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deduction (after the application of section 1 4 1 (e)) shall be allowed, notwithstanding paragraph (2), if the tax p a y e r so elects in his r e t u r n. ' ' (d) EFFECTIVE D A T E. — The amendments m a d e by t h i s section shall a p p l y to tax a b l e year s b e g i n n i n g after December 31, 1971. SEC. 302. LIMITATION ON CARRYOVERS OF UNUSED CREDITS AND CAPITAL LOSSES. (a) LiMrrATiox o x CARRYOVERS.—Part V of subchapter C of chapter 1 ( r e l a t i n g to c a r r y o v e r s) is amended by a d d i n g a t the end thereof the following new section: "SEC. 383. SPECIAL LIMITATIONS ON CARRYOVERS OF UNUSED INVESTMENT CREDITS, WORK INCENTIVE PROGRAM CREDITS, FOREIGN TAXES, AND CAPITAL LOSSES.

Ante, p, 520.

26 USC f*38\^^'

"If—

" (1) the o w n e r s h i p and business of a corporation a r e c h a n g e d in the m a n n e r described in section 382(a)(1), or "'(2) i n the case of a r e organization specified i n paragraph (2) of section 3 8 1 (a), the r e is a change i n o w n e r s h i p described in section 3 8 2 (b)(1)(B), the n the l i m i t a t i o n s provided i n section 382 in such cases w i t h respect to the c a r r y o v e r of net operating losses shall a p p l y in the same m a n n e r, as provided under r e g u l a t i o n s prescribed by the Secretary o r h i s deleg a t e, w i t h respect to any unused investment credit of the corporation which c a n otherwise be carried for w a r d under section 4 6 (b), to any ^"'®' P* 5°^* unused w o r k incentive program credit of the corporation which c a n otherwise be c a r r i e d for w a r d under section 5 0 A (b), to any excess Post, p. 554. foreign tax e s of the corporation which can otherwise be carried forw a r d under section 9 0 4 (d), and to any n e t c a p i t a l loss of the corpora- y/statVon^'^' tion which c a n otherwise be c a r r i e d for w a r d under section 1212." 73 Stat. 99,'36o; (b) CLERICAL AMENDMENT. — The table of sections of such part V ^^ ^*^'' ^^^> ^'^^' is amended by a d d i n g a t the end thereof the following new item: "Sec. 3S3. Special limitations on carryovers of unused investment credits, work incentive program credits, foreign taxes, and capital losses." (c) EFFECTIVE D A T E. — The amendments m a d e by t h i s section shall be applicable only w i t h respect to r e organizations and other changes in o w n e r s h i p o c c u r r i n g after the date of e n a c t m e n t of t h i s Act pursuant to a p l a n of r e organization o r contract entered into on o r after September 29, 1971. SEC. 303. AMORTIZATION OF CERTAIN EXPENDITURES FOR ON-THEJOB TRAINING AND FOR CHILD CARE CENTERS. (a)

AMORTIZATION

DEDUCTION.—Part

VI

of

subchapter

B

of

chapter 1 ( r e l a t i n g to itemized deductions for i n d i v i d u a l s and cor- ga^sttf'erV'^^' p o r a t i o n s) is amended by a d d i n g a t the e n d thereof the following new section: "SEC. 188. AMORTIZATION OF CERTAIN EXPENDITURES FOR ON-THEJOB TRAINING AND CHILD CARE FACILITIES. " (a) A L L O W A N C E o r DEDUCTION. — A t the election of the tax p a y e r,

m a d e i n accordance w i t h r e g u l a t i o n s prescribed by the Secretary o r his delegate, any expenditure chargeable to capital account m a d e by an e m p l o y e r to acquire, construct, reconstruct, o r r e h a b i l i t a t e section 188 property ( a s defined i n subsection (b)) shall be allowable as a deduction r a t a b l y over a period of 60 months, b e g i n n i n g w i t h the month in which the property is placed in service. The deduction provided by t h i s section w i t h respect to such expenditure shall be i n lieu of any depreciation deduction otherwise allowable on account of such expenditure.

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Effective date. 26 u*sc 5^*^*

PUBLIC LAW 92-178-DEC. 10, 1971

"(b) SECTION 188 PROPERTY.—For purposes of this section, the term 'section 188 property' means tangible property which qualifies under regulations prescribed hj the Secretary or his delegate as a facility for on-the-job training of employees (or prospective employees) of the taxpayer, or as a child care center facility primarily for the children of employees of the taxpayer; except that such term shall not include— "(1) any property which is not of a character subject to depreciation; or " (2) property located outside the United States. "(c) APPLICATION" OF SECTION.—This section shall apply only with respect to expenditures made after December 31, 1971, and before January 1, 1977." ^"^^ MINIMUM TAX.—Section 57(a) (relating to items of tax preference) is amended by inserting after paragraph (9) the following new paragraph: "(10)

Ante, p. 521.

Ante, p. 508.

[85 STAT.

AMORTIZATION OF ON-THE-JOB TRAINING AND CHILD CARE

FACILITIES.—With respcct to each item of section 188 property for which an election is in effect under section 188, the amount by which the deduction allowable for the taxable year under such section exceeds the depreciation deduction which would otherwise ^ allowable under section 167." (c) TECHNICAL AMENDMENTS.—

83 Stat. 670.

83 Stat. 669.

(1) Section 1245(a)(2) is amended by striking out "or 187" each place it appears and inserting in lieu thereof "187, or 188". (2) Section 1245(a)(3)(D) is amended by striking out "or 185" and inserting in lieu thereof ", 185, or 188". (3) Section 1250(b)(3) is amended by striking out "or 185" and inserting in lieu thereof ", 185, or 188". (4) Section 642(f) is amended by striking out "and 187" and inserting in lieu thereof "187, and 188". (5) Section 1 0 8 2 (a)(2)(B) is amended by striking out "or 187" and inserting in lieu thereof "187, or 188". (6) The table of sections for part VI of subchapter B of chapter 1 is amended by adding at the end thereof the following new item: "Sec. 188. Amortization of certain expenditures for on-the-job training and child care facilities." (d) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years ending after December 31, 1971. SEC. 304. EXCESS INVESTMENT INTEREST. (a) DEFINITION OF N E T LEASE.—

83 Stat. 581.

^ ^ Section 57(c) (relating to definition of net lease) is amended to read as follows: "(c) N E T LEASES.—

Post, p. 525.

"(1) IN GENERAL.—For purposes of this section, property shall be considered to be subject to a net lease for a taxable year if— " (A) for such taxable year the sum of the deductions of the lessor with respect to such property which are allowable solely by reason of section 162 (other than rents and reimbursed amounts with respect to such property) is less than 15 percent of the rental income produced by such property, or " (B) the lessor is either guaranteed a specified return or is guaranteed in whole or in part against loss of income. " (2) MULTIPLE LEASES OF SINGLE PARCEL OF REAL PROPERTY.—If

a parcel of real property of the taxpayer is leased under two or more leases, paragraph (1)(A) shall, at the election of the taxpayer, be applied by treating all leased portions of such property as subject to a single lease.

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license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


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" (3) ELIMINATION OF 15-PERCENT TEST AFTER 5 YEARS I N CASE OF

REAL PROPERTY.—At the election of the taxpayer, paragraph (1) (A) shall not apply with respect to real property of the taxpayer which has been in use for more than 5 years. "(4) ELECTIONS.—An election under paragraph (2) or (3) shall be made at such time and in such manner as the Secretary or his delegate prescribes by regulations." (2) Secti6n 163(d) (relating to limitation on interest on 26us^ciY3l' investment indebtedness) is amended— (A) by striking out clause (i) of paragraph (4)(A) and inserting in lieu thereof the following: " (i) for such taxable year the sum of the deductions of the lessor with respect to such property which are allowable solely by reason of section 162 (other than ^°*'» P* ^^^' rents and reimbursed amounts with respect to such property) is less than 15 percent of the rental income produced by such property, or", and (B) by adding at the end thereof the following new paragraph: " (7) REAL PROPERTY LEASES.—For purposes of paragraph (4)

" (A) if a parcel of real property of the taxpayer is leased under two or more leases, paragraph (4)(A)(1) shall, at the election of the taxpayer, be applied by treating all leased portions of such property as subject to a single lease; and " (B) at the election of the taxpayer, paragraph (4)(A)(i) shall not apply with respect to real property of the taxpayer which has been in use for more than 5 years. An election under subparagraph (A) or (B) shall be made at such time and in such manner as the Secretary or his delegate prescribes by regulations."

^"P'^-

(b) DEFINITION OF EXCESS INVESTMENT INTEREST.—

(1) Section 57(b)(1) (relating to definition of excess investment ^^ ^*^'* ^^^* interest) is amended by striking out "exceeds the net investment income for the taxable year" and inserting in lieu thereof "exceeds the sum of— " (A) the net investment income for the taxable year, and " (B) the amount (if any) by which the deductions allowable under sections 162,163,164(a)(1) or (2), and 212 attributable to 78^sfat!'4o/^' property of the taxpayer subject to a net lease exceeds the gross rental income produced by such property for the taxable year". (2) Section 1 6 3 (d)(1)(B) (relating to limitation on interest on ss Stat. s74. investment indebtedness) is amended to read as follows: " (B) the amount of the net investment income (as defined in paragraph (3)(A)), plus the amount (if any) by which the deductions allowable under this section (determined without regard to this subsection) and sections 162,164(a)(1) or (2), or 212 attributable to property of the taxpayer subject to a net lease exceeds the rental income produced by such property for the taxable year, plus". (c) ELECTION BY MEMBERS OF PARTNERSHIP—Section 703(b) (re- ^^^ ^tat. 240; lating to elections of a partnership) is amended by— ^^ ^*°'' ^^^* (1) striking out "or" after "(relating to pre-1970 exploration expenditures)" and inserting in lieu thereof a comma; and (2) inserting after "(relating to deduction and recapture of certain mining exploration expenditures)" the following: "under section 57(c) (relating to definition of net lease), or under section ^"'^' P* ^22. 163 (d) (relating to limitation on interest on investment indebted- ^'^pr^ness)".

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PUBLIC LAW 92-178-DEC. 10, 1971 (d)

[85 STAT.

ELECTING SMALL BUSINESS CORPORATIONS.—Section 57(b)

(2)

^^83 Stat. 581, ((]) (relating to items of tax preference) and section 163(d)(3)(C) 26 USC 57, 163. (relating to interest on investment indebtedness) are each amended by striking out "sections 164:(a)(l) or (2) " and inserting in lieu thereof "sections 162,164(a)(1) or (2)". (e) EFFECTIVE DATES.—The amendments made by this section to section 57 of the Internal Revenue Code of 1954 shall apply to taxable years beginning after December 31, 1969. The amendments made by this section to section 163 of such Code shall apply to taxable years beginning after December 31, 1971. SEC. 305. FARM LOSSES OF ELECTING SMALL BUSINESS CORPORATIONS. (a)

83 Stat. 566.

8 3 Stat, 592.

