II 

115TH CONGRESS 

1ST SESSION S. 863 

To amend the Internal Revenue Code of 1986 to provide for the taxation 

of income of controlled foreign corporations attributable to imported property. 

IN THE SENATE OF THE UNITED STATES 

APRIL 6 (legislative day, APRIL 4), 2017 

Mr. WHITEHOUSE 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 the taxation of income of controlled foreign corporations attributable to imported property. 

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. 

4 This Act may be cited as the ‘‘Offshoring Prevention 

5 Act’’. 

6 SEC. 2. TAXATION OF INCOME OF CONTROLLED FOREIGN 

7 CORPORATIONS ATTRIBUTABLE TO IM8 PORTED PROPERTY. 

9 (a) GENERAL RULE.—Subsection (a) of section 954 

10 of the Internal Revenue Code of 1986 is amended by strikVerDate Sep 11 2014 01:59 Apr 15, 2017 Jkt 069200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S863.IS S863

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1 ing the period at the end of paragraph (5) and inserting 

2 ‘‘, and’’, by redesignating paragraph (5) as paragraph (4), 

3 and by adding at the end the following new paragraph: 

4 ‘‘(5) imported property income for the taxable 

5 year (determined under subsection (j) and reduced 

6 as provided in subsection (b)(5)).’’. 

7 (b) DEFINITION OF IMPORTED PROPERTY IN8 COME.—Section 954 of the Internal Revenue Code of 1986 

9 is amended by adding at the end the following new sub10 section: 

11 ‘‘(j) IMPORTED PROPERTY INCOME.— 

12 ‘‘(1) IN GENERAL.—For purposes of subsection 

13 (a)(5), the term ‘imported property income’ means 

14 income (whether in the form of profits, commissions, 

15 fees, or otherwise) derived in connection with— 

16 ‘‘(A) manufacturing, producing, growing, 

17 or extracting imported property; 

18 ‘‘(B) the sale, exchange, or other disposi19 tion of imported property; or 

20 ‘‘(C) the lease, rental, or licensing of im21 ported property. 

22 Such term shall not include any foreign oil and gas 

23 extraction income (within the meaning of section 

24 907(c)) or any foreign oil related income (within the 

25 meaning of section 907(c)). 


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1 ‘‘(2) IMPORTED PROPERTY.—For purposes of 

2 this subsection— 

3 ‘‘(A) IN GENERAL.—Except as otherwise 

4 provided in this paragraph, the term ‘imported 

5 property’ means property which is imported 

6 into the United States by the controlled foreign 

7 corporation or a related person. 

8 ‘‘(B) IMPORTED PROPERTY INCLUDES CER9 TAIN PROPERTY IMPORTED BY UNRELATED

10 PERSONS.—The term ‘imported property’ in11 cludes any property imported into the United 

12 States by an unrelated person if, when such 

13 property was sold to the unrelated person by 

14 the controlled foreign corporation (or a related 

15 person), it was reasonable to expect that— 

16 ‘‘(i) such property would be imported 

17 into the United States; or 

18 ‘‘(ii) such property would be used as 

19 a component in other property which would 

20 be imported into the United States. 

21 ‘‘(C) EXCEPTION FOR PROPERTY SUBSE22 QUENTLY EXPORTED.—The term ‘imported 

23 property’ does not include any property which is 

24 imported into the United States and which— 


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1 ‘‘(i) before substantial use in the 

2 United States, is sold, leased, or rented by 

3 the controlled foreign corporation or a re4 lated person for direct use, consumption, 

5 or disposition outside the United States; or 

6 ‘‘(ii) is used by the controlled foreign 

7 corporation or a related person as a com8 ponent in other property which is so sold, 

9 leased, or rented. 

10 ‘‘(D) EXCEPTION FOR CERTAIN AGRICUL11 TURAL COMMODITIES.—The term ‘imported 

12 property’ does not include any agricultural com13 modity which is not grown in the United States 

14 in commercially marketable quantities. 

15 ‘‘(3) DEFINITIONS AND SPECIAL RULES.— 

16 ‘‘(A) IMPORT.—For purposes of this sub17 section, the term ‘import’ means entering, or 

18 withdrawal from warehouse, for consumption or 

19 use. Such term includes any grant of the right 

20 to use intangible property (as defined in section 

21 936(h)(3)(B)) in the United States. 

22 ‘‘(B) UNITED STATES.—For purposes of 

23 this subsection, the term ‘United States’ in24 cludes the Commonwealth of Puerto Rico, the 

25 Virgin Islands of the United States, Guam, 


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1 American Samoa, and the Commonwealth of 

2 the Northern Mariana Islands. 

3 ‘‘(C) UNRELATED PERSON.—For purposes 

4 of this subsection, the term ‘unrelated person’ 

5 means any person who is not a related person 

6 with respect to the controlled foreign corpora7 tion. 

8 ‘‘(D) COORDINATION WITH FOREIGN BASE

9 COMPANY SALES INCOME.—For purposes of this 

10 section, the term ‘foreign base company sales 

11 income’ shall not include any imported property 

12 income.’’. 

13 (c) SEPARATE APPLICATION OF LIMITATIONS ON

14 FOREIGN TAX CREDIT FOR IMPORTED PROPERTY IN15 COME.— 

16 (1) IN GENERAL.—Paragraph (1) of section 

17 904(d) of the Internal Revenue Code of 1986 is 

18 amended by striking ‘‘and’’ at the end of subpara19 graph (A), by redesignating subparagraph (B) as 

20 subparagraph (C), and by inserting after subpara21 graph (A) the following new subparagraph: 

22 ‘‘(B) imported property income, and’’. 

23 (2) IMPORTED PROPERTY INCOME DEFINED.— 

24 Paragraph (2) of section 904(d) of such Code is 

25 amended by redesignating subparagraphs (I) and 


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1 (K) as subparagraphs (J) and (K) respectively, and 

2 by inserting after subparagraph (H) the following 

3 new subparagraph: 

4 ‘‘(I) IMPORTED PROPERTY INCOME.—The 

5 term ‘imported property income’ means any in6 come received or accrued by any person which 

7 is of a kind which would be imported property 

8 income (as defined in section 954(j)).’’. 

9 (3) CONFORMING AMENDMENT.—Clause (ii) of 

10 section 904(d)(2)(A) of such Code is amended by in11 serting ‘‘or imported property income’’ after ‘‘pas12 sive category income’’. 

13 (d) TECHNICAL AMENDMENTS.— 

14 (1) Clause (iii) of section 952(c)(1)(B) of the 

15 Internal Revenue Code of 1986 is amended— 

16 (A) by redesignating subclauses (II), (III), 

17 (IV), and (V) as subclauses (III), (IV), (V), and 

18 (VI), and 

19 (B) by inserting after subclause (I) the fol20 lowing new subclause: 

21 ‘‘(II) imported property in22 come,’’. 

23 (2) The last sentence of paragraph (4) of sec24 tion 954(b) of such Code is amended by striking 


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1 ‘‘subsection (a)(5)’’ and inserting ‘‘subsection 

2 (a)(4)’’. 

3 (3) Paragraph (5) of section 954(b) of such 

4 Code is amended by striking ‘‘and the foreign base 

5 company oil related income’’ and inserting ‘‘the for6 eign base company oil related income, and the im7 ported property income’’. 

8 (e) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to taxable years of foreign corpora10 tions beginning after the date of the enactment of this 

11 Act, and to taxable years of United States shareholders 

12 within which or with which such taxable years of such for13 eign corporations end. 

Æ 


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