Page:United States Statutes at Large Volume 100 Part 3.djvu/483

 PUBLIC LAW 99-514—OCT. 22, 1986 '

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100 STAT. 2291

"(ii) the dividends considered as paid on the last day of the taxable year under section 563(c) (as limited by the second sentence of section 563(b)), and "(iii) the consent dividends for the taxable year (determined under section 565), equals or exceeds the amount, if any, by which the personal holding company income for the taxable year exceeds 10 percent of the ordinary gross income of such corporation for such taxable year. "(B)

COMPUTATION

OF PERSONAL

HOLDING

COMPANY

INCOME.—For purposes of this paragraph, personal holding company income shall be computed— "(i) without regard to amounts described in subsection (a)(1)(C), "(ii) without regard to interest income during any ^'*" taxable year— .„ "(I) which is in the 5-taxable year period beginning with the later of the 1st taxable year of the corporation or the 1st taxable year in which the corporation conducted the trade or business described in paragraph (2)(A), and "(II) during which the corporation meets the requirements of paragraphs (2), (3), and (4), and .,, „^ "(iii) by including adjusted income from rents and adjusted income from mineral, oil, and gas royalties (within the meaning of paragraphs (2) and (3) of subsection (a)). "(6) SPECIAL RULES FOR AFFILIATED GROUP MEMBERS.—

"(A) IN GENERAL.—In any case in which— "(i) the taxpayer receives royalties in connection with the licensing of computer software, and "(ii) another corporation which is a member of the same affiliated group as the taxpayer meets the requirements of paragraphs (2), (3), (4), and (5) with respect to such computer software, the taxpayer shall be treated as having met such requirements. "(B) AFFILIATED GROUP.—For purposes of this paragraph, the term 'affiliated group' has the meaning given such term by section 1504(a)." (3) FOREIGN PERSONAL HOLDING COMPANY INCOME.—Paragraph

(1) of section 553(a) (defining foreign personal holding company income) is amended by adding at the end thereof the following new sentence: "This paragraph shall not apply to active business computer software royalties (as defined in section 543(d))." (4) CONFORMING AMENDMENTS.—

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(A) Section 543(a)(4) (relating to copyright royalties) is amended by adding at the end thereof the following new sentence: "This paragraph shall not apply to active business computer software royalties.". (B) Section 543(b)(3) (relating to adjusted income from rents) is amended— (i) by striking out "or" at the end of subparagraph (C), (ii) by striking out the period at the end of subparagraph (D) and inserting in lieu thereof ", or", and

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