102 STAT. 3504 26 USC 864 note.
PUBLIC LAW 100-647—NOV. 10, 1988 (7) Paragraph (2) of section 1215(c) of the Reform Act is amended to read as follows: "(2) TRANSITIONAL RULES.— "(A) GENERAL PHASE-IN.—
"(i) IN GENERAL.—In the case of the 1st 3 taxable years of the taxpayer beginning after December 31, 1986, the amendments made by this section shall not apply to interest expenses paid or accrued by the taxpayer during the taxable year with respect to an aggregate amount of indebtedness which does not exceed the general phase-in amount. "(ii) GENERAL PHASE-IN AMOUNT.—Except as provided
in clause (iii), the general phase-in amount for purposes of clause (i) is the applicable percentage (determined under the following table) of the aggregate amount of indebtedness of the taxpayer outstanding on November 16, 1985: "In the case of the: 1st taxable year 2nd taxable year 3rd taxable year
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The applicable percentage is: 75 50 25.
"(iii) LOWER LIMIT WHERE TAXPAYER REDUCES INDEBTEDNESS.—For purposes of applying this subparagraph to interest expenses attributable to any month, the general phase-in amount shall in no event exceed the lowest amount of indebtedness of the taxpayer outstanding as of the close of any preceding month beginning after November 16, 1985. To the extent provided in regulations, the average amount of indebtedness outstanding during any month shall be used (in lieu of the amount outstanding as of the close of such month) for purposes of the preceding sentence. "(B) ClONSOLIDATION RULE NOT TO APPLY TO CERTAIN INTEREST.—
"(i) IN GENERAL.—In the case of the 1st 5 taxable years of the taxpayer beginning after December 31, 1986— "(I) subparagraph (A) shall not apply for purposes of paragraph (1) of section 864(e) of the Internal Revenue Code of 1986 (as added by this section), but "(II) such paragraph (1) shall not apply to interest expenses paid or accrued by the taxpayer during the taxable year with respect to an aggregate amount of indebtedness which does not exceed the special phase-in amount, "(ii) SPECIAL PHASE-IN AMOUNT.—The special phase-in amount for purposes of clause (i) is the sum of— "(I) the general phase-in amount as determined for purposes of subparagraph (A), "(II) the 5-year phase-in amount, and "(HI) the 4-year phase-in amount. For purposes of applying this subparagraph to interest expense attributable to any month, the special phase-in amount shall in no event exceed the limitation determined under subparagraph (A)(iii)-
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