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"For inclusion in gross income of amount equal to taxes deemed paid under paragraph (1), see section 78.

"(b) Special Rules for Foreign Tax Credit in Year of Receipt of Previously Taxed Earnings and Profits.

"(1) Increase in section 904 limitation.-In the case of any taxpayer who

"(A) either (i) chose to have the benefits of subpart A of this part for a taxable year in which he was required under section 951 (a) to include in his gross income an amount in respect of a controlled foreign corporation, or (ii) did not pay or accrue for such taxable year any income, war profits, or excess profits taxes to any foreign country or to any possession of the United States, and

"(B) chooses to have the benefits of subpart A of this part for the taxable year in which he receives a distribution or amount which is excluded from gross income under section 958(a) and which is attributable to earnings and profits of the controlled foreign corporation which was included in his gross income for the taxable year referred to in subparagraph (A), and

"(C) for the taxable year in which such distribution or amount is received, pays, or is deemed to have paid, or accrues income, war profits, or excess profits taxes to a foreign country or to any possession of the United States with respect to such distribution or amount,

the applicable limitation under section 904 for the taxable year in which such distribution or amount is received shall be increased as provided in paragraph (2), but such increase shall not exceed the amount of such taxes paid, or deemed paid, or accrued with respect to such distribution or amount.

"(2) Amount of increase.-The amount of increase of the applicable limitation under section 904(a) for the taxable year in which the distribution or amount referred to in paragraph (1) (B) is received shall be an amount equal to

"(A) the amount by which the applicable limitation under section 904(a) for the taxable year referred to in paragraph (1)(A) was increased by reason of the inclusion in gross income under section 951 (a) of the amount in respect of the controlled foreign corporation, reduced by

"(B) the amount of any income, war profits, and excess profits taxes paid, or deemed paid, or accrued to any foreign country or possession of the United States which were allowable as a credit under section 901 for the taxable year referred to in paragraph (1) (A) and which would not have been allowable but for the inclusion in gross income of the amount described in subparagraph (A). "(3) Cases in which taxes not to be allowed as deduction.-In the case of any taxpayer who

"(A) chose to have the benefits of subpart A of this part for a taxable year in which he was required under 72100-S J-87-2-35

section 951 (a) to include in his gross income an amount in respect of a controlled foreign corporation, and

"(B) does not choose to have the benefits of subpart A of this part for the taxable year in which he receives a distribution or amount which is excluded from gross income under section 958(a) and which is attributable to earnings and profits of the controlled foreign corporation which was included in his gross income for the taxable year referred to in subparagraph (A),

no deduction shall be allowed under section 164 for the taxable year in which such distribution or amount is received for any income, war profits, or excess profits taxes paid or accrued to any foreign country or to any possession of the United States on or with respect to such distriubtion or amount.

"(4) Insufficient taxable income.-If an increase in the limitation under this subsection exceeds the tax imposed by this chapter for such year, the amount of such excess shall be deemed an overpayment of tax for such year. "Sec. 960. Adjustments to basis of stock in controlled foreign corporation and of other prop

erty.

"(a) Increase in basis.-Under regulations prescribed by the Secretary or his delegate, the basis of a United States shareholder's stock in a controlled foreign corporation, and the basis of property of a United States shareholder by reason of which he is considered under section 957 (a) (2) as owning a stock of a controlled foreign corporation, shall be increased by the amount required to be included in his gross income under section 951 (a) with respect to such stock or with respect to such property, as the case may be, but only to the extent to which such amount was included in the gross income of such United States shareholder.

"(b) Reduction in Basis.—

"(1) In general.-Under regulations prescribed by the Secretary or his delegate, the adjusted basis of stock or other property with respect to which a United States shareholder or a United States person receives an amount which is excluded from gross income under section 958 (a) shall be reduced by the amount so excluded.

"(2) Amount in excess of basis.-To the extent that an amount excluded from gross income under section 958 (a) exceeds the adjusted basis of the stock or other property with respect to which it is received, the amount shall be treated as gain from the sale or exchange of property.

"Sec. 961. Miscellaneous provisions.

"(a) Earnings and profits.—For purposes of this subpart, the earnings and profits of any foreign corporation, and the deficit in earnings and profits of any foreign corporation, for any taxable year shall be determined according to rules

substantially similar to those applicable to domestic corporations, under regulations prescribed by the Secretary or his delegate.

