[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 5349 Introduced in Senate (IS)]

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117th CONGRESS
  2d Session
                                S. 5349

To amend the Internal Revenue Code of 1986 to modify certain provisions 
          relating to the taxation of international entities.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           December 21, 2022

  Mr. Portman introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to modify certain provisions 
          relating to the taxation of international entities.

    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 ``International 
Competition for American Jobs 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.

SEC. 2. PERMANENT EXTENSION OF LOOK-THRU RULE FOR CONTROLLED FOREIGN 
              CORPORATIONS.

    (a) In General.--Section 954(c)(6)(C) is amended by striking ``and 
before January 1, 2026,''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years of foreign corporations beginning after December 31, 
2022, and to taxable years of United States shareholders with or within 
which such taxable years of foreign corporations end.

SEC. 3. MODIFICATION OF DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME 
              AND GLOBAL INTANGIBLE LOW-TAXED INCOME.

    (a) In General.--Section 250(a) is amended to read as follows:
    ``(a) Allowance of Deduction.--In the case of a domestic 
corporation for any taxable year, there shall be allowed as a deduction 
an amount equal to the sum of--
            ``(1) 37.5 percent of the foreign-derived intangible income 
        of such domestic corporation for such taxable year, plus
            ``(2) 50 percent of--
                    ``(A) the global intangible low-taxed income amount 
                (if any) which is included in the gross income of such 
                domestic corporation under section 951A for such 
                taxable year, and
                    ``(B) the amount treated as a dividend received by 
                such corporation under section 78 which is attributable 
                to the amount described in subparagraph (A).''.
    (b) Deduction Taken Into Account in Determining Net Operating Loss 
Deduction.--Section 172(d) is amended by striking paragraph (9).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2022.

SEC. 4. MODIFICATIONS TO BASE EROSION MINIMUM TAX.

    (a) Base Erosion Minimum Tax Amount Determined Without Regard to 
Credits.--
            (1) In general.--Section 59A(b)(1)(B) is amended to read as 
        follows:
                    ``(B) an amount equal to the regular tax liability 
                (as defined in section 26(b)) of the taxpayer for the 
                taxable year.''.
            (2) Conforming amendment.--Section 59A(b) is amended by 
        striking paragraph (4).
    (b) Elimination of Modifications for Taxable Years After 2025.--
            (1) In general.--Section 59A(b) is amended by striking 
        paragraph (2) and redesignating paragraph (3) as paragraph (2).
            (2) Conforming amendments.--
                    (A) Section 59A(b)(1) is amended by striking 
                ``paragraphs (2) and (3)'' and inserting ``paragraph 
                (2)''.
                    (B) Paragraph (2) of section 59A(b), as 
                redesignated by paragraph (1), is amended by striking 
                ``under paragraphs (1)(A) and (2)(A) shall each be 
                increased'' and inserting ``under paragraph (1)(A) 
                shall be increased''.
                    (C) Section 59A(e)(1)(C) is amended by striking 
                ``subsection (b)(3)(B)'' and inserting ``subsection 
                (b)(2)(B)''.
    (c) Expansion and Consolidation of Rules To Exempt Certain Payments 
From Treatment as Base Erosion Payments.--
            (1) In general.--Section 59A is amended by redesignating 
        subsection (i) as subsection (j) and by inserting after 
        subsection (h) the following new subsection:
    ``(i) Certain Payment Not Treated as Base Erosion Payments.--
            ``(1) Exception for payments on which tax is imposed.--
                    ``(A) In general.--An amount shall not be treated 
                as a base erosion payment if tax is (or was at the time 
                of payment or accrual) imposed by this chapter with 
                respect to such amount (other than by this section).
                    ``(B) Treatment of certain deductions.--For 
                purposes of subparagraph (A), tax shall be treated as 
                imposed by this chapter without regard to any deduction 
                allowed under part VIII of subchapter B.
                    ``(C) Application of certain rules.--The amount not 
                treated as a base erosion payment by reason of this 
                paragraph shall be determined under rules similar to 
                the rules of section 163(j)(5) (as in effect before the 
                date of the enactment of Public Law 115-97).
            ``(2) Exception for certain payments subject to sufficient 
        foreign tax.--
                    ``(A) In general.--An amount shall not be treated 
                as a base erosion payment if the taxpayer establishes 
                to the satisfaction of the Secretary that such amount 
                was made to a foreign person which is a related party 
                of the taxpayer that is subject to an effective rate of 
                foreign income tax (as defined in section 904(d)(2)(F)) 
                which is not less than 18.9 percent.
                    ``(B) Certain payments to related parties.--To the 
                extent provided by the Secretary in regulations, an 
                amount paid to a foreign person which is a related 
                party of the taxpayer shall be treated as paid to 
                another foreign person which is a related party of the 
                taxpayer if such second foreign person is subject to an 
                effective rate of foreign income tax (as defined in 
                section 904(d)(2)(F)) which is less than 18.9 percent, 
                to the extent the amount so paid directly or indirectly 
                funds a payment to such second foreign person.
                    ``(C) Determination on basis of applicable 
                financial statements.--Except as otherwise provided by 
                the Secretary under subparagraph (D), the effective 
                rate of foreign income tax with respect to any amount 
                may be established on the basis of applicable financial 
                statements (as defined in section 451(b)(3)).
                    ``(D) Regulations.--The Secretary shall issue such 
                regulations or other guidance as may be necessary or 
                appropriate to carry out the purposes of this 
                paragraph, including regulations or other guidance 
                providing procedures for determining the effective rate 
                of foreign income tax to which any amount is subject. 
                Such procedures may require that any transaction or 
                series of transactions among multiple parties be 
                recharacterized as one or more transactions directly 
                among any 2 or more of such parties where the Secretary 
                determines that such recharacterization is appropriate 
                to carry out, or prevent avoidance of, the purposes of 
                this section.
            ``(3) Exception for certain amounts with respect to 
        services.--Subsections (d)(1) and (d)(2) shall not apply to so 
        much of any amount paid or accrued by a taxpayer for services 
        as does not exceed the total services cost of such services. 
        The preceding sentence shall not apply unless such services 
        meet the requirements for eligibility for use of the services 
        cost method under section 482 (determined without regard to the 
        requirement that the services not contribute significantly to 
        fundamental risks of business success or failure).''.
            (2) Conforming amendment.--Section 59A(d) is amended by 
        striking paragraph (5).
    (d) Other Modifications.--
            (1) Section 59A(b)(3)(B)(ii) is amended by striking 
        ``registered securities dealer'' and inserting ``securities 
        dealer registered''.
            (2) Section 59A(h)(2)(B) is amended by striking ``section 
        6038B(b)(2)'' and inserting ``section 6038A(b)(2)''.
            (3) Section 59A(j)(2), as redesignated by subsection (b), 
        is amended by striking ``subsection (g)(3)'' and inserting 
        ``subsection (h)(3)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2022.

