118 STAT. 1492 PUBLIC LAW 108–357—OCT. 22, 2004 sources within the United States for each succeeding taxable year which is equal to the lesser of— ‘‘(A) the amount of such loss (to the extent not used under this paragraph in prior taxable years), or ‘‘(B) 50 percent of the taxpayer’s taxable income from sources within the United States for such succeeding tax able year, shall be treated as income from sources without the United States (and not as income from sources within the United States). ‘‘(2) OVERALL DOMESTIC LOSS DEFINED.—For purposes of this subsection— ‘‘(A) IN GENERAL.—The term ‘overall domestic loss’ means any domestic loss to the extent such loss offsets taxable income from sources without the United States for the taxable year or for any preceding taxable year by reason of a carryback. For purposes of the preceding sentence, the term ‘domestic loss’ means the amount by which the gross income for the taxable year from sources within the United States is exceeded by the sum of the deductions properly apportioned or allocated thereto (deter mined without regard to any carryback from a subsequent taxable year). ‘‘(B) TAXPAYER MUST HAVE ELECTED FOREIGN TAX CREDIT FOR YEAR OF LOSS.—The term ‘overall domestic loss’ shall not include any loss for any taxable year unless the taxpayer chose the benefits of this subpart for such taxable year. ‘‘(3) CHARACTERIZATION OF SUBSEQUENT INCOME.— ‘‘(A) IN GENERAL.—Any income from sources within the United States that is treated as income from sources without the United States under paragraph (1) shall be allocated among and increase the income categories in proportion to the loss from sources within the United States previously allocated to those income categories. ‘‘(B) INCOME CATEGORY.—For purposes of this para graph, the term ‘income category’ has the meaning given such term by subsection (f)(5)(E)(i). ‘‘(4) COORDINATION WITH SUBSECTION (f).—The Secretary shall prescribe such regulations as may be necessary to coordi nate the provisions of this subsection with the provisions of subsection (f).’’. (b) CONFORMING AMENDMENTS.— (1) Section 535(d)(2) is amended by striking ‘‘section 904(g)(6)’’ and inserting ‘‘section 904(h)(6)’’. (2) Subparagraph (A) of section 936(a)(2) is amended by striking ‘‘section 904(f)’’ and inserting ‘‘subsections (f) and (g) of section 904’’. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to losses for taxable years beginning after December 31, 2006. SEC. 403. LOOK THRU RULES TO APPLY TO DIVIDENDS FROM NONCON TROLLED SECTION 902 CORPORATIONS. (a) IN GENERAL.—Section 904(d)(4) (relating to look thru rules apply to dividends from noncontrolled section 902 corporations) is amended to read as follows: 26 USC 535 note. Regulations.
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