[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 174 Introduced in Senate (IS)]

114th CONGRESS
  1st Session
                                 S. 174

   To end offshore tax abuses, to preserve our national defense and 
protect American families and businesses from devastating cuts, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 13, 2015

Mr. Whitehouse (for himself and Mrs. Shaheen) introduced the following 
  bill; which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
   To end offshore tax abuses, to preserve our national defense and 
protect American families and businesses from devastating cuts, and for 
                            other purposes.

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

SECTION 1. SHORT TITLE, ETC.

    (a) Short Title.--This Act may be cited as the ``Stop Tax Haven 
Abuse Act''.
    (b) Amendment of 1986 Code.--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) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title, etc.
        TITLE I--DETERRING THE USE OF TAX HAVENS FOR TAX EVASION

Sec. 101. Authorizing special measures against foreign jurisdictions, 
                            financial institutions, and others that 
                            significantly impede United States tax 
                            enforcement.
Sec. 102. Strengthening the Foreign Account Tax Compliance Act (FATCA).
Sec. 103. Treatment of foreign corporations managed and controlled in 
                            the United States as domestic corporations.
Sec. 104. Reporting United States beneficial owners of foreign owned 
                            financial accounts.
Sec. 105. Swap payments made from the United States to persons 
                            offshore.
          TITLE II--OTHER MEASURES TO COMBAT TAX HAVEN ABUSES

Sec. 201. Country-by-country reporting.
Sec. 202. Penalty for failing to disclose offshore holdings.
Sec. 203. Deadline for anti-money laundering rule for investment 
                            advisers.
Sec. 204. Anti-money laundering requirements for formation agents.
Sec. 205. Strengthening John Doe summons proceedings.
Sec. 206. Improving enforcement of foreign financial account reporting.
           TITLE III--ENDING CORPORATE OFFSHORE TAX AVOIDANCE

Sec. 301. Allocation of expenses and taxes on basis of repatriation of 
                            foreign income.
Sec. 302. Excess income from transfers of intangibles to low-taxed 
                            affiliates treated as subpart F income.
Sec. 303. Limitations on income shifting through intangible property 
                            transfers.
Sec. 304. Repeal of check-the-box rules for certain foreign entities 
                            and CFC look-thru rules.
Sec. 305. Restrictions on deduction for interest expense of members of 
                            financial reporting groups with excess 
                            domestic indebtedness.
                    TITLE IV--INVERTED CORPORATIONS

Sec. 401. Modifications to rules relating to inverted corporations.

        TITLE I--DETERRING THE USE OF TAX HAVENS FOR TAX EVASION

SEC. 101. AUTHORIZING SPECIAL MEASURES AGAINST FOREIGN JURISDICTIONS, 
              FINANCIAL INSTITUTIONS, AND OTHERS THAT SIGNIFICANTLY 
              IMPEDE UNITED STATES TAX ENFORCEMENT.

    Section 5318A of title 31, United States Code, is amended--
            (1) by striking the section heading and inserting the 
        following:
``Sec. 5318A. Special measures for jurisdictions, financial 
              institutions, or international transactions that are of 
              primary money laundering concern or significantly impede 
              United States tax enforcement'';
            (2) in subsection (a), by striking the subsection heading 
        and inserting the following:
    ``(a) Special Measures To Counter Money Laundering and Efforts To 
Significantly Impede United States Tax Enforcement.--'';
            (3) in subsection (c)--
                    (A) by striking the subsection heading and 
                inserting the following:
    ``(c) Consultations and Information To Be Considered in Finding 
Jurisdictions, Institutions, Types of Accounts, or Transactions To Be 
of Primary Money Laundering Concern or To Be Significantly Impeding 
United States Tax Enforcement.--''; and
                    (B) by inserting at the end of paragraph (2) 
                thereof the following new subparagraph:
                    ``(C) Other considerations.--The fact that a 
                jurisdiction or financial institution is cooperating 
                with the United States on implementing the requirements 
                specified in chapter 4 of the Internal Revenue Code of 
                1986 may be favorably considered in evaluating whether 
                such jurisdiction or financial institution is 
                significantly impeding United States tax 
                enforcement.'';
            (4) in subsection (a)(1), by inserting ``or is 
        significantly impeding United States tax enforcement'' after 
        ``primary money laundering concern'';
            (5) in subsection (a)(4)--
                    (A) in subparagraph (A)--
                            (i) by inserting ``in matters involving 
                        money laundering,'' before ``shall consult''; 
                        and
                            (ii) by striking ``and'' at the end;
                    (B) by redesignating subparagraph (B) as 
                subparagraph (C); and
                    (C) by inserting after subparagraph (A) the 
                following:
                    ``(B) in matters involving United States tax 
                enforcement, shall consult with the Commissioner of the 
                Internal Revenue, the Secretary of State, the Attorney 
                General of the United States, and in the sole 
                discretion of the Secretary, such other agencies and 
                interested parties as the Secretary may find to be 
                appropriate; and'';
            (6) in each of paragraphs (1)(A), (2), (3), and (4) of 
        subsection (b), by inserting ``or to be significantly impeding 
        United States tax enforcement'' after ``primary money 
        laundering concern'' each place that term appears;
            (7) in subsection (b), by striking paragraph (5) and 
        inserting the following:
            ``(5) Prohibitions or conditions on opening or maintaining 
        certain correspondent or payable-through accounts or 
        authorizing certain payment cards.--If the Secretary finds a 
        jurisdiction outside of the United States, 1 or more financial 
        institutions operating outside of the United States, or 1 or 
        more classes of transactions within or involving a jurisdiction 
        outside of the United States to be of primary money laundering 
        concern or to be significantly impeding United States tax 
        enforcement, the Secretary, in consultation with the Secretary 
        of State, the Attorney General of the United States, and the 
        Chairman of the Board of Governors of the Federal Reserve 
        System, may prohibit, or impose conditions upon--
                    ``(A) the opening or maintaining in the United 
                States of a correspondent account or payable-through 
                account; or
                    ``(B) the authorization, approval, or use in the 
                United States of a credit card, charge card, debit 
                card, or similar credit or debit financial instrument 
                by any domestic financial institution, financial 
                agency, or credit card company or association, for or 
                on behalf of a foreign banking institution, if such 
                correspondent account, payable-through account, credit 
                card, charge card, debit card, or similar credit or 
                debit financial instrument, involves any such 
                jurisdiction or institution, or if any such transaction 
                may be conducted through such correspondent account, 
                payable-through account, credit card, charge card, 
                debit card, or similar credit or debit financial 
                instrument.'';
            (8) in subsection (c)(1), by inserting ``or is 
        significantly impeding United States tax enforcement'' after 
        ``primary money laundering concern'';
            (9) in subsection (c)(2)(A)--
                    (A) in clause (ii), by striking ``bank secrecy or 
                special regulatory advantages'' and inserting ``bank, 
                tax, corporate, trust, or financial secrecy or 
                regulatory advantages'';
                    (B) in clause (iii), by striking ``supervisory and 
                counter-money'' and inserting ``supervisory, 
                international tax enforcement, and counter-money'';
                    (C) in clause (v), by striking ``banking or 
                secrecy'' and inserting ``banking, tax, or secrecy''; 
                and
                    (D) in clause (vi), by inserting ``, tax treaty, or 
                tax information exchange agreement'' after ``treaty'';
            (10) in subsection (c)(2)(B)--
                    (A) in clause (i), by inserting ``or tax evasion'' 
                after ``money laundering''; and
                    (B) in clause (iii), by inserting ``, tax 
                evasion,'' after ``money laundering''; and
            (11) in subsection (d), by inserting ``involving money 
        laundering, and shall notify, in writing, the Committee on 
        Finance of the Senate and the Committee on Ways and Means of 
        the House of Representatives of any such action involving 
        United States tax enforcement'' after ``such action''.

SEC. 102. STRENGTHENING THE FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA).

