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Page:United States Statutes at Large Volume 98 Part 1.djvu/1034

 98 STAT. 986

PUBLIC LAW 98-369—JULY 18, 1984 corporation within the United States. Income described in paragraph (1) shall be treated as derived from sources within the United States.

26 USC 922.

Post, p. 991.

26 USC 923.

"SEC. 922. FSC DEFINED.

"(a) FSC DEFINED.—For purposes of this title, the term 'FSC means any corporation— "(1) which— "(A) was created or organized— "(i) under the laws of any foreign country which meets the requirements of section 927(e)(3), or "(ii) under the laws applicable to any possession of the United States, "(B) has no more than 25 shareholders at any time during the taxable year, "(C) does not have any preferred stock outstanding at any time during the taxable year, "(D) during the taxable year— "(i) maintains an office located outside the United ' States in a foreign country which meets the requirements of section 927(e)(3) or in any possession of the United States, "(ii) maintains a set of the permanent books of account (including invoices) of such corporation at such office, and "(iii) maintains at a location within the United States the records which such corporation is required to keep under section 6001, "(E) at all times during the taxable year, has a board of directors which includes at least one individual who is not a resident of the United States, and "(F) is not a member, at any time during the taxable year, of any controlled group of corporations of which a DISC is a member, and "(2) which has made an election (at the time and in the manner provided in section 927(f)(1)) which is in effect for the taxable year to be treated as a FSC. "(b) SMALL FSC DEFINED.—For purposes of this title, a FSC is a small FSC with respect to any taxable year if^ "(1) such corporation has made an election (at the time and in the manner provided in section 927(f)(1)) which is in effect for the taxable year to be treated as a small FSC, and "(2) such corporation is not a member, at any time during the taxable year, of a controlled group of corporations which includes a FSC unless such other FSC has also made an election under paragraph (1) which is in effect for such year. "SEC. 923. EXEMPT FOREIGN TRADE INCOME.

"(a) EXEMPT FOREIGN TRADE INCOME.—For purposes of this subpart— "(1) IN GENERAL.—The term 'exempt foreign trade income' means the aggregate amount of all foreign trade income of a FSC for the taxable year which is described in paragraph (2) or (3). "(2) INCOME DETERMINED WITHOUT REGARD TO ADMINISTRATIVE PRICING RULES.—In the case of any transaction to which para-

graph (3) does not apply, 32 percent of the foreign trade income

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1035

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 987

derived from such transaction shall be treated as described in this paragraph. For purposes of the preceding sentence, foreign trade income shall not include any income properly allocable to excluded property described in subparagraph (B) of section 927(a)(2) (relating to intangibles). Post, p. 991. "(3)

INCOME DETERMINED WITH REGARD TO ADMINISTRATIVE

PRICING RULES.—In the case of any transaction with respect to which paragraph (1) or (2) of section 925(a) (or the corresponding Post, p. 990. provisions of the regulations prescribed under section 925(b)) applies, 16/23 of the foreign trade income derived from such transaction shall be treated as described in this paragraph.

b

"(4) SPECIAL RULE FOR FOREIGN TRADE INCOME ALLOCABLE TO A COOPERATIVE.—

"(A) IN GENERAL.—In any case in which a qualified cooperative is a shareholder of a FSC, paragraph (3) shall be applied with respect to that portion of the foreign trade income of such FSC for any taxable year which is properly allocable to the marketing of agricultural or horticultural products (or the providing of related services) by such cooperative by substituting *100 percent' for '16/23'. "(B) PARAGRAPH ONLY TO APPLY TO AMOUNTS FSC DISTRIB-

!

UTES.—Subparagraph (A) shall not apply for any taxable year unless the FSC distributes to the qualified cooperative the amount which (but for such subparagraph) would not be treated as exempt foreign trade income. Any distribution under this subparagraph for any taxable year— "(i) shall be made before the due date for filing the return of tax for such taxable year, but "(ii) shall be treated as made on the last day of such taxable year. "(5) SPECIAL RULE FOR MILITARY PROPERTY.—Under regulations prescribed by the Secretary, that portion of the foreign trading gross receipts of the FSC for the taxable year attributable to the disposition of, or services relating to, military property (within the meaning of section 995(b)(3)(B)) which may be treated as exempt foreign trade income shall equal 50 percent of the amount which (but for this paragraph) would be treated as exempt foreign trade income. "(b) FOREIGN TRADE INCOME DEFINED.—For purposes of this subpart, the term 'foreign trade income' means the gross income of a FSC attributable to foreign trading gross receipts. "SEC. 924. FOREIGN TRADING GROSS RECEIPTS.

"(a) IN GENERAL.—Except as otherwise provided in this section, for purposes of this subpart, the term 'foreign trading gross receipts' means the gross receipts of any FSC which are— "(1) from the sale, exchange, or other disposition of export property, "(2) from the lease or rental of export property for use by the lessee outside the United States, ^, "(3) for services which are related and subsidiary to— "(A) any sale, exchange, or other disposition of export property by such corporation, or .-' "(B) any lease or rental of export property described in paragraph (2) by such corporation,

26 USC 924.

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


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Page:United States Statutes at Large Volume 98 Part 1.djvu/1036

 98 STAT. 988

PUBLIC LAW 98-369—JULY 18, 1984 "(4) for engineering or architectural services for construction projects located (or proposed for location) outside the United States, or "(5) for the performance of managerial services for an unrelated FSC or DISC in furtherance of the production of foreign trading gross receipts described in paragraph (1), (2), or (3). Paragraph (5) shall not apply to a FSC for any taxable year unless at least 50 percent of its gross receipts for such taxable year is derived from activities described in paragraph (1), (2), or (3). "(b) FOREIGN MANAGEMENT AND FOREIGN ECONOMIC PROCESS REQUIREMENTS.—

"(1) IN GENERAL.—Except as provided in paragraph (2)— "(A) a FSC shall be treated as having foreign trading gross receipts for the taxable year only if the management of such corporation during such taxable year takes place outside the United States as required by subsection (c), and "(B) a FSC has foreign trading gross receipts from any transaction only if economic processes with respect to such transaction take place outside the United States as required by subsection (d). "(2) EXCEPTION FOR SMALL FSC.—

"(A) IN GENERAL.—Paragraph (1) shall not apply with respect to any small FSC. "(B) LIMITATION ON AMOUNT OF FOREIGN TRADING GROSS RECEIPTS OF SMALL FSC TAKEN INTO ACCOUNT.—

"(i) IN GENERAL.—Any foreign trading gross receipts of a small FSC for the taxable year which exceed $5,000,000 shall not be taken into account in determining the exempt foreign trade income of such corporation and shall not be taken into account under any other provision of this subpart. "(ii) ALLOCATION OF LIMITATION.—If the foreign trading gross receipts of a small FSC exceed the limitation of clause (i), the corporation may allocate such limitation among such gross receipts in such manner as it may select (at such time and in such manner as may be prescribed in regulations). "(iii) RECEIPTS OF CONTROLLED GROUP AGGREGATED.— For purposes of applying clauses (i) and (ii), all small FSC's which are members of the same controlled group of corporations shall be treated as a single corporation. "(iv) ALLOCATION OF LIMITATION AMONG MEMBERS OF CONTROLLED GROUP.—The limitation under clause (i)

shall be allocated among the foreign trading gross receipts of small FSC's which are members of the same controlled group of corporations in a manner provided in regulations prescribed by the Secretary. "(c) REQUIREMENT THAT FSC B E MANAGED OUTSIDE THE UNITED

STATES.—The management of a FSC meets the requirements of this subsection for the taxable year if— "(1) all meetings of the board of directors of the corporation, and all meetings of the shareholders of the corporation, are outside the United States, "(2) the principal bank account of the corporation is maintained outside the United States at all times during the taxable year, and

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1037

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 989

"(3) all dividends, legal and accounting fees, and salaries of officers and members of the board of directors of the corporation disbursed during the taxable year are disbursed out of bank accounts of the corporation maintained outside the United States. "(d) REQUIREMENT THAT ECONOMIC PROCESSES TAKE PLACE OUTSIDE THE UNITED STATES.—

"(1) IN GENERAL.—The requirements of this subsection are met with respect to the gross receipts of a FSC derived from any transaction if— "(A) such corporation (or any person acting under a contract with such corporation) has participated outside the United States in the solicitation (other than advertising), the negotiation, or the making of the contract relating to such transaction, and "(B) the foreign direct costs incurred by the FSC attributable to the transaction equal or exceed 50 percent of the total direct costs attributable to the transaction. "(2) ALTERNATIVE 85-PERCENT TEST.—A corporation shall be treated as satisfying the requirements of paragraph (1)(B) with respect to any transaction if, with respect to each of at least 2 paragraphs of subsection (e), the foreign direct costs incurred by such corporation attributable to activities described in such paragraph equal or exceed 85 percent of the total direct costs attributable to activities described in such paragraph. "(3) DEFINITIONS.—For purposes of this subsection— "(A) TOTAL DIRECT COSTS.—The term 'total direct costs' means, with respect to any transaction, the total direct costs incurred by the FSC attributable to activities described in subsection (e) performed at any location by the FSC or any person acting under a contract with such FSC. "(B) FOREIGN DIRECT COSTS.—The term 'foreign direct costs' means, with respect to any transaction, the portion of the total direct costs which are attributable to activities performed outside the United States. "(4) RULES FOR COMMISSIONS, ETC.—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection and subsection (e) in the case of commissions, rentals, and furnishing of services. "(e) ACTIVITIES RELATING TO DISPOSITION OF EXPORT PROPERTY.—

The activities referred to in subsection (d) are— "(1) advertising and sales promotion, "(2) the processing of customer orders and the arranging for delivery of the export property, "(3) transportation from the time of acquisition by the FSC (or, in the case of a commission relationship, from the beginning of such relationship for such transaction) to the delivery to the customer, "(4) the determination and transmittal of a final invoice or statement of account and the receipt of payment, and "(5) the assumption of credit risk. "(f) CERTAIN RECEIPTS NOT INCLUDED IN FOREIGN TRADING GROSS RECEIPTS.— "(1) CERTAIN RECEIPTS EXCLUDED ON BASIS OF USE; SUBSIDIZED RECEIPTS AND RECEIPTS FROM RELATED PARTIES EXCLUDED.—The

term 'foreign trading gross receipts' shall not include receipts of a FSC from a transaction if—

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/1038

 98 STAT. 990

PUBLIC LAW 98-369—JULY 18, 1984 "(A) the export property or services— "(i) are for ultimate use in the United States, or "(ii) are for use by the United States or any instrumentality thereof and such use of export property or services is required by law or regulation, "(B) such transaction is accomplished by a subsidy granted by the United States or any instrumentality thereof, or "(C) such receipts are from another FSC which is a member of the same controlled group of corporations of which such corporation is a member. "(2) INVESTMENT INCOME; CARRYING CHARGES.—The term 'foreign trading gross receipts' shall not include any investment income or carrying charges.

26 USC 925.

"SEC. 925. TRANSFER PRICING RULES.