"(b) Blocked Foreign Income.-Under regulations prescribed by the Secretary or his delegate, no part of the earnings and profits of a controlled foreign corporation for any taxable year shall be included in earnings and profits for purposes of sections 952, 954, and 955, if it is established to the satisfaction of the Secretary or his delegate that such part could not have been distributed by the controlled foreign corporation to United States shareholders who own (within the meaning of section 957 (a)) stock of such controlled foreign corporation because of currency or other restrictions or limitations imposed under the laws of any foreign country.

"(c) Records and Accounts of United States Shareholders.-The Secretary or his delegate may by regulations require each person who is, or has been, a United States shareholder of a controlled foreign corporation to maintain such records and accounts as may be prescribed by such regulations as necessary to carry out the provisions of this subpart.

"Sec. 962. Inclusion in gross income on consolidated basis of earnings and profits.

"(a) General Rule.-A United States shareholder may elect to include in gross income under section 951 on a consolidated basis the earnings and profits (less his pro rata share of deficits) of controlled foreign corporations.

"(b) Regulations.-The Secretary or his delegate shall prescribe such regulations as he may deem necessary in order that the tax liability with respect to the earnings and profits (less deficits) of controlled foreign corporations for which the eletcion provided for under subsection (a) is exercised and of each separate corporation, both during and after the period of such consolidation, may be returned, determined, computed, assessed, collected, and adjusted, in such manner as clearly to reflect the income tax liability and the various factors necessary for determination of such liability, and in order to present avoidance of such tax liability."

(b) Technical and Clerical Amendments.

(1) Section 552 (b) (relating to foreign personal holding company income included in gross income of United States shareholders) is amended by adding at the end thereof the following new sentence: "The amount included in the gross income of any United States shareholder for any taxable year under the preceding sentence shall be reduced by such shareholder's proportionate share of the undistributed personal holding company income which is included in his gross income under section 951 (a) (1) (A) (relating to amounts included in gross income of United States shareholders) for such taxable year as his

pro rata share of the earnings and profits of the company."

(2) Section 901 (relating to foreign tax credit) is amended by striking out "section 902" and inserting in lieu thereof "sections 902 and 960".

(3) Section 902(e) is amended to read as follows:

"(e) Cross References.

"(1) For application of subsections (a) and (b) with respect to taxes deemed paid in a prior taxable year by United States shareholder with respect to a controlled foreign corporation, see section 960.

"(2) For reduction of credit with respect to dividends paid out of accumulated profits for years for which certain information is not furnished, see section 6038."

Section 904(f) is amended to read as follows:

"(f) Cross References.

"(1) For increase of applicable limitation under subsection (a) for taxes paid with respect to amounts received which were included in the gross income of the taxpayer for a prior taxable year as a United States shareholder with respect to a controlled foreign corporation, see section 960(b).

"(2) For special rule relating to the application of the credit providing by section 901 in the case of affiliated groups which include Western Hemisphere trade corporations for years in which the limitation provided by subsection (a) (2) applies, see section 1503(d)."

(5) The table of subparts for part III of subchapter N of chapter 1 is amended by adding at the end thereof the following:

“Subpart F. Controlled foreign
corporations."

(6) Section 1016 (a) (relating to adjustments to basis) is amended—

(A) by striking out the period at the end of paragraph (18) and inserting in lieu thereof a semicolon; and

(B) by adding after paragraph (18) the following new paragraph:

"(19) to the extent provided in section 961 in the case of stock in controlled foreign corporations (or foreign corporations which were controlled foreign corporations) and of property by reason of which a person is considered as owning such stock." (c) Effective Date.-The amendments made by this section shall apply with respect to taxable years of foreign corporations beginning after December 31, 1962, and to taxable years of United States shareholders within which or with which such taxable years of such foreign corporations end."

Page 164, after line 18, insert the following new section:

Sec. Sales and exchanges of patents, etc., to certain foreign corporations.

(a) Treatment of Gain as Ordinary Income-Part IV or subchapter P of chapter 1 (relating to special rules for determining capital gains and losses) is amended by adding after section 1248

(as added by section 16 of this Act) the following new section:

"Sec. 1249. Gain from certain sales or exchanges of patents, etc., to foreign corporations. "(a) General Rules.-Gain from the sale or exchange after December 31, 1962, of a patent, an invention, model, or design (whether or not patented), a copyright, a secret formula or process, or any other similar property right to any foreign corporation by any United States person (as defined in section 7701(a) (30)) which controls such foreign corporation shall, if such gain would (but for the provisions of this subsection) be gain from the sale or exchange of a capital asset or of property described in section 1231, be considered as gain from the sale or exchange of property which is neither a capital asset nor property described in section 1213.

