Public Law 92–9

Section 4912 is amended by adding at the end thereof the following new subsection:

“(c)“(c)

Election To Subject Certain Debt Obligations to Tax.—

“(1)“(1)

In general.—

A domestic corporation or domestic partnership may elect to have its debt obligations—

“(A)“(A)

which are part of a new or original issue, or

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“(B)“(B)

which are part of an issue outstanding on the date of the enactment of the Interest Equalization Tax Extension Act of 1971 and are treated under subsection (b) (3) as debt obligations of a foreign obligor,

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treated as debt obligations of a foreign obligor the acquisition of which by a United States person (other than the issuer) will, notwithstanding any other provision of this chapter, be subject to the tax imposed by section 4911 at the rate applicable on acquisitions of stock under section 4911(b).

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“(2)“(2)

Assumption of obligations.—

For purposes of paragraph (1), the assumption by a domestic corporation of debt obligations of an affiliated corporation shall be treated as the issuance of a new or original issue of debt obligations by such domestic corporation. For purposes of this paragraph, a domestic corporation shall lie treated as affiliated with another corporation if both corporations are members, or would be members if they were both domestic corporations) of the same controlled group (within the

83 Stat. 603.

meaning of section 48(c) (3) (C)).

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“(3)“(3)

Election.—

An election under paragraph (1) with respect to any issue of debt obligations shall be made at such time and in such manner as the Secretary or his delegate may prescribe by regulations, and such election may not be revoked. In the case of a new or original issue, such election shall be made prior to the issuance (or, in the case of an issue treated as a new or original issue under paragraph (2), prior to the assumption) of any debt obligations of such issue.

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“(4)“(4)

Indication or endorsement of taxability.—

In the case of a debt obligation which is part of a new or original issue (other than an issue treated as a new or original issue under paragraph (2)), an election under paragraph (1) shall apply to such debt obligation only if the document evidencing such debt obligation indicates that its acquisition by a United States person is subject to the tax imposed by section 4911 as provided in paragraph (1). In the case of any other debt obligation, an election under paragraph (1) shall apply to such debt obligation only if the document evidencing such debt obligation is marked or endorsed, subject to such regulations as the Secretary or his delegate may prescribe, so as to indicate that its acquisition by a United States person is subject to such tax.”

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Section 861(a)(1) is amended—

80 Stat. 1542.

26 USC 861.

The amendments made by this subsection shall take effect on the date of the enactment of this Act.

Section 4914(b) is amended by adding at the end thereof

78 Stat. 813; 81 Stat. 157.

the following new paragraph:

“(16)“(16)

Acquisitions of stock or debt obligations in connection with nationalization, expropriation, etc.—

Of Stock or debt obligations of a foreign issuer or obligor, where such acquisition is required as a reinvestment in connection with an actual or threatened nationalization, expropriation, or seizure of property, to the extent provided in subsection (k).”

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Section 4914 is amended by adding at the end thereof the following new subsection:

“(k)“(k)

Acquisitions of Stock or Debt Obligations in Connection With Nationalization, Expropriation, Etc.—

The tax imposed by section 4911 shall not apply to the acquisition by a United States person

78 Stat. 809.

of stock or a debt obligation of a foreign issuer or obligor, to the extent that such acquisition is required as a reinvestment within a foreign country by the terms of a contract of sale to, or a contract of indemnification with respect to the nationalization, expropriation, or seizure by, the government of such country or a political subdivision thereof, or an agency or instrumentality of such government, of property owned within such country or such political subdivision by such United States person, or by a controlled foreign corporation (as defined in section 957) more than 50 percent of the total combined voting power of all

76 Stat. 1017.

classes of stock entitled to vote of which is owned (within the meaning of section 958) by such United States person, but only if such contract was entered into because the government of such country or political subdivision, or such agency or instrumentality—

“(A)“(A)

has nationalized or has expropriated or seized, or has threatened to nationalize or to expropriate or seize, a substantial portion of the property owned within such country or such political subdivision by such United States person or such controlled foreign corporation; or

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“(B)“(B)

has taken action which has the effect of nationalizing or of expropriating or seizing, or of threatening to nationalize or to expropriate or seize, a substantial portion of the property so owned.

