I 

117TH CONGRESS 

1ST SESSION H. R. 1785 

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 HOUSE OF REPRESENTATIVES 

MARCH 11, 2021 

Mr. DOGGETT (for himself, Ms. BARRAGA ́N, Mrs. BEATTY, Mr. BLUMENAUER, 

Ms. BONAMICI, Mr. BRENDAN F. BOYLE of Pennsylvania, Mrs. BUSTOS, 

Ms. CHU, Mr. CICILLINE, Mr. CLEAVER, Mr. COHEN, Mr. COOPER, Mr. 

COURTNEY, Mr. CRIST, Mr. CROW, Mr. DANNY K. DAVIS of Illinois, Mr. 

DEFAZIO, Ms. DELAURO, Mr. DESAULNIER, Mr. DEUTCH, Mrs. DINGELL, Mr. MICHAEL F. DOYLE of Pennsylvania, Ms. ESHOO, Mr. 

ESPAILLAT, Mr. EVANS, Mr. FOSTER, Mr. GALLEGO, Mr. GARAMENDI, 

Mr. GARCI ́A of Illinois, Mr. GOMEZ, Mr. GRIJALVA, Mr. HASTINGS, Mrs. 

HAYES, Mr. HIGGINS of New York, Mr. HUFFMAN, Ms. JACKSON LEE, 

Ms. JAYAPAL, Mr. JEFFRIES, Ms. JOHNSON of Texas, Mr. JOHNSON of 

Georgia, Ms. KAPTUR, Ms. KELLY of Illinois, Mr. KHANNA, Mr. KIM of 

New Jersey, Mrs. KIRKPATRICK, Mr. LANGEVIN, Mr. LAMB, Mrs. LAWRENCE, Ms. LEE of California, Mr. LEVIN of Michigan, Mr. LOWENTHAL, 

Mrs. LURIA, Mr. LYNCH, Mrs. CAROLYN B. MALONEY of New York, Ms. 

MCCOLLUM, Mr. MCGOVERN, Mr. MRVAN, Mr. MEEKS, Ms. MENG, Mr. 

JONES, Mr. MOULTON, Mr. MFUME, Mr. NADLER, Mrs. NAPOLITANO, 

Mr. NEGUSE, Mr. NORCROSS, Ms. NORTON, Ms. OMAR, Mr. PALLONE, 

Mr. PANETTA, Mr. PAPPAS, Mr. PERLMUTTER, Ms. PINGREE, Mr. 

POCAN, Ms. PORTER, Ms. PRESSLEY, Mr. RASKIN, Ms. ROYBAL-ALLARD, 

Mr. RYAN, Mr. SARBANES, Ms. SCANLON, Ms. SCHAKOWSKY, Mr. SHERMAN, Mr. SIRES, Mr. SUOZZI, Mr. TAKANO, Ms. TITUS, Ms. TLAIB, Mr. 

TONKO, Ms. VELA ́ZQUEZ, Ms. WATERS, Mrs. WATSON COLEMAN, Mr. 

WELCH, Ms. WILD, Mr. YARMUTH, Mr. CARTWRIGHT, Mr. PASCRELL, 

Ms. BASS, Mr. GREEN of Texas, Mr. DAVID SCOTT of Georgia, Mr. 

CASE, Ms. CLARKE of New York, and Ms. ESCOBAR) introduced the following bill; which was referred to the Committee on Ways and Means 


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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 

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

10 shall be considered to be made to a section or other provi11 sion of the Internal Revenue Code of 1986. 

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

13 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. 

14 SEC. 2. CURRENT YEAR INCLUSION OF NET CFC TESTED IN15 COME. 

16 (a) REPEAL OF TAX-FREE DEEMED RETURN ON IN17 VESTMENTS.— 


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

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

3 inserting ‘‘net CFC tested income’’. 

4 (2) CONFORMING AMENDMENTS.— 

5 (A) Section 951A is amended by striking 

6 subsections (b) and (d). 

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

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

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

10 (C) Section 951A(f) is amended by strik11 ing ‘‘global intangible low-taxed income’’ each 

12 place it appears and inserting ‘‘net CFC tested 

13 income’’. 

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

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

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

17 CFC tested income (as defined in section 

18 951A(c))’’. 

