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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 357 Introduced in Senate (IS)]

<DOC>

118th CONGRESS
  1st Session
                                 S. 357

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

                            February 9, 2023

Mr. Whitehouse (for himself, Mr. Durbin, Mr. Van Hollen, Ms. Duckworth, 
    Ms. Hirono, Mr. Booker, Ms. Warren, Mr. Reed, Mr. Heinrich, Mr. 
    Blumenthal, Mr. Murphy, Ms. Baldwin, Mr. Markey, Mr. Casey, Mr. 
Merkley, and Mr. Schatz) 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.

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

SECTION 1. SHORT TITLE, ETC.

    (a) Short Title.--This Act may be cited as the ``No Tax Breaks for 
Outsourcing Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title, etc.
Sec. 2. Current year inclusion of net CFC tested income.
Sec. 3. Country-by-country application of limitation on foreign tax 
                            credit based on taxable units.
Sec. 4. Limitation on deduction of interest by domestic corporations 
                            which are members of an international 
                            financial reporting group.
Sec. 5. Modifications to rules relating to inverted corporations.
Sec. 6. Treatment of foreign corporations managed and controlled in the 
                            United States as domestic corporations.

SEC. 2. CURRENT YEAR INCLUSION OF NET CFC TESTED INCOME.

    (a) Repeal of Tax-Free Deemed Return on Investments.--
            (1) In general.--Section 951A(a) is amended by striking 
        ``global intangible low-taxed income'' and inserting ``net CFC 
        tested income''.
            (2) Conforming amendments.--
                    (A) Section 951A is amended by striking subsections 
                (b) and (d).
                    (B) Section 951A(e)(1) is amended by striking 
                ``subsections (b), (c)(1)(A), and'' and inserting 
                ``subsections (c)(1)(A) and''.
                    (C) Section 951A(f) is amended by striking ``global 
                intangible low-taxed income'' each place it appears and 
                inserting ``net CFC tested income''.
                    (D) Section 960(d)(2)(A) is amended by striking 
                ``global intangible low-taxed income (as defined in 
                section 951A(b))'' and inserting ``net CFC tested 
                income (as defined in section 951A(c))''.
    (b) Country-by-Country Application of Section Based on CFC Taxable 
Units.--Section 951A is amended by adding at the end the following new 
subsection:
    ``(g) Country-by-Country Application of Section Based on CFC 
Taxable Units.--
            ``(1) In general.--If any CFC taxable unit of a United 
        States shareholder is a tax resident of (or, in the case of a 
        branch, is located in) a country which is different from the 
        country with respect to which any other CFC taxable unit of 
        such United States shareholder is a tax resident (or, in the 
        case of a branch, is located in)--
                    ``(A) such shareholder's net CFC tested income for 
                purposes of subsection (a) shall be the sum of the 
                amounts of net CFC tested income determined separately 
                with respect to each such country, and
                    ``(B) for purposes of determining such separate 
                amounts of net CFC tested income--
                            ``(i) except as otherwise provided by the 
                        Secretary, any reference in subsection (c) to a 
                        controlled foreign corporation of such 
                        shareholder shall be treated as reference to a 
                        CFC taxable unit of such shareholder, and
                            ``(ii) net CFC tested income and such other 
                        items and amounts as the Secretary may provide, 
                        shall be determined separately with respect to 
                        each such country by determining such amounts 
                        with respect to the CFC taxable units of such 
                        shareholder which are a tax resident of such 
                        country.
            ``(2) Definitions.--For purposes of this subsection--
                    ``(A) CFC taxable unit.--The term `CFC taxable 
                unit' means any taxable unit described in clause (ii), 
                (iii), or (iv) of section 904(e)(2)(B), determined--
                            ``(i) by substituting `controlled foreign 
                        corporation' for `foreign corporation' each 
                        place it appears in such clauses, and
                            ``(ii) without regard to the references to 
                        the taxpayer in clauses (iii) and (iv) of such 
                        section.
                    ``(B) Application of other definitions.--Terms used 
                in this subsection which are also used in section 
                904(e) shall have the same meaning as when used in 
                section 904(e).
            ``(3) Special rules.--For purposes of this subsection--
