II 

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. 

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

3 SECTION 1. SHORT TITLE, ETC. 

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

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

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


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

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986. 

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

5 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. 

6 SEC. 2. CURRENT YEAR INCLUSION OF NET CFC TESTED IN7 COME. 

8 (a) REPEAL OF TAX-FREE DEEMED RETURN ON IN9 VESTMENTS.— 

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

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

12 inserting ‘‘net CFC tested income’’. 

13 (2) CONFORMING AMENDMENTS.— 

14 (A) Section 951A is amended by striking 

15 subsections (b) and (d). 

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

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

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

19 (C) Section 951A(f) is amended by strik20 ing ‘‘global intangible low-taxed income’’ each 


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1 place it appears and inserting ‘‘net CFC tested 

2 income’’. 

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

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

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

6 CFC tested income (as defined in section 

7 951A(c))’’. 

8 (b) COUNTRY-BY-COUNTRY APPLICATION OF SEC9 TION BASED ON CFC TAXABLE UNITS.—Section 951A is 

10 amended by adding at the end the following new sub11 section: 

12 ‘‘(g) COUNTRY-BY-COUNTRY APPLICATION OF SEC13 TION BASED ON CFC TAXABLE UNITS.— 

14 ‘‘(1) IN GENERAL.—If any CFC taxable unit of 

15 a United States shareholder is a tax resident of (or, 

16 in the case of a branch, is located in) a country 

17 which is different from the country with respect to 

18 which any other CFC taxable unit of such United 

19 States shareholder is a tax resident (or, in the case 

20 of a branch, is located in)— 

21 ‘‘(A) such shareholder’s net CFC tested in22 come for purposes of subsection (a) shall be the 

23 sum of the amounts of net CFC tested income 

24 determined separately with respect to each such 

25 country, and 


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1 ‘‘(B) for purposes of determining such sep2 arate amounts of net CFC tested income— 

3 ‘‘(i) except as otherwise provided by 

4 the Secretary, any reference in subsection 

5 (c) to a controlled foreign corporation of 

6 such shareholder shall be treated as ref7 erence to a CFC taxable unit of such 

8 shareholder, and 

9 ‘‘(ii) net CFC tested income and such 

10 other items and amounts as the Secretary 

11 may provide, shall be determined sepa12 rately with respect to each such country by 

13 determining such amounts with respect to 

14 the CFC taxable units of such shareholder 

15 which are a tax resident of such country. 

16 ‘‘(2) DEFINITIONS.—For purposes of this sub17 section— 

18 ‘‘(A) CFC TAXABLE UNIT.—The term 

19 ‘CFC taxable unit’ means any taxable unit de20 scribed in clause (ii), (iii), or (iv) of section 

21 904(e)(2)(B), determined— 

22 ‘‘(i) by substituting ‘controlled foreign 

23 corporation’ for ‘foreign corporation’ each 

24 place it appears in such clauses, and 


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1 ‘‘(ii) without regard to the references 

2 to the taxpayer in clauses (iii) and (iv) of 

3 such section. 

4 ‘‘(B) APPLICATION OF OTHER DEFINI5 TIONS.—Terms used in this subsection which 

6 are also used in section 904(e) shall have the 

7 same meaning as when used in section 904(e). 

8 ‘‘(3) SPECIAL RULES.—For purposes of this 

9 subsection— 

10 ‘‘(A) APPLICATION OF CERTAIN RULES.— 

11 Except as otherwise provided by the Secretary, 

12 rules similar to the rules of section 904(e) shall 

13 apply. 

14 ‘‘(B) ALLOCATION OF NET CFC TESTED

15 INCOME TO CONTROLLED FOREIGN CORPORA16 TIONS.—Except as otherwise provided by the 

17 Secretary, subsection (f)(2) shall be applied 

18 separately with respect to each CFC taxable 

19 unit.’’. 

20 (c) REGULATORY AUTHORITY.—Section 951A, as 

21 amended by subsection (b), is amended by adding at the 

22 end the following new subsection: 

23 ‘‘(h) REGULATIONS.—The Secretary shall issue such 

24 regulations or other guidance as may be necessary or ap25 propriate to carry out, or prevent the avoidance of, the 


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1 purposes of this section, including regulations or guidance 

2 which provide for— 

3 ‘‘(1) the treatment of property if such property 

4 is transferred, or held, temporarily, 

5 ‘‘(2) the treatment of property if the avoidance 

6 of the purposes of this section is a factor in the 

7 transfer or holding of such property, 

8 ‘‘(3) appropriate adjustments to the basis of 

9 stock and other ownership interests, and to earnings 

10 and profits, to reflect tested losses (whether or not 

11 taken into account in determining net CFC tested 

12 income), 

13 ‘‘(4) rules similar to the rules provided under 

14 the regulations or guidance issued under section 

15 904(e)(4), 

16 ‘‘(5) other appropriate basis adjustments, 

17 ‘‘(6) appropriate adjustments to be made, and 

18 appropriate tax attributes and records to be main19 tained, separately with respect to CFC taxable units, 

20 and 

21 ‘‘(7) appropriate adjustments in determining 

22 tested income or tested loss if property is trans23 ferred between related parties or amounts are paid 

24 or accrued between related parties.’’. 


