S.Amdt. 3375

SA 3375. Mr. DORGAN submitted an amendment intended to be proposed to
amendment SA 3336 proposed by Mr. Baucus to the bill H.R. 4213, to
amend the Internal Revenue Code of 1986 to extend certain expiring
provisions, and for other purposes; which was ordered to lie on the
table; as follows:

On page 161, between lines 10 and 11, insert the following:

SEC. ___. TAXATION OF INCOME OF CONTROLLED FOREIGN
CORPORATIONS ATTRIBUTABLE TO IMPORTED PROPERTY.

(a) General Rule.--Subsection (a) of section 954 (defining
foreign base company income) is amended by striking the
period at the end of paragraph (5) and inserting ``, and'',
by redesignating paragraph (5) as paragraph (4), and by
adding at the end the following new paragraph:
``(5) imported property income for the taxable year
(determined under subsection (j) and reduced as provided in
subsection (b)(5)).''.
(b) Definition of Imported Property Income.--Section 954 is
amended by adding at the end the following new subsection:
``(j) Imported Property Income.--
``(1) In general.--For purposes of subsection (a)(5), the
term `imported property income' means income (whether in the
form of profits, commissions, fees, or otherwise) derived in
connection with--
``(A) manufacturing, producing, growing, or extracting
imported property;
``(B) the sale, exchange, or other disposition of imported
property; or
``(C) the lease, rental, or licensing of imported property.
Such term shall not include any foreign oil and gas
extraction income (within the meaning of section 907(c)) or
any foreign oil related income (within the meaning of section
907(c)).
``(2) Imported property.--For purposes of this subsection--
``(A) In general.--Except as otherwise provided in this
paragraph, the term `imported property' means property which
is imported into the United States by the controlled foreign
corporation or a related person.
``(B) Imported property includes certain property imported
by unrelated persons.--The term `imported property' includes
any property imported into the United States by an unrelated
person if, when such property was sold to the unrelated

[[Page S1095]]

person by the controlled foreign corporation (or a related
person), it was reasonable to expect that--
``(i) such property would be imported into the United
States; or
``(ii) such property would be used as a component in other
property which would be imported into the United States.
``(C) Exception for property subsequently exported.--The
term `imported property' does not include any property which
is imported into the United States and which--
``(i) before substantial use in the United States, is sold,
leased, or rented by the controlled foreign corporation or a
related person for direct use, consumption, or disposition
outside the United States; or
``(ii) is used by the controlled foreign corporation or a
related person as a component in other property which is so
sold, leased, or rented.
``(D) Exception for certain agricultural commodities.--The
term `imported property' does not include any agricultural
commodity which is not grown in the United States in
commercially marketable quantities.
``(3) Definitions and special rules.--
``(A) Import.--For purposes of this subsection, the term
`import' means entering, or withdrawal from warehouse, for
consumption or use. Such term includes any grant of the right
to use intangible property (as defined in section
936(h)(3)(B)) in the United States.
``(B) United states.--For purposes of this subsection, the
term `United States' includes the Commonwealth of Puerto
Rico, the Virgin Islands of the United States, Guam, American
Samoa, and the Commonwealth of the Northern Mariana Islands.
``(C) Unrelated person.--For purposes of this subsection,
the term `unrelated person' means any person who is not a
related person with respect to the controlled foreign
corporation.
``(D) Coordination with foreign base company sales
income.--For purposes of this section, the term `foreign base
company sales income' shall not include any imported property
income.''.
(c) Separate Application of Limitations on Foreign Tax
Credit for Imported Property Income.--
(1) In general.--Paragraph (1) of section 904(d) (relating
to separate application of section with respect to certain
categories of income) is amended by striking ``and'' at the
end of subparagraph (A), by redesignating subparagraph (B) as
subparagraph (C), and by inserting after subparagraph (A) the
following new subparagraph:
``(B) imported property income, and''.
(2) Imported property income defined.--Paragraph (2) of
section 904(d) is amended by redesignating subparagraphs (I),
(J), and (K) as subparagraphs (J), (K), and (L),
respectively, and by inserting after subparagraph (H) the
following new subparagraph:
``(I) Imported property income.--The term `imported
property income' means any income received or accrued by any
person which is of a kind which would be imported property
income (as defined in section 954(j)).''.
(3) Conforming amendment.--Clause (ii) of section
904(d)(2)(A) is amended by inserting ``or imported property
income'' after ``passive category income''.
(d) Technical Amendments.--
(1) Clause (iii) of section 952(c)(1)(B) (relating to
certain prior year deficits may be taken into account) is
amended--
(A) by redesignating subclauses (II), (III), (IV), and (V)
as subclauses (III), (IV), (V), and (VI), and
(B) by inserting after subclause (I) the following new
subclause:

``(II) imported property income,''.

(2) The last sentence of paragraph (4) of section 954(b)
(relating to exception for certain income subject to high
foreign taxes) is amended by striking ``subsection (a)(5)''
and inserting ``subsection (a)(4)''.
(3) Paragraph (5) of section 954(b) (relating to deductions
to be taken into account) is amended by striking ``and the
foreign base company oil related income'' and inserting ``the
foreign base company oil related income, and the imported
property income''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after the date of the enactment of this Act, and to
taxable years of United States shareholders within which or
with which such taxable years of such foreign corporations
end.
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