net unrelated loss
(13) Special rules for certain amounts received from controlled entities.— (A) In general .— If an organization (in this paragraph referred to as the “controlling organization”) receives or accrues (directly or indirectly) a specified payment from another entity which it controls (in this paragraph referred to as the “controlled entity”), notwithstanding paragraphs (1), (2), and (3), the controlling organization shall include such payment as an item of gross income derived from an unrelated trade or business to the extent such payment reduces the net unrelated income of the controlled entity (or increases any net unrelated loss of the controlled entity). There shall be allowed all deductions of the controlling organization directly connected with amounts treated as derived from an unrelated trade or business under the preceding sentence. (B) Net unrelated income or loss .— For purposes of this paragraph— (i) Net unrelated income .— The term “net unrelated income” means— (I) in the case of a controlled entity which is not exempt from tax under section 501(a), the portion of such entity’s taxable income which would be unrelated business taxable income if such entity were exempt from tax under section 501(a) and had the same exempt purposes as the controlling organization, or (II) in the case of a controlled entity which is exempt from tax under section 501(a), the amount of the unrelated business taxable income of the controlled entity. (ii) Net unrelated loss .— The term “net unrelated loss” means the net operating loss adjusted under rules similar to the rules of clause (i). (C) Specified payment .— For purposes of this paragraph, the term “specified payment” means any interest, annuity, royalty, or rent. (D) Definition of control .— For purposes of this paragraph— (i) Control .— The term “control” means— (I) in the case of a corporation, ownership (by vote or value) of more than 50 percent of the stock in such corporation, (II) in the case of a partnership, ownership of more than 50 percent of the profits interests or capital interests in such partnership, or (III) in any other case, ownership of more than 50 percent of the beneficial interests in the entity. (ii) Constructive ownership .— Section 318 (relating to constructive ownership of stock) shall apply for purposes of determining ownership of stock in a corporation. Similar principles shall apply for purposes of determining ownership of interests in any other entity. (E) Paragraph to apply only to certain excess payments.— (i) In general .— Subparagraph (A) shall apply only to the portion of a qualifying specified payment received or accrued by the controlling organization that exceeds the amount which would have been paid or accrued if such payment met the requirements prescribed under section 482. (ii) Addition to tax for valuation misstatements .— The tax imposed by this chapter on the controlling organization shall be increased by an amount equal to 20 percent of the larger of— (I) such excess determined without regard to any amendment or supplement to a return of tax, or (II) such excess determined with regard to all such amendments and supplements. (iii) Qualifying specified payment .— The term “qualifying specified payment” means a specified payment which is made pursuant to— (I) a binding written contract in effect on the date of the enactment of this subparagraph, or (II) a contract which is a renewal, under substantially similar terms, of a contract described in subclause (I). (F) Related persons .— The Secretary shall prescribe such rules as may be necessary or appropriate to prevent avoidance of the purposes of this paragraph through the use of related persons.