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1 (d) COORDINATION WITH OTHER PROVISIONS.—Sec2 tion 951A(f)(1) is amended by adding at the end the fol3 lowing new subparagraph: 

4 ‘‘(C) TREATMENT OF CERTAIN REF5 ERENCES.—Except as otherwise provided by the 

6 Secretary, references to section 951 or section 

7 951(a) in sections 959, 961, 962, and such 

8 other provisions as the Secretary may identify 

9 shall include references to section 951A or sec10 tion 951A(a), respectively.’’. 

11 (e) REPEAL OF REDUCED RATE OF TAX ON NET

12 CFC TESTED INCOME AND FOREIGN-DERIVED INTAN13 GIBLE INCOME.— 

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

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

16 by striking the item relating to such section in the 

17 table of sections of such part). 

18 (2) CONFORMING AMENDMENTS.— 

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

20 striking ‘‘section 172, 245A, or 250’’ and in21 serting ‘‘section 172 or 245A’’. 

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

23 paragraph (9). 

24 (C) Section 246(b)(1) is amended— 


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

2 of section 245, and section 250’’ and in3 serting ‘‘and subsection (a) and (b) of sec4 tion 245’’; and 

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

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

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

8 245’’. 

9 (D) Section 469(i)(3)(E)(iii) is amended 

10 by striking ‘‘, 221, and 250’’ and inserting 

11 ‘‘and 221’’. 

12 (f) REPEAL OF CERTAIN EXCLUSIONS FROM THE

13 DETERMINATION OF TESTED INCOME.—Section 

14 951A(c)(2)(A)(i) is amended— 

15 (1) by striking subclauses (III) and (V), 

16 (2) by redesignating subclause (IV) as sub17 clause (III), 

18 (3) by adding ‘‘and’’ at the end of subclause 

19 (II), and 

20 (4) by striking ‘‘and’’ at the end of subclause 

21 (III) (as so redesignated) and inserting ‘‘over’’. 

22 (g) INCREASE IN DEEMED PAID CREDIT FOR TAXES

23 PROPERLY ATTRIBUTABLE TO TESTED INCOME.— 

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

25 by striking ‘‘80 percent of’’. 


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1 (2) CONFORMING AMENDMENT.—Section 78 is 

2 amended by striking ‘‘(determined without regard to 

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

4 thereof)’’. 

5 (h) REPEAL OF HIGH TAX EXCLUSION FOR FOREIGN

6 BASE COMPANY INCOME AND INSURANCE INCOME.— 

7 (1) IN GENERAL.—Section 954(b) is amended 

8 by striking paragraph (4). 

9 (2) CONFORMING AMENDMENT.—Section 

10 904(d)(3)(E) is amended by striking the last sen11 tence. 

12 (i) ELIMINATION OF CARRYBACK OF FOREIGN TAX

13 CREDIT.— 

14 (1) IN GENERAL.—Section 904(c) is amended— 

15 (A) by striking ‘‘in the first preceding tax16 able year, and in any of the first 10 succeeding 

17 taxable years, in that order’’ and inserting ‘‘in 

18 any of the first 10 succeeding taxable years, in 

19 order’’, 

20 (B) by striking ‘‘preceding or’’ each place 

21 it appears, and 

22 (C) by striking ‘‘CARRYBACK AND’’ in the 

23 heading thereof. 

24 (2) APPLICATION TO LIMITATION ON FOREIGN

25 OIL AND GAS TAXES.—Section 907(f) is amended— 


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1 (A) in paragraph (1), by striking ‘‘in the 

2 first preceding taxable year and’’, 

3 (B) in paragraph (2), by striking ‘‘pre4 ceding or’’ in the matter preceding subpara5 graph (A), 

6 (C) in paragraph (3)(B)— 

7 (i) by striking ‘‘in a preceding or suc8 ceeding’’ and inserting ‘‘in a succeeding’’, 

9 and 

10 (ii) by striking ‘‘in such preceding or 

11 succeeding’’ both places it appears and in12 serting ‘‘in such succeeding’’, and 

13 (D) in the heading, by striking 

14 ‘‘CARRYBACK AND’’. 

