1.Short title; amendment of
1986 Code; table of contents
(a)This Act may be cited
as the United States Job Creation and
International Tax Reform Act of 2012
.
(b)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)The table of contents of this Act is as
follows:
Sec. 1. Short title; amendment of 1986 Code; table of
contents.
TITLE I—Participation exemption system for taxation of foreign
income
Sec. 101. Deduction for dividends received by domestic
corporations from certain foreign corporations.
Sec. 102. Application of dividends received deduction to
certain sales and exchanges of stock.
Sec. 103. Deduction for foreign intangible income derived from
trade or business within the United States.
Sec. 104. Treatment of deferred foreign income upon transition
to participation exemption system of taxation.
TITLE II—Other international tax reforms
Subtitle A—Modifications of subpart F
Sec. 201. Treatment of low-taxed foreign income as subpart F
income.
Sec. 202. Permanent extension of look-thru rule for controlled
foreign corporations.
Sec. 203. Permanent extension of exceptions for active
financing income.
Sec. 204. Foreign base company income not to include sales or
services income.
Subtitle B—Modifications related to foreign tax
credit
Sec. 211. Modification of application of sections 902 and 960
with respect to post-2012 earnings.
Sec. 212. Separate foreign tax credit basket for foreign
intangible income.
Sec. 213. Inventory property sales source rule exceptions not
to apply for foreign tax credit limitation.
Subtitle C—Allocation of interest on worldwide
basis
Sec. 221. Acceleration of election to allocate interest on a
worldwide basis.
<enum>I</enum><header>Participation
exemption system for taxation of foreign income</header>
<section id="H84B144A187E0459EB523804C69E9AC32" section-type="subsequent-section"><enum>101.</enum><header>Deduction for
dividends received by domestic corporations from certain foreign
corporations</header>
<subsection id="H21D5EE2D380B4A6F94AE5AB6733F1054"><enum>(a)</enum><header>Allowance of
deduction</header><text display-inline="yes-display-inline">Part VIII of
subchapter B of chapter 1 is amended by inserting after section 245 the
following new section:</text>
<quoted-block display-inline="no-display-inline" id="HDF799119F6F34B8580620E62C7929E78" style="OLC">
<section id="HD9F379B4CF3446938BEBCC82911BFC29"><enum>245A.</enum><header>Dividends
received by domestic corporations from certain foreign corporations</header>
<subsection id="H4C924F531A694CDA9F21EF4A13FEAA47"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">In the case of any
dividend received from a controlled foreign corporation by a domestic
corporation which is a United States shareholder with respect to such
controlled foreign corporation, there shall be allowed as a deduction an amount
equal to 95 percent of the qualified foreign-source portion of the
dividend.</text>
</subsection><subsection id="H6E5A0D3520F54B7CAC4C28139F0C2A87"><enum>(b)</enum><header>Treatment of
electing noncontrolled section 902 corporations as controlled foreign
corporations</header>
<paragraph id="HE169D15493F5457893E3293BC8483139"><enum>(1)</enum><header>In
general</header><text>If a domestic corporation elects the application of this
subsection for any noncontrolled section 902 corporation with respect to the
domestic corporation, then, for purposes of this title—</text>
<subparagraph id="id197EDDFFAD13451AABA567BACC3F1FC0"><enum>(A)</enum><text>the noncontrolled
section 902 corporation shall be treated as a controlled foreign corporation
with respect to the domestic corporation, and</text>
</subparagraph><subparagraph id="id96AD9D4F6B9341458C058D37ACEC9939"><enum>(B)</enum><text>the domestic
corporation shall be treated as a United States shareholder with respect to the
noncontrolled section 902 corporation.</text>
</subparagraph></paragraph><paragraph id="H974DB459746C4251B55B5D284F070C5C"><enum>(2)</enum><header>Election</header>
<subparagraph id="H3DE984E822164D30891724DD38E15258"><enum>(A)</enum><header>Time of
election</header><text>Any election under this subsection with respect to any
noncontrolled section 902 corporation shall be made not later than the due date
for filing the return of tax for the first taxable year of the taxpayer with
respect to which the foreign corporation is a noncontrolled section 902
corporation with respect to the taxpayer (or, if later, the first taxable year
of the taxpayer for which this section is in effect).</text>
</subparagraph><subparagraph id="HC440F73983E247D9A437E9B7A776E98A"><enum>(B)</enum><header>Revocation of
election</header><text>Any election under this subsection, once made, may be
revoked only with the consent of the Secretary.</text>
</subparagraph><subparagraph commented="no" id="HF5407A4CCAC0463386F54EE782ECDD01"><enum>(C)</enum><header>Controlled
groups</header><text>If a domestic corporation making an election under this
subsection with respect to any noncontrolled section 902 corporation is a
member of a controlled group of corporations (within the meaning of section
1563(a), except that <quote>more than 50 percent</quote> shall be substituted
for <quote>at least 80 percent</quote> each place it appears therein), then,
except as otherwise provided by the Secretary, such election shall apply to all
members of such group.</text>
</subparagraph></paragraph></subsection><subsection id="HDC6863245B434F199E087179980B1358"><enum>(c)</enum><header>Qualified
foreign-Source portion of dividends</header><text>For purposes of this
section—</text>
<paragraph id="HA4BF5656E0944252BD2265A2D073009D"><enum>(1)</enum><header>Qualified
foreign-source portion</header>
<subparagraph id="idD72C10E0CC1B4C2288F75F7CC224401A"><enum>(A)</enum><header>In
general</header><text>The qualified foreign-source portion of any dividend is
an amount which bears the same ratio to such dividend as—</text>
<clause id="H0F9919F0A27D4DBE885650757FD07126"><enum>(i)</enum><text>the post-2012
undistributed qualified foreign earnings, bears to</text>
</clause><clause id="H2008F0EA5F38468C9A8280DFAD556243"><enum>(ii)</enum><text>the total
post-2012 undistributed earnings.</text>
</clause></subparagraph><subparagraph id="H04B423CF18704AC8BCEA66A7F735B046"><enum>(B)</enum><header>Post-2012
undistributed earnings</header><text>The term <term>post-2012 undistributed
earnings</term> means the amount of the earnings and profits of a controlled
foreign corporation (computed in accordance with sections 964(a) and 986)
accumulated in taxable years beginning after December 31, 2012—</text>
<clause id="H6139BF76EE42465C83E728FED88C47A7"><enum>(i)</enum><text>as
of the close of the taxable year of the controlled foreign corporation in which
the dividend is distributed, and</text>
</clause><clause id="H2BBB98EF992747DCB6F4ACA9F8FD874E"><enum>(ii)</enum><text>without
diminution by reason of dividends distributed during such taxable years.</text>
</clause></subparagraph><subparagraph id="idE928F9DF637B4AF8B05A9E33D28FE3DA"><enum>(C)</enum><header>Post-2012
undistributed qualified foreign earnings</header><text>The term <term>post-2012
undistributed qualified foreign earnings</term> means the portion of the
post-2012 undistributed earnings which is attributable to income other
than—</text>
<clause id="idD0EBC766E3E8421693AF975D11166B7B"><enum>(i)</enum><text>income described
in section 245(a)(5)(A), or</text>
</clause><clause id="id45863768EA8D4807A2E650AE131A4D96"><enum>(ii)</enum><text>dividends
described in section 245(a)(5)(B).</text>
</clause></subparagraph></paragraph><paragraph id="id5E1E5CBB96414926A34E38549C1B49C2"><enum>(2)</enum><header>Ordering rule
for distributions of earnings and profits</header><text>Distributions shall be
treated as first made out of earnings and profits of a controlled foreign
corporation which are not post-2012 undistributed earnings and then out of
post-2012 undistributed earnings.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="H71666BA3F8984F8087FEF2ED13323622"><enum>(d)</enum><header>Disallowance of
foreign tax credit, etc</header>