19 (b) REPEAL OF REDUCED RATE OF TAX ON NET

20 CFC TESTED INCOME AND FOREIGN-DERIVED INTAN21 GIBLE INCOME.— 

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

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

24 by striking the item relating to such section in the 

25 table of sections of such part). 


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1 (2) CONFORMING AMENDMENTS.— 

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

3 striking ‘‘section 172, 245A, or 250’’ and in4 serting ‘‘section 172 or 245A’’. 

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

6 paragraph (9). 

7 (C) Section 246(b)(1) is amended— 

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

9 of section 245, and section 250’’ and in10 serting ‘‘and subsection (a) and (b) of sec11 tion 245’’; and 

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

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

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

15 245’’. 

16 (D) Section 469(i)(3)(F)(iii) is amended 

17 by striking ‘‘222, and 250’’ and inserting ‘‘and 

18 222’’. 

19 (c) REPEAL OF CERTAIN EXCLUSIONS FROM THE

20 DETERMINATION OF TESTED INCOME.—Section 

21 951A(c)(2)(A)(i) is amended— 

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

23 (2) by redesignating subclause (IV) as sub24 clause (III), 


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

2 (II), and 

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

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

5 (d) INCREASE IN DEEMED PAID CREDIT FOR TAXES

6 PROPERLY ATTRIBUTABLE TO TESTED INCOME.— 

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

8 by striking ‘‘80 percent of’’. 

9 (2) CONFORMING AMENDMENT.—Section 78 is 

10 amended by striking ‘‘(determined without regard to 

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

12 thereof)’’. 

13 (e) REPEAL OF HIGH TAX EXCLUSION FOR FOREIGN

14 BASE COMPANY INCOME AND INSURANCE INCOME.— 

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

16 by striking paragraph (4). 

17 (2) CONFORMING AMENDMENT.—Section 

18 904(d)(3)(E) is amended by striking the last sen19 tence. 

20 (f) ELIMINATION OF CARRYBACK OF FOREIGN TAX

21 CREDIT.—Section 904(c) is amended— 

22 (1) by striking ‘‘in the first preceding taxable 

23 year, and in any of the first 10 succeeding taxable 

24 years, in that order’’ and inserting ‘‘in any of the 

25 first 10 succeeding taxable years, in order’’, 


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1 (2) by striking ‘‘preceding or’’ each place it ap2 pears, and 

3 (3) by striking ‘‘CARRYBACK AND’’ in the head4 ing thereof. 

5 (g) TREATMENT OF FOREIGN BASE COMPANY OIL

6 RELATED INCOME AS SUBPART F INCOME.— 

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

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

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

10 inserting ‘‘, and’’, and by adding at the end the fol11 lowing new paragraph: 

12 ‘‘(4) the foreign base company oil related in13 come for the taxable year (determined under sub14 section (g) and reduced as provided in subsection 

15 (b)(5)).’’. 

16 (2) FOREIGN BASE COMPANY OIL RELATED IN17 COME.—Section 954 is amended by inserting after 

18 subsection (e) the following new subsection: 

19 ‘‘(g) FOREIGN BASE COMPANY OIL RELATED IN20 COME.—For purposes of this section, the term ‘foreign 

21 base company oil related income’ means foreign oil related 

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

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

24 within a foreign country in connection with— 


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

2 or gas well located in such foreign country, or 

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

4 which is sold by the foreign corporation or a related 

5 person for use or consumption within such country 

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

7 as fuel for such vessel or aircraft. 

8 Such term shall not include any foreign personal holding 

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

10 (3) CONFORMING AMENDMENTS.— 

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

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

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

14 inserting after subclause (II) the following new 

15 subclause: 

16 ‘‘(III) foreign base company oil 

17 related income.’’. 

18 (B) Section 954(b) is amended— 

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

20 company services income’’ in paragraph 

21 (5) and inserting ‘‘the foreign base com22 pany services income, and the foreign base 

23 company oil related income’’, and 

24 (ii) by adding at the end the following 

25 new paragraph: 


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1 ‘‘(6) FOREIGN BASE COMPANY OIL RELATED IN2 COME NOT TREATED AS ANOTHER KIND OF FOREIGN

3 BASE COMPANY INCOME.—Income of a corporation 

4 which is foreign base company oil related income 

5 shall not be considered foreign base company income 

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

7 subsection (a).’’. 

