110 STAT. 1782 PUBLIC LAW 104-188—AUG. 20, 1996 " (5) ADDITION TO TAX FOR FAILURE TO COMPLY WITH SEC- TION.— '^or addition to tax in the case of a shareholder's negligence in connection with, or disregard of, the requirements of this section, see part II of subchapter A of chapter 68.. (3) CONFORMING AMENDMENTS.— (A) Section 1366 is amended by striking subsection (g). (B) Subsection (b) of section 6233 is amended to read as follows: "(b) SIMILAR RULES IN CERTAIN CASES.— I f a partnership return is filed for any taxable year but it is determined that there is no entity for such taxable year, to the extent provided in regulations, rules similar to the rules of subsection (a) shall apply.". (C) The table of subchapters for chapter 63 is amended by striking the item relating to subchapter D. SEC. 1308. S CORPORATIONS PERMITTED TO HOLD SUBSIDIARIES. (a) IN GENERAL. —Paragraph (2) of section 1361(b) (defining ineligible corporation) is amended by striking subparagraph (A) and by redesignating subparagraphs (B), (C), (D), and (E) as subparagraphs (A), (B), (C), and (D), respectively. (b) TREATMENT OF CERTAIN WHOLLY OWNED S CORPORATION SUBSIDIARIES.— Section 1361(b) (defining small business corporation) is amended by adding at the end the following new paragraph: " (3) TREATMENT OF CERTAIN WHOLLY OWNED SUBSIDI- ARIES.— "(A) IN GENERAL.— For purposes of this title— "(i) a corporation which is a qualified subchapter S subsidiary shall not be treated as a separate corporation, and "(ii) all assets, liabilities, and items of income, deduction, and credit of a qualified subchapter S subsidiary shall be treated as assets, liabilities, and such items (as the case may be) of the S corporation. "(B) QUALIFIED SUBCHAPTER S SUBSIDIARY.—For purposes of this paragraph, the term 'qualified subchapter S subsidiary* means any domestic corporation which is not an ineligible corporation (as defined in paragraph (2)), if— "(i) 100 percent of the stock of such corporation is held by the S corporation, and "(ii) the S corporation elects to treat such corporation as a qualified subchapter S subsidiary. " (C) TREATMENT OF TERMINATIONS OF QUALIFIED SUB- CHAPTER s SUBSIDIARY STATUS. —For purposes of this title, if any corporation which was a qualified subchapter S subsidiary ceases to meet the requirements of subparagraph (B), such corporation shall be treated as a new corporation acquiring all of its assets (and assuming all of its liabilities) immediately before such cessation from the S corporation in exchange for its stock. "(D) ELECTION AFTER TERMINATION.— I f a corporation's status as a qualified subchapter S subsidiary terminates, such corporation (and any successor corporation) shall not be eligible to make—
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