[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1690 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 1690

 To amend the Internal Revenue Code of 1986 to simplify certain rules 
 relating to the taxation of United States business operating abroad, 
                        and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 24, 1995

Mr. Levin (for himself and Mr. Houghton) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to simplify certain rules 
 relating to the taxation of United States business operating abroad, 
                        and for other purposes.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``International Tax 
Simplification and Reform Act of 1995''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 2. 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.''
                    (B) Subparagraph (B) of section 902(c)(4) is 
                amended by striking ``3rd foreign corporation'' and 
                inserting ``sixth tier foreign corporation''.
                    (C) The heading for paragraph (3) of section 902(c) 
                is amended by striking ``where domestic corporation 
                acquires 10 percent of foreign corporation'' and 
                inserting ``where foreign corporation first 
                qualifies''.
                    (D) Paragraph (3) of section 902(c) is amended by 
                striking ``ownership'' each place it appears.
    (b) Section 960 Credit.--Paragraph (1) of section 960(a) (relating 
to special rules for foreign tax credits) is amended to read as 
follows:
            ``(1) Deemed paid credit.--For purposes of subpart A of 
        this part, if there is included under section 951(a) in the 
        gross income of a domestic corporation any amount attributable 
        to earnings and profits of a foreign corporation which is a 
        member of a qualified group (as defined in section 902(b)) with 
        respect to the domestic corporation, then, except to the extent 
        provided in regulations, section 902 shall be applied as if the 
        amount so included were a dividend paid by such foreign 
        corporation (determined by applying section 902(c) in 
        accordance with section 904(d)(3)(B)).''
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxes of foreign corporations for taxable years of 
        such corporations beginning after the date of enactment of this 
        Act.
            (2) Special rule.--In the case of any chain of foreign 
        corporations described in clauses (i) and (ii) of section 
        902(b)(2)(B) of the Internal Revenue Code of 1986 (as amended 
        by this section), no liquidation, reorganization, or similar 
        transaction in a taxable year beginning after the date of the 
        enactment of this Act shall have the effect of permitting taxes 
        to be taken into account under section 902 of the Internal 
        Revenue Code of 1986 which could not have been taken into 
        account under such section but for such transaction.

SEC. 3. EXCHANGE RATE USED IN TRANSLATING FOREIGN TAXES.

    (a) Accrued Taxes Translated by Using Average Rate for Year to 
Which Taxes Relate.--
            (1) In general.--Subsection (a) of section 986 (relating to 
        translation of foreign taxes) is amended to read as follows:
    ``(a) Foreign Income Taxes.--
            ``(1) Translation of accrued taxes.--
                    ``(A) In general.--For purposes of determining the 
                amount of the foreign tax credit, in the case of a 
                taxpayer who takes foreign income taxes into account 
                when accrued, the amount of any foreign income taxes 
                (and any adjustment thereto) shall be translated into 
                dollars by using the average exchange rate for the 
                taxable year to which such taxes relate.
                    ``(B) Exception for taxes not paid within following 
                2 years.--
                            ``(i) Subparagraph (A) shall not apply to 
                        any foreign income taxes paid after the date 2 
                        years after the close of the taxable year to 
                        which such taxes relate.
                            ``(ii) Subparagraph (A) shall not apply to 
                        taxes paid before the beginning of the taxable 
                        year to which such taxes relate.
                    ``(C) Exception for inflationary currencies.--To 
                the extent provided in regulations, subparagraph (A) 
                shall not apply to any foreign income taxes the 
                liability for which is denominated in any currency 
                determined to be an inflationary currency under such 
                regulations.
                    ``(D) Cross reference.--