]^251 (b)(2)(B) is amended by striking out the last sentence and inserting in lieu thereof the following new sentences: "This subparagraph shall not apply to an electing small business corporation for a taxable year if on any day of such year a shareholder of such corporation is an individual who, for his taxable year with which or within which the taxable year of the corporation ends, has a farm net loss or is a shareholder of another electing small business corporation which has a farm net loss for its taxable year ending within such taxable year of the individual. For purposes of clause (i), in the case of an electing small business corporation the nonfarm adjusted gross income of the corporation shall be increased by the amount of the nonfarm adjusted gross income of that shareholder (on any day of the corporation's taxable year) who has the highest amount of all such shareholders of nonfarm adjusted gross income for his taxable year with which or within which the taxable year of the corporation ends."' (b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable years ending after the date of the enactment of this Act. SEC. 306. CAPITAL GAIN DISTRIBUTIONS OF CERTAIN TRUSTS. (^^^ AMENDMENT TO SECTION 665 (g).—Effective with respect to taxable years beginning after December 31, 1968, subsection (g) of section 665 (relating to definition of capital gain distribution) is amended by striking out "for such taxable year" the first place it appears therein, (b)

83 Stat. 599. note.

26^80*92^1^°'

83 Stat. 583.

COMPUTATION or NONFARM ADJUSTED GROSS INCOME.—Section

APPLICATION TO TRUSTS IN EXISTENCE ON DECEMBER 31, 1969.—

Section 331(d)(2)(C) of the Tax Reform Act of 1969 is amended by striking out "January 1, 1972" each place it appears therein and inserting in lieu thereof "January 1, 1973". SEC. 307. APPLICATION OF WESTERN HEMISPHERE TRADE CORPORATION PROVISION UNDER THE VIRGIN ISLANDS TAX LAWS. For purposes of applying the income tax laws of the United States with respect to the Virgin Islands under the Act of July 12, 1921 (42 Stat. 123; 48 U.S.C. 1397), subpart C of part III of subchapter ^ ^^ chapter 1 of the Internal Revenue Code of 1954 (relating to Western Hemisphere Trade Corporations) shall be treated as having been repealed effective with respect to taxable years beginning after the date of the enactment of this Act. SEC. 308. CAPITAL GAINS AND STOCK OPTIONS. ^j^) j ^ GENERAL.—Section 58(g)(2) (relating to tax preferences attributable to foreign sources) is amended by adding at the end thereof the following new sentence: "For purposes of this paragraph, preferential treatment is accorded such items which are attributable to a foreign country or possession of the United States if such country or possession

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PUBLIC LAW 92-178-DEC. 10, 1971

525

imposes no significant amount of tax with respect to such items.", (b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable years beginning after December 31, 1969. SEC. 309. CERTAIN TREATY CASES.

(a) IN GENERAL.—The second sentence of section 7422(f)(1) (relating to limitation on right of action for refund) is amended by inserting before the period at the end thereof "and notwithstanding the provisions of section 1502 of such title 28 (relating to certain treaty cases)". (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to suits or proceedings which are instituted after January 30, 1967.

80 Stat. 1108. 26 USC 7422.

^^ ^*^*' ^'^^•

SEC. 310. BRIBES, KICKBACKS, MEDICAL REFERRAL PAYMENTS, ETC.

(a) AMENDMENTS TO SECTION 162(C).—Section 162(c) (relating to ^^ Stat. 7io. bribes and illegal kickbacks) is amended— (1) by striking out paragraphs (2) and (3) and inserting in lieu thereof the following new paragraphs: " (2) OTHER ILLEGAL PAYMENTS.—No deduction shall be allowed under subsection (a) for any payment (other than a payment described in paragraph (1)) made, directly or indirectly, to any person, if the payment constitutes an illegal bribe, illegal kickback, or other illegal payment under any law of the United States, or under any law of a State (but only if such State law is generally enforced), which subjects the payor to a criminal penalty or the loss of license or privilege to engage in a trade or business. For purposes of this paragraph, a kickback includes a payment in consideration of the referral of a client, patient, or customer. The burden of proof in respect of the issue, for purposes of this paragraph, as to whether a payment constitutes an illegal bribe, illegal kickback, or other illegal payment shall be upon the Secretary or his delegate to the same extent as he bears the burden of proof under section 7454 (concerning the burden of proof when the 83 Stat. 532. a^^l^f'Vo^^'* issue relates to fraud). " (3) KICKBACKS, REBATES, AND BKIBES UNDER MEDICARE AND

MEDICAID.—No deduction shall be allowed under subsection (a) for any kickback, rebate, or bribe made by any provider of services, supplier, physician, or other person who furnishes items or services for which payment is or may be made under the Social Security Act, or in whole or in part out of Federal funds under a State plan approved under such Act, if such kickback, rebate, or bribe is made in connection with the furnishing of such items or services or the making or receipt of such payments. For purposes of this paragraph, a kickback includes a payment in consideration of the referral of a client, patient, or customer."; and (2) by striking out "Bribes and Illegal Kickbacks." in the heading of such section and inserting in lieu thereof "Illegal Bribes, Kickbacks, and Other Payments.". (b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply with respect to payments after December 30, 1969, except that section 162(c)(3) of the Internal Revenue Act of 1954 (as added by subsection (a)) shall apply only with respect to kickbacks, rebates, and bribes payment of which is made on or after the date of the enactment of this Act. SEC. 311. ACTIVITIES NOT ENGAGED IN FOR PROFIT. (a) APPLICATION OF STATUTORY PRESUMPTION.—Section 183 (relat-

ing to activities not engaged in for profit) is amended by adding at the end thereof the following new subsection: " (e) SPECIAL RULE. —

" (1) IN GENERAL.—A determination as to whether the presump-

8 3 Stat. 5 7 1.

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 526

76^st^f'97*7^'*' 26 USC 30*1.

PUBLIC LAW 92-178-DEC. 10, 1971

[85 STAT.

tion provided by subsection (d) applies with respect to any activity shall, if the taxpayer so elects, not be made before the close of the fourth taxable year (sixth taxable year, in the case of an activity described in the last sentence of such subsection) following the taxable year in which the taxpayer first engages in the activity. For purposes of the preceding sentence, a taxpayer shall be treated as not having engaged in an activity during any taxable year beginning before January 1, 1970. " (2) INITIAL PERIOD.—If the taxpayer makes an election under paragraph (1), the presumption provided by subsection (d) shall apply to each taxable year in the 5-taxable year (or 7-taxable year) period beginning with the taxable year in which the taxpayer first engages in the activity, if the gross income derived from the activity for 2 or more of the taxable years in such period exceeds the deductions attributable to the activity (determined without regard to whether or not the activity is engaged in for profit). "(3) ELECTION.—An election under paragraph (1) shall be made at such time and manner, and subject to such terms and conditions, as the Secretary or his delegate may prescribe." (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1969. SEC. 312. CERTAIN DISTRIBUTIONS TO FOREIGN CORPORATIONS. (^) ^^ GENERAL.—Section 301 (relating to corporate distributions of property) is amended by— (1) inserting in subsection (b)(1)(B), after "corporation" the first time it appears, a comma and "unless subparagraph (D) applies"; (2) adding at the end of subsection (b)(1) the following new subparagraph: " (D) FOREIGN CORPORATE DISTRIBUTEES.—In the case of a distribution to a shareholder which is a foreign corporation, if the amount received by the foreign corporation is not effectively connected with the conduct by it of a trade or business within the United States, the amount of the money received, plus the fair market value of the other property received."; (3) inserting in subsection (d)(2), after "corporation" the first time it appears, a comma and "unless paragraph (3) applies"; and (4) redesignating paragraph (3) of subsection (d) as (4) and inserting after paragraph (2) thereof the following new paragraph: "(3) FOREIGN CORPORATE DISTRIBUTEES.—In the case of a distribution of property to a shareholder which is a foreign corporation, if the amount received by the foreign corporation is not effectively connected with the conduct by it of a trade or business within the United States, the fair market value of the property received." (b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply with respect to distributions made after November 8, 1971. SEC. 313. ORIGINAL ISSUE DISCOUNT. (a) SEPARATE TREATMENT OF ORIGINAL ISSUE DISCOUNT.—Sections

1555-^68Asm' 357.' ^* 83 Stat. 611.

8 T 1 ( ^) (1) ( ^) ' 881(a)(1), and 1441(b) (relating to taxation and withholding on noneffectively connected income of nonresident alien individuals and foreign corporations) are each amended by inserting after the word "interest" the following: "(other than original issue discount as defined in section 1232(b))".

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PUBLIC LAW 92-178-DEC. 10, 1971

527

(b) NONRESIDENT ALIENS.—Section 871(a)(1)(C) (relating to tax \l ^^^'Jon noneffectively connected income of nonresident alien individuals) is amended to read as follows: " (C) in the case of— " (i) bonds or other evidences of indebtedness issued after September 28, 1965, and before April 1, 1972, amounts which under section 1232(a)(2)(B) are con- 83 Stat. 609. sidered as gain from the sale or exchange of property which is not a capital asset, and, in the case of corporate obligations issued after May 27, 1969, and before April 1, 1972, amounts which would be so considered but for the fact the obligations were issued after May 27, 1969, "(ii) bonds or other evidences of indebtedness issued after March 31, 1972, and payable more than 6 months from the date of original issue (without regard to the period held by the taxpayer), amounts which under section 1232(a)(2)(B) would be considered as gain from the sale or exchange of property which is not a capital asset but for the fact such obligations were issued after May 27, 1969, and "(iii) the payment of interest on an obligation described in clause (ii), an amount equal to the original issue discount (but not in excess of such interest less the tax imposed by subparagraph (A) thereon) accrued on such obligation since the last payment of interest thereon, and". (c) FOREIGN CORPORATIONS.—Section 881(a)(3) (relating to income ^o s*^'* ^ss;;. of foreign corporations) is amended to read as follows: "(3) in the case of— " (A) bonds or other evidences of indebtedness issued after September 28, 1965, and before April 1, 1972, amounts which under section 1232(a)(2)(B) are considered as gain from the sale or exchange of property which is not a capital asset, and, in the case of corporate obligations issued after May 27, 1969, and before April 1, 1972, amounts which would be so considered but for the fact the obligations were issued after May 27, 1969, " (B) bonds or other evidences of indebtedness issued after March 31, 1972, and payable more than 6 months from the date of original issue (without regard to the period held by the taxpayer), amounts which under section 1232(a)(2)(B) would be considered as gain from the sale or exchange of property which is not a capital asset but for the fact such obligations were issued after May 27, 1969, and " (C) the payment of interest on an obligation described in subparagraph (B), an amount equal to the original issue discount (but not in excess of such interest less the tax imposed by paragraph (1) thereon) accrued on such obligation since the last payment of interest thereon, and". (d)

WITHHOLDING

ON NONRESIDENT ALIENS.—Section

1441(c) so^stttf^^ssa^^''

(relating to withholding of tax on nonresident aliens) is amended by adding at the end thereof the following new paragraph: "(8) ORIGINAL ISSUE DISCOUNT.—The Secretary or his delegate

may prescribe such regulations as may be necessary for the deduction and withholding of the tax on original issue discount subject to tax under section 871(a)(1)(C) including rules for the deduction and withholding of the tax on original issue discount from payments of interest."