<paragraph id="H84F71EF493844E4DAB79FC17BE7DE347"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">No credit shall be
allowed under section 901 for any taxes paid or accrued (or treated as paid or
accrued) with respect to the qualified foreign-source portion of any
dividend.</text>
</paragraph><paragraph id="H5AFCF344D5F547259CDF246A95C31B15"><enum>(2)</enum><header>Denial of
deduction</header><text>No deduction shall be allowed under this chapter for
any tax for which credit is not allowable under section 901 by reason of
paragraph (1).</text>
</paragraph><paragraph id="H02150D1FF14D49C190B3D6E0E3F9C771"><enum>(3)</enum><header>Coordination
with section 78</header><text display-inline="yes-display-inline">Section 78
shall not apply to any tax for which credit is not allowable under section 901
by reason of paragraph (1).</text>
</paragraph><paragraph id="id48A54D9C728B4B83ACDE4CD008B9EF59"><enum>(4)</enum><header>Treatment of
nondeductible portion in applying foreign tax credit limit</header><text>For
purposes of applying the limitation under section 904(a), the remaining 5
percent of the qualified foreign-source portion of any dividend with respect to
which a deduction is not allowable to the domestic corporation under subsection
(a) shall be treated as income from sources within the United States.</text>
</paragraph></subsection><subsection id="id5A7F526F83EA4CBF8FE14FC084DAAA54"><enum>(e)</enum><header>Special rules
for hybrid dividends</header>
<paragraph id="idBFCA4D3D957840EA8E394BF1DB22749F"><enum>(1)</enum><header>In
general</header><text>Subsection (a) shall not apply to any dividend received
by a United States shareholder from a controlled foreign corporation if the
dividend is a hybrid dividend.</text>
</paragraph><paragraph id="id861C90A7F3924BC49FCC66AC599A4245"><enum>(2)</enum><header>Hybrid
dividends of tiered controlled foreign corporations</header><text>If a
controlled foreign corporation with respect to which a domestic corporation is
a United States shareholder receives a hybrid dividend from any other
controlled foreign corporation with respect to which such domestic corporation
is also a United States shareholder, then, notwithstanding any other provision
of this title—</text>
<subparagraph id="id3C509E6AD75643A1984E89AE3A2EEB5E"><enum>(A)</enum><text>the hybrid
dividend shall be treated for purposes of section 951(a)(1)(A) as subpart F
income of the receiving controlled foreign corporation for the taxable year of
the controlled foreign corporation in which the dividend was received,
and</text>
</subparagraph><subparagraph id="id5DDBEDB85A4D40F3A6CDCC32D47DF7B0"><enum>(B)</enum><text>the United States
shareholder shall include in gross income an amount equal to the shareholder's
pro rata share (determined in the same manner as under section 951(a)(2)) of
the subpart F income described in subparagraph (A).</text>
</subparagraph></paragraph><paragraph id="id0719B3ED179B4B2D9A2FE92A5F4A36A7"><enum>(3)</enum><header>Denial of
foreign tax credit, etc</header><text>The rules of subsection (d) shall apply
to any hybrid dividend received by, or any amount included under paragraph (2)
in the gross income of, a United States shareholder, except that, for purposes
of applying subsection (d)(4), all of such dividend or amount shall be treated
as income from sources within the United States.</text>
</paragraph><paragraph id="idED7784D6A4AD4581B6FB6453880CAEA6"><enum>(4)</enum><header>Hybrid
dividend</header><text>The term <term>hybrid dividend</term> means an amount
received from a controlled foreign corporation—</text>
<subparagraph id="id6A97F44D1E4A45AE9C8E83B80BBB2FC3"><enum>(A)</enum><text>which is treated
as a dividend for purposes of this title, and</text>
</subparagraph><subparagraph id="idE668E06165B6404ABFF9E39C9D67FE6A"><enum>(B)</enum><text>for which the
controlled foreign corporation received a deduction (or similar tax benefit)
under the laws of the country in which the controlled foreign corporation was
created or organized.</text>
</subparagraph></paragraph></subsection><subsection id="HA1C35448A92941A9A2B9A36CDE20CF44"><enum>(f)</enum><header>Definitions</header><text>For
purposes of this section—</text>
<paragraph id="H3624395085ED4338BAC33956FAD6973D"><enum>(1)</enum><header>United States
shareholder</header><text>The term <term>United States shareholder</term> has
the meaning given such term in section 951(b).</text>
</paragraph><paragraph id="H5E5B7096A0F1459C9105357545AD168C"><enum>(2)</enum><header>Controlled
foreign corporation</header><text>The term <term>controlled foreign
corporation</term> has the meaning given such term in section 957(a).</text>
</paragraph><paragraph id="HDEBBAC84B45F44E08EB1BA29618F2CAE"><enum>(3)</enum><header>Noncontrolled
section 902 corporation</header><text display-inline="yes-display-inline">The
term <term>noncontrolled section 902 corporation</term> has the meaning given
such term in section 904(d)(2)(E)(i).</text>
</paragraph></subsection><subsection id="H391F05DEEA264F34827BDB5508703CB9"><enum>(g)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the provisions of
this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H20A5978817E946039D636886B8B5C606"><enum>(b)</enum><header>Application of
holding period requirement</header><text display-inline="yes-display-inline">Subsection (c) of section 246 is
amended—</text>
<paragraph id="H66C89F4153F8484699632C4DB74A034D"><enum>(1)</enum><text>by striking
<quote>or 245</quote> in paragraph (1) and inserting <quote>245, or
245A</quote>, and</text>
</paragraph><paragraph id="H28C986EF9455437D804A97A7DF49B4D3"><enum>(2)</enum><text>by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HE9EBEB03941540A9A02F923BB44FEAE9" style="OLC">
<paragraph id="H49AFE6B736BD436D81A8C565D6B27295"><enum>(5)</enum><header>Special rules
for qualified foreign-source portion of dividends received from controlled
foreign corporations</header>
<subparagraph id="H9934D287583041F2BFF762911C4FF6EA"><enum>(A)</enum><header>1-year holding
period requirement</header><text display-inline="yes-display-inline">For
purposes of section 245A—</text>
<clause id="H9EF67B4B752547C68E70C07FBDD200C6"><enum>(i)</enum><text>paragraph (1)(A)
shall be applied—</text>
<subclause id="H02109902CF96461C92CB3542CF6E1B72"><enum>(I)</enum><text>by substituting
<quote>365 days</quote> for <quote>45 days</quote> each place it appears,
and</text>
</subclause><subclause id="H5FBC47E8653B4E86AA7F03C99EE237C2"><enum>(II)</enum><text>by substituting
<quote>731-day period</quote> for <quote>91-day period</quote>, and</text>
</subclause></clause><clause id="H9CC5BF7A286A48D4B4D9FDB5A3630676"><enum>(ii)</enum><text display-inline="yes-display-inline">paragraph (2) shall not apply.</text>
</clause></subparagraph><subparagraph commented="no" id="H8936E7B56AC64378A7A71155FD0527D4"><enum>(B)</enum><header>Status must be
maintained during holding period</header><text>For purposes of section 245A,
the holding period requirement of this subsection shall be treated as met only
if—</text>
<clause commented="no" id="H30065C67F02F43CD824517E01069B290"><enum>(i)</enum><text>the controlled
foreign corporation referred to in section 245A(a) is a controlled foreign
corporation at all times during such period, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="H640217C3DAD847B0B3D66543B516AEA4"><enum>(ii)</enum><text>the taxpayer is a
United States shareholder (as defined in section 951) with respect to such
controlled foreign corporation at all times during such period.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id5F43C639B911447FA5514934431CC33B"><enum>(C)</enum><header>Special rules
for electing noncontrolled section 902 corporations</header><text>In the case
of an election under section 245A(b) to treat a noncontrolled section 902
corporation as a controlled foreign corporation, the requirements of
subparagraph (B) shall be treated as met for any continuous period ending on
the day before the effective date of the election for which the taxpayer met
the ownership requirements of section 904(d)(2)(E) with respect to such
