II 109th CONGRESS 1st Session S. 750 IN THE SENATE OF THE UNITED STATES April 11, 2005 Mr. Kyl 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 allow look-through treatment of payments between related foreign corporations.

1.

Look-through treatment of payments between related controlled foreign corporations under the foreign personal holding company rules

(a)

In general

Section 954(c) of the Internal Revenue Code of 1986 (relating to foreign personal holding company income) is amended by adding at the end the following new paragraph: (6)

Look-thru rule for related controlled foreign corporations

For purposes of this subsection, dividends, interest, rents, and royalties received or accrued from a controlled foreign corporation which is a related person shall not be treated as foreign personal holding company income to the extent attributable or properly allocable (determined under rules similar to the rules of subparagraphs (C) and (D) of section 904(d)(3)) to income of the related person which is not subpart F income. For purposes of this paragraph, interest shall include factoring income which is treated as income equivalent to interest for purposes of paragraph (1)(E). The Secretary shall prescribe such regulations as may be appropriate to prevent the abuse of the purposes of this paragraph. . (b)

Effective date

The amendment made by this section shall apply to taxable years of foreign corporations ending after January 1, 2005, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.