[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 995 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 995
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
February 5, 2025
Mr. Doggett (for himself, Ms. Adams, Ms. Ansari, Ms. Balint, Ms.
Barragan, Mrs. Beatty, Mr. Bishop, Ms. Bonamici, Mr. Boyle of
Pennsylvania, Ms. Brown, Ms. Brownley, Ms. Budzinski, Mr. Carson, Mr.
Carter of Louisiana, Mr. Casar, Mr. Case, Ms. Chu, Ms. Clarke of New
York, Mr. Cleaver, Mr. Cohen, Mr. Conaway, Ms. Crockett, Mr. Crow, Mr.
Davis of Illinois, Mr. Davis of North Carolina, Ms. Dean of
Pennsylvania, Mrs. McClain Delaney, Ms. DeLauro, Ms. DelBene, Mr.
Deluzio, Mr. DeSaulnier, Ms. Dexter, Mrs. Dingell, Ms. Escobar, Mr.
Espaillat, Mr. Evans of Pennsylvania, Ms. Leger Fernandez, Mr. Foster,
Mrs. Foushee, Ms. Lois Frankel of Florida, Mr. Frost, Mr. Garamendi,
Mr. Garcia of Illinois, Mr. Garcia of California, Ms. Garcia of Texas,
Mr. Golden of Maine, Mr. Goldman of New York, Mr. Gomez, Mr. Green of
Texas, Mr. Grijalva, Mrs. Hayes, Mr. Horsford, Ms. Hoyle of Oregon, Mr.
Huffman, Mr. Ivey, Mr. Jackson of Illinois, Ms. Jayapal, Mr. Johnson of
Georgia, Ms. Kaptur, Ms. Kelly of Illinois, Mr. Kennedy of New York,
Mr. Khanna, Mr. Landsman, Mr. Larson of Connecticut, Ms. Lee of
Pennsylvania, Mr. Lieu, Mr. Lynch, Mr. Magaziner, Mrs. McBath, Ms.
McBride, Ms. McCollum, Mr. McGarvey, Mr. McGovern, Mr. Meeks, Mr.
Menendez, Ms. Meng, Mr. Mfume, Mr. Moulton, Mr. Mrvan, Mr. Nadler, Mr.
Neguse, Mr. Norcross, Ms. Norton, Ms. Ocasio-Cortez, Ms. Omar, Mr.
Pallone, Ms. Perez, Ms. Pingree, Mr. Pocan, Ms. Pressley, Mrs. Ramirez,
Mr. Raskin, Mr. Riley of New York, Ms. Ross, Mr. Ryan, Ms. Salinas, Ms.
Scanlon, Ms. Schakowsky, Mr. Sherman, Mr. Smith of Washington, Mr.
Soto, Ms. Stansbury, Ms. Stevens, Mrs. Sykes, Mr. Takano, Mr. Thanedar,
Mr. Thompson of Mississippi, Ms. Titus, Ms. Tlaib, Ms. Tokuda, Mr.
Tonko, Mrs. Torres of California, Mrs. Trahan, Mr. Turner of Texas, Mr.
Vargas, Ms. Velazquez, Ms. Wasserman Schultz, Ms. Waters, Mrs. Watson
Coleman, Ms. Williams of Georgia, and Ms. Wilson of Florida) 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) Country-by-Country Application of Section Based on CFC Taxable
Units.--Section 951A is amended by adding at the end the following new
subsection:
``(g) Country-by-Country Application of Section Based on CFC
Taxable Units.--
``(1) In general.--If any CFC taxable unit of a United
States shareholder is a tax resident of (or, in the case of a
branch, is located in) a country which is different from the
country with respect to which any other CFC taxable unit of
such United States shareholder is a tax resident (or, in the
case of a branch, is located in)--
``(A) such shareholder's net CFC tested income for
purposes of subsection (a) shall be the sum of the
amounts of net CFC tested income determined separately
with respect to each such country, and
``(B) for purposes of determining such separate
amounts of net CFC tested income--
``(i) except as otherwise provided by the
Secretary, any reference in subsection (c) to a
controlled foreign corporation of such
shareholder shall be treated as reference to a
CFC taxable unit of such shareholder, and
``(ii) net CFC tested income and such other
items and amounts as the Secretary may provide,
shall be determined separately with respect to
each such country by determining such amounts
with respect to the CFC taxable units of such
shareholder which are a tax resident of such
country.
