SEC. 902 (revised 1962)-Continued are determined on the basis of an accounting period of less than 1 year, the word 'year' as used in this subsection shall be construed to mean such accounting period. "(d) LESS DEVELOPED COUNTRY CORPORATION DEFINED.-For purposes of this section, the term 'less developed country corporation' means "(1) a foreign corporation which, for its taxable year, is a less developed country corporation within the meaning of section 955(c) (1) or (2), and "(2) a foreign corporation which owns 10 percent or more of the total combined voting power of all classes of stock entitled to vote of a foreign corporation which is a less developed country corporation within the meaning of section 955(c) (1), and "(A) 80 percent or more of the gross income of which for its taxable year meets the requirement of section 955(c) (1) (A); and "(B) 80 percent or more in value of the assets of which on each day of such year consists of property described in section 955(c) (1) (B). A foreign corporation which is a less developed country corporation for its first taxable year beginning after December 31, 1962, shall, for purposes of this section, be treated as having been a less developed country corporation for each of its taxable years beginning before January 1, 1963. "(e) CROSS REFERENCES. "(1) For inclusion in gross income of an amount equal to taxes deemed paid under subsection (a) (1), see section 78. "(2) For application of subsections (a) and (b) with respect to taxes deemed paid in a prior taxable year by a United States shareholder with respect to a controlled foreign corporation, see section 960. "(3) For reduction of credit with respect to dividends paid out of accumulated profits for years for which certain information is not furnished, see section 6038." Applicability: Any distribution received by a domestic corporation after December 31, 1964, and certain distributions received before January 1, 1965. (Id., § 9(e), 76 Stat. 1001. See "Applicability" under amendment to Secs. 78, 535 (b)(1), 545(b)(1), 861(a)(2) (B), and 901 (d) above.) SEC. 903. CREDIT FOR TAXES IN LIEU OF INCOME, ETC., TAXES (68A Stat. 287): In part... Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 207(b) (8), 78 Stat. 42: 268 Section 903 originally read as follows (68A Stat. 287): "SEC. 903. CREDIT FOR TAXES IN LIEU OF INCOME, ETC., TAXES. "For purposes of this subpart and of section 164 (b), the term income, war profits, and excess profits taxes shall include a tax paid in lieu of a tax on income, war profits, or excess profits otherwise generally imposed by any foreign country or by any possession of the United States" SEC. 904. LIMITATION ON CREDIT (68A Stat. 287-288): (a). (b). (new, added) "(a) ALTERNATIVE LIMITATIONS.— "(1) PER-COUNTRY LIMITATIONS.-In the case of any taxpayer who does not elect the limitation provided by paragraph (2), the amount of the credit in respect of the tax paid or accrued to any foreign country or possession of the United States shall not exceed the same proportion of the tax against which such credit. is taken which the taxpayer's taxable income from sources within such country or possession (but not in excess of the taxpayer's entire taxable income) bears to his entire taxable income for the same taxable year. "(2) OVERALL LIMITATION. In the case of any taxpayer who elects the limitation provided by this paragraph, the total amount of the credit in respect of taxes paid or accrued to all foreign countries and possessions of the United States shall not exceed the same proportion of the tax against which such credit is taken which the taxpayer's taxable income from sources without the United States (but not in excess of the taxpayer's entire taxable income) bears to his entire taxable income for the same taxable year." Sept. 14, 1960, H.R. 10087, P.L. 86-780, § 1(a), 74 Stat. 1010-1011: "(1) IN GENERAL.-A taxpayer may elect the limitation provided by subsection (a) (2) for any taxable year beginning after December 31, 1960. An election under this paragraph for any taxable year shall remain in effect for all subsequent taxable years, except that it may be revoked with the consent of the Secretary or his delegate with respect to any taxable year. "(2) ELECTION AFTER REVOCATION.