[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 4098 Introduced in Senate (IS)]

<DOC>






118th CONGRESS
  2d Session
                                S. 4098

 To amend the Internal Revenue Code of 1986 to modify the treatment of 
             foreign corporations, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 10, 2024

  Mr. Sanders 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 the treatment of 
             foreign corporations, 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.

    This Act may be cited as the ``Corporate Tax Dodging Prevention 
Act''.

SEC. 2. RESTORATION OF PROGRESSIVE CORPORATE TAX RATE.

    (a) In General.--Section 11(b) of the Internal Revenue Code of 1986 
is amended to read as follows:
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) shall be the sum of--
                    ``(A) 15 percent of so much of the taxable income 
                as does not exceed $50,000,
                    ``(B) 25 percent of so much of the taxable income 
                as exceeds $50,000 but does not exceed $75,000,
                    ``(C) 34 percent of so much of the taxable income 
                as exceeds $75,000 but does not exceed $10,000,000, and
                    ``(D) 35 percent of so much of the taxable income 
                as exceeds $10,000,000.
        In the case of a corporation which has taxable income in excess 
        of $100,000 for any taxable year, the amount of tax determined 
        under the preceding sentence for such taxable year shall be 
        increased by the lesser of (i) 5 percent of such excess, or 
        (ii) $11,750. In the case of a corporation which has taxable 
        income in excess of $15,000,000, the amount of the tax 
        determined under the foregoing provisions of this paragraph 
        shall be increased by an additional amount equal to the lesser 
        of (i) 3 percent of such excess, or (ii) $100,000.
            ``(2) Certain personal service corporations not eligible 
        for graduated rates.--Notwithstanding paragraph (1), the amount 
        of the tax imposed by subsection (a) on the taxable income of a 
        qualified personal service corporation (as defined in section 
        448(d)(2)) shall be equal to 35 percent of the taxable 
        income.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2024.

SEC. 3. EQUALIZATION OF TAX RATES ON DOMESTIC AND FOREIGN INCOME.

    (a) In General.--Section 952 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(e) Special Application of Subpart.--
            ``(1) In general.--For taxable years beginning after 
        December 31, 2024, notwithstanding any other provision of this 
        subpart, the term `subpart F income' means, in the case of any 
        controlled foreign corporation, the income of such corporation 
        derived from any foreign country.
            ``(2) Applicable rules.--Rules similar to the rules under 
        the last sentence of subsection (a) and subsection (d) shall 
        apply to this subsection.''.
    (b) Treatment of Previously Deferred Foreign Income.--
            (1) Treatment of interest.--Section 965(h) of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new paragraph:
            ``(7) Rules relating to interest.--In the case of any 
        amount of the net tax liability prorated to an installment 
        under this subsection which has not been paid before the date 
        of the enactment of this paragraph, the last date prescribed 
        for payment of any such installment for purposes of section 
        6601 shall be the earlier of such last date (determined without 
        regard to this paragraph) or such date of enactment.''.
            (2) Rules for s corporations.--Section 965(i)(2)(A) of such 
        Code is amended by adding at the end the following new clause:
                            ``(iv) The date of the enactment of the 
                        Corporate Tax Dodging Prevention Act.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2024, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 4. COUNTRY-BY-COUNTRY APPLICATION OF LIMITATION ON FOREIGN TAX 
              CREDIT BASED ON TAXABLE UNITS.

