606
PUBLIC LAW 91-172-DEC. 30, 1969
2^1JS*C*3OV"
" (B) The average annual earnings referred to in subparagraph (A) is, for any corporation, the amount of its earnings and profits for any 3-year period ending with the last day of a taxable year of the issuing corporation described in paragraph (1), computed without reduction for— "(i) interest paid or incurred, "(ii) depreciation or amortization allowed under this ,. chapter, " (iii) liability for tax under this chapter, and '•'• "(^^^ distributions to which section 301(c)(1) ap•*, plies (other than such distributions from the acquired to the issuing corporation), and reduced to an annual average for such 3-year period pursuant to regulations prescribed by the Secretary or his delegate. Such regulations shall include rules for cases where > any corporation was not in existence for all of such 3-year period or such period includes only a portion of a taxable year of any corporation. "(4) A N N U A L INTEREST TO BE PAID OR INCURRED.—The term 'annual interest to be paid or incurred' means— " (A) if subparagraph (B) does not apply, the annual interest to be paid or incurred by the issuing corporation only, determined by reference to its total indebtedness outstanding, or " (B) if projected earnings are determined under clause (ii) of paragraph (3)(A), the annual interest to be paid or incurred by both the issuing corporation and the acquired corporation, determined by reference to their combined total indebtedness outstanding. "(5)
26 USC 581.
.
[33 STAT
SPECIAL RULES FOR BANKS AND LENDING OR FINANCE COM-
PANIES.—With respect to any corporation which is a bank (as defined in section 581) or is primarily engaged in a lending or finance business— " (A) in determining under paragraph (2) the ratio of debt to equity of such corporation (or of the affiliated group of which such corporation is a member), the total indebtedness of such corporation (and the assets of such corporation) shall be reduced by an amount equal to the total indebtedness owed to such corporation which arises out of the banking business of such corporation, or out of the lending or finance business of such corporation, as the case may be; " (B) in determining under paragraph (4) the annual interest to be paid or incurred by such corporation (or by the issuing and acquired corporations referred to in para. graph (4)(B) or by the affiliated group of which such corporation is a member) the amount of such interest (determined without regard to this paragraph) shall be reduced by an amount which bears the same ratio to the amount of such interest as the amount of the reduction for the taxable year '•:• under subparagraph (A) bears to the total indebtedness of such corporation; and " (C) in determining under paragraph (3)(B) the average annual earnings, the amount of the earnings and profits for the 3-year period shall be reduced by the sum of the reductions under subparagraph (B) for such period. For purposes of this paragraph, the term 'lending or finance business' means a business of making loans or purchasing or discounting accounts receivable, notes, or installment obligations.
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