I 

115TH CONGRESS 

2D SESSION H. R. 5108 

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 

FEBRUARY 27, 2018 

Mr. DOGGETT (for himself, Mr. CAPUANO, Mr. CUMMINGS, Mr. DANNY K. 

DAVIS of Illinois, Ms. DELAURO, Mr. DEFAZIO, Mr. GRIJALVA, Ms. 

JAYAPAL, Ms. KAPTUR, Mr. NADLER, Mrs. NAPOLITANO, Ms. NORTON, 

Mr. POCAN, Mr. RASKIN, Mr. RYAN of Ohio, Ms. SCHAKOWSKY, Mr. 

SARBANES, Mr. GARAMENDI, Ms. SLAUGHTER, Mr. HIGGINS of New 

York, Mr. ELLISON, Mrs. CAROLYN B. MALONEY of New York, Mrs. 

WATSON COLEMAN, Ms. LEE, Mr. DESAULNIER, and Ms. JUDY CHU of 

California) 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 

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’’. 


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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment 

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

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986. 

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

8 this Act is as follows: 

Sec. 1. Short title, etc. 

Sec. 2. Current year inclusion of net CFC tested income. 

Sec. 3. Limitation on deduction of interest by domestic corporations which are 

members of an international financial reporting group. 

Sec. 4. Modifications to rules relating to inverted corporations. 

Sec. 5. Treatment of foreign corporations managed and controlled in the United 

States as domestic corporations. 

9 SEC. 2. CURRENT YEAR INCLUSION OF NET CFC TESTED IN10 COME. 

11 (a) REPEAL OF TAX-FREE DEEMED RETURN ON IN12 VESTMENTS.— 

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

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

15 inserting ‘‘net CFC tested income’’. 

16 (2) CONFORMING AMENDMENTS.— 

17 (A) Section 951A is amended by striking 

18 subsections (b) and (d). 

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

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

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


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1 (C) Section 951A(f) is amended to read as 

2 follows: 

3 ‘‘(f) TREATMENT AS SUBPART F INCOME FOR CER4 TAIN PURPOSES.— 

5 ‘‘(1) IN GENERAL.—Except as provided in para6 graph (2), any net CFC tested income included in 

7 gross income under subsection (a) shall be treated in 

8 the same manner as an amount included under sec9 tion 951(a)(1)(A) for purposes of applying sections 

10 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 

11 961, 962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 

12 1248(d)(1), 6501(e)(1)(C), 6654(d)(2)(D), and 

13 6655(e)(4). 

14 ‘‘(2) EXCEPTION.—The Secretary shall provide 

15 rules for the application of paragraph (1) to other 

16 provisions of this title in any case in which the de17 termination of subpart F income is required to be 

18 made at the level of the controlled foreign corpora19 tion.’’. 

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

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

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

23 CFC tested income (as defined in section 

24 951A(c))’’. 


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

2 CFC TESTED INCOME.— 

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

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

5 by striking the item relating to such section in the 

6 table of sections of such part). 

7 (2) CONFORMING AMENDMENTS.— 

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

9 striking ‘‘section 172, 245A, or 250’’ and in10 serting ‘‘section 172 or 245A’’. 

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

12 paragraph (9). 

13 (C) Section 246(b)(1) is amended— 

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

15 of section 245, and section 250’’ and in16 serting ‘‘and subsection (a) and (b) of sec17 tion 245’’; and 

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

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

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

21 245’’. 

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

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

24 222’’. 


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1 (c) NET CFC TESTED INCOME DETERMINED WITH2 OUT REGARD TO HIGH TAX FOREIGN INCOME.—Section 

3 951A(c)(2)(A)(i) is amended by redesignating subclauses 

4 (IV) and (V) as subclauses (V) and (VI), respectively, and 

5 by inserting after subclause (III) the following new sub6 clause: 

7 ‘‘(IV) any item of income subject 

8 to an effective rate of income tax im9 posed by a foreign country greater 

10 than the maximum rate of tax speci11 fied in section 11,’’. 

