Page:United States Statutes at Large Volume 102 Part 4.djvu/542

 102 STAT. 3512

'

PUBLIC LAW 100-647—NOV. 10, 1988 "(III) foreign base company sales income, "(IV) foreign base company services income,". (24) Clause (ii) of section 952(c)(l)(B) of the 1986 Code is amended by adding at the end thereof the following new sentence: "In determining the deficit attributable to qualified activities described in clause (iiiXIH) or (IV), deficits in earnings and profits (to the extent not previously taken into account under this section) for taxable years beginning after 1962 and before 1987 also shall be taken into account. In the case of the qualified activity described in clause (iiiXH), the rule of the preceding sentence shall apply, except that '1982' shall be substituted for '1962'." (25XA) Paragraph (1) of section 952(c) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: "(C) CERTAIN DEFICITS OF MEMBER OF THE SAME CHAIN OF

CORPORATIONS MAY BE TAKEN INTO ACCOUNT.— "(i) IN GENERAL.—A Controlled foreign corporation may elect to reduce the amount of its subpart F income for any taxable year which is attributable to any qualified activity by the amount of any deficit in earnings and profits of a qualified chain member for a taxable year ending with (or within) the taxable year of such controlled foreign corporation to the extent such deficit is attributable to such activity. To the extent any deficit reduces subpart F income under the preceding sentence, such deficit shall not be taken into account under subparagraph (B). "(ii) QuAUFiED CHAIN MEMBER.—For purposes of this subparagraph, the term 'qualified chain member' means, with respect to any controlled foreign corporation, any other corporation which is created or organized under the laws of the same foreign country as the controlled foreign corporation but only if— "(I) all the stock of such other corporation (other than directors' qualifying shares) is owned at all times during the taxable year in which the deficit arose (directly or through 1 or more corporations other than the common parent) by such controlled foreign corporation, or "(II) all the stock of such controlled foreign corporation (other than directors' qualifying shares) is owned at all times during the taxable year in which the deficit arose (directly or through 1 or more corporations other th£m the common parent) by such other corporation, "(iii) CooRDiNATiON.—This subparagraph shall be applieid after subparagraphs (A) and (B). (B) Subparagraph (B) of section 954(c)(3) of the 1986 Code is amended by inserting before the period at the end thereof the following: "or creates (or increases) a deficit which under section 952(c) may reduce the subpart F income of the payor or another controlled foreign corporation", (j) AMENDMENT RELATED TO SECTION 1224 OF THE REFORM ACT.—

Paragraph (2) of section 901(g) of the 1986 Code and section 936(d)(3)(B) of the 1986 Code are each amended by striking out "section 957(c)" and inserting in lieu thereof "section 957(c) (as in

