Page:United States Statutes at Large Volume 100 Part 3.djvu/737

 PUBLIC LAW 99-514—OCT. 22, 1986 Bl

100 STAT. 2545

applying such section separately to corporations so described. "(C) DESCRIPTION.—A corporation is described in this subparagraph if— "(i) such corporation is a financial institution described in section 581 or 591, "(ii) the business of such financial institution is predominantly with persons other than related persons (within the meaning of subsection (d)(4)) or their customers, and "(iii) such financial institution is required by State or Federal law to be operated separately from any other entity which is not such an institution. "(6) ALLOCATION AND APPORTIONMENT OF OTHER EXPENSES.—

Expenses other than interest which are not directly allocable and apportioned to any specific income producing activity shall be allocated and apportioned as if all members of the affiliated group were a single corporation. "(7) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations providing— "(A) for the resourcing of income of any member of an affiliated group or modifications to the consolidated return regulations to the extent such resourcing or modification is necessary to carry out the purposes of this section, "(B) for direct allocation of interest expense incurred to carry out an integrated financial transaction to any interest (or interest-type income) derived from such transaction, and "(C) for the apportionment of expenses allocated to for/' eign source income among the members of the affiliated ':•: group and various categories of income described in section 904(d)(1)." (b) CLERICAL AMENDMENTS.—

(1) The section heading for section 864 is amended to read as follows: SEC. 864. DEFINITIONS AND SPECIAL RULES."

(2) The table of sections for part I of subchapter N of chapter 1 is amended by striking out the item relating to section 864 and inserting in lieu thereof the following: "Sec. 864. Definitions and special rules." (c) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 1986. (2) TRANSITIONAL RULES.— (A) GENERAL PHASE-IN.—Except as provided in subpara-

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graph (B), in the case of the 1st 3 taxable years of the taxpayer beginning after December 31, 1986, the amendments made by this section shall apply only to the applicable percentage (determined under the following table) of the interest expenses paid or accrued by the taxpayer during the taxable year with respect to an aggregate amount of indebtedness which does not exceed the aggre-

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