39–006 

113TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 113–428 

PERMANENT CFC LOOK-THROUGH ACT OF 2014 

MAY 2, 2014.—Committed to the Committee of the Whole House on the State of the 

Union and ordered to be printed 

Mr. CAMP, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

DISSENTING VIEWS 

[To accompany H.R. 4464] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 4464) to amend the Internal Revenue Code of 1986 to 

make permanent the look-through treatment of payments between 

related controlled foreign corporations, having considered the same, 

report favorably thereon with an amendment and recommend that 

the bill as amended do pass. 

CONTENTS 

Page 

I. SUMMARY AND BACKGROUND ............................................................... 2 

A. Purpose and Summary ..................................................................... 2 

B. Background and Need for Legislation ............................................. 2 

C. Legislative History ............................................................................ 2 

II. EXPLANATION OF THE BILL ................................................................... 3 

A. Look-Through Treatment of Payments Between Related Controlled Foreign Corporations Under Foreign Personal Holding 

Company Rules (sec. 954(c)(6) of the Code) .................................. 3 

III. VOTES OF THE COMMITTEE .................................................................... 5 

IV. BUDGET EFFECTS OF THE BILL ............................................................ 6 

A. Committee Estimate of Budgetary Effects ...................................... 6 

B. Statement Regarding New Budget Authority and Tax Expenditures Budget Authority .................................................................. 6 

C. Cost Estimate Prepared by the Congressional Budget Office ....... 6 

D. Macroeconomic Impact Analysis ...................................................... 7 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF 

THE HOUSE .............................................................................................. 7 


tjames on DSK6SPTVN1PROD with REPORTS
2 

A. Committee Oversight Findings and Recommendations ................. 7 

B. Statement of General Performance Goals and Objectives ............. 7 

C. Information Relating to Unfunded Mandates ................................ 8 

D. Applicability of House Rule XXI 5(b) .............................................. 8 

E. Tax Complexity Analysis .................................................................. 8 

F. Congressional Earmarks, Limited Tax Benefits, and Limited 

Tariff Benefits ................................................................................. 8 

G. Duplication of Federal Programs ..................................................... 8 

H. Disclosure of Directed Rule Makings .............................................. 9 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED 9 

VII. DISSENTING VIEWS ................................................................................... 11 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Permanent CFC Look-Through Act of 2014’’. 

SEC. 2. LOOK-THROUGH TREATMENT OF PAYMENTS BETWEEN RELATED CONTROLLED FOREIGN CORPORATIONS MADE PERMANENT. 

(a) IN GENERAL.—Paragraph (6) of section 954(c) of the Internal Revenue Code of 

1986 is amended by striking subparagraph (C). 

(b) EFFECTIVE DATE.—The amendment made by this section shall apply to taxable 

years of foreign corporations beginning after December 31, 2013, and to taxable 

years of United States shareholders with or within which such taxable years of foreign corporations end. 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

Identical to a provision contained in the discussion draft of the 

‘‘Tax Reform Act of 2014’’ released on February 26, 2014, the bill, 

H.R. 4464, reported by the Committee on Ways and Means, provides permanent look-through treatment of payments between related controlled foreign corporations. Under current law, the temporary look-through treatment of payments between related controlled foreign corporations expired for taxable years beginning 

after December 31, 2013. 

B. BACKGROUND AND NEED FOR LEGISLATION

While the Committee continues actively to pursue comprehensive 

tax reform as a critical means of promoting economic growth and 

job creation, the Committee also believes that it is important to 

provide permanent, immediate tax relief to worldwide American 

companies to help encourage economic growth and job creation. By 

allowing worldwide American companies to deploy capital from one 

foreign subsidiary to another foreign subsidiary in a tax-efficient 

manner, H.R. 4464 will enable American employers to be competitive against foreign multinational corporations that are not subject 

to an onerous worldwide tax system. 

C. LEGISLATIVE HISTORY

BACKGROUND

H.R. 4464 was introduced on April 10, 2014, and was referred to 

the Committee on Ways and Means. 

COMMITTEE ACTION

The Committee on Ways and Means marked up H.R. 4464, the 

Permanent CFC Look-Through Act of 2014, on April 29, 2014, and 


tjames on DSK6SPTVN1PROD with REPORTS
3 

1Secs. 951–965. 

ordered the bill, as amended, favorably reported (with a quorum 

being present). 

COMMITTEE HEARINGS

The need for permanent look-through treatment of payments between related controlled foreign corporations was discussed at no 

fewer than five hearings during the 112th and 113th Congresses: • Full Committee hearing on Fundamental Tax Reform 

(January 20, 2011); • Full Committee hearing on The Need for Comprehensive 

Tax Reform to Help American Companies Compete in the 

Global Market and Create Jobs for American Workers 

(May 12, 2011); • Select Revenue Measures Subcommittee hearing on Ways 

and Means International Tax Reform Discussion Draft 

(November 17, 2011); • Full Committee hearing on Tax Havens, Base Erosion and 

Profit-Shifting (June 13, 2013); and • Full Committee hearing on the Benefits of Permanent Tax 

Policy for America’s Job Creators (April 8, 2014). 

