Page:United States Statutes at Large Volume 100 Part 3.djvu/584

 100 STAT. 2392

PUBLIC LAW 99-514—OCT. 22, 1986 "(B) SPECIAL RULE.—The adjusted surplus as of the beginning of the organization's 1st taxable year beginning after December 31, 1986, shall be its surplus as of such time. For purposes of the preceding sentence and subsection (c)(3)(C), the term 'surplus' means the excess of the total assets over total liabilities as shown on the annual statement. "(C) ADJUSTED TAXABLE INCOME.—The term 'adjusted taxable income' means taxable income determined— "(i) without regard to the deduction determined under this subsection, "(ii) without regard to any carr3rforward or carryback to such taxable year, and "(iii) by increasing gross income by an amount equal to the net exempt income for the taxable year. "(D) ADJUSTED NET OPERATING LOSS.—The term 'adjusted net operating loss' means the net operating loss for any taxable year determined with the adjustments set forth in subparagraph (C). "(E) NET EXEMPT INCOME.—The term 'net exempt income' means— "(i) any tax-exempt interest received or accrued during the taxable year, reduced by any amount (not otherwise deductible) which would have been allowable as a deduction for the taxable year if such interest were not tax-exempt, and "(ii) the aggregate amount allowed as a deduction for the taxable year under sections 243, 244, and 245. The amount determined under clause (ii) shall be reduced by the amount of any decrease in deductions allowable for the taxable year by reason of section 832(b)(5)(B) to the extent such decrease is attributable to deductions under sections 243, 244, and 245. "(4) ONLY HEALTH-RELATED ITEMS TAKEN INTO ACCOUNT.—Any

determination under this subsection shall be made by only taking into account items attributable to the health-related business of the taxpayer. "(c) ORGANIZATIONS TO WHICH SECTION APPLIES.—

"(1) IN GENERAL.—This section shall apply to— "(A) any existing Blue Cross or Blue Shield organization, and "(B) any other organization meeting the requirements of paragraph (3). "(2) EXISTING BLUE CROSS OR BLUE SHIELD ORGANIZATION.—The

term 'existing Blue Cross or Blue Shield organization' means any Blue Cross or Blue Shield organization if— "(A) such organization was in existence on August 16, 1986, "(B) such organization is determined to be exempt from tax for its last taxable year beginning before January 1, 1987, and "(C) no material change has occurred in the operations of such organization or in its structure after August 16, 1986, and before the close of the taxable year. To the extent permitted by the Secretary, any successor to an organization meeting the requirements of the preceding sentence, and any organization resulting from the merger or consolidation of organizations each of which met such require-