                    ``(A) Application of certain rules.--Except as 
                otherwise provided by the Secretary, rules similar to 
                the rules of section 904(e) shall apply.
                    ``(B) Allocation of net cfc tested income to 
                controlled foreign corporations.--Except as otherwise 
                provided by the Secretary, subsection (f)(2) shall be 
                applied separately with respect to each CFC taxable 
                unit.''.
    (c) Regulatory Authority.--Section 951A, as amended by subsection 
(b), is amended by adding at the end the following new subsection:
    ``(h) Regulations.--The Secretary shall issue such regulations or 
other guidance as may be necessary or appropriate to carry out, or 
prevent the avoidance of, the purposes of this section, including 
regulations or guidance which provide for--
            ``(1) the treatment of property if such property is 
        transferred, or held, temporarily,
            ``(2) the treatment of property if the avoidance of the 
        purposes of this section is a factor in the transfer or holding 
        of such property,
            ``(3) appropriate adjustments to the basis of stock and 
        other ownership interests, and to earnings and profits, to 
        reflect tested losses (whether or not taken into account in 
        determining net CFC tested income),
            ``(4) rules similar to the rules provided under the 
        regulations or guidance issued under section 904(e)(4),
            ``(5) other appropriate basis adjustments,
            ``(6) appropriate adjustments to be made, and appropriate 
        tax attributes and records to be maintained, separately with 
        respect to CFC taxable units, and
            ``(7) appropriate adjustments in determining tested income 
        or tested loss if property is transferred between related 
        parties or amounts are paid or accrued between related 
        parties.''.
    (d) Coordination With Other Provisions.--Section 951A(f)(1) is 
amended by adding at the end the following new subparagraph:
                    ``(C) Treatment of certain references.--Except as 
                otherwise provided by the Secretary, references to 
                section 951 or section 951(a) in sections 959, 961, 
                962, and such other provisions as the Secretary may 
                identify shall include references to section 951A or 
                section 951A(a), respectively.''.
    (e) Repeal of Reduced Rate of Tax on Net CFC Tested Income and 
Foreign-Derived Intangible Income.--
            (1) In general.--Part VIII of subchapter B of chapter 1 is 
        amended by striking section 250 (and by striking the item 
        relating to such section in the table of sections of such 
        part).
            (2) Conforming amendments.--
                    (A) Section 59A(c)(4)(B)(i) is amended by striking 
                ``section 172, 245A, or 250'' and inserting ``section 
                172 or 245A''.
                    (B) Section 172(d) is amended by striking paragraph 
                (9).
                    (C) Section 246(b)(1) is amended--
                            (i) by striking ``subsection (a) and (b) of 
                        section 245, and section 250'' and inserting 
                        ``and subsection (a) and (b) of section 245''; 
                        and
                            (ii) by striking ``subsection (a) and (b) 
                        of section 245, and 250'' and inserting ``and 
                        subsection (a) and (b) of section 245''.
                    (D) Section 469(i)(3)(E)(iii) is amended by 
                striking ``, 221, and 250'' and inserting ``and 221''.
    (f) Repeal of Certain Exclusions From the Determination of Tested 
Income.--Section 951A(c)(2)(A)(i) is amended--
            (1) by striking subclauses (III) and (V),
            (2) by redesignating subclause (IV) as subclause (III),
            (3) by adding ``and'' at the end of subclause (II), and
            (4) by striking ``and'' at the end of subclause (III) (as 
        so redesignated) and inserting ``over''.
    (g) Increase in Deemed Paid Credit for Taxes Properly Attributable 
to Tested Income.--
            (1) In general.--Section 960(d) is amended by striking ``80 
        percent of''.
            (2) Conforming amendment.--Section 78 is amended by 
        striking ``(determined without regard to the phrase ``80 
        percent of'' in subsection (d)(1) thereof)''.
    (h) Repeal of High Tax Exclusion for Foreign Base Company Income 
and Insurance Income.--
            (1) In general.--Section 954(b) is amended by striking 
        paragraph (4).
            (2) Conforming amendment.--Section 904(d)(3)(E) is amended 
        by striking the last sentence.
    (i) Elimination of Carryback of Foreign Tax Credit.--
            (1) In general.--Section 904(c) is amended--
                    (A) by striking ``in the first preceding taxable 
                year, and in any of the first 10 succeeding taxable 
                years, in that order'' and inserting ``in any of the 
                first 10 succeeding taxable years, in order'',