    (a) Reporting Activities With Respect to Passive Foreign Investment 
Companies.--Section 1298(f) is amended by inserting ``, or who directly 
or indirectly forms, transfers assets to, is a beneficiary of, has a 
beneficial interest in, or receives money or property or the use 
thereof from,'' after ``shareholder of''.
    (b) Withholdable Payments to Foreign Financial Institutions.--
Section 1471(d) is amended--
            (1) by inserting ``or transaction'' after ``any 
        depository'' in paragraph (2)(A), and
            (2) by striking ``or any interest'' and all that follows in 
        paragraph (5)(C) and inserting ``derivatives, or any interest 
        (including a futures or forward contract, swap, or option) in 
        such securities, partnership interests, commodities, or 
        derivatives.''.
    (c) Withholdable Payments to Other Foreign Financial 
Institutions.--Section 1472 is amended--
            (1) by inserting ``as a result of any customer 
        identification, anti-money laundering, anti-corruption, or 
        similar obligation to identify account holders,'' after 
        ``reason to know,'' in subsection (b)(2), and
            (2) by inserting ``as posing a low risk of tax evasion'' 
        after ``this subsection'' in subsection (c)(1)(G).
    (d) Definitions.--Clauses (i) and (ii) of section 1473(2)(A) are 
each amended by inserting ``or as a beneficial owner'' after 
``indirectly''.
    (e) Special Rules.--Section 1474(c) is amended--
            (1) by inserting ``, except that information provided under 
        sections 1471(c) or 1472(b) may be disclosed to any Federal law 
        enforcement agency, upon request or upon the initiation of the 
        Secretary, to investigate or address a possible violation of 
        United States law'' after ``shall apply'' in paragraph (1), and
            (2) by inserting ``, or has had an agreement terminated 
        under such section,'' after ``section 1471(b)'' in paragraph 
        (2).
    (f) Information With Respect to Foreign Financial Assets.--Section 
6038D(a) is amended by inserting ``ownership or beneficial ownership'' 
after ``holds any''.
    (g) Establishing Presumptions for Entities and Transactions 
Involving Non-FATCA Institutions.--
            (1) Presumptions for tax purposes.--
                    (A) In general.--Chapter 76 is amended by inserting 
                after section 7491 the following new subchapter:

       ``Subchapter F--Presumptions for Certain Legal Proceedings

``Sec. 7492. Presumptions pertaining to entities and transactions 
                            involving non-FATCA institutions.

``SEC. 7492. PRESUMPTIONS PERTAINING TO ENTITIES AND TRANSACTIONS 
              INVOLVING NON-FATCA INSTITUTIONS.

    ``(a) Control.--For purposes of any United States civil judicial or 
administrative proceeding to determine or collect tax, there shall be a 
rebuttable presumption that a United States person who, directly or 
indirectly, formed, transferred assets to, was a beneficiary of, had a 
beneficial interest in, or received money or property or the use 
thereof from an entity, including a trust, corporation, limited 
liability company, partnership, or foundation, that holds an account, 
or in any other manner has assets, in a non-FATCA institution, 
exercised control over such entity. The presumption of control created 
by this subsection shall not be applied to prevent the Secretary from 
determining or arguing the absence of control.
    ``(b) Transfers of Income.--For purposes of any United States civil 
judicial or administrative proceeding to determine or collect tax, 
there shall be a rebuttable presumption that any amount or thing of 
value received by a United States person directly or indirectly from an 
account or from an entity that holds an account, or in any other manner 
has assets, in a non-FATCA institution, constitutes income of such 
person taxable in the year of receipt; and any amount or thing of value 
paid or transferred by or on behalf of a United States person directly 
or indirectly to an account, or entity that holds an account, or in any 
other manner has assets, in a non-FATCA institution, represents 
previously unreported income of such person taxable in the year of the 
transfer.
    ``(c) Rebutting the Presumptions.--The presumptions established in 
this section may be rebutted only by clear and convincing evidence, 
including detailed documentary, testimonial, and transactional 
evidence, establishing that--
            ``(1) in subsection (a), such taxpayer exercised no 
        control, directly or indirectly, over account or entity at the 
        time in question, and
            ``(2) in subsection (b), such amounts or things of value 
        did not represent income related to such United States person.
Any court having jurisdiction of a civil proceeding in which control of 
such an offshore account or offshore entity or the income character of 
such receipts or amounts transferred is an issue shall prohibit the 
introduction by the taxpayer of any foreign based document that is not 
authenticated in open court by a person with knowledge of such 
document, or any other evidence supplied by a person outside the 
jurisdiction of a United States court, unless such person appears 
before the court.''.
                    (B) The table of subchapters for chapter 76 is 
                amended by inserting after the item relating to 
                subchapter E the following new item:

     ``subchapter f. presumptions for certain legal proceedings''.

            (2) Definition of non-fatca institution.--Section 7701(a) 
        is amended by adding at the end the following new paragraph:
            ``(51) Non-fatca institution.--The term `non-FATCA 
        institution' means any foreign financial institution that does 
        not meet the reporting requirements of section 1471(b).''.
            (3) Presumptions for securities law purposes.--Section 21 
        of the Securities Exchange Act of 1934 (15 U.S.C. 78u) is 
        amended by adding at the end the following new subsection:
    ``(j) Presumptions Pertaining to Control and Beneficial 
Ownership.--
            ``(1) Control.--For purposes of any civil judicial or 
        administrative proceeding under this title, there shall be a 
        rebuttable presumption that a United States person who, 
        directly or indirectly, formed, transferred assets to, was a 
        beneficiary of, had a beneficial interest in, or received money 
        or property or the use thereof from an entity, including a 
        trust, corporation, limited liability company, partnership, or 
        foundation, that holds an account, or in any other manner has 
        assets, in a non-FATCA institution (as defined in section 
        7701(a)(51) of the Internal Revenue Code of 1986), exercised 
        control over such entity. The presumption of control created by 
        this paragraph shall not be applied to prevent the Commission 
        from determining or arguing the absence of control.
            ``(2) Beneficial ownership.--For purposes of any civil 
        judicial or administrative proceeding under this title, there 
        shall be a rebuttable presumption that securities that are 
        nominally owned by an entity, including a trust, corporation, 
        limited liability company, partnership, or foundation, and that 
        are held in a non-FATCA institution (as so defined), are 
        beneficially owned by any United States person who directly or 
        indirectly exercised control over such entity. The presumption 
        of beneficial ownership created by this paragraph shall not be 
        applied to prevent the Commission from determining or arguing 
        the absence of beneficial ownership.''.
            (4) Presumption for reporting purposes relating to foreign 
        financial accounts.--Section 5314 of title 31, United States 
        Code, is amended by adding at the end the following new 
        subsection:
    ``(d) Rebuttable Presumption.--For purposes of this section, there 
shall be a rebuttable presumption that any account with a non-FATCA 
institution (as defined in section 7701(a)(51) of the Internal Revenue 
Code of 1986) contains funds in an amount that is at least sufficient 
to require a report prescribed by regulations under this section.''.
            (5) Regulatory authority.--Not later than 180 days after 
        the date of enactment of this Act, the Secretary of the 
        Treasury and the Chairman of the Securities and Exchange 
        Commission shall each adopt regulations or other guidance 
        necessary to implement the amendments made by this subsection. 
        The Secretary and the Chairman may, by regulation or guidance, 
        provide that the presumption of control shall not extend to 
        particular classes of transactions, such as corporate 
        reorganizations or transactions below a specified dollar 
        threshold, if either determines that applying such amendments 
        to such transactions is not necessary to carry out the purposes 
        of such amendments.
    (h) Effective Date.--The amendments made by this section shall take 
effect on the date which is 180 days after the date of enactment of 
this Act, whether or not regulations are issued under subsection 
(g)(5).

SEC. 103. TREATMENT OF FOREIGN CORPORATIONS MANAGED AND CONTROLLED IN 
              THE UNITED STATES AS DOMESTIC CORPORATIONS.

    (a) In General.--Section 7701 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.
            ``(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 
                        assets 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, whether or not regulations 
are issued under section 7701(p)(3) of the Internal Revenue Code of 
1986, as added by this section.

SEC. 104. REPORTING UNITED STATES BENEFICIAL OWNERS OF FOREIGN OWNED 
              FINANCIAL ACCOUNTS.

    (a) In General.--Subpart B of part III of subchapter A of chapter 
61 is amended by inserting after section 6045B the following new 
sections:

``SEC. 6045C. RETURNS REGARDING UNITED STATES BENEFICIAL OWNERS OF 
              FINANCIAL ACCOUNTS LOCATED IN THE UNITED STATES AND HELD 
              IN THE NAME OF A FOREIGN ENTITY.