15 (j) TREATMENT OF FOREIGN BASE COMPANY OIL

16 RELATED INCOME AS SUBPART F INCOME.— 

17 (1) IN GENERAL.—Section 954(a) is amended 

18 by striking ‘‘and’’ at the end of paragraph (2), by 

19 striking the period at the end of paragraph (3) and 

20 inserting ‘‘, and’’, and by adding at the end the fol21 lowing new paragraph: 

22 ‘‘(4) the foreign base company oil related in23 come for the taxable year (determined under sub24 section (f) and reduced as provided in subsection 

25 (b)(5)).’’. 


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1 (2) FOREIGN BASE COMPANY OIL RELATED IN2 COME.—Section 954 is amended by inserting after 

3 subsection (e) the following new subsection: 

4 ‘‘(f) FOREIGN BASE COMPANY OIL RELATED IN5 COME.—For purposes of this section, the term ‘foreign 

6 base company oil related income’ means foreign oil related 

7 income (within the meaning of paragraphs (2) and (3) of 

8 section 907(c)) other than income derived from a source 

9 within a foreign country in connection with— 

10 ‘‘(1) oil or gas which was extracted from an oil 

11 or gas well located in such foreign country, or 

12 ‘‘(2) oil, gas, or a primary product of oil or gas 

13 which is sold by the foreign corporation or a related 

14 person for use or consumption within such country 

15 or is loaded in such country on a vessel or aircraft 

16 as fuel for such vessel or aircraft. 

17 Such term shall not include any foreign personal holding 

18 company income (as defined in subsection (c)).’’. 

19 (3) CONFORMING AMENDMENTS.— 

20 (A) Section 952(c)(1)(B)(iii) is amended 

21 by redesignating subclauses (III) and (IV) as 

22 subclauses (IV) and (V), respectively, and by 

23 inserting after subclause (II) the following new 

24 subclause: 


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1 ‘‘(III) foreign base company oil 

2 related income.’’. 

3 (B) Section 954(b) is amended— 

4 (i) by striking ‘‘and the foreign base 

5 company services income’’ in paragraph 

6 (5) and inserting ‘‘the foreign base com7 pany services income, and the foreign base 

8 company oil related income’’, and 

9 (ii) by adding at the end the following 

10 new paragraph: 

11 ‘‘(6) FOREIGN BASE COMPANY OIL RELATED IN12 COME NOT TREATED AS ANOTHER KIND OF FOREIGN

13 BASE COMPANY INCOME.—Income of a corporation 

14 which is foreign base company oil related income 

15 shall not be considered foreign base company income 

16 of such corporation under paragraph (2) or (3) of 

17 subsection (a).’’. 

18 (k) EFFECTIVE DATES.— 

19 (1) IN GENERAL.—Except as otherwise pro20 vided in this subsection, the amendments made by 

21 this section shall apply to taxable years of foreign 

22 corporations beginning after December 31, 2022, 

23 and to taxable years of United States shareholders 

24 in which or with which such taxable years of foreign 

25 corporations end. 


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1 (2) REGULATORY AUTHORITY AND COORDINA2 TION WITH OTHER PROVISIONS.—The amendments 

3 made by subsections (c) and (d) shall apply to tax4 able years of foreign corporations beginning after 

5 the date of the enactment of this Act, and to taxable 

6 years of United States shareholders in which or with 

7 which such taxable years of foreign corporations 

8 end. 

9 (3) REPEAL OF REDUCED RATE OF TAX; IN10 CREASE IN DEEMED PAID CREDIT.—The amend11 ments made by subsections (e) and (g) shall apply 

12 to taxable years beginning after December 31, 2022. 

13 (4) ELIMINATION OF CARRYBACK OF FOREIGN

14 TAX CREDIT.—The amendment made by subsection 

15 (i) shall apply to credits arising in taxable years be16 ginning after December 31, 2022. 

17 (l) NO INFERENCE REGARDING CERTAIN MODIFICA18 TIONS.—The amendments made by subsections (c) and 

19 (d) shall not be construed to create any inference with re20 spect to the proper application of any provision of the In21 ternal Revenue Code of 1986 with respect to any taxable 

22 year beginning before the taxable years to which such 

23 amendments apply. 


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1 SEC. 3. COUNTRY-BY-COUNTRY APPLICATION OF LIMITA2 TION ON FOREIGN TAX CREDIT BASED ON 

3 TAXABLE UNITS. 

4 (a) IN GENERAL.—Section 904 is amended by insert5 ing after subsection (d) the following new subsection: 

6 ‘‘(e) COUNTRY-BY-COUNTRY APPLICATION BASED ON

7 TAXABLE UNITS.— 

8 ‘‘(1) IN GENERAL.—Subsection (d) (and the 

9 provisions of this title referred to in paragraph (1) 

10 of such subsection) shall be applied separately with 

11 respect to each country by taking into account the 

12 aggregate income properly attributable or otherwise 

13 allocable to a taxable unit of the taxpayer which is 

14 a tax resident of (or, in the case of a branch, is lo15 cated in) such country. 

