CONTENTS

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I. Summary..

II. Purpose and background of Foreign Investors Tax Act..

III. Revenue estimates_

IV. General explanation. -

A. Foreign Investors Tax Act..

1. Income tax source rules..

a. Rules for determining source of certain interest

payments (sec. 102(a)(1) of the bill and secs.

861 (a) and (c) of the code).

b. Interest on deposits in foreign branch banks

of domestic corporations (sec. 102(a)(2) of

the bill, sec. 861(a)(1) (D) of the code)

c. Foreign central banks and the Bank for Inter-

national Settlements (sec. 102(a)(3)(A) of

the bill and sec. 895 of the code).

d. Rules for determining the sources of dividends

and interest from foreign corporations (sec.

102(a)(2), (a)(3), and (b) of the bill and secs.

861(a) (1) (B), (C), and (D) and (2)(B) and

(C) of the code).

e. Compensation for personal services (secs.

102 (c) and (d) of the bill and secs. 861(a) (3)

(C)(ii) and 864(b)(1) of the code) ___

2. Definitions used in determining taxable status of

income

a. Trading in stocks or securities or in commodi-

ties (sec. 102(d) of the bill and sec. 864(b) (2)

of the code) -

b. Income effectively connected with the conduct

of a trade or business in the United States

(sec. 102(d) of the bill and sec. 864 (c) of the

code)

3. Taxation of nonresident aliens..

a. Income tax on nonresident alien individuals

(sec. 103(a) of the bill and sec. 871 of the

code) -

b. Deductions (sec. 103(c) of the bill and sec. 873

of the code) -

c. Expatriation to avoid tax (sec. 103(f) of the

bill and new sec. 877 of the code)_

d. Partial exclusion of dividends from gross in-

come (sec. 103(g) of the bill and sec. 116(d) of

the code) __

e. Withholding of tax on nonresident alien indi-

viduals (secs. 103 (h) and (k) of the bill and

secs. 1441 and 3401 of the code) - - .

f. Withheld taxes and declarations of estimated

income tax (secs. 103 (i) and (j) of the bill

and secs. 1461 and 6015 of the code).

g. Foreign estates or trusts (secs. 103 (e) and (1)

of the bill and secs. 875 and 7701(a)(31) of

the code)..

h. Citizens of possessions of the United States

(sec. 103(m) of the bill and sec. 932(a) of the

code).

i. Gain from disposition of certain depreciable

realty (sec. 3(j) of the House bill and sec.

1250(d) of the code)__.

III

IV. General explanation-Continued

A. Foreign Investors Tax Act-Continued

4. Taxauon of foreign corporations..

a. Income tax on foreign corporations (secs.

104 (a) and (b) of the bill and secs. 881 and

882 of the code)__

b. Withholding of tax on foreign corporations

(sec. 104 (c) of the bill and sec. 1442 of the

code)_

c. Deduction for dividends received from foreign

corporations (secs. 104 (d) and (e) of the bill

and secs. 245 (a) and (b) of the code) ___.

d. Unrelated business taxable income of certain

foreign charitable organizations (sec. 104(g)

of the bill and sec. 512(a) of the code).

e. Corporations subject to personal holding com-

pany tax (sec. 104(h) of the bill and secs.

542(c), 543(b), and 545 (a) and (d) of the

code).

f. Foreign corporations carrying on insurance

business in the United States (sec. 104(i) of

the bill and secs. 819, 821, 822, 831, 832, 841,

and 842 of the code)___

g. Subpart F income (sec. 104(j) of the bill and

sec. 952(b) of the code)...

h. Gain from certain sales or exchanges of stock

in certain foreign corporations (sec. 104(k)

of the bill and sec. 1248(d). of the code).

5. Miscellaneous income tax provisions, etc...

a. Income affected by treaty (sec. 105(a) of the

bill and sec. 894 of the code).

b. Adjustment of tax on nationals, residents, and

corporations of certain foreign countries

(sec. 105(b) of the bill and new sec. 896 of

the code)-----

c. Foreign community property income (sec.

