Page:United States Statutes at Large Volume 98 Part 1.djvu/699

 PUBLIC LAW 98-369—JULY 18, 1984 -t'^t" =

98 STAT. 651

that the beneficial owner of the obligation is not a United States person.

"(3) PORTFOLIO INTEREST SHALL NOT INCLUDE INTEREST RECEIVED BY CERTAIN PERSONS.—For purposes of this subsection,

the term 'portfolio interest' shall not include any portfolio interest which— "(A) except in the case of interest paid on an obligation of ^^'* < '^J.^i* 3 the United States, is received by a bank on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business, "(B) is received by a 10-percent shareholder (within the meaning of section 871(h)(3)(B)), or Ante, p. 648. = "(C) is received by a controlled foreign corporation from a related person (within the meaning of section 864(d)(4). Ante, p. 644. "(4) SPECIAL RULES FOR CONTROLLED FOREIGN CORPORATIONS.—

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"(A) IN GENERAL.—In the case of any portfolio interest received by a controlled foreign corporation, the following provisions shall not apply: "(i) Subparagraph (A) of section 954(b)(3) (relating to exception where foreign base company income is less than 10 percent), "(ii) Paragraph (4) of section 954(b) (relating to corpoooiS'Sti.^ rations not formed or availed of to avoid tax). "(iii) Subparagraph (B) of section 954(c)(3) (relating to certain income derived in active conduct of trade or business), "(iv) Subparagraph (C) of section 954(c)(3) (relating to S« certain income derived by an insurance company). "(v) Subparagraphs (A) and (B) of section 954(c)(4) ^' (relating to exception for certain income received from ' related persons).

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"(B) CONTROLLED FOREIGN CORPORATION.—For purposes of

this subsection, the term 'controlled foreign corporation' has the meaning given to such term by section 957(a). "(5) SECRETARY MAY CEASE APPLICATION OF THIS SUBSECTION.—

Under rules similar to the rules of section 871(h)(5), the Secre- Ante, p. 648. tary may provide that this subsection shall not apply to payments of interest described in section 871(h)(5). "(6) REGISTERED FORM.—For purposes of this subsection, the term 'registered form' has the meaning given such term by i-^ -y section 163(f)." (2) CONFORMING AMENDMENT.—Subsection (a) of section 881

26 USC 881.

(relating to imposition of tax) is amended by striking out "There' and inserting in lieu thereof "Except as provided in subsection (c), there". (c) AMENDMENT OF SECTION 864(c)(2).—Paragraph (2) of section 26 USC 864. 864(c) (relating to effectively connected income, etc.) is amended by striking out "section 871(a)(1) or section 881(a)" and inserting in lieu thereof "section 871(a)(1), section 871(h) section 881(a), or section 881(c)". (d) AMENDMENT OF SECTION 2105.—Subsection (b) of section 2105 26 USC 2105. (relating to property without the United States) is amended to read as follows: "(b) BANK DEPOSITS AND CERTAIN OTHER DEBT OBLIGATIONS.—For

purposes of this subchapter— "(1) amounts described in section 861(c), if any interest thereon would be treated by reason of section 861(a)(1)(A) as

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