§1271 — Treatment of amounts received on retirement or sale or exchange of debt instruments
11 citing cases
Statute Text — 26 U.S.C. §1271
For purposes of this title—
Amounts received by the holder on retirement of any debt instrument shall be considered as amounts received in exchange therefor.
If at the time of original issue there was an intention to call a debt instrument before maturity, any gain realized on the sale or exchange thereof which does not exceed an amount equal to—
the original issue discount, reduced by
the portion of original issue discount previously includible in the gross income of any holder (without regard to section 1272(a)(7) (or the corresponding provisions of prior law)),
shall be treated as ordinary income.
This paragraph shall not apply to—
any tax-exempt obligation, or
any holder who has purchased the debt instrument at a premium.
On the sale or exchange of any short-term Government obligation, any gain realized which does not exceed an amount equal to the ratable share of the acquisition discount shall be treated as ordinary income.
For purposes of this paragraph, the term “short-term Government obligation” means any obligation of the United States or any of its possessions, or of a State or any political subdivision thereof, or of the District of Columbia, which has a fixed maturity date not more than 1 year from the date of issue. Such term does not include any tax-exempt obligation.
For purposes of this paragraph, the term “acquisition discount” means the excess of the stated redemption price at maturity over the taxpayer’s basis for the obligation.
For purposes of this paragraph, except as provided in subparagraph (E), the ratable share of the acquisition discount is an amount which bears the same ratio to such discount as—
the number of days which the taxpayer held the obligation, bears to
the number of days after the date the taxpayer acquired the obligation and up to (and including) the date of its maturity.
At the election of the taxpayer with respect to any obligation, the ratable share of the acquisition discount is the portion of the acquisition discount accruing while the taxpayer held the obligation determined (under regulations prescribed by the Secretary) on the basis of—
the taxpayer’s yield to maturity based on the taxpayer’s cost of acquiring the obligation, and
compounding daily.
An election under this subparagraph, once made with respect to any obligation, shall be irrevocable.
On the sale or exchange of any short-term nongovernment obligation, any gain realized which does not exceed an amount equal to the ratable share of the original issue discount shall be treated as ordinary income.
For purposes of this paragraph, the term “short-term nongovernment obligation” means any obligation which—
has a fixed maturity date not more than 1 year from the date of the issue, and
is not a short-term Government obligation (as defined in paragraph (3)(B) without regard to the last sentence thereof).
For purposes of this paragraph, except as provided in subparagraph (D), the ratable share of the original issue discount is an amount which bears the same ratio to such discount as—
the number of days which the taxpayer held the obligation, bears to
the number of days after the date of original issue and up to (and including) the date of its maturity.
At the election of the taxpayer with respect to any obligation, the ratable share of the original issue discount is the portion of the original issue discount accruing while the taxpayer held the obligation determined (under regulations prescribed by the Secretary) on the basis of—
the yield to maturity based on the issue price of the obligation, and
compounding daily.
Any election under this subparagraph, once made with respect to any obligation, shall be irrevocable.
This section shall not apply to any obligation issued by a natural person before June 9, 1997.
Paragraph (1) shall not apply to any obligation purchased (within the meaning of section 1272(d)(1)) 11 See References in Text note below. after June 8, 1997.
This section and sections 1272 and 1286 shall not require the inclusion of any amount previously includible in gross income.
Treasury Regulations
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Treas. Reg. §1.1271-0Original issue discount; effective date; table of contents
(a) Effective date. Except as otherwise provided, §§ 1.1271-1 through 1.1275-5 apply to debt instruments issued on or after April 4, 1994. Taxpayers, however, may rely on these sections (as contained in 26 CFR part 1 revised April 1, 1996) for debt instruments issued after December 21, 1992, and before April 4, 1994.
(b) Table of contents. This section lists captioned paragraphs contained in §§ 1.1271-1 through 1.1275-7.
(a) Intention to call before maturity.
(1) In general.
(2) Exceptions.
(b) Short-term obligations.
(1) In general.
(2) Method of making elections.
(3) Counting conventions.
(a) Overview.
(1) In general.
(2) Debt instruments not subject to OID inclusion rules.
(b) Accrual of OID.
(1) Constant yield method.
(2) Exceptions.
(3) Modifications.
(4) Special rules for determining the OID allocable to an accrual period.
(c) Yield and maturity of certain debt instruments subject to contingencies.
(1) Applicability.
(2) Payment schedule that is significantly more likely than not to occur.
(3) Mandatory sinking fund provision.
