MODIFICATIONS TO TREATMENT OF AIRCRAFT LEASING AND SHIPPING INCOME.

SEC. 415. MODIFICATIONS TO TREATMENT OF AIRCRAFT LEASING AND SHIPPING INCOME.(a) Elimination of Foreign Base Company Shipping Income.—Section 954 (relating to foreign base company income) is amended—(1) by striking paragraph (4) of subsection (a) (relating to foreign base company shipping income), and(2) by striking subsection (f) (relating to foreign base company shipping income).(b) Safe Harbor for Certain Leasing Activities.—Subparagraph (A) of section 954(c)(2) is amended by adding at the end the following new sentence: “For purposes of the preceding sentence, rents derived from leasing an aircraft or vessel in foreign commerce shall not fail to be treated as derived in the active conduct of a trade or business if, as determined under regulations prescribed by the Secretary, the active leasing expenses are not less than 10 percent of the profit on the lease.”.(c) Conforming Amendments.—(1) Section 952(c)(1)(B)(iii) is amended by striking subclause (I) and redesignating subclauses (II) through (VI) as subclauses (I) through (V), respectively.(2) Subsection (b) of section 954 is amended—(A) by striking “the foreign base company shipping income,” in paragraph (5),(B) by striking paragraphs (6) and (7), and(C) by redesignating paragraph (8) as paragraph (6).(d) Effective Date.—The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.