    ``(a) Requirement of Return.--If--
            ``(1) any withholding agent under sections 1441 and 1442 
        has the control, receipt, custody, disposal, or payment of any 
        amount constituting gross income from sources within the United 
        States of any foreign entity, including a trust, corporation, 
        limited liability company, partnership, or foundation (other 
        than an entity with shares regularly traded on an established 
        securities market), and
            ``(2) such withholding agent determines for purposes of 
        titles 14, 18, or 31 of the United States Code that a United 
        States person has any beneficial interest in the foreign entity 
        or in the account in such entity's name (hereafter in this 
        section referred to as `United States beneficial owner'),
then the withholding agent shall make a return according to the forms 
or regulations prescribed by the Secretary.
    ``(b) Required Information.--For purposes of subsection (a) the 
information required to be included on the return shall include--
            ``(1) the name, address, and, if known, the taxpayer 
        identification number of the United States beneficial owner,
            ``(2) the known facts pertaining to the relationship of 
        such United States beneficial owner to the foreign entity and 
        the account,
            ``(3) the gross amount of income from sources within the 
        United States (including gross proceeds from brokerage 
        transactions), and
            ``(4) such other information as the Secretary may by forms 
        or regulations provide.
    ``(c) Statements To Be Furnished to Beneficial Owners With Respect 
to Whom Information Is Required To Be Reported.--A withholding agent 
required to make a return under subsection (a) shall furnish to each 
United States beneficial owner whose name is required to be set forth 
in such return a statement showing--
            ``(1) the name, address, and telephone number of the 
        information contact of the person required to make such return, 
        and
            ``(2) the information required to be shown on such return 
        with respect to such United States beneficial owner.
The written statement required under the preceding sentence shall be 
furnished to the United States beneficial owner on or before January 31 
of the year following the calendar year for which the return under 
subsection (a) was required to be made. In the event the person filing 
such return does not have a current address for the United States 
beneficial owner, such written statement may be mailed to the address 
of the foreign entity.

``SEC. 6045D. RETURNS BY FINANCIAL INSTITUTIONS REGARDING ESTABLISHMENT 
              OF ACCOUNTS IN NON-FATCA INSTITUTIONS.

    ``(a) Requirement of Return.--Any financial institution directly or 
indirectly opening a bank, brokerage, or other financial account for or 
on behalf of an offshore entity, including a trust, corporation, 
limited liability company, partnership, or foundation (other than an 
entity with shares regularly traded on an established securities 
market), in a non-FATCA institution (as defined in section 7701(a)(51)) 
at the direction of, on behalf of, or for the benefit of a United 
States person shall make a return according to the forms or regulations 
prescribed by the Secretary.
    ``(b) Required Information.--For purposes of subsection (a) the 
information required to be included on the return shall include--
            ``(1) the name, address, and taxpayer identification number 
        of such United States person,
            ``(2) the name and address of the financial institution at 
        which a financial account is opened, the type of account, the 
        account number, the name under which the account was opened, 
        and the amount of the initial deposit,
            ``(3) if the account is held in the name of an entity, the 
        name and address of such entity, the type of entity, and the 
        name and address of any company formation agent or other 
        professional employed to form or acquire the entity, and
            ``(4) such other information as the Secretary may by forms 
        or regulations provide.
    ``(c) Statements To Be Furnished to United States Persons With 
Respect to Whom Information Is Required To Be Reported.--A financial 
institution required to make a return under subsection (a) shall 
furnish to each United States person whose name is required to be set 
forth in such return a statement showing--
            ``(1) the name, address, and telephone number of the 
        information contact of the person required to make such return, 
        and
            ``(2) the information required to be shown on such return 
        with respect to such United States person.
The written statement required under the preceding sentence shall be 
furnished to such United States person on or before January 31 of the 
year following the calendar year for which the return under subsection 
(a) was required to be made.
    ``(d) Exemption.--The Secretary may by regulations exempt any class 
of United States persons or any class of accounts or entities from the 
requirements of this section if the Secretary determines that applying 
this section to such persons, accounts, or entities is not necessary to 
carry out the purposes of this section.''.
    (b) Penalties.--
            (1) Returns.--Section 6724(d)(1)(B) is amended by striking 
        ``or'' at the end of clause (xxiv), by striking ``and'' at the 
        end of clause (xxv), and by adding after clause (xxv) the 
        following new clauses:
                            ``(xxvi) section 6045C(a) (relating to 
                        returns regarding United States beneficial 
                        owners of financial accounts located in the 
                        United States and held in the name of a foreign 
                        entity), or
                            ``(xxvii) section 6045D(a) (relating to 
                        returns by financial institutions regarding 
                        establishment of accounts at non-FATCA 
                        institutions), and''.
            (2) Payee statements.--Section 6724(d)(2) is amended by 
        striking ``or'' at the end of subparagraph (GG), by striking 
        the period at the end of subparagraph (HH), and by inserting 
        after subparagraph (HH) the following new subparagraphs:
                    ``(II) section 6045C(c) (relating to returns 
                regarding United States beneficial owners of financial 
                accounts located in the United States and held in the 
                name of a foreign entity), and
                    ``(JJ) section 6045D(c) (relating to returns by 
                financial institutions regarding establishment of 
                accounts at non-FATCA institutions).''.
    (c) Clerical Amendment.--The table of sections for subpart B of 
part III of subchapter A of chapter 61 is amended by inserting after 
the item relating to section 6045B the following new items:

``Sec. 6045C. Returns regarding United States beneficial owners of 
                            financial accounts located in the United 
                            States and held in the name of a foreign 
                            entity.
``Sec. 6045D. Returns by financial institutions regarding establishment 
                            of accounts at non-FATCA institutions.''.
    (d) Additional Penalties.--
            (1) Additional penalties on banks.--Section 5239(b)(1) of 
        the Revised Statutes of the United States (12 U.S.C. 93(b)(1)) 
        is amended by inserting ``or any of the provisions of section 
        6045D of the Internal Revenue Code of 1986,'' after ``any 
        regulation issued pursuant to,''.
            (2) Additional penalties on securities firms.--Section 
        21(d)(3)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 
        78u(d)(3)(A)) is amended by inserting ``any of the provisions 
        of section 6045D of the Internal Revenue Code of 1986,'' after 
        ``the rules or regulations thereunder,''.
    (e) Regulatory Authority and Effective Date.--
            (1) Regulatory authority.--Not later than 180 days after 
        the date of the enactment of this Act, the Secretary of the 
        Treasury shall adopt regulations, forms, or other guidance 
        necessary to implement this section.
            (2) Effective date.--Section 6045C of the Internal Revenue 
        Code of 1986 (as added by this section) and the amendment made 
        by subsection (d)(1) shall take effect with respect to amounts 
        paid into foreign owned accounts located in the United States 
        after December 31 of the year of the date of the enactment of 
        this Act. Section 6045D of such Code (as so added) and the 
        amendment made by subsection (d)(2) shall take effect with 
        respect to accounts opened after December 31 of the year of the 
        date of the enactment of this Act.

SEC. 105. SWAP PAYMENTS MADE FROM THE UNITED STATES TO PERSONS 
              OFFSHORE.

    (a) Tax on Swap Payments Received by Foreign Persons.--Section 
871(a)(1) is amended--
            (1) by inserting ``swap payments (as identified in section 
        1256(b)(2)(B)),'' after ``annuities,'' in subparagraph (A), and
            (2) by adding at the end the following new sentence: ``In 
        the case of swap payments, the source of a swap payment is 
        determined by reference to the location of the payor.''.
    (b) Tax on Swap Payments Received by Foreign Corporations.--Section 
881(a) is amended--
            (1) by inserting ``swap payments (as identified in section 
        1256(b)(2)(B)),'' after ``annuities,'' in paragraph (1), and
            (2) by adding at the end the following new sentence: ``In 
        the case of swap payments, the source of a swap payment is 
        determined by reference to the location of the payor.''.

          TITLE II--OTHER MEASURES TO COMBAT TAX HAVEN ABUSES

SEC. 201. COUNTRY-BY-COUNTRY REPORTING.

