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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3933 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 3933

      To amend the Internal Revenue Code of 1986 to provide that 
distributions from a controlled foreign corporation to a United States 
 shareholder shall be excluded from gross income if at least a portion 
  of the distribution is invested in certain property located in the 
  United States and in the employment of new employees in the United 
                                States.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             March 1, 1994

Ms. Slaughter introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL

 
      To amend the Internal Revenue Code of 1986 to provide that 
distributions from a controlled foreign corporation to a United States 
 shareholder shall be excluded from gross income if at least a portion 
  of the distribution is invested in certain property located in the 
  United States and in the employment of new employees in the United 
                                States.

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

SECTION 1. EXCLUSION FROM GROSS INCOME FOR DISTRIBUTIONS FROM 
              CONTROLLED FOREIGN CORPORATIONS WHICH ARE INVESTED IN 
              CERTAIN PROPERTY LOCATED IN THE UNITED STATES OR USED TO 
              HIRE NEW EMPLOYEES IN THE UNITED STATES.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by redesignating section 137 as section 
138 and by inserting after section 136 the following new section:

``SEC. 137. DISTRIBUTIONS FROM CONTROLLED FOREIGN CORPORATIONS WHICH 
              ARE INVESTED IN CERTAIN UNITED STATES PROPERTY OR WHICH 
              ARE USED TO HIRE NEW EMPLOYEES IN THE UNITED STATES.

