26 U.S.C. § 989 — Other definitions and special rules

Page 2231 TITLE 26—INTERNAL REVENUE CODE § 989 ‘‘(A) in the case of a transaction described in para- graph (1)(B)(i) or (ii), the date on which payment is made or received, or ‘‘(B) in the case of a transaction described in para- graph (1)(B)(iii), the date payment is made or re- ceived or the date the taxpayer’s rights with respect to the position are terminated.’’ Subsec. (c)(5). Pub. L. 100–647, § 1012(v)(2)(A), added par. (5). Subsec. (d)(1). Pub. L. 100–647, § 1012(v)(4), substituted ‘‘this subtitle’’ for ‘‘this section’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1999 AMENDMENT Amendment by Pub. L. 106–170 applicable to any in- strument held, acquired, or entered into, any trans- action entered into, and supplies held or acquired on or after Dec. 17, 1999, see section 532(d) of Pub. L. 106–170, set out as a note under section 170 of this title. EFFECTIVE DATE OF 1997 AMENDMENT Pub. L. 105–34, title XI, § 1104(b), Aug. 5, 1997, 111 Stat. 967, provided that: ‘‘The amendments made by this sec- tion [amending this section] shall apply to taxable years beginning after December 31, 1997.’’ EFFECTIVE DATE OF 1993 AMENDMENT Amendment by Pub. L. 103–66 applicable to all tax- able years ending on or after Dec. 31, 1993, with special rules for taxpayers required to change accounting methods and for floor specialists and market makers, see section 13223(c) of Pub. L. 103–66, set out as an Effec- tive Date note under section 475 of this title. EFFECTIVE DATE OF 1989 AMENDMENT Amendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1988 AMENDMENT Pub. L. 100–647, title I, § 1012(v)(2)(B), Nov. 10, 1988, 102 Stat. 3529, provided that: ‘‘The amendment made by subparagraph (A) [amending this section] shall not apply in any case in which the taxpayer takes or makes delivery before June 11, 1987.’’ Amendment by section 1012(v)(3), (4), (6)–(8) of Pub. L. 100–647 effective, except as otherwise provided, as if in- cluded in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title. Pub. L. 100–647, title VI, § 6130(d), Nov. 10, 1988, 102 Stat. 3719, provided that: ‘‘(1) IN GENERAL.—The amendments made by this sec- tion [amending this section and section 1092 of this title] shall apply with respect to forward contracts, fu- ture contracts, options, and similar instruments en- tered into or acquired after October 21, 1988. ‘‘(2) TIME FOR MAKING ELECTION.—The time for mak- ing any election under subparagraph (D) or (E) of sec- tion 988(c)(1) of the 1986 Code shall not expire before the date 30 days after the date of the enactment of this Act [Nov. 10, 1988]. ‘‘(3) TRANSITIONAL RULES.— ‘‘(A) The requirements of subclause (IV) of section 988(c)(1)(E)(iii) of the 1986 Code (as added by sub- section (b)) shall not apply to periods before the date of the enactment of this Act. ‘‘(B) In the case of any partner in an existing part- nership, the 20-percent ownership requirements of subclause (I) of such section 988(c)(1)(E)(iii) shall be treated as met during any period during which such partner does not own a percentage interest in the capital or profits of such partnership greater than 331⁄3 percent (or, if lower, the lowest such percentage interest of such partner during any prior period after October 21, 1988, during which such partnership is in existence). For purposes of the preceding sentence, the term ‘existing partnership’ means any partner- ship if— ‘‘(i) such partnership was in existence on October 21, 1988, and principally engaged on such date in buying and selling options, futures, or forwards with respect to commodities, or ‘‘(ii) a registration statement was filed with re- spect to such partnership with the Securities and Exchange Commission on or before such date and such registration statement indicated that the principal activity of such partnership will consist of buying and selling instruments referred to in clause (i).’’ EFFECTIVE DATE Section applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifica- tions, see section 1261(e) of Pub. L. 99–514, set out as a note under section 985 of this title. § 989. Other definitions and special rules (a) Qualified business unit For purposes of this subpart, the term ‘‘quali- fied business unit’’ means any separate and clearly identified unit of a trade or business of a taxpayer which maintains separate books and records. (b) Appropriate exchange rate Except as provided in regulations, for purposes of this subpart, the term ‘‘appropriate exchange rate’’ means— (1) in the case of an actual distribution of earnings and profits, the spot rate on the date such distribution is included in income, (2) in the case of an actual or deemed sale or exchange of stock in a foreign corporation treated as a dividend under section 1248, the spot rate on the date the deemed dividend is included in income, (3) in the case of any amounts included in in- come under section 951(a)(1)(A) or 1293(a), the average exchange rate for the taxable year of the foreign corporation, or (4) in the case of any other qualified business unit of a taxpayer, the average exchange rate for the taxable year of such qualified business unit. For purposes of the preceding sentence, any amount included in income under section 951(a)(1)(B) shall be treated as an actual dis- tribution made on the last day of the taxable year for which such amount was so included. (c) Regulations The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subpart, including