Page:United States Statutes at Large Volume 124.djvu/2426

 124 STAT. 2400 PUBLIC LAW 111–226—AUG. 10, 2010 ‘‘(i) be subject to tax under this chapter for the taxable year in which the dividends arise, nor ‘‘(ii) be includible in the earnings and profits of a controlled foreign corporation (as defined in section 957 and without regard to section 953(c)).’’. (b) EFFECTIVE DATE.—The amendments made by this section shall apply to acquisitions after the date of the enactment of this Act. MODIFICATION OF AFFILIATION RULES FOR PURPOSES OF RULES ALLOCATING INTEREST EXPENSE SEC. 216. (a) IN GENERAL.—Subparagraph (A) of section 864(e)(5) of the Internal Revenue Code of 1986 is amended by adding at the end the following: ‘‘Notwithstanding the preceding sentence, a foreign corporation shall be treated as a member of the affiliated group if— ‘‘(i) more than 50 percent of the gross income of such foreign corporation for the taxable year is effec- tively connected with the conduct of a trade or business within the United States, and ‘‘(ii) at least 80 percent of either the vote or value of all outstanding stock of such foreign corporation is owned directly or indirectly by members of the affili- ated group (determined with regard to this sentence).’’. (b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable years beginning after the date of the enact- ment of this Act. TERMINATION OF SPECIAL RULES FOR INTEREST AND DIVIDENDS RE- CEIVED FROM PERSONS MEETING THE 80-PERCENT FOREIGN BUSI- NESS REQUIREMENTS SEC. 217. (a) IN GENERAL.—Paragraph (1) of section 861(a) of the Internal Revenue Code of 1986 is amended by striking subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively. (b) GRANDFATHER RULE WITH RESPECT TO WITHHOLDING ON INTEREST AND DIVIDENDS RECEIVED FROM PERSONS MEETING THE 80-PERCENT FOREIGN BUSINESS REQUIREMENTS.— (1) IN GENERAL.—Subparagraph (B) of section 871(i)(2) of the Internal Revenue Code of 1986 is amended to read as follows: ‘‘(B) The active foreign business percentage of— ‘‘(i) any dividend paid by an existing 80/20 com- pany, and ‘‘(ii) any interest paid by an existing 80/20 com- pany.’’. (2) DEFINITIONS AND SPECIAL RULES.—Section 871 of such Code is amended by redesignating subsections (l) and (m) as subsections (m) and (n), respectively, and by inserting after subsection (k) the following new subsection: ‘‘(l) RULES RELATING TO EXISTING 80/20 COMPANIES.—For pur- poses of this subsection and subsection (i)(2)(B)— ‘‘(1) EXISTING 80/20 COMPANY.— ‘‘(A) IN GENERAL.—The term ‘existing 80/20 company’ means any corporation if— 26 USC 871. 26 USC 861. 26 USC 864 note. 26 USC 864. 26 USC 304 note.