"(b) Control.-For purposes of subsection (a), control means, with respect to any foreign corporation, the ownership, directly or indirectly, of stock possessing more than 50 percent of the total combined voting power of all classes of stock entitled to vote. For purposes of this subsection, the rules for determining ownership of stock prescribed by section 957 shall apply.

"(c) Other Transfers of Patent Rights, etc., to Foreign Corporations"For allocation, etc., of income by the Secretary or his delegate, in case of corporations owned or controlled directly or indirectly by the same interests, see section 482(a)."

(b) Clerical Amendment.—The table of sections for such part IV is amended by adding at the end thereof the following:

"Sec. 1249. Gain from certain sales or exchanges of patents, etc., to foreign corporations."

(c) Effective Date.-The amendments made by this section shall apply to taxable years beginning after December 31 1962.

It was determined in Yeas the negative.------ Nays

30 58 The yeas and nays having been heretofore ordered.

Senators who voted in the affirmative

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(1) Amendment of subtitle C.-Subtitle C relating to employment taxes and collection of income tax at source) is amended by redesignating chapter 25 as chapter 26 and by inserting after chapter 24 the following new chapter: "Chapter 25-Collection of Income Tax at Source on Interest, Dividends, and Patronage Dividends "Subchapter A. Interest. "Subchapter B Dividends. "Subchapter C. Patronage dividends. “Subchapter D. General provisions.

"Subchapter A-Interest "Sec. 3451. Income tax collected to source on interest.

"Sec. 3452. Interest defined. "Sec. 3451. Income tax collected at source on interest.

"(a) Requirement of Withholding.— Except as otherwise provided in this chapter, every person who pays interest shall deduct and withhold on such interest a tax equal to 20 percent of the amount thereof.

"(b) Payee Unknown.—If_the_withholding agent is unable to determine the person to whom the interest is payable, the tax under this section shall be deducted and withheld at the time payment of the interest would be made if such person were known.

"(c) Cross References.

"(1) For credit, against income tax of the recipient of the income, of amounts deducted and withheld under this section, see section 39.

"(2) For special rules as to credit or refund of such amounts, see sections 3484, 3485, 3486, 3487, and 3505.

"(3) For exemption from requirement of deducting and withholding on certain interest paid to certain persons, see section 3483.

“Sec. 3452. Interest defined.

"(a) General Rule.-For purposes of this chapter, the term 'interest' means—

"(1) interest on evidences of indebtedness (including bonds, debentures, notes, and certificates) issued by a corporation with interest coupons or in registered form, and, to the extent provided in regulations prescribed by the

Secretary or his delegate, interest on other evidences of indebtedness issued by a corporation of a type offered by corporations to the public;

"(2) interest on amounts held by an insurance company under an agreement to pay interest thereon;

"(3) interest on deposits with stockbrokers;

"(4) interest on obligations of the United States; and

"(5) in the case of a non-interestbearing obligation of the United States

"(A) issued on a discount basis, and

"(B) having a maturity date more than one year from the date of issue, the amount by which the amount paid on surrender or redemption exceeds the issue price.

"(b) Exceptions.-For purposes of this chapter, the term 'interest' does not include

"(1) interest on obligations described in section 103(a) (1) or (3) (relating to interest on certain governmental obligations);

"(2) any amount paid by

"(A) a foreign government or international organization,

"(B) a foreign corporation not engaged in trade of business within the United States,

"(C) a nonresident alien individual not engaged in trade or business within the United States, or

"(D) a partnership not engaged in trade or business within the United States and composed in whole or in part of nonresident aliens;

"(3) any amount paid by one corporation to another corporation, if both corporations are members of the same affiliated group which filed a consolidated return for the preceding taxable year of the affiliated group;

"(4) interest subject to withholding under subchapter A of chapter 3 (sec. 1441 and following, relating to withholding of tax on nonresident aliens and foreign corporations) by the person paying such interest, or which would be so subject to withholding by such person, but for the fact that it is not treated as income from sources within the United States;

"(5) any amount on which the withholding agent is required to deduct and withhold a tax under section 1451 (relating to tax-free covenant bonds), or would be so required but for section 1451 (d) (relating to benefit of personal exemptions);

"(6) any amount described in subsection (a) (5) paid to a State or foreign government or international organization.

