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TITLE 26-INTERNAL REVENUE CODE deemed to be oil and gas extraction taxes paid or accrued in the second preceding taxable year, in the first preceding taxable year, and in the first, second, third, fourth, or fifth suc- ceeding taxable year, in that order and to the extent not deemed tax paid or accrued in a prior taxable year by reason of the limitation imposed by paragraph (2). Such amount deemed paid or accrued In any taxable year may be availed of only as a tax credit and not as a deduction and only if the taxpayer for such year chooses to have the benefits of this subpart as to taxes paid or accrued for that year to foreign countries or possessions. For purposes of this subsection, the terms "second preceding taxable year", and "first preceding taxable year" do not include any taxable year ending before January 1, 1975. For purposes of determining the amount of such taxes which may be deemed paid or ac- crued in any taxable year ending in 1975, 1976, or 1977, the first sentence of this para- graph shall be applied by substituting "such excess" for "so much of such excess as does not exceed 2 percent of the foreign oil and gas extraction income for such taxable year",. (2) Limitation The amount of the unused oil and gas ex- traction taxes which under paragraph (1) may be deemed paid or accrued in any preced- ing or succeeding taxable year shall not exceed the lesser of- (A) the amount by which the limitation provided by subsection (a) for such taxable year exceeds the sum of- (i) the oil and gas extraction taxes paid or accrued during such taxable year, plus (I) the amounts of the oil and kas ex- traction taxes which by reason of this subsection are deemed paid or accrued in such taxable year and are attributable to taxable years preceding the unused credit car; or (B) the amount by which the limitation provided by section 904 on taxes paid or ac- crued with respect to foreign oil-related income for such taxable year exceeds the sum of- (i) the taxes paid or accrued (or deemed to have been paid under section 902 or 960) to all foreign countries and posses- sions of the United States with respect to such income during such taxable year, (Hi) the amount of such taxes which were deemed paid or accrued in such tax- able year under section 904(c) and which are attributable to taxable years preced- ing the unused credit year, plus (iii) the amount of the oil and gas ex- traction taxes which by reason of this subsection are deemed paid or accrued in such taxable year and are attributable to taxable years preceding the unused credit year. (3) Special rules (A) In the case of any taxable year which is an unused credit year under this subsection and which is an unused credit year under sec- tion 904(c) with respect to oil-related income, the provisions of this subsection shall be ap- plied before section 904(c). (B) For purposes of determining the amount of oil-related taxes paid or accrued in any taxable year which may be deemed paid or accrued in a preceding or succeeding tax- able year under section 904(c), any tax deemed paid or accrued in such preceding or succeeding taxable year under this subsection shall be considered to be tax paid or accrued in such preceding or succeeding taxable year. (C) For purposes of determining the amount of the unused oil and gas extraction taxes which under paragraph (1) may be deemed paid or accrued In any taxable year ending before January 1, 1977, subparagraph (A) of paragraph (2) shall be applied as if the amendment made by section 1035(a) of the Tax Reform Act of 1976 applied to such tax- able year. (g) Western Hemisphere trade corporations which are members of an affiliated group If a Western Hemisphere trade corporation is a member of an affiliated group for the taxable year, then in applying section 901, the amount of any income, war profits, and excess profits taxes paid or accrued (or deemed to have been paid) during the taxable year with respect to foreign oil and gas extraction income which would (but for this section and section 1503(b)) be taken into account for purposes of section 901 shall be reduced by the greater of- (1) the reduction with respect to such taxes provided by subsection (a) of this section, or (2) the reduction determined under section 1503(b) by applying section 1503(b) separately with respect to such taxes, but not by both such reductions. (Added Pub. L. 94-12, title VI, § 601(a), Mar. 29, 1975, 89 Stat. 54, and amended Pub. L. 94-455, title X, §§ 1031(b)(6), 1032(b), 1035(a)-(d)(1), (2), Oct. 4, 1976, 90 Stat. 1623, 1626, 1630-1632.) REPEAL OF SUBSECTION (g) Pub. L. 94-455, title X, § 1052(c)(4), Oct. 4, 1976, 90 Stat. 1648, repealed subsec. (g) of this section, effective with respect to taxable years beginning after Dec. 31, 1979. REFERENCEs IN TEXT The Tax Reform Act of 1976, referred to in subsecs. (e)(1), (2), (f)(3)(C), is Pub. L. 94-455, Oct. 4, 1976, 90 Stat. 1520. which was enacted Oct. 4, 1976. Section 1035(a) of the Tax Reform Act of 1976 amended subsec. (a) of this section. For complete classification of this Act to the Code, see Tables volume. AMENDMENTS 1976-Subsec. (a). Pub. L. 94-455, § 1035(a), substitut- ed "oil and gas extraction taxes" for "income, war profits, and excess profits taxes" following "the amount of any" and, in par. (2). substituted "the per- centage which is the sum of the normal tax rate and the surtax rate for the taxable year specified in sec- tion 11" for provisions giving the percentage multipli- er for years ending 1975, 1976, and after 1976. Subsec. (b). Pub. L. 94-455, §§ 1032(b)(1), 1035(b), added provisions making a distinction between corpo- rations and other taxpayers and rules applicable to each and, as amended, struck out provision requiring the overall limitation, rather than the per-country limitation, be applied in the case of a corporation to foreign oil-related income and, a taxpayer other than a corporation, to foreign oil and gas extraction income. Subsec. (c)(5). Pub. L. 94-455, § 1035(d)(2), added par. (5). Page 588