II 

115TH CONGRESS 

2D SESSION S. 2459 

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 27, 2018 

Mr. WHITEHOUSE 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 

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


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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 

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

4 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. 

5 SEC. 2. CURRENT YEAR INCLUSION OF NET CFC TESTED IN6 COME. 

7 (a) REPEAL OF TAX-FREE DEEMED RETURN ON IN8 VESTMENTS.— 

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

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

11 inserting ‘‘net CFC tested income’’. 

12 (2) CONFORMING AMENDMENTS.— 

13 (A) Section 951A is amended by striking 

14 subsections (b) and (d). 

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

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

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

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

19 follows: 

20 ‘‘(f) TREATMENT AS SUBPART F INCOME FOR CER21 TAIN PURPOSES.— 


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1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), any net CFC tested income included in 

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

4 the same manner as an amount included under sec5 tion 951(a)(1)(A) for purposes of applying sections 

6 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 

7 961, 962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 

8 1248(d)(1), 6501(e)(1)(C), 6654(d)(2)(D), and 

9 6655(e)(4). 

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

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

12 provisions of this title in any case in which the de13 termination of subpart F income is required to be 

14 made at the level of the controlled foreign corpora15 tion.’’. 

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

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

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

19 CFC tested income (as defined in section 

20 951A(c))’’. 

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

22 CFC TESTED INCOME.— 

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

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


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1 by striking the item relating to such section in the 

2 table of sections of such part). 

3 (2) CONFORMING AMENDMENTS.— 

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

5 striking ‘‘section 172, 245A, or 250’’ and in6 serting ‘‘section 172 or 245A’’. 

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

8 paragraph (9). 

9 (C) Section 246(b)(1) is amended— 

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

11 of section 245, and section 250’’ and in12 serting ‘‘and subsection (a) and (b) of sec13 tion 245’’; and 

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

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

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

17 245’’. 

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

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

20 222’’. 

21 (c) NET CFC TESTED INCOME DETERMINED WITH22 OUT REGARD TO HIGH TAX FOREIGN INCOME.—Section 

23 951A(c)(2)(A)(i) is amended by redesignating subclauses 

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


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1 by inserting after subclause (III) the following new sub2 clause: 

3 ‘‘(IV) any item of income subject 

4 to an effective rate of income tax im5 posed by a foreign country greater 

6 than the maximum rate of tax speci7 fied in section 11,’’. 

8 (d) REPEAL OF EXCLUSION OF FOREIGN OIL AND

9 GAS EXTRACTION INCOME FROM THE DETERMINATION

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

11 amended by subsection (c) is amended— 

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

13 (IV); 

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

15 (V) and inserting ‘‘over’’; and 

16 (3) by striking subclause (VI). 

17 (e) EFFECTIVE DATE.— 

18 (1) IN GENERAL.—Except as otherwise pro19 vided in this subsection, the amendments made by 

20 this section shall apply to taxable years of foreign 

21 corporations beginning after December 31, 2017, 

22 and to taxable years of United States shareholders 

23 in which or with which such taxable years of foreign 

24 corporations end. 


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

2 amendments made by subsection (b) shall apply to 

3 taxable years beginning after December 31, 2017. 

4 SEC. 3. 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. 

24 ‘‘(B) RULES RELATING TO DETERMINA25 TION OF AVERAGE GROSS RECEIPTS.—For purVerDate Sep 11 2014 03:01 Mar 01, 2018 Jkt 079200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2459.IS S2459

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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 shall apply to any partner21 ship which is a member of any international fi22 nancial reporting group under rules similar to 

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

24 ‘‘(B) FOREIGN CORPORATIONS ENGAGED

25 IN TRADE OR BUSINESS WITHIN THE UNITED


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1 STATES.—Except as otherwise provided by the 

2 Secretary in paragraph (7), any deduction for 

3 interest paid or accrued by a foreign corpora4 tion engaged in a trade or business within the 

5 United States shall be limited in a manner con6 sistent with the principles of this subsection. 

7 ‘‘(C) CONSOLIDATED GROUPS.—For pur8 poses of this subsection, the members of any 

9 group that file (or are required to file) a con10 solidated return with respect to the tax imposed 

11 by chapter 1 for a taxable year shall be treated 

12 as a single corporation. 

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

14 such regulations or other guidance as are necessary 

15 or appropriate to carry out the purposes of this sub16 section.’’. 

17 (b) CARRYFORWARD OF DISALLOWED INTEREST.— 

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

19 to read as follows: 

20 ‘‘(o) CARRYFORWARD OF CERTAIN DISALLOWED IN21 TEREST.—The amount of any interest not allowed as a 

22 deduction for any taxable year by reason of subsection 

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

24 with respect to such taxable year) shall be treated as inter25 est (and as business interest for purposes of subsection 


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1 (j)(1)) paid or accrued in the succeeding taxable year. In2 terest paid or accrued in any taxable year (determined 

3 without regard to the preceding sentence) shall not be car4 ried past the fifth taxable year following such taxable year, 

5 determined by treating interest as allowed as a deduction 

6 on a first-in, first-out basis.’’. 

7 (2) CONFORMING AMENDMENTS.— 

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

9 as follows: 

10 ‘‘(20) CARRYFORWARD OF DISALLOWED INTER11 EST.—The carryover of disallowed interest described 

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

13 date of distribution or transfer.’’. 