"(c) Exemption for United States.The Secretary may authorize exemption from the tax imposed by section 3451 for any amount paid by the United States or any wholly owned agency or instrumentality thereof to the United States or any wholly owned agency or instrumentality thereof if the Secretary determines that the imposition of the tax with

respect to such amount will cause a burden or expense which can be avoided by granting the tax exemption.

"Subchapter B-Dividends

"Sec. 3461. Income tax collected at source on dividends.

"Sec. 3462. Dividend defined.

"Sec. 3461. Income tax collected at source on dividends.

"(a) Requirement of Withholding.Except as otherwise provided in this chapter, every person who pays a dividend shall deduct and withhold on such dividend a tax equal to 20 percent of the amount thereof.

"(b) Payee Unknown.-If the withholding agent is unable to determine the person to whom the dividend is payable, the tax under this section shall be deducted and withheld at the time payment of the dividend would be made if such person were known.

"(c) Amount of Dividend Unknown.If the withholding agent is unable to determine the portion of a distribution which is a dividend, the tax under this section shall be computed on the entire amount of the distribution.

"(d) Cross References.

"(1) For credit, against income tax of the recipient of the income, of amounts deducted and withheld under this section, see section 39.

"(2) For special rules as to credit or refund of such amounts, see sections 3484, 3485, 3486, 3487, and 3505.

"(3) For exemption from requirement of deducting and withholding on dividends paid to certain individuals, see section 3483.

"Sec. 3462. Dividend Defined.

"(a) General Rule.-For purposes of this chapter, the term 'dividend' means—

"(1) any distribution by a corporation which is a dividend (as defined in section 316); and

"(2) any payment made by a stockholder to any person as a substitute for a dividend (as so defined).

"(b) Exceptions.-For purposes of this chapter, the term 'dividend' does not include

"(1) any amount paid in the stock, or rights to acquire the stock, of the distributing corporation if the distribution is not includible in gross income of the recipient under the provisions of section 305 (relating to distributions of stock and stock rights);

"(2) any distribution to the extent that, under chapter 1

"(A) the amount thereof is treated by the recipient as an amount received on the sale or exchange of property, or

"(B) gain or loss to the recipient is not recognized;

"(3) any amount which is includible in gross income as a taxable dividend by reason of the provisions of section 302 (relating to redemptions of stock), 306 (relating to dispositions of certain stock), 356 (relating to receipt of additional consideration in connection with certain reorganizations), or 1081(e) (2)

(relating to certain distributions pursuant to order of the Securities and Exchange Commission);

"(4) any amount paid by one corporation to another corporation, if both corporations are members of the same affiliated group which filed a consolidated return for the preceding taxable year of the affiliated group:

"(5) an amount which

"(A) is subject to withholding under subchapter A of chapter 3 (sec. 1441 and following, relating to withholding of tax on nonresident aliens and foreign corporations) by the person paying such amount, or

"(B) would be subject to withholding under such subchapter A by the person paying such amount but for

"(i) the fact that it is attributable to income from sources outside the United States, or

"(ii) the fact that the payor thereof is excepted from the application of section 1441 (a) by the provisions of section 1441 (c); "(6) any amount paid by a foreign corporation not engaged in trade or business within the United States;

"(7) any amount described in section 1373 (relating to undistributed taxable income of electing small business corporations);

"(8) amounts paid pursuant to the terms of a lease entered into before January 1, 1954, if under such lease the shareholders of the lessor corporation are entitled to such amounts without deduction for any tax which any law of the United States might require to be deducted and withheld on the payment of dividends. "Subchapter C-Patronage dividends "Sec. 3471. Income tax collected at source on patronage dividends. "Sec. 3472. Amounts subject to withholding. "Sec. 3471. Income tax collected at source on patronage dividends.

"(a) Requirement of Withholding.Except as otherwise provided in this chapter, every cooperative to which part I of subchapter T of chapter 1 applies which pays an amount described in section 3472 shall deduct and withhold on such amount a tax equal to 20 percent of such amount.