"(a) IN GENERAL.—In the case of a sale of export property to a FSC by a person described in section 482, the taxable income of such FSC and such person shall be based upon a transfer price which would allow such FSC 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) 1.83 percent of the foreign trading gross receipts derived from the sale of such property by such FSC, "(2) 23 percent of the combined taxable income of such FSC and such person which is attributable to the foreign trading gross receipts derived from the sale of such property by such FSC, or "(3) taxable income based upon the sale price actually charged (but subject to the rules provided in section 482). Paragraphs (1) and (2) shall apply only if the FSC meets the requirements of subsection (c) with respect to the sale. "(b) RULES FOR COMMISSIONS, RENTALS, AND MARGINAL COSTING.—

The Secretary 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 FSC is seeking to establish or maintain a market for export property. "(c) REQUIREMENTS FOR USE OF ADMINISTRATIVE PRICING RULES.—

Ante, p. 987.

Ante, p. 985.

A sale by a FSC meets the requirements of this subsection if— "(1) all of the activities described in section 924(e) attributable to such sale, and "(2) all of the activities relating to the solicitation (other than advertising), negotiation, and making of the contract for such sale, have been performed by such FSC (or by another person acting under a contract with such FSC). "(d) LIMITATION ON GROSS RECEIPTS PRICING RULE.—The amount determined under subsection (a)(1) with respect to any transaction shall not exceed 2 times the amount which would be determined under subsection (a)(2) with respect to such transaction. "(e) TAXABLE INCOME.—For purposes of this section, the taxable income of a FSC shall be determined without regard to section 921.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1039

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 991

"(f) SPECIAL RULE FOR COOPERATIVES.—In any case in which a qualified cooperative sells export property to a FSC, in computing the combined taxable income of such FSC and such organization for purposes of subsection (a)(2), there shall not be taken into account any deduction allowable under subsection (b) or (c) of section 1382 (relating to patronage dividends, per-unit retain allocations, and nonpatronage distributions). "SEC. 926. DISTRIBUTIONS TO SHAREHOLDERS.

.. '26 USC 926.

"(a) DISTRIBUTIONS MADE FIRST OUT OF FOREIGN TRADE INCOME.—

For purposes of this title, any distribution to a shareholder of a FSC by such FSC which is made out of earnings and profits shall be treated as made— "(1) first, out of earnings and profits attributable to foreign trade income, to the extent thereof, and "(2) then, out of any other earnings and profits. "(b) DISTRIBUTIONS BY FSC TO NONRESIDENT ALIENS AND FOREIGN CORPORATIONS TREATED AS UNITED STATES CONNECTED.—For pur-

poses of this title, any distribution by a FSC which is made out of earnings and profits attributable to foreign trade income to any shareholder of such corporation which is a foreign corporation or a nonresident alien individual shall be treated as a distribution— "(1) which is effectively connected with the conduct of a trade 1 or business conducted through a permanent establishment of such shareholder within the United States, and "(2) of income which is derived from sources within the United States. "(c) FSC INCLUDES FORMER FSC.—For purposes of this section, the term 'FSC includes a former FSC. "SEC. 927. OTHER DEFINITIONS AND SPECIAL RULES.

"(a) EXPORT PROPERTY.—For purposes of this subpart— "(1) IN GENERAL.—The term 'export property' means property— "(A) manufactured, produced, grown, or extracted in the United States by a person other than a FSC, "(B) held primarily for sale, lease, or rental, in the ordinary course of trade or business, by, or to, a FSC, 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. For purposes of subparagraph (C), the fair market value of any article imported into the United States shall be its appraised value, as determined by the Secretary under section 402 of the Tariff Act of 1930 (19 U.S.C. 1401a) in connection with its importation. t "(2) EXCLUDED PROPERTY.—The term 'export property' shall not include— "(A) property leased or rented by a FSC for use by any member of a controlled group of corporations of which such FSC is a member, "(B) patents, inventions, models, designs, formulas, or processes whether or not patented, copyrights (other than films, tapes, records, or similar reproductions, for commer-

26 USC 927.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1040

 98 STAT. 992

50 USC app. 2402.

PUBLIC LAW 98-369—JULY 18, 1984 cial or home use), good will, trademarks, trade brands, franchises, or other like property, "(C) oil or gas (or any primary product thereof), or "(D) products the export of which is prohibited or curtailed to effectuate the policy set forth in paragraph (2)(C) of section 3 of the Export Administration Act of 1979 (relating to the protection of the domestic economy). "(3) PROPERTY IN 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 not be treated as export property 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. "(4) QuAUFiED COOPERATIVE.—The term 'qualified cooperative' means any organization to which part I of subchapter T applies which is engaged in the marketing of agricultural or horticultural products. "(b) GROSS RECEIPTS.—

"(1) IN GENERAL.—For purposes of this subpart, the term 'gross receipts' means— "(A) 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 "(B) gross income from all other sources. "(2) GROSS RECEIPTS TAKEN INTO ACCOUNT IN CASE OF COMMIS-

SIONS.—In the case of commissions on the sale, lease, or rental of property, the amount taken into account for purposes of this subpart as gross receipts shall be the gross receipts on the sale, lease, or rental of the property on which such commissions arose. "(c) INVESTMENT INCOME.—For purposes of this subpart, the term 'investment income' means— "(1) dividends, "(2) interest, "(3) royalties, "(4) annuities, "(5) rents (other than rents from the lease or rental of export property for use by the lessee outside of the United States), "(6) gains from the sale or exchange of stock or securities, "(7) gains from futures transactions in any commodity on, or subject to the rules of, a board of trade or commodity exchange (other than gains which arise out of a bona fide hedging transaction reasonably necessary to conduct the business of the FSC in the manner in which such business is customarily conducted by others), "(8) amounts includible in computing the taxable income of the corporation under part I of subchapter J, and "(9) gains from the sale or other disposition of any interest in an estate or trust. "(d) OTHER DEFINITIONS.—For purposes of this subpart— "(1) CARRYING CHARGES.—The term 'carrying charges' means— "(A) carrying charges, and

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 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 993

"(B) under regulations prescribed by the Secretary, any amount in excess of the price for an immediate cash sale and any other unstated interest. "(2) TRANSACTION.—

"(A) IN GENERAL.—The term 'transaction' means— "(i) any sale, exchange, or other disposition, "(ii) any lease or rental, and "(iii) any furnishing of services. "(B) GROUPING OF TRANSACTIONS.—To the extent provided in regulations, any provision of this subpart which, but for this subparagraph, would be applied on a transaction-bytransaction basis may be applied by the taxpayer on the ,;_, basis of groups of transactions based on product lines or " recognized industry or trade usage. Such regulations may permit different groupings for different purposes. "(3) UNITED STATES DEFINED.—The term 'United States' includes the Commonwealth of Puerto Rico. "(4) CONTROLLED GROUP OF CORPORATIONS.—The term 'controlled group of corporations' has the meaning given to such term by section 1563(a), except that— "(A) 'more than 50 percent' shall be substituted for 'at least 80 percent' each place it appears therein, and "(B) section 1563(b) shall not apply. "(5) POSSESSIONS.—The term 'possession of the United States' means Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and the Virgin Islands of the United States. "(6) SECTION 923(A)(2) NON-EXEMPT INCOME.—The term 'section 923(a)(2) non-exempt income' means any foreign trade Ante, p. income from a transaction with respect to which paragraph (1) or (2) of section 925(a) does not apply and which is not exempt Ante, p. foreign trade income.

. ^

986. 990.

"(e) SPECIAL RULES,— "(1) SOURCE RULES FOR RELATED PERSONS.—Under regulations,

the income of a person described in section 482 from a transaction giving rise to foreign trading gross receipts of a FSC which is treated as from sources outside the United States shall not exceed the amount which would be treated as foreign source income earned by such person if the pricing rule under section 994 which corresponds to the rule used under section 925 with respect to such transaction applied to such transaction. "(2) PARTICIPATION IN INTERNATIONAL BOYCOTTS, ETC.—Under

regulations prescribed by the Secretary, the exempt foreign trade income of a FSC for any taxable year shall be limited under rules similar to the rules of clauses (i) and (ii) of section 995(b)(1)(F). "(3) EXCHANGE OF INFORMATION REQUIREMENTS.—For purposes of this title, the term 'FSC shall not include any corporation which was created or organized under the laws of any foreign country unless, at the time such corporation was created or organized, there was in effect between such country and the United States— "(A) a bilateral or multilateral agreement described in section 274(h)(6)(C), or 97 Stat. 395. "(B) an income tax treaty with respect to which the 26 USC 274. Secretary certifies that the exchange of information pro«

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1042

 98 STAT. 994

PUBLIC LAW 98-369—JULY 18, 1984 Y^^^ J

gram with such country under such treaty carries out the purposes of this paragraph. "(4) DISALLOWANCE OF TREATY BENEFITS.—Any corporation electing to be treated as a FSC under subsection (f)(1) may not claim any benefits under any income tax treaty between the United States and any foreign country. "(5) EXEMPTION FROM CERTAIN OTHER TAXES.—No tax shall be imposed by any jurisdiction described in subsection (d)(5) on any foreign trade income derived before January 1, 1987. "(0 ELECTION OF STATUS AS FSC (AND AS SMALL FSC).— "(1) ELECTION.— "(A) TIME FOR MAKING.—An election by a corporation

Ante, p. 986.

under section 922(a)(2) to be treated as a FSC, and an election under section 922(b)(1) to be a small FSC, 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 may give his consent to the making of an election at such other times as he may designate. "(B) MANNER OF ELECTION.—An election under subparagraph (A) shall be made in such manner as the Secretary 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 subpart shall apply to such corporation for the taxable year of the corporation for which made and for all succeeding taxable years. "(3) TERMINATION OF ELECTION.—

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,

"(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 shall prescribe by regulations. "(B) CONTINUED FAILURE TO BE A FSC.—If a corporation is not a FSC for each of any 5 consecutive taxable years of the corporation for which an election under this subsection is effective, the election to be a FSC shall be terminated and not be in effect for any taxable year of the corporation after such 5th year.".

