26 U.S.C. § 7873 — Income derived by Indians from exercise

Page 4085 TITLE 26—INTERNAL REVENUE CODE § 7873 ‘‘(A) was outstanding on June 6, 1984, and ‘‘(B) was repaid before the date 60 days after the date of the enactment of this Act [July 18, 1984]. ‘‘(3) EXCEPTION FOR CERTAIN EXISTING LOANS TO CON- TINUING CARE FACILITIES.—Nothing in this subsection shall be construed to apply the amendments made by this section to any loan made before June 6, 1984, to a continuing care facility by a resident of such facility which is contingent on continued residence at such fa- cility. ‘‘(4) APPLICABLE FEDERAL RATE FOR PERIODS BEFORE JANUARY 1, 1985.—For periods before January 1, 1985, the applicable Federal rate under paragraph (2) of section 7872(f) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], as added by this section, shall be 10 per- cent, compounded semiannually. ‘‘(5) TREATMENT OF RENEGOTIATIONS, ETC.—For pur- poses of this subsection, any loan renegotiated, ex- tended, or revised after June 6, 1984, shall be treated as a loan made after such date. ‘‘(6) DEFINITION OF TERM AND DEMAND LOANS.—For purposes of this subsection, the terms ‘demand loan’ and ‘term loan’ have the respective meanings given such terms by paragraphs (5) and (6) of section 7872(f) of the Internal Revenue Code of 1986, as added by this sec- tion, but the second sentence of such paragraph (5) shall not apply.’’ PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title. CERTAIN ISRAEL OR POLISH BONDS NOT SUBJECT TO RULES RELATING TO BELOW-MARKET LOANS Pub. L. 99–514, title XVIII, § 1812(b)(5), Oct. 22, 1986, 100 Stat. 2834, as amended by Pub. L. 101–179, title III, § 307(a), Nov. 28, 1989, 103 Stat. 1314, provided that: ‘‘Sec- tion 7872 of the Internal Revenue Code of 1954 [now 1986] (relating to treatment of loans with below-market in- terest rates) shall not apply to any obligation issued by Israel or Poland if— ‘‘(A) the obligation is payable in United States dol- lars, and ‘‘(B) the obligation bears interest at an annual rate of not less than 4 percent.’’ [Pub. L. 101–179, title III, § 307(b), Nov. 28, 1989, 103 Stat. 1314, provided that: ‘‘The amendments made by this section [amending section 1812(b)(5) of Pub. L. 99–514, set out above] shall apply to obligations issued after the date of the enactment of this Act [Nov. 28, 1989].’’] § 7873. Income derived by Indians from exercise of fishing rights (a) In general (1) Income and self-employment taxes No tax shall be imposed by subtitle A on in- come derived— (A) by a member of an Indian tribe di- rectly or through a qualified Indian entity, or (B) by a qualified Indian entity, from a fishing rights-related activity of such tribe. (2) Employment taxes No tax shall be imposed by subtitle C on re- muneration paid for services performed in a fishing rights-related activity of an Indian tribe by a member of such tribe for another member of such tribe or for a qualified Indian entity. (b) Definitions For purposes of this section— (1) Fishing rights-related activity The term ‘‘fishing rights-related activity’’ means, with respect to an Indian tribe, any ac- tivity directly related to harvesting, proc- essing, or transporting fish harvested in the exercise of a recognized fishing right of such tribe or to selling such fish but only if sub- stantially all of such harvesting was per- formed by members of such tribe. (2) Recognized fishing rights The term ‘‘recognized fishing rights’’ means, with respect to an Indian tribe, fishing rights secured as of March 17, 1988, by a treaty be- tween such tribe and the United States or by an Executive order or an Act of Congress. (3) Qualified Indian entity (A) In general The term ‘‘qualified Indian entity’’ means, with respect to an Indian tribe, any entity if— (i) such entity is engaged in a fishing rights-related activity of such tribe, (ii) all of the equity interests in the enti- ty are owned by qualified Indian tribes, members of such tribes, or their spouses, (iii) except as provided in regulations, in the case of an entity which engages to any extent in any substantial processing or transporting of fish, 90 percent or more of the annual gross receipts of the entity is derived from fishing rights-related activi- ties of one or more qualified Indian tribes each of which owns at least 10 percent of the equity interests in the entity, and (iv) substantially all of the management functions of the entity are performed by members of qualified Indian tribes. For purposes of clause (iii), equity interests owned by a member (or the spouse of a mem- ber) of a qualified Indian tribe shall be treat- ed as owned by the tribe. (B) Qualified Indian tribe For purposes of subparagraph (A), an In- dian tribe is a qualified Indian tribe with re- spect to an entity if such entity is engaged in a fishing rights-related activity of such tribe. (c) Special rules (1) Distributions from qualified Indian entity For purposes of this section, any distribu- tion with respect to an equity interest in a qualified Indian entity of an Indian tribe to a member of such tribe shall be treated as de- rived by such member from a fishing rights-re- lated activity of such tribe to the extent such distribution is attributable to income derived by such entity from a fishing rights-related activity of such tribe. (2) De minimis unrelated amounts may be ex- cluded If, but for this paragraph, all but a de mini- mis amount— Page 4086 TITLE 26—INTERNAL REVENUE CODE § 7874 (A) derived by a qualified Indian tribal en- tity, or by an individual through such an en- tity, is entitled to the benefits of paragraph (1) of subsection (a), or (B) paid to an individual for services is en- titled to the benefits of paragraph (2) of sub- section (a), then the entire amount shall be entitled to the benefits of such paragraph. (Added Pub. L. 100–647, title III, § 3041(a), Nov. 10, 1988, 102 Stat. 3640.