    (a) In General.--Section 904 is amended by inserting after 
subsection (d) the following new subsection:
    ``(e) Country-by-Country Application of Section Based on Taxable 
Units.--
            ``(1) In general.--The provisions of subsections (a), (b), 
        (c), and (d) and sections 907 and 960 shall be applied 
        separately with respect to each country and possession by 
        taking into account the aggregate items properly attributable 
        or otherwise allocable to a taxable unit of the taxpayer which 
        is a tax resident of such country or possession.
            ``(2) Taxable units.--
                    ``(A) In general.--Unless otherwise provided by the 
                Secretary, to the extent an item may be properly 
                attributable or otherwise allocable to more than one 
                taxable unit under paragraph (1), such item shall be 
                treated as properly attributable or otherwise allocable 
                to the lowest-tier taxable unit of the taxpayer to 
                which such item may be properly attributable or 
                otherwise allocable. No item shall be attributable or 
                otherwise allocable to more than one taxable unit of 
                the taxpayer.
                    ``(B) Determination of taxable units.--Except as 
                otherwise provided by the Secretary, the taxable units 
                of a taxpayer are as follows:
                            ``(i) In general.--The general taxable unit 
                        of the taxpayer which is not otherwise 
                        described in a separate clause of this 
                        subparagraph.
                            ``(ii) Foreign branches.--Each foreign 
                        branch the activities of which are carried on 
                        directly or indirectly (through one or more 
                        pass-through entities) by the taxpayer.
                            ``(iii) Controlled foreign corporations.--
                        Each controlled foreign corporation with 
                        respect to which the taxpayer is a United 
                        States shareholder.
                            ``(iv) Branches of controlled foreign 
                        corporations.--Each branch the activities of 
                        which are carried on directly or indirectly 
                        (through one or more pass-through entities) by 
                        a controlled foreign corporation referred to in 
                        clause (iii).
                            ``(v) Interests in pass-through entities.--
                                    ``(I) In general.--Each interest in 
                                a pass-through entity held directly or 
                                indirectly by the taxpayer or a 
                                controlled foreign corporation referred 
                                to in clause (iii) if such entity is a 
                                tax resident of a foreign country.
                                    ``(II) Certain interests held by 
                                controlled foreign corporations.--Each 
                                interest in a pass-through entity held 
                                directly or indirectly by a controlled 
                                foreign corporation referred to in 
                                clause (iii) if such entity is a tax 
                                resident of a foreign country or such 
                                entity is treated as a corporation (or 
                                other entity that is not fiscally 
                                transparent) for purposes of the tax 
                                law of a foreign country in which such 
                                controlled foreign corporation is a tax 
                                resident.
            ``(3) Tax resident.--For purposes of this subsection, a 
        taxable unit shall be treated as a tax resident of a country or 
        possession if such taxable unit is liable to tax under the tax 
        law of such country or possession as a resident.
            ``(4) Pass-through entity.--For purposes of this 
        subsection, the term `pass-through entity' means any 
        partnership and any other type of entity (other than a 
        corporation) identified by the Secretary as a pass-through 
        entity for purposes of this subsection.
            ``(5) Regulations.--The Secretary shall issue such 
        regulations or other guidance as the Secretary determines 
        necessary or appropriate to carry out the purposes of this 
        subsection, including regulations or other guidance--
                    ``(A) for determining the country or possession 
                with respect to which any taxable unit is a tax 
                resident, including--
                            ``(i) determining such country or 
                        possession on the basis of location if such 
                        taxable unit would not otherwise be a tax 
                        resident of any country or possession, and
                            ``(ii) ensuring that such taxable unit is a 
                        tax resident of not more than 1 country or 
                        possession,
                    ``(B) applying this section to hybrid entities, 
                passive foreign investment companies, tiered 
                structures, and branches, including branches that do 
                not give rise to a taxable presence under the tax law 
                of the country where the branch is located, and
                    ``(C) determining whether any entity is not 
                fiscally transparent within the meaning of paragraph 
                (2)(B)(v)(II).''.
    (b) Application of Foreign Tax Credit Limitation With Respect to 
Foreign Branches.--Section 904(d)(2)(J)(i) is amended--
            (1) by striking ``qualified business units (as defined in 
        section 989(a)) in 1 or more foreign countries'' and inserting 
        ``foreign branches described in section 904(e)(2)(B)(ii)'', and
            (2) by striking ``a qualified business unit'' and inserting 
        ``a foreign branch''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2024.

