II 

114TH CONGRESS 

1ST SESSION S. 174 

To end offshore tax abuses, to preserve our national defense and protect 

American families and businesses from devastating cuts, and for other 

purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 13, 2015 

Mr. WHITEHOUSE (for himself and Mrs. SHAHEEN) introduced the following 

bill; which was read twice and referred to the Committee on Finance 

A BILL 

To end offshore tax abuses, to preserve our national defense 

and protect American families and businesses from devastating cuts, 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 ‘‘Stop Tax Haven Abuse 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. 

TITLE I—DETERRING THE USE OF TAX HAVENS FOR TAX 

EVASION 

Sec. 101. Authorizing special measures against foreign jurisdictions, financial 

institutions, and others that significantly impede United States 

tax enforcement. 

Sec. 102. Strengthening the Foreign Account Tax Compliance Act (FATCA). 

Sec. 103. Treatment of foreign corporations managed and controlled in the 

United States as domestic corporations. 

Sec. 104. Reporting United States beneficial owners of foreign owned financial 

accounts. 

Sec. 105. Swap payments made from the United States to persons offshore. 

TITLE II—OTHER MEASURES TO COMBAT TAX HAVEN ABUSES 

Sec. 201. Country-by-country reporting. 

Sec. 202. Penalty for failing to disclose offshore holdings. 

Sec. 203. Deadline for anti-money laundering rule for investment advisers. 

Sec. 204. Anti-money laundering requirements for formation agents. 

Sec. 205. Strengthening John Doe summons proceedings. 

Sec. 206. Improving enforcement of foreign financial account reporting. 

TITLE III—ENDING CORPORATE OFFSHORE TAX AVOIDANCE 

Sec. 301. Allocation of expenses and taxes on basis of repatriation of foreign 

income. 

Sec. 302. Excess income from transfers of intangibles to low-taxed affiliates 

treated as subpart F income. 

Sec. 303. Limitations on income shifting through intangible property transfers. 

Sec. 304. Repeal of check-the-box rules for certain foreign entities and CFC 

look-thru rules. 

Sec. 305. Restrictions on deduction for interest expense of members of financial 

reporting groups with excess domestic indebtedness. 

TITLE IV—INVERTED CORPORATIONS 

Sec. 401. Modifications to rules relating to inverted corporations. 


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1 TITLE I—DETERRING THE USE 

2 OF TAX HAVENS FOR TAX 

3 EVASION 

4 SEC. 101. AUTHORIZING SPECIAL MEASURES AGAINST FOR5 EIGN JURISDICTIONS, FINANCIAL INSTITU6 TIONS, AND OTHERS THAT SIGNIFICANTLY 

7 IMPEDE UNITED STATES TAX ENFORCEMENT. 

8 Section 5318A of title 31, United States Code, is 

9 amended— 

10 (1) by striking the section heading and insert11 ing the following: 

12 ‘‘§ 5318A. Special measures for jurisdictions, financial 

13 institutions, or international transactions 

14 that are of primary money laundering 

15 concern or significantly impede United 

16 States tax enforcement’’; 

17 (2) in subsection (a), by striking the subsection 

18 heading and inserting the following: 

19 ‘‘(a) SPECIAL MEASURES TO COUNTER MONEY

20 LAUNDERING AND EFFORTS TO SIGNIFICANTLY IMPEDE

21 UNITED STATES TAX ENFORCEMENT.—’’; 

22 (3) in subsection (c)— 

23 (A) by striking the subsection heading and 

24 inserting the following: 


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1 ‘‘(c) CONSULTATIONS AND INFORMATION TO BE

2 CONSIDERED IN FINDING JURISDICTIONS, INSTITUTIONS, 

3 TYPES OF ACCOUNTS, OR TRANSACTIONS TO BE OF PRI4 MARY MONEY LAUNDERING CONCERN OR TO BE SIGNIFI5 CANTLY IMPEDING UNITED STATES TAX ENFORCE6 MENT.—’’; and 

7 (B) by inserting at the end of paragraph 

8 (2) thereof the following new subparagraph: 

9 ‘‘(C) OTHER CONSIDERATIONS.—The fact 

10 that a jurisdiction or financial institution is co11 operating with the United States on imple12 menting the requirements specified in chapter 4 

13 of the Internal Revenue Code of 1986 may be 

14 favorably considered in evaluating whether such 

15 jurisdiction or financial institution is signifi16 cantly impeding United States tax enforce17 ment.’’; 

18 (4) in subsection (a)(1), by inserting ‘‘or is sig19 nificantly impeding United States tax enforcement’’ 

20 after ‘‘primary money laundering concern’’; 

21 (5) in subsection (a)(4)— 

22 (A) in subparagraph (A)— 

23 (i) by inserting ‘‘in matters involving 

24 money laundering,’’ before ‘‘shall consult’’; 

25 and 


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1 (ii) by striking ‘‘and’’ at the end; 

2 (B) by redesignating subparagraph (B) as 

3 subparagraph (C); and 

4 (C) by inserting after subparagraph (A) 

5 the following: 

6 ‘‘(B) in matters involving United States 

7 tax enforcement, shall consult with the Commis8 sioner of the Internal Revenue, the Secretary of 

9 State, the Attorney General of the United 

10 States, and in the sole discretion of the Sec11 retary, such other agencies and interested par12 ties as the Secretary may find to be appro13 priate; and’’; 

14 (6) in each of paragraphs (1)(A), (2), (3), and 

15 (4) of subsection (b), by inserting ‘‘or to be signifi16 cantly impeding United States tax enforcement’’ 

17 after ‘‘primary money laundering concern’’ each 

18 place that term appears; 

19 (7) in subsection (b), by striking paragraph (5) 

20 and inserting the following: 

21 ‘‘(5) PROHIBITIONS OR CONDITIONS ON OPEN22 ING OR MAINTAINING CERTAIN CORRESPONDENT OR

23 PAYABLE-THROUGH ACCOUNTS OR AUTHORIZING

24 CERTAIN PAYMENT CARDS.—If the Secretary finds a 

25 jurisdiction outside of the United States, 1 or more 


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1 financial institutions operating outside of the United 

2 States, or 1 or more classes of transactions within 

3 or involving a jurisdiction outside of the United 

4 States to be of primary money laundering concern or 

5 to be significantly impeding United States tax en6 forcement, the Secretary, in consultation with the 

7 Secretary of State, the Attorney General of the 

8 United States, and the Chairman of the Board of 

9 Governors of the Federal Reserve System, may pro10 hibit, or impose conditions upon— 

11 ‘‘(A) the opening or maintaining in the 

12 United States of a correspondent account or 

13 payable-through account; or 

14 ‘‘(B) the authorization, approval, or use in 

15 the United States of a credit card, charge card, 

16 debit card, or similar credit or debit financial 

17 instrument by any domestic financial institu18 tion, financial agency, or credit card company 

19 or association, for or on behalf of a foreign 

20 banking institution, if such correspondent ac21 count, payable-through account, credit card, 

22 charge card, debit card, or similar credit or 

23 debit financial instrument, involves any such ju24 risdiction or institution, or if any such trans25 action may be conducted through such corVerDate Sep 11 2014 08:09 Jan 23, 2015 Jkt 049200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S174.IS S174

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1 respondent account, payable-through account, 

2 credit card, charge card, debit card, or similar 

3 credit or debit financial instrument.’’; 

4 (8) in subsection (c)(1), by inserting ‘‘or is sig5 nificantly impeding United States tax enforcement’’ 

6 after ‘‘primary money laundering concern’’; 

7 (9) in subsection (c)(2)(A)— 

8 (A) in clause (ii), by striking ‘‘bank secrecy 

9 or special regulatory advantages’’ and inserting 

10 ‘‘bank, tax, corporate, trust, or financial secrecy 

11 or regulatory advantages’’; 

12 (B) in clause (iii), by striking ‘‘supervisory 

13 and counter-money’’ and inserting ‘‘supervisory, 

14 international tax enforcement, and counter15 money’’; 

16 (C) in clause (v), by striking ‘‘banking or 

17 secrecy’’ and inserting ‘‘banking, tax, or se18 crecy’’; and 

19 (D) in clause (vi), by inserting ‘‘, tax trea20 ty, or tax information exchange agreement’’ 

21 after ‘‘treaty’’; 

22 (10) in subsection (c)(2)(B)— 

23 (A) in clause (i), by inserting ‘‘or tax eva24 sion’’ after ‘‘money laundering’’; and 


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1 (B) in clause (iii), by inserting ‘‘, tax eva2 sion,’’ after ‘‘money laundering’’; and 

3 (11) in subsection (d), by inserting ‘‘involving 

4 money laundering, and shall notify, in writing, the 

5 Committee on Finance of the Senate and the Com6 mittee on Ways and Means of the House of Rep7 resentatives of any such action involving United 

8 States tax enforcement’’ after ‘‘such action’’. 

9 SEC. 102. STRENGTHENING THE FOREIGN ACCOUNT TAX 

10 COMPLIANCE ACT (FATCA). 

11 (a) REPORTING ACTIVITIES WITH RESPECT TO PAS12 SIVE FOREIGN INVESTMENT COMPANIES.—Section 

13 1298(f) is amended by inserting ‘‘, or who directly or indi14 rectly forms, transfers assets to, is a beneficiary of, has 

15 a beneficial interest in, or receives money or property or 

16 the use thereof from,’’ after ‘‘shareholder of’’. 

17 (b) WITHHOLDABLE PAYMENTS TO FOREIGN FINAN18 CIAL INSTITUTIONS.—Section 1471(d) is amended— 

19 (1) by inserting ‘‘or transaction’’ after ‘‘any de20 pository’’ in paragraph (2)(A), and 

21 (2) by striking ‘‘or any interest’’ and all that 

22 follows in paragraph (5)(C) and inserting ‘‘deriva23 tives, or any interest (including a futures or forward 

24 contract, swap, or option) in such securities, part25 nership interests, commodities, or derivatives.’’. 