8 (h) EFFECTIVE DATES.— 

9 (1) IN GENERAL.—Except as otherwise pro10 vided in this subsection, the amendments made by 

11 this section shall apply to taxable years of foreign 

12 corporations beginning after December 31, 2020, 

13 and to taxable years of United States shareholders 

14 in which or with which such taxable years of foreign 

15 corporations end. 

16 (2) REPEAL OF REDUCED RATE OF TAX; IN17 CREASE IN DEEMED PAID CREDIT.—The amend18 ments made by subsection (b) and (d) shall apply to 

19 taxable years beginning after December 31, 2020. 

20 (3) REPEAL OF HIGH TAX EXCLUSION FOR

21 FOREIGN BASE COMPANY INCOME AND INSURANCE

22 INCOME.—The amendment made by subsection (e) 

23 shall apply to taxable years of foreign corporations 

24 beginning after December 31, 2020, and to taxable 

25 years of United States shareholders in which or with 


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1 which such taxable years of foreign corporations 

2 end. 

3 (4) ELIMINATION OF CARRYBACK OF FOREIGN

4 TAX CREDIT.—The amendment made by subsection 

5 (f) shall apply to credits arising in taxable years be6 ginning after December 31, 2020. 

7 SEC. 3. COUNTRY-BY-COUNTRY APPLICATION OF LIMITA8 TION ON FOREIGN TAX CREDIT BASED ON 

9 TAXABLE UNITS. 

10 (a) IN GENERAL.—Section 904 is amended by insert11 ing after subsection (d) the following new subsection: 

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

14 ‘‘(1) IN GENERAL.—The provisions of sub15 sections (a), (b), (c), and (d) and sections 907 and 

16 960 shall be applied separately with respect to each 

17 country and possession by taking into account the 

18 aggregate items properly attributable or otherwise 

19 allocable to a taxable unit of the taxpayer which is 

20 a tax resident of such country or possession. 

21 ‘‘(2) TAXABLE UNITS.— 

22 ‘‘(A) IN GENERAL.—Unless otherwise pro23 vided by the Secretary, to the extent an item 

24 may be properly attributable or otherwise allo25 cable to more than one taxable unit under paraVerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785

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1 graph (1), such item shall be treated as prop2 erly attributable or otherwise allocable to the 

3 lowest-tier taxable unit of the taxpayer to which 

4 such item may be properly attributable or oth5 erwise allocable. No item shall be attributable 

6 or otherwise allocable to more than one taxable 

7 unit of the taxpayer. 

8 ‘‘(B) DETERMINATION OF TAXABLE

9 UNITS.—Except as otherwise provided by the 

10 Secretary, the taxable units of a taxpayer are 

11 as follows: 

12 ‘‘(i) IN GENERAL.—The general tax13 able unit of the taxpayer which is not oth14 erwise described in a separate clause of 

15 this subparagraph. 

16 ‘‘(ii) FOREIGN BRANCHES.—Each for17 eign branch the activities of which are car18 ried on directly or indirectly (through one 

19 or more pass-through entities) by the tax20 payer. 

21 ‘‘(iii) CONTROLLED FOREIGN COR22 PORATIONS.—Each controlled foreign cor23 poration with respect to which the tax24 payer is a United States shareholder. 


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1 ‘‘(iv) BRANCHES OF CONTROLLED

2 FOREIGN CORPORATIONS.—Each branch 

3 the activities of which are carried on di4 rectly or indirectly (through one or more 

5 pass-through entities) by a controlled for6 eign corporation referred to in clause (iii). 

7 ‘‘(v) INTERESTS IN PASS-THROUGH

8 ENTITIES.— 

9 ‘‘(I) IN GENERAL.—Each interest 

10 in a pass-through entity held directly 

11 or indirectly by the taxpayer or a con12 trolled foreign corporation referred to 

13 in clause (iii) if such entity is a tax 

14 resident of a foreign country. 