                                ``For adjustments where tax is not paid 
within 2 years, see section 905(c).
            ``(2) Translation of taxes to which paragraph (1) does not 
        apply.--For purposes of determining the amount of the foreign 
        tax credit, in the case of any foreign income taxes to which 
        subparagraph (A) of paragraph (1) does not apply--
                    ``(A) such taxes shall be translated into dollars 
                using the exchange rates as of the time such taxes were 
                paid to the foreign country or possession of the United 
                States, and
                    ``(B) any adjustment to the amount of such taxes 
                shall be translated into dollars using--
                            ``(i) except as provided in clause (ii), 
                        the exchange rate as of the time when such 
                        adjustment is paid to the foreign country or 
                        possession, or
                            ``(ii) in the case of any refund or credit 
                        of foreign income taxes, using the exchange 
                        rate as of the time of the original payment of 
                        such foreign income taxes.
            ``(3) Foreign income taxes.--For purposes of this 
        subsection, the term `foreign income taxes' means any income, 
        war profits, or excess profits taxes paid or accrued to any 
        foreign country or to any possession of the United States.''
            (2) Adjustment when not paid within 2 years after year to 
        which taxes relate.--Subsection (c) of section 905 is amended 
        to read as follows:
    ``(c) Adjustments to Accrued Taxes.--
            ``(1) In general.--If--
                    ``(A) accrued taxes when paid differ from the 
                amounts claimed as credits by the taxpayer,
                    ``(B) accrued taxes are not paid before the date 2 
                years after the close of the taxable year to which such 
                taxes relate, or
                    ``(C) any tax paid is refunded in whole or in part,
        the taxpayer shall notify the Secretary, who shall redetermine 
        the amount of the tax for the year or years affected.
            ``(2) Special rule for taxes not paid within 2 years.--In 
        making the redetermination under paragraph (1), no credit shall 
        be allowed for accrued taxes not paid before the date referred 
        to in subparagraph (B) of paragraph (1). Any such taxes if 
        subsequently paid shall be taken into account for the taxable 
        year in which paid and no redetermination under this section 
        shall be made on account of such payment.
            ``(3) Adjustments.--The amount of tax due on any 
        redetermination under paragraph (1) (if any) shall be paid by 
        the taxpayer on notice and demand by the Secretary, and the 
        amount of tax overpaid (if any) shall be credited or refunded 
        to the taxpayer in accordance with subchapter B of chapter 66 
        (section 6511 et seq.).
            ``(4) Bond requirements.--In the case of any tax accrued 
        but not paid, the Secretary, as a condition precedent to the 
        allowance of the credit provided in this subpart, may require 
        the taxpayer to give a bond, with sureties satisfactory to and 
        approved by the Secretary, in such sum as the Secretary may 
        require, conditioned on the payment by the taxpayer of any 
        amount of tax found due on any such redetermination. Any such 
        bond shall contain such further conditions as the Secretary may 
        require.
            ``(5) Other special rules.--In any redetermination under 
        paragraph (1) by the Secretary of the amount of tax due from 
        the taxpayer for the year or years affected by a refund, the 
        amount of the taxes refunded for which credit has been allowed 
        under this section shall be reduced by the amount of any tax 
        described in section 901 imposed by the foreign country or 
        possession of the United States with respect to such refund; 
        but no credit under this subpart, or deduction under section 
        164, shall be allowed for any taxable year with respect to any 
        such tax imposed on the refund. No interest shall be assessed 
        or collected on any amount of tax due on any redetermination by 
        the Secretary, resulting from a refund to the taxpayer, for any 
        period before the receipt of such refund, except to the extent 
        interest was paid by the foreign country or possession of the 
        United States on such refund for such period.''
    (b) Authority To Use Average Rates.--
            (1) In general.--Subsection (a) of section 986 (as amended 
        by subsection (a)) is amended by redesignating paragraph (3) as 
        paragraph (4) and inserting after paragraph (2) the following 
        new paragraph:
            ``(3) Authority to permit use of average rates.--To the 
        extent prescribed in regulations, the average exchange rate for 
        the period (specified in such regulations) during which the 
        taxes or adjustment is paid may be used instead of the exchange 
        rate as of the time of such payment.''
            (2) Determination of average rates.--Subsection (c) of 
        section 989 is amended by striking ``and'' at the end of 
        paragraph (4), by striking the period at the end of paragraph 
        (5) and inserting ``, and'', and by adding at the end thereof 
        the following new paragraph:
            ``(6) setting forth procedures for determining the average 
        exchange rate for any period.''
            (3) Conforming amendments.--Subsection (b) of section 989 
        is amended by striking ``weighted'' each place it appears.
    (c) Effective Dates.--
            (1) In general.--The amendments made by subsections (a)(1) 
        and (b) shall apply to taxes paid or accrued in taxable years 
        beginning after December 31, 1995.
            (2) Subsection (a)(2).--The amendment made by subsection 
        (a)(2) shall apply to taxes which relate to taxable years 
        beginning after December 31, 1995.

SEC. 4. LIMITED APPLICATION OF UNIFORM CAPITALIZATION RULES TO FOREIGN 
              PERSONS.

    (a) In General.--Section 263A(c) (relating to exceptions) is 
amended by adding at the end thereof the following new paragraph:
            ``(7) Foreign persons.--This section shall apply to any 
        taxpayer who is not a United States person only for purposes of 
        applying sections 871(b)(1) and 882(a)(1) and subpart F of part 
        III of subchapter N.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1995.
SEC. 5. EXEMPTION FOR ACTIVE FINANCING INCOME.