``(2) Definitions.--For purposes of this subsection--
``(A) CFC taxable unit.--The term `CFC taxable
unit' means any taxable unit described in clause (ii),
(iii), or (iv) of section 904(e)(2)(B), determined--
``(i) by substituting `controlled foreign
corporation' for `foreign corporation' each
place it appears in such clauses, and
``(ii) without regard to the references to
the taxpayer in clauses (iii) and (iv) of such
section.
``(B) Application of other definitions.--Terms used
in this subsection which are also used in section
904(e) shall have the same meaning as when used in
section 904(e).
``(3) Special rules.--For purposes of this subsection--
``(A) Application of certain rules.--Except as
otherwise provided by the Secretary, rules similar to
the rules of section 904(e) shall apply.
``(B) Allocation of net cfc tested income to
controlled foreign corporations.--Except as otherwise
provided by the Secretary, subsection (f)(2) shall be
applied separately with respect to each CFC taxable
unit.''.
(c) Regulatory Authority.--Section 951A, as amended by subsection
(b), is amended by adding at the end the following new subsection:
``(h) Regulations.--The Secretary shall issue such regulations or
other guidance as may be necessary or appropriate to carry out, or
prevent the avoidance of, the purposes of this section, including
regulations or guidance which provide for--
``(1) the treatment of property if such property is
transferred, or held, temporarily,
``(2) the treatment of property if the avoidance of the
purposes of this section is a factor in the transfer or holding
of such property,
``(3) appropriate adjustments to the basis of stock and
other ownership interests, and to earnings and profits, to
reflect tested losses (whether or not taken into account in
determining net CFC tested income),
``(4) rules similar to the rules provided under the
regulations or guidance issued under section 904(e)(4),
``(5) other appropriate basis adjustments,
``(6) appropriate adjustments to be made, and appropriate
tax attributes and records to be maintained, separately with
respect to CFC taxable units, and
``(7) appropriate adjustments in determining tested income
or tested loss if property is transferred between related
parties or amounts are paid or accrued between related
parties.''.
(d) Coordination With Other Provisions.--Section 951A(f)(1) is
amended by adding at the end the following new subparagraph:
``(C) Treatment of certain references.--Except as
otherwise provided by the Secretary, references to
section 951 or section 951(a) in sections 959, 961,
962, and such other provisions as the Secretary may
identify shall include references to section 951A or
section 951A(a), respectively.''.
(e) 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)(E)(iii) is amended by
striking ``, 221, and 250'' and inserting ``and 221''.
(f) 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''.
(g) 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)''.
(h) 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.
(i) Elimination of Carryback of Foreign Tax Credit.--
(1) In general.--Section 904(c) is amended--
(A) 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'',
(B) by striking ``preceding or'' each place it
appears, and
(C) by striking ``Carryback and'' in the heading
thereof.
(2) Application to limitation on foreign oil and gas
taxes.--Section 907(f) is amended--
(A) in paragraph (1), by striking ``in the first
preceding taxable year and'',
(B) in paragraph (2), by striking ``preceding or''
in the matter preceding subparagraph (A),
(C) in paragraph (3)(B)--
(i) by striking ``in a preceding or
succeeding'' and inserting ``in a succeeding'',
and
(ii) by striking ``in such preceding or
succeeding'' both places it appears and
inserting ``in such succeeding'', and
(D) in the heading, by striking ``Carryback and''.
(j) 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 (f) 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:
``(f) 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).''.
(k) 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, 2024, and to taxable years of United States shareholders in
which or with which such taxable years of foreign corporations
end.
(2) Regulatory authority and coordination with other
provisions.--The amendments made by subsections (c) and (d)
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 in which or with which such
taxable years of foreign corporations end.
(3) Repeal of reduced rate of tax; increase in deemed paid
credit.--The amendments made by subsections (e) and (g) shall
apply to taxable years beginning after December 31, 2024.
(4) Elimination of carryback of foreign tax credit.--The
amendment made by subsection (i) shall apply to credits arising
in taxable years beginning after December 31, 2024.
(l) No Inference Regarding Certain Modifications.--The amendments
made by subsections (c) and (d) 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 any taxable year
beginning before the taxable years to which such amendments apply.
