Page:United States Statutes at Large Volume 102 Part 4.djvu/567

 PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3537

(9) CLARIFICATION OF DIVIDENDS RECEIVED DEDUCTION FOR DIVIDENDS FROM A FSC.—

(A) Subsection (c) of section 245 of the 1986 Code is amended to read as follows: "(c) CERTAIN DIVIDENDS RECEIVED FROM FSC— "(1) IN GENERAL.—In the case of a domestic corporation, there shall be allowed as a deduction an amount equal to— "(A) 100 percent of any dividend received from another corporation which is distributed out of earnings and profits attributable to foreign trade income for a period during which such other corporation was a FSC, and "(B) 70 percent (80 percent in the case of dividends from a 20-percent owned corporation as defined in section 243(c)(2)) of any dividend received from another corporation which is distributed out of earnings and profits attributable to effectively connected income received or accrued by such other corporation while such other corporation was a FSC. "(2) EXCEPTION FOR CERTAIN DIVIDENDS.—Paragraph (1) shall not apply to any dividend which is distributed out of earnings and profits attributable to foreign trade income which— "(A) is section 923(a)(2) nonexempt income (within the meaning of section 927(d)(6)), or "(B) would not, but for section 923(a)(4), be treated as exempt foreign trade income. "(3) No DEDUCTION UNDER SUBSECTION (a) OR (b).—No deduction shall be allowable under subsection (a) or (b) with respect to any dividend which is distributed out of earnings and profits of a corporation accumulated while such corporation was a FSC. "(4) DEFINITIONS.—For purposes of this subsection— "(A)

FOREIGN TRADE INCOME; EXEMPT FOREIGN TRADE

INCOME.—The terms 'foreign trade income' and 'exempt foreign trade income' have the respective meanings given such terms by section 923. "(B) EFFECTIVELY CONNECTED INCOME.—The term 'effectively connected income' means any income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States and is subject to tax under this chapter. Such term shall not include any foreign trade income." (B) The amendment made by subparagraph (A) shall 26 USC 245 note. apply as if included in the provision of the Tax Reform Act of 1984 to which it relates. SEC. 1013. AMENDMENTS RELATED TO TITLE XIII OP THE REFORM ACT. (a) AMENDMENTS RELATED TO SECTION 1301 OF THE REFORM ACT.—

(1) Clause (iii) of section 142(d)(4)(B) of the 1986 Code is amended by striking out "average rent" and inserting in lieu thereof "average gross rent". (2) Clause (iii) of section 143(a)(2)(A) of the 1986 Code is amended by striking out "no bond which is part of such issue meets" and inserting in lieu thereof "such issue does not meet". (3) Paragraph (4) of section 143(b) of the 1986 Ckxie is amended by inserting "is part of an issue which" after "which". (4)(A) Clause (ii) of section 144(a)(12XA) of the 1986 Code is amended by inserting "(or series of bonds)" before "issued to refund".

