[Congressional Record Volume 172, Number 48 (Tuesday, March 17, 2026)]
[Senate]
[Pages S1112-S1116]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SA 4412. Mr. WHITEHOUSE submitted an amendment intended to be
proposed by him to the bill S. 1383, to establish the Veterans Advisory
Committee on Equal Access, and for other purposes; which was ordered to
lie on the table; as follows:
In lieu of the matter proposed to be inserted, insert the
following:
SECTION 1. SHORT TITLE, ETC.
(a) Short Title.--This title may be cited as the ``No Tax
Breaks for Outsourcing Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this title 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.
Sec. 2. Current year inclusion of net CFC tested income.
Sec. 3. Country-by-country application of limitation on foreign tax
credit based on taxable units.
Sec. 4. Limitation on deduction of interest by domestic corporations
which are members of an international financial reporting
group.
Sec. 5. Modifications to rules relating to inverted corporations.
Sec. 6. Treatment of foreign corporations managed and controlled in the
United States as domestic corporations.
SEC. 2. CURRENT YEAR INCLUSION OF NET CFC TESTED INCOME.
(a) Country-by-Country Application of Section Based on CFC
Taxable Units.--Section 951A is amended by adding at the end
the following new subsection:
[[Page S1113]]
``(e) Country-by-Country Application of Section Based on
CFC Taxable Units.--
``(1) In general.--If any CFC taxable unit of a United
States shareholder is a tax resident of (or, in the case of a
branch, is located in) a country which is different from the
country with respect to which any other CFC taxable unit of
such United States shareholder is a tax resident (or, in the
case of a branch, is located in)--
``(A) such shareholder's net CFC tested income for purposes
of subsection (a) shall be the sum of the amounts of net CFC
tested income determined separately with respect to each such
country, and
``(B) for purposes of determining such separate amounts of
net CFC tested income--
``(i) except as otherwise provided by the Secretary, any
reference in subsection (b) to a controlled foreign
corporation of such shareholder shall be treated as reference
to a CFC taxable unit of such shareholder, and
``(ii) net CFC tested income and such other items and
amounts as the Secretary may provide, shall be determined
separately with respect to each such country by determining
such amounts with respect to the CFC taxable units of such
shareholder which are a tax resident of such country.
``(2) Definitions.--For purposes of this subsection--
``(A) CFC taxable unit.--The term `CFC taxable unit' means
any taxable unit described in clause (ii), (iii), or (iv) of
section 904(e)(2)(B), determined--
``(i) by substituting `controlled foreign corporation' for
`foreign corporation' each place it appears in such clauses,
and
``(ii) without regard to the references to the taxpayer in
clauses (iii) and (iv) of such section.
``(B) Application of other definitions.--Terms used in this
subsection which are also used in section 904(e) shall have
the same meaning as when used in section 904(e).
``(3) Special rules.--For purposes of this subsection--
``(A) Application of certain rules.--Except as otherwise
provided by the Secretary, rules similar to the rules of
section 904(e) shall apply.
``(B) Allocation of net cfc tested income to controlled
foreign corporations.--Except as otherwise provided by the
Secretary, subsection (d)(2) shall be applied separately with
respect to each CFC taxable unit.''.
(b) Regulatory Authority.--Section 951A, as amended by
subsection (b), is amended by adding at the end the following
new subsection:
``(f) Regulations.--The Secretary shall issue such
regulations or other guidance as may be necessary or
appropriate to carry out, or prevent the avoidance of, the
purposes of this section, including regulations or guidance
which provide for--
``(1) the treatment of property if such property is
transferred, or held, temporarily,
``(2) the treatment of property if the avoidance of the
purposes of this section is a factor in the transfer or
holding of such property,
``(3) appropriate adjustments to the basis of stock and
other ownership interests, and to earnings and profits, to
reflect tested losses (whether or not taken into account in
determining net CFC tested income),
``(4) rules similar to the rules provided under the
regulations or guidance issued under section 904(e)(4),
``(5) other appropriate basis adjustments,
``(6) appropriate adjustments to be made, and appropriate
tax attributes and records to be maintained, separately with
respect to CFC taxable units, and
``(7) appropriate adjustments in determining tested income
or tested loss if property is transferred between related
parties or amounts are paid or accrued between related
parties.''.