(4) Consistency rule. [Reserved]
(5) Treatment of certain options.
(6) Subsequent adjustments.
(7) Effective date.
(d) Certain debt instruments that provide for a fixed yield.
(e) Convertible debt instruments.
(f) Special rules to determine whether a debt instrument is a short-term obligation.
(1) Counting of either the issue date or maturity date.
(2) Coordination with paragraph (c) of this section for certain sections of the Internal Revenue Code.
(g) Basis adjustment.
(h) Debt instruments denominated in a currency other than the U.S. dollar.
(i) [Reserved]
(j) Examples.
(a) In general.
(b) Definitions and special rules.
(1) Purchase.
(2) Premium.
(3) Acquisition premium.
(4) Acquisition premium fraction.
(5) Election to accrue discount on a constant yield basis.
(6) Special rules for determining basis.
(c) Examples.
(a) Election.
(b) Scope of election.
(1) In general.
(2) Exceptions, limitations, and special rules.
(c) Mechanics of the constant yield method.
(1) In general.
(2) Special rules to determine adjusted basis.
(d) Time and manner of making the election.
(e) Revocation of election.
(f) Effective date.
(a) In general.
(b) Stated redemption price at maturity.
(c) Qualified stated interest.
(1) Definition.
(2) Debt instruments subject to contingencies.
(3) Variable rate debt instrument.
(4) Stated interest in excess of qualified stated interest.
(5) Short-term obligations.
(6) Business day convention.
(d) De minimis OID.
(1) In general.
(2) De minimis amount.
(3) Installment obligations.
(4) Special rule for interest holidays, teaser rates, and other interest shortfalls.
(5) Treatment of de minimis OID by holders.
(e) Definitions.
(1) Installment obligation.
(2) Self-amortizing installment obligation.
(3) Weighted average maturity.
(f) Examples.
(a) Debt instruments issued for money.
(1) Issue price.
(2) Issue date.
(b) Publicly traded debt instruments issued for property.
(1) Issue price.
(2) Issue date.
(c) Debt instruments issued for publicly traded property.
(1) Issue price.
(2) Issue date.
(d) Other debt instruments.
(1) Issue price.
(2) Issue date.
(e) Special rule for certain sales to bond houses, brokers, or similar persons.
(f) Traded on an established market (publicly traded).
(1) In general.
(2) Sales price.
(3) Firm quote.
(4) Indicative quote.
(5) Presumption that price or quote is equal to fair market value.
(6) Exception for small debt issues.
(7) Anti-abuse rules.
(8) Convertible debt instruments.
(9) Issuer-holder consistency requirement.
(10) Effective/applicability dates.
(g) Treatment of certain cash payments incident to lending transactions.
(1) Applicability.
(2) Payments from borrower to lender.
(3) Payments from lender to borrower.
(4) Payments between lender and third party.
(5) Examples.
(h) Investment units.
(1) In general.
(2) Consistent allocation by holders and issuer.
(i) [Reserved]
(j) Convertible debt instruments.
(k) Below-market loans subject to section 7872(b).
(l) [Reserved]
(m) Treatment of amounts representing pre-issuance accrued interest.
(1) Applicability.
(2) Exclusion of pre-issuance accrued interest from issue price.
(3) Example.
(a) In general.
(b) Exceptions.
(1) Debt instrument with adequate stated interest and no OID .
(2) Exceptions under sections 1274(c)(1)(B), 1274(c)(3), 1274A(c), and 1275(b)(1).
(3) Other exceptions to section 1274.
(c) Examples.
(a) In general.
(b) Issue price.
(1) Debt instruments that provide for adequate stated interest; stated principal amount.
(2) Debt instruments that do not provide for adequate stated interest; imputed principal amount.
(3) Debt instruments issued in a potentially abusive situation; fair market value.
(c) Determination of whether a debt instrument provides for adequate stated interest.
(1) In general.
(2) Determination of present value.
(d) Treatment of certain options.
(e) Mandatory sinking funds.
(f) Treatment of variable rate debt instruments.
(1) Stated interest at a qualified floating rate.
(2) Stated interest at a single objective rate.
(g) Treatment of contingent payment debt instruments.
(h) Examples.
(i) [Reserved]
(j) Special rules for tax-exempt obligations.
(1) Certain variable rate debt instruments.
(2) Contingent payment debt instruments.
(3) Effective date.
(a) In general.
(b) Operating rules.
(1) Debt instrument exchanged for nonrecourse financing.
(2) Nonrecourse debt with substantial down payment.
(3) Clearly excessive interest.
(4) Debt-for-debt exchange.
(c) Other situations to be specified by Commissioner.
(d) Consistency rule.
(a) Determination of test rate of interest.
(1) In general.
(2) Test rate for certain debt instruments.
(b) Applicable Federal rate.
(c) Special rules to determine the term of a debt instrument for purposes of determining the applicable Federal rate.
(1) Installment obligations.
(2) Certain variable rate debt instruments.
(3) Counting of either the issue date or the maturity date.
(4) Certain debt instruments that provide for principal payments uncertain as to time.
(d) Foreign currency loans.
(e) Examples.
(a) In general.
(b) Modifications of debt instruments.
(1) In general.
(2) Election to treat buyer as modifying the debt instrument.
(c) Wraparound indebtedness.
(d) Consideration attributable to assumed debt.
(a) In general.
(b) Rules for both qualified and cash method debt instruments.
(1) Sale-leaseback transactions.
(2) Debt instruments calling for contingent payments.
(3) Aggregation of transactions.
(4) Inflation adjustment of dollar amounts.
(c) Rules for cash method debt instruments.
(1) Time and manner of making cash method election.
(2) Successors of electing parties.
(3) Modified debt instrument.
(4) Debt incurred or continued to purchase or carry a cash method debt instrument.
(a) Applicability.
(b) Adjusted issue price.
(1) In general.
(2) Adjusted issue price for subsequent holders.
(c) OID.
(d) Debt instrument.
(e) Tax-exempt obligations.
(f) Issue.
(1) Debt instruments issued on or after March 13, 2001.
(2) Debt instruments issued before March 13, 2001.
(3) Transition rule.
(4) Cross-references for reopening and aggregation rules.
(g) Debt instruments issued by a natural person.
(h) Publicly offered debt instrument.
(i) [Reserved]
(j) Life annuity exception under section 1275(a)(1)(B)(i).
(k) Exception under section 1275(a)(1)(B)(ii) for annuities issued by an insurance company subject to tax under subchapter L of the Internal Revenue Code.
(1) Rule.
(2) Examples.
(3) Effective date.
(1) Purpose.
(2) General rule.
(3) Availability of a cash surrender option.
(4) Availability of a loan secured by the contract.
(5) Minimum payout provision.
(6) Maximum payout provision.
(7) Decreasing payout provision.
(8) Effective dates.
(a) Payment ordering rule.
(1) In general.
(2) Exceptions.
(b) Debt instruments distributed by corporations with respect to stock.
(1) Treatment of distribution.
(2) Issue date.
(c) Aggregation of debt instruments.
(1) General rule.
(2) Exception if separate issue price established.
(3) Special rule for debt instruments that provide for the issuance of additional debt instruments.
(4) Examples.
(d) Special rules for Treasury securities.
(1) Issue price and issue date.
(2) Reopenings of Treasury securities.
(e) Disclosure of certain information to holders.
(f) Treatment of pro rata prepayments.
(1) Treatment as retirement of separate debt instrument.
(2) Definition of pro rata prepayment.
(g) Anti-abuse rule.
(1) In general.
(2) Unreasonable result.
(3) Examples.
(4) Effective date.
(h) Remote and incidental contingencies.
(1) In general.
(2) Remote contingencies.
(3) Incidental contingencies.
(4) Aggregation rule.
(5) Consistency rule.
(6) Subsequent adjustments.
(7) Effective date.
(i) [Reserved]
(j) Treatment of certain modifications.
(k) Reopenings.
(1) In general.
(2) Definitions.
(3) Qualified reopening.
(4) Issuer's treatment of a qualified reopening.
(5) Effective/applicability dates.
(l) OID rule for income item subject to section 451(b).
(1) In general.
(2) Applicability dates.
(m) Transition from certain interbank offered rates.
(1) In general.
(2) Single qualified floating rate.
(3) Remote contingency.
(4) Change in circumstances.
(5) Applicability date.
(a) In general.
(b) Information required to be set forth on face of debt instruments that are not publicly offered.
(1) In general.
(2) Time for legending.
(3) Legend must survive reissuance upon transfer.
(4) Exceptions.
(c) Information required to be reported to Secretary upon issuance of publicly offered debt instruments.
(1) In general.
(2) Time for filing information return.
(3) Exceptions.
(4) Subsequent registration.
(d) Application to foreign issuers and U.S. issuers of foreigntargeted debt instruments.
(e) Penalties.
(f) Effective date.
(a) Applicability.
(1) In general.
(2) Exceptions.
(3) Insolvency and default.
(4) Convertible debt instruments.
(5) Remote and incidental contingencies.
(b) Noncontingent bond method.
(1) Applicability.
(2) In general.
(3) Description of method.
(4) Comparable yield and projected payment schedule.
(5) Qualified stated interest.
(6) Adjustments.
(7) Adjusted issue price, adjusted basis, and retirement.
(8) Character on sale, exchange, or retirement.
(9) Operating rules.
(c) Method for debt instruments not subject to the noncontingent bond method.
(1) Applicability.
(2) Separation into components.
(3) Treatment of noncontingent payments.
(4) Treatment of contingent payments.
(5) Basis different from adjusted issue price.
(6) Treatment of a holder on sale, exchange, or retirement.
(7) Examples.
(d) Rules for tax-exempt obligations.
(1) In general.
(2) Certain tax-exempt obligations with interest-based or revenue-based payments
(3) All other tax-exempt obligations.
(4) Basis different from adjusted issue price.
(e) Amounts treated as interest under this section.
(f) Effective date.
(a) Applicability.
(1) In general.
(2) Principal payments.
(3) Stated interest.
(4) Current value.
(5) No contingent principal payments.
(6) Special rule for debt instruments issued for nonpublicly traded property.
(b) Qualified floating rate.
(1) In general.
(2) Certain rates based on a qualified floating rate.
(3) Restrictions on the stated rate of interest.
(c) Objective rate.
(1) Definition.
(2) Other objective rates to be specified by Commissioner.
(3) Qualified inverse floating rate.
(4) Significant front-loading or back-loading of interest.
(5) Tax-exempt obligations.
(d) Examples.
(e) Qualified stated interest and OID with respect to a variable rate debt instrument.
(1) In general.
(2) Variable rate debt instrument that provides for annual payments of interest at a single variable rate.
(3) All other variable rate debt instruments except for those that provide for a fixed rate.
(4) Variable rate debt instrument that provides for a single fixed rate.
(f) Special rule for certain reset bonds.
(a) In general.
(b) Definitions.
(1) Qualifying debt instrument.
(2) Section 1.1275-6 hedge.
(3) Financial instrument.
(4) Synthetic debt instrument.
(c) Integrated transaction.
(1) Integration by taxpayer.
(2) Integration by Commissioner.
(d) Special rules for legging into and legging out of an integrated transaction.
(1) Legging into.
(2) Legging out.
(e) Identification requirements.
(f) Taxation of integrated transactions.
(1) General rule.
(2) Issue date.
(3) Term.
(4) Issue price.
(5) Adjusted issue price.
(6) Qualified stated interest.
(7) Stated redemption price at maturity.
(8) Source of interest income and allocation of expense.
(9) Effectively connected income.
(10) Not a short-term obligation.
(11) Special rules in the event of integration by the Commissioner.
(12) Retention of separate transaction rules for certain purposes.
(13) Coordination with consolidated return rules.
(g) Predecessors and successors.
(h) Examples.
(i) [Reserved]
(j) Effective date.
(a) Overview.
(b) Applicability.
(1) In general.
(2) Exceptions.
(c) Definitions.
(1) Inflation-indexed debt instrument.
(2) Reference index.
(3) Qualified inflation index.
(4) Inflation-adjusted principal amount.
(5) Minimum guarantee payment.
(d) Coupon bond method.
(1) In general.
(2) Applicability.
(3) Qualified stated interest.
(4) Inflation adjustments.
(5) Example.
(e) Discount bond method.
(1) In general.
(2) No qualified stated interest.
(3) OID.
(4) Example.
(f) Special rules.
(1) Deflation adjustments.
(2) Adjusted basis.
(3) Subsequent holders.
(4) Minimum guarantee.
(5) Temporary unavailability of a qualified inflation index.
(g) TIPS.
(1) Reopenings.
(2) TIPS issued with more than a de minimis amount of premium.
(h) Effective/applicability dates.
(1) In general.
(2) TIPS issued with more than a de minimis amount of premium.
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Treas. Reg. §1.1271-0(a)Overview.
Overview.
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Treas. Reg. §1.1271-0(b)Applicability.
Applicability.
(1) In general.
(2) Exceptions.
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Treas. Reg. §1.1271-0(c)Definitions.
Definitions.
(1) Inflation-indexed debt instrument.
(2) Reference index.
(3) Qualified inflation index.
(4) Inflation-adjusted principal amount.
(5) Minimum guarantee payment.
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Treas. Reg. §1.1271-0(d)Coupon bond method.
Coupon bond method.
(1) In general.
(2) Applicability.
(3) Qualified stated interest.
(4) Inflation adjustments.
(5) Example.
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Treas. Reg. §1.1271-0(e)Discount bond method.
Discount bond method.
(1) In general.
(2) No qualified stated interest.
(3) OID.
(4) Example.
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Treas. Reg. §1.1271-0(f)Special rules.
Special rules.
(1) Deflation adjustments.
(2) Adjusted basis.
(3) Subsequent holders.
(4) Minimum guarantee.
(5) Temporary unavailability of a qualified inflation index.
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Treas. Reg. §1.1271-0(g)TIPS.
TIPS.
(1) Reopenings.
(2) TIPS issued with more than a de minimis amount of premium.
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Treas. Reg. §1.1271-0(h)Effective/applicability dates.
Effective/applicability dates.
(1) In general.
(2) TIPS issued with more than a de minimis amount of premium.
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Treas. Reg. §1.1271-0(i)§1.1271-0(i)
[Reserved]
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Treas. Reg. §1.1271-0(j)Effective date.
Effective date.
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Treas. Reg. §1.1271-0(k)Reopenings.
Reopenings.
(1) In general.
(2) Definitions.
(3) Qualified reopening.
(4) Issuer's treatment of a qualified reopening.
(5) Effective/applicability dates.
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Treas. Reg. §1.1271-0(l)OID rule for income item subject to section 451(b).
OID rule for income item subject to section 451(b).
(1) In general.
(2) Applicability dates.
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Treas. Reg. §1.1271-0(m)Transition from certain interbank offered rates.
Transition from certain interbank offered rates.
(1) In general.
(2) Single qualified floating rate.
(3) Remote contingency.
(4) Change in circumstances.
(5) Applicability date.
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Treas. Reg. §1.1271-1Special rules applicable to amounts received on retirement, sale, or exchange of debt instruments
(a) Intention to call before maturity—(1) In general. For purposes of section 1271(a)(2), all or a portion of gain realized on a sale or exchange of a debt instrument to which section 1271 applies is treated as interest income if there was an intention to call the debt instrument before maturity. An intention to call a debt instrument before maturity means a written or oral agreement or understanding not provided for in the debt instrument between the issuer and the original holder of the debt instrument that the issuer will redeem the debt instrument before maturity. In the case of debt instruments that are part of an issue, the agreement or understanding must be between the issuer and the original holders of a substantial amount of the debt instruments in the issue. An intention to call before maturity can exist even if the intention is conditional (e.g., the issuer's decision to call depends on the financial condition of the issuer on the potential call date) or is not legally binding. For purposes of this section, original holder means the first holder (other than an underwriter or dealer that purchased the debt instrument for resale in the ordinary course of its trade or business).
(2) Exceptions. In addition to the exceptions provided in sections 1271(a)(2)(B) and 1271(b), section 1271(a)(2) does not apply to—
(i) A debt instrument that is publicly offered (as defined in § 1.1275-1(h));
(ii) A debt instrument to which section 1272(a)(6) applies (relating to certain interests in or mortgages held by a REMIC, and certain other debt instruments with payments subject to acceleration); or
(iii) A debt instrument sold pursuant to a private placement memorandum that is distributed to more than ten offerees and that is subject to the sanctions of section 12(2) of the Securities Act of 1933 (15 U.S.C. 77l) or the prohibitions of section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78j).
(b) Short-term obligations—(1) In general. Under sections 1271 (a)(3) and (a)(4), all or a portion of the gain realized on the sale or exchange of a short-term government or nongovernment obligation is treated as interest income. Sections 1271 (a)(3) and (a)(4), however, do not apply to any short-term obligation subject to section 1281. See § 1.1272-1(f) for rules to determine if an obligation is a short-term obligation.
(2) Method of making elections. Elections to accrue on a constant yield basis under sections 1271 (a)(3)(E) and (a)(4)(D) are made on an obligation-by-obligation basis by reporting the transaction on the basis of daily compounding on the taxpayer's timely filed Federal income tax return for the year of the sale or exchange. These elections are irrevocable.
(3) Counting conventions. In computing the ratable share of acquisition discount under section 1271(a)(3) or OID under section 1271(a)(4), any reasonable counting convention may be used (e.g., 30 days per month/360 days per year).
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Treas. Reg. §1.1271-1(a)Intention to call before maturity—(1) In general.
Intention to call before maturity—(1) In general. For purposes of section 1271(a)(2), all or a portion of gain realized on a sale or exchange of a debt instrument to which section 1271 applies is treated as interest income if there was an intention to call the debt instrument before maturity. An intention to call a debt instrument before maturity means a written or oral agreement or understanding not provided for in the debt instrument between the issuer and the original holder of the debt instrument that the issuer will redeem the debt instrument before maturity. In the case of debt instruments that are part of an issue, the agreement or understanding must be between the issuer and the original holders of a substantial amount of the debt instruments in the issue. An intention to call before maturity can exist even if the intention is conditional (e.g., the issuer's decision to call depends on the financial condition of the issuer on the potential call date) or is not legally binding. For purposes of this section, original holder means the first holder (other than an underwriter or dealer that purchased the debt instrument for resale in the ordinary course of its trade or business).
(2) Exceptions. In addition to the exceptions provided in sections 1271(a)(2)(B) and 1271(b), section 1271(a)(2) does not apply to—
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Treas. Reg. §1.1271-1(b)Short-term obligations—(1) In general.
Short-term obligations—(1) In general. Under sections 1271 (a)(3) and (a)(4), all or a portion of the gain realized on the sale or exchange of a short-term government or nongovernment obligation is treated as interest income. Sections 1271 (a)(3) and (a)(4), however, do not apply to any short-term obligation subject to section 1281. See § 1.1272-1(f) for rules to determine if an obligation is a short-term obligation.
(2) Method of making elections. Elections to accrue on a constant yield basis under sections 1271 (a)(3)(E) and (a)(4)(D) are made on an obligation-by-obligation basis by reporting the transaction on the basis of daily compounding on the taxpayer's timely filed Federal income tax return for the year of the sale or exchange. These elections are irrevocable.
(3) Counting conventions. In computing the ratable share of acquisition discount under section 1271(a)(3) or OID under section 1271(a)(4), any reasonable counting convention may be used (e.g., 30 days per month/360 days per year).
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Treas. Reg. §1.1271-1(i)A debt instrument that is publicly offered (as defined in § 1.
A debt instrument that is publicly offered (as defined in § 1.1275-1(h));
(ii) A debt instrument to which section 1272(a)(6) applies (relating to certain interests in or mortgages held by a REMIC, and certain other debt instruments with payments subject to acceleration); or
(iii) A debt instrument sold pursuant to a private placement memorandum that is distributed to more than ten offerees and that is subject to the sanctions of section 12(2) of the Securities Act of 1933 (15 U.S.C. 77l) or the prohibitions of section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78j).
11 Citing Cases
thin the control ofone party or that one party has a unique nexus with the issue in question and therefore that party should bear the burden ofaffirmatively raising the matter. 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure sec. 1271, at 603 (3d ed. 2004); see also Ray v. Kertes, 285 F.3d 287, 295 (3d Cir. 2002). - 11 - enacted section 7623(b) to encourage tax whistleblowers to provide information regarding persons who underpay tax or violate the internal revenue laws.
- 5 - (b) Special Rule for Guam, American Samoa, and the Northern Mariana Islands.--The amendments made by this subtitle shall apply with respect to Guam, American Samoa, or the Northern Mariana Islands (and to residents thereof and corporations created or organized therein) only if (and so long as) an implementing agreement under section 1271 is in effect between the United States and such possession.
(Emphasis added.) Pursuant to section 1271 of TRA 1986, and the resulting implementing agreement, the Secretary is granted extraordinary authority.
— The amendments made by this subtitle shall apply with respect to Guam, American Samoa, or the Northern Mariana Islands (and to residents thereof and corporations created or organized therein) only if (and so long as) an implementing agreement under section 1271 is in effect between the United States and such possession.
(b) Special Rule for Guam, American Samoa, and the Northern Mariana Islands.--The amendments made by this subtitle shall apply with respect to Guam, American Samoa, or the Northern Mariana Islands (and to residents thereof and corporations created or organized therein) only if (and so long as) an implementing agreement under section 1271 is in effect between the United States and such possession.
(b) Special Rule for Guam, American Samoa, and the Northern Mariana Islands.--The amendments made by this subtitle shall apply with respect to Guam, American Samoa, or the Northern Mariana Islands (and to residents thereof and corporations created or organized therein) only if (and so long as) an implementing agreement under section 1271 is in effect between the United States and such possession.