regula- tions— (1) setting forth procedures to be followed by taxpayers with qualified business units using a net worth method of accounting before the en- actment of this subpart, (2) limiting the recognition of foreign cur- rency loss on certain remittances from quali- fied business units, (3) providing for the recharacterization of in- terest and principal payments with respect to obligations denominated in certain hyperinflationary currencies, Page 2232 TITLE 26—INTERNAL REVENUE CODE § 991 1 Section numbers editorially supplied. (4) providing for alternative adjustments to the application of section 905(c), (5) providing for the appropriate treatment of related party transactions (including trans- actions between qualified business units of the same taxpayer), and (6) setting forth procedures for determining the average exchange rate for any period. (Added Pub. L. 99–514, title XII, § 1261(a), Oct. 22, 1986, 100 Stat. 2590; amended Pub. L. 100–647, title I, § 1012(v)(5), Nov. 10, 1988, 102 Stat. 3529; Pub. L. 103–66, title XIII, § 13231(c)(4)(C), Aug. 10, 1993, 107 Stat. 499; Pub. L. 104–188, title I, § 1501(b)(9), Aug. 20, 1996, 110 Stat. 1826; Pub. L. 105–34, title XI, § 1102(b)(2), (3), Aug. 5, 1997, 111 Stat. 966; Pub. L. 108–357, title IV, § 413(c)(17), Oct. 22, 2004, 118 Stat. 1508.) Editorial Notes REFERENCES IN TEXT The enactment of this subpart, referred to in subsec. (c)(1), probably means the date of enactment of Pub. L. 99–514, which was approved Oct. 22, 1986. AMENDMENTS 2004—Subsec. (b)(3). Pub. L. 108–357 struck out ‘‘, 551(a),’’ after ‘‘section 951(a)(1)(A)’’. 1997—Subsec. (b)(3), (4). Pub. L. 105–34, § 1102(b)(3), struck out ‘‘weighted’’ before ‘‘average exchange rate’’. Subsec. (c)(6). Pub. L. 105–34, § 1102(b)(2), added par. (6). 1996—Subsec. (b). Pub. L. 104–188 substituted ‘‘section 951(a)(1)(B)’’ for ‘‘subparagraph (B) or (C) of section 951(a)(1)’’ in closing provisions. 1993—Subsec. (b). Pub. L. 103–66 substituted ‘‘subpara- graph (B) or (C) of section 951(a)(1)’’ for ‘‘section 951(a)(1)(B)’’ in last sentence. 1988—Subsec. (b). Pub. L. 100–647 substituted in par. (3) ‘‘section 951(a)(1)(A)’’ for ‘‘section 951(a)’’ and in- serted at end ‘‘For purposes of the preceding sentence, any amount included in income under section 951(a)(1)(B) shall be treated as an actual distribution made on the last day of the taxable year for which such amount was so included.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108–357 applicable to taxable years of foreign corporations beginning after Dec. 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign cor- porations end, see section 413(d)(1) of Pub. L. 108–357, set out as an Effective and Termination Dates of 2004 Amendments note under section 1 of this title. EFFECTIVE DATE OF 1997 AMENDMENT Amendment by Pub. L. 105–34 applicable to taxes paid or accrued in taxable years beginning after Dec. 31, 1997, see section 1102(c)(1) of Pub. L. 105–34, set out as a note under section 986 of this title. EFFECTIVE DATE OF 1996 AMENDMENT Amendment by Pub. L. 104–188 applicable to taxable years of foreign corporations beginning after Dec. 31, 1996, and to taxable years of United States shareholders within which or with which such taxable years of for- eign corporations end, see section 1501(d) of Pub. L. 104–188, set out as a note under section 904 of this title. EFFECTIVE DATE OF 1993 AMENDMENT Amendment by Pub. L. 103–66 applicable to taxable years of foreign corporations beginning after Sept. 30, 1993, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 13231(e) of Pub. L. 103–66, set out as a note under section 951 of this title. EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title. EFFECTIVE DATE Section applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifica- tions, see section 1261(e) of Pub. L. 99–514, set out as a note under section 985 of this title. PART IV—DOMESTIC INTERNATIONAL SALES CORPORATIONS Subpart Sec.1 A. Treatment of qualifying corporations ... 991 B. Treatment of distributions to share- holders ............................................... 995 Editorial Notes AMENDMENTS 1971—Pub. L. 92–178, title V, § 501, Dec. 10, 1971, 85 Stat. 535, added part IV to subchapter N of chapter 1. SUBPART A—TREATMENT OF QUALIFYING CORPORATIONS Sec. 991. Taxation of a domestic international sales corporation. 992. Requirements of a domestic international sales corporation. 993. Definitions and special rules. 994. Inter-company pricing rules. § 991. Taxation of a domestic international sales corporation For purposes of the taxes imposed by this sub- title upon a DISC (as defined in section 992(a)), a DISC shall not be subject to the taxes imposed by this subtitle. (Added Pub. L. 92–178, title V, § 501, Dec. 10, 1971, 85 Stat. 535; amended Pub. L. 105–206, title VI, § 6011(e)(1), July 22, 1998, 112 Stat. 818.) Editorial Notes AMENDMENTS 1998—Pub. L. 105–206 struck out ‘‘except for the tax imposed by chapter 5’’ before period at end. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1998 AMENDMENT Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates (section 1131(a) of Pub. L. 105–34), see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title. EFFECTIVE DATE Pub. L. 92–178, title V, § 507, Dec. 10, 1971, 85 Stat. 553, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘Except as provided in section 505 of this title [amending section 971 of this title and en-