I 

114TH CONGRESS 

1ST SESSION H. R. 625 

To eliminate the incentive for corporations to continue to hold accumulated 

earnings offshore, to invest in domestic infrastructure, to provide for 

international tax reform, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 30, 2015 

Mr. DELANEY (for himself and Mr. HANNA) introduced the following bill; 

which was referred to the Committee on Ways and Means, and in addition to the Committees on Transportation and Infrastructure and Rules, 

for a period to be subsequently determined by the Speaker, in each case 

for consideration of such provisions as fall within the jurisdiction of the 

committee concerned 

A BILL 

To eliminate the incentive for corporations to continue to 

hold accumulated earnings offshore, to invest in domestic 

infrastructure, to provide for international tax reform, 

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 ‘‘Infrastructure 2.0 Act’’. 


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

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

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

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

8 this Act is as follows: 

Sec. 1. Short title; etc. 

TITLE I—DEEMED REPATRIATION AND INVESTMENT IN 

DOMESTIC INFRASTRUCTURE 

Sec. 101. Elimination of incentive for corporations to continue to hold accumulated earnings offshore. 

Sec. 102. American Infrastructure Fund. 

Sec. 103. Dedication of remaining revenues to highway trust fund. 

Sec. 104. Highway Trust Fund Solvency Commission. 

Sec. 105. Regional infrastructure accelerator pilot program. 

TITLE II—DEADLINE FOR INTERNATIONAL TAX REFORM 

Sec. 201. 18-month deadline for international tax reform. 

TITLE III—FALLBACK INTERNATIONAL TAX REFORM 

Sec. 300. General effective date of title. 

Subtitle A—Reform of Taxation of Income Earned by Controlled Foreign 

Corporations 

PART I—GENERAL PROVISIONS

Sec. 301. Modifications to subpart F income. 

Sec. 302. Deemed repatriation upon transition to fallback international tax reform. 

PART II—FOREIGN TAX CREDIT LIMITATIONS

Sec. 311. Reform of foreign tax credit limitation. 

Sec. 312. Denial of credit and deduction for foreign taxes with respect to excluded subpart F income. 

PART III—EXPENSE DISALLOWANCE

Sec. 321. Disallowance of deduction for expenses allocable to exempt income of 

a controlled foreign corporation. 

PART IV—OTHER PROVISIONS RELATING TO SUBPART F 


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SUBPART A—PREVIOUSLY DEFERRED FOREIGN INCOME

Sec. 331. Treatment of previously deferred foreign income. 

SUBPART B—OTHER PROVISIONS

Sec. 336. Elimination of 30-day requirement. 

Sec. 337. Modification of definition of United States shareholder. 

Subtitle B—Reform of Foreign Tax Credit Provisions 

Sec. 341. Repeal of section 902 indirect foreign tax credits; foreign tax credit 

related to subpart F income. 

Sec. 342. Repeal of rule suspending foreign taxes and credits until related income is taken into account. 

1 TITLE I—DEEMED REPATRI2 ATION AND INVESTMENT IN 

3 DOMESTIC INFRASTRUCTURE 

4 SEC. 101. ELIMINATION OF INCENTIVE FOR CORPORATIONS 

5 TO CONTINUE TO HOLD ACCUMULATED 

6 EARNINGS OFFSHORE. 

7 (a) IN GENERAL.—Section 965 is amended to read 

8 as follows: 

9 ‘‘SEC. 965. ELIMINATION OF INCENTIVE TO HOLD ACCUMU10 LATED EARNINGS AND PROFITS OFFSHORE. 

11 ‘‘(a) TREATMENT OF DEFERRED FOREIGN INCOME

12 AS SUBPART F INCOME.—In the case of the last taxable 

13 year of a deferred foreign income corporation which ends 

14 before the date of the enactment of the Infrastructure 2.0 

15 Act, the subpart F income of such foreign corporation (as 

16 otherwise determined for such taxable year under section 

17 952) shall be increased by the accumulated post-1986 de18 ferred foreign income of such corporation determined as 

19 of the close of such taxable year. 


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1 ‘‘(b) REDUCTION IN AMOUNTS INCLUDED IN GROSS

2 INCOME OF UNITED STATES SHAREHOLDERS OF SPECI3 FIED FOREIGN CORPORATIONS WITH DEFICITS IN EARN4 INGS AND PROFITS.— 

5 ‘‘(1) IN GENERAL.—In the case of a taxpayer 

6 which is a United States shareholder with respect to 

7 at least one deferred foreign income corporation and 

8 at least one E&P deficit foreign corporation, the 

9 amount which would (but for this subsection) be 

10 taken into account under section 951(a)(1) by rea11 son of subsection (a) as such United States share12 holder’s pro rata share of the subpart F income of 

13 each deferred foreign income corporation shall be re14 duced (but not below zero) by the amount of such 

15 United States shareholder’s aggregate foreign E&P 

16 deficit which is allocated under paragraph (2) to 

17 such deferred foreign income corporation. 

18 ‘‘(2) ALLOCATION OF AGGREGATE FOREIGN E&P

19 DEFICIT.—The aggregate foreign E&P deficit of any 

20 United States shareholder shall be allocated among 

21 the deferred foreign income corporations of such 

22 United States shareholder in an amount which bears 

23 the same proportion to such aggregate as— 

24 ‘‘(A) such United States shareholder’s pro 

25 rata share of the accumulated post-1986 deVerDate Sep 11 2014 22:09 Feb 06, 2015 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H625.IH H625

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1 ferred foreign income of each such deferred for2 eign income corporation, bears to 

3 ‘‘(B) the aggregate of such United States 

4 shareholder’s pro rata share of the accumulated 

5 post-1986 deferred foreign income of all de6 ferred foreign income corporations of such 

7 United States shareholder. 

8 ‘‘(3) DEFINITIONS RELATED TO E&P DEFI9 CITS.—For purposes of this subsection— 

10 ‘‘(A) AGGREGATE FOREIGN E&P DEF11 ICIT.—The term ‘aggregate foreign E&P deficit’ 

12 means, with respect to any United States share13 holder, the aggregate of such shareholder’s pro 

14 rata shares of the specified E&P deficits of the 

15 E&P deficit foreign corporations of such share16 holder. 

17 ‘‘(B) E&P DEFICIT FOREIGN CORPORA18 TION.—The term ‘E&P deficit foreign corpora19 tion’ means, with respect to any taxpayer, any 

20 specified foreign corporation with respect to 

21 which such taxpayer is a United States share22 holder, if— 

23 ‘‘(i) such specified foreign corporation 

24 has a deficit in post-1986 earnings and 

25 profits, and 


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1 ‘‘(ii) as of the date of the introduction 

2 of Infrastructure 2.0 Act— 

3 ‘‘(I) such corporation was a spec4 ified foreign corporation, and 

5 ‘‘(II) such taxpayer was a United 

6 States shareholder of such corpora7 tion. 

8 ‘‘(C) SPECIFIED E&P DEFICIT.—The term 

9 ‘specified E&P deficit’ means, with respect to 

10 any E&P deficit foreign corporation, the 

11 amount of the deficit referred to in subpara12 graph (B). 

13 ‘‘(c) DEDUCTION FOR PORTION OF INCLUDED IN14 COME.—In the case of a United States shareholder of a 

15 deferred foreign income corporation, there shall be allowed 

16 as a deduction for the taxable year in which an amount 

17 is included in the gross income of such United States 

18 shareholder under section 951(a)(1) by reason of this sec19 tion an amount equal to 75 percent of the amount so in20 cluded in gross income. 

21 ‘‘(d) DEFERRED FOREIGN INCOME CORPORATION; 

22 ACCUMULATED POST-1986 DEFERRED FOREIGN IN23 COME.—For purposes of this section— 

24 ‘‘(1) DEFERRED FOREIGN INCOME CORPORA25 TION.—The term ‘deferred foreign income corporaVerDate Sep 11 2014 22:09 Feb 06, 2015 Jkt 049200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H625.IH H625

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1 tion’ means, with respect to any United States 

2 shareholder, any specified foreign corporation of 

3 such United States shareholder which has accumu4 lated post-1986 deferred foreign income (as of the 

5 close of the taxable year referred to in subsection 

6 (a)) greater than zero. 

7 ‘‘(2) ACCUMULATED POST-1986 DEFERRED FOR8 EIGN INCOME.—The term ‘accumulated post-1986 

9 deferred foreign income’ means the post-1986 earn10 ings and profits except to the extent such earnings— 

11 ‘‘(A) are attributable to income of the 

12 specified foreign corporation which is effectively 

13 connected with the conduct of a trade or busi14 ness within the United States and subject to 

15 tax under this chapter, 

16 ‘‘(B) if distributed, would— 

17 ‘‘(i) in the case of a controlled foreign 

18 corporation, be excluded from the gross in19 come of a United States shareholder under 

20 section 959, or 

21 ‘‘(ii) in the case of any passive foreign 

22 investment company (as defined in section 

23 1297) other than a controlled foreign cor24 poration, be treated as a distribution which 

25 is not a dividend, or 


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1 ‘‘(C) in the case of any passive foreign in2 vestment company (as so defined), is properly 

3 attributable to an unreversed inclusion of a 

4 United States person under section 1296. 

5 To the extent provided in regulations or other guid6 ance prescribed by the Secretary, in the case of any 

7 controlled foreign corporation which has share8 holders which are not United States shareholders, 

9 accumulated post-1986 deferred foreign income shall 

10 be appropriately reduced by amounts which would be 

11 described in subparagraph (B)(i) if such share12 holders were United States shareholders. Such regu13 lations or other guidance may provide a similar rule 

14 for purposes of subparagraph (B)(ii) and (C). 

15 ‘‘(3) POST-1986 EARNINGS AND PROFITS.—The 

16 term ‘post-1986 earnings and profits’ means the 

17 earnings and profits of the foreign corporation (com18 puted in accordance with sections 964(a) and 986) 

19 accumulated in taxable years beginning after Decem20 ber 31, 1986, and determined— 

21 ‘‘(A) as of the close the taxable year re22 ferred to in subsection (a), and 

23 ‘‘(B) without diminution by reason of divi24 dends distributed during such taxable year. 

25 ‘‘(e) SPECIFIED FOREIGN CORPORATION.— 


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1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the term ‘specified foreign corporation’ 

3 means— 

4 ‘‘(A) any controlled foreign corporation, 

5 and 

6 ‘‘(B) any section 902 corporation (as de7 fined in section 909(d)(5)). 

8 ‘‘(2) APPLICATION TO SECTION 902 CORPORA9 TIONS.—For purposes of section 951, a section 902 

10 corporation (as so defined) shall be treated as a con11 trolled foreign corporation solely for purposes of tak12 ing into account the subpart F income of such cor13 poration under subsection (a) (and for purposes of 

14 applying subsection (f)). 

15 ‘‘(f) DETERMINATIONS OF PRO RATA SHARE.—For 

16 purposes of this section, the determination of any United 

17 States shareholder’s pro rata share of any amount with 

18 respect to any specified foreign corporation shall be deter19 mined under rules similar to the rules of section 951(a)(2) 

20 by treating such amount in the same manner as subpart 

21 F income (and by treating such specified foreign corpora22 tion as a controlled foreign corporation). 

23 ‘‘(g) DISALLOWANCE OF FOREIGN TAX CREDIT, 

24 ETC.— 


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1 ‘‘(1) IN GENERAL.—No credit shall be allowed 

2 under section 901 for the applicable percentage of 

3 any taxes paid or accrued (or treated as paid or ac4 crued) with respect to any amount for which a de5 duction is allowed under this section. 

6 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

7 of this subsection, the term ‘applicable percentage’ 

8 means the percentage specified in subsection (c). 

9 ‘‘(3) DENIAL OF DEDUCTION.—No deduction 

10 shall be allowed under this chapter for any tax for 

11 which credit is not allowable under section 901 by 

12 reason of paragraph (1) (determined by treating the 

13 taxpayer as having elected the benefits of subpart A 

14 of part III of subchapter N). 

15 ‘‘(4) COORDINATION WITH SECTION 78.—Sec16 tion 78 shall not apply to any tax for which credit 

17 is not allowable under section 901 by reason of para18 graph (1). 

19 ‘‘(h) ELECTION TO PAY LIABILITY IN INSTALL20 MENTS.— 

21 ‘‘(1) IN GENERAL.—In the case of a United 

22 States shareholder of a deferred foreign income cor23 poration, such United States shareholder may elect 

24 to pay the net tax liability under this section in 8 

25 installments of the following amounts: 


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1 ‘‘(A) 8 percent of the net tax liability in 

2 the case of each of the first 5 of such install3 ments, 

4 ‘‘(B) 15 percent of the net tax liability in 

5 the case of the 6th such installment, 

6 ‘‘(C) 20 percent of the net tax liability in 

7 the case of the 7th such installment, and 

8 ‘‘(D) 25 percent of the net tax liability in 

9 the case of the 8th such installment. 

10 ‘‘(2) DATE FOR PAYMENT OF INSTALLMENTS.— 

11 If an election is made under paragraph (1), the first 

12 installment shall be paid on the due date (deter13 mined without regard to any extension of time for 

14 filing the return) for the return of tax for the tax15 able year described in subsection (b) and each suc16 ceeding installment shall be paid on the due date (as 

17 so determined) for the return of tax for the taxable 

18 year following the taxable year with respect to which 

19 the preceding installment was made. 

20 ‘‘(3) ACCELERATION OF PAYMENT.—If there is 

21 an addition to tax for failure to pay timely assessed 

22 with respect to any installment required under this 

23 subsection, a liquidation or sale of substantially all 

24 the assets of the taxpayer (including in a title 11 or 

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1 payer, or any similar circumstance, then the unpaid 

2 portion of all remaining installments shall be due on 

3 the date of such event (or in the case of a title 11 

4 or similar case, the day before the petition is filed). 

5 The preceding sentence shall not apply to the sale 

6 of substantially all the assets of a taxpayer to a 

7 buyer if such buyer enters into an agreement with 

8 the Secretary under which such buyer is liable for 

9 the remaining installments due under this subsection 

10 in the same manner as if such buyer were the tax11 payer. 

12 ‘‘(4) PRORATION OF DEFICIENCY TO INSTALL13 MENTS.—If an election is made under paragraph (1) 

14 to pay the net tax liability under this section in in15 stallments and a deficiency has been assessed with 

16 respect to such net tax liability, the deficiency shall 

17 be prorated to the installments payable under para18 graph (1). The part of the deficiency so prorated to 

19 any installment the date for payment of which has 

20 not arrived shall be collected at the same time as, 

21 and as a part of, such installment. The part of the 

22 deficiency so prorated to any installment the date 

23 for payment of which has arrived shall be paid upon 

24 notice and demand from the Secretary. This sub25 section shall not apply if the deficiency is due to 


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1 negligence, to intentional disregard of rules and reg2 ulations, or to fraud with intent to evade tax. 

3 ‘‘(5) ELECTION.—Any election under paragraph 

4 (1) shall be made not later than the due date for the 

5 return of tax for the taxable year described in sub6 section (a) and shall be made in such manner as the 

7 Secretary may provide. 

8 ‘‘(6) NET TAX LIABILITY UNDER THIS SEC9 TION.—For purposes of this subsection— 

10 ‘‘(A) IN GENERAL.—The net tax liability 

11 under this section with respect to any United 

12 States shareholder is the excess (if any) of— 

13 ‘‘(i) such taxpayer’s net income tax 

14 for the taxable year described in subsection 

15 (a), over 

16 ‘‘(ii) such taxpayer’s net income tax 

17 for such taxable year determined without 

18 regard to this section. 

19 ‘‘(B) NET INCOME TAX.—The term ‘net 

20 income tax’ means the regular tax liability re21 duced by the credits allowed under subparts A, 

22 B, and D of part IV of subchapter A. 

23 ‘‘(i) INCLUSION OF DEFERRED FOREIGN INCOME

24 UNDER THIS SECTION NOT TO TRIGGER RECAPTURE OF

25 OVERALL FOREIGN LOSS.—For purposes of section 


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1 904(f)(1), in the case of a United States shareholder of 

2 a deferred foreign income corporation, such United States 

3 shareholder’s taxable income from sources without the 

4 United States shall be determined without regard to this 

5 section. 

6 ‘‘(j) REGULATIONS.—The Secretary may prescribe 

7 such regulations or other guidance as may be necessary 

8 or appropriate to carry out the provisions of this section.’’. 

9 (b) CLERICAL AMENDMENT.—The table of sections 

10 for subpart F of part III of subchapter N of chapter 1 

11 of such Code is amended by striking the item relating to 

12 section 965 and inserting the following: 

‘‘Sec. 965. Elimination of incentive to hold accumulated earnings and profits 

offshore.’’. 

