AMENDMENT OF PROVISION RELATING TO INVESTMENT IN UNITED STATES PROPERTY BY CONTROLLED FOREIGN CORPORATIONS.

SEC. 1021. AMENDMENT OF PROVISION RELATING TO INVESTMENT IN UNITED STATES PROPERTY BY CONTROLLED FOREIGN CORPORATIONS. (a) Exceptions to Definition of United States Property.— Section 956(b)(2) (relating to exceptions to definition of United States property) is amended by striking out “and” at the end of sub-90 STAT. 1619paragraph (E),by redesignating subparagraph (F) as subparagraph (H), and by inserting after subparagraph (E) the following new subparagraphs: “(F) the stock or obligations of a domestic corporation which is neither a United States shareholder (as defined in section 951(b)) of the controlled foreign corporation, nor a domestic corporation, 25 percent or more of the total combined voting power of which, immediately after the acquisition of any stock in such domestic corporation by the controlled foreign corporation, is owned, or is considered as being owned, by such United States shareholder’s in the aggregate; “(G) any movable property (other than a vessel or aircraft) which is used for the purpose of exploring for, developing, removing, or transporting resources from ocean waters or under such waters when used on the Continental Shelf of the United States: and”. (b) Constructive Ownership of Stock.— Section 958(b) (relating to rules for determining stock ownership) is amended— (1) by striking out “954(d)(3),” the first place it appears and inserting in lieu thereof “954(d)(3), 956(b)(2),”; (2) by striking out “954(d)(3).” the second place it appears and inserting in lieu thereof “954(d)(3), to treat the stock of a domestic corporation as owned by a United States shareholder of the controlled foreign corporation for purposes of section 956(b)(2),”; and (3) by adding at the end thereof the following new sentence: “Paragraphs (1) and (4) shall not apply for purposes of section 956(b)(2) to treat stock of a domestic corporation as not owned by a United States shareholder.” (c) Effective Date.— The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 1975, and to taxable years of United States shareholders (within the meaning of section 951 (b) of the Internal Revenue Code of 1954) within which or with which such taxable years of such foreign corporations end. in determining for purposes of any taxable year referred to in the preceding sentence the amount referred to in section 956(a)(2)(A) of the Internal Revenue Code of 1954 for the last taxable year of a corporation beginning before January 1, 1976, the amendments made by this section shall be deemed also to apply to such last taxable year.