Par. 5. Section 1.1297-0 is amended by: 1. Revising the entries for § 1.1297-2(f)(1) and (2). 2. Revising the entries for § 1.1297-4(e)(4) and (5), (f)(1)(iv), (f)(6)(i), (ii), and (iii), and (g)(1) and (2). 3. Adding an entry for § 1.1297-5. 4. Revising the entries for § 1.1297-6(e)(2) and (3) and (f)(1) and (2). The revisions and additions read as follows:
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§ 1.1297-1 Definition of passive foreign investment company.
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(c) * * *
(2) Exception for certain income derived in the active conduct of a banking businesses by a foreign bank.
(i) In general.
(ii) Foreign bank determination.
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(d) * * *
(1) * * *
(v) * * *
(D) Valuation.
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(2) Working capital.
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(g) * * *
(3) Paragraphs (c)(1)(i)(B), (c)(2), (d)(1)(v)(D), and (d)(2) of this section.
§ 1.1297-2 Special rules regarding look-through subsidiaries and look-through partnerships.
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(e) * * *
(4) Active banking business.
(f) * * *
(1) Stock basis adjustment.
(2) Amount of gain taken into account.
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§ 1.1297-4 Qualifying insurance corporation.
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(e) * * *
(4) Corresponding adjustment to total assets.
(i) Consolidated applicable financial statement
(ii) Insurance risk transferred through reinsurance.
(5) Example.
(i) Facts.
(ii) Results.
(A) AIL reduction.
(B) Asset reduction.
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(f) * * *
(1) * * *
(iv) Priority of financial statements.
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(6) * * *
(i) In general.
(ii) Consolidated and non-consolidated financial statement.
(iii) Audited financial statement.
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(g) * * *
(1) General applicability date.
(2) Exception.
(3) Early application.
§ 1.1297-5 Active conduct of an insurance business.
(a) Scope.
(b) Active conduct of an insurance business.
(1) In general.
(2) Exceptions.
(c) Factual requirements test.
(1) In general.
(2) Substantial managerial and operational activities with respect to core functions.
(i) Substantial managerial and operational activities.
(ii) Regular and continuous basis.
(3) Performance of virtually all of the active decision-making functions relevant to a QIC's underwriting activities.
(i) Active decision-making functions.
(ii) Performance requirements.
(iii) Exclusions.
(4) Number of officers and employees.
(d) Active conduct percentage test.
(1) Percentage test.
(2) Outsourcing.
(e) Related officers and employees.
(1) Modified qualified affiliate requirement.
(2) Oversight and supervision requirement.
(3) Compensation requirement.
(f) Definitions.
(1) Applicable reporting period.
(2) Compensation costs.
(3) Contract and claims management activities.
(4) Core functions.
(5) Investment activities.
(6) Qualifying insurance corporation or QIC.
(7) Sales activities.
(8) Total costs.
(9) Underwriting activities.
(10) Virtually all.
(g) Applicability date.
§ 1.1297-6 Exception from the definition of passive income for active insurance income.
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(e) * * *
(2) Qualifying domestic insurance corporation non-passive asset and income limitations.
(i) Qualifying domestic insurance corporation's non-passive assets.
(ii) Qualifying domestic insurance corporation's non-passive income.
(iii) Non-passive asset limitation.
(iv) Total insurance liabilities.
(A) Companies taxable under Part I of Subchapter L.
(B) Companies taxable under Part II of Subchapter L.
(3) Example.
(i) Facts.
(ii) Result.
(A) Non-passive asset limitation.
(B) Non-passive income limitation.
(f) * * *
(1) General applicability date.
(2) Exception.
(3) Early application.