II 

116TH CONGRESS 

1ST SESSION S. 780 

To amend the Internal Revenue Code of 1986 to provide for current year 

inclusion of net CFC tested income, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 13, 2019 

Mr. WHITEHOUSE (for himself and Mr. VAN HOLLEN) 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 provide 

for current year inclusion of net CFC tested income, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE, ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘No Tax Breaks for Outsourcing Act’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 

9 to, or repeal of, a section or other provision, the reference 


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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 

3 (c) TABLE OF CONTENTS.—The table of contents of 

4 this Act is as follows: 

Sec. 1. Short title, etc. 

Sec. 2. Current year inclusion of net CFC tested income. 

Sec. 3. Limitation on deduction of interest by domestic corporations which are 

members of an international financial reporting group. 

Sec. 4. Modifications to rules relating to inverted corporations. 

Sec. 5. Treatment of foreign corporations managed and controlled in the United 

States as domestic corporations. 

5 SEC. 2. CURRENT YEAR INCLUSION OF NET CFC TESTED IN6 COME. 

7 (a) REPEAL OF TAX-FREE DEEMED RETURN ON IN8 VESTMENTS.— 

9 (1) IN GENERAL.—Section 951A(a) is amended 

10 by striking ‘‘global intangible low-taxed income’’ and 

11 inserting ‘‘net CFC tested income’’. 

12 (2) CONFORMING AMENDMENTS.— 

13 (A) Section 951A is amended by striking 

14 subsections (b) and (d). 

15 (B) Section 951A(e)(1) is amended by 

16 striking ‘‘subsections (b), (c)(1)(A), and’’ and 

17 inserting ‘‘subsections (c)(1)(A) and’’. 

18 (C) Section 951A(f) is amended to read as 

19 follows: 

20 ‘‘(f) TREATMENT AS SUBPART F INCOME FOR CER21 TAIN PURPOSES.— 


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1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), any net CFC tested income included in 

3 gross income under subsection (a) shall be treated in 

4 the same manner as an amount included under sec5 tion 951(a)(1)(A) for purposes of applying sections 

6 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 

7 961, 962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 

8 1248(d)(1), 6501(e)(1)(C), 6654(d)(2)(D), and 

9 6655(e)(4). 

10 ‘‘(2) EXCEPTION.—The Secretary shall provide 

11 rules for the application of paragraph (1) to other 

12 provisions of this title in any case in which the de13 termination of subpart F income is required to be 

14 made at the level of the controlled foreign corpora15 tion.’’. 

16 (D) Section 960(d)(2)(A) is amended by 

17 striking ‘‘global intangible low-taxed income (as 

18 defined in section 951A(b))’’ and inserting ‘‘net 

19 CFC tested income (as defined in section 

20 951A(c))’’. 

21 (b) REPEAL OF REDUCED RATE OF TAX ON NET

22 CFC TESTED INCOME.— 

23 (1) IN GENERAL.—Part VIII of subchapter B 

24 of chapter 1 is amended by striking section 250 (and 


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1 by striking the item relating to such section in the 

2 table of sections of such part). 

3 (2) CONFORMING AMENDMENTS.— 

4 (A) Section 59A(c)(4)(B)(i) is amended by 

5 striking ‘‘section 172, 245A, or 250’’ and in6 serting ‘‘section 172 or 245A’’. 

7 (B) Section 172(d) is amended by striking 

8 paragraph (9). 

9 (C) Section 246(b)(1) is amended— 

10 (i) by striking ‘‘subsection (a) and (b) 

11 of section 245, and section 250’’ and in12 serting ‘‘and subsection (a) and (b) of sec13 tion 245’’; and 

14 (ii) by striking ‘‘subsection (a) and 

15 (b) of section 245, and 250’’ and inserting 

16 ‘‘and subsection (a) and (b) of section 

17 245’’. 

18 (D) Section 469(i)(3)(F)(iii) is amended 

19 by striking ‘‘222, and 250’’ and inserting ‘‘and 

20 222’’. 

