[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 914 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 914

To amend the Internal Revenue Code of 1986 to apply look-thru rules for 
purposes of the foreign tax credit limitation to dividends from foreign 
         corporations not controlled by a domestic corporation.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 11, 2003

   Mr. Smith (for himself, Mr. Breaux, and Mr. Hatch) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to apply look-thru rules for 
purposes of the foreign tax credit limitation to dividends from foreign 
         corporations not controlled by a domestic corporation.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. LOOK-THRU RULES TO APPLY TO DIVIDENDS FROM NONCONTROLLED 
              SECTION 902 CORPORATIONS.

    (a) In General.--Paragraph (4) of section 904(d) of the Internal 
Revenue Code of 1986 (relating to separate application of section with 
respect to certain categories of income) is amended to read as follows:
            ``(4) Look-thru applies to dividends from noncontrolled 
        section 902 corporations.--
                    ``(A) In general.--For purposes of this subsection, 
                any dividend from a noncontrolled section 902 
                corporation with respect to the taxpayer shall be 
                treated as income in a separate category in proportion 
                to the ratio of--
                            ``(i) the portion of earnings and profits 
                        attributable to income in such category, to
                            ``(ii) the total amount of earnings and 
                        profits.
                    ``(B) Special rules.--For purposes of this 
                paragraph--
                            ``(i) In general.--Rules similar to the 
                        rules of paragraph (3)(F) shall apply.
                            ``(ii) Earnings and profits.--
                                    ``(I) In general.--The rules of 
                                section 316 shall apply.
                                    ``(II) Regulations.--The Secretary 
                                may prescribe regulations regarding the 
                                treatment of distributions out of 
                                earnings and profits for periods before 
                                the taxpayer's acquisition of the stock 
                                to which the distributions relate.
                            ``(iii) Dividends not allocable to separate 
                        category.--The portion of any dividend from a 
                        noncontrolled section 902 corporation which is 
                        not treated as income in a separate category 
                        under subparagraph (A) shall be treated as a 
                        dividend to which subparagraph (A) does not 
                        apply.
                            ``(iv) Look-thru with respect to 
                        carryforwards of credit.--Rules similar to the 
                        rules of subparagraph (A) also shall apply to 
                        any carryforward under subsection (c) from a 
                        taxable year beginning before January 1, 2003, 
                        of tax allocable to a dividend from a 
                        noncontrolled section 902 corporation with 
                        respect to the taxpayer.''.
    (b) Conforming Amendments.--
            (1) Subparagraph (E) of section 904(d)(1) of the Internal 
        Revenue Code of 1986, as in effect both before and after the 
        amendments made by section 1105 of the Taxpayer Relief Act of 
        1997, is hereby repealed.
            (2) Section 904(d)(2)(C)(iii) of such Code, as so in 
        effect, is amended by striking subclause (II) and by 
        redesignating subclause (III) as subclause (II).
            (3) The last sentence of section 904(d)(2)(D) of such Code, 
        as so in effect, is amended to read as follows: ``Such term 
        does not include any financial services income.''.
            (4) Section 904(d)(2)(E) of such Code is amended--
                    (A) by inserting ``or (4)'' after ``paragraph (3)'' 
                in clause (i), and
                    (B) by striking clauses (ii) and (iv) and by 
                redesignating clause (iii) as clause (ii).
            (5) Section 904(d)(3)(F) of such Code is amended by 
        striking ``(D), or (E)'' and inserting ``or (D)''.
            (6) Section 864(d)(5)(A)(i) of such Code is amended by 
        striking ``(C)(iii)(III)'' and inserting ``(C)(iii)(II)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.
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