(b) DIVIDEND RECEIVED DEDUCTION FOR DOMESTICORPORATIONS.—

26 USC 245. j_

(1) IN GENERAL.—Section 245 (relating to dividends received from certain foreign corporations) is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection: "(c) CERTAIN DIVIDENDS RECEIVED FROM FSC.—

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1043

 PUBLIC LAW 98-369—JULY 18, 1984

STAT. 995

"(1) IN GENERAL.—In the case of a domestic corporation, there shall be allowed as a deduction an amount equal to 100 percent .siMiS. of any dividend received by such corporation from another corporation which is distributed out of earnings and profits attributable to foreign trade income for a period during which such other corporation was a FSC. The deduction allowable under the preceding sentence with respect to any dividend shall be in lieu of any deduction allowable under subsection (a) or (b) with respect to such dividend. "(2) EXCEPTION FOR CERTAIN DIVIDENDS.—Paragraph (1) shall ^ not apply to any dividend which is distributed out of earnings •Mk r»ai r m and profits attributable to foreign trade income which— "(A) is section 923(a)(2) non-exempt income (within the Ante, p. 986. Ante, p. 991. ' ^ meaning of section 927(d)(6)), or "(B) would not, but for section 923(a)(4), be treated as exempt foreign trade income. "(3) DEFINITIONS.—For purposes of this subsection, the terms ,ia«: ••>fc0 m the meaning given such terms by section 923.". (2) CONFORMING AMENDMENTS.—
 * ' 'foreign trade income' and 'exempt foreign trade income' have

(A) Paragraph (1) of section 246(b) (relating to limitation 26 USC 246. on aggregate amount of deduction) is amended by striking out "245" each place it appears and inserting in lieu thereof "subsection (a) or (b) of section 245". (B) Subsection (d) of section 245 (relating to property Ante, p. 994. distributions), as redesignated by paragraph (1), is amended by striking out "subsections (a) and (b)" and inserting in lieu thereof "this section". (c) CLARIFICATION OF INFORMATION EXCHANGE AGREEMENTS.—Sub-

paragraph (D) of section 274(h)(6) (relating to coordination with section 6103) is amended— (1) by adding at the end thereof the following new sentence: "The Secretary may exercise his authority under subchapter A of chapter 78 to carry out any obligation of the United States under an agreement referred to in subparagraph (C).", and (2) by striking out the heading thereof and inserting in lieu

97 Stat. 395. 26 USC 274.

26 USC 7601 et seq.

thereof "COORDINATION WITH OTHER PROVISIONS.—". (d) CONFORMING AMENDMENTS.—

(1) Section 901 (relating to foreign tax credit) is amended by 26 USC 901. redesignating subsection (h) as subsection (i) and inserting after subsection (g) the following new subsection: "(h) TAXES PAID WITH RESPECT TO FOREIGN TRADE INCOME.—No

credit shall be allowed under this section for any income, war profits, and excess profits taxes paid or accrued with respect to the foreign trade income (within the meaning of section 923(b)) of a FSC, Ante, p. 986. other than section 923(a)(2) non-exempt income (within the meaning of section 927(d)(6).". Ante, p. 991. (2) Paragraph (1) of section 904(d) (relating to application of 26 USC 904. section in case of certain interest income and dividends from a DISC) as amended— (A) by striking out "and" at the end of subparagraph (B), •J9K (B) by striking out subparagraph (C) and inserting in lieu thereof the following: "(C) taxable income attributable to foreign trade income (within the meaning of section 923(b)),

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1044

 98 STAT. 996

Ante, p. 986.

PUBLIC LAW 98-369—JULY 18, 1984 "(D) distributions from a FSC (or former FSC) out of earnings and profits attributable to foreign trade income (within the meaning of section 923(b)), and "(E) income other than income described in subparagraph (A),(B),(C),or(D).",and (C) by striking out the heading and inserting in lieu thereof: "(d) SEPARATE APPLICATION OF SECTION WITH RESPECT TO CERTAIN INTEREST INCOME AND INCOME FROM DISC, FORMER DISC, FSC, OR

FORMER FSC.—".

26 USC 906.

26 USC 951.

(3) Subsection (b) of section 906 (relating to special rules) is amended by adding at the end thereof the following new paragraph: "(5) No credit shall be allowed under this section for any income, war profits, and excess profits taxes paid or accrued with respect to the foreign trade income (within the meaning of section 923(b)) of a FSC". (4) Section 951 (relating to amounts included in gross income of shareholders) is amended by adding at the end thereof the following new subsection: "(e) FOREIGN TRADE INCOME NOT TAKEN INTO ACCOUNT.—

Ante, p. 985.

Ante, p. 986. Ante, p. 991. 26 USC 275.

26 USC 1248.

"(1) IN GENERAL.—The foreign trade income of a FSC and any deductions which are apportioned or allocated to such income shall not be taken into account under this subpart. For purposes of the preceding sentence, income described in paragraph (2) or (3) of section 921(d) shall be treated as derived from sources within the United States. "(2) FOREIGN TRADE INCOME.—For purposes of this subsection, the term 'foreign trade income' has the meaning given such term by section 923(b), but does not include section 923(a)(2) nonexempt income (within the meaning of section 927(d)(6)).". (5) Paragraph (4) of section 275(a) (relating to disallowance of deduction for certain taxes) is amended to read as follows: "(4) Income, war profits, and excess profits taxes imposed by the authority of any foreign country or possession of the United States if— "(A) the taxpayer chooses to take to any extent the benefits of section 901, or "(B) such taxes are paid or accrued with respect to foreign trade income (within the meaning of section 923(b)) of a FSC". (6) Subsection (d) of section 1248 (relating to exclusions from earnings and profits) is amended by adding at the end thereof the following new paragraph: "(6) FOREIGN TRADE INCOME.—Earnings and profits of

Ante, p. 986. 26 USC 934.

26 USC 956.

the

foreign corporation attributable to foreign trade income (within the meaning of section 923(b)) of a FSC". (7) Section 934 (relating to limitation on reduction in income tax liability incurred to the Virgin Islands) is amended by adding at the end thereof the following new subsection: "(f) FSC—Subsection (a) shall not apply in the case of a Virgin Islands corporation which is a FSC". (8) Paragraph (2) of section 956(b) (defining United States property) is amended by striking out "and" at the end of subparagraph (G), by striking out the period at the end of subparagraph (H) and inserting in lieu thereof a semicolon and

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1045

 PUBLIC LAW 98-369—JULY 18, 1984 "and", and by adding at the end thereof the following new subparagraph: "(I) to the extent provided in regulations prescribed by the Secretary, property which is otherwise United States property which is held by a FSC and which is related to the export activities of such FSC". (9) Subparagraph (B) of section 7651(5), as amended by this Act, is amended by inserting "or subpart C of part III of subchapter N of chapter 1" after "SSKbXD". (10) Section 996(g) (relating to effectively connected income) is amended by inserting "and which are derived from sources within the United States" after "United States". (11) Section 936(f) (relating to DISC or former DISC ineligible for credit) is amended to read as follows: "(f) LIMITATION ON CREDIT FOR DISC'S AND FSC'S.—NO credit shall be allowed under this section to a corporation for any taxable year—, "(1) for which it is a DISC or former DISC, or "(2) in which it owns at any time stock in a— "(A) DISC or former DISC, or "(B) FSC or former FSC." (12) Section 6011(c) (relating to returns of DISC'S and former DISC's) is amended— (A) by inserting "or a FSC or former FSC" after "former DISC" in paragraph (1), and (B) by inserting "and FSC's and Former FSC's" after "Former DISC's" in the heading thereof. (13) Section 6072(c) (relating to returns by nonresident alien individuals and foreign corporations) is amended by inserting "or a FSC or former FSC" after "United States". (14) Section 6501(g)(3) (relating to income tax returns of Disc's) is amended by striking out "section 6011(e)(2)" and inserting in lieu thereof "section 6011(c)(2)". (15)(A) Section 6686 (relating to failure of DISC to file returns) is amended— (i) by striking out "section 6011(e)" and inserting in lieu thereof "section 6011(c)", and (ii) by striking out the heading thereof and inserting in lieu thereof the following:

98 STAT. 997

26 USC 7651. 26 USC 996. 26 USC 936.

26 USC 6011.

26 USC 6072. 26 USC 6501. 26 USC 6686.

"SEC. 6686. FAILURE TO FILE RETURNS OR SUPPLY INFORMATION BY DISC OR FSC."

(B) The table of sections for subchapter B of chapter 68 is amended by striking out the item relating to section 6686 and inserting in lieu thereof the following new item: "Sec. 6686. Failure to file returns or supply information by DISC or FSC." SEC. 802. INTEREST CHARGE DISC.

(a) INTEREST CHARGE ON DEFERRED TAX.—Section 995 (relating to 26 USC 995. taxation of DISC income to shareholders) is amended— (1) by striking out subsections (e) and (f), (2) by redesignating subsection (g) as subsection (e), and (3) by adding at the end thereof the following new subsection: "(f) INTEREST ON DISC-RELATED DEFERRED TAX LIABILITY.— "(1) IN GENERAL.—A shareholder of a DISC shall pay for

each taxable year interest in an amount equal to the product of—

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1046

 98 STAT. 998

PUBLIC LAW 98-369—JULY 18, 1984 "(A) the shareholder's DISC-related deferred tax liability for such year, and "(B) the base period T-bill rate. "(2) SHAREHOLDER'S DISC-RELATED DEFERRED TAX LIABILITY,—

For purposes of this subsection— "(A) IN GENERAL.—The term 'shareholder's DISC-related deferred tax liability' means, with respect to any taxable year of a shareholder of a DISC, the excess of— "(i) the amount which would be the tax liability of the shareholder for the taxable year if the deferred DISC income of such shareholder for such taxable year were included in gross income as ordinary income, over "(ii) the actual amount of the tax liability of such shareholder for such teixable year. Determinations under the preceding sentence shall be made without regard to carrybacks to such taxable year. "(B)

Ante, p. 826.

ADJUSTMENTS FOR

LOSSES,

CREDITS,

AND OTHER

ITEMS.—The Secretary shall prescribe regulations which provide such adjustments— "(i) to the accounts of the DISC, and "(ii) to the amount of any carryover or carryback of the shareholder, as may be necessary or appropriate in the case of net operating losses, credits, and carryovers, and carrybacks of losses and credits. "(C) TAX LIABILITY.—The term 'tax liability' means the amount of the tax imposed by this chapter for the taxable year reduced by credits allowable against such tax (other than Credits allowable under sections 31, 32, and 34). "(3) DEFERRED DISC INCOME.—For purposes of this subsection— "(A) IN GENERAL.—The term 'deferred DISC income' means, with respect to any taxable year of a shareholder, the excess of^ "(i) the shareholder's pro rata share of accumulated DISC income (for periods after 1984) of the DISC as of the close of the computation year, over "(ii) the amount of the distributions-in-excess-ofincome for the taxable year of the DISC following the computation year. "(B) COMPUTATION YEAR.—For purposes of applying subparagraph (A) with respect to any taxable year of a shareholder, the computation year is the taxable year of the DISC which ends with (or within) the taxable year of the shareholder which precedes the taxable year of the shareholder for which the amount of deferred DISC income is i being determined. "(C) D:STRIBUTIONS-IN-EXCESS-OF-INCOME.—For purposes of

subparagraph (A), the term 'distributions-in-excess-ofincome' means, with respect to any taxable year of a DISC, the excess (if any) of— "(i) the amount of actual distributions to the shareholder out of accumulated DISC income, over "(ii) the shareholder's pro rata share of the DISC income for such taxable year. il;, "(3) BASE PERIOD T-BILL RATE.—For purposes of this subsection, .„: the term 'base period T-bill rate' means the annual rate of
 * rT5_

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1047

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 999

interest determined by the Secretary to be equivalent to the average investment yield of United States Treasury bills with maturities of 52 weeks which were auctioned during the 1-year period ending on September 30 of the calendar year ending with (or of the most recent calendar year ending before) the close of the taxable year of the shareholder. "(4) SHORT YEARS.—The Secretary shall prescribe such regulations as may be necessary for the application of this subsection to short years of the DISC, the shareholder, or both.