'^"^'•^•

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Page:United States Statutes at Large Volume 85.djvu/558

 528 80 Stat. 1557.

26 USC 1442. Anfe, p. 527.

68A Stat. 275;

PUBLIC LAW 92-178-DEC. 10, 1971 (e)

WITHHOLDING ON FOREIGN CORPORATIONS.

[85 Sectioil

STAT.

1442(a)

(relating to withholding of tax on foreign corporations) is amended— (1) by striking out "and" the last time it appears, and (2) by inserting before the period at the end thereof ", and the reference in section 1441(c)(8) to section 8 7 1 (a)(1)(C) shall be treated as referring to section 881(a)(3)". (f) EFFECTIVE DATES.—The amendments to sections 871 and 881 of the Internal Revenue Code of 1954 made by this section shall apply with respect to taxable years beginning after December 31, 1966. The amendments to sections 1441 and 1442 of such Code made by this section shall apply with respect to payments occurring on or after April 1, 1972. SEC. 314. INCOME FROM CERTAIN AIRCRAFT AND VESSELS. (a) ELECTION.—Section 861 (relating to iucomc from sources witMu the United States) is amended by adding at the end thereof the following new subsection: " (e) ELECTION TO TREAT INCOME F R O M CERTAIN AIRCRAFT AND VESSELS AS I N C O M E F R O M SOURCES W I T H I N THE UNITED STATES. —

Ante, p. 501. 78 Stat. 120.

"(1) IN GENERAL.—For purposes of subsection (a) and section 862(a), if a taxpayer owning an aircraft or vessel which is section 38 property (or would be section 38 property but for section 48(a) (^5)) leases such aircraft or vessel to a United States person, other than a member of the same controlled group of corporations (as defined in section 1563) as the taxpayer, and if such aircraft or vessel is manufactured or constructed in the United States, the taxpayer may elect, for any taxable year ending after the commencement of such lease, to treat all amounts includible in gross income with respect to such aircraft or vessel (whether during or after the period of any such lease), including gain from sale or other disposition of such aircraft or vessel, as income from sources within the United States. "(2) EFFECT OF ELECTION.—An election under paragraph (1) made with respect to any aircraft or vessel shall apply to the taxable year for which made and to all subsequent taxable years. Such election may not be revoked except with the consent of the Secretary or his delegate. "(3)

MANNER AND TIME OF ELECTION AND REVOCATION.—An

election under paragraph (1), and any revocation of such election, shall be made in such manner and at such time as the Secretary or his delegate prescribes by regulations. "(4)

68A Stat. 276.

CERTAIN TR.VNSFER8 INVOLVING CARRYOVER BASIS.—If

the

taxpayer transfers or distributes an aircraft or vessel which is subject to an election under paragraph (1) and the basis of such, aircraft, or vessel in the hands of the transferee or distributee is determined by reference to its basis in the hands of the transferor or distributor, the transferee or distributee shall, for purposes of paragraph (1), be treated as having made an election with respect to such aircraft or vessel." ^j^^ CLERICAL AMENDMENT.—Section 862 (relating to income from sources without the United States) is amended by adding at the end thereof the following new subsection: "(c)

CROSS REFERENCE—

"For source of amounts attributable to certain aircraft and vessels, see section 861(e)." (c) EFFECTIVE DATE,—The amendments made by this section shall apply to taxable years ending after August 15, 1971, but only with respect to leases entered into after such date.

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529

SEC. 315. INDUSTRIAL DEVELOPMENT BONDS. (a) ISSUES FOR WATER FACILITIES.—Section 103(c)(4)

(relating

82 Stat. 2 6 6. 26 USC 1 0 3.

to certain exempt activities) is amended— (1) by striking out in subparagraph (E) "energy, gas, or water, or" and by inserting in lieu thereof "energy or gas,"; (2) by striking out the period at the end of subparagraph (F) and inserting in lieu thereof ", or"; and (3) by adding at the end thereof the following: " (G) facilities for the furnishing of water, if available on reasonable demand to members of the general public." (b) CERTAIN CAPITAL EXPENDITURES.—Section 103(c)(6)(F) (iii) «2 Stat. 1349 (relating to exception of certain capital expenditures for purposes of the $5,000,000 limit) is amended by striking out "$250,000" and inserting in lieu thereof "$1,000,000". (c) EFFECTIVE DATES.—The amendments made by subsection (a) shall apply with respect to obligations issued after January 1, 1969. The amendment made by subsection (b) shall apply with respect to expenditures incurred after the date of the enactment of this Act. SEC. 316. DISCLOSURE OR USE OF INFORMATION BY PREPARERS OF RETURNS. (a) CRIMINAL PENALTY.—Part I of subchapter A of chapter 75 (relating to crimes) is amended by adding at the end thereof the following new section: "SEC. 7216. DISCLOSURE OR USE OF INFORMATION BY PREPARERS OF RETURNS. " (a) GENERAL RULE.—Any person who is engaged in the business of preparing, or providing services in connection with the preparation of, returns of the tax imposed by chapter 1, or declarations or amended declarations of estimated tax under section 6015, or any person who for compensation prepares any such return or declaration for any other person, and who— "(1) discloses any information furnished to him for, or in connection with, the preparation of any such return or declaration, or "(2) uses any such information for any purpose other than to prepare, or assist in preparing, any such return or declaration, shall be guilty of a misdemeanor, and, upon conviction thereof, shall be fined not more than $1,000, or imprisoned not more than 1 year, or both, together with the costs of prosecution. " (b) EXCEPTIONS.—

"(1) DISCLOSURE.—Subsection (a) shall not apply to a disclosure of information if such disclosure is made— " (A) pursuant to any other provision of this title, or " (B) pursuant to an order of a court. "(2) USE.—Subsection (a) shall not apply to the use of information in the preparation of, or in connection with the preparation of. State and local tax returns and declarations of estimated tax of the person to whom the information relates. "(3) REGULATIONS.—Subsection (a) shall not apply to a disclosure or use of information which is permitted by regulations prescribed by the Secretary or his delegate under this section." (b) CLERICAL AMENDMENT.—The table of contents for part I of subchapter A of chapter 75 is amended by adding at the end thereof the following new item: "Sec. 7216. Disclosure or use of information by preparers of returns."

68A Stat. 8 5 1. 26 USC 7201.

P^^aity Ante,

p. 517,

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Page:United States Statutes at Large Volume 85.djvu/560

 530

PUBLIC LAW 92-178-DEC. 10, 1971

[85 STAT.

(c) EFFECTIVE DATE.—The amendments made by this section shall take effect on the first day of the first month which begins after the date of the enactment of this Act.

TITLE IV—EXCISE TAX SEC. 401. REPEAL OF MANUFACTURERS EXCISE TAX ON PASSENGER AUTOMOBILES, LIGHT-DUTY TRUCKS, ETC. (a)

68A Stat. 481; 84 Stat! 1843. 26 USC 4061.

EEPEAL OF AND EXEMPTIONS FROM T A X. —

(^i^ EEPEAL.—Section 4061(a) (relating to tax on automobiles, etc.) is amended to read as follows: "(a)

TRUCKS,BUSES,TRACTORS,ETC.—

"(1) TAX IMPOSED.—There is hereby imposed upon the following articles (including in each case parts or accessories therefor sold on or in connection therewith or with the sale thereof) sold by the manufacturer, producer, or importer a tax of 10 percent of the price for which so sold, except that on and after October 1, 1977, the rate shall be 5 percent— "Automobile truck chassis. "Automobile truck bodies. "Automobile bus chassis. "Automobile bus bodies. "Truck and bus trailer and semitrailer chassis. "Truck and bus trailer and semitrailer bodies. "Tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. A sale of an automobile truck, bus, truck or bus trailer or semitrailer shall, for the purposes of this subsection, be considered to be a sale of a chassis and of a body enumerated in this subsection. " (2) Exci.usiON FOR LIGHT-DUTY TRUCKS, ETC.—The tax imposed by paragraph (1) shall not apply to a sale by the manufacturer, producer, or importer of the following articles suitable for use with a vehicle having a gross vehicle weight of 10,000 pounds or less (as determined under regulations prescribed by the Secretary or his delegate)— "Automobile truck chassis. "Automobile truck bodies. "Automobile bus chassis. "Automobile bus bodies. "Truck trailer and semitrailer chassis and bodies, suitable for use with a trailer or semitrailer having a gross vehicle weight of 10,000 pounds or less (as so determined)." (2) EXEMPTIONS FOR LOCAL TRANSIT BUSES, AND FOR TRASH CON-

79 Stat. 157; 83 Stat. 724;

TAiNERS, ETC.—Section 4063(a) (relating to exemptions for spec[fied articles) is amended by adding at the end thereof the

Post,

e n -

p. 5 3 3.

Supra,

'

i

" ^

^

Tollowing new paragraphs: "(6) LOCAL TRANSIT BUSES.—The tax imposed under section 4061(a) shall not apply in the case of automobile bus chassis or automobile bus bodies which are to be used predominantly by the purchaser in mass transportation service in urban areas. "(7) TRASH CONTAINERS, ETC.—The tax imposed under section 4061(a) shall not apply in the case of any box, container, receptacle, bin, or other similar article which is to be used as a trash container and is not designed for the transportation of freight other than trash, and which is not designed to be permanently mounted on or permanently affixed to an automobile truck chassis or body, or in the case of parts or accessories designed primarily for use on, in connection with, or as a component part of any such article."

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 85 STAT. ]

PUBLIC LAW 92-178-DEC. 10, 1971

(3) TECHNICAL AMENDMENTS.—

Stat. (A) Section 4221(c) (relating to relief of manufacturer 72 USC 41282. 26 221. from liability in certain cases) is amended by striking out "section 4063(b)," and inserting in lieu thereof "section 4063 (a)(6) or (7), 4063(b),". Ante, p, 530. (B) Section 4222(d) (relating to registration in the case of certain exemptions) is amended by striking out "sections 4063(b)," and inserting in lieu thereof "sections 4063(a)(6) and (7), 4063(b),". (C) Section 6416(b)(2) (relating to specified uses and y/statTi'ssf ^' resales in case of which tax payments are considered overpayments) is amended— (i) by striking out "described in section 4221(e)(5)." in subparagraph (R) and inserting in lieu thereof "described in section 4063(a)(6) or4221(e)(5); or"; and (ii) by adding at the end thereof the following new subparagraph: " (S) in the case of a box, container, receptacle, bin, or other similar article taxable under section 4061(a), sold to any person for use as described in section 4063(a)(7)."

