PUBLIC LAW 101-239—DEC. 19, 1989 103 STAT. 2327 "(3) SPECIAL RULES FOR EXPENDITURES ATTRIBUTABLE TO ACTIVI- TIES CONDUCTED IN SPACE, ETC.— "(A) IN GENERAL.— Any qualified research and experi- mental expenditures described in subparagraph (B)— "(i) if incurred by a United States person, shall be allocated and apportioned under this section in the same manner as if they were attributable to activities conducted in the United States, and "(ii) if incurred by a person other than a United States person, shall be allocated and apportioned under this section in the same manner as if they were attrib- utable to activities conducted outside the United States. "(B) DESCRIPTION OF EXPENDITURES. — For purposes of subparagraph (A), qualified research and experimental expenditures are described in this subparagraph if such expenditures are attributable to activities conducted— '(i) in space, "(ii) on or under water not within the jurisdiction (as recognized by the United States) of a foreign country, possession of the United States, or the United States, or "(iii) in Antarctica. " (4) AFFIUATED GROUP. — "(A) Except as provided in subparagraph (B), the alloca- tion and apportionment required by paragraph (1) shall be determined as if all members of the affiliated group (as defined in subsection (e)(5)) were a single corporation. "(B) For purposes of the allocation and apportionment required by paragraph (1)— "(i) sales and gross income from products produced in whole or in part in a possession by an electing corpora- tion (within the meaning of section 936(h)(5)(E)), and "(ii) dividends from an electing corporation, 1^ shall not be taken into account, except that this subpara- graph shall not apply to sales of (and gross income and dividends attributable to sales of) products with respect to which an election under section 936(h)(5)(F) is not in effect. "(C) The qualified research and experimental expendi- tures taken into account for purposes of paragraph (1) shall be adjusted to reflect the amount of such expenditures included in computing the cost-sharing amount (determined under section 936(h)(5)(C)(i)(I)). "(D) The Secretary may prescribe such regulations as may be necessary to carry out the purposes of this para- graph, including regulations providing for the source of gross income and the allocation and apportionment of deductions to take into account the adjustments required by subparagraph (C). "(E) Paragraph (6) of subsection (e) shall not apply to qualified research and experimental expenditures. " (5) YEAR TO WHICH RULE APPLIES.— "(A) IN GENERAL.— Except as provided in this paragraph, this subsection shall apply to the taxpayer's first taxable year beginning after August 1, 1989, and before August 2, 1990. "(B) REDUCTION.— Notwithstanding subparagraph (A) this subsection shall only apply to that portion of the
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