SEC. 5. RULES FOR ALLOCATION OF CERTAIN DEDUCTIONS TO FOREIGN SOURCE 
              GLOBAL INTANGIBLE LOW-TAXED INCOME FOR PURPOSES OF 
              FOREIGN TAX CREDIT LIMITATION.

    (a) In General.--Section 904(b) is amended by adding at the end the 
following new paragraph:
            ``(5) Deductions treated as allocable to foreign source 
        global intangible low-taxed income.--In the case of a domestic 
        corporation and solely for purposes of the application of 
        subsection (a) with respect to amounts described in subsection 
        (d)(1)(A), the taxpayer's taxable income from sources without 
        the United States shall be determined--
                    ``(A) by allocating and apportioning any deduction 
                allowed under section 250(a)(2) (and any deduction 
                allowed under section 164(a)(3) for taxes imposed on 
                amounts described in section 250(a)(2)) to such income, 
                and
                    ``(B) by allocating and apportioning any other 
                deduction to such income only if the Secretary 
                determines that such deduction is directly allocable to 
                such income.
        Any deduction which would (but for subparagraph (B)) have been 
        allocated or apportioned to such income shall only be allocated 
        or apportioned to income which is from sources within the 
        United States.''.
    (b) Application of Separate Limitation Losses With Respect to 
Global Intangible Low-Taxed Income.--
            (1) In general.--Section 904(f)(5)(B) is amended to read as 
        follows:
                    ``(B) Allocation of losses.--Except as otherwise 
                provided in this subparagraph, the separate limitation 
                losses for any taxable year (to the extent such losses 
                do not exceed the separate limitation incomes for such 
                year) shall be allocated among (and operate to reduce) 
                such incomes on a proportionate basis. In the case of a 
                separate limitation loss for any taxable year in any 
                category other than subparagraph (d)(1)(A), the amount 
                of such separate limitation loss shall be allocated 
                among (and operate to reduce) separate limitation 
                income in any category other than income described in 
                subparagraph (d)(1)(A) on a proportionate basis 
                (without regard to income described in subparagraph 
                (d)(1)(A)). The remaining separate limitation losses 
                may reduce separate limitation income described in 
                subparagraph (d)(1)(A) only to the extent that the 
                aggregate amount of such losses exceeds the aggregate 
                amount of separate limitation incomes (other than 
                income described in subparagraph (d)(1)(A)) for such 
                taxable year.''.
            (2) Income category.--Section 904(f)(5)(E)(i) is amended to 
        read as follows:
                            ``(i) Income category.--The term `income 
                        category' means each category of income with 
                        respect to which this section is required to be 
                        applied separately by reason of any provision 
                        of this title.''.
            (3) Separate limitation loss.--Section 904(f)(5)(E)(iii) is 
        amended to read as follows:
                            ``(iii) Separate limitation loss.--The term 
                        `separate limitation loss' means, with respect 
                        to any income category, the amount by which the 
                        gross income from sources outside the United 
                        States is exceeded by the sum of the deductions 
                        properly allocated and apportioned thereto.''.
    (c) Application of Carryforward to Taxes on Global Intangible Low-
Taxed Income.--Section 904(c) is amended by striking the last sentence.
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2022.
            (2) Modification of foreign tax credit carryback and 
        carryforward.--The amendment made by subsection (c) shall apply 
        to taxes paid or accrued in taxable years beginning after 
        December 31, 2022.

