Page:United States Statutes at Large Volume 100 Part 3.djvu/744

 100 STAT. 2552

PUBLIC LAW 99-514—OCT. 22, 1986

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is owned (directly or indirectly under the principles of section 883(c)(4)) by persons who are the primary insured under any policy of insurance or reinsurance issued by such corporation or who are related persons (within the meaning of section 954(d)(3)) to any such primary insured. "(B) D E MINIMIS EXCEPTION.—Paragraph (1) shall not apply to any foreign corporation for a taxable year of such corporation if the related person insurance income of such corporation for such taxable year is less than 20 percent of its insurance income for such taxable year determined without regard to those provisions of subsection (a)(1) which limit insurance income to income from countries other than the country in which the corporation was created or organized. "(C)

ELECTION TO TREAT INCOME AS EFFECTIVELY CON-

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NECTED.—Paragraph (1) shall not apply to any foreign corporation for any taxable year if— "(i) such corporation elects (at such time and in such manner as the Secretary may prescribe)— - '^ • > "(I) to treat its related person insurance income for such taxable year as income effectively con* c nected with the conduct of a trade or business in the United States, and b'i "(II) to waive all benefits with respect to related person insurance income under any income tax t-i treaty between the United States and any foreign • -:: i. > country, and "(ii) such corporation meets such requirements as the Secretary shall prescribe to ensure that the tax im> posed by this chapter on such income is paid. "(D) SPECIAL RULES FOR SUBPARAGRAPH (C).— "(i) ELECTION IRREVOCABLE.—Any election

- '^•< under which made and all subsequent taxable years unless revoked with the consent of the Secretary. (ii) EXEMPTION FROM TAX IMPOSED BY SECTION 4371.— The tax imposed by section 4371 shall not apply with respect to any related person insurance income treated as effectively connected with the conduct of a trade or business within the United States under subparagraph (C). '
 * •. 'M V subparagraph (C) shall apply to the taxable year for

"(4) TREATMENT OF MUTUAL INSURANCE COMPANIES.—In

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case of a mutual insurance company— -» " "(A) this subsection shall apply, "(B) policyholders of such company shall be treated as f shareholders, and j'»' "(C) appropriate adjustments in the application of this subpart shall be made under regulations prescribed by the Secretary. "(5) REGULATIONS.—The Secretary shall prescribe such regu" lations as may be necessary to carry out the purposes of this subsection, including regulations preventing the^ avoidance of >. this subsection through cross insurance arrangements or otherwise." (3) CONFORMING AMENDMENTS.—

(A) Paragraph (1) of section 952(a) (defining subpart F income) is amended to read as follows:

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