- 46 -
prior section 819 and added prior section 813. The prior section
819(a) required a foreign life insurance company to reduce
certain deductions by the product of the deficiency and the
foreign insurance company's actual yield. Sec. 819(a). The
Deficit Reduction Act of 1984, Pub. L. 98-369, modified how
taxable income was calculated for foreign insurance companies.
Sec. 801; see H. Rept. 98-861, 1984-3 C.B. (Vol. 2) 1, 297-298.
This change necessitated treating the product of the deficiency
and the foreign insurance company's actual yield as additional
effectively connected income instead of as a reduction of certain
deductions which was done under the previous section 819.
Subsequently, Omnibus Budget Reconciliation Act of 1987,
Pub. L. 100-203, 101 Stat. 1330, repealed prior section 813 and
added section 842(b). We do not find that section 842(b) is
similar enough to prior sections 819 and 813 so as to establish
that section 842(b) was customary within the meaning of paragraph
23 of the Model Commentaries. Two features of section 842(b) go
beyond the historical approach taken by both of the earlier
statutes. First, section 842(b)(1) imputes additional income
based on an earnings yield derived from domestic industry
averages, sec. 842(b)(3), or petitioner's worldwide operations,
sec. 842(b)(4), whereas both prior section 819 and section 813
imputed income based on the U.S. branch's actual earnings yield.
Secs. 819(a)(1)(B), 805(b)(2), 813(a)(3). Second, section 842(b)
Page: Previous 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 NextLast modified: May 25, 2011