    (a) Country-by-Country Reporting.--Section 13 of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m) is amended by adding at the end 
the following new subsection:
    ``(s) Disclosure of Financial Performance on a Country-by-Country 
Basis.--
            ``(1) Rules required.--The Commission shall issue rules 
        that require each issuer to include in an annual report filed 
        by the issuer with the Commission information on a country-by-
        country basis during the covered period for each tax 
        jurisdiction, aggregated from all subsidiaries residing in that 
        jurisdiction, consisting of--
                    ``(A) revenues from unrelated parties, related 
                parties, and in total,
                    ``(B) profit or loss before taxes,
                    ``(C) income tax accrued for the current year,
                    ``(D) income tax paid (on a cash basis),
                    ``(E) stated capital,
                    ``(F) accumulated earnings,
                    ``(G) number of employees,
                    ``(H) tangible assets other than cash or cash 
                equivalents; and
                    ``(I) such other financial information as the 
                Commission may determine is necessary or appropriate in 
                the public interest or for the protection of investors.
            ``(2) Rules relating to foreign subsidiary.--For each 
        foreign subsidiary, the report required by paragraph (1) shall 
        be grouped by resident jurisdiction (including a group for 
        subsidiaries resident nowhere), the tax jurisdiction (if 
        different), and main business activity.''.
    (b) Rulemaking.--
            (1) Deadlines.--The Securities and Exchange Commission (in 
        this section referred to as the ``Commission'') shall--
                    (A) not later than 270 days after the date of 
                enactment of this Act, issue a proposed rule to carry 
                out this section and the amendment made by this 
                section; and
                    (B) not later than 1 year after the date of 
                enactment of this Act, issue a final rule to carry out 
                this section and the amendment made by this section.
            (2) Data format.--The information required to be provided 
        by this section shall be provided by the issuer in a report in 
        a format prescribed by the Commission, and such report shall be 
        made available to the public online, in such format as the 
        Commission shall prescribe.
            (3) Effective date.--Subsection (s) of section 13 of the 
        Securities Exchange Act of 1934, as added by this section, 
        shall become effective 1 year after the date on which the 
        Commission issues a final rule under this section.

SEC. 202. PENALTY FOR FAILING TO DISCLOSE OFFSHORE HOLDINGS.

    (a) Securities Exchange Act of 1934.--Section 21(d)(3)(B) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(B)) is amended by 
adding at the end the following:
                            ``(iv) Fourth tier.--Notwithstanding 
                        clauses (i), (ii), and (iii), for each 
                        violation, the amount of the penalty shall not 
                        exceed $1,000,000 for any natural person or 
                        $10,000,000 for any other person, if--
                                    ``(I) such person directly or 
                                indirectly controlled any foreign 
                                entity, including any trust, 
                                corporation, limited liability company, 
                                partnership, or foundation through 
                                which an issuer purchased, sold, or 
                                held equity or debt instruments;
                                    ``(II) such person knowingly or 
                                recklessly failed to disclose any such 
                                holding, purchase, or sale by the 
                                issuer; and
                                    ``(III) the holding, purchase, or 
                                sale would have been otherwise subject 
                                to disclosure by the issuer or such 
                                person under this title.''.
    (b) Securities Act of 1933.--Section 20(d)(2) of the Securities Act 
of 1933 (15 U.S.C. 77t(d)(2)) is amended by adding at the end the 
following:
                    ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), for each violation, the amount of 
                the penalty shall not exceed $1,000,000 for any natural 
                person or $10,000,000 for any other person, if--
                            ``(i) such person directly or indirectly 
                        controlled any foreign entity, including any 
                        trust, corporation, limited liability company, 
                        partnership, or foundation through which an 
                        issuer purchased, sold, or held equity or debt 
                        instruments;
                            ``(ii) such person knowingly or recklessly 
                        failed to disclose any such holding, purchase, 
                        or sale by the issuer; and
                            ``(iii) the holding, purchase, or sale 
                        would have been otherwise subject to disclosure 
                        by the issuer or such person under this 
                        title.''.
    (c) Investment Advisers Act of 1940.--Section 203(i)(2) of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-3(i)(2)) is amended by 
adding at the end the following:
                    ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), for each violation, the amount of 
                the penalty shall not exceed $1,000,000 for any natural 
                person or $10,000,000 for any other person, if--
                            ``(i) such person directly or indirectly 
                        controlled any foreign entity, including any 
                        trust, corporation, limited liability company, 
                        partnership, or foundation through which an 
                        issuer purchased, sold, or held equity or debt 
                        instruments;
                            ``(ii) such person knowingly or recklessly 
                        failed to disclose any such holding, purchase, 
                        or sale by the issuer; and
                            ``(iii) the holding, purchase, or sale 
                        would have been otherwise subject to disclosure 
                        by the issuer or such person under this 
                        title.''.

SEC. 203. DEADLINE FOR ANTI-MONEY LAUNDERING RULE FOR INVESTMENT 
              ADVISERS.

    (a) Anti-Money Laundering Obligations for Investment Advisers.--
Section 5312(a)(2) of title 31, United States Code, is amended--
            (1) in subparagraph (Y), by striking ``or'' at the end;
            (2) by redesignating subparagraph (Z) as subparagraph (BB); 
        and
            (3) by inserting after subparagraph (Y) the following:
                    ``(Z) an investment adviser;''.
    (b) Rules Required.--The Secretary of the Treasury shall--
            (1) in consultation with the Chairman of the Securities and 
        Exchange Commission and the Chairman of the Commodity Futures 
        Trading Commission, not later than 180 days after the date of 
        enactment of this Act, publish a proposed rule in the Federal 
        Register to carry out the amendments made by this section; and
            (2) not later than 270 days after the date of enactment of 
        this Act, publish a final rule in the Federal Register on the 
        matter described in paragraph (1).
    (c) Contents.--The final rule published under this section shall 
require, at a minimum, each investment adviser (as defined in section 
202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
2(a)(11))) registered with the Securities and Exchange Commission 
pursuant to section 203 of that Act (15 U.S.C. 80b-3)--
            (1) to submit suspicious activity reports and establish an 
        anti-money laundering program under subsections (g) and (h), 
        respectively, of section 5318 of title 31, United States Code; 
        and
            (2) to comply with--
                    (A) the customer identification program 
                requirements under section 5318(l) of title 31, United 
                States Code; and
                    (B) the due diligence requirements under section 
                5318(i) of title 31, United States Code.

SEC. 204. ANTI-MONEY LAUNDERING REQUIREMENTS FOR FORMATION AGENTS.

    (a) Anti-Money Laundering Obligations for Formation Agents.--
Section 5312(a)(2) of title 31, United States Code, as amended by 
section 203 of this Act, is amended by inserting after subparagraph (Z) 
the following:
                    ``(AA) any person engaged in the business of 
                forming new corporations, limited liability companies, 
                partnerships, trusts, or other legal entities; or''.
    (b) Deadline for Anti-Money Laundering Rule for Formation Agents.--
            (1) Proposed rule.--The Secretary of the Treasury, in 
        consultation with the Attorney General of the United States, 
        the Secretary of Homeland Security, and the Commissioner of 
        Internal Revenue, shall--
                    (A) not later than 120 days after the date of 
                enactment of this Act, publish a proposed rule in the 
                Federal Register requiring persons described in section 
                5312(a)(2)(AA) of title 31, United States Code, as 
                added by this section, to establish anti-money 
                laundering programs under section 5318(h) of that 
                title; and
                    (B) not later than 270 days after the date of 
                enactment of this Act, publish a final rule in the 
                Federal Register on the matter described in 
                subparagraph (A).
            (2) Exclusions.--The rule promulgated under this subsection 
        shall exclude from the category of persons engaged in the 
        business of forming new corporations or other entities--
                    (A) any government agency; and
                    (B) any attorney or law firm that uses a paid 
                formation agent operating within the United States to 
                form such corporations or other entities.

SEC. 205. STRENGTHENING JOHN DOE SUMMONS PROCEEDINGS.