12 (d) REPEAL OF EXCLUSION OF FOREIGN OIL AND

13 GAS EXTRACTION INCOME FROM THE DETERMINATION

14 OF TESTED INCOME.—Section 951A(c)(2)(A)(i), as 

15 amended by subsection (c) is amended— 

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

17 (IV); 

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

19 (V) and inserting ‘‘over’’; and 

20 (3) by striking subclause (VI). 

21 (e) EFFECTIVE DATE.— 

22 (1) IN GENERAL.—Except as otherwise pro23 vided in this subsection, the amendments made by 

24 this section shall apply to taxable years of foreign 

25 corporations beginning after December 31, 2017, 


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1 and to taxable years of United States shareholders 

2 in which or with which such taxable years of foreign 

3 corporations end. 

4 (2) REPEAL OF REDUCED RATE OF TAX.—The 

5 amendments made by subsection (b) shall apply to 

6 taxable years beginning after December 31, 2017. 

7 SEC. 3. LIMITATION ON DEDUCTION OF INTEREST BY DO8 MESTIC CORPORATIONS WHICH ARE MEM9 BERS OF AN INTERNATIONAL FINANCIAL RE10 PORTING GROUP. 

11 (a) IN GENERAL.—Section 163 is amended by redes12 ignating subsection (n) as subsection (p) and by inserting 

13 after subsection (m) the following new subsection: 

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

15 DOMESTIC CORPORATIONS IN INTERNATIONAL FINAN16 CIAL REPORTING GROUPS.— 

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

18 corporation which is a member of any international 

19 financial reporting group, the deduction under this 

20 chapter for interest paid or accrued during the tax21 able year shall not exceed the sum of— 

22 ‘‘(A) the allowable percentage of 110 per23 cent of the excess (if any) of— 

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

25 paid or accrued, over 


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1 ‘‘(ii) the amount described in subpara2 graph (B), plus 

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

4 gross income of such corporation for such tax5 able year. 

6 ‘‘(2) INTERNATIONAL FINANCIAL REPORTING

7 GROUP.— 

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

9 term ‘international financial reporting group’ 

10 means, with respect to any reporting year, any 

11 group of entities which— 

12 ‘‘(i) includes— 

13 ‘‘(I) at least one foreign corpora14 tion engaged in a trade or business 

15 within the United States, or 

16 ‘‘(II) at least one domestic cor17 poration and one foreign corporation, 

18 ‘‘(ii) prepares consolidated financial 

19 statements with respect to such year, and 

20 ‘‘(iii) reports in such statements aver21 age annual gross receipts (determined in 

22 the aggregate with respect to all entities 

23 which are part of such group) for the 3-re24 porting-year period ending with such re25 porting year in excess of $100,000,000. 


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1 ‘‘(B) RULES RELATING TO DETERMINA2 TION OF AVERAGE GROSS RECEIPTS.—For pur3 poses of subparagraph (A)(iii), rules similar to 

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

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

6 of this subsection— 

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

8 percentage’ means, with respect to any domestic 

9 corporation for any taxable year, the ratio (ex10 pressed as a percentage and not greater than 

11 100 percent) of— 

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

13 of the international financial reporting 

14 group’s reported net interest expense for 

15 the reporting year of such group which 

16 ends in or with such taxable year of such 

17 corporation, over 

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

19 interest expense for such reporting year of 

20 such group. 

21 ‘‘(B) REPORTED NET INTEREST EX22 PENSE.—The term ‘reported net interest ex23 pense’ means— 


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1 ‘‘(i) with respect to any international 

2 financial reporting group for any reporting 

3 year, the excess of— 

4 ‘‘(I) the aggregate amount of in5 terest expense reported in such 

6 group’s consolidated financial state7 ments for such taxable year, over 

8 ‘‘(II) the aggregate amount of in9 terest income reported in such group’s 

10 consolidated financial statements for 

11 such taxable year, and 

12 ‘‘(ii) with respect to any domestic cor13 poration for any reporting year, the excess 

14 of— 

15 ‘‘(I) the amount of interest ex16 pense of such corporation reported in 

17 the books and records of the inter18 national financial reporting group 

19 which are used in preparing such 

20 group’s consolidated financial state21 ments for such taxable year, over 

22 ‘‘(II) the amount of interest in23 come of such corporation reported in 

24 such books and records. 


