Page 183

107 STAT. 494 PUBLIC LAW 103-66—AUG. 10, 1993 shall be applied as if dividends from a corporation eligible for the credit provided by section 936 were a separate category of income referred to in a subparagraph of section 904(dX 1). "(V) COORDINATION WITH UMTTATION ON 936 CREDIT.—Any reference in this clause to a dividend received from a corporation eligible for the credit provided by section 936 shall be treated as a ref- erence to the portion of any such dividend for which the dividends received deduction is dis- allowed imder clause (i) after the application of clause (iiXD." 26 use 904. (d) CONFORMING AMENDMENT.—Paragraph (4) of section 904(b) is amended by inserting before the period at the end thereof the following: "(without regard to subsections (aX4) and (i) thereof)", (e) INCREASE IN LIMITATION ON COVER OVER.—Paragraph (1) of section 7652(f) is amended to read as follows: "(1) $10.50 ($11.30 in the case of distilled spirits brought into the United States during the 5-year period beginning on October 1,1993), or." 26 use 56 note. (f) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1993; except that the amendment made by subsection (e) shall take effect on October 1,1993. SEC. 13228. MODIFICATION TO LIMITATION ON DEDUCTION FOR CER- TAIN INTEREST. (a) GENERAL RULE.—Paragraph (3) of section 163(j) (defining disqualified interest) is amended to read as follows: "(3) DISQUALIFIED INTEREST.—For purposes of this sub- section, the term 'disqualified interest' means— **(A) any interest paid or accrued by the taxpayer (directly or indirectly) to a related person if no tax is imposed by this subtitle with respect to such interest, and "(B) any interest paid or accrued by the taxpayer with respect to any indebtedness to a person who is not a related person if— "(i) there is a disqualified guarantee of such indebt- edness, and "(ii) no gross basis tax is imposed by this subtitle with respect to such interest." (b) DEFINITIONS.—Paragraph (6) of section 163(j) is amended by adding at the end thereof the following new subparagraphs: "(D) DiSQUAUFIED GUARANTEE.— "(i) IN GENERAL.—^Except as provided in clause (ii), the term 'disqualified guarantee' means any guarantee by a related person which is— "(I) an organization exempt from taxation under this subtitle, or "(II) a foreign person, "(ii) EXCEPTIONS.—The term 'disqualified guaran- tee' shall not include a guarantee— "(I) in any circumstances identified by the Sec- retary by regulation, where the interest on the indebtedness would have been subject to a net