    (a) In General.--Subsection (f) of section 7609 is amended to read 
as follows:
    ``(f) Additional Requirement in the Case of a John Doe Summons.--
            ``(1) General rule.--Any summons described in subsection 
        (c)(1) which does not identify the person with respect to whose 
        liability the summons is issued may be served only after a 
        court proceeding in which the Secretary establishes that--
                    ``(A) the summons relates to the investigation of a 
                particular person or ascertainable group or class of 
                persons,
                    ``(B) there is a reasonable basis for believing 
                that such person or group or class of persons may fail 
                or may have failed to comply with any provision of any 
                internal revenue law, and
                    ``(C) the information sought to be obtained from 
                the examination of the records or testimony (and the 
                identity of the person or persons with respect to whose 
                liability the summons is issued) is not readily 
                available from other sources.
            ``(2) Exception.--Paragraph (1) shall not apply to any 
        summons which specifies that it is limited to information 
        regarding a United States correspondent account (as defined in 
        section 5318A(e)(1)(B) of title 31, United States Code) or a 
        United States payable-through account (as defined in section 
        5318A(e)(1)(C) of such title) of a financial institution that 
        is held at a non-FATCA institution (as defined in section 
        7701(a)(51)).
            ``(3) Presumption in cases involving non-fatca 
        institutions.--For purposes of this section, in any case in 
        which the particular person or ascertainable group or class of 
        persons have financial accounts in or transactions related to a 
        non-FATCA institution (as defined in section 7701(a)(51)), 
        there shall be a presumption that there is a reasonable basis 
        for believing that such person or group or class of persons may 
        fail or may have failed to comply with provisions of internal 
        revenue law.
            ``(4) Project john doe summonses.--
                    ``(A) In general.--Notwithstanding the requirements 
                of paragraph (1), the Secretary may issue a summons 
                described in paragraph (1) if the summons--
                            ``(i) relates to a project which is 
                        approved under subparagraph (B),
                            ``(ii) is issued to a person who is a 
                        member of the group or class established under 
                        subparagraph (B)(i), and
                            ``(iii) is issued within 3 years of the 
                        date on which such project was approved under 
                        subparagraph (B).
                    ``(B) Approval of projects.--A project may only be 
                approved under this subparagraph after a court 
                proceeding in which the Secretary establishes that--
                            ``(i) any summons issued with respect to 
                        the project will be issued to a member of an 
                        ascertainable group or class of persons, and
                            ``(ii) any summons issued with respect to 
                        such project will meet the requirements of 
                        paragraph (1).
                    ``(C) Extension.--Upon application of the 
                Secretary, the court may extend the time for issuing 
                such summonses under subparagraph (A)(i) for additional 
                3-year periods, but only if the court continues to 
                exercise oversight of such project under subparagraph 
                (D).
                    ``(D) Ongoing court oversight.--During any period 
                in which the Secretary is authorized to issue summonses 
                in relation to a project approved under subparagraph 
                (B) (including during any extension under subparagraph 
                (C)), the Secretary shall report annually to the court 
                on the use of such authority, provide copies of all 
                summonses with such report, and comply with the court's 
                direction with respect to the issuance of any John Doe 
                summons under such project.''.
    (b) Jurisdiction of Court.--
            (1) In general.--Paragraph (1) of section 7609(h) is 
        amended by inserting after the first sentence the following new 
        sentence: ``Any United States district court in which a member 
        of the group or class to which a summons may be issued resides 
        or is found shall have jurisdiction to hear and determine the 
        approval of a project under subsection (f)(4)(B).''.
            (2) Conforming amendment.--The first sentence of section 
        7609(h)(1) is amended by striking ``(f)'' and inserting 
        ``(f)(1)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to summonses issued after the date of the enactment of this Act.

SEC. 206. IMPROVING ENFORCEMENT OF FOREIGN FINANCIAL ACCOUNT REPORTING.

    (a) Clarifying the Connection of Foreign Financial Account 
Reporting to Tax Administration.--Paragraph (4) of section 6103(b) is 
amended by adding at the end the following new sentence:
        ``For purposes of subparagraph (A)(i), section 5314 of title 
        31, United States Code, and sections 5321 and 5322 of such 
        title (as such sections pertain to such section 5314), shall be 
        considered related statutes.''.
    (b) Simplifying the Calculation of Foreign Financial Account 
Reporting Penalties.--Section 5321(a)(5)(D)(ii) of title 31, United 
States Code, is amended by striking ``the balance in the account at the 
time of the violation'' and inserting ``the highest balance in the 
account during the reporting period to which the violation relates''.
    (c) Clarifying the Use of Suspicious Activity Reports Under the 
Bank Secrecy Act for Civil Tax Law Enforcement.--Section 5319 of title 
31, United States Code, is amended by inserting ``the civil and 
criminal enforcement divisions of the Internal Revenue Service,'' after 
``including''.

           TITLE III--ENDING CORPORATE OFFSHORE TAX AVOIDANCE

SEC. 301. ALLOCATION OF EXPENSES AND TAXES ON BASIS OF REPATRIATION OF 
              FOREIGN INCOME.

    (a) In General.--Part III of subchapter N of chapter 1 is amended 
by inserting after subpart G the following new subpart:

``Subpart H--Special Rules for Allocation of Foreign-Related Deductions 
                        and Foreign Tax Credits

``Sec. 975. Deductions allocated to deferred foreign income may not 
                            offset United States source income.
``Sec. 976. Amount of foreign taxes computed on overall basis.
``Sec. 977. Application of subpart.

``SEC. 975. DEDUCTIONS ALLOCATED TO DEFERRED FOREIGN INCOME MAY NOT 
              OFFSET UNITED STATES SOURCE INCOME.

    ``(a) Current Year Deductions.--For purposes of this chapter, 
foreign-related deductions for any taxable year--
            ``(1) shall be taken into account for such taxable year 
        only to the extent that such deductions are allocable to 
        currently-taxed foreign income, and
            ``(2) to the extent not so allowed, shall be taken into 
        account in subsequent taxable years as provided in subsection 
        (b).
Foreign-related deductions shall be allocated to currently-taxed 
foreign income in the same proportion which currently-taxed foreign 
income bears to the sum of currently-taxed foreign income and deferred 
foreign income.
    ``(b) Deductions Related to Repatriated Deferred Foreign Income.--
            ``(1) In general.--If there is repatriated foreign income 
        for a taxable year, the portion of the previously deferred 
        deductions allocated to the repatriated foreign income shall be 
        taken into account for the taxable year as a deduction 
        allocated to income from sources outside the United States. Any 
        such amount shall not be included in foreign-related deductions 
        for purposes of applying subsection (a) to such taxable year.
            ``(2) Portion of previously deferred deductions.--For 
        purposes of paragraph (1), the portion of the previously 
        deferred deductions allocated to repatriated foreign income 
        is--
                    ``(A) the amount which bears the same proportion to 
                such deductions, as
                    ``(B) the repatriated income bears to the 
                previously deferred foreign income.
    ``(c) Definitions and Special Rule.--For purposes of this section--
            ``(1) Foreign-related deductions.--The term `foreign-
        related deductions' means the total amount of deductions and 
        expenses which would be allocated or apportioned to gross 
        income from sources without the United States for the taxable 
        year if both the currently-taxed foreign income and deferred 
        foreign income were taken into account.
            ``(2) Currently-taxed foreign income.--The term `currently-
        taxed foreign income' means the amount of gross income from 
        sources without the United States for the taxable year 
        (determined without regard to repatriated foreign income for 
        such year).
            ``(3) Deferred foreign income.--The term `deferred foreign 
        income' means the excess of--
                    ``(A) the amount that would be includible in gross 
                income under subpart F of this part for the taxable 
                year if--
                            ``(i) all controlled foreign corporations 
                        were treated as one controlled foreign 
                        corporation, and
                            ``(ii) all earnings and profits of all 
                        controlled foreign corporations were subpart F 
                        income (as defined in section 952), over
                    ``(B) the sum of--
                            ``(i) all dividends received during the 
                        taxable year from controlled foreign 
                        corporations, plus
                            ``(ii) amounts includible in gross income 
                        under section 951(a).
            ``(4) Previously deferred foreign income.--The term 
        `previously deferred foreign income' means the aggregate amount 
        of deferred foreign income for all prior taxable years to which 
        this part applies, determined as of the beginning of the 
        taxable year, reduced by the repatriated foreign income for all 
        such prior taxable years.
            ``(5) Repatriated foreign income.--The term `repatriated 
        foreign income' means the amount included in gross income on 
        account of distributions out of previously deferred foreign 
        income.
            ``(6) Previously deferred deductions.--The term `previously 
        deferred deductions' means the aggregate amount of foreign-
        related deductions not taken into account under subsection (a) 
        for all prior taxable years (determined as of the beginning of 
        the taxable year), reduced by any amounts taken into account 
        under subsection (b) for such prior taxable years.
            ``(7) Treatment of certain foreign taxes.--
                    ``(A) Paid by controlled foreign corporation.--
                Section 78 shall not apply for purposes of determining 
                currently-taxed foreign income and deferred foreign 
                income.
                    ``(B) Paid by taxpayer.--For purposes of 
                determining currently-taxed foreign income, gross 
                income from sources without the United States shall be 
                reduced by the aggregate amount of taxes described in 
                the applicable paragraph of section 901(b) which are 
                paid by the taxpayer (without regard to sections 902 
                and 960) during the taxable year.
            ``(8) Coordination with section 976.--In determining 
        currently-taxed foreign income and deferred foreign income, the 
        amount of deemed foreign tax credits shall be determined with 
        regard to section 976.