    ``(a) Exclusion.--The gross income of a United States shareholder 
of a controlled foreign corporation shall not include the amount of any 
distribution received during the taxable year by such shareholder from 
such corporation.
    ``(b) Maximum Exclusion.--
            ``(1) In general.--The amount distributed from a controlled 
        foreign corporation which is excluded from a shareholder's 
        gross income under subsection (a) for any taxable year shall 
        not exceed the excess (if any) of--
                    ``(A) the amount equal to such shareholder's 
                ownership percentage of the excess passive assets of 
                such corporation for its base year, over
                    ``(B) the aggregate amount distributed from such 
                corporation which was excluded from such shareholder's 
                gross income under subsection (a) for all prior taxable 
                years of such shareholder ending on or after the close 
                of the base year of such corporation.
            ``(2) Shareholder's ownership percentage.--For purposes of 
        paragraph (1), a shareholder's ownership percentage is the 
        percentage of the total combined voting power of all classes of 
        stock entitled to vote in the controlled foreign corporation 
        which the shareholder owns (within the meaning of section 
        958(a)) or is considered as owning under section 958(b). Such 
        percentage shall be determined as of the close of the base 
        year.
            ``(3) Base year.--For purposes of this subsection, the base 
        year is the controlled foreign corporation's first taxable year 
        ending after December 31, 1992.
            ``(4) Lower limitation if reduction in excess passive 
        assets.--If, for any taxable year of the corporation after the 
        base year, the excess passive assets of such corporation are 
        less than such excess passive assets for the base year, then, 
        for purposes of applying this subsection to any taxable year of 
        a United States shareholder ending after the close of such 
        taxable year of the corporation, the limitation under paragraph 
        (1) shall be the lesser of--
                    ``(A) such limitation (determined without regard to 
                this paragraph), or
                    ``(B) such limitation determined as if such taxable 
                year of the corporation were the base year of such 
                corporation.
            ``(5) Excess passive assets.--For purposes of this 
        subsection, the term `excess passive assets' has the meaning 
        given such term by section 956A(c).
            ``(6) Predecessors.--Under regulations prescribed by the 
        Secretary, to the extent necessary to carry out the purposes of 
        this subsection, any reference to a shareholder shall be 
        treated as including a reference to any predecessor of such 
        shareholder and to any person from whom such shareholder 
        acquired any portion of such shareholder's stock in such 
        corporation.
    ``(c) Reinvestment Requirements.--
            ``(1) In general.--If, as of the close of the reinvestment 
        period with respect to any distribution, the taxpayer fails to 
        meet--
                    ``(A) the investment in property requirement of 
                subsection (d), or
                    ``(B) the job creation requirement of subsection 
                (e),
        then the taxpayer's tax imposed by this chapter for the taxable 
        year in which such reinvestment period ends shall be increased 
        by an amount equal to the recapture amount with respect to such 
        distribution.
            ``(2) Recapture amount.--For purposes of paragraph (1), the 
        term `recapture amount' means an amount equal to the sum of--
                    ``(A) the shortfall percentage of the reduction in 
                the taxpayer's liability for tax under this chapter 
                which resulted from excluding such distribution from 
                gross income under subsection (a), plus
                    ``(B) the aggregate amount of interest (determined 
                in the manner provided in subsection (f)(3)) on the 
                amount determined under subparagraph (A).
            ``(3) Shortfall percentage.--For purposes of paragraph (2), 
        the term `shortfall percentage' means the greater of--
                    ``(A) the investment in property shortfall 
                percentage, or
                    ``(B) the job creation shortfall percentage.
            ``(4) Investment in property shortfall percentage.--For 
        purposes of paragraph (3), the term `investment in property 
        shortfall percentage' means the percentage which--
                    ``(A) the excess (if any) of--
                            ``(i) an amount equal to 50 percent of the 
                        distribution involved, over
                            ``(ii) the amount of qualified investment 
                        made during the reinvestment period which 
                        allocable to such distribution, bears to
                    ``(B) the amount described in subparagraph (A)(i).
            ``(5) Job creation shortfall percentage.--For purposes of 
        paragraph (3), the term `job creation shortfall percentage' 
        means the percentage which--
                    ``(A) the excess (if any) of--
                            ``(i) an amount equal to 12.5 percent of 
                        the distribution involved, over
                            ``(ii) the amount of new employee wages 
                        paid during the last taxable year of the 
                        reinvestment period allocable to such 
                        distribution, bears to
                    ``(B) the amount described in subparagraph (A)(i).
    ``(d) Investment in Property Requirement.--For purposes of this 
section--
            ``(1) Requirement.--A taxpayer meets the investment in 
        property requirement of this subsection if the qualified 
        investment of the taxpayer during the reinvestment period (to 
        the extent not taken into account under this paragraph with 
        respect to any prior distribution) is not less than 50 percent 
        of the amount of the distribution.
            ``(2) Qualified investment.--The term `qualified 
        investment' means the sum of--
                    ``(A) the aggregate bases of new qualified property 
                placed in service by the taxpayer, and
                    ``(B) the aggregate cost of used qualified property 
                placed in service by the taxpayer.
        Rules similar to the rules of subsections (b) and (c) of 
        section 48 (as in effect on the day before the date of the 
        enactment of the Revenue Reconciliation Act of 1990) shall 
        apply for purposes of this paragraph.
            ``(3) Qualified property.--For purposes of paragraph (2), 
        the term `qualified property' means--
                    ``(A) section 38 property (as defined by section 
                48(a) as in effect on the day before the date of the 
                enactment of the Omnibus Budget Reconciliation Act of 
                1990), and
                    ``(B) real property (not described in subparagraph 
                (A)) used as an integral part of manufacturing facility 
                (as defined in section 144(a)(12)(C)).
        The term `qualified property' shall not include any property if 
        the taxpayer is the lessor of the property.
            ``(4) Recapture if property disposed of, etc.--
                    ``(A) In general.--If any qualified property is 
                disposed of, or otherwise ceases to be qualified 
                property with respect to the taxpayer, before the close 
                of the recapture period, then the taxpayer's tax 
                imposed by this chapter for the taxable year in which 
                such disposition or cessation occurs shall be increased 
                by the sum of--
                            ``(i) the recapture percentage of such 
                        property's share of the tax benefit under this 
                        section, plus
                            ``(ii) the aggregate amount of interest 
                        (determined in the manner provided in 
                        subsection (f)(3)) on the amount determined 
                        under subparagraph (A).
                    ``(B) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Recapture period.--The term 
                        `recapture period' means, with respect to any 
                        property, the period consisting of the first 
                        full year after the property is placed in 
                        service and--
                                    ``(I) the 2 succeeding full years 
                                in the case of 3-year property (within 
                                the meaning of section 168),
                                    ``(II) the 4 succeeding full years 
                                in the case of section 38 property 
                                other than 3-year property, and
                                    ``(III) the 9 succeeding full years 
                                in the case of property referred to in 
                                paragraph (2)(B).
                            ``(ii) Recapture percentage.--The term 
                        `recapture percentage' means the percentage 