corporation.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H4607A30B75BE469497FC7F4D1E30F854"><enum>(c)</enum><header>Application of
rules generally applicable to deductions for dividends received</header>
<paragraph id="H3E16F9024C1F4FF1B81559F2B8F0E2E4"><enum>(1)</enum><header>Treatment of
dividends from tax-exempt corporations</header><text display-inline="yes-display-inline">Paragraph (1) of section 246(a) is amended
by striking <quote>and 245</quote> and inserting <quote>245, and
245A</quote>.</text>
</paragraph><paragraph id="H8F14D56E4A6342259332B5F0021E80B2"><enum>(2)</enum><header>Assets
generating tax-exempt portion of dividend not taken into account in allocating
and apportioning deductible expenses</header><text>Paragraph (3) of section
864(e) is amended by striking <quote>or 245(a)</quote> and inserting <quote>,
245(a), or 245A</quote>.</text>
</paragraph><paragraph id="H2FE2D5891D7B466D98E30C6314652410"><enum>(3)</enum><header>Coordination
with section 1059</header><text>Subparagraph (B) of section 1059(b)(2) is
amended by striking <quote>or 245</quote> and inserting <quote>245, or
245A</quote>.</text>
</paragraph></subsection><subsection id="HEFE516CC7A8C4393AF85901D6EAE0DBA"><enum>(d)</enum><header>Conforming
amendments</header>
<paragraph id="HAA45D217292A4575A7FA514CE3C13973"><enum>(1)</enum><text>Clause (vi) of
section 56(g)(4)(C) is amended by inserting <quote>245A or</quote> before
<quote>965</quote>.</text>
</paragraph><paragraph id="H2BB16042B3F941B78D29E58180BF50DC"><enum>(2)</enum><text>Subsection (b) of
section 951 is amended—</text>
<subparagraph id="HC61E72E46266481CBB8AA9D0EAA88774"><enum>(A)</enum><text>by striking
<quote>subpart</quote> and inserting <quote>title</quote>, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H8FB589D3A29A45068138EEEE67769F8D"><enum>(B)</enum><text>by adding at the
end the following: <quote>Such term shall include, with respect to any entity
treated as a controlled foreign corporation under section 245A(b), any domestic
corporation treated as a United States shareholder with respect to such entity
under such section.</quote>.</text>
</subparagraph></paragraph><paragraph id="H89EA47A83CD5424990B93311F88CF9B5"><enum>(3)</enum><text>Subsection (a) of
section 957 is amended—</text>
<subparagraph id="HB2D12C0C71CC4567A771043CF5D30F55"><enum>(A)</enum><text>by striking
<quote>subpart</quote> in the matter preceding paragraph (1) and inserting
<quote>title</quote>, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HB01DDD051A9B416C9D29F3958D0790F7"><enum>(B)</enum><text>by adding at the
end the following: <quote>Such term shall include any entity treated as a
controlled foreign corporation under section 245A(b).</quote>.</text>
</subparagraph></paragraph><paragraph id="id1660870A7FAA44DE87E962F0F5223352"><enum>(4)</enum><text display-inline="yes-display-inline">The table of sections for part VIII of
subchapter B of chapter 1 is amended by inserting after the item relating to
section 245 the following new item:</text>
<quoted-block display-inline="no-display-inline" id="HA5DC95E08627426A9EEB18CC6240E9F2" style="OLC">
<toc container-level="quoted-block-container" idref="HDF799119F6F34B8580620E62C7929E78" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HD9F379B4CF3446938BEBCC82911BFC29" level="section">Sec. 245A. Dividends received by domestic corporations from
certain foreign
corporations.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection display-inline="no-display-inline" id="H310B073FFE434353A6B566D8DC137107"><enum>(e)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to taxable years of foreign corporations beginning
after December 31, 2012, and to taxable years of United States shareholders
with or within which such taxable years of foreign corporations end.</text>
</subsection></section><section id="idC9E276410137400D9EA8464E3F526CAA"><enum>102.</enum><header>Application of
dividends received deduction to certain sales and exchanges of stock</header>
<subsection id="id55D15240111742B7866A1AEC6AEEF4A2"><enum>(a)</enum><header>Sales by United
States persons of stock in CFC</header><text>Section 1248 is amended by
redesignating subsection (j) as subsection (k) and by inserting after
subsection (i) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="idF0FA12A717324751AE18F699431DC574" style="OLC">
<subsection id="idE0F977A333C24799954FBF27221127AF"><enum>(j)</enum><header>Coordination
with dividends received deduction</header>
<paragraph id="id0B5E51AEDC24431F8F35405D0B780F71"><enum>(1)</enum><header>In
general</header><text>In the case of the sale or exchange by a domestic
corporation of stock in a foreign corporation held for 1 year or more, any
amount received by the domestic corporation which is treated as a dividend by
reason of this section shall be treated as a dividend for purposes of applying
section 245A.</text>
</paragraph><paragraph id="idE81EA350742647B5907439300538F115"><enum>(2)</enum><header>Losses
disallowed</header><text>If a domestic corporation—</text>
<subparagraph id="id1CF2531F1EB94103B90A1678BD1C2873"><enum>(A)</enum><text>sells or
exchanges stock in a foreign corporation in a taxable year of the domestic
corporation with or within which a taxable year of the foreign corporation
beginning after December 31, 2012, ends, and</text>
</subparagraph><subparagraph id="id35597C5902BA4033A21F171DE62F506C"><enum>(B)</enum><text>met the ownership
requirements of subsection (a)(2) with respect to such stock,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">no
deduction shall be allowed to the domestic corporation with respect to any loss
from the sale or
exchange.</continuation-text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id21C86A32ED2847F8A34B472DC8D38342"><enum>(b)</enum><header>Sale by a CFC
of a lower tier CFC</header><text>Section 964(e) is amended by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id286B577EC9CF44C3B1F26B1E8F414170" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="id2CEA146C827D434CA4F3DD7DE9B8E325"><enum>(4)</enum><header>Coordination
with dividends received deduction</header>
<subparagraph commented="no" display-inline="no-display-inline" id="id9F2A10F89F3F42F0A4C9BB0D46479672"><enum>(A)</enum><header>In
general</header><text>If, for any taxable year of a controlled foreign
corporation beginning after December 31, 2012, any amount is treated as a
dividend under paragraph (1) by reason of a sale or exchange by the controlled
foreign corporation of stock in another foreign corporation held for 1 year or
more, then, notwithstanding any other provision of this title—</text>
<clause id="idCBDF87D2A314405CBC3ACF08A7A871E1"><enum>(i)</enum><text>the qualified
foreign-source portion of such dividend shall be treated for purposes of
section 951(a)(1)(A) as subpart F income of the selling controlled foreign
corporation for such taxable year,</text>
</clause><clause id="idE04ECBEB9A374B4FB731B781A1C33FE2"><enum>(ii)</enum><text>a United States
shareholder with respect to the selling controlled foreign corporation shall
include in gross income for the taxable year of the shareholder with or within
which such taxable year of the controlled foreign corporation ends an amount
equal to the shareholder's pro rata share (determined in the same manner as
under section 951(a)(2)) of the amount treated as subpart F income under clause
(i), and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="idD2F8718E4E1546E5B694E89D1774B670"><enum>(iii)</enum><text>the deduction
under section 245A(a) shall be allowable to the United States shareholder with
respect to the subpart F income included in gross income under clause (ii) in
the same manner as if such subpart F income were a dividend received by the
shareholder from the selling controlled foreign corporation.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id0D1F8CBB84D644038B5C46DFCE5E79B5"><enum>(B)</enum><header>Effect of loss
on earnings and profits</header><text>For purposes of this title, in the case
of a sale or exchange by a controlled foreign corporation of stock in another