J HK

"(5) PAYMENT AND ASSESSMENT AND COLLECTION OF INTEREST.—

The interest accrued during any taxable year which a shareholder is required to pay under paragraph (1) shall be treated, for purposes of this title, as interest payable under section 6601 and shall be paid by the shareholder at the time the tax imposed by this chapter for such taxable year is required to be paid.". (b) TAXABLE INCOME IN EXCESS OF $10,000,000 DEEMED DISTRIBUTED.—

r

(1) IN GENERAL.—Subparagraph (E) of section 995(b)(1) (relat- 26 USC 995. ing to based period export gross receipts) is amended to read as follows: "(E) the taxable income of the DISC attributable to qualifled export receipts of the DISC for the taxable year which exceed $10,000,000,".

r

(2) AGGREGATION OF RECEIPTS.—Subsection (b) of section 995

(relating to deemed distributions) is amended by adding at the end thereof the following new paragraph: "(4) AGGREGATION OF QUALIFIED EXPORT RECEIPTS.—

ij^i**

"(A) IN GENERAL.—For purposes of applying paragraph (1)(E), all D I S C ' S which are members of the same controlled group shall be treated as a single corporation. "(B) ALLOCATION.—The dollar amount under paragraph (I)(E) shall be allocated among the DISC's which are members of the same controlled group in a manner provided in regulations prescribed by the Secretary.".

(c) CONFORMING AMENDMENTS.—

(1) Subsection (a)(1) of section 992 (relating to definition of 26 USC 992. DISC) is amended— I (A) by striking out "and" at the end of subparagraph (C), ^'" (B) by striking out the period at the end of subparagraph (D) and inserting in lieu thereof ", and", and (C) by adding at the end thereof the following new subma tseaauos paragraph: "(E) such corporation is not a member of any controlled group of which a FSC is a member.". (2) Paragraph (3) of section 993(a) (relating to controlled 26 USC 993. groups) is amended by striking out "such term by" and inserting in lieu thereof "the term 'controlled group of corporations' by". (3) Subsection (c) of section 999 (relating to international 26 USC 999. boycott factor) is amended by striking out "995(b)(l)(F)(ii)" each place it appears and inserting in lieu thereof "995(b)(l)(F)(i)". (4) The table of subparts of part III of subchapter N of chapter 1 is amended by inserting after the item relating to subpart B the following new item: ^^,:As\i'. ^ "Subpart C. Taxation of foreign sales corporations."

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1048

 98 STAT. 1000

26 USC 441.

PUBLIC LAW 98-369—JULY 18, 1984

SEC. 803. TAXABLE YEAR OF DISC AND FSC REQUIRED TO CONFORM TO TAXABLE YEAR OF MAJORITY SHAREHOLDER. (a) IN GENERAL.—Subsection (b) of section 441 (relating to period for computation of taxable income) is amended— (1) by striking out "or" at the end of paragraph (2), (2) by striking out the period at the end of paragraph (3) and inserting in lieu thereof "; or", and (3) by adding at the end thereof the following new paragraph: "(4) in the case of a FSC or DISC filing a return for a period of at least 12 months, the period determined under subsection (h).". (b) DETERMINATION OF TAXABLE YEAR.—Section 441 is amended by

adding at the end thereof the following new subsection: "(h) TAXABLE YEAR OF F S C ' S AND DISC'S.—

"(1) IN GENERAL.—For purposes of this subtitle, the taxable year of any FSC or DISC shall be the taxable year of that shareholder (or group of shareholders with the same 12-month taxable year) who has the highest percentage of voting power. "(2) SPECIAL RULE WHERE MORE THAN ONE SHAREHOLDER (OR

GROUP) HAS HIGHEST PERCENTAGE.—If 2 or more shareholders (or groups) have the highest percentage of voting power under paragraph (1), the taxable year of the FSC or DISC shall be the same 12-month period as that of any such shareholder (or group). "(3) SUBSEQUENT CHANGES OF OWNERSHIP.—The Secretary

'

shall prescribe regulations under which paragraphs (1) and (2) shall apply to a change of ownership of a corporation after the taxable year of the corporation has been determined under paragraph (1) or (2) only if such change is a substantial change of ownership. "(4) VOTING POWER DETERMINED.—For purposes of this subsection, voting power shall be determined on the basis of total combined voting power of all classes of stock of the corporation entitled to vote..

SEC. 804. REPORTING REQUIREMENTS. 26 USC 921 note. (a) IN GENERAL.—The Secretary of the Treasury shall, for calendar year 1985 and each second calendar year thereafter, submit a report to the Congress within 27 ¥2 months following the close of such calendar yea> setting forth an analysis of the operation and effect of the provisions of this title, (b) REPEAL OF DISC REPORTING REQUIREMENTS.— 26 USC 991 note. (1) IN GENERAL.—Section 806 of the Revenue Act of 1971 (relating to submission of annual reports to Congress) is hereby repealed. 26 USC 991 note. (2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to reports for calendar years after 1984. SEC. 805. EFFECTIVE DATE; TRANSITION RULES. 26 USC 921 note.

.

Ante, p. 987.

(a) EFFECTIVE D A T E S. —

(1) IN GENERAL.—Except as provided in this subsection, the amendments made by this title shall apply to transactions after December 31, 1984, in taxable years ending after such date. (2) SPECIAL RULE FOR CERTAIN CONTRACTS.—To the extent provided in regulations prescribed by the Secretary, subsections (c) and (d) of section 924 of the Internal Revenue Code of 1954 (as added by this title) shall not apply to—

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1049

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 1001

(A) any contract with respect to which the taxpayer uses the completed contract method of accounting and which— ' (i) was entered into before March 16, 1984, or (ii) was entered into after March 15, 1984, and before January 1, 1985, pursuant to a written plan to enter into such contract which was in effect on March 15, 1984, (B) any contract which was entered into before March 16, 1984, except that this subparagraph shall only apply to the first 2 taxable years of the FSC ending after January 1, 1985, or such later taxable years as the Secretary of the Treasury may designate, or (C) any contract which was entered into after March 15, 1984, and before January 1, 1985, except that this subparagraph shall only apply to the first taxable year of the FSC ending after January 1, 1985, or such later taxable years as the Secretary of the Treasury may designate. (3) SECTION 801(d)(10).—The amendment made by section 801(d)(10) shall apply to distributions on or after June 22, 1984. Ante, p. 985. (4) SECTION 803.—The amendments made by section 803 shall Ante, p. looo. apply to any DISC established after March 21, 1984. (b) TRANSITION RULES FOR DISC'S.— 26 USC 99i note. (1) CLOSE OF I 9 8 4 TAXABLE YEARS OF DISC'S.—

(A) IN GENERAL.—For purposes of applying the Internal Revenue Code of 1954, the taxable year of each DISC which 26 USC i et seq. begins before January 1, 1985, and which (but for this paragraph) would include January 1, 1985, shall close on December 31, 1984. For purposes of such Code, the requirements of section 992(a)(l)(B) of such Code (relating to percentage of qualified export assets on last day of the taxable year) shall not apply to any taxable year ending on December 31, 1984. (B) UNDERPAYMENTS OF ESTIMATED TAX.—To the extent provided in regulations prescribed by the Secretary of the Treasury or his delegate, no addition to tax shall be made under section 6654 or 6655 of such Code with respect to any Ante, p. 788. underpayment of any installment required to be paid before April 13, 1985, to the extent the underpayment was created or increased by reason of subparagraph (A). (2) EXEMPTION OF ACCUMULATED DISC INCOME FROM TAX.—

efe:

(A) IN GENERAL.—For purposes of applying the Internal Revenue Code of 1954 with respect to actual distributions made after December 31, 1984, by a DISC or former DISC which was a DISC on December 31, 1984, any accumulated DISC income of a DISC or former DISC (within the meaning of section 996(f)(1) of such Code) which is derived before January 1, 1985, shall be treated as previously taxed income (within the meaning of section 996(f)(2) of such Code) with respect to which there had previously been a deemed distribution to which section 996(e)(1) of such Code applied. (B) EXCEPTION FOR DISTRIBUTION OF AMOUNTS PREVIOUSLY

J, e

.

DISQUALIFIED.—Subparagraph (A) shall not apply to the distribution of any accumulated DISC income of a DISC or former DISC to which section 995(b)(2) of such Code applied by reason of any revocation or disqualification (other than a

• •..- ' »„

.;,..

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1050

 98 STAT. 1002

PUBLIC LAW 98-369—JULY 18, 1984 revocation which under regulations prescribed by the Secretary results solely from the provisions of this title. (3) INSTALLMENT TREATMENT OF CERTAIN DEEMED DISTRIBUTIONS OF SHAREHOLDERS.—

(A) IN GENERAL.—Notwithstanding section 995(b) of such Code, if a shareholder of a DISC elects the application of this paragraph, any qualified distribution shall be treated, for purposes of such Code, as received by such shareholder in 10 equal installments on the last day of each of the 10 taxable years of such shareholder which begins after the first taxable year of such shareholder beginning in 1984. The preceding sentence shall apply without regard to whether the DISC exists after December 31, 1984. (B) QUALIFIED DISTRIBUTION.—The term 'qualified distribution' means any distribution which a shareholder is deemed to have received by reason of section 99503) of such Code with respect to income derived by the DISC in the first taxable year of the DISC beginning— (i) in 1984, and (ii) after the date in 1984 on which the taxable year of such shareholder begins. (C) SHORTER PERIOD FOR INSTALLMENTS.—The Secretary of

-'•

the Treasury or his delegate may by regulations provide for the election by any shareholder to be treated as receiving a qualified distribution over such shorter period as the taxpayer may elect. (D) ELECTIONS.—Any election under this paragraph shall be made at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe. (4) TREATMENT OP TRANSFERS FROM DISC TO FSC—Except to the

extent provided in regulations, section 367 of such Code shall not apply to transfers made before January 1, 1986 (or, if later, the date 1 year after the date on which the corporation ceases to be a DISC), to a FSC of qualified export assets (as defined in section 9930)) of such Code) held on August 4, 1983, by a DISC in a transaction described in section 351 or 368(a)(1) of such Code. (5) DEEMED TERMINATION OF A DISC—Under regulations prescribed by the Secretary, if any controlled group of corporations of which a DISC is a member establishes a FSC, then any DISC which is a member of such group shall be treated as having terminated its DISC status. (6) DEFINITIONS.—For purposes of this subsection, the terms "DISC" and "former DISC" have the respective meanings given to such terms by section 992 of such Code. 26 USC 991 note.

Ante, p. 991.