21 (c) NET CFC TESTED INCOME DETERMINED WITH22 OUT REGARD TO HIGH TAX FOREIGN INCOME.—Section 

23 951A(c)(2)(A)(i) is amended by redesignating subclauses 

24 (IV) and (V) as subclauses (V) and (VI), respectively, and 


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1 by inserting after subclause (III) the following new sub2 clause: 

3 ‘‘(IV) any item of income subject 

4 to an effective rate of income tax im5 posed by a foreign country greater 

6 than the maximum rate of tax speci7 fied in section 11,’’. 

8 (d) REPEAL OF EXCLUSION OF FOREIGN OIL AND

9 GAS EXTRACTION INCOME FROM THE DETERMINATION

10 OF TESTED INCOME.—Section 951A(c)(2)(A)(i), as 

11 amended by subsection (c) is amended— 

12 (1) by adding ‘‘and’’ at the end of subclause 

13 (IV); 

14 (2) by striking ‘‘and’’ at the end of subclause 

15 (V) and inserting ‘‘over’’; and 

16 (3) by striking subclause (VI). 

17 (e) INCREASE IN DEEMED PAID CREDIT FOR TAXES

18 PROPERLY ATTRIBUTABLE TO TESTED INCOME.— 

19 (1) IN GENERAL.—Section 960(d) is amended 

20 by striking ‘‘80 percent of’’. 

21 (2) CONFORMING AMENDMENT.—Section 78 is 

22 amended by striking ‘‘(determined without regard to 

23 the phrase ‘‘80 percent of’’ in subsection (d)(1) 

24 thereof)’’. 

25 (f) EFFECTIVE DATE.— 


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1 (1) IN GENERAL.—Except as otherwise pro2 vided in this subsection, the amendments made by 

3 this section shall apply to taxable years of foreign 

4 corporations beginning after December 31, 2018, 

5 and to taxable years of United States shareholders 

6 in which or with which such taxable years of foreign 

7 corporations end. 

8 (2) REPEAL OF REDUCED RATE OF TAX; IN9 CREASE IN DEEMED PAID CREDIT.—The amend10 ments made by subsection (b) and (e) shall apply to 

11 taxable years beginning after December 31, 2018. 

12 SEC. 3. LIMITATION ON DEDUCTION OF INTEREST BY DO13 MESTIC CORPORATIONS WHICH ARE MEM14 BERS OF AN INTERNATIONAL FINANCIAL RE15 PORTING GROUP. 

16 (a) IN GENERAL.—Section 163 is amended by redes17 ignating subsection (n) as subsection (p) and by inserting 

18 after subsection (m) the following new subsection: 

19 ‘‘(n) LIMITATION ON DEDUCTION OF INTEREST BY

20 DOMESTIC CORPORATIONS IN INTERNATIONAL FINAN21 CIAL REPORTING GROUPS.— 

22 ‘‘(1) IN GENERAL.—In the case of any domestic 

23 corporation which is a member of any international 

24 financial reporting group, the deduction under this 


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1 chapter for interest paid or accrued during the tax2 able year shall not exceed the sum of— 

3 ‘‘(A) the allowable percentage of 110 per4 cent of the excess (if any) of— 

5 ‘‘(i) the amount of such interest so 

6 paid or accrued, over 

7 ‘‘(ii) the amount described in subpara8 graph (B), plus 

9 ‘‘(B) the amount of interest includible in 

10 gross income of such corporation for such tax11 able year. 

12 ‘‘(2) INTERNATIONAL FINANCIAL REPORTING

13 GROUP.— 

14 ‘‘(A) For purposes of this subsection, the 

15 term ‘international financial reporting group’ 

16 means, with respect to any reporting year, any 

17 group of entities which— 

18 ‘‘(i) includes— 

19 ‘‘(I) at least one foreign corpora20 tion engaged in a trade or business 

21 within the United States, or 

22 ‘‘(II) at least one domestic cor23 poration and one foreign corporation, 

24 ‘‘(ii) prepares consolidated financial 

25 statements with respect to such year, and 


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1 ‘‘(iii) reports in such statements aver2 age annual gross receipts (determined in 

3 the aggregate with respect to all entities 

4 which are part of such group) for the 3-re5 porting-year period ending with such re6 porting year in excess of $100,000,000. 