13 SEC. 102. AMERICAN INFRASTRUCTURE FUND. 

14 (a) AMERICAN INFRASTRUCTURE FUND.— 

15 (1) IN GENERAL.—There is established a wholly 

16 owned Government corporation— 

17 (A) which shall be called the American In18 frastructure Fund (referred to in this Act as 

19 the ‘‘AIF’’); 

20 (B) which shall be headed by the Board of 

21 Trustees established under subsection (b); 

22 (C) which may have separate subaccounts 

23 or subsidiaries for funds used to make loans, 


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1 bond guarantees, and equity investments under 

2 this section; 

3 (D) which shall be available to the AIF to 

4 pay for the costs of carrying out this section, 

5 including the compensation of the Board and 

6 other employees of the AIF; and 

7 (E) the funds of which may be invested by 

8 the Board in such manner as the Board deter9 mines appropriate. 

10 (2) DEPOSITS TO AIF.—All funds received from 

11 bond issuances, loan payments, bond guarantee fees, 

12 and any other funds received in carrying out this 

13 section shall be held by AIF. 

14 (3) LIMITATIONS.—The charter of the AIF 

15 shall limit its activities to those activities described 

16 as the mission of the Board under subsection (b)(2). 

17 (4) OVERSIGHT.—The AIF shall register with 

18 the Securities and Exchange Commission and the 

19 Chairman shall report to Congress annually as to 

20 whether the AIF is fulfilling the mission of the 

21 Board under subsection (b)(2). 

22 (5) TREATMENT OF AIF.— 

23 (A) ACCOUNTS.—Title 31, United States 

24 Code, is amended in each of sections 9107(c)(3) 

25 and 9108(d)(2)— 


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1 (i) by inserting ‘‘the American Infra2 structure Fund,’’ after ‘‘the Regional 

3 Banks for Cooperatives,’’; and 

4 (ii) by striking ‘‘those banks’’ and in5 serting ‘‘those entities’’. 

6 (B) BONDS.—Section 149(b)(3)(A)(i) is 

7 amended by inserting ‘‘American Infrastructure 

8 Fund,’’ after ‘‘Federal Home Loan Mortgage 

9 Corporation,’’. 

10 (b) BOARD OF TRUSTEES.— 

11 (1) IN GENERAL.—There is established a Board 

12 of Trustees of the AIF (referred to in this sub13 section as the ‘‘Board’’), which shall be composed of 

14 9 members who— 

15 (A) have substantial experience in bond 

16 guarantees or municipal credit; and 

17 (B) to the greatest extent practicable, have 

18 extensive experience working with municipal 

19 credit, risk management, and infrastructure fi20 nance. 

21 (2) MISSION.—The mission of the Board is— 

22 (A) to operate the AIF and its subsidiaries 

23 to be a low cost provider of bond guarantees, 

24 loans, and equity investments to State and local 


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1 governments and infrastructure providers for 

2 urban and rural infrastructure projects that— 

3 (i) provide a positive economic impact; 

4 and 

5 (ii) meet such other standards as the 

6 Board may develop; 

7 (B) to operate the AIF in a self-sustaining 

8 manner; 

9 (C) to not have a profit motive, but to seek 

10 at all times to pursue its mission of providing 

11 low cost bond guarantees and loans while— 

12 (i) covering its costs; 

13 (ii) maintaining such reserves as may 

14 be needed; and 

15 (iii) applying prudent underwriting 

16 standards; 

17 (D) to only consider projects put forth by 

18 State and local governments and not to seek 

19 projects directly; and 

20 (E) to engage in no other activities other 

21 than those permitted under this section. 

22 (3) MEMBERSHIP.— 

23 (A) INITIAL MEMBERS.— 

24 (i) APPOINTMENT.—Not later than 

25 150 days after the date of the enactment 


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1 of this Act, the President shall appoint, 

2 with the advice and consent of the Senate, 

3 as members of the Board— 

4 (I) 2 individuals from a list of at 

5 least 5 individuals selected by the 

6 Speaker of the House of Representa7 tives; 

8 (II) 2 individuals from a list of 

9 at least 5 individuals selected by the 

10 Minority Leader of the House of Rep11 resentatives; 

12 (III) 2 individuals from a list of 

13 at least 5 individuals selected by the 

14 Majority Leader of the Senate; 

15 (IV) 2 individuals from a list of 

16 at least 5 individuals selected by the 

17 Minority Leader of the Senate; and 

18 (V) 1 individual selected at will 

19 by the President. 

20 (ii) SUBMISSION OF LISTS.—Each of 

21 the lists described in clause (i) shall be 

22 submitted to the President not later than 

23 90 days after the date of the enactment of 

24 this Act. If any of such lists are submitted 

25 after the date required under this clause, 


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1 the President may appoint the 2 members 

2 of the Board who were to be selected from 

3 such list at will. 

4 (B) STAGGERED TERMS.—The members of 

5 the Board appointed pursuant to subparagraph 

6 (A)(i) shall serve staggered terms, with 2 each 

7 of the initial members of the Board serving for 

8 terms of 5, 6, 7, and 8 years, respectively, and 

9 the initial Chair selected under subparagraph 

10 (D) serving for 9 years. The decision of which 

11 Board members, other than the Chair, serve for 

12 which initial terms shall be made by the mem13 bers of the Board drawing lots. 

14 (C) ADDITIONAL MEMBERS.— 

15 (i) IN GENERAL.—Except as provided 

16 in subparagraph (A), if the term of a 

17 member of the Board expires or otherwise 

18 becomes vacant, the President shall ap19 point a replacement for such member, with 

20 the advice and consent of the Senate, from 

21 among a list of at least 5 individuals sub22 mitted by the Board. 

23 (ii) TERM OF SERVICE.— 

24 (I) IN GENERAL.—Each member 

25 of the Board appointed to replace a 


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1 member whose term is expiring shall 

2 serve for a 7-year term. 

3 (II) VACANCIES.—Any member 

4 of the Board appointed to fill a va5 cancy occurring before the expiration 

6 of the term to which that member’s 

7 predecessor was appointed shall be ap8 pointed only for the remainder of the 

9 term. 

10 (D) CHAIR.—The members of the Board 

11 shall choose 1 member to serve as the Chair of 

12 the Board for a term of 7 years, except that the 

13 initial Chair shall serve for a term of 9 years, 

14 pursuant to subsection (B). 

15 (E) CONTINUATION OF SERVICE.—Each 

16 member of the Board may continue to serve 

17 after the expiration of the term of office to 

18 which that member was appointed until a suc19 cessor has been appointed. 

20 (F) CONFLICTS OF INTEREST.—No mem21 ber of the Board may have a financial interest 

22 in, or be employed by, a Qualified Infrastruc23 ture Project (‘‘QIP’’) related to assistance pro24 vided under this section. Owning municipal 

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1 ing the securities of a diversified company that 

2 engages in infrastructure activities, provided 

3 those activities constitute less than 20 percent 

4 of the company’s revenues, or investing in 

5 broadly held investment funds shall not be 

6 deemed to create a conflict of interest. The 

7 Board may issue regulations to define terms 

8 used under this subparagraph. 

9 (4) COMPENSATION.—The members of the 

10 Board shall be compensated at an amount to be set 

11 by the Board, but under no circumstances may such 

12 compensation be higher than the rate prescribed for 

13 level IV of the Executive Schedule under section 

14 5315 of title 5, United States Code. 

15 (5) STAFF.—The Board shall employ and set 

16 compensation for such staff as the Board determines 

17 as is necessary to carry out the activities and mis18 sion of the AIF, and such staff may be paid without 

19 regard to the provisions of chapter 51 and sub20 chapter III of chapter 53, United States Code, relat21 ing to classification and General Schedule pay rates. 

22 (6) PROCEDURES.—The Board shall establish 

23 such procedures as are necessary to carry out this 

24 section. 

25 (7) CORPORATE GOVERNANCE STANDARDS.— 


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1 (A) BOARD COMMITTEES GENERALLY.— 

2 The Board shall maintain all of the committees 

3 required to be maintained by the board of direc4 tors of an issuer listed on the New York Stock 

5 Exchange as of the date of the enactment of 

6 this section. 

7 (B) RISK MANAGEMENT COMMITTEE.—The 

8 Board shall maintain a risk management com9 mittee, which shall— 

10 (i) employ additional staff who are 

11 certified by the Board as having significant 

12 and relevant experience in insurance un13 derwriting and credit risk management; 

14 and 

15 (ii) establish the risk management 

16 policies used by the Board. 

17 (C) STANDARDS.—The Board shall, to the 

18 extent practicable, follow all standards with re19 spect to corporate governance that are required 

20 to be followed by the board of directors of an 

21 issuer listed on the New York Stock Exchange 

22 as of the date of the enactment of this section. 

23 (8) BIENNIAL REPORTS.—Not less frequently 

24 than once every 2 years, the Board shall produce a 

25 report that describes, of the materials, goods, and 


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1 products that were used to construct, or to support 

2 the construction of, qualified infrastructure projects 

3 (as described in subsection (c)) and received financ4 ing from the American Infrastructure Fund within 

5 the most recent 2 calendar years, the percentage of 

6 such materials, goods, and products that were cre7 ated, sourced, or manufactured in the United States. 

8 (c) INFRASTRUCTURE INVESTMENT.— 

9 (1) ENTITIES ELIGIBLE FOR ASSISTANCE.—The 

10 AIF may provide assistance to State and local gov11 ernment entities, nonprofit infrastructure providers, 

12 private parties, and public-private partnerships (re13 ferred to in this section as ‘‘eligible entities’’) to help 

14 finance qualified infrastructure projects (referred to 

15 in this subsection as ‘‘QIPs’’). 

16 (2) FORMS OF ASSISTANCE.—The AIF may— 

17 (A) provide bond guarantees to debt issued 

18 by eligible entities; 

19 (B) make loans, including subordinated 

20 loans, to eligible entities; and 

21 (C) make equity investments in QIPs. 

22 (3) QUALIFIED INFRASTRUCTURE PROJECTS.— 

23 A project qualifies as a QIP under this section if— 

24 (A) the project is sponsored by a State or 

25 local government; 


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1 (B) the infrastructure is, or will be, owned 

2 by a State or local government; 

3 (C) the project involves the construction, 

4 maintenance, improvement, or repair of a trans5 portation, energy, water, communications, or 

6 educational facility; 

7 (D) the recipient of bond guarantees, 

8 loans, equity investments, or any other innova9 tive financing technique authorized under this 

10 Act provides written assurances prescribed by 

11 the AIF that the project will be performed in 

12 compliance with the requirements of all Federal 

13 laws that would otherwise apply to similar 

14 projects to which the United States is a party; 

15 and 

16 (E) in the case of a public transportation 

17 capital project as defined in section 5302 of 

18 title 49, United States Code, the recipient of 

19 bond guarantees, loans, equity investments, or 

20 any other innovative financing technique au21 thorized under this Act complies with the grant 

22 requirements applicable to grants made under 

23 section 5309 of such title. 

24 (4) APPLICATION FOR ASSISTANCE.— 


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1 (A) IN GENERAL.—A State or local gov2 ernment that wishes to receive a loan or bond 

3 guarantee under this section shall submit an 

4 application to the Board in such form and man5 ner and containing such information as the 

6 Board may require. 

7 (B) REQUIREMENT FOR PUBLIC SPONSOR8 SHIP OF PRIVATE ENTITIES.—A private entity 

9 may only receive a bond guarantee, loan, or eq10 uity investment under this section if the State 

11 or local government for the jurisdiction in which 

12 the nonprofit infrastructure provider or private 

13 partner is located submits an application pursu14 ant to subparagraph (A) on behalf of such non15 profit infrastructure provider or private part16 ner. 

17 (5) LIMITATIONS ON SINGLE STATE AWARDS.— 

18 (A) ANNUAL LIMITATION.—The Board 

19 shall set an annual limit, as a percentage of 

20 total assistance provided under this section dur21 ing a year, on the amount of assistance a single 

22 State (including local governments and other 

23 infrastructure providers within such State) may 

24 receive in assistance provided under this sec25 tion. 


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1 (B) CUMULATIVE LIMITATION.—The 

2 Board shall set a limit, as a percentage of total 

3 assistance provided under this section out4 standing at any one time, on the amount of as5 sistance a single State (including local govern6 ments and other infrastructure providers within 

7 such State) may receive in assistance provided 

8 under this section. 

9 (6) LOAN SPECIFICATIONS.—Loans made under 

10 this section shall have such maturity and carry such 

11 interest rate as the Board determines appropriate. 

12 (7) BOND GUARANTEE.—The Board shall 

13 charge such fees for Bond guarantees made under 

14 this section as the Board determines appropriate. 

15 (8) EQUITY INVESTMENTS.—With respect to a 

16 QIP, the amount of an equity investment made by 

17 the AIF in such QIP may not exceed 20 percent of 

18 the total cost of the QIP. 

19 (9) PUBLIC-PRIVATE PARTNERSHIP REQUIRE20 MENTS.—At least 35 percent of the assistance pro21 vided under this section shall be provided to QIPs 

22 for which at least 10 percent of the financing for 

23 such QIPs comes from private debt or equity. 

24 (10) PROHIBITION ON PRINCIPAL FORGIVE25 NESS.—With respect to a loan made under this secVerDate Sep 11 2014 22:09 Feb 06, 2015 Jkt 049200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\H625.IH H625

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1 tion, the Board may not forgive any amount of prin2 cipal on such loan. 

3 (d) DEFINITIONS.—For purposes of this section: 

4 (1) INFRASTRUCTURE PROVIDER.—The term 

5 ‘‘infrastructure provider’’ means an entity that seeks 

6 to finance a QIP. 

7 (2) SECRETARY.—The term ‘‘Secretary’’ means 

8 the Secretary of the Treasury. 

9 (3) STATE.—The term ‘‘State’’ means each of 

10 the several States, the District of Columbia, any ter11 ritory or possession of the United States, and each 

12 federally recognized Indian tribe. 

13 (e) APPROPRIATION.—Out of money in the Treasury 

14 not otherwise appropriated, there is hereby appropriated 

15 $50,000,000,000 to the American Infrastructure Fund. 

16 Amounts appropriated under this subsection shall remain 

17 available without fiscal year limitation. 

18 SEC. 103. DEDICATION OF REMAINING REVENUES TO HIGH19 WAY TRUST FUND. 

20 (a) IN GENERAL.—Section 9503(f) is amended by re21 designating paragraph (5) as paragraph (6) and by insert22 ing after paragraph (4) the following new paragraph: 

23 ‘‘(5) APPROPRIATION OF REVENUES ATTRIB24 UTABLE TO SECTION 965.— 


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1 ‘‘(A) INITIAL APPROPRIATION.—Out of 

2 money in the Treasury not otherwise appro3 priated, there is hereby appropriated 

4 $100,000,000,000 to the Highway Trust Fund. 

5 ‘‘(B) REMAINING REVENUES.— 

6 ‘‘(i) IN GENERAL.—Out of money in 

7 the Treasury not otherwise appropriated, 

8 there are hereby appropriated to the High9 way Trust Fund the excess of— 

10 ‘‘(I) amounts equivalent to the 

11 aggregate net tax liabilities under sec12 tion 965 (as defined in such section) 

13 received in the Treasury, over 

14 ‘‘(II) $150,025,000,000. 

15 ‘‘(ii) ADDITIONAL TRANSFERS ONLY

16 AFTER REVENUES EQUALING INITIAL

17 TRANSFERS HAVE BEEN RECEIVED IN THE

18 TREASURY.—For purposes of applying sec19 tion 9601 to clause (i), no transfer shall be 

20 made under clause (i) until the Secretary 

21 estimates that the amount described in 

22 clause (i)(I) has exceeded the amount de23 scribed in clause (i)(II).’’. 

24 (b) TRANSFERS TO MASS TRANSIT ACCOUNT.—Sec25 tion 9503(e)(2) of such Code is amended by striking ‘‘the 


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1 mass transit portion’’ and inserting ‘‘, 20 percent of the 

2 amounts appropriated to the Highway Trust Fund under 

3 subsection (f)(5), and the mass transit portion’’. 

4 SEC. 104. HIGHWAY TRUST FUND SOLVENCY COMMISSION. 

5 (a) ESTABLISHMENT.—There is established in the 

6 legislative branch a commission to be known as the ‘‘High7 way Trust Fund Solvency Commission’’ (in this section 

8 referred to as the ‘‘Commission’’). 

9 (b) DUTY OF THE COMMISSION.—Not later than 1 

10 year after the initial meeting of the Commission, the Com11 mission shall transmit to Congress a written report that 

12 includes recommendations and proposed legislation for 

13 achieving long-term solvency of the Highway Trust Fund. 

