118 STAT. 1513 PUBLIC LAW 108–357—OCT. 22, 2004 in computing long term capital gains for such shareholder under subparagraph (B) or (D) (without regard to this subparagraph)— ‘‘(i) shall not be included in computing such share holder’s long term capital gains, and ‘‘(ii) shall be included in such shareholder’s gross income as a dividend from the real estate investment trust.’’. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after the date of the enact ment of this Act. SEC. 419. EXCLUSION OF INCOME DERIVED FROM CERTAIN WAGERS ON HORSE RACES AND DOG RACES FROM GROSS INCOME OF NONRESIDENT ALIEN INDIVIDUALS. (a) IN GENERAL.—Subsection (b) of section 872 (relating to exclusions) is amended by redesignating paragraphs (5), (6), and (7) as paragraphs (6), (7), and (8), respectively, and inserting after paragraph (4) the following new paragraph: ‘‘(5) INCOME DERIVED FROM WAGERING TRANSACTIONS IN CERTAIN PARIMUTUEL POOLS.—Gross income derived by a non resident alien individual from a legal wagering transaction initiated outside the United States in a parimutuel pool with respect to a live horse race or dog race in the United States.’’. (b) CONFORMING AMENDMENT.—Section 883(a)(4) is amended by striking ‘‘(5), (6), and (7)’’ and inserting ‘‘(6), (7), and (8)’’. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to wagers made after the date of the enactment of this Act. SEC. 420. LIMITATION OF WITHHOLDING TAX FOR PUERTO RICO COR PORATIONS. (a) IN GENERAL.—Subsection (b) of section 881 is amended by redesignating paragraph (2) as paragraph (3) and by inserting after paragraph (1) the following new paragraph: ‘‘(2) COMMONWEALTH OF PUERTO RICO.— ‘‘(A) IN GENERAL.—If dividends are received during a taxable year by a corporation— ‘‘(i) created or organized in, or under the law of, the Commonwealth of Puerto Rico, and ‘‘(ii) with respect to which the requirements of subparagraphs (A), (B), and (C) of paragraph (1) are met for the taxable year, subsection (a) shall be applied for such taxable year by substituting ‘10 percent’ for ‘30 percent’. ‘‘(B) APPLICABILITY.—If, on or after the date of the enactment of this paragraph, an increase in the rate of the Commonwealth of Puerto Rico’s withholding tax which is generally applicable to dividends paid to United States corporations not engaged in a trade or business in the Commonwealth to a rate greater than 10 percent takes effect, this paragraph shall not apply to dividends received on or after the effective date of the increase.’’. (b) WITHHOLDING.—Subsection (c) of section 1442 (relating to withholding of tax on foreign corporations) is amended— (1) by striking ‘‘For purposes’’ and inserting the following: ‘‘(1) GUAM, AMERICAN SAMOA, THE NORTHERN MARIANA ISLANDS, AND THE VIRGIN ISLANDS.—For purposes’’, and 26 USC 872 note. 26 USC 857 note.
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