16 ‘‘(2) TAXABLE UNITS.— 

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

18 provided by the Secretary, each item shall be 

19 attributable or otherwise allocable to exactly 

20 one taxable unit of the taxpayer. 

21 ‘‘(B) DETERMINATION OF TAXABLE

22 UNITS.—Except as otherwise provided by the 

23 Secretary, the taxable units of a taxpayer are 

24 as follows: 

25 ‘‘(i) GENERAL TAXABLE UNIT.—The 

26 person that is the taxpayer and that is not 


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1 otherwise described in a separate clause of 

2 this subparagraph. 

3 ‘‘(ii) CERTAIN FOREIGN CORPORA4 TIONS.—Each foreign corporation with re5 spect to which the taxpayer is a United 

6 States shareholder. 

7 ‘‘(iii) INTERESTS IN PASS-THROUGH

8 ENTITIES.—Each interest held (directly or 

9 indirectly) by the taxpayer or any foreign 

10 corporation referred to in clause (ii) in a 

11 pass-through entity if such pass-through 

12 entity is a tax resident of a country other 

13 than the country with respect to which 

14 such taxpayer or foreign corporation (as 

15 the case may be) is a tax resident. 

16 ‘‘(iv) BRANCHES.—Each branch (or 

17 portion thereof) the activities of which are 

18 directly or indirectly carried on by the tax19 payer or any foreign corporation referred 

20 to in clause (ii) and which give rise to a 

21 taxable presence in a country other than 

22 the country with respect to which such tax23 payer or foreign corporation (as the case 

24 may be) is a tax resident. 


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1 ‘‘(3) DEFINITIONS AND SPECIAL RULES.—For 

2 purposes of this subsection— 

3 ‘‘(A) TAX RESIDENT.—Except as otherwise 

4 provided by the Secretary, the term ‘tax resi5 dent’ means a person or entity subject to tax 

6 under the tax law of a country as a resident. If 

7 an entity is organized under the law of a coun8 try, or resident in a country, that does not im9 pose an income tax with respect to such enti10 ties, such entity shall, except as provided by the 

11 Secretary, be treated as subject to tax under 

12 the tax law of such country for the purposes of 

13 the preceding sentence. 

14 ‘‘(B) PASS-THROUGH ENTITY.—Except as 

15 otherwise provided by the Secretary, the term 

16 ‘pass-through entity’ includes any partnership 

17 or other entity to the extent that income, gain, 

18 deduction, or loss of the entity is taken into ac19 count in determining the income or loss of a 

20 person that owns (directly or indirectly) an in21 terest in such entity. 

22 ‘‘(C) BRANCH.—Except as otherwise pro23 vided by the Secretary, the term ‘branch’ means 

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1 mined under such other country’s tax law. The 

2 Secretary shall provide regulations or other 

3 guidance applying such term to activities in a 

4 country that do not give rise to a taxable pres5 ence. 

6 ‘‘(D) TREATMENT OF FISCALLY AUTONO7 MOUS JURISDICTIONS.—Any fiscally autono8 mous jurisdiction shall be treated as a separate 

9 country. Any possession of the United States 

10 shall also be treated as a separate country. 

11 ‘‘(E) POSSESSION OF THE UNITED

12 STATES.—The term ‘possession of the United 

13 States’ means each of American Samoa, the 

14 Commonwealth of the Northern Mariana Is15 lands, the Commonwealth of Puerto Rico, 

16 Guam, and the Virgin Islands. 

17 ‘‘(4) REGULATIONS.—The Secretary shall issue 

18 such regulations or other guidance as may be nec19 essary or appropriate to carry out, or prevent avoid20 ance of, the purposes of this subsection, including 

21 regulations or other guidance— 

22 ‘‘(A) providing for the application of this 

23 subsection to an entity or arrangement that is 

24 considered a tax resident of more than one 

25 country or of no country, 


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1 ‘‘(B) providing for the application of this 

2 subsection to hybrid entities or hybrid trans3 actions (as such terms are used for purposes of 

4 section 267A), pass-through entities, passive 

5 foreign investment companies, trusts, and other 

6 entities or arrangements not otherwise de7 scribed in this subsection, and 

8 ‘‘(C) providing for the assignment of any 

9 item (including foreign taxes and deductions) to 

10 taxable units, including in the case of amounts 

11 not otherwise taken into account in determining 

12 taxable income under this chapter.’’. 

13 (b) TREATMENT OF INADEQUATE SUBSTAN14 TIATION.—Section 904(d)(4)(C)(ii) is amended by strik15 ing ‘‘paragraph (1)(A)’’ and inserting ‘‘paragraph 

16 (1)(C)’’. 

