[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4993 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 4993

To amend the Internal Revenue Code of 1986 to prevent corporations from 
   exploiting tax treaties to evade taxation of United States income.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 21, 2002

Mr. Doggett (for himself, Mr. Stark, Mr. Matsui, Mr. Coyne, Mr. Levin, 
     Mr. McDermott, Mr. Kleczka, Mr. Lewis of Georgia, Mr. Neal of 
Massachusetts, Mr. McNulty, Mr. Jefferson, Mrs. Thurman, Mr. Allen, Mr. 
Andrews, Mr. Baird, Ms. Baldwin, Mr. Barrett of Wisconsin, Ms. Berkley, 
 Mr. Berry, Ms. Brown of Florida, Mr. Brown of Ohio, Mr. Capuano, Mr. 
Clay, Mr. Conyers, Mr. Davis of Illinois, Mr. DeFazio, Ms. DeGette, Mr. 
Delahunt, Ms. DeLauro, Mr. Edwards, Mr. Engel, Mr. Farr of California, 
Mr. Filner, Mr. Ford, Mr. Frank, Mr. Frost, Mr. Gonzalez, Mr. Green of 
Texas, Mr. Hastings of Florida, Mr. Hinchey, Mr. Holt, Mr. Israel, Mr. 
   Jackson of Illinois, Ms. Jackson-Lee of Texas, Ms. Eddie Bernice 
   Johnson of Texas, Mr. Kanjorski, Ms. Kaptur, Mr. Kennedy of Rhode 
Island, Ms. Kilpatrick, Mr. Kind, Mr. Kucinich, Mr. Lampson, Mr. Larson 
 of Connecticut, Mr. Lynch, Mr. Markey, Ms. McCarthy of Missouri, Ms. 
McCollum, Mr. McGovern, Ms. McKinney, Mr. Meehan, Mrs. Meek of Florida, 
 Mr. George Miller of California, Mrs. Mink of Hawaii, Mr. Moore, Mr. 
Obey, Mr. Olver, Mr. Pallone, Mr. Pascrell, Mr. Pastor, Mr. Payne, Ms. 
 Rivers, Mr. Rodriguez, Ms. Roybal-Allard, Mr. Rush, Mr. Sandlin, Ms. 
   Schakowsky, Mr. Schiff, Mr. Scott, Ms. Slaughter, Ms. Solis, Mr. 
Strickland, Mr. Stupak, Mr. Tierney, Mr. Towns, Mrs. Jones of Ohio, Mr. 
 Turner, Mr. Udall of Colorado, Mr. Udall of New Mexico, Ms. Watson of 
 California, Mr. Waxman, Ms. Woolsey, Mr. Wu, and Mr. Wynn) 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 prevent corporations from 
   exploiting tax treaties to evade taxation of United States income.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``No Tax Breaks for Corporations 
Renouncing America Act of 2002''.

SEC. 2. DENIAL OF TREATY BENEFITS FOR CERTAIN DEDUCTIBLE PAYMENTS.

    (a) In General.--Section 894 of the Internal Revenue Code of 1986 
(relating to income affected by treaty) is amended by adding at the end 
the following new subsection:
    ``(d) Denial of Treaty Benefits for Certain Deductible Payments.--
            ``(1) In general.--A foreign entity shall not be entitled 
        under any income tax treaty of the United States with a foreign 
        country to any reduced rate of any withholding tax imposed by 
        this title on any deductible foreign payment unless such entity 
        is predominantly owned by individuals who are residents of such 
        foreign country.
            ``(2) Deductible foreign payment.--For purposes of 
        paragraph (1), the term `deductible foreign payment' means any 
        payment--
                    ``(A) which is made by a domestic entity directly 
                or indirectly to a related person which is a foreign 
                entity, and
                    ``(B) which is allowable as a deduction under this 
                chapter.
            ``(3) Domestic and foreign entities; related person.--For 
        purposes of this subsection--
                    ``(A) Domestic entity.--The term `domestic entity' 
                means any domestic corporation or domestic partnership.
                    ``(B) Foreign entity.--The term `foreign entity' 
                means any foreign corporation or foreign partnership.
                    ``(C) Related person.--The term `related person' 
                has the meaning given such term by section 954(d)(3) 
                (determined by substituting `domestic entity' for 
                `controlled foreign corporation' each place it 
                appears).
            ``(4) Predominant ownership.--For purposes of this 
        subsection--
                    ``(A) In general.--An entity is predominantly owned 
                by individuals who are residents of a foreign country 
                if--
                            ``(i) in the case of a corporation, more 
                        than 50 percent (by value) of the stock of such 
                        corporation is owned (within the meaning of 
                        section 883(c)(4)) by individuals who are 
                        residents of such foreign country, or
                            ``(ii) in the case of a partnership, more 
                        than 50 percent (by value) of the beneficial 
                        interests in such partnership are so owned.
                    ``(B) Publicly traded corporations.--A foreign 
                corporation also shall be treated as predominantly 
                owned by individuals who are residents of a foreign 
                country if--
                            ``(i)(I) the stock of such corporation is 
                        primarily and regularly traded on an 
                        established securities market in such foreign 
                        country, and
                            ``(II) such corporation has activities 
                        within such foreign country which are 
                        substantial in relation to the total activities 
                        of such corporation and its related persons, or
                    ``(ii) such corporation is wholly owned (directly 
                or indirectly) by another foreign corporation which is 
                described in clause (i).
            ``(5) Conduit payments.--Under regulations prescribed by 
        the Secretary, paragraph (1) shall not apply to a payment 
        received by a foreign entity referred to in paragraph (1) if--
                    ``(A) within a reasonable period after such entity 
                receives such payment, such entity makes a comparable 
                payment directly or indirectly to another related 
                person,
                    ``(B) such related person is a resident of a 
                foreign country with which the United States has an 
                income tax treaty,
                    ``(C) such related person is predominantly owned by 
                individuals who are residents of such country, and
                    ``(D) the withholding tax rate reduction under such 
                treaty is not less than the withholding tax rate 
                reduction applicable (without regard to this paragraph) 
                to the payment received by such foreign entity.''
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.
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