105(e) of the bill and new sec. 981 of the

code)

d. Foreign tax credit-foreign corporations and

nonresident aliens (sec. 106(a) of the bill and

secs. 874, 901, and new sec. 906 of the code)__

e. Similar credit requirement (secs. 106(b) (2) and

(3) of the bill and secs. 901(c) and 2014(b)

of the code) -

f.

Separate foreign tax credit limitation (sec.

106(c) of the bill and sec. 904(f) of the code) -

g. Amendment to preserve existing law on de-

ductions under section 931 (sec. 107 of the

bill and sec. 931(d) of the code)....

6. Estate tax provisions__

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IV. General explanation-Continued

A. Foreign Investors Tax Act-Continued
7. Gift tax provisions__.

a. Tax on gifts of nonresidents not citizens (sec.
109(a) of the bill and sec. 2501 of the code)__
b. Situs of bonds given by expatriates (sec. 109(b)
of the bill and sec. 2511 of the code).

8. Treaty obligation___

B. Other amendments to the Internal Revenue Code_.
1. Application of investment credit to property used in
U.S. possessions (sec. 201 of the bill and secs.
48(a) (2), 48(a) (5), and 48(d) of the code).

2. Medical expenses deductions of individuals age 65 or
over (sec. 202 of the bill and sec. 213 of the code)__
3. Basis of property received in the liquidation of sub-
sidiary (sec. 203 of the bill and sec. 334(b) (2) and
(3) and sec. 453(d) of the code)..

4. "Swap funds" (sec. 204 of the bill and sec. 351 of the
code)___

5. Minimum amount treated as earned income for retire-
ment plans of self-employed persons (sec. 205 of the
bill and sec. 401(c) (2) (B) of the code)

6. Treatment of certain income of authors, inventors,
etc., as earned income for retirement plan purposes
(sec. 206 of the bill and sec. 401(c) (2) of the code).
7. Exclusion of certain rents from personal holding com-
pany income (sec. 207 of the bill and sec. 543 of the
code)___

8. Percentage depletion rate for certain clay bearing
alumina (sec. 208 of the bill and sec. 613 of the
code)____.

9. Percentage depletion rate for clam and oyster shells
(sec. 209 of the bill and sec. 613 of the code)__
10. Sintering and burning of shale, clay, and slate used as
lightweight aggregates (sec. 210 of the bill and sec.
613 of the code) -

11. Income from lapsing of straddle options (sec. 211 of
the bill and sec. 1234 (c) of the code)_.

12. Tax treatment of per-unit retain allocations (sec. 212
of the bill and secs. 1382, 1383, 1385, 1388, and 6044
of the code)----

13. Excise tax rate on hearses (sec. 213 of the bill and
sec. 4062 of the code).

14. Interest equalization tax; loans to insure raw material
sources (sec. 214 of the bill and sec. 4914 of the
code).

15. Interest equalization tax; insurance company reserve
funds (sec. 215 of the bill and sec. 4914(e) of the
code).

16. Interest equalization tax; dollar loans of foreign
branches of U.S. banks (sec. 216 of the bill and
sec. 4931(a) of the code)..

C. Presidential Election Campaign Fund Act_

1. Background.......

2. Designation of income tax payments to Presidential
Election Campaign Fund (sec. 302 of the bill and
sec. 6096 of the code)..

3. The Presidential Election Campaign Fund and pay-
ments therefrom (sec. 303 of the bill)_

4. The Advisory Board (sec. 304 of the bill).

IV. General explanation-Continued
D. Miscellaneous provisions.

1. Treasury notes payable in foreign currency (sec. 401
of the bill)

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2. Reports on Government contingent liabilities and
assets (sec. 402 of the bill) - - - - - -

3. Coverage of drug expenses under supplementary medi-
cal insurance benefits (sec. 403 of the bill and secs.
1832, 1833, 1845, 1846, and 1847 of the Social
Security Act).

V. Technical explanation of Foreign Investors Tax Act.
VI. Changes in existing law_.