14 (c) MEMBERS.— 

15 (1) NUMBER AND APPOINTMENT.—The Com16 mission shall be composed of 9 members. Of the 

17 members of the Commission— 

18 (A) 1 member shall be appointed by the 

19 President of the United States; 

20 (B) 1 member shall be appointed by the 

21 chairman of the Committee on Finance of the 

22 Senate; 

23 (C) 1 member shall be appointed by the 

24 ranking minority member of the Committee on 

25 Finance of the Senate; 


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1 (D) 1 member shall be appointed by the 

2 chairman of the Committee on Ways and Means 

3 of the House of Representatives; 

4 (E) 1 member shall be appointed by the 

5 ranking minority member of the Committee on 

6 Ways and Means of the House of Representa7 tives; 

8 (F) 1 member shall be appointed by the 

9 chairman of the Committee on Environment 

10 and Public Works of the Senate; 

11 (G) 1 member shall be appointed by the 

12 ranking minority member of the Committee on 

13 Environment and Public Works of the Senate; 

14 (H) 1 member shall be appointed by the 

15 chairman of the Committee on Transportation 

16 and Infrastructure of the House of Representa17 tives; and 

18 (I) 1 member shall be appointed by the 

19 ranking minority member of the Committee on 

20 Transportation and Infrastructure of the House 

21 of Representatives. 

22 (2) TIMING OF APPOINTMENTS.—Each of the 

23 appointments made under paragraph (1) shall be 

24 made not later than 45 days after the date of the 

25 enactment of this Act. 


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1 (3) TERMS; VACANCIES.—Each member shall be 

2 appointed for the life of the Commission, and a va3 cancy in the Commission shall be filled in the man4 ner in which the original appointment was made. 

5 (4) COMPENSATION.— 

6 (A) IN GENERAL.—Members of the Com7 mission shall serve without pay. 

8 (B) TRAVEL EXPENSES.—Each member 

9 shall receive travel expenses, including per diem 

10 in lieu of subsistence, in accordance with appli11 cable provisions under subchapter I of chapter 

12 57 of title 5, United States Code. 

13 (d) OPERATION AND POWERS OF THE COMMIS14 SION.— 

15 (1) CHAIR.—The chairperson of the Commis16 sion shall be elected by the members of the Commis17 sion. 

18 (2) MEETINGS.—The Commission shall meet 

19 not later than 30 days after the members of the 

20 Commission have been appointed, and at such times 

21 thereafter as the chairperson shall determine. 

22 (3) RULES OF PROCEDURE.—The chairperson 

23 shall, with the approval of a majority of the mem24 bers of the Commission, establish written rules of 

25 procedure for the Commission, which shall include a 


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1 quorum requirement to conduct the business of the 

2 Commission. 

3 (4) HEARINGS.—The Commission may, for the 

4 purpose of carrying out this section, hold hearings, 

5 sit and act at times and places, take testimony, and 

6 receive evidence as the Commission considers appro7 priate. 

8 (5) OBTAINING OFFICIAL DATA.—The Commis9 sion may secure directly from any department or 

10 agency of the United States, including the Congres11 sional Budget Office and the Government Account12 ability Office, any information or technical assist13 ance necessary to enable it to carry out this section. 

14 Upon request of the chairperson of the Commission, 

15 the head of that department or agency shall furnish 

16 that information or technical assistance to the Com17 mission. 

18 (6) CONTRACT AUTHORITY.—The Commission 

19 may contract with and compensate government and 

20 private agencies or persons for any purpose nec21 essary to enable it to carry out this section. 

22 (7) MAILS.—The Commission may use the 

23 United States mails in the same manner and under 

24 the same conditions as other departments and agen25 cies of the United States. 


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1 (e) PERSONNEL.— 

2 (1) DIRECTOR.—The Commission shall have a 

3 Director who shall be appointed by the Commission. 

4 The Director shall be paid at a rate of pay equiva5 lent to the annual rate of basic pay for a comparable 

6 position paid under the Executive Schedule, subject 

7 to the approval of the chairperson of the Commis8 sion. 

9 (2) STAFF.—The Director may appoint and fix 

10 the pay of additional staff as the Director considers 

11 appropriate. 

12 (3) EXPERTS AND CONSULTANTS.—The Com13 mission may procure temporary and intermittent 

14 services under section 3109(b) of title 5, United 

15 States Code, but at rates for individuals not to ex16 ceed the daily equivalent of the annual rate of basic 

17 pay for a comparable position paid under the Execu18 tive Schedule. 

19 (4) STAFF OF FEDERAL AGENCIES.—Upon re20 quest of the Commission, the head of any Federal 

21 department or agency may detail, without reim22 bursement, any of the personnel of that department 

23 or agency to the Commission to assist it in carrying 

24 out its duties under this section. 


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1 (5) ADMINISTRATIVE SUPPORT SERVICES.— 

2 Upon the request of the Commission, the Adminis3 trator of General Services shall provide to the Com4 mission, on a reimbursable basis, the administrative 

5 support services necessary for the Commission to 

6 carry out its responsibilities under this section. 

7 (f) TERMINATION.—The Commission shall terminate 

8 not later than 60 days after the submission of the report 

9 described in subsection (b). 

10 (g) AUTHORIZATION OF APPROPRIATIONS.—There is 

11 authorized to be appropriated such sums as may be nec12 essary to carry out this section. 

13 (h) EXPEDITED CONSIDERATION OF COMMISSION

14 RECOMMENDATIONS.— 

15 (1) EXPEDITED CONSIDERATION.— 

16 (A) INTRODUCTION OF APPROVAL BILL.— 

17 The majority leader of each House or a des18 ignee shall (by request) introduce an approval 

19 bill as described in paragraph (3) not later than 

20 the third day of session of that House after the 

21 date of receipt of the report transmitted to the 

22 Congress under subsection (b). 

23 (B) CONSIDERATION IN THE HOUSE OF

24 REPRESENTATIVES.— 


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1 (i) REFERRAL AND REPORTING.—Any 

2 committee of the House of Representatives 

3 to which an approval bill is referred shall 

4 report it to the House without amendment 

5 not later than the third legislative day 

6 after the date of its introduction. If a com7 mittee fails to report the bill within that 

8 period or the House has adopted a concur9 rent resolution providing for adjournment 

10 sine die at the end of a Congress, such 

11 committee shall be automatically dis12 charged from further consideration of the 

13 bill and it shall be placed on the appro14 priate calendar. 

15 (ii) PROCEEDING TO CONSIDER16 ATION.—Not later than 3 legislative days 

17 after the approval bill is reported or a 

18 committee has been discharged from fur19 ther consideration thereof, it shall be in 

20 order to move to proceed to consider the 

21 approval bill in the House. Such a motion 

22 shall be in order only at a time designated 

23 by the Speaker in the legislative schedule 

24 within two legislative days after the day on 

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1 tion to the House to offer the motion pro2 vided that such notice may not be given 

3 until the approval bill is reported or a com4 mittee has been discharged from further 

5 consideration thereof. Such a motion shall 

6 not be in order after the House has dis7 posed of a motion to proceed with respect 

8 to that special message. The previous ques9 tion shall be considered as ordered on the 

10 motion to its adoption without intervening 

11 motion. A motion to reconsider the vote by 

12 which the motion is disposed of shall not 

13 be in order. 

14 (iii) CONSIDERATION.—If the motion 

15 to proceed is agreed to, the House shall 

16 immediately proceed to consider the ap17 proval bill in the House without inter18 vening motion. The approval bill shall be 

19 considered as read. All points of order 

20 against the approval bill and against its 

21 consideration are waived. The previous 

22 question shall be considered as ordered on 

23 the approval bill to its passage without in24 tervening motion except 4 hours of debate 

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1 ponent and an opponent and one motion to 

2 limit debate on the bill. A motion to recon3 sider the vote on passage of the approval 

4 bill shall not be in order. 

5 (C) CONSIDERATION IN THE SENATE.— 

6 (i) COMMITTEE ACTION.—The appro7 priate committee of the Senate shall report 

8 without amendment the approval bill not 

9 later than the third session day after intro10 duction. If a committee fails to report the 

11 approval bill within that period or the Sen12 ate has adopted a concurrent resolution 

13 providing for adjournment sine die at the 

14 end of a Congress, the Committee shall be 

15 automatically discharged from further con16 sideration of the approval bill and it shall 

17 be placed on the appropriate calendar. 

18 (ii) MOTION TO PROCEED.—Not later 

19 than 3 session days after the approval bill 

20 is reported in the Senate or the committee 

21 has been discharged thereof, it shall be in 

22 order for any Senator to move to proceed 

23 to consider the approval bill in the Senate. 

24 The motion shall be decided without debate 

25 and the motion to reconsider shall be 


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1 deemed to have been laid on the table. 

2 Such a motion shall not be in order after 

3 the Senate has disposed of a prior motion 

4 to proceed with respect to the approval bill. 

5 (iii) CONSIDERATION.—If a motion to 

6 proceed to the consideration of the ap7 proval bill is agreed to, the Senate shall 

8 immediately proceed to consideration of 

9 the approval bill without intervening mo10 tion, order, or other business, and the ap11 proval bill shall remain the unfinished 

12 business of the Senate until disposed of. 

13 Consideration on the bill in the Senate 

14 under this subsection, and all debatable 

15 motions and appeals in connection there16 with, shall not exceed 10 hours equally di17 vided in the usual form. All points of order 

18 against the approval bill or its consider19 ation are waived. Consideration in the Sen20 ate on any debatable motion or appeal in 

21 connection with the approval bill shall be 

22 limited to not more than 1 hour. A motion 

23 to postpone, or a motion to proceed to the 

24 consideration of other business, or a mo25 tion to recommit the approval bill is not in 


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1 order. A motion to reconsider the vote by 

2 which the approval bill is agreed to or dis3 agreed to is not in order. 

4 (D) AMENDMENTS PROHIBITED.—No 

5 amendment to, or motion to strike a provision 

6 from, an approval bill considered under this sec7 tion shall be in order in either the Senate or the 

8 House of Representatives. 

9 (E) COORDINATION WITH ACTION BY

10 OTHER HOUSE.— 

11 (i) IN GENERAL.—If, before passing 

12 the approval bill, one House receives from 

13 the other a bill— 

14 (I) the approval bill of the other 

15 House shall not be referred to a com16 mittee; and 

17 (II) the procedure in the receiv18 ing House shall be the same as if no 

19 approval bill had been received from 

20 the other House until the vote on pas21 sage, when the bill received from the 

22 other House shall supplant the ap23 proval bill of the receiving House. 


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1 (ii) EXCEPTION.—This paragraph 

2 shall not apply to the House of Represent3 atives. 

4 (2) LIMITATION.—Paragraph (1) shall apply 

5 only to an approval bill described in paragraph (3) 

6 and introduced pursuant to paragraph (1)(A). 

7 (3) APPROVAL BILL DESCRIBED.—For purposes 

8 of paragraph (1), a bill described in this paragraph 

9 is a bill— 

10 (A) which consists of the proposed legisla11 tion which is included in such report to carry 

12 out the recommendations made by the Commis13 sion in the report; and 

14 (B) the title of which is as follows: ‘‘A bill 

15 to carry out the recommendations of the High16 way Trust Fund Solvency Commission.’’. 

17 (4) EXTENDED TIME PERIOD.—If Congress ad18 journs at the end of a Congress and an approval bill 

19 was then pending in either House of Congress or a 

20 committee thereof, or an approval bill had not yet 

21 been introduced with respect to a special message, 

22 then within the first 3 days of session of the next 

23 Congress, the Commission shall transmit to Con24 gress an additional special message containing all of 

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1 sage. An approval bill may be introduced within the 

2 first five days of session of such next Congress and 

3 shall be treated as an approval bill under this sec4 tion, and the time periods described in subpara5 graphs (B) and (C) of paragraph (1) shall com6 mence on the day of introduction of that approval 

7 bill. 

8 SEC. 105. REGIONAL INFRASTRUCTURE ACCELERATOR 

9 PILOT PROGRAM. 

10 (a) IN GENERAL.—Not later than 90 days after the 

11 date of enactment of this Act, the Secretary of Transpor12 tation shall establish a regional infrastructure accelerator 

13 pilot program (in this section referred to as the ‘‘Pro14 gram’’) to assist certain State, local, and regional public 

15 entities to develop improved priorities and financing strat16 egies for the accelerated development of covered infra17 structure projects. 

18 (b) ACCELERATOR ESTABLISHMENT AUTHORITY.— 

19 (1) IN GENERAL.—In carrying out the Pro20 gram, the Secretary is authorized to establish re21 gional infrastructure accelerators that will— 

22 (A) serve a defined geographic area; and 

23 (B) act as a resource to State, local, and 

24 regional public entities in that area in accord25 ance with this section. 


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1 (2) APPLICATIONS.—To be eligible for a re2 gional infrastructure accelerator under the Program, 

3 State, local, and regional public entities shall submit 

4 to the Secretary an application proposing an accel5 erator at such time, in such form, and containing 

6 such information as the Secretary determines is ap7 propriate. 

8 (3) NUMBER.—To the extent practicable, the 

9 Secretary shall establish at least 5 regional infra10 structure accelerators under the Program. 

11 (4) GEOGRAPHIC DIVERSITY.—In establishing 

12 regional infrastructure accelerators under the Pro13 gram, the Secretary shall consider the need for geo14 graphic diversity among such accelerators. 

15 (c) ACCELERATOR COMPOSITION.— 

16 (1) IN GENERAL.—Each regional infrastructure 

17 accelerator established under subsection (b) shall in18 clude a membership composed of at least the fol19 lowing: 

20 (A) A representative of each State, local, 

21 or regional public entity in the area served by 

22 the accelerator that participated in the applica23 tion that resulted in the establishment of the 

24 accelerator. 


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1 (B) A representative of a State, local, or 

2 regional public entity located outside the area 

3 served by the accelerator with experience in in4 novative infrastructure financing. 

5 (C) A representative of a financing entity 

6 that intends to finance covered infrastructure 

7 projects in the area served by the accelerator. 

8 (D) A representative of a construction or 

9 development entity that intends to develop cov10 ered infrastructure projects in the area served 

11 by the accelerator. 

12 (E) A representative of the Department of 

13 Transportation. 

14 (F) A representative of the Department of 

15 the Treasury. 

16 (G) A representative of the Environmental 

17 Protection Agency. 

18 (H) A representative of another Federal 

19 department or agency with jurisdiction over 

20 covered infrastructure projects intended for the 

21 area served by the accelerator. 

22 (2) LOCAL REPRESENTATION REQUIREMENT.— 

23 At least 60 percent of the membership of each re24 gional infrastructure accelerator established under 

25 subsection (b) shall be composed of representatives 


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1 of State, local, and regional public entities located in 

2 the area served by the accelerator. 

3 (3) DIVERSE PERSPECTIVES.—Each regional 

4 infrastructure accelerator established under sub5 section (b) shall have a membership that represents 

6 a diverse set of public and private perspectives. 

7 (d) REGIONAL INFRASTRUCTURE ACCELERATION

8 PLAN.—Each regional infrastructure accelerator estab9 lished under subsection (b) shall develop and implement 

10 a regional infrastructure acceleration plan for the area 

11 served by the accelerator that— 

12 (1) describes how the accelerator will promote 

13 investment in covered infrastructure projects, includ14 ing through— 

15 (A) providing guidance and feedback to 

16 State, local, and regional public entities with re17 spect to infrastructure priorities, financing 

18 strategies, and other matters relating to such 

19 projects; 

20 (B) evaluating and promoting innovative 

21 financing methods; 

22 (C) connecting sources of financing to the 

23 public sponsors of such projects; 


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1 (D) establishing standards to measure the 

2 life-cycle impacts of investments in such 

3 projects; and 

4 (E) providing technical assistance and in5 formation on best practices with respect to such 

6 projects from predevelopment activities through 

7 maintenance; 

8 (2) assesses regional and multimodal ap9 proaches to advancing innovative investment in cov10 ered infrastructure projects; and 

11 (3) develops strategies for— 

12 (A) transparency with respect to covered 

13 infrastructure project analysis to ensure the 

14 public interest is protected; 

15 (B) predevelopment capital programs to fa16 cilitate the creation of a catalog of covered in17 frastructure projects available for investment; 

18 (C) the bundling of smaller-scale and rural 

19 projects into project pools for investment; and 

20 (D) the multimodal integration of trans21 portation projects. 

22 (e) PROGRAM TERMINATION.—The Program shall 

23 terminate on the date that is 10 years after the date on 

24 which the Program is established under subsection (a). 


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1 (f) COVERED INFRASTRUCTURE PROJECT DE2 FINED.—In this section, the term ‘‘covered infrastructure 

3 project’’ means a project— 

4 (1) sponsored by a State, local, or regional pub5 lic entity; and 

6 (2) that involves the construction, maintenance, 

7 improvement, or repair of a transportation, energy, 

8 water, communications, or educational facility that 

9 is, or will be, owned by such an entity. 

10 (g) APPROPRIATION.—Out of money in the Treasury 

11 not otherwise appropriated, there is hereby appropriated 

12 $25,000,000 to the Department of Transportation to 

13 carry out the Program. Amounts appropriated under this 

14 subsection shall remain available without fiscal year limi15 tation. 