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For purposes of this subsection, an instrumentality of the government of a country or a political subdivision thereof includes a corporation or other entity with respect to which such government, or any agency of such government, owns more than 50 percent of the total combined voting power of all classes of stock entitled to vote or, in the case of a corporation or other entity not issuing shares of stock, has the authority to elect or appoint a majority of the board of directors or equivalent body of such corporation or other entity.”

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Section 4916(a) is amended—

The amendments made by this subsection shall apply with respect to acquisitions made after the date of the enactment of this Act.

Section 4914(c) (5) is amended by adding at the end thereof the following new sentence: “For purposes of subparagraph (B), if the proceeds of the loan are to be used by the foreign obligor (or by a person controlled by, or controlling, the foreign obligor) for additional facilities, the substantial portion requirement contained in such subparagraph, and the one-half of the percentage of cost requirement contained in the last sentence of such subparagraph, shall be treated as satisfied with respect to such loan if it is established that an additional amount of ores or minerals (or derivatives thereof) extracted outside the United States by the United States person, or otherwise taken into account for purposes of such subparagraph, will be stored, handled, transported, processed, or serviced in the existing and additional facilities of such foreign obligor or person, and that, with respect to such additional facilities, such additional amount fulfills such substantial portion requirement or such one-half of the percentage of cost requirement, as the case may be.”

The amendment made by paragraph (1) shall apply with respect to acquisitions made after the date of the enactment of this Act.

Section 4914(g) (1) is amended—

The amendments made by this subsection shall apply with

Effective date.

respect to acquisitions made after the date of the enactment of this Act.

Section 4915 is amended—

78 Stat. 824; 83 Stat. 267.

Section 4920(a) (3B) is amended to read as follows:

“(3B)“(3B)

Certain domestic lending or financing corporations.—

“(A)“(A)

In general.—

The terms ‘foreign issuer’, ‘foreign obligor’, and ‘foreign issuer or obligor’ also mean a domestic corporation which is a qualified lending or financing corporation (as defined in subsection (d)) and which elects to be treated, for purposes of this chapter, as a foreign issuer and foreign obligor.

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“(B)“(B)

Election.—

An election under subparagraph (A) shall be made in such manner as the Secretary or his delegate prescribes by regulations. Any such election shall be effective as of the date thereof and shall remain in effect until revoked. If, at any time, the corporation ceases to be a qualified lending or financing corporation, 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 stock or debt obligations 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.” (3) Section 4920(d) is amended to read as follows:

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“(d)“(d)

Qualified Lending and Financing Corporations.—

For purposes of this chapter, the term ‘qualified lending or financing corporation’ means a corporation—

“(1)“(1)

substantially all of the business of which consists of—

“(A)“(A)

making loans (including the acquisition of obligations arising under a lease which is entered into principally as a financing transaction),

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“(B)“(B)

acquiring accounts receivable, notes, or installment obligations arising out of the sale of tangible personal property or the performance of services,

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“(C)“(C)

leasing tangible personal property (but only if such leasing accounts for less than 50 percent of its business),

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“(D)“(D)

servicing debt obligations,

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“(E)“(E)

carrying on incidental activities in connection with its business described in subparagraphs (A), (B), (C), or (D),or

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“(F)“(F)

any combination of the foregoing;

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“(2)“(2)

all debt obligations of foreign obligors acquired by such corporation, and all tangible personal property not manufactured or produced in the United States acquired by such corporation for leasing, are acquired and carried solely out of—

“(A)“(A)

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

78 Stat. 833.

26 USC 4919.

described in section 4912(b) (3) which is a member of a controlled group, as defined in section 48 (c) (3) (C), of which such corporation is a member) of debt

83 Stat. 603.

obligations of such corporation (or such domestic corporation) to persons other than—

“(i)“(i)

a United States person (not including a foreign branch of a domestic corporation or of a domestic partnership, if such branch is engaged in the commercial banking business and acquires such debt obligations in the ordinary course of such commercial banking business),