(b) FLOOR STOCKS REFUNDS.—

(1) IN GENERAL.—Where, before the day after the date of the enactment of this Act, any tax-repealed article (as defined in subsection (e)) has been sold by the manufacturer, producer, or importer and on such day is held by a dealer and has not been used and is intended for sale, there shall be credited or refunded (without interest) to the manufacturer, producer, or importer an amount equal to the tax paid by such manufacturer, producer, or importer on his sale of the article, if— (A) claim for such credit or refund is filed with the Secretary of the Treasury or his delegate before the first day of the 10th calendar month beginning after the day after the date of the enactment of this Act based upon a request submitted to the manufacturer, producer, or importer before the first day of the 7th calendar month beginning after the day after the date of the enactment of this Act by the dealer who held the article in respect of which the credit or refund is claimed; and (B) on or before the first day of such 10th calendar month reimbursement has been made to the dealer by the manufacturer, producer, or importer in an amount equal to the tax paid on the article or written consent has been obtained from the dealer to allowance of the credit or refund. (2)

LIMITATION ON ELIGIBILITY FOR CREDIT OR REFUND.—No

manufacturer, producer, or importer shall be entitled to credit or refund under paragraph (1) unless he has in his possession such evidence of the inventories with respect to which the credit or refund is claimed as may be required by regulations prescribed by the Secretary of the Treasury or his delegate under this subsection. (3) OTHER LAWS APPLICABLE.—All provisions of law, including

penalties, applicable with respect to the taxes imposed by section 4061(a) of the Internal Revenue Code of 1954 shall, insofar as ^"'e*?• S30. applicable and not inconsistent with paragraphs (1) and (2) of this subsection, apply in respect of the credits and refunds provided for in paragraph (1) to the same extent as if the credits or refunds constituted overpayments of the tax.

75-432 O - 72 - 36

531

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Page:United States Statutes at Large Volume 85.djvu/562

 532

PUBLIC LAW 92-178-DEC. 10, 1971

[85 STAT.

(c) REFUNDS W I T H EESPECT TO CERTAIN CONSUMER PURCHASES.—

Ante, p, 530.

(1) IN GENERAL.—Except as otherwise provided in paragraph (2), where— (A) after August 15, 1971, with respect to any article which was subject to the tax imposed by section 4061(a)(2) of the Internal Revenue Code of 1954 (as in effect on the day before the date of the enactment of this Act), or (B) after September 22, 1971, with respect to any article which was subject to the tax imposed by section 4061(a)(1) of such Code (as in effect on the day before the date of the enactment of this Act), and on or before such date of enactment, a tax-repealed article (as defined in subsection (e)) has been sold to an ultimate purchaser, there shall be credited or refunded (without interest) to the manufacturer, producer, or importer of such article an amount equal to the tax paid by such manufacturer, producer, or importer on his sale of the article. (2) LIMITATION ON ELIGIBILITY FOR CREDIT OR REFUND.—No

manufacturer, producer, or importer shall be entitled to a credit or refund under paragraph (1) with respect to an article unless— (A) he has in his possession such evidence of the sale of the article to an ultimate purchaser, and of the reimbursement of the tax to such purchaser, as may be required by regulations prescribed by the Secretary of the Treasury or his delegate under this subsection; (B) claim for such credit or refund is filed with the Secretary of the Treasury or his delegate before the first day of the 10th calendar month beginning after the day after the date of the enactment of this Act based upon information submitted to the manufacturer, producer, or importer before the first day of the 7th calendar month beginning after the day after the date of the enactment of this Act by the person who sold the article (in respect of which the credit or refund is claimed) to the ultimate purchaser; and (C) on or before the first day of such 10th calendar month reimbursement has been made to the ultimate purchaser in an amount equal to the tax paid on the article. (3) OTHER LAWS APPLICABLE.—All provisions of law, including

penalties, applicable with respect to the taxes imposed by section 4061(a) of the Internal Revenue Code of 1954 shall, insofar as applicable and not inconsistent with paragraph (1) or (2) of this subsection, apply in respect of the credits and refunds provided for in paragraph (1) to the same extent as if the credits or refunds constituted overpayments of the tax. (d) CERTAIN USES BY MANUFACTURER, ETC.—Any tax paid by rea7 2 Stat. 1281; gQ^ of section 4218(a) of the Internal Revenue Code of 1954 (relating 26 USC 42*18. to use by manufacturer or importer considered sale) shall be deemed an overpayment of such tax with respect to— (1) any article which was subject to the tax imposed by section 4061(a)(2) of such Code as in effect on the day before the date of the enactment of this Act if tax was imposed on such article by reason of such section 4218(a) after August 15, 1971, and (2) any article which was subject to the tax imposed by section 4061 (a)(1) of such Code as in effect on the day before the date of the enactment of this Act and on which such tax is no longer imposed (by reason of subsection (a) of this section) if tax was imposed on such article by reason of such section 4218(a) after September 22, 1971.

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Page:United States Statutes at Large Volume 85.djvu/563

 85 STAT. ]

PUBLIC LAW 9 2 - 1 7 8 - D E C. 10, 1971

(e) DEFINITIONS. — For purposes of t h i s section— (1) The term " d e a l e r " includes a wholesaler, jobber, d i s t r i b u to r, o r retailer. (2) A n article shall be considered as " h e l d by a d e a l e r " if title thereto has passed to such dealer ( w h e the r or not delivery to h i m lias been m a d e) and if for purposes of c o n s u m p t i o n title to such article o r possession thereof has not a t any t i m e been transfer r e d to any person other than a dealer. (3) The term " tax - r e p e a l e d a r t i c l e " means a n article o n which a tax w a s imposed by section 4 0 6 1 (a) of the I n t e r n a l Revenue Code of 1954 as i n effect on the d a y before the date of the enactm e n t of t h i s Act and is not imposed ( w i t h o u t r e g a r d to the amendment m a d e by paragraph (2) of subsection (a) of t h i s section) under such section 4 0 6 1 (a) a s i n effect on the d a y after the date of the e n a c t m e n t of t h i s Act. (f)

533

^"*^' ^' ^^°'

O R I G I N A L EQUIPMENT T I R E S ON I M P O R T E D ARTICLE S. — S e c t i o n

4071 ( r e l a t i n g to tax on t i r e s and tubes) is amended by a d d i n g a t so'^statraal!^' the e n d thereof the following new subsection: 26 USC 40*71. " (e) T I R E S O N I M P O R T E D ARTICLE S. — For the purposes of subsection

(a), if a n article i m p o r t e d i n to the United States is e q u i p p e d w i t h t i r e s or i n n e r tubes ( other than bicycle t i r e s and i n n e r tubes) — " (1) the importer of the article shall be t r e a t e d a s the importer of the t i r e s and i n n e r tubes w i t h which such article is equipped, and " (2) the sale of the article by the importer thereof shall b e t r e a t e d as the sale of the tires and i n n e r tubes w i t h which such article is equipped. T h i s subsection shall not a p p l y w i t h respect to the sale' of a n article if a tax o n such sale is imposed under section 4061." (g)

T E C H N I C A L AND CONFORMING AMENDMENTS. —

(1) Section 4 0 6 1 (b)(2) ( r e l a t i n g to part s and accessories) i s amended by striking o u t " any article e n u m e r a t e d i n subsection (a)(2) o r a house t r a i l e r " and inserting i n lieu thereof " any chassis o r body for a passenger automobile, any chassis o r b o d y for a t r a i l e r o r semitrailer suitable for use i n connection w i t h a passenger automobile, or a house t r a i l e r ". (2)(A) Section 4062 ( r e l a t i n g to definitions applicable to tax on m o to r vehicles) is amended by striking o u t subsection (b). (B) The heading of section 4062 is amended to read a s follows: "SEC. 4062. ARTICLES CLASSIFIED AS PARTS." (C) Section 4062 is amended by striking out " (a)

^^ ^*^** ^^^*

^° ^*^** ^^^''•

CERTAIN ARTICLE S CONSIDERED AS P A R T S. — ".

(D) The item r e l a t i n g to section 4062 i n the table of sections for part I of subchapter A of chapter 32 is amended to read as follows: "Sec. 4062. Articles classified as parts." (3) Section 4 0 6 3 (a)(4) ( r e l a t i n g to e x e m p t i o n s for specified articles) is amended to read as follows: "(4)

^^ Stat. 157.

A M B U L A N C E S, HEARSES, E T C. — The tax i m p o s e d by section

4 0 6 1 (a) shall not a p p l y in the case of a n ambulance, hearse, o r combination ambulance-hearse." (4) Section 4216 ( r e l a t i n g to definition of price) is amended — s/stat^^isV/ *' (A) i n subsections (b)(2)(C) and (b)(5) by striking o u t " ( r e l a t i n g to automobiles, t r u c k s, e t c.), " and inserting i n lieii thereof " ( r e l a t i n g to t r u c k s, buses, t r a c to r s, e t c.), "; and (B) i n subsection (g) by inserting " t r a c to r s, " i m m e d i a t e l y ^^ ^^^^'' ^^^' after "buses,". (5) Section 6 4 1 2 (a) ( r e l a t i n g to floor stocks refunds) is ^ 79 Stat. 141; amended by striking out paragraph (1). a..

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Page:United States Statutes at Large Volume 85.djvu/564

 534 26u*sc64iV'

PUBLIC LAW 92-178-DEC. 10, 1971 (^^ '^l^® heading of section 6416(g) exports) is amended to read as follows: "(g)

^^p^^^' ?5 USC Ust, Effective date.

[85 STAT.

(relating to certain

TRUCKS, BUSES, TRACTORS, E T C. — ".

(7)(A) Section 304 of the Excise, Estate, and Gift Tax AdjustV^^^^ ^^^ ^* 1^'^^' Public Law 91-614 (relating to new car labels), is hereby repealed. (B) Subparagraph (A) shall apply to acts (or failures to act) after the date of the enactment of this Act. (h) EFFECTIVE DATE.—

26^sc^446V'

79sttT\4^^''

(1) Except as otherwise provided in this section, the amendments made by subsections (a), (f), and (g) of this section shall apply with respect to articles sold on or after the day after the date of the enactment of this Act. (2) For purposes of paragraph (1), an article shall not be considered sold before the day after the date of the enactment of this Act unless possession or right to possession passes to the purchaser before such day. (3) In the case of— (A) a lease, (B) a contract for the sale of an article where it is provided that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments, (C) a conditional sale, or (D) a chattel mortgage arrangement wherein it i s provided that the sale price shall be paid in installments, entered into on or before the date of the enactment of this Act, payments made after such date with respect to the article leased or sold shall, for purposes of this subsection, be considered as payments made with respect to an article sold after such date, if the lessor or vendor establishes that the amount of payments payable after such date with respect to such article has been reduced by an amount equal to that portion of the tax applicable with respect to the lease or sale of such article which is due and payable after such date. If the lessor or vendor does not establish that the payments have been so reduced, they shall be treated as payments made in respect of an article sold before the day after the date of the enactment of this Act. SEC. 402. CREDIT AGAINST TAX ON COIN-OPERATED GAMING DEVICES. (a) ALLOWANCE OF CREDIT FOR STATE TAXES.—Subchapter B of chap^^^ ^^ (relating to occupational tax on coin-operated devices) is amended by adding at the end thereof the following new section: "SEC. 4464. CREDIT FOR STATE-IMPOSED TAXES. " (a) IN GENERAL.—There shall be allowed as a credit against the ^^^ imposed by section 4461 with respect to any coin-operated gaming device for any j^ear an amount equal to the amount of State tax paid for such year with respect to such device by the person liable for the tax imposed by section 4461, if such State tax (1) is paid under a law of the State in which the place or premises on which such device is maintained or used is located, and (2) is similar to the tax imposed by section 4461 (including a tax, other than a general personal property tax, imposed on such device). "(b)

LIMITATIONS.— "(1) DEVICES MUST BE LEGAL UNDER STATE LAW.—Credit

shall be allowed under subsection (a) for a tax imposed by a State only if the maintenance of the coin-operated gaming device by the person liable for the tax imposed by section 4461 on the place or premises occupied by him does not violate any law of such State.