foreign corporation in a taxable year of the selling controlled foreign
corporation beginning after December 31, 2012, to which this paragraph would
apply if gain were recognized, the earnings and profits of the selling
controlled foreign corporation shall not be reduced by reason of any loss from
such sale or exchange.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idF1664D4776364042939BF4ED508A6453"><enum>(C)</enum><header>Qualified
foreign-source portion</header><text>For purposes of this paragraph, the
qualified foreign-source portion of any amount treated as a dividend under
paragraph (1) shall be determined in the same manner as under section
245A(c).</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><section id="H1F75FE30546249738E2B5F36696EDB0B"><enum>103.</enum><header>Deduction for
foreign intangible income derived from trade or business within the United
States</header>
<subsection id="H1FFB13AF456541C895C34FCB099F39ED"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Part VIII of
subchapter B of chapter 1 is amended by adding at the end the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="H7D87DBA6455F419FAAE920F61406EC49" style="OLC">
<section id="HEC5E79EAE8444B59B48347CE43CEFC0A"><enum>250.</enum><header>Foreign
intangible income derived from trade or business within the United
States</header>
<subsection id="HF59CB9AC272C4C88A7DC2728EF0B237A"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">In the case of a
domestic corporation, there shall be allowed as a deduction an amount equal to
50 percent of the qualified foreign intangible income of such domestic
corporation for the taxable year.</text>
</subsection><subsection id="id1AB4FC8C3A5A45999367BCF6D1C1C03C"><enum>(b)</enum><header>Qualified
foreign intangible income</header>
<paragraph id="id6A497F89BF234675B6805C9E1F7B1B3B"><enum>(1)</enum><header>In
general</header><text>The term <term>qualified foreign intangible income</term>
means, with respect to any domestic corporation, foreign intangible income
which is derived by the domestic corporation from the active conduct of a trade
or business within the United States with respect to the intangible property
giving rise to the income.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idA7D25FB07CB34FA89AF75A97A91225B9"><enum>(2)</enum><header>Requirements
relating to trade or business within the United States</header><text display-inline="yes-display-inline">For purposes of this section, foreign
intangible income shall be treated as derived by a domestic corporation from
the active conduct of a trade or business within the United States only
if—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="id8C8409A92F2E4364A1552C94E59E466E"><enum>(A)</enum><text display-inline="yes-display-inline">the domestic corporation developed,
created, or produced within the United States the intangible property giving
rise to the income, or</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id6DB87B8DBB1A42419C70E368F9F9AF90"><enum>(B)</enum><text display-inline="yes-display-inline">in any case in which the domestic
corporation acquired such intangible property, the domestic corporation added
substantial value to the property through the active conduct of such trade or
business within the United States.</text>
</subparagraph></paragraph></subsection><subsection id="H66097FF673D3411394E65E31AD9B3CEB"><enum>(c)</enum><header>Foreign
intangible income</header><text>For purposes of this section—</text>
<paragraph id="id2DA96C0915E04B889FDAD6D48A552D2B"><enum>(1)</enum><header>In
general</header><text>The term <term>foreign intangible income</term> means any
intangible income which is derived in connection with—</text>
<subparagraph display-inline="no-display-inline" id="HE25C7CC45FDD46C1B819045C4BBC79FE"><enum>(A)</enum><text>property which is
sold, leased, licensed, or otherwise disposed of for use, consumption, or
disposition outside the United States, or</text>
</subparagraph><subparagraph id="H8D23DA495FB142A9BBF7D10EF0B8C596"><enum>(B)</enum><text>services provided
with respect to persons or property located outside the United States.</text>
</subparagraph></paragraph><paragraph id="idFEF3E0633E5E4526AC7AA4D68A66CD7F"><enum>(2)</enum><header>Exceptions for
certain income</header><text>The following amounts shall not be taken into
account in computing foreign intangible income:</text>
<subparagraph id="id8B77158804D54AF4AF733103A58F878A"><enum>(A)</enum><text>Any amount
treated as received by the domestic corporation under section 367(d)(2) with
respect to any intangible property.</text>
</subparagraph><subparagraph id="idCC2B40EEAE294CA683E6E8EC8590E5E6"><enum>(B)</enum><text>Any payment under
a cost-sharing arrangement entered into under section 482.</text>
</subparagraph><subparagraph id="id9AB13883A6F842C08F76DB18B22131F0"><enum>(C)</enum><text>Any amount
received from a controlled foreign corporation with respect to which the
domestic corporation is a United States shareholder to the extent such amount
is attributable or properly allocable to income which is—</text>
<clause id="H021F5126296146779312C484A100F8E7"><enum>(i)</enum><text>effectively
connected with the conduct of a trade or business within the United States and
subject to tax under this chapter, or</text>
</clause><clause id="HF35D31C321C44107A603350C29939052"><enum>(ii)</enum><text>subpart F
income.</text>
</clause><continuation-text continuation-text-level="subparagraph">For
purposes of clause (ii), amounts not otherwise treated as subpart F income
shall be so treated if the amount creates (or increases) a deficit which under
section 952(c) may reduce the subpart F income of the payor or any other
controlled foreign corporation.</continuation-text></subparagraph></paragraph><paragraph id="id8ABE63D225BB4A148727030ED3BA991C"><enum>(3)</enum><header>Intangible
income</header><text>The term <term>intangible income</term> means gross income
from—</text>
<subparagraph id="id473802C4529F4235ABF15B5801A2B215"><enum>(A)</enum><text display-inline="yes-display-inline">the sale, lease, license, or other
disposition of property in which intangible property is used directly or
indirectly, or</text>
</subparagraph><subparagraph id="id797EB2387FB643BF8D1C0F6B5C6DBD39"><enum>(B)</enum><text>the provision of
services related to intangible property or in connection with property in which
intangible property is used directly or indirectly,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">to the
extent that such gross income is properly attributable to such intangible
property.</continuation-text></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H2D7A96462C86459E878829AD05C07E22"><enum>(4)</enum><header display-inline="yes-display-inline">Deductions to be taken into
account</header><text display-inline="yes-display-inline">The gross income of a
domestic corporation taken into account under this subsection shall be reduced,
under regulations prescribed by the Secretary, so as to take into account
deductions properly allocable to such income.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id96EF87E273984212A8022CAC251E1D97"><enum>(5)</enum><header display-inline="yes-display-inline">Intangible property</header><text display-inline="yes-display-inline">The term <term>intangible property</term>
has the meaning given such term by section 936(h)(3)(B).</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="idCC34A15375A74E9DA2CDB196399A93F0"><enum>(d)</enum><header display-inline="yes-display-inline">Regulations</header><text display-inline="yes-display-inline">The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the provisions of
this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idFB49892620324E9C8E3F7CF899AFB30F"><enum>(b)</enum><header>Conforming
amendment</header><text>The table of sections for part VIII of subchapter B of
chapter 1 is amended by adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="id9AB247C087804F9FABCFF57DFD333721" style="OLC">
<toc>
<toc-entry bold="off" level="section">Sec. 250. Foreign intangible
income derived from trade or business within the United States.
