Federal Employee Pension Fairness Act of 2015

Summary: Federal Employee Pension Fairness Act of 2015 Repeals provisions requiring federal employees, including foreign service employees,&nbsp;who began service after 2012&nbsp;to pay an increased contribution (4.4%)&nbsp;for funding their annuities under the Federal Employees Retirement System. Amends the Internal Revenue Code to: (1) treat certain foreign corporations managed and controlled primarily in the United States as domestic corporations for U.S. tax purposes; and (2)&nbsp;revise rules for the taxation of inverted corporations (i.e., U.S. corporations that acquire foreign companies to reincorporate in a foreign jurisdiction with lower income tax rates than the United States).

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal Employee Pension Fairness 
Act of 2015''.

SEC. 2. REPEAL OF FERS REVISED AND FURTHER REVISED ANNUITANT 
              CATEGORIES.

    (a) Repeal of Annuity Computation.--Section 8415 of title 5, United 
States Code, is amended by striking subsection (d).
    (b) Repeal of Annuitant Categories.--Section 8422(a)(3) of title 5, 
United States Code, is amended--
            (1) by striking ``other than revised annuity employees or 
        further revised annuity employees''; and
            (2) by striking subparagraphs (B) and (C).
    (c) Repeal of Government Contributions.--Section 8423(a) of title 
5, United States Code, is amended by striking paragraph (2) and 
inserting the following:
            ``(2) In determining any normal-cost percentage to be 
        applied under this subsection, amounts provided for under 
        section 8422 shall be taken into account.''.
    (d) Conforming Amendments.--Section 8401 of title 5, United States 
Code, is amended--
            (1) in paragraph (35)(B), by striking the semi-colon at the 
        end and inserting ``; and'';
            (2) in paragraph (36), by striking ``; and'' at the end and 
        inserting a period; and
            (3) by striking paragraphs (37) and (38).
    (e) Application.--
            (1) In general.--The amendments made by this section shall 
        apply on the first day of the first pay period beginning after 
        the date of enactment of this Act.
            (2) Treatment of former revised or further revised 
        annuitants.--Any individual who, as of the date of enactment of 
        this Act, was a revised annuity employee or a further revised 
        annuity employee (but for the amendments made by this section) 
        shall be deemed to be an employee or Member (as those terms are 
        defined in section 8401 of title 5, United States Code) for 
        purposes of chapter 84 of such title.

SEC. 3. REPEAL OF FOREIGN SERVICE REVISED OR FURTHER REVISED ANNUITY 
              PARTICIPANT CATEGORIES.

    (a) Repeal of Annuitant Categories.--Section 856(a) of the Foreign 
Service Act of 1980 (22 U.S.C. 4071e(a)) is amended by striking 
paragraph (2) and inserting the following:
    ``(2) The applicable percentage for a participant other than a 
revised annuity participant or a further revised annuity participant 
shall be as follows:


                            ``7.5   Before January 1, 1999.
                             7.75   January 1, 1999, to December 31,
                                     1999.
                              7.9   January 1, 2000, to December 31,
                                     2000.
                             7.55   After January 11, 2003.''.
 

    (b) Government Contribution.--Section 857 of the Foreign Service 
Act of 1980 (22 U.S.C. 4071f) is amended by striking subsection (c).
    (c) Conforming Amendments.--Section 852 of such Act is amended (22 
U.S.C. 4071a)--
            (1) by striking paragraphs (7) and (8); and
            (2) by redesignating paragraphs (9), (10), and (11) as 
        paragraphs (7), (8), and (9), respectively.
    (d) Application.--
            (1) In general.--The amendments made by this section shall 
        apply on the first day of the first pay period beginning after 
        the date of enactment of this Act.
            (2) Treatment of former revised or further revised 
        annuitants.--Any individual who, as of the date of enactment of 
        this Act, was a revised annuity participant or a further 
        revised annuity participant (but for the amendments made by 
        this section) shall be deemed to be a participant (as that term 
        is defined in section 852 of the Foreign Service Act of 1980 
        (22 U.S.C. 4071a)) for purposes of the Foreign Service pension 
        system.

SEC. 4. 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, whether or not regulations 
are issued under section 7701(p)(3) of the Internal Revenue Code of 
1986, as added by this section.

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