[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1785 Introduced in House (IH)]
<DOC>
117th CONGRESS
1st Session
H. R. 1785
To amend the Internal Revenue Code of 1986 to provide for current year
inclusion of net CFC tested income, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 11, 2021
Mr. Doggett (for himself, Ms. Barragan, Mrs. Beatty, Mr. Blumenauer,
Ms. Bonamici, Mr. Brendan F. Boyle of Pennsylvania, Mrs. Bustos, Ms.
Chu, Mr. Cicilline, Mr. Cleaver, Mr. Cohen, Mr. Cooper, Mr. Courtney,
Mr. Crist, Mr. Crow, Mr. Danny K. Davis of Illinois, Mr. DeFazio, Ms.
DeLauro, Mr. DeSaulnier, Mr. Deutch, Mrs. Dingell, Mr. Michael F. Doyle
of Pennsylvania, Ms. Eshoo, Mr. Espaillat, Mr. Evans, Mr. Foster, Mr.
Gallego, Mr. Garamendi, Mr. Garcia of Illinois, Mr. Gomez, Mr.
Grijalva, Mr. Hastings, Mrs. Hayes, Mr. Higgins of New York, Mr.
Huffman, Ms. Jackson Lee, Ms. Jayapal, Mr. Jeffries, Ms. Johnson of
Texas, Mr. Johnson of Georgia, Ms. Kaptur, Ms. Kelly of Illinois, Mr.
Khanna, Mr. Kim of New Jersey, Mrs. Kirkpatrick, Mr. Langevin, Mr.
Lamb, Mrs. Lawrence, Ms. Lee of California, Mr. Levin of Michigan, Mr.
Lowenthal, Mrs. Luria, Mr. Lynch, Mrs. Carolyn B. Maloney of New York,
Ms. McCollum, Mr. McGovern, Mr. Mrvan, Mr. Meeks, Ms. Meng, Mr. Jones,
Mr. Moulton, Mr. Mfume, Mr. Nadler, Mrs. Napolitano, Mr. Neguse, Mr.
Norcross, Ms. Norton, Ms. Omar, Mr. Pallone, Mr. Panetta, Mr. Pappas,
Mr. Perlmutter, Ms. Pingree, Mr. Pocan, Ms. Porter, Ms. Pressley, Mr.
Raskin, Ms. Roybal-Allard, Mr. Ryan, Mr. Sarbanes, Ms. Scanlon, Ms.
Schakowsky, Mr. Sherman, Mr. Sires, Mr. Suozzi, Mr. Takano, Ms. Titus,
Ms. Tlaib, Mr. Tonko, Ms. Velazquez, Ms. Waters, Mrs. Watson Coleman,
Mr. Welch, Ms. Wild, Mr. Yarmuth, Mr. Cartwright, Mr. Pascrell, Ms.
Bass, Mr. Green of Texas, Mr. David Scott of Georgia, Mr. Case, Ms.
Clarke of New York, and Ms. Escobar) introduced the following bill;
which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide for current year
inclusion of net CFC tested income, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE, ETC.
(a) Short Title.--This Act may be cited as the ``No Tax Breaks for
Outsourcing Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title, etc.
Sec. 2. Current year inclusion of net CFC tested income.
Sec. 3. Country-by-country application of limitation on foreign tax
credit based on taxable units.
Sec. 4. Limitation on deduction of interest by domestic corporations
which are members of an international
financial reporting group.
Sec. 5. Modifications to rules relating to inverted corporations.
Sec. 6. Treatment of foreign corporations managed and controlled in the
United States as domestic corporations.
SEC. 2. CURRENT YEAR INCLUSION OF NET CFC TESTED INCOME.
(a) Repeal of Tax-Free Deemed Return on Investments.--
(1) In general.--Section 951A(a) is amended by striking
``global intangible low-taxed income'' and inserting ``net CFC
tested income''.
(2) Conforming amendments.--
(A) Section 951A is amended by striking subsections
(b) and (d).
(B) Section 951A(e)(1) is amended by striking
``subsections (b), (c)(1)(A), and'' and inserting
``subsections (c)(1)(A) and''.
(C) Section 951A(f) is amended by striking ``global
intangible low-taxed income'' each place it appears and
inserting ``net CFC tested income''.
