Executive Order 11328—Modifying Executive Order No. 11198, Relating to the Interest Equalization Tax on Certain Commercial Bank Loans

WHEREAS it has been determined heretofore that the acquisition of debt obligations of foreign obligors by commercial banks in making loans in the ordinary course of the commercial banking business has materially impaired the effectiveness of the tax imposed by section 4911 of the Internal Revenue Code of 1954, as added by the Interest Equalization Tax Act, because such acquisitions have replaced acquisitions by United States persons, other than commercial banks, of debt obligations of foreign obligors which are subject to the tax imposed by section 4911; and

WHEREAS such determination formed the basis for the issuance of Executive Order No. 11198, dated February 10, 1965, relating to the imposition of the interest equalization tax on the acquisition of such debt obligations by commercial banks; and

WHEREAS it is now appropriate that Executive Order No. 11198 be modified:

Now, THEREFORE, by virtue of the authority vested in me by section 4931 (a) of the Internal Revenue Code of 1954, as amended (26 U.S.C. 4931 (a)), by section 3 (e) (2) of the Interest Equalization Tax Extension Act of 1965 (Public Law 89-243; 79 Stat. 955), by section 301 of title 3 of the United States Code, and as President of the United States, it is ordered that Executive Order No. 11198 be, and it is hereby, modified to read as follows:

SECTION 1. The provisions of section 4931 of the Internal Revenue Code of 1954, as amended, shall apply to acquisitions by commercial banks of debt obligations of foreign obligors to the extent set forth in sections 2 and 3.

SEC. 2. (a) The exclusions provided in section 4914 (j) (1) (A) (ii) and section 4915 (c) (2) (A) from the tax imposed by section 4911 shall continue to apply to any acquisition by a commercial bank of a debt obligation of a foreign obligor; and

(b) The exclusion provided in section 4914(b) (2) (A) from the tax imposed by section 4911 shall apply only to an acquisition of such debt obligation which is made by a commercial bank at any of its branches located outside the United States.

SEC. 3. The amendments of section 4931 contained in section 3(e) (1) of the Interest Equalization Tax Extension Act of 1965 (Public Law 89-243; 79 Stat. 954) shall be applicable with respect to acquisitions of debt obligations of foreign obligors made after the date on which this order is issued.

SEC. 4. The Secretary of the Treasury or his delegate is authorized to prescribe from time to time such regulations, rulings, directions, and instructions, and to require such reports of information, as he shall deem necessary to carry out the purposes of this order.

SEC. 5. This order shall be effective with respect to acquisitions of debt obligations of foreign obligors made during the period beginning on the day after the date on which this order is issued and ending on the date set forth in section 4911 (d).

LYNDON B. JOHNSON

The White House

February 20, 1967