Ill STAT. 970 PUBLIC LAW 105-34—AUG. 5, 1997 (1) IN GENERAL. —Subsection (b) of section 952 is amended by adding at the end thereof the following new sentence: "For purposes of this subsection, any exemption (or reduction) with respect to the tax imposed by section 884 shall not be teiken into account.". 26 USC 952 note. (2) EFFECTIVE DATE.— The amendment made by paragraph (1) shall apply to taxable years beginning after December 31, 1986. SEC. 1113. INDIRECT FOREIGN TAX CREDIT ALLOWED FOR CERTAIN LOWER TIER COMPANIES. (a) SECTION 902 CREDIT. — (1) IN GENERAL. —Subsection (b) of section 902 (relating to deemed taxes increased in case of certain 2nd and 3rd tier foreign corporations) is amended to read as follows: "(b) DEEMED TAXES INCREASED IN CASE OF CERTAIN LOWER TIER CORPORATIONS.— "(1) IN GENERAL. —If— "(A) any foreign corporation is a member of a qualified group, and "(B) such foreign corporation owns 10 percent or more of the voting stock of another member of such group from which it receives dividends in any taxable year, such foreign corporation shall be deemed to have paid the same proportion of such other member's post-1986 foreign income taxes as would be determined under subsection (a) if such foreign corporation were a domestic corporation. "(2) QUALIFIED GROUP.— For purposes of paragraph (1), the term 'qualified group' means— "(A) the foreign corporation described in subsection (a), and "(B) any other foreign corporation if— "(i) the domestic corporation owns at least 5 percent of the voting stock of such other foreign corporation indirectly through a chain of foreign corporations connected through stock ownership of at least 10 percent of their voting stock, "(ii) the foreign corporation described in subsection (a) is the first tier corporation in such chain, and "(iii) such other corporation is not below the sixth tier in such chain. The term 'qualified group' shall not include any foreign corporation below the third tier in the chain referred to in clause (i) unless such foreign corporation is a controlled foreign corporation (as defined in section 957) and the domestic corporation is a United States shareholder (as defined in section 951(b)) in such foreign corporation. Paragraph (1) shall apply to those taxes paid by a member of the qualified group below the third tier only with respect to periods during which it was a controlled foreign corporation.". (2) CONFORMING AMENDMENTS. — (A) Subparagraph (B) of section 902(c)(3) is amended by adding "or" at the end of clause (i) and by striking clauses (ii) and (iii) and inserting the following new clause: "(ii) the requirements of subsection (b)(2) are met with respect to such foreign corporation.".
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