118 STAT. 1499 PUBLIC LAW 108–357—OCT. 22, 2004 ‘‘(I) a United States shareholder (as defined in section 951(b)) of the controlled foreign corpora tion, or ‘‘(II) a partnership, estate, or trust in which the controlled foreign corporation, or any related person (as defined in section 954(d)(3)), is a partner, beneficiary, or trustee immediately after the acquisition of any obligation of such partner ship, estate, or trust by the controlled foreign cor poration.’’. (b) CONFORMING AMENDMENT.—Section 956(c)(2) is amended by striking ‘‘and (K)’’ in the last sentence and inserting ‘‘, (K), and (L)’’. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2004, and to taxable years of United States share holders with or within which such taxable years of foreign corpora tions end. SEC. 408. TRANSLATION OF FOREIGN TAXES. (a) ELECTIVE EXCEPTION FOR TAXES PAID OTHER THAN IN FUNC TIONAL CURRENCY.—Paragraph (1) of section 986(a) (relating to determination of foreign taxes and foreign corporation’s earnings and profits) is amended by redesignating subparagraph (D) as subparagraph (E) and by inserting after subparagraph (C) the fol lowing new subparagraph: ‘‘(D) ELECTIVE EXCEPTION FOR TAXES PAID OTHER THAN IN FUNCTIONAL CURRENCY.— ‘‘(i) IN GENERAL.—At the election of the taxpayer, subparagraph (A) shall not apply to any foreign income taxes the liability for which is denominated in any currency other than in the taxpayer’s functional cur rency. ‘‘(ii) APPLICATION TO QUALIFIED BUSINESS UNITS.— An election under this subparagraph may apply to foreign income taxes attributable to a qualified busi ness unit in accordance with regulations prescribed by the Secretary. ‘‘(iii) ELECTION.—Any such election shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.’’. (b) SPECIAL RULE FOR REGULATED INVESTMENT COMPANIES.— (1) IN GENERAL.—Section 986(a)(1), as amended by sub section (a), is amended by redesignating subparagraph (E) as subparagraph (F) and by inserting after subparagraph (D) the following: ‘‘(E) SPECIAL RULE FOR REGULATED INVESTMENT COMPA NIES.—In the case of a regulated investment company which takes into account income on an accrual basis, sub paragraphs (A) through (D) shall not apply and foreign income taxes paid or accrued with respect to such income shall be translated into dollars using the exchange rate as of the date the income accrues.’’. (2) CONFORMING AMENDMENT.—Section 986(a)(2) is amended by inserting ‘‘or (E)’’ after ‘‘subparagraph (A)’’. Applicability. 26 USC 956 note.
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