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after the date of enactment, followed by a gradual reduction to
zero over a 4-year period. Id. at 421.
The House version of the legislation did not provide for
repeal. At conference, a measure to repeal the withholding tax
on portfolio interest was adopted, but the transitional
provisions of the Senate version were replaced. Instead of a
phase-out of the withholding tax on all interest paid after
enactment, the final conference version provided for immediate
repeal, but only with respect to interest paid on obligations
issued after the date of enactment. The withholding tax would
continue to apply to interest on obligations issued before that
date. However, a transition rule (DEFRA section 127(g)(3), at
issue in this case) provided that interest paid on obligations
issued before June 22, 1984, by foreign finance subsidiaries in
existence on or before that date would be treated as paid to a
resident of the country of the finance subsidiary’s incorporation
(and therefore eligible for applicable treaty exemptions) if the
finance subsidiary “[satisfied] requirements based upon the
principles set forth in” four revenue rulings. H. Conf. Rept.
98-861, at 938 (1984), 1984-3 C.B. (Vol. 2) 1, 192. These four
revenue rulings were those issued in connection with the Interest
Equalization Tax that in general recognized the corporate
existence of a finance subsidiary if it maintained a debt/equity
ratio not exceeding 5 to 1; i.e., Rev. Rul. 73-110, 1973-1 C.B.
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