S.Amdt. 2674

1. Adds SECTION __. INTEREST PAYMENTS DEDUCTIBLE WHERE DISQUALIFIED GUARANTEE HAS NO ECONOMIC EFFECT on page 146, line 23

   Adds a sectionPrinted page

   Inserted: SECTION __. INTEREST PAYMENTS DEDUCTIBLE WHERE DISQUALIFIED GUARANTEE HAS NO ECONOMIC EFFECT.

   Inserted: (a) In General.--Section 163(j)(6)(D)(ii) (relating to exceptions to disqualified guarantee) is amended--

   Inserted: (1) by striking "or" at the end of subclause (I),

   Inserted: (2) by striking the period at the end of subclause (II) and inserting ", or",

   Inserted: (3) by inserting after subclause (II) the following new subclause:

   Inserted: "(III) in the case of a guarantee by a foreign person, to the extent of the amount that the taxpayer establishes to the satisfaction of the Secretary that the taxpayer could have borrowed from an unrelated person without the guarantee.".

   Inserted: (b) Effective Date.--The amendments made by this section shall apply to guarantees issued on and after the date of the enactment of this Act.

   Inserted: SEC. __. INTEREST PAID TO CERTAIN LENDERS NOT DISQUALIFIED INTEREST.

   Inserted: (a) In General.--Section 163(j)(3)(B) (defining disqualified interest) is amended by striking "and" at the end of clause (i) and by inserting after clause (ii) the following new clause:

   Inserted: "(iii) the interest is not paid or accrued to a qualified lender, and".

   Inserted: (b) Qualified Lender.--Section 163(j)(6) (relating to other definitions and special rules) is amended by adding at the end the following new subparagraphs:

   Inserted: "(F) Qualified lender.--A holder of debt shall be a qualified lender with respect to such debt if such person is--

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   Inserted: "(i) a United States person subject to the income tax imposed by this chapter (determined without regard to section 511) and--

   Inserted: "(I) such person is a financial institution, or

   Inserted: "(II) such debt is publicly issued debt, or

   Inserted: "(ii) a foreign person which is subject to either net basis or gross basis taxation and--

   Inserted: "(I) such person is a financial institution required to include the interest on such debt in taxable income under section 882, or

   Inserted: "(II) such debt is publicly issued debt.

   Inserted: "(G) Financial institution.--The term 'financial institution' means a person which is--

   Inserted: "(i) predominantly engaged in the active conduct of a banking, financing, or similar business within the meaning of section 954(h),

   Inserted: "(ii) a corporation described in section 581 or 591 (relating to banks and other savings institutions), or

   Inserted: "(iii) an insurance company subject to tax under subchapter L or which would be subject to tax under subchapter L if it were a domestic corporation.

   Inserted: "(H) Publicly issued debt.--The term 'publicly issued debt' means--

   Inserted: "(i) commercial paper described in section 3(a)(3) or 4(2) of the Securities Act of 1933,

   Inserted: "(ii) a debt instrument which is--

   Inserted: "(I) part of an issue of debt instruments meeting the requirements of section 871(h) or 881(c) (relating to the exemptions from withholding tax for certain portfolio debt investments) without regard to section 871(h)(2)(B)(ii) and section 881(c)(2)(B)(ii), and

   Inserted: "(II) readily tradable on an established securities market, or

   Inserted: "(iii) a debt instrument which is part of an issue of debt instruments the initial offering of which is registered with the Securities and Exchange Commission or would be required to be registered under the Securities Act of 1933 but for an exemption from registration--

   Inserted: "(I) under section 3 of the Securities Act of 1933,

   Inserted: "(II) under any law (other than the Securities Act of 1933) because of the identity of the issuer or the nature of the security,

   Inserted: "(III) because the issue is intended for distribution to persons who are not United States persons, or

   Inserted: "(IV) pursuant to section 230.144A of title 17, Code of Federal Regulations (relating to securities placed with qualified institutional buyers) or any successor rule or regulation.".

   Inserted: (c) Effective Date.--The amendments made by this section shall apply to debt issued on or after the date of the enactment of this Act.

   Original wording

   On page 146, after line 23, insert the following:

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As printed