    (a) Exemption From Foreign Personal Holding Company Income.--
Subsection (c) of section 954 is amended by adding at the end the 
following new paragraph:
            ``(4) Certain income derived in active conduct of trade or 
        business.--For purposes of paragraph (1), foreign personal 
        holding company income does not include income which is derived 
        from sources within the country under the laws of which the 
        controlled foreign corporation is created or organized and 
        which is--
                    ``(A) income derived in the active conduct of a 
                banking, financing or similar business, but only if 
                such corporation is predominantly engaged in such 
                active conduct;
                    ``(B) dividends, interest, and gains from the sale 
                or exchange of stock or securities derived from the 
                investments made by a qualifying insurance company of 
                its unearned premiums or reserves ordinary and 
                necessary for the proper conduct of its insurance 
                business, and which are received from a person other 
                than a related person (within the meaning of subsection 
                (d)(3)); or
                    ``(C) dividends, interest, and gains from the sale 
                or exchange of stock or securities received from a 
                person other than a related person (within the meaning 
                of subsection (d)(3)) derived from investments made by 
                a qualifying insurance company of an amount of its 
                assets equal to \1/3\ of its premiums earned on 
                insurance contracts during the taxable year (as defined 
                in section 832(b)(4)) which are not directly or 
                indirectly attributable to the insurance or reinsurance 
                of risks of persons who are related persons (within the 
                meaning of subsection (d)(3)).
        Dividends, interest, income equivalent to interest, rent, and 
        royalties received or accrued from a related person (within the 
        meaning of subsection (d)(3)), shall be subject to look-thru 
        treatment for purposes of subparagraph (A) under regulations 
        prescribed by the Secretary which are consistent with the 
        principles of section 904(d)(2). The Secretary shall prescribe 
        regulations which interpret subparagraph (A) in accordance with 
        the applicable principles of section 904(d)(2)(C). For purposes 
        of subparagraph (C), the term `qualifying insurance company' 
        means an insurance company which is subject to regulation as an 
        insurance company under the laws of its country of 
        incorporation and which realizes at least 50 percent of its 
        gross income (other than gross income derived from investments) 
        from premiums written on risks situated within its country of 
        incorporation.''
    (b) Exemption From Foreign Base Company Services Income.--Paragraph 
(2) of section 954(e) is amended by striking ``or'' at the end of 
subparagraph (A), by striking the period at the end of subparagraph (B) 
and inserting ``, or'', and by adding at the end the following:
                    ``(C) the active conduct of a banking, financing or 
                similar business, but only if--
                            ``(i) the controlled foreign corporation is 
                        predominantly engaged in such active conduct, 
                        and
                            ``(ii) the income so derived is from 
                        sources within the country under the laws of 
                        which the controlled foreign corporation is 
                        created or organized.
                The Secretary shall prescribe regulations which 
                interpret subparagraph (C) in accordance with the 
                applicable principles of section 904(d)(2)(C).''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 1995, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 6. EXTENSION OF PERIOD TO WHICH EXCESS FOREIGN TAXES MAY BE 
              CARRIED.

    (a) General Rule.--Subsection (c) of section 904 (relating to 
carryback and carryover of excess tax paid) is amended--
            (1) by inserting ``in the third preceding taxable year,'' 
        before ``in the second preceding taxable year'', and
            (2) by striking ``in the first, second, third, fourth, or 
        fifth'' and inserting ``in any of the first 15''.
    (b) Excess Extraction Taxes.--Paragraph (1) of section 907(f) is 
amended--
            (1) by inserting ``in the third preceding taxable year,'' 
        before ``in the second preceding taxable year'', and
            (2) by striking ``in the first, second, third, fourth, or 
        fifth'' and inserting ``in any of the first 15''.
    (c) Effective Date.--The amendments made by this section shall 
apply to excess foreign taxes for taxable years beginning after 
December 31, 1995.
SEC. 7. APPLICATION OF SEPARATE FOREIGN TAX CREDIT LIMITATION FOR 
              NONCONTROLLED SECTION 902 CORPORATIONS.