</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HCD2B3BAF643F4D87B507B9DC2782B718"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years of domestic corporations beginning after December 31, 2012.</text>
</subsection></section><section id="H0514EA09BC044D9CBC5814014BAC209D"><enum>104.</enum><header>Treatment of
deferred foreign income upon transition to participation exemption system of
taxation</header>
<subsection id="H1862FCFF54EC48BD9666E561628C5866"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 965 is
amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H0DE765D1F4B346818A8F9CEC8AF1F7F6" style="OLC">
<section id="H9769D063707B4CE88B0DED94BDED2942"><enum>965.</enum><header>Treatment of
deferred foreign income upon transition to participation exemption system of
taxation</header>
<subsection id="H91436CF2685D42CB85E5E77AFBD64389"><enum>(a)</enum><header>Deduction
allowed</header><text display-inline="yes-display-inline">In the case of a
domestic corporation which elects the application of this section to any
controlled foreign corporation with respect to which it is a United States
shareholder, there shall be allowed as a deduction for the taxable year of the
United States shareholder with or within which the first taxable year of the
controlled foreign corporation beginning after December 31, 2012, ends an
amount equal to 70 percent of the amount determined under subsection (b) for
the taxable year.</text>
</subsection><subsection id="id25CE6BF021D9483E8BDACB4B61BAE571"><enum>(b)</enum><header>Eligible
amount</header><text>For purposes of subsection (a)—</text>
<paragraph id="idFE14AA720FE846E597C016B5AAC5F1CA"><enum>(1)</enum><header>In
general</header><text>The amount determined under this subsection for a United
States shareholder with respect to any controlled foreign corporation for the
taxable year of the shareholder described in subsection (a) is the lesser
of—</text>
<subparagraph id="idB848A7C6F4414683B4AC15AE626A0E66"><enum>(A)</enum><text>the shareholder's
pro rata share of the earnings and profits of the controlled foreign
corporation described in section 959(c)(3) as of the close of the taxable year
preceding the first taxable year of the controlled foreign corporation
beginning after December 31, 2012, or</text>
</subparagraph><subparagraph id="id3D2B523FA791465E812101433EDA5BA3"><enum>(B)</enum><text>an amount equal
to the sum of—</text>
<clause id="id96ED410A3FFF427985F372247ABB07C2"><enum>(i)</enum><text display-inline="yes-display-inline">the dividends received by the shareholder
during such taxable year from the controlled foreign corporation which are
attributable to the earnings and profits described in subparagraph (A),
plus</text>
</clause><clause id="id8E9240FFE7A14F6BB357D55542A518A0"><enum>(ii)</enum><text>the increase in
subpart F income required to be included in gross income of the shareholder for
the taxable year by reason of the election under paragraph (2).</text>
</clause></subparagraph></paragraph><paragraph id="id7B4F87E1A77D49DBBBDAFDCCE69892EF"><enum>(2)</enum><header>Election of
deemed subpart F inclusion</header><text>A United States shareholder may elect
for purposes of paragraph (1)(B)(ii) to treat all (or any portion) of the
shareholder's pro rata share of the earnings and profits of a controlled
foreign corporation described in paragraph (1)(A) as subpart F income
includible in the gross income of the shareholder for the taxable year of the
shareholder described in subsection (a).</text>
</paragraph><paragraph id="id037137F7EEE54E67A501DB53FB35B9F6"><enum>(3)</enum><header>Ordering
rule</header><text>For purposes of paragraph (1)(B)(i), distributions shall be
treated as first made out of earnings and profits of a controlled foreign
corporation described in paragraph (1)(A).</text>
</paragraph><paragraph id="P9560927357014391BB6A306FBC929E05"><enum>(4)</enum><header>Dividend</header><text>The
term <term>dividend</term> shall not include amounts includible in gross income
as a dividend under section 78.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="HC2C75FDAE33B4EF28C4635FADBA12746"><enum>(c)</enum><header>Disallowance of
foreign tax credit, etc</header><text>In the case of a domestic corporation
making an election under subsection (a) with respect to any controlled foreign
corporation—</text>
<paragraph id="H2E3362FF05A34A5794906E6CF68630D8"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">No credit shall be
allowed under section 901 for any taxes paid or accrued (or treated as paid or
accrued) with respect to the earnings and profits taken into account in
determining the amount under subsection (b).</text>
</paragraph><paragraph id="HD92840AA867F40AEBB65091DBA402351"><enum>(2)</enum><header>Denial of
deduction</header><text>No deduction shall be allowed under this chapter for
any tax for which credit is not allowable under section 901 by reason of
paragraph (1).</text>
</paragraph><paragraph id="H58CEDA9EA36043B4A4495CDD780331DB"><enum>(3)</enum><header>Coordination
with section 78</header><text display-inline="yes-display-inline">Section 78
shall not apply to any tax for which credit is not allowable under section 901
by reason of paragraph (1).</text>
</paragraph><paragraph id="id10034B3F327541D9B8D1A22CC71DF8FD"><enum>(4)</enum><header>Treatment of
nondeductible portion in applying foreign tax credit limit</header><text>For
purposes of applying the limitation under section 904(a), the remaining 30
percent of the amount determined under subsection (b) with respect to which a
deduction is not allowable under subsection (a) shall be treated as income from
sources within the United States.</text>
</paragraph></subsection><subsection id="HBA7311BF10974895A720158FAC2A1764"><enum>(d)</enum><header>Election To pay
liability for deemed subpart F income in installments</header>
<paragraph id="H8C0D5FC3981647C3887780C2297A4C2F"><enum>(1)</enum><header>In
general</header><text>In the case of a United States shareholder with respect
to 1 or more controlled foreign corporations to which elections under
subsections (a) and (b)(2) apply, such United States shareholder may elect to
pay the net tax liability determined with respect to its deemed subpart F
inclusions with respect to such corporations under subsection (b)(2) for the
taxable year described in subsection (a) in 2 or more (but not exceeding 8)
equal installments.</text>
</paragraph><paragraph id="H702021B0253D4AC781D3CF4C937481D9"><enum>(2)</enum><header>Date for payment
of installments</header><text>If an election is made under paragraph (1), the
first installment shall be paid on the due date (determined without regard to
any extension of time for filing the return) for the return of tax for the
taxable year for which the election was made and each succeeding installment
shall be paid on the due date (as so determined) for the return of tax for the
taxable year following the taxable year with respect to which the preceding
installment was made.</text>
</paragraph><paragraph id="HFEE19EDFC0A04EFFA1D234D9A893F91A"><enum>(3)</enum><header>Acceleration of
payment</header><text>If there is an addition to tax for failure to pay timely
assessed with respect to any installment required under this subsection, a
liquidation or sale of substantially all the assets of the taxpayer (including
in a title 11 or similar case), a cessation of business by the taxpayer, or any
similar circumstance, then the unpaid portion of all remaining installments
shall be due on the date of such event (or in the case of a title 11 or similar
case, the day before the petition is filed).</text>
</paragraph><paragraph id="HC7D3952CFD594244B4603AC2619C2EFC"><enum>(4)</enum><header>Proration of
deficiency to installments</header><text display-inline="yes-display-inline">If
an election is made under paragraph (1) to pay the net tax liability described
in paragraph (1) in installments and a deficiency has been assessed which
increases such net tax liability, the increase shall be prorated to the
installments payable under paragraph (1). The part of the increase so prorated
to any installment the date for payment of which has not arrived shall be
collected at the same time as, and as a part of, such installment. The part of
the increase so prorated to any installment the date for payment of which has
arrived shall be paid upon notice and demand from the Secretary. This
subsection shall not apply if the deficiency is due to negligence, to
intentional disregard of rules and regulations, or to fraud with intent to
evade tax.</text>
</paragraph><paragraph id="H513787D5F4E94A7C9BC32AD950D38C10"><enum>(5)</enum><header>Time for payment
of interest</header><text>Interest payable under section 6601 on the unpaid
portion of any amount of tax the time for payment of which as been extended
under this subsection shall be paid annually at the same time as, and as part
of, each installment payment of such tax. In the case of a deficiency to which