15 ‘‘(II) CERTAIN INTERESTS HELD

16 BY CONTROLLED FOREIGN CORPORA17 TIONS.—Each interest in a pass18 through entity held directly or indi19 rectly by a controlled foreign corpora20 tion referred to in clause (iii) if such 

21 entity is a tax resident of a foreign 

22 country or such entity is treated as a 

23 corporation (or other entity that is 

24 not fiscally transparent) for purposes 

25 of the tax law of a foreign country in 


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1 which such controlled foreign corpora2 tion is a tax resident. 

3 ‘‘(3) TAX RESIDENT.—For purposes of this 

4 subsection, a taxable unit shall be treated as a tax 

5 resident of a country or possession if such taxable 

6 unit is liable to tax under the tax law of such coun7 try or possession as a resident. 

8 ‘‘(4) PASS-THROUGH ENTITY.—For purposes of 

9 this subsection, the term ‘pass-through entity’ means 

10 any partnership and any other type of entity (other 

11 than a corporation) identified by the Secretary as a 

12 pass-through entity for purposes of this subsection. 

13 ‘‘(5) REGULATIONS.—The Secretary shall issue 

14 such regulations or other guidance as the Secretary 

15 determines necessary or appropriate to carry out the 

16 purposes of this subsection, including regulations or 

17 other guidance— 

18 ‘‘(A) for determining the country or pos19 session with respect to which any taxable unit 

20 is a tax resident, including— 

21 ‘‘(i) determining such country or pos22 session on the basis of location if such tax23 able unit would not otherwise be a tax resi24 dent of any country or possession, and 


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1 ‘‘(ii) ensuring that such taxable unit 

2 is a tax resident of not more than 1 coun3 try or possession, 

4 ‘‘(B) applying this section to hybrid enti5 ties, passive foreign investment companies, 

6 tiered structures, and branches, including 

7 branches that do not give rise to a taxable pres8 ence under the tax law of the country where the 

9 branch is located, and 

10 ‘‘(C) determining whether any entity is not 

11 fiscally transparent within the meaning of para12 graph (2)(B)(v)(II).’’. 

13 (b) APPLICATION OF FOREIGN TAX CREDIT LIMITA14 TION WITH RESPECT TO FOREIGN BRANCHES.—Section 

15 904(d)(2)(J)(i) is amended— 

16 (1) by striking ‘‘qualified business units (as de17 fined in section 989(a)) in 1 or more foreign coun18 tries’’ and inserting ‘‘foreign branches described in 

19 section 904(e)(2)(B)(ii)’’, and 

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

21 inserting ‘‘a foreign branch’’. 

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

23 this section shall apply to taxable years beginning after 

24 December 31, 2020. 


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1 SEC. 4. LIMITATION ON DEDUCTION OF INTEREST BY DO2 MESTIC CORPORATIONS WHICH ARE MEM3 BERS OF AN INTERNATIONAL FINANCIAL RE4 PORTING GROUP. 

5 (a) IN GENERAL.—Section 163 is amended by redes6 ignating subsection (n) as subsection (p) and by inserting 

7 after subsection (m) the following new subsection: 

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

9 DOMESTIC CORPORATIONS IN INTERNATIONAL FINAN10 CIAL REPORTING GROUPS.— 

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

12 corporation which is a member of any international 

13 financial reporting group, the deduction under this 

14 chapter for interest paid or accrued during the tax15 able year shall not exceed the sum of— 

16 ‘‘(A) the allowable percentage of 110 per17 cent of the excess (if any) of— 

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

19 paid or accrued, over 

20 ‘‘(ii) the amount described in subpara21 graph (B), plus 

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

23 gross income of such corporation for such tax24 able year. 

25 ‘‘(2) INTERNATIONAL FINANCIAL REPORTING

26 GROUP.— 


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

2 term ‘international financial reporting group’ 

3 means, with respect to any reporting year, any 

4 group of entities which— 

5 ‘‘(i) includes— 

6 ‘‘(I) at least one foreign corpora7 tion engaged in a trade or business 

8 within the United States, or 

9 ‘‘(II) at least one domestic cor10 poration and one foreign corporation, 

11 ‘‘(ii) prepares consolidated financial 

12 statements with respect to such year, and 

13 ‘‘(iii) reports in such statements aver14 age annual gross receipts (determined in 

15 the aggregate with respect to all entities 

16 which are part of such group) for the 3-re17 porting-year period ending with such re18 porting year in excess of $100,000,000. 