(c) SPECIAL RULE FOR ExPORT TRADE CORPORATIONS.—

(1) IN GENERAL.—If, before January 1, 1985, any export trade corporation— (A) makes an election under section 927(f)(1) of the Internal Revenue Code of 1954 to be treated as a FSC, or (B) elects not to be treated as an export trade corporation with respect to taxable years beginning after December 31, 1984, rules similar to the rules of paragraphs (2) and (4) of subsection (b) shall apply to such export trade corporation. (2) TREATMENT OF TRANSFERS TO FSC.—In the case of any export trade corporation which— (A) makes an election described in paragraph (1), and

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 PUBLIC L A W 98-369—JULY 18, 1984

98 STAT. 1003

(B) transfers before January 1, 1986, any portion of its property to a FSC in a transaction described in section 351 or 368(a)(l), then, subject to such rules as the Secretary of the Treasury or his delegate may prescribe based on principles similar to the principles of section 505(a) and (h) of the Revenue Act of 1971, 26 USC 970 note. no income, gain, or loss shall be recognized on such transfer or on the distribution of any stock of the FSC received (or treated £ as received) in connection with such transfer. >: •.: (3) EXPORT TRADE CORPORATION.—For purposes of this subsection, the term "export trade corporation" has the meaning given such term by section 971 of the Internal Revenue Code of
 * g|,| «> •, ^
 * a.? --PU,;£

1954. W^'^

TITLE IX—HIGHWAY REVENUE S;::,:,,,^...,,^^ PROVISIONS

^

Subtitle A—Provisions Relating to Heavy Vehicle Use Tax •! SEC. 901. REDUCTION OF HEAVY VEHICLE USE TAX. (a) GENERAL RULE.—Subsection (a) of section 4481 (as amended by 26 USC 4481.

section 513(a) of the Highway Revenue Act of 1982) is amended to read as follows:

.,,_ j

"(a) IMPOSITION OF TAX.—A tax is hereby imposed on the use of

any highway motor vehicle which (together with the semitrailers and trailers customarily used in connection with highway motor vehicles of the same type as such highway motor vehicle) has a taxable gross weight of at least 55,000 pounds at the rate specified in the following table: "Taxable gross weight: Rate of tax: "At least 55,000 pounds, but not $100 per year plus $22 for each 1,000 over 75,000 pounds. pounds (or fraction thereof) in excess of 55,000 pounds. Over 75,000 pounds $550." (b) SPECIAL RULES IN THE CASE OF CERTAIN OWNER-OPERATORS.— 26 USC 4481 (1) SPECIAL RULE FOR TAXABLE PERIOD BEGINNING ON JULY i, note.

1984.—In the case of a small owner-operator, the amount of the tax imposed by section 4481 of the Internal Revenue Code of 1954 on the use of any highway motor vehicle subject to tax under section 4481(a) of such Code (as amended by subsection (a)) for the taxable period which begins on July 1, 1984, shall be the lesser of— (A) $3 for each 1,000 pounds of taxable gross weight (or fraction thereof), or (B) the amount of the tax which would be imposed under such section 4481(a) without regard to this paragraph. (2) EXEMPTION FOR VEHICLES USED FOR LESS THAN 5,OOO MILES (AND CERTAIN OTHER AMENDMENTS) TO TAKE EFFECT ON JULY 1,

1984.—In the case of a small owner-operator, notwithstanding subsection (f)(2) of section 513 of the Highway Revenue Act of 1982, the amendments made by subsections (b), (c), and (d) of 26 USC 4481 such section shall take effect on July 1, 1984. note. t

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1052

 98 STAT. 1004

PUBLIC LAW 98-369—JULY 18, 1984 (3) SMALL OWNER-OPERATOR DEFINED.—For purposes of this subsection, the term "small owner-operator" has the meaning given such term by section 513(f)(2) of the Highway Revenue Act

26 USC 4481

note. 26 USC 4481 iiote. 26 USC 4483.

of 1982. (4) TAXABLE GROSS WEIGHT.—For purposes of this subsection,

the term 'taxable gross weight' has the same meaning as when used in section 4481 of the Internal Revenue Code of 1954. (c) EFFECTIVE DATE.—The amendment made by subsection (a) (and the provisions of subsection (b)) shall take effect on July 1, 1984. SEC. 902. SPECIAL RULE FOR TRUCKS USED IN LOGGING. (a) IN GENERAL.—Section 4483 (relating to exemptions from highway use tax) is amended by redesignating subsection (e) as subsection (f) and inserting after subsection (d) the following new subsection: "(e) REDUCTION IN TAX FOR TRUCKS USED IN LOGGING.—The tax

26 USC 4483 note.

imposed by section 4481 shall be reduced by 25 percent with respect to any highway motor vehicle if— "(1) the exclusive use of such vehicle during any taxable period is the transportation, to and from a point located on a forested site, of products harvested from such forested site, and "(2) such vehicle is registered (under the laws of the State in which such vehicle is required to be registered) as a highway motor vehicle used in the transportation of harvested forest products.". (b) EFFECTIVE DATE.—The amendment made by this section shall take effect on July 1, 1984. SEC. 903. SPECIAL RULE FOR CERTAIN AGRICULTURAL VEHICLES. (a) IN GENERAL.—Subsection (d) of section 4483 (relating to exemptions from highway use tax) is gmiended by redesignating paragraph (5) as paragraph (6) and by inserting sifter paragraph (4) the following new paragraph: "(5)

26 USC 4483 note. 96 Stat. 2177.

7,500-MILES EXEMPTION FOR AGRICULTURAL VEHICLES.—

"(A) IN GENERAL.—In the Case of an agricultural vehicle, paragraphs (1) and (2) shall be applied by substituting 7,500' for '5,000' each place it appears. "(B) DEFINITIONS.—For purposes of this paragraph— "(i) AGRICULTURAL VEHICLE.—The term 'agricultural vehicle' means any highway motor vehicle— "(I) used primarily for farming purposes, and "(II) registered (under the laws of the State in which such vehicle is required to be registered) as a highway motor vehicle used for farn^ing purposes. "(ii) FARMING PURPOSES.—The term 'farming purposes' means the transporting of any farm commodity to or from a farm or the use directly in agricultural production. "(iii) FARM COMMODITY.—The term 'farm commodity' means any agricultural or horticultural commodity, feed, seed, fertilizer, livestock, bees, poultry, fur-bearing animals, or wildlife.". Qj) EFFECTIVE DATE.—The amendments made by subsection (a) shall take effect as if included in the amendments made by section 513 of the Highway Revenue Act of 1982.

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 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 1005

Subtitle B—Provisions Relating to Fuel Taxes SEC. 911. INCREASE IN DIESEL FUEL TAX.

(a) GENERAL RULE.—Paragraph (1) of section 4041(a) (relating to 26 USC 4041. diesel fuel) is amended by striking out "9 cents" and inserting in lieu thereof "15 cents". (b) INCOME TAX CREDIT FOR PURCHASE OF DIESEL-POWERED AUTOMOBILE OR LIGHT TRUCK.—Section 6427 (relating to fuels not used for Ante, p. 979.

taxable purposes), as amended by this Act, is amended by redesignating subsections (g), (h), (i), (j), (k), (D. and (m) as subsections (h), (i), 0"), (k), (1), (m), and (n), respectively, and by inserting after subsection (f) the following new subsection: "(g) ADVANCE REPAYMENT OF INCREASED DIESEL FUEL TAX TO ORIGINAL PURCHASERS OF DIESEL-POWERED AUTOMOBILES AND LIGHT TRUCKS.—

"(1) IN GENERAL.—Except as provided in subsection (j), the Secretary shall pay (without interest) to the original purchaser of any qualified diesel-powered highway vehicle an anount equal to the diesel fuel differential amount. "(2) QUALIFIED DIESEL-POWERED HIGHWAY VEHICLE.—For purposes of this subsection, the term 'qualified diesel-powered highway vehicle' means any diesel-powered highway vehicle which— "(A) has at least 4 wheels, "(B) has a gross vehicle weight rating of 10,000 pounds or less, and "(C) is registered for highway use in the United States under the laws of any State. "(3) DIESEL FUEL DIFFERENTIAL AMOUNT.—For purposes of this subsection, the term 'diesel fuel differential amount' means— "(A) except as provided in subparagraph (B), $102, or "(B) in the case of a truck or van, $198. "(4) ORIGINAL PURCHASER.—For purposes of this subsection— (A) IN GENERAL.—Except as provided in subparagraph (B), the term 'original purchaser means the first person to purchase the qualified diesel-powered vehicle for use other than resale. "(B) EXCEPTION FOR CERTAIN PERSONS NOT SUBJECT TO FUELS TAX.—The term 'original purchaser' shall not include

any State or local government (as defined in section 4221(d)(4)) or any nonprofit educational organization (as defined in section 4221(d)(5)).

>

"(C) TREATMENT OF DEMONSTRATION USE BY DEALER.—For

purposes of subparagraph (A), use as a demonstrator by a dealer shall not be taken into account. "(5) VEHICLES TO WHICH SUBSECTION APPLIES.—Except as pro-

vided in paragraph (6), this subsection shall only apply to qualified diesel-powered highway vehicles originally purchased after January 1, 1985, and before January 1, 1988. "(6) SPECIAL RULE FOR CERTAIN VEHICLES HELD ON JANUARY i,

1985.—

"(A) IN GENERAL.—In the case of any person holding a qualified diesel-powered highway vehicle on January 1, 1985— "(i) such person shall be treated as if he originally purchased such vehicle on December 31, 1984, but

o IK; v >

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1054

 98 STAT. 1006

PUBLIC LAW 98-369—JULY 18, 1984 "(ii) the amount payable under paragraph (1) to such person for such vehicle shall be the applicable fraction of the diesel fuel differential amount. "(B) APPLICABLE FRACTION.—For purposes of subpara-

graph (A), the applicable fraction is the fraction determined in accordance with the following table: "If the model year of the vehicle is: 1984 or 1985 1983 1982 1981 1980 1979

The applicable fraction is: 1 % Ye % % V f e

In the case of a 1978 or earlier model year vehicle, the applicable fraction shall be zero. "(7) BASIS REDUCTION.—For the purposes of subtitle A, the

basis of any qualified diesel-powered highway vehicle shall be reduced by the amount payable under this subsection with respect to such vehicle." (d) TECHNICAL AND CONFORMING AMENDMENTS.— (1) AMENDMENTS TO HIGHWAY TRUST FUND.— (A) TRANSFERS TO MASS TRANSIT ACCOUNT.—Paragraph (2)

26 USC 9503.

of Section 9503(e) (relating to transfers to Mass Transit Account) is amended to read as follows: "(2) TRANSFERS TO MASS TRANSIT ACCOUNT.—The Secretary of

the Treasury shall transfer to the Mass Transit Account the mass transit portion of the amounts appropriated to the Highway Trust Fund under subsection (b) which are attributable to taxes under sections 4041 and 4081 imposed after March 31, 1983. For purposes of the preceding sentence, the term 'mass transit portion' means an amount determined at the rate of 1 cent for each gallon with respect to which tax was imposed under section 4041 or 4081." (B) INCOME TAX CREDITS PAYABLE OUT OF HIGHWAY TRUST

FUND.—Clause (ii) of section 9503(c)(2)(A) is amended by striking out "used before October 1, 1988" and inserting in lieu thereof "used before October 1, 1988 (or with respect to qualified diesel-powered highway vehicles purchased before January 1, 1988)". (2) CONFORMING AMENDMENTS TO INCOME TAX CREDIT —

26 USC 39.

26 USC 6427. Ante, p. 1005.

(A) Subsections (a)(4) and (b) of section 39 (as in effect before the enactment made by title IV of this Act) are each amended by striking out "6427(i)" and inserting in lieu thereof "6427(j)". (B) Subsections (a), 0)X1), (c), (d), (e)(D, and (f)(1) of section 6427 are each amended by striking out "(i)" and inserting in lieu thereof "(j)". (C) Subsection (h)(1) of section 6427 (as redesignated by subsection (c)) is amended— (i) by striking out "or (f)" and inserting in lieu thereof "(f), or (g)", and (ii) by striking out "fuel used" each place it appears and inserting in lieu thereof "fuel used (or a qualified diesel powered highway vehicle purchased)". (D) Subsection (h)(2)(A) of section 6427 (as so redesignated) is amended—

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 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 1007

feoo *£ !

