100 STAT. 2522
PUBLIC LAW 99-514—OCT. 22, 1986 "(ii) SPECIAL RULE IF ENTITY PREDOMINANTLY ENGAGED
IN BANKING, ETC., BUSINESS.—If, for any taxable year, an entity is predominantly engaged in the active conduct of a banking, insurance, financing, or similar business, the term 'financial services income' includes ' ' any passive income (determined without regard to U subparagraph (A)(iiiXD) of such corporation for such taxable year. In the case of any entity described in the " preceding sentence, the term 'shipping income' shall not include any income treated as financial services . ^;.' income under the preceding sentence. "(iii) EXCEPTION FOR EXPORT FINANCING.—The term [ ' e • 'financial services income' does not include any export financing interest. 5;. "(iv) HIGH WITHHOLDING TAX INTEREST.—The term 'financial services income' does not include any high withholding teix interest. "(D) SHIPPING INCOME.—The term 'shipping income' > r means any income received or accrued by any person which is of a kind which would be foreign base company shipping income (as defined in section 954(0). "(E) N O N C O N T R O L L E D S E C T I O N 902 CORPORATION.—
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"(i) IN GENERAL.—The term 'noncontrolled section 902 corporation' means any foreign corporation with respect to which the taxpayer meets the stock ownership requirements of section 902(a) (or, for purposes of applying paragraph (3), the requirements of section 902(b)). A controlled foreign corporation shall not be . ' treated as a noncontrolled section 902 corporation with respect to any distribution out of its earnings and profits for periods during which it was a controlled . foreign corporation. "(ii) SPECIAL RULE FOR TAXES ON HIGH-WITHHOLDING
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TAX INTEREST.—If a foreign corporation is a noncontrolled section 902 corporation with respect to the taxpayer, taxes on high withholding tax interest (to the extent imposed at a rate in excess of 5 percent) shall not be treated as foreign taxes for purposes of determining the amount of foreign taxes deemed paid by the taxpayer under section 902. "(F) HIGH-TAXED INCOME.—The term 'high-taxed income' means any income which (but for this subparagraph) would be passive income if the sum of— "(i) the foreign income taxes paid or accrued by the taxpayer with respect to such income, and "(ii) the foreign income taxes deemed paid by the taxpayer with respect to such income under section 902 or 960, exceeds the highest rate of tax specified in section 1 or 11 (whichever applies) multiplied by the amount of such income (determined with regard to section 78). For purposes of the preceding sentence, the term 'foreign income taxes' means any income, war profits, or excess profits tax imposed by any foreign country or possession of the United States. "(G) EXPORT FINANCING INTEREST.—For purposes of this paragraph, the term 'export financing interest' means any
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