``SEC. 976. AMOUNT OF FOREIGN TAXES COMPUTED ON OVERALL BASIS.

    ``(a) Current Year Allowance.--For purposes of this chapter, the 
amount taken into account as foreign income taxes for any taxable year 
shall be an amount which bears the same ratio to the total foreign 
income taxes for that taxable year as--
            ``(1) the currently-taxed foreign income for such taxable 
        year, bears to
            ``(2) the sum of the currently-taxed foreign income and 
        deferred foreign income for such year.
The portion of the total foreign income taxes for any taxable year not 
taken into account under the preceding sentence for a taxable year 
shall only be taken into account as provided in subsection (b) (and 
shall not be taken into account for purposes of applying sections 902 
and 960).
    ``(b) Allowance Related to Repatriated Deferred Foreign Income.--
            ``(1) In general.--If there is repatriated foreign income 
        for any taxable year, the portion of the previously deferred 
        foreign income taxes paid or accrued during such taxable year 
        shall be taken into account for the taxable year as foreign 
        taxes paid or accrued. Any such taxes so taken into account 
        shall not be included in foreign income taxes for purposes of 
        applying subsection (a) to such taxable year.
            ``(2) Portion of previously deferred foreign income 
        taxes.--For purposes of paragraph (1), the portion of the 
        previously deferred foreign income taxes allocated to 
        repatriated deferred foreign income is--
                    ``(A) the amount which bears the same proportion to 
                such taxes, as
                    ``(B) the repatriated deferred income bears to the 
                previously deferred foreign income.
    ``(c) Definitions and Special Rule.--For purposes of this section--
            ``(1) Previously deferred foreign income taxes.--The term 
        `previously deferred foreign income taxes' means the aggregate 
        amount of total foreign income taxes not taken into account 
        under subsection (a) for all prior taxable years (determined as 
        of the beginning of the taxable year), reduced by any amounts 
        taken into account under subsection (b) for such prior taxable 
        years.
            ``(2) Total foreign income taxes.--The term `total foreign 
        income taxes' means the sum of foreign income taxes paid or 
        accrued during the taxable year (determined without regard to 
        section 904(c)) plus the increase in foreign income taxes that 
        would be paid or accrued during the taxable year under sections 
        902 and 960 if--
                    ``(A) all controlled foreign corporations were 
                treated as one controlled foreign corporation, and
                    ``(B) all earnings and profits of all controlled 
                foreign corporations were subpart F income (as defined 
                in section 952).
            ``(3) Foreign income taxes.--The term `foreign income 
        taxes' means any income, war profits, or excess profits taxes 
        paid by the taxpayer to any foreign country or possession of 
        the United States.
            ``(4) Currently-taxed foreign income and deferred foreign 
        income.--The terms `currently-taxed foreign income' and 
        `deferred foreign income' have the meanings given such terms by 
        section 975(c).

``SEC. 977. APPLICATION OF SUBPART.

    ``This subpart--
            ``(1) shall be applied before subpart A, and
            ``(2) shall be applied separately with respect to the 
        categories of income specified in section 904(d)(1).''.
    (b) Clerical Amendment.--The table of subparts for part III of 
subpart N of chapter 1 is amended by inserting after the item relating 
to subpart G the following new item:

``subpart h. special rules for allocation of foreign-related deductions 
                       and foreign tax credits''.

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 302. EXCESS INCOME FROM TRANSFERS OF INTANGIBLES TO LOW-TAXED 
              AFFILIATES TREATED AS SUBPART F INCOME.

    (a) In General.--Subsection (a) of section 954 is amended by 
inserting after paragraph (3) the following new paragraph:
            ``(4) the foreign base company excess intangible income for 
        the taxable year (determined under subsection (f) and reduced 
        as provided in subsection (b)(5)), and''.
    (b) Foreign Base Company Excess Intangible Income.--Section 954 is 
amended by inserting after subsection (e) the following new subsection:
    ``(f) Foreign Base Company Excess Intangible Income.--For purposes 
of subsection (a)(4) and this subsection:
            ``(1) Foreign base company excess intangible income 
        defined.--
                    ``(A) In general.--The term `foreign base company 
                excess intangible income' means, with respect to any 
                covered intangible, the excess of--
                            ``(i) the sum of--
                                    ``(I) gross income from the sale, 
                                lease, license, or other disposition of 
                                property in which such covered 
                                intangible is used directly or 
                                indirectly, and
                                    ``(II) gross income from the 
                                provision of services related to such 
                                covered intangible or in connection 
                                with property in which such covered 
                                intangible is used directly or 
                                indirectly, over
                            ``(ii) 150 percent of the costs properly 
                        allocated and apportioned to the gross income 
                        taken into account under clause (i) other than 
                        expenses for interest and taxes and any 
                        expenses which are not directly allocable to 
                        such gross income.
                    ``(B) Same country income not taken into account.--
                If--
                            ``(i) the sale, lease, license, or other 
                        disposition of the property referred to in 
                        subparagraph (A)(i)(I) is for use, consumption, 
                        or disposition in the country under the laws of 
                        which the controlled foreign corporation is 
                        created or organized, or
                            ``(ii) the services referred to in 
                        subparagraph (A)(i)(II) are performed in such 
                        country,
                the gross income from such sale, lease, license, or 
                other disposition, or provision of services, shall not 
                be taken into account under subparagraph (A)(i).
            ``(2) Exception based on effective foreign income tax 
        rate.--
                    ``(A) In general.--Foreign base company excess 
                intangible income shall not include the applicable 
                percentage of any item of income received by a 
                controlled foreign corporation if the taxpayer 
                establishes to the satisfaction of the Secretary that 
                such income was subject to an effective rate of income 
                tax imposed by a foreign country in excess of 5 
                percent.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the term `applicable percentage' 
                means the ratio (expressed as a percentage), not 
                greater than 100 percent, of--
                            ``(i) the number of percentage points by 
                        which the effective rate of income tax referred 
                        to in subparagraph (A) exceeds 5 percentage 
                        points, over
                            ``(ii) 10 percentage points.
                    ``(C) Treatment of losses in determining effective 
                rate of foreign income tax.--For purposes of 
                determining the effective rate of income tax imposed by 
                any foreign country--
                            ``(i) such effective rate shall be 
                        determined without regard to any losses carried 
                        to the relevant taxable year, and
                            ``(ii) to the extent the income with 
                        respect to such intangible 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.
            ``(3) Covered intangible.--The term `covered intangible' 
        means, with respect to any controlled foreign corporation, any 
        intangible property (as defined in section 936(h)(3)(B))--
                    ``(A) which is sold, leased, licensed, or otherwise 
                transferred (directly or indirectly) to such controlled 
                foreign corporation from a related person, or
                    ``(B) with respect to which such controlled foreign 
                corporation and one or more related persons has 
                (directly or indirectly) entered into any shared risk 
                or development agreement (including any cost sharing 
                agreement).
            ``(4) Related person.--The term `related person' has the 
        meaning given such term in subsection (d)(3).''.
    (c) Separate Basket for Foreign Tax Credit.--Subsection (d) of 
section 904 is amended by redesignating paragraph (7) as paragraph (8) 
and by inserting after paragraph (6) the following new paragraph:
            ``(7) Separate application to foreign base company excess 
        intangible income.--
                    ``(A) In general.--Subsections (a), (b), and (c) of 
                this section and sections 902, 907, and 960 shall be 
                applied separately with respect to each item of income 
                which is taken into account under section 954(a)(4) as 
                foreign base company excess intangible income.
                    ``(B) Regulations.--The Secretary may issue such 
                regulations or other guidance as is necessary or 
                appropriate to carry out the purposes of this 
                subsection, including regulations or other guidance 
                which provides that related items of income may be 
                aggregated for purposes of this paragraph.''.
    (d) Conforming Amendments.--
            (1) Paragraph (4) of section 954(b) is amended by inserting 
        ``foreign base company excess intangible income described in 
        subsection (a)(4) or'' before ``foreign base company oil-
        related income'' in the last sentence thereof.
            (2) Subsection (b) of section 954 is amended by adding at 
        the end the following new paragraph:
            ``(7) Foreign base company excess intangible income not 
        treated as another kind of base company income.--Income of a 
        corporation which is foreign base company excess intangible 
        income shall not be considered foreign base company income of 
        such corporation under paragraph (2), (3), or (5) of subsection 
        (a).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 303. LIMITATIONS ON INCOME SHIFTING THROUGH INTANGIBLE PROPERTY 
              TRANSFERS.