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Page:United States Statutes at Large Volume 85.djvu/565

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PUBLIC LAW 92-178-DEC. 10, 1971

535

"(£) CREDIT NOT TO EXCEED SO PERCENT OF TAX.—The credit under subsection (a) with respect to any coin-operated gaming device shall not exceed 80 percent of the tax imposed by section 4461 with respect to such device. 73 Stat. 620; "(c) SPECIAL PROVISIONS FOR PAYMENT OF TAX.—Under regulations ^^2rusc 446i,. prescribed by the Secretary or his delegate, a person who believes he will be entitled to a credit under subsection (a) with respect to any coin-operated gaming device for any year shall, for purposes of this subtitle and subtitle F, satisfy his liability for the tax imposed by ^oo^i^^^ ^°'*^" section 4461 with respect to such device for such year if— "(1) on or before the date prescribed by law for payment of the tax imposed by section 4461 with respect to such device for such year, he has paid the amount of such tax reduced by the amount of the credit which he estimates will be allowable under subsection (a) with respect to such device for such year, and "(2) on or before the last day of such year, pays the amount (if any) by which the credit for such year is less than the credit estimated under paragraph (1). " (b) CLERICAL AMENDMENT.—The table of sections for subchapter B of chapter 36 is amended by adding at the end thereof the following new item: "Sec. 4464. Credit for State-imposed taxes." (c) EFFECTIVE DATE.—The amendments made by subsections (a)

and (b) shall apply on and after July 1, 1972.

TITLE

V—DOMESTIC INTERNATIONAL SALES CORPORATIONS

SEC. 501. DOMESTIC INTERNATIONAL SALES CORPORATIONS. Subchapter N of chapter 1 (relating to income from sources without 76^|^t!'ioo6^^' the United States) is amended by adding at the end thereof the fol- so stat! ises! lowing new part: ^e use sei.

"PART IV—DOMESTIC INTERNATIONAL SALES CORPORATIONS "Subpart A. Treatment of qualifying corporations. "Subpart B. Treatment of distributions to shareholders.

"Subpart A—Treatment of Qualifying Corporations "Sec. 991. Taxation of a domestic international sales corporation. "See. 992. Requirements of a domestic international sales corporation. "Sec. 993. Definitions and special rules. "Sec. 994. Inter-company pricing rules. "SEC. 991. TAXATION OF A DOMESTIC INTERNATIONAL SALES CORPORATION.

"For purposes of the taxes imposed by this subtitle upon a D I S C (as defined in section 992(a)), a D I S C shall not be subject to the taxes imposed by this subtitle except for the tax imposed by chapter 5. "SEC. 992. REQUIREMENTS OF A DOMESTIC INTERNATIONAL SALES CORPORATION. " (a) DEFINITION of ' D I S C and 'FORMER D I S C — "(1) D I S C — For purposes of this title, the term ' D I S C means, with respect to any taxable year, a corporation which is incorporated under the laws of any State and satisfies the following conditions for the taxable year: " (A) 95 percent or more of the gross receipts (as defined

^""•^' sfi^isr^^idQ^i^' 26 USC 1491.

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Page:United States Statutes at Large Volume 85.djvu/566

 536 Post, p. 538.

PUBLIC LAW 92-178-DEC. 10, 1971

[85 STAT.

ijj section 993(f)) of such corporation consist of qualified export receipts (as defined in section 993(a)), " (B) the adjusted basis of the qualified export assets (as defined in section 993(b)) of the corporation at the close of of the taxable year equals or exceeds 95 percent of the sum of the adjusted basis of all assets of the corporation at the close of the taxable year, " (C) such corporation does not have more than one class of stock and the par or stated value of its outstanding stock is at least $2,500 on each day of the taxable year, and " (D) the corporation has made an election pursuant to subsection (b) to be treated as a D I S C and such election is in effect for the taxable year, "(2) STATUS AS D I S C AFTER HAVING FILED A EETURN AS A DISC.—The Secretary or his delegate shall prescribe regulations setting forth the conditions under and the extent to which a corporation which has filed a return as a D I S C for a taxable year shall be treated as a D I S C for such taxable year for all purposes of this title, notwithstanding the fact that the corporation has failed to satisfy the conditions of paragraph (1). "(3) 'FORMER D I S C. — For purposes of this title, the term 'former D I S C means, with respect to any taxable year, a corporation which is not a D I S C for such year but was a D I S C in a preceding taxable year and at the beginning of the taxable year has undistributed previously taxed income or accumulated D I S C income. "(b)

ELECTION.— "(1) ELECTION.—

" (A) An election by a corporation to be treated as a D I S C shall be made by such corporation for a taxable year at any time during the 90-day period immediately preceding the beginning of the taxable year, except that the Secretary or his delegate may give his consent to the making of an election at such other times as he may designate. " (B) Such election shall be made in such manner as the Secretary or his delegate shall prescribe and shall be valid only if all persons who are shareholders in such corporation on the first day of the first taxable year for which such election is effective consent to such election. "(2) EFFECT OF ELECTION.—If a corporation makes an election under paragraph (1), then the provisions of this part shall apply to such corporation for the taxable year of the corporation for which made and for all succeeding taxable years and shall apply to each person who at any time is a shareholder of such corporation for all periods on or after the first day of the first taxable year of the corporation for which the election is effective. "(S) TERMINATION OF ELECTION.—

" (A) REVOCATION.—An election under this subsection made by any corporation may be terminated by revocation of such election for any taxable year of the corporation after the first taxable year of the corporation for which the election is effective. A termination under this paragraph shall be effective with respect to such election— "(i) for the taxable year in which made, if made at any time during the first 90 days of such taxable year, or "(ii) for the taxable year following the taxable year in which made, if made after the close of such 90 days, and for all succeeding taxable years of the corporation. Such termination shall be made in such manner as the Secretary or his delegate shall prescribe by regulations.

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text:
The Age of Ice

 * (unattributed)

title: The Age of Ice


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Page:United States Statutes at Large Volume 85.djvu/567

 85 STAT. ]

PUBLIC LAW 92-178~DEC. 10, 1971

" (B) CONTINUED FAILURE TO BE DISC.—If a corporation is not a D I S C for each of any 5 consecutive taxable years of the corporation for which an election under this subsection is effective, the election shall be terminated and not be in effect for any taxable year of the corporation after such 5th year. " (c) DISTRIBUTIONS TO MEET QUALIFICATION REQUIREMENTS.—

"(1) IN GENERAL.—Subject to the conditions provided by paragraph (2), a corporation which for a taxable year does not satisfy a condition specified in paragraph (1)(A) (relating to gross receipts) or (1)(B) (relating to assets) of subsection (a) shall nevertheless be deemed to satisfy such condition for such year if it makes a pro rata distribution of property after the close of the taxable year to its shareholders (designated at the time of such distribution as a distribution to meet qualification requirements) with respect to their stock in an amount which is equal to— " (A) if the condition of subsection (a)(1)(A) is not satisfied, the portion of such corporation's taxable income attributable to its gross receipts which are not qualified export receipts for such year, " (B) if the condition of subsection (a)(1)(B) is not satisfied, the fair market value of those assets which are not qualified export assets on the last day of such taxable year, or " (C) if neither of such conditions is satisfied, the sum of the amounts required by subparagraphs (A) and (B). "(2) REASONABLE CAUSE FOR FAILURE.—The conditions under paragraph (1) shall be deemed satisfied in the case of a distribution made under such paragraph— " (A) if the failure to meet the requirements of subsection (a)(1)(A) or (B), and the failure to make such distribution prior to the date on which made, are due to reasonable cause; and " (B) the corporation pays, within the 30-day period beginning with the day on which such distribution is made, to the Secretary or his delegate, if such corporation makes such distribution after the 15th day of the 9th month after the close of the taxable year, an amount determined by multiplying (i) the amount equal to 4i/4 percent of such distribution, by (ii) the number of its taxable years which begin after the taxable year with respect to which such distribution is made and before such distribution is made. For purposes of this title, any payment made pursuant to this paragraph shall be treated as interest. " (3) CERTAIN DISTRIBUTIONS MADE WITHIN 8i MONTHS AFTER CLOSE OF TAXABLE YEAR DEEMED FOR REASONABLE CAUSE.—A distri-

bution made on or before the 15th day of the 9th month after the close of the taxable year shall be deemed for reasonable cause for purposes of paragraph (2)(A) if— " (A) at least 70 percent of the gross receipts of such corporation for such taxable year consist of qualified export receipts, and " (B) the adjusted basis of the qualified export assets held by the corporation on the last day of each month of the taxable year equals or exceeds 70 percent of the sum of the adjusted basis of all assets held by the corporation on such day.

537

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Page:United States Statutes at Large Volume 85.djvu/568

 538

26^scr'so\^^* 76 Stat. 977. 73 Stat. 112. 26 USC 8 0 1.

68A Stat. 268.

72 Stat. 1650.

PUBLIC LAW 92-178-DEC. 10, 1971

[85 STAT.