"(b) Payee Unknown.-If the withholding agent is unable to determine the person to whom the amount is payable, the tax under this section shall be deducted and withheld at the time payment of the amount would be made if such person were known.

"(c) Cross References.

"(1) for credit, against income tax of the recipient of the income of amounts deducted and withheld under this section, see section 39.

"(2) For special rules as to credit or refund of such amounts, see sections 3484, 3485, 3486, 3487, and 3505.

"(3) For exemption from requirement of deducting and withholding on

amounts paid to certain individuals, see section 3483.

Sec. 3472. Amounts subject to withholding.

"(a) General Rule-Except as otherwise provided in this section or section 3483, the amounts subject to deduction and withholding under section 3471

are

"(1) the amount of any patronage dividend (as defined in section 1388 (a)) which is paid in money, qualified written notices of allocation (as deAined in section 1388 (c)), or other property (except nonqualified written notices of allocation as defined in section 1388 (d)), and

"(2) any amount, described in section 1382(c) (2) (A) (relating to certain nonpatronage distributions), which is paid in money, qualified written notices of allocation, or other property (except nonqualified written notices of allocation) by an organization exempt from tax under section 521 (relating to exemption of farmers' cooperatives from tax).

"(b) Exceptions.-The provisions of section 3471 shall not apply to—

"(1) any amount paid by one corporation to another corporation, if both corporations are members of the same affiliated group which filed a consolidated return for the preceding taxable year of the affiliated group; "(2) an amount which

"(A) is subject to withholding under subchapter A of chapter 3 (sec. 1441 and following, relating to withholding of tax on nonresident aliens and foreign corporations) by the person paying such amount, or

"(B) would be subject to withholding under such subchapter A by the person paying such amount but for the fact that it is attributable to income from sources outside the United States; and

"(3) any amount paid by a foreign corporation not engaged in trade or business within the United States.

"(c) Exemption for Certain Consumer Cooperatives.-A cooperative which the Secretary or his delegate determines is primarily engaged in selling at retail goods or services of a type that are generally for personal, living, or family use shall, upon application to the Secretary or his delegate, be granted exemption from the tax imposed by section 3471. Application for exemption under this subsection shall be made in accordance with regulations prescribed by the Secretary or his delegate.

"(d) Determination of Amount Paid.For purposes of this subchapter, in determining amounts paid

“(1) property (other than a written notice of allocation) shall be taken into account as its fair market value, and

“(2) a qualified written notice of allocation shall be taken into account as its stated dollar amount.

"Subchapter D-General provisions "Sec. 3481. Liability for return and payment of withheld taz.

"Sec. 3482. Return and payment by United States.

"Sec. 3483. Exemption certificates. "Sec. 3484. Refund of tax to individuals. "Sec. 3485. Refund of tax to States, taxezempt organizations, etc. "Sec. 3486. Refund of tax to corporation. "Sec. 3487. Credit for tax withheld on corporation.

"Sec. 3488. Obligation sold between interestpayment dates.

"Sec. 3489. Presumption. "Sec. 3490. Definitions.

"Sec. 3481. Liability for return and pay

ment of withheld tax.

"(a) General Rule.—Every person required to deduct and withhold any tax under this chapter shall, on or before the last day of the first month following the close of each quarter of his taxable year, make a return of the tax required to be deducted and withheld during such quarter and pay the tax to the officer designated in section 6151. The withholding agent shall be liable for the payment of the taxes required to be deducted and withheld under this chapter, and shall not otherwise be liable to any person for the amount of any such payment.

"(b) Tax Paid by Recipient.—If the withholding agent, in violation of the provisions of this chapter, fails to deduct and withhold any tax under this chapter, and thereafter the tax against which such tax may be credited is paid, the tar so required to be deducted and withheld shall not be collected from the withholding agent; but this subsection shall in no case relieve the withholding agent from liability for any penalties or additions to the tax otherwise applicable in respect to such failure to deduct and withhold.

"(c) Cross Reference.

"For limitation on the use of Government depositaries in the collection of taxes deducted and withheld under this chapter, see the last sentence of section 6302(c).

"Sec. 3482. Return and and payment by United States.

"If the withholding agent is the United States the return of the tax deducted and withheld under this chapter may be made by an officer or employee of the United States having control of the payment of the amount subject to withholding, or appropriately designated for that

purpose.