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1 (c) WITHHOLDABLE PAYMENTS TO OTHER FOREIGN

2 FINANCIAL INSTITUTIONS.—Section 1472 is amended— 

3 (1) by inserting ‘‘as a result of any customer 

4 identification, anti-money laundering, anti-corrup5 tion, or similar obligation to identify account hold6 ers,’’ after ‘‘reason to know,’’ in subsection (b)(2), 

7 and 

8 (2) by inserting ‘‘as posing a low risk of tax 

9 evasion’’ after ‘‘this subsection’’ in subsection 

10 (c)(1)(G). 

11 (d) DEFINITIONS.—Clauses (i) and (ii) of section 

12 1473(2)(A) are each amended by inserting ‘‘or as a bene13 ficial owner’’ after ‘‘indirectly’’. 

14 (e) SPECIAL RULES.—Section 1474(c) is amended— 

15 (1) by inserting ‘‘, except that information pro16 vided under sections 1471(c) or 1472(b) may be dis17 closed to any Federal law enforcement agency, upon 

18 request or upon the initiation of the Secretary, to in19 vestigate or address a possible violation of United 

20 States law’’ after ‘‘shall apply’’ in paragraph (1), 

21 and 

22 (2) by inserting ‘‘, or has had an agreement 

23 terminated under such section,’’ after ‘‘section 

24 1471(b)’’ in paragraph (2). 


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1 (f) INFORMATION WITH RESPECT TO FOREIGN FI2 NANCIAL ASSETS.—Section 6038D(a) is amended by in3 serting ‘‘ownership or beneficial ownership’’ after ‘‘holds 

4 any’’. 

5 (g) ESTABLISHING PRESUMPTIONS FOR ENTITIES

6 AND TRANSACTIONS INVOLVING NON-FATCA INSTITU7 TIONS.— 

8 (1) PRESUMPTIONS FOR TAX PURPOSES.— 

9 (A) IN GENERAL.—Chapter 76 is amended 

10 by inserting after section 7491 the following 

11 new subchapter: 

12 ‘‘Subchapter F—Presumptions for Certain 

13 Legal Proceedings 

‘‘Sec. 7492. Presumptions pertaining to entities and transactions involving nonFATCA institutions. 

14 ‘‘SEC. 7492. PRESUMPTIONS PERTAINING TO ENTITIES AND 

15 TRANSACTIONS INVOLVING NON-FATCA IN16 STITUTIONS. 

17 ‘‘(a) CONTROL.—For purposes of any United States 

18 civil judicial or administrative proceeding to determine or 

19 collect tax, there shall be a rebuttable presumption that 

20 a United States person who, directly or indirectly, formed, 

21 transferred assets to, was a beneficiary of, had a beneficial 

22 interest in, or received money or property or the use there23 of from an entity, including a trust, corporation, limited 

24 liability company, partnership, or foundation, that holds 


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1 an account, or in any other manner has assets, in a non2 FATCA institution, exercised control over such entity. The 

3 presumption of control created by this subsection shall not 

4 be applied to prevent the Secretary from determining or 

5 arguing the absence of control. 

6 ‘‘(b) TRANSFERS OF INCOME.—For purposes of any 

7 United States civil judicial or administrative proceeding 

8 to determine or collect tax, there shall be a rebuttable pre9 sumption that any amount or thing of value received by 

10 a United States person directly or indirectly from an ac11 count or from an entity that holds an account, or in any 

12 other manner has assets, in a non-FATCA institution, 

13 constitutes income of such person taxable in the year of 

14 receipt; and any amount or thing of value paid or trans15 ferred by or on behalf of a United States person directly 

16 or indirectly to an account, or entity that holds an ac17 count, or in any other manner has assets, in a non18 FATCA institution, represents previously unreported in19 come of such person taxable in the year of the transfer. 

20 ‘‘(c) REBUTTING THE PRESUMPTIONS.—The pre21 sumptions established in this section may be rebutted only 

22 by clear and convincing evidence, including detailed docu23 mentary, testimonial, and transactional evidence, estab24 lishing that— 


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1 ‘‘(1) in subsection (a), such taxpayer exercised 

2 no control, directly or indirectly, over account or en3 tity at the time in question, and 

4 ‘‘(2) in subsection (b), such amounts or things 

5 of value did not represent income related to such 

6 United States person. 

7 Any court having jurisdiction of a civil proceeding in which 

8 control of such an offshore account or offshore entity or 

9 the income character of such receipts or amounts trans10 ferred is an issue shall prohibit the introduction by the 

11 taxpayer of any foreign based document that is not au12 thenticated in open court by a person with knowledge of 

13 such document, or any other evidence supplied by a person 

14 outside the jurisdiction of a United States court, unless 

15 such person appears before the court.’’. 

16 (B) The table of subchapters for chapter 

17 76 is amended by inserting after the item relat18 ing to subchapter E the following new item: 

‘‘SUBCHAPTER F. PRESUMPTIONS FOR CERTAIN LEGAL PROCEEDINGS’’. 

19 (2) DEFINITION OF NON-FATCA INSTITUTION.— 

20 Section 7701(a) is amended by adding at the end 

21 the following new paragraph: 

22 ‘‘(51) NON-FATCA INSTITUTION.—The term 

23 ‘non-FATCA institution’ means any foreign financial 

24 institution that does not meet the reporting require25 ments of section 1471(b).’’. 


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1 (3) PRESUMPTIONS FOR SECURITIES LAW PUR2 POSES.—Section 21 of the Securities Exchange Act 

3 of 1934 (15 U.S.C. 78u) is amended by adding at 

4 the end the following new subsection: 

5 ‘‘(j) PRESUMPTIONS PERTAINING TO CONTROL AND

6 BENEFICIAL OWNERSHIP.— 

7 ‘‘(1) CONTROL.—For purposes of any civil judi8 cial or administrative proceeding under this title, 

9 there shall be a rebuttable presumption that a 

10 United States person who, directly or indirectly, 

11 formed, transferred assets to, was a beneficiary of, 

12 had a beneficial interest in, or received money or 

13 property or the use thereof from an entity, including 

14 a trust, corporation, limited liability company, part15 nership, or foundation, that holds an account, or in 

16 any other manner has assets, in a non-FATCA insti17 tution (as defined in section 7701(a)(51) of the In18 ternal Revenue Code of 1986), exercised control over 

19 such entity. The presumption of control created by 

20 this paragraph shall not be applied to prevent the 

21 Commission from determining or arguing the ab22 sence of control. 

23 ‘‘(2) BENEFICIAL OWNERSHIP.—For purposes 

24 of any civil judicial or administrative proceeding 

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1 tion that securities that are nominally owned by an 

2 entity, including a trust, corporation, limited liability 

3 company, partnership, or foundation, and that are 

4 held in a non-FATCA institution (as so defined), are 

5 beneficially owned by any United States person who 

6 directly or indirectly exercised control over such enti7 ty. The presumption of beneficial ownership created 

8 by this paragraph shall not be applied to prevent the 

9 Commission from determining or arguing the ab10 sence of beneficial ownership.’’. 

11 (4) PRESUMPTION FOR REPORTING PURPOSES

12 RELATING TO FOREIGN FINANCIAL ACCOUNTS.—Sec13 tion 5314 of title 31, United States Code, is amend14 ed by adding at the end the following new sub15 section: 

16 ‘‘(d) REBUTTABLE PRESUMPTION.—For purposes of 

17 this section, there shall be a rebuttable presumption that 

18 any account with a non-FATCA institution (as defined in 

19 section 7701(a)(51) of the Internal Revenue Code of 

20 1986) contains funds in an amount that is at least suffi21 cient to require a report prescribed by regulations under 

22 this section.’’. 

23 (5) REGULATORY AUTHORITY.—Not later than 

24 180 days after the date of enactment of this Act, the 

25 Secretary of the Treasury and the Chairman of the 


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1 Securities and Exchange Commission shall each 

2 adopt regulations or other guidance necessary to im3 plement the amendments made by this subsection. 

4 The Secretary and the Chairman may, by regulation 

5 or guidance, provide that the presumption of control 

6 shall not extend to particular classes of transactions, 

7 such as corporate reorganizations or transactions 

8 below a specified dollar threshold, if either deter9 mines that applying such amendments to such trans10 actions is not necessary to carry out the purposes of 

11 such amendments. 

12 (h) EFFECTIVE DATE.—The amendments made by 

13 this section shall take effect on the date which is 180 days 

14 after the date of enactment of this Act, whether or not 

15 regulations are issued under subsection (g)(5). 

16 SEC. 103. TREATMENT OF FOREIGN CORPORATIONS MAN17 AGED AND CONTROLLED IN THE UNITED 

18 STATES AS DOMESTIC CORPORATIONS. 

19 (a) IN GENERAL.—Section 7701 is amended by re20 designating subsection (p) as subsection (q) and by insert21 ing after subsection (o) the following new subsection: 

22 ‘‘(p) CERTAIN CORPORATIONS MANAGED AND CON23 TROLLED IN THE UNITED STATES TREATED AS DOMES24 TIC FOR INCOME TAX.— 


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

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

3 paragraph (2) if— 

4 ‘‘(A) the corporation would not otherwise 

5 be treated as a domestic corporation for pur6 poses of this title, but 

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

8 corporation occurs, directly or indirectly, pri9 marily within the United States, 

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

11 provision of this title relating to chapter 1), the cor12 poration shall be treated as a domestic corporation. 

