Volume 81 · 145
Public Law 90–59
To provide an extension of the interest equalization tax and for other purposes.
Approved July 31, 1967
Statutory text
AN ACT
To provide an extension of the interest equalization tax and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE, ETC.
Short Title.—
This Act may be cited as the “Interest Equalization Tax Extension Act of 1967”.
Amendment of 1954 Code.—
Except as otherwise expressly provided, whenever in this Act an amendment is expressed in terms of an amendment to a section or other provision, the reference is to a section or other provision of the Internal Revenue Code of 1954.
SEC. 2. EXTENSION OF INTEREST EQUALIZATION TAX.
Section 4911(d) is amended by striking out “July 31, 1967”
and inserting in lieu thereof “July 31, 1969”.
SEC. 3. IMPOSITION OF TAX.
Amount of Tax.—
Section 4911(b) is amended to read as follows:
Amount of Tax.—
Rates of tax.—
Except as provided in paragraphs (2) and (3)—
Stock.—
The tax imposed by subsection (a) on the acquisition of stock shall be equal to 15 percent of the actual value of the stock.
Debt obligations.—
The tax imposed by subsection (a) on the acquisition of a debt obligation shall be equal to a percentage of the actual value of the debt obligation measured by the period remaining to its maturity and determined under column II(A) of the following table:
| “I “If the period remaining to maturity is— | II The tax, as a percentage of actual value, is— | |
|---|---|---|
| (A) | (B) | |
| At least 1 year, but less than 1¼ years. | 1.05 | 1.58 |
| At least 1¼ years, but less than 1½ years. | 1.30 | 1.95 |
| At least 1¼ years, but less than 1¾ years | 1.50 | 2.25 |
| At least 1¼ years, but less than 2¼ years. | 1.85 | 2.78 |
| At least 2¼ years, but less than 2¾ years. | 2.30 | 3.45 |
| At least 2¾ years, but less than 3¾ years. | 2.75 | 4. 13 |
| At least 3½ years, but less than 4½ years | 3.55 | 5. 33 |
| At least 4½ years, but less than 5½ years | 4.35 | 6.53 |
| At least 5½ years, but less than 6½ years. | 5. 10 | 7.65 |
| At least 6½ years, but less than 7½ years | 5.80 | 8 70 |
| At least 7½ years, but less than 8½ years | 6.50 | 9.75 |
| At least 8½ years, but less than 9½ years | 7. 10 | 10.65 |
| At least 9½ years, but less than 10½ years | 7.70 | 11.55 |
| At least 10½ years, but less than 11½ years | 8.30 | 12.45 |
| At least 11½ years, but less than 13½ years | 9.10 | 13.65 |
| At least 13½ years, but less than 16½ years | 10. 30 | 15.45 |
| At least 16½ years, but less than 18½ years | 11.35 | 17.03 |
| At least 18½ years, but less than 21½ years | 12.25 | 18.38 |
| At least 21½ years, but less than 23½ years | 13.05 | 19.58 |
| At least 23½ years, but less than 26½ years | 13.75 | 20.63 |
| At least 26½ years, but less than 28½ years | 14.35 | 21.53 |
| 28½ years or more | 15.00 | 22.50 |
Modification of tax bates by executive order.—
In general.—
If the President of the United States determines that the rates of tax imposed by paragraph (1), or provided in any prior Executive order issued pursuant to this paragraph, are lower or higher than the rates of tax necessary to limit the total acquisitions by United States persons of stock of foreign issuers and debt obligations of foreign obligors within a range consistent with the balance-of-payments objectives of the United States, he may by Executive order (effective as provided in subparagraph (C) (ii)) increase or decrease such rates of tax.
Maximum rate.—
No increase in the rates of tax which is prescribed in an Executive order issued under subparagraph (A) shall—
cause the rate applicable to the acquisition of stock to be higher than 22.5 percent, or
cause the rates applicable to the acquisition of debt obligations to be higher than the rates set forth in column II(B) of the table in paragraph (1) (B) of this subsection.
Application of executive orders.—
Each increase and each decrease in the rates of tax which is prescribed in an Executive order issued under subparagraph (A) shall provide for the same proportionate increase or decrease in each rate of tax, except that any such rate may be rounded to the nearest 0.01 percent.
Any Executive order issued under subparagraph (A) shall apply with respect to acquisitions made after the date on which such order is issued (or, if later, after the 29th day following the date of the enactment of this paragraph); except that in the case of any such order which increases the rates of tax (as in effect without regard to such order), to the extent specified in such order, rules similar to the rules prescribed by paragraphs (2), (3), and (4) of section 3(c) of the Interest Equalization
Post, p. 147.
Tax Extension Act of 1967 shall apply.
If, by reason of an Executive order issued under subparagraph (A), the rates of tax in effect on the date of an acquisition described in paragraph (2) or (4) of section 3(c) of the Interest Equalization Tax Extension Act of 1967 are lower than the rates of tax in effect on January 25, 1967, the applicable rate of tax prescribed in such Executive order shall apply to such acquisition.
Rates during interim period.—
In the case of acquisitions of stock and debt obligations made after January 25, 1967, and before the thirtieth day after the date of the enactment of this paragraph, the tax imposed by subsection (a) shall be 22.5 percent in the case of acquisition of stock, and shall be determined under column II (B) (rather than column II (A)) of the table in paragraph (1) (B) in the case of acquisition of a debt obligation.
Regulations.—
The Secretary or his delegate may prescribe such regulations (not inconsistent with the provisions of this section or of any Executive order issued and in effect under this section) as may be necessary to carry out the provisions of this section.”
