[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 513 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 513

To amend the Internal Revenue Code of 1986 and the Securities Exchange 
  Act of 1934 to provide for the treatment of corporate expatriation 
                 transactions, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 4, 2003

   Mr. Bayh 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 and the Securities Exchange 
  Act of 1934 to provide for the treatment of corporate expatriation 
                 transactions, 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.

    This Act may be cited as the ``Corporate Tax Fairness and 
Shareholder Rights Act of 2003''.

SEC. 2. PREVENTION OF CORPORATE EXPATRIATION TO AVOID UNITED STATES 
              INCOME TAX.

    (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) Certain corporations treated as domestic.--
                            ``(i) In general.--The acquiring 
                        corporation in a corporate expatriation 
                        transaction shall be treated as a domestic 
                        corporation.
                            ``(ii) Corporate expatriation 
                        transaction.--For purposes of this 
                        subparagraph, the term `corporate expatriation 
                        transaction' means any transaction if--
                                    ``(I) a nominally foreign 
                                corporation (referred to in this 
                                subparagraph as the `acquiring 
                                corporation') acquires, as a result of 
                                such transaction, directly or 
                                indirectly substantially all of the 
                                properties held directly or indirectly 
                                by a domestic corporation, and
                                    ``(II) immediately after the 
                                transaction, more than 80 percent of 
                                the stock (by vote or value) of the 
                                acquiring corporation is held by former 
                                shareholders of the domestic 
                                corporation by reason of holding stock 
                                in the domestic corporation.
                            ``(iii) Lower stock ownership requirement 
                        in certain cases.--Subclause (II) of clause 
                        (ii) shall be applied by substituting `50 
                        percent' for `80 percent' with respect to any 
                        nominally foreign corporation if--
                                    ``(I) such corporation does not 
                                have substantial business activities 
                                (when compared to the total business 
                                activities of the expanded affiliated 
                                group) in the foreign country in which 
                                or under the law of which the 
                                corporation is created or organized, 
                                and
                                    ``(II) the stock of the corporation 
                                is publicly traded and the principal 
                                market for the public trading of such 
                                stock is in the United States.
                            ``(iv) Partnership transactions.--The term 
                        `corporate expatriation transaction' includes 
                        any transaction if--
                                    ``(I) a nominally foreign 
                                corporation (referred to in this 
                                subparagraph as the `acquiring 
                                corporation') acquires, as a result of 
                                such transaction, directly or 
                                indirectly properties constituting a 
                                trade or business of a domestic 
                                partnership,
                                    ``(II) immediately after the 
                                transaction, more than 80 percent of 
                                the stock (by vote or value) of the 
                                acquiring corporation is held by former 
                                partners of the domestic partnership or 
                                related foreign partnerships 
                                (determined without regard to stock of 
                                the acquiring corporation which is sold 
                                in a public offering related to the 
                                transaction), and
                                    ``(III) the acquiring corporation 
                                meets the requirements of subclauses 
                                (I) and (II) of clause (iii).
                            ``(v) Special rules.--For purposes of this 
                        subparagraph--
                                    ``(I) a series of related 
                                transactions shall be treated as 1 
                                transaction, and
                                    ``(II) stock held by members of the 
                                expanded affiliated group which 
                                includes the acquiring corporation 
                                shall not be taken into account in 
                                determining ownership.
                            ``(vi) Other definitions.--For purposes of 
                        this subparagraph--
                                    ``(I) Nominally foreign 
                                corporation.--The term `nominally 
                                foreign corporation' means any 
                                corporation which would (but for this 
                                subparagraph) be treated as a foreign 
                                corporation.
                                    ``(II) Expanded affiliated group.--
                                The term `expanded affiliated group' 
                                means an affiliated group (as defined 
                                in section 1504(a) without regard to 
                                section 1504(b)).
                                    ``(III) Related foreign 
                                partnership.--A foreign partnership is 
                                related to a domestic partnership if 
                                they are under common control (within 
                                the meaning of section 482), or they 
                                shared the same trademark or 
                                tradename.''.
    (b) Effective Dates.--
            (1) In general.--The amendment made by this section shall 
        apply to corporate expatriation transactions completed after 
        September 11, 2001.
            (2) Special rule.--The amendment made by this section shall 
        also apply to corporate expatriation transactions completed 
        after December 31, 1996, and before September 11, 2001, but 
        only with respect to taxable years of the acquiring corporation 
        beginning after December 31, 2003.