(i) by striking out "and (e)" in clause (i) and inserting in lieu thereof "(e), and (g)", and (ii) by striking out "fuel used" each place it appears and inserting in lieu thereof "fuel used (or a qualified diesel powered highway vehicle purchased)". (E) Subsection (k)(2) of section 6427 (as so redesignated) is amended by striking out "(g)(2)" and inserting in lieu gn... thereof "(h)(2)". (F) Subsection (m) of section 6427 (as so redesignated) is amended by striking out "and (d)" each place it appears and fim ' inserting in lieu thereof "(d), and (g)". (G) Sections 7210, 7603, 76G4(b), 7604(c)(2), 7605(a), sV ' g. 7609(c)(1), and 7610(c) are each amended by striking out "6427(h)(2)" each place it appears and inserting in lieu thereof "6427(i)(2)". (e) EFFECTIVE DATE.—The amendments made by this section shall take effect on August 1, 1984.

Ante, p. 1005.

26 USC 7210, 7603-7605,7609, 26 USC 6427 note.

SEC. 912. DECREASE IN TAX IMPOSED ON GASOHOL. (a) AMENDMENT OF SECTION 4041.—Paragraph (1) of section 4041(k) 26 USC 4041, j^^? (relating to fuels containing alcohol) is amended to read as follows: "(1) IN GENERAL.—Under regulations prescribed by the Secretary, in the case of the sale or use of any liquid at least 10 percent of which consists of alcohol (as defined in section u. 4081(c)(3))— •••' -' -^ ^ "(A) subsection (a)(1) shall be applied by substituting '9 ^ " J,, 1,, cents' for '15 cents', and "(B) subsection (a)(2) shall be applied by substituting '3 cents' for '9 cents', and T' < •' ^ «^Q ^^ ^^^ shall be imposed by subsection (c).". Ob) AMENDMENTS OF SECTION 4081.—Subsection (c) of section 4081 26 USC 4081. (relating to imposition of tax on petroleum products), as amended by title VII of this Act, is amended— (A) by striking out "4 cents" each place it appears and inserting in lieu thereof "3 cents", (B) by striking out "4% cents" and inserting in lieu thereof " 3 % cents", and (C) by striking out "4% cents" and inserting in lieu thereof " 5 % cents". (c) CREDIT FOR ALCOHOL USED AS A FUEL.—Section 40 (relating to

Ante, p. 826.

alcohol used as a fuel) (as amended by title IV of this Act) is amended— (1) by striking out "50 cents" each place it appears and inserting in lieu thereof "60 cents", and (2) by striking out "37.5 cents" each place it appears and inserting in lieu thereof "45 cents". (d) AMENDMENT OF SECTION 6427.—Paragraph (1) of section 6427(f) 26 USC 6427. (relating to gasoline used to produce certain alcohol fuels) is amended by striking out "4% cents" and inserting in lieu thereof " 5 % cents"'. (e) TARIFF IMPORTED FOR USE AS A FUEL.—Item 901.50 of the Tariff Schedules of the United States (19 U.S.C. 1202) is amended by striking out "50 cents per gal." each place it appears and inserting in lieu thereof "60 cents per gal.". if) DEFINITION OF ALCOHOL.—Sections 40(d)(l)(A)(i) (as amended by Ante, p. 826. title IV of this Act) and 4081(c)(3) (defining alcohol) are each 26 USC 4081.

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 98 STAT. 1008

26 USC 40 note.

26 USC 4041.

PUBLIC LAW 98-369—JULY 18, 1984

amended by striking out "coal" and inserting in lieu thereof "coal (including peat)". (g) EFFECTIVE DATE.—The amendments made by this section shall take effect on January 1, 1985. SEC. 913. MODIFICATION OF TAX IMPOSED ON METHANOL AND ETHANOL. (a) IN GENERAL.—Section 4041 (relating to imposition of tax on special fuels) is amended by adding at the end thereof the following new subsection, "(m) CERTAIN ALCOHOL FUELS.—

"(1) IN GENERAL.—In the case of the sale or use of any partially exempt methanol or ethanol fuel— "(A) subsection (a)(2) shall be applied by substituting 'AV2 cents' for '9 cents', and "(B) no tax shall be imposed by subsection (c). "(2) PARTIALLY EXEMPT METHANOL OR ETHANOL FUEL.—The

Ante, p. 826.

26 USC 4041 note.

term 'partially exempt methanol or ethanol fuel' means any liquid at least 85 percent of which consists of methanol, ethanol, or other alcohol produced from natural gas.". Oo) CONFORMING AMENDMENT.—Subsection (c) of section 40 (relating to coordination of credit for alcohol used as a fuel with exemption from excise tax) (as redesignated by title IV of this Act) is amended by striking out "(b)(2) or (k)" and inserting in lieu thereof "(b)(2),(k),or(m)". (c) EFFECTIVE DATE.—The amendments made by this section shall take effect on August 1, 1984. SEC. 914. EXTENSION OF REDUCTION IN TAX FOR FUEL USED BY TAXICABS.

26 USC 6427.

Paragraph (3) of section 6427(e) (relating to termination of use in certain teixicabs) is amended by striking out "September 30, 1984" and inserting in lieu thereof "September 30, 1985". SEC. 915. 3 CENT TAX ON DIESEL FUEL, ETC., USED IN CERTAIN BUSES. (a) IN GENERAL.—Subsection (b) of section 6427 (relating to fuels not used for taxable purposes) is amended by redesignating paragraph (2) as paragraph (3) and inserting after paragraph (1) the following new paragraph: "(2) 3-CENT REDUCTION IN REFUND IN CERTAIN CASES.—

"(A) IN GENERAL.—Except as provided in subparagraph (B), the rate of tax taken into account under paragraph (1) shall not exceed 12 cents. "(B) EXCEPTION.—Subparagraph (A) shall not apply to fuel used in any automobile bus while engaged in furnishing (for compensation) intracity passenger land transportation— "(i) which is available to the general public, and "(ii) which is scheduled and along regular routes, but only if such bus is a qualified local bus. "(C) QUALIFIED LOCAL BUS.—For purposes of this paragraph, the term 'qualified local bus' means any local bus— "(i) which has a seating capacity of at least 20 adults (not including the driver), and "(ii) which is under contract (or is receiving more than a nominal subsidy) from any State or local government (as defined in section 4221(d)) to furnish such transportation."

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98 STAT. 1009

(b) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 6427 take effect on August 1, 1984. note-

Subtitle C—Temporary Reduction in Retail Tax on Certain Piggyback Trailers

'; '

SEC. 921. TEMPORARY REDUCTION IN TAX. Section 4051 (relating to retail tax on heavy trucks and trailers) is 26 USC 4051. amended by redesignating subsection (d) as subsection (e) and insert,3 ing after subsection (c) the following new subsection: . ^.r "(d) TEMPORARY REDUCTION IN TRAILERS.—

TAX

ON CERTAIN PIGGYBACK

"(1) IN GENERAL.—In the case of piggyback trailers or semitrailers sold within the 1-year period beginning on the date of the enactment of the Tax Reform Act of 1984, subsection (a) Ante, p. 494. shall be applied by substituting *6 percent' for '12 percent'. "(2) PIGGYBACK TRAILERS OR SEMITRAILERS.—For purposes of this subsection, the term 'piggyback trailers or semitrailers' means any trailer or semitrailer— "(A) which is designed for use principally in connection with trailer-on-flatcar service by rail, and "(B)(i) both the seller and the purchaser of which are registered in a manner similar to registration under section 4222, and "(ii) with respect to which the purchaser certifies (at such . ».. time and in such form and manner as the Secretary pre> scribes by regulations) to the seller that such trailer or semitrailer— "(I) will be used, or resold for use, principally in connection with such service, or "(II) will be incorporated into an article which will be so used or resold. "(3) ADDITIONAL TAX WHERE NONQUALIFIED USE.—If any piggy-

f

back trailer or semitrailer was subject to tax under subsection (a) at the 6 percent rate and such trailer or semitrailer is used or resold for use other than for a use described in paragraph (2)"(A) such use or resale shall be treated as a sale to which subsection (a) applies, "(B) the amount of the tax imposed under subsection (a) on such sale shall be equal to the amount of the tax which was imposed on the first retail sale, and "(C) the person so using or reselling such trailer or semitrailer shall be liable for the tax imposed by subsection (a)."

31-194 0 - 86 - 34: QL. 3 Part 1

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 98 STAT. 1010

PUBLIC LAW 98-369—JULY 18, 1984

Subtitle D—Studies PART I—STUDIES RELATING TO HEAVY VEHICLE USE TAX 26 USC 4481 note.

SEC. 931. WHETHER HEAVY VEHICLES BEAR FAIR SHARE OF HIGHWAY COSTS.

The Secretary of Transportation shall conduct a study of whether highway motor vehicles with taxable gross weights of 80,000 pounds or more bear their fair share of the costs of the highway system. 26 USC 4481 note.

26 USC 4481 note.

26 USC 4481 note.

SEC. 932. TRANS-BORDER TRUCKING.

The Secretary of Transportation shall conduct a study to determine the significance of the tax imposed by section 4481 of the Internal Revenue Code of 1954 (relating to tax on use of certain vehicles) on trans-border trucking operations. SEC. 933. WEIGHT-DISTANCE TAXES.

The Secretary of Transportation shall conduct a study to evaluate the feasibility and ability of weight-distance truck taxes to provide the greatest degree of equity among highway users, to ease the costs of compliance of such taxes, and to improve the efficiency by which such taxes might be administered. Such study shall also include an evaluation of the evasion potential for weight-distance taxes and an assessment of the benefits to interstate commerce of replacing all Federal truck taxes (other than fuel taxes) with a weight-distance tax. SEC. 934. REPORTS, ETC. (a) CONSULTATION WITH TREASURY.—Studies conducted under this

part shall be conducted in consultation with the Secretary of the Treasury. (b) REPORT.—Not later than October 1, 1987, the Secretary of Transportation shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report on each study conducted under this part together with such recommendations as the Secretary may deem advisable. PART II—OTHER STUDIES SEC. 935. STUDY OF REDUCED FUEL TAXES FOR TAXICABS.