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1 ‘‘(C) ALLOCABLE SHARE OF REPORTED

2 NET INTEREST EXPENSE.—With respect to any 

3 domestic corporation which is a member of any 

4 international financial reporting group, such 

5 corporation’s allocable share of such group’s re6 ported net interest expense for any reporting 

7 year is the portion of such expense which bears 

8 the same ratio to such expense as— 

9 ‘‘(i) the EBITDA of such corporation 

10 for such reporting year, bears to 

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

12 such reporting year. 

13 ‘‘(D) EBITDA.— 

14 ‘‘(i) IN GENERAL.—The term 

15 ‘EBITDA’ means, with respect to any re16 porting year, earnings before interest, 

17 taxes, depreciation, and amortization— 

18 ‘‘(I) as determined in the inter19 national financial reporting group’s 

20 consolidated financial statements for 

21 such year, or 

22 ‘‘(II) for purposes of subpara23 graph (A)(i), as determined in the 

24 books and records of the international 

25 financial reporting group which are 


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1 used in preparing such statements if 

2 not determined in such statements. 

3 ‘‘(ii) TREATMENT OF DISREGARDED

4 ENTITIES.—The EBITDA of any domestic 

5 corporation shall not fail to include the 

6 EBITDA of any entity which is dis7 regarded for purposes of this chapter. 

8 ‘‘(iii) TREATMENT OF INTRA-GROUP

9 DISTRIBUTIONS.—The EBITDA of any do10 mestic corporation shall be determined 

11 without regard to any distribution received 

12 by such corporation from any other mem13 ber of the international financial reporting 

14 group. 

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

16 EBITDA.— 

17 ‘‘(i) NON-POSITIVE GROUP EBITDA.— 

18 In the case of any international financial 

19 reporting group the EBITDA of which is 

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

21 to any member of such group the EBITDA 

22 of which is above zero. 

23 ‘‘(ii) NON-POSITIVE ENTITY

24 EBITDA.—In the case of any group mem25 ber the EBITDA of which is zero or less, 


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1 paragraph (1) shall be applied without re2 gard to subparagraph (A) thereof. 

3 ‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 

4 For purposes of this subsection, the term ‘consoli5 dated financial statement’ means any consolidated 

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

7 if such statement is— 

8 ‘‘(A) a financial statement which is cer9 tified as being prepared in accordance with gen10 erally accepted accounting principles, inter11 national financial reporting standards, or any 

12 other comparable method of accounting identi13 fied by the Secretary, and which is— 

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

15 annual statement to shareholders, required 

16 to be filed with the United States Securi17 ties and Exchange Commission, 

18 ‘‘(ii) an audited financial statement 

19 which is used for— 

20 ‘‘(I) credit purposes, 

21 ‘‘(II) reporting to shareholders, 

22 partners, or other proprietors, or to 

23 beneficiaries, or 

24 ‘‘(III) any other substantial 

25 nontax purpose, 


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1 but only if there is no statement described 

2 in clause (i), or 

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

4 State agency for nontax purposes, but only 

5 if there is no statement described in clause 

6 (i) or (ii), or 

7 ‘‘(B) a financial statement which— 

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

9 subclause (I), (II), or (III) of subpara10 graph (A)(ii), or 

11 ‘‘(ii) filed with any regulatory or gov12 ernmental body (whether domestic or for13 eign) specified by the Secretary, 

14 but only if there is no statement described in 

15 subparagraph (A). 

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

17 subsection, the term ‘reporting year’ means, with re18 spect to any international financial reporting group, 

19 the year with respect to which the consolidated fi20 nancial statements are prepared. 