" (d) INELIGIBLE CORPORATIONS.—The following corporations shall not be eligible to be treated as a D I S C — " ^ corporation exempt from tax by reason of section 501, "(2) a personal holding company (as defined in section 542), "^3^ g^ financial institution to which section 581 or 593 applies, "(4) an insurance company subject to the tax imposed by subchapter L, "(5) a regulated investment company (as defined in section 851(a)),

" (6) a China Trade Act corporation receiving the special deduction provided in section 941(a), or "(7) an electing small business corporation (as defined in section 1371(b)). " (e) COORDINATION W I T H PERSONAL HOLDING COMPANY PROVISIONS IN CASE or CERTAIN PRODUCED F I L M EENTS.—If—

78 Stat. 8 1.

"(1) a corporation (hereinafter in this subsection referred to as 'subsidiary') was established to take advantage of the provisions of this part, and "(2) a second corporation (hereinafter in this subsection referred to as 'parent') throughout the taxable year owns directly at least 80 percent of the stock of the subsidiary, then, for purposes of applying subsection (d)(2) and section 541 (relating to personal holding company tax) to the subsidiary for the taxable year, there shall be taken into account under section 543(a)(5) (relating to produced film rents) any interest in a film acquired by the parent and transferred to the subsidiary as if such interest were acquired by the subsidiary at the time it was acquired by the parent. "SEC. 993. DEFINITIONS. " (a) QUALIFIED EXPORT RECEIPTS.— " (1) GENERAL RULE.—For purposes

76 Stat. 1006.

of this part, except as provided by regulations under paragraph (2), the qualified export receipts of a corporation are— " (A) gross receipts from the sale, exchange, or other disposition of export property, " (B) ^ross receipts from the lease or rental of export property, which is used by the lessee of such property outside the United States, " (C) gross receipts for services which are related and subsidiary to any qualified sale, exchange, lease, rental, or other disposition of export property by such corporation, " (D) gross receipts from the sale, exchange, or other disposition of qualified export assets (other than export property), " (E) dividends (or amounts includible in gross income under section 951) with respect to stock of a related foreign export corporation (as defined in subsection (e)), " (F) interest on any obligation which is a qualified export asset, " (G) gross receipts for engineering or architectural services for construction projects located (or proposed for location) outside the United States, and " (H) gross receipts for the performance of managerial services in furtherance of the production of other qualified export receipts of a D I S C. " (2) EXCLUDED RECEIPTS.—The Secretary or his delegate may

under regulations designate receipts from the sale, exchange, lease, rental, or other disposition of export property, and from services, as not being receipts described in paragraph (1) if he determines

�


text:
Author:Roy Rockwood

Works

 * Bomba, the Jungle Boy series, 20 books published between 1926 and 1938
 * Dave Dashaway series, 5 books published between 1913 and 1915
 * Dave Fearless series, 17 books published between 1918 and 1927
 * Deep Sea series, 4 books published between 1905 and 1908
 * Great Marvel series, 9 books published between 1906 and 1935
 * Speedwell Boys series, 5 books published between 1913 and 1915

title: Author:Roy Rockwood


text:
Page:United States Statutes at Large Volume 85.djvu/569

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PUBLIC LAW 92-178-DEC. 10, 1971

539

that such sale, exchange, lease, rental, or other disposition, or furnishing of services— " (A) is for ultimate use in the United States; " (B) is accomplished by a subsidy granted by the United States or any instrumentality thereof; " (C) is for use by the United States or any instrumentality thereof where the use of such export property or services is required by law or regulation. "Qualified x For purposes of this part, the term 'q[ualified export receipts' does port r e c e i p t s e". not include receipts from a corporation which is a D I S C for its taxable year in which the receipts arise and which is a member of a controlled group (as defined in paragraph (3)) which includes the recipient corporation. "(3) DEFINITION OF CONTROLLED GROUP.—For purposes of this part, the term 'controlled group' has the meaning assigned to such term by section 1563(a), except that the phrase 'more than 50 ^^ Stat. 120. percent' shall be substituted for the phrase 'at least 80 percent' each place it appears therein, and section 1563(b) shall not. apply. " (b) QUALIFIED EXPORT ASSETS.—For purposes of this part, the qualified export assets of a corporation are— " (1) export property (as defined in subsection (c)); "(2) assets used primarily in connection with the sale, lease, rental, storage, handling, transportation, packaging, assembly, or servicing of export property, or the performance of engineering or architectural services described in subparagraph (G) of subsection (a)(1) or managerial services in furtherance of the production of qualified export receipts described in subparagraphs (A), (B), (C), and (G) of subsection (a)(1); "(3) accounts receivable and evidences of indebtedness which arise by reason of transactions of such corporation described in subparagraph (A), (B), (C), (D), (G), or (H), of subsection (a)(1); "(4) money, bank deposits, and other similar temporary investments, which are reasonably necessary to meet the working ^ capital requirements of such corporation; "(5) obligations arising in connection with a producer's loan (as defined in subsection (d)); " (6) stock or securities of a related foreign export corporation (as defined in subsection (e)); "(7) obligations issued, guaranteed, or insured, in whole or in part, by the Export-Import Bank of the United States or the Foreign Credit Insurance Association in those cases where such obligations are acquired from such Bank or Association or from the seller or purchaser of the goods or services with respect to which such obligations arose; "(8) obligations issued by a domestic corporation organized solely for the purpose of financing sales of export jDroperty pursuant to an agreement with the Export-Import Bank of the United States under which such corporation makes export loans guaranteed by such bank; and "(9) amounts (other than reasonable working capital) on deposit in the United States that are utilized during the period provided for in, and otherwise in accordance with, regulations prescribed by the Secretary or his delegate to acquire other qualified export assets. " (c) EXPORT PROPERTY.—

"(1) IN GENERAL.—For purposes of this part, the term 'export property' means property— " (A) manufactured, produced, grown, or extracted in the United States by a person other than a DISC,

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Page:United States Statutes at Large Volume 85.djvu/570

 540

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PUBLIC LAW 92-178-DEC. 10, 1971

[85 STAT.

" (B) held primarily for sale, lease, or rental, in the ordinary course of trade or business, by, or to, a D I S C, for direct use, consumption, or disposition outside the United States, and " (C) not more than 50 percent of the fair market value of which is attributable to articles imported into the United States. I n applying subparagraph (C), the fair market value of any article imported into the United States shall be its appraised value, as determined by the Secretary or his delegate under section 402 or 402a of the Tariff Act of 1930 (19 U.S.C. sec. 1401a or 1402) iucomiection withitsimportation. "(2) EXCLUDED PROPERTY.-—For purposes of this part, the term 'export property' does not include— " (A) property leased or rented by a D I S C for use by any member of a controlled group (as defined in subsection (a)(3)) which includes the D I S C, or " (B) patents, inventions, models, designs, formulas, or processes, whether or not patented, copyrights (other than films, tapes, records, or similar reproductions, for commercial or home use), good will, trademarks, trade brands, franchises, or other like property. "(3) PROPERTY I N SHORT SUPPLY.—If the President determines that the supply of any property described in paragraph (1) is insufficient to meet the requirements of the domestic economy, he may by Executive order designate the property as in short supply. Any property so designated shall be treated as property not described in paragraph (1) during the period beginning with the date specified in the Executive order and ending with the date specified in an Executive order setting forth the President's determination that the property is no longer in short supply. "(d)

PRODUCER'S LOANS.—

" (1) IN GENERAL.—An obligation, subject to the rules provided in paragraphs (2) and (3), shall be treated as arising out of a producer's loan if— " (A) the loan, when added to the unpaid balance of all other producer's loans made by the D I S C, does not exceed the accumulated D I S C income at the beginning of the month in which the loan is made; " (B) the obligation is evidenced by a note (or other evidence of indebtedness) with a stated maturity date not more than 5 years from the date of the loan; " (C) the loan is made to a person engaged in the United States in the manufacturing, production, growing, or extraction of export property (referred to hereinafter as the 'borrower'); and " (D) at the time of such loan.it is designated as a producer's loan. "(2) LIMITATION.—An obligation shall be treated as arising out of a producer's loan only to the extent that such loan, when added to the unpaid balance of all other producer's loans to the borrower outstanding at the time such loan is made, does not exceed an amount determined by multiplying the sum of— " (A) the amount of the iDorrower's adjusted basis determined at the beginning of the borrower's taxable year in which the loan is made, in plant, machinery, and equipment, and supporting production facilities in the United States; " (B) the amount of the borrower's property held primarily for sale, lease, or rental, to customers in the ordinary course

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Page:United States Statutes at Large Volume 85.djvu/571

 85 STAT. ]

PUBLIC LAW 92-178-DEC. 10, 1971

of trade or business, at the beginning of such taxable year; and " (C) the aggregate amount of the borrower's research and experimental expenditures (within the meaning of section 174) in the United States during all preceding taxable years beginning after December 31, 1971, by the percentage which the borrower's receipts, during the 3 taxable years immediately preceding the taxable year (but not including any taxable year commencing prior to 1972) in which the loan is made, from the sale, lease, or rental outside the United States of property which would be export property if held by a D I S C is of the gross receipts during such 3 taxable years from the sale, lease, or rental of property held by such borrower primarily for sale, lease, or rental to customers in the ordinary course of the trade or business of such borrower. "(3) INCREASED INVESTMENT REQUIREMENT.—An obligation shall be treated as arising out of a producer's loan in a taxable year only to the extent that such loan, when added to the unpaid balance of all other producer's loans to the borrower made during such taxable year, does not exceed an amount equal to— " (A) the amount by which the sum of the adjusted basis of assets described in paragraph (2)(A) and (B) on the last day of the taxable year in which the loan is made exceeds the sum of the adjusted basis of such assets on the first day of such taxable year; plus " (B) the aggregate amount of the borrower's research and experimental expenditures (within the meaning of section 174) in the United States during such taxable year.

541

se'us^c \*74^'

" (4) SPECIAL LIMITATION IN THE CASE or DOMESTIC FILM MAKER.—

" (A) IN GENERAL.—In the case of a borrower who is a domestic film maker and who incurs an obligation to a D I S C for the making of a film, and such D I S C is engaged in the trade or business of selling, leasing, or renting films which are export property, the limitation described in paragraph (2) may be determined (to the extent provided under regulations prescribed by the Secretary or his delegate) on the basis of— " (i) the sum of the amounts described in subparagraphs (A), (B), and (C) thereof plus reasonable estimates of all such amounts to be incurred at any time by the borrower with respect to films which are commenced within the taxable year in which the loan is made, and "(ii) the percentage which, based on the experience of producers of similar films, the annual receipts of such producers from the sale, lease, or rental of such films outside the United States is of the annual gross receipts of such producers from the sale, lease, or rental of such films. " (B) DOMESTIC FILM MAKER.—For purposes of this paragraph, a borrower is a domestic film maker with respect to a film if— "(i) such borrower is a United States person within the meaning of section 7701(a) (30), except that with respect to a partnership, all of the partners must be United States persons, and with respect to a corporation, all of its officers and at least a majority of its directors must be United States persons; "(ii) such borrower is engaged in the trade or business of making the film with respect to which the loan is made;

76 Stat. 988.

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Page:United States Statutes at Large Volume 85.djvu/572

 542

PUBLIC LAW 92-178-DEC. 10, 1971

[85 STAT.