13 ‘‘(2) CORPORATION DESCRIBED.— 

14 ‘‘(A) IN GENERAL.—A corporation is de15 scribed in this paragraph if— 

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

17 regularly traded on an established securi18 ties market, or 

19 ‘‘(ii) the aggregate gross assets of 

20 such corporation (or any predecessor there21 of), including assets under management 

22 for investors, whether held directly or indi23 rectly, at any time during the taxable year 

24 or any preceding taxable year is 

25 $50,000,000 or more. 


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1 ‘‘(B) GENERAL EXCEPTION.—A corpora2 tion shall not be treated as described in this 

3 paragraph if— 

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

5 corporation described in this paragraph in 

6 a preceding taxable year, 

7 ‘‘(ii) such corporation— 

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

9 established securities market, and 

10 ‘‘(II) has, and is reasonably ex11 pected to continue to have, aggregate 

12 gross assets (including assets under 

13 management for investors, whether 

14 held directly or indirectly) of less than 

15 $50,000,000, and 

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

17 such corporation under this subparagraph. 

18 ‘‘(3) MANAGEMENT AND CONTROL.— 

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

20 prescribe regulations for purposes of deter21 mining cases in which the management and 

22 control of a corporation is to be treated as oc23 curring primarily within the United States. 


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1 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

2 MANAGEMENT.—Such regulations shall provide 

3 that— 

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

5 corporation shall be treated as occurring 

6 primarily within the United States if sub7 stantially all of the executive officers and 

8 senior management of the corporation who 

9 exercise day-to-day responsibility for mak10 ing decisions involving strategic, financial, 

11 and operational policies of the corporation 

12 are located primarily within the United 

13 States, and 

14 ‘‘(ii) individuals who are not executive 

15 officers and senior management of the cor16 poration (including individuals who are of17 ficers or employees of other corporations in 

18 the same chain of corporations as the cor19 poration) shall be treated as executive offi20 cers and senior management if such indi21 viduals exercise the day-to-day responsibil22 ities of the corporation described in clause 

23 (i). 

24 ‘‘(C) CORPORATIONS PRIMARILY HOLDING

25 INVESTMENT ASSETS.—Such regulations shall 


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1 also provide that the management and control 

2 of a corporation shall be treated as occurring 

3 primarily within the United States if— 

4 ‘‘(i) the assets of such corporation (di5 rectly or indirectly) consist primarily of as6 sets being managed on behalf of investors, 

7 and 

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

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

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

11 this section shall apply to taxable years beginning on or 

12 after the date which is 2 years after the date of the enact13 ment of this Act, whether or not regulations are issued 

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

15 of 1986, as added by this section. 

16 SEC. 104. REPORTING UNITED STATES BENEFICIAL OWN17 ERS OF FOREIGN OWNED FINANCIAL AC18 COUNTS. 

19 (a) IN GENERAL.—Subpart B of part III of sub20 chapter A of chapter 61 is amended by inserting after sec21 tion 6045B the following new sections: 


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1 ‘‘SEC. 6045C. RETURNS REGARDING UNITED STATES BENE2 FICIAL OWNERS OF FINANCIAL ACCOUNTS 

3 LOCATED IN THE UNITED STATES AND HELD 

4 IN THE NAME OF A FOREIGN ENTITY. 

5 ‘‘(a) REQUIREMENT OF RETURN.—If— 

6 ‘‘(1) any withholding agent under sections 1441 

7 and 1442 has the control, receipt, custody, disposal, 

8 or payment of any amount constituting gross income 

9 from sources within the United States of any foreign 

10 entity, including a trust, corporation, limited liability 

11 company, partnership, or foundation (other than an 

12 entity with shares regularly traded on an established 

13 securities market), and 

14 ‘‘(2) such withholding agent determines for pur15 poses of titles 14, 18, or 31 of the United States 

16 Code that a United States person has any beneficial 

17 interest in the foreign entity or in the account in 

18 such entity’s name (hereafter in this section referred 

19 to as ‘United States beneficial owner’), 

20 then the withholding agent shall make a return according 

21 to the forms or regulations prescribed by the Secretary. 

22 ‘‘(b) REQUIRED INFORMATION.—For purposes of 

23 subsection (a) the information required to be included on 

24 the return shall include— 


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1 ‘‘(1) the name, address, and, if known, the tax2 payer identification number of the United States 

3 beneficial owner, 

4 ‘‘(2) the known facts pertaining to the relation5 ship of such United States beneficial owner to the 

6 foreign entity and the account, 

7 ‘‘(3) the gross amount of income from sources 

8 within the United States (including gross proceeds 

9 from brokerage transactions), and 

10 ‘‘(4) such other information as the Secretary 

11 may by forms or regulations provide. 

12 ‘‘(c) STATEMENTS TO BE FURNISHED TO BENE13 FICIAL OWNERS WITH RESPECT TO WHOM INFORMATION

14 IS REQUIRED TO BE REPORTED.—A withholding agent 

15 required to make a return under subsection (a) shall fur16 nish to each United States beneficial owner whose name 

17 is required to be set forth in such return a statement 

18 showing— 

19 ‘‘(1) the name, address, and telephone number 

20 of the information contact of the person required to 

21 make such return, and 

22 ‘‘(2) the information required to be shown on 

23 such return with respect to such United States bene24 ficial owner. 


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1 The written statement required under the preceding sen2 tence shall be furnished to the United States beneficial 

3 owner on or before January 31 of the year following the 

4 calendar year for which the return under subsection (a) 

5 was required to be made. In the event the person filing 

6 such return does not have a current address for the United 

7 States beneficial owner, such written statement may be 

8 mailed to the address of the foreign entity. 

9 ‘‘SEC. 6045D. RETURNS BY FINANCIAL INSTITUTIONS RE10 GARDING ESTABLISHMENT OF ACCOUNTS IN 

11 NON-FATCA INSTITUTIONS. 

12 ‘‘(a) REQUIREMENT OF RETURN.—Any financial in13 stitution directly or indirectly opening a bank, brokerage, 

14 or other financial account for or on behalf of an offshore 

15 entity, including a trust, corporation, limited liability com16 pany, partnership, or foundation (other than an entity 

17 with shares regularly traded on an established securities 

18 market), in a non-FATCA institution (as defined in sec19 tion 7701(a)(51)) at the direction of, on behalf of, or for 

20 the benefit of a United States person shall make a return 

21 according to the forms or regulations prescribed by the 

22 Secretary. 

23 ‘‘(b) REQUIRED INFORMATION.—For purposes of 

24 subsection (a) the information required to be included on 

25 the return shall include— 


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1 ‘‘(1) the name, address, and taxpayer identifica2 tion number of such United States person, 

3 ‘‘(2) the name and address of the financial in4 stitution at which a financial account is opened, the 

5 type of account, the account number, the name 

6 under which the account was opened, and the 

7 amount of the initial deposit, 

8 ‘‘(3) if the account is held in the name of an 

9 entity, the name and address of such entity, the type 

10 of entity, and the name and address of any company 

11 formation agent or other professional employed to 

12 form or acquire the entity, and 

13 ‘‘(4) such other information as the Secretary 

14 may by forms or regulations provide. 

15 ‘‘(c) STATEMENTS TO BE FURNISHED TO UNITED

16 STATES PERSONS WITH RESPECT TO WHOM INFORMA17 TION IS REQUIRED TO BE REPORTED.—A financial insti18 tution required to make a return under subsection (a) 

19 shall furnish to each United States person whose name 

20 is required to be set forth in such return a statement 

21 showing— 

22 ‘‘(1) the name, address, and telephone number 

23 of the information contact of the person required to 

24 make such return, and 


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1 ‘‘(2) the information required to be shown on 

2 such return with respect to such United States per3 son. 

4 The written statement required under the preceding sen5 tence shall be furnished to such United States person on 

6 or before January 31 of the year following the calendar 

7 year for which the return under subsection (a) was re8 quired to be made. 

9 ‘‘(d) EXEMPTION.—The Secretary may by regula10 tions exempt any class of United States persons or any 

11 class of accounts or entities from the requirements of this 

12 section if the Secretary determines that applying this sec13 tion to such persons, accounts, or entities is not necessary 

14 to carry out the purposes of this section.’’. 

15 (b) PENALTIES.— 

16 (1) RETURNS.—Section 6724(d)(1)(B) is 

17 amended by striking ‘‘or’’ at the end of clause 

18 (xxiv), by striking ‘‘and’’ at the end of clause (xxv), 

19 and by adding after clause (xxv) the following new 

20 clauses: 

21 ‘‘(xxvi) section 6045C(a) (relating to 

22 returns regarding United States beneficial 

23 owners of financial accounts located in the 

24 United States and held in the name of a 

25 foreign entity), or 


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1 ‘‘(xxvii) section 6045D(a) (relating to 

2 returns by financial institutions regarding 

3 establishment of accounts at non-FATCA 

4 institutions), and’’. 

5 (2) PAYEE STATEMENTS.—Section 6724(d)(2) 

6 is amended by striking ‘‘or’’ at the end of subpara7 graph (GG), by striking the period at the end of 

8 subparagraph (HH), and by inserting after subpara9 graph (HH) the following new subparagraphs: 

10 ‘‘(II) section 6045C(c) (relating to returns 

11 regarding United States beneficial owners of fi12 nancial accounts located in the United States 

13 and held in the name of a foreign entity), and 

14 ‘‘(JJ) section 6045D(c) (relating to re15 turns by financial institutions regarding estab16 lishment of accounts at non-FATCA institu17 tions).’’. 

18 (c) CLERICAL AMENDMENT.—The table of sections 

19 for subpart B of part III of subchapter A of chapter 61 

20 is amended by inserting after the item relating to section 

21 6045B the following new items: 

‘‘Sec. 6045C. Returns regarding United States beneficial owners of financial 

accounts located in the United States and held in the name of 

a foreign entity. 

