110 HR 3160 IH: To amend the Internal Revenue Code of 1986 to prevent U.S. House of Representatives 2007-07-24 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 110th CONGRESS 1st Session H. R. 3160 IN THE HOUSE OF REPRESENTATIVES July 24, 2007 Mr. Doggett (for himself, Mr. Stark, Mr. Levin, Mr. McDermott, Mr. Lewis of Georgia, Mr. Neal of Massachusetts, Mr. McNulty, Mr. Pomeroy, Mrs. Jones of Ohio, Mr. Pascrell, Mr. Meek of Florida, Mr. Abercrombie, Mr. Ackerman, Mr. Andrews, Mr. Baird, Mr. Berman, Mr. Berry, Ms. Corrine Brown of Florida, Mr. Capuano, Ms. Carson, Ms. Clarke, Mr. Cleaver, Mr. Conyers, Mr. Costello, Mr. Cummings, Mr. Davis of Illinois, Mr. DeFazio, Mr. Delahunt, Ms. DeLauro, Mr. Edwards, Mr. Ellison, Mr. Farr, Mr. Fattah, Mr. Filner, Mr. Grijalva, Mr. Hare, Mr. Hinchey, Mr. Holt, Ms. Hooley, Mr. Jackson of Illinois, Ms. Jackson-Lee of Texas, Mr. Johnson of Georgia, Ms. Kaptur, Mr. Kennedy, Ms. Kilpatrick, Ms. Lee, Mr. McGovern, Mr. George Miller of California, Mr. Patrick J. Murphy of Pennsylvania, Mr. Nadler, Mr. Payne, Mr. Rush, Ms. Loretta Sanchez of California, Ms. Schakowsky, Mr. Sherman, Ms. Slaughter, Ms. Solis, Ms. Sutton, Mr. Tierney, Ms. Watson, and Mr. Waxman) 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.

1.

Limitation on 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)

Limitation on treaty benefits for certain deductible payments

(1)

In general

In the case of any deductible related-party payment, the amount of any withholding tax imposed under chapter 3 (and any tax imposed under subpart A or B of this part) with respect to such payment shall not be less than the amount which would be imposed if the payment were made directly to the foreign parent corporation (taking into account any income tax treaty between the United States and the country in which the foreign parent corporation is resident). (2)

Deductible related-party payment

For purposes of this subsection, the term deductible related-party payment means any payment made, directly or indirectly, by any person to any other person if the payment is allowable as a deduction under this chapter and both persons are members of the same foreign controlled group of entities. (3)

Foreign controlled group of entities

For purposes of this subsection— (A)

In general

The term foreign controlled group of entities means a controlled group of entities the common parent of which is a foreign corporation. (B)

Controlled group of entities

The term controlled group of entities means a controlled group of corporations as defined in section 1563(a)(1), except that— (i)more than 50 percent shall be substituted for at least 80 percent each place it appears therein, and (ii)the determination shall be made without regard to subsections (a)(4) and (b)(2) of section 1563. A partnership or any other entity (other than a corporation) shall be treated as a member of a controlled group of entities if such entity is controlled (within the meaning of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this sentence).(4)

Foreign parent corporation

For purposes of this subsection, the term foreign parent corporation means, with respect to any deductible related-party payment, the common parent of the foreign controlled group of entities referred to in paragraph (3)(A). (5)

Regulations

The Secretary may prescribe such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provide for— (A)the treatment of two or more persons as members of a foreign controlled group of entities if such persons would be the common parent of such group if treated as one corporation, and (B)the treatment of any member of a foreign controlled group of entities as the common parent of such group if such treatment is appropriate taking into account the economic relationships among such entities. . (b)

Effective date

The amendment made by this section shall apply to payments made after the date of the enactment of this Act.