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE Pub. L. 100–647, title III, § 3044, Nov. 10, 1988, 102 Stat. 3642, provided that: ‘‘(a) EFFECTIVE DATE.—The amendments made by this subtitle [subtitle E (§§ 3041–3044) of title III of Pub. L. 100–647, enacting this section and amending sections 1402 and 3121 of this title, section 71 of Title 25, Indians, and sections 409 and 411 of Title 42, The Public Health and Welfare] shall apply to all periods beginning before, on, or after the date of the enactment of this Act [Nov. 10, 1988]. ‘‘(b) NO INFERENCE CREATED.—Nothing in the amend- ments made by this subtitle shall create any inference as to the existence or non-existence or scope of any ex- emption from tax for income derived from fishing rights secured as of March 17, 1988, by any treaty, law, or Executive Order.’’ § 7874. Rules relating to expatriated entities and their foreign parents (a) Tax on inversion gain of expatriated entities (1) In general The taxable income of an expatriated entity for any taxable year which includes any por- tion of the applicable period shall in no event be less than the inversion gain of the entity for the taxable year. (2) Expatriated entity For purposes of this subsection— (A) In general The term ‘‘expatriated entity’’ means— (i) the domestic corporation or partner- ship referred to in subparagraph (B)(i) with respect to which a foreign corporation is a surrogate foreign corporation, and (ii) any United States person who is re- lated (within the meaning of section 267(b) or 707(b)(1)) to a domestic corporation or partnership described in clause (i). (B) Surrogate foreign corporation A foreign corporation shall be treated as a surrogate foreign corporation if, pursuant to a plan (or a series of related transactions)— (i) the entity completes after March 4, 2003, the direct or indirect acquisition of substantially all of the properties held di- rectly or indirectly by a domestic corpora- tion or substantially all of the properties constituting a trade or business of a do- mestic partnership, (ii) after the acquisition at least 60 per- cent of the stock (by vote or value) of the entity is held— (I) in the case of an acquisition with respect to a domestic corporation, by former shareholders of the domestic cor- poration by reason of holding stock in the domestic corporation, or (II) in the case of an acquisition with respect to a domestic partnership, by former partners of the domestic partner- ship by reason of holding a capital or profits interest in the domestic partner- ship, and (iii) after the acquisition the expanded affiliated group which includes the entity does not have substantial business activi- ties in the foreign country in which, or under the law of which, the entity is cre- ated or organized, when compared to the total business activities of such expanded affiliated group. An entity otherwise described in clause (i) with respect to any domestic corporation or partnership trade or business shall be treat- ed as not so described if, on or before March 4, 2003, such entity acquired directly or indi- rectly more than half of the properties held directly or indirectly by such corporation or more than half of the properties consti- tuting such partnership trade or business, as the case may be. (3) Coordination with subsection (b) A corporation which is treated as a domestic corporation under subsection (b) shall not be treated as a surrogate foreign corporation for purposes of paragraph (2)(A). (b) Inverted corporations treated as domestic corporations Notwithstanding section 7701(a)(4), a foreign corporation shall be treated for purposes of this title as a domestic corporation if such corpora- tion would be a surrogate foreign corporation if subsection (a)(2) were applied by substituting ‘‘80 percent’’ for ‘‘60 percent’’. (c) Definitions and special rules (1) Expanded affiliated group The term ‘‘expanded affiliated group’’ means an affiliated group as defined in section 1504(a) but without regard to section 1504(b)(3), except that section 1504(a) shall be applied by sub- stituting ‘‘more than 50 percent’’ for ‘‘at least 80 percent’’ each place it appears. (2) Certain stock disregarded There shall not be taken into account in de- termining ownership under subsection (a)(2)(B)(ii)— (A) stock held by members of the expanded affiliated group which includes the foreign corporation, or (B) stock of such foreign corporation which is sold in a public offering related to the acquisition described in subsection (a)(2)(B)(i). (3) Plan deemed in certain cases If a foreign corporation acquires directly or indirectly substantially all of the properties of a domestic corporation or partnership during the 4-year period beginning on the date which is 2 years before the ownership requirements of subsection (a)(2)(B)(ii) are met, such actions shall be treated as pursuant to a plan.