(c) Coordination With Other Provisions.--Section 951A(d)(1)
is amended by adding at the end the following new
subparagraph:
``(C) Treatment of certain references.--Except as otherwise
provided by the Secretary, references to section 951 or
section 951(a) in sections 959, 961, 962, and such other
provisions as the Secretary may identify shall include
references to section 951A or section 951A(a),
respectively.''.
(d) Repeal of Reduced Rate of Tax on Net CFC Tested Income
and Foreign-derived Intangible Income.--
(1) In general.--Part VIII of subchapter B of chapter 1 is
amended by striking section 250 (and by striking the item
relating to such section in the table of sections of such
part).
(2) Conforming amendments.--
(A) Section 59A(c)(4)(B)(i) is amended by striking
``section 172, 245A, or 250'' and inserting ``section 172 or
245A''.
(B) Section 172(d) is amended by striking paragraph (9).
(C) Section 246(b)(1) is amended--
(i) by striking ``subsection (a) and (b) of section 245,
and section 250'' and inserting ``and subsection (a) and (b)
of section 245''; and
(ii) by striking ``subsection (a) and (b) of section 245,
and 250'' and inserting ``and subsection (a) and (b) of
section 245''.
(D) Section 469(i)(3)(E)(iii) is amended by striking ``,
221, and 250'' and inserting ``and 221''.
(E) Section 904(b)(5) is amended--
(i) by striking subparagraph (A) and by redesignating
subparagraphs (B) and (C) as subparagraphs (A) and (B), and
(ii) by striking ``subparagraphs (B) and (C)'' in the
second sentence and inserting ``subparagraphs (A) and (B)''.
(e) Repeal of Certain Exclusions From the Determination of
Tested Income.--Section 951A(b)(2)(A)(i) is amended--
(1) by striking subclauses (III) and (V),
(2) by redesignating subclause (IV) as subclause (III),
(3) by adding ``and'' at the end of subclause (II), and
(4) by striking ``and'' at the end of subclause (III) (as
so redesignated) and inserting ``over''.
(f) Increase in Deemed Paid Credit for Taxes Properly
Attributable to Tested Income.--
(1) In general.--Section 960(d) is amended by striking ``90
percent of''.
(2) Conforming amendments.--
(A) Section 78 is amended by striking ``(determined without
regard to the phrase ``90 percent of'' in subsection (d)(1)
thereof)''.
(B) Section 960(d) is amended by striking paragraph (4).
(g) Repeal of High Tax Exclusion for Foreign Base Company
Income and Insurance Income.--
(1) In general.--Section 954(b) is amended by striking
paragraph (4).
(2) Conforming amendment.--Section 904(d)(3)(E) is amended
by striking the last sentence.
(h) Elimination of Carryback of Foreign Tax Credit.--
(1) In general.--Section 904(c) is amended--
(A) by striking ``in the first preceding taxable year, and
in any of the first 10 succeeding taxable years, in that
order'' and inserting ``in any of the first 10 succeeding
taxable years, in order'',
(B) by striking ``preceding or'' each place it appears, and
(C) by striking ``Carryback and'' in the heading thereof.
(2) Application to limitation on foreign oil and gas
taxes.--Section 907(f) is amended--
(A) in paragraph (1), by striking ``in the first preceding
taxable year and'',
(B) in paragraph (2), by striking ``preceding or'' in the
matter preceding subparagraph (A),
(C) in paragraph (3)(B)--
(i) by striking ``in a preceding or succeeding'' and
inserting ``in a succeeding'', and
(ii) by striking ``in such preceding or succeeding'' both
places it appears and inserting ``in such succeeding'', and
(D) in the heading, by striking ``Carryback and''.
(i) Treatment of Foreign Base Company Oil Related Income as
Subpart F Income.--
(1) In general.--Section 954(a) is amended by striking
``and'' at the end of paragraph (2), by striking the period
at the end of paragraph (3) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(4) the foreign base company oil related income for the
taxable year (determined under subsection (f) and reduced as
provided in subsection (b)(5)).''.