                    (B) by striking ``preceding or'' each place it 
                appears, and
                    (C) by striking ``Carryback and'' in the heading 
                thereof.
            (2) Application to limitation on foreign oil and gas 
        taxes.--Section 907(f) is amended--
                    (A) in paragraph (1), by striking ``in the first 
                preceding taxable year and'',
                    (B) in paragraph (2), by striking ``preceding or'' 
                in the matter preceding subparagraph (A),
                    (C) in paragraph (3)(B)--
                            (i) by striking ``in a preceding or 
                        succeeding'' and inserting ``in a succeeding'', 
                        and
                            (ii) by striking ``in such preceding or 
                        succeeding'' both places it appears and 
                        inserting ``in such succeeding'', and
                    (D) in the heading, by striking ``Carryback and''.
    (j) Treatment of Foreign Base Company Oil Related Income as Subpart 
F Income.--
            (1) In general.--Section 954(a) is amended by striking 
        ``and'' at the end of paragraph (2), by striking the period at 
        the end of paragraph (3) and inserting ``, and'', and by adding 
        at the end the following new paragraph:
            ``(4) the foreign base company oil related income for the 
        taxable year (determined under subsection (f) and reduced as 
        provided in subsection (b)(5)).''.
            (2) Foreign base company oil related income.--Section 954 
        is amended by inserting after subsection (e) the following new 
        subsection:
    ``(f) Foreign Base Company Oil Related Income.--For purposes of 
this section, the term `foreign base company oil related income' means 
foreign oil related income (within the meaning of paragraphs (2) and 
(3) of section 907(c)) other than income derived from a source within a 
foreign country in connection with--
            ``(1) oil or gas which was extracted from an oil or gas 
        well located in such foreign country, or
            ``(2) oil, gas, or a primary product of oil or gas which is 
        sold by the foreign corporation or a related person for use or 
        consumption within such country or is loaded in such country on 
        a vessel or aircraft as fuel for such vessel or aircraft.
Such term shall not include any foreign personal holding company income 
(as defined in subsection (c)).''.
            (3) Conforming amendments.--
                    (A) Section 952(c)(1)(B)(iii) is amended by 
                redesignating subclauses (III) and (IV) as subclauses 
                (IV) and (V), respectively, and by inserting after 
                subclause (II) the following new subclause:
                                    ``(III) foreign base company oil 
                                related income.''.
                    (B) Section 954(b) is amended--
                            (i) by striking ``and the foreign base 
                        company services income'' in paragraph (5) and 
                        inserting ``the foreign base company services 
                        income, and the foreign base company oil 
                        related income'', and
                            (ii) by adding at the end the following new 
                        paragraph:
            ``(6) Foreign base company oil related income not treated 
        as another kind of foreign base company income.--Income of a 
        corporation which is foreign base company oil related income 
        shall not be considered foreign base company income of such 
        corporation under paragraph (2) or (3) of subsection (a).''.
    (k) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years of foreign corporations beginning after December 
        31, 2022, and to taxable years of United States shareholders in 
        which or with which such taxable years of foreign corporations 
        end.
            (2) Regulatory authority and coordination with other 
        provisions.--The amendments made by subsections (c) and (d) 
        shall apply to taxable years of foreign corporations beginning 
        after the date of the enactment of this Act, and to taxable 
        years of United States shareholders in which or with which such 
        taxable years of foreign corporations end.
            (3) Repeal of reduced rate of tax; increase in deemed paid 
        credit.--The amendments made by subsections (e) and (g) shall 
        apply to taxable years beginning after December 31, 2022.
            (4) Elimination of carryback of foreign tax credit.--The 
        amendment made by subsection (i) shall apply to credits arising 
        in taxable years beginning after December 31, 2022.
    (l) No Inference Regarding Certain Modifications.--The amendments 
made by subsections (c) and (d) shall not be construed to create any 
inference with respect to the proper application of any provision of 
the Internal Revenue Code of 1986 with respect to any taxable year 
beginning before the taxable years to which such amendments apply.

