[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 1605 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 1605
To amend the Internal Revenue Code of 1986 to modify certain provisions
relating to the taxation of international entities.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 6, 2025
Mr. Tillis introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to modify certain provisions
relating to the taxation of international entities.
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 ``International
Competition for American Jobs 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.
SEC. 2. PERMANENT EXTENSION OF LOOK-THRU RULE FOR CONTROLLED FOREIGN
CORPORATIONS.
(a) In General.--Section 954(c)(6)(C) is amended by striking ``and
before January 1, 2026,''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years of foreign corporations beginning after December 31,
2025, and to taxable years of United States shareholders with or within
which such taxable years of foreign corporations end.
SEC. 3. MODIFICATION OF DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME
AND GLOBAL INTANGIBLE LOW-TAXED INCOME.
(a) In General.--Section 250(a) is amended to read as follows:
``(a) Allowance of Deduction.--In the case of a domestic
corporation for any taxable year, there shall be allowed as a deduction
an amount equal to the sum of--
``(1) 37.5 percent of the foreign-derived intangible income
of such domestic corporation for such taxable year, plus
``(2) 50 percent of--
``(A) the global intangible low-taxed income amount
(if any) which is included in the gross income of such
domestic corporation under section 951A for such
taxable year, and
``(B) the amount treated as a dividend received by
such corporation under section 78 which is attributable
to the amount described in subparagraph (A).''.
(b) Deduction Not To Apply Against Dividends Received Deduction
Limitation.--Section 246(b)(1) is amended by striking ``subsection (a)
and (b) of section 245, and section 250'' the first place it appears
and inserting ``and subsection (a) and (b) of section 245''.
(c) Deduction Taken Into Account in Determining Net Operating Loss
Deduction.--Section 172(d) is amended by striking paragraph (9).
(d) Expense Apportionment Limited to Directly Related Expenses .--
Section 250(b)(3)(A)(ii) is amended to read as follows:
``(ii) expenses and deductions (including
taxes) directly related to such gross
income.''.
(e) Deduction for Foreign-Derived Deduction Eligible Income.--
(1) In general.--Section 250(a)(1), as amended by
subsection (a), is amended by striking ``foreign-derived
intangible income'' and inserting ``foreign-derived deduction
eligible income''.
(2) Conforming amendments.--
(A) Section 250(b), as amended by subsection (c),
is amended--
(i) by striking paragraphs (1) and (2),
(ii) by redesignating paragraphs (4) and
(5) as paragraphs (1) and (2), respectively,
and by moving such paragraphs before paragraph
(3),
(iii) in paragraph (2)(B)(ii), as so
redesignated, by striking ``paragraph (4)(B)''
and inserting ``paragraph (1)(B)'', and
(iv) by striking ``Intangible'' in the
heading thereof and inserting ``Deduction
Eligible''.
(B)(i) The heading for section 250 is amended by
striking ``intangible'' in the heading thereof and
inserting ``deduction eligible''.
(ii) The item relating to section 250 in the table
of sections for part VIII of subchapter B of chapter 1
is amended by striking ``intangible'' and inserting
``deduction eligible''.
(f) Look-Thru for Interest Payments.--Section 250(b)(2), as
redesignated under subsection (e), is amended by adding at the end the
following:
``For purposes of this subsection, foreign-derived deduction
eligible income shall include interest paid by a controlled
foreign corporation to corporation that is a United States
shareholder with respect to such foreign corporation if such
controlled foreign corporation is related (within the meaning
of section 954(d)) to such United States shareholder and such
interest is an amount which is described in section
951A(c)(2)(A)(ii) with respect to such controlled foreign
corporation. To the extent provided by the Secretary in
regulations, the preceding sentence shall not apply to interest
paid by a controlled foreign corporation to a related United
States shareholder if such interest is directly related to
interest expense of such shareholder (or another related
person).''.
(g) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 4. MODIFICATIONS TO BASE EROSION MINIMUM TAX.
(a) Base Erosion Minimum Tax Amount Determined Without Regard to
Credits.--
(1) In general.--Section 59A(b)(1)(B) is amended to read as
follows:
``(B) an amount equal to the regular tax liability
(as defined in section 26(b)) of the taxpayer for the
taxable year.''.
