II 

112TH CONGRESS 

1ST SESSION S. 1373 

To amend the Internal Revenue Code of 1986 to reduce international tax 

avoidance and restore a level playing field for American businesses. 

IN THE SENATE OF THE UNITED STATES 

JULY 14, 2011 

Mr. ROCKEFELLER 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 reduce 

international tax avoidance and restore a level playing 

field for American businesses. 

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 ‘‘International Tax 

5 Competitiveness Act of 2011’’. 

6 SEC. 2. TREATMENT OF FOREIGN CORPORATIONS MAN7 AGED AND CONTROLLED IN THE UNITED 

8 STATES AS DOMESTIC CORPORATIONS. 

9 (a) IN GENERAL.—Section 7701 of the Internal Rev10 enue Code of 1986 is amended by redesignating subsection 


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1 (p) as subsection (q) and by inserting after subsection (o) 

2 the following new subsection: 

3 ‘‘(p) CERTAIN CORPORATIONS MANAGED AND CON4 TROLLED IN THE UNITED STATES TREATED AS DOMES5 TIC FOR INCOME TAX.— 

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

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

8 paragraph (2) if— 

9 ‘‘(A) the corporation would not otherwise 

10 be treated as a domestic corporation for pur11 poses of this title, but 

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

13 corporation occurs, directly or indirectly, pri14 marily within the United States, 

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

16 provision of this title relating to chapter 1), the cor17 poration shall be treated as a domestic corporation. 

18 ‘‘(2) CORPORATION DESCRIBED.— 

19 ‘‘(A) IN GENERAL.—A corporation is de20 scribed in this paragraph if— 

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

22 regularly traded on an established securi23 ties market, or 

24 ‘‘(ii) the aggregate gross assets of 

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1 of), including assets under management 

2 for investors, whether held directly or indi3 rectly, at any time during the taxable year 

4 or any preceding taxable year is 

5 $50,000,000 or more. 

6 ‘‘(B) GENERAL EXCEPTION.—A corpora7 tion shall not be treated as described in this 

8 paragraph if— 

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

10 corporation described in this paragraph in 

11 a preceding taxable year, 

12 ‘‘(ii) such corporation— 

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

14 established securities market, and 

15 ‘‘(II) has, and is reasonably ex16 pected to continue to have, aggregate 

17 gross assets (including assets under 

18 management for investors, whether 

19 held directly or indirectly) of less than 

20 $50,000,000, and 

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

22 such corporation under this subparagraph. 

23 ‘‘(C) EXCEPTION FROM GROSS ASSETS

24 TEST.—Subparagraph (A)(ii) shall not apply to 

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1 poration (as defined in section 957) and which 

2 is a member of an affiliated group (as defined 

3 section 1504, but determined without regard to 

4 section 1504(b)(3)) the common parent of 

5 which— 

6 ‘‘(i) is a domestic corporation (deter7 mined without regard to this subsection), 

8 and 

9 ‘‘(ii) has substantial assets (other 

10 than cash and cash equivalents and other 

11 than stock of foreign subsidiaries) held for 

12 use in the active conduct of a trade or 

13 business in the United States. 

14 ‘‘(3) MANAGEMENT AND CONTROL.— 

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

16 prescribe regulations for purposes of deter17 mining cases in which the management and 

18 control of a corporation is to be treated as oc19 curring primarily within the United States. 

20 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

21 MANAGEMENT.—Such regulations shall provide 

22 that— 

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

24 corporation shall be treated as occurring 

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1 stantially all of the executive officers and 

2 senior management of the corporation who 

3 exercise day-to-day responsibility for mak4 ing decisions involving strategic, financial, 

5 and operational policies of the corporation 

6 are located primarily within the United 

7 States, and 

8 ‘‘(ii) individuals who are not executive 

9 officers and senior management of the cor10 poration (including individuals who are of11 ficers or employees of other corporations in 

12 the same chain of corporations as the cor13 poration) shall be treated as executive offi14 cers and senior management if such indi15 viduals exercise the day-to-day responsibil16 ities of the corporation described in clause 

17 (i). 

18 ‘‘(C) CORPORATIONS PRIMARILY HOLDING

19 INVESTMENT ASSETS.—Such regulations shall 

20 also provide that the management and control 

21 of a corporation shall be treated as occurring 

22 primarily within the United States if— 

23 ‘‘(i) the assets of such corporation (di24 rectly or indirectly) consist primarily of as 


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1 sets being managed on behalf of investors, 

2 and 

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

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

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

6 this section shall apply to taxable years beginning on or 

7 after the date which is 2 years after the date of the enact8 ment of this Act. 