Application of Executive Order 11198, etc.—
The table in section 4931(c) (relating to debt obligations with maturity from 1 to 3 years) is amended to read as follows:
| “If the period remaining to maturity is: | The tax, as a percentage of actual value, is: |
|---|---|
| “ At least 1 year, but less than 1¼ years | 1. 58 percent |
| At least 1¼ years, but less than 1½ years | 1.95 percent |
| At least 1½ years, but less than 1¾ years | 2.25 percent |
| At least 1¾ years, but less than 2¼ years | 2.78 percent |
| At least 2¼ years, but less than 2¾ years | 3.45 percent |
| At least 2¾ years, but less than 3 years | 4.13 percent.” |
Section 3(e) (1) (A) of the Interest Equalization Tax Extension Act of 1965 is amended to read as follows:
“(A) by striking out subsection (c) (as amended by the Interest Equalization Tax Extension Act of 1967) and redesignating subsections (d) and (e) as subsections (c) and (d), respectively;”.
Effective Date and Special Rules.—
General rule.—
The amendments made by subsection (a) shall apply only with respect to acquisitions of stock or debt obligations made after January 25, 1967. The amendment made by paragraph (1) of subsection (b) shall apply only with respect to acquisitions of debt obligations made after January 25, 1967, and before February 21, 1967 (the date on which the amendments made by section 3(e)(1) of the Interest Equalization Tax Extension Act of 1965 became effective).
Preexisting commitments.—
Except as provided in section 4911(b) (2) (C) (iii) of the Internal Revenue Code of 1954 (as added by such amendments), such amendments shall not apply to an acquisition—
made pursuant to an obligation to acquire which on January 25, 1967—
was unconditional, or
was subject only to conditions contained in a formal contract under which partial performance had occurred; or
as to which on or before January 25, 1967, the acquiring United States person (or, in a case where 2 or more United States persons are making acquisitions as part of a single transaction, a majority in interest of such persons) had taken every action to signify approval of the acquisition under the procedures ordinarily employed by such person (or persons) in similar transactions and had sent or deposited for delivery to the foreign person from whom the acquisition was made written evidence of such approval in the form of a commitment letter, memorandum of terms, draft purchase contract, or other document setting forth, or referring to a document sent by the foreign person from whom the acquisition was made which set forth, the principal terms of such acquisition, subject only to the execution of formal documents evidencing the acquisition and to customary closing conditions.
Public offerings.—
Such amendments shall not apply to an acquisition made on or before March 27, 1967, if—
a registration statement (within the meaning of the Securities Act of 1933) was in effect with respect to the stock
or debt obligation acquired at the time of its acquisition;
the registration statement was first filed with the Securities and Exchange Commission on January 25, 1967, or within 90 days before that date; and
no amendment was filed with the Securities and Exchange Commission after January 25, 1967, and before the acquisition which had the effect of increasing the number of shares of stock or the aggregate face amount of the debt obligations covered by the registration statement.
Options, foreclosures, and conversions.—
Except as provided in section 4911(b) (2) (C) (iii) of the Internal Revenue
Ante, p. 146.
Code of 1954 (as added by such amendments), such amendments shall not apply to an acquisition—
of stock pursuant to the exercise of an option or similar right (or a right to convert a debt obligation into stock), if such option or right was held on January 25, 1967, by the person making the acquisition or by a decedent from whom such person acquired the right to exercise such option or right by bequest or inheritance or by reason of such decedent’s death, or
of stock or debt obligations as a result of a foreclosure by a creditor pursuant to the terms of an instrument held by such creditor on January 25, 1967.
Returns.—
If, by reason of the enactment of this Act, a person incurs additional liability for interest equalization tax with respect to acquisitions of stock or debt obligations made after January 25, 1967, for which a return has been filed under section 6011(d) (1)
of the Internal Revenue Code of 1954 before the date of the enactment of this Act, such person shall make an amended return showing such additional liability. If liability for interest equalization tax with respect to such acquisitions is initially created by reason of the enactment of this section, the person incurring such liability shall make a return. The returns required to be made by this paragraph shall be filed on or before the last day of the month following the close of the calendar quarter in which the date of the enactment of this Act occurs or at such later time as the Secretary or his delegate may prescribe.
SEC. 4. COMPLIANCE PROCEDURES.
Exemption for Prior American Ownership and Compliance.—
Section 4918 is amended to read as follows:
“SEC. 4918. EXEMPTION FOR PRIOR AMERICAN OWNERSHIP AND COMPLIANCE.
“(a) General Rule.—
The tax imposed by section 4911 shall not apply to an acquisition of stock of a foreign issuer or a debt obligation of a foreign obligor if it is established in the manner provided in this section that—
“(1) the person from whom such stock or debt obligation was acquired was a United States person throughout the period of his ownership or continuously since July 18, 1963, and was not ineligible, under the provisions of this chapter, to dispose of such stock or debt obligation as a United States person; and
“(2) such person—
“(A) had paid the tax imposed by section 4911 with respect to the acquisition of such stock or debt obligation by such person; or
“(B) acquired such stock or debt obligation without liability for payment of such tax.
“(b) Establishing Exemption for Prior American Ownership and Compliance.—
“(1) Conclusive proof.—
For purposes of the exemption for prior American ownership and compliance provided in subsection (a)—
“(A) a validation certificate, evidencing that the person from whom stock of a foreign issuer or a debt obligation of a foreign obligor was acquired was a person described in subsection (a), issued by the Secretary or his delegate (or by any officer or employee of the United States designated by the Secretary or his delegate) and filed in accordance with the requirements prescribed by the Secretary or his delegate; or
“(B) a written confirmation (referred to as an IET clean confirmation) received by the person acquiring such stock or debt obligation from a participating firm acting as a broker in effecting the acquisition (or acting for its own account) which contains no reference to liability for the tax imposed by section 4911,
Ante, p. 145.
shall be conclusive proof that such exemption applies with respect to the acquisition of the stock or debt obligation described in such certificate or confirmation, if the person making the acquisition relies in good faith on the validity of such certificate or confirmation.
“(2) Other proof.—
If the person making an acquisition of stock or a debt obligation shows reasonable cause for his inability to establish such exemption under paragraph (1) he may furnish other evidence to establish to the satisfaction of the Secretary or his delegate that such exemption is applicable to such acquisition.
“(c) Participating Firm.—
“(1) Definition.—
For purposes of this section, a participating firm is a member or member organization of a national securities exchange or association registered with the Securities and Exchange Commission which satisfies the eligibility requirements set forth in paragraph (2).