paragraph (4) applies, interest with respect to such deficiency which is
assigned under the preceding sentence to any installment the date for payment
of which has arrived on or before the date of the assessment of the deficiency,
shall be paid upon notice and demand from the Secretary.</text>
</paragraph><paragraph id="H22B9B70569BF48A29EBC5C1D60D57F64"><enum>(6)</enum><header>Net tax
liability for deemed subpart F inclusions</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph id="H9466764A58E34232979060513D3EC33E"><enum>(A)</enum><header>In
general</header><text>The net tax liability described in paragraph (1) with
respect to any United States shareholder for any taxable year is the excess (if
any) of—</text>
<clause id="HCF1126006DCA4BD2B23F745407C774C5"><enum>(i)</enum><text>such taxpayer’s
net income tax for the taxable year, over</text>
</clause><clause id="HDD7EF8BA40854732B127F2B1AAADD428"><enum>(ii)</enum><text>such taxpayer’s
net income tax for such taxable year determined as if the elections under
subsection (b)(2) with respect to 1 or more controlled foreign corporations had
not been made.</text>
</clause></subparagraph><subparagraph id="H920146DE38B747C79BE6D2855A283EC5"><enum>(B)</enum><header>Net income
tax</header><text>The term <term>net income tax</term> means the net income tax
(as defined in section 38(c)(1)) reduced by the credit allowed under section
38.</text>
</subparagraph></paragraph></subsection><subsection id="PB77F58B6EE474C229380C23B65BB7D33"><enum>(e)</enum><header>Special
rules</header><text>For purposes of this section—</text>
<paragraph id="HE9BCDEA20DA246058E3BE4A331DCC77A"><enum>(1)</enum><header>Elections</header><text>Any
election under subsection (a), (b)(2), or (d)(1) shall be made not later than
the due date (including extensions) for the return of tax for the taxable year
for which made and shall be made in such manner as the Secretary may
provide.</text>
</paragraph><paragraph id="id8E11A38C41314E818E1EAF3685EB260A"><enum>(2)</enum><header>Section not to
apply to noncontrolled section 902 corporations treated as
CFCs</header><text>No election may be made under subsection (a) with respect to
a controlled foreign corporation which was a noncontrolled section 902
corporation which a United States shareholder elected under section 245A(b) to
treat as a controlled foreign corporation.</text>
</paragraph><paragraph id="idFDE383CADFC242DF9BB938090BE985D2"><enum>(3)</enum><header>Pro rata
share</header><text>A shareholder's pro rata share of any earnings and profits
shall be determined in the same manner as under section
951(a)(2).</text>
</paragraph></subsection></section><after-quoted-block></after-quoted-block></quoted-block>
</subsection><subsection id="H74701E55D01048FAB519F2746A4D5F36"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="H1F060DECB3E94C7DB63F5838F5BACE34"><enum>(1)</enum><text>Clause (vi) of
section 56(g)(4)(C), as amended by this Act, is amended—</text>
<subparagraph id="HFF6B80F359A64726A605BD5711BBA963"><enum>(A)</enum><text>by striking
<quote>965</quote> and inserting <quote>965(b)</quote>, and</text>
</subparagraph><subparagraph id="HF05F9CAFE78C4F159CE7BA1F78EA2A12"><enum>(B)</enum><text display-inline="yes-display-inline">by inserting <quote><header-in-text level="clause" style="OLC">and inclusions</header-in-text></quote> after
<quote><header-in-text level="clause" style="OLC">certain
distributions</header-in-text></quote> in the heading thereof.</text>
</subparagraph></paragraph><paragraph id="H1453C60D9E0940E891FAAB66BAFDE759"><enum>(2)</enum><text>Paragraph (2) of
section 6601(b) is amended—</text>
<subparagraph id="H86BA38C236414DAC9F57C9928DFDF1E5"><enum>(A)</enum><text>by striking
<quote>section 6156(a)</quote> in the matter preceding subparagraph (A) and
inserting <quote>section 965(d)(1) or 6156(a)</quote>, and</text>
</subparagraph><subparagraph id="H8A666500C219473784A460A73E48513C"><enum>(B)</enum><text>by striking
<quote>section 6156(b)</quote> in subparagraph (A) and inserting <quote>section
965(d)(2) or 6156(b), as the case may be</quote>.</text>
</subparagraph></paragraph><paragraph id="H9194F742B8F34FDF83CF2F4428C8A3D5"><enum>(3)</enum><text>The table of
section for subpart F of part III of subchapter N of chapter 1 is amended by
striking the item relating to section 965 and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H59DD647A72A3480CA4E34A96D9594840" style="OLC">
<toc container-level="quoted-block-container" idref="H0DE765D1F4B346818A8F9CEC8AF1F7F6" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H9769D063707B4CE88B0DED94BDED2942" level="section">Sec. 965. Treatment of deferred foreign income upon transition
to participation exemption system of
taxation.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="idA080262ACED44D4A874A943B308156C4"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to taxable years of foreign corporations beginning
after December 31, 2012, and to taxable years of United States shareholders
with or within which such taxable years of foreign corporations end.</text>
</subsection></section><enum>II</enum><header>Other
international tax reforms</header>
<subtitle id="idF65733EF67AB4C2D8304D8E1762869EE"><enum>A</enum><header>Modifications of
subpart F</header>
<section id="idC074408C74574F5591933F23E66CFE8C"><enum>201.</enum><header>Treatment of
low-taxed foreign income as subpart F income</header>
<subsection id="HE67B642C074B4D459DA64AEC2DB74A28"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (a) of
section 952 is amended by redesignating paragraphs (3), (4), and (5) as
paragraphs (4), (5), and (6), respectively, and by inserting after paragraph
(2) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H8692FC8169CC403CBFA970EE0CC0C69F" style="OLC">
<paragraph id="H3A192497766445A3A3D323904ED5DEA7"><enum>(3)</enum><text display-inline="yes-display-inline">low-taxed income (as defined under
subsection
(e)),</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H66A4DA6998EC48E380B9803D2B69E845"><enum>(b)</enum><header>Low-Taxed
income</header><text>Section 952 is amended by adding at the end the following
new subsection:</text>
<quoted-block display-inline="no-display-inline" id="idFF4B5E49BAB74811A53050AAB6C96354" style="OLC">
<subsection id="HD3136F773605478CA1B78A2AC79832D0"><enum>(e)</enum><header>Low-Taxed
income</header>
<paragraph id="HAC328E964E554B99AC542A726ED94D21"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">For purposes of
subsection (a), except as provided in paragraph (2), the term <term>low-taxed
income</term> means, with respect to any taxable year of a controlled foreign
corporation, the entire gross income of the controlled foreign corporation
unless the taxpayer establishes to the satisfaction of the Secretary that such
income was subject to an effective rate of income tax (determined under rules
similar to the rules of section 954(b)(4)) imposed by a foreign country in
excess of one-half of the highest rate of tax under section 11(b) for taxable
years of United States corporations beginning in the same calendar year as the
taxable year of the controlled foreign corporation begins.</text>
</paragraph><paragraph id="id0727B5F388D549029F1F6239F69E254C"><enum>(2)</enum><header>Exception for
qualified business income</header><text>For purposes of paragraph (1),
qualified business income—</text>
<subparagraph id="id81EAF1E1A5D348849341793AE60CECCC"><enum>(A)</enum><text>shall be taken
into account in determining the effective rate of income tax at which the
entire gross income of the controlled foreign corporation is taxed, but</text>
</subparagraph><subparagraph id="id5A487E747BED4AE78BD5FFCF82FE3520"><enum>(B)</enum><text>the amount of
gross income treated as low-taxed income under paragraph (1) shall be reduced
by the amount of the qualified business income.</text>
</subparagraph></paragraph><paragraph id="id9FB101AF66F34130AEB078B02AA6A1BA"><enum>(3)</enum><header>Qualified
business income</header><text>For purposes of this subsection—</text>
<subparagraph id="id0FC8A560DE254F6D9DA3DAE99485F1A9"><enum>(A)</enum><header>In
general</header><text>The term <term>qualified business income</term> means,
with respect to any controlled foreign corporation, income derived by the
controlled foreign corporation in a foreign country but only if—</text>
<clause id="idC1C46EB5B38C4697B0821A7A2803AA32"><enum>(i)</enum><text>such income is
attributable to the active conduct of a trade or business of such corporation
in such foreign country,</text>
</clause><clause id="id7B852E4898814014AFA9FF6A43910856"><enum>(ii)</enum><text>the corporation
maintains an office or fixed place of business in such foreign country,
and</text>
</clause><clause id="id2DA6A973141E41128B91E52E6AABD0A1"><enum>(iii)</enum><text>officers and
employees of the corporation physically located at such office or place of
business in such foreign country conducted (or significantly contributed to the
