PUBLIC LAW 104-188—AUG. 20, 1996 110 STAT. 1835 for purposes of paragraphs (1) and (2) as a loan made on or before the date of the enactment of this Act. SEC. 1603. CERTAIN AMOUNTS DERIVED FROM FOREIGN CORPORA- TIONS TREATED AS UNRELATED BUSINESS TAXABLE INCOME. (a) GENERAL RULE. —Subsection (b) of section 512 (relating to modifications) is amended by adding at the end the following new paragraph: "(17) TREATMENT OF CERTAIN AMOUNTS DERIVED FROM FOREIGN CORPORATIONS. — "(A) IN GENERAL.— Notwithstanding paragraph (1), any amount included in gross income under section 951(a)(1)(A) shall be included as an item of gross income derived from an unrelated trade or business to the extent the amount so included is attributable to insurance income (as defined in section 953) which, if derived directly by the organization, would be treated as gross income from an unrelated trade or business. There shall be allowed all deductions directly connected with amounts included in gross income under the preceding sentence. " (B) EXCEPTION. — "(i) IN GENERAL. —Subparagraph (A) shall not apply to income attributable to a policy of insurance or reinsurance with respect to which the person (directly or indirectly) insured is— "(I) such organization, "(II) an affiliate of such organization which is exemptfi*omtax under section 501(a), or "(III) a director or officer of, or an individual who (directly or indirectly) performs services for, such organization or affiliate but only if the insurance covers primarily risks associated with the performance of services in connection with such organization or affiliate. "(ii) AFFILIATE. —For purposes of this subparagraph— "(I) IN GENERAL.— The determination as to whether an entity is an affiliate of an organization shall be made under rules similar to the rules of section 168(h)(4)(B). "(II) SPECIAL RULE. —TWO or more organizations (and any affiliates of such organizations) shall be treated as affiliates if such organizations are colleges or universities described in section 170(b)(l)(A)(ii) or organizations described in section 170(b)(l)(A)(iii) and participate in an insurance arremgement that provides for any profits from such arrangement to be returned to the policyholders in their capacity as such. "(C) REGULATIONS.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this paragraph, including regulations for the application of this paragraph in the case of income paid through 1 or more entities or between 2 or more chains of entities.".
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