‘‘Sec. 6045D. Returns by financial institutions regarding establishment of accounts at non-FATCA institutions.’’. 

22 (d) ADDITIONAL PENALTIES.— 


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1 (1) ADDITIONAL PENALTIES ON BANKS.—Sec2 tion 5239(b)(1) of the Revised Statutes of the 

3 United States (12 U.S.C. 93(b)(1)) is amended by 

4 inserting ‘‘or any of the provisions of section 6045D 

5 of the Internal Revenue Code of 1986,’’ after ‘‘any 

6 regulation issued pursuant to,’’. 

7 (2) ADDITIONAL PENALTIES ON SECURITIES

8 FIRMS.—Section 21(d)(3)(A) of the Securities Ex9 change Act of 1934 (15 U.S.C. 78u(d)(3)(A)) is 

10 amended by inserting ‘‘any of the provisions of sec11 tion 6045D of the Internal Revenue Code of 1986,’’ 

12 after ‘‘the rules or regulations thereunder,’’. 

13 (e) REGULATORY AUTHORITY AND EFFECTIVE

14 DATE.— 

15 (1) REGULATORY AUTHORITY.—Not later than 

16 180 days after the date of the enactment of this Act, 

17 the Secretary of the Treasury shall adopt regula18 tions, forms, or other guidance necessary to imple19 ment this section. 

20 (2) EFFECTIVE DATE.—Section 6045C of the 

21 Internal Revenue Code of 1986 (as added by this 

22 section) and the amendment made by subsection 

23 (d)(1) shall take effect with respect to amounts paid 

24 into foreign owned accounts located in the United 

25 States after December 31 of the year of the date of 


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1 the enactment of this Act. Section 6045D of such 

2 Code (as so added) and the amendment made by 

3 subsection (d)(2) shall take effect with respect to ac4 counts opened after December 31 of the year of the 

5 date of the enactment of this Act. 

6 SEC. 105. SWAP PAYMENTS MADE FROM THE UNITED 

7 STATES TO PERSONS OFFSHORE. 

8 (a) TAX ON SWAP PAYMENTS RECEIVED BY FOR9 EIGN PERSONS.—Section 871(a)(1) is amended— 

10 (1) by inserting ‘‘swap payments (as identified 

11 in section 1256(b)(2)(B)),’’ after ‘‘annuities,’’ in 

12 subparagraph (A), and 

13 (2) by adding at the end the following new sen14 tence: ‘‘In the case of swap payments, the source of 

15 a swap payment is determined by reference to the lo16 cation of the payor.’’. 

17 (b) TAX ON SWAP PAYMENTS RECEIVED BY FOR18 EIGN CORPORATIONS.—Section 881(a) is amended— 

19 (1) by inserting ‘‘swap payments (as identified 

20 in section 1256(b)(2)(B)),’’ after ‘‘annuities,’’ in 

21 paragraph (1), and 

22 (2) by adding at the end the following new sen23 tence: ‘‘In the case of swap payments, the source of 

24 a swap payment is determined by reference to the lo25 cation of the payor.’’. 


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1 TITLE II—OTHER MEASURES TO 

2 COMBAT TAX HAVEN ABUSES 

3 SEC. 201. COUNTRY-BY-COUNTRY REPORTING. 

4 (a) COUNTRY-BY-COUNTRY REPORTING.—Section 13 

5 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) 

6 is amended by adding at the end the following new sub7 section: 

8 ‘‘(s) DISCLOSURE OF FINANCIAL PERFORMANCE ON

9 A COUNTRY-BY-COUNTRY BASIS.— 

10 ‘‘(1) RULES REQUIRED.—The Commission shall 

11 issue rules that require each issuer to include in an 

12 annual report filed by the issuer with the Commis13 sion information on a country-by-country basis dur14 ing the covered period for each tax jurisdiction, ag15 gregated from all subsidiaries residing in that juris16 diction, consisting of— 

17 ‘‘(A) revenues from unrelated parties, re18 lated parties, and in total, 

19 ‘‘(B) profit or loss before taxes, 

20 ‘‘(C) income tax accrued for the current 

21 year, 

22 ‘‘(D) income tax paid (on a cash basis), 

23 ‘‘(E) stated capital, 

24 ‘‘(F) accumulated earnings, 

25 ‘‘(G) number of employees, 


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1 ‘‘(H) tangible assets other than cash or 

2 cash equivalents; and 

3 ‘‘(I) such other financial information as 

4 the Commission may determine is necessary or 

5 appropriate in the public interest or for the pro6 tection of investors. 

7 ‘‘(2) RULES RELATING TO FOREIGN SUB8 SIDIARY.—For each foreign subsidiary, the report 

9 required by paragraph (1) shall be grouped by resi10 dent jurisdiction (including a group for subsidiaries 

11 resident nowhere), the tax jurisdiction (if different), 

12 and main business activity.’’. 

13 (b) RULEMAKING.— 

14 (1) DEADLINES.—The Securities and Exchange 

15 Commission (in this section referred to as the ‘‘Com16 mission’’) shall— 

17 (A) not later than 270 days after the date 

18 of enactment of this Act, issue a proposed rule 

19 to carry out this section and the amendment 

20 made by this section; and 

21 (B) not later than 1 year after the date of 

22 enactment of this Act, issue a final rule to 

23 carry out this section and the amendment made 

24 by this section. 


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1 (2) DATA FORMAT.—The information required 

2 to be provided by this section shall be provided by 

3 the issuer in a report in a format prescribed by the 

4 Commission, and such report shall be made available 

5 to the public online, in such format as the Commis6 sion shall prescribe. 

7 (3) EFFECTIVE DATE.—Subsection (s) of sec8 tion 13 of the Securities Exchange Act of 1934, as 

9 added by this section, shall become effective 1 year 

10 after the date on which the Commission issues a 

11 final rule under this section. 

12 SEC. 202. PENALTY FOR FAILING TO DISCLOSE OFFSHORE 

13 HOLDINGS. 

14 (a) SECURITIES EXCHANGE ACT OF 1934.—Section 

15 21(d)(3)(B) of the Securities Exchange Act of 1934 (15 

16 U.S.C. 78u(d)(3)(B)) is amended by adding at the end 

17 the following: 

18 ‘‘(iv) FOURTH TIER.—Notwith19 standing clauses (i), (ii), and (iii), for each 

20 violation, the amount of the penalty shall 

21 not exceed $1,000,000 for any natural per22 son or $10,000,000 for any other person, 

23 if— 

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1 cluding any trust, corporation, limited 

2 liability company, partnership, or 

3 foundation through which an issuer 

4 purchased, sold, or held equity or debt 

5 instruments; 

6 ‘‘(II) such person knowingly or 

7 recklessly failed to disclose any such 

8 holding, purchase, or sale by the 

9 issuer; and 

10 ‘‘(III) the holding, purchase, or 

11 sale would have been otherwise sub12 ject to disclosure by the issuer or such 

13 person under this title.’’. 

14 (b) SECURITIES ACT OF 1933.—Section 20(d)(2) of 

15 the Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is 

16 amended by adding at the end the following: 

17 ‘‘(D) FOURTH TIER.—Notwithstanding 

18 subparagraphs (A), (B), and (C), for each viola19 tion, the amount of the penalty shall not exceed 

20 $1,000,000 for any natural person or 

21 $10,000,000 for any other person, if— 

22 ‘‘(i) such person directly or indirectly 

23 controlled any foreign entity, including any 

24 trust, corporation, limited liability com25 pany, partnership, or foundation through 


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1 which an issuer purchased, sold, or held 

2 equity or debt instruments; 

3 ‘‘(ii) such person knowingly or reck4 lessly failed to disclose any such holding, 

5 purchase, or sale by the issuer; and 

6 ‘‘(iii) the holding, purchase, or sale 

7 would have been otherwise subject to dis8 closure by the issuer or such person under 

9 this title.’’. 

10 (c) INVESTMENT ADVISERS ACT OF 1940.—Section 

11 203(i)(2) of the Investment Advisers Act of 1940 (15 

12 U.S.C. 80b–3(i)(2)) is amended by adding at the end the 

13 following: 

14 ‘‘(D) FOURTH TIER.—Notwithstanding 

15 subparagraphs (A), (B), and (C), for each viola16 tion, the amount of the penalty shall not exceed 

17 $1,000,000 for any natural person or 

18 $10,000,000 for any other person, if— 

19 ‘‘(i) such person directly or indirectly 

20 controlled any foreign entity, including any 

21 trust, corporation, limited liability com22 pany, partnership, or foundation through 

23 which an issuer purchased, sold, or held 

24 equity or debt instruments; 


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1 ‘‘(ii) such person knowingly or reck2 lessly failed to disclose any such holding, 

3 purchase, or sale by the issuer; and 

4 ‘‘(iii) the holding, purchase, or sale 

5 would have been otherwise subject to dis6 closure by the issuer or such person under 

7 this title.’’. 

8 SEC. 203. DEADLINE FOR ANTI-MONEY LAUNDERING RULE 

9 FOR INVESTMENT ADVISERS. 

10 (a) ANTI-MONEY LAUNDERING OBLIGATIONS FOR

11 INVESTMENT ADVISERS.—Section 5312(a)(2) of title 31, 

12 United States Code, is amended— 

13 (1) in subparagraph (Y), by striking ‘‘or’’ at 

14 the end; 

15 (2) by redesignating subparagraph (Z) as sub16 paragraph (BB); and 

17 (3) by inserting after subparagraph (Y) the fol18 lowing: 

19 ‘‘(Z) an investment adviser;’’. 