17 (c) APPLICATION OF FOREIGN TAX CREDIT LIMITA18 TION WITH RESPECT TO FOREIGN BRANCHES.—Section 

19 904(d)(2)(J)(i) is amended— 

20 (1) by striking ‘‘qualified business units (as de21 fined in section 989(a)) in 1 or more foreign coun22 tries’’ and inserting ‘‘foreign branches described in 

23 section 904(e)(2)(B)(iv)’’, and 

24 (2) by striking ‘‘a qualified business unit’’ and 

25 inserting ‘‘a foreign branch’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2022. 

4 SEC. 4. LIMITATION ON DEDUCTION OF INTEREST BY DO5 MESTIC CORPORATIONS WHICH ARE MEM6 BERS OF AN INTERNATIONAL FINANCIAL RE7 PORTING GROUP. 

8 (a) IN GENERAL.—Section 163 is amended by redes9 ignating subsection (n) as subsection (p) and by inserting 

10 after subsection (m) the following new subsection: 

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

12 DOMESTIC CORPORATIONS IN INTERNATIONAL FINAN13 CIAL REPORTING GROUPS.— 

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

15 corporation which is a member of any international 

16 financial reporting group, the deduction under this 

17 chapter for interest paid or accrued during the tax18 able year shall not exceed the sum of— 

19 ‘‘(A) the allowable percentage of 110 per20 cent of the excess (if any) of— 

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

22 paid or accrued, over 

23 ‘‘(ii) the amount described in subpara24 graph (B), plus 


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

2 gross income of such corporation for such tax3 able year. 

4 ‘‘(2) INTERNATIONAL FINANCIAL REPORTING

5 GROUP.— 

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

7 term ‘international financial reporting group’ 

8 means, with respect to any reporting year, any 

9 group of entities which— 

10 ‘‘(i) includes— 

11 ‘‘(I) at least one foreign corpora12 tion engaged in a trade or business 

13 within the United States, or 

14 ‘‘(II) at least one domestic cor15 poration and one foreign corporation, 

16 ‘‘(ii) prepares consolidated financial 

17 statements with respect to such year, and 

18 ‘‘(iii) reports in such statements aver19 age annual gross receipts (determined in 

20 the aggregate with respect to all entities 

21 which are part of such group) for the 3-re22 porting-year period ending with such re23 porting year in excess of $100,000,000. 

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1 poses of subparagraph (A)(iii), rules similar to 

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

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

4 of this subsection— 

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

6 percentage’ means, with respect to any domestic 

7 corporation for any taxable year, the ratio (ex8 pressed as a percentage and not greater than 

9 100 percent) of— 

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

11 of the international financial reporting 

12 group’s reported net interest expense for 

13 the reporting year of such group which 

14 ends in or with such taxable year of such 

15 corporation, over 

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

17 interest expense for such reporting year of 

18 such group. 

19 ‘‘(B) REPORTED NET INTEREST EX20 PENSE.—The term ‘reported net interest ex21 pense’ means— 

22 ‘‘(i) with respect to any international 

23 financial reporting group for any reporting 

24 year, the excess of— 


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1 ‘‘(I) the aggregate amount of in2 terest expense reported in such 

3 group’s consolidated financial state4 ments for such taxable year, over 

5 ‘‘(II) the aggregate amount of in6 terest income reported in such group’s 

7 consolidated financial statements for 

8 such taxable year, and 

9 ‘‘(ii) with respect to any domestic cor10 poration for any reporting year, the excess 

11 of— 

12 ‘‘(I) the amount of interest ex13 pense of such corporation reported in 

14 the books and records of the inter15 national financial reporting group 

16 which are used in preparing such 

17 group’s consolidated financial state18 ments for such taxable year, over 

19 ‘‘(II) the amount of interest in20 come of such corporation reported in 

21 such books and records. 

22 ‘‘(C) ALLOCABLE SHARE OF REPORTED

23 NET INTEREST EXPENSE.—With respect to any 

24 domestic corporation which is a member of any 

25 international financial reporting group, such 


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1 corporation’s allocable share of such group’s re2 ported net interest expense for any reporting 

3 year is the portion of such expense which bears 

4 the same ratio to such expense as— 

5 ‘‘(i) the EBITDA of such corporation 

6 for such reporting year, bears to 

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

8 such reporting year. 

9 ‘‘(D) EBITDA.— 

10 ‘‘(i) IN GENERAL.—The term 

11 ‘EBITDA’ means, with respect to any re12 porting year, earnings before interest, 

13 taxes, depreciation, and amortization— 

14 ‘‘(I) as determined in the inter15 national financial reporting group’s 

16 consolidated financial statements for 

17 such year, or 

18 ‘‘(II) for purposes of subpara19 graph (A)(i), as determined in the 

20 books and records of the international 

21 financial reporting group which are 

22 used in preparing such statements if 

23 not determined in such statements. 