    (a) Look-Thru in Case of Noncontrolled Section 902 Corporations if 
Information Available.--Section 904(d) (relating to separate 
application of section with respect to certain categories of income) is 
amended by redesignating paragraphs (4) and (5) as paragraphs (5) and 
(6), respectively, and by inserting after paragraph (3) the following 
new paragraph:
            ``(4) Look-thru in the case of certain noncontrolled 
        section 902 corporations.--
                    ``(A) In general.--Dividends received or accrued by 
                a corporation from a noncontrolled section 902 
                corporation shall be treated as not described in 
                paragraph (1)(E) if information necessary to make the 
                determinations under subparagraph (B) is readily 
                available to the taxpayer.
                    ``(B) Allocation of dividends among categories.--
                Dividends treated as provided in subparagraph (A) which 
                are paid out of the earnings or profits of such 
                corporation shall be treated as income in a separate 
                category in proportion to the ratio of--
                            ``(i) the portion of the earnings and 
                        profits attributable to income in such separate 
                        category, to
                            ``(ii) the total amount of earnings and 
                        profits.
                    ``(C) Coordination with other provisions.--
                Dividends treated as provided in subparagraph (A) shall 
                not be treated as dividends from a noncontrolled 
                section 902 corporation for purposes of subparagraphs 
                (C)(iii) and (D) of paragraph (2).''
    (b) Dividends From Other Noncontrolled Section 902 Corporations All 
in Same Separate Basket.--Subparagraph (E) of section 904(d)(1) is 
amended to read as follows:
                    ``(E) in the case of a corporation, except as 
                provided in paragraph (4), dividends from all 
                noncontrolled section 902 corporations,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 1995, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 8. COUNTRIES IN EUROPEAN UNION TREATED A SINGLE COUNTRY UNDER SAME 
              COUNTRY EXCEPTIONS.

    (a) In General.--Subsection (d) of section 954 is amended by adding 
at the end the following new paragraph:
            ``(5) Countries in european union treated as 1 country.--
        For purposes of this subsection and subsection (e), in the case 
        of a controlled foreign corporation which is created or 
        organized under the laws of a country included in the European 
        Union, the geographic extent of such country shall be treated 
        as including the countries in such Union.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years of foreign corporations beginning after December 31, 
1995, and to taxable years of United States shareholders in which or 
with which such taxable years of foreign corporations end.

SEC. 9. CONTROLLED FOREIGN CORPORATIONS PASSIVE FOREIGN INVESTMENT 
              COMPANY.

    (a) In General.--Subsection (b) of section 1297 is amended by 
adding at the end thereof the following new paragraph:
            ``(10) Exception where section 951 applies without regard 
        to this section.--This part shall not apply to a taxpayer with 
        respect to a corporation if, without regard to this section--
                    ``(A) such corporation is a controlled foreign 
                corporation (as defined in section 957), and
                    ``(B) the taxpayer is a United States shareholder 
                (as defined in section 951(b)) with respect to such 
                corporation.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years of foreign corporations beginning after December 
31, 1995, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 10. EARNINGS AND PROFITS DEPRECIATION USED IN ASSET BASIS IN 
              ALLOCATING EXPENSES.

    (a) In General.--Subsection (e)(2) of section 864 is amended by 
inserting at the end thereof the following new sentence: ``Except as 
otherwise provided in this subsection, for purposes of allocating and 
apportioning any deductible expense on the basis of assets, the 
taxpayer shall be permitted to base such allocations and apportionments 
on the adjusted bases of assets as determined by applying the rules and 
principles of subsections (k) and (n) of section 312.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1995.

SEC. 11. RECHARACTERIZATION OF OVERALL DOMESTIC LOSS.

    (a) General Rule.--Section 904 is amended by redesignating 
subsections (g), (h), (i), and (j) as subsections (h), (i), (j), and 
(k), respectively, and by inserting after subsection (f) the following 
new subsection:
    ``(g) Recharacterization of Overall Domestic Loss.--
            ``(1) General rule.--For purposes of this subpart, in the 
        case of any taxpayer who sustains an overall domestic loss for 
        any taxable year beginning after December 31, 1995, that 
        portion of the taxpayer's taxable income from sources within 
        the United States for each succeeding taxable year which is 
        equal to the lesser of--
                    ``(A) the amount of such loss (to the extent not 
                used under this paragraph in prior taxable years), or
                    ``(B) 50 percent of the taxpayer's taxable income 
                from sources within the United States for such 
                succeeding taxable year,
        shall be treated as income from sources without the United 
        States (and not as income from sources within the United 
        States).
            ``(2) Overall domestic loss defined.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `overall domestic loss' 
                means any domestic loss to the extent such loss offsets 
                taxable income from sources without the United States 
                for the taxable year or for any preceding taxable year 
                by reason of a carryback. For purposes of the preceding 
                sentence, the term `domestic loss' means the amount by 
                which the gross income for the taxable year from 
                sources within the United States is exceeded by the sum 
                of the deductions properly apportioned or allocated 
                thereto (determined without regard to any carryback 
                from a subsequent taxable year).
                    ``(B) Taxpayer must have elected foreign tax credit 
                for year of loss.--The term `overall domestic loss' 
                shall not include any loss for any taxable year unless 
                the taxpayer chose the benefits of this subpart for 
                such taxable year.
            ``(3) Characterization of subsequent income.--
                    ``(A) In general.--Any income from sources within 
                the United States that is treated as income from 
                sources without the United States under paragraph (1) 
                shall be allocated among and increase the income 
                categories in proportion to the loss from sources 
                within the United States previously allocated to those 
                income categories.
                    ``(B) Income category.--For purposes of this 
                paragraph, the term `income category' has the meaning 
                given to such term by subsection (f)(5)(E)(i).
            ``(4) Coordination with subsection (f).--The Secretary 
        shall prescribe such regulations as may be necessary to 
        coordinate the provisions of this subsection with the 
        provisions of subsection (f).''
    (b) Conforming Amendment.--Subparagraph (A) of section 936(a)(2) is 
amended by striking ``section 904(f)'' and inserting ``subsections (f) 
and (g) of section 904''.
    (c) Effective Date.--The amendments made by this section shall 
apply to losses for taxable years beginning after December 31, 1995.