20 (b) RULES REQUIRED.—The Secretary of the Treas21 ury shall— 

22 (1) in consultation with the Chairman of the 

23 Securities and Exchange Commission and the Chair24 man of the Commodity Futures Trading Commis25 sion, not later than 180 days after the date of enactVerDate Sep 11 2014 08:09 Jan 23, 2015 Jkt 049200 PO 00000 Frm 00033 Fmt 6652 Sfmt 6201 E:\BILLS\S174.IS S174

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1 ment of this Act, publish a proposed rule in the Fed2 eral Register to carry out the amendments made by 

3 this section; and 

4 (2) not later than 270 days after the date of 

5 enactment of this Act, publish a final rule in the 

6 Federal Register on the matter described in para7 graph (1). 

8 (c) CONTENTS.—The final rule published under this 

9 section shall require, at a minimum, each investment ad10 viser (as defined in section 202(a)(11) of the Investment 

11 Advisers Act of 1940 (15 U.S.C. 80b–2(a)(11))) reg12 istered with the Securities and Exchange Commission pur13 suant to section 203 of that Act (15 U.S.C. 80b–3)— 

14 (1) to submit suspicious activity reports and es15 tablish an anti-money laundering program under 

16 subsections (g) and (h), respectively, of section 5318 

17 of title 31, United States Code; and 

18 (2) to comply with— 

19 (A) the customer identification program 

20 requirements under section 5318(l) of title 31, 

21 United States Code; and 

22 (B) the due diligence requirements under 

23 section 5318(i) of title 31, United States Code. 


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1 SEC. 204. ANTI-MONEY LAUNDERING REQUIREMENTS FOR 

2 FORMATION AGENTS. 

3 (a) ANTI-MONEY LAUNDERING OBLIGATIONS FOR

4 FORMATION AGENTS.—Section 5312(a)(2) of title 31, 

5 United States Code, as amended by section 203 of this 

6 Act, is amended by inserting after subparagraph (Z) the 

7 following: 

8 ‘‘(AA) any person engaged in the business 

9 of forming new corporations, limited liability 

10 companies, partnerships, trusts, or other legal 

11 entities; or’’. 

12 (b) DEADLINE FOR ANTI-MONEY LAUNDERING

13 RULE FOR FORMATION AGENTS.— 

14 (1) PROPOSED RULE.—The Secretary of the 

15 Treasury, in consultation with the Attorney General 

16 of the United States, the Secretary of Homeland Se17 curity, and the Commissioner of Internal Revenue, 

18 shall— 

19 (A) not later than 120 days after the date 

20 of enactment of this Act, publish a proposed 

21 rule in the Federal Register requiring persons 

22 described in section 5312(a)(2)(AA) of title 31, 

23 United States Code, as added by this section, to 

24 establish anti-money laundering programs 

25 under section 5318(h) of that title; and 


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1 (B) not later than 270 days after the date 

2 of enactment of this Act, publish a final rule in 

3 the Federal Register on the matter described in 

4 subparagraph (A). 

5 (2) EXCLUSIONS.—The rule promulgated under 

6 this subsection shall exclude from the category of 

7 persons engaged in the business of forming new cor8 porations or other entities— 

9 (A) any government agency; and 

10 (B) any attorney or law firm that uses a 

11 paid formation agent operating within the 

12 United States to form such corporations or 

13 other entities. 

14 SEC. 205. STRENGTHENING JOHN DOE SUMMONS PRO15 CEEDINGS. 

16 (a) IN GENERAL.—Subsection (f) of section 7609 is 

17 amended to read as follows: 

18 ‘‘(f) ADDITIONAL REQUIREMENT IN THE CASE OF A

19 JOHN DOE SUMMONS.— 

20 ‘‘(1) GENERAL RULE.—Any summons described 

21 in subsection (c)(1) which does not identify the per22 son with respect to whose liability the summons is 

23 issued may be served only after a court proceeding 

24 in which the Secretary establishes that— 


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1 ‘‘(A) the summons relates to the investiga2 tion of a particular person or ascertainable 

3 group or class of persons, 

4 ‘‘(B) there is a reasonable basis for believ5 ing that such person or group or class of per6 sons may fail or may have failed to comply with 

7 any provision of any internal revenue law, and 

8 ‘‘(C) the information sought to be obtained 

9 from the examination of the records or testi10 mony (and the identity of the person or persons 

11 with respect to whose liability the summons is 

12 issued) is not readily available from other 

13 sources. 

14 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

15 apply to any summons which specifies that it is lim16 ited to information regarding a United States cor17 respondent account (as defined in section 

18 5318A(e)(1)(B) of title 31, United States Code) or 

19 a United States payable-through account (as defined 

20 in section 5318A(e)(1)(C) of such title) of a finan21 cial institution that is held at a non-FATCA institu22 tion (as defined in section 7701(a)(51)). 

23 ‘‘(3) PRESUMPTION IN CASES INVOLVING NON24 FATCA INSTITUTIONS.—For purposes of this section, 

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1 tainable group or class of persons have financial ac2 counts in or transactions related to a non-FATCA 

3 institution (as defined in section 7701(a)(51)), there 

4 shall be a presumption that there is a reasonable 

5 basis for believing that such person or group or class 

6 of persons may fail or may have failed to comply 

7 with provisions of internal revenue law. 

8 ‘‘(4) PROJECT JOHN DOE SUMMONSES.— 

9 ‘‘(A) IN GENERAL.—Notwithstanding the 

10 requirements of paragraph (1), the Secretary 

11 may issue a summons described in paragraph 

12 (1) if the summons— 

13 ‘‘(i) relates to a project which is ap14 proved under subparagraph (B), 

15 ‘‘(ii) is issued to a person who is a 

16 member of the group or class established 

17 under subparagraph (B)(i), and 

18 ‘‘(iii) is issued within 3 years of the 

19 date on which such project was approved 

20 under subparagraph (B). 

21 ‘‘(B) APPROVAL OF PROJECTS.—A project 

22 may only be approved under this subparagraph 

23 after a court proceeding in which the Secretary 

24 establishes that— 


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1 ‘‘(i) any summons issued with respect 

2 to the project will be issued to a member 

3 of an ascertainable group or class of per4 sons, and 

5 ‘‘(ii) any summons issued with respect 

6 to such project will meet the requirements 

7 of paragraph (1). 

8 ‘‘(C) EXTENSION.—Upon application of 

9 the Secretary, the court may extend the time 

10 for issuing such summonses under subpara11 graph (A)(i) for additional 3-year periods, but 

12 only if the court continues to exercise oversight 

13 of such project under subparagraph (D). 

14 ‘‘(D) ONGOING COURT OVERSIGHT.—Dur15 ing any period in which the Secretary is author16 ized to issue summonses in relation to a project 

17 approved under subparagraph (B) (including 

18 during any extension under subparagraph (C)), 

19 the Secretary shall report annually to the court 

20 on the use of such authority, provide copies of 

21 all summonses with such report, and comply 

22 with the court’s direction with respect to the 

23 issuance of any John Doe summons under such 

24 project.’’. 

25 (b) JURISDICTION OF COURT.— 


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1 (1) IN GENERAL.—Paragraph (1) of section 

2 7609(h) is amended by inserting after the first sen3 tence the following new sentence: ‘‘Any United 

4 States district court in which a member of the group 

5 or class to which a summons may be issued resides 

6 or is found shall have jurisdiction to hear and deter7 mine the approval of a project under subsection 

8 (f)(4)(B).’’. 

9 (2) CONFORMING AMENDMENT.—The first sen10 tence of section 7609(h)(1) is amended by striking 

11 ‘‘(f)’’ and inserting ‘‘(f)(1)’’. 

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

13 this section shall apply to summonses issued after the date 

14 of the enactment of this Act. 

15 SEC. 206. IMPROVING ENFORCEMENT OF FOREIGN FINAN16 CIAL ACCOUNT REPORTING. 

17 (a) CLARIFYING THE CONNECTION OF FOREIGN FI18 NANCIAL ACCOUNT REPORTING TO TAX ADMINISTRA19 TION.—Paragraph (4) of section 6103(b) is amended by 

20 adding at the end the following new sentence: 

21 ‘‘For purposes of subparagraph (A)(i), section 5314 

22 of title 31, United States Code, and sections 5321 

23 and 5322 of such title (as such sections pertain to 

24 such section 5314), shall be considered related stat25 utes.’’. 


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1 (b) SIMPLIFYING THE CALCULATION OF FOREIGN

2 FINANCIAL ACCOUNT REPORTING PENALTIES.—Section 

3 5321(a)(5)(D)(ii) of title 31, United States Code, is 

4 amended by striking ‘‘the balance in the account at the 

5 time of the violation’’ and inserting ‘‘the highest balance 

6 in the account during the reporting period to which the 

7 violation relates’’. 

8 (c) CLARIFYING THE USE OF SUSPICIOUS ACTIVITY

9 REPORTS UNDER THE BANK SECRECY ACT FOR CIVIL

10 TAX LAW ENFORCEMENT.—Section 5319 of title 31, 

11 United States Code, is amended by inserting ‘‘the civil and 

12 criminal enforcement divisions of the Internal Revenue 

13 Service,’’ after ‘‘including’’. 

14 TITLE III—ENDING CORPORATE 

15 OFFSHORE TAX AVOIDANCE 

16 SEC. 301. ALLOCATION OF EXPENSES AND TAXES ON BASIS 

17 OF REPATRIATION OF FOREIGN INCOME. 

18 (a) IN GENERAL.—Part III of subchapter N of chap19 ter 1 is amended by inserting after subpart G the following 

20 new subpart: 

21 ‘‘Subpart H—Special Rules for Allocation of Foreign22 Related Deductions and Foreign Tax Credits 

‘‘Sec. 975. Deductions allocated to deferred foreign income may not offset 

United States source income. 

