To amend the Internal Revenue Code of 1986 to limit the interest deduction of foreign corporations that hold interests of less than ten percent in partnerships engaged in business in the United States.

Amends the Internal Revenue Code to require that a foreign corporation be treated as owning (or as having incurred) a pro rata share of the assets and liabilities of a partnership in which it is a partner for purposes of allocating interest deductions (thus barring such deductions on the basis of gross income).

 
HR 5969 IH
101st CONGRESS
2d Session
 H. R. 5969
To amend the Internal Revenue Code of 1986 to limit the interest deduction
of foreign corporations that hold interests of less than 10 percent in
partnerships engaged in business in the United States.
October 27, 1990
Mr. MCGRATH introduced the following bill; which was referred to the Committee
on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to limit the interest deduction
of foreign corporations that hold interests of less than 10 percent in
partnerships engaged in business in the United States.
  Be it enacted by the Senate and House of Representatives of the United
  States of America in Congress assembled,
SECTION 1. REVISION OF RULES FOR ALLOCATING INTEREST EXPENSE DEDUCTONS.
  (a) IN GENERAL- Subsection (e)(2) of section 864 of the Internal Revenue
  Code of 1986 (relating to source rules and other rules relating to foreign
  income) is amended to read as follows:
  (2) `GROSS INCOME METHOD MAY NOT BE USED FOR INTEREST- All allocations
  and apportionments of interest expense shall be made on the basis of
  assets rather than gross income. In applying this paragraph for purposes
  of section 882(c)(1)(A) a foreign corporation shall be treated as owning
  (or as having incurred) a pro rata share of the assets and liabilities of
  a partnership in which it is partner.'.