conduct of) activities within the foreign country which are substantial in
relation to the activities necessary for the active conduct of the trade or
business to which such income is attributable.</text>
</clause></subparagraph><subparagraph id="idA437B9BCF9CB4CF2B8094A6604AD44D3"><enum>(B)</enum><header>Exception for
intangible income</header><text>For purposes of subparagraph (A), qualified
business income of a controlled foreign corporation shall not include
intangible income (as defined in section 250(c)(3)).</text>
</subparagraph></paragraph><paragraph id="HA7E6CFA7FC134D52B33B665BF67EF85E"><enum>(4)</enum><header>Determination of
effective rate of foreign income tax and qualified business income</header>
<subparagraph id="HF9090850EC6D49BB868D7E5C3AEBA7B2"><enum>(A)</enum><header>Country-by-country
determination</header><text>For purposes of determining the effective rate of
income tax imposed by any foreign country under paragraph (1) and qualified
business income under paragraph (3), each such paragraph shall be applied
separately with respect to—</text>
<clause id="H64BC3AA5B72A49A3990CCB3F583777AD"><enum>(i)</enum><text>each foreign
country in which a controlled foreign corporation conducts any trade or
business, and</text>
</clause><clause id="H4B10B6E564FF406FB293D3F440FFAF1F"><enum>(ii)</enum><text>the entire gross
income and qualified business income derived with respect to such foreign
country.</text>
</clause></subparagraph><subparagraph id="HB784DA7D09E14F69AF34999388228A5A"><enum>(B)</enum><header>Treatment of
losses</header><text>For purposes of determining the effective rate of income
tax imposed by any foreign country under paragraph (1)—</text>
<clause id="H7F595C018C1B45E2AFB6F9557932698B"><enum>(i)</enum><text>such effective
rate shall be determined without regard to any losses carried to the relevant
taxable year, and</text>
</clause><clause id="H8E141CEC774A4DCC9351D4BC59B7E518"><enum>(ii)</enum><text>to the extent the
income of the controlled foreign corporation reduces losses in the relevant
taxable year, such effective rate shall be treated as being the effective rate
which would have been imposed on such income without regard to such
losses.</text>
</clause></subparagraph></paragraph><paragraph commented="no" id="HE07BB014A1CC45F9B0F00046F3FAD855"><enum>(5)</enum><header>Deductions to be
taken into account</header><text>The gross income of a controlled foreign
corporation taken into account under this subsection shall be reduced, under
regulations prescribed by the Secretary, so as to take into account deductions
(including taxes) properly allocable to such
income.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H1B1DACEB80B548ADA51F99C997D1F771"><enum>(c)</enum><header>Conforming
amendments</header>
<paragraph id="H4B0E18B8F25D496ABB7F620BA6A73F0B"><enum>(1)</enum><text display-inline="yes-display-inline">Subsection (a) of section 952 is
amended—</text>
<subparagraph id="H76D5F32992EC417DA299744FB571EAC1"><enum>(A)</enum><text>by striking
<quote>paragraph (4)</quote> in the next to last sentence and inserting
<quote>paragraph (5)</quote>, and</text>
</subparagraph><subparagraph id="H612B129D0A9B4B72920479D56ED47E2D"><enum>(B)</enum><text>by striking
<quote>paragraph (5)</quote> in the last sentence and inserting
<quote>paragraph (6)</quote>.</text>
</subparagraph></paragraph><paragraph id="HD6D67BD887414D23A962DA27189D09DC"><enum>(2)</enum><text>Subsection (d) of
section 952 is amended by striking <quote>subsection (a)(5)</quote> and
inserting <quote>subsection (a)(6)</quote>.</text>
</paragraph><paragraph id="H743711F2737D45508180DA26D01C949E"><enum>(3)</enum><text>Paragraphs (1) and
(2) of section 999(c) are each amended by striking <quote>section
952(a)(3)</quote> and inserting <quote>section 952(a)(4)</quote>.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HAC23929E57344AE6A06E39162B6A79EA"><enum>(d)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to taxable years of foreign corporations beginning
after December 31, 2012, and to taxable years of United States shareholders
with or within which such taxable years of foreign corporations end.</text>
</subsection></section><section id="id5FF055F715154E40869CDE9C023062CC"><enum>202.</enum><header>Permanent
extension of look-thru rule for controlled foreign corporations</header>
<subsection id="idEF3E8AC74B2549E8AC19838DF45903E3"><enum>(a)</enum><header>In
general</header><text>Section 954(c)(6)(C) is amended by striking <quote>and
before January 1, 2012,</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id19323976914E4B3F926B388DC977D01B"><enum>(b)</enum><header>Effective
date</header><text display-inline="yes-display-inline">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
with or within which such taxable years of foreign corporations end.</text>
</subsection></section><section id="id6BD63A22CFA64F79B4D2C40F119F9B59"><enum>203.</enum><header>Permanent
extension of exceptions for active financing income</header>
<subsection id="id5139E0C1E5E94C1F980249167F08EE48"><enum>(a)</enum><header>Exception from
insurance income</header><text>Section 953(e)(10) is amended—</text>
<paragraph id="id3C199DC2F3FE4D4DB5AD7D975A84A30A"><enum>(1)</enum><text>by striking
<quote>and before January 1, 2012,</quote>, and</text>
</paragraph><paragraph id="id40093C230AD14209AC0887D3D652DB6F"><enum>(2)</enum><text>by striking the
last sentence.</text>
</paragraph></subsection><subsection id="id6ADA841131384CB9BB7880783761DA72"><enum>(b)</enum><header>Exception from
foreign personal holding company income</header><text>Section 954(h)(9) is
amended by striking <quote>and before January 1, 2012,</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="idCE9147E1ADC24932936B5A01038B9173"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">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
with or within which such taxable years of foreign corporations end.</text>
</subsection></section><section id="id63178DF4F4E84B5BBA932DBF0E5BB1CE"><enum>204.</enum><header>Foreign base
company income not to include sales or services income</header>
<subsection id="id7376936A6D7F49E99B696FB21B81378E"><enum>(a)</enum><header>Repeal</header><text>Paragraphs
(2) and (3) of section 954(a) are repealed.</text>
</subsection><subsection id="idFA10ECB20E5A4170966DCC9220C712DC"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="idA9A8FFC3EA1A411599CEB37E1A159C43"><enum>(1)</enum><text>Section 954(d) is
amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id3AB5FD38FA5C4EAB88426A9E361D8AFF" style="OLC">
<paragraph id="id67F6C68F085A447790C06C94D5BE1FBE"><enum>(5)</enum><header>Termination</header><text>This
subsection shall not apply to taxable years of foreign corporations beginning
after December 31, 2012, and to taxable years of United States shareholders
with or within which such taxable years of foreign corporations
end.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id6CCB9C890DE744619D5A4AFDF7151EE4"><enum>(2)</enum><text>Section 954(e) is
amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id7793337E9B214FD5BD1C4168BAACFC28" style="OLC">
<paragraph id="id6329F372EDCB4BC4A11957064DC160B9"><enum>(3)</enum><header>Termination</header><text>This
subsection shall not apply to taxable years of foreign corporations beginning
after December 31, 2012, and to taxable years of United States shareholders
with or within which such taxable years of foreign corporations
end.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id7946792879B143C987EAE57A9958D387"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to taxable years of foreign corporations beginning
after December 31, 2012, and to taxable years of United States shareholders
with or within which such taxable years of foreign corporations end.</text>
</subsection></section></subtitle><subtitle id="id2716117D413B4BCE8A59454889A4B899"><enum>B</enum><header>Modifications
related to foreign tax credit</header>
<section id="idAE8265B7EAC64CD18B2DB999443C5480"><enum>211.</enum><header>Modification
of application of sections 902 and 960 with respect to post-2012
earnings</header>
<subsection id="id416B14A0C9B3442A810AD818AD644279"><enum>(a)</enum><header>Section 902 not
To apply to dividends from post-2012 earnings</header><text>Section 902 is
amended by redesignating subsection (d) as subsection (e) and by inserting
after subsection (c) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="idC2BC9D3E10334EB6A0175D41FF91730E" style="OLC">
<subsection id="idFF347D01B52A477F9A9362EE184CF5C0"><enum>(d)</enum><header>Section not To
apply to dividends from post-2012 earnings</header>
<paragraph id="idE5122AC55C69420495A600597451E7DF"><enum>(1)</enum><header>In
general</header><text>This section shall not apply to the portion of any
dividend paid by a foreign corporation to the extent such portion is made out
of earnings and profits of the foreign corporation (computed in accordance with
sections 964(a) and 986) accumulated in taxable years beginning after December