‘‘Sec. 976. Amount of foreign taxes computed on overall basis. 

‘‘Sec. 977. Application of subpart. 


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1 ‘‘SEC. 975. DEDUCTIONS ALLOCATED TO DEFERRED FOR2 EIGN INCOME MAY NOT OFFSET UNITED 

3 STATES SOURCE INCOME. 

4 ‘‘(a) CURRENT YEAR DEDUCTIONS.—For purposes 

5 of this chapter, foreign-related deductions for any taxable 

6 year— 

7 ‘‘(1) shall be taken into account for such tax8 able year only to the extent that such deductions are 

9 allocable to currently-taxed foreign income, and 

10 ‘‘(2) to the extent not so allowed, shall be taken 

11 into account in subsequent taxable years as provided 

12 in subsection (b). 

13 Foreign-related deductions shall be allocated to currently14 taxed foreign income in the same proportion which cur15 rently-taxed foreign income bears to the sum of currently16 taxed foreign income and deferred foreign income. 

17 ‘‘(b) DEDUCTIONS RELATED TO REPATRIATED DE18 FERRED FOREIGN INCOME.— 

19 ‘‘(1) IN GENERAL.—If there is repatriated for20 eign income for a taxable year, the portion of the 

21 previously deferred deductions allocated to the repa22 triated foreign income shall be taken into account 

23 for the taxable year as a deduction allocated to in24 come from sources outside the United States. Any 

25 such amount shall not be included in foreign-related 


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1 deductions for purposes of applying subsection (a) to 

2 such taxable year. 

3 ‘‘(2) PORTION OF PREVIOUSLY DEFERRED DE4 DUCTIONS.—For purposes of paragraph (1), the por5 tion of the previously deferred deductions allocated 

6 to repatriated foreign income is— 

7 ‘‘(A) the amount which bears the same 

8 proportion to such deductions, as 

9 ‘‘(B) the repatriated income bears to the 

10 previously deferred foreign income. 

11 ‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur12 poses of this section— 

13 ‘‘(1) FOREIGN-RELATED DEDUCTIONS.—The 

14 term ‘foreign-related deductions’ means the total 

15 amount of deductions and expenses which would be 

16 allocated or apportioned to gross income from 

17 sources without the United States for the taxable 

18 year if both the currently-taxed foreign income and 

19 deferred foreign income were taken into account. 

20 ‘‘(2) CURRENTLY-TAXED FOREIGN INCOME.— 

21 The term ‘currently-taxed foreign income’ means the 

22 amount of gross income from sources without the 

23 United States for the taxable year (determined with24 out regard to repatriated foreign income for such 

25 year). 


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1 ‘‘(3) DEFERRED FOREIGN INCOME.—The term 

2 ‘deferred foreign income’ means the excess of— 

3 ‘‘(A) the amount that would be includible 

4 in gross income under subpart F of this part 

5 for the taxable year if— 

6 ‘‘(i) all controlled foreign corporations 

7 were treated as one controlled foreign cor8 poration, and 

9 ‘‘(ii) all earnings and profits of all 

10 controlled foreign corporations were sub11 part F income (as defined in section 952), 

12 over 

13 ‘‘(B) the sum of— 

14 ‘‘(i) all dividends received during the 

15 taxable year from controlled foreign cor16 porations, plus 

17 ‘‘(ii) amounts includible in gross in18 come under section 951(a). 

19 ‘‘(4) PREVIOUSLY DEFERRED FOREIGN IN20 COME.—The term ‘previously deferred foreign in21 come’ means the aggregate amount of deferred for22 eign income for all prior taxable years to which this 

23 part applies, determined as of the beginning of the 

24 taxable year, reduced by the repatriated foreign in25 come for all such prior taxable years. 


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1 ‘‘(5) REPATRIATED FOREIGN INCOME.—The 

2 term ‘repatriated foreign income’ means the amount 

3 included in gross income on account of distributions 

4 out of previously deferred foreign income. 

5 ‘‘(6) PREVIOUSLY DEFERRED DEDUCTIONS.— 

6 The term ‘previously deferred deductions’ means the 

7 aggregate amount of foreign-related deductions not 

8 taken into account under subsection (a) for all prior 

9 taxable years (determined as of the beginning of the 

10 taxable year), reduced by any amounts taken into 

11 account under subsection (b) for such prior taxable 

12 years. 

13 ‘‘(7) TREATMENT OF CERTAIN FOREIGN

14 TAXES.— 

15 ‘‘(A) PAID BY CONTROLLED FOREIGN COR16 PORATION.—Section 78 shall not apply for pur17 poses of determining currently-taxed foreign in18 come and deferred foreign income. 

19 ‘‘(B) PAID BY TAXPAYER.—For purposes 

20 of determining currently-taxed foreign income, 

21 gross income from sources without the United 

22 States shall be reduced by the aggregate 

23 amount of taxes described in the applicable 

24 paragraph of section 901(b) which are paid by 


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1 the taxpayer (without regard to sections 902 

2 and 960) during the taxable year. 

3 ‘‘(8) COORDINATION WITH SECTION 976.—In 

4 determining currently-taxed foreign income and de5 ferred foreign income, the amount of deemed foreign 

6 tax credits shall be determined with regard to sec7 tion 976. 

8 ‘‘SEC. 976. AMOUNT OF FOREIGN TAXES COMPUTED ON 

9 OVERALL BASIS. 

10 ‘‘(a) CURRENT YEAR ALLOWANCE.—For purposes of 

11 this chapter, the amount taken into account as foreign in12 come taxes for any taxable year shall be an amount which 

13 bears the same ratio to the total foreign income taxes for 

14 that taxable year as— 

15 ‘‘(1) the currently-taxed foreign income for such 

16 taxable year, bears to 

17 ‘‘(2) the sum of the currently-taxed foreign in18 come and deferred foreign income for such year. 

19 The portion of the total foreign income taxes for any tax20 able year not taken into account under the preceding sen21 tence for a taxable year shall only be taken into account 

22 as provided in subsection (b) (and shall not be taken into 

23 account for purposes of applying sections 902 and 960). 

24 ‘‘(b) ALLOWANCE RELATED TO REPATRIATED DE25 FERRED FOREIGN INCOME.— 


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1 ‘‘(1) IN GENERAL.—If there is repatriated for2 eign income for any taxable year, the portion of the 

3 previously deferred foreign income taxes paid or ac4 crued during such taxable year shall be taken into 

5 account for the taxable year as foreign taxes paid or 

6 accrued. Any such taxes so taken into account shall 

7 not be included in foreign income taxes for purposes 

8 of applying subsection (a) to such taxable year. 

9 ‘‘(2) PORTION OF PREVIOUSLY DEFERRED FOR10 EIGN INCOME TAXES.—For purposes of paragraph 

11 (1), the portion of the previously deferred foreign in12 come taxes allocated to repatriated deferred foreign 

13 income is— 

14 ‘‘(A) the amount which bears the same 

15 proportion to such taxes, as 

16 ‘‘(B) the repatriated deferred income bears 

17 to the previously deferred foreign income. 

18 ‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur19 poses of this section— 

20 ‘‘(1) PREVIOUSLY DEFERRED FOREIGN INCOME

21 TAXES.—The term ‘previously deferred foreign in22 come taxes’ means the aggregate amount of total 

23 foreign income taxes not taken into account under 

24 subsection (a) for all prior taxable years (determined 

25 as of the beginning of the taxable year), reduced by 


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1 any amounts taken into account under subsection 

2 (b) for such prior taxable years. 

3 ‘‘(2) TOTAL FOREIGN INCOME TAXES.—The 

4 term ‘total foreign income taxes’ means the sum of 

5 foreign income taxes paid or accrued during the tax6 able year (determined without regard to section 

7 904(c)) plus the increase in foreign income taxes 

8 that would be paid or accrued during the taxable 

9 year under sections 902 and 960 if— 

10 ‘‘(A) all controlled foreign corporations 

11 were treated as one controlled foreign corpora12 tion, and 

13 ‘‘(B) all earnings and profits of all con14 trolled foreign corporations were subpart F in15 come (as defined in section 952). 

16 ‘‘(3) FOREIGN INCOME TAXES.—The term ‘for17 eign income taxes’ means any income, war profits, or 

18 excess profits taxes paid by the taxpayer to any for19 eign country or possession of the United States. 

20 ‘‘(4) CURRENTLY-TAXED FOREIGN INCOME AND

21 DEFERRED FOREIGN INCOME.—The terms ‘cur22 rently-taxed foreign income’ and ‘deferred foreign in23 come’ have the meanings given such terms by sec24 tion 975(c). 


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1 ‘‘SEC. 977. APPLICATION OF SUBPART. 

2 ‘‘This subpart— 

3 ‘‘(1) shall be applied before subpart A, and 

4 ‘‘(2) shall be applied separately with respect to 

5 the categories of income specified in section 

6 904(d)(1).’’. 

7 (b) CLERICAL AMENDMENT.—The table of subparts 

8 for part III of subpart N of chapter 1 is amended by in9 serting after the item relating to subpart G the following 

10 new item: 

‘‘SUBPART H. SPECIAL RULES FOR ALLOCATION OF FOREIGN-RELATED

DEDUCTIONS AND FOREIGN TAX CREDITS’’. 

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

12 this section shall apply to taxable years beginning after 

13 the date of the enactment of this Act. 

