Page:United States Statutes at Large Volume 118.djvu/1524

 118 STAT. 1494 PUBLIC LAW 108–357—OCT. 22, 2004 (4) Section 904(d)(2)(E) is amended— (A) by inserting ‘‘or (4)’’ after ‘‘paragraph (3)’’ in clause (i), and (B) by striking clauses (ii) and (iv) and by redesignating clause (iii) as clause (ii). (5) Section 904(d)(3)(F) is amended by striking ‘‘(D), or (E)’’ and inserting ‘‘or (D)’’. (6) Section 864(d)(5)(A)(i) is amended by striking ‘‘(C)(iii)(III)’’ and inserting ‘‘(C)(iii)(II)’’. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2002. SEC. 404. REDUCTION TO 2 FOREIGN TAX CREDIT BASKETS. (a) IN GENERAL.—Paragraph (1) of section 904(d) (relating to separate application of section with respect to certain categories of income) is amended to read as follows: ‘‘(1) IN GENERAL.—The provisions of subsections (a), (b), and (c) and sections 902, 907, and 960 shall be applied sepa rately with respect to— ‘‘(A) passive category income, and ‘‘(B) general category income.’’. (b) CATEGORIES.—Paragraph (2) of section 904(d) is amended by striking subparagraph (B), by redesignating subparagraph (A) as subparagraph (B), and by inserting before subparagraph (B) (as so redesignated) the following new subparagraph: ‘‘(A) CATEGORIES.— ‘‘(i) PASSIVE CATEGORY INCOME.—The term ‘passive category income’ means passive income and specified passive category income. ‘‘(ii) GENERAL CATEGORY INCOME.—The term ‘gen eral category income’ means income other than passive category income.’’. (c) SPECIFIED PASSIVE CATEGORY INCOME.—Subparagraph (B) of section 904(d)(2), as so redesignated, is amended by adding at the end the following new clause: ‘‘(v) SPECIFIED PASSIVE CATEGORY INCOME.—The term ‘specified passive category income’ means— ‘‘(I) dividends from a DISC or former DISC (as defined in section 992(a)) to the extent such dividends are treated as income from sources with out the United States, ‘‘(II) taxable income attributable to foreign trade income (within the meaning of section 923(b)), and ‘‘(III) distributions from a FSC (or a former FSC) out of earnings and profits attributable to foreign trade income (within the meaning of sec tion 923(b)) or interest or carrying charges (as defined in section 927(d)(1)) derived from a trans action which results in foreign trade income (as defined in section 923(b)).’’. (d) TREATMENT OF FINANCIAL SERVICES.—Paragraph (2) of sec tion 904(d), as amended by section 403(b)(3), is amended by striking subparagraph (D), by redesignating subparagraph (C) as subpara graph (D), and by inserting before subparagraph (D) (as so redesig nated) the following new subparagraph: Applicability. 26 USC 864 note.