(2) Conforming amendment.--Section 59A(b) is amended by
striking paragraph (4).
(b) Application of General Business Credit Against Beat.--The
second sentence of section 38(c)(1) is amended by striking ``and the
tax imposed by section 55'' and inserting ``, the tax imposed by
section 55, and the tax imposed by section 59A''.
(c) Elimination of Modifications for Taxable Years After 2025.--
(1) In general.--Section 59A(b) is amended by striking
paragraph (2) and redesignating paragraph (3) as paragraph (2).
(2) Conforming amendments.--
(A) Section 59A(b)(1) is amended by striking
``paragraphs (2) and (3)'' and inserting ``paragraph
(2)''.
(B) Paragraph (2) of section 59A(b), as
redesignated by paragraph (1), is amended by striking
``under paragraphs (1)(A) and (2)(A) shall each be
increased'' and inserting ``under paragraph (1)(A)
shall be increased''.
(C) Section 59A(e)(1)(C) is amended by striking
``subsection (b)(3)(B)'' and inserting ``subsection
(b)(2)(B)''.
(d) Expansion and Consolidation of Rules To Exempt Certain Payments
From Treatment as Base Erosion Payments.--
(1) In general.--Section 59A is amended by redesignating
subsection (i) as subsection (j) and by inserting after
subsection (h) the following new subsection:
``(i) Certain Payments Not Treated as Base Erosion Payments.--
``(1) Exception for payments on which tax is imposed.--
``(A) In general.--An amount shall not be treated
as a base erosion payment if tax is (or was at the time
of payment or accrual) imposed by this chapter with
respect to such amount (other than by this section).
``(B) Treatment of certain deductions.--For
purposes of subparagraph (A), tax shall be treated as
imposed by this chapter without regard to any deduction
allowed under part VIII of subchapter B.
``(C) Application of certain rules.--The amount not
treated as a base erosion payment by reason of this
paragraph shall be determined under rules similar to
the rules of section 163(j)(5) (as in effect before the
date of the enactment of Public Law 115-97).
``(2) Exception for certain payments subject to sufficient
foreign tax.--
``(A) In general.--An amount shall not be treated
as a base erosion payment if the taxpayer establishes
to the satisfaction of the Secretary that such amount
was made to a foreign person which is a related party
of the taxpayer that is subject to an effective rate of
foreign income tax (as defined in section 904(d)(2)(F))
which is not less than 18.9 percent.
``(B) Certain payments to related parties.--To the
extent provided by the Secretary in regulations, an
amount paid to a foreign person which is a related
party of the taxpayer shall be treated as paid to
another foreign person which is a related party of the
taxpayer if such second foreign person is subject to an
effective rate of foreign income tax (as defined in
section 904(d)(2)(F)) which is less than 18.9 percent,
to the extent the amount so paid directly or indirectly
funds a payment to such second foreign person.
``(C) Determination on basis of applicable
financial statements.--Except as otherwise provided by
the Secretary under subparagraph (D), the effective
rate of foreign income tax with respect to any amount
may be established on the basis of applicable financial
statements (as defined in section 451(b)(3)).
``(D) Regulations.--The Secretary shall issue such
regulations or other guidance as may be necessary or
appropriate to carry out the purposes of this
paragraph, including regulations or other guidance
providing procedures for determining the effective rate
of foreign income tax to which any amount is subject.
Such procedures may require that any transaction or
series of transactions among multiple parties be
recharacterized as one or more transactions directly
among any 2 or more of such parties where the Secretary
determines that such recharacterization is appropriate
to carry out, or prevent avoidance of, the purposes of
this section.
``(3) Exception for certain amounts with respect to
services.--Subsections (d)(1) and (d)(2) shall not apply to so
much of any amount paid or accrued by a taxpayer for services
as does not exceed the total services cost of such services.
The preceding sentence shall not apply unless such services
meet the requirements for eligibility for use of the services
cost method under section 482 (determined without regard to the
requirement that the services not contribute significantly to
fundamental risks of business success or failure).''.
