[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6288 Introduced in House (IH)]








109th CONGRESS
  2d Session
                                H. R. 6288

    To amend the Internal Revenue Code of 1986 to improve the rules 
                   relating to income earned abroad.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 29, 2006

   Mr. Sam Johnson of Texas 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 improve the rules 
                   relating to income earned abroad.

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

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``International Tax 
Simplification Act of 2006''.
    (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 for this Act is as 
follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.
Sec. 2. Permanent Subpart F exemption for active financing income.
Sec. 3. Permanent look-thru rule for related controlled foreign 
                            corporations.
Sec. 4. Repeal of foreign base company sales and services income rules.
Sec. 5. Repeal of foreign base company oil related income rules.
Sec. 6. Repeal of special rules for applying foreign tax credit in case 
                            of foreign oil and gas income.
Sec. 7. Extension of carryforward period for excess foreign taxes.
Sec. 8. Subpart F earnings and profits determined under generally 
                            accepted accounting principles.
Sec. 9. Acceleration of election to allocate interest on a worldwide 
                            basis.
Sec. 10. Expansion of de minimis rule under subpart F.

SEC. 2. PERMANENT SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

    (a) Exempt Insurance Income.--Paragraph (10) of section 953(e) is 
amended--
            (1) by striking ``and before January 1, 2009,'', and
            (2) by striking the second sentence.
    (b) Foreign Personal Holding Company Income.--Paragraph (9) of 
section 954(h) is amended by striking ``and before January 1, 2009,''.

SEC. 3. PERMANENT LOOK-THRU RULE FOR RELATED CONTROLLED FOREIGN 
              CORPORATIONS.

    Subparagraph (B) of section 954(c)(6) (relating to application) is 
amended by striking ``and before January 1, 2009,''.

SEC. 4. REPEAL OF FOREIGN BASE COMPANY SALES AND SERVICES INCOME RULES.

    (a) In General.--Subsection (a) of section 954 (relating to foreign 
base company income) is amended by striking paragraphs (2) and (3).
    (b) Certain Sales.--Paragraph (1) of section 954(c) is amended by 
adding at the end the following new subparagraph:
                    ``(I) Certain sales.--Income (whether in the form 
                of profits, commissions, fees, or otherwise) derived in 
                connection with the purchase of personal property from 
                a related person and its sale to any person, the sale 
                of personal property to any person on behalf of a 
                related person, the purchase of personal property from 
                any person and its sale to a related person, or the 
                purchase of personal property from any person on behalf 
                of a related person where--
                            ``(i) the property which is purchased (or 
                        in the case of property sold on behalf of a 
                        related person, the property which is sold) is 
                        manufactured, produced, grown, or extracted in 
                        the United States, and
                            ``(ii) the property is sold for use, 
                        consumption, or disposition in the United 
                        States, or, in the case of property purchased 
                        on behalf of a related person, is purchased for 
                        use, consumption, or disposition in the United 
                        States.''.
    (c) Conforming Amendments.--
            (1) Clause (iii) of section 952(c)(1)(B) is amended by 
        striking subclauses (II) and (III) and by redesignating 
        subclauses (IV) and (V) as subclauses (II) and (III), 
        respectively.
            (2) Paragraph (5) of section 954(b) is amended by striking 
        ``, the foreign base company sales income, the foreign base 
        company services income,''.
            (3) Section 954 is amended by striking subsections (d) and 
        (e).
            (4)(A) Subsection (b) of section 954 is amended by adding 
        at the end the following new paragraph:
            ``(7) Related person defined.--For purposes of this 
        section, a person is a related person with respect to a 
        controlled foreign corporation if--
                    ``(A) such person is an individual, corporation, 
                partnership, trust, or estate which controls, or is 
                controlled by, the controlled foreign corporation, or--
                    ``(B) such person is a corporation, partnership, 
                trust, or estate which is controlled by the same person 
                or persons which control the controlled foreign 
                corporation.
        For purposes of the preceding sentence, control means, with 
        respect to a corporation, the ownership, directly or 
        indirectly, of stock possessing more than 50 percent of the 
        total voting power of all classes of stock entitled to vote or 
        of the total value of stock of such corporation. In the case of 
        a partnership, trust, or estate, control means the ownership, 
        directly or indirectly, of more than 50 percent (by value) of 
        the beneficial interests in such partnership, trust, or estate. 
        For purposes of this paragraph, rules similar to the rules of 
        section 958 shall apply.''.
            (B) Sections 552(c)(2), 861(c)(2)(B), 904(d)(2)(H), 
        953(d)(3), 953(e), 955(b), 958(b), 971(f), 988(e)(3)(C), 
        1297(b)(2), 1298(d)(3), and 1298(e)(2)(B) are each amended by 
        striking ``954(d)(3)'' each place it appears and inserting 
        ``954(b)(7)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years of a foreign corporation beginning after 
December 31, 2006, and to taxable years of United States shareholders 
with or within which any such taxable year of such foreign corporation 
ends.

