TRANSLATION OF FOREIGN TAXES.

SEC. 408. TRANSLATION OF FOREIGN TAXES.(a) Elective Exception for Taxes Paid Other Than in Functional Currency.—Paragraph (1) of section 986(a) (relating to determination of foreign taxes and foreign corporation’s earnings and profits) is amended by redesignating subparagraph (D) as subparagraph (E) and by inserting after subparagraph (C) the following new subparagraph:“(D) Elective exception for taxes paid other than in functional currency.—“(i) In general.—At the election of the taxpayer, subparagraph (A) shall not apply to any foreign income taxes the liability for which is denominated in any currency other than in the taxpayer’s functional currency.“(ii) Application to qualified business units.—An election under this subparagraph may apply to foreign income taxes attributable to a qualified business unit in accordance with regulations prescribed by the Secretary.“(iii) Election.—Any such election shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.”.(b) Special Rule for Regulated Investment Companies.—(1) In general.—Section 986(a)(1), as amended by subsection (a), is amended by redesignating subparagraph (E) as subparagraph (F) and by inserting after subparagraph (D) the following:“(E) Special rule for regulated investment companies.—In the case of a regulated investment company which takes into account income on an accrual basis, subparagraphs (A) through (D) shall not apply and foreign income taxes paid or accrued with respect to such income shall be translated into dollars using the exchange rate as of the date the income accrues.”.(2) Conforming amendment.—Section 986(a)(2) is amended by inserting “or (E)” after “subparagraph (A)”.118 STAT. 1500(c) Effective Date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2004.