Executive Order 11368—Modifying Rates of Interest Equalization Tax and Amending Executive Order No. 11211

WHEREAS section 4911(b) (3) of the Internal Revenue Code of 1954 fixes the rates of the interest equalization tax generally applicable in the case of acquisitions of stock and debt obligations made after January 25, 1967 and before August 30, 1967 at approximately 150 percent of the rates set forth in section 4911(b) (1) of the Code; and

WHEREAS the rates set forth in section 4911 (b) (1) of the Internal Revenue Code of 1954 would, in the absence of a determination made by the President under section 4911 (b) (2), be generally applicable in the case of acquisitions made on or after August 30, 1967; and

WHEREAS I have determined that the rates of tax prescribed in section 4911(b) (1) of the Internal Revenue Code of 1954 are lower than the rates of tax necessary to limit the total acquisitions by United States persons of stock of foreign issuers and debt obligations of foreign obligors within a range consistent with the balance-of-payments objectives of the United States; and

WHEREAS it is now appropriate that Executive Order No. 11211, dated April 2, 1965 (effective April 5, 1965), relating to the exclusion from the interest equalization tax for original or new Japanese issues as required for international monetary stability, be modified;

Now, THEREFORE, by virtue of the authority vested in me by sections 4911 (b) (2) and 4917(a) of the Internal Revenue Code of 1954, by section 301 of title 3 of the United States Code, and as President of the United States, it is hereby ordered as follows:

SECTION 1. Rates of Tax.

(a) Rates applicable to acquisitions of stock. The tax imposed by section 4911 of the Internal Revenue Code of 1954 on the acquisition of stock shall be equal to 18.75 percent of the actual value of the stock.

(b) Rates applicable to acquisitions of debt obligations. The tax imposed by section 4911 of the Internal Revenue Code of 1954 on the acquisition of a debt obligation shall be equal to a percentage of the actual value of the debt obligation measured by the period remaining to its maturity and determined in accordance with the following table:

The tax, as a percentage of actual value,

If the period remaining to maturity is:

At least 1 year, but less than 11/4 years 1.31 percent

At least 1 1/4 years, but less than 1 1/2 years 1.63 percent

At least 1 1/2 years, but less than 1 3/4 years 1.88 percent

At least 1 3/4 years, but less than 2 1/4 years 2.31 percent

At least 2 1/4 years, but less than 2 3/4 years 2.88 percent

At least 2 3/4 years, but less than 3 1/2 years 3.44 percent

At least 3 1/2 years, but less than 4 1/2 years 4.44 percent

At least 4 1/2 years, but less than 5 1/2 years 5.44 percent

At least 5 1/2 years, but less than 6 1/2 years 6.38 percent

At least 6 1/2 years, but less than 7 1/2 years 7.25 percent

At least 7 1/2 years, but less than 8 1/2 years 8.13 percent

At least 8 1/2 years, but less than 9 1/2 years 8.88 percent

At least 9 1/2 years, but less than 10 1/2 years 9.63 percent

At least 10 1/2 years, but less than 11 1/2 years 10.38 percent

At least 11 1/2 years, but less than 13 1/2 years 11.38 percent

At least 13 1/2 years, but less than 16 1/2 years 12.88 percent

At least 16 1/2 years, but less than 18 1/2 years 14.19 percent

At least 18 1/2 years, but less than 21 1/2 years 15.31 percent

At least 21 1/2 years, but less than 23 1/2 years 16.31 percent

At least 23 1/2 years, but less than 26 1/2 years 17.19 percent

At least 26 1/2 years, but less than 28 1/2 years 17.94 percent

28 1/2 years or more 18.75 percent

SEC. 2. Authority of Secretary of Treasury. The Secretary of the Treasury or his delegate is authorized to prescribe from time to time such regulations, rulings, directions, and instructions (not inconsistent with the provisions of section 4911 of the Internal Revenue Code of 1954) as he shall deem necessary to carry out the purposes of section 1 of this order.

SEC. 3. Amendment to Executive Order No. 11211. Executive Order No. 11211 of April 2, 1965, is amended as follows:

(a) by striking out so much of the text of section 1 as precedes subsection (a) and inserting in lieu thereof, "The tax imposed by section 4911 of the Internal Revenue Code of 1954 shall not apply to an acquisition by a United States person of a debt obligation (as defined in section 4920(a) (1) of the Code) repayable exclusively in United States currency which is (i) issued or guaranteed as to payment of principal and interest by the Government of Japan, or (ii) issued, with the prior approval of the Government of Japan, by a corporation organized under the laws of Japan which is neither a company regulated under the Investment Company Act of 1940 (54 Stat. 847; 15 U.S.C. 80a-1 to 80a-52) nor formed or availed of for the principal purpose of acquiring stock or debt obligations of a Japanese or other foreign issuer or obligor, other than stock or debt obligations described in section 4916(a) of the Code, provided that—"

(b) by inserting after section 1 the following new section— "Section 1A. The tax imposed by section 4911 of the Internal Revenue Code of 1954 shall not apply to an acquisition by a United States person of stock acquired pursuant to the exercise of a right (without the payment of additional consideration) to convert into stock, a debt obligation which was acquired under the exemption created by section 1, provided that—

"(a) such debt obligation had never been acquired by a person other than a United States person; and

"(b) such stock is acquired as all or part of an original or new issue as to which there is filed such notice of acquisition as the Secretary of the Treasury or his delegate may prescribe by regulation."

SEC. 4. Effective Date. Sections 1 and 2 of this order shall be effective with respect to acquisitions of stock of foreign issuers and debt obligations of foreign obligors made after August 29, 1967, other than acquisitions described in paragraphs (2) and (4) of section 3(c) of the Interest Equalization Tax Extension Act of 1967. Section 3 of this order shall be effective with respect to acquisitions made after November 1, 1967.

LYNDON B. JOHNSON

The White House

August 28, 1967