ESTATES OF NONRESIDENTS NOT CITIZENS.

SEC. 108. ESTATES OF NONRESIDENTS NOT CITIZENS. (a) Rate of Tax.— Subsection (a) of section 2101 (relating to tax imposed in case of estates of nonresidents not citizens) is amended to read as follows: “(a) Rate of Tax.— Except as provided in section 2107, a tax computed in accordance with the following table is hereby imposed on the transfer of the taxable estate, determined as provided in section 2106, of every decedent nonresident not a citizen of the United States: “If the taxable estate is: The tax shall be: Not over $100,000 5% of the taxable estate. Over $100,000 but not over $500,000 $5,000, plus 10% of excess over $100,000. Over $500,000 but not over $1,000,000 $45,000, plus 15% of excess over $500,000. Over $1,000,000 but not over $2,000,000 $120,000, plus 20% of excess over $1,000,000. Over $2,000,000 $320,000, plus 25% of excess over $2,000,000.” 80 Stat. 1572 (b) Credits Against Tax.— Section 2102 (relating to credits allowed against estate tax) is amended to read as follows: “SEC. 2102. CREDITS AGAINST TAX. “(a) In General.— The tax imposed by section 2101 shall be credited with the amounts determined in accordance with sections 2011 to 2013, inclusive (relating to State death taxes, gift tax, and tax on prior transfers), subject to the special limitation provided in subsection (b). “(b) Special Limitation.— The maximum credit allowed under section 2011 against the tax imposed by section 2101 for State death taxes paid shall be an amount which bears the same ratio to the credit computed as provided in section 2011(b) as the value of the property, as determined for purposes of this chapter, upon which State death taxes were paid and which is included in the gross estate under section 2103 bears to the value of the total gross estate under section 2103. For purposes of this subsection, the term ‘State death taxes’ means the taxes described in section 2011(a).” (c) Property Within the United States.— Section 2104 (relating to property within the United States) is amended by adding at the end thereof the following new subsection: “(c) Debt Obligations.— For purposes of this subchapter, debt obligations of— “(1) a United States person, or “(2) the United States, a State or any political subdivision thereof, or the District of Columbia, owned and held by a nonresident not a citizen of the United States shall be deemed property within the United States. With respect to estates of decedents dying after December 31, 1972, deposits with a domestic branch of a foreign corporation, if such branch is engaged in the commercial banking business, shall, for purposes of this subchapter, be deemed property within the United States. This subsection shall not apply to a debt obligation to which section 2105(b) applies or to a debt obligation of a domestic corporation if any interest on such obligation, were such interest received by the decedent at the time of his death, would be treated by reason of section 861(a)(1)(B) as income from sources without the United States.” (d) Property Without the United States.—Subsection (b) of section 2105 (relating to bank deposits) is amended to read as follows: “(b) Certain Bank Deposits, Etc.— For purposes of this subchapter— “(1) amounts described in section 861(c) if any interest thereon, were such interest received by the decedent at the time of his death, would be treated by reason of section 861(a)(1)(A) as income from sources without the United States, and “(2) deposits with a foreign branch of a domestic corporation or domestic partnership, if such branch is engaged in the commercial banking business, shall not be deemed property within the United States.” (e) Definition of Taxable Estate.— Paragraph (3) of section 2106(a) (relating to deduction of exemption from gross estate) is amended to read as follows: “(3) Exemption.— “(A) General rule.—An exemption of $30,000. “(B) Residents of possessions of the united states.— In the case of a decedent who is considered to be a ‘nonresident not a citizen of the United States’ under the provisions of section 2209, the exemption shall be the greater of (i) $30,000, or (ii) that proportion of the exemption authorized by section 2052 which the value of that part of 80 Stat. 1573the decedent’s gross estate which at the time of his death is situated in the United States bears to the value of his entire gross estate wherever situated.” (f) Special Methods of Computing Tax.— Subchapter B of chapter 11 (relating to estates of nonresidents not citizens) is amended by adding at the end thereof the following new sections: “SEC. 2107. EXPATRIATION TO AVOID TAX. “(a) Rate of Tax.— A tax computed in accordance with the table contained in section 2001 is hereby imposed on the transfer of the taxable estate, determined as provided in section 2106, of every decedent nonresident not a citizen of the United States dying after the date of enactment of this section, if after March 8, 1965, and within the 10-year period ending with the date of death such decedent lost United States citizenship, unless such loss did not have for one of its principal purposes the avoidance of taxes under this subtitle or subtitle A. “(b) Gross Estate.