Page:United States Statutes at Large Volume 100 Part 3.djvu/1032

 100 STAT. 2840

PUBLIC LAW 99-514—OCT. 22, 1986 holder dividends determined under section 808 (without regard to section 808(c)(2)),".

(g) DIFFERENTIAL EARNINGS RATE WHICH MAY B E USED FOR PURPOSES OF ESTIMATED TAX PAYMENTS.—Subsection (c) of section 809

(defining differential earnings rate) is amended by adding at the end thereof the following new paragraph: "(3) COORDINATION WITH ESTIMATED TAX PAYMENTS.—For purposes of applying section 6655 with respect to any installment of estimated tax, the amount of tax shall be determined by using the lesser of— "(A) the differential earnings rate of the second tax year preceding the taxable year for which the installment is made, or "(B) the differential earnings rate for the taxable year for which the installment is made." (h) RECOMPUTATION OF DIFFERENTIAL EARNINGS AMOUNT NOT TAKEN INTO ACCOUNT FOR PURPOSES OF ESTIMATED TAX.—Subsection

(f) of section 809 (relating to recomputation in subsequent year) is amended by adding at the end thereof the following new paragraph: "(5) SUBSECTION NOT TO APPLY FOR PURPOSES OF ESTIMATED

TAX.—Section 6655 shall be applied to any taxable year without regard to any adjustments under this subsection for such year." (i) AMENDMENTS RELATED TO PRORATION FORMULAS.—

(1) Paragraph (2) of section 812(b) is amended— (A) by striking out "the prevailing State assumed rate" in subparagraph (A) and inserting in lieu thereof "the prevailing State assumed rate or, where such rate is not used, another appropriate rate", (B) by striking out "and" at the end of subparagraph (B), (C) by striking out the period at the end of subparagraph (C) and inserting in lieu thereof ", and", and (D) by adding at the end thereof the following new subparagraph: "(D) interest on amounts left on deposit with the company." (2) Subparagraph (B) of section 8120t>)(3) (relating to gross investment income's proportionate share of policyholder dividends) is amended— (A) by striking out "(including tax-exempt interest)" in clause (ii), and (B) by adding at the end thereof the following new sentence: "For purposes of subparagraph (B)(ii), life insurance gross income shall be determined by including tax-exempt interest and by applying section 807(a)(2)(B) as if it did not contain clause (i) thereof." (3) Subsection (c) of section 812 (defining net investment income) is amended to read as follows: "(c) N E T INVESTMENT INCOME.—For purposes of this section, the term 'net investment income' means— "(1) except as provided in paragraph (2), 90 percent of gross investment income; or "(2) in the case of gross investment income attributable to assets held in segregated asset accounts under variable contracts, 95 percent of gross investment income." (4) Section 812 is amended by adding at the end thereof the following new subsection:

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