SEC. 5. 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) of the 
Internal Revenue Code of 1986 is amended--
            (1) by striking ``and'', and
            (2) by inserting after ``insurance companies'' the 
        following: ``, and any foreign business entity that has one or 
        more owners all of which have limited liability.''.
    (b) Look-Thru Rule.--Subparagraph (C) of section 954(c)(6) of such 
Code 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 Corporate Tax Dodging Prevention Act.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 6. LIMITATION ON DEDUCTION OF INTEREST BY DOMESTIC CORPORATIONS 
              WHICH ARE MEMBERS OF AN INTERNATIONAL FINANCIAL REPORTING 
              GROUP.

    (a) In General.--Section 163 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Limitation on Deduction of Interest by Domestic Corporations 
in International Financial Reporting Groups.--
            ``(1) In general.--In the case of any domestic corporation 
        which is a member of any international financial reporting 
        group, the deduction under this chapter for interest paid or 
        accrued during the taxable year shall not exceed the sum of--
                    ``(A) the allowable percentage of 105 percent of 
                the excess (if any) of--
                            ``(i) the amount of such interest so paid 
                        or accrued, over
                            ``(ii) the amount described in subparagraph 
                        (B), plus
                    ``(B) the amount of interest includible in gross 
                income of such corporation for such taxable year.
            ``(2) International financial reporting group.--
                    ``(A) For purposes of this subsection, the term 
                `international financial reporting group' means, with 
                respect to any reporting year, any group of entities 
                which--
                            ``(i) includes--
                                    ``(I) at least one foreign 
                                corporation engaged in a trade or 
                                business within the United States, or
                                    ``(II) at least one domestic 
                                corporation and one foreign 
                                corporation,
                            ``(ii) prepares consolidated financial 
                        statements with respect to such year, and
                            ``(iii) reports in such statements average 
                        annual gross receipts (determined in the 
                        aggregate with respect to all entities which 
                        are part of such group) for the 3-reporting-
                        year period ending with such reporting year in 
                        excess of $25,000,000.
                    ``(B) Rules relating to determination of average 
                gross receipts.--For purposes of subparagraph (A)(iii), 
                rules similar to the rules of section 448(c)(3) shall 
                apply.
            ``(3) Allowable percentage.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `allowable percentage' 
                means, with respect to any domestic corporation for any 
                taxable year, the ratio (expressed as a percentage and 
                not greater than 100 percent) of--
                            ``(i) such corporation's allocable share of 
                        the international financial reporting group's 
                        reported net interest expense for the reporting 
                        year of such group which ends in or with such 
                        taxable year of such corporation, over
                            ``(ii) such corporation's reported net 
                        interest expense for such reporting year of 
                        such group.
                    ``(B) Reported net interest expense.--The term 
                `reported net interest expense' means--
                            ``(i) with respect to any international 
                        financial reporting group for any reporting 
                        year, the excess of--
                                    ``(I) the aggregate amount of 
                                interest expense reported in such 
                                group's consolidated financial 
                                statements for such taxable year, over
                                    ``(II) the aggregate amount of 
                                interest income reported in such 
                                group's consolidated financial 
                                statements for such taxable year, and
                            ``(ii) with respect to any domestic 
                        corporation for any reporting year, the excess 
                        of--
                                    ``(I) the amount of interest 
                                expense of such corporation reported in 
                                the books and records of the 
                                international financial reporting group 
                                which are used in preparing such 
                                group's consolidated financial 
                                statements for such taxable year, over
                                    ``(II) the amount of interest 
                                income of such corporation reported in 
                                such books and records.
                    ``(C) Allocable share of reported net interest 
                expense.--With respect to any domestic corporation 
                which is a member of any international financial 
                reporting group, such corporation's allocable share of 
                such group's reported net interest expense for any 
                reporting year is the portion of such expense which 
                bears the same ratio to such expense as--
                            ``(i) the EBITDA of such corporation for 
                        such reporting year, bears to
                            ``(ii) the EBITDA of such group for such 
                        reporting year.
                    ``(D) EBITDA.--
                            ``(i) In general.--The term `EBITDA' means, 
