II 110th CONGRESS 1st Session S. 396 IN THE SENATE OF THE UNITED STATES January 25, 2007 Mr. Dorgan (for himself, Mr. Levin, and Mr. Feingold) 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 controlled foreign corporations established in tax havens as domestic corporations.

1.

Tax treatment of controlled foreign corporations established in tax havens

(a)

In general

Subchapter C of chapter 80 of the Internal Revenue Code of 1986 (relating to provisions affecting more than one subtitle) is amended by adding at the end the following new section:

7875.

Controlled foreign corporations in tax havens treated as domestic corporations

(a)

General rule

If a controlled foreign corporation is a tax-haven CFC, then, notwithstanding section 7701(a)(4), such corporation shall be treated for purposes of this title as a domestic corporation. (b)

Tax-Haven CFC

For purposes of this section— (1)

In general

The term tax-haven CFC means, with respect to any taxable year, a foreign corporation which— (A)was created or organized under the laws of a tax-haven country, and (B)is a controlled foreign corporation (determined without regard to this section) for an uninterrupted period of 30 days or more during the taxable year. (2)

Exception

The term tax-haven CFC does not include a foreign corporation for any taxable year if substantially all of its income for the taxable year is derived from the active conduct of trades or businesses within the country under the laws of which the corporation was created or organized. (c)

Tax-Haven country

For purposes of this section— (1)

In general

The term tax-haven country means any of the following: AndorraGuernseyPanama AnguillaIsle of ManSamoa Antigua and BarbudaJerseySan Marino ArubaLiberiaFederation of Commonwealth of thePrincipality of  Saint Christ-  Bahamas Liechtenstein opher  BahrainRepublic of the  and Nevis Barbados MaldivesSaint Lucia BelizeMaltaSaint Vincent BermudaRepublic of the  and the British Virgin Islands Marshall Islands Grenadines Cayman IslandsMauritiusRepublic of the Cook IslandsPrincipality of Monaco  Seychelles CyprusMontserratTonga Commonwealth of theRepublic of NauruTurks and Caicos  DominicaNetherlands Republic of GibraltarAntilles Vanuatu GrenadaNiue (2)

Secretarial authority

The Secretary may remove or add a foreign jurisdiction from the list of tax-haven countries under paragraph (1) if the Secretary determines such removal or addition is consistent with the purposes of this section.

. (b)

Conforming amendment

The table of sections for subchapter C of chapter 80 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item: Sec. 7875. Controlled foreign corporations in tax havens treated as domestic corporations. . (c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.