Page:United States Statutes at Large Volume 111 Part 1.djvu/1015

 PUBLIC LAW 105-34—AUG. 5, 1997 111 STAT. 991 "(ii) in the case of other contracts, income not allocable under clause (i) shall be allocated ratably among such contracts. "(C) LOOK-THRU RULES. — The Secretary shall prescribe Regulations. regulations consistent with the principles of section 904(d)(3) which provide that dividends, interest, income equivalent to interest, rents, or royalties received or accrued from a related person (within the meaning of subsection (d)(3)) shall be subject to look-thru treatment for purposes of this subsection. "(3) PREDOMINANTLY ENGAGED.—For purposes of paragraph (1)(A), a corporation shall be deemed predominantly engaged in the active conduct of a bsuiking, financing, or similar business only if— "(A) more than 70 percent of its gross income is derived from such business from transactions with persons which are not related persons (as defined in subsection (d)(3)) and which are located within the country under the laws of which the controlled foreign corporation is created or organized, or "(B) the corporation is— "(i) engaged in the active conduct of a banking or securities business (within the meaning of section 1296(b), as in effect before the enactment of the Taxpayer Relief Act of 1997), or "(ii) a qualified bank affiliate or a qualified securities affiliate (within the meaning of the proposed regulations under such section 1296(b)). "(4) METHODS FOR DETERMINING UNEARNED PREMIUMS AND RESERVES.— For purposes of paragraph (1)(B)— "(A) PROPERTY AND CASUALTY CONTRACTS. —The unearned premiums and reserves of a qualifying insurance company with respect to property, casualty, or health insurance contracts shall be determined using the same methods and interest rates which would be used if such company were subject to tax under subchapter L. " (B) LIFE INSURANCE AND ANNUITY CONTRACTS. — The reserves of a qualifying insurance company with respect to life insurance or annuity contracts shall be determined under the method described in paragraph (5) which such company elects to apply for purposes of this paragraph. Such election shall be made at such time and in such manner as the Secretary may prescribe and, once made, shall be irrevocable without the consent of the Secretary. "(C) LIMITATION ON RESERVES.—In no event shall the reserve determined under this paragraph for any contract as of any time exceed the amount which would be taken into account with respect to such contract as of such time in determining foreign annual statement reserves (less any catastrophe or deficiency reserves). "(5) METHODS. — The methods described in this paragraph are as follows: " (A) U.S. METHOD.— The method which would apply if the qualifying insurance company were subject to tax under subchapter L, except that the interest rate used shall be an interest rate determined for the foreign country in which such company is created or organized and which

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