pre-election worldwide affiliated group
(5) Election to expand financial institution group of worldwide group (A) In general If a worldwide affiliated group elects the application of this subsection, all financial corporations which— (i) are members of such worldwide affiliated group, but (ii) are not corporations described in paragraph (4)(B), shall be treated as described in paragraph (4)(B) for purposes of applying paragraph (4)(A). This subsection (other than this paragraph) shall apply to any such group in the same manner as this subsection (other than this paragraph) applies to the pre-election worldwide affiliated group of which such group is a part. (B) Financial corporation For purposes of this paragraph, the term “financial corporation” means any corporation if at least 80 percent of its gross income is income described in section 904(d)(2)(D)(ii) and the regulations thereunder which is derived from transactions with persons who are not related (within the meaning of section 267(b) or 707(b)(1)) to the corporation. For purposes of the preceding sentence, there shall be disregarded any item of income or gain from a transaction or series of transactions a principal purpose of which is the qualification of any corporation as a financial corporation. (C) Anti-abuse rules In the case of a corporation which is a member of an electing financial institution group, to the extent that such corporation— (i) distributes dividends or makes other distributions with respect to its stock after the date of the enactment of this paragraph to any member of the pre-election worldwide affiliated group (other than to a member of the electing financial institution group) in excess of the greater of— (I) its average annual dividend (expressed as a percentage of current earnings and profits) during the 5-taxable-year period ending with the taxable year preceding the taxable year, or (II) 25 percent of its average annual earnings and profits for such 5-taxable-year period, or (ii) deals with any person in any manner not clearly reflecting the income of the corporation (as determined under principles similar to the principles of section 482 ), an amount of indebtedness of the electing financial institution group equal to the excess distribution or the understatement or overstatement of income, as the case may be, shall be recharacterized (for the taxable year and subsequent taxable years) for purposes of this paragraph as indebtedness of the worldwide affiliated group (excluding the electing financial institution group). If a corporation has not been in existence for 5 taxable years, this subparagraph shall be applied with respect to the period it was in existence. (D) Election An election under this paragraph with respect to any financial institution group may be made only by the common parent of the pre-election worldwide affiliated group and may be made only for the first taxable year beginning after December 31, 2020 , in which such affiliated group includes 1 or more financial corporations. Such an election, once made, shall apply to all financial corporations which are members of the electing financial institution group for such taxable year and all subsequent years unless revoked with the consent of the Secretary. (E) Definitions relating to groups For purposes of this paragraph— (i) Pre-election worldwide affiliated group The term “pre-election worldwide affiliated group” means, with respect to a corporation, the worldwide affiliated group of which such corporation would (but for an election under this paragraph) be a member for purposes of applying paragraph (1). (ii) Electing financial institution group The term “electing financial institution group” means the group of corporations to which this subsection applies separately by reason of the application of paragraph (4)(A) and which includes financial corporations by reason of an election under subparagraph (A). (F) Regulations The Secretary shall prescribe such regulations as may be appropriate to carry out this subsection, including regulations— (i) providing for the direct allocation of interest expense in other circumstances where such allocation would be appropriate to carry out the purposes of this subsection, (ii) preventing assets or interest expense from being taken into account more than once, and (iii) dealing with changes in members of any group (through acquisitions or otherwise) treated under this paragraph as an affiliated group for purposes of this subsection.