“(2) Eligibility requirements.—
“(A) In general.—
A member or member organization of a national securities exchange or association registered with the Securities and Exchange Commission shall qualify as a participating firm if such member or member organization notifies the Secretary or his delegate that it—
“(i) agrees to comply with the provisions of this chapter and with the documentation, recordkeeping, reporting, and auditing requirements prescribed by the Secretary or his delegate to implement such provisions; and
“(ii) if such notification is made after August 14, 1967, is complying with such provisions and requirements.
“(B) Participating firms during interim period.—
During the period commencing July 15, 1967, and ending on August 14, 1967, the following are deemed to be participating firms which satisfy the eligibility requirements of subparagraph (A):
“(i) all members and member organizations of the New York Stock Exchange;
“(ii) all members and member organizations of the American Stock Exchange; and
“(iii) members or member organizations of the National Association of Securities Dealers, Inc., which reported net capital (as defined in rule 15c 3–1 under the Securities Exchange Act of 1934) of $750,000 in the
latest financial statement filed with the Securities and Exchange Commission on form X-17A-5 prior to July 13, 1967, or which effected at least 300 transactions with respect to the sale or acquisition of stock of foreign issuers or debt obligations of foreign obligors during either the week commencing on July 2, 1967, or the week commencing on July 9, 1967.
“(C) Termination of status.—
The status of a member or member organization of a national securities exchange or association registered with the Securities and Exchange Commission qualifying as a participating firm shall be terminated if—
“(i) such member or member organization qualifies as a participating firm during the interim period described in subparagraph (B) and does not submit to the Secretary or his delegate, on or before August 15, 1967, the notification described in subparagraph (A);
“(ii) such member or member organization files a written request with the Secretary or his delegate to terminate such status; or
“(iii) the Secretary or his delegate has reasonable cause to believe a participating firm is failing to comply with the statutory provisions and procedural requirements described in subparagraph (A), and notifies the participating firm of such noncompliance.
Any termination of the status of a participating firm in accordance with this subparagraph shall lie effective as of the date specified in a notice to such participating firm issued by the Secretary or his delegate which date shall be subsequent to the date on which information regarding the termination of such status is published for the purpose of informing the remaining participating firms and participating custodians. For purposes of this paragraph, an associate member or member organization of the New York Stock Exchange, the American Stock Exchange, or a national securities association registered with the Securities and Exchange Commission shall be deemed a member or member organization of such exchange or association.
“(d) Issuance of IET Clean Confirmation by Participating Firm.—
A participating firm may issue an IET clean confirmation (referred to in subsection (b)(1) (B)) in connection with an acquisition of stock of a foreign issuer or a debt obligation of a foreign obligor by a United States person—
“(1) if such participating firm—
“(A) acted as a broker in effecting such acquisition and received from another participating firm a written comparison or broker-dealer confirmation under subsection (e) which indicates that the exemption for prior American ownership and compliance provided in subsection (a) applies to such acquisition;
“(B) acted as a broker in effecting both the sale and acquisition on the same day of such stock or debt obligation and would have been entitled to issue a written comparison or broker-dealer confirmation under paragraph (e) which indicates that the exemption for prior American ownership and compliance provided in subsection (a) applies to such acquisition if such acquisition had been effected by another participating firm; or
“(C) sold such stock or debt obligation for its own account and is a person described in subsection (a) with respect to such acquisition; or
“(2) if such acquisition was effected by such participating firm in a sale by, or effected by, another participating firm on a national securities exchange registered with the Securities and Exchange Commission, or in a transaction in which such participating firm and the participating firm effecting the sale were members of a national association of securities dealers registered with the Securities and Exchange Commission, and if such acquisition was effected in accordance with rules of such exchange or such association which the Secretary or his delegate determines require acquisitions exempt from tax under this section to be effected in such a manner that the requirements of subsection (e) are satisfied.
Any IET clean confirmation issued under this subsection shall be clearly distinguishable from any other confirmation issued with respect to an acquisition of stock of a foreign issuer or a debt obligation of a foreign obligor by a participating firm.
“(e) Sales Effected by Participating Firms in Connection With Exempt Acquisitions.—
A participating firm selling, or effecting the sale of, stock of a foreign issuer or a debt obligation of a foreign obligor may issue a written comparison or broker-dealer confirmation, which indicates the exemption for prior American ownership and compliance provided in subsection (a) applies to such acquisition, only if such participating firm has in its possession (except in the case of a sale for another participating firm or a participating custodian to which paragraph (4) applies) a statement, upon which such participating firm relies in good faith, executed under penalty of perjury by the person making the sale, establishing that such person is a United States person and is the owner of all stock of foreign issuers and debt obligations of foreign obligors carried in the records of such participating firm for the account of such person; and either—
“(1) (A) at the close of business on July 14, 1967, carried such stock or debt obligation in its records (on a trade-date basis) for the account of the seller; and
“(B) included such stock or debt obligation in the transition inventory referred to in subsection (g) filed or to be filed on or before the due date by such participating firm with the Secretary or his delegate in accordance with the provisions of such subsection:
“(2) after July 14, 1967—
“(A) sold for its own account such stock or debt obligation to the seller, or acting as broker effected the acquisition of such stock or debt obligation by the seller, if the exemption for prior American ownership and compliance provided in subsection (a) applied to such acquisition by reason of subsection (b) (1) (B); and
“(B) continuously carried in its records on a trade-date basis for the account of the seller such stock or debt obligation;
“(3) (A) sold for its own account such stock or debt obligation to the seller, or acting as a broker effected the acquisition of such stock or debt obligation by the seller, if, by reason of subsection (b)(1)(B) (or by reason of subsections (c) or (d) as in effect with respect to acquisitions before July 15, 1967), the exemption for prior American ownership and compliance provided by subsection (a) (or the exemption for prior American ownership provided by subsection (a) as in effect with respect to acquisitions before July 15, 1967) applied to such acquisition; and
“(B) after July 14, 1967, received from the seller the identical stock certificates or evidences of indebtedness which it had previously delivered to the seller with respect to such acquisition by the seller;
“(4) receives possession of such stock or debt obligation from another participating firm or from a participating custodian, together with a transfer of custody certificate, as provided in subsection (h);
“(5) receives from the seller stock which was registered before July 19, 1963, in the name of the seller by a participating custodian which acted as transfer agent or registrar in registering such stock;
“(6) receives a validation certificate issued by the Secretary or his delegate evidencing that the seller is a person described in subsection (a) with respect to such stock or debt obligation and files such certificate with the Secretary or his delegate in accordance with the requirements prescribed by the Secretary or his delegate; or
“(7) withholds from the proceeds of such sale (with the consent of the seller) an amount equal to the tax which would be imposed under section 4911 on the acquisition of such stock or debt obligation by the purchaser if such acquisition were not exempt from such tax under this section.
