[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 2050 Introduced in Senate (IS)]







107th CONGRESS
  2d Session
                                S. 2050

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


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                   IN THE SENATE OF THE UNITED STATES

                             March 21, 2002

  Mr. Wellstone (for himself and Mr. Dayton) 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 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--
                                    ``(I) property is directly or 
                                indirectly transferred by a domestic 
                                corporation to such foreign 
                                corporation, or
                                    ``(II) stock in a domestic 
                                corporation is transferred directly or 
                                indirectly by its shareholders to such 
                                foreign corporation,
                        more than 50 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) Regulations relating to inverted 
                        domestic corporations.--The Secretary may by 
                        regulations provide that clause (i) shall not 
                        apply to a foreign corporation which is an 
                        inverted domestic corporation if, immediately 
                        before the transaction described in clause 
                        (ii), such foreign corporation was engaged in 
                        the active conduct of 1 or more trades or 
                        businesses which are substantial in relation to 
                        the trades or businesses which the domestic 
                        corporation described in clause (ii) was 
                        engaged in the active conduct of at such 
                        time.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years of any inverted domestic corporation beginning after 
December 31, 2002, without regard to whether the corporation became an 
inverted domestic corporation before, on, or after such date.
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