(2) Conforming amendment.--Section 59A(d) is amended by
striking paragraph (5).
(e) Other Modifications.--
(1) Section 59A(b)(3)(B)(ii) is amended by striking
``registered securities dealer'' and inserting ``securities
dealer registered''.
(2) Section 59A(h)(2)(B) is amended by striking ``section
6038B(b)(2)'' and inserting ``section 6038A(b)(2)''.
(3) Section 59A(j)(2), as redesignated by subsection (c),
is amended by striking ``subsection (g)(3)'' and inserting
``subsection (h)(3)''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 5. MODIFICATION OF FOREIGN TAX CREDIT LIMITATION BASKETS.
(a) Modification of Foreign Tax Credit Limitation Baskets.--
(1) In general.--Section 904(d)(1) is amended by striking
subparagraphs (A) and (B) and by redesignating subparagraphs
(C) and (D) as subparagraphs (A) and (B), respectively.
(2) Conforming amendments.--
(A) Section 904(d)(2)(A)(ii) is amended by striking
``income described in paragraph (1)(A), foreign branch
income, and''.
(B) Section 904(c) is amended by striking the last
sentence.
(C)(i) Section 904(d)(2) is amended by striking
subparagraph (J) and by redesignating subparagraph (K)
as subparagraph (J).
(ii) Section 250(b)(3)(A)(i)(VI) is amended to read
as follows:
``(VI) the business profits of such
corporation which are attributable
(under rules established by the
Secretary) to 1 or more qualified
business units (as defined in section
989(a)) in 1 or more foreign countries,
over''.
(D) Section 904(d)(2)(J), as redesignated by
subparagraph (C)(i), is amended by striking ``2007''
each place it appears in the text and in the heading
and inserting ``2026''.
(3) Transition rule.--The Secretary of the Treasury (or the
Secretary's delegate) shall establish rules for the application
of section 960(c)(2) with respect to categories of income
described in subparagraphs (A) and (B) of section 904(d)(2) (as
in effect for taxable years beginning before January 1, 2026).
(b) Rules for Allocation of Certain Deductions to Foreign Source
Global Intangible Low-taxed Income for Purposes of Foreign Tax Credit
Limitation.--Section 904(b) is amended by adding at the end the
following new paragraph:
``(5) Deductions treated as allocable to foreign source
global intangible low-taxed income.--In the case of a domestic
corporation and solely for purposes of the application of
subsection (a) with respect to amounts includible inc gross
income by reason of section 951A (other than passive category
income), the taxpayer's taxable income from sources without the
United States shall be determined--
``(A) by allocating and apportioning any deduction
allowed under section 250(a)(2) (and any deduction
allowed under section 164(a)(3) for taxes imposed on
amounts described in section 250(a)(2)) to such income,
and
``(B) by allocating and apportioning any other
deduction to such income only if the Secretary
determines that such deduction is directly allocable to
such income.
Any deduction which would (but for subparagraph (B)) have been
allocated or apportioned to such income shall only be allocated
or apportioned to income which is from sources within the
United States.''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2025.
(2) Modification of foreign tax credit carryback and
carryforward.--The amendment made by subsection (a)(2)(B) shall
apply to taxes paid or accrued in taxable years beginning after
December 31, 2025.
SEC. 6. RESTORATION OF LIMITATION ON DOWNWARD ATTRIBUTION OF STOCK
OWNERSHIP IN APPLYING CONSTRUCTIVE OWNERSHIP RULES.
(a) In General.--Section 958(b) is amended--
(1) by inserting after paragraph (3) the following:
``(4) Subparagraphs (A), (B), and (C) of section 318(a)(3)
shall not be applied so as to consider a United States person
as owning stock which is owned by a person who is not a United
States person.'', and
(2) by striking ``Paragraph (1)'' in the last sentence and
inserting ``Paragraphs (1) and (4)''.
(b) Foreign Controlled United States Shareholders.--Subpart F of
part III of subchapter N of chapter 1 is amended by inserting after
section 951A the following new section:
``SEC. 951B. AMOUNTS INCLUDED IN GROSS INCOME OF FOREIGN CONTROLLED
UNITED STATES SHAREHOLDERS.
