CONTROLLED FOREIGN CORPORATIONS.

SEC. 103. CONTROLLED FOREIGN CORPORATIONS. (a) Subpart F Exception for Active Financing.—(1) Exempt insurance income.—Paragraph (10) of section 953(e) (relating to application) is amended—(A) by striking “January 1, 2007” and inserting “January 1, 2009”, and (B) by striking “December 31, 2006” and inserting “December 31, 2008”. (2) Exception to treatment as foreign personal holding company income.—Paragraph (9) of section 954(h) (relating to application) is amended by striking “January 1, 2007” and inserting “January 1, 2009”. (b) Look-Through Treatment of Payments Between Related Controlled Foreign Corporations Under the Foreign Personal Holding Company Rules.—(1) In general.—Subsection (c) of section 954 (relating to foreign personal holding company income) is amended by adding at the end the following new paragraph: “(6) Look-thru rule for related controlled foreign corporations.—“(A) In general.—For purposes of this subsection, dividends, interest, rents, and royalties received or accrued from a controlled foreign corporation which is a related person shall not be treated as foreign personal holding company income to the extent attributable or properly allocable (determined under rules similar to the rules of subparagraphs (C) and (D) of section 904(d)(3)) to income of the related person which is not subpart F income. For 120 STAT. 347 purposes of this subparagraph, interest shall include factoring income which is treated as income equivalent to interest for purposes of paragraph (1)(E). The Secretary shall prescribe such regulations as may be appropriate to prevent the abuse of the purposes of this paragraph. “(B) Application.—Subparagraph (A) shall apply to taxable years of foreign corporations beginning after December 31, 2005, and before January 1, 2009, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.”. (2) Effective date.—The amendment made by this subsection shall apply to taxable years of foreign corporations beginning after December 31, 2005, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.