(D) Section 960(d)(2)(A) is amended by striking
``global intangible low-taxed income (as defined in
section 951A(b))'' and inserting ``net CFC tested
income (as defined in section 951A(c))''.
(b) Repeal of Reduced Rate of Tax on Net CFC Tested Income and
Foreign-Derived Intangible Income.--
(1) In general.--Part VIII of subchapter B of chapter 1 is
amended by striking section 250 (and by striking the item
relating to such section in the table of sections of such
part).
(2) Conforming amendments.--
(A) Section 59A(c)(4)(B)(i) is amended by striking
``section 172, 245A, or 250'' and inserting ``section
172 or 245A''.
(B) Section 172(d) is amended by striking paragraph
(9).
(C) Section 246(b)(1) is amended--
(i) by striking ``subsection (a) and (b) of
section 245, and section 250'' and inserting
``and subsection (a) and (b) of section 245'';
and
(ii) by striking ``subsection (a) and (b)
of section 245, and 250'' and inserting ``and
subsection (a) and (b) of section 245''.
(D) Section 469(i)(3)(F)(iii) is amended by
striking ``222, and 250'' and inserting ``and 222''.
(c) Repeal of Certain Exclusions From the Determination of Tested
Income.--Section 951A(c)(2)(A)(i) is amended--
(1) by striking subclauses (III) and (V),
(2) by redesignating subclause (IV) as subclause (III),
(3) by adding ``and'' at the end of subclause (II), and
(4) by striking ``and'' at the end of subclause (III) (as
so redesignated) and inserting ``over''.
(d) Increase in Deemed Paid Credit for Taxes Properly Attributable
to Tested Income.--
(1) In general.--Section 960(d) is amended by striking ``80
percent of''.
(2) Conforming amendment.--Section 78 is amended by
striking ``(determined without regard to the phrase ``80
percent of'' in subsection (d)(1) thereof)''.
(e) Repeal of High Tax Exclusion for Foreign Base Company Income
and Insurance Income.--
(1) In general.--Section 954(b) is amended by striking
paragraph (4).
(2) Conforming amendment.--Section 904(d)(3)(E) is amended
by striking the last sentence.
(f) Elimination of Carryback of Foreign Tax Credit.--Section 904(c)
is amended--
(1) by striking ``in the first preceding taxable year, and
in any of the first 10 succeeding taxable years, in that
order'' and inserting ``in any of the first 10 succeeding
taxable years, in order'',
(2) by striking ``preceding or'' each place it appears, and
(3) by striking ``Carryback and'' in the heading thereof.
(g) Treatment of Foreign Base Company Oil Related Income as Subpart
F Income.--
(1) In general.--Section 954(a) is amended by striking
``and'' at the end of paragraph (2), by striking the period at
the end of paragraph (3) and inserting ``, and'', and by adding
at the end the following new paragraph:
``(4) the foreign base company oil related income for the
taxable year (determined under subsection (g) and reduced as
provided in subsection (b)(5)).''.
(2) Foreign base company oil related income.--Section 954
is amended by inserting after subsection (e) the following new
subsection:
``(g) Foreign Base Company Oil Related Income.--For purposes of
this section, the term `foreign base company oil related income' means
foreign oil related income (within the meaning of paragraphs (2) and
(3) of section 907(c)) other than income derived from a source within a
foreign country in connection with--
``(1) oil or gas which was extracted from an oil or gas
well located in such foreign country, or
``(2) oil, gas, or a primary product of oil or gas which is
sold by the foreign corporation or a related person for use or
consumption within such country or is loaded in such country on
a vessel or aircraft as fuel for such vessel or aircraft.
Such term shall not include any foreign personal holding company income
(as defined in subsection (c)).''.
(3) Conforming amendments.--
(A) Section 952(c)(1)(B)(iii) is amended by
redesignating subclauses (III) and (IV) as subclauses
(IV) and (V), respectively, and by inserting after
subclause (II) the following new subclause:
``(III) foreign base company oil
related income.''.
(B) Section 954(b) is amended--
(i) by striking ``and the foreign base
company services income'' in paragraph (5) and
inserting ``the foreign base company services
income, and the foreign base company oil
related income'', and
(ii) by adding at the end the following new
paragraph:
``(6) Foreign base company oil related income not treated
as another kind of foreign base company income.--Income of a
corporation which is foreign base company oil related income
shall not be considered foreign base company income of such
corporation under paragraph (2) or (3) of subsection (a).''.