II. EXPLANATION OF THE BILL 

A. LOOK-THROUGH TREATMENT OF PAYMENTS BETWEEN RELATED

CONTROLLED FOREIGN CORPORATIONS UNDER FOREIGN PERSONAL

HOLDING COMPANY RULES (SEC. 954(C)(6) OF THE CODE) 

PRESENT LAW

In general 

The rules of subpart F 1 require U.S. shareholders with a 10-percent or greater interest in a controlled foreign corporation (‘‘CFC’’) 

to include certain income of the CFC (referred to as ‘‘subpart F income’’) on a current basis for U.S. tax purposes, regardless of 

whether the income is distributed to the shareholders. 

Subpart F income includes foreign base company income. One 

category of foreign base company income is foreign personal holding company income. For subpart F purposes, foreign personal 

holding company income generally includes dividends, interest, 

rents, and royalties, among other types of income. There are several exceptions to these rules. For example, foreign personal holding company income does not include dividends and interest received by a CFC from a related corporation organized and operating in the same foreign country in which the CFC is organized, 

or rents and royalties received by a CFC from a related corporation 

for the use of property within the country in which the CFC is organized. Interest, rent, and royalty payments do not qualify for this 

exclusion to the extent that such payments reduce the subpart F 

income of the payor. In addition, subpart F income of a CFC does 

not include any item of income from sources within the United 

States that is effectively connected with the conduct by such CFC 

of a trade or business within the United States (‘‘ECI’’) unless such 

item is exempt from taxation (or is subject to a reduced rate of tax) 

pursuant to a tax treaty. 


tjames on DSK6SPTVN1PROD with REPORTS
4 

2Sec. 954(c)(6). 

The ‘‘look-thru rule’’ 

Under the ‘‘look-thru rule,’’ 2 dividends, interest (including factoring income that is treated as equivalent to interest under section 

954(c)(1)(E)), rents, and royalties received or accrued by one CFC 

from a related CFC are not treated as foreign personal holding 

company income to the extent attributable or properly allocable to 

income of the payor that is neither subpart F income nor treated 

as ECI. For this purpose, a related CFC is a CFC that controls or 

is controlled by the other CFC, or a CFC that is controlled by the 

same person or persons that control the other CFC. Ownership of 

more than 50 percent of the CFC’s stock (by vote or value) constitutes control for these purposes. 

The Secretary is authorized to prescribe regulations that are necessary or appropriate to carry out the look-thru rule, including 

such regulations as are necessary or appropriate to prevent the 

abuse of the purposes of such rule. 

The look-thru rule applies to taxable years of foreign corporations beginning after December 31, 2005 and before January 1, 

2014, and to taxable years of U.S. shareholders with or within 

which such taxable years of foreign corporations end. 

REASONS FOR CHANGE

The Committee believes that it is appropriate to make permanent the look-thru rule to provide certainty for businesses and to 

help U.S. companies with overseas operations compete more effectively with foreign firms. 

EXPLANATION OF PROVISION

The proposal makes the application of the look-thru rule permanent. 

EFFECTIVE DATE

The proposal is effective for taxable years of foreign corporations 

beginning after December 31, 2013, and for taxable years of U.S. 

shareholders with or within which such taxable years of foreign 

corporations end. 


tjames on DSK6SPTVN1PROD with REPORTS
5 


tjames on DSK6SPTVN1PROD with REPORTSInsert graphic folio 7 HR428.001

III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the House of Representatives, 

the following statement is made concerning the vote ofthe Committee on Ways and Means in its 

consideration of H.R. 4464, the Permanent CFC Look-Through Act of 20 14. 

The bill, H.R. 4464, was ordered favorably reported as amended by a roll call vote of22 

yeas to 14 nays (with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Camp .t Mr. Levin .t Mr. Johnson .t Mr. Rangel .t Mr. Brady .t Mr. McDermott .t 

Mr.Ryan .t Mr. Lewis .t Mr. Nunes .t Mr. Neal .t Mr. Tiberi .t Mr. Becerra .t Mr. Reichert .t Mr. Doggett .t Mr. Boustany .t Mr. Thompson .t Mr. Roskam .t Mr. Larson .t Mr. Gerlach .t Mr. Blumenauer .t Mr. Price .t Mr.Kind 

Mr. Buchanan .t Mr. Pascrell .t Mr. Smith .t Mr. Crowley .t Mr. Schock .t Ms. Schwartz 

Ms. Jenkins .t Mr. Davis .t Mr. Paulsen .t Ms. Sanchez .t Mr. Marchant .t Ms. Black .t Mr. Reed .t Mr. Young .t Mr. Kelly .t Mr. Griffin 

Mr. Renacci .t 
6 

IV. BUDGET EFFECTS OF THE BILL 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the bill, H.R. 4464, as reported. 

The bill, as reported, is estimated to have the following effect on 

Federal budget receipts for fiscal years 2014–2024. 

