Page:United States Statutes at Large Volume 102 Part 4.djvu/705

 PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3675

"(i) CLOSELY HELD PASS-THRU ENTITIES.—This paragraph shall not apply to any closely held pass-thru entity. "(ii) FOREIGN CONTRACTS.—This paragraph shall not apply to any contract unless substantially all of the income from such contract is from sources in the United States. "(C) OTHER DEFINITIONS.—For purposes of this paragraph— "(i) HIGHEST RATE.—The term 'highest rate' means— "(I) the highest rate of tax specified in section 11, or "(II) if at all times during the year involved more than 50 percent of thfe interests in the entity are held by individuals directly or through 1 or more other pass-thru entities, the highest rate of tax specified in section 1. "(ii) PASS-THRU ENTITY.—The term 'pass-thru entity' means any— "(I) partnership, "(II) S corporation, or "(III) trust, "(iii) CLOSELY HELD PASS-THRU ENTITY.—The term 'closely held pass-thru entity' means any pass-thru entity if, at any time during any taxable year for which there is income under the contract, 50 percent or more (by value) of the beneficial interests in such entity are held (directly or indirectly) by or for 5 or fewer persons. For purposes of the preceding sentence, rules similar to the constructive ownership rules of section 1563(e) shall apply" (e) EFFECTIVE DATES.— (1) SUBSECTIONS (a), (b), AND (C).—

(A) IN GENERAL.—Except as otherwise provided in this paragraph, the amendments made by subsections (a), (b), and (c) shall apply to contracts entered into on or after June 21, 1988. (B) BINDING BIDS.—The amendments made by subsections (a), (b), and (c) shall not apply to any contract resulting from the accept^ce of a bid made before June 21, 1988. The preceding sentence shall apply only if the bid could not have been revoked or altered at any time on or after June 21, 1988. (C)

SPECIAL RULE FOR CERTAIN SHIP CONTRACTS.—The

amendments made by subsections (a), (b), and (c) shall not apply in the case of a qualified ship contract (as defined in section 10203flk)X2XB) of the Revenue Act of 1987). (2) SUBSECTION (d).—The amendment made by subsection (d) shall apply as if included in the amendments made by section 804 of the Reform Act; except that such amendment shall not apply to any contract completed in a taxable year ending before the date of the enactment of this Act, if the due date (determined with regard to extensions) for the return for such year is before such date of enactment. (d) STUDY.—The Secretary of the Treasury or his delegate shall conduct a study of the revenue realization method of accounting for long-term contracts and of improvements to the percentage of

26 USC 460 note.

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