7 ‘‘(B) RULES RELATING TO DETERMINA8 TION OF AVERAGE GROSS RECEIPTS.—For pur9 poses of subparagraph (A)(iii), rules similar to 

10 the rules of section 448(c)(3) shall apply. 

11 ‘‘(3) ALLOWABLE PERCENTAGE.—For purposes 

12 of this subsection— 

13 ‘‘(A) IN GENERAL.—The term ‘allowable 

14 percentage’ means, with respect to any domestic 

15 corporation for any taxable year, the ratio (ex16 pressed as a percentage and not greater than 

17 100 percent) of— 

18 ‘‘(i) such corporation’s allocable share 

19 of the international financial reporting 

20 group’s reported net interest expense for 

21 the reporting year of such group which 

22 ends in or with such taxable year of such 

23 corporation, over 


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1 ‘‘(ii) such corporation’s reported net 

2 interest expense for such reporting year of 

3 such group. 

4 ‘‘(B) REPORTED NET INTEREST EX5 PENSE.—The term ‘reported net interest ex6 pense’ means— 

7 ‘‘(i) with respect to any international 

8 financial reporting group for any reporting 

9 year, the excess of— 

10 ‘‘(I) the aggregate amount of in11 terest expense reported in such 

12 group’s consolidated financial state13 ments for such taxable year, over 

14 ‘‘(II) the aggregate amount of in15 terest income reported in such group’s 

16 consolidated financial statements for 

17 such taxable year, and 

18 ‘‘(ii) with respect to any domestic cor19 poration for any reporting year, the excess 

20 of— 

21 ‘‘(I) the amount of interest ex22 pense of such corporation reported in 

23 the books and records of the inter24 national financial reporting group 

25 which are used in preparing such 


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1 group’s consolidated financial state2 ments for such taxable year, over 

3 ‘‘(II) the amount of interest in4 come of such corporation reported in 

5 such books and records. 

6 ‘‘(C) ALLOCABLE SHARE OF REPORTED

7 NET INTEREST EXPENSE.—With respect to any 

8 domestic corporation which is a member of any 

9 international financial reporting group, such 

10 corporation’s allocable share of such group’s re11 ported net interest expense for any reporting 

12 year is the portion of such expense which bears 

13 the same ratio to such expense as— 

14 ‘‘(i) the EBITDA of such corporation 

15 for such reporting year, bears to 

16 ‘‘(ii) the EBITDA of such group for 

17 such reporting year. 

18 ‘‘(D) EBITDA.— 

19 ‘‘(i) IN GENERAL.—The term 

20 ‘EBITDA’ means, with respect to any re21 porting year, earnings before interest, 

22 taxes, depreciation, and amortization— 

23 ‘‘(I) as determined in the inter24 national financial reporting group’s 


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1 consolidated financial statements for 

2 such year, or 

3 ‘‘(II) for purposes of subpara4 graph (A)(i), as determined in the 

5 books and records of the international 

6 financial reporting group which are 

7 used in preparing such statements if 

8 not determined in such statements. 

9 ‘‘(ii) TREATMENT OF DISREGARDED

10 ENTITIES.—The EBITDA of any domestic 

11 corporation shall not fail to include the 

12 EBITDA of any entity which is dis13 regarded for purposes of this chapter. 

14 ‘‘(iii) TREATMENT OF INTRA-GROUP

15 DISTRIBUTIONS.—The EBITDA of any do16 mestic corporation shall be determined 

17 without regard to any distribution received 

18 by such corporation from any other mem19 ber of the international financial reporting 

20 group. 

21 ‘‘(E) SPECIAL RULES FOR NON-POSITIVE

22 EBITDA.— 

23 ‘‘(i) NON-POSITIVE GROUP EBITDA.— 

24 In the case of any international financial 

25 reporting group the EBITDA of which is 


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1 zero or less, paragraph (1) shall not apply 

2 to any member of such group the EBITDA 

3 of which is above zero. 

4 ‘‘(ii) NON-POSITIVE ENTITY

5 EBITDA.—In the case of any group mem6 ber the EBITDA of which is zero or less, 

7 paragraph (1) shall be applied without re8 gard to subparagraph (A) thereof. 