                        determined under section 50(a)(1)(B); except 
                        that--
                                    ``(I) in the case of 3-year 
                                property, the percentage set forth in 
                                clause (ii) of the table contained in 
                                paragraph (1)(B) shall be 66 percent, 
                                the percentage set forth in clause 
                                (iii) of such table shall be 33 
                                percent, and clauses (iv) and (v) of 
                                such table shall not apply, and
                                    ``(II) in the case of property 
                                referred to in paragraph (2)(B), the 
                                percentage shall be 100 percent for the 
                                first full year of the recapture period 
                                and, for each full year thereafter, 
                                shall be 10 percentage points less than 
                                the recapture percentage for the prior 
                                year.
                    ``(C) Property's share of tax benefit.--A 
                property's share of the tax benefit under this section 
                shall be--
                            ``(i) an amount which bears the same ratio 
                        to the reduction in the taxpayer's liability 
                        for tax under this chapter which resulted from 
                        excluding the distribution involved from gross 
                        income under subsection (a), as
                            ``(ii) the unadjusted basis of such 
                        property bears to the aggregate unadjusted 
                        bases of all qualified property placed in 
                        service during the reinvestment period with 
                        respect to such distribution.
    ``(e) Job Creation Requirement.--For purposes of this section--
            ``(1) Requirement.--A taxpayer meets the job creation 
        requirement of this subsection if the new employee wages paid 
        by the taxpayer during the last taxable year of the 
        reinvestment period (to the extent not taken into account under 
        this paragraph with respect to any prior distribution) is not 
        less than 12.5 percent of the amount of the distribution.
            ``(2) New employee wages.--The term `new employee wages' 
        means, with respect to any distribution, wages paid to 
        employees--
                    ``(A) who are first hired after the date of such 
                distribution, and
                    ``(B) whose employment represents an increase in 
                the aggregate number of employees of the taxpayer in 
                the United States.
            ``(3) Wages.--The term `wages' has the same meaning as when 
        used in section 51.
            ``(4) Increased employment must be maintained for 4 
        years.--
                    ``(A) In general.--If for any taxable year in the 
                employment maintenance period (hereafter in this 
                paragraph referred to as the `redetermination year') 
                the new employee wages with respect to any distribution 
                are less than the new employee wages for the last 
                taxable year of the reinvestment period with respect to 
                such distribution, the taxpayer's tax imposed by this 
                chapter for the redetermination year shall be increased 
                by an amount equal to the adjusted recapture amount 
                with respect to such distribution.
                    ``(B) Adjusted recapture amount.--For purposes of 
                subparagraph (A), the term `adjusted recapture amount' 
                means an amount equal to the sum of--
                            ``(i) the excess (if any) of--
                                    ``(I) the job creation shortfall 
                                percentage of the reduction in the 
                                taxpayer's liability for tax under this 
                                chapter which resulted from excluding 
                                such distribution from gross income 
                                under subsection (a) (determined for 
                                the redetermination year), over
                                    ``(II) the amount determined under 
                                subsection (c)(2)(A) (increased by any 
                                prior increase in tax under this 
                                paragraph with respect to such 
                                distribution), plus
                            ``(ii) the aggregate amount of interest 
                        (determined in the manner provided in 
                        subsection (f)(3)) on the excess determined 
                        under clause (i).
                    ``(C) Employment maintenance period.--For purposes 
                of this paragraph, the term `employment maintenance 
                period' means any period of 4 consecutive taxable years 
                selected by the taxpayer so long as at least 1 of such 
                taxable years is during the reinvestment period.
    ``(f) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Reinvestment period.--The term `reinvestment period' 
        means, with respect to any distribution received during a 
        taxable year, such taxable year and the 4 succeeding taxable 
        years.
            ``(2) United states shareholder; controlled foreign 
        corporation.--The terms `United States shareholder' and 
        `controlled foreign corporation' have the respective meanings 
        given such terms by sections 951 and 957.
            ``(3) Rules relating to determination of interest.--
                    ``(A) In general.--The amount of interest referred 
                to in subsections (c)(2), (d)(4), and (e)(3) for any 
                taxable year shall be determined for the period--
                            ``(i) beginning on the due date for taxable 
                        year during which the distribution involved was 
                        made, and
                            ``(ii) ending on the due date for the 
                        taxable year for which the increase in tax is 
                        being determined,
                by using the rates and method applicable under section 
                6621 for underpayment of tax for such period.
                    ``(B) Due date.--For purposes of subparagraph (A), 
                the term `due date' means the date prescribed by law 
                (determined without regard to extensions) for filing 
                the return of the tax imposed by this chapter for the 
                taxable year.
                    ``(C) Treatment of increase in tax attributable to 
                interest as interest.--Any increase in tax imposed by 
                this chapter for a taxable year by reason of this 
                section to the extent attributable to an amount 
                referred to in subsection (c)(2)(B), (d)(4)(A)(ii), or 
                (e)(3)(B) shall be treated as interest paid under 
                section 6601 on the due date for such taxable year.
            ``(4) Controlled groups.--All taxpayers treated as a single 
        employer under subsection (a) or (b) of section 52 shall be 
        treated as a single taxpayer.
    ``(g) Basis Adjustment.--
            ``(1) In general.--For purposes of this subtitle, the basis 
        of any qualified property placed in service during any taxable 
        year for which an amount was excluded from gross income under 
        this section shall be reduced by an amount equal to such 
        property's share of such exclusion (determined under subsection 
        (d)(4)).
            ``(2) Certain dispositions.--If there is an increase in tax 
        by reason of this section for any taxable year, proper 
        adjustments shall be made under regulations prescribed by the 
        Secretary with respect to any property the basis of which was 
        reduced under paragraph (1).''
    (b) Technical Amendment.--Subsection (a) of section 1016 of such 
Code is amended by striking ``and'' at the end of paragraph (24), by 
striking the period at the end of paragraph (25) and inserting ``, 
and'', and by adding at the end thereof the following new paragraph:
            ``(26) to the extent provided in section 137(g).''
    (c) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of such Code is amended by striking the last 
item and inserting the following new items:

                              ``Sec. 137. Distributions from controlled 
                                        foreign corporations which are 
                                        invested in certain United 
                                        States property or which are 
                                        used to hire new employees in 
                                        the United States.
                              ``Sec. 138. Cross references to other 
                                        Acts.''
    (d) Effective Date.--The amendments made by this section shall 
apply to distributions received after the date of the enactment of this 
Act in taxable years ending after such date.

                                 <all>

HR 3933 IH----2
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