SEC. 3. COUNTRY-BY-COUNTRY APPLICATION OF LIMITATION ON FOREIGN TAX 
              CREDIT BASED ON TAXABLE UNITS.

    (a) In General.--Section 904 is amended by inserting after 
subsection (d) the following new subsection:
    ``(e) Country-by-Country Application Based on Taxable Units.--
            ``(1) In general.--Subsection (d) (and the provisions of 
        this title referred to in paragraph (1) of such subsection) 
        shall be applied separately with respect to each country by 
        taking into account the aggregate income properly attributable 
        or otherwise allocable to a taxable unit of the taxpayer which 
        is a tax resident of (or, in the case of a branch, is located 
        in) such country.
            ``(2) Taxable units.--
                    ``(A) In general.--Except as otherwise provided by 
                the Secretary, each item shall be attributable or 
                otherwise allocable to exactly one taxable unit of the 
                taxpayer.
                    ``(B) Determination of taxable units.--Except as 
                otherwise provided by the Secretary, the taxable units 
                of a taxpayer are as follows:
                            ``(i) General taxable unit.--The person 
                        that is the taxpayer and that is not otherwise 
                        described in a separate clause of this 
                        subparagraph.
                            ``(ii) Certain foreign corporations.--Each 
                        foreign corporation with respect to which the 
                        taxpayer is a United States shareholder.
                            ``(iii) Interests in pass-through 
                        entities.--Each interest held (directly or 
                        indirectly) by the taxpayer or any foreign 
                        corporation referred to in clause (ii) in a 
                        pass-through entity if such pass-through entity 
                        is a tax resident of a country other than the 
                        country with respect to which such taxpayer or 
                        foreign corporation (as the case may be) is a 
                        tax resident.
                            ``(iv) Branches.--Each branch (or portion 
                        thereof) the activities of which are directly 
                        or indirectly carried on by the taxpayer or any 
                        foreign corporation referred to in clause (ii) 
                        and which give rise to a taxable presence in a 
                        country other than the country with respect to 
                        which such taxpayer or foreign corporation (as 
                        the case may be) is a tax resident.
            ``(3) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Tax resident.--Except as otherwise provided 
                by the Secretary, the term `tax resident' means a 
                person or entity subject to tax under the tax law of a 
                country as a resident. If an entity is organized under 
                the law of a country, or resident in a country, that 
                does not impose an income tax with respect to such 
                entities, such entity shall, except as provided by the 
                Secretary, be treated as subject to tax under the tax 
                law of such country for the purposes of the preceding 
                sentence.
                    ``(B) Pass-through entity.--Except as otherwise 
                provided by the Secretary, the term `pass-through 
                entity' includes any partnership or other entity to the 
                extent that income, gain, deduction, or loss of the 
                entity is taken into account in determining the income 
                or loss of a person that owns (directly or indirectly) 
                an interest in such entity.
                    ``(C) Branch.--Except as otherwise provided by the 
                Secretary, the term `branch' means a taxable presence 
                of a tax resident in a country other than its country 
                of residence as determined under such other country's 
                tax law. The Secretary shall provide regulations or 
                other guidance applying such term to activities in a 
                country that do not give rise to a taxable presence.
                    ``(D) Treatment of fiscally autonomous 
                jurisdictions.--Any fiscally autonomous jurisdiction 
                shall be treated as a separate country. Any possession 
                of the United States shall also be treated as a 
                separate country.
                    ``(E) Possession of the united states.--The term 
                `possession of the United States' means each of 
                American Samoa, the Commonwealth of the Northern 
                Mariana Islands, the Commonwealth of Puerto Rico, Guam, 
                and the Virgin Islands.
            ``(4) Regulations.--The Secretary shall issue such 
        regulations or other guidance as may be necessary or 
        appropriate to carry out, or prevent avoidance of, the purposes 
        of this subsection, including regulations or other guidance--
                    ``(A) providing for the application of this 
                subsection to an entity or arrangement that is 
                considered a tax resident of more than one country or 
                of no country,
                    ``(B) providing for the application of this 
                subsection to hybrid entities or hybrid transactions 
                (as such terms are used for purposes of section 267A), 
                pass-through entities, passive foreign investment 
                companies, trusts, and other entities or arrangements 
                not otherwise described in this subsection, and
                    ``(C) providing for the assignment of any item 
                (including foreign taxes and deductions) to taxable 
                units, including in the case of amounts not otherwise 
                taken into account in determining taxable income under 
                this chapter.''.
    (b) Treatment of Inadequate Substantiation.--Section 
904(d)(4)(C)(ii) is amended by striking ``paragraph (1)(A)'' and 
inserting ``paragraph (1)(C)''.
    (c) Application of Foreign Tax Credit Limitation With Respect to 
Foreign Branches.--Section 904(d)(2)(J)(i) is amended--
            (1) by striking ``qualified business units (as defined in 
        section 989(a)) in 1 or more foreign countries'' and inserting 
        ``foreign branches described in section 904(e)(2)(B)(iv)'', and
            (2) by striking ``a qualified business unit'' and inserting 
        ``a foreign branch''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2022.