19 ‘‘(B) RULES RELATING TO DETERMINA20 TION OF AVERAGE GROSS RECEIPTS.—For pur21 poses of subparagraph (A)(iii), rules similar to 

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

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

24 of this subsection— 


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

2 percentage’ means, with respect to any domestic 

3 corporation for any taxable year, the ratio (ex4 pressed as a percentage and not greater than 

5 100 percent) of— 

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

7 of the international financial reporting 

8 group’s reported net interest expense for 

9 the reporting year of such group which 

10 ends in or with such taxable year of such 

11 corporation, over 

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

13 interest expense for such reporting year of 

14 such group. 

15 ‘‘(B) REPORTED NET INTEREST EX16 PENSE.—The term ‘reported net interest ex17 pense’ means— 

18 ‘‘(i) with respect to any international 

19 financial reporting group for any reporting 

20 year, the excess of— 

21 ‘‘(I) the aggregate amount of in22 terest expense reported in such 

23 group’s consolidated financial state24 ments for such taxable year, over 


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1 ‘‘(II) the aggregate amount of in2 terest income reported in such group’s 

3 consolidated financial statements for 

4 such taxable year, and 

5 ‘‘(ii) with respect to any domestic cor6 poration for any reporting year, the excess 

7 of— 

8 ‘‘(I) the amount of interest ex9 pense of such corporation reported in 

10 the books and records of the inter11 national financial reporting group 

12 which are used in preparing such 

13 group’s consolidated financial state14 ments for such taxable year, over 

15 ‘‘(II) the amount of interest in16 come of such corporation reported in 

17 such books and records. 

18 ‘‘(C) ALLOCABLE SHARE OF REPORTED

19 NET INTEREST EXPENSE.—With respect to any 

20 domestic corporation which is a member of any 

21 international financial reporting group, such 

22 corporation’s allocable share of such group’s re23 ported net interest expense for any reporting 

24 year is the portion of such expense which bears 

25 the same ratio to such expense as— 


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1 ‘‘(i) the EBITDA of such corporation 

2 for such reporting year, bears to 

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

4 such reporting year. 

5 ‘‘(D) EBITDA.— 

6 ‘‘(i) IN GENERAL.—The term 

7 ‘EBITDA’ means, with respect to any re8 porting year, earnings before interest, 

9 taxes, depreciation, and amortization— 

10 ‘‘(I) as determined in the inter11 national financial reporting group’s 

12 consolidated financial statements for 

13 such year, or 

14 ‘‘(II) for purposes of subpara15 graph (A)(i), as determined in the 

16 books and records of the international 

17 financial reporting group which are 

18 used in preparing such statements if 

19 not determined in such statements. 

20 ‘‘(ii) TREATMENT OF DISREGARDED

21 ENTITIES.—The EBITDA of any domestic 

22 corporation shall not fail to include the 

23 EBITDA of any entity which is dis24 regarded for purposes of this chapter. 


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1 ‘‘(iii) TREATMENT OF INTRA-GROUP

2 DISTRIBUTIONS.—The EBITDA of any do3 mestic corporation shall be determined 

4 without regard to any distribution received 

5 by such corporation from any other mem6 ber of the international financial reporting 

7 group. 

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

9 EBITDA.— 

10 ‘‘(i) NON-POSITIVE GROUP EBITDA.— 

11 In the case of any international financial 

12 reporting group the EBITDA of which is 

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

14 to any member of such group the EBITDA 

15 of which is above zero. 

16 ‘‘(ii) NON-POSITIVE ENTITY

17 EBITDA.—In the case of any group mem18 ber the EBITDA of which is zero or less, 

19 paragraph (1) shall be applied without re20 gard to subparagraph (A) thereof. 

