[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1373 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                S. 1373

To amend the Internal Revenue Code of 1986 to reduce international tax 
  avoidance and restore a level playing field for American businesses.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 14, 2011

Mr. Rockefeller 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 reduce international tax 
  avoidance and restore a level playing field for American businesses.

    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 ``International Tax Competitiveness 
Act of 2011''.

SEC. 2. TREATMENT OF FOREIGN CORPORATIONS MANAGED AND CONTROLLED IN THE 
              UNITED STATES AS DOMESTIC CORPORATIONS.

    (a) In General.--Section 7701 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (p) as subsection (q) and by 
inserting after subsection (o) the following new subsection:
    ``(p) Certain Corporations Managed and Controlled in the United 
States Treated as Domestic for Income Tax.--
            ``(1) In general.--Notwithstanding subsection (a)(4), in 
        the case of a corporation described in paragraph (2) if--
                    ``(A) the corporation would not otherwise be 
                treated as a domestic corporation for purposes of this 
                title, but
                    ``(B) the management and control of the corporation 
                occurs, directly or indirectly, primarily within the 
                United States,
        then, solely for purposes of chapter 1 (and any other provision 
        of this title relating to chapter 1), the corporation shall be 
        treated as a domestic corporation.
            ``(2) Corporation described.--
                    ``(A) In general.--A corporation is described in 
                this paragraph if--
                            ``(i) the stock of such corporation is 
                        regularly traded on an established securities 
                        market, or
                            ``(ii) the aggregate gross assets of such 
                        corporation (or any predecessor thereof), 
                        including assets under management for 
                        investors, whether held directly or indirectly, 
                        at any time during the taxable year or any 
                        preceding taxable year is $50,000,000 or more.
                    ``(B) General exception.--A corporation shall not 
                be treated as described in this paragraph if--
                            ``(i) such corporation was treated as a 
                        corporation described in this paragraph in a 
                        preceding taxable year,
                            ``(ii) such corporation--
                                    ``(I) is not regularly traded on an 
                                established securities market, and
                                    ``(II) has, and is reasonably 
                                expected to continue to have, aggregate 
                                gross assets (including assets under 
                                management for investors, whether held 
                                directly or indirectly) of less than 
                                $50,000,000, and
                            ``(iii) the Secretary grants a waiver to 
                        such corporation under this subparagraph.
                    ``(C) Exception from gross assets test.--
                Subparagraph (A)(ii) shall not apply to a corporation 
                which is a controlled foreign corporation (as defined 
                in section 957) and which is a member of an affiliated 
                group (as defined section 1504, but determined without 
                regard to section 1504(b)(3)) the common parent of 
                which--
                            ``(i) is a domestic corporation (determined 
                        without regard to this subsection), and
                            ``(ii) has substantial assets (other than 
                        cash and cash equivalents and other than stock 
                        of foreign subsidiaries) held for use in the 
                        active conduct of a trade or business in the 
                        United States.
            ``(3) Management and control.--
                    ``(A) In general.--The Secretary shall prescribe 
                regulations for purposes of determining cases in which 
                the management and control of a corporation is to be 
                treated as occurring primarily within the United 
                States.
                    ``(B) Executive officers and senior management.--
                Such regulations shall provide that--
                            ``(i) the management and control of a 
                        corporation shall be treated as occurring 
                        primarily within the United States if 
                        substantially all of the executive officers and 
                        senior management of the corporation who 
                        exercise day-to-day responsibility for making 
                        decisions involving strategic, financial, and 
                        operational policies of the corporation are 
                        located primarily within the United States, and
                            ``(ii) individuals who are not executive 
                        officers and senior management of the 
                        corporation (including individuals who are 
                        officers or employees of other corporations in 
                        the same chain of corporations as the 
                        corporation) shall be treated as executive 
                        officers and senior management if such 
                        individuals exercise the day-to-day 
                        responsibilities of the corporation described 
                        in clause (i).
                    ``(C) Corporations primarily holding investment 
                assets.--Such regulations shall also provide that the 
                management and control of a corporation shall be 
                treated as occurring primarily within the United States 
                if--
                            ``(i) the assets of such corporation 
                        (directly or indirectly) consist primarily of 
                        as sets being managed on behalf of investors, 
                        and
                            ``(ii) decisions about how to invest the 
                        assets are made in the United States.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning on or after the date which is 2 years 
after the date of the enactment of this Act.