SEC. 4. LIMITATION ON DEDUCTION OF INTEREST BY DOMESTIC CORPORATIONS 
              WHICH ARE MEMBERS OF AN INTERNATIONAL FINANCIAL REPORTING 
              GROUP.

    (a) In General.--Section 163 is amended by redesignating subsection 
(n) as subsection (p) and by inserting after subsection (m) the 
following new subsection:
    ``(n) Limitation on Deduction of Interest by Domestic Corporations 
in International Financial Reporting Groups.--
            ``(1) In general.--In the case of any domestic corporation 
        which is a member of any international financial reporting 
        group, the deduction under this chapter for interest paid or 
        accrued during the taxable year shall not exceed the sum of--
                    ``(A) the allowable percentage of 110 percent of 
                the excess (if any) of--
                            ``(i) the amount of such interest so paid 
                        or accrued, over
                            ``(ii) the amount described in subparagraph 
                        (B), plus
                    ``(B) the amount of interest includible in gross 
                income of such corporation for such taxable year.
            ``(2) International financial reporting group.--
                    ``(A) For purposes of this subsection, the term 
                `international financial reporting group' means, with 
                respect to any reporting year, any group of entities 
                which--
                            ``(i) includes--
                                    ``(I) at least one foreign 
                                corporation engaged in a trade or 
                                business within the United States, or
                                    ``(II) at least one domestic 
                                corporation and one foreign 
                                corporation,
                            ``(ii) prepares consolidated financial 
                        statements with respect to such year, and
                            ``(iii) reports in such statements average 
                        annual gross receipts (determined in the 
                        aggregate with respect to all entities which 
                        are part of such group) for the 3-reporting-
                        year period ending with such reporting year in 
                        excess of $100,000,000.
                    ``(B) Rules relating to determination of average 
                gross receipts.--For purposes of subparagraph (A)(iii), 
                rules similar to the rules of section 448(c)(3) shall 
                apply.
            ``(3) Allowable percentage.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `allowable percentage' 
                means, with respect to any domestic corporation for any 
                taxable year, the ratio (expressed as a percentage and 
                not greater than 100 percent) of--
                            ``(i) such corporation's allocable share of 
                        the international financial reporting group's 
                        reported net interest expense for the reporting 
                        year of such group which ends in or with such 
                        taxable year of such corporation, over
                            ``(ii) such corporation's reported net 
                        interest expense for such reporting year of 
                        such group.
                    ``(B) Reported net interest expense.--The term 
                `reported net interest expense' means--
                            ``(i) with respect to any international 
                        financial reporting group for any reporting 
                        year, the excess of--
                                    ``(I) the aggregate amount of 
                                interest expense reported in such 
                                group's consolidated financial 
                                statements for such taxable year, over
                                    ``(II) the aggregate amount of 
                                interest income reported in such 
                                group's consolidated financial 
                                statements for such taxable year, and
                            ``(ii) with respect to any domestic 
                        corporation for any reporting year, the excess 
                        of--
                                    ``(I) the amount of interest 
                                expense of such corporation reported in 
                                the books and records of the 
                                international financial reporting group 
                                which are used in preparing such 
                                group's consolidated financial 
                                statements for such taxable year, over
                                    ``(II) the amount of interest 
                                income of such corporation reported in 
                                such books and records.
                    ``(C) Allocable share of reported net interest 
                expense.--With respect to any domestic corporation 
                which is a member of any international financial 
                reporting group, such corporation's allocable share of 
                such group's reported net interest expense for any 
                reporting year is the portion of such expense which 
                bears the same ratio to such expense as--
                            ``(i) the EBITDA of such corporation for 
                        such reporting year, bears to
                            ``(ii) the EBITDA of such group for such 
                        reporting year.
                    ``(D) EBITDA.--
                            ``(i) In general.--The term `EBITDA' means, 
                        with respect to any reporting year, earnings 
                        before interest, taxes, depreciation, and 
                        amortization--
                                    ``(I) as determined in the 
                                international financial reporting 
                                group's consolidated financial 
                                statements for such year, or
                                    ``(II) for purposes of subparagraph 
                                (A)(i), as determined in the books and 
                                records of the international financial 
                                reporting group which are used in 
                                preparing such statements if not 
                                determined in such statements.
                            ``(ii) Treatment of disregarded entities.--
                        The EBITDA of any domestic corporation shall 
                        not fail to include the EBITDA of any entity 
                        which is disregarded for purposes of this 
