88th Congress, H. R. 8000 An Act 78 STAT 809 To amend the Internal Revenue Code of 1954 to impose a tax on acquisitions of certain foreign securities in order to equalize costs of longer-term financing in the United States and in markets abroad, 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. Interest Equal (a) SHORT TITLE.-This Act may be cited as the "Interest Equali-ization Tax Aot. zation Tax Act". (b) 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 shall be considered to be made to a section or other provision of the Internal Revenue Code of 1954. SEC. 2. INTEREST EQUALIZATION TAX. (a) IMPOSITION OF TAX.-Subtitle D (relating to miscellaneous excise taxes) is amended by adding at the end thereof the following new chapter: "CHAPTER 41-INTEREST EQUALIZATION TAX "SUBCHAPTER A. Acquisitions of foreign stock and debt obligations. "Subchapter A-Acquisitions of Foreign Stock and "Sec. 4911. Imposition of tax. "Sec. 4912. Acquisitions. "Sec. 4913. Limitation on tax on certain acquisitions. "Sec. 4914. Exclusion for certain acquisitions. "Sec. 4915. Exclusion for direct investments. "Sec. 4916. Exclusion for investments in less developed countries. "Sec. 4918. Exemption for prior American ownership. "Sec. 4919. Sales by underwriters and dealers to foreign persons. "SEC. 4911. IMPOSITION OF TAX. “(a) IN GENERAL.-There is hereby imposed, on each acquisition 68A Stat. 3. by a United States person (as defined in section 4920(a) (4)) of stock Post, p. 837. of a foreign issuer, or of a debt obligation of a foreign obligor (if such obligation has a period remaining to maturity of 3 years or more), a tax determined under subsection (b). "(b) AMOUNT OF TAX.- "(1) 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. "(2) DEBT OBLIGATIONS.-The tax imposed by subsection (a) on the acquisition of a debt obligation shall be equal to a percent-. age of the actual value of the debt obligation measured by the 545 78 STAT 810. Post, p. 835. 76 Stat. 812. 26 USC 401. period remaining to its maturity and determined in accordance with the following table: years, but less than 10% years. 281⁄2 years or more----- "(c) PERSONS LIABLE FOR TAX.— years.. 11.35 percent 12.25 percent 13.05 percent "(1) IN GENERAL.-The tax imposed by subsection (a) shall be paid by the person acquiring the stock or debt obligation involved. "(2) CROSS REFERENCE.— "For imposition of penalty on maker of false certificate in lieu of or in addition to tax on acquisition in certain cases, see section 6681. "(d) TERMINATION OF TAX.-The tax imposed by subsection (a) shall not apply to any acquisition made after December 31, 1965. "SEC. 4912. ACQUISITIONS. "(a) IN GENERAL.-For purposes of this chapter, the term 'acquisition' means any purchase, transfer, distribution, exchange, or other transaction by virtue of which ownership is obtained either directly or through a nominee, custodian, or agent. A United States person acting as a fiscal agent in connection with the redemption or purchase for retirement of stock or debt obligations (whether or not acting under a trust arrangement) shall not be considered to obtain ownership of such stock or debt obligations. The exercise of a right to convert a debt obligation (as defined in section 4920(a)(1)) into stock shall be deemed an acquisition of stock from the foreign issuer by the person exercising such right. Any extension or renewal of an existing debt obligation requiring affirmative action of the obligee shall be considered the acquisition of a new debt obligation. "(b) SPECIAL RULES.-For purposes of this chapter "(1) CERTAIN TRANSFERS TO FOREIGN TRUSTS.-Any transfer (other than in a sale or exchange for full and adequate consideration) of money or other property to a foreign trust shall, if such trust acquires stock or debt obligations (of one or more foreign issuers or obligors) the direct acquisition of which by the transferor would be subject to the tax imposed by section 4911, be deemed an acquisition by the transferor (as of the time of such transfer) of stock of a foreign issuer in an amount equal to the actual value of the money or property transferred or, if less, the actual value of the stock or debt obligations so acquired by such trust. Contributions made by an employer to a foreign pension or profit-sharing trust established by such employer for the exclusive benefit of employees (who are not owner-employees as defined in section 401 (c) (3)) who perform personal services for such employer on a full-time basis in a foreign country, and contributions to a foreign pension or profit-sharing trust established by an employer, made by an employee who performs personal services for such employer on full-time basis in a foreign country (and is not an owner-employee as defined in section 401 (c) (3)), shall not be considered under the preceding 76 Stat. 812. sentence as transfers which may be deemed acquisitions of stock 26 USC 401. of a foreign issuer. (2) CERTAIN TRANSFERS.— "(A) TRANSFERS TO FOREIGN CORPORATIONS AND PARTNERSHIPS.—Any transfer of money or other property to a foreign corporation or a foreign partnership "(i) as a contribution to the capital of such corporation or partnership, or "(ii) in exchange for one or more debt obligations of shall be deemed an acquisition by the transferor of stock of "(B) TRANSFERS TO FOREIGN BRANCHES.-If a domestic corporation or partnership transfers money or other property to, or applies money or other property for the benefit of, a branch office of such corporation or partnership with respect to which there is in effect an election under section 4920 (a) (5) (E), or if funds are borrowed by such branch office from a bank (as defined in section 581), other than from a branch 26 USC 581. of such a bank located outside the United States lending such funds in the ordinary course of its business, such domestic corporation or partnership shall be deemed to have acquired stock of a foreign corporation or partnership in an amount equal to the actual value of the money or property transferred or applied, or the funds borrowed. "(3) ACQUISITIONS FROM DOMESTIC CORPORATION OR PARTNERSHIP FORMED OR AVAILED OF TO OBTAIN FUNDS FOR FOREIGN ISSUER OR OBLIGOR.—The acquisition of stock or a debt obligation of a domestic corporation (other than a domestic corporation described in section 4920(a)(3)(B)), or a domestic partnership, formed or availed of for the principal purpose of obtaining funds (directly or indirectly) for a foreign issuer or obligor, shall be deemed an acquisition (from such foreign issuer or obligor) of stock or a debt obligation of such foreign issuer or obligor. "(4) REORGANIZATION EXCHANGES.-Any acquisition of stock or debt obligations of a foreign issuer or obligor in an exchange to which section 354, 355, or 356 applies (or would, but for section 367, apply) shall be deemed an acquisition from the foreign issuer 26 USC 354or obligor in exchange for its stock or for its debt obligations. 356, 367. For purposes of this paragraph, in determining whether section 854, 355, or 356 applies, or would apply, to any transaction 1 "(A) such transaction shall, if it took place before the date of the enactment of this chapter, be treated as taking place on such date, and "(B) section 368(a) (1) (B) shall be treated as permitting 26 USC 368. the receipt by a United States person of money or other property in addition to voting stock. |