SEC. 3. DISCLOSURE OF CORPORATE EXPATRIATION TRANSACTIONS.

    (a) In General.--Section 14 of the Securities Exchange Act of 1934 
(15 U.S.C. 78n) is amended by adding at the end the following new 
subsection:
    ``(i) Proxy Solicitations in Connection With Corporate Expatriation 
Transactions.--
            ``(1) Disclosure to shareholders of effects of corporate 
        expatriation transaction.--The Commission shall, by rule, 
        require that each domestic issuer shall prominently disclose, 
        as a separate and distinct document accompanying each proxy 
        statement relating to a corporate expatriation transaction--
                    ``(A) the number of employees of the domestic 
                issuer that would be located in the new foreign 
                jurisdiction of incorporation or organization of that 
                issuer upon completion of the corporate expatriation 
                transaction;
                    ``(B) the percentage of the total assets of the 
                domestic issuer that would be located within the new 
                foreign jurisdiction of incorporation or organization 
                of that issuer upon completion of the corporate 
                expatriation transaction;
                    ``(C) how the rights of holders of the securities 
                of the domestic issuer would be impacted by a completed 
                corporate expatriation transaction;
                    ``(D) that as a result of a completed corporate 
                expatriation transaction, any taxable holder of the 
securities of the domestic issuer shall be subject to the taxation of 
any capital gains realized with respect to such securities; and
                    ``(E) the estimated tax benefit that would be 
                realized by the domestic issuer upon completion of the 
                corporate expatriation transaction.
            ``(2) Disclosure to commission of results of vote.--Upon 
        the approval of any corporate expatriation transaction by the 
        holders of the securities of a domestic issuer, that issuer 
        shall provide to the Commission, in a form and manner to be 
        determined by the Commission, information as to how each holder 
        of record of a voting security of that domestic issuer (or a 
        proxy there for) voted with respect to the corporate 
        expatriation transaction.
            ``(3) Definitions.--In this subsection, the following 
        definitions shall apply:
                    ``(A) Corporate expatriation transaction.--The term 
                `corporate expatriation transaction' means any 
                transaction, or series of related transactions, in 
                which an entity organized under the laws of a foreign 
                country acquires, directly or indirectly, substantially 
                all of the voting securities in, or substantially all 
                of the assets of, a domestic issuer, and--
                            ``(i) immediately after completion of the 
                        transaction, more than 80 percent of the 
                        securities (by vote or value) of the acquiring 
                        foreign entity will be held by persons that 
                        were security holders of the domestic issuer 
                        immediately prior to the transaction; or
                            ``(ii) immediately after completion of the 
                        transaction, more than 50 percent of the 
                        securities (by vote or value) of the acquiring 
                        foreign entity will be held by persons that 
                        were security holders of the domestic issuer 
                        immediately prior to the transaction, and--
                                    ``(I) such foreign entity will not 
                                have substantial business activities in 
                                the foreign country in which it is 
                                organized; and
                                    ``(II) the securities of the 
                                foreign entity will be publicly traded, 
                                and the principal market for the public 
                                trading of such securities will be in 
                                the United States.
                    ``(B) Domestic issuer.--The term `domestic issuer' 
                means an issuer created or organized in the United 
                States or under the law of the United States or of any 
                State.''.
    (b) Effective Date.--Section 14(i) of the Securities Exchange Act 
of 1934 (as added by this section) shall apply with respect to 
corporate expatriation transactions (as defined in that section 14(i)) 
proposed on and after the date of enactment of this Act.

SEC. 4. MODIFICATIONS TO EXPENSING UNDER SECTION 179.

    (a) Increase of Amount Which May Be Expensed.--
            (1) In general.--Paragraph (1) of section 179(b) of the 
        Internal Revenue Code of 1986 (relating to dollar limitation) 
        is amended to read as follows:
            ``(1) Dollar limitation.--The aggregate cost which may be 
        taken into account under subsection (a) for any taxable year 
        shall not exceed $75,000 ($25,000 in the case of taxable years 
        beginning after December 31, 2007).''.
            (2) Increase in phaseout threshold.--Paragraph (2) of 
        section 179(b) of such Code is amended by striking ``$200,000'' 
        and inserting ``$325,000 ($200,000 in the case of taxable years 
        beginning after December 31, 2007)''.
    (b) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
December 31, 2002.
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