SEC. 12. EXPANSION OF DE MINIMIS RULE UNDER SUBPART F.

    (a) In General.--Subparagraph (A) of section 954(b)(3) (relating to 
de minimis, etc., rules) is amended to read as follows:
                    ``(A) De minimis rule.--If the sum of foreign base 
                company income (determined without regard to paragraph 
                (5)) and the gross insurance income for the taxable 
                year is less than 10 percent of gross income, no part 
                of the gross income for the taxable year shall be 
                treated as foreign base company income or insurance 
                income.''
    (b) Technical Amendments.--
            (1) Clause (ii) of section 864(d)(5)(A) is amended by 
        striking ``5 percent or $1,000,000'' and inserting ``10 
        percent''.
            (2) Clause (i) of section 881(c)(5)(A) is amended by 
        striking ``5 percent or $1,000,000'' and inserting ``10 
        percent''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.
SEC. 13. ALLOCATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.

    (a) General Rule.--Subparagraph (B) of section 864(f)(1) (relating 
to allocation of research and experimental expenditures) is amended by 
striking ``50 percent'' each place it appears and inserting ``64 
percent''.
    (b) Allocation Rule Made Permanent.--Subsection (f) of section 864 
is amended by striking paragraph (6).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the last taxable year to which 
section 864(f) of the Internal Revenue Code of 1986 would have applied 
but for this section.

SEC. 14. INCREASE IN FILING THRESHOLDS FOR RETURNS AS TO ORGANIZATION 
              OF FOREIGN CORPORATIONS AND ACQUISITIONS OF STOCK IN SUCH 
              CORPORATIONS.

    (a) In General.--Subsection (a) of section 6046 (relating to 
returns as to organization or reorganization of foreign corporations 
and as to acquisitions of their stock) is amended to read as follows:
    ``(a) Requirement of return.--A return complying with the 
requirements of subsection (b) shall be made by--
            ``(1) each United States citizen or resident who becomes an 
        officer or director of a foreign corporation, 10 percent or 
        more in value of the stock of which is owned by a United States 
        person (as defined in section 7701(a)(30)),
            ``(2) each United States person--
                    ``(A) who acquires stock which, when added to any 
                stock owned on the date of such acquisition, has a 
                value equal to 10 percent or more of the value of the 
                stock of a foreign corporation, or
                    ``(B) who acquires an additional 10 percent or more 
                in value of the stock of a foreign corporation,
            ``(3) each person (not described in paragraph (2)) who is 
        treated as a United States shareholder under section 953(c) 
        with respect to a foreign corporation, and
            ``(4) each person who becomes a United States person while 
        owning 10 percent or more in value of the stock of a foreign 
        corporation.
In the case of a foreign corporation with respect to which any person 
is treated as a United States shareholder under section 953(c), 
paragraph (1) shall be treated as including a reference to each United 
States person who is an officer or director of such corporation.''
    (b) Effective Date.--The amendment made by this section shall take 
effect on January 1, 1996.

SEC. 15. SUBPART F EARNINGS AND PROFITS DETERMINED UNDER GENERALLY 
              ACCEPTED ACCOUNTING PRINCIPLES.

    (a) In General.--Subsection (a) of section 964 (relating to 
miscellaneous provisions) is amended by striking ``rules substantially 
similar to those applicable to domestic corporations, under regulations 
prescribed by the Secretary'' and inserting ``generally accepted 
accounting principles in the United States''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to distributions during, and the determination of the inclusion 
under section 951 of the Internal Revenue Code of 1986 with respect to, 
taxable years of foreign corporations beginning after December 31, 
1995.
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