testing period

(1) Existing 80/20 company (A) In general The term “existing 80/20 company” means any corporation if— (i) such corporation met the 80-percent foreign business requirements of section 861(c)(1) (as in effect before the date of the enactment of this subsection) for such corporation’s last taxable year beginning before January 1, 2011 , (ii) such corporation meets the 80-percent foreign business requirements of subparagraph (B) with respect to each taxable year after the taxable year referred to in clause (i), and (iii) there has not been an addition of a substantial line of business with respect to such corporation after the date of the enactment of this subsection. (B) Foreign business requirements (i) In general Except as provided in clause (iv), a corporation meets the 80-percent foreign business requirements of this subparagraph if it is shown to the satisfaction of the Secretary that at least 80 percent of the gross income from all sources of such corporation for the testing period is active foreign business income. (ii) Active foreign business income For purposes of clause (i), the term “active foreign business income” means gross income which— (I) is derived from sources outside the United States (as determined under this subchapter), and (II) is attributable to the active conduct of a trade or business in a foreign country or possession of the United States. (iii) Testing period For purposes of this subsection, the term “testing period” means the 3-year period ending with the close of the taxable year of the corporation preceding the payment (or such part of such period as may be applicable). If the corporation has no gross income for such 3-year period (or part thereof), the testing period shall be the taxable year in which the payment is made. (iv) Transition rule In the case of a taxable year for which the testing period includes 1 or more taxable years beginning before January 1, 2011 — (I) a corporation meets the 80-percent foreign business requirements of this subparagraph if and only if the weighted average of— (aa) the percentage of the corporation’s gross income from all sources that is active foreign business income (as defined in subparagraph (B) of section 861(c)(1) (as in effect before the date of the enactment of this subsection)) for the portion of the testing period that includes taxable years beginning before January 1, 2011 , and (bb) the percentage of the corporation’s gross income from all sources that is active foreign business income (as defined in clause (ii) of this subparagraph) for the portion of the testing period, if any, that includes taxable years beginning on or after January 1, 2011 , is at least 80 percent, and (II) the active foreign business percentage for such taxable year shall equal the weighted average percentage determined under subclause (I).

Source

26 USC § 871(l)(1)


Scoping language

None identified. Default scope is assumed to be the entire title.
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