24 ‘‘(ii) TREATMENT OF DISREGARDED

25 ENTITIES.—The EBITDA of any domestic 


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1 corporation shall not fail to include the 

2 EBITDA of any entity which is dis3 regarded for purposes of this chapter. 

4 ‘‘(iii) TREATMENT OF INTRA-GROUP

5 DISTRIBUTIONS.—The EBITDA of any do6 mestic corporation shall be determined 

7 without regard to any distribution received 

8 by such corporation from any other mem9 ber of the international financial reporting 

10 group. 

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

12 EBITDA.— 

13 ‘‘(i) NON-POSITIVE GROUP EBITDA.— 

14 In the case of any international financial 

15 reporting group the EBITDA of which is 

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

17 to any member of such group the EBITDA 

18 of which is above zero. 

19 ‘‘(ii) NON-POSITIVE ENTITY

20 EBITDA.—In the case of any group mem21 ber the EBITDA of which is zero or less, 

22 paragraph (1) shall be applied without re23 gard to subparagraph (A) thereof. 

24 ‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 

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1 dated financial statement’ means any consolidated 

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

3 if such statement is— 

4 ‘‘(A) a financial statement which is cer5 tified as being prepared in accordance with gen6 erally accepted accounting principles, inter7 national financial reporting standards, or any 

8 other comparable method of accounting identi9 fied by the Secretary, and which is— 

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

11 annual statement to shareholders, required 

12 to be filed with the United States Securi13 ties and Exchange Commission, 

14 ‘‘(ii) an audited financial statement 

15 which is used for— 

16 ‘‘(I) credit purposes, 

17 ‘‘(II) reporting to shareholders, 

18 partners, or other proprietors, or to 

19 beneficiaries, or 

20 ‘‘(III) any other substantial 

21 nontax purpose, 

22 but only if there is no statement described 

23 in clause (i), or 

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

25 State agency for nontax purposes, but only 


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1 if there is no statement described in clause 

2 (i) or (ii), or 

3 ‘‘(B) a financial statement which— 

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

5 subclause (I), (II), or (III) of subpara6 graph (A)(ii), or 

7 ‘‘(ii) filed with any regulatory or gov8 ernmental body (whether domestic or for9 eign) specified by the Secretary, 

10 but only if there is no statement described in 

11 subparagraph (A). 

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

13 subsection, the term ‘reporting year’ means, with re14 spect to any international financial reporting group, 

15 the year with respect to which the consolidated fi16 nancial statements are prepared. 

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

18 ‘‘(A) PARTNERSHIPS.—Except as other19 wise provided by the Secretary in paragraph 

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

21 apply to any partnership which is a member of 

22 any international financial reporting group 

23 under rules similar to the rules of section 

24 163(j)(4). 


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1 ‘‘(B) FOREIGN CORPORATIONS ENGAGED

2 IN TRADE OR BUSINESS WITHIN THE UNITED

3 STATES.—Except as otherwise provided by the 

4 Secretary in paragraph (7), any deduction for 

5 interest paid or accrued by a foreign corpora6 tion engaged in a trade or business within the 

7 United States shall be limited in a manner con8 sistent with the principles of this subsection. 

9 ‘‘(C) CONSOLIDATED GROUPS.—For pur10 poses of this subsection, the members of any 

11 group that file (or are required to file) a con12 solidated return with respect to the tax imposed 

13 by chapter 1 for a taxable year shall be treated 

14 as a single corporation. 

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

16 such regulations or other guidance as are necessary 

17 or appropriate to carry out the purposes of this sub18 section.’’. 

19 (b) CARRYFORWARD OF DISALLOWED INTEREST.— 

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

21 inserting after subsection (n), as added by sub22 section (a), the following new subsection: 

23 ‘‘(o) CARRYFORWARD OF CERTAIN DISALLOWED IN24 TEREST.—The amount of any interest not allowed as a 

25 deduction for any taxable year by reason of subsection 


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

2 with respect to such taxable year) shall be treated as inter3 est (and as business interest for purposes of subsection 

4 (j)(1)) paid or accrued (and as interest expense reported 

5 as described in clause (i)(I) or (ii)(I) of subsection 

6 (n)(3)(B), as the case may be) in the succeeding taxable 

7 year. Interest paid or accrued in any taxable year (deter8 mined without regard to the preceding sentence) shall not 

9 be carried past the fifth taxable year following such tax10 able year, determined by treating interest as allowed as 

11 a deduction on a first-in, first-out basis.’’. 