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

22 ‘‘(A) PARTNERSHIPS.—Except as other23 wise provided by the Secretary in paragraph 

24 (7), this subsection shall apply to any partner25 ship which is a member of any international fiVerDate Sep 11 2014 02:03 Mar 02, 2018 Jkt 079200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H5108.IH H5108

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1 nancial reporting group under rules similar to 

2 the rules of section 163(j)(4). 

3 ‘‘(B) FOREIGN CORPORATIONS ENGAGED

4 IN TRADE OR BUSINESS WITHIN THE UNITED

5 STATES.—Except as otherwise provided by the 

6 Secretary in paragraph (7), any deduction for 

7 interest paid or accrued by a foreign corpora8 tion engaged in a trade or business within the 

9 United States shall be limited in a manner con10 sistent with the principles of this subsection. 

11 ‘‘(C) CONSOLIDATED GROUPS.—For pur12 poses of this subsection, the members of any 

13 group that file (or are required to file) a con14 solidated return with respect to the tax imposed 

15 by chapter 1 for a taxable year shall be treated 

16 as a single corporation. 

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

18 such regulations or other guidance as are necessary 

19 or appropriate to carry out the purposes of this sub20 section.’’. 

21 (b) CARRYFORWARD OF DISALLOWED INTEREST.— 

22 (1) IN GENERAL.—Section 163(o) is amended 

23 to read as follows: 

24 ‘‘(o) CARRYFORWARD OF CERTAIN DISALLOWED IN25 TEREST.—The amount of any interest not allowed as a 


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1 deduction for any taxable year by reason of subsection 

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

3 with respect to such taxable year) shall be treated as inter4 est (and as business interest for purposes of subsection 

5 (j)(1)) paid or accrued in the succeeding taxable year. In6 terest paid or accrued in any taxable year (determined 

7 without regard to the preceding sentence) shall not be car8 ried past the fifth taxable year following such taxable year, 

9 determined by treating interest as allowed as a deduction 

10 on a first-in, first-out basis.’’. 

11 (2) CONFORMING AMENDMENTS.— 

12 (A) Section 381(c)(19) is amended to read 

13 as follows: 

14 ‘‘(20) CARRYFORWARD OF DISALLOWED INTER15 EST.—The carryover of disallowed interest described 

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

17 date of distribution or transfer.’’. 

18 (B) Section 382(d)(3) is amended to read 

19 as follows: 

20 ‘‘(3) APPLICATION TO CARRYFORWARD OF DIS21 ALLOWED INTEREST.—The term ‘pre-change loss’ 

22 shall include any carryover of disallowed interest de23 scribed in section 163(o) under rules similar to the 

24 rules of paragraph (1).’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 SEC. 4. MODIFICATIONS TO RULES RELATING TO IN5 VERTED CORPORATIONS. 

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

7 amended to read as follows: 

8 ‘‘(b) INVERTED CORPORATIONS TREATED AS DO9 MESTIC CORPORATIONS.— 

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

11 7701(a)(4), a foreign corporation shall be treated for 

12 purposes of this title as a domestic corporation if— 

13 ‘‘(A) such corporation would be a surro14 gate foreign corporation if subsection (a)(2) 

15 were applied by substituting ‘80 percent’ for 

16 ‘60 percent’, or 

17 ‘‘(B) such corporation is an inverted do18 mestic corporation. 

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

20 purposes of this subsection, a foreign corporation 

21 shall be treated as an inverted domestic corporation 

22 if, pursuant to a plan (or a series of related trans23 actions)— 

24 ‘‘(A) the entity completes after May 8, 

25 2014, the direct or indirect acquisition of— 


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1 ‘‘(i) substantially all of the properties 

2 held directly or indirectly by a domestic 

3 corporation, or 

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

5 or substantially all of the properties consti6 tuting a trade or business of, a domestic 

7 partnership, and 

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

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

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

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

12 with respect to a domestic corpora13 tion, by former shareholders of the 

14 domestic corporation by reason of 

15 holding stock in the domestic corpora16 tion, or 

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

18 with respect to a domestic partner19 ship, by former partners of the do20 mestic partnership by reason of hold21 ing a capital or profits interest in the 

22 domestic partnership, or 

23 ‘‘(ii) the management and control of 

24 the expanded affiliated group which in25 cludes the entity occurs, directly or indiVerDate Sep 11 2014 02:03 Mar 02, 2018 Jkt 079200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\H5108.IH H5108

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1 rectly, primarily within the United States, 

2 and such expanded affiliated group has 

3 significant domestic business activities. 

