or extracted by it and which are performed before the time of the sale or exchange, or "(B) an offer or effort to sell or exchange such property. "(3) TREATMENT OF CERTAIN INSURANCE CONTRACTS.—For purposes of paragraph (1), in the case of any services performed with respect to any policy of insurance or reinsurance with respect to which the primary insured is a related person (within the meaning of section 864(d)(4))— "(A) such primary insured shall be treated as a related person for purposes of paragraph (I)(A) (whether or not the requirements of subsection (d)(3) are met), "(B) such services shall be treated as performed in the country within which the insured hazards, risks, losses, or liabilities occur, and "(C) except as otherwise provided in regulations by the Secretary, rules similar to the rules of section 953(b) shall be applied in determining the income from such services."

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(1) AMENDMENTS RELATED TO SECTION 138 OF THE ACT.—

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(1) Clause (i) of section 7701(b)(4)(E) (relating to limitation of teachers and trednees) is amended by adding at the end thereof the following new sentence: "In the case of an individual all of whose compensation is described in section 872(b)(3), the preceding sentence shall be applied by substituting '4 calendar years' for *2 calendar years'." (2) Subparagraph (A) of section 7701(b)(l) is amended— (A) by striking out "the requirements of clause (i) or (ii)" and inserting in lieu thereof the requirements of clause (i), u. (ii), or (iii)", and (B) by adding at the end thereof the following new clause:

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(iii) FIRST YEAR ELECTION.—Such individual makes

the election provided in paragraph (4)."

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