``(a) In General.--In the case of any foreign controlled United
States shareholder of a foreign controlled foreign corporation--
``(1) this subpart (other than sections 951A, 951(b), and
957) shall be applied with respect to such shareholder
(separately from, and in addition to, the application of this
subpart without regard to this section)--
``(A) by substituting `foreign controlled United
States shareholder' for `United States shareholder'
each place it appears therein, and
``(B) by substituting `foreign controlled foreign
corporation' for `controlled foreign corporation' each
place it appears therein, and
``(2) section 951A shall be applied with respect to such
shareholder--
``(A) by treating each reference to `United States
shareholder' in such section as including a reference
to such shareholder, and
``(B) by treating each reference to `controlled
foreign corporation' in such section as including a
reference to such foreign controlled foreign
corporation.
``(b) Foreign Controlled United States Shareholder.--For purposes
of this section, the term `foreign controlled United States
shareholder' means, with respect to any foreign corporation, any United
States person which would be a United States shareholder with respect
to such foreign corporation if--
``(1) section 951(b) were applied by substituting `more
than 50 percent' for `10 percent or more', and
``(2) section 958(b) were applied without regard to
paragraph (4) thereof.
``(c) Foreign Controlled Foreign Corporation.--For purposes of this
section, the term `foreign controlled foreign corporation' means a
foreign corporation, other than a controlled foreign corporation, which
would be a controlled foreign corporation if section 957(a) were
applied--
``(1) by substituting `foreign controlled United States
shareholders' for `United States shareholders', and
``(2) by substituting `section 958(b) (other than paragraph
(4) thereof)' for `section 958(b)'.
``(d) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
purposes of this section, including regulations or other guidance--
``(1) to treat a foreign controlled United States
shareholder or a foreign controlled foreign corporation as a
United States shareholder or as a controlled foreign
corporation, respectively, for purposes of provisions of this
title other than this subpart, and
``(2) to prevent the avoidance of the purposes of this
section.''.
(c) Clerical Amendment.--The table of sections for subpart F of
part III of subchapter N of chapter 1 is amended by inserting after the
item relating to section 951A the following new item:
``Sec. 951B. Amounts included in gross income of foreign controlled
United States shareholders.''.
(d) Effective Date.--The amendments made by this section shall
apply to--
(1) the last taxable year of foreign corporations beginning
before January 1, 2026, and each subsequent taxable year of
such foreign corporations, and
(2) taxable years of United States persons in which or with
which such taxable years of foreign corporations end.
(e) No Inference.--The amendments made by this section shall not be
construed to create any inference with respect to the proper
application of any provision of the Internal Revenue Code of 1986 with
respect to taxable years beginning before the taxable years to which
such amendments apply.
SEC. 7. CARRYOVER OF NET CFC TESTED LOSS.
(a) In General.--Section 951A(c) is amended by adding at the end
the following new paragraph:
``(3) Carryover of net cfc tested loss.--
``(A) In general.--If the amount described in
paragraph (1)(B) with respect to any United States
shareholder for any taxable year of such United States
shareholder (determined after the application of this
paragraph with respect to amounts arising in preceding
taxable years) exceeds the amount described in
paragraph (1)(A) with respect to such shareholder of
such taxable year, the amount otherwise described in
paragraph (1)(B) with respect to such shareholder for
the succeeding taxable year shall be increased by the
amount of such excess.
``(B) Proper adjustment in allocations of global
intangible low-taxed income to controlled foreign
corporations.--Proper adjustments shall be made in the
application of subsection (f)(2)(B) to take into
account any decrease in global intangible low-taxed
income by reason of the application of subparagraph
(A).''.
(b) Application of Rules With Respect to Ownership Changes.--
Section 382(d) is amended by adding at the end the following new
paragraph:
``(4) Application to carryover of net cfc tested loss.--The
term `pre-change loss' shall include any excess carried over
under section 951A(c)(3) under rules similar to the rules of
paragraph (1).''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning after December
31, 2025, and to taxable years of United States shareholders in which
or with which such taxable years of foreign corporations end.