4 ‘‘(3) EXCEPTION FOR CORPORATIONS WITH

5 SUBSTANTIAL BUSINESS ACTIVITIES IN FOREIGN

6 COUNTRY OF ORGANIZATION.—A foreign corporation 

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

8 inverted domestic corporation if after the acquisition 

9 the expanded affiliated group which includes the en10 tity has substantial business activities in the foreign 

11 country in which or under the law of which the enti12 ty is created or organized when compared to the 

13 total business activities of such expanded affiliated 

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

15 the preceding sentence, the term ‘substantial busi16 ness activities’ shall have the meaning given such 

17 term under regulations in effect on May 8, 2014, ex18 cept that the Secretary may issue regulations in19 creasing the threshold percent in any of the tests 

20 under such regulations for determining if business 

21 activities constitute substantial business activities for 

22 purposes of this paragraph. 

23 ‘‘(4) MANAGEMENT AND CONTROL.—For pur24 poses of paragraph (2)(B)(ii)— 


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

2 prescribe regulations for purposes of deter3 mining cases in which the management and 

4 control of an expanded affiliated group is to be 

5 treated as occurring, directly or indirectly, pri6 marily within the United States. The regula7 tions prescribed under the preceding sentence 

8 shall apply to periods after May 8, 2014. 

9 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

10 MANAGEMENT.—Such regulations shall provide 

11 that the management and control of an ex12 panded affiliated group shall be treated as oc13 curring, directly or indirectly, primarily within 

14 the United States if substantially all of the ex15 ecutive officers and senior management of the 

16 expanded affiliated group who exercise day-to17 day responsibility for making decisions involving 

18 strategic, financial, and operational policies of 

19 the expanded affiliated group are based or pri20 marily located within the United States. Indi21 viduals who in fact exercise such day-to-day re22 sponsibilities shall be treated as executive offi23 cers and senior management regardless of their 

24 title. 


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1 ‘‘(5) SIGNIFICANT DOMESTIC BUSINESS ACTIVI2 TIES.—For purposes of paragraph (2)(B)(ii), an ex3 panded affiliated group has significant domestic 

4 business activities if at least 25 percent of— 

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

6 in the United States, 

7 ‘‘(B) the employee compensation incurred 

8 by the group is incurred with respect to employ9 ees based in the United States, 

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

11 the United States, or 

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

13 the United States, 

14 determined in the same manner as such determina15 tions are made for purposes of determining substan16 tial business activities under regulations referred to 

17 in paragraph (3) as in effect on May 8, 2014, but 

18 applied by treating all references in such regulations 

19 to ‘foreign country’ and ‘relevant foreign country’ as 

20 references to ‘the United States’. The Secretary may 

21 issue regulations decreasing the threshold percent in 

22 any of the tests under such regulations for deter23 mining if business activities constitute significant 

24 domestic business activities for purposes of this 

25 paragraph.’’. 


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1 (b) CONFORMING AMENDMENTS.— 

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

3 amended by striking ‘‘after March 4, 2003,’’ and in4 serting ‘‘after March 4, 2003, and before May 9, 

5 2014,’’. 