" (iii) the studio, if any, used or to be used for the taking of photographs and the recording of sound incorporated into such film is located in the United States; "(iv) the aggregate playing time of portions of such film photographed outside the United States does not or will not exceed 20 percent of the playing time of such film; and " (v) not less than 80 percent of the total amount paid or to be paid for services performed in the making of such film IS paid or to be paid to persons who are United States persons at the time such services are performed or consists of amounts which are fully taxable by the United States. "(C)

SPECIAL RULES FOR APPLICATION OF SUBPARAGRAPH

(B)(v).—For purposes of clause (v) of subparagraph (B) — "(i) there shall not be taken into account any amount which is contingent upon receipts or profits of the film and which is fully taxable by the United States (within the meaning of clause ( i i)); and "(ii) any amount paid or to be paid to a United States person, to a non-resident alien individual, or to a corporation which furnishes the services of an officer or employee to the borrower with respect to the making of a film, shall be treated as fully taxable by the United States only if the total amount received by such person, individual, officer, or employee for services performed in the making of such film is fully included in gross income for purposes of this chapter. "(e) RELATED FOREIGN EXPORT CORPORATION.—In determining whether a corporation (hereinafter in this subsection referred to as 'the domestic corporation') is a DISC— "(1)

FOREIGN INTERNATIONAL SALES CORPORATION.—A foreign

corporation is a related foreign export corporation if— " (A) stock possessing more than 50 percent of the total combined voting power of all classes of stock entitled to vote is owned directly by the domestic corporation, " (B) 95 percent or more of such foreign corporation's gross receipts for its taxable year ending with or within the taxable year of the domestic corporation consists of qualified export receipts described in subparagraphs (A), (B), (C), and (D) of subsection (a)(1) and interest on any obligation described in paragraphs (3) and (4) of subsection (b), and " (C) the adjusted basis of the qualified export assets (described in paragraphs (1), (2), (3), and (4) of subsection (b)) held by such foreign corporation at the close of such taxable year equals or exceeds 95 percent of the sum of the adjusted basis of all assets held by it at the close of such taxable year. "(2) REAL PROPERTY HOLDING COMPANY.—A foreign corporation is a related foreign export corporation if— " (A) stock possessing more than 50 percent of the total combined voting power of all classes of stock entitled to vote is owned directly by the domestic corporation, and " (B) its exclusive function is to hold real property for the exclusive use (under a lease or otherwise) of the domestic corporation. "(3) ASSOCIATED FOREIGN CORPORATION.—A foreign corporation is a related foreign export corporation if—

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Page:United States Statutes at Large Volume 85.djvu/573

 85 STAT. ]

PUBLIC LAW 92-178-DEC. 10, 1971

" (A) less than 10 percent of the total combined voting power of all classes of stock entitled to vote of such foreign corporation is owned (within the meaning of section 1563 (d) and (e)) by the domestic corporation or by a controlled group of corporations (within the meaning of section 1563) of which the domestic corporation is a member, and " (B) the ownership of stock or securities in such foreign corporation by the domestic corporation is determined (under regulations prescribed by the Secretary or his delegate) to be reasonably in furtherance of a transaction or transactions giving rise to qualified export receipts of the domestic corporation. " (f) GROSS RECEIPTS.—For purposes of this part, the term 'gross receipts' means the total receipts from the sale, lease, or rental of property held primarily for sale, lease, or rental in the ordinary course of trade or business, and gross income from all other sources. I n the case of commissions on the sale, lease, or rental of property, the amount taken into account for purposes of this part as gross receipts shall be the gross receipts on the sale, lease, or rental of the property on M'hich such commissions arose. " (g) UNITED STATES DEFINED.—For purposes of this part, the term 'Laiited States' includes the Commonwealth of Puerto Rico and the possessions of the United States. "SEC. 994. INTER-COMPANY PRICING RULES. " (a) IN GENERAL.—In the case of a sale of export property to a D I S C by a person described in section 482, the taxable income of such D I S C and such person shall be based upon a transfer price which would allow such D I S C to derive taxable income attributable to such sale (regardless of the sales price actually charged) in an amount which does not exceed the greatest of— "(1) 4 percent of the oualified export receipts on the sale of such property by the D I S C plus 10 percent of the export promotion expenses of such D I S C attributable to such receipts, "(2) 50 percent of the combined taxable income of such D I S C and such person which is attributable to the qualified export receipts on such property derived as the result of a sale by the D I S C plus 10 percent of the export promotion expenses of such D I S C attributable to such receipts, or "(3) taxable income based upon the sale price actually charged (but subject to the rules provided in section 482). "(b)

RULES FOR COMMISSIONS, RENTALS, AND MARGINAL COSTING.—

The Secretary or his delegate shall prescribe regulations setting forth— "(1) rules which are consistent with the rules set forth in subsection (a) for the application of this section in the case of commissions, rentals, and other income, and "(2) rules for the allocation of expenditures in computing combined taxable income under subsection (a)(2) in those cases where a D I S C is seeking to establish or maintain a market for export property. "(c) EXPORT PROMOTION EXPENSES.—For purposes of this section, the term 'export promotion expenses' means those expenses incurred to advance the distribution or sale of export property for use, consumption, or distribution outside of the United States, but does not include income taxes. Such expenses shall also include freight expenses to the extent of 50 percent of the cost of shipping export property aboard airplanes owned and operated by United States persons or ships documented under the laws of the United States in those cases where law or regulations does not require that such property be shipped aboard such airplanes or ships.

543

78 Stat. 120, 26 USC 1563,

^^^ s*^'* ^^'^'•'

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Page:United States Statutes at Large Volume 85.djvu/574

 544

PUBLIC LAW 92-178-DEC. 10, 1971

[85 STAT.

"Subpart B—Treatment of Distributions to Shareholders "Sec. 995. Taxation of DISC income to shareholders. "Sec. 996. Rules for allocation in the case of distributions and losses. "Sec. 997. Special subchapter C rules. "SEC. 995. TAXATION OF DISC INCOME TO SHAREHOLDERS. " (a) GENERAL RULE.—^A shareholder of a D I S C or former D I S C

26^sc^*i 2^2^!'

6|A Stat. 325;

shall be subject to taxation on the earnings and profits of a D I S C as provided in this chapter, but subject to the modifications of this subpart. " (b) DEEMED DiSTRiBTJTioisrs.— "(1) DISTRIBUTIONS I N QUALIFIED YEARS.—^A shareholder of a D I S C shall be treated as having received a distribution taxable as a dividend with respect to his stock in an amount which is equal to his pro rata share of the sum (or, if smaller, the earnings and profits for the taxable year) of— " (A) the gross interest derived during the taxable year from producer's loans, " (B) the gain recognized by the D I S C during the taxable year on the sale or exchange of property, other than property which in the hands of the D I S C is a qualified export asset, previously transferred to it in a transaction in which gain was not recognized in whole or in part, but only to the extent that the transferor's gain on the previous transfer was not recognized, " (C) the gain (other than the gain described in subparagraph (B)) recognized by the D I S C during the taxable year on the sale or exchange of property (other than property which in the hands of the D I S C is stock in trade or other property described in section 1221(1)) previously transferred to it in a transaction in which gain was not recognized in whole or in part, but only to the extent that the transferor's gain on the previous transfer was not recognized and would have been treated as gain from the sale or exchange of property which is neither a capital asset nor property described jj^ section 1231 if the property had been sold or exchanged rather than transferred to the D I S C, " (D) one-half of the excess of the taxable income of the D I S C for the taxable year, before reduction for any distributions during the year, over the sum of the amounts deemed distributed for the taxable year under subparagraphs (A), (B), and (C), and " (E) the amount of foreign investment attributable to producer's loans (as defined in subsection (d)) of a D I S C for the taxable year. Distributions described in this paragraph shall be deemed to be received on the last day of the taxable year of the D I S C in which the gross income (taxable income in the case of subparagraph (D)) was derived. I n the case of a distribution described in subparagraph (E), earnings and profits for the taxable year shall include accumulated earnings and profits. " (2) DISTRIBUTIONS UPON DISQUALIFICATION.—

Ante, p. 535.

" (A) A shareholder of a corporation which revoked its election to be treated as a D I S C or failed to satisfy the conditions ^f section 992(a)(1) for a taxable year shall be deemed to have received (at the time specified in subparagraph (B)) a distribution taxable as a dividend equal to his pro rata share of the D I S C income of such corporation accumulated during

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Page:United States Statutes at Large Volume 85.djvu/575

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PUBLIC LAW 92-178-DEC. 10, 1971

545

the immediately preceding consecutive taxable years for which the corporation was a DISC. " (B) Distributions described in subparagraph (A) shall be deemed to be received in equal installments on the last day of each of the 10 taxable years of the corporation following the year of the termination or disqualification described in subparagraph (A) (but in no case over more than the number of immediately preceding consecutive taxable years during which the corporation was a D I S C). "(c) GAIN ON DISPOSITION OF STOCK I N A DISC.—If a shareholder

disposes of stock in a D I S C or former D I S C, any gain recognized on such disposition shall be included in gross income as a dividend to the extent of the accumulated D I S C income of such D I S C or former D I S C which is attributable to such stock and which was accumulated in taxable years of such corporation during the period or periods the stock disposed of was held by such shareholder. If stock of the D I S C or former D I S C is disposed of in a transaction in which the separate corporate existence of the D I S C or former D I S C is terminated other than by a mere change in place of organization, however ejffected, any gain realized on the disposition of such stock in the transaction shall be recognized notwithstanding any other provision of this title to the extent of the accumulated D I S C income of such D I S C or former D I S C which is attributable to such stock and which was accumulated in taxable years of such corporation during the period or periods the stock disposed of was held by the stockholder which disposed of such stock, and such gain shall be included in gross income as a dividend. " (d) FOREIGN INVESTMENT ATTRIBUTABLE TO DISC.EARNINGS.—For

the purposes of this part— "(1) IN GENERAL.—The amount of foreign investment attributable to producer's loans of a D I S C for a taxable year shall be the smallest of— " (A) the net increase in foreign assets by members of the controlled group (as defined in section 993(a)(3)) which includes the D I S C, " (B) the actual foreign investment by domestic members of such group, or " (C) the amount of outstanding producer's loans by such D I S C to members of such controlled group. "(2) N E T INCREASE I N FOREIGN ASSETS.—The term 'net increase in foreign assets' of a controlled group means the excess of— " (A) the amount incurred by such group to acquire assets (described in section 1231(b)) located outside the United otates over, " (B) the sum of— "(i) the depreciation with respect to assets of such group located outside the United States; "(ii) the outstanding amount of stock or debt obligations of such group issued after December 31, 1971, to persons other than the United States persons or any member of such group; "(iii) one-half the earnings and profits of foreign members of such group and foreign branches of domestic members of such group; "(iv) one-half the royalties and fees paid by foreign members of such group to domestic members of such group; and "(v) the uncommitted transitional funds of the group as determined under paragraph (4).

Ante,

p. 538.

68A Stat. 325; 26 USC u'si.

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Page:United States Statutes at Large Volume 85.djvu/576

 546

il°?M^*^'^

member.'

Ante, p. 538, ber,"°'^^^^" '"^"''

Lii",^'^ assets.'

PUBLIC LAW 92-178-DEC. 10, 1971

[85 STAT.