16 TITLE II—DEADLINE FOR 

17 INTERNATIONAL TAX REFORM 

18 SEC. 201. 18-MONTH DEADLINE FOR INTERNATIONAL TAX 

19 REFORM. 

20 Notwithstanding any provision of title III, the provi21 sions of, and amendments made by, title III shall not take 

22 effect if a bill which reforms the corporate international 

23 tax system by eliminating the incentive to hold earnings 

24 in low-tax foreign jurisdictions is enacted into law during 


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1 the 18-month period which begins on the date of the en2 actment of this Act. 

3 TITLE III—FALLBACK 

4 INTERNATIONAL TAX REFORM 

5 SEC. 300. GENERAL EFFECTIVE DATE OF TITLE. 

6 For purposes of this title, the term ‘‘applicable date’’ 

7 means the date which is 18 months after the date of the 

8 enactment of this Act. 

9 Subtitle A—Reform of Taxation of 

10 Income Earned by Controlled 

11 Foreign Corporations 

12 PART I—GENERAL PROVISIONS 

13 SEC. 301. MODIFICATIONS TO SUBPART F INCOME. 

14 (a) IN GENERAL.—Subpart F of part III of sub15 chapter N of chapter 1 is amended by striking sections 

16 952 through 956 and inserting the following: 

17 ‘‘SEC. 952. SUBPART F INCOME DEFINED. 

18 ‘‘(a) IN GENERAL.—For purposes of this subpart, the 

19 term ‘subpart F income’ means, with respect to any con20 trolled foreign corporation, the sum of— 

21 ‘‘(1) the inclusion percentage of the corpora22 tion’s modified active income, plus 

23 ‘‘(2) 100 percent of the corporation’s modified 

24 nonactive income. 

25 ‘‘(b) MODIFIED ACTIVE INCOME.— 


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1 ‘‘(1) IN GENERAL.—The term ‘modified active 

2 income’ means, with respect to any controlled for3 eign corporation, the excess (if any) of— 

4 ‘‘(A) the corporation’s active foreign mar5 ket income, over 

6 ‘‘(B) the amount of the reduction under 

7 subsection (e) for deductions properly allocable 

8 to such income. 

9 ‘‘(2) REDUCTION FOR CERTAIN LOSSES.— 

10 ‘‘(A) IN GENERAL.—The modified active 

11 income determined under paragraph (1) for any 

12 taxable year shall be reduced (but not below 

13 zero)— 

14 ‘‘(i) first by any active foreign market 

15 loss for any prior taxable year, and 

16 ‘‘(ii) then by any qualified loss for 

17 such taxable year (or for any prior taxable 

18 year to the extent provided in subsection 

19 (c)(3)(B)). 

20 ‘‘(B) LIMITATION.—An active foreign mar21 ket loss or qualified loss for any prior taxable 

22 year shall only be taken into account under sub23 paragraph (A)— 

24 ‘‘(i) if the prior taxable year is a tax25 able year which begins on or after the apVerDate Sep 11 2014 22:09 Feb 06, 2015 Jkt 049200 PO 00000 Frm 00048 Fmt 6652 Sfmt 6201 E:\BILLS\H625.IH H625

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1 plicable date (as defined in section 300 of 

2 the Infrastructure 2.0 Act), and for which 

3 the controlled foreign corporation was a 

4 controlled foreign corporation, and 

5 ‘‘(ii) to the extent such loss has not 

6 been previously taken into account under 

7 this subsection. 

8 ‘‘(3) ACTIVE FOREIGN MARKET LOSS.—The 

9 term ‘active foreign market loss’ means, with respect 

10 to any taxable year, the amount by which the 

11 amount determined under paragraph (1)(B) exceeds 

12 the amount determined under paragraph (1)(A). 

13 ‘‘(c) MODIFIED NONACTIVE INCOME.— 

14 ‘‘(1) IN GENERAL.—The term ‘modified non15 active income’ means, with respect to any controlled 

16 foreign corporation, the excess (if any) of— 

17 ‘‘(A) the corporation’s gross income deter18 mined without regard to active foreign market 

19 income, over 

20 ‘‘(B) the amount of the reduction under 

21 subsection (e) for deductions properly allocable 

22 to such gross income. 

23 ‘‘(2) REDUCTION FOR QUALIFIED LOSSES.— 

24 The amount determined under paragraph (1) for 

25 any taxable year shall be reduced (but not below 


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1 zero) by any qualified loss for any prior taxable year 

2 beginning on or after the applicable date (as defined 

3 in section 300 of the Infrastructure 2.0 Act), for 

4 which the controlled foreign corporation was a con5 trolled foreign corporation, but only to the extent 

6 such loss has not been previously taken into account 

7 under subsection (b)(2) or this subsection. 

8 ‘‘(3) QUALIFIED LOSS.—For purposes of this 

9 section— 

10 ‘‘(A) IN GENERAL.—The term ‘qualified 

11 loss’ means, with respect to any taxable year, 

12 the amount by which the amount determined 

13 under paragraph (1)(B) exceeds the amount de14 termined under paragraph (1)(A). 

15 ‘‘(B) ORDERING RULE FOR LOSSES CAR16 RIED FROM PRIOR TAXABLE YEARS.—In the 

17 case of any qualified losses carried to a taxable 

18 year from 1 or more prior taxable years, such 

19 losses shall be taken into account— 

20 ‘‘(i) first under paragraph (2), and 

21 ‘‘(ii) then under subsection (b)(2)(B) 

22 to the extent such losses exceed the 

23 amount determined under paragraph (1). 

24 ‘‘(d) INCLUSION PERCENTAGE.—For purposes of this 

25 section— 


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1 ‘‘(1) IN GENERAL.—The term ‘inclusion per2 centage’ means 20 percent increased by the number 

3 of percentage points (if any) determined under para4 graph (2). 

5 ‘‘(2) ADDITIONAL INCLUSION FOR EARNINGS

6 NOT SUBJECT TO OECD AVERAGE FOREIGN TAX.— 

7 The number of percentage points determined under 

8 this paragraph with respect to any controlled foreign 

9 corporation for any taxable year, is the number of 

10 percentage points (not less than zero nor more than 

11 15) which bears the same ratio to 15 as— 

12 ‘‘(A) the number of percentage points by 

13 which 25 percent exceeds the aggregate foreign 

14 rate of tax imposed on the modified active in15 come of such controlled foreign corporation for 

16 such taxable year, bears to 

17 ‘‘(B) 25. 

18 ‘‘(e) EXCLUSION OF UNITED STATES INCOME.—For 

19 purposes of this subpart, any item of income of the con20 trolled foreign corporation which is effectively connected 

21 with the conduct by such corporation of a trade or busi22 ness within the United States shall not be taken into ac23 count in computing the subpart F income of such corpora24 tion unless such item is exempt from taxation (or is sub25 ject to a reduced rate of tax) pursuant to a treaty obligaVerDate Sep 11 2014 22:09 Feb 06, 2015 Jkt 049200 PO 00000 Frm 00051 Fmt 6652 Sfmt 6201 E:\BILLS\H625.IH H625

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1 tion of the United States. For purposes of this subsection, 

2 any exemption (or reductions) with respect to the tax im3 posed by section 884 shall not be taken into account. 

4 ‘‘(f) DEDUCTIONS.—For purposes of subsections 

5 (b)(1)(B) and (c)(1)(B), the active foreign market income, 

6 and gross income other than active foreign market income, 

7 of a controlled foreign corporation shall each be reduced, 

8 under regulations prescribed by the Secretary, by any de9 ductions (including taxes) of such corporation properly al10 locable to items of income taken into account in computing 

11 such income. 

12 ‘‘SEC. 953. ACTIVE FOREIGN MARKET INCOME. 

13 ‘‘(a) ACTIVE FOREIGN MARKET INCOME DEFINED.— 

14 For purposes of this subpart, the term ‘active foreign mar15 ket income’ means, with respect to any controlled foreign 

16 corporation, the aggregate of all items of income which 

17 are— 

18 ‘‘(1) attributable to economically significant ac19 tivities with respect to a qualified trade or business, 

20 and 

21 ‘‘(2) derived in connection with— 

22 ‘‘(A) property which is sold, exchanged, or 

23 otherwise disposed of for use, consumption, or 

24 disposition outside of the United States, or 


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1 ‘‘(B) services which are provided outside of 

2 the United States with respect to persons or 

3 property located outside of the United States. 

4 ‘‘(b) TREATMENT OF PASSIVE INCOME.— 

5 ‘‘(1) IN GENERAL.—Except as otherwise pro6 vided in this subsection, the term ‘active foreign 

7 market income’ shall not include the passive income 

8 (as defined in section 954) of a controlled foreign 

9 corporation. 

10 ‘‘(2) ACTIVE FOREIGN MARKET INCOME IN11 CLUDES CERTAIN INCOME.—The term ‘active foreign 

12 market income’ shall include— 

13 ‘‘(A) if the controlled foreign corporation 

14 or a qualified business unit of the corporation 

15 is an eligible controlled foreign corporation (as 

16 defined in section 954(c)), any item of income 

17 of the corporation or unit which is qualified 

18 banking or financing income (as so defined), 

19 ‘‘(B) if the controlled foreign corporation 

20 or a qualified business unit of the corporation 

21 is a qualifying insurance company (as defined 

22 in section 954(d)) or a qualifying insurance 

23 company branch (as so defined), any item of in24 come of the corporation or unit which is quali25 fied insurance income (as so defined), 


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1 ‘‘(C) any item of income which is rents or 

2 royalties derived from the ownership and oper3 ation (including leasing) of real or personal 

4 property which is not treated as passive income 

5 under section 954(a)(2)(A), and 

6 ‘‘(D) in the case of a regular dealer in 

7 property which is property described in section 

8 954(a)(1)(B), forward contracts, option con9 tracts, or similar financial instruments (includ10 ing notional principal contracts and all instru11 ments referenced to commodities), any item of 

12 income from any transaction (including hedging 

13 transactions and transactions involving physical 

14 settlement) entered into in the ordinary course 

15 of such dealer’s trade or business as such a 

16 dealer. 

17 ‘‘(3) GAIN OR LOSS FROM SALES OF STOCK IN

18 OTHER CFCS.—If a controlled foreign corporation 

19 sells, exchanges, or otherwise disposes of stock in 

20 another controlled foreign corporation which is a re21 lated person to the selling corporation— 

22 ‘‘(A) gain from such sale, exchange, or dis23 position shall be treated as active foreign mar24 ket income to the extent that such gain would 

25 have been excluded from gross income under 


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1 section 1203 if the selling corporation were a 

2 United States shareholder in the other con3 trolled foreign corporation, and 

4 ‘‘(B) loss from such sale, exchange, or dis5 position shall not be allowed to the extent such 

6 loss would have been disallowed under section 

7 1213 if the selling corporation were a United 

8 States shareholder in the other controlled for9 eign corporation. 

10 ‘‘(4) GAIN OR LOSS FROM SALES OF INTERESTS

11 IN 25-PERCENT OWNED PARTNERSHIPS.— 

12 ‘‘(A) IN GENERAL.— 

13 ‘‘(i) PORTION TREATED AS ACTIVE

14 FOREIGN MARKET INCOME.—In the case of 

15 any sale or exchange by a controlled for16 eign corporation of an interest in a part17 nership with respect to which such cor18 poration is a 25-percent owner, gain or 

19 loss on such sale shall be taken into ac20 count in determining active foreign market 

21 income in the amount which bears the 

22 same ratio to the amount of such gain or 

23 loss as the controlled foreign corporation’s 

24 distributable share of the active foreign 

25 market income from the partnership over 


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1 the applicable period bears to the con2 trolled foreign corporation’s distributable 

3 share of gross income from the partnership 

4 over such period. The Secretary shall pre5 scribe such regulations as may be appro6 priate to prevent abuse of the purposes of 

7 this paragraph, including regulations pro8 viding for coordination of this paragraph 

9 with the provisions of subchapter K. 

10 ‘‘(ii) APPLICABLE PERIOD.—For pur11 poses of this subparagraph, the term ‘ap12 plicable period’ means, with respect to any 

13 interest in a partnership, the shorter of the 

14 3-taxable year period immediately pre15 ceding the taxable year of the sale or ex16 change or the controlled foreign corpora17 tion’s holding period in the interest. In no 

18 event shall the applicable period include 

19 any portion of any taxable year beginning 

20 before the applicable date (as defined in 

21 section 300 of the Infrastructure 2.0 Act). 

22 ‘‘(B) 25-PERCENT OWNER.—For purposes 

23 of this paragraph, the term ‘25-percent owner’ 

24 means a controlled foreign corporation which 

25 owns directly 25 percent or more of the capital 


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1 or profits interest in a partnership. For pur2 poses of the preceding sentence, if a controlled 

3 foreign corporation is a shareholder or partner 

4 of a corporation or a partnership, the controlled 

5 foreign corporation shall be treated as owning 

6 directly its proportionate share of any capital or 

7 profits interest in any partnership held directly 

8 or indirectly by such corporation or partnership. 

9 If a controlled foreign corporation is treated as 

10 owning a capital or profits interest in a part11 nership under constructive ownership rules 

12 similar to the rules of section 958(b), the con13 trolled foreign corporation shall be treated as 

14 owning such interest directly for purposes of 

15 this subparagraph. 

16 ‘‘(c) TREATMENT OF INSURANCE INCOME.— 

17 ‘‘(1) IN GENERAL.—Except as otherwise pro18 vided in this subsection, the term ‘active foreign 

19 market income’ shall not include the insurance in20 come (as defined in section 955(a)) of a controlled 

21 foreign corporation. 

22 ‘‘(2) ACTIVE FOREIGN MARKET INCOME IN23 CLUDES EXEMPT INSURANCE INCOME.—The term 

24 ‘active foreign market income’ shall include exempt 


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1 insurance income (as defined in section 955(c)) shall 

2 be treated as active foreign market income. 

3 ‘‘(d) TREATMENT OF INCOME FROM PROPERTY

4 USED, CONSUMED, OR DISPOSED OF IN THE UNITED

5 STATES.—For purposes of subsection (a)(2)(A)— 

6 ‘‘(1) IN GENERAL.—The term ‘active foreign 

7 market income’ shall not include income derived in 

8 connection with property which is sold, exchanged, 

9 or otherwise disposed of to any person if it was rea10 sonable for the controlled foreign corporation (or a 

11 related person) to expect that— 

12 ‘‘(A) such property would be used, con13 sumed, or disposed of in the United States, or 

14 ‘‘(B) such property would be used in the 

15 manufacture or production of, or as a compo16 nent part in, other property which would be 

17 used, consumed, or disposed of in the United 

18 States. 

19 ‘‘(2) CHAIN OF RELATED PERSONS.—If— 

20 ‘‘(A) property is ultimately used, con21 sumed, or disposed of as described in subpara22 graph (A) or (B) of paragraph (1), and 

23 ‘‘(B) all sales, exchanges, or dispositions of 

24 such property (or of the other property de25 scribed in paragraph (1)(B)) before the sale for 


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1 use, consumption, or disposition in the United 

2 States are between related persons, 

3 then, for purposes of paragraph (1), there shall be 

4 deemed to have been a reasonable expectation that 

5 the property (or the other property described in 

6 paragraph (1)(B)) would be used, consumed, or dis7 posed of in the United States. 

8 ‘‘(3) EXCEPTION FOR PROPERTY SUBSE9 QUENTLY EXPORTED.—Paragraphs (1) and (2) shall 

10 not apply with respect to property which, after entry 

11 into the United States is— 

12 ‘‘(A) sold, leased, rented, or licensed by the 

13 controlled foreign corporation or a related per14 son for direct use, consumption, or disposition 

15 outside the United States, or 

16 ‘‘(B) used by the controlled foreign cor17 poration or a related person as a component in 

18 other property which is so sold, leased, rented, 

19 or licensed. 

20 ‘‘(4) RELATED PERSON DEFINED.—For pur21 poses of this subsection, the term ‘related person’ 

22 has the meaning given such term under section 

23 954(b). 

24 ‘‘(e) ECONOMICALLY SIGNIFICANT ACTIVITIES.—For 

25 purposes of this section, the term ‘economically significant 


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1 activities’ means, with respect to any item of income, ac2 tivities— 

3 ‘‘(1) performed outside the United States, 

4 ‘‘(2) performed by officers or employees of the 

5 controlled foreign corporation which are part of the 

6 management and operational functions of the cor7 poration, and 

8 ‘‘(3) which make a substantial contribution to 

9 the production of such item of income. 

