Page:United States Statutes at Large Volume 111 Part 1.djvu/1016

 Ill STAT. 992 PUBLIC LAW 105-34—AUG. 5, 1997 is calculated in the same manner as the Federal midterm rate under section 1274(d). "(B) FOREIGN METHOD.— A preliminary term method, except that the interest rate used shall be the interest rate determined for the foreign country in which such company is created or organized and which is calculated in the same manner as the Federal mid-term rate under section 1274(d). If a qualifying insurance company uses such a preliminary term method with respect to contracts insuring risks located in such foreign country, such method shall apply if such company elects the method under this clause. "(C) CASH SURRENDER VALUE. — A method under which reserves are equal to the net surrender value (as defined in section 807(e)(1)(A)) of the contract. "(6) DEFINITIONS.— For purposes of this subsection— " (A) TERMS RELATING TO INSURANCE COMPANIES.— "(i) QUALIFYING INSURANCE COMPANY.—The term 'qualifying insurance company* means any entity which— "(I) is subject to regulation as an insurance company under the laws of its country of incorporation, "(II) realizes at least 50 percent of its net written premiums from the insurance or reinsurance of risks located within the country in which such entity is created or organized, and "(III) is engaged in the active conduct of an insurance business and would be subject to tax under subchapter L if it were a domestic corporation. "(ii) START-UP COMPANY. — ^A qualifying insurance company shall be treated as a start-up company if such company (and any predecessor) has not been engaged in the active conduct of an insurance business for more than 5 years as of the beginning of the taxable year of such company. "(B) LOCATED.— For purposes of paragraph (3)(A)— "(i) IN GENERAL. — A person shall be treated as located— "(I) except as provided in subclause (II), within the country in which it maintains an office or other fixed place of business through which it engages in a trade or business and by which the transaction is effected, or "(II) in the case of a natural person, within the country in which such person is physically located when such person enters into a transaction, " (ii) SPECIAL RULE FOR QUALIFIED BUSINESS UNITS. —Gross income derived by a corporation's qualified business unit (within the meaning of section 989(a)) from transactions with persons which are not related persons (as defined in subsection (d)(3)) and which are located in the country in which the qualified business unit both maintains its principal office and conducts substantial business activity shall be treated as derived from transactions with persons which are

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