9 ‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 

10 For purposes of this subsection, the term ‘consoli11 dated financial statement’ means any consolidated 

12 financial statement described in paragraph (2)(A)(ii) 

13 if such statement is— 

14 ‘‘(A) a financial statement which is cer15 tified as being prepared in accordance with gen16 erally accepted accounting principles, inter17 national financial reporting standards, or any 

18 other comparable method of accounting identi19 fied by the Secretary, and which is— 

20 ‘‘(i) a 10–K (or successor form), or 

21 annual statement to shareholders, required 

22 to be filed with the United States Securi23 ties and Exchange Commission, 

24 ‘‘(ii) an audited financial statement 

25 which is used for— 


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1 ‘‘(I) credit purposes, 

2 ‘‘(II) reporting to shareholders, 

3 partners, or other proprietors, or to 

4 beneficiaries, or 

5 ‘‘(III) any other substantial 

6 nontax purpose, 

7 but only if there is no statement described 

8 in clause (i), or 

9 ‘‘(iii) filed with any other Federal or 

10 State agency for nontax purposes, but only 

11 if there is no statement described in clause 

12 (i) or (ii), or 

13 ‘‘(B) a financial statement which— 

14 ‘‘(i) is used for a purpose described in 

15 subclause (I), (II), or (III) of subpara16 graph (A)(ii), or 

17 ‘‘(ii) filed with any regulatory or gov18 ernmental body (whether domestic or for19 eign) specified by the Secretary, 

20 but only if there is no statement described in 

21 subparagraph (A). 

22 ‘‘(5) REPORTING YEAR.—For purposes of this 

23 subsection, the term ‘reporting year’ means, with re24 spect to any international financial reporting group, 


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1 the year with respect to which the consolidated fi2 nancial statements are prepared. 

3 ‘‘(6) APPLICATION TO CERTAIN ENTITIES.— 

4 ‘‘(A) PARTNERSHIPS.—Except as other5 wise provided by the Secretary in paragraph 

6 (7), this subsection and subsection (o) shall 

7 apply to any partnership which is a member of 

8 any international financial reporting group 

9 under rules similar to the rules of section 

10 163(j)(4). 

11 ‘‘(B) FOREIGN CORPORATIONS ENGAGED

12 IN TRADE OR BUSINESS WITHIN THE UNITED

13 STATES.—Except as otherwise provided by the 

14 Secretary in paragraph (7), any deduction for 

15 interest paid or accrued by a foreign corpora16 tion engaged in a trade or business within the 

17 United States shall be limited in a manner con18 sistent with the principles of this subsection. 

19 ‘‘(C) CONSOLIDATED GROUPS.—For pur20 poses of this subsection, the members of any 

21 group that file (or are required to file) a con22 solidated return with respect to the tax imposed 

23 by chapter 1 for a taxable year shall be treated 

24 as a single corporation. 


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1 ‘‘(7) REGULATIONS.—The Secretary may issue 

2 such regulations or other guidance as are necessary 

3 or appropriate to carry out the purposes of this sub4 section.’’. 

5 (b) CARRYFORWARD OF DISALLOWED INTEREST.— 

6 (1) IN GENERAL.—Section 163 is amended by 

7 inserting after subsection (n), as added by sub8 section (a), the following new subsection: 

9 ‘‘(o) CARRYFORWARD OF CERTAIN DISALLOWED IN10 TEREST.—The amount of any interest not allowed as a 

11 deduction for any taxable year by reason of subsection 

12 (j)(1) or (n)(1) (whichever imposes the lower limitation 

13 with respect to such taxable year) shall be treated as inter14 est (and as business interest for purposes of subsection 

15 (j)(1)) paid or accrued in the succeeding taxable year. In16 terest paid or accrued in any taxable year (determined 

17 without regard to the preceding sentence) shall not be car18 ried past the fifth taxable year following such taxable year, 

19 determined by treating interest as allowed as a deduction 

20 on a first-in, first-out basis.’’. 