"Sec. 3483. Exemption certificates. "(a) General Rules.

"(1) Individuals under age 18.-Any individual may file with any withholding agent an exemption certificate on which he certifies the date of his birth. If such a certificate is filed, all amounts payable by such withholding agent to such individual, on and after the effective date for such certificate and before the beginning of the calendar year during which the certificate in

dicates that he will attain age 18, shall be exempt from the requirement of deducting and withholding under this chapter.

"(2) Individuals over age 17-Any individual may file with any withholding agent an exemption certificate on which he certifles—

"(A) that he will have attained age 18-before the close of the calendar year for which such certificate is filed, and

"(B) that he reasonably believes that he will not (after the application of the credits against tax provided by part IV of subchapter A of chapter 1, other than the credits under sections 31 and 39) be liable for the payment of any tax under chapter 1 for each of his taxable years any portion of which is included in the period for which such certificate will be in effect.

If such a certificate is filed, all amounts payable by such withholding agent to such individual during the period such certificate is in effect shall be exempt from the requirement of deducting and withholding under this chapter. Except as may otherwise be provided in regulations prescribed by the Secretary or his delegate, an exemption certificate filed by an individual described in this paragraph shall remain in effect only for the period beginning on the effective date of such certificate and ending at the close of the calendar year in which such period begins.

"(3) Tax-exempt organizations.

"(A) Any organization (other than a cooperative described in section 521) which is exempt from the tax imposed by chapter 1 may file with any withholding agent who pays amounts described in section 3452(a) (5) an exemption certificate on which it certifies that it is such an organization. If such a certifcate is filed, all amounts described in section 3452(a) (5) payable by such withholding agent to such organization on and after the effective date for such certificate shall (except as provided in subparagraph (B)) be exempt from the requirement of deducting and withholding under this chapter.

"(B) An exemption certificate Aled by an organization under subparagraph (A) shall cease to be effective on the thirtieth day after the day on which the withholding agent, with whom such certificate was filed, is notified by either the organization or the Secretary or his delegate that the organization is no longer exempt from the tax imposed by chapter 1. If an organization ceases to be exempt from such tax, it shall, within the time specified in regulations prescribed by the Secretary or his delegate, so notify each withholding agent with whom it has an exemption certificate in effect.

1962

"(b) Exceptions and Special Rules."(1) Certain exceptions.-This section shall not apply to any amount

"(A) described in section 3452(a) (1) (relating to interest on evidences of indebtedness), or

"(B) described in section 3452(a) (4) (relating to interest on obligations of the United States).

"(2) Series E Bonds, etc.-In the case of transactions involving the redemption of one or more obligations described in section 3452(a) (5) (relating to certain obligations of the United States isued on a discount basis), a separate certificate shall be filed with respect to each such transaction.

"(3) Nominees, custodians, and joint ownerships.—Under regulations prescribed by the Secretary or his delegate, the exemption provided by subsection (a) may be extended, in a manner consistent with the other provisions of this section, to

"(A) amounts (other than amounts described in section 3462(a), relating to dividends) paid through nominees; "(B) amounts paid to custodians; and

"(C) amounts paid jointly to 2 or more individuals;

"(4) Effective date of certificate.Any exemption certificate under this section shall take effect on such day as is specified in accordance with regulations prescribed by the Secretary or his delegate.

"(5) Form and contents of certificate and notice.-Any exemption certificate under this section, and any notice under subsection (a) (3) (B), shall be in such form and contain such information as the Secretary or his delegate may by regulations prescribe.

"(c) Cross Reference.

"For penalty for filing fraudulent certificate, or for failing to provide notice, under this section, see section 7205. "Sec. 3484. Refund of tax to individ

uals.

"(a) General Rule.-Except as provided in subsection (e), the tax deducted and withheld under this chapter with respect to amounts received by an individual during any quarter (other than the fourth quarter) of his taxable year (together with any tax so deducted and withheld on amounts which were received by him during any prior quarter of such year and with respect to which no allowable claim for refund has been filed under this section) shall, to the extent such tax does not exceed his refund allowance as of the time the claim for refund is filed, be promptly refunded to him as an overpayment of tax. A refund of tax shall be made under this section only if the amount claimed and allowable equals or exceeds $10.

