Page:United States Statutes at Large Volume 100 Part 3.djvu/758

 100 STAT. 2566

PUBLIC I^AW 99-514—OCT. 22, 1986 (3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to applications submitted after December 81, 1987 (or, if earlier, the effective date which shall not be earlier than January 1, 1987) of the initial regulations issued under section 6039E of the Internal Revenue Code of 1986 as added by this subsection),

(b) WITHHOLDING ON CERTAIN DEFERRED PAYMENTS OUTSIDE THE UNITED STATES.—

(1) IN GENERAL.—Subsection (d) of section 3405 (relating to definitions and special rules) is amended by adding at the end thereof the following new paragraph: "(13) ELECTION MAY NOT BE MADE WITH RESPECT TO CERTAIN PAYMENTS OUTSIDE THE UNITED STATES.—

"(A) IN GENERAL.—Except as provided in subparagraph (B), in the case of any periodic payment or nonperiodic distribution which is to be delivered outside of the United ""^ States, no election may be made under subsection (a)(2) or . ^ (b)(3) with respect to such payment. ,'sw"(g) EXCEPTION.—Subparagraph (A) shall not apply if the recipient certifies to the payor, in such manner as the ^.. "'•:•' Secretary may prescribe, that such person is not— ^•''' "(i) a United States citizen who is a bona fide resident of a foreign country, or ^*^"(ii) an individual to whom section 877 applies." (2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to payments after December 31, 1986. SEC. 1235. TREATMENT OF CERTAIN PASSIVE FOREIGN INVESTMENT COMPANIES.

(a) GENERAL RULE.—Subchapter P of chapter 1 is amended by adding at the end thereof the following new part: "PART VI—TREATMENT OF CERTAIN PASSIVE FOREIGN INVESTMENT COMPANIES "Subpart A. Interest on tax deferral. "Subpart B. Treatment of qualified electing funds. "Subpart C. General provisions.

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"Subpart A—Interest on Tax Deferral "Sec. 1291. Interest on tax deferral.

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"SEC. 1291. INTEREST ON TAX DEFERRAL. "(a) TREATMENT OF DISTRIBUTIONS AND STOCK DISPOSITIONS.—

"(1) DISTRIBUTIONS.—If a United States person receives an excess distribution in respect of stock in a passive foreign investment company, then— "(A) the amount of the excess distribution shall be allocated ratably to each day in the taxpayer's holding period for the stock, "(B) with respect to such excess distribution, the taxpayer's gross income for the current year shall include (as ordinary income) only the amounts allocated under subparagraph (A) to— "(i) the current year, or • • •.'. >. "(ii) any period in the taxpayer's holding period before the 1st day of the 1st taxable year of the com-

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