                        with respect to any reporting year, earnings 
                        before interest, taxes, depreciation, and 
                        amortization--
                                    ``(I) as determined in the 
                                international financial reporting 
                                group's consolidated financial 
                                statements for such year, or
                                    ``(II) for purposes of subparagraph 
                                (A)(i), as determined in the books and 
                                records of the international financial 
                                reporting group which are used in 
                                preparing such statements if not 
                                determined in such statements.
                            ``(ii) Treatment of disregarded entities.--
                        The EBITDA of any domestic corporation shall 
                        not fail to include the EBITDA of any entity 
                        which is disregarded for purposes of this 
                        chapter.
                            ``(iii) Treatment of intra-group 
                        distributions.--The EBITDA of any domestic 
                        corporation shall be determined without regard 
                        to any distribution received by such 
                        corporation from any other member of the 
                        international financial reporting group.
                    ``(E) Special rules for non-positive ebitda.--
                            ``(i) Non-positive group ebitda.--In the 
                        case of any international financial reporting 
                        group the EBITDA of which is zero or less, 
                        paragraph (1) shall not apply to any member of 
                        such group the EBITDA of which is above zero.
                            ``(ii) Non-positive entity ebitda.--In the 
                        case of any group member the EBITDA of which is 
                        zero or less, paragraph (1) shall be applied 
                        without regard to subparagraph (A) thereof.
            ``(4) Consolidated financial statement.--For purposes of 
        this subsection, the term `consolidated financial statement' 
        means any consolidated financial statement described in 
        paragraph (2)(A)(ii) if such statement is--
                    ``(A) a financial statement which is certified as 
                being prepared in accordance with generally accepted 
                accounting principles, international financial 
                reporting standards, or any other comparable method of 
                accounting identified by the Secretary, and which is--
                            ``(i) a 10-K (or successor form) or annual 
                        statement to shareholders required to be filed 
                        with the United States Securities and Exchange 
                        Commission,
                            ``(ii) an audited financial statement which 
                        is used for--
                                    ``(I) credit purposes,
                                    ``(II) reporting to shareholders, 
                                partners, or other proprietors, or to 
                                beneficiaries, or
                                    ``(III) any other substantial 
                                nontax purpose,
                        but only if there is no statement described in 
                        clause (i), or
                            ``(iii) filed with any other Federal or 
                        State agency for nontax purposes, but only if 
                        there is no statement described in clause (i) 
                        or (ii), or
                    ``(B) a financial statement which--
                            ``(i) is used for a purpose described in 
                        subclause (I), (II), or (III) of subparagraph 
                        (A)(ii), or
                            ``(ii) filed with any regulatory or 
                        governmental body (whether domestic or foreign) 
                        specified by the Secretary,
                but only if there is no statement described in 
                subparagraph (A).
            ``(5) Reporting year.--For purposes of this subsection, the 
        term `reporting year' means, with respect to any international 
        financial reporting group, the year with respect to which the 
        consolidated financial statements are prepared.
            ``(6) Application to certain entities.--
                    ``(A) Partnerships.--The secretary shall prescribe 
                rules for application of this subsection to any 
                partnership which is a member of any international 
                financial reporting group. Such rules shall treat any 
                such partnership in a manner similar to the way such 
                partnership would be treated under this subsection if 
                it were a domestic corporation which is a member of any 
                international financial reporting group.
                    ``(B) Foreign corporations engaged in trade or 
                business within the united states.--Except as otherwise 
                provided by the Secretary in paragraph (7), any 
                deduction for interest paid or accrued by a foreign 
                corporation engaged in a trade or business within the 
                United States shall be limited in a manner consistent 
                with the principles of this subsection.
                    ``(C) Consolidated groups.--For purposes of this 
                subsection, the members of any group that file (or are 
                required to file) a consolidated return with respect to 
                the tax imposed by chapter 1 for a taxable year shall 
                be treated as a single corporation.
            ``(7) Regulations.--The Secretary may issue such 
        regulations or other guidance as are necessary or appropriate 
        to carry out the purposes of this subsection.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 7. MODIFICATIONS TO RULES RELATING TO INVERTED CORPORATIONS.