(h) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
taxable years of foreign corporations beginning after December
31, 2020, and to taxable years of United States shareholders in
which or with which such taxable years of foreign corporations
end.
(2) Repeal of reduced rate of tax; increase in deemed paid
credit.--The amendments made by subsection (b) and (d) shall
apply to taxable years beginning after December 31, 2020.
(3) Repeal of high tax exclusion for foreign base company
income and insurance income.--The amendment made by subsection
(e) shall apply to taxable years of foreign corporations
beginning after December 31, 2020, and to taxable years of
United States shareholders in which or with which such taxable
years of foreign corporations end.
(4) Elimination of carryback of foreign tax credit.--The
amendment made by subsection (f) shall apply to credits arising
in taxable years beginning after December 31, 2020.
SEC. 3. COUNTRY-BY-COUNTRY APPLICATION OF LIMITATION ON FOREIGN TAX
CREDIT BASED ON TAXABLE UNITS.
(a) In General.--Section 904 is amended by inserting after
subsection (d) the following new subsection:
``(e) Country-by-Country Application of Section Based on Taxable
Units.--
``(1) In general.--The provisions of subsections (a), (b),
(c), and (d) and sections 907 and 960 shall be applied
separately with respect to each country and possession by
taking into account the aggregate items properly attributable
or otherwise allocable to a taxable unit of the taxpayer which
is a tax resident of such country or possession.
``(2) Taxable units.--
``(A) In general.--Unless otherwise provided by the
Secretary, to the extent an item may be properly
attributable or otherwise allocable to more than one
taxable unit under paragraph (1), such item shall be
treated as properly attributable or otherwise allocable
to the lowest-tier taxable unit of the taxpayer to
which such item may be properly attributable or
otherwise allocable. No item shall be attributable or
otherwise allocable to more than one taxable unit of
the taxpayer.
``(B) Determination of taxable units.--Except as
otherwise provided by the Secretary, the taxable units
of a taxpayer are as follows:
``(i) In general.--The general taxable unit
of the taxpayer which is not otherwise
described in a separate clause of this
subparagraph.
``(ii) Foreign branches.--Each foreign
branch the activities of which are carried on
directly or indirectly (through one or more
pass-through entities) by the taxpayer.
``(iii) Controlled foreign corporations.--
Each controlled foreign corporation with
respect to which the taxpayer is a United
States shareholder.
``(iv) Branches of controlled foreign
corporations.--Each branch the activities of
which are carried on directly or indirectly
(through one or more pass-through entities) by
a controlled foreign corporation referred to in
clause (iii).
``(v) Interests in pass-through entities.--
``(I) In general.--Each interest in
a pass-through entity held directly or
indirectly by the taxpayer or a
controlled foreign corporation referred
to in clause (iii) if such entity is a
tax resident of a foreign country.
``(II) Certain interests held by
controlled foreign corporations.--Each
interest in a pass-through entity held
directly or indirectly by a controlled
foreign corporation referred to in
clause (iii) if such entity is a tax
resident of a foreign country or such
entity is treated as a corporation (or
other entity that is not fiscally
transparent) for purposes of the tax
law of a foreign country in which such
controlled foreign corporation is a tax
resident.
``(3) Tax resident.--For purposes of this subsection, a
taxable unit shall be treated as a tax resident of a country or
possession if such taxable unit is liable to tax under the tax
law of such country or possession as a resident.
``(4) Pass-through entity.--For purposes of this
subsection, the term `pass-through entity' means any
partnership and any other type of entity (other than a
corporation) identified by the Secretary as a pass-through
entity for purposes of this subsection.
``(5) Regulations.--The Secretary shall issue such
regulations or other guidance as the Secretary determines
necessary or appropriate to carry out the purposes of this
subsection, including regulations or other guidance--
``(A) for determining the country or possession
with respect to which any taxable unit is a tax
resident, including--
``(i) determining such country or
possession on the basis of location if such
taxable unit would not otherwise be a tax
resident of any country or possession, and
``(ii) ensuring that such taxable unit is a
tax resident of not more than 1 country or
possession,
``(B) applying this section to hybrid entities,
passive foreign investment companies, tiered
structures, and branches, including branches that do
not give rise to a taxable presence under the tax law
of the country where the branch is located, and
``(C) determining whether any entity is not
fiscally transparent within the meaning of paragraph
(2)(B)(v)(II).''.