10 ‘‘(f) QUALIFIED TRADE OR BUSINESS.—For pur11 poses of this section— 

12 ‘‘(1) IN GENERAL.—The term ‘qualified trade 

13 or business’ means any trade or business which con14 sists of— 

15 ‘‘(A) manufacturing, producing, growing, 

16 or extracting property outside of the United 

17 States, or 

18 ‘‘(B) providing services outside of the 

19 United States. 

20 ‘‘(2) SPECIAL RULE FOR SUBSTANTIAL CON21 TRIBUTIONS TO MANUFACTURING AND SERVICES.— 

22 If a trade or business consists of making a substan23 tial contribution through the activities of the officers 

24 and employees of the controlled foreign corporation 

25 to a qualified trade or business which is described in 


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1 subparagraph (A) or (B) of paragraph (1) of an2 other person, then the trade or business shall be 

3 treated as a qualified trade or business described in 

4 subparagraph (A) or (B) of paragraph (1), which5 ever is applicable. 

6 ‘‘SEC. 954. DEFINITION OF PASSIVE INCOME. 

7 ‘‘(a) PASSIVE INCOME.— 

8 ‘‘(1) IN GENERAL.—For purposes of this part, 

9 the term ‘passive income’ means the portion of the 

10 gross income which consists of: 

11 ‘‘(A) DIVIDENDS, ETC.—Dividends, inter12 est, royalties, rents, and annuities. 

13 ‘‘(B) CERTAIN PROPERTY TRANS14 ACTIONS.—The excess of gains over losses from 

15 the sale or exchange of property— 

16 ‘‘(i) which gives rise to income de17 scribed in subparagraph (A) (after applica18 tion of paragraph (2)(A)) other than prop19 erty which gives rise to income not treated 

20 as passive income by reason of subsection 

21 (c) or (d) for the taxable year, 

22 ‘‘(ii) which is an interest in a trust, 

23 partnership, or REMIC, or 

24 ‘‘(iii) which does not give rise to any 

25 income. 


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1 Gains and losses from the sale or exchange of 

2 any property which, in the hands of the con3 trolled foreign corporation, is property de4 scribed in section 1221(a)(1) shall not be taken 

5 into account under this subparagraph. 

6 ‘‘(C) COMMODITIES TRANSACTIONS.—The 

7 excess of gains over losses from transactions 

8 (including futures, forward, and similar trans9 actions) in any commodities. This subparagraph 

10 shall not apply to gains or losses which— 

11 ‘‘(i) arise out of commodity hedging 

12 transactions (as defined in paragraph 

13 (5)(A)), 

14 ‘‘(ii) are active business gains or 

15 losses from the sale of commodities, but 

16 only if substantially all of the controlled 

17 foreign corporation’s commodities are 

18 property described in paragraph (1), (2), 

19 or (8) of section 1221(a), or 

20 ‘‘(iii) are foreign currency gains or 

21 losses (as defined in section 988(b)) attrib22 utable to any section 988 transactions. 

23 ‘‘(D) FOREIGN CURRENCY GAINS.—The ex24 cess of foreign currency gains over foreign cur25 rency losses (as defined in section 988(b)) atVerDate Sep 11 2014 22:09 Feb 06, 2015 Jkt 049200 PO 00000 Frm 00062 Fmt 6652 Sfmt 6201 E:\BILLS\H625.IH H625

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1 tributable to any section 988 transactions. This 

2 subparagraph shall not apply in the case of any 

3 transaction, other than a borrowing, directly re4 lated to the business needs of the controlled for5 eign corporation. 

6 ‘‘(E) INCOME EQUIVALENT TO INTER7 EST.—Any income equivalent to interest, in8 cluding income from commitment fees (or simi9 lar amounts) for loans actually made. 

10 ‘‘(F) INCOME FROM NOTIONAL PRINCIPAL

11 CONTRACTS.— 

12 ‘‘(i) IN GENERAL.—Net income from 

13 notional principal contracts. 

14 ‘‘(ii) COORDINATION WITH OTHER

15 CATEGORIES OF PASSIVE INCOME.—Any 

16 item of income, gain, deduction, or loss 

17 from a notional principal contract entered 

18 into for purposes of hedging any item de19 scribed in any preceding subparagraph 

20 shall not be taken into account for pur21 poses of this subparagraph but shall be 

22 taken into account under such other sub23 paragraph. 

24 ‘‘(G) PAYMENTS IN LIEU OF DIVIDENDS.— 

25 Payments in lieu of dividends which are made 


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1 pursuant to an agreement to which section 

2 1058 applies. 

3 ‘‘(H) PERSONAL SERVICE CONTRACTS.— 

4 ‘‘(i) Amounts received under a con5 tract under which the corporation is to fur6 nish personal services if— 

7 ‘‘(I) some person other than the 

8 corporation has the right to designate 

9 (by name or by description) the indi10 vidual who is to perform the services, 

11 or 

12 ‘‘(II) the individual who is to per13 form the services is designated (by 

14 name or by description) in the con15 tract, and 

16 ‘‘(ii) amounts received from the sale 

17 or other disposition of such a contract. 

18 This subparagraph shall apply with respect to 

19 amounts received for services under a particular 

20 contract only if at some time during the taxable 

21 year 25 percent or more in value of the out22 standing stock of the corporation is owned, di23 rectly or indirectly, by or for the individual who 

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1 ignated (by name or by description) as the one 

2 to perform, such services. 

3 ‘‘(2) EXCEPTION FOR CERTAIN AMOUNTS.— 

4 ‘‘(A) RENTS AND ROYALTIES DERIVED IN

5 ACTIVE BUSINESS.—Passive income shall not 

6 include rents and royalties which are derived in 

7 the active conduct of a trade or business and 

8 which are received from a person other than a 

9 related person. For purposes of the preceding 

10 sentence, rents derived from leasing an aircraft 

11 or vessel in foreign commerce shall not fail to 

12 be treated as derived in the active conduct of a 

13 trade or business if, as determined under regu14 lations prescribed by the Secretary, the active 

15 leasing expenses are not less than 10 percent of 

16 the profit on the lease. 

17 ‘‘(B) EXCEPTION FOR DEALERS.—Except 

18 as provided by regulations, in the case of a reg19 ular dealer in property which is property de20 scribed in paragraph (1)(B), forward contracts, 

21 option contracts, or similar financial instru22 ments (including notional principal contracts 

23 and all instruments referenced to commodities), 

24 there shall not be taken into account in com25 puting passive income any item of income, gain, 


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1 deduction, or loss from any transaction (includ2 ing hedging transactions and transactions in3 volving physical settlement) entered into in the 

4 ordinary course of such dealer’s trade or busi5 ness as such a dealer. 

6 ‘‘(3) LOOK-THRU RULE FOR CERTAIN PARTNER7 SHIP SALES.— 

8 ‘‘(A) IN GENERAL.—In the case of any 

9 sale or exchange by a controlled foreign cor10 poration of an interest in a partnership with re11 spect to which such corporation is a 25-percent 

12 owner, gain or loss on such sale shall be treated 

13 as being described in paragraph (1)(B)(ii) in 

14 the amount which bears the same ratio to the 

15 amount of such gain or loss as the controlled 

16 foreign corporation’s distributable share of pas17 sive income from the partnership over the appli18 cable period (as defined in section 

19 953(b)(4)(A)(ii)) bears to the controlled foreign 

20 corporation’s distributable share of gross in21 come from the partnership over such period. 

22 The Secretary shall prescribe such regulations 

23 as may be appropriate to prevent abuse of the 

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1 tions providing for the coordination of this 

2 paragraph with the provisions of subchapter K. 

3 ‘‘(B) 25-PERCENT OWNER.—For purposes 

4 of this paragraph, the term ‘25-percent owner’ 

5 has the meaning given such term under section 

6 953(b)(4)(B). 

7 ‘‘(4) DEFINITION AND SPECIAL RULES RELAT8 ING TO COMMODITY TRANSACTIONS.— 

9 ‘‘(A) COMMODITY HEDGING TRANS10 ACTIONS.—For purposes of paragraph 

11 (1)(C)(i), the term ‘commodity hedging trans12 action’ means any transaction with respect to a 

13 commodity if such transaction— 

14 ‘‘(i) is a hedging transaction as de15 fined in section 1221(b)(2), determined— 

16 ‘‘(I) without regard to subpara17 graph (A)(ii) thereof, 

18 ‘‘(II) by applying subparagraph 

19 (A)(i) thereof by substituting ‘ordi20 nary property or property described in 

21 section 1231(b)’ for ‘ordinary prop22 erty’, and 

23 ‘‘(III) by substituting ‘controlled 

24 foreign corporation’ for ‘taxpayer’ 

25 each place it appears, and 


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1 ‘‘(ii) is clearly identified as such in ac2 cordance with section 1221(a)(7). 

3 ‘‘(B) TREATMENT OF DEALER ACTIVITIES

4 UNDER PARAGRAPH (1)(C).—Commodities with 

5 respect to which gains and losses are not taken 

6 into account under paragraph (2)(B) in com7 puting a controlled foreign corporation’s passive 

8 income shall not be taken into account in apply9 ing the substantially all test under paragraph 

10 (1)(C)(ii) to such corporation. 

11 ‘‘(C) REGULATIONS.—The Secretary shall 

12 prescribe such regulations as are appropriate to 

13 carry out the purposes of paragraph (1)(C) in 

14 the case of transactions involving related per15 sons. 

16 ‘‘(b) RELATED PERSON DEFINED.—For purposes of 

17 this section, a person is a related person with respect to 

18 a controlled foreign corporation, if— 

19 ‘‘(1) such person is an individual, corporation, 

20 partnership, trust, or estate which controls, or is 

21 controlled by, the controlled foreign corporation, or 

22 ‘‘(2) such person is a corporation, partnership, 

23 trust, or estate which is controlled by the same per24 son or persons which control the controlled foreign 

25 corporation. 


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1 For purposes of the preceding sentence, control means, 

2 with respect to a corporation, the ownership, directly or 

3 indirectly, of stock possessing more than 50 percent of the 

4 total voting power of all classes of stock entitled to vote 

5 or of the total value of stock of such corporation. In the 

6 case of a partnership, trust, or estate, control means the 

7 ownership, directly or indirectly, of more than 50 percent 

8 (by value) of the beneficial interests in such partnership, 

9 trust, or estate. For purposes of this subsection, rules 

10 similar to the rules of section 958 shall apply. 

11 ‘‘(c) SPECIAL RULE FOR INCOME DERIVED IN THE

12 ACTIVE CONDUCT OF BANKING, FINANCING, OR SIMILAR

13 BUSINESSES.— 

14 ‘‘(1) IN GENERAL.—For purposes of subsection 

15 (a)(1), passive income shall not include qualified 

16 banking or financing income of an eligible controlled 

17 foreign corporation. 

18 ‘‘(2) ELIGIBLE CONTROLLED FOREIGN COR19 PORATION.—For purposes of this subsection, the 

20 term ‘eligible controlled foreign corporation’ means 

21 any controlled foreign corporation if— 

22 ‘‘(A) more than 80 percent of the gross in23 come of the controlled foreign corporation is de24 rived directly from the active and regular con25 duct of a lending, finance, or financial services 


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1 business from transactions with customers 

2 which are located outside the United States and 

3 are not related persons, or 

4 ‘‘(B) it is a regulated financial institution. 

5 ‘‘(3) QUALIFIED BANKING OR FINANCING IN6 COME.—For purposes of this subsection— 

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

8 banking or financing income’ means income of 

9 an eligible controlled foreign corporation 

10 which— 

11 ‘‘(i) is derived in the active conduct of 

12 a banking, financing, or similar business 

13 by such eligible controlled foreign corpora14 tion, 

15 ‘‘(ii) is derived from one or more 

16 transactions— 

17 ‘‘(I) with customers located in a 

18 country other than the United States, 

19 and 

20 ‘‘(II) substantially all of the ac21 tivities in connection with which are 

22 conducted directly by the corporation 

23 in its home country, and 


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1 ‘‘(iii) is treated as earned by such cor2 poration in its home country for purposes 

3 of such country’s tax laws. 

4 ‘‘(B) INCOME DERIVED FROM CUSTOMERS

5 TO INCLUDE CERTAIN INVESTMENT INCOME.— 

6 For purposes of subparagraph (A), in the case 

7 of a regulated financial institution, income de8 rived from customers includes income derived 

9 from— 

10 ‘‘(i) reserves that are required to be 

11 held pursuant to banking regulations, 

12 ‘‘(ii) deposits placed with the central 

13 bank (or equivalent thereof) in the cor14 poration’s home country, and 

15 ‘‘(iii) investments in debt instruments 

16 issued by the home country. 

17 ‘‘(C) SUBSTANTIAL ACTIVITY REQUIRE18 MENT FOR CROSS BORDER INCOME.—The term 

19 ‘qualified banking or financing income’ shall 

20 not include income derived from 1 or more 

21 transactions with customers located in a coun22 try other than the home country of the eligible 

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1 spect to a banking, financing, or similar busi2 ness in its home country. 

3 ‘‘(D) DIRECT CONDUCT OF ACTIVITIES.— 

4 For purposes of subparagraph (A)(ii)(II), an 

5 activity shall be treated as conducted directly by 

6 an eligible controlled foreign corporation in its 

7 home country if the activity is performed by 

8 employees of a related person and— 

9 ‘‘(i) the related person is a resident 

10 subject to tax under the laws of the home 

11 country of the corporation to which sub12 paragraph (A)(ii)(II) is being applied, 

13 ‘‘(ii) the activity is performed in such 

14 home country, and 

15 ‘‘(iii) the related person is com16 pensated on an arm’s-length basis for the 

17 performance of the activity by its employ18 ees and such compensation is treated as 

19 earned by such person in such home coun20 try for purposes of the home country’s tax 

21 laws. 

22 ‘‘(4) LENDING, FINANCE, OR FINANCIAL SERV23 ICES BUSINESS.—For purposes of this subsection, 

24 except as provided in regulations, the term ‘lending, 


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1 finance, or financial services business’ means the 

2 business of— 

3 ‘‘(A) making loans, 

4 ‘‘(B) purchasing, selling, discounting, or 

5 negotiating on a regular basis accounts receiv6 able, notes, or installment obligations, 

7 ‘‘(C) engaging in leasing (including enter8 ing into leases and purchasing, servicing, and 

9 disposing of leases and leased assets), 

10 ‘‘(D) issuing letters of credit or providing 

11 guarantees, 

12 ‘‘(E) providing charge and credit card 

13 services, 

14 ‘‘(F) performing trust services, including 

15 as a fiduciary, agent, or custodian, other than 

16 trust services provided by a broker or dealer in 

17 stock, securities, or other financial instruments, 

18 ‘‘(G) arranging interest rate or currency 

19 futures, forwards, options, or notional principal 

20 contracts for, or entering into such transactions 

21 with, customers, 

22 ‘‘(H) providing traveler’s check and money 

23 order services for customers, 

24 ‘‘(I) providing correspondent bank services 

25 for customers, 


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1 ‘‘(J) engaging in hedging activities directly 

2 related to an activity described in any other 

3 subparagraph of this paragraph, 

4 ‘‘(K) underwriting issues of stock, debt, or 

5 other securities for customers, 

6 ‘‘(L) providing financial, investment advi7 sory, or investment management services, 

8 ‘‘(M) purchasing or selling stock, debt in9 struments, interest rate or currency futures, or 

10 other securities or derivative financial products 

11 (including notional principal contracts) from or 

12 to customers and holding such stock, debt in13 struments, futures, or other securities or prod14 ucts as inventory for sale to customers, unless 

15 such stock, debt instruments, futures, or other 

16 securities or products are not held in a dealer 

17 capacity, 

18 ‘‘(N) effecting transactions in securities for 

19 customers as a securities broker, or 

20 ‘‘(O) rendering services or making facilities 

21 available in connection with activities described 

22 in subparagraphs (A) through (N) carried on 

23 by— 

24 ‘‘(i) the corporation rendering services 

25 or making facilities available, or 


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1 ‘‘(ii) another corporation which is a 

2 member of the same affiliated group (as 

3 defined in section 1504, but determined 

4 without regard to section 1504(b)(3)). 

5 ‘‘(5) OTHER DEFINITIONS.—For purposes of 

6 this subsection— 

7 ‘‘(A) CUSTOMER.—The term ‘customer’ 

8 means, with respect to any controlled foreign 

9 corporation, any person which has a customer 

10 relationship with such corporation and which is 

11 acting in its capacity as such. 

12 ‘‘(B) HOME COUNTRY.—Except as pro13 vided in regulations, the term ‘home country’ 

14 means, with respect to any entity, the country 

15 with respect to which the entity is a resident for 

16 purposes of the country’s income tax laws. 

17 ‘‘(C) LOCATED.—Except as provided in 

18 regulations, for purposes of paragraph (3)(A)— 

19 ‘‘(i) if a customer is a natural person, 

20 the customer is considered to be located in 

21 the country in which the customer is phys22 ically located when entering into the trans23 action, and 

24 ‘‘(ii) if a customer is not a natural 

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1 cated in the country from which the cus2 tomer enters into the transaction. 

3 ‘‘(D) QUALIFIED BUSINESS UNIT.—The 

4 term ‘qualified business unit’ has the meaning 

5 given such term by section 989(a). 