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

15 as follows: 

16 ‘‘(3) APPLICATION TO CARRYFORWARD OF DIS17 ALLOWED INTEREST.—The term ‘pre-change loss’ 

18 shall include any carryover of disallowed interest de19 scribed in section 163(o) under rules similar to the 

20 rules of paragraph (1).’’. 

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

22 this section shall apply to taxable years beginning after 

23 December 31, 2017. 


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1 SEC. 4. MODIFICATIONS TO RULES RELATING TO IN2 VERTED CORPORATIONS. 

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

4 amended to read as follows: 

5 ‘‘(b) INVERTED CORPORATIONS TREATED AS DO6 MESTIC CORPORATIONS.— 

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

8 7701(a)(4), a foreign corporation shall be treated for 

9 purposes of this title as a domestic corporation if— 

10 ‘‘(A) such corporation would be a surro11 gate foreign corporation if subsection (a)(2) 

12 were applied by substituting ‘80 percent’ for 

13 ‘60 percent’, or 

14 ‘‘(B) such corporation is an inverted do15 mestic corporation. 

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

17 purposes of this subsection, a foreign corporation 

18 shall be treated as an inverted domestic corporation 

19 if, pursuant to a plan (or a series of related trans20 actions)— 

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

22 2014, the direct or indirect acquisition of— 

23 ‘‘(i) substantially all of the properties 

24 held directly or indirectly by a domestic 

25 corporation, or 


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

2 or substantially all of the properties consti3 tuting a trade or business of, a domestic 

4 partnership, and 

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

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

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

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

9 with respect to a domestic corpora10 tion, by former shareholders of the 

11 domestic corporation by reason of 

12 holding stock in the domestic corpora13 tion, or 

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

15 with respect to a domestic partner16 ship, by former partners of the do17 mestic partnership by reason of hold18 ing a capital or profits interest in the 

19 domestic partnership, or 

20 ‘‘(ii) the management and control of 

21 the expanded affiliated group which in22 cludes the entity occurs, directly or indi23 rectly, primarily within the United States, 

24 and such expanded affiliated group has 

25 significant domestic business activities. 


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1 ‘‘(3) EXCEPTION FOR CORPORATIONS WITH

2 SUBSTANTIAL BUSINESS ACTIVITIES IN FOREIGN

3 COUNTRY OF ORGANIZATION.—A foreign corporation 

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

5 inverted domestic corporation if after the acquisition 

6 the expanded affiliated group which includes the en7 tity has substantial business activities in the foreign 

8 country in which or under the law of which the enti9 ty is created or organized when compared to the 

10 total business activities of such expanded affiliated 

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

12 the preceding sentence, the term ‘substantial busi13 ness activities’ shall have the meaning given such 

14 term under regulations in effect on May 8, 2014, ex15 cept that the Secretary may issue regulations in16 creasing the threshold percent in any of the tests 

17 under such regulations for determining if business 

18 activities constitute substantial business activities for 

19 purposes of this paragraph. 

20 ‘‘(4) MANAGEMENT AND CONTROL.—For pur21 poses of paragraph (2)(B)(ii)— 

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

23 prescribe regulations for purposes of deter24 mining cases in which the management and 

25 control of an expanded affiliated group is to be 


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1 treated as occurring, directly or indirectly, pri2 marily within the United States. The regula3 tions prescribed under the preceding sentence 

4 shall apply to periods after May 8, 2014. 

5 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

6 MANAGEMENT.—Such regulations shall provide 

7 that the management and control of an ex8 panded affiliated group shall be treated as oc9 curring, directly or indirectly, primarily within 

10 the United States if substantially all of the ex11 ecutive officers and senior management of the 

12 expanded affiliated group who exercise day-to13 day responsibility for making decisions involving 

14 strategic, financial, and operational policies of 

15 the expanded affiliated group are based or pri16 marily located within the United States. Indi17 viduals who in fact exercise such day-to-day re18 sponsibilities shall be treated as executive offi19 cers and senior management regardless of their 

20 title. 

21 ‘‘(5) SIGNIFICANT DOMESTIC BUSINESS ACTIVI22 TIES.—For purposes of paragraph (2)(B)(ii), an ex23 panded affiliated group has significant domestic 

24 business activities if at least 25 percent of— 


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

2 in the United States, 

3 ‘‘(B) the employee compensation incurred 

4 by the group is incurred with respect to employ5 ees based in the United States, 

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

7 the United States, or 

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

9 the United States, 

10 determined in the same manner as such determina11 tions are made for purposes of determining substan12 tial business activities under regulations referred to 

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

14 applied by treating all references in such regulations 

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

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

17 issue regulations decreasing the threshold percent in 

18 any of the tests under such regulations for deter19 mining if business activities constitute significant 

20 domestic business activities for purposes of this 

21 paragraph.’’. 

22 (b) CONFORMING AMENDMENTS.— 

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

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1 serting ‘‘after March 4, 2003, and before May 9, 

2 2014,’’. 

3 (2) Subsection (c) of section 7874 is amend4 ed— 

5 (A) in paragraph (2)— 

6 (i) by striking ‘‘subsection 

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

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

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

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

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

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

13 ‘‘(a)(2)(B)(ii)’’; 

14 (C) in paragraph (5), by striking ‘‘sub15 section (a)(2)(B)(ii)’’ and inserting ‘‘sub16 sections (a)(2)(B)(ii) and (b)(2)(B)(i)’’; and 

17 (D) in paragraph (6), by inserting ‘‘or in18 verted domestic corporation, as the case may 

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

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

21 this section shall apply to taxable years ending after May 

22 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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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 


dlhill on DSK3GLQ082PROD with BILLS