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 Based on Taxable Units.--
``(1) In general.--Subsection (d) (and the provisions of
this title referred to in paragraph (1) of such subsection)
shall be applied separately with respect to each country by
taking into account the aggregate income properly attributable
or otherwise allocable to a taxable unit of the taxpayer which
is a tax resident of (or, in the case of a branch, is located
in) such country.
``(2) Taxable units.--
``(A) In general.--Except as otherwise provided by
the Secretary, each item shall be attributable or
otherwise allocable to exactly 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) General taxable unit.--The person
that is the taxpayer and that is not otherwise
described in a separate clause of this
subparagraph.
``(ii) Certain foreign corporations.--Each
foreign corporation with respect to which the
taxpayer is a United States shareholder.
``(iii) Interests in pass-through
entities.--Each interest held (directly or
indirectly) by the taxpayer or any foreign
corporation referred to in clause (ii) in a
pass-through entity if such pass-through entity
is a tax resident of a country other than the
country with respect to which such taxpayer or
foreign corporation (as the case may be) is a
tax resident.
``(iv) Branches.--Each branch (or portion
thereof) the activities of which are directly
or indirectly carried on by the taxpayer or any
foreign corporation referred to in clause (ii)
and which give rise to a taxable presence in a
country other than the country with respect to
which such taxpayer or foreign corporation (as
the case may be) is a tax resident.
``(3) Definitions and special rules.--For purposes of this
subsection--
``(A) Tax resident.--Except as otherwise provided
by the Secretary, the term `tax resident' means a
person or entity subject to tax under the tax law of a
country as a resident. If an entity is organized under
the law of a country, or resident in a country, that
does not impose an income tax with respect to such
entities, such entity shall, except as provided by the
Secretary, be treated as subject to tax under the tax
law of such country for the purposes of the preceding
sentence.
``(B) Pass-through entity.--Except as otherwise
provided by the Secretary, the term `pass-through
entity' includes any partnership or other entity to the
extent that income, gain, deduction, or loss of the
entity is taken into account in determining the income
or loss of a person that owns (directly or indirectly)
an interest in such entity.
``(C) Branch.--Except as otherwise provided by the
Secretary, the term `branch' means a taxable presence
of a tax resident in a country other than its country
of residence as determined under such other country's
tax law. The Secretary shall provide regulations or
other guidance applying such term to activities in a
country that do not give rise to a taxable presence.
``(D) Treatment of fiscally autonomous
jurisdictions.--Any fiscally autonomous jurisdiction
shall be treated as a separate country. Any possession
of the United States shall also be treated as a
separate country.
``(E) Possession of the united states.--The term
`possession of the United States' means each of
American Samoa, the Commonwealth of the Northern
Mariana Islands, the Commonwealth of Puerto Rico, Guam,
and the Virgin Islands.
``(4) Regulations.--The Secretary shall issue such
regulations or other guidance as may be necessary or
appropriate to carry out, or prevent avoidance of, the purposes
of this subsection, including regulations or other guidance--
``(A) providing for the application of this
subsection to an entity or arrangement that is
considered a tax resident of more than one country or
of no country,
``(B) providing for the application of this
subsection to hybrid entities or hybrid transactions
(as such terms are used for purposes of section 267A),
pass-through entities, passive foreign investment
companies, trusts, and other entities or arrangements
not otherwise described in this subsection, and
``(C) providing for the assignment of any item
(including foreign taxes and deductions) to taxable
units, including in the case of amounts not otherwise
taken into account in determining taxable income under
this chapter.''.
(b) Treatment of Inadequate Substantiation.--Section
904(d)(4)(C)(ii) is amended by striking ``paragraph (1)(A)'' and
inserting ``paragraph (1)(C)''.
(c) 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)(iv)'', and
(2) by striking ``a qualified business unit'' and inserting
``a foreign branch''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2024.
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
(and as interest expense reported as described in clause (i)(I) or
(ii)(I) of subsection (n)(3)(B), as the case may be) 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, 2024.
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.
(d) Extension of Limitation on Assessment.--If the period of
limitation on assessment of tax resulting from the amendments made by
subsection (a) expires before the end of the 3-year period beginning on
the date of the enactment of this Act, such assessment (to the extent
attributable to such amendments) may, nevertheless, be made before the
close of such 3-year period.
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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