    (a) In General.--Subsection (b) of section 7874 of the Internal 
Revenue Code of 1986 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, 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.
            ``(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.''.
    (b) Conforming Amendments.--
            (1) Clause (i) of section 7874(a)(2)(B) of the Internal 
        Revenue Code of 1986 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 of such Code 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)'', 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), 
                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)'', 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.

SEC. 8. TREATMENT OF FOREIGN CORPORATIONS MANAGED AND CONTROLLED IN THE 
              UNITED STATES AS DOMESTIC CORPORATIONS.

    (a) In General.--Section 7701 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (p) as subsection (q) and by 
inserting after subsection (o) the following new subsection:
    ``(p) Certain Corporations Managed and Controlled in the United 
States Treated as Domestic for Income Tax.--
            ``(1) In general.--Notwithstanding subsection (a)(4), in 
        the case of a corporation described in paragraph (2) if--
                    ``(A) the corporation would not otherwise be 
                treated as a domestic corporation for purposes of this 
                title, but
                    ``(B) the management and control of the corporation 
                occurs, directly or indirectly, primarily within the 
                United States,
        then, solely for purposes of chapter 1 (and any other provision 
        of this title relating to chapter 1), the corporation shall be 
        treated as a domestic corporation.
            ``(2) Corporation described.--
                    ``(A) In general.--A corporation is described in 
                this paragraph if--
                            ``(i) the stock of such corporation is 
                        regularly traded on an established securities 
                        market, or
                            ``(ii) the aggregate gross assets of such 
                        corporation (or any predecessor thereof), 
                        including assets under management for 
                        investors, whether held directly or indirectly, 
                        at any time during the taxable year or any 
                        preceding taxable year is $50,000,000 or more.
                    ``(B) General exception.--A corporation shall not 
                be treated as described in this paragraph if--
                            ``(i) such corporation was treated as a 
                        corporation described in this paragraph in a 
                        preceding taxable year,
                            ``(ii) such corporation--
                                    ``(I) is not regularly traded on an 
                                established securities market, and
                                    ``(II) has, and is reasonably 
                                expected to continue to have, aggregate 
                                gross assets (including assets under 
                                management for investors, whether held 
                                directly or indirectly) of less than 
                                $50,000,000, and
                            ``(iii) the Secretary grants a waiver to 
                        such corporation under this subparagraph.
            ``(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.

SEC. 9. MODIFICATIONS TO BASE EROSION AND ANTI-ABUSE TAX.

    (a) Acceleration of Modifications.--Section 59A(b) of the Internal 
Revenue Code of 1986 is amended--
            (1) in paragraph (1)(A), by striking ``10 percent (5 
        percent in the case of taxable years beginning in calendar year 
        2018)'' and inserting ``12.5 percent'',
            (2) in paragraph (1)(B), by striking ``by the excess of'' 
        and all that follows and inserting ``by the aggregate amount of 
        the credits allowed under this chapter against such regular tax 
        liability.'',
            (3) by striking paragraphs (2) and (4) and redesignating 
        paragraph (3) as paragraph (2), and
            (4) in paragraph (2)(A) (as so redesignated), by striking 
        ``paragraphs (1)(A) and (2)(A) shall each'' and inserting 
        ``paragraph (1)(A) shall''.
    (b) Modifications to Definition of Applicable Taxpayer.--Section 
59A(e)(1) of the Internal Revenue Code of 1986 is amended--
            (1) by striking ``$500,000,000'' in subparagraph (B) and 
        inserting ``$25,000,000'', and
            (2) by inserting ``and'' at the end of subparagraph (A), by 
        striking ``, and'' at the end of subparagraph (B) and inserting 
        a period, and by striking subparagraph (C).
    (c) Exceptions to Definition of Base Erosion Payment.--Section 
59A(d) of the Internal Revenue Code of 1986 is amended by adding at the 
end the following new paragraph:
            ``(6) Exception for certain payments includible in gross 
        income of payee.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any portion of an amount--
                            ``(i) which is paid or accrued by the 
                        taxpayer to a foreign person who is a member of 
                        the same controlled group of corporations as 
                        the taxpayer, and
                            ``(ii) which--
                                    ``(I) is treated by the foreign 
                                person as an amount of income from 
                                sources within the United States which 
                                is effectively connected with the 
                                conduct by such person of a trade or 
                                business within the United States, or
                                    ``(II) if the foreign person is a 
                                controlled foreign corporation, is 
                                included in the income of a United 
                                States shareholder of such controlled 
                                foreign corporation under section 
                                951(a).
                    ``(B) Controlled group of corporations.--For 
                purposes of this paragraph, the term `controlled group 
                of corporations' has the same meaning given to such 
                term by section 1563(a), except that--
                            ``(i) `more than 50 percent' shall be 
                        substituted for `at least 80 percent' each 
                        place it appears in section 1563(a)(1), and
                            ``(ii) the determination shall be made 
                        without regard to subsections (a)(4), 
                        (b)(2)(C), and (e)(3)(C) of section 1563.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning in calendar years beginning after the 
date of the enactment of this Act.