SEC. 6. RESTORATION OF LIMITATION ON DOWNWARD ATTRIBUTION OF STOCK 
              OWNERSHIP IN APPLYING CONSTRUCTIVE OWNERSHIP RULES.

    (a) In General.--Section 958(b) is amended--
            (1) by inserting after paragraph (3) the following:
            ``(4) Subparagraphs (A), (B), and (C) of section 318(a)(3) 
        shall not be applied so as to consider a United States person 
        as owning stock which is owned by a person who is not a United 
        States person.'', and
            (2) by striking ``Paragraph (1)'' in the last sentence and 
        inserting ``Paragraphs (1) and (4)''.
    (b) Foreign Controlled United States Shareholders.--Subpart F of 
part III of subchapter N of chapter 1 is amended by inserting after 
section 951A the following new section:

``SEC. 951B. AMOUNTS INCLUDED IN GROSS INCOME OF FOREIGN CONTROLLED 
              UNITED STATES SHAREHOLDERS.

    ``(a) In General.--In the case of any foreign controlled United 
States shareholder of a foreign controlled foreign corporation--
            ``(1) this subpart (other than sections 951A, 951(b), and 
        957) shall be applied with respect to such shareholder 
        (separately from, and in addition to, the application of this 
        subpart without regard to this section)--
                    ``(A) by substituting `foreign controlled United 
                States shareholder' for `United States shareholder' 
                each place it appears therein, and
                    ``(B) by substituting `foreign controlled foreign 
                corporation' for `controlled foreign corporation' each 
                place it appears therein, and
            ``(2) section 951A shall be applied with respect to such 
        shareholder--
                    ``(A) by treating each reference to `United States 
                shareholder' in such section as including a reference 
                to such shareholder, and
                    ``(B) by treating each reference to `controlled 
                foreign corporation' in such section as including a 
                reference to such foreign controlled foreign 
                corporation.
    ``(b) Foreign Controlled United States Shareholder.--For purposes 
of this section, the term `foreign controlled United States 
shareholder' means, with respect to any foreign corporation, any United 
States person which would be a United States shareholder with respect 
to such foreign corporation if--
            ``(1) section 951(b) were applied by substituting `more 
        than 50 percent' for `10 percent or more', and
            ``(2) section 958(b) were applied without regard to 
        paragraph (4) thereof.
    ``(c) Foreign Controlled Foreign Corporation.--For purposes of this 
section, the term `foreign controlled foreign corporation' means a 
foreign corporation, other than a controlled foreign corporation, which 
would be a controlled foreign corporation if section 957(a) were 
applied--
            ``(1) by substituting `foreign controlled United States 
        shareholders' for `United States shareholders', and
            ``(2) by substituting `section 958(b) (other than paragraph 
        (4) thereof)' for `section 958(b)'.
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
purposes of this section, including regulations or other guidance--
            ``(1) to treat a foreign controlled United States 
        shareholder or a foreign controlled foreign corporation as a 
        United States shareholder or as a controlled foreign 
        corporation, respectively, for purposes of provisions of this 
        title other than this subpart, and
            ``(2) to prevent the avoidance of the purposes of this 
        section.''.
    (c) Clerical Amendment.--The table of sections for subpart F of 
part III of subchapter N of chapter 1 is amended by inserting after the 
item relating to section 951A the following new item:

``Sec. 951B. Amounts included in gross income of foreign controlled 
                            United States shareholders.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to--
            (1) the last taxable year of foreign corporations beginning 
        before January 1, 2023, and each subsequent taxable year of 
        such foreign corporations, and
            (2) taxable years of United States persons in which or with 
        which such taxable years of foreign corporations end.
    (e) No Inference.--The amendments made by this section shall not be 
construed to create any inference with respect to the proper 
application of any provision of the Internal Revenue Code of 1986 with 
respect to taxable years beginning before the taxable years to which 
such amendments apply.

SEC. 7. CARRYOVER OF NET CFC TESTED LOSS.

    (a) In General.--Section 951A(c) is amended by adding at the end 
the following new paragraph:
            ``(3) Carryover of net cfc tested loss.--
                    ``(A) In general.--If the amount described in 
                paragraph (1)(B) with respect to any United States 
                shareholder for any taxable year of such United States 
                shareholder (determined after the application of this 
                paragraph with respect to amounts arising in preceding 
                taxable years) exceeds the amount described in 
                paragraph (1)(A) with respect to such shareholder of 
                such taxable year, the amount otherwise described in 
                paragraph (1)(B) with respect to such shareholder for 
                the succeeding taxable year shall be increased by the 
                amount of such excess.
                    ``(B) Proper adjustment in allocations of global 
                intangible low-taxed income to controlled foreign 
                corporations.--Proper adjustments shall be made in the 
                application of subsection (f)(2)(B) to take into 
                account any decrease in global intangible low-taxed 
                income by reason of the application of subparagraph 
                (A).''.
    (b) Application of Rules With Respect to Ownership Changes.--
Section 382(d) is amended by adding at the end the following new 
paragraph:
            ``(4) Application to carryover of net cfc tested loss.--The 
        term `pre-change loss' shall include any excess carried over 
        under section 951A(c)(3) under rules similar to the rules of 
        paragraph (1).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2022, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 8. REDETERMINATION OF FOREIGN TAXES AND RELATED CLAIMS.

    (a) In General.--Section 905(c) is amended--
            (1) in paragraph (1), by striking ``or'' at the end of 
        subparagraph (B) and by inserting after subparagraph (C) the 
        following new subparagraphs:
                    ``(D) the taxpayer makes a timely change in its 
                choice to claim a credit or deduction for taxes paid or 
                accrued, or
                    ``(E) there is any other change in the amount, or 
                treatment, of taxes, which affects the taxpayer's tax 
                liability under this chapter,'',
            (2) in paragraph (2)(B)(i), by inserting ``, except as 
        otherwise provided by the Secretary,'' after ``shall'', and
            (3) by striking ``Accrued'' in the heading thereof.
    (b) Modification to Time for Claiming Credit or Deduction.--Section 
901(a) is amended by striking the second sentence and inserting the 
following: ``Such choice for any taxable year may be made or changed at 
any time before the expiration of the applicable period prescribed by 
section 6511 for making a claim for credit or refund of an overpayment 
of the tax imposed by this chapter for such taxable year that is 
attributable to such amounts.''.
    (c) Modification to Special Period of Limitation.--Section 
6511(d)(3) is amended--
            (1) in subparagraph (A)--
                    (A) by inserting ``a change in the liability for'' 
                before ``any taxes paid or accrued'',
                    (B) by striking ``actually paid'' and inserting 
                ``paid (or deemed paid under section 960)'', and
                    (C) by inserting ``change in the liability for'' 
                before ``foreign taxes'' in the heading thereof, and
            (2) in subparagraph (B), by striking ``the allowance of a 
        credit for the taxes'' and inserting ``the allowance of an 
        additional credit by reason of the change in liability for the 
        taxes''.
    (d) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxes paid or accrued in taxable years beginning after December 
        31, 2022.
            (2) Certain changes.--The amendments made by paragraphs (1) 
        and (3) of subsection (a) shall apply to changes that occur on 
        or after the date which is 60 days after the date of the 
        enactment of this Act.
            (3) Modification to special period of limitation.--The 
        amendments made by subsection (c) shall apply to taxes paid, 
        accrued, or deemed paid in taxable years beginning after 
        December 31, 2022.
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