6 (2) Subsection (c) of section 7874 is amend7 ed— 

8 (A) in paragraph (2)— 

9 (i) by striking ‘‘subsection 

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

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

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

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

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

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

16 ‘‘(a)(2)(B)(ii)’’; 

17 (C) in paragraph (5), by striking ‘‘sub18 section (a)(2)(B)(ii)’’ and inserting ‘‘sub19 sections (a)(2)(B)(ii) and (b)(2)(B)(i)’’; and 

20 (D) in paragraph (6), by inserting ‘‘or in21 verted domestic corporation, as the case may 

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

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

24 this section shall apply to taxable years ending after May 

25 8, 2014. 


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1 SEC. 5. TREATMENT OF FOREIGN CORPORATIONS MAN2 AGED AND CONTROLLED IN THE UNITED 

3 STATES AS DOMESTIC CORPORATIONS. 

4 (a) IN GENERAL.—Section 7701 is amended by re5 designating subsection (p) as subsection (q) and by insert6 ing after subsection (o) the following new subsection: 

7 ‘‘(p) CERTAIN CORPORATIONS MANAGED AND CON8 TROLLED IN THE UNITED STATES TREATED AS DOMES9 TIC FOR INCOME TAX.— 

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

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

12 paragraph (2) if— 

13 ‘‘(A) the corporation would not otherwise 

14 be treated as a domestic corporation for pur15 poses of this title, but 

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

17 corporation occurs, directly or indirectly, pri18 marily within the United States, 

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

20 provision of this title relating to chapter 1), the cor21 poration shall be treated as a domestic corporation. 

22 ‘‘(2) CORPORATION DESCRIBED.— 

23 ‘‘(A) IN GENERAL.—A corporation is de24 scribed in this paragraph if— 


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

2 regularly traded on an established securi3 ties market, or 

4 ‘‘(ii) the aggregate gross assets of 

5 such corporation (or any predecessor there6 of), including assets under management 

7 for investors, whether held directly or indi8 rectly, at any time during the taxable year 

9 or any preceding taxable year is 

10 $50,000,000 or more. 

11 ‘‘(B) GENERAL EXCEPTION.—A corpora12 tion shall not be treated as described in this 

13 paragraph if— 

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

15 corporation described in this paragraph in 

16 a preceding taxable year, 

17 ‘‘(ii) such corporation— 

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

19 established securities market, and 

20 ‘‘(II) has, and is reasonably ex21 pected to continue to have, aggregate 

22 gross assets (including assets under 

23 management for investors, whether 

24 held directly or indirectly) of less than 

25 $50,000,000, and 


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

2 such corporation under this subparagraph. 

3 ‘‘(3) MANAGEMENT AND CONTROL.— 

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

5 prescribe regulations for purposes of deter6 mining cases in which the management and 

7 control of a corporation is to be treated as oc8 curring primarily within the United States. 

9 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

10 MANAGEMENT.—Such regulations shall provide 

11 that— 

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

13 corporation shall be treated as occurring 

14 primarily within the United States if sub15 stantially all of the executive officers and 

16 senior management of the corporation who 

17 exercise day-to-day responsibility for mak18 ing decisions involving strategic, financial, 

19 and operational policies of the corporation 

20 are located primarily within the United 

21 States, and 

22 ‘‘(ii) individuals who are not executive 

23 officers and senior management of the cor24 poration (including individuals who are of25 ficers or employees of other corporations in 


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25 

•HR 5108 IH

1 the same chain of corporations as the cor2 poration) shall be treated as executive offi3 cers and senior management if such indi4 viduals exercise the day-to-day responsibil5 ities of the corporation described in clause 

6 (i). 

7 ‘‘(C) CORPORATIONS PRIMARILY HOLDING

8 INVESTMENT ASSETS.—Such regulations shall 

9 also provide that the management and control 

10 of a corporation shall be treated as occurring 

11 primarily within the United States if— 

12 ‘‘(i) the assets of such corporation (di13 rectly or indirectly) consist primarily of as14 sets being managed on behalf of investors, 

15 and 

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

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

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

19 this section shall apply to taxable years beginning on or 

20 after the date which is 2 years after the date of the enact21 ment of this Act, whether or not regulations are issued 

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

23 of 1986, as added by this section. 

Æ 


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