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“(ii)“(ii)

a foreign partnership in which such corporation (or one or more includible corporations

68A Stat. 369.

in an affiliated group, as defined in section 1504, of which such corporation is a member) owns directly or indirectly (within the meaning of section 4915(a) (1)) 10 percent or more

78 Stat. 824.

of the profits interest, or

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“(iii)“(iii)

a foreign corporation, if such corporation (or one or more includible corporations in an affiliated group, as defined in section 1504, of which such 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 of 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 clauses (i) and (ii) and this clause and is using the proceeds of the sale of such debt obligations to acquire the debt obligations of such corporation (or such other domestic corporation),

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“(B)“(B)

the proceeds of payment for stock, or a contribution to the capital of such corporation, if the payment or contribution was derived from the sale of debt obligations by one or more members of a controlled group (as defined in section 48(c)(3)(C)) of which such corporation is a member (or by a corporation which would be such a member if it were a domestic corporation) to persons other than persons described in clauses (i), (ii), and (iii) of subparagraph (A) and such debt obligations, if acquired by United States persons, would be subject to the tax imposed by section 4911,

78 Stat. 809; 83 Stat. 262.

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“(C)“(C)

retained earnings and reserves of such corporation to the extent attributable to the conduct of the lending or financing business outside the United States, or

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“(D)“(D)

trade accounts and accrued liabilities, to the extent attributable to the conduct of the lending or financing business outside the United States, which are payable by such corporation within 1 year (3 years in the case of tax liabilities) from the date they were incurred or accrued, and which arise in the ordinary course of the trade or business of the corporation otherwise than from borrowing;

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“(3)“(3)

such corporation does not acquire any stock of foreign issuers or of domestic corporations or domestic partnerships other than stock of one or more members of a controlled group (as defined in section 48(c)(3) (C)) of which such corporation is a member (or of a corporation which would be a member if it were a domestic corporation) acquired as payment for stock, or as a contribution to capital, of such corporation; and

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“(4)“(4)

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 and other documents as may be necessary to establish that the requirements of the foregoing paragraphs have been met.”

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The amendments made by paragraph (1) shall apply with respect to acquisitions made after the date of the enactment of this Act. The amendments made by paragraphs (2) and (3) shall take effect on the day after such date.

For purposes of section 4920(a) (3B) of the Internal Revenue Code of 1954 (as amended by paragraph (2)) an election made under section 4920(d) of such Code (as in effect on the date of the enactment of this Act) shall be treated as an election made under such section 4920(a) (3B). For purposes of section 4915

Ante, p. 17.

(e) (2) (C) of such Code (as amended by paragraph (1)), notice given under section 4915(c) (3) of such Code (as in effect on the ate of the enactment of this Act) shall be treated as notice given under section 4915(e) (2) (C).

Section 4919(a) is amended by adding at the end thereof the following new sentence: “The President may by Executive order (which shall be applicable for such period and subject to such conditions as may be specified therein) extend the period of two business days specified in subparagraphs (A) and (B) of paragraph (3) to not to exceed 13 calendar days in the case of acquisitions made for customers and not for investment purposes, but any such extension shall be applicable only in cases where the acquiring dealer has submitted to the Secretary or his delegate in advance a satisfactory procedure for identifying which of his acquisitions are for customers and which are for investment purposes.”

Section 4919(b) (1) is amended—

The amendments made by this subsection shall apply with respect to acquisitions made after the date of the enactment of this Act.

Section 4920(b) (2) is amended by adding at the end there-of the following new sentence: “Upon application by the issuing corporation within 2 years after the date on which additional shares described in the second sentence of this paragraph were issued, the Secretary or his delegate may waive the 15-day requirement set forth in subparagraph (D) (v) with respect to such additional shares if it is shown that the issuing corporation failed to file the notice required by such subparagraph due to inadvertence and not with an intent to avoid the requirements of this chapter.”