(b) Application of Foreign Tax Credit Limitation With Respect to
Foreign Branches.--Section 904(d)(2)(J)(i) is amended--
(1) by striking ``qualified business units (as defined in
section 989(a)) in 1 or more foreign countries'' and inserting
``foreign branches described in section 904(e)(2)(B)(ii)'', and
(2) by striking ``a qualified business unit'' and inserting
``a foreign branch''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2020.
SEC. 4. LIMITATION ON DEDUCTION OF INTEREST BY DOMESTIC CORPORATIONS
WHICH ARE MEMBERS OF AN INTERNATIONAL FINANCIAL REPORTING
GROUP.
(a) In General.--Section 163 is amended by redesignating subsection
(n) as subsection (p) and by inserting after subsection (m) the
following new subsection:
``(n) Limitation on Deduction of Interest by Domestic Corporations
in International Financial Reporting Groups.--
``(1) In general.--In the case of any domestic corporation
which is a member of any international financial reporting
group, the deduction under this chapter for interest paid or
accrued during the taxable year shall not exceed the sum of--
``(A) the allowable percentage of 110 percent of
the excess (if any) of--
``(i) the amount of such interest so paid
or accrued, over
``(ii) the amount described in subparagraph
(B), plus
``(B) the amount of interest includible in gross
income of such corporation for such taxable year.
``(2) International financial reporting group.--
``(A) For purposes of this subsection, the term
`international financial reporting group' means, with
respect to any reporting year, any group of entities
which--
``(i) includes--
``(I) at least one foreign
corporation engaged in a trade or
business within the United States, or
``(II) at least one domestic
corporation and one foreign
corporation,
``(ii) prepares consolidated financial
statements with respect to such year, and
``(iii) reports in such statements average
annual gross receipts (determined in the
aggregate with respect to all entities which
are part of such group) for the 3-reporting-
year period ending with such reporting year in
excess of $100,000,000.
``(B) Rules relating to determination of average
gross receipts.--For purposes of subparagraph (A)(iii),
rules similar to the rules of section 448(c)(3) shall
apply.
``(3) Allowable percentage.--For purposes of this
subsection--
``(A) In general.--The term `allowable percentage'
means, with respect to any domestic corporation for any
taxable year, the ratio (expressed as a percentage and
not greater than 100 percent) of--
``(i) such corporation's allocable share of
the international financial reporting group's
reported net interest expense for the reporting
year of such group which ends in or with such
taxable year of such corporation, over
``(ii) such corporation's reported net
interest expense for such reporting year of
such group.
``(B) Reported net interest expense.--The term
`reported net interest expense' means--
``(i) with respect to any international
financial reporting group for any reporting
year, the excess of--
``(I) the aggregate amount of
interest expense reported in such
group's consolidated financial
statements for such taxable year, over
``(II) the aggregate amount of
interest income reported in such
group's consolidated financial
statements for such taxable year, and
``(ii) with respect to any domestic
corporation for any reporting year, the excess
of--
``(I) the amount of interest
expense of such corporation reported in
the books and records of the
international financial reporting group
which are used in preparing such
group's consolidated financial
statements for such taxable year, over
``(II) the amount of interest
income of such corporation reported in
such books and records.
``(C) Allocable share of reported net interest
expense.--With respect to any domestic corporation
which is a member of any international financial
reporting group, such corporation's allocable share of
such group's reported net interest expense for any
reporting year is the portion of such expense which
bears the same ratio to such expense as--
``(i) the EBITDA of such corporation for
such reporting year, bears to
``(ii) the EBITDA of such group for such
reporting year.
``(D) EBITDA.--
``(i) In general.--The term `EBITDA' means,
with respect to any reporting year, earnings
before interest, taxes, depreciation, and
amortization--
``(I) as determined in the
international financial reporting
group's consolidated financial
statements for such year, or
``(II) for purposes of subparagraph
(A)(i), as determined in the books and
records of the international financial
reporting group which are used in
preparing such statements if not
determined in such statements.
