Page:United States Statutes at Large Volume 86.djvu/981

 86 STAT.]

PUBLIC LAW 92-51 2 - O C T. 20, 1972

939

" (B) the interest on obligations described in such section, of the State and its political subdivision which under the law of the State is subject to the individual income tax imposed by the State, over the sum of the amount of deductions allocable to such interest which is disallowed by application of section 265, and the amount yg^stlt^se*. ^^' of the proper adjustment to basis allocable to such obligations 26 USC 256. which is required to be made for the taxable year under section 1016(a)(5) or (6). "(c) QUALIFIED KESIDENT TAX W H I C H Is A PERCENTAGE OF THE FEDERAL T A X. —

"(1) IN GENERAL.—A tax meets the requirements of this subsection only if it is imposed as a specified percentage of the excess of the taxes imposed by chapter 1 over the sum of the credits allowable under part IV of subchapter A of chapter 1 (other than the credits allowable by sections 31 and 39). "(2) REQUIRED ADJUSTMENT.—^A tax meets the requirements of this subsection only if the liability for tax is decreased by the decrease in such liaoility which would result from excluding from gross income an amount equal to the interest on obligations of the United States which was included in gross income for such year. "(3) PERMITTED ADJUSTMENTS.—A tax which otherwise meets the requirements of paragraphs (1) and (2) shall not be deemed to fail to meet such requirements solely because it provides for both of the following adjustments: " (A) the liability for tax is increased by the increase in such liability which would result from including as an item of gross income an amount equal to the net tax-exempt income for the year, and " (B) the liability for tax is increased by the increase in such liability which would result from including as an item of gross income an amount equal to the net State income tax deduction for the year. "(4) FURTHER PERMITTED ADJUSTMENT.—^A tax which otherwise meets the requirements of paragraphs (1) and (2) shall not be deemed to fail to meet such requirements solely because a credit determined under rules prescribed by the Secretary or his delegate is allowed against such tax for income tax paid to another State or a political subdivision thereof. "(d)

QUALIFIED NONRESIDENT T A X. —

"(1) IN GENERAL.—A tax imposed by a State meets the requirements of this subsection only if it has the following characteristics— " (A) such tax is imposed by the State on the wage and other business income of individuals who are not residents of such State, " (B) such tax applies only with respect to wage and other business income derived from sources within such State, " (C) such tax applies only if 25 percent or more of the individual's wage and other business income for the taxable year is derived from sources within such State, " (D) the amount of such tax imposed with respect to any individual who is not a resident does not exceed the amount of tax for which he would be liable under such State's qualified resident tax if he were a resident of such State and if his taxable income were an amount equal to the excess of— " (i) the amount of his wage and other business income derived from sources within such State, over

^^ '^^^ ' • ^e use 31.

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