TREATMENT OF CERTAIN UNITED STATES OBLIGATIONS HELD BY POSSESSION BANKS.

SEC. 6133. TREATMENT OF CERTAIN UNITED STATES OBLIGATIONS HELD BY POSSESSION BANKS. (a) In General.—Subsection (e) of section 882 of the 1986 Code is amended— (1) by inserting “which is not portfolio interest (as defined in section 881(c)(2))” before “shall”, and (2) by striking out the last sentence thereof. (b) Exclusion From Branch Profits Tax.—Paragraph (2) of section 884(d) of the 1986 Code is amended by striking out “or” at the end of subparagraph (C), by striking out the period at the end of subparagraph (D) and inserting in lieu thereof “, or” and by inserting after subparagraph (D) the following new subparagraph: “(E) income treated as effectively connected with the conduct of a trade or business within the United States under section 882(e).” (c) Effective Date.—The amendments made by this subsection shall apply to taxable years beginning after December 31, 1988.