118 STAT. 1567 PUBLIC LAW 108–357—OCT. 22, 2004 ‘‘(c) TAX TO APPLY ONLY IF SHAREHOLDER GAIN RECOGNIZED.— Subsection (a) shall apply to any disqualified individual with respect to an expatriated corporation only if gain (if any) on any stock in such corporation is recognized in whole or part by any share holder by reason of the acquisition referred to in section 7874(a)(2)(B)(i) with respect to such corporation. ‘‘(d) EXCEPTION WHERE GAIN RECOGNIZED ON COMPENSATION.— Subsection (a) shall not apply to— ‘‘(1) any stock option which is exercised on the expatriation date or during the 6 month period before such date and to the stock acquired in such exercise, if income is recognized under section 83 on or before the expatriation date with respect to the stock acquired pursuant to such exercise, and ‘‘(2) any other specified stock compensation which is exer cised, sold, exchanged, distributed, cashed out, or otherwise paid during such period in a transaction in which income, gain, or loss is recognized in full. ‘‘(e) DEFINITIONS.—For purposes of this section— ‘‘(1) DISQUALIFIED INDIVIDUAL.—The term ‘disqualified indi vidual’ means, with respect to a corporation, any individual who, at any time during the 12 month period beginning on the date which is 6 months before the expatriation date— ‘‘(A) is subject to the requirements of section 16(a) of the Securities Exchange Act of 1934 with respect to such corporation or any member of the expanded affiliated group which includes such corporation, or ‘‘(B) would be subject to such requirements if such corporation or member were an issuer of equity securities referred to in such section. ‘‘(2) EXPATRIATED CORPORATION; EXPATRIATION DATE.— ‘‘(A) EXPATRIATED CORPORATION.—The term ‘expatri ated corporation’ means any corporation which is an expatriated entity (as defined in section 7874(a)(2)). Such term includes any predecessor or successor of such a cor poration. ‘‘(B) EXPATRIATION DATE.—The term ‘expatriation date’ means, with respect to a corporation, the date on which the corporation first becomes an expatriated corporation. ‘‘(3) SPECIFIED STOCK COMPENSATION.— ‘‘(A) IN GENERAL.—The term ‘specified stock compensa tion’ means payment (or right to payment) granted by the expatriated corporation (or by any member of the expanded affiliated group which includes such corporation) to any person in connection with the performance of serv ices by a disqualified individual for such corporation or member if the value of such payment or right is based on (or determined by reference to) the value (or change in value) of stock in such corporation (or any such member). ‘‘(B) EXCEPTIONS.—Such term shall not include— ‘‘(i) any option to which part II of subchapter D of chapter 1 applies, or ‘‘(ii) any payment or right to payment from a plan referred to in section 280G(b)(6). ‘‘(4) EXPANDED AFFILIATED GROUP.—The term ‘expanded affiliated group’ means an affiliated group (as defined in section 1504(a) without regard to section 1504(b)(3)); except that section Applicability.
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