31, 2012.</text>
</paragraph><paragraph id="id8B6C394423C4496DA06AC7E778268034"><enum>(2)</enum><header>Coordination
with distributions from pre-2013 earnings and profits</header><text>For
purposes of this section—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="id59603A0E6A3A495DB979B239C5630A41"><enum>(A)</enum><header display-inline="yes-display-inline">Ordering rule</header><text display-inline="yes-display-inline">Any distribution in a taxable year
beginning after December 31, 2012, shall be treated as first made out of
earnings and profits of the foreign corporation (computed in accordance with
sections 964(a) and 986) accumulated in taxable years beginning before January
1, 2013.</text>
</subparagraph><subparagraph id="id72E50B2C36114CD0917AC8624F18AC32"><enum>(B)</enum><header>Post-1986
undistributed earnings</header><text>Post-1986 undistributed earnings shall not
include earnings and profits described in paragraph
(1).</text>
</subparagraph></paragraph></subsection><after-quoted-block></after-quoted-block></quoted-block>
</subsection><subsection id="idBB06C4AC3CF94735B74F6B1A87F45C85"><enum>(b)</enum><header>Determination
of section 960 credit on current year basis</header><text>Section 960 is
amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="idBC915FD4E89541B6A35474A17385CB08" style="OLC">
<subsection id="id73DD7B4509F641EC8D73B11CD5BDAD06"><enum>(d)</enum><header>Deemed paid
credit for subpart F inclusions attributable to post-2012 earnings</header>
<paragraph commented="no" id="H0812298BFD5B445293D21954B5837AC6"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">For purposes of this
subpart, if there is included in the gross income of a domestic corporation any
amount under section 951(a)—</text>
<subparagraph commented="no" id="id6032E9790CB341F3A1D1013136CD2E56"><enum>(A)</enum><text display-inline="yes-display-inline">with respect to any controlled foreign
corporation with respect to which such domestic corporation is a United States
shareholder, and</text>
</subparagraph><subparagraph commented="no" id="id3E9D6650A46644F1B41EE8E8B6C3A069"><enum>(B)</enum><text display-inline="yes-display-inline">which is attributable to the earnings and
profits of the controlled foreign corporation (computed in accordance with
sections 964(a) and 986) accumulated in taxable years beginning after December
31, 2012,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">then
subsections (a), (b), and (c) shall not apply and such domestic corporation
shall be deemed to have paid so much of such foreign corporation’s foreign
income taxes as are properly attributable to the amount so included.</continuation-text></paragraph><paragraph commented="no" id="H8EF3D78C826248909E290129071FCA56"><enum>(2)</enum><header>Foreign income
taxes</header><text>For purposes of this subsection, the term <term>foreign
income taxes</term> means any income, war profits, or excess profits taxes paid
or accrued by the controlled foreign corporation to any foreign country or
possession of the United States.</text>
</paragraph><paragraph commented="no" id="HEB84F5DD8AB6426B880AD5FBB5EE944D"><enum>(3)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary shall provide such
regulations as may be necessary or appropriate to carry out the provisions of
this
subsection.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><section id="id6A7854A3071A43FC9E43263C6C84CF6A"><enum>212.</enum><header>Separate
foreign tax credit basket for foreign intangible income</header>
<subsection id="idFD6AD00F673B4AF78CF01BF86498B4C3"><enum>(a)</enum><header>In
general</header><text>Paragraph (1) of section 904(d) is amended by striking
<quote>and</quote> at the end of subparagraph (A), by striking the period at
the end of subparagraph (B) and inserting <quote>, and</quote>, and by adding
at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="id7D6A09C3FB5A4EE18E36A8BD6D77BB1D" style="OLC">
<subparagraph id="id1E43FDDCBAF9405C8290132A86946302"><enum>(C)</enum><text>foreign
intangible income (as defined in paragraph
(2)(J)).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idD329A81649484FCB98C3D5A4DD546BDD"><enum>(b)</enum><header>Foreign
intangible income</header>
<paragraph commented="no" display-inline="no-display-inline" id="idDE4B6A4BD6E545959BC2AD6EEA87F3AC"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Section 904(d)(2) is amended by
redesignating subparagraphs (J) and (K) as subparagraphs (K) and (L) and by
inserting after subparagraph (I) the following:</text>
<quoted-block act-name="" display-inline="no-display-inline" id="id4680EDAC993B43C5B0BE6D9BA5011D9A" style="OLC">
<subparagraph commented="no" display-inline="no-display-inline" id="idB7BA622051E54A069E842CF31136D597"><enum>(J)</enum><header display-inline="yes-display-inline">Foreign intangible income</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<clause commented="no" display-inline="no-display-inline" id="id2C761DE73B3C447F86442EFEE6F0CC2F"><enum>(i)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">The term <term>foreign intangible
income</term> has the meaning given such term by section 250(c).</text>
</clause><clause commented="no" display-inline="no-display-inline" id="idD4AC720CC196420FB157C81C523EE850"><enum>(ii)</enum><header display-inline="yes-display-inline">Coordination</header><text display-inline="yes-display-inline">Passive category income and general
category income shall not include foreign intangible
income.</text>
</clause></subparagraph><after-quoted-block></after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idA596E84B60044B099FBE7E4C3565FD80"><enum>(2)</enum><header>General
category income</header><text>Section 904(d)(2)(A)(ii) is amended by inserting
<quote>or foreign intangible income</quote> after <quote>passive category
income</quote>.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="IDE9D8F37FECF54DEBA293D79320A74CF3"><enum>(c)</enum><header display-inline="yes-display-inline">Effective dates</header>
<paragraph commented="no" display-inline="no-display-inline" id="ID916ABD94707546CD9B6A2ADD3927F4D5"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">The amendments made by this section shall
apply to taxable years beginning after December 31, 2012.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDB5FAAE2DE2454C049D127F5E0985C6B2"><enum>(2)</enum><header display-inline="yes-display-inline">Transitional rule</header><text>For
purposes of section 904(d)(1) of the Internal Revenue Code of 1986 (as amended
by this Act)—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="PE5AFDFD5B92745B0959262BF7D2664E0"><enum>(A)</enum><text>taxes carried from
any taxable year beginning before January 1, 2013, to any taxable year
beginning on or after such date, with respect to any item of income, shall be
treated as described in the subparagraph of such section 904(d)(1) in which
such income would be described without regard to the amendments made by this
section, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="P89DB630D15294947861C737A9A001E6A"><enum>(B)</enum><text>any carryback of
taxes with respect to foreign intangible income from a taxable year beginning
on or after January 1, 2013, to a taxable year beginning before such date shall
be allocated to the general income category.</text>
</subparagraph></paragraph></subsection></section><section id="id27E39AD9A04C4779869E825E6D4D71C8"><enum>213.</enum><header>Inventory
property sales source rule exceptions not to apply for foreign tax credit
limitation</header>
<subsection id="id67B1AA847A904FC48F6ED31FD402A3A8"><enum>(a)</enum><header>In
general</header><text>Section 904 is amended by redesignating subsection (l) as
subsection (m) and by inserting after subsection (k) the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="idBC3E826728F746D58140F2477C639788" style="OLC">
<subsection id="id52CF885F2F444011AF7D79807CEE101A"><enum>(l)</enum><header>Inventory
property sales source rule exceptions not To apply</header><text>Any amount
which would be treated as derived from sources without the United States by
reason of the application of section 862(a)(6) or 863(b)(2) for any taxable
year shall be treated as derived from sources within the United States for
purposes of this
section.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idB651A73465314F4CA90DAE8AAD608D25"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to taxable
years beginning after December 31, 2012.</text>
</subsection></section></subtitle><subtitle id="idDB05073E81584DA0A8DA96B7B2B4042A"><enum>C</enum><header>Allocation of
interest on worldwide basis</header>
<section id="id53189E07AA6D4E89998CA700B05D7E74"><enum>221.</enum><header>Acceleration
of election to allocate interest on a worldwide basis</header><text display-inline="no-display-inline">Section 864(f)(6) is amended by striking
<quote>December 31, 2020</quote> and inserting <quote>December 31,
2012</quote>.</text>
</section></subtitle>