Y 4.T 19/4:F 76/4

[JOINT COMMITTEE PRINT]

STANFORD
LIBRARIES
P10327

EXPLANATION OF H.R. 5270
(FOREIGN INCOME TAX RATIONALIZATION

AND SIMPLIFICATION ACT OF 1992)

JONSSON LIBRARY OF

DOCUMENTS

J.J. PICKLE, Texas

BILL ARCHER, Texas

DANIEL PATRICK MOYNIHAN, New York SAM GIBBONS, Florida

MAX BAUCUS, Montana
BOB PACKWOOD, Oregon

ROBERT DOLE, Kansas

GUY VANDER JAGT, Michigan

HARRY L. GUTMAN, Chief of Staff

ALAN J. AUERBACH, Deputy Chief of Staff

MARY M. SCHMITT, Associate Chief of Staff (Law)

BERNARD A. SCHMITT, Associate Chief of Staff (Revenue Analysis)

(II)

CONTENTS

INTRODUCTION

I. SUMMARY OF THE BILL.

II. TECHNICAL EXPLANATION OF THE BILL

Title I-Treatment of U.S. Businesses Operating Abroad.

Subtitle A. Interest Allocation Rules: Revise Appli-

cation of Interest Allocation Rules (sec. 101)............

Subtitle B. Foreign Tax Credit Rules.

1. Repeal of 90-percent limitation on alternative

minimum tax foreign tax credit (sec. 111) .....

2. Recharacterization of overall domestic loss

(sec. 112)......

3. Extension of period to which excess foreign

taxes may be carried (sec. 113).

4. Election to treat certain companies as con-

trolled foreign corporations (sec. 114)

Subtitle C. Other Provisions

1. Regulatory authority to exempt foreign per-

sons from uniform capitalization rules (sec.

121)

2. Modification of certain look-through rules

(sec. 122).

Title II-Treatment of Controlled Foreign Corporations...

1. Repeal of deferral for controlled foreign cor-

porations (sec. 201).

2. Election to treat controlled foreign corpora-

tions as domestic corporations (sec. 202) ........

3. Source of income from certain sales of inven-

tory property (sec. 203)

Title III-Taxation of Foreign Persons Having U.S.-Re-

lated Income.......

1. Taxation of certain stock gains of foreign per-

sons (sec. 301)........

Page

1

2

7

7

7

13

13

14

18

19

21

21

26

28

28

30

33

38

38

2. Limitation on treaty benefits (sec. 302).............

3. Excise tax on certain insurance premiums

paid to certain foreign persons (sec. 303) .......

4. Special section 482 rules for certain foreign

and foreign-owned corporations (sec. 304 of

the bill)

Title IV-Other Reforms...

Subtitle A. Individual Provisions..

1. Simplified foreign tax credit limitation for in-

dividuals (sec. 401)

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41

45

48

56

56

56

2. Personal transactions by individuals in for-

eign currency (sec. 402).

57

3. Treatment of certain grants (sec. 403).............

4. Estate tax marital credit for certain employ-

ees of international organizations (sec. 404)..

58

61

Subtitle B. Other Provisions

1. Reduction of Puerto Rico and possession tax

credit (sec. 411).

2. Treatment of passive income related to for-

eign oil and gas extraction income and ship-

ping income (sec. 412).

Title V-Foreign Simplification Provisions.

Subtitle A. Consolidation of Statutory Rules Provid-

ing Exceptions to Deferral (secs. 501-504).

Subtitle B. Treatment of Controlled Foreign Corpo-

rations (secs. 511-514).

Subtitle C. Other Provisions

65

65

65

68

68

81

90

1. Translation of foreign taxes into U.S. dollar

amounts (sec. 521)

90

2. Foreign tax credit limitation under the alter-

native minimum tax (sec. 522)