For purposes of this paragraph, assets which are qualified export assets of a D I S C (or would be qualified export assets if owned by a D I S C) shall not be taken into account. Amounts described in this paragraph (other than in subparagraphs (B) (ii) and (v)) shall be taken into account only to the extent they are attributable to taxable years beginning after December 31, 1971. "(3) ACTUAL FOREIGN INVESTMENT,—The term 'actual foreign investment' by domestic members of a controlled group means the sum of— " (A) contributions to capital of foreign members of the group by domestic members of the group after December 31, 1971, " (B) the outstanding amount of stock or debt obligations of foreign members of such group (other than normal trade indebtedness) issued after December 31, 1971, to domestic members of such group, "(C) amounts transferred by domestic members of the group after I>ecember 31, 1971, to foreign branches of such members, and " (D) one-half the earnings and profits of foreign members of such group and foreign branches of domestic members of such group for taxable years beginning after December 31, 1971. A s used i n t h i s subsection, the term 'domestic m e m b e r ' means a domestic corporation which is a m e m b e r of a controlled g r o u p ( a s defined in section 9 9 3 (a)(3)), and the term 'foreign member' means a foreign corporation which is a member of such a controlled group. "(4) UNCOMMITTED TRANSITIONAL FUNDS.—The uncommitted transitional funds of the group shall be an amount equal to the sum of— (A) the excess of— (i) the amount of stock or debt obligations of domestic members of such group outstanding on December 31, 1971, and issued on or after January 1, 1968, to persons other than United States persons or any members of such group, but only to the extent the taxpayer establishes that such amount constitutes a long-term borrowing for purposes of the foreign direct investment program, over (ii) the net amount of actual foreign investment by domestic members of such group during the period that such stock or debt obligations have been outstanding; and " (B) the amount of liquid assets to the extent not included in subparagraph (A) held by foreign members of such group and foreign branches of domestic members of such group on October 31, 1971, in excess of their reasonable working capital needs on such date. For purposes of this paragraph, the term 'liquid assets' means money, bank deposits (not including time deposits), and indebtedness of 2 years or less to maturity on the date of acquisition; and the actual foreign investment shall be determined under paragraph (3) without regard to the date in subparagraph (A) of such paragraph and without regard to subparagraph (D) of such paragraph. "(5) SPECIAL RULE.—Under regulations prescribed by the Secretary or his delegate the determinations under this subsection shall be made on a cumulative basis with proper adjustments for amounts previously taken into account.

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Page:United States Statutes at Large Volume 85.djvu/577

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PUBLIC LAW 92-178-DEC. 10, 1971

547

"SEC. 996. RULES FOR ALLOCATION IN THE CASE OF DISTRIBUTIONS AND LOSSES. " (a) RULES FOR ACTUAL DISTRIBUTIONS AND CERTAIN DEEMED DISTRIBUTIONS.—

"(1) IN GENERAL.—Any actual distribution (other than a distribution described in paragraph (2) or to which section 995(c) applies) to a shareholder by a D I S C (or former D I S C) which is made out of earnings and profits shall be treated as made— " (A) first, out of previously taxed income, to the extent thereof, " (B) second, out of accumulated D I S C income, to the extent thereof, and " (C) finally, out of other earnings and profits. " (2) QUALIFYING

DISTRIBUTIONS.—Any

actual

distribution

made pursuant to section 992(c) (relating to distributions to meet qualification requirements), and any deemed distribution pursuant to section 9 9 5 (b)(1)(E) (relating to foreign investment attributable to producer's loans), shall be treated as made— " (A) first, out of accumulated D I S C income, to the extent thereof, " (B) second, out of the earnings and profits described in paragraph (1)(C), to the extent thereof, and " (C) finally, out of previously taxed income. " (3) EXCLUSION FROM GROSS INCOME.—Amounts distributed out of previously taxed income shall be excluded by the distributee from gross income except for gains described in subsection (e)(2), and shall reduce the amount of the previously taxed income. " (b) ORDERING RULES FOR LOSSES.—If for any taxable year a D I S C, or a former D I S C, incurs a deficit in earnings and profits, such deficit shall be chargeable— "(1) first, to earnings and profits described in subsection (a)(1)(C), to the extent thereof, "(2) second, to accumulated D I S C income, to the extent thereof, and "(3) finally, to previously taxed income, except that a deficit in earnings and profits shall not be applied against accumulated D I S C income which has been determined is to be deemed distributed to the shareholders (pursuant to section 995(b)(2)(A)) as a result of a revocation of election or other disqualification. "(c) PRIORITY OF DISTRIBUTIONS.—Any actual distribution made during a taxable year shall be treated as being made subsequent to any deemed distribution made during such year. Any actual distribution made pursuant to section 992(c) (relating to distributions to meet qualification requirements) shall be treated as being made before any other actual distributions during the taxable year. " (d) SUBSEQUENT EFFECT OF PREVIOUS DISPOSITION OF D I S C STOCK.— " (1) SHAREHOLDER PREVIOUSLY TAXED INCOME ADJUSTMENT.—

If— " (A) gain with respect to a share of stock of a D I S C or former D I S C is treated under section 995(c) as a dividend or as gain from the sale or exchange of property which is not a capital asset, and " (B) any person subsequently receives an actual distribution maide out of accumulated D I S C income, or a deemed distribution made pursuant to section 995(b)(2), with respect to such share, 75-432 O - 72 - 37

^"'^' P* S'^'*-

^n^e, p. 535.

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PUBLIC LAW 92-178-DEC. 10, 1971

such person shall treat such distribution in the same manner as a distribution from previously taxed income to the extent that (i) the gain referred to in subparagraph (A), exceeds (ii) any other amounts with respect to such share which were treated under this paragraph as made from previously taxed income. I n applying this paragraph with respect to a share of stock in a D I S C or former D I S C, gain on the acquisition of such share by the D I S C or former D I S C or gain on a transaction prior to such acquisition shall not be considered gain referred to in subparagraph (A). "(2) CORPORATE ADJUSTMENT U P O N REDEMPTION.—If section 995(c) applies to a redemption of stock in a D I S C or former D I S C, the accumulated D I S C income shall be reduced by an amount equal to the gain described in section 995(c) with respect to such stock which is (or has been) treated as gain from the sale or exchange of property which is not a capital asset, except to the extent distributions with respect to such stock have been treated under paragraph (1). "(e)

84^s t ^^fsae^^^' 26 u'sc 2032.

[85 STAT.

ADJUSTMENT TO BASIS.— "(1) ADDITIONS TO BASIS.—Amounts

representing deemed distributions as provided in section 995(b) shall increase the basis of the stock with respect to which the distribution is made. "(2) REDUCTIONS OF BASIS.—The portion of an actual distribution made out of previously taxed income shall reduce the basis of the stock with respect to which it is made, and to the extent that it exceeds the adjusted basis of such stock, shall be treated as gain from the sale or exchange of property. I n the case of stock includible in the gross estate of a decedent for which an election ^^ made under section 2032 (relating to alternate valuation), this paragraph shall not apply to any distribution made after the date of the decedent's death and before the alternate valuation date provided by section 2032. " (f) DEFINITIONS OF DIVISIONS OF EARNINGS AND PROFITS.—For purposes of this part: "(1) D I S C INCOME.—The earnings and profits derived by a corporation during a taxable year in which such corporation is a D I S C, before reduction for any distributions during the year, but reduced by amounts deemed distributed under section 995(b)(1), shall constitute the D I S C income for such year. The earnings and profits of a D I S C for a taxable year include any amounts includible in such D I S C ' S gross income pursuant to section 951(a) for such year. Accumulated D I S C income shall be reduced by deemed distributions under section 995(b)(2). " (2) PREVIOUSLY TAXED INCOME.—Earnings and profits deemed

distributed under section 995(b) for a taxable year shall constitute previously taxed income for such year. "(3) OTHER EARNINGS AND PROFITS.—The earnings and profits for a taxable year which are described in neither paragraph (1) nor (2) shall constitute the other earnings and profits for such year. " (g) EFFECTIVELY CONNECTED INCOME.—In the case of a shareholder who is a nonresident alien individual or a foreign corporation, trust, or estate, gains referred to in section 995(c) and all distributions out of accumulated D I S C income including deemed distributions shall be treated as gains and distributions which are effectively connected with the conduct of a trade or business conducted through a permanent establishment of such shareholder within the United States.

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text:
Page:United States Statutes at Large Volume 85.djvu/579

 85 STAT. ]

PUBLIC LAW 92-178-DEC. 10, 1971

"SEC. 997. SPECIAL SUBCHAPTER C RULES. "For purposes of applying the provisions of subchapter C of chapter 1, any distribution in property to a corporation by a D I S C or former D I S C which is made out of previously taxed income or accumulated D I S C income shall— " (1) be treated as a distribution in the same amount as if such distribution of property were made to an individual, and "(2) have a basis, in the hands of the recipient corporation, equal to the amount determined under paragraph (1)." SEC. 502. DEDUCTIONS, CREDITS, ETC. (a) DivnjENDS RECEIVED DEDUCTION.—Section 246 (relating to rules applying to deductions for dividends received) is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following: " (d) DIVIDENDS FROM A D I S C OR FORMER DISC.—No deduction shall be allowed under section 243 in respect of a dividend from a corporation which is a D I S C or former D I S C (as defined in section 992(a)) to the extent such dividend is paid out of the corporation's accumulated D I S C income or previously taxed income, or is a deemed distribution pursuant to section 995(b)(1). " (b) FOREIGN TAX CREDIT.—

(1) Section 901(d) (relating to corporations treated as foreign corporations) is amended by adding at the end thereof the following: "For purposes of this subpart, dividends from a D I S C or former D I S C (as defined in section 992(a)) shall be treated as dividends from a foreign corporation to the extent such dividends are treated under part I as income from sources without the United States." (2) The heading of section 904(f) and paragraph (1) of section 904(f) (relating to limitation on foreign tax credit) are amended to read as follows: " (f) APPLICATION or SECTION I N CASE or CERTAIN INTEREST INCOME AND DIVIDENDS FROM A D I S C OR FORMER DISC.—

"(1) IN GENERAL.—The provisions of subsections (a), (c), (d), and (e) of this section shall be applied separately with respect to each of the following items of income— " (A) the interest income described in paragraph (2), " (B) dividends from a D I S C or former D I S C (as defined in section 992(a)) to the extent such dividends are treated as income from sources without the United States, and " (C) income other than the interest income described in paragraph (2) and dividends described in subparagraph (B)." (3) Section 904(f)(3) (relating to limitation on foreign tax credit) is amended to read as follows: "(3) OVERALL LIMITATION NOT TO APPLY.—The limitation provided by subsection (a)(2) shall not apply with respect to the interest income described in paragraph (2) or to dividends described in paragraph (1)(B). The Secretary or his delegate shall by regulations prescribe the manner of application of subsection (e) with respect to cases in which the limitation provided by subsection (a)(2) applies with respect to income described in paragraph (1)(B) and (C). " (4) Section 904(f) is amended by adding at the end thereof the following new paragraph: " (5) D I S C DIVIDENDS AGGREGATED FOR PURPOSES OF PER-COUNTRY LIMITATION.—In the case of a taxpayer who for the taxable year has dividends described in paragraph (1)(B) from more than

549

68A Stat. 8 4. 26 USC 3 0 1.

68A Stat. 74; 83 Stat. 6 2 5.

Ante, p. 535. Ante, p. 544. 68A Stat. 285; 80 Stat. 1569.

76 Stat. 1002.

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