Fiscal Years 

[Billions of Dollars] 

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2014–19 2014–24 

¥0.8 ¥1.3 ¥1.4 ¥1.5 ¥1.7 ¥1.8 ¥1.9 ¥2.1 ¥2.4 ¥2.6 ¥2.9 ¥8.4 ¥20.3 

fNOTE: Details do not add to totals due to rounding. 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the bill involves no new or increased budget authority. The Committee further states that the revenue-reducing tax provisions involve increased tax expenditures. (See amounts in table in Part IV.A., 

above.) 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, the following statement by CBO is provided. 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, Washington, DC, May 1, 2014. 

Hon. DAVE CAMP, 

Chairman, Committee on Ways and Means, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 4464, the Permanent 

CFC Look-Through Act of 2014. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Logan Timmerhoff. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

H.R. 4464—Permanent CFC Look-Through Act of 2014 

H.R. 4464 would amend the Internal Revenue Code to make permanent the ‘‘look-through rule’’ that applied to the taxable years of 

foreign corporations beginning after December 31, 2005 and before 

January 1, 2014. This treatment would be permanently effective for 

taxable years beginning after December 31, 2013. The ‘‘lookthrough rule’’ determines the tax treatment of payments between 


tjames on DSK6SPTVN1PROD with REPORTS
7 

related controlled foreign corporations (CFCs) under foreign personal holding company rules. Under this rule, dividends, interest, 

rents, and royalties received or accrued by one CFC from a related 

CFC are not treated as foreign personal holding company income 

for tax purposes if they meet certain characteristics. 

The staff of the Joint Committee on Taxation (JCT) estimates 

that enacting H.R. 4464 would reduce revenues, thus increasing 

federal deficits, by about $20 billion over the 2014–2024 period. 

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct 

spending and revenues. Enacting H.R. 4464 would result in revenue losses in each year beginning in 2014. The estimated increases in the deficit are shown in the following table. 

JCT has determined that the bill contains no intergovernmental 

or private-sector mandates as defined in the Unfunded Mandates 

Reform Act. 

The CBO staff contact for this estimate is Logan Timmerhoff. 

The estimate was approved by David Weiner, Assistant Director for 

Tax Analysis. 

CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 4464, AS ORDERED REPORTED BY THE 

HOUSE COMMITTEE ON WAYS AND MEANS ON APRIL 29, 2014 

By fiscal year, in millions of dollars— 

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2014– 

2019 

2014– 

2024 

NET INCREASE IN THE DEFICIT 

Statutory Pay-AsYou-Go Effects ... 808 1,254 1,388 1,527 1,666 1,792 1,934 2,137 2,381 2,589 2,856 8,434 20,331 

Source: Staff of the Joint Committee on Taxation. 

Note: Components may not sum to totals because of rounding. 

D. MACROECONOMIC IMPACT ANALYSIS

In compliance with clause 3(h)(2) of rule XIII of the Rules of the 

House of Representatives, the following statement is made by the 

Joint Committee on Taxation with respect to the provisions of the 

bill amending the Internal Revenue Code of 1986: the effects of the 

bill on economic activity are so small as to be incalculable within 

the context of a model of the aggregate economy. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives (relating to oversight findings), the Committee advises that it was as a result of the Committee’s review of 

the provisions of H.R. 4464 that the Committee concluded that it 

is appropriate to report the bill, as amended, favorably to the 

House of Representatives with the recommendation that the bill do 

pass. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the bill conVerDate Mar 15 2010 06:05 May 04, 2014 Jkt 039006 PO 00000 Frm 00007 Fmt 6659 Sfmt 6602 E:\HR\OC\HR428.XXX HR428

tjames on DSK6SPTVN1PROD with REPORTS
8 

tains no measure that authorizes funding, so no statement of general performance goals and objectives for which any measure authorizes funding is required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(B) 

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the bill, and 

states that the bill does not involve any Federal income tax rate 

increases within the meaning of the rule. 

E. TAX COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Restructuring 

and Reform Act of 1998 (the ‘‘IRS Reform Act’’) requires the staff 

of the Joint Committee on Taxation (in consultation with the Internal Revenue Service and the Treasury Department) to provide a 

tax complexity analysis. The complexity analysis is required for all 

legislation reported by the Senate Committee on Finance, the 

House Committee on Ways and Means, or any committee of conference if the legislation includes a provision that directly or indirectly amends the Internal Revenue Code and has widespread applicability to individuals or small businesses. 

Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House 

of Representatives, the staff of the Joint Committee on Taxation 

has determined that a complexity analysis is not required under 

section 4022(b) of the IRS Reform Act because the bill contains no 

provisions that amend the Code and that have ‘‘widespread applicability’’ to individuals or small businesses, within the meaning of 

the rule. 

F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

G. DUPLICATION OF FEDERAL PROGRAMS

In compliance with Sec. 3(j)(2) of H. Res. 5 (113th Congress), the 

Committee states that no provision of the bill establishes or reauthorizes: (1) a program of the Federal Government known to be duVerDate Mar 15 2010 06:05 May 04, 2014 Jkt 039006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR428.XXX HR428

tjames on DSK6SPTVN1PROD with REPORTS
9 

plicative of another Federal program, (2) a program included in any 

report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111–139, or (3) a program related 

to a program identified in the most recent Catalog of Federal Domestic Assistance, published pursuant to the Federal Program Information Act (Public Law 95–220, as amended by Public Law 98– 

169). 

H. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with Sec. 3(k) of H. Res. 5 (113th Congress), the 

following statement is made concerning directed rule makings: The 

Committee estimates that the bill requires no directed rule makings within the meaning of such section. 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS 

REPORTED 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

INTERNAL REVENUE CODE OF 1986 

* * * * * * * 

Subtitle A—Income Taxes 

* * * * * * * 

CHAPTER 1—NORMAL TAXES AND SURTAXES 

* * * * * * * 

Subchapter N—Tax Based on Income From 

Sources Within or Without the United States 

* * * * * * * 

PART III—INCOME FROM SOURCES WITHOUT THE 

UNITED STATES 

* * * * * * * 

Subpart F—Controlled Foreign Corporations 

* * * * * * * 

SEC. 954. FOREIGN BASE COMPANY INCOME. 

(a) * * * 

* * * * * * * 

(c) FOREIGN PERSONAL HOLDING COMPANY INCOME.— 

(1) * * * 

* * * * * * * 


tjames on DSK6SPTVN1PROD with REPORTS
10 

(6) LOOK-THRU RULE FOR RELATED CONTROLLED FOREIGN COR- PORATIONS.— (A) * * * 

* * * * * * * 

ø(C) APPLICATION.—Subparagraph (A) shall apply to taxable years of foreign corporations beginning after December 31, 2005, and before January 1, 2014, and to taxable 

years of United States shareholders with or within which 

such taxable years of foreign corporations end.¿ 

* * * * * * * 


tjames on DSK6SPTVN1PROD with REPORTS
(11) 

VII. DISSENTING VIEWS 

These bills would add a combined $310 billion to the deficit. 

Even though these bills were introduced individually with some bipartisan support, the opposition to these bills was based on the position that these tax provisions should not be made permanent by 

adding to the deficit without any revenue offset. 

To put the combined cost ($310 billion) into context, this total 

represents more than one-half of the entire federal deficit this 

year—the lowest it has been since President Obama took office. It 

represents nearly two-thirds of all non-defense domestic discretionary spending in 2014. It is more than three times what we 

spend annually on education, job training, and social services. It is 

five times more than we spend on veterans. And, it is five times 

more than we spend on medical research and public health. 

We also opposed the manner in which Republicans were proceeding—selecting six to make permanent without any offset from 

the approximately 60 tax provisions that expired last year. This approach was both fiscally irresponsible and fundamentally hypocritical. 

We found it hypocritical that, four months ago, Republicans let 

emergency unemployment insurance expire for more than 1.3 million Americans by arguing that an adequate offset had yet to be 

proposed. In early April, the Senate came to a bipartisan agreement on an offset after months of painstaking negotiations. Yet 

House Republicans still refuse to act. 

Further, we found it also hypocritical that the Republicans were 

in favor of passing these six tax bills at a cost of $310 billion without an offset at the same time that they were requiring an offset 

for a provision stripped from another bill under consideration at 

the markup that helped foster children at a cost of $12 million. 

The consideration of these six tax bills should have been part of 

the consideration of all the expired tax provisions commonly referred to as ‘‘tax extenders.’’ The Republicans did not take up other 

tax extenders that also are important to Democratic Committee 

Members. Left to an uncertain fate are provisions like the Work 

Opportunity Tax Credit, the New Markets Tax Credit, and the renewable energy tax credits, as well as the long-term status of the 

Earned Income Tax Credit, the Child Tax Credit, and the American 

Opportunity Tax Credit. 

Sincerely, 

SANDER M. LEVIN, Ranking Member. 

Æ 


tjames on DSK6SPTVN1PROD with REPORTS