S.Amdt. 2630

1. Adds SEC. __. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE TO DUAL CAPACITY TAXPAYERS at the end of title V

   Adds a section

   In S. 2020 · Placed on Calendar Senate

   (1) by striking "The Secretary" and inserting the

   Inserted: SEC. __. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE TO DUAL CAPACITY TAXPAYERS.

   Inserted: (a) In General.--Section 901 (relating to credit for taxes of foreign countries and of possessions of the United States) is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:

   Inserted: "(m) Special Rules Relating To Dual Capacity Taxpayers.--

   Inserted: "(1) General rule.--Notwithstanding any other provision of this chapter, any amount paid or accrued by a dual capacity taxpayer to a foreign country or possession of the United States for any period shall not be considered a tax--

   Inserted: "(A) if, for such period, the foreign country or possession does not impose a generally applicable income tax, or

   Inserted: "(B) to the extent such amount exceeds the amount (determined in accordance with regulations) which--

   Inserted: "(i) is paid by such dual capacity taxpayer pursuant to the generally applicable income tax imposed by the country or possession, or

   Inserted: "(ii) would be paid if the generally applicable income tax imposed by the country or possession were applicable to such dual capacity taxpayer.

   Inserted: Nothing in this paragraph shall be construed to imply the proper treatment of any such amount not in excess of the amount determined under subparagraph (B).

   Inserted: "(2) Dual capacity taxpayer.--For purposes of this subsection, the term 'dual capacity taxpayer' means, with respect to any foreign country or possession of the United States, a person who--

   Inserted: "(A) is subject to a levy of such country or possession, and

   Inserted: "(B) receives (or will receive) directly or indirectly a specific economic benefit (as determined in accordance with regulations) from such country or possession.

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   Inserted: "(3) Generally applicable income tax.--For purposes of this subsection--

   Inserted: "(A) In general.--The term 'generally applicable income tax' means an income tax (or a series of income taxes) which is generally imposed under the laws of a foreign country or possession on income derived from the conduct of a trade or business within such country or possession.

   Inserted: "(B) Exceptions.--Such term shall not include a tax unless it has substantial application, by its terms and in practice, to--

   Inserted: "(i) persons who are not dual capacity taxpayers, and

   Inserted: "(ii) persons who are citizens or residents of the foreign country or possession."

   Inserted: (b) Effective Date.--

   Inserted: (1) In general.--The amendments made by this section shall apply to taxes paid or accrued in taxable years beginning after the date of the enactment of this Act.

   Inserted: (2) Contrary treaty obligations upheld.--The amendments made by this section shall not apply to the extent contrary to any treaty obligation of the United States.

   Inserted: SEC. __. RULES RELATING TO FOREIGN OIL AND GAS INCOME.

   Inserted: (a) Separate Basket for Foreign Tax Credit.--

   Inserted: (1) Years before 2007.--Paragraph (1) of section 904(d) (relating to separate application of section with respect to certain categories of income), as in effect for years beginning before 2007, is amended by striking "and" at the end of subparagraph (H), by redesignating subparagraph (I) as subparagraph (J), and by inserting after subparagraph (H) the following new subparagraph:

   Inserted: "(I) foreign oil and gas income, and".

   Inserted: (2) 2007 and after.--Paragraph (1) of section 904(d), as in effect for years beginning after 2006, is amended by striking "and" at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ", and", and by adding at the end the following:

   Inserted: "(C) foreign oil and gas income."

   Inserted: (b) Definition.--

   Inserted: (1) Years before 2007.--Paragraph (2) of section 904(d), as in effect for years beginning before 2007, is amended by redesignating subparagraphs (H) and (I) as subparagraphs (I) and (J), respectively, and by inserting after subparagraph (G) the following new subparagraph:

   Inserted: "(H) Foreign oil and gas income.--The term 'foreign oil and gas income' has the meaning given such term by section 954(g)."

   Inserted: (2) 2007 and after.--Section 904(d)(2), as in effect for years after 2006, is amended by redesignating subparagraphs (J) and (K) as subparagraphs (K) and (L) and by inserting after subparagraph (I) the following:

   Inserted: "(J) Foreign oil and gas income.--For purposes of this section--

   Inserted: "(i) In general.--The term 'foreign oil and gas income' has the meaning given such term by section 954(g).

   Inserted: "(ii) Coordination.--Passive category income and general category income shall not include foreign oil and gas income (as so defined)."

   Inserted: (c) Conforming Amendments.--

   Inserted: (1) Section 904(d)(3)(F)(i) is amended by striking "or (E)" and inserting "(E), or (I)".

   Inserted: (2) Section 907(a) is hereby repealed.

   Inserted: (3) Section 907(c)(4) is hereby repealed.

   Inserted: (4) Section 907(f) is hereby repealed.

   Inserted: (d) Effective Dates.--

   Inserted: (1) In general.--The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

   Inserted: (2) Years after 2006.--The amendments made by paragraphs (1)(B) and (2)(B) shall apply to taxable years beginning after December 31, 2006.

   Inserted: (3) Transitional rules.--

   Inserted: (A) Separate basket treatment.--Any taxes paid or accrued in a taxable year beginning on or before the date of the enactment of this Act, with respect to income which was described in subparagraph (I) of section 904(d)(1) of such Code (as in effect on the day before the date of the enactment of this Act), shall be treated as taxes paid or accrued with respect to foreign oil and gas income to the extent the taxpayer establishes to the satisfaction of the Secretary of the Treasury that such taxes were paid or accrued with respect to foreign oil and gas income.

   Inserted: (B) Carryovers.--Any unused oil and gas extraction taxes which under section 907(f) of such Code (as so in effect) would have been allowable as a carryover to the taxpayer's first taxable year beginning after the date of the enactment of this Act (without regard to the limitation of paragraph (2) of such section 907(f) for first taxable year) shall be allowed as carryovers under section 904(c) of such Code in the same manner as if such taxes were unused taxes under such section 904(c) with respect to foreign oil and gas extraction income.

   Inserted: (C) Losses.--The amendment made by subsection (c)(3) shall not apply to foreign oil and gas extraction losses arising in taxable years beginning on or before the date of the enactment of this Act.

   Original wording

   At the end of title V, add the following:

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As printed