"(b) Refund Allowances.-For purposes of this section, the refund allowance of an individual as of the time the claim for refund is filed is an amount equal to the excess, if any, of—

"(1) an amount equal to 22 percent of

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THE SENATE

"(A) the total of the deductions which, on the basis of facts existing at the time the claim for refund is filed, such individual would be allowed for the taxable year under section 151 (relating to deductions for personal exemptions), plus

"(B) in the case of an individual who, at the time the claim for refund is filed, reasonably expects that he will be allowed a credit under section 37 (relating to retirement income) for the taxable year, the amount which, at such time, such individual reasonably expect to be the amount of his retirement income (as defined in section 37 (c) and as limited by section 37 (d)) for the taxable year, less

"(C) the amounts (other than amounts on which tax is required to be deducted and withheld under this chapter) which, at the time the claim for refund is filed, such individual reasonably expects to be includible in his gross income for the taxable year; over

"(2) the amounts of tax with respect to which an allowable claim for refund has been previously filed under this section during the taxable year. For purposes of paragraph (1)(C), an individual who files more than one claim for refund under this section for any taxable year may use the estimate for the preceding claim for such year unless, at the time he files the claim, he reasonably expects the amounts referred to in pararaph (1) (C) to exceed such prior estimate by more than $100.

"(c) Married Individuals. For purposes of subsections (a), (b), and (d), married individuals shall be treated as an individual if, at the time the claim for refund is filed, they reasonably expect that they will file a joint return for the taxable year in which such claim is filed.

"(d) Time for Filing Claim.-Not more than one claim may be filed under this section by any individual during any quarter of his taxable year. A refund of tax deducted and withheld on amounts received during a taxable year shall be made under this section only if claim therefor is filed on or before the last day of such taxable year.

"(e) Individuals Not Eligible for Refund.-No claim for refund may be filed under this section by

"(1) any individual (other than an individual referred to in paragraph (2) or (3)) unless, at the time the claim for refund is filed, he reasonably expects that his gross income for the taxable year will not exceed $5,000;

"(2) any married individual unless, at the time the claim for refund is filed, he reasonably expects that the aggregate gross income of such individual and his spouse for the taxable year will not exceed $10,000;

"(3) a head of a household (as defined in section 1(b) (2)) or a surviving spouse (as defined in section 2(b)) unless, at the time the claim for refund is filed, he reasonably expects that his

547

gross income for the taxable year will not exceed $10,000; or

"(4) any child, unless, at the time the claim for refund is filed, he reasonably expects that no deduction would be allowed for him under section 151 (e) (1) (B) for the taxable year of his parent (or parents) beginning with or within the calendar year in which the claim for refund is filed.

"(f) Cross Reference.

"For credit or refund of amounts not refunded under this section, see section 39.

"Sec. 3485. Refund of tax to States, taxexempt organizations, etc. "(a) General Rule.-In the case of a person which is

"(1) the United States or a State, "(2) an organization (other than a cooperative described in section 521) which is exempt from the tax imposed by chapter 1,

"(3) a foreign govermnent or international organization, or

"(4) a foreign central bank of issue, if the tax deducted and withheld under this chapter with respect to amounts received by such person during any calendar quarter exceeds the credit, if any, claimed by and allowable to such person under section 3505 (relating to credit against employment taxes) for such quarter, the excess (together with any such excess for any prior quarter of the same calendar year with respect to which no refund has been claimed and allowed under this section) shall be promptly refunded or credited to such person as an overpayment of tax. In the case of a person to which paragraph (4) applies, the amount which may be refunded or credited against this section shall not exceed the amount of tax deducted and withheld under section 3451 on interest paid on obligations of the United States which are not held for, or used in connection with, the conduct of commercia! banking functions or other commercial activities.

"(b) Cross References.

"(1) For period of limitation for filing claim under this section, see section 6511.

"(2) For presumed date of payment for purposes of (A) period of limitation, see section 6513(b), and (B) allowance of interest on overpayments, see section 6611(d).

"Sec. 3486. Refund of Tax to Corporation.

"(a) General Rule.-If the tax deducted and withheld under this chapter with respect to amounts received by a corporation (other than a corporation described in section 3485(a)) during any quarter (other than the fourth quarter) of its taxable year exceeds the amount claimed by and allowable to such corporation under section 3487 as a credit against its liability for tax under this chapter for such quarter, the excess (together with any such excess for any prior quarter of the same year with respect to which no refund has been claimed and allowed under this section) shall be

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