21 ‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 

22 For purposes of this subsection, the term ‘consoli23 dated financial statement’ means any consolidated 

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

25 if such statement is— 


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1 ‘‘(A) a financial statement which is cer2 tified as being prepared in accordance with gen3 erally accepted accounting principles, inter4 national financial reporting standards, or any 

5 other comparable method of accounting identi6 fied by the Secretary, and which is— 

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

8 annual statement to shareholders, required 

9 to be filed with the United States Securi10 ties and Exchange Commission, 

11 ‘‘(ii) an audited financial statement 

12 which is used for— 

13 ‘‘(I) credit purposes, 

14 ‘‘(II) reporting to shareholders, 

15 partners, or other proprietors, or to 

16 beneficiaries, or 

17 ‘‘(III) any other substantial 

18 nontax purpose, 

19 but only if there is no statement described 

20 in clause (i), or 

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

22 State agency for nontax purposes, but only 

23 if there is no statement described in clause 

24 (i) or (ii), or 

25 ‘‘(B) a financial statement which— 


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

2 subclause (I), (II), or (III) of subpara3 graph (A)(ii), or 

4 ‘‘(ii) filed with any regulatory or gov5 ernmental body (whether domestic or for6 eign) specified by the Secretary, 

7 but only if there is no statement described in 

8 subparagraph (A). 

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

10 subsection, the term ‘reporting year’ means, with re11 spect to any international financial reporting group, 

12 the year with respect to which the consolidated fi13 nancial statements are prepared. 

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

15 ‘‘(A) PARTNERSHIPS.—Except as other16 wise provided by the Secretary in paragraph 

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

18 apply to any partnership which is a member of 

19 any international financial reporting group 

20 under rules similar to the rules of section 

21 163(j)(4). 

22 ‘‘(B) FOREIGN CORPORATIONS ENGAGED

23 IN TRADE OR BUSINESS WITHIN THE UNITED

24 STATES.—Except as otherwise provided by the 

25 Secretary in paragraph (7), any deduction for 


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1 interest paid or accrued by a foreign corpora2 tion engaged in a trade or business within the 

3 United States shall be limited in a manner con4 sistent with the principles of this subsection. 

5 ‘‘(C) CONSOLIDATED GROUPS.—For pur6 poses of this subsection, the members of any 

7 group that file (or are required to file) a con8 solidated return with respect to the tax imposed 

9 by chapter 1 for a taxable year shall be treated 

10 as a single corporation. 

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

12 such regulations or other guidance as are necessary 

13 or appropriate to carry out the purposes of this sub14 section.’’. 

15 (b) CARRYFORWARD OF DISALLOWED INTEREST.— 

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

17 inserting after subsection (n), as added by sub18 section (a), the following new subsection: 

19 ‘‘(o) CARRYFORWARD OF CERTAIN DISALLOWED IN20 TEREST.—The amount of any interest not allowed as a 

21 deduction for any taxable year by reason of subsection 

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

23 with respect to such taxable year) shall be treated as inter24 est (and as business interest for purposes of subsection 

25 (j)(1)) paid or accrued in the succeeding taxable year. InVerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00022 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785

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1 terest paid or accrued in any taxable year (determined 

2 without regard to the preceding sentence) shall not be car3 ried past the fifth taxable year following such taxable year, 

4 determined by treating interest as allowed as a deduction 

5 on a first-in, first-out basis.’’. 

6 (2) CONFORMING AMENDMENTS.— 

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

8 as follows: 

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

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

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

12 by striking ‘‘paragraph (2)’’ and inserting ‘‘sub13 section (o)’’. 

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

15 as follows: 

16 ‘‘(20) CARRYFORWARD OF DISALLOWED INTER17 EST.—The carryover of disallowed interest described 

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

19 date of distribution or transfer.’’. 

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

21 as follows: 

22 ‘‘(3) APPLICATION TO CARRYFORWARD OF DIS23 ALLOWED INTEREST.—The term ‘pre-change loss’ 

24 shall include any carryover of disallowed interest deVerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785

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1 scribed in section 163(o) under rules similar to the 

2 rules of paragraph (1).’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2020. 

6 SEC. 5. MODIFICATIONS TO RULES RELATING TO IN7 VERTED CORPORATIONS. 

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

9 amended to read as follows: 

10 ‘‘(b) INVERTED CORPORATIONS TREATED AS DO11 MESTIC CORPORATIONS.— 

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

13 7701(a)(4), a foreign corporation shall be treated for 

14 purposes of this title as a domestic corporation if— 

15 ‘‘(A) such corporation would be a surro16 gate foreign corporation if subsection (a)(2) 

17 were applied by substituting ‘80 percent’ for 

18 ‘60 percent’, or 

19 ‘‘(B) such corporation is an inverted do20 mestic corporation. 

