PUBLIC LAW 103-66 —AUG. 10, 1993 107 STAT. 489 SEC. 13227. LIMITATION ON SECTION 936 CREDIT. Puerto Rico. (a) GENERAL RULE. —Subsection (a) of section 936 (relating 26 USC 936. to Puerto Rico and possession tax credit) is amended— (1) by striking "as provided in paragraph (3)" in paragraph (1) and inserting "as otherwise provided in this section"; and (2) by adding at the end thereof the following new paragraph: "(4) LIMITATIONS ON CREDIT FOR ACTIVE BUSINESS INCOME. — "(A) IN GENERAL.— The amount of the credit determined under paragraph (1) for any taxable year with respect to income referred to in subparagraph (A) thereof shall not exceed the sum of the following amounts: "(i) 60 percent of the sum of— "(I) the aggregate amount of the possession corporation's qualified possession wages for such taxable year, plus "(II) the allocable employee fringe benefit expenses of the possession corporation for the taxable year, "(ii) The sum of— "(I) 15 percent of the depreciation allowances for the taxable year with respect to short-life qualified tangible property, "(II) 40 percent of the depreciation allowances for the taxable year with respect to mediimi-life qualified tangible property, and "(III) 65 percent of the depreciation allowances for the taxable year with respect to long-life qualified tangible property. "(iii) If the possession corporation does not have i an election to use the method described in subsection (h)(5)(C)(ii) (relating to profit split) in effect for the taxable year, the amount of qualified possession income taxes for the taxable year allocable to nonsheltered income. "(B) ELECTION TO TAKE REDUCED CREDIT.— "(i) IN GENERAL.— If an election under this subparagraph applies to a possession corporation for any taxable year— "(I) subparagraph (A), and the provisions of subsection (i), shall not apply to such possession corporation for such taxable year, and "(II) the credit determined under paragraph (1) for such taxable year with respect to income referred to in subparagraph (A) thereof shall be the applicable percentage of the credit which would otherwise have been determined under such paragraph with respect to such income. Notwithstanding subclause (I), a possession corporation to which an election under this subparagraph applies shall be entitled to the benefits of subsection (i)(3)(B) for taxes allocable (on a pro rata basis) to taxable income the tax on which is not offset by reason of this subparagraph.
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