9 SEC. 3. CURRENT TAXATION OF ROYALTIES AND OTHER IN10 COME FROM INTANGIBLES RECEIVED FROM 

11 A CONTROLLED FOREIGN CORPORATION. 

12 (a) REPEAL OF LOOK-THRU RULE FOR ROYALTIES

13 RECEIVED FROM CONTROLLED FOREIGN CORPORA14 TIONS.—Paragraph (6) of section 954(c) of the Internal 

15 Revenue Code of 1986 is amended— 

16 (1) by striking ‘‘rents, and royalties’’ in sub17 paragraph (A) and inserting ‘‘and rents’’, and 

18 (2) by striking ‘‘, rent, or royalty’’ both places 

19 it appears in subparagraph (B) and inserting ‘‘or 

20 rent’’. 

21 (b) ENTITIES NOT PERMITTED TO BE DIS22 REGARDED IN DETERMINING ROYALTIES.—Subsection (c) 

23 of section 954 of the Internal Revenue Code of 1986 is 

24 amended by adding at the end the following new para25 graph: 


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1 ‘‘(7) ALL ROYALTIES TAKEN INTO ACCOUNT.— 

2 For purposes of determining the foreign personal 

3 holding company income which consists of royalties, 

4 this subsection shall be applied without regard to 

5 any election to disregard any entity which would be 

6 taken into account for Federal income tax purposes 

7 but for such election.’’. 

8 (c) CERTAIN OTHER INCOME DERIVED FROM

9 UNITED STATES INTANGIBLES TAKEN INTO ACCOUNT AS

10 SUBPART F INCOME.—Subsection (d) of section 954 of 

11 the Internal Revenue Code of 1986 is amended by adding 

12 at the end the following new paragraph: 

13 ‘‘(5) SPECIAL RULE FOR CERTAIN PRODUCTS

14 PRODUCED PURSUANT TO INTANGIBLES MADE

15 AVAILABLE BY UNITED STATES PERSONS.—For pur16 poses of this subsection, personal property shall be 

17 treated as having been purchased from a related per18 son if any intangible property (within the meaning 

19 of section 936(h)(3)(B)) made available to a con20 trolled foreign corporation, directly or indirectly, by 

21 a related person which is a United States person 

22 contributes, directly or indirectly, to the production 

23 of such personal property by the controlled foreign 

24 corporation. The preceding sentence shall not apply 

25 to any personal property produced directly by the 


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1 controlled foreign corporation, without regard to any 

2 election to disregard any entity which would be 

3 taken into account for Federal income tax purposes 

4 but for such election.’’. 

5 (d) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to taxable years of foreign corpora7 tions beginning after December 31, 2011, and to taxable 

8 years of United States shareholders within which or with 

9 which such tax years of such foreign corporations end. 

10 SEC. 4. TAXATION OF BOOT RECEIVED IN REORGANIZA11 TIONS. 

12 (a) IN GENERAL.—Paragraph (2) of section 356(a) 

13 of the Internal Revenue Code of 1986 is amended— 

14 (1) by striking ‘‘If an exchange’’ and inserting 

15 ‘‘Except as otherwise provided by the Secretary— 

16 ‘‘(A) IN GENERAL.—If an exchange’’; 

17 (2) by striking ‘‘then there shall be’’ and all 

18 that follows through ‘‘February 28, 1913’’ and in19 serting ‘‘then the amount of other property or 

20 money shall be treated as a dividend to the extent 

21 of the earnings and profits of the corporation’’; and 

22 (3) by adding at the end the following new sub23 paragraph: 

24 ‘‘(B) CERTAIN REORGANIZATIONS.—In the 

25 case of a reorganization described in section 


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1 368(a)(1)(D) with respect to which the require2 ments of subparagraphs (A) and (B) of section 

3 354(b)(1) are met (or any other reorganization 

4 specified by the Secretary), in applying sub5 paragraph (A)— 

6 ‘‘(i) the earnings and profits of each 

7 corporation which is a party to the reorga8 nization shall be taken into account, and 

9 ‘‘(ii) the amount which is a dividend 

10 (and source thereof) shall be determined 

11 under rules similar to the rules of para12 graphs (2) and (5) of section 304(b).’’. 

13 (b) EARNINGS AND PROFITS.—Paragraph (7) of sec14 tion 312(n) of the Internal Revenue Code of 1986 is 

15 amended by adding at the end the following: ‘‘A similar 

16 rule shall apply to an exchange to which section 356(a)(1) 

17 applies.’’. 

18 (c) CONFORMING AMENDMENT.—Paragraph (1) of 

19 section 356(a) of the Internal Revenue Code of 1986 is 

20 amended by striking ‘‘then the gain’’ and inserting ‘‘then 

21 (except as provided in paragraph (2)) the gain’’. 

22 (d) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to exchanges after the date of the 

24 enactment of this Act. 

Æ 


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