The Secretary of the Treasury or his delegate shall conduct a study of the reduced rate of fuel taxes provided by section 6427(e) of the Internal Revenue Code of 1954. Not later than January 1, 1985, such Secretary shall submit a report on such study to the Congress, together with such recommendations as the Secretary may deem advisable. SEC. 936. STUDY OF PIGGYBACK TRAILERS.

(a) IN GENERAL.—The Secretary of Transportation (in consultation with the Secretary of the Treasury) shall conduct a study of the appropriate application and level of the tax imposed by section 4051 of the Internal Revenue Code of 1954 (relating to tax on trucks and trailers sold at retail) on piggyback trailers and semi-trailers. (b) REPORT.—Not later than May 1, 1985, the Secretary of Transportation shall submit to the Committee on Ways and Means of the

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 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 1011

House of Representatives and the Committee on Finance of the Senate a report on the study conducted under subsection (a) together with such recommendations as the Secretary may deem advisable.

^

TITLE X—MISCELLANEOUS REVENUE PROVISIONS

-

a 0 ^

u^ e Subtitle A—Capital Gains and Losses SEC. 1001. DECREASE IN HOLDING PERIOD REQUIRED FOR LONG-TERM CAPITAL GAIN TREATMENT.

.

'8U i»2 P

(a) IN GENERAL.—

(1) CAPITAL GAINS.—Paragraphs (1) and (3) of section 1222 26 USC 1222.

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(relating to other terms relating to capital gains and losses) are each amended by striking out "1 year" and inserting in lieu thereof "6 months".

-^"^^i-^i'-:

(2) CAPITAL LOSSES.—Paragraphs (2) and (4) of section 1222 are

each amended by striking out "1 year" and inserting in lieu thereof "6 months". (b) CONFORMING AMENDMENTS.—The following provisions are each amended by striking out "1 year" each place it appears and inserting in lieu thereof "6 months: (1) Paragraph (1)(B) of section 166(d) (relating to nonbusiness debts). (2) Subsection (a) of section 341 (relating to treatment of gain I- to shareholders in the case of collapsible corporations). (3) Paragraph (2) of subsection (a) and subparagraph (L) of I subsection (e)(4) of section 402 (relating to capital gains treatment for certain distributions in the case of a beneficiary of an exempt employees' trust). (4) Subparagraph (A) of section 403(a)(2) (relating to capital i gains treatment for certain distributions in the case of a beneficiary under a qualified annuity plan). (5) Paragraph (1) of section 423(a) (relating to employee stock purchase plans). (6) Paragraph (2) of section 582(c) (relating to capital gains of banks). (7) Subparagraphs (A) and (B) of section 584(c)(1) (relating to inclusions in taxable income of participants in common trust funds). (8) Paragraphs (3) and (4) of section 642(c) (relating to charitable deductions for certain trusts). (9) Paragraphs (1) and (2) of section 702(a) (relating to income and credits of partner). (10) Subparagraph (A) of section 818(b)(1) (relating to certain » gains and losses in the case of life insurance companies). ''^ (11) Subparagraph (B) of section 852(b)(3) (relating to taxation of shareholders of regulated investment companies). (12) Subparagraph (A) of section 856(c)(4) (relating to definition of real estate investment trust). (13) Paragraphs (3)(B) and (7) of section 857(b) (relating to taxation of shareholders of real estate investment trust). (14) Paragraph s (11) and (12) of section 1223 (relating to holding period of property).

C^H.q ^iJ

26 USC 166. 26 USC 341. 26 USC 402. 26 USC 403. 26 USC 423. 26 USC 582. 26 USC 584. 26 USC 642. 26 USC 702. Ante, p. 752. 26 USC 852. 26 USC 856. Ante, p. 572. 26 USC 1223.

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 98 STAT. 1012 26 USC 1231. 26 USC 1232.

26 USC 1233. 26 USC 1234. 26 USC 1235. 26 USC 1246. 26 USC 1247. 26 USC 1248.

Ante, p. 853. 26 USC 631.

PUBLIC LAW 98-369—JULY 18, 1984 (15) Section 1231 (relating to property used in the trade or business and involuntary conversions). (16) Paragraph (2) of section 1232(a) (relating to sale or exchange in the case of bonds and other evidences of indebtedness). (17) Subsections (b), (d), and subparagraph (A) of subsection (e)(4) of section 1233 (relating to gains and losses from short sales). (18) Paragraph (1) of section 1234(b) (relating to treatment of the grantor of an option in the case of stock, securities, or commodities). (19) Subsection (a) of section 1235 (relating to sale or exchange of patents). (20) Paragraph (4) of section 1246(a) (relating to holding period in the case of gain on foreign investment company stock). (21) Subsection (i) of section 1247 (relating to loss on sale or exchange of certain stock in the case of foreign investment companies electing to distribute income currently). (22) Subsections (b) and (g)(3)(C) of section 1248 (relating to gain from certain sales or exchanges of stock in certain foreign corporations). (23) Subparagraph (A) of section 1251(e)(l) (defining farm recapture property).

(c) TECHNICAL AMENDMENT RELATING TO TIMBER, COAL, AND DOMESTIC IRON ORE.—Section 631 (relating to gain or loss in the case of

timber, coal, or domestic iron ore) is amended— (1) by striking out "for a period of more than 1 year" in the first sentence of subsection (a) and inserting in lieu thereof "on the first day of such year and for a period of more than 6 months before such cutting", and (2) by striking out "1 year" in subsections Oa) and (c) and inserting in lieu thereof "6 months". 26 USC 1232.

26 USC 166 note.

(d) TECHNICAL AMENDMENT RELATING TO CERTAIN SHORT-TERM GOVERNMENT OBLIGATIONS.—Section 1232(a)(3)(A) (relating to cer-

tain short-term government obligations) is amended by striking out "held less than 1 year". (e) EFFECTIVE DATE.—The amendments made by this section shall apply to property acquired after June 22, 1984, and before January 1, 1988. SEC. 1002. REPEAL OF SPECIAL RULE FOR PRE-1970 LOSSES.

26 USC 1212. 26 USC 1212 note.

(a) IN GENERAL.—Paragraph (3) of section 12120)) (relating to transitional rule for taxpayers other than corporations) is repealed. (b) EFFECTIVE DATE.—The repeal made by subsection (a) shall apply to taxable years beginning after December 31, 1986.

Subtitle B—Excise Tax Provisions PART I—BOATING SAFETY AND SPORT FISH RESTORATION Subpart A—Boating Safety Amendments 46 USC 13101 note.

SEC. 1010. POLICY.

It is declared to be the policy of Congress and the purpose of this part to improve recreational boating safety and to foster greater development, use, and enjoyment of all waters of the United States

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 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 1013

by encouraging and assisting participation by the States, the boating industry, and the boating public in activities related to increasing boating safety; by authorizing the establishment of national construction and performance standards for boats and associated equipment; by creating more flexible authority governing the use of boats and equipment; and by facilitating the provision of services by the United States Coast Guard on behalf of boating safety. It is further declared to be the policy of Congress to encourage greater and continuing uniformity of boating laws and regulations among the States and the Federal Government, to encourage and assist the States in exercising their authorities in boating safety, to foster greater cooperation and assistance between the Federal Government and the States in administering and enforcing Federal and State laws and regulations pertaining to boating safety, and to equitably utilize taxes paid on fuel use in motor boats in a manner which enhances boating safety.

SEC. 1011. GENERAL AMENDMENTS TO TITLE 46.

(a) Section 2102 of title 46, United States Code, is amended— (1) by striking out "and facilities improvement" in paragraph (1); (2) by striking out paragraphs (3) and (4); and (3) by redesignating paragraph (5) as paragraph (3). O^XD Section 13101 of such title is amended— (A) by striking out "and facility improvement" in subsection (a); and (B) by striking out "and facilities improvement" each place it appears. (2) Subsection (a) of section 13101 of such title is amended by striking out "may" in the second sentence and inserting in lieu thereof "shall". (c)(1) Section 13102 of such title is amended by striking out "and facilities improvement" each place it appears. (2) Subsection (a) of section 13102 of such title is amended by striking out "may" and inserting in lieu thereof "shall". (3) Paragraph (2) of section 13102(a) of such title is amended by striking out ", (d), or (f)". (4) Subsections (d) and (f) of section 13102 of such title are repealed, and subsection (e) of such section (and any reference thereto) is redesignated as subsection (d). (d)(1) Subsections (b), (d), and (f) of section 13103 of such title are repealed, and subsections (c) and (e) of such section (and all references thereto) are redesignated as subsections (b) and (c), respectively. (2) Subsections (b) and (c) of section 13103 of such title (as redesignated by paragraph (1) of this subsection) are amended by striking out "and facilities improvement" each place it appears. (e) Section 13105 of such title is amended by striking out "and facilities improvement". (f) Subsection (c) of section 13108 of such title is amended by striking out "and facilities improvement" each place it appears. (g) Section 13109 of such title is amended by striking out "and facilities improvement" each place it appears.

97 Stat. 505.

97 Stat. 592.

97 Stat. 593.

97 Stat. 594.

97 Stat. 596. 97 Stat. 596. 97 Stat. 597.

SEC. 1012. AUTHORIZATION OF FUNDS FOR BOATING SAFETY.

Section 13106 of title 46, United States Code, is amended to read 97 Stat. 596. as follows:

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 98 STAT. 1014

Post, p. 1020. 97 Stat. 594.

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.%' mv> •

,

46 USC 13101

•XV.

-r

PUBLIC LAW 98-369—JULY 18, 1984

"(a) The Secretary may expend in each of the fiscal years 1985, 1986, 1987, and 1988, subject to amounts as are provided in appropriations laws for liquidation of contract authority, an amount equal to two-thirds of the amount transferred for such fiscal year to the Boat Safety Account under section 9503(c)(4) of the Internal Revenue Code of 1954 (26 U.S.C. 9503(c)(4)). The amount shall be allocated as provided under section 13103 of this title and shall be available for State recreational boating safety programs as provided under the guidelines established under subsection (b) of this section. Amounts authorized to be expended for State recreational boating safety programs shall remain available until expended and are deemed to have been expended only if an amount equal to the total amounts authorized to be expended under this section for the fiscal year in question and all prior fiscal years have been obligated. Amounts previously obligated but released by payment of a final voucher or modification of a program acceptance shall be credited to the balance of vinobligated amounts and are immediately available for expenditure. "(b) The Secretary shall establish guidelines prescribing the purposes for which amounts available under this chapter for State recreational boating safety programs may be used. Those purposes may include— "(1) providing facilities, equipment, and supplies for boating safety education and law enforcement, including purchase, operation, maintenance, and repair; "(2) training personnel in skills related to boating safety and to the enforcement of boating safety laws and regulations; "(3) providing public boating safety education, including educational programs and lectures, to the boating community and the public school system; "(4) acquiring, constructing, or repairing public access sites used primarily by recreational boaters; "(5) conducting boating safety inspections and marine casualty investigations; "(6) establishing and maintaining emergency or search and rescue facilities, and providing emergency or search and rescue assistance; "(7) establishing and maintaining waterway markers and other appropriate aids to navigation; and "(8) providing State recreational vessel numbering or titling programs. "(c) An amount equal to one-third of the amount transferred for each fiscal year to the Boat Safety Account under section 9503(c)(4) of the Internal Revenue Code of 1954 (26 U.S.C. 9503(c)(4)) is available to the Secretary for expenditures out of the operating expenses account of the Coast Guard for services provided by the Coast Guard for recreational boating safety, including services provided by the Coast Guard Auxiliary. Amounts made available by this subsection shall remain available until expended." SEC. 1013. EFFECTIVE DATE.