    (a) Clarification of Definition of Intangible Asset.--Clause (vi) 
of section 936(h)(3)(B) is amended by inserting ``(including any 
section 197 intangible described in subparagraph (A), (B), or (C)(i) of 
subsection (d)(1) of such section)'' after ``item''.
    (b) Clarification of Allowable Valuation Methods.--
            (1) Foreign corporations.--Paragraph (2) of section 367(d) 
        is amended by adding at the end the following new subparagraph:
                    ``(D) Regulatory authority.--For purposes of the 
                last sentence of subparagraph (A), the Secretary may 
                require--
                            ``(i) the valuation of transfers of 
                        intangible property on an aggregate basis, or
                            ``(ii) the valuation of such a transfer on 
                        the basis of the realistic alternatives to such 
                        a transfer,
                in any case in which the Secretary determines that such 
                basis is the most reliable means of valuation of such 
                transfers.''.
            (2) Allocation among taxpayers.--Section 482 is amended by 
        adding at the end the following: ``For purposes of the 
        preceding sentence, the Secretary may require the valuation of 
        transfers of intangible property on an aggregate basis or the 
        valuation of such a transfer on the basis of the realistic 
        alternatives to such a transfer, in any case in which the 
        Secretary determines that such basis is the most reliable means 
        of valuation of such transfers.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to transfers in taxable years beginning after the date of 
        the enactment of this Act.
            (2) No inference.--Nothing in the amendment made by 
        subsection (a) shall be construed to create any inference with 
        respect to the application of section 936(h)(3) of the Internal 
        Revenue Code of 1986, or the authority of the Secretary of the 
        Treasury to provide regulations for such application, on or 
        before the date of the enactment of such amendment.

SEC. 304. REPEAL OF CHECK-THE-BOX RULES FOR CERTAIN FOREIGN ENTITIES 
              AND CFC LOOK-THRU RULES.

    (a) Check-the-Box Rules.--Paragraph (3) of section 7701(a) is 
amended--
            (1) by striking ``and'', and
            (2) by inserting after ``insurance companies'' the 
        following: ``, and any foreign business entity that--
                    ``(A) has a single owner that does not have limited 
                liability, or
                    ``(B) has one or more members all of which have 
                limited liability''.
    (b) Look-Thru Rule.--Subparagraph (C) of section 954(c)(6) is 
amended to read as follows:
                    ``(C) Termination.--Subparagraph (A) shall not 
                apply to dividends, interest, rents, and royalties 
                received or accrued after the date of the enactment of 
                the Stop Tax Haven Abuse Act.''.
    (c) Effective Date.--
            (1) The amendments made by subsection (a) shall take effect 
        on the date of the enactment of this Act.
            (2) The amendment made by subsection (b) shall apply to 
        payments received after the date of the enactment of this Act.

SEC. 305. RESTRICTIONS ON DEDUCTION FOR INTEREST EXPENSE OF MEMBERS OF 
              FINANCIAL REPORTING GROUPS WITH EXCESS DOMESTIC 
              INDEBTEDNESS.

    (a) In General.--Section 163 is amended by redesignating subsection 
(n) as subsection (o) and by inserting after subsection (m) the 
following new subsection:
    ``(n) Restriction on Deduction for Interest Expense of Members of 
Financial Reporting Groups With Excess Domestic Indebtedness.--
            ``(1) In general.--In the case of any corporation which is 
        a member of an applicable financial reporting group the common 
        parent of which is a foreign corporation, the deduction allowed 
        under this chapter for interest paid or accrued by the 
        corporation during the taxable year shall not exceed the 
        applicable limitation for the taxable year.
            ``(2) Carryforward.--Any amount disallowed under paragraph 
        (1) for any taxable year shall be treated as interest paid or 
        accrued in the succeeding taxable year.
            ``(3) Applicable limitation.--For purposes of this 
        subsection--
                    ``(A) In general.--The applicable limitation with 
                respect to a taxpayer for any taxable year is the sum 
                of--
                            ``(i) the greater of--
                                    ``(I) the taxpayer's allocable 
                                share of the applicable financial 
                                reporting group's net interest expense 
                                for the taxable year, or
                                    ``(II) 10 percent of the taxpayer's 
                                adjusted taxable income for the taxable 
                                year, plus
                            ``(ii) the excess limitation carryforwards 
                        to the taxable year from any preceding taxable 
                        year.
                    ``(B) Limitation not less than includible 
                interest.--The applicable limitation under subparagraph 
                (A) for any taxable year shall not be less than the 
                amount of interest includible in the gross income of 
                the taxpayer for the taxable year.
                    ``(C) Excess limitation carryforward.--If the 
                applicable limitation of a taxpayer for any taxable 
                year (determined without regard to carryforwards under 
                subparagraph (A)(ii)) exceeds the interest paid or 
                accrued by the taxpayer during the taxable year, such 
                excess shall be an excess limitation carryforward to 
                the 1st succeeding taxable year and the 2nd and 3rd 
                succeeding taxable years to the extent not previously 
                taken into account under this paragraph.
            ``(4) Allocable share of net interest expense.--For 
        purposes of this subsection--
                    ``(A) In general.--A taxpayer's allocable share of 
                an applicable financial reporting group's net interest 
                expense for any taxable year shall be the amount (not 
                less than zero) which bears the same ratio to such net 
                interest expense as--
                            ``(i) the net earnings of the taxpayer, 
                        bears to
                            ``(ii) the aggregate net earnings of all 
                        members of the applicable financial reporting 
                        group.
                    ``(B) Net earnings.--The term `net earnings' means, 
                with respect to any taxpayer, the earnings of the 
                taxpayer--
                            ``(i) computed without regard to any 
                        reduction allowable for--
                                    ``(I) net interest expense,
                                    ``(II) taxes, or
                                    ``(III) depreciation, amortization, 
                                or depletion, and
                            ``(ii) computed with such other adjustments 
                        as the Secretary may by regulations prescribe.
                    ``(C) Burden on taxpayer.--If a taxpayer elects not 
                to compute its allocable share, or fails to establish 
                to the satisfaction of the Secretary the amount of its 
                allocable share, for any taxable year, the allocable 
                share shall be zero.
            ``(5) Net interest expense and net earnings 
        determinations.--For purposes of this subsection--
                    ``(A) Net interest expense.--Any determination of 
                net interest expense for any taxable year shall be 
                made--
                            ``(i) on the basis of the applicable 
                        financial statement of the applicable financial 
                        reporting group for the last financial 
                        reporting year ending with or within the 
                        taxable year, and
                            ``(ii) under United States tax principles.
                    ``(B) Net earnings.--Any determination of net 
                earnings for any taxable year shall be made on the 
                basis of the applicable financial statement of the 
                applicable financial reporting group for the last 
                financial reporting year ending with or within the 
                taxable year.
                    ``(C) Applicable financial statement.--The term 
                `applicable financial statement' means a statement for 
                financial reporting purposes which is made on the basis 
                of--
                            ``(i) generally accepted accounting 
                        principles,
                            ``(ii) international financial reporting 
                        standards, or
                            ``(iii) any other method specified by the 
                        Secretary in regulations.
                A statement under clause (ii) or (iii) may be used as 
                an applicable financial statement by a group only if 
                there is no statement of the group under any preceding 
                clause.
            ``(6) Applicable financial reporting group.--For purposes 
        of this subsection--
                    ``(A) In general.--The term `applicable financial 
                reporting group' means, with respect to any 
                corporation, a group of which such corporation is a 
                member and which files an applicable financial 
                statement.
                    ``(B) Exception for groups with minimal domestic 
                net interest expense.--Such term shall not include a 
                group if the aggregate net interest expense for which a 
                deduction is allowable to all members of the group 
                under this chapter (determined without regard to this 
                subsection or any other limitation on deductibility of 
                interest under this chapter) is less than $5,000,000.
                    ``(C) Exception for certain financial entities.--A 
                corporation which is described in section 864(f)(4)(B), 
                or is treated as described in section 864(f)(4)(B) by 
                reason of paragraph (4)(C) or (5)(A) of section 864(f) 
                (without regard to whether an election is made under 
                such paragraph (5)(A)), shall not be treated as a 
                member of an applicable financial reporting group of 
                which it is otherwise a member and this subsection 
                shall not apply to such corporation.
            ``(7) Other definitions and rules.--For purposes of this 
        subsection--
                    ``(A) Adjusted taxable income.--The term `adjusted 
                taxable income' has the meaning given such term by 
                subsection (j)(6)(A).
                    ``(B) Net interest expense.--The term `net interest 
                expense' has the meaning given such term by subsection 
                (j)(6)(B).
                    ``(C) Treatment of affiliated group.--All members 
                of the same affiliated group (within the meaning of 
                section 1504(a)) shall be treated as 1 taxpayer.
            ``(8) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this section, including regulations providing--
                    ``(A) for the coordination of the application of 
                this subsection and other provisions of this chapter 
                relating to the deductibility of interest,
                    ``(B) for the waiver of certain adjustments 
                required under United States tax principles in 
                appropriate cases for purposes of applying this 
                subsection,
                    ``(C) for the determination of which financial 
                institutions are eligible for the exception from 
                membership in an applicable financial reporting group 
                under paragraph (6)(C) and the application of this 
                subsection to the other members of the group which are 
                not so excepted, and
                    ``(D) for the application of this subsection in the 
                case of pass thru entities and for the treatment of 
                pass thru entities as corporations in cases where 
                necessary to prevent the avoidance of the purposes of 
                this subsection.''.
    (b) Coordination With Limitation on Related Party Indebtedness.--
Paragraph (2) of section 163(j) of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subparagraph:
                    ``(D) Coordination with limitation on excess 
                domestic indebtedness.--This subsection shall not apply 
                to any corporation for any taxable year to which 
                subsection (n) applies to such corporation.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