``(ii) Treatment of disregarded entities.--
The EBITDA of any domestic corporation shall
not fail to include the EBITDA of any entity
which is disregarded for purposes of this
chapter.
``(iii) Treatment of intra-group
distributions.--The EBITDA of any domestic
corporation shall be determined without regard
to any distribution received by such
corporation from any other member of the
international financial reporting group.
``(E) Special rules for non-positive ebitda.--
``(i) Non-positive group ebitda.--In the
case of any international financial reporting
group the EBITDA of which is zero or less,
paragraph (1) shall not apply to any member of
such group the EBITDA of which is above zero.
``(ii) Non-positive entity ebitda.--In the
case of any group member the EBITDA of which is
zero or less, paragraph (1) shall be applied
without regard to subparagraph (A) thereof.
``(4) Consolidated financial statement.--For purposes of
this subsection, the term `consolidated financial statement'
means any consolidated financial statement described in
paragraph (2)(A)(ii) if such statement is--
``(A) a financial statement which is certified as
being prepared in accordance with generally accepted
accounting principles, international financial
reporting standards, or any other comparable method of
accounting identified by the Secretary, and which is--
``(i) a 10-K (or successor form), or annual
statement to shareholders, required to be filed
with the United States Securities and Exchange
Commission,
``(ii) an audited financial statement which
is used for--
``(I) credit purposes,
``(II) reporting to shareholders,
partners, or other proprietors, or to
beneficiaries, or
``(III) any other substantial
nontax purpose,
but only if there is no statement described in
clause (i), or
``(iii) filed with any other Federal or
State agency for nontax purposes, but only if
there is no statement described in clause (i)
or (ii), or
``(B) a financial statement which--
``(i) is used for a purpose described in
subclause (I), (II), or (III) of subparagraph
(A)(ii), or
``(ii) filed with any regulatory or
governmental body (whether domestic or foreign)
specified by the Secretary,
but only if there is no statement described in
subparagraph (A).
``(5) Reporting year.--For purposes of this subsection, the
term `reporting year' means, with respect to any international
financial reporting group, the year with respect to which the
consolidated financial statements are prepared.
``(6) Application to certain entities.--
``(A) Partnerships.--Except as otherwise provided
by the Secretary in paragraph (7), this subsection and
subsection (o) shall apply to any partnership which is
a member of any international financial reporting group
under rules similar to the rules of section 163(j)(4).
``(B) Foreign corporations engaged in trade or
business within the united states.--Except as otherwise
provided by the Secretary in paragraph (7), any
deduction for interest paid or accrued by a foreign
corporation engaged in a trade or business within the
United States shall be limited in a manner consistent
with the principles of this subsection.
``(C) Consolidated groups.--For purposes of this
subsection, the members of any group that file (or are
required to file) a consolidated return with respect to
the tax imposed by chapter 1 for a taxable year shall
be treated as a single corporation.
``(7) Regulations.--The Secretary may issue such
regulations or other guidance as are necessary or appropriate
to carry out the purposes of this subsection.''.
(b) Carryforward of Disallowed Interest.--
(1) In general.--Section 163 is amended by inserting after
subsection (n), as added by subsection (a), the following new
subsection:
``(o) Carryforward of Certain Disallowed Interest.--The amount of
any interest not allowed as a deduction for any taxable year by reason
of subsection (j)(1) or (n)(1) (whichever imposes the lower limitation
with respect to such taxable year) shall be treated as interest (and as
business interest for purposes of subsection (j)(1)) paid or accrued in
the succeeding taxable year. Interest paid or accrued in any taxable
year (determined without regard to the preceding sentence) shall not be
carried past the fifth taxable year following such taxable year,
determined by treating interest as allowed as a deduction on a first-
in, first-out basis.''.
(2) Conforming amendments.--
(A) Section 163(j)(2) is amended to read as
follows:
``(2) Carryforward cross-reference.--For carryforward
treatment, see subsection (o).''.
(B) Section 163(j)(4)(B)(i)(I) is amended by
striking ``paragraph (2)'' and inserting ``subsection
(o)''.
(C) Section 381(c)(20) is amended to read as
follows:
``(20) Carryforward of disallowed interest.--The carryover
of disallowed interest described in section 163(o) to taxable
years ending after the date of distribution or transfer.''.