The withholding under paragraph (7) shall be treated as the collection of the tax imposed under section 4911 on the acquisition by the seller of such stock or debt obligation and shall be paid over to the Secretary or his delegate or released to the seller at such time and in such manner as provided in regulations prescribed by the Secretary or his delegate.
“(f) Participating Custodian.—
“(1) Definition.—
For purposes of this section, a participating custodian is a bank or trust company insured by the Federal Deposit Insurance Corporation which satisfies the eligibility requirements set forth in paragraph (2).
“(2) Eligibility requirements.—
“(A) In general.—
A bank or trust company insured by the Federal Deposit Insurance Corporation may become a participating custodian if such bank or trust company notifies the Secretary or his delegate that it—
“(i) agrees to comply with the provisions of this chapter and the documentation, record-keeping, reporting, and auditing requirements prescribed by the Secretary or his delegate to implement such provisions, and
“(ii) if such notification is made after August 14, 1967, is complying with such provisions and requirements.
“(B) Participating custodians during interim period.—
During the period commencing July 15, 1967, and ending on August 14, 1967, Federal Reserve member banks which are classified as reserve city banks are deemed to be participating custodians which satisfy the eligibility requirements of subparagraph (A).
“(C) Termination of status.—
The status of a bank or trust company insured by the Federal Deposit Insurance Corporation as a participating custodian shall lie terminated, if—
“(i) such bank or trust company qualifies as a participating firm during the interim period described in subparagraph (B) and does not submit to the Secretary or his delegate, on or before August 15, 1967, the notification described in subparagraph (A);
“(ii) such bank or trust company files a written request with the Secretary or his delegate to terminate such status: or
“(iii) the Secretary or his delegate has reasonable cause to believe a participating custodian is failing to comply with the statutory provisions and procedural requirements described in subparagraph (A), and notifies the participating custodian of such noncompliance.
Any termination of the status of a participating custodian in accordance with this subparagraph shall be effective as of the date specified in a notice to such participating custodian issued by the Secretary or his delegate which date shall be subsequent to the date on which information regarding the termination of such status is published for the purpose of informing the remaining participating custodians and participating firms.
“(g) Filing of Transition Inventory.—
A participating firm and participating custodian which qualifies before August 15, 1967, shall, on or before August 15, 1967, file an inventory (designated as a transition inventory) with the Secretary or his delegate which shall include all stock of foreign issuers and debt obligations of foreign obligors carried in its records (on a trade-date basis) by such participating firm or participating custodian as of the close of business on July 14, 1967 (excluding, in the case of a member or member organization which becomes a participating firm after July 15, 1967, and in the case of a bank or trust company which becomes a participating custodian after July 15, 1967, stock and debt obligations not also carried in its records (on a trade-date basis) as of the close of business on the day prior to the day on which it became a participating firm or participating custodian), together with such information as may be required by the Secretary or his delegate.
“(h) Transfer of Custody Certificate.—
“(1) Nature of certificate.—
A certificate (designated as a transfer of custody certificate) may be issued in accordance with paragraph (2) by a participating firm or participating custodian in connection with a delivery of stock of foreign issuers or debt obligations of foreign obligors which are carried in its records for the account of a United States person to another participating firm or participating custodian.
“(2) Authorized transfers of custody.—
A participating firm or participating custodian shall issue a transfer of custody certificate only if, with respect to the stock or debt obligations described in such certificate, it has in its possession a statement, upon which it relies in good faith, executed under penalty of perjury, by the person for whose account the delivery is being made, establishing that such person is a United States person and is the owner of all stock of foreign issuers and debt obligations of foreign obligors carried in its records for the account of such person, and if either—
“(A) such participating firm or participating custodian—
“(i) carried in its records (on a trade-date basis) at the close of business on July 14, 1967, for the account of a United States person the stock or debt obligation described in the transfer of custody certificate; and
“(ii) includes such stock or debt obligation in the transition inventory referred to in subsection (g) filed or to lie filed on or before the due date by such participating firm with the Secretary or his delegate in accordance with the provisions of such subsection;
“(B) such participating firm or participating custodian received a like amount of stock or debt obligations described in the transfer of custody certificate from another participating firm or participating custodian accompanied by a transfer of custody certificate with respect to such stock or debt obligation;
“(C) such participating firm—
“(i) effected as broker (or for its own account) the acquisition of the stock or debt obligation described in the transfer of custody certificate, and the exemption for prior American ownership and compliance provided in subsection (a) applied to such acquisition by reason of subsection (b) (1) (B); and
“(ii) continuously carried in its records for the account of the person who acquired such stock or debt obligation, or received from such person, the identical stock certificates or evidences of indebtedness which it had previously delivered to such person in connection with such acquisition;
“(D) such participating custodian received an 1ET clean confirmation in connection with the acquisition of the stock or debt obligation described in the transfer of custody certificate for the person for whose account such stock or debt obligation is carried in its records; or
“(E) conditions set forth in regulations prescribed by the Secretary or his delegate are met.