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

22 purposes of this subsection, a foreign corporation 

23 shall be treated as an inverted domestic corporation 

24 if, pursuant to a plan (or a series of related trans25 actions)— 


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1 ‘‘(A) the entity completes after December 

2 22, 2017, the direct or indirect acquisition of— 

3 ‘‘(i) substantially all of the properties 

4 held directly or indirectly by a domestic 

5 corporation, or 

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

7 or substantially all of the properties consti8 tuting a trade or business of, a domestic 

9 partnership, and 

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

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

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

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

14 with respect to a domestic corpora15 tion, by former shareholders of the 

16 domestic corporation by reason of 

17 holding stock in the domestic corpora18 tion, or 

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

20 with respect to a domestic partner21 ship, by former partners of the do22 mestic partnership by reason of hold23 ing a capital or profits interest in the 

24 domestic partnership, or 


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1 ‘‘(ii) the management and control of 

2 the expanded affiliated group which in3 cludes the entity occurs, directly or indi4 rectly, primarily within the United States, 

5 and such expanded affiliated group has 

6 significant domestic business activities. 

7 ‘‘(3) EXCEPTION FOR CORPORATIONS WITH

8 SUBSTANTIAL BUSINESS ACTIVITIES IN FOREIGN

9 COUNTRY OF ORGANIZATION.—A foreign corporation 

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

11 inverted domestic corporation if after the acquisition 

12 the expanded affiliated group which includes the en13 tity has substantial business activities in the foreign 

14 country in which or under the law of which the enti15 ty is created or organized when compared to the 

16 total business activities of such expanded affiliated 

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

18 the preceding sentence, the term ‘substantial busi19 ness activities’ shall have the meaning given such 

20 term under regulations in effect on December 22, 

21 2017, except that the Secretary may issue regula22 tions increasing the threshold percent in any of the 

23 tests under such regulations for determining if busi24 ness activities constitute substantial business activi25 ties for purposes of this paragraph. 


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1 ‘‘(4) MANAGEMENT AND CONTROL.—For pur2 poses of paragraph (2)(B)(ii)— 

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

4 prescribe regulations for purposes of deter5 mining cases in which the management and 

6 control of an expanded affiliated group is to be 

7 treated as occurring, directly or indirectly, pri8 marily within the United States. The regula9 tions prescribed under the preceding sentence 

10 shall apply to periods after December 22, 2017. 

11 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

12 MANAGEMENT.—Such regulations shall provide 

13 that the management and control of an ex14 panded affiliated group shall be treated as oc15 curring, directly or indirectly, primarily within 

16 the United States if substantially all of the ex17 ecutive officers and senior management of the 

18 expanded affiliated group who exercise day-to19 day responsibility for making decisions involving 

20 strategic, financial, and operational policies of 

21 the expanded affiliated group are based or pri22 marily located within the United States. Indi23 viduals who in fact exercise such day-to-day re24 sponsibilities shall be treated as executive offiVerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785

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1 cers and senior management regardless of their 

2 title. 

3 ‘‘(5) SIGNIFICANT DOMESTIC BUSINESS ACTIVI4 TIES.—For purposes of paragraph (2)(B)(ii), an ex5 panded affiliated group has significant domestic 

6 business activities if at least 25 percent of— 

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

8 in the United States, 

9 ‘‘(B) the employee compensation incurred 

10 by the group is incurred with respect to employ11 ees based in the United States, 

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

13 the United States, or 

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

15 the United States, 

16 determined in the same manner as such determina17 tions are made for purposes of determining substan18 tial business activities under regulations referred to 

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

20 but applied by treating all references in such regula21 tions to ‘foreign country’ and ‘relevant foreign coun22 try’ as references to ‘the United States’. The Sec23 retary may issue regulations decreasing the thresh24 old percent in any of the tests under such regula25 tions for determining if business activities constitute 


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1 significant domestic business activities for purposes 

2 of this paragraph.’’. 

3 (b) CONFORMING AMENDMENTS.— 

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

5 amended by striking ‘‘after March 4, 2003,’’ and in6 serting ‘‘after March 4, 2003, and before December 

7 23, 2017,’’. 