                        chapter.
                            ``(iii) Treatment of intra-group 
                        distributions.--The EBITDA of any domestic 
                        corporation shall be determined without regard 
                        to any distribution received by such 
                        corporation from any other member of the 
                        international financial reporting group.
                    ``(E) Special rules for non-positive ebitda.--
                            ``(i) Non-positive group ebitda.--In the 
                        case of any international financial reporting 
                        group the EBITDA of which is zero or less, 
                        paragraph (1) shall not apply to any member of 
                        such group the EBITDA of which is above zero.
                            ``(ii) Non-positive entity ebitda.--In the 
                        case of any group member the EBITDA of which is 
                        zero or less, paragraph (1) shall be applied 
                        without regard to subparagraph (A) thereof.
            ``(4) Consolidated financial statement.--For purposes of 
        this subsection, the term `consolidated financial statement' 
        means any consolidated financial statement described in 
        paragraph (2)(A)(ii) if such statement is--
                    ``(A) a financial statement which is certified as 
                being prepared in accordance with generally accepted 
                accounting principles, international financial 
                reporting standards, or any other comparable method of 
                accounting identified by the Secretary, and which is--
                            ``(i) a 10-K (or successor form), or annual 
                        statement to shareholders, required to be filed 
                        with the United States Securities and Exchange 
                        Commission,
                            ``(ii) an audited financial statement which 
                        is used for--
                                    ``(I) credit purposes,
                                    ``(II) reporting to shareholders, 
                                partners, or other proprietors, or to 
                                beneficiaries, or
                                    ``(III) any other substantial 
                                nontax purpose,
                        but only if there is no statement described in 
                        clause (i), or
                            ``(iii) filed with any other Federal or 
                        State agency for nontax purposes, but only if 
                        there is no statement described in clause (i) 
                        or (ii), or
                    ``(B) a financial statement which--
                            ``(i) is used for a purpose described in 
                        subclause (I), (II), or (III) of subparagraph 
                        (A)(ii), or
                            ``(ii) filed with any regulatory or 
                        governmental body (whether domestic or foreign) 
                        specified by the Secretary,
                but only if there is no statement described in 
                subparagraph (A).
            ``(5) Reporting year.--For purposes of this subsection, the 
        term `reporting year' means, with respect to any international 
        financial reporting group, the year with respect to which the 
        consolidated financial statements are prepared.
            ``(6) Application to certain entities.--
                    ``(A) Partnerships.--Except as otherwise provided 
                by the Secretary in paragraph (7), this subsection and 
                subsection (o) shall apply to any partnership which is 
                a member of any international financial reporting group 
                under rules similar to the rules of section 163(j)(4).
                    ``(B) Foreign corporations engaged in trade or 
                business within the united states.--Except as otherwise 
                provided by the Secretary in paragraph (7), any 
                deduction for interest paid or accrued by a foreign 
                corporation engaged in a trade or business within the 
                United States shall be limited in a manner consistent 
                with the principles of this subsection.
                    ``(C) Consolidated groups.--For purposes of this 
                subsection, the members of any group that file (or are 
                required to file) a consolidated return with respect to 
                the tax imposed by chapter 1 for a taxable year shall 
                be treated as a single corporation.
            ``(7) Regulations.--The Secretary may issue such 
        regulations or other guidance as are necessary or appropriate 
        to carry out the purposes of this subsection.''.
    (b) Carryforward of Disallowed Interest.--
            (1) In general.--Section 163 is amended by inserting after 
        subsection (n), as added by subsection (a), the following new 
        subsection:
    ``(o) Carryforward of Certain Disallowed Interest.--The amount of 
any interest not allowed as a deduction for any taxable year by reason 
of subsection (j)(1) or (n)(1) (whichever imposes the lower limitation 
with respect to such taxable year) shall be treated as interest (and as 
business interest for purposes of subsection (j)(1)) paid or accrued 
(and as interest expense reported as described in clause (i)(I) or 
(ii)(I) of subsection (n)(3)(B), as the case may be) in the succeeding 
taxable year. Interest paid or accrued in any taxable year (determined 
without regard to the preceding sentence) shall not be carried past the 
fifth taxable year following such taxable year, determined by treating 
interest as allowed as a deduction on a first-in, first-out basis.''.
            (2) Conforming amendments.--
                    (A) Section 163(j)(2) is amended to read as 
                follows:
            ``(2) Carryforward cross-reference.--For carryforward 
        treatment, see subsection (o).''.
                    (B) Section 163(j)(4)(B)(i)(I) is amended by 
                striking ``paragraph (2)'' and inserting ``subsection 
                (o)''.
                    (C) Section 381(c)(20) is amended to read as 
                follows:
            ``(20) Carryforward of disallowed interest.--The carryover 
        of disallowed interest described in section 163(o) to taxable 
        years ending after the date of distribution or transfer.''.
                    (D) Section 382(d)(3) is amended to read as 
                follows:
            ``(3) Application to carryforward of disallowed interest.--
        The term `pre-change loss' shall include any carryover of 
        disallowed interest described in section 163(o) under rules 
        similar to the rules of paragraph (1).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2022.