(D) Section 382(d)(3) is amended to read as
follows:
``(3) Application to carryforward of disallowed interest.--
The term `pre-change loss' shall include any carryover of
disallowed interest described in section 163(o) under rules
similar to the rules of paragraph (1).''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2020.
SEC. 5. MODIFICATIONS TO RULES RELATING TO INVERTED CORPORATIONS.
(a) In General.--Subsection (b) of section 7874 is amended to read
as follows:
``(b) Inverted Corporations Treated as Domestic Corporations.--
``(1) In general.--Notwithstanding section 7701(a)(4), a
foreign corporation shall be treated for purposes of this title
as a domestic corporation if--
``(A) such corporation would be a surrogate foreign
corporation if subsection (a)(2) were applied by
substituting `80 percent' for `60 percent', or
``(B) such corporation is an inverted domestic
corporation.
``(2) Inverted domestic corporation.--For purposes of this
subsection, a foreign corporation shall be treated as an
inverted domestic corporation if, pursuant to a plan (or a
series of related transactions)--
``(A) the entity completes after December 22, 2017,
the direct or indirect acquisition of--
``(i) substantially all of the properties
held directly or indirectly by a domestic
corporation, or
``(ii) substantially all of the assets of,
or substantially all of the properties
constituting a trade or business of, a domestic
partnership, and
``(B) after the acquisition, either--
``(i) more than 50 percent of the stock (by
vote or value) of the entity is held--
``(I) in the case of an acquisition
with respect to a domestic corporation,
by former shareholders of the domestic
corporation by reason of holding stock
in the domestic corporation, or
``(II) in the case of an
acquisition with respect to a domestic
partnership, by former partners of the
domestic partnership by reason of
holding a capital or profits interest
in the domestic partnership, or
``(ii) the management and control of the
expanded affiliated group which includes the
entity occurs, directly or indirectly,
primarily within the United States, and such
expanded affiliated group has significant
domestic business activities.
``(3) Exception for corporations with substantial business
activities in foreign country of organization.--A foreign
corporation described in paragraph (2) shall not be treated as
an inverted domestic corporation if after the acquisition the
expanded affiliated group which includes the entity has
substantial business activities in the foreign country in which
or under the law of which the entity is created or organized
when compared to the total business activities of such expanded
affiliated group. For purposes of subsection (a)(2)(B)(iii) and
the preceding sentence, the term `substantial business
activities' shall have the meaning given such term under
regulations in effect on December 22, 2017, except that the
Secretary may issue regulations increasing the threshold
percent in any of the tests under such regulations for
determining if business activities constitute substantial
business activities for purposes of this paragraph.
``(4) Management and control.--For purposes of paragraph
(2)(B)(ii)--
``(A) In general.--The Secretary shall prescribe
regulations for purposes of determining cases in which
the management and control of an expanded affiliated
group is to be treated as occurring, directly or
indirectly, primarily within the United States. The
regulations prescribed under the preceding sentence
shall apply to periods after December 22, 2017.
``(B) Executive officers and senior management.--
Such regulations shall provide that the management and
control of an expanded affiliated group shall be
treated as occurring, directly or indirectly, primarily
within the United States if substantially all of the
executive officers and senior management of the
expanded affiliated group who exercise day-to-day
responsibility for making decisions involving
strategic, financial, and operational policies of the
expanded affiliated group are based or primarily
located within the United States. Individuals who in
fact exercise such day-to-day responsibilities shall be
treated as executive officers and senior management
regardless of their title.
``(5) Significant domestic business activities.--For
purposes of paragraph (2)(B)(ii), an expanded affiliated group
has significant domestic business activities if at least 25
percent of--
``(A) the employees of the group are based in the
United States,
``(B) the employee compensation incurred by the
group is incurred with respect to employees based in
the United States,
``(C) the assets of the group are located in the
United States, or
``(D) the income of the group is derived in the
United States,
determined in the same manner as such determinations are made
for purposes of determining substantial business activities
under regulations referred to in paragraph (3) as in effect on
December 22, 2017, but applied by treating all references in
such regulations to `foreign country' and `relevant foreign
country' as references to `the United States'. The Secretary
may issue regulations decreasing the threshold percent in any
of the tests under such regulations for determining if business
activities constitute significant domestic business activities
for purposes of this paragraph.''.
