To amend the Internal Revenue Code of 1986 to reduce international tax avoidance and restore a level playing field for American businesses.

Summary: International Tax Competitiveness Act of 2010 - Amends the Internal Revenue Code to: (1) treat foreign corporations that are managed, directly or indirectly, within the United States as domestic corporations for U.S. tax purposes; (2) make certain royalty income and income from intangibles received from a controlled foreign corporation subject to U.S. taxation; (3) repeal tax rules exempting foreign source income attributable to the active conduct of a foreign trade or business from withholding of tax requirements; and (4) revise the tax treatment of property other than stock (i.e., boot) received in connection with a corporate reorganization to provide that such property shall be treated as a taxable dividend.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``International Tax Competitiveness 
Act of 2010''.

SEC. 2. 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 
(relating to definitions) 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.
                    ``(C) Exception from gross assets test.--
                Subparagraph (A)(ii) shall not apply to a corporation 
                which is a controlled foreign corporation (as defined 
                in section 957) and which is a member of an affiliated 
                group (as defined section 1504, but determined without 
                regard to section 1504(b)(3)) the common parent of 
                which--
                            ``(i) is a domestic corporation (determined 
                        without regard to this subsection), and
                            ``(ii) has substantial assets (other than 
                        cash and cash equivalents and other than stock 
                        of foreign subsidiaries) held for use in the 
                        active conduct of a trade or business in the 
                        United States.
            ``(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 
                        as sets 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. 3. CURRENT TAXATION OF ROYALTIES AND OTHER INCOME FROM INTANGIBLES 
              RECEIVED FROM A CONTROLLED FOREIGN CORPORATION.

    (a) Repeal of Look-Thru Rule for Royalties Received From Controlled 
Foreign Corporations.--Paragraph (6) of section 954(c) of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking ``rents, and royalties'' in subparagraph 
        (A) and inserting ``and rents'', and
            (2) by striking ``, rent, or royalty'' both places it 
        appears in subparagraph (B) and inserting ``or rent''.
    (b) Entities Not Permitted To Be Disregarded in Determining 
Royalties.--Subsection (c) of section 954 of such Code is amended by 
adding at the end the following new paragraph:
            ``(7) All royalties taken into account.--For purposes of 
        determining the foreign personal holding company income which 
        consists of royalties, this subsection shall be applied without 
        regard to any election to disregard any entity which would be 
        taken into account for Federal income tax purposes but for such 
        election.''.
    (c) Certain Other Income Derived From United States Intangibles 
Taken Into Account as Subpart F Income.--Subsection (d) of section 954 
of such Code is amended by adding at the end the following new 
paragraph:
            ``(5) Special rule for certain products produced pursuant 
        to intangibles made available by united states persons.--For 
        purposes of this subsection, personal property shall be treated 
        as having been purchased from a related person if any 
        intangible property (within the meaning of section 
        936(h)(3)(B)) made available to a controlled foreign 
        corporation, directly or indirectly, by a related person which 
        is a United States person contributes, directly or indirectly, 
        to the production of such personal property by the controlled 
        foreign corporation. The preceding sentence shall not apply to 
        any personal property produced directly by the controlled 
        foreign corporation, without regard to any election to 
        disregard any entity which would be taken into account for 
        Federal income tax purposes but for such election.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2010, and to taxable years of United States shareholders within 
which or with which such tax years of such foreign corporations end.

SEC. 4. REPEAL OF SPECIAL RULES FOR INTEREST AND DIVIDENDS RECEIVED 
              FROM PERSONS MEETING THE 80-PERCENT FOREIGN BUSINESS 
              REQUIREMENTS.

    (a) Repeal of Special Rules for Interest as United States Source.--
Paragraph (1) of section 861(a) of the Internal Revenue Code of 1986 is 
amended by striking subparagraph (A) and by redesignating subparagraphs 
(B) and (C) as subparagraphs (A) and (B), respectively.
    (b) Repeal of Exception To Tax on Dividends Received by Nonresident 
Aliens and Foreign Corporations.--Paragraph (2) of section 871(i) of 
such Code is amended by striking subparagraph (B) and by redesignating 
subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively.
    (c) Conforming Amendments.--
            (1) Section 861 of such Code is amended by striking 
        subsection (c) and by redesignating subsections (d), (e), and 
        (f) as subsections (c), (d), and (e), respectively.
            (2) Paragraph (9) of section 904(h) of such Code is amended 
        to read as follows:
            ``(9) Treatment of certain domestic corporations.--In the 
        case of any dividend treated as not from sources with the 
        United States under section 861(a)(2)(A), the corporation 
        paying such dividend shall be treated for purposes of this 
        subsection as a United States-owned foreign corporation.''.
            (3) Subsection (c) of section 2104 of such Code is amended 
        in the last sentence by striking ``or to a debt obligation of a 
        domestic corporation'' and all that follows and inserting a 
        period.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2010.

SEC. 5. TAXATION OF BOOT RECEIVED IN CERTAIN REORGANIZATIONS INVOLVING 
              FOREIGN CORPORATIONS.

    (a) In General.--Paragraph (2) of section 356(a) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(2) Treatment as dividend.--
                    ``(A) In general.--The sum of such money and the 
                fair market value of such other property received by 
                the taxpayer in the exchange shall be treated as a 
                dividend to the extent it would be so treated if such 
                money and other property had been distributed to the 
                taxpayer by the corporation immediately after the 
                exchange in redemption of stock having a fair market 
                value equal to the amount of such sum.
                    ``(B) Coordination with paragraph (1).--Gain shall 
                be recognized under paragraph (1) only to the extent 
                the amount which would be recognized under such 
                paragraph without regard to this paragraph exceeds the 
                amount treated as a dividend under subparagraph (A).
                    ``(C) Regulations.--The Secretary shall prescribe 
                such regulations as may be necessary to carry out the 
                purposes of this paragraph, including regulations to 
                address interactions between this subchapter and 
                subchapter N.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to exchanges after December 31, 2010.