[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1006 Introduced in Senate (IS)]

110th CONGRESS
  1st Session
                                S. 1006

 To amend the Internal Revenue Code of 1986 to deny qualified dividend 
             income treatment to certain foreign dividends.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 28, 2007

   Mr. Kerry 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 deny qualified dividend 
             income treatment to certain foreign dividends.

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

SECTION 1. CERTAIN FOREIGN DIVIDENDS NOT TREATED AS QUALIFIED DIVIDEND 
              INCOME.

    (a) In General.--Clause (ii) of section 1(h)(11)(B) of the Internal 
Revenue Code of 1986 (relating to certain dividends excluded) is 
amended by striking ``and'' at the end of subclause (II), by striking 
the period at the end of subclause (III) and inserting ``, and'', and 
by adding at the end the following new subclause:
                                    ``(IV) any nonqualified dividend 
                                from a foreign corporation.''.
    (b) Nonqualified Dividend From a Foreign Corporation.--Paragraph 
(11) of section 1(h) of such Code (relating to dividends taxed as net 
capital gain) is amended by redesignating subparagraph (D) as 
subparagraph (E) and by inserting after subparagraph (C) the following 
new subparagraph:
                    ``(D) Nonqualified dividend from a foreign 
                corporation.--For purposes of subparagraph (B)(ii)(IV), 
                the term `nonqualified dividend from a foreign 
                corporation' means any dividend from a foreign 
                corporation if--
                            ``(i) any amount is allowable as a 
                        deduction to any person at any time under the 
                        taxation law of any foreign country (or any 
                        amount is otherwise creditable against the tax 
                        imposed under such law) with respect to such 
                        dividend,
                            ``(ii) for the taxable year of the 
                        corporation in which the distribution is made, 
                        or the preceding taxable year--
                                    ``(I) such corporation is not 
                                treated as a corporation for purposes 
                                of the taxation laws of any foreign 
                                country to which it would be subject to 
                                tax if it were treated as a 
                                corporation,
                                    ``(II) such corporation is exempt 
                                from tax under the taxation laws of any 
                                foreign country to which (but for such 
                                exemption) it would otherwise be 
                                subject to tax (except for exemption on 
                                the basis of nonresidence, nondomicile, 
                                or similar criteria), or
                                    ``(III) such corporation is a 
                                passive foreign investment company (as 
                                defined in section 1297 (without regard 
                                to subsection (e) thereof)), or
                            ``(iii) such dividend is paid with respect 
                        to an instrument which is treated as other than 
                        stock (or a similar equity interest) under the 
                        taxation laws of any foreign country with 
                        respect to which the payment is taken into 
                        account.''.
    (c) Conforming Amendment.--Subparagraph (C) of section 1(h)(11) of 
such Code is amended by striking clause (iii) and by redesignating 
clause (iv) as clause (iii).
    (d) Effective Date.--The amendments made by this section shall 
apply to dividends received after the date of the enactment of this 
Act.

SEC. 2. MODIFICATION TO THE DEFINITION OF QUALIFIED FOREIGN 
              CORPORATION.

    (a) In General.--Clause (ii) of section 1(h)(11)(C) of the Internal 
Revenue Code of 1986 (relating to dividends on stock readily tradable 
on United States securities market) is amended by striking ``by such 
corporation if the stock'' and all that follows and inserting ``by such 
corporation if--
                                    ``(I) the stock with respect to 
                                which such dividend is paid is readily 
                                tradable on an established securities 
                                market in the United States, and
                                    ``(II) such corporation is created 
                                or organized under the laws of a 
                                foreign country which has a 
                                comprehensive income tax system which 
                                the Secretary determines is 
                                satisfactory for the purposes of this 
                                paragraph.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to dividends received after the date of the enactment of this Act.
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