6 ‘‘(E) REGULATED FINANCIAL INSTITU7 TION.—Except as provided in regulations, the 

8 term ‘regulated financial institution’ means a 

9 controlled foreign corporation which— 

10 ‘‘(i) is engaged in the active conduct 

11 of a banking business and is an institution 

12 licensed to do business as a bank in the 

13 United States (or is any other corporation 

14 not so licensed which is specified by the 

15 Secretary in regulations), or 

16 ‘‘(ii) satisfies each of the following 

17 conditions: 

18 ‘‘(I) The corporation is directly 

19 or indirectly wholly owned by a do20 mestic corporation that is a bank (as 

21 defined in section 581) or a depository 

22 institution holding company (as de23 fined in section 3(w)(1) of the Federal 

24 Deposit Insurance Act (12 U.S.C. 

25 1813(w)(1))). 


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1 ‘‘(II) The corporation is subject 

2 to bank regulatory supervision in a ju3 risdiction the central bank of which 

4 (or equivalent thereof) is a member of 

5 the Basel Committee on Banking Su6 pervision. 

7 ‘‘(III) The corporation is licensed 

8 and regulated in such jurisdiction as a 

9 bank. 

10 ‘‘(6) SEPARATE APPLICATION TO QUALIFIED

11 BUSINESS UNITS.— 

12 ‘‘(A) IN GENERAL.—If a controlled foreign 

13 corporation has 1 or more qualified business 

14 units— 

15 ‘‘(i) this subsection shall be applied 

16 separately to each such unit in the same 

17 manner as if it were a controlled foreign 

18 corporation, and 

19 ‘‘(ii) if any such unit is treated as an 

20 eligible controlled foreign corporation after 

21 application of clause (i), the qualified 

22 banking or financing income of such unit 

23 shall be treated as qualified banking or fi24 nancing income of the controlled foreign 

25 corporation of which such unit is a part. 


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1 ‘‘(B) DETERMINATIONS MADE SEPA2 RATELY.—For purposes of the separate applica3 tion of this subsection to a controlled foreign 

4 corporation and its qualified business units— 

5 ‘‘(i) in the case of the controlled for6 eign corporation, only activities and items 

7 of income, deduction, gain, or loss and ac8 tivities of such corporation not properly al9 locable or attributable to any qualified 

10 business unit of such corporation shall be 

11 taken into account, and 

12 ‘‘(ii) in the case of a qualified busi13 ness unit, only activities and items of in14 come, deduction, gain, or loss and activities 

15 properly allocable or attributable to such 

16 unit shall be taken into account. 

17 ‘‘(C) HOME COUNTRY.—For purposes of 

18 this subsection, except as provided in regula19 tions, notwithstanding paragraph (5)(B), the 

20 home country with respect to any qualified 

21 business unit treated as a controlled foreign 

22 corporation under subparagraph (A) shall be 

23 the country in which such unit maintains its 

24 principal office. 


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1 ‘‘(7) ANTI-ABUSE RULES.—For purposes of ap2 plying this subsection— 

3 ‘‘(A) there shall be disregarded any item of 

4 income, gain, loss, or deduction with respect to 

5 any transaction or series of transactions one of 

6 the principal purposes of which is qualifying in7 come or gain for the exclusion under this sec8 tion, including any transaction or series of 

9 transactions a principal purpose of which is the 

10 acceleration or deferral of any item in order to 

11 claim the benefits of such exclusion through the 

12 application of this subsection, 

13 ‘‘(B) there shall be disregarded any item of 

14 income, gain, loss, or deduction of an entity 

15 which is not engaged in regular and continuous 

16 transactions with customers which are not re17 lated persons, 

18 ‘‘(C) there shall be disregarded any item of 

19 income, gain, loss, or deduction with respect to 

20 any transaction or series of transactions uti21 lizing, or doing business with— 

22 ‘‘(i) one or more entities in order to 

23 satisfy any home country requirement 

24 under this subsection, or 


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1 ‘‘(ii) a special purpose entity or ar2 rangement, including a securitization, fi3 nancing, or similar entity or arrangement, 

4 if one of the principal purposes of such trans5 action or series of transactions is qualifying in6 come or gain for the exclusion under this sub7 section, and 

8 ‘‘(D) a related person, an officer, a direc9 tor, or an employee with respect to any con10 trolled foreign corporation which would other11 wise be treated as a customer of such corpora12 tion with respect to any transaction shall not be 

13 so treated if a principal purpose of such trans14 action is to satisfy any requirement of this sub15 section. 

16 ‘‘(8) REGULATIONS.—The Secretary shall pre17 scribe such regulations as may be necessary or ap18 propriate to carry out the purposes of this sub19 section and subsection (a)(1)(B)(i). 

20 ‘‘(d) SPECIAL RULE FOR INCOME DERIVED IN THE

21 ACTIVE CONDUCT OF INSURANCE BUSINESS.— 

22 ‘‘(1) IN GENERAL.—For purposes of subsection 

23 (a)(1), passive income shall not include qualified in24 surance income of a qualifying insurance company. 


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1 ‘‘(2) QUALIFIED INSURANCE INCOME.—For 

2 purposes of this subsection, the term ‘qualified in3 surance income’ means income of a qualifying insur4 ance company which is— 

5 ‘‘(A) received from a person other than a 

6 related person and derived from the invest7 ments made by a qualifying insurance company 

8 or a qualifying insurance company branch of its 

9 reserves allocable to exempt contracts or of 80 

10 percent of its unearned premiums from exempt 

11 contracts (as both are determined in the man12 ner prescribed under paragraph (4)), or 

13 ‘‘(B) received from a person other than a 

14 related person and derived from investments 

15 made by a qualifying insurance company or a 

16 qualifying insurance company branch of an 

17 amount of its assets allocable to exempt con18 tracts equal to— 

19 ‘‘(i) in the case of property, casualty, 

20 or health insurance contracts, one-third of 

21 its premiums earned on such insurance 

22 contracts during the taxable year (as de23 fined in section 832(b)(4)), and 

24 ‘‘(ii) in the case of life insurance or 

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1 serves described in subparagraph (A) for 

2 such contracts. 

3 ‘‘(3) PRINCIPLES FOR DETERMINING QUALI4 FIED INSURANCE INCOME.—Except as provided by 

5 the Secretary, for purposes of subparagraphs (A) 

6 and (B) of paragraph (2)— 

7 ‘‘(A) in the case of any contract which is 

8 a separate account-type contract (including any 

9 variable contract not meeting the requirements 

10 of section 817), income credited under such 

11 contract shall be allocable only to such contract, 

12 and 

13 ‘‘(B) income not allocable under subpara14 graph (A) shall be allocated ratably among con15 tracts not described in subparagraph (A). 

16 ‘‘(4) METHODS FOR DETERMINING UNEARNED

17 PREMIUMS AND RESERVES.—For purposes of para18 graph (2)(A)— 

19 ‘‘(A) PROPERTY AND CASUALTY CON20 TRACTS.—The unearned premiums and reserves 

21 of a qualifying insurance company or a quali22 fying insurance company branch with respect to 

23 property, casualty, or health insurance con24 tracts shall be determined using the same meth25 ods and interest rates which would be used if 


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1 such company or branch were subject to tax 

2 under subchapter L, except that— 

3 ‘‘(i) the interest rate determined for 

4 the functional currency of the company or 

5 branch, and which, except as provided by 

6 the Secretary, is calculated in the same 

7 manner as the Federal mid-term rate 

8 under section 1274(d), shall be substituted 

9 for the applicable Federal interest rate, 

10 and 

11 ‘‘(ii) such company or branch shall 

12 use the appropriate foreign loss payment 

13 pattern. 

14 ‘‘(B) LIFE INSURANCE AND ANNUITY CON15 TRACTS.— 

16 ‘‘(i) IN GENERAL.—Except as pro17 vided in clause (ii), the amount of the re18 serve of a qualifying insurance company or 

19 qualifying insurance company branch for 

20 any life insurance or annuity contract shall 

21 be equal to the greater of— 

22 ‘‘(I) the net surrender value of 

23 such contract (as defined in section 

24 807(e)(1)(A)), or 


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1 ‘‘(II) the reserve determined 

2 under paragraph (5). 

3 ‘‘(ii) RULING REQUEST, ETC.—The 

4 amount of the reserve under clause (i) 

5 shall be the foreign statement reserve for 

6 the contract (less any catastrophe, defi7 ciency, equalization, or similar reserves), if, 

8 pursuant to a ruling request submitted by 

9 the taxpayer or as provided in published 

10 guidance, the Secretary determines that 

11 the factors taken into account in deter12 mining the foreign statement reserve pro13 vide an appropriate means of measuring 

14 income. 

15 ‘‘(C) LIMITATION ON RESERVES.—In no 

16 event shall the reserve determined under this 

17 paragraph for any contract as of any time ex18 ceed the amount which would be taken into ac19 count with respect to such contract as of such 

20 time in determining foreign statement reserves 

21 (less any catastrophe, deficiency, equalization, 

22 or similar reserves). 

23 ‘‘(5) AMOUNT OF RESERVE.—The amount of 

24 the reserve determined under this paragraph with 

25 respect to any contract shall be determined in the 


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1 same manner as it would be determined if the quali2 fying insurance company or qualifying insurance 

3 company branch were subject to tax under sub4 chapter L, except that in applying such sub5 chapter— 

6 ‘‘(A) the interest rate determined for the 

7 functional currency of the company or branch, 

8 and which, except as provided by the Secretary, 

9 is calculated in the same manner as the Federal 

10 mid-term rate under section 1274(d), shall be 

11 substituted for the applicable Federal interest 

12 rate, 

13 ‘‘(B) the highest assumed interest rate 

14 permitted to be used in determining foreign 

15 statement reserves shall be substituted for the 

16 prevailing State assumed interest rate, and 

17 ‘‘(C) tables for mortality and morbidity 

18 which reasonably reflect the current mortality 

19 and morbidity risks in the company’s or 

20 branch’s home country shall be substituted for 

21 the mortality and morbidity tables otherwise 

22 used for such subchapter. 

23 The Secretary may provide that the interest rate 

24 and mortality and morbidity tables of a qualifying 

25 insurance company may be used for 1 or more of its 


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1 qualifying insurance company branches when appro2 priate. 

3 ‘‘(6) DEFINITIONS.—For purposes of this sec4 tion, any term used in this subsection which is also 

5 used in section 955(c) shall have the meaning given 

6 such term under section 955(c). 

7 ‘‘SEC. 955. DEFINITION OF INSURANCE INCOME. 

8 ‘‘(a) INSURANCE INCOME.— 

9 ‘‘(1) IN GENERAL.—For purposes of section 

10 953(c), the term ‘insurance income’ means the gross 

11 income which— 

12 ‘‘(A) is attributable to the issuing (or rein13 suring) of an insurance or annuity contract, 

14 and 

15 ‘‘(B) is of a kind that would be subject to 

16 tax under subchapter L of this chapter if such 

17 income were the income of a domestic insurance 

18 company. 

19 ‘‘(2) EXCEPTION.—Such term shall not include 

20 any exempt insurance income (as defined in sub21 section (c)). 

22 ‘‘(b) SPECIAL RULES FOR DETERMINATION OF

23 GROSS INCOME AND ALLOCABLE DEDUCTIONS.—For 

24 purposes of determining gross income under subsection (a) 


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1 and deductions allocable to insurance income under sec2 tion 952(e), the following rules shall apply: 

3 ‘‘(1) CERTAIN DEDUCTIONS NOT ALLOWED.— 

4 The following provisions of subchapter L shall not 

5 apply: 

6 ‘‘(A) The small life insurance company de7 duction. 

8 ‘‘(B) Section 805(a)(5) (relating to oper9 ations loss deduction). 

10 ‘‘(C) Section 832(c)(5) (relating to certain 

11 capital losses). 

12 ‘‘(2) SPECIAL RULES FOR AMOUNTS INCLUDED

13 IN INCOME.—The items referred to in— 

14 ‘‘(A) section 803(a)(1) (relating to gross 

15 amount of premiums and other considerations), 

16 ‘‘(B) section 803(a)(2) (relating to net de17 crease in reserves), 

18 ‘‘(C) section 805(a)(2) (relating to net in19 crease in reserves), and 

20 ‘‘(D) section 832(b)(4) (relating to pre21 miums earned on insurance contracts), 

22 shall be taken into account only to the extent they 

23 are in respect of any reinsurance or the issuing of 

24 any insurance or annuity contract described in sub25 section (a)(1). 


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1 ‘‘(3) TREATMENT OF RESERVES.—Reserves for 

2 any insurance or annuity contract shall be deter3 mined in the same manner as under section 954(d). 

4 ‘‘(c) EXEMPT INSURANCE INCOME.—For purposes of 

5 this section— 

6 ‘‘(1) EXEMPT INSURANCE INCOME DEFINED.— 

7 ‘‘(A) IN GENERAL.—The term ‘exempt in8 surance income’ means income derived by a 

9 qualifying insurance company which— 

10 ‘‘(i) is attributable to the issuing (or 

11 reinsuring) of an exempt contract by such 

12 company or a qualifying insurance com13 pany branch of such company, and 

14 ‘‘(ii) is treated as earned by such com15 pany or branch in its home country for 

16 purposes of such country’s tax laws. 

17 ‘‘(B) EXCEPTION FOR CERTAIN ARRANGE18 MENTS.—Such term shall not include income 

19 attributable to the issuing (or reinsuring) of an 

20 exempt contract as the result of any arrange21 ment whereby another corporation receives a 

22 substantially equal amount of premiums or 

23 other consideration in respect of issuing (or re24 insuring) a contract which is not an exempt 

25 contract. 


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1 ‘‘(C) DETERMINATIONS MADE SEPA2 RATELY.—For purposes of this subsection and 

3 section 954(d), the exempt insurance income 

4 and exempt contracts of a qualifying insurance 

5 company or any qualifying insurance company 

6 branch of such company shall be determined 

7 separately for such company and each such 

8 branch by taking into account— 

9 ‘‘(i) in the case of the qualifying in10 surance company, only items of income, de11 duction, gain, or loss, and activities of such 

12 company not properly allocable or attrib13 utable to any qualifying insurance com14 pany branch of such company, and 

15 ‘‘(ii) in the case of a qualifying insur16 ance company branch, only items of in17 come, deduction, gain, or loss and activities 

18 properly allocable or attributable to such 

19 branch. 

20 ‘‘(2) EXEMPT CONTRACT.— 

21 ‘‘(A) IN GENERAL.—The term ‘exempt 

22 contract’ means an insurance or annuity con23 tract issued or reinsured by a qualifying insur24 ance company or qualifying insurance company 

25 branch in connection with property in, liability 


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1 arising out of activity in, or the lives or health 

2 of residents of, a country other than the United 

3 States. 

4 ‘‘(B) MINIMUM NON-RELATED INCOME RE5 QUIRED.—No contract of a qualifying insurance 

6 company or of a qualifying insurance company 

7 branch shall be treated as an exempt contract 

8 unless such company or branch derives more 

9 than 30 percent of its net written premiums 

10 from exempt contracts (determined without re11 gard to this subparagraph) with respect to 

12 which no policyholder, insured, annuitant, or 

13 beneficiary is a related person (as defined in 

14 section 954(b)). 

15 ‘‘(C) SUBSTANTIAL ACTIVITY REQUIRE16 MENTS.—A contract issued by a qualifying in17 surance company or qualifying insurance com18 pany branch shall not be treated as an exempt 

19 contract unless such company or branch, as the 

20 case may be— 

21 ‘‘(i) conducts substantial activity with 

22 respect to an insurance business in its 

23 home country, and 

24 ‘‘(ii) performs in its home country 

25 substantially all of the activities necessary 


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1 to give rise to the income generated by 

2 such contract. 

3 ‘‘(3) QUALIFYING INSURANCE COMPANY.— 

4 ‘‘(A) IN GENERAL.—The term ‘qualifying 

5 insurance company’ means any controlled for6 eign corporation— 

7 ‘‘(i) which— 

8 ‘‘(I) is subject to regulation as an 

9 insurance (or reinsurance) company 

10 by its home country, and is licensed, 

11 authorized, or regulated by the appli12 cable insurance regulatory body for its 

13 home country to sell insurance, rein14 surance, or annuity contracts to per15 sons other than related persons (with16 in the meaning of section 954(b)) in 

17 such home country, and 

18 ‘‘(II) is engaged in the insurance 

19 business and would be subject to tax 

20 under subchapter L if it were a do21 mestic corporation, 

22 ‘‘(ii) which derives more than 50 per23 cent of its aggregate net written premiums 

24 from the issuance or reinsurance by such 

25 controlled foreign corporation and each of 


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1 its qualifying insurance company branches 

2 of contracts with respect to which no pol3 icyholder, insured, annuitant, or bene4 ficiary is a related person (as defined in 

5 section 954(b)), except that in the case of 

6 a branch, such premiums shall only be 

7 taken into account to the extent such pre8 miums are treated as earned by such 

9 branch in its home country for purposes of 

10 such country’s tax laws, 

11 ‘‘(iii) more than 50 percent of the 

12 gross receipts of which for the taxable 

13 year— 

14 ‘‘(I) consist of premiums for in15 surance or reinsurance in connection 

16 with property, liability, or the lives or 

17 health of individuals, and 

18 ‘‘(II) are treated as earned by 

19 such controlled foreign corporation in 

20 its home country for purposes of such 

21 country’s tax laws, and 

22 ‘‘(iv) the applicable insurance liabil23 ities of which constitute more than 35 per24 cent of its total assets as reported on the 

25 company’s applicable financial statement 


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1 for the year with which or in which the 

2 taxable year ends. 