                    TITLE IV--INVERTED CORPORATIONS

SEC. 401. MODIFICATIONS TO RULES RELATING TO INVERTED CORPORATIONS.

    (a) In General.--Subsection (b) of section 7874 is amended to read 
as follows:
    ``(b) Inverted Corporations Treated as Domestic Corporations.--
            ``(1) In general.--Notwithstanding section 7701(a)(4), a 
        foreign corporation shall be treated for purposes of this title 
        as a domestic corporation if--
                    ``(A) such corporation would be a surrogate foreign 
                corporation if subsection (a)(2) were applied by 
                substituting `80 percent' for `60 percent', or
                    ``(B) such corporation is an inverted domestic 
                corporation.
            ``(2) Inverted domestic corporation.--For purposes of this 
        subsection, a foreign corporation shall be treated as an 
        inverted domestic corporation if, pursuant to a plan (or a 
        series of related transactions)--
                    ``(A) the entity completes after May 8, 2014, the 
                direct or indirect acquisition of--
                            ``(i) substantially all of the properties 
                        held directly or indirectly by a domestic 
                        corporation, or
                            ``(ii) substantially all of the assets of, 
                        or substantially all of the properties 
                        constituting a trade or business of, a domestic 
                        partnership, and
                    ``(B) after the acquisition, either--
                            ``(i) more than 50 percent of the stock (by 
                        vote or value) of the entity is held--
                                    ``(I) in the case of an acquisition 
                                with respect to a domestic corporation, 
                                by former shareholders of the domestic 
                                corporation by reason of holding stock 
                                in the domestic corporation, or
                                    ``(II) in the case of an 
                                acquisition with respect to a domestic 
                                partnership, by former partners of the 
                                domestic partnership by reason of 
                                holding a capital or profits interest 
                                in the domestic partnership, or
                            ``(ii) the management and control of the 
                        expanded affiliated group which includes the 
                        entity occurs, directly or indirectly, 
                        primarily within the United States, and such 
                        expanded affiliated group has significant 
                        domestic business activities.
            ``(3) Exception for corporations with substantial business 
        activities in foreign country of organization.--A foreign 
        corporation described in paragraph (2) shall not be treated as 
        an inverted domestic corporation if after the acquisition the 
        expanded affiliated group which includes the entity has 
        substantial business activities in the foreign country in which 
        or under the law of which the entity is created or organized 
        when compared to the total business activities of such expanded 
        affiliated group. For purposes of subsection (a)(2)(B)(iii) and 
        the preceding sentence, the term `substantial business 
        activities' shall have the meaning given such term under 
        regulations in effect on May 8, 2014, except that the Secretary 
        may issue regulations increasing the threshold percent in any 
        of the tests under such regulations for determining if business 
        activities constitute substantial business activities for 
        purposes of this paragraph.
            ``(4) Management and control.--For purposes of paragraph 
        (2)(B)(ii)--
                    ``(A) In general.--The Secretary shall prescribe 
                regulations for purposes of determining cases in which 
                the management and control of an expanded affiliated 
                group is to be treated as occurring, directly or 
                indirectly, primarily within the United States. The 
                regulations prescribed under the preceding sentence 
                shall apply to periods after May 8, 2014.
                    ``(B) Executive officers and senior management.--
                Such regulations shall provide that the management and 
                control of an expanded affiliated group shall be 
                treated as occurring, directly or indirectly, primarily 
                within the United States if substantially all of the 
                executive officers and senior management of the 
                expanded affiliated group who exercise day-to-day 
                responsibility for making decisions involving 
                strategic, financial, and operational policies of the 
                expanded affiliated group are based or primarily 
                located within the United States. Individuals who in 
                fact exercise such day-to-day responsibilities shall be 
                treated as executive officers and senior management 
                regardless of their title.
            ``(5) Significant domestic business activities.--For 
        purposes of paragraph (2)(B)(ii), an expanded affiliated group 
        has significant domestic business activities if at least 25 
        percent of--
                    ``(A) the employees of the group are based in the 
                United States,
                    ``(B) the employee compensation incurred by the 
                group is incurred with respect to employees based in 
                the United States,
                    ``(C) the assets of the group are located in the 
                United States, or
                    ``(D) the income of the group is derived in the 
                United States,
        determined in the same manner as such determinations are made 
        for purposes of determining substantial business activities 
        under regulations referred to in paragraph (3) as in effect on 
        May 8, 2014, but applied by treating all references in such 
        regulations to `foreign country' and `relevant foreign country' 
        as references to `the United States'. The Secretary may issue 
        regulations decreasing the threshold percent in any of the 
        tests under such regulations for determining if business 
        activities constitute significant domestic business activities 
        for purposes of this paragraph.''.
    (b) Conforming Amendments.--
            (1) Clause (i) of section 7874(a)(2)(B) is amended by 
        striking ``after March 4, 2003,'' and inserting ``after March 
        4, 2003, and before May 9, 2014,''.
            (2) Subsection (c) of section 7874 is amended--
                    (A) in paragraph (2)--
                            (i) by striking ``subsection 
                        (a)(2)(B)(ii)'' and inserting ``subsections 
                        (a)(2)(B)(ii) and (b)(2)(B)(i)'', and
                            (ii) by inserting ``or (b)(2)(A)'' after 
                        ``(a)(2)(B)(i)'' in subparagraph (B),
                    (B) in paragraph (3), by inserting ``or 
                (b)(2)(B)(i), as the case may be,'' after 
                ``(a)(2)(B)(ii)'',
                    (C) in paragraph (5), by striking ``subsection 
                (a)(2)(B)(ii)'' and inserting ``subsections 
                (a)(2)(B)(ii) and (b)(2)(B)(i)'', and
                    (D) in paragraph (6), by inserting ``or inverted 
                domestic corporation, as the case may be,'' after 
                ``surrogate foreign corporation''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after May 8, 2014.
                                 <all>