![]() (D) Financial services income (i) In general Except as otherwise provided in this subparagraph, the term “financial services income” means any income which is received or accrued by any person predominantly engaged in the active conduct of a banking, insurance, financing, or similar business, and which is- (I) described in clause (ii), or (II) passive income (determined without regard to subparagraph (B)(iii)(II)). (iii) Pass-thru entities The Secretary shall by regulation specify for purposes of this subparagraph the treatment of financial services income received or accrued by partnerships and by other pass-thru entities which are not members of a financial services group. In determining whether such a group is so engaged, there shall be taken into account only the income of members of the group that are- (I) United States corporations, or (II) controlled foreign corporations in which such United States corporations own, directly or indirectly, at least 80 percent of the total voting power and value of the stock. (ii) Financial services group The term “financial services group” means any affiliated group (as defined in section 1504(a) without regard to paragraphs (2) and (3) of section 1504(b)) which is predominantly engaged in the active conduct of a banking, insurance, financing, or similar business. (C) Treatment of financial services income and companies (i) In general Financial services income shall be treated as general category income in the case of- (I) a member of a financial services group, and (II) any other person if such person is predominantly engaged in the active conduct of a banking, insurance, financing, or similar business. Any reference in subclause (II) to section 922, 923, or 927 shall be treated as a reference to such section as in effect before its repeal by the FSC Repeal and Extraterritorial Income Exclusion Act of 2000. ![]() (v) Specified passive category income The term “specified passive category income” means- (I) dividends from a DISC or former DISC (as defined in section 992(a) ) to the extent such dividends are treated as income from sources without the United States, and (II) distributions from a former FSC (as defined in section 922) out of earnings and profits attributable to foreign trade income (within the meaning of section 923(b)) or interest or carrying charges (as defined in section 927(d)(1)) derived from a transaction which results in foreign trade income (as defined in section 923(b)). (iv) Clarification of application of section 864(d)(6) In determining whether any income is of a kind which would be foreign personal holding company income, the rules of section 864(d)(6) shall apply only in the case of income of a controlled foreign corporation. (iii) Exceptions The term “passive income” shall not include- (I) any export financing interest, and (II) any high-taxed income. (ii) Certain amounts included Except as provided in clause (iii), subparagraph (E)(ii), or paragraph (3)(H), the term “passive income” includes any amount includible in gross income under section 1293 (relating to certain passive foreign investment companies). ![]() (B) Passive income (i) In general Except as otherwise provided in this subparagraph, the term “passive income” means any income received or accrued by any person which is of a kind which would be foreign personal holding company income (as defined in section 954(c) ). (ii) General category income The term “general category income” means income other than income described in paragraph (1)(A), foreign branch income, and passive category income. ![]() (2) Definitions and special rules For purposes of this subsection- (A) Categories (i) Passive category income The term “passive category income” means passive income and specified passive category income.
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