SEC. 10. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE TO OIL, 
              GAS, MINING, GAMBLING AND OTHER INDUSTRY TAXPAYERS 
              RECEIVING SPECIFIC ECONOMIC BENEFITS.

    (a) In General.--Section 901 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Special Rules Relating to Dual Capacity Taxpayers.--
            ``(1) General rule.--Notwithstanding any other provision of 
        this chapter, any amount paid or accrued by a dual capacity 
        taxpayer to a foreign country or possession of the United 
        States for any period shall not be considered a tax--
                    ``(A) if, for such period, the foreign country or 
                possession does not impose a generally applicable 
                income tax, or
                    ``(B) to the extent such amount exceeds the amount 
                (determined in accordance with regulations) which--
                            ``(i) is paid by such dual capacity 
                        taxpayer pursuant to the generally applicable 
                        income tax imposed by the country or 
                        possession, or
                            ``(ii) would be paid if the generally 
                        applicable income tax imposed by the country or 
                        possession were applicable to such dual 
                        capacity taxpayer.
                Nothing in this paragraph shall be construed to imply 
                the proper treatment of any such amount not in excess 
                of the amount determined under subparagraph (B).
            ``(2) Dual capacity taxpayer.--For purposes of this 
        subsection, the term `dual capacity taxpayer' means, with 
        respect to any foreign country or possession of the United 
        States, a person who--
                    ``(A) is subject to a levy of such country or 
                possession, and
                    ``(B) receives (or will receive) directly or 
                indirectly a specific economic benefit (as determined 
                in accordance with regulations) from such country or 
                possession.
            ``(3) Generally applicable income tax.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `generally applicable 
                income tax' means an income tax (or a series of income 
                taxes) which is generally imposed under the laws of a 
                foreign country or possession on income derived from 
                the conduct of a trade or business within such country 
                or possession.
                    ``(B) Exceptions.--Such term shall not include a 
                tax unless it has substantial application, by its terms 
                and in practice, to--
                            ``(i) persons who are not dual capacity 
                        taxpayers, and
                            ``(ii) persons who are citizens or 
                        residents of the foreign country or 
                        possession.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxes paid or accrued in taxable years beginning after the 
date of the enactment of this Act.
    (c) Special Rule for Treaties.--Notwithstanding sections 894 or 
7852(d) of the Internal Revenue Code of 1986, the amendments made by 
this section shall apply without regard to any treaty obligation of the 
United States.

SEC. 11. LIMITATIONS ON TREATY BENEFITS.

