Page:United States Statutes at Large Volume 118.djvu/1527

 118 STAT. 1497 PUBLIC LAW 108–357—OCT. 22, 2004 ‘‘(i) In determining whether any income of a con trolled foreign corporation is passive category income, subclause (II) of paragraph (2)(B)(iii) shall not apply. ‘‘(ii) Any income of the taxpayer which is treated as passive category income under this paragraph shall be so treated notwithstanding any provision of para graph (2); except that the determination of whether any amount is high taxed income shall be made after the application of this paragraph. ‘‘(G) DIVIDEND.—For purposes of this paragraph, the term ‘dividend’ includes any amount included in gross income in section 951(a)(1)(B). Any amount included in gross income under section 78 to the extent attributable to amounts included in gross income in section 951(a)(1)(A) shall not be treated as a dividend but shall be treated as included in gross income under section 951(a)(1)(A). ‘‘(H) LOOK THRU APPLIES TO PASSIVE FOREIGN INVEST MENT COMPANY INCLUSION.—If— ‘‘(i) a passive foreign investment company is a controlled foreign corporation, and ‘‘(ii) the taxpayer is a United States shareholder in such controlled foreign corporation, any amount included in gross income under section 1293 shall be treated as income in a separate category to the extent such amount is attributable to income in such cat egory.’’. (5) Paragraph (2) of section 904(d) is amended by adding at the end the following new subparagraph: ‘‘(K) TRANSITIONAL RULES FOR 2007 CHANGES.—For pur poses of paragraph (1)— ‘‘(i) taxes carried from any taxable year beginning before January 1, 2007, to any taxable year beginning on or after such date, with respect to any item of income, shall be treated as described in the subpara graph of paragraph (1) in which such income would be described were such taxes paid or accrued in a taxable year beginning on or after such date, and ‘‘(ii) the Secretary may by regulations provide for the allocation of any carryback of taxes with respect to income from a taxable year beginning on or after January 1, 2007, to a taxable year beginning before such date for purposes of allocating such income among the separate categories in effect for the taxable year to which carried.’’. (6) Section 904(j)(3)(A)(i) is amended by striking ‘‘subsection (d)(2)(A)’’ and inserting ‘‘subsection (d)(2)(B)’’. (g) EFFECTIVE DATES.— (1) IN GENERAL.—The amendments made by this section shall apply to taxable years beginning after December 31, 2006. (2) TRANSITIONAL RULE RELATING TO INCOME TAX BASE DIF FERENCE.—Section 904(d)(2)(H)(ii) of the Internal Revenue Code of 1986, as added by subsection (e), shall apply to taxable years beginning after December 31, 2004. 26 USC 904 note.

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