SEC. 3. CURRENT TAXATION OF ROYALTIES AND OTHER INCOME FROM INTANGIBLES 
              RECEIVED FROM A CONTROLLED FOREIGN CORPORATION.

    (a) Repeal of Look-Thru Rule for Royalties Received From Controlled 
Foreign Corporations.--Paragraph (6) of section 954(c) of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking ``rents, and royalties'' in subparagraph 
        (A) and inserting ``and rents'', and
            (2) by striking ``, rent, or royalty'' both places it 
        appears in subparagraph (B) and inserting ``or rent''.
    (b) Entities Not Permitted To Be Disregarded in Determining 
Royalties.--Subsection (c) of section 954 of the Internal Revenue Code 
of 1986 is amended by adding at the end the following new paragraph:
            ``(7) All royalties taken into account.--For purposes of 
        determining the foreign personal holding company income which 
        consists of royalties, this subsection shall be applied without 
        regard to any election to disregard any entity which would be 
        taken into account for Federal income tax purposes but for such 
        election.''.
    (c) Certain Other Income Derived From United States Intangibles 
Taken Into Account as Subpart F Income.--Subsection (d) of section 954 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new paragraph:
            ``(5) Special rule for certain products produced pursuant 
        to intangibles made available by united states persons.--For 
        purposes of this subsection, personal property shall be treated 
        as having been purchased from a related person if any 
        intangible property (within the meaning of section 
        936(h)(3)(B)) made available to a controlled foreign 
        corporation, directly or indirectly, by a related person which 
        is a United States person contributes, directly or indirectly, 
        to the production of such personal property by the controlled 
        foreign corporation. The preceding sentence shall not apply to 
        any personal property produced directly by the controlled 
        foreign corporation, without regard to any election to 
        disregard any entity which would be taken into account for 
        Federal income tax purposes but for such election.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2011, and to taxable years of United States shareholders within 
which or with which such tax years of such foreign corporations end.

SEC. 4. TAXATION OF BOOT RECEIVED IN REORGANIZATIONS.

    (a) In General.--Paragraph (2) of section 356(a) of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking ``If an exchange'' and inserting ``Except 
        as otherwise provided by the Secretary--
                    ``(A) In general.--If an exchange'';
            (2) by striking ``then there shall be'' and all that 
        follows through ``February 28, 1913'' and inserting ``then the 
        amount of other property or money shall be treated as a 
        dividend to the extent of the earnings and profits of the 
        corporation''; and
            (3) by adding at the end the following new subparagraph:
                    ``(B) Certain reorganizations.--In the case of a 
                reorganization described in section 368(a)(1)(D) with 
                respect to which the requirements of subparagraphs (A) 
                and (B) of section 354(b)(1) are met (or any other 
                reorganization specified by the Secretary), in applying 
                subparagraph (A)--
                            ``(i) the earnings and profits of each 
                        corporation which is a party to the 
                        reorganization shall be taken into account, and
                            ``(ii) the amount which is a dividend (and 
                        source thereof) shall be determined under rules 
                        similar to the rules of paragraphs (2) and (5) 
                        of section 304(b).''.
    (b) Earnings and Profits.--Paragraph (7) of section 312(n) of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following: ``A similar rule shall apply to an exchange to which section 
356(a)(1) applies.''.
    (c) Conforming Amendment.--Paragraph (1) of section 356(a) of the 
Internal Revenue Code of 1986 is amended by striking ``then the gain'' 
and inserting ``then (except as provided in paragraph (2)) the gain''.
    (d) Effective Date.--The amendments made by this section shall 
apply to exchanges after the date of the enactment of this Act.
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