[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3857 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 3857

 To amend the Internal Revenue Code of 1986 to treat nominally foreign 
    corporations created through inversion transactions as domestic 
                             corporations.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 6, 2002

 Mr. McInnis 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 treat nominally foreign 
    corporations created through inversion transactions as domestic 
                             corporations.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. FOREIGN CORPORATIONS CREATED THROUGH INVERSION TRANSACTIONS 
              TAXED AS DOMESTIC CORPORATIONS.

    (a) In General.--Paragraph (4) of section 7701(a) of the Internal 
Revenue Code of 1986 (defining domestic) is amended to read as follows:
            ``(4) Domestic.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `domestic' when applied to a 
                corporation or partnership means created or organized 
                in the United States or under the law of the United 
                States or of any State unless, in the case of a 
                partnership, the Secretary provides otherwise by 
                regulations.
                    ``(B) Inversion transactions disregarded.--
                            ``(i) In general.--A corporation which 
                        would (but for this subparagraph) be treated as 
                        a foreign corporation shall be treated as a 
                        domestic corporation if such corporation is an 
                        inverted domestic corporation.
                            ``(ii) Inverted domestic corporation.--For 
                        purposes of clause (i), a foreign corporation 
                        is an inverted domestic corporation if, 
                        immediately after a transaction in which 
                        property is directly or indirectly transferred 
                        by a domestic corporation to such foreign 
                        corporation, more than 80 percent of the stock 
                        (by vote or value) of such foreign corporation 
                        is held by former shareholders of the domestic 
                        corporation by reason of holding stock in such 
                        domestic corporation.
                            ``(iii) Lower stock ownership test for 
                        certain corporations.--Clause (ii) shall be 
                        applied by substituting `50 percent' for `80 
                        percent' if--
                                    ``(I) stock in such foreign 
                                corporation is publicly traded on an 
                                exchange in the United States,
                                    ``(II) less than 10 percent of the 
                                gross income of such foreign 
                                corporation is derived from activities 
                                in the foreign country in which such 
                                foreign corporation is created or 
                                organized, and
                                    ``(III) less than 10 percent of the 
                                employees of such foreign corporation 
                                are permanently located in such foreign 
                                country.''
    (b) Effective Date.--The amendment made by this section shall apply 
to transactions after December 31, 2001.
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