“(i) Certain Debt Obligations Arising Out of Loans To Assure Raw Material Sources.—
Under regulations prescribed by the Secretary or his delegate, subsection (a) shall not apply to the acquisition by a United States person of any debt obligation to which section
4914(d) applied where the acquisition of the debt obligation by such person is made with an intent to sell, or to offer to sell, any part of such debt obligation to United States persons. The preceding sentence
Ante, p. 145.
shall not apply if the tax imposed by section 4911 has applied to any prior acquisition of such debt obligation.
“(j) Regulations.—
The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this section.
Return Requirements.—
Section 6011(d)(1) is amended to read as follows:
“(1) In general.—
“(A) Every person shall make a return for each calendar quarter during which he incurs liability for the tax imposed by section 4911, or would so incur liability but for the pro-
Ante, p. 148.
visions of section 4918. The return shall, in addition to such other information as the Secretary or his delegate may by regulations require, include a list of all acquisitions made by such person during the calendar quarter for which exemption is claimed under section 4918 accompanied by a copy of any return made during such quarter under subparagraph (B). No return or accompanying evidence shall be required under this paragraph, in connection with any acquisition with respect to which—
“(i) an IET clean confirmation is obtained in accordance with the provisions of section 4918(b),
“(ii) a validation certificate described in section 4918(b) issued to the person from whom such acquisition was made is obtained, and such certificate was filed m accordance with the requirements prescribed by the Secretary or his delegate, or
“(iii) a validation certificate was obtained by the acquiring person after such acquisition and before the date prescribed by section 6076(a) for the filing of the
Infra.
return.
nor shall any such acquisition be required to be listed in any return made under this paragraph.
“(B) Every person who incurs liability for the tax imposed by section 4911 shall, if he disposes of the stock or debt
Ante, p. 145.
obligation with respect to which such liability was incurred prior to the filing of the return required by subparagraph (A), make a return of such tax.”
Time for Filing Returns.—
The text of section 6076 is amended
to read as follows:
“(a) Each return made under section 6011(d) (1) (A) shall be filed
Ante, p. 154.
on or before the last day of the first month following the period for which it is made.
“(b) Each return made under section 6011 (d) (1) (B) shall be filed on or before the date of disposition of the stock or debt obligation with respect to which such return is made.”
Penalties for False Statements, Etc.—
Section 6681 is amended by striking out subsections (a)
and (b) and inserting in lieu thereof the following:
“(a) False Statement of United States Person Status.—
In addition to the criminal penalty imposed by section 7241, any person
Post, p. 156.
who, for purposes of section 4918(e), knowingly executes a statement
Ante, p. 148.
as to his status as a United States person and ownership of stock and debt obligations which contains a misstatement of material fact shall be liable to a penalty equal to 125 percent of the amount of the tax imposed by section 4911 on the acquisition of any stock or debt obligation which, but for the provisions of section 4918, would be payable by the person acquiring such stock or debt obligation.
“(b) Liability of Participating Firms and Participating Custodians.—
“(1) Confirmations and comparisons.—
A participating firm described in section 4918(c) shall be liable to a penalty equal to 125 percent of the amount of tax imposed by section 4911 on the acquisition of stock or a debt obligation which, but for the provisions of section 4918, would be payable by the person acquiring the stock or debt obligation, if such participating firm knowingly—
“(A) furnishes an IET clean confirmation referred to in section 4918(b) other than in accordance with the provisions of section 4918(d),
“(B) furnishes a written comparison or broker-dealer confirmation other than in accordance with the provisions of section 4918(e), or
“(C) violates the rules of an exchange or association referred to in section 4918(d)(2) and as a result thereof an IET clean confirmation referred to in section 4918(b) is issued under section 4918(d) (2) by another participating firm.
“(2) Transfer of custody certificates.—
A participating firm or participating custodian (described in section 4918(f)) shall be liable to a penalty equal to 125 percent of the amount of tax imposed by section 4911 on the acquisition of stock or a debt obligation which, but for the provisions of section 4918, would be pay-able by the person acquiring the stock or debt obligation, if such firm or custodian knowingly issues a transfer of custody
Ante, p. 148.
certificate (described in section 4918(h) (1)) which contains a misstatement of material fact or knowingly issues a transfer of custody certificate other than in accordance with the provisions of section 4918.”
Section 6681(e) is amended to read as follows:
“(e) Penalty To Be in Lieu of Tax in Certain Cases.—
Unless the person acquiring the stock or debt obligation involved had reason to know that the IET clean confirmation which he received was false in any material respect, the penalty under subsection (b) (1) shall be in lieu of any tax on the acquisition of stock or debt obligation under
Ante, p. 145.
section 4911.”
Section 6681 is amended by adding at the end thereof the following new subsection:
“(f) False Application for Validation Certificate, Etc.—
Any person who knowingly supplies information in connection with an application for a validation certificate (described in section 4918 (b)(1)(A)) which contains a misstatement of a material fact, or who knowingly obtains or uses a validation certificate for the purpose of establishing an exemption for prior American ownership and compliance under section 4918(a) other than in accordance with the provisions of section 4918, shall be liable to a penalty equal to 125 percent of an amount equal to the tax which would have been imposed by section 4911 if the stock or debt obligation described in such certificate had been acquired by a person required to pay such tax on the date of application.”
Criminal Penalty.—
Section 7241 is amended by inserting “(a)” before “Any person” and by adding at the end thereof the following new subsection:
“(b) Any person who, on or after the date of the enactment of the Interest Equalization Tax Extension Act of 1967, willfully executes, for purposes of section 4918(e), a statement as to his status as a United States person and ownership of stock and debt obligations which is known by him to be fraudulent or to be false in any material respect shall be guilty of a misdemeanor and, upon conviction thereof, shall for each offense be fined not more than $1,000, or imprisoned not more than 1 year, or both.”
Conforming Amendment.—
Section 4920(a)(5) is amended by striking out “execute a certificate of American ownership (within the meaning of section 4918)” and insert in lieu thereof “be considered a United States person”.