21 (2) CONFORMING AMENDMENTS.— 

22 (A) Section 163(j)(2) is amended to read 

23 as follows: 

24 ‘‘(2) CARRYFORWARD CROSS-REFERENCE.—For 

25 carryforward treatment, see subsection (o).’’. 


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1 (B) Section 163(j)(4)(B)(i)(I) is amended 

2 by striking ‘‘paragraph (2)’’ and inserting ‘‘sub3 section (o)’’. 

4 (C) Section 381(c)(20) is amended to read 

5 as follows: 

6 ‘‘(20) CARRYFORWARD OF DISALLOWED INTER7 EST.—The carryover of disallowed interest described 

8 in section 163(o) to taxable years ending after the 

9 date of distribution or transfer.’’. 

10 (D) Section 382(d)(3) is amended to read 

11 as follows: 

12 ‘‘(3) APPLICATION TO CARRYFORWARD OF DIS13 ALLOWED INTEREST.—The term ‘pre-change loss’ 

14 shall include any carryover of disallowed interest de15 scribed in section 163(o) under rules similar to the 

16 rules of paragraph (1).’’. 

17 (c) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to taxable years beginning after 

19 December 31, 2018. 

20 SEC. 4. MODIFICATIONS TO RULES RELATING TO IN21 VERTED CORPORATIONS. 

22 (a) IN GENERAL.—Subsection (b) of section 7874 is 

23 amended to read as follows: 

24 ‘‘(b) INVERTED CORPORATIONS TREATED AS DO25 MESTIC CORPORATIONS.— 


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1 ‘‘(1) IN GENERAL.—Notwithstanding section 

2 7701(a)(4), a foreign corporation shall be treated for 

3 purposes of this title as a domestic corporation if— 

4 ‘‘(A) such corporation would be a surro5 gate foreign corporation if subsection (a)(2) 

6 were applied by substituting ‘80 percent’ for 

7 ‘60 percent’, or 

8 ‘‘(B) such corporation is an inverted do9 mestic corporation. 

10 ‘‘(2) INVERTED DOMESTIC CORPORATION.—For 

11 purposes of this subsection, a foreign corporation 

12 shall be treated as an inverted domestic corporation 

13 if, pursuant to a plan (or a series of related trans14 actions)— 

15 ‘‘(A) the entity completes after December 

16 22, 2017, the direct or indirect acquisition of— 

17 ‘‘(i) substantially all of the properties 

18 held directly or indirectly by a domestic 

19 corporation, or 

20 ‘‘(ii) substantially all of the assets of, 

21 or substantially all of the properties consti22 tuting a trade or business of, a domestic 

23 partnership, and 

24 ‘‘(B) after the acquisition, either— 


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1 ‘‘(i) more than 50 percent of the stock 

2 (by vote or value) of the entity is held— 

3 ‘‘(I) in the case of an acquisition 

4 with respect to a domestic corpora5 tion, by former shareholders of the 

6 domestic corporation by reason of 

7 holding stock in the domestic corpora8 tion, or 

9 ‘‘(II) in the case of an acquisition 

10 with respect to a domestic partner11 ship, by former partners of the do12 mestic partnership by reason of hold13 ing a capital or profits interest in the 

14 domestic partnership, or 

15 ‘‘(ii) the management and control of 

16 the expanded affiliated group which in17 cludes the entity occurs, directly or indi18 rectly, primarily within the United States, 

19 and such expanded affiliated group has 

20 significant domestic business activities. 

21 ‘‘(3) EXCEPTION FOR CORPORATIONS WITH

22 SUBSTANTIAL BUSINESS ACTIVITIES IN FOREIGN

23 COUNTRY OF ORGANIZATION.—A foreign corporation 

24 described in paragraph (2) shall not be treated as an 

25 inverted domestic corporation if after the acquisition 


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1 the expanded affiliated group which includes the en2 tity has substantial business activities in the foreign 

3 country in which or under the law of which the enti4 ty is created or organized when compared to the 

5 total business activities of such expanded affiliated 

6 group. For purposes of subsection (a)(2)(B)(iii) and 

7 the preceding sentence, the term ‘substantial busi8 ness activities’ shall have the meaning given such 

9 term under regulations in effect on December 22, 

10 2017, except that the Secretary may issue regula11 tions increasing the threshold percent in any of the 

12 tests under such regulations for determining if busi13 ness activities constitute substantial business activi14 ties for purposes of this paragraph. 