14 SEC. 302. EXCESS INCOME FROM TRANSFERS OF INTANGI15 BLES TO LOW-TAXED AFFILIATES TREATED 

16 AS SUBPART F INCOME. 

17 (a) IN GENERAL.—Subsection (a) of section 954 is 

18 amended by inserting after paragraph (3) the following 

19 new paragraph: 

20 ‘‘(4) the foreign base company excess intangible 

21 income for the taxable year (determined under sub22 section (f) and reduced as provided in subsection 

23 (b)(5)), and’’. 


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1 (b) FOREIGN BASE COMPANY EXCESS INTANGIBLE

2 INCOME.—Section 954 is amended by inserting after sub3 section (e) the following new subsection: 

4 ‘‘(f) FOREIGN BASE COMPANY EXCESS INTANGIBLE

5 INCOME.—For purposes of subsection (a)(4) and this sub6 section: 

7 ‘‘(1) FOREIGN BASE COMPANY EXCESS INTAN8 GIBLE INCOME DEFINED.— 

9 ‘‘(A) IN GENERAL.—The term ‘foreign 

10 base company excess intangible income’ means, 

11 with respect to any covered intangible, the ex12 cess of— 

13 ‘‘(i) the sum of— 

14 ‘‘(I) gross income from the sale, 

15 lease, license, or other disposition of 

16 property in which such covered intan17 gible is used directly or indirectly, and 

18 ‘‘(II) gross income from the pro19 vision of services related to such cov20 ered intangible or in connection with 

21 property in which such covered intan22 gible is used directly or indirectly, 

23 over 

24 ‘‘(ii) 150 percent of the costs properly 

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1 come taken into account under clause (i) 

2 other than expenses for interest and taxes 

3 and any expenses which are not directly al4 locable to such gross income. 

5 ‘‘(B) SAME COUNTRY INCOME NOT TAKEN

6 INTO ACCOUNT.—If— 

7 ‘‘(i) the sale, lease, license, or other 

8 disposition of the property referred to in 

9 subparagraph (A)(i)(I) is for use, con10 sumption, or disposition in the country 

11 under the laws of which the controlled for12 eign corporation is created or organized, or 

13 ‘‘(ii) the services referred to in sub14 paragraph (A)(i)(II) are performed in such 

15 country, 

16 the gross income from such sale, lease, license, 

17 or other disposition, or provision of services, 

18 shall not be taken into account under subpara19 graph (A)(i). 

20 ‘‘(2) EXCEPTION BASED ON EFFECTIVE FOR21 EIGN INCOME TAX RATE.— 

22 ‘‘(A) IN GENERAL.—Foreign base company 

23 excess intangible income shall not include the 

24 applicable percentage of any item of income re25 ceived by a controlled foreign corporation if the 


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1 taxpayer establishes to the satisfaction of the 

2 Secretary that such income was subject to an 

3 effective rate of income tax imposed by a for4 eign country in excess of 5 percent. 

5 ‘‘(B) APPLICABLE PERCENTAGE.—For 

6 purposes of subparagraph (A), the term ‘appli7 cable percentage’ means the ratio (expressed as 

8 a percentage), not greater than 100 percent, 

9 of— 

10 ‘‘(i) the number of percentage points 

11 by which the effective rate of income tax 

12 referred to in subparagraph (A) exceeds 5 

13 percentage points, over 

14 ‘‘(ii) 10 percentage points. 

15 ‘‘(C) TREATMENT OF LOSSES IN DETER16 MINING EFFECTIVE RATE OF FOREIGN INCOME

17 TAX.—For purposes of determining the effective 

18 rate of income tax imposed by any foreign 

19 country— 

20 ‘‘(i) such effective rate shall be deter21 mined without regard to any losses carried 

22 to the relevant taxable year, and 

23 ‘‘(ii) to the extent the income with re24 spect to such intangible reduces losses in 

25 the relevant taxable year, such effective 


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1 rate shall be treated as being the effective 

2 rate which would have been imposed on 

3 such income without regard to such losses. 

4 ‘‘(3) COVERED INTANGIBLE.—The term ‘cov5 ered intangible’ means, with respect to any con6 trolled foreign corporation, any intangible property 

7 (as defined in section 936(h)(3)(B))— 

8 ‘‘(A) which is sold, leased, licensed, or oth9 erwise transferred (directly or indirectly) to 

10 such controlled foreign corporation from a re11 lated person, or 

12 ‘‘(B) with respect to which such controlled 

13 foreign corporation and one or more related 

14 persons has (directly or indirectly) entered into 

15 any shared risk or development agreement (in16 cluding any cost sharing agreement). 

17 ‘‘(4) RELATED PERSON.—The term ‘related 

18 person’ has the meaning given such term in sub19 section (d)(3).’’. 

20 (c) SEPARATE BASKET FOR FOREIGN TAX CRED21 IT.—Subsection (d) of section 904 is amended by redesig22 nating paragraph (7) as paragraph (8) and by inserting 

23 after paragraph (6) the following new paragraph: 

24 ‘‘(7) SEPARATE APPLICATION TO FOREIGN

25 BASE COMPANY EXCESS INTANGIBLE INCOME.— 


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1 ‘‘(A) IN GENERAL.—Subsections (a), (b), 

2 and (c) of this section and sections 902, 907, 

3 and 960 shall be applied separately with respect 

4 to each item of income which is taken into ac5 count under section 954(a)(4) as foreign base 

6 company excess intangible income. 

7 ‘‘(B) REGULATIONS.—The Secretary may 

8 issue such regulations or other guidance as is 

9 necessary or appropriate to carry out the pur10 poses of this subsection, including regulations 

11 or other guidance which provides that related 

12 items of income may be aggregated for pur13 poses of this paragraph.’’. 

14 (d) CONFORMING AMENDMENTS.— 

15 (1) Paragraph (4) of section 954(b) is amended 

16 by inserting ‘‘foreign base company excess intangible 

17 income described in subsection (a)(4) or’’ before 

18 ‘‘foreign base company oil-related income’’ in the 

19 last sentence thereof. 

20 (2) Subsection (b) of section 954 is amended by 

21 adding at the end the following new paragraph: 

22 ‘‘(7) FOREIGN BASE COMPANY EXCESS INTAN23 GIBLE INCOME NOT TREATED AS ANOTHER KIND OF

24 BASE COMPANY INCOME.—Income of a corporation 

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1 come shall not be considered foreign base company 

2 income of such corporation under paragraph (2), 

3 (3), or (5) of subsection (a).’’. 

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

5 this section shall apply to taxable years beginning after 

6 the date of the enactment of this Act. 

7 SEC. 303. LIMITATIONS ON INCOME SHIFTING THROUGH IN8 TANGIBLE PROPERTY TRANSFERS. 

9 (a) CLARIFICATION OF DEFINITION OF INTANGIBLE

10 ASSET.—Clause (vi) of section 936(h)(3)(B) is amended 

11 by inserting ‘‘(including any section 197 intangible de12 scribed in subparagraph (A), (B), or (C)(i) of subsection 

13 (d)(1) of such section)’’ after ‘‘item’’. 

14 (b) CLARIFICATION OF ALLOWABLE VALUATION

15 METHODS.— 

16 (1) FOREIGN CORPORATIONS.—Paragraph (2) 

17 of section 367(d) is amended by adding at the end 

18 the following new subparagraph: 

19 ‘‘(D) REGULATORY AUTHORITY.—For pur20 poses of the last sentence of subparagraph (A), 

21 the Secretary may require— 

22 ‘‘(i) the valuation of transfers of in23 tangible property on an aggregate basis, or 


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1 ‘‘(ii) the valuation of such a transfer 

2 on the basis of the realistic alternatives to 

3 such a transfer, 

4 in any case in which the Secretary determines 

5 that such basis is the most reliable means of 

6 valuation of such transfers.’’. 

7 (2) ALLOCATION AMONG TAXPAYERS.—Section 

8 482 is amended by adding at the end the following: 

9 ‘‘For purposes of the preceding sentence, the Sec10 retary may require the valuation of transfers of in11 tangible property on an aggregate basis or the valu12 ation of such a transfer on the basis of the realistic 

13 alternatives to such a transfer, in any case in which 

14 the Secretary determines that such basis is the most 

15 reliable means of valuation of such transfers.’’. 

16 (c) EFFECTIVE DATE.— 

17 (1) IN GENERAL.—The amendments made by 

18 this section shall apply to transfers in taxable years 

19 beginning after the date of the enactment of this 

20 Act. 

21 (2) NO INFERENCE.—Nothing in the amend22 ment made by subsection (a) shall be construed to 

23 create any inference with respect to the application 

24 of section 936(h)(3) of the Internal Revenue Code of 

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1 ury to provide regulations for such application, on or 

2 before the date of the enactment of such amend3 ment. 

4 SEC. 304. REPEAL OF CHECK-THE-BOX RULES FOR CERTAIN 

5 FOREIGN ENTITIES AND CFC LOOK-THRU 

6 RULES. 

7 (a) CHECK-THE-BOX RULES.—Paragraph (3) of sec8 tion 7701(a) is amended— 

9 (1) by striking ‘‘and’’, and 

10 (2) by inserting after ‘‘insurance companies’’ 

11 the following: ‘‘, and any foreign business entity 

12 that— 

13 ‘‘(A) has a single owner that does not have 

14 limited liability, or 

15 ‘‘(B) has one or more members all of 

16 which have limited liability’’. 

17 (b) LOOK-THRU RULE.—Subparagraph (C) of sec18 tion 954(c)(6) is amended to read as follows: 

19 ‘‘(C) TERMINATION.—Subparagraph (A) 

20 shall not apply to dividends, interest, rents, and 

21 royalties received or accrued after the date of 

22 the enactment of the Stop Tax Haven Abuse 

23 Act.’’. 

24 (c) EFFECTIVE DATE.— 


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1 (1) The amendments made by subsection (a) 

2 shall take effect on the date of the enactment of this 

3 Act. 

4 (2) The amendment made by subsection (b) 

5 shall apply to payments received after the date of 

6 the enactment of this Act. 