3 ‘‘(B) APPLICABLE INSURANCE LIABIL4 ITIES.—For purposes of subparagraph (A)(iv), 

5 the term ‘applicable insurance liabilities’ 

6 means— 

7 ‘‘(i) loss and loss adjustment ex8 penses, 

9 ‘‘(ii) unearned premiums, and 

10 ‘‘(iii) reserves (other than any catas11 trophe, deficiency, equalization, or similar 

12 reserves) for life and health insurance risks 

13 and life and health insurance claims with 

14 respect to contracts providing coverage for 

15 mortality or morbidity risks (not to exceed 

16 the amount of such reserve that is required 

17 to be reported to the home country insur18 ance regulatory body). 

19 ‘‘(C) APPLICABLE FINANCIAL STATE20 MENT.—For purposes of subparagraph (A)(iv), 

21 the term ‘applicable financial statement’ means 

22 a statement for financial reporting purposes 

23 which— 

24 ‘‘(i) is made on the basis of generally 

25 accepted accounting principles, 


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1 ‘‘(ii) is made on the basis of inter2 national financial reporting standards, but 

3 only if there is no statement that meets 

4 the requirement of clause (i), or 

5 ‘‘(iii) except as otherwise provided by 

6 the Secretary in regulations, is the annual 

7 statement which is required to be filed 

8 with the home country insurance regu9 latory body, but only if there is no state10 ment which meets the requirements of 

11 clause (i) or (ii). 

12 ‘‘(D) REGULATIONS.—The Secretary shall 

13 prescribe such regulations as necessary to carry 

14 out the purposes of this paragraph. 

15 ‘‘(4) QUALIFYING INSURANCE COMPANY

16 BRANCH.—The term ‘qualifying insurance company 

17 branch’ means a qualified business unit (within the 

18 meaning of section 989(a)) of a controlled foreign 

19 corporation if— 

20 ‘‘(A) such unit is licensed, authorized, or 

21 regulated by the applicable insurance regulatory 

22 body for its home country to sell insurance, re23 insurance, or annuity contracts to persons other 

24 than related persons (within the meaning of 

25 section 954(b)) in such home country, and 


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1 ‘‘(B) such controlled foreign corporation is 

2 a qualifying insurance company, determined 

3 under paragraph (3) as if such unit were a 

4 qualifying insurance company branch. 

5 ‘‘(5) LIFE INSURANCE OR ANNUITY CON6 TRACT.—For purposes of this section and section 

7 954, the determination of whether a contract issued 

8 by a controlled foreign corporation or a qualifying 

9 insurance company branch is a life insurance con10 tract or an annuity contract shall be made without 

11 regard to sections 72(s), 101(f), 817(h), and 7702 

12 if— 

13 ‘‘(A) such contract is regulated as a life in14 surance or annuity contract by the corpora15 tion’s or branch’s home country, and 

16 ‘‘(B) no policyholder, insured, annuitant, 

17 or beneficiary with respect to the contract is a 

18 United States person. 

19 ‘‘(6) HOME COUNTRY.—For purposes of this 

20 subsection, except as provided in regulations— 

21 ‘‘(A) CONTROLLED FOREIGN CORPORA22 TION.—The term ‘home country’ means, with 

23 respect to a controlled foreign corporation, the 

24 country in which such corporation is created or 

25 organized. 


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1 ‘‘(B) QUALIFYING INSURANCE COMPANY

2 BRANCH.—The term ‘home country’ means, 

3 with respect to a qualifying insurance company 

4 branch, the country in which the principal office 

5 of such branch is located and in which such 

6 branch is licensed, authorized, or regulated by 

7 the applicable insurance regulatory body to sell 

8 insurance, reinsurance, or annuity contracts to 

9 persons other than related persons (as defined 

10 in section 954(b)) in such country. 

11 ‘‘(7) ANTI-ABUSE RULES.—For purposes of ap12 plying this subsection and section 954(d)— 

13 ‘‘(A) the rules of section 954(c)(7) (other 

14 than subparagraph (B) thereof) shall apply, 

15 ‘‘(B) there shall be disregarded any item of 

16 income, gain, loss, or deduction of, or derived 

17 from, an entity which is not engaged in regular 

18 and continuous transactions with persons which 

19 are not related persons, 

20 ‘‘(C) there shall be disregarded any change 

21 in the method of computing reserves a principal 

22 purpose of which is the acceleration or deferral 

23 of any item in order to claim the benefits of 

24 this subsection or section 954(d), 


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1 ‘‘(D) a contract of insurance or reinsur2 ance shall not be treated as an exempt contract 

3 (and premiums from such contract shall not be 

4 taken into account for purposes of paragraph 

5 (2)(B) or (3)) if— 

6 ‘‘(i) any policyholder, insured, annu7 itant, or beneficiary is a resident of the 

8 United States and such contract was mar9 keted to such resident and was written to 

10 cover a risk outside the United States, or 

11 ‘‘(ii) the contract covers risks located 

12 within and without the United States and 

13 the qualifying insurance company or quali14 fying insurance company branch does not 

15 maintain such contemporaneous records, 

16 and file such reports, with respect to such 

17 contract as the Secretary may require, 

18 ‘‘(E) the Secretary may prescribe rules for 

19 the allocation of contracts (and income from 

20 contracts) among 2 or more qualifying insur21 ance company branches of a qualifying insur22 ance company in order to clearly reflect the in23 come of such branches, and 

24 ‘‘(F) premiums from a contract shall not 

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1 graph (2)(B) or (3) if such contract reinsures 

2 a contract issued or reinsured by a related per3 son (as defined in section 954(b)). 

4 ‘‘(8) COORDINATION WITH SECTION 956(a).— 

5 ‘‘(A) IN GENERAL.—In determining insur6 ance income for purposes of section 956(a), ex7 empt insurance income shall not include income 

8 derived from exempt contracts which cover risks 

9 other than applicable home country risks. 

10 ‘‘(B) APPLICABLE HOME COUNTRY

11 RISKS.—For purposes of subparagraph (A), the 

12 term ‘applicable home country risks’ means 

13 risks in connection with property in, liability 

14 arising out of activity in, or the lives or health 

15 of residents of, the home country of the quali16 fying insurance company or qualifying insur17 ance company branch, as the case may be, 

18 issuing or reinsuring the contract covering the 

19 risks. 

20 ‘‘(9) REGULATIONS.—The Secretary shall pre21 scribe such regulations as may be necessary or ap22 propriate to carry out the purposes of this sub23 section and section 954(d). 


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1 ‘‘(10) CROSS REFERENCE.—For treatment of 

2 certain investment income derived by qualifying in3 surance companies, see section 954(d). 

4 ‘‘SEC. 956. SPECIAL RULE FOR CERTAIN CAPTIVE INSUR5 ANCE COMPANIES. 

6 ‘‘(a) TREATMENT AS CONTROLLED FOREIGN COR7 PORATIONS AND UNITED STATES SHAREHOLDERS.— 

8 ‘‘(1) IN GENERAL.—For purposes only of tak9 ing into account related person insurance income— 

10 ‘‘(A) the term ‘United States shareholder’ 

11 means, with respect to any foreign corporation, 

12 a United States person (as defined in section 

13 957(c)) who owns (within the meaning of sec14 tion 958(a)) any stock of the foreign corpora15 tion, 

16 ‘‘(B) the term ‘controlled foreign corpora17 tion’ has the meaning given to such term by 

18 section 957(a) determined by substituting ‘25 

19 percent or more’ for ‘more than 50 percent’, 

20 and 

21 ‘‘(C) the pro rata share referred to in sec22 tion 951(a)(1) shall be determined under para23 graph (5) of this subsection. 

24 ‘‘(2) RELATED PERSON INSURANCE INCOME.— 

25 For purposes of this subsection, the term ‘related 


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1 person insurance income’ means any insurance in2 come (within the meaning of section 955(a)) attrib3 utable to a policy of insurance or reinsurance with 

4 respect to which the person (directly or indirectly) 

5 insured is a United States shareholder in the foreign 

6 corporation or a related person to such a share7 holder. 

8 ‘‘(3) EXCEPTIONS.— 

9 ‘‘(A) CORPORATIONS NOT HELD BY IN10 SURED.—Paragraph (1) shall not apply to any 

11 foreign corporation if at all times during the 

12 taxable year of such foreign corporation— 

13 ‘‘(i) less than 20 percent of the total 

14 combined voting power of all classes of 

15 stock of such corporation entitled to vote, 

16 and 

17 ‘‘(ii) less than 20 percent of the total 

18 value of such corporation, 

19 is owned (directly or indirectly under the prin20 ciples of section 883(c)(4)) by persons who are 

21 (directly or indirectly) insured under any policy 

22 of insurance or reinsurance issued by such cor23 poration or who are related persons to any such 

24 person. 


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1 ‘‘(B) DE MINIMIS EXCEPTION.—Paragraph 

2 (1) shall not apply to any foreign corporation 

3 for a taxable year of such corporation if the re4 lated person insurance income (determined on a 

5 gross basis) of such corporation for such tax6 able year is less than 20 percent of its insur7 ance income (as so determined) for such taxable 

8 year. 

9 ‘‘(C) ELECTION TO TREAT INCOME AS EF10 FECTIVELY CONNECTED.—Paragraph (1) shall 

11 not apply to any foreign corporation for any 

12 taxable year if— 

13 ‘‘(i) such corporation elects (at such 

14 time and in such manner as the Secretary 

15 may prescribe)— 

16 ‘‘(I) to treat its related person in17 surance income for such taxable year 

18 as income effectively connected with 

19 the conduct of a trade or business in 

20 the United States, and 

21 ‘‘(II) to waive all benefits (other 

22 than with respect to section 884) with 

23 respect to related person insurance in24 come granted by the United States 


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1 under any treaty between the United 

2 States and any foreign country, and 

3 ‘‘(ii) such corporation meets such re4 quirements as the Secretary shall prescribe 

5 to ensure that the tax imposed by this 

6 chapter on such income is paid. 

7 An election under this subparagraph made for 

8 any taxable year shall not be effective if the 

9 corporation (or any predecessor thereof) was a 

10 disqualified corporation for the taxable year for 

11 which the election was made or for any prior 

12 taxable year beginning after 1986. 

13 ‘‘(D) SPECIAL RULES FOR SUBPARAGRAPH

14 (C).— 

15 ‘‘(i) PERIOD DURING WHICH ELEC16 TION IN EFFECT.— 

17 ‘‘(I) IN GENERAL.—Except as 

18 provided in subclause (II), any elec19 tion under subparagraph (C) shall 

20 apply to the taxable year for which 

21 made and all subsequent taxable years 

22 unless revoked with the consent of the 

23 Secretary. 

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1 tion under subparagraph (C) for any 

2 taxable year is a disqualified corpora3 tion for any subsequent taxable year, 

4 such election shall not apply to any 

5 taxable year beginning after such sub6 sequent taxable year. 

7 ‘‘(ii) EXEMPTION FROM TAX IMPOSED

8 BY SECTION 4371.—The tax imposed by 

9 section 4371 shall not apply with respect 

10 to any related person insurance income 

11 treated as effectively connected with the 

12 conduct of a trade or business within the 

13 United States under subparagraph (C). 

14 ‘‘(E) DISQUALIFIED CORPORATION.—For 

15 purposes of this paragraph the term ‘disquali16 fied corporation’ means, with respect to any 

17 taxable year, any foreign corporation which is a 

18 controlled foreign corporation at any time dur19 ing such taxable year (determined without re20 gard to this subsection) but only if a United 

21 States shareholder (determined without regard 

22 to this subsection) owns (within the meaning of 

23 section 958(a)) stock in such corporation at 

24 some time during such taxable year. 


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1 ‘‘(4) TREATMENT OF MUTUAL INSURANCE COM2 PANIES.—In the case of a mutual insurance com3 pany— 

4 ‘‘(A) this subsection shall apply, 

5 ‘‘(B) policyholders of such company shall 

6 be treated as shareholders, and 

7 ‘‘(C) appropriate adjustments in the appli8 cation of this subpart shall be made under reg9 ulations prescribed by the Secretary. 

10 ‘‘(5) DETERMINATION OF PRO RATA SHARE.— 

11 ‘‘(A) IN GENERAL.—The pro rata share 

12 determined under this paragraph for any 

13 United States shareholder is the lesser of— 

14 ‘‘(i) the amount which would be deter15 mined under paragraph (2) of section 

16 951(a) if— 

17 ‘‘(I) only related person insur18 ance income were taken into account, 

19 ‘‘(II) stock owned (within the 

20 meaning of section 958(a)) by United 

21 States shareholders on the last day of 

22 the taxable year were the only stock 

23 in the foreign corporation, and 

24 ‘‘(III) only distributions received 

25 by United States shareholders were 


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1 taken into account under subpara2 graph (B) of such paragraph (2), or 

3 ‘‘(ii) the amount which would be de4 termined under paragraph (2) of section 

5 951(a) if the entire earnings and profits of 

6 the foreign corporation for the taxable year 

7 were subpart F income. 

8 ‘‘(B) COORDINATION WITH OTHER PROVI9 SIONS.—The Secretary shall prescribe regula10 tions providing for such modifications to the 

11 provisions of this subpart as may be necessary 

12 or appropriate by reason of subparagraph (A). 

13 ‘‘(6) RELATED PERSON.—For purposes of this 

14 subsection— 

15 ‘‘(A) IN GENERAL.—Except as provided in 

16 subparagraph (B), the term ‘related person’ has 

17 the meaning given such term by section 954(b). 

18 ‘‘(B) TREATMENT OF CERTAIN LIABILITY

19 INSURANCE POLICIES.—In the case of any pol20 icy of insurance covering liability arising from 

21 services performed as a director, officer, or em22 ployee of a corporation or as a partner or em23 ployee of a partnership, the person performing 

24 such services and the entity for which such 


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1 services are performed shall be treated as re2 lated persons. 

3 ‘‘(7) REGULATIONS.—The Secretary shall pre4 scribe such regulations as may be necessary to carry 

5 out the purposes of this subsection, including— 

6 ‘‘(A) regulations preventing the avoidance 

7 of this subsection through cross insurance ar8 rangements or otherwise, and 

9 ‘‘(B) regulations which may provide that a 

10 person will not be treated as a United States 

11 shareholder under paragraph (1) with respect 

12 to any foreign corporation if neither such per13 son (nor any related person to such person) is 

14 (directly or indirectly) insured under any policy 

15 of insurance or reinsurance issued by such for16 eign corporation. 

17 ‘‘(b) ELECTION BY FOREIGN INSURANCE COMPANY

18 TO BE TREATED AS DOMESTIC CORPORATION.— 

19 ‘‘(1) IN GENERAL.—If— 

20 ‘‘(A) a foreign corporation is a controlled 

21 foreign corporation (as defined in section 

22 957(a) by substituting ‘25 percent or more’ for 

23 ‘more than 50 percent’ and by using the defini24 tion of United States shareholder under sub25 section (a)(1)(B)), 


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1 ‘‘(B) such foreign corporation would qual2 ify under part I or II of subchapter L for the 

3 taxable year if it were a domestic corporation, 

4 ‘‘(C) such foreign corporation meets such 

5 requirements as the Secretary shall prescribe to 

6 ensure that the taxes imposed by this chapter 

7 on such foreign corporation are paid, and 

8 ‘‘(D) such foreign corporation makes an 

9 election to have this paragraph apply and 

10 waives all benefits to such corporation granted 

11 by the United States under any treaty, 

12 for purposes of this title, such corporation shall be 

13 treated as a domestic corporation. 

14 ‘‘(2) PERIOD DURING WHICH ELECTION IS IN

15 EFFECT.— 

16 ‘‘(A) IN GENERAL.—Except as provided in 

17 subparagraph (B), an election under paragraph 

18 (1) shall apply to the taxable year for which 

19 made and all subsequent taxable years unless 

20 revoked with the consent of the Secretary. 

21 ‘‘(B) TERMINATION.—If a corporation 

22 which made an election under paragraph (1) for 

23 any taxable year fails to meet the requirements 

24 of subparagraphs (A), (B), and (C) of para25 graph (1) for any subsequent taxable year, such 


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1 election shall not apply to any taxable year be2 ginning after such subsequent taxable year. 