Clerical Amendment.—
The table of sections for subchapter A of chapter 41 is amended by striking out the item relating to section 4918 and inserting in lieu thereof the following:
Effective Date.—
The amendments made by this section (other than by subsections (d) and (e)) shall apply with respect to acquisitions of stock and debt obligations made after July 14, 1967. The amendments made by subsections (d) and (e) shall take effect on the date of the enactment of this Act.
Interim Procedures.—
The Secretary of the Treasury or his delegate may establish such procedures and require the filing of such information and the maintenance of such records as may be necessary in order to permit an orderly transition in respect to market procedures for the period beginning on July 15, 1967, and ending on August 14, 1967, pursuant to which participating firms and participating custodians may issue IET clean confirmations, written com-parisons, broker-dealer confirmations, and transfer of custody certificates without satisfying the specific procedural requirements provided in section 4918 of the Internal Revenue Code of 1954 as amended by
Ante, p. 148
subsection (a) of this section.
SEC. 5. OTHER AMENDMENTS.
Commissions Paid to Foreign Branch Offices of Domestic Securities Dealers.—
Section 4912(b)(2)(B) is amended by adding at the end
thereof the following new sentence: “The preceding sentence shall not apply to a transfer of money or other property by a domestic corporation or partnership to a branch office with respect to which there is an election in effect under paragraph (5) of section 4920 (a), to the extent that such transfer is in payment of a commission
on a transaction initiated by such branch office and such commission is not in excess of the commission which such domestic corporation or partnership would pay to another domestic corporation or partnership in a similar transaction entered into at arm’s length.”
The amendment made by paragraph (1) shall apply with respect to transfers made on or after the date of the enactment of this Act.
Exclusion of Acquisitions Arising Out of Sales of Certain Foreign Real Property.—
Section 4914(b) (14) is amended to read as follows:
“(14) Foreign property.—
Of debt obligations arising out of the sale of—
“(A) tangible property located outside the United States which was held by the person acquiring such obligation for his personal use, or
“(B) real property (other than real property to which subparagraph (A) applies) located outside the United States and owned, on July 18, 1963, by—
“(i) the person acquiring such obligation,
“(ii) a decedent who was a United States person on the date of his death, if such real property was transferred to the person acquiring such obligation by reason of the death of the decedent, or
“(iii) a United States person who after July 18, 1963, transferred such property (whether or not for consideration) to a trust created by him for the benefit of the members of his family (within the meaning of section 318(a)(1)), if such trust is the person acquiring such
obligation.”
The amendment made by paragraph (1) shall apply only with respect to acquisitions made on or after the date of the enactment of this Act.
Exclusion of Certain Acquisitions by Residents Not Citizens.—
Section 4914(b) is amended by adding at the end thereof
the following new paragraph:
“(15) Certain acquisitions by residents not citizens.—
Of stock or debt obligations by an individual who is a resident but not a citizen of the United States, during the 90-day period beginning on the date such individual first became a resident of the United States.”
Section 4914(j) (2) is amended by adding at the end thereof
the following new sentence: “For purposes of this chapter, if, after February 27, 1967, a United States person sells or otherwise disposes of stock or a debt obligation to the acquisition of which subsection (b)(15) applied, such person shall not, with respect to that stock or debt obligation, be considered a United States person.”
The amendment made by paragraph (1) shall apply with respect to acquisitions made after July 18, 1963.
Export Credit Transactions Guaranteed by United States Agencies.—
Section 4914(c)(1) is amended—
by striking out “to such obligor” in the matter preceding subparagraph (A); and
by inserting before “the United States person” in subparagraph (B) “such sale is made to such foreign obligor and”.
The amendments made by paragraph (1) shall apply with respect to acquisitions made on or after the date of the enactment of this Act.
Certain Sales of Ores or Minerals by United States Persons.—
Section 4914 (c) (5) is amended by adding at the end thereof (after and below subparagraph (B)) the following new sentence:
“For purposes of clause (iii) of subparagraph (A) (and for purposes of determining whether a debt obligation arises out of a loan described in subparagraph (B) in a case where the ores, minerals, or derivatives involved are obtained under a contract described in such clause), a contract shall be deemed to have been entered into on or before July 18, 1963, if it is entered into after such date and before January 26, 1967, and is a substitute for a contract, which has been canceled or terminated, between the same parties which was entered into on or before July 18, 1963; except that the total amount of the acquisitions excluded by this paragraph on the basis of a contract entered into after July 18, 1963, which is deemed by this sentence to have been entered into on or before such date shall not exceed the total amount of the acquisitions which could have been excluded by this paragraph on the basis of the earlier contract for which such contract was substituted.”
The amendment made by paragraph (1) shall apply with respect to acquisitions made on or after the date of the enactment of this Act.
Reacquisition of Certain Export Debt Obligations.—
Section 4914(c) is amended by renumbering paragraph (7) as (8), and by inserting after paragraph (6) the following new paragraph:
“(7) Reacquisition of certain export debt obligations.—
If paragraph (1), (2), or (6) of this subsection applied to the acquisition of a debt obligation by a United States person and such debt obligation is transferred by such United States person to a person other than a United States person (and subsection (j) (1)(A)(iii) would have applied if such transfer had been to a United States person), the tax imposed by section 4911 shall not apply to the reacquisition of such debt obligation by such United States person from such person.”
The amendment made by paragraph (1) shall apply with respect to reacquisitions made on or after the date of the enactment of this Act.
Less Developed Country Shipping Companies.—
Section 4916(c) is amended—
by redesignating subparagraph (B) of paragraph (1) as subparagraph (C);
by striking out subparagraph (A) of paragraph (1) and inserting in lieu thereof the following:
“(A) meets the requirements of section 955(c)(1);
“(B) (i) meets the requirements of section 955(c) (2), and
“(ii) on each day of such applicable periods, is owned (as determined under section 958(a)), to the extent of at least 80
percent of each class of its stock, by United States persons or residents of one or more less developed countries; or”;
by striking out the last sentence of paragraph (1) and inserting in lieu thereof the following: “A foreign partnership, as defined in section 7701(a) (2) and (5), the assets, gross income, and ownership of which, for the applicable periods set forth in paragraph (3), satisfy the requirements of subparagraph (A), (B), or (C) of the first sentence of this paragraph, shall be treated as a less developed country corporation for purposes of this section.”;
by striking out “subparagraphs (A) and (B)” in paragraphs (2) (A) and (3) and inserting in lieu thereof “subparagraphs (A), (B), and (C)”; and
by striking out “subparagraph (B)” in paragraph (2) (C) and inserting in lieu thereof “subparagraph (C)”.