15 ‘‘(4) MANAGEMENT AND CONTROL.—For pur16 poses of paragraph (2)(B)(ii)— 

17 ‘‘(A) IN GENERAL.—The Secretary shall 

18 prescribe regulations for purposes of deter19 mining cases in which the management and 

20 control of an expanded affiliated group is to be 

21 treated as occurring, directly or indirectly, pri22 marily within the United States. The regula23 tions prescribed under the preceding sentence 

24 shall apply to periods after December 22, 2017. 


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1 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

2 MANAGEMENT.—Such regulations shall provide 

3 that the management and control of an ex4 panded affiliated group shall be treated as oc5 curring, directly or indirectly, primarily within 

6 the United States if substantially all of the ex7 ecutive officers and senior management of the 

8 expanded affiliated group who exercise day-to9 day responsibility for making decisions involving 

10 strategic, financial, and operational policies of 

11 the expanded affiliated group are based or pri12 marily located within the United States. Indi13 viduals who in fact exercise such day-to-day re14 sponsibilities shall be treated as executive offi15 cers and senior management regardless of their 

16 title. 

17 ‘‘(5) SIGNIFICANT DOMESTIC BUSINESS ACTIVI18 TIES.—For purposes of paragraph (2)(B)(ii), an ex19 panded affiliated group has significant domestic 

20 business activities if at least 25 percent of— 

21 ‘‘(A) the employees of the group are based 

22 in the United States, 

23 ‘‘(B) the employee compensation incurred 

24 by the group is incurred with respect to employ25 ees based in the United States, 


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1 ‘‘(C) the assets of the group are located in 

2 the United States, or 

3 ‘‘(D) the income of the group is derived in 

4 the United States, 

5 determined in the same manner as such determina6 tions are made for purposes of determining substan7 tial business activities under regulations referred to 

8 in paragraph (3) as in effect on December 22, 2017, 

9 but applied by treating all references in such regula10 tions to ‘foreign country’ and ‘relevant foreign coun11 try’ as references to ‘the United States’. The Sec12 retary may issue regulations decreasing the thresh13 old percent in any of the tests under such regula14 tions for determining if business activities constitute 

15 significant domestic business activities for purposes 

16 of this paragraph.’’. 

17 (b) CONFORMING AMENDMENTS.— 

18 (1) Clause (i) of section 7874(a)(2)(B) is 

19 amended by striking ‘‘after March 4, 2003,’’ and in20 serting ‘‘after March 4, 2003, and before December 

21 23, 2017,’’. 

22 (2) Subsection (c) of section 7874 is amend23 ed— 

24 (A) in paragraph (2)— 


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1 (i) by striking ‘‘subsection 

2 (a)(2)(B)(ii)’’ and inserting ‘‘subsections 

3 (a)(2)(B)(ii) and (b)(2)(B)(i)’’; and 

4 (ii) by inserting ‘‘or (b)(2)(A)’’ after 

5 ‘‘(a)(2)(B)(i)’’ in subparagraph (B); 

6 (B) in paragraph (3), by inserting ‘‘or 

7 (b)(2)(B)(i), as the case may be,’’ after 

8 ‘‘(a)(2)(B)(ii)’’; 

9 (C) in paragraph (5), by striking ‘‘sub10 section (a)(2)(B)(ii)’’ and inserting ‘‘sub11 sections (a)(2)(B)(ii) and (b)(2)(B)(i)’’; and 

12 (D) in paragraph (6), by inserting ‘‘or in13 verted domestic corporation, as the case may 

14 be,’’ after ‘‘surrogate foreign corporation’’. 

15 (c) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to taxable years ending after De17 cember 22, 2017. 