SEC. 5. MODIFICATIONS TO RULES RELATING TO INVERTED CORPORATIONS.

    (a) In General.--Subsection (b) of section 7874 is amended to read 
as follows:
    ``(b) Inverted Corporations Treated as Domestic Corporations.--
            ``(1) In general.--Notwithstanding section 7701(a)(4), a 
        foreign corporation shall be treated for purposes of this title 
        as a domestic corporation if--
                    ``(A) such corporation would be a surrogate foreign 
                corporation if subsection (a)(2) were applied by 
                substituting `80 percent' for `60 percent', or
                    ``(B) such corporation is an inverted domestic 
                corporation.
            ``(2) Inverted domestic corporation.--For purposes of this 
        subsection, a foreign corporation shall be treated as an 
        inverted domestic corporation if, pursuant to a plan (or a 
        series of related transactions)--
                    ``(A) the entity completes after December 22, 2017, 
                the direct or indirect acquisition of--
                            ``(i) substantially all of the properties 
                        held directly or indirectly by a domestic 
                        corporation, or
                            ``(ii) substantially all of the assets of, 
                        or substantially all of the properties 
                        constituting a trade or business of, a domestic 
                        partnership, and
                    ``(B) after the acquisition, either--
                            ``(i) more than 50 percent of the stock (by 
                        vote or value) of the entity is held--
                                    ``(I) in the case of an acquisition 
                                with respect to a domestic corporation, 
                                by former shareholders of the domestic 
                                corporation by reason of holding stock 
                                in the domestic corporation, or
                                    ``(II) in the case of an 
                                acquisition with respect to a domestic 
                                partnership, by former partners of the 
                                domestic partnership by reason of 
                                holding a capital or profits interest 
                                in the domestic partnership, or
                            ``(ii) the management and control of the 
                        expanded affiliated group which includes the 
                        entity occurs, directly or indirectly, 
                        primarily within the United States, and such 
                        expanded affiliated group has significant 
                        domestic business activities.
            ``(3) Exception for corporations with substantial business 
        activities in foreign country of organization.--A foreign 
        corporation described in paragraph (2) shall not be treated as 
        an inverted domestic corporation if after the acquisition the 
        expanded affiliated group which includes the entity has 
        substantial business activities in the foreign country in which 
        or under the law of which the entity is created or organized 
        when compared to the total business activities of such expanded 
        affiliated group. For purposes of subsection (a)(2)(B)(iii) and 
        the preceding sentence, the term `substantial business 
        activities' shall have the meaning given such term under 
        regulations in effect on December 22, 2017, except that the 
        Secretary may issue regulations increasing the threshold 
        percent in any of the tests under such regulations for 
        determining if business activities constitute substantial 
        business activities for purposes of this paragraph.
            ``(4) Management and control.--For purposes of paragraph 
        (2)(B)(ii)--
                    ``(A) In general.--The Secretary shall prescribe 
                regulations for purposes of determining cases in which 
                the management and control of an expanded affiliated 
                group is to be treated as occurring, directly or 
                indirectly, primarily within the United States. The 
                regulations prescribed under the preceding sentence 
                shall apply to periods after December 22, 2017.
