Page:United States Statutes at Large Volume 100 Part 3.djvu/1092

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PUBLIC LAW 99-000—MMMM. DD, 1986

100 STAT. 2900

PUBLIC LAW 99-514—OCT. 22, 1986 property or the performance of services for ultimate use, consumption, or disposition within the possession. "(B) CLARIFICATION THAT POSSESSION MAY EXEMPT CERTAIN

INCOME FROM TAX.—Nothing in any provision of law shall be construed as prohibiting any possession of the United States from exempting from tax any foreign trade income of a FSC or any other income of a FSC described in paragraph (2) or (3) of section 921(d).

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"(C) N o COVER OVER OF TAXES IMPOSED ON FSC.—Nothing

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in any provision of law shall be construed as requiring any tax imposed by this title on a FSC to be covered over (or otherwise transferred) to any possession of the United ^i States." (2) CLERICAL AMENDMENT.—Section 934 is amended by strik' ing out the subsection (f) added by section 801(d)(7) of the Tax Reform Act of 1984. '

(g) CLARIFICATION OF INTEREST ON DISC-RELATED DEFERRED TAX

LIABILITY.—Subsection (f) of section 995 (relating to interest on DISC-related deferred tax liability) is amended by adding at the end thereof the following new paragraph: "(7) DISC INCLUDES FORMER DISC.—For purposes of this subsection, the term 'DISC includes a former DISC." (h) CLARIFICATION OF EXEMPTION OF ACCUMULATED DISC INCOME.—Subparagraph (A) of section 805(b)(2) of the Tax Reform Act of 1984 (relating to exemption of accumulated DISC income from tax) is amended by adding at the end thereof the following new sentence: "For purposes of the preceding sentence, the term 'actual distribution' includes a distribution in liquidation, and the earnings and profits of any corporation receiving a distribution not included in gross income by reason of the preceding sentence shall be increased by the amount of such distribution." (i) CLARIFICATION OF EFFECTIVE DATE FOR REQUIREMENT THAT TAXABLE YEAR OF DISC AND FSC CONFORM TO TAXABLE YEAR OF MAJORITY SHAREHOLDER.—Paragraph (4) of section 805(a) of the Tax

Reform Act of 1984 is amended to read as follows: "(4) SECTION 803.—The amendments made by section 803 shall apply to taxable years beginning after December 31, 1984." (j) APPLICATION OF DIVIDENDS RECEIVED DEDUCTION WITH RESPECT

TO CERTAIN DIVIDENDS.—Subsection (c) of section 245 (relating to dividends received from certain foreign corporations) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph: "(3) COORDINATION WITH SUBSECTIONS (a) AND (b).—The gross income giving rise to the earnings and profits described in - subparagraph (A) or (B) of paragraph (1) (and not described in i paragraph (2)) shall not be taken into account under subsections (a) and (b)." (k)

TREATMENT OF CERTAIN QUALIFYING DISTRIBUTIONS FROM

DISC.—Paragraph (2) of section 996(a) (relating to qualifying distributions) is amended by striking out the last sentence and inserting in lieu thereof the following: "In the case of any amount of any actual distribution to a C corporation made pursuant to section 992(c) which is required to satisfy the condition of section 992(a)(l)(A), the preceding sentence shall apply to 16/17ths of such amount and paragraph (1) shall apply to the remaining l/17th of such amount.'