PUBLIC LAW 100-647—NOV. 10,1988 102 STAT. 3507

Secretary of the Treasury or his delegate may prescribe) to
have this paragraph not apply. In the case of members of
the same affiliated group (as so defined), such an election
may be made only if each member consents to such
election."

(i) AMENDMENTS RELATED TO SECTION 1221 OF THE REFORM ACT.—
(1)(A) Subparagraph (C) of section 953(cX3) of the 1986 Code is
amended by adding at the end thereof the following new sen-
tence:

"An election under this subparagraph made for any taxable
year shall not be effective if the corporation (or any prede-
cessor thereof) was a disqualified corporation for the tax-
able year for which the election was made or for any prior
taxable year beginning after 1986."

(B) Clause (i) of section 953(c)(3XD) of the 1986 Code is
amended to read as follows:

"(i) PERIOD DURING WHICH ELECTION IN EFFECT.—

"(I) IN GENERAL.—Except as provided in
subclause (II), any election under subparagraph (C)
shall apply to the taxable year for which made and
all subsequent taxable years unless revoked with
the consent of the Secretary.

"(II) TERMINATION.—If a foreign corporation
which made an election under subparagraph (C) for
any taxable year is a disqualified corporation for
any subsequent taxable year, such election shall
not apply to any taxable year beginning after such
subsequent taxable year."

(C) Paragraph (3) of section 953(c) of the 1986 Code is amended
by adding at the end thereof the following new subparagraph:

"(E) DISQUALIFIED CORPORATION.—For purposes of this
paragraph the term 'disqualified corporation' means, with
respect to any taxable year, any foreign corporation which
is a controlled foreign corporation for an uninterrupted
period of 30 days or more during such taxable year (deter-
mined without regard to this subsection) but only if a
United States shareholder (determined without regard to
this subsection) owns (within the meaning of section 958(a))
stock in such corporation at some time during such taxable
year."

(2XA) Paragraph (1) of section 953(c) of the 1986 Code is
amended by striking out "and" at the end of subparagraph (A),
by striking out the period at the end of subparagraph (B) and
inserting in lieu thereof ", and", and by adding at the end
thereof the following new subparagraph:

"(C) the pro rata share referred to in section 951(aXlXA)(i)
shall be determined under paragraph (5) of this subsection."
(B) Subsection (c) of section 953 of the 1986 Code is amended
by redesignating paragraph (5) as paragraph (6) and by insert-
ing after paragraph (4) the following new paragraph:
"(5) DETERMINATION OP PRO RATA SHARE.—

"(A) IN GENERAL.—The pro rata share determined under
this paragraph for any United States shareholder is the
lesser of—

"(i) the amount which would be determined under
paragraph (2) of section 951(a) if—