The requirement in the last sentence of section 4920(b) (2) (as added by paragraph (1) of this subsection) that the issuing corporation make its application within 2 years after the date on which additional shares were issued in order to qualify for a waiver shall be deemed satisfied, in any case in which such 2-year period has elapsed before the expiration of 60 days after the date of the enactment of this Act, if the issuing corporation involved makes the application within such 60-day period.

The amendment made by paragraph (1) shall take effect

Effective date.

on the date of the enactment of this Act.

Section 4920 is amended—

78 Stat. 835.

26 USC 4920.

The amendments made by paragraphs (1) (A) and (C)

Effective date.

shall apply with respect to acquisitions made after March 24, 1971. The amendment made by paragraph (1) (B) shall take effect on the date of the enactment of this Act.

Subchapter A of chapter 41 is amended by adding at the

26 USC 4911.

end thereof the following new section:

“SEC. 4921. DEBT OBLIGATIONS WITH MATURITY OF LESS THAN A YEAR.

“(a)“(a)

Standby Authority.—

“(1)“(1)

In general.—

If the President of the United States determines, after taking into account the domestic economic objectives, the balance of payments objectives, and the other international economic objectives of the United States, that it is desirable to apply the tax imposed by section 4911 to the acquisition of debt

78 Stat. 809; 83 Stat. 262.

obligations of foreign obligors having a period remaining to maturity of less than 1 year, he may, from time to time by Executive order (applicable as provided in subsection (c)), extend the application of such tax. at such rate or rates (subject to the provisions of subsection (b)) specified in such order, to the acquisition of such debt obligations specified in such order. The authority conferred by this paragraph may be exercised, at the discretion of the President, with respect to any classification of such debt obligations specified in paragraph (2), and with respect to acquisitions occurring during such period of time, as may be specified in the Executive order. The President may by subsequent Executive order terminate or modify any Executive order previously issued under this section.

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“(2)“(2)

Classifications.—

For purposes of paragraph (1), debt obligations may be classified according to—

“(A)“(A)

type of debt obligation,

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“(B)“(B)

period of maturity,

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“(C)“(C)

category of obligee,

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“(D)“(D)

category of obligor,

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“(E)“(E)

aggregate amounts subject to tax or not subject to tax, or

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“(F)“(F)

other criteria similar to any of the foregoing.

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“(b)“(b)

Rates of Tax.—

The rates of tax which may be specified in an Executive order issued under this section shall not exceed the rate applicable to debt obligations having a period remaining to maturity of at least 1 year, but less than 1 ¹/₄ years.

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“(c)“(c)

Applicability of Executive Order.—

Any Executive order issued under this section shall apply with respect to acquisitions made after the date on which such Executive order is issued, except that in the case of any such order which subjects acquisitions to the tax which are not then subject to the tax, or which increases a rate of tax (as in effect without regard to such order), to the extent specified in such order, rules similar to the rules prescribed in paragraphs (2), (3), and (4) of section 3(c) of the Interest Equalization Tax Extension

81 Stat. 145.

26 USC 4911 note.

Act of 1967 shall apply.

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“(d)“(d)

Regulations.—

The Secretary or his delegate may prescribe such regulations (not inconsistent with the. provisions of this section or any Executive order issued and in effect under this section) as may be necessary to carry out the provisions of this section.”

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The table of sections for subchapter A of chapter 41 is amended by adding at the end thereof the following new item:

Section 6651 is amended by adding at the end thereof the following new subsection:

“(e)“(e)

Certain Interest Equalization Tax Returns.—

The provisions of this section shall apply with respect to returns of amounts

81 Stat. 148.

withheld under section 4918(e)(7) (relating to withholding of interest equalization tax by participating firms) in the same manner and to the same extent as they apply with respect to returns specified in subsection (a)(1).”

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Section 6680 is amended—

The amendments made by this subsection shall apply with respect to returns required to be filed on or after the date of the enactment of this Act

Section 6681(a) is amended—

Section 6681 (b) (1) is amended—

81 Stat. 155.

26 USC 6681.

Section 6681 (b)(2) is amended—

The amendments made by this subsection shall apply with

Effective date.

respect to actions occurring after the date of the enactment of this Act.