12 (2) CONFORMING AMENDMENTS.— 

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

14 as follows: 

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

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

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

18 by striking ‘‘paragraph (2)’’ and inserting ‘‘sub19 section (o)’’. 

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

21 as follows: 

22 ‘‘(20) CARRYFORWARD OF DISALLOWED INTER23 EST.—The carryover of disallowed interest described 

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

25 date of distribution or transfer.’’. 


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

2 as follows: 

3 ‘‘(3) APPLICATION TO CARRYFORWARD OF DIS4 ALLOWED INTEREST.—The term ‘pre-change loss’ 

5 shall include any carryover of disallowed interest de6 scribed in section 163(o) under rules similar to the 

7 rules of paragraph (1).’’. 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2022. 

11 SEC. 5. MODIFICATIONS TO RULES RELATING TO IN12 VERTED CORPORATIONS. 

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

14 amended to read as follows: 

15 ‘‘(b) INVERTED CORPORATIONS TREATED AS DO16 MESTIC CORPORATIONS.— 

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

18 7701(a)(4), a foreign corporation shall be treated for 

19 purposes of this title as a domestic corporation if— 

20 ‘‘(A) such corporation would be a surro21 gate foreign corporation if subsection (a)(2) 

22 were applied by substituting ‘80 percent’ for 

23 ‘60 percent’, or 

24 ‘‘(B) such corporation is an inverted do25 mestic corporation. 


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

2 purposes of this subsection, a foreign corporation 

3 shall be treated as an inverted domestic corporation 

4 if, pursuant to a plan (or a series of related trans5 actions)— 

6 ‘‘(A) the entity completes after December 

7 22, 2017, the direct or indirect acquisition of— 

8 ‘‘(i) substantially all of the properties 

9 held directly or indirectly by a domestic 

10 corporation, or 

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

12 or substantially all of the properties consti13 tuting a trade or business of, a domestic 

14 partnership, and 

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

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

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

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

19 with respect to a domestic corpora20 tion, by former shareholders of the 

21 domestic corporation by reason of 

22 holding stock in the domestic corpora23 tion, or 

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

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1 ship, by former partners of the do2 mestic partnership by reason of hold3 ing a capital or profits interest in the 

4 domestic partnership, or 

5 ‘‘(ii) the management and control of 

6 the expanded affiliated group which in7 cludes the entity occurs, directly or indi8 rectly, primarily within the United States, 

9 and such expanded affiliated group has 

10 significant domestic business activities. 

11 ‘‘(3) EXCEPTION FOR CORPORATIONS WITH

12 SUBSTANTIAL BUSINESS ACTIVITIES IN FOREIGN

13 COUNTRY OF ORGANIZATION.—A foreign corporation 

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

15 inverted domestic corporation if after the acquisition 

16 the expanded affiliated group which includes the en17 tity has substantial business activities in the foreign 

18 country in which or under the law of which the enti19 ty is created or organized when compared to the 

20 total business activities of such expanded affiliated 

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

22 the preceding sentence, the term ‘substantial busi23 ness activities’ shall have the meaning given such 

24 term under regulations in effect on December 22, 

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1 tions increasing the threshold percent in any of the 

2 tests under such regulations for determining if busi3 ness activities constitute substantial business activi4 ties for purposes of this paragraph. 

5 ‘‘(4) MANAGEMENT AND CONTROL.—For pur6 poses of paragraph (2)(B)(ii)— 

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

8 prescribe regulations for purposes of deter9 mining cases in which the management and 

10 control of an expanded affiliated group is to be 

11 treated as occurring, directly or indirectly, pri12 marily within the United States. The regula13 tions prescribed under the preceding sentence 

14 shall apply to periods after December 22, 2017. 

15 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

16 MANAGEMENT.—Such regulations shall provide 

17 that the management and control of an ex18 panded affiliated group shall be treated as oc19 curring, directly or indirectly, primarily within 

20 the United States if substantially all of the ex21 ecutive officers and senior management of the 

22 expanded affiliated group who exercise day-to23 day responsibility for making decisions involving 

24 strategic, financial, and operational policies of 

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1 marily located within the United States. Indi2 viduals who in fact exercise such day-to-day re3 sponsibilities shall be treated as executive offi4 cers and senior management regardless of their 

5 title. 

6 ‘‘(5) SIGNIFICANT DOMESTIC BUSINESS ACTIVI7 TIES.—For purposes of paragraph (2)(B)(ii), an ex8 panded affiliated group has significant domestic 

9 business activities if at least 25 percent of— 

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

11 in the United States, 

12 ‘‘(B) the employee compensation incurred 

13 by the group is incurred with respect to employ14 ees based in the United States, 

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

16 the United States, or 

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

18 the United States, 

19 determined in the same manner as such determina20 tions are made for purposes of determining substan21 tial business activities under regulations referred to 

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

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1 retary may issue regulations decreasing the thresh2 old percent in any of the tests under such regula3 tions for determining if business activities constitute 

4 significant domestic business activities for purposes 

5 of this paragraph.’’. 