3 ‘‘(3) EFFECT OF ELECTION.— 

4 ‘‘(A) IN GENERAL.—For purposes of sec5 tion 367, any foreign corporation making an 

6 election under paragraph (1) shall be treated as 

7 transferring (as of the 1st day of the 1st tax8 able year to which such election applies) all of 

9 its assets to a domestic corporation in connec10 tion with an exchange to which section 354 ap11 plies. 

12 ‘‘(B) EXCEPTION FOR PRE-1988 EARNINGS

13 AND PROFITS.— 

14 ‘‘(i) IN GENERAL.—Earnings and 

15 profits of the foreign corporation accumu16 lated in taxable years beginning before 

17 January 1, 1988, shall not be included in 

18 the gross income of the persons holding 

19 stock in such corporation by reason of sub20 paragraph (A). 

21 ‘‘(ii) TREATMENT OF DISTRIBU22 TIONS.—For purposes of this title, any dis23 tribution made by a corporation to which 

24 an election under paragraph (1) applies 

25 out of earnings and profits accumulated in 


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1 taxable years beginning before January 1, 

2 1988, shall be treated as a distribution 

3 made by a foreign corporation. 

4 ‘‘(iii) CERTAIN RULES TO CONTINUE

5 TO APPLY TO PRE-1988 EARNINGS.—Sec6 tion 884 to the extent the foreign corpora7 tion reinvested 1987 earnings and profits 

8 in United States assets shall be applied 

9 without regard to paragraph (1), except 

10 that, in the case of a corporation to which 

11 an election under paragraph (1) applies, 

12 only earnings and profits accumulated in 

13 taxable years beginning before January 1, 

14 1988, shall be taken into account. 

15 ‘‘(4) EFFECT OF TERMINATION.—For purposes 

16 of section 367, if— 

17 ‘‘(A) an election is made by a corporation 

18 under paragraph (1) for any taxable year, and 

19 ‘‘(B) such election ceases to apply for any 

20 subsequent taxable year, 

21 such corporation shall be treated as a domestic cor22 poration transferring (as of the 1st day of such sub23 sequent taxable year) all of its property to a foreign 

24 corporation in connection with an exchange to which 

25 section 354 applies. 


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1 ‘‘(5) ADDITIONAL TAX ON CORPORATION MAK2 ING ELECTION.— 

3 ‘‘(A) IN GENERAL.—If a corporation 

4 makes an election under paragraph (1), the 

5 amount of tax imposed by this chapter for the 

6 1st taxable year to which such election applies 

7 shall be increased by the amount determined 

8 under subparagraph (B). 

9 ‘‘(B) AMOUNT OF TAX.—The amount of 

10 tax determined under this paragraph shall be 

11 equal to the lesser of— 

‘‘(i) 3 12 ⁄4 of 1 percent of the aggregate 

13 amount of capital and accumulated surplus 

14 of the corporation as of December 31, 

15 1987, or 

16 ‘‘(ii) $1,500,000.’’. 

17 (b) TREATMENT OF CERTAIN EXCLUDED SUBPART

18 F INCOME AS PREVIOUSLY TAXED INCOME.—Section 

19 959(g), as added by section 331, is amended to read as 

20 follows: 

21 ‘‘(g) SPECIAL RULES FOR NONTAXED PORTION OF

22 CERTAIN INCOME.—For purposes of this section— 

23 ‘‘(1) IN GENERAL.—A United States share24 holder’s pro rata share of the excludable portion of 

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1 come shall be treated as an amount which has been 

2 included in gross income under section 951(a). 

3 ‘‘(2) ORDERING RULE.—Notwithstanding sub4 section (c), for purposes of subsections (a) and (b), 

5 section 316(a) shall be applied by applying para6 graph (2) thereof and then paragraph (1) thereof— 

7 ‘‘(A) first to the deductible portion (as de8 fined in section 965(c)(3)) of the increase in 

9 subpart F income described in section 

10 965(a)(1) included in the gross income of 

11 United States shareholders under section 

12 951(a)(1) (after application of section 

13 965(a)(2)(A)), 

14 ‘‘(B) second to the excludable portion of 

15 the controlled foreign corporation’s subpart F 

16 income, and 

17 ‘‘(C) then to the amounts described in 

18 paragraphs (1), (2), or (3) of subsection (c) in 

19 accordance with the provisions of subsection (c). 

20 ‘‘(3) DEFINITIONS.—For purposes of this sub21 section— 

22 ‘‘(A) DEDUCTIBLE PORTION.—The term 

23 ‘deductible portion’ has the meaning given such 

24 term by section 965(c)(3). 


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1 ‘‘(B) EXCLUDABLE PORTION.—The term 

2 ‘excludable portion’ means, with respect to the 

3 subpart F income of a controlled foreign cor4 poration, so much of such controlled foreign 

5 corporation’s modified active income as is not 

6 taken into account in computing subpart F in7 come under section 952(a)(1).’’. 

8 (c) GAINS AND LOSSES FROM THE SALE OF CFC 

9 STOCK.— 

10 (1) GAINS.— 

11 (A) IN GENERAL.—Part I of subchapter P 

12 of chapter 1 is amended by adding at the end 

13 the following new section: 

14 ‘‘SEC. 1203. GAINS FROM SALES OR EXCHANGES OF STOCK 

15 IN CONTROLLED FOREIGN CORPORATIONS. 

16 ‘‘(a) IN GENERAL.—In the case of a United States 

17 shareholder (as defined in section 951), there shall be ex18 cluded from gross income an amount equal to the applica19 ble portion of the amount of any gain recognized from the 

20 sale or exchange of stock in a controlled foreign corpora21 tion. 

22 ‘‘(b) APPLICABLE PORTION.—For purposes of this 

23 section— 

24 ‘‘(1) IN GENERAL.—The term ‘applicable por25 tion’ means the amount which bears the same ratio 


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1 to the gain recognized from such sale or exchange 

2 as— 

3 ‘‘(A) the shareholder’s pro rata share (de4 termined under section 951(a)(2)) of the ex5 cludable portion of the aggregate subpart F in6 come of the controlled foreign corporation for 

7 the applicable period, bears to 

8 ‘‘(B) the sum of the amount determined 

9 under subparagraph (A) plus the shareholder’s 

10 pro rata share (determined under section 

11 951(a)(2)) of the aggregate subpart F income 

12 of the controlled foreign corporation for the ap13 plicable period. 

14 ‘‘(2) EXCLUDABLE PORTION.—For purposes of 

15 this section, the term ‘excludable portion’ has the 

16 meaning given such term by section 959(g)(3)(B). 

17 ‘‘(3) APPLICABLE PERIOD.—The term ‘applica18 ble period’ means, with respect to any stock, the 

19 shorter of the 3-taxable year period immediately pre20 ceding the taxable year of the sale or exchange or 

21 the shareholder’s holding period in the stock. In no 

22 event shall the applicable period include any portion 

23 of any taxable year beginning before the applicable 

24 date (as defined in section 300 of the Infrastructure 

25 2.0 Act).’’. 


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1 (B) CLERICAL AMENDMENT.—The table of 

2 sections for part I of subchapter P of chapter 

3 1 is amended by adding at the end the following 

4 new item: 

‘‘Sec. 1203. Gains from sales or exchanges of stock in controlled foreign corporations.’’. 

5 (2) LOSSES.— 

6 (A) IN GENERAL.—Part II of subchapter P 

7 of chapter 1 is amended by adding at the end 

8 the following new section: 

9 ‘‘SEC. 1213. LOSSES FROM SALES OR EXCHANGES OF STOCK 

10 IN CONTROLLED FOREIGN CORPORATIONS. 

11 ‘‘(a) IN GENERAL.—In the case of a United States 

12 shareholder (as defined in section 951), any loss from the 

13 sale or exchange of stock in a controlled foreign corpora14 tion shall be reduced (but not below zero) by an amount 

15 equal to the shareholder’s aggregate pro rata share (deter16 mined under section 951(a)(2)) of the excludable portion 

17 of the subpart F income of the controlled foreign corpora18 tion during the shareholder’s holding period in the stock. 

19 ‘‘(b) EXCLUDABLE PORTION.—For purposes of this 

20 section, the term ‘excludable portion’ has the meaning 

21 given such term by section 959(g)(3)(B).’’. 

22 (B) CLERICAL AMENDMENT.—The table of 

23 sections for part I of subchapter P of chapter 


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1 1 is amended by adding at the end the following 

2 new item: 

‘‘Sec. 1213. Losses from sales or exchanges of stock in controlled foreign corporations.’’. 

3 (d) REPEAL OF ORDINARY INCOME TREATMENT FOR

4 GAINS FROM THE SALE OF STOCK IN CERTAIN FOREIGN

5 CORPORATIONS.— 

6 (1) IN GENERAL.—Part IV of subchapter P of 

7 chapter 1 is amended by striking section 1248. 

8 (2) CONFORMING AMENDMENTS.— 

9 (A) Section (a) is amended by striking 

10 paragraph (11). 

11 (B) Section 338(h) is amended— 

12 (i) in paragraph (6)(B)(ii), by striking 

13 ‘‘or described in section 1248(e)’’, and 

14 (ii) in paragraph (16), by striking the 

15 second sentence. 

16 (C) Section 751 is amended— 

17 (i) in subsection (c), by striking 

18 ‘‘stock in certain foreign corporations (as 

19 described in section 1248),’’, and 

20 (ii) by striking subsection (e) and re21 designating subsection (f) as subsection 

22 (e). 

23 (D) Section 865(k) is amended to read as 

24 follows: 


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1 ‘‘(k) CROSS REFERENCE.—For sourcing of income 

2 from certain foreign currency transactions, see section 

3 988.’’. 

4 (E) Section 904(h)(7) is amended by strik5 ing ‘‘or as a dividend under section 1248’’. 

6 (F) Section 951(a)(2) is amended by strik7 ing the last sentence thereof. 

8 (G) Section 964 is amended by striking 

9 subsection (e). 

10 (H) Section 989(b) is amended by striking 

11 paragraph (2) and by redesignating paragraphs 

12 (3) and (4) as paragraphs (2) and (3), respec13 tively. 

14 (e) COORDINATION WITH AMOUNTS INCLUDED IN

15 GROSS INCOME OF UNITED STATES SHAREHOLDERS.— 

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

17 951(a) is amended by striking ‘‘such taxable year of 

18 the corporation ends—’’ and all that follows through 

19 the end period and inserting: ‘‘such taxable year of 

20 the corporation ends, the shareholder’s pro rata 

21 share (determined under paragraph (2)) of the cor22 poration’s subpart F income for such taxable year.’’. 

23 (2) CONFORMING AMENDMENTS.— 

24 (A) Section 951(a) is amended— 


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1 (i) by striking ‘‘paragraph (1)(A)(i)’’ 

2 in paragraph (2) and inserting ‘‘paragraph 

3 (1)’’, and 

4 (ii) by striking paragraph (3). 

5 (B) Subparagraph (A) of section 

6 512(b)(17) is amended by striking 

7 ‘‘951(a)(1)(A)’’ and inserting ‘‘951(a)(1)’’. 

8 (C) Section 851(b) is amended by striking 

9 ‘‘951(a)(1)(A)(i)’’ in the first sentence following 

10 paragraph (3) and inserting ‘‘951(a)(1)’’. 

11 (D) Section 959(a) is amended— 

12 (i) by striking ‘‘shall not, when’’ and 

13 all that follows through ‘‘such shareholder’’ 

14 and inserting ‘‘shall not, when actually dis15 tributed to such shareholder’’, and 

16 (ii) by striking ‘‘and the rules of sub17 section (f) shall apply for purposes of para18 graph (2) of this subsection’’. 

19 (E) Section 959(c) is amended by adding 

20 at the end the following: ‘‘References in this 

21 subsection and subsection (f) to section 

22 951(a)(1)(B) shall be treated as references to 

23 such provisions as in effect on the day before 

24 the enactment of the Infrastructure 2.0 Act.’’. 


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1 (F) Section 959(e) is amended by striking 

2 ‘‘951(a)(1)(A)’’ and inserting ‘‘951(a)(1)’’. 

3 (G) Section 989(b)(3) is amended by strik4 ing ‘‘951(a)(1)(A)’’ and inserting ‘‘951(a)(1)’’. 

5 (H) Section 1298(b) is amended by strik6 ing paragraph (8). 

7 (f) APPLICATION OF ANTI-LOSS IMPORTATION

8 RULES.—Section 362(e)(1)(B) is amended by adding at 

9 the end the following new sentence: ‘‘For purposes of 

10 clause (i), except as provided under regulations, a con11 trolled foreign corporation shall be considered to be sub12 ject to tax under this subtitle.’’. 

13 (g) OTHER CONFORMING AMENDMENTS.— 

14 (1) Sections 163(e)(3)(B)(i) and 

15 267(a)(3)(B)(i) are each amended by striking ‘‘and 

16 qualified deficits under section 952(c)(1)(B)’’ and 

17 inserting ‘‘and loss carryforwards under sections 

18 952(d) and 953(b)’’. 

19 (2) Section 304(b)(5)(B)(ii) is amended by 

20 striking ‘‘953(c)’’ and inserting ‘‘956(a)’’. 

21 (3) Section 355(g)(2)(B)(ii)(I) is amended by 

22 striking ‘‘section 954(h)(4)’’ and inserting ‘‘section 

23 954(c)(4)’’. 

24 (4) Section 512(b)(17) is amended by striking 

25 ‘‘953’’ and inserting ‘‘section 955’’. 


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1 (5) Section 864(d)(8) is amended by striking 

2 ‘‘or section 956(b)(3)’’. 

3 (6) Section 864(d)(5)(A) is amended— 

4 (A) by striking clause (iii) and redesig5 nating clause (iv) as clause (iii), and 

6 (B) by striking ‘‘954(c)(3)(A)’’ in clause 

7 (iii) (as redesignated by subparagraph (A)) and 

8 inserting ‘‘954(a)(3)(A)’’. 

9 (7) Section 864(d)(7)(B) is amended by strik10 ing ‘‘foreign base company income (as defined in 

11 section 954(a), determined without regard to section 

12 954(b)(3)(A))’’ and inserting ‘‘passive income (as 

13 defined in section 954(a))’’. 

14 (8) Section 881(c)(5)(A)(iii) is amended by 

15 striking ‘‘954(c)(3)(A)’’ and inserting 

16 ‘‘954(a)(3)(A)’’. 

17 (9) Section 884(d)(2)(D) is amended by strik18 ing ‘‘953(c)(3)(C)’’ and inserting ‘‘956(a)(3)(C)’’. 

19 (10) Section 898(b)(3) is amended— 

20 (A) by striking ‘‘953(c)(2)’’ and inserting 

21 ‘‘956(a)(2)’’, and 

22 (B) by striking ‘‘953(c)(1)’’ and inserting 

23 ‘‘956(a)(1)’’. 

24 (11) Section 936(h)(5) is amended— 


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1 (A) by inserting ‘‘(as in effect on the day 

2 before the enactment of the Infrastructure 2.0 

3 Act)’’ after ‘‘section 954’’ in the last sentence 

4 of subparagraph (B)(ii), and 

5 (B) in subparagraph (F)(iv)(II)— 

6 (i) by inserting ‘‘(as in effect on the 

7 day before the enactment of the Infrastruc8 ture 2.0 Act)’’ after ‘‘section 954’’, and 

9 (ii) by inserting ‘‘(as so in effect)’’ 

10 after ‘‘section 954(a)’’. 

11 (12) Section 957(b) is amended— 

12 (A) by striking ‘‘income described in sec13 tion 953(a)’’ and inserting ‘‘income described in 

14 section 955(a)’’, and 

15 (B) by striking ‘‘contracts described in sec16 tion 953(a)(1)’’ and inserting ‘‘contracts de17 scribed in section 955(a)(1)’’. 

18 (13) Section 958(b) is amended— 

19 (A) by striking ‘‘956(c)(2),’’ before ‘‘and 

20 957’’, 

21 (B) by striking ‘‘to treat the stock of a do22 mestic corporation as owned by a United States 

23 shareholder of the controlled foreign corpora24 tion for purposes of section 956(c)(2),’’, and 

25 (C) by striking the last sentence. 


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1 (14) Section 964(b) is amended by striking 

2 ‘‘sections 952, 955, and 956’’ and inserting ‘‘section 

3 952’’. 

4 (15) Section 964(e)(2) is amended by striking 

5 ‘‘954(c)(3)(A)’’ and inserting ‘‘954(a)(3)(A)’’. 

6 (16)(A) Part III of subchapter N of chapter 1 

7 is amended by striking subpart G. 

8 (B) Section 865(e)(2)(A) is amended by strik9 ing the last sentence. 

10 (C) The table of subparts for part III of sub11 chapter N of chapter 1 is amended by striking the 

12 item relating to subpart G. 

13 (17) