Page:United States Statutes at Large Volume 100 Part 3.djvu/787

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2595

(12) The table of sections for subpart D of part III of subchapter N of chapter 1 is amended by striking out the items relating to sections 932 and 935 and by striking out the item relating to section 931 and inserting in lieu thereof the following: "Sec. 931. Income from sources within Guam, American Samoa, or the Northern Mariana Islands."

(13) The table of sections for subpart A of part II of subchapter N of chapter 1 is amended by striking out the item relating to section 876 and inserting in lieu thereof the follow' ing: "Sec. 876. Alien residents of Puerto Rico, Guam, American Samoa, or the Northern Mariana Islands." SEC. 1273. TREATMENT OF CORPORATIONS ORGANIZED IN GUAM, AMERICAN SAMOA, OR THE NORTHERN MARIANA ISLANDS.

(a) TREATMENT UNDER SUBPART F.—Subsection (c) of section 957 (relating to controlled foreign corporations; United States persons), as amended by section 1224, is amended by adding "and" at the end of paragraph (1) and by striking out paragraphs (2) and (3) and inserting in lieu thereof the following new paragraph: "(2) with respect to a corporation organized under the laws of Guam, American Samoa, or the Northern Mariana Islands— "(A) 80 percent or more of the gross income of which for the 3-year period ending at the close of the taxable year (or for such part of such period as such corporation or any 15'C,: ' predecessor has been in existence) was derived from sources v; • within such a possession or was effectively connected with the conduct of a trade or business in such a possession, and "(B) 50 percent or more of the gross income of which for such period (or part) was derived from the conduct of an active trade or business within such a possession, such term does not include an individual who is a bona fide J'' resident of Guam, American Samoa, or the Northern Mariana Islands. For purposes of subparagraphs (A) and (B) of paragraph (2), the determination as to whether income was derived from sources within a possession, was effectively connected with the conduct of a trade or business within a possession, or derived from the active conduct of a trade or business within a possession shall be made under regulations prescribed by the Secretary." (b) EXEMPTION FROM WITHHOLDING.—

(1) IN GENERAL.—Subsection (b) of section 881 (relating to exception for certain Guam and Virgin Islands corporations) is amended by striking out paragraphs (1) and (2) and inserting in
 * lieu thereof the following:

"(1) IN GENERAL.—For purposes of this section and section ^i 884, a corporation created or organized in Guam, American Samoa, the Northern Mariana Islands, or the Virgin Islands or under the law of any such possession shall not be treated as a foreign corporation for any taxable year if— .,. "(A) at all times during such taxable year less than 25 percent in value of the stock of such corporation is beneficially owned (directly or indirectly) by foreign persons, "(B) at least 65 percent of the gross income of such corporation is shown to the satisfaction of the Secretary to

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