The amendments made by paragraph (1) shall apply with respect to acquisitions made after the date of the enactment of this Act,
International Monetary Stability Exclusion.—
Section 4917(d) is amended by—
striking out “after the date of the enactment of the Interest Equalization Tax Extension Act of 1965”;
striking out “5 percent” and inserting in lieu thereof “1 percent”; and
striking out “25 percent” and inserting in lieu thereof “5 percent”.
The amendments made by paragraph (1) shall apply with respect to acquisitions made after July 18, 1963.
If, with respect to an acquisition after July 18, 1963, and before the date of enactment of this Act, by a State or political subdivision, or by any agency or instrumentality thereof, of stock or a debt obligation which is all or part of an original or new issue to which an Executive order issued under section 4917(a)
is applicable (other than an Executive order which is applicable to a limited aggregate amount of such issues), the notice of acquisition required by section 4917(a) is filed on or before the 60th day after the date of enactment of this Act, such notice shall be considered as filed on or before the last day specified in the regulations prescribed by the Secretary or his delegate under section 4917(a).
No interest shall be paid with respect to any credit or refund allowed or made by reason of the application of this subsection.
Resales of Debt Obligations by United States Dealers.—
Sections 4919(a) (2) (A) (ii) and 4919(a) (2) (B) (ii) are
each amended by striking out “on the same or the next business day” and inserting in lieu thereof “within 30 days after the day of purchase”.
Section 4919(b) (3) is amended—
by striking out in subparagraph (A) (ii) “on the day of purchase or the next business day” and inserting in lieu thereof “within 30 days after the day of purchase”;
by striking out in the sentence following subparagraph (A) (ii) “on the day on which it was purchased or the next business day” and inserting in lieu thereof “within 30 days after the day of purchase”;
by striking out “or” at the end of subparagraph (B)(i);
by striking out “or debt obligation” in subparagraph (B) (ii) and by adding “or” at the end of such subparagraph;
by adding after subparagraph (B) (ii) the following: “(iii) purchased a debt obligation which he resold within 30 days after the day of purchase to a person other than a United States person,”; and
by striking out in the matter following subparagraph (B) (iii) (as added by subparagraph (E) of this paragraph) “on the day of purchase or the next business day” and by inserting before the period at the end of subparagraph (B) the following: “on the day of purchase or the next business day in the case of stock, or within 30 days after the day of purchase in the case of a debt obligation”.
The amendments made by this subsection shall apply only with respect to an acquisition by a dealer of a debt obligation which is resold by such dealer to another dealer (whether such acquisition by the former dealer occurs before or after such resale) after January 25, 1967.
Foreign Lending and Finance Businesses.—
Section 4920(a) (3) is amended by striking out the period at the. end of subparagraph (B) and inserting in lieu thereof “; or”, and by adding after subparagraph (B) the following new subparagraph:
“(C) a domestic corporation which together with its subsidiaries (if any) —
“(i) is primarily engaged in the lending or finance business through offices located outside the United States, and
“(ii) holds itself out, in the course of such business outside the United States, as lending money to the public generally,
and which elects to be treated as a foreign issuer or obligor for purposes of this chapter. The election under the preceding sentence shall be made on or before the 60th day after the date of the enactment of this subparagraph or the 60th day after the organization of the corporation, whichever is later, under regulations prescribed by the Secretary or his delegate. Any such election shall be effective as of January 26, 1967, or the date of the organization of the corporation, whichever is later, and shall remain in effect until revoked. If, at the close of any succeeding calendar quarter, the corporation ceases to meet the requirement of clause (i) or clause (ii), the election shall thereupon (with respect to quarters after such calendar quarter) be deemed revoked. When an election is revoked no further election may be made.”
Section 4920(a) is further amended by inserting after paragraph
(3) the following new paragraph:
“(3A) For purposes of paragraph (3) (C) —
Ante, p. 160.
“(A) the term ‘lending or finance business’ has the meaning given
“Lending or finance business.”
it by section 542(d) (1); except that for such purposes the term ‘60 months’ appearing in subparagraph (B) (i) of such section shall be deemed to read ‘48 months’ and the subsequent portion of such subparagraph (B)(i) shall be disregarded;
“(B) a corporation shall be considered a ‘subsidiary’ of another corporation only if stock possessing at least 50 percent of the voting power of all classes of its stock is directly or indirectly owned by such other corporation and the two corporations are affiliated with each other; and
“(C) a corporation primarily engaged in lending money to one or more other corporations each of which is affiliated with it and satisfies the requirements of clauses (i) and (ii) of paragraph (3)(C) shall itself be deemed to satisfy such requirements.
For purposes of this paragraph, two corporations are ‘affiliated’ with each other if they are members (or would lie members if they were both domestic corporations) of the same affiliated group (within the meaning of section 1504).”
Section 4920(a) (4) (C) is amended by striking out “paragraph (3) (B)” and inserting in lieu thereof “subparagraph (B) or (C) of paragraph (3)”.
Certain Financing Companies.—
Section 4920(a) is amended by inserting after paragraph (3A) (as added by subsection (j)(2)) the following new paragraph:
“(3B) Certain domestic financing companies.—
The terms
“Foreign issuer.” “foreign obligor.”