                    ``(B) Executive officers and senior management.--
                Such regulations shall provide that the management and 
                control of an expanded affiliated group shall be 
                treated as occurring, directly or indirectly, primarily 
                within the United States if substantially all of the 
                executive officers and senior management of the 
                expanded affiliated group who exercise day-to-day 
                responsibility for making decisions involving 
                strategic, financial, and operational policies of the 
                expanded affiliated group are based or primarily 
                located within the United States. Individuals who in 
                fact exercise such day-to-day responsibilities shall be 
                treated as executive officers and senior management 
                regardless of their title.
            ``(5) Significant domestic business activities.--For 
        purposes of paragraph (2)(B)(ii), an expanded affiliated group 
        has significant domestic business activities if at least 25 
        percent of--
                    ``(A) the employees of the group are based in the 
                United States,
                    ``(B) the employee compensation incurred by the 
                group is incurred with respect to employees based in 
                the United States,
                    ``(C) the assets of the group are located in the 
                United States, or
                    ``(D) the income of the group is derived in the 
                United States,
        determined in the same manner as such determinations are made 
        for purposes of determining substantial business activities 
        under regulations referred to in paragraph (3) as in effect on 
        December 22, 2017, but applied by treating all references in 
        such regulations to `foreign country' and `relevant foreign 
        country' as references to `the United States'. The Secretary 
        may issue regulations decreasing the threshold percent in any 
        of the tests under such regulations for determining if business 
        activities constitute significant domestic business activities 
        for purposes of this paragraph.''.
    (b) Conforming Amendments.--
            (1) Clause (i) of section 7874(a)(2)(B) is amended by 
        striking ``after March 4, 2003,'' and inserting ``after March 
        4, 2003, and before December 23, 2017,''.
            (2) Subsection (c) of section 7874 is amended--
                    (A) in paragraph (2)--
                            (i) by striking ``subsection 
                        (a)(2)(B)(ii)'' and inserting ``subsections 
                        (a)(2)(B)(ii) and (b)(2)(B)(i)''; and
                            (ii) by inserting ``or (b)(2)(A)'' after 
                        ``(a)(2)(B)(i)'' in subparagraph (B);
                    (B) in paragraph (3), by inserting ``or 
                (b)(2)(B)(i), as the case may be,'' after 
                ``(a)(2)(B)(ii)'';
                    (C) in paragraph (5), by striking ``subsection 
                (a)(2)(B)(ii)'' and inserting ``subsections 
                (a)(2)(B)(ii) and (b)(2)(B)(i)''; and
                    (D) in paragraph (6), by inserting ``or inverted 
                domestic corporation, as the case may be,'' after 
                ``surrogate foreign corporation''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 22, 2017.
    (d) Extension of Limitation on Assessment.--If the period of 
limitation on assessment of tax resulting from the amendments made by 
subsection (a) expires before the end of the 3-year period beginning on 
the date of the enactment of this Act, such assessment (to the extent 
attributable to such amendments) may, nevertheless, be made before the 
close of such 3-year period.

SEC. 6. TREATMENT OF FOREIGN CORPORATIONS MANAGED AND CONTROLLED IN THE 
              UNITED STATES AS DOMESTIC CORPORATIONS.

    (a) In General.--Section 7701 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.
            ``(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 
                        assets 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, whether or not regulations 
are issued under section 7701(p)(3) of the Internal Revenue Code of 
1986, as added by this section.
                                 <all>
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