    (a) Limitation for Certain Deductible Payments.--Section 894 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new subsection:
    ``(d) Limitation on Treaty Benefits for Certain Deductible 
Payments.--
            ``(1) In general.--In the case of any deductible related-
        party payment, any withholding tax imposed under chapter 3 (and 
        any tax imposed under subpart A or B of this part) with respect 
        to such payment may not be reduced under any treaty of the 
        United States unless any such withholding tax would be reduced 
        under a treaty of the United States if such payment were made 
        directly to the foreign parent corporation.
            ``(2) Deductible related-party payment.--For purposes of 
        this subsection, the term `deductible related-party payment' 
        means any payment made, directly or indirectly, by any person 
        to any other person if the payment is allowable as a deduction 
        under this chapter and both persons are members of the same 
        foreign controlled group of entities.
            ``(3) Foreign controlled group of entities.--For purposes 
        of this subsection--
                    ``(A) In general.--The term `foreign controlled 
                group of entities' means a controlled group of entities 
                the common parent of which is a foreign corporation.
                    ``(B) Controlled group of entities.--The term 
                `controlled group of entities' means a controlled group 
                of corporations as defined in section 1563(a)(1), 
                except that--
                            ``(i) `more than 50 percent' shall be 
                        substituted for `at least 80 percent' each 
                        place it appears therein, and
                            ``(ii) the determination shall be made 
                        without regard to subsections (a)(4) and (b)(2) 
                        of section 1563.
                A partnership or any other entity (other than a 
                corporation) shall be treated as a member of a 
                controlled group of entities if such entity is 
                controlled (within the meaning of section 954(d)(3)) by 
                members of such group (including any entity treated as 
                a member of such group by reason of this sentence).
            ``(4) Foreign parent corporation.--For purposes of this 
        subsection, the term `foreign parent corporation' means, with 
        respect to any deductible related-party payment, the common 
        parent of the foreign controlled group of entities referred to 
        in paragraph (3)(A).
            ``(5) Regulations.--The Secretary may prescribe such 
        regulations or other guidance as are necessary or appropriate 
        to carry out the purposes of this subsection, including 
        regulations or other guidance which provide for--
                    ``(A) the treatment of two or more persons as 
                members of a foreign controlled group of entities if 
                such persons would be the common parent of such group 
                if treated as one corporation, and
                    ``(B) the treatment of any member of a foreign 
                controlled group of entities as the common parent of 
                such group if such treatment is appropriate taking into 
                account the economic relationships among such 
                entities.''.
    (b) Limitation for Certain Income Attributable to Permanent 
Establishments in a Third Country.--Section 894 of such Code, as 
amended by subsection (a), is amended by adding at the end the 
following new subsection:
    ``(e) Denial of Treaty Benefits With Respect to Certain Income 
Attributable to a Permanent Establishment in a Third Country.--A 
foreign person shall not be entitled under any income tax treaty of the 
United States with a foreign country to any exemption from, or 
reduction of, any tax with respect to income if--
            ``(1) such income is income from sources within the United 
        States, and
            ``(2) such income is attributable to a permanent 
        establishment which is outside of such foreign country and--
                    ``(A) the profits of which are subject to a 
                combined aggregate effective rate of tax in such 
                foreign country and the country of the permanent 
                establishment that is less than the lesser of--
                            ``(i) 15 percent, or
                            ``(ii) 60 percent of the general statutory 
                        rate of tax on income on corporations in such 
                        foreign country, or
                    ``(B) which is located in a foreign country with 
                which the United States does not have an income tax 
                treaty and is not taxed by the foreign country which is 
                a party to the treaty.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments made after the date of the enactment of this Act.
    (d) Special Rule for Treaties.--Notwithstanding sections 894 or 
7852(d) of the Internal Revenue Code of 1986, the amendments made by 
this section shall apply without regard to any treaty obligation of the 
United States.

SEC. 12. REPEAL OF DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME.

    (a) In General.--Part VIII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by striking section 250 (and 
the item related to such section in the table of sections for such 
part).
    (b) Conforming Amendments.--
            (1) Section 172(d) of the Internal Revenue Code of 1986 is 
        amended by striking paragraph (9).
            (2) Section 246(b) of such Code is amended--
                    (A) by striking the comma after ``section 
                243(a)(1)'' the first place it appears and inserting 
                ``and'' and by striking ``and section 250'', and
                    (B) by inserting ``and'' after ``section 
                243(a)(1)'' the second place it appears and by striking 
                ``, and 250''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2024.
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