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PUBLIC LAW 103-66—AUG. 10, 1993 107 STAT. 501 "(3) CONTROLLED FOREIGN CORPORATION.—For punwses of this subsection, the term 'controlled foreign corporation' has the meaning given such term by section 957(8)." (e) EFFECTIVE DATE.—The amendments made by this section 26 use 95i note. shall apply to taxable years of foreign corporations beginning after September 30, 1993, and to taxable years of United States share- holders in which or with which such taxable years of foreign corpora- tions end. SEC. 13232. MODIFICATION TO TAXATION OF INVESTMENT IN UNITED STATES PROPERTY. (a) GENERAL RULE.—Section 956 (relating to investment of earnings in United States property) is amended— 26 use 956. (1) by redesignating subsections (b) and (c) as subsections (c) and (d), respectively, and (2) by striking subsection (a) and inserting the following: "(a) GENERAL RULE.—In the case of any controlled foreign cor- poration, the amount determined under this section with respect to any United States shareholder for any taxable year is the lesser of— "(1) the excess (if any) of— "(A) such shareholder's pro rata share of the average of the amounts of United States property held (directly or indirectly) by the controlled foreign corporation as of the close of each quarter of such taxable year, over "(B) the amount of earnings and profits described in section 959(cXlXA) with respect to such shareholder, or "(2) such shareholder's pro rata share of the applicable earnings of such controlled foreign corporation. The amount taken into accoimt vmder paragraph (1) with respect to any property shall be its adjusted basis as determined for pur- poses of computing earnings and profits, reduced by any liability to which the property is subject. "(b) SPECIAL RULES.— "(1) APPLICABLE EARNINGS.—For purposes of this section, the term 'applicable earnings' has the meaning given to such term by section 956A(b), except that the provisions of such section excluding earnings and profits accumulated in taxable years beginning before October 1, 1993, shall be disregarded. "(2) SPECIAL RULE FOR U.S. PROPERTY ACQUIRED BEFORE CORPORATION IS A CONTROLLED FOREIGN CORPORATION.—IN applying subsection (a) to any taxable year, there shall be disregarded any item of United States property which was acquired by the controlled foreign corporation before the first day on which such corporation was treated as a controlled foreign corporation. The aggregate amount of property dis- regarded imder the preceding sentence shall not exceed the portion of the applicable earnings of such controlled foreign corporation which were acciunulated during periods before such first day. "(3) SPECIAL RULE WHERE CORPORATION CEASES TO BE CON- TROLLED FOREIGN CORPORATION.—Rules similar to the rules of section 956A(e) shall apply for purposes of this section." (b) REGULATORY AUTHORITY.—iSection 956 is amended by add- ing at the end thereof the following new subsection: "(e) REGULATIONS.—^The Secretary shall prescribe such regula- tions as may be necessary to carry out the purposes of this section,