8 (2) Subsection (c) of section 7874 is amend9 ed— 

10 (A) in paragraph (2)— 

11 (i) by striking ‘‘subsection 

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

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

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

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

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

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

18 ‘‘(a)(2)(B)(ii)’’; 

19 (C) in paragraph (5), by striking ‘‘sub20 section (a)(2)(B)(ii)’’ and inserting ‘‘sub21 sections (a)(2)(B)(ii) and (b)(2)(B)(i)’’; and 

22 (D) in paragraph (6), by inserting ‘‘or in23 verted domestic corporation, as the case may 

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


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

2 this section shall apply to taxable years ending after De3 cember 22, 2017. 

4 SEC. 6. TREATMENT OF FOREIGN CORPORATIONS MAN5 AGED AND CONTROLLED IN THE UNITED 

6 STATES AS DOMESTIC CORPORATIONS. 

7 (a) IN GENERAL.—Section 7701 is amended by re8 designating subsection (p) as subsection (q) and by insert9 ing after subsection (o) the following new subsection: 

10 ‘‘(p) CERTAIN CORPORATIONS MANAGED AND CON11 TROLLED IN THE UNITED STATES TREATED AS DOMES12 TIC FOR INCOME TAX.— 

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

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

15 paragraph (2) if— 

16 ‘‘(A) the corporation would not otherwise 

17 be treated as a domestic corporation for pur18 poses of this title, but 

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

20 corporation occurs, directly or indirectly, pri21 marily within the United States, 

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

23 provision of this title relating to chapter 1), the cor24 poration shall be treated as a domestic corporation. 

25 ‘‘(2) CORPORATION DESCRIBED.— 


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1 ‘‘(A) IN GENERAL.—A corporation is de2 scribed in this paragraph if— 

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

4 regularly traded on an established securi5 ties market, or 

6 ‘‘(ii) the aggregate gross assets of 

7 such corporation (or any predecessor there8 of), including assets under management 

9 for investors, whether held directly or indi10 rectly, at any time during the taxable year 

11 or any preceding taxable year is 

12 $50,000,000 or more. 

13 ‘‘(B) GENERAL EXCEPTION.—A corpora14 tion shall not be treated as described in this 

15 paragraph if— 

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

17 corporation described in this paragraph in 

18 a preceding taxable year, 

19 ‘‘(ii) such corporation— 

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

21 established securities market, and 

22 ‘‘(II) has, and is reasonably ex23 pected to continue to have, aggregate 

24 gross assets (including assets under 

25 management for investors, whether 


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1 held directly or indirectly) of less than 

2 $50,000,000, and 

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

4 such corporation under this subparagraph. 

5 ‘‘(3) MANAGEMENT AND CONTROL.— 

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

7 prescribe regulations for purposes of deter8 mining cases in which the management and 

9 control of a corporation is to be treated as oc10 curring primarily within the United States. 

11 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

12 MANAGEMENT.—Such regulations shall provide 

13 that— 

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

15 corporation shall be treated as occurring 

16 primarily within the United States if sub17 stantially all of the executive officers and 

18 senior management of the corporation who 

19 exercise day-to-day responsibility for mak20 ing decisions involving strategic, financial, 

21 and operational policies of the corporation 

22 are located primarily within the United 

23 States, and 

24 ‘‘(ii) individuals who are not executive 

25 officers and senior management of the corVerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00032 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785

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1 poration (including individuals who are of2 ficers or employees of other corporations in 

3 the same chain of corporations as the cor4 poration) shall be treated as executive offi5 cers and senior management if such indi6 viduals exercise the day-to-day responsibil7 ities of the corporation described in clause 

8 (i). 

9 ‘‘(C) CORPORATIONS PRIMARILY HOLDING

10 INVESTMENT ASSETS.—Such regulations shall 

11 also provide that the management and control 

12 of a corporation shall be treated as occurring 

13 primarily within the United States if— 

14 ‘‘(i) the assets of such corporation (di15 rectly or indirectly) consist primarily of as16 sets being managed on behalf of investors, 

17 and 

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

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

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

21 this section shall apply to taxable years beginning on or 

22 after the date which is 2 years after the date of the enact23 ment of this Act, whether or not regulations are issued 


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

2 of 1986, as added by this section. 

Æ 


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