18 SEC. 5. TREATMENT OF FOREIGN CORPORATIONS MAN19 AGED AND CONTROLLED IN THE UNITED 

20 STATES AS DOMESTIC CORPORATIONS. 

21 (a) IN GENERAL.—Section 7701 is amended by re22 designating subsection (p) as subsection (q) and by insert23 ing after subsection (o) the following new subsection: 


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1 ‘‘(p) CERTAIN CORPORATIONS MANAGED AND CON2 TROLLED IN THE UNITED STATES TREATED AS DOMES3 TIC FOR INCOME TAX.— 

4 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

5 (a)(4), in the case of a corporation described in 

6 paragraph (2) if— 

7 ‘‘(A) the corporation would not otherwise 

8 be treated as a domestic corporation for pur9 poses of this title, but 

10 ‘‘(B) the management and control of the 

11 corporation occurs, directly or indirectly, pri12 marily within the United States, 

13 then, solely for purposes of chapter 1 (and any other 

14 provision of this title relating to chapter 1), the cor15 poration shall be treated as a domestic corporation. 

16 ‘‘(2) CORPORATION DESCRIBED.— 

17 ‘‘(A) IN GENERAL.—A corporation is de18 scribed in this paragraph if— 

19 ‘‘(i) the stock of such corporation is 

20 regularly traded on an established securi21 ties market, or 

22 ‘‘(ii) the aggregate gross assets of 

23 such corporation (or any predecessor there24 of), including assets under management 

25 for investors, whether held directly or indiVerDate Sep 11 2014 04:05 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 E:\BILLS\S780.IS S780

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1 rectly, at any time during the taxable year 

2 or any preceding taxable year is 

3 $50,000,000 or more. 

4 ‘‘(B) GENERAL EXCEPTION.—A corpora5 tion shall not be treated as described in this 

6 paragraph if— 

7 ‘‘(i) such corporation was treated as a 

8 corporation described in this paragraph in 

9 a preceding taxable year, 

10 ‘‘(ii) such corporation— 

11 ‘‘(I) is not regularly traded on an 

12 established securities market, and 

13 ‘‘(II) has, and is reasonably ex14 pected to continue to have, aggregate 

15 gross assets (including assets under 

16 management for investors, whether 

17 held directly or indirectly) of less than 

18 $50,000,000, and 

19 ‘‘(iii) the Secretary grants a waiver to 

20 such corporation under this subparagraph. 

21 ‘‘(3) MANAGEMENT AND CONTROL.— 

22 ‘‘(A) IN GENERAL.—The Secretary shall 

23 prescribe regulations for purposes of deter24 mining cases in which the management and 


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1 control of a corporation is to be treated as oc2 curring primarily within the United States. 

3 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

4 MANAGEMENT.—Such regulations shall provide 

5 that— 

6 ‘‘(i) the management and control of a 

7 corporation shall be treated as occurring 

8 primarily within the United States if sub9 stantially all of the executive officers and 

10 senior management of the corporation who 

11 exercise day-to-day responsibility for mak12 ing decisions involving strategic, financial, 

13 and operational policies of the corporation 

14 are located primarily within the United 

15 States, and 

16 ‘‘(ii) individuals who are not executive 

17 officers and senior management of the cor18 poration (including individuals who are of19 ficers or employees of other corporations in 

20 the same chain of corporations as the cor21 poration) shall be treated as executive offi22 cers and senior management if such indi23 viduals exercise the day-to-day responsibil24 ities of the corporation described in clause 

25 (i). 


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26 

•S 780 IS

1 ‘‘(C) CORPORATIONS PRIMARILY HOLDING

2 INVESTMENT ASSETS.—Such regulations shall 

3 also provide that the management and control 

4 of a corporation shall be treated as occurring 

5 primarily within the United States if— 

6 ‘‘(i) the assets of such corporation (di7 rectly or indirectly) consist primarily of as8 sets being managed on behalf of investors, 

9 and 

10 ‘‘(ii) decisions about how to invest the 

11 assets are made in the United States.’’. 

12 (b) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to taxable years beginning on or 

14 after the date which is 2 years after the date of the enact15 ment of this Act, whether or not regulations are issued 

16 under section 7701(p)(3) of the Internal Revenue Code 

17 of 1986, as added by this section. 

Æ 


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