6 (b) CONFORMING AMENDMENTS.— 

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

8 amended by striking ‘‘after March 4, 2003,’’ and in9 serting ‘‘after March 4, 2003, and before December 

10 23, 2017,’’. 

11 (2) Subsection (c) of section 7874 is amend12 ed— 

13 (A) in paragraph (2)— 

14 (i) by striking ‘‘subsection 

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

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

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

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

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

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

21 ‘‘(a)(2)(B)(ii)’’; 

22 (C) in paragraph (5), by striking ‘‘sub23 section (a)(2)(B)(ii)’’ and inserting ‘‘sub24 sections (a)(2)(B)(ii) and (b)(2)(B)(i)’’; and 


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1 (D) in paragraph (6), by inserting ‘‘or in2 verted domestic corporation, as the case may 

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

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

5 this section shall apply to taxable years ending after De6 cember 22, 2017. 

7 (d) EXTENSION OF LIMITATION ON ASSESSMENT.— 

8 If the period of limitation on assessment of tax resulting 

9 from the amendments made by subsection (a) expires be10 fore the end of the 3-year period beginning on the date 

11 of the enactment of this Act, such assessment (to the ex12 tent attributable to such amendments) may, nevertheless, 

13 be made before the close of such 3-year period. 

14 SEC. 6. TREATMENT OF FOREIGN CORPORATIONS MAN15 AGED AND CONTROLLED IN THE UNITED 

16 STATES AS DOMESTIC CORPORATIONS. 

17 (a) IN GENERAL.—Section 7701 is amended by re18 designating subsection (p) as subsection (q) and by insert19 ing after subsection (o) the following new subsection: 

20 ‘‘(p) CERTAIN CORPORATIONS MANAGED AND CON21 TROLLED IN THE UNITED STATES TREATED AS DOMES22 TIC FOR INCOME TAX.— 

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

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

25 paragraph (2) if— 


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1 ‘‘(A) the corporation would not otherwise 

2 be treated as a domestic corporation for pur3 poses of this title, but 

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

5 corporation occurs, directly or indirectly, pri6 marily within the United States, 

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

8 provision of this title relating to chapter 1), the cor9 poration shall be treated as a domestic corporation. 

10 ‘‘(2) CORPORATION DESCRIBED.— 

11 ‘‘(A) IN GENERAL.—A corporation is de12 scribed in this paragraph if— 

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

14 regularly traded on an established securi15 ties market, or 

16 ‘‘(ii) the aggregate gross assets of 

17 such corporation (or any predecessor there18 of), including assets under management 

19 for investors, whether held directly or indi20 rectly, at any time during the taxable year 

21 or any preceding taxable year is 

22 $50,000,000 or more. 

23 ‘‘(B) GENERAL EXCEPTION.—A corpora24 tion shall not be treated as described in this 

25 paragraph if— 


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

2 corporation described in this paragraph in 

3 a preceding taxable year, 

4 ‘‘(ii) such corporation— 

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

6 established securities market, and 

7 ‘‘(II) has, and is reasonably ex8 pected to continue to have, aggregate 

9 gross assets (including assets under 

10 management for investors, whether 

11 held directly or indirectly) of less than 

12 $50,000,000, and 

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

14 such corporation under this subparagraph. 

15 ‘‘(3) MANAGEMENT AND CONTROL.— 

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

17 prescribe regulations for purposes of deter18 mining cases in which the management and 

19 control of a corporation is to be treated as oc20 curring primarily within the United States. 

21 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

22 MANAGEMENT.—Such regulations shall provide 

23 that— 

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

25 corporation shall be treated as occurring 


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1 primarily within the United States if sub2 stantially all of the executive officers and 

3 senior management of the corporation who 

4 exercise day-to-day responsibility for mak5 ing decisions involving strategic, financial, 

6 and operational policies of the corporation 

7 are located primarily within the United 

8 States, and 

9 ‘‘(ii) individuals who are not executive 

10 officers and senior management of the cor11 poration (including individuals who are of12 ficers or employees of other corporations in 

13 the same chain of corporations as the cor14 poration) shall be treated as executive offi15 cers and senior management if such indi16 viduals exercise the day-to-day responsibil17 ities of the corporation described in clause 

18 (i). 

19 ‘‘(C) CORPORATIONS PRIMARILY HOLDING

20 INVESTMENT ASSETS.—Such regulations shall 

21 also provide that the management and control 

22 of a corporation shall be treated as occurring 

23 primarily within the United States if— 

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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, whether or not regulations are issued 

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

10 of 1986, as added by this section. 

Æ 


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