-If a taxpayer has made an election under paragraph (1) and such election has been revoked, such taxpayer shall not be eligible to make a new election under paragraph (1) for any taxable year, unless the Secretary or his delegate consents to such new election. "(3) FORM AND TIME OF ELECTION AND REVOCATION.-An election under paragraph (1), and any revocation of such an election, may be made only in such manner as the Secretary or his delegate may by regulations prescribe. Such an election or revocation with respect to any taxable year may be made or changed at any time before the expiration of the period prescribed for making a claim for credit or refund of the tax imposed by this chapter for such taxable year." 269 Section 904 originally read as follows (68A Stat. 287-288): "SEC. 904. LIMITATION ON CREDIT. "(a) LIMITATION -The amount of the credit in respect of the tax paid or accrued to any country shall not exceed the same proportion of the tax against which such credit is taken which the taxpayer's taxable income from sources within such country (but not in excess of the taxpayer's entire taxable income) bears to his entire taxable income for the same taxable year "(b) TAXABLE INCOME FOR PURPOSE OF COMPUTING LIMITATION -For purposes of computing the limitation under subsection (a), the taxable income in the case of an individual, estate, or trust shall be computed without any deduction for personal exemptions under section 151 or 642 (b).” SEC. 904-Continued (b) (added 1960)—Continued Sept. 14, 1960, H.R. 10087, P.L. 86-780, § 1(b), 74 Stat. 1011: and inserting in lieu thereof "the applicable limitation under subsection (a)”. Taxable years beginning after December 31, 1960. Sept. 2, 1958, H.R. 8381, P.L. 85-866, § 42(a), 72 Stat. 1639: Amended Sec. 904 (as originally enacted-n. 269, p. 407 above) by adding at the end thereof, after subsection (b) (taxable income for purpose of computing limitation), the following new subsection (c): "(c) CARRYBACK AND CARRYOVER OF EXCESS TAX PAID.-Any amount by which any such tax paid or accrued to any foreign country or possession of the United States for any taxable year beginning after December 31, 1957, for which the taxpayer chooses to have the benefits of this subpart exceeds the limitation under subsection (a) shall be deemed tax paid or accrued to such foreign country or possession of the United States in the second preceding taxable year, in the first preceding taxable year, and in the first, second, third, fourth, or fifth succeeding taxable years, in that order and to the extent not deemed tax paid or accrued in a prior taxable year, in the amount by which the limitation under subsection (a) for such preceding or succeeding taxable year exceeds the sum of the tax paid or accrued to such foreign country or possession for such preceding or succeeding taxable year and the amount of the tax for any taxable year earlier than the current taxable year which shall be deemed to have been paid or accrued in such preceding or subsequent taxable year (whether or not the taxpayer chooses to have the benefits of this subpart with respect to such earlier taxable year). Such amount deemed paid or accrued in any year may be availed of only as a tax credit and not as a deduction and only if taxpayer for such year chooses to have the benefits of this subpart as to taxes paid or accrued for that year to foreign countries or possessions. For purposes of this subsection, the terms 'second preceding taxable year' and 'first preceding taxable year' do not include any taxable year beginning before January 1, 1958.". Applicability: Only taxable years beginning after December 31, 1957. Sept. 14, 1960, H.R. 10087, P.L. 86–780, § 1(c), 74 Stat. 1011: (1) by redesignating subsection (c) (as added by P.L. 85–866, § 42(a)) as subsection (d); and (2) by striking out each place it appeared in the first sentence of such subsection as so redesignated "the limitation under subsection (a)" and inserting in lieu thereof "the applicable limitation under subsection (a)". SEC. 904-Continued (d) (amended 1960)-Continued (e), (f) (added) (redesignated, added) Sept. 14, 1960, H.R. 10087, P.L. 86-780, § 1(d), 74 Stat. 1011: Amended Sec. 904 by adding at the end thereof, after subsection (d) (former subsection (c) as added by P.L. 85-866, § 42(a), and redesignated by P.L. 86-780, § 86–780, § 1(c)(1)), the following new subsections (e) and (f): "(e) CARRYBACKS AND CARRYOVERS WHERE OVERALL LIMITATION IS ELECTED. "(1) FOREIGN TAXES TO BE AGGREGATED FOR PURPOSES OF SUBSECTION (d).