7 SEC. 305. RESTRICTIONS ON DEDUCTION FOR INTEREST 

8 EXPENSE OF MEMBERS OF FINANCIAL RE9 PORTING GROUPS WITH EXCESS DOMESTIC 

10 INDEBTEDNESS. 

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

13 after subsection (m) the following new subsection: 

14 ‘‘(n) RESTRICTION ON DEDUCTION FOR INTEREST

15 EXPENSE OF MEMBERS OF FINANCIAL REPORTING

16 GROUPS WITH EXCESS DOMESTIC INDEBTEDNESS.— 

17 ‘‘(1) IN GENERAL.—In the case of any corpora18 tion which is a member of an applicable financial re19 porting group the common parent of which is a for20 eign corporation, the deduction allowed under this 

21 chapter for interest paid or accrued by the corpora22 tion during the taxable year shall not exceed the ap23 plicable limitation for the taxable year. 

24 ‘‘(2) CARRYFORWARD.—Any amount disallowed 

25 under paragraph (1) for any taxable year shall be 


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1 treated as interest paid or accrued in the succeeding 

2 taxable year. 

3 ‘‘(3) APPLICABLE LIMITATION.—For purposes 

4 of this subsection— 

5 ‘‘(A) IN GENERAL.—The applicable limita6 tion with respect to a taxpayer for any taxable 

7 year is the sum of— 

8 ‘‘(i) the greater of— 

9 ‘‘(I) the taxpayer’s allocable 

10 share of the applicable financial re11 porting group’s net interest expense 

12 for the taxable year, or 

13 ‘‘(II) 10 percent of the taxpayer’s 

14 adjusted taxable income for the tax15 able year, plus 

16 ‘‘(ii) the excess limitation carryfor17 wards to the taxable year from any pre18 ceding taxable year. 

19 ‘‘(B) LIMITATION NOT LESS THAN IN20 CLUDIBLE INTEREST.—The applicable limita21 tion under subparagraph (A) for any taxable 

22 year shall not be less than the amount of inter23 est includible in the gross income of the tax24 payer for the taxable year. 


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1 ‘‘(C) EXCESS LIMITATION

2 CARRYFORWARD.—If the applicable limitation 

3 of a taxpayer for any taxable year (determined 

4 without regard to carryforwards under subpara5 graph (A)(ii)) exceeds the interest paid or ac6 crued by the taxpayer during the taxable year, 

7 such excess shall be an excess limitation 

8 carryforward to the 1st succeeding taxable year 

9 and the 2nd and 3rd succeeding taxable years 

10 to the extent not previously taken into account 

11 under this paragraph. 

12 ‘‘(4) ALLOCABLE SHARE OF NET INTEREST EX13 PENSE.—For purposes of this subsection— 

14 ‘‘(A) IN GENERAL.—A taxpayer’s allocable 

15 share of an applicable financial reporting 

16 group’s net interest expense for any taxable 

17 year shall be the amount (not less than zero) 

18 which bears the same ratio to such net interest 

19 expense as— 

20 ‘‘(i) the net earnings of the taxpayer, 

21 bears to 

22 ‘‘(ii) the aggregate net earnings of all 

23 members of the applicable financial report24 ing group. 


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1 ‘‘(B) NET EARNINGS.—The term ‘net 

2 earnings’ means, with respect to any taxpayer, 

3 the earnings of the taxpayer— 

4 ‘‘(i) computed without regard to any 

5 reduction allowable for— 

6 ‘‘(I) net interest expense, 

7 ‘‘(II) taxes, or 

8 ‘‘(III) depreciation, amortization, 

9 or depletion, and 

10 ‘‘(ii) computed with such other adjust11 ments as the Secretary may by regulations 

12 prescribe. 

13 ‘‘(C) BURDEN ON TAXPAYER.—If a tax14 payer elects not to compute its allocable share, 

15 or fails to establish to the satisfaction of the 

16 Secretary the amount of its allocable share, for 

17 any taxable year, the allocable share shall be 

18 zero. 

19 ‘‘(5) NET INTEREST EXPENSE AND NET EARN20 INGS DETERMINATIONS.—For purposes of this sub21 section— 

22 ‘‘(A) NET INTEREST EXPENSE.—Any de23 termination of net interest expense for any tax24 able year shall be made— 


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1 ‘‘(i) on the basis of the applicable fi2 nancial statement of the applicable finan3 cial reporting group for the last financial 

4 reporting year ending with or within the 

5 taxable year, and 

6 ‘‘(ii) under United States tax prin7 ciples. 

8 ‘‘(B) NET EARNINGS.—Any determination 

9 of net earnings for any taxable year shall be 

10 made on the basis of the applicable financial 

11 statement of the applicable financial reporting 

12 group for the last financial reporting year end13 ing with or within the taxable year. 

14 ‘‘(C) APPLICABLE FINANCIAL STATE15 MENT.—The term ‘applicable financial state16 ment’ means a statement for financial reporting 

17 purposes which is made on the basis of— 

18 ‘‘(i) generally accepted accounting 

19 principles, 

20 ‘‘(ii) international financial reporting 

21 standards, or 

22 ‘‘(iii) any other method specified by 

23 the Secretary in regulations. 

24 A statement under clause (ii) or (iii) may be 

25 used as an applicable financial statement by a 


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1 group only if there is no statement of the group 

2 under any preceding clause. 

3 ‘‘(6) APPLICABLE FINANCIAL REPORTING

4 GROUP.—For purposes of this subsection— 

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

6 financial reporting group’ means, with respect 

7 to any corporation, a group of which such cor8 poration is a member and which files an appli9 cable financial statement. 

10 ‘‘(B) EXCEPTION FOR GROUPS WITH MINI11 MAL DOMESTIC NET INTEREST EXPENSE.— 

12 Such term shall not include a group if the ag13 gregate net interest expense for which a deduc14 tion is allowable to all members of the group 

15 under this chapter (determined without regard 

16 to this subsection or any other limitation on de17 ductibility of interest under this chapter) is less 

18 than $5,000,000. 

19 ‘‘(C) EXCEPTION FOR CERTAIN FINANCIAL

20 ENTITIES.—A corporation which is described in 

21 section 864(f)(4)(B), or is treated as described 

22 in section 864(f)(4)(B) by reason of paragraph 

23 (4)(C) or (5)(A) of section 864(f) (without re24 gard to whether an election is made under such 

25 paragraph (5)(A)), shall not be treated as a 


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1 member of an applicable financial reporting 

2 group of which it is otherwise a member and 

3 this subsection shall not apply to such corpora4 tion. 

5 ‘‘(7) OTHER DEFINITIONS AND RULES.—For 

6 purposes of this subsection— 

7 ‘‘(A) ADJUSTED TAXABLE INCOME.—The 

8 term ‘adjusted taxable income’ has the meaning 

9 given such term by subsection (j)(6)(A). 

10 ‘‘(B) NET INTEREST EXPENSE.—The term 

11 ‘net interest expense’ has the meaning given 

12 such term by subsection (j)(6)(B). 

13 ‘‘(C) TREATMENT OF AFFILIATED

14 GROUP.—All members of the same affiliated 

15 group (within the meaning of section 1504(a)) 

16 shall be treated as 1 taxpayer. 

17 ‘‘(8) REGULATIONS.—The Secretary shall pre18 scribe such regulations as may be necessary to carry 

19 out the purposes of this section, including regula20 tions providing— 

21 ‘‘(A) for the coordination of the application 

22 of this subsection and other provisions of this 

23 chapter relating to the deductibility of interest, 

24 ‘‘(B) for the waiver of certain adjustments 

25 required under United States tax principles in 


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1 appropriate cases for purposes of applying this 

2 subsection, 

3 ‘‘(C) for the determination of which finan4 cial institutions are eligible for the exception 

5 from membership in an applicable financial re6 porting group under paragraph (6)(C) and the 

7 application of this subsection to the other mem8 bers of the group which are not so excepted, 

9 and 

10 ‘‘(D) for the application of this subsection 

11 in the case of pass thru entities and for the 

12 treatment of pass thru entities as corporations 

13 in cases where necessary to prevent the avoid14 ance of the purposes of this subsection.’’. 

15 (b) COORDINATION WITH LIMITATION ON RELATED

16 PARTY INDEBTEDNESS.—Paragraph (2) of section 163(j) 

17 of the Internal Revenue Code of 1986 is amended by add18 ing at the end the following new subparagraph: 

19 ‘‘(D) COORDINATION WITH LIMITATION ON

20 EXCESS DOMESTIC INDEBTEDNESS.—This sub21 section shall not apply to any corporation for 

22 any taxable year to which subsection (n) applies 

23 to such corporation.’’. 


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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, 2014. 

4 TITLE IV—INVERTED 

5 CORPORATIONS 

6 SEC. 401. 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 May 8, 

2 2014, 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 May 8, 2014, ex21 cept that the Secretary may issue regulations in22 creasing the threshold percent in any of the tests 

23 under such regulations for determining if business 

24 activities constitute substantial business activities for 

25 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 May 8, 2014. 

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 08:09 Jan 23, 2015 Jkt 049200 PO 00000 Frm 00069 Fmt 6652 Sfmt 6201 E:\BILLS\S174.IS S174

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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 May 8, 2014, but 

20 applied by treating all references in such regulations 

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

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

23 issue regulations decreasing the threshold percent in 

24 any of the tests under such regulations for deter25 mining if business activities constitute significant 


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1 domestic business activities for purposes of this 

2 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 May 9, 

7 2014,’’. 

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 May 

3 8, 2014. 

Æ 


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