118 STAT. 1500 PUBLIC LAW 108–357—OCT. 22, 2004 (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2004. SEC. 409. REPEAL OF WITHHOLDING TAX ON DIVIDENDS FROM CER TAIN FOREIGN CORPORATIONS. (a) IN GENERAL.—Paragraph (2) of section 871(i) (relating to tax not to apply to certain interest and dividends) is amended by adding at the end the following new subparagraph: ‘‘(D) Dividends paid by a foreign corporation which are treated under section 861(a)(2)(B) as income from sources within the United States.’’. (b) EFFECTIVE DATE.—The amendment made by this section shall apply to payments made after December 31, 2004. SEC. 410. EQUAL TREATMENT OF INTEREST PAID BY FOREIGN PART NERSHIPS AND FOREIGN CORPORATIONS. (a) IN GENERAL.—Paragraph (1) of section 861(a) is amended by striking ‘‘and’’ at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ‘‘, and’’, and by adding at the end the following new subparagraph: ‘‘(C) in the case of a foreign partnership, which is predominantly engaged in the active conduct of a trade or business outside the United States, any interest not paid by a trade or business engaged in by the partnership in the United States and not allocable to income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States.’’. (b) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2003. SEC. 411. TREATMENT OF CERTAIN DIVIDENDS OF REGULATED INVESTMENT COMPANIES. (a) TREATMENT OF CERTAIN DIVIDENDS.— (1) NONRESIDENT ALIEN INDIVIDUALS.—Section 871 (relating to tax on nonresident alien individuals) is amended by redesig nating subsection (k) as subsection (l) and by inserting after subsection (j) the following new subsection: ‘‘(k) EXEMPTION FOR CERTAIN DIVIDENDS OF REGULATED INVEST MENT COMPANIES.— ‘‘(1) INTEREST RELATED DIVIDENDS.— ‘‘(A) IN GENERAL.—Except as provided in subparagraph (B), no tax shall be imposed under paragraph (1)(A) of subsection (a) on any interest related dividend received from a regulated investment company. ‘‘(B) EXCEPTIONS.—Subparagraph (A) shall not apply— ‘‘(i) to any interest related dividend received from a regulated investment company by a person to the extent such dividend is attributable to interest (other than interest described in subparagraph (E) (i) or (iii)) received by such company on indebtedness issued by such person or by any corporation or partnership with respect to which such person is a 10 percent share holder, ‘‘(ii) to any interest related dividend with respect to stock of a regulated investment company unless the person who would otherwise be required to deduct and withhold tax from such dividend under chapter 26 USC 861 note. 26 USC 871 note. 26 USC 986 note.
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