SEC. 5. REPEAL OF FOREIGN BASE COMPANY OIL RELATED INCOME RULES.

    (a) In General.--Subsection (a) of section 954 (relating to foreign 
base company income) is amended by striking paragraph (5).
    (b) Conforming Amendments.--
            (1) Clause (iii) of section 952(c)(1)(B), as amended by 
        this Act, is amended by striking subclause (I) and by 
        redesignating subclauses (II) and (III) as subclauses (I) and 
        (II), respectively.
            (2) Paragraph (5) of section 954(b), as amended by this 
        Act, is amended by striking ``and the foreign base company oil 
        related income''.
            (3) Section 954 is amended by striking subsection (g).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2006, and to taxable years of United States shareholders with or 
within which such taxable years of foreign corporations end.

SEC. 6. REPEAL OF SPECIAL RULES FOR APPLYING FOREIGN TAX CREDIT IN CASE 
              OF FOREIGN OIL AND GAS INCOME.

    (a) In General.--Section 907 (relating to special rules in case of 
foreign oil and gas income), as amended by this Act, is repealed.
    (b) Conforming Amendments.--
            (1) Each of the following provisions are amended by 
        striking ``907,'':
                    (A) Section 245(a)(10).
                    (B) Section 865(h)(1)(B).
                    (C) Section 904(d)(1).
                    (D) Section 904(g)(10)(A).
            (2) Section 904(f)(5)(E)(iii) is amended by inserting ``, 
        as in effect before its repeal by the International Tax 
        Simplification Act of 2006'' after ``section 907(c)(4)(B)''.
            (3) Section 954(g)(1) is amended by inserting ``, as in 
        effect before its repeal by the International Tax 
        Simplification Act of 2006'' after ``907(c)''.
            (4) Section 6501(i) is amended--
                    (A) by striking ``, or under section 907(f) 
                (relating to carryback and carryover of disallowed oil 
                and gas extraction taxes)'', and
                    (B) by striking ``or 907(f)''.
            (5) The table of sections for subpart A of part III of 
        subchapter N of chapter 1 is amended by striking the item 
        relating to section 907.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2006.

SEC. 7. EXTENSION OF CARRYFORWARD PERIOD FOR EXCESS FOREIGN TAXES.

    (a) In General.--Section 904(c)(1) is amended by striking ``10'' 
and inserting ``20''.
    (b) Excess Extraction Taxes.--Paragraph (1) of section 907(f) is 
amended by striking ``10 succeeding taxable year'' and inserting ``20 
succeeding taxable years''.
    (c) Effective Date.--The amendments made by this section shall 
apply to excess foreign taxes arising in taxable years beginning after 
December 31, 2006.

SEC. 8. SUBPART F EARNINGS AND PROFITS DETERMINED UNDER GENERALLY 
              ACCEPTED ACCOUNTING PRINCIPLES.

    (a) In General.--Section 964(a) (relating to earnings and profits) 
is amended by striking ``rules substantially similar to those 
applicable to domestic corporations, under regulations prescribed by 
the Secretary'' and inserting ``generally accepted accounting 
principles in the United States''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to distributions during, and the determination of the inclusion 
under section 951 of the Internal Revenue Code of 1986 with respect to, 
taxable years of foreign corporations beginning after December 31, 
2006.

SEC. 9. ACCELERATION OF ELECTION TO ALLOCATE INTEREST ON A WORLDWIDE 
              BASIS.

    (a) In General.--Section 864(f)(6) is amended by striking 
``December 31, 2008'' and inserting ``December 31, 2006''.
    (b) Conforming Amendment.--Section 401(c) of the American Jobs 
Creation Act of 2004 is amended by striking ``December 31, 2008'' and 
inserting ``December 31, 2006''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in section 401 of the American Jobs Creation Act 
of 2004.

SEC. 10. EXPANSION OF DE MINIMIS RULE UNDER SUBPART F.

    (a) In General.--Sections 954(b)(3)(A)(ii), 864(d)(5)(A)(ii), and 
881(c)(5)(A)(i) are each amended by striking ``$1,000,000'' and 
inserting ``$5,000,000''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2006, and to taxable years of United States shareholders with or 
within which such taxable years of foreign corporations end.
                                 <all>