Page:United States Statutes at Large Volume 100 Part 3.djvu/743

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2551

by striking out clauses (iii) and (iv) and inserting in lieu thereof the following: "(iii) Subparagraph (B) of section 954(c)(2) (relating to certain export financing). "(iv) Clause (i) of section 954(c)(3)(A) (relating to certain income received from related persons)." (b) DEFINITION OF INSURANCE INCOME.—

(1) IN GENERAL.—Subsection (a) of section 953 (defining income derived from the insurance of United States risks) is amended to read as follows: "(a) GENERAL RULE.—For purposes of section 952(a)(l), the term 'insurance income' means any income which— "(1) is attributable to the issuing (or reinsuring) of any insurance or annuity contract— "(A) in connection with property in, liability arising out of activity in, or in connection with the lives or health of residents of, a country other than the country under the If/ laws of which the controlled foreign corporation is created or organized, or "(B) in connection with risks not described in subparagraph (A) as the result of any arrangement whereby another corporation receives a substantially equal amount of premiums or other consideration in respect of issuing (or reinsuring) a contract described in subparagraph (A), and "(2) would (subject to the modifications provided by paragraphs (1) and (2) of subsection (b)) be taxed under subchapter L of this chapter if such income were the income of a domestic insurance company." (2) SPECIAL RULE FOR CERTAIN CAPTIVE INSURANCE COMPA-

NIES.—Section 953 is amended by adding at the end thereof the following new subsection: "(c) SPECIAL RULE FOR CERTAIN CAPTIVE INSURANCE COMPANIES.—

"(1) IN GENERAL.—For purposes only of taking into account «„. related person insurance income— "(A) the term 'United States shareholder' means, with respect to any foreign corporation, a United States person (as defined in section 957(c)) who owns (within the meaning of section 958(a)) any stock of the foreign corporation, and "(B) the term 'controlled foreign corporation' has the meaning given to such term by section 957(a) determined by substituting '25 percent or more' for 'more than 50 percent. lu; "(2) RELATED PERSON INSURANCE INCOME.—For purposes of this subsection, the term 'related person insurance income' means any insurance income attributable to a policy of insur.-. ance or reinsurance with respect to which the primary insured is a United States shareholder in the foreign corporation or a related person (within the meaning of section 954(d)(3)) to such a shareholder. "(3) EXCEPTIONS.— "(A) CORPORATIONS NOT HELD BY INSUREDS.—Paragraph

(1) shall not apply to any foreign corporation if at all times during the taxable year of such foreign corporation— "(i) less than 20 percent of the total combined voting power of all classes of stock of such corporation entitled to vote, and i V •; "(ii) less than 20 percent of the total value of such corporation,

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