-With respect to each taxable year of the taxpayer to which the limitation provided by subsection (a) (2) applies, the taxes referred to in the first sentence of subsection (d) shall, for purposes of applying such first sentence, be aggregated on an overall basis (rather than taken into account on a per-country basis). "(2) FOREIGN TAXES MAY NOT BE CARRIED FROM PER-COUNTRY YEAR TO OVERALL YEAR OR FROM OVERALL YEAR TO PER-COUNTRY "(f) CROSS REFERENCE. "For special rule relating to the application of the credit provided by section 901 in the case of affiliated groups which include Western Hemisphere trade corporations for years in which the limitation provided by subsection (a) (2) applies, see section 1503(d).” Applicability: Taxable years beginning after December 31, 1960. Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 10(a), 76 Stat. 1002-1003: "(f) APPLICATION OF SECTION IN CASE OF CERTAIN INTEREST INCOME. "(1) IN GENERAL.-The provisions of subsections (a), (c), (d), and (e) of this section shall be applied separately with respect to "(A) the interest income described in paragraph (2), and "(B) income other than the interest income described in paragraph (2). (2) INTEREST INCOME TO WHICH APPLICABLE.-For purposes of this subsection, the interest income described in this paragraph is interest other than interest SEC. 904-Continued (f) (added 1962)-Continued "(A) derived from any transaction which is directly related to the active conduct of a trade or business in a foreign country or a possession of the United States. "(B) derived in the conduct of a banking, financing, or similar business, "(C) received from a corporation in which the taxpayer owns at least 10 percent of the voting stock, or "(D) received on obligations acquired as a result of the disposition of a trade or business actively conducted by the taxpayer in a foreign country or possession of the United States or as a result of the disposition of stock or obligations of a corporation in which the taxpayer owned at least 10 percent of the voting stock. "(3) OVERALL LIMITATIONS NOT TO APPLY.-The limitation provided by subsection (a) (2) shall not apply with respect to the interest income described in paragraph (2). The Secretary or his delegate shall by regulations prescribe the manner of application of subsection (e) with respect to cases in which the limitation provided by subsection (a)(2) applies with respect to income other than the interest income described in paragraph (2). "(4) TRANSITIONAL RULES FOR CARRYBACKS AND CARRY OVERS. "(A) CARRYBACKS TO YEARS PRIOR TO REVENUE ACT OF 1962. Where, under the provisions of subsection (d), taxes (i) paid or accrued to any foreign country or possession of the United States in any taxable year beginning after the date [Oct. 16, 1962] of the enactment of the Revenue Act of 1962 are deemed (ii) paid or accrued in one or more taxable years beginning on or before the date of enactment of the Revenue Act of 1962, the amount of such taxes deemed paid or accrued shall be determined without regard to the provisions of this subsection. To the extent the taxes paid or accrued to a foreign country or possession of the United States in any taxable year described in clause (i) are not, with the application of the preceding sentence, deemed paid or accrued in any taxable year described in clause (ii), such taxes shall, for purposes of applying subsection (d), be deemed paid or accrued in a taxable year beginning after the date of the enactment of the Revenue Act of 1962, with respect to interest income described in paragraph (2), and with respect to income other than interest income described in paragraph (2), in the same ratios as the amount of such taxes paid or accrued with respect to interest income described in paragraph (2), and the amount of such taxes paid or accrued with respect to income other than interest income described in paragraph (2), respectively, bear to the total amount of such taxes paid or accrued to such foreign country or possession of the United States. "(B) CARRYOVERS TO YEARS AFTER REVENUE ACT OF 1962.— Where, under the provisions of subsection (d), taxes (i) paid or accrued to any foreign country or possession of the United States in any taxable year beginning on or before the date of the enactment of the Revenue Act of 1962 are deemed (ii) paid or accrued in one or more taxable years beginning after |