Page:United States Statutes at Large Volume 100 Part 3.djvu/724

 100 STAT. 2532

PUBLIC LAW 99-514—OCT. 22, 1986

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"(i) INCOME CATEGORY.—The term 'income category' means each separate category of income described in subsection (d)(1). "(ii) SEPARATE LIMITATION INCOME.—The term 'sepaj,, -.. rate limitation income' means, with respect to any income category, the taxable income from sources outside the United States, separately computed for such category, "(iii) SEPARATE LIMITATION LOSS.—The term 'separate • •'^ limitation loss' means, with respect to any income category, the loss from such category determined under the principles of section 907(c)(4)(B).'^ (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to losses incurred in taxable years beginning after December 31, 1986. SEC. 1204. FOREIGN TAXES USED TO PROVIDE SUBSIDIES. (a) TREATMENT OF CERTAIN SUBSIDIES.—Section 901 (relating to

credit for foreign taxes) is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection: "(i) TAXES USED TO PROVIDE SUBSIDIES.—Any income, war profits,

or excess profits tax shall not be treated as a tax for purposes of this title to the extent— "(1) the amount of such tax is used (directly or indirectly) by the country imposing such tax to provide a subsidy by any means to the taxpayer, a related person (within the meaning of section 482), or any party to the transaction or to a related transaction, and "(2) such subsidy is determined (directly or indirectly) by reference to the amount of such tax, or the base used to compute the amount of such tax." 0)) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to foreign taxes paid or accrued in taxable years beginning after December 31, 1986, SEC. 1205. LIMITATION ON CARRYBACK OF FOREIGN TAX CREDITS TO TAXABLE YEARS BEGINNING BEFORE 1987. (a) DETERMINATION OF EXCESS CREDITS.—

(1) IN GENERAL.—Any taxes paid or accrued in a taxable year beginning after 1986 may be treated under section 904(c) of the Internal Revenue Code of 1954 as paid or accrued in a taxable year beginning before 1987 only to the extent such taxes would be so treated if the tax imposed by chapter 1 of such Code for the taxable year beginning after 1986 were determined by applying section 1 or 11 of such Code (as the case may be) as in 1 effect on the day before the date of the enactment of this Act. (2) ADJUSTMENTS.—Under regulations prescribed by the Secretary of the Treasury or his delegate proper adjustments shall be made in the application of paragraph (1) to take into account— (A) the repeal of the zero bracket amount, and (B) the changes in the treatment of capital gains. (b) COORDINATION WITH SEPARATE BASKETS.—Any taxes paid or accrued in a taxable year beginning after 1986 which (after the application of subsection (a)) are treated as paid or accrued in a taxable year beginning before 1987 shall be treated as imposed on

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