SEC. 8. REDETERMINATION OF FOREIGN TAXES AND RELATED CLAIMS.
(a) In General.--Section 905(c) is amended--
(1) in paragraph (1), by striking ``or'' at the end of
subparagraph (B) and by inserting after subparagraph (C) the
following new subparagraphs:
``(D) the taxpayer makes a timely change in its
choice to claim a credit or deduction for taxes paid or
accrued, or
``(E) there is any other change in the amount, or
treatment, of taxes, which affects the taxpayer's tax
liability under this chapter,'',
(2) in paragraph (2)(B)(i), by inserting ``, except as
otherwise provided by the Secretary,'' after ``shall'', and
(3) by striking ``Accrued'' in the heading thereof.
(b) Modification to Time for Claiming Credit or Deduction.--Section
901(a) is amended by striking the second sentence and inserting the
following: ``Such choice for any taxable year may be made or changed at
any time before the expiration of the applicable period prescribed by
section 6511 for making a claim for credit or refund of an overpayment
of the tax imposed by this chapter for such taxable year that is
attributable to such amounts.''.
(c) Modification to Special Period of Limitation.--Section
6511(d)(3) is amended--
(1) in subparagraph (A)--
(A) by inserting ``a change in the liability for''
before ``any taxes paid or accrued'',
(B) by striking ``actually paid'' and inserting
``paid (or deemed paid under section 960)'', and
(C) by inserting ``change in the liability for''
before ``foreign taxes'' in the heading thereof, and
(2) in subparagraph (B), by striking ``the allowance of a
credit for the taxes'' and inserting ``the allowance of an
additional credit by reason of the change in liability for the
taxes''.
(d) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
taxes paid or accrued in taxable years beginning after December
31, 2025.
(2) Certain changes.--The amendments made by paragraphs (1)
and (3) of subsection (a) shall apply to changes that occur on
or after the date which is 60 days after the date of the
enactment of this Act.
(3) Modification to special period of limitation.--The
amendments made by subsection (c) shall apply to taxes paid,
accrued, or deemed paid in taxable years beginning after
December 31, 2025.
SEC. 9. REPEAL OF FOREIGN TAX CREDIT HAIRCUT FOR GLOBAL INTANGIBLE LOW-
TAXED INCOME.
(a) In General.--Section 960(d)(1) is amended by striking ``80
percent of''.
(b) Conforming Amendment.--Section 78 is amended by striking
``(determined without regard to the phrase `80 percent of' in
subsection (d)(1) thereof)''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning after December
31, 2025, and to taxable years of United States shareholders in which
or with which such taxable years of foreign corporations end.
SEC. 10. APPLICATION OF FOREIGN-SOURCE DIVIDEND DEDUCTION TO AMOUNTS
RECEIVED BY CONTROLLED FOREIGN CORPORATIONS.
(a) In General.--Section 245A is amended by redesignating
subsection (g) as subsection (h) and by inserting after subsection (f)
the following new subsection:
``(g) Application to Certain Dividends Received by Controlled
Foreign Corporations From Specified 10-Percent Owned Foreign
Corporations.--Except as otherwise provided by the Secretary in
regulations or other guidance, if a controlled foreign corporation with
respect to which a domestic corporation is a United States shareholder
receives a dividend (other than a hybrid dividend) from a specified 10-
percent owned foreign corporation with respect to which such domestic
corporation is also a United States shareholder, the amount includible
in the gross income of such United States shareholder under section
951(a)(1)(A) by reason of the foreign-source portion of such dividend
shall be treated for purposes of this section in the same manner as if
such amount were the foreign-source portion of a dividend received by
such United States shareholder from such specified 10-percent owned
foreign corporation.''.
(b) Effective Date.--The amendments made by this section shall
apply to distributions made in taxable years of foreign corporations
beginning after December 31, 2025, and to taxable years of United
States shareholders in which or with which such taxable years of
foreign corporations end.
(c) No Inference.--Nothing in the amendments made by subsection (a)
shall be construed to create any inference with respect to the
treatment of dividends described in section 245A(g) of the Internal
Revenue Code of 1986 (as added by subsection (a)) in taxable years
beginning before the taxable year described in subsection (b).