(2) Foreign base company oil related income.--Section 954
is amended by inserting after subsection (e) the following
new subsection:
``(f) Foreign Base Company Oil Related Income.--For
purposes of this section, the term `foreign base company oil
related income' means foreign oil related income (within the
meaning of paragraphs (2) and (3) of section 907(c)) other
than income derived from a source within a foreign country in
connection with--
``(1) oil or gas which was extracted from an oil or gas
well located in such foreign country, or
``(2) oil, gas, or a primary product of oil or gas which is
sold by the foreign corporation or a related person for use
or consumption within such country or is loaded in such
country on a vessel or aircraft as fuel for such vessel or
aircraft.
Such term shall not include any foreign personal holding
company income (as defined in subsection (c)).''.
(3) Conforming amendments.--
(A) Section 952(c)(1)(B)(iii) is amended by redesignating
subclauses (III) and (IV) as subclauses (IV) and (V),
respectively, and by inserting after subclause (II) the
following new subclause:
``(III) foreign base company oil related income.''.
(B) Section 954(b) is amended--
(i) by striking ``and the foreign base company services
income'' in paragraph (5) and inserting ``the foreign base
company services income, and the foreign base company oil
related income'', and
(ii) by adding at the end the following new paragraph:
``(6) Foreign base company oil related income not treated
as another kind of foreign base company income.--Income of a
corporation which is foreign base company oil related income
shall not be considered foreign base company income of such
corporation under paragraph (2) or (3) of subsection (a).''.
(j) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to taxable years of foreign corporations beginning after
December 31, 2025, and to taxable years of United States
shareholders in which or with which such taxable years of
foreign corporations end.
(2) Regulatory authority and coordination with other
provisions.--The amendments made by subsections (b) and (c)
shall
[[Page S1114]]
apply to taxable years of foreign corporations beginning
after the date of the enactment of this Act, and to taxable
years of United States shareholders in which or with which
such taxable years of foreign corporations end.
(3) Repeal of reduced rate of tax; increase in deemed paid
credit.--The amendments made by subsections (d) and (f) shall
apply to taxable years beginning after December 31, 2025.
(4) Elimination of carryback of foreign tax credit.--The
amendment made by subsection (h) shall apply to credits
arising in taxable years beginning after December 31, 2025.
(k) No Inference Regarding Certain Modifications.--The
amendments made by subsections (b) and (c) 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 any taxable year beginning before the
taxable years to which such amendments apply.
SEC. 3. 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 Based on Taxable
Units.--
``(1) In general.--Subsection (d) (and the provisions of
this title referred to in paragraph (1) of such subsection)
shall be applied separately with respect to each country by
taking into account the aggregate income properly
attributable or otherwise allocable to a taxable unit of the
taxpayer which is a tax resident of (or, in the case of a
branch, is located in) such country.
``(2) Taxable units.--
``(A) In general.--Except as otherwise provided by the
Secretary, each item shall be attributable or otherwise
allocable to exactly 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) General taxable unit.--The person that is the
taxpayer and that is not otherwise described in a separate
clause of this subparagraph.
``(ii) Certain foreign corporations.--Each foreign
corporation with respect to which the taxpayer is a United
States shareholder.
``(iii) Interests in pass-through entities.--Each interest
held (directly or indirectly) by the taxpayer or any foreign
corporation referred to in clause (ii) in a pass-through
entity if such pass-through entity is a tax resident of a
country other than the country with respect to which such
taxpayer or foreign corporation (as the case may be) is a tax
resident.
``(iv) Branches.--Each branch (or portion thereof) the
activities of which are directly or indirectly carried on by
the taxpayer or any foreign corporation referred to in clause
(ii) and which give rise to a taxable presence in a country
other than the country with respect to which such taxpayer or
foreign corporation (as the case may be) is a tax resident.
``(3) Definitions and special rules.--For purposes of this
subsection--
``(A) Tax resident.--Except as otherwise provided by the
Secretary, the term `tax resident' means a person or entity
subject to tax under the tax law of a country as a resident.
If an entity is organized under the law of a country, or
resident in a country, that does not impose an income tax
with respect to such entities, such entity shall, except as
provided by the Secretary, be treated as subject to tax under
the tax law of such country for the purposes of the preceding
sentence.
``(B) Pass-through entity.--Except as otherwise provided by
the Secretary, the term `pass-through entity' includes any
partnership or other entity to the extent that income, gain,
deduction, or loss of the entity is taken into account in
determining the income or loss of a person that owns
(directly or indirectly) an interest in such entity.