‘foreign issuer’, ‘foreign obligor’, and ‘foreign issuer or obligor’ also mean a domestic corporation if—
“(A) such corporation is engaged in the business of acquiring—
“(i) debt obligations arising out of the sale of tangible personal property produced, manufactured, assembled, or extracted by one or more includible corporations in an affiliated group (as determined under section 48(c) (3)(C)) of which such corporation is a member,
“(ii) debt obligations arising out of the sale of tangible personal property received as part or all of the consideration in sales of property described in clause (i),
“(iii) debt obligations arising out of the sale of tangible personal property received as part or all of the consideration in sales of property described in clause (ii),
“(iv) debt obligations arising out of the sale of tangible property or property described in section 4914(c) (3) (A) or services (or any combination thereof) by one or
more includible corporations in an affiliated group (as determined under section 1054) of which such corporation is a member, if at least 15 percent of the purchase price of each such sale is attributable to the sale of prop-erty manufactured, produced, grown, or extracted in the United States by one or more such includible corporations, or to the performance of services by one or more such includible corporations, or to both,
“(v) debt obligations arising out of loans to dealers or distributors primarily engaged in the business of selling property described in clause (i), (ii), or (iii), the proceeds of which are used by such dealers or distributors in such business, or
“(vi) any combination of the foregoing,
“(B) at least 90 percent of the actual value of the debt obligations acquired by such corporation during each calendar quarter consists of debt obligations described in subparagraph (A),.
“(C) such corporation acquires the debt obligations described in subparagraph (A) solely out of the proceeds of the
sale (including a sale in a transaction described in section 4919
(a)(1) by such corporation (or by a domestic corporation described in section 4912(b)(3) which owns all of the stock of such corporation) of debt obligations of such corporation (or such other domestic corporation) to persons other than—
“(i) a United States person,
“(ii) a foreign partnership in which such corporation owns directly or indirectly (within the meaning of section 4915(a)(1)) 10 percent or more of the profits interest, or
“(iii) a foreign corporation, if such domestic corporation (or one or more includible corporations in an
affiliated group, as determined under section 1504, of which such domestic corporation is a member) owns directly or indirectly (within the meaning of section 4915(a) (1)) 10 percent or more of the total combined voting power or all classes of stock of such foreign corporation, except to the extent such foreign corporation has, after having given advance notice to the Secretary or his delegate, sold its debt obligations to persons other than persons described in clause (i) or (ii) or this clause and is using the proceeds of the sale of such debt obligations to acquire the debt obligations of such domestic corporation (or such other domestic corporation),
“(D) the total actual value of the outstanding debt obligations described in subparagraph (C) sold by such corporation (or such other domestic corporation) at all times exceeds the total actual value of the debt obligations described in subparagraph (A) owned by such corporation,
“(E) the total actual value of the debt obligations described in subparagraph (A) owned by such corporation with a period remaining to maturity of less than one year at the time of acquisition at all times exceed the total actual value of the outstanding debt obligations described in subparagraph (C) sold by such corporation (or such other domestic corporation) with a period remaining to maturity of less than one year at the time of sale (other than debt obligations sold pursuant to an overdraft arrangement),
“(F) such corporation does not acquire any stock or debt obligations of foreign issuers or foreign obligors (other than debt obligations described in subparagraph (A)), or any stock or debt obligations of a domestic corporation described in section 4912(b) (3), the acquisition of which would have
been subject to the tax imposed by section 4911 if such corporation
Ante, p. 145.
had not elected to be treated as a foreign issuer or obligor under subparagraph (H),
“(G) such corporation, in a manner satisfactory to the Secretary or his delegate, identifies the certificates representing its stock and debt obligations, and maintains such records and accounts and submits such reports as may be necessary to establish that the requirements of the foregoing subparagraphs have been met, and
“(H) such corporation elects to be treated as a foreign issuer or obligor for purposes of this chapter.
The election under subparagraph (H) shall be made on or before the 60th day after the date of the enactment of this paragraph or the 60th day after the organization of the corporation, whichever is later, under regulations prescribed by the Secretary or his delegate. Any such election shall lie effective as of the date thereof and shall remain in effect until revoked. If, at any time, the corporation ceases to meet any requirement of subparagraph (A), (B), (C), (D), (E), (F), or (G), the election shall thereupon be deemed revoked. When an election is revoked, no further election may be made. If an election is revoked, the corporation shall incur liability at the time of such revocation for the tax imposed by section 4911 with respect to all debt obligations described in subparagraph (A) (and all stock and debt obligations described in subparagraph (F)) which were acquired by it during the period for which the election was in effect and which are held by it at the time of such revocation; and the amount of such tax shall be equal to the amount of tax for which the corporation would be liable under such section if it had acquired such stock or debt obligations immediately after such revocation. For purposes of sections 4912 and 4915, a corporation which has made an election under subparagraph (II) shall, during the period for which such election is in effect, be treated with respect to acquisitions from such corporation, as a foreign corporation which is not formed or availed of for the principal purpose described in section 4915(c)(1).”
Section 4920(a) (4) (C) (as amended by subsection (j) (3)) is amended by inserting after “subparagraph (B) or (C) of paragraph (3)” the following: “or in paragraph (3B)”.
Section 4915(c) is amended by redesignating paragraph (3)
as paragraph (4), and by inserting after paragraph (2) the following new paragraph:
“(3) Foreign financing company.—
A foreign corporation—
“(A) 50 percent or more of the voting power of all classes of stock of which is owned directly or indirectly (within the meaning of subsection (a)) by a domestic corporation (or by one or more includible corporations in an affiliated group, as defined in section 48(c) (3) (C), of which such domestic
corporation is a member),
“(B) which, if it were a domestic corporation, would be eligible to make an election under section 4920(a) (3B), and
Ante, p. 161.
“(C) gives notice to the Secretary or his delegate within the period for making an election under such section,
shall, during the period after the date of such notice during which it meets the requirements of subparagraphs (A), (B), (C), (D), (E), (F), and (G) of such section, be treated as not formed or availed of for the principal purpose described in paragraph (1) of this subsection. If such corporation ceases to meet such requirements, such corporation shall be treated as having been availed of for the principal purpose described in paragraph (1) of this subsection at the time of such cessation.”
Approved July 31, 1967, 7:22 p. m.