SEC. 11. ELIMINATION OF INCLUSION OF FOREIGN BASE COMPANY SALES INCOME
AND FOREIGN BASE COMPANY SERVICES INCOME.
(a) Repeal.--Subsection (a) of section 954 is amended--
(1) by striking ``the sum of'' and all that follows through
``the foreign personal holding company income'' in paragraph
(1) and inserting ``the foreign personal holding company
income'',
(2) by striking the comma after ``subsection (c) and
reduced as provided in subsection (b)(5))'' and inserting a
period, and
(3) by striking paragraphs (2) and (3).
(b) Conforming Amendments.--
(1)(A) Section 954(d) is amended to read as follows:
``(d) Related Person Defined.--For purposes of this section, a
person is a related person with respect to a controlled foreign
corporation, if--
``(1) such person is an individual, corporation,
partnership, trust, or estate which controls, or is controlled
by, the controlled foreign corporation, or
``(2) such person is a corporation, partnership, trust, or
estate which is controlled by the same person or persons which
control the controlled foreign corporation.
For purposes of the preceding sentence, control means, with respect to
a corporation, the ownership, directly or indirectly, of stock
possessing more than 50 percent of the total voting power of all
classes of stock entitled to vote or of the total value of stock of
such corporation. In the case of a partnership, trust, or estate,
control means the ownership, directly or indirectly, of more than 50
percent (by value) of the beneficial interests in such partnership,
trust, or estate. For purposes of this subsection, rules similar to the
rules of section 958 shall apply.''.
(B) The following sections are amended by striking
``954(d)(3)'' each place it appears and inserting ``954(d)'':
(i) Section 162(r)(6)(B)(ii).
(ii) Section 250(b)(2)(D) (as redesignated by
section 3).
(iii) Section 267A(b)(2).
(iv) Section 904(d)(2)(I).
(v) Section 951A(c)(2)(A)(i)(IV).
(vi) Section 953.
(vii) Section 956(c)(2)(L)(ii)(II).
(viii) Section 958(b).
(ix) Section 971(f).
(x) Section 988(a)(3)(C).
(xi) Section 1297(b)(2).
(xii) Subsections (d)(3)(A) and (e)(2)(B)(i) of
section 1298.
(xiii) Section 1471(e)(2).
(xiv) Section 3121(z)(2).
(C) Section 954(h)(5)(E) is amended by striking
``subsection (d)(3)'' and inserting ``subsection (d)''.
(D) Subparagraphs (A) and (B) of section 954(i)(2) are each
amended by striking ``subsection (d)(3)'' and inserting
``subsection (d)''.
(2) Section 954 is amended by striking subsections (e) and
(g).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning after December
31, 2025, and to taxable years of United States shareholders with or
within which such taxable years of foreign corporations end.
SEC. 12. CORPORATIONS EXEMPT FROM SUBPART F INCLUSION FOR INVESTMENT IN
UNITED STATES PROPERTY.
(a) In General.--Section 956(a) is amended by inserting ``(other
than a corporation)'' after ``United States shareholder'' in the matter
preceding paragraph (1).
(b) Effective Date.--The amendment made by this section shall apply
to taxable years of controlled foreign corporations ending after
December 31, 2025, and to taxable years of United States shareholders
with or within which such taxable years of controlled foreign
corporations end.
SEC. 13. OTHER MODIFICATIONS RELATING TO FOREIGN TAX CREDIT.
(a) Creditable Taxes.--Section 901 is amended by redesignating
subsection (n) as subsection (o) and by inserting after subsection (m)
the following new subsection:
``(n) Determination of Income Taxes.--For purposes of this section,
a foreign tax shall be treated as an income tax if the predominant
character of the tax is an income tax. The determinations made under
the preceding sentence and under section 903 shall be made without
regard to whether the income or other base of the tax bears a nexus to
the jurisdiction imposing the tax.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 14. SPECIAL RULES FOR TRANSFERS OF INTANGIBLE PROPERTY FROM
CONTROLLED FOREIGN CORPORATIONS TO UNITED STATES
SHAREHOLDERS.
