PUBLIC LAW 94-12—MAR. 29, 1975
8 9 STAT. 6 1
g r a p h (2), by striking out the period at the end of paragraph (3) and inserting in heu thereof ", and", and by adding at the end thereof the following new paragraph: " (4) the foreign base company shipping income for the taxable year (determined under subsection (f) and reduced as provided in subsection (b)(5)). " (B) Paragraph (2) of section 954(b) is amended to read 26 USC 954, as follows: "(2)
EXCLUSION FOR REINVESTED SHIPPING I N C O M E. — For p u r -
poses of subsection (a), foreign base company income does not include foreign base company shipping income to the extent that the amount of such income does not exceed the increase for the taxable year in qualified investments in foreign base company shipping operations of the controlled foreign corporation (as determined under subsection (g)). " (C) Subparagraph s (A) and (B) of section 9 5 4 (b)(3) are each amended by striking out " paragraph s (1) and (5) " and inserting in lieu thereof " paragraph s (2) and (5) ". (D) Subparagraph (B) of section 9 5 4 (b)(3) is amended by striking out " paragraph s (1), (2), " and inserting in lieu thereof " paragraph (2), ". (E) Paragraph (5) of section 954(b) is amended by striking out " and the foreign base company services income" and inserting in lieu thereof " the foreign base company services income, and the foreign base company shipping income". (F) Section 954(b) is amended by adding at the end thereof the following new paragraph: "(6)
SPECIAL RULES FOR FOREIGN BASE COMPANY SHIPPING I N -
COME.—Income of a corporation which is foreign base company s h i p p i n g income under paragraph (4) of subsection (a) (determined without regard to the exclusion under paragraph (2) of this subsection) — " (A) shall not be considered foreign base company income of such corporation under any other paragraph of subsection (a) and " (B) if distributed through a chain of ownership described under section 9 5 8 (a), shall not be included in foreign base 26 USC 958. company income of another controlled foreign corporation in such chain." (G) Section 954 is amended by a d d i n g at the end thereof the following new subsections: "(f)
FOREIGN B A S E COMPANY S H I P P I N G I N C O M E. — For purposes of
subsection (a)(4), the term 'foreign base company shipping income' means income derived from, or in connection with, the use (or h i r i n g or leasing for use) of any aircraft or vessel in foreign commerce, or from, or in connection with, the performance of services directly related to the use of any such aircraft, or vessel, or from the sale, exchange, o r other disposition of any such aircraft or vessel. Such term includes, but is not limited to — " (1) dividends and interest received from a foreign corporation in respect of which taxes a r e deemed paid under section 902, and 26 USC 902. gain from the sale, exchange, or other disposition of stock or obligations of such a foreign corporation to the extent that such dividends, interest, and gains are attributable to foreign base company s h i p p i n g income, and " (2) that portion of the distributive share of the income of a partnership attributable to foreign base company shipping income.
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