(b) Conforming Amendments.--
(1) Clause (i) of section 7874(a)(2)(B) is amended by
striking ``after March 4, 2003,'' and inserting ``after March
4, 2003, and before December 23, 2017,''.
(2) Subsection (c) of section 7874 is amended--
(A) in paragraph (2)--
(i) by striking ``subsection
(a)(2)(B)(ii)'' and inserting ``subsections
(a)(2)(B)(ii) and (b)(2)(B)(i)''; and
(ii) by inserting ``or (b)(2)(A)'' after
``(a)(2)(B)(i)'' in subparagraph (B);
(B) in paragraph (3), by inserting ``or
(b)(2)(B)(i), as the case may be,'' after
``(a)(2)(B)(ii)'';
(C) in paragraph (5), by striking ``subsection
(a)(2)(B)(ii)'' and inserting ``subsections
(a)(2)(B)(ii) and (b)(2)(B)(i)''; and
(D) in paragraph (6), by inserting ``or inverted
domestic corporation, as the case may be,'' after
``surrogate foreign corporation''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years ending after December 22, 2017.
SEC. 6. TREATMENT OF FOREIGN CORPORATIONS MANAGED AND CONTROLLED IN THE
UNITED STATES AS DOMESTIC CORPORATIONS.
(a) In General.--Section 7701 is amended by redesignating
subsection (p) as subsection (q) and by inserting after subsection (o)
the following new subsection:
``(p) Certain Corporations Managed and Controlled in the United
States Treated as Domestic for Income Tax.--
``(1) In general.--Notwithstanding subsection (a)(4), in
the case of a corporation described in paragraph (2) if--
``(A) the corporation would not otherwise be
treated as a domestic corporation for purposes of this
title, but
``(B) the management and control of the corporation
occurs, directly or indirectly, primarily within the
United States,
then, solely for purposes of chapter 1 (and any other provision
of this title relating to chapter 1), the corporation shall be
treated as a domestic corporation.
``(2) Corporation described.--
``(A) In general.--A corporation is described in
this paragraph if--
``(i) the stock of such corporation is
regularly traded on an established securities
market, or
``(ii) the aggregate gross assets of such
corporation (or any predecessor thereof),
including assets under management for
investors, whether held directly or indirectly,
at any time during the taxable year or any
preceding taxable year is $50,000,000 or more.
``(B) General exception.--A corporation shall not
be treated as described in this paragraph if--
``(i) such corporation was treated as a
corporation described in this paragraph in a
preceding taxable year,
``(ii) such corporation--
``(I) is not regularly traded on an
established securities market, and
``(II) has, and is reasonably
expected to continue to have, aggregate
gross assets (including assets under
management for investors, whether held
directly or indirectly) of less than
$50,000,000, and
``(iii) the Secretary grants a waiver to
such corporation under this subparagraph.
``(3) Management and control.--
``(A) In general.--The Secretary shall prescribe
regulations for purposes of determining cases in which
the management and control of a corporation is to be
treated as occurring primarily within the United
States.
``(B) Executive officers and senior management.--
Such regulations shall provide that--
``(i) the management and control of a
corporation shall be treated as occurring
primarily within the United States if
substantially all of the executive officers and
senior management of the corporation who
exercise day-to-day responsibility for making
decisions involving strategic, financial, and
operational policies of the corporation are
located primarily within the United States, and
``(ii) individuals who are not executive
officers and senior management of the
corporation (including individuals who are
officers or employees of other corporations in
the same chain of corporations as the
corporation) shall be treated as executive
officers and senior management if such
individuals exercise the day-to-day
responsibilities of the corporation described
in clause (i).
``(C) Corporations primarily holding investment
assets.--Such regulations shall also provide that the
management and control of a corporation shall be
treated as occurring primarily within the United States
if--
``(i) the assets of such corporation
(directly or indirectly) consist primarily of
assets being managed on behalf of investors,
and
``(ii) decisions about how to invest the
assets are made in the United States.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning on or after the date which is 2 years
after the date of the enactment of this Act, whether or not regulations
are issued under section 7701(p)(3) of the Internal Revenue Code of
1986, as added by this section.
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