(a) In General.--Subpart F of part III of subchapter N of chapter 1
is amended by adding at the end the following new section:
``SEC. 966. TRANSFERS OF INTANGIBLE PROPERTY TO UNITED STATES
SHAREHOLDERS.
``(a) In General.--In the case of any distribution of intangible
property which is held by a controlled foreign corporation on the date
of enactment of this section and which is described in subsection (b)--
``(1) for purposes of part I of subchapter C and any other
provision of this title specified by the Secretary, the fair
market value of such property on the date of such distribution
shall be treated as not exceeding the adjusted basis of such
property immediately before such distribution, and
``(2) if the distribution is not a dividend--
``(A) the United States shareholder's adjusted
basis in the stock of the controlled foreign
corporation with respect to which such distribution is
made shall be increased by the amount (if any) of such
distribution which would (but for this subsection) be
includible in gross income, and
``(B) the adjusted basis of such property in the
hands of such United States shareholder immediately
after such distribution shall be such adjusted basis
immediately before such distribution reduced by the
amount of the increase described in subparagraph (A).
``(b) Distribution.--A distribution is described in this section if
the distribution is--
``(1) received by a domestic corporation from a controlled
foreign corporation with respect to which such corporation is a
United States shareholder, and
``(2) made by the controlled foreign corporation before the
last day of the third taxable year of the controlled foreign
corporation beginning after December 31, 2025.
``(c) Intangible Property.--For purposes of this subsection, the
term `intangible property' has the meaning given such term by section
367(d)(4) or which is computer software described in section
197(e)(3)(B).''.
(b) Conforming Amendments.--
(1) Section 197(f)(2)(B)(i) is amended by inserting
``966(a),'' after ``731,''.
(2) The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by adding at the end the
following new item:
``Sec. 966. Transfers of intangible property to United States
shareholders.''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions made in taxable years of foreign corporations
beginning after December 31, 2025, and to taxable years of United
States shareholders in which or with which such taxable years of
foreign corporations end.
SEC. 15. GLOBAL INTANGIBLE LOW-TAXED INCOME DETERMINED WITHOUT REGARD
TO CERTAIN INCOME DERIVED FROM SERVICES PERFORMED IN THE
VIRGIN ISLANDS.
(a) In General.--Section 951A(c)(2)(A)(i) is amended by striking
``and'' at the end of subclause (IV), by striking the period at the end
of subclause (V) and inserting ``, and'', and by adding at the end the
following new subclause:
``(VI) in the case of any specified
United States shareholder, any
qualified Virgin Islands services
income.''.
(b) Definitions and Special Rules.--Section 951A(c)(2) is amended
by adding at the end the following new subparagraph:
``(C) Provisions related to qualified virgin
islands services income.--For purposes of subparagraph
(A)(i)(VI)--
``(i) Qualified virgin islands services
income.--The term `qualified Virgin Islands
services income' means any gross income which
satisfies all of the following requirements:
``(I) Such gross income is
compensation for labor or personal
services (within the meaning of section
862(a)(3)) performed in the Virgin
Islands by a corporation formed under
the laws of the Virgin Islands.
``(II) Such gross income is
attributable to services performed from
within the Virgin Islands by
individuals for the benefit of such
corporation.
``(III) Such gross income is
effectively connected with the conduct
of a trade or business within the
Virgin Islands.
``(ii) Specified united states
shareholder.--The term `specified United States
shareholder' means any United States
shareholder which is--
``(I) an individual, trust, or
estate, or
``(II) a closely held C corporation
(as defined in section 469(j)(1)) if
such corporation acquired its direct or
indirect equity interest in the foreign
corporation which derived the qualified
Virgin Islands services income before
December 31, 2023.
``(iii) Regulations.--The Secretary shall
prescribe such regulations or other guidance as
may be necessary or appropriate to carry out
this subparagraph and subparagraph (A)(i)(VI),
including regulations or other guidance to
prevent the abuse of such subparagraphs.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning after the date
of the enactment of this Act, and to taxable years of United States
shareholders with or within which such taxable years of foreign
corporations end.
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