Foreign companies carrying on insurance business

If a foreign company carrying on an insurance business within the United States would qualify under part I or II of this subchapter for the taxable year if (without regard to income not effectively connected with the conduct of any trade or business within the United States) it were a domestic corporation, such company shall be taxable under such part on its income effectively connected with its conduct of any trade or business within the United States. With respect to the remainder of its income which is from sources within the United States, such a foreign company shall be taxable as provided in section 881. In the case of a foreign company taxable under part I or II of this subchapter for the taxable year, its net investment income for such year which is effectively connected with the conduct of an insurance business within the United States shall be not less than the product of— For purposes of paragraph (1), the required United States assets of any foreign company for any taxable year is an amount equal to the product of— For purposes of this paragraph— In the case of a company taxable under part I, the term “total insurance liabilities” means the sum of the total reserves (as defined in section 816(c)) plus (to the extent not included in total reserves) the items referred to in paragraphs (3), (4), (5), and (6) of section 807(c). In the case of a company taxable under part II, the term “total insurance liabilities” means the sum of unearned premiums and unpaid losses. The domestic asset/liability percentage applicable for purposes of subparagraph (A)(ii) to any foreign company for any taxable year is a percentage determined by the Secretary on the basis of a ratio— The domestic investment yield applicable for purposes of paragraph (1)(B) to any foreign company for any taxable year is the percentage determined by the Secretary on the basis of a ratio— If the foreign company makes an election under this paragraph, such company’s worldwide current investment yield shall be taken into account in lieu of the domestic investment yield for purposes of paragraph (1)(B). For purposes of subparagraph (A), the term “worldwide current investment yield” means the percentage obtained by dividing— An election under this paragraph shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary. For purposes of this subsection, the term “net investment income” means— The tax under section 881 (determined without regard to this paragraph) shall be reduced (but not below zero) by an amount which bears the same ratio to such tax as— The reduction under subparagraph (A) shall not exceed the increase in taxes under part I or II (as the case may be) by reason of the increase in effectively connected income of the company resulting from subsection (b). Each domestic asset/liability percentage, and each domestic investment yield, for any taxable year shall be based on such representative data with respect to domestic insurance companies for the second preceding taxable year as the Secretary considers appropriate. The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations—