qualified banking or financing income
(3) Qualified banking or financing income For purposes of this subsection— (A) In general The term “qualified banking or financing income” means income of an eligible controlled foreign corporation which— (i) is derived in the active conduct of a banking, financing, or similar business by— (I) such eligible controlled foreign corporation, or (II) a qualified business unit of such eligible controlled foreign corporation, (ii) is derived from one or more transactions— (I) with customers located in a country other than the United States, and (II) substantially all of the activities in connection with which are conducted directly by the corporation or unit in its home country, and (iii) is treated as earned by such corporation or unit in its home country for purposes of such country’s tax laws. (B) Limitation on nonbanking and nonsecurities businesses No income of an eligible controlled foreign corporation not described in clause (ii) or (iii) of paragraph (2)(B) (or of a qualified business unit of such corporation) shall be treated as qualified banking or financing income unless more than 30 percent of such corporation’s or unit’s gross income is derived directly from the active and regular conduct of a lending or finance business from transactions with customers which are not related persons and which are located within such corporation’s or unit’s home country. (C) Substantial activity requirement for cross border income The term “qualified banking or financing income” shall not include income derived from 1 or more transactions with customers located in a country other than the home country of the eligible controlled foreign corporation or a qualified business unit of such corporation unless such corporation or unit conducts substantial activity with respect to a banking, financing, or similar business in its home country. (D) Determinations made separately For purposes of this paragraph, the qualified banking or financing income of an eligible controlled foreign corporation and each qualified business unit of such corporation shall be determined separately for such corporation and each such unit by taking into account— (i) in the case of the eligible controlled foreign corporation, only items of income, deduction, gain, or loss and activities of such corporation not properly allocable or attributable to any qualified business unit of such corporation, and (ii) in the case of a qualified business unit, only items of income, deduction, gain, or loss and activities properly allocable or attributable to such unit. (E) Direct conduct of activities For purposes of subparagraph (A)(ii)(II), an activity shall be treated as conducted directly by an eligible controlled foreign corporation or qualified business unit in its home country if the activity is performed by employees of a related person and— (i) the related person is an eligible controlled foreign corporation the home country of which is the same as the home country of the corporation or unit to which subparagraph (A)(ii)(II) is being applied, (ii) the activity is performed in the home country of the related person, and (iii) the related person is compensated on an arm’s-length basis for the performance of the activity by its employees and such compensation is treated as earned by such person in its home country for purposes of the home country’s tax laws.