Page:United States Statutes at Large Volume 96 Part 1.djvu/507

 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 465

(A) shall be treated as income which is effectively connected with the conduct of a trade or business conducted through a permanent establishment of such shareholder within the United States. "(C) DISTRIBUTION DENIED IN CASE OF FRAUD OR WILLFUL

NEGLECT.—Subparagraph (A) shall not apply to a corporation if the determination of the Secretary described in subparagraph (A) contains a finding that the failure of such corporation to satisfy the conditions in subsection Qa) was due in whole or in part to fraud with intent to evade tax or willful neglect on the part of such corporation. "(4) CERTAIN PROVISIONS OF SECTION 936 TO APPLY.—

"(A) IN GENERAL.—The rules contained in paragraphs (5), (6), and (7) of section 936(h) shall apply to a domestic Ante, p. 452. corporation described in paragraph (I)(A) of this subsection. "(B) CERTAIN MODIFICATIONS.—For purposes of subpara-

graph (A), section 936(h) shall be applied by substituting wherever appropriate— "(i) 'Virgin Islands' for 'possession', and "(ii) qualification under paragraphs (1) and (2) of subsection (b) for qualification under section 936(a)(2). "(f) TRANSITIONAL RULE.—In applying subsection (b)(2) with respect to taxable years beginning after December 31, 1982, and before January 1, 1985, the following percentage shall be substituted for '65 percent': "For taxable years beginning in calendar year: 1983 1984

The percentage is: 55 60".

(c) DENIAL OF DIVIDEND RECEIVED DEDUCTION IN CASE OF A DISTRIBUTION T MEET QUALIFICATION REQUIREMENTS.—Section 246 (relatO

26 USC 246.

ing to rules applying to deduction for dividends received) is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection: "(e)

CERTAIN

DISTRIBUTIONS TO SATISFY

REQUIREMENTS.—No

deduction shall be allowed under section 243(a) with respect to a dividend received pursuant to a distribution described in section 936(h)(4) or 934(e)(3)." Ante, pp. 452, (d) TRANSFER OF INTANGIBLES BY POSSESSION CORPORATION ^^^ TREATED AS TRANSFER TO AVOID TAXES.—Section 367 (relating to 26 USC 367.

foreign corporations) is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection: "(d) SPECIAL RULE RELATING TO TRANSFER OF INTANGIBLES BY POSSESSION CORPORATIONS.—

"(1) IN GENERAL.—If, after August 14, 1982, any possession corporation transfers, directly or indirectly, any intangible property (within the meaning of section 936(h)(3)(B)) to any foreign corporation, such transfer shall be treated for purposes of subsection (a) as pursuant to a plan having as one of its principal purposes the avoidance of Federal income taxes. "(2) POSSESSION CORPORATION.—

"(A) IN GENERAL.—The term 'possession corporation' means any corporation— "(i) to which an election under section 936 applies, or

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