The amendments made by this subpart shall take effect on October 1, 1984, and shall apply with respect to fiscal years beginning after September 30, 1984..,^. _, u.^

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 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 1015

Subpart B—Sport Fish Restoration Program SEC. 1014. AMENDMENTS TO THE SPORT FISH RESTORATION PROGRAM.

(a) The Act entitled "An Act to provide that the United States shall aid the States in fish restoration and management projects, and for other purposes", approved August 9, 1950 (16 U.S.C. 777 et seq.), is amended as follows: (1) The first section is amended— 16 USC 777. (A) by inserting "(a)" after "That"; and •' (B) by adding at the end thereof the following new subsection: "KIT oi "(b) Each coastal State, to the extent practicable, shall equitably allocate the following sums between marine fish projects and freshwater fish projects in the same proportion as the estimated number of resident marine anglers and the estimated number of resident freshwater anglers, respectively, bear to the estimated number of all '' resident anglers in that State: "(1) The additional sums apportioned to such State under this Act as a result of the taxes imposed by the amendments made by section 1015 of the Tax Reform Act of 1984 on items not taxed under section 4161(a) of the Internal Revenue Code of Post, p. 1017. 1954 before October 1, 1984. "(2) The sums apportioned to such State under this Act that are not attributable to any tax imposed by such section 4161(a). As used in this subsection, the term 'coastal State' means any one of the States of Alabama, Alaska, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Oregon, Rhode Island, South Carolina, Texas, Virginia, and Washington. The term also includes the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Marianas." (2) The first sentence of section 3 is amended to read as Appropriation follows: "To carry out the provisions of this Act for fiscal years authorization. after September 30, 1984, there are authorized to be appropri- 16 USC 777b. ated from the Sport Fish Restoration Account established by section 9504(a) of the Internal Revenue Code of 1954 the Post, p. 1019. amounts paid, transferred, or otherwise credited to that Account. For purposes of the provision of the Act of August 31, 1951, which refers to this section, such amounts shall be treated 65 Stat. 262. as the amounts that are equal to the revenues described in this section." (3) The first sentence of section 4 is amended to read as 16 USC 777c. follows: "So much, not to exceed 6 per centum, of each annual Conservation. appropriation made in accordance with the provisions of section i. 3 of this Act as the Secretary of the Interior may estimate to be necessary for his expenses in the conduct of necessary investigations, administration, and the execution of this Act and for aiding in the formulation, adoption, or administration of any compact between two or more States for the conservation and management of migratory fishes in marine or freshwaters shall be deducted for that purpose, and such sum is authorized to be made available therefor until the expiration of the next sue" '' ceeding fiscal year." (4) Section 5 is amended by striking all after the first sen- 16 USC 777d. tence.

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 98 STAT. 1016 16 USC 777e.

PUBLIC LAW 98-369—JULY 18, 1984

(5) Section 6 is amended by adding at the end thereof the following new subsection: "(d) The Secretary of the Interior may enter into agreements to finance up to 75 per centum of the initial costs of the acquisition of lands or interests therein and the construction of structures or facilities for appropriations currently available for the purposes of this Act; and to agree to finance up to 75 per centum of the remaining costs over such a period of time as the Secretary may consider necessary. The liability of the United States in any such agreement is contingent upon the continued availability of funds for the purposes of this Act." 16 USC 777g. (6) Section 8 is amended by inserting "(a)" before the first sentence, and by adding at the end thereof the following new subsections: "(b)(1) Each State shall allocate 10 per centum of the funds 16 USC 777c. apportioned to it for each fiscal year under section 4 of this Act for the payment of up to 75 per centum of the costs of the acquisition, development, renovation, or improvement of facilities (and auxiliary facilities necessary to insure the safe use of such facilities) that create, or add to, public access to the waters of the United States to improve the suitability of such waters for recreational boating purposes. "(2) So much of the funds that are allocated by a State under paragraph (1) in any fiscal year that remained unexpended or unobligated at the close of such year are authorized to be made available for the purposes described in paragraph (1) during the succeeding fiscal year, but any portion of such funds that remain unexpended or unobligated at the close of such succeeding fiscal year are authorized to be made available for expenditure by the Secretary of the Interior in carrying out the research program of the Fish and Wildlife Service in respect to fish of material value for sport or recreation. Public "(c) Each State may use not to exceed 10 per centum of the funds information. apportioned to it under section 4 of this Act to pay up to 75 per centum of the costs of an aquatic resource education program for the purpose of increasing public understanding of the Nation's water resources and associated aquatic life forms. The non-Federal share Grants. of such costs may not be derived from other Federal grant programs. The Secretary shall issue not later than the one hundred and twentieth day after the effective date of this subsection such regulations as he deems advisable regarding the criteria for such programs." 16 USC 777k. (7) Section 12 is amended— (A) inserting "the Mayor of the District of Columbia," immediately after "the Secretary of Agriculture of Puerto Rico,"; (B) by inserting "for the District of Columbia one-third of 1 per centum," immediately after "for Puerto Rico 1 per centum,"; and (C) by inserting "the District of Columbia," after "Puerto Rico," each place it appears therein. 16 USC 777 note. (b) The amendments made by subsection (a) shall take effect on October 1, 1984, and shall apply with respect to fiscal years begin'••:'•' ning after September 30, 1984. • - -

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 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 1017

Subpart C—Taxes on Sales of Sport Fishing Equipment, Etc. SEC. 1015. TAX ON SALE OF SPORT FISHING EQUIPMENT. (a) GENERAL RULE.—Subsection (a) of section 4161 (relating to 26 USC 4161. imposition of tax on the sale of rods, reels, etc.) is amended to read as follows: "(a) SPORT FISHING EQUIPMENT.— "(1) IMPOSITION OF TAX.—There is hereby imposed on the sale

of any article of sport fishing equipment by the manufacturer, producer, or importer a tax equal to 10 percent of the price for which so sold. "(2) 3 PERCENT RATE OF TAX FOR ELECTRIC OUTBOARD MOTORS AND SONAR DEVICES SUITABLE FOR FINDING FISH.— t "(A) IN GENERAL.—In the case of an electric outboard i motor or a sonar device suitable for finding fish, paragraph (1) shall be applied by substituting '3 percent' for '10 percent'. "(B) $30 LIMITATION ON TAX IMPOSED ON SONAR DEVICES SUITABLE FOR FINDING FISH.—The tax imposcd by paragraph -i>« < (1) on any sonar device suitable for finding fish shall not exceed $30. "(3) PARTS OR ACCESSORIES SOLD IN CONNECTION WITH TAXABLE

V

SALE.—In the case of any sale by the manufacturer, producer, or importer of any article of sport fishing equipment, such article shall be treated as including any parts or accessories of such article sold on or in connection therewith or with the sale thereof."

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(b) DEFINITION OF SPORT FISHING EQUIPMENT, ETC.—Part I of

subchapter D of chapter 32 is amended by adding at the end thereof the following new section: "SEC. 4162. DEFINITIONS; TREATMENT OF CERTAIN RESALES. "(a) SPORT FISHING EQUIPMENT DEFINED.—For purposes of this part, the term 'sport fishing equipment' means— "(1) fishing rods and poles (and component parts therefor), "(2) fishing reels, "(3) fly fishing lines, and other fishing lines not over 130 pounds test, "(4) fishing spears, spear guns, and spear tips, "(5) items of terminal tackle, including— "(A) leaders, "(B) artificial lures, "(C) artificial baits, "(D) artificial flies, "(E) fishing hooks, "(F) bobbers, "(G) sinkers, "(H) snaps, "(I) drayles, and "(J) swivels, but not including natural bait or any item of terminal tackle designed for use and ordinarily used on fishing lines not described in paragraph (3), and "(6) the following items of fishing supplies and accessories— "(A) fish stringers, "(B) creels, "(C) tackle boxes,

26 USC 4162.

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/1066

 98 STAT. 1018

PUBLIC LAW 98-369—JULY 18, 1984 .•>j:'i

"(D) bags, baskets, and other containers designed to hold fish, "(E) portable bait containers, "(F) fishing vests, .; "(G) landing nets, • -.;,, ^H;.|,, "(H) gaff hooks, "(I) fishing hood disgorgers, and "(J) dressing for fishing lines and artificial flies, "(7) fishing tip-ups and tilts, "(8) fishing rod belts, fishing rodholders, fishing harnesses, fish fighting chairs, fishing outriggers, and fishing downriggers, "(9) electric outboard boat motors, and "(10) sonar devices suitable for finding fish.

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"(b) SONAR DEVICE SUITABLE FOR FINDING FISH.—For purposes of

this part, the term 'sonar device suitable for finding fish' shall not include any sonar device which is— ,...., "(1) a graph recorder, "(2) a digital type, "(3) a meter readout, or "(4) a combination graph recorder or combination meter readout. "(c) TREATMENT OF CERTAIN RESALES.—

"(1) IN GENERAL.—If—

Ante, p. 1017. 'i '

"(A) the manufacturer, producer, or importer sells any article taxable under section 4161(a) to any person, "(B) the constructive sale price rules of section 4216(b) do not apply to such sale, and "(C) such person (or any other person) sells such article to ' a related person with respect to the manufacturer, producer, or importer, then such related person shall be liable for tax under section 4161 in the same manner as if such related person were the manufacturer of the article. "(2) CREDIT FOR TAX PREVIOUSLY PAID.—If—

26 USC 6302.

"(A) tax is imposed on the sale of any article by reason of paragraph (1), and "(B) the related person establishes the amount of the tax which was paid on the' sale described in paragraph (1)(A), the amount of the tax so paid shall be allowed as a credit against the tax imposed by reason of paragraph (1). "(3) RELATED PERSON.—For purposes of this subsection, the term 'related person' has the meaning given such term by section 168(e)(4)(D). "(4) REGULATIONS.—Except to the extent provided in regulations, rules similar to the rules of this subsection shall also apply in cases (not described in paragraph (1)) in which intermediaries or other devices are used for purposes of reducing the amount of the tax imposed by section 4161(a)." (c) TiME FOR PAYMENT OF TAX.—Section 6302 (relating to mode or time of collecting tax) is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection: "(d) TIME FOR PAYMENT OF MANUFACTURERS EXCISE TAX ON SPORT

Ante, p. 1017.

FiSHiNG EQUIPMENT.—The tax imposed by section 4161(a) (relating to manufacturers excise tax on sport fishing equipment) shall be due and payable on the date for filing the return for such tax."

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