``(C) Branch.--Except as otherwise provided by the
Secretary, the term `branch' means a taxable presence of a
tax resident in a country other than its country of residence
as determined under such other country's tax law. The
Secretary shall provide regulations or other guidance
applying such term to activities in a country that do not
give rise to a taxable presence.
``(D) Treatment of fiscally autonomous jurisdictions.--Any
fiscally autonomous jurisdiction shall be treated as a
separate country. Any possession of the United States shall
also be treated as a separate country.
``(E) Possession of the united states.--The term
`possession of the United States' means each of American
Samoa, the Commonwealth of the Northern Mariana Islands, the
Commonwealth of Puerto Rico, Guam, and the Virgin Islands.
``(4) Regulations.--The Secretary shall issue such
regulations or other guidance as may be necessary or
appropriate to carry out, or prevent avoidance of, the
purposes of this subsection, including regulations or other
guidance--
``(A) providing for the application of this subsection to
an entity or arrangement that is considered a tax resident of
more than one country or of no country,
``(B) providing for the application of this subsection to
hybrid entities or hybrid transactions (as such terms are
used for purposes of section 267A), pass-through entities,
passive foreign investment companies, trusts, and other
entities or arrangements not otherwise described in this
subsection, and
``(C) providing for the assignment of any item (including
foreign taxes and deductions) to taxable units, including in
the case of amounts not otherwise taken into account in
determining taxable income under this chapter.''.
(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)(iv)'', 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,
2025.
SEC. 4. LIMITATION ON DEDUCTION OF INTEREST BY DOMESTIC
CORPORATIONS WHICH ARE MEMBERS OF AN
INTERNATIONAL FINANCIAL REPORTING GROUP.
(a) In General.--Section 163 is amended by redesignating
subsection (n) as subsection (p) 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 110 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
$100,000,000.
``(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--
[[Page S1115]]
``(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.--Except as otherwise provided by the
Secretary in paragraph (7), this subsection and subsection
(o) shall apply to any partnership which is a member of any
international financial reporting group under rules similar
to the rules of section 163(j)(4).
``(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) Carryforward of Disallowed Interest.--
(1) In general.--Section 163 is amended by inserting after
subsection (n), as added by subsection (a), the following new
subsection:
``(o) Carryforward of Certain Disallowed Interest.--The
amount of any interest not allowed as a deduction for any
taxable year by reason of subsection (j)(1) or (n)(1)
(whichever imposes the lower limitation with respect to such
taxable year) shall be treated as interest (and as business
interest for purposes of subsection (j)(1)) paid or accrued
(and as interest expense reported as described in clause
(i)(I) or (ii)(I) of subsection (n)(3)(B), as the case may
be) in the succeeding taxable year. Interest paid or accrued
in any taxable year (determined without regard to the
preceding sentence) shall not be carried past the fifth
taxable year following such taxable year, determined by
treating interest as allowed as a deduction on a first-in,
first-out basis.''.
(2) Conforming amendments.--
(A) Section 163(j)(2) is amended to read as follows:
``(2) Carryforward cross-reference.--For carryforward
treatment, see subsection (o).''.
(B) Section 163(j)(4)(B)(i)(I) is amended by striking
``paragraph (2)'' and inserting ``subsection (o)''.
(C) Section 381(c)(20) is amended to read as follows:
``(20) Carryforward of disallowed interest.--The carryover
of disallowed interest described in section 163(o) to taxable
years ending after the date of distribution or transfer.''.
(D) Section 382(d)(3) is amended to read as follows:
``(3) Application to carryforward of disallowed interest.--
The term `pre-change loss' shall include any carryover of
disallowed interest described in section 163(o) under rules
similar to the rules of paragraph (1).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2025.
SEC. 5. 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 December 22, 2017, 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 December 22,
2017, 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 December
22, 2017.
``(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,
[[Page S1116]]
``(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 December 22, 2017, 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 December 23, 2017,''.
(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 December 22, 2017.
(d) Extension of Limitation on Assessment.--If the period
of limitation on assessment of tax resulting from the
amendments made by subsection (a) expires before the end of
the 3-year period beginning on the date of the enactment of
this Act, such assessment (to the extent attributable to such
amendments) may, nevertheless, be made before the close of
such 3-year period.
SEC. 6. 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.
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