— For purposes of the tax imposed by subsection (a), the value of the gross estate of every decedent to whom subsection (a) applies shall be determined as provided in section 2103, except that— “(1) if such decedent owned (within the meaning of section 958(a)) at the time of his death 10 percent or more of the total combined voting power of all classes of stock entitled to vote of a foreign corporation, and “(2) if such decedent owned (within the meaning of section 958(a)), or is considered to have owned (by applying the ownership rules of section 958(b)), at the time of his death, more than 50 percent of the total combined voting power of all classes of stock entitled to vote of such foreign corporation, then that proportion of the fair market value of the stock of such foreign corporation owned (within the meaning of section 958(a)) by such decedent at the time of his death, which the fair market value of any assets owned by such foreign corporation and situated in the United States, at the time of his death, bears to the total fair market value of all assets owned by such foreign corporation at the time of his death, shall lie included in the gross estate of such decedent. For purposes of the preceding sentence, a decedent shall be treated as owning stock of a foreign corporation at the time of his death if, at the time of a transfer, by trust or otherwise, within the meaning of sections 2035 to 2038, inclusive, he owned such stock. “(c) Credits.— The tax imposed by subsection (a) shall be credited with the amounts determined in accordance with section 2102. “(d) Exception for Loss of Citizenship for Certain Causes.— Subsection (a) shall not apply to the transfer of the estate of a decedent whose loss of United States citizenship resulted from the application of section 301(b), 350, or 355 of the Immigration and Nationality Act, as amended (8 U.S.C. 1401 (b), 1482, or 1487). “(e) Burden of Proof.— If the Secretary or his delegate establishes that it is reasonable to believe that an individual’s loss of United States citizenship would, but for this section, result in a substantial reduction in the estate, inheritance, legacy, and succession taxes in respect of the transfer of his estate, the burden of proving that such loss of citizenship did not have for one of its principal purposes the avoidance of taxes under this subtitle or subtitle A shall be on the executor of such individual’s estate. “SEC. 2108. APPLICATION OF PRE–1967 ESTATE TAX PROVISIONS. “(a) Imposition of More Burdensome Tax by Foreign Country.— Whenever the President finds that— “(1) under the laws of any foreign country, considering the tax system of such foreign country, a more burdensome tax is 80 Stat. 1574imposed by such foreign country on the transfer of estates of decedents who were citizens of the United States and not residents of such foreign country than the tax imposed by this subchapter on the transfer of estates of decedents who were residents of such foreign country, “(2) such foreign country, when requested by the United States to do so, has not acted to revise or reduce such tax so that it is no more burdensome than the tax imposed by this subchapter on the transfer of estates of decedents who were residents of such foreign country, and “(3) it is in the public interest to apply pre–1967 tax provisions in accordance with this section to the transfer of estates of decedents who were residents of such foreign country, the President shall proclaim that the tax on the transfer of the estate of every decedent who was a resident of such foreign country at the time of his death shall, in the case of decedents dying after the date of such proclamation, be determined under this subchapter without regard to amendments made to sections 2101 (relating to tax imposed), 2102 (relating to credits against tax), 2106 (relating to taxable estate), and 6018 (relating to estate tax returns) on or after the date of enactment of this section. “(b) Alleviation of More Burdensome Tax.—Whenever the President finds that the laws of any foreign country with respect to which the President has made a proclamation under subsection (a) have been modified so that the tax on the transfer of estates of decedents who were citizens of the United States and not residents of such foreign country is no longer more burdensome than the tax imposed by this subchapter on the transfer of estates of decedents who were residents of such foreign country, he shall proclaim that the tax on the transfer of the estate of every decedent who was a resident of such foreign country at the time of his death shall, in the case of decedents dying after the date of such proclamation, be determined under this subchapter without regard to subsection (a). “(c) Notification of Congress Required.—No proclamation shall be issued by the President pursuant to this section unless, at least 30 days prior to such proclamation, he has notified the Senate and the House of Representatives of his intention to issue such proclamation. “(d) Implementation by Regulations.—The Secretary or his delegate shall prescribe such regulations as may be necessary or appropriate to implement this section.” (g) Estate Tax Returns.—Paragraph (2) of section 6018(a) (relating to estates of nonresidents not citizens) is amended by striking out “$2,000” and inserting in lieu thereof “$30,000”. (h) Clerical Amendment.—The table of sections for subchapter B of chapter 11 (relating to estates of nonresidents not citizens) is amended by adding at the end thereof the following: “Sec. 2107. Expatriation to avoid tax. “Sec. 2108. Application of pre–1967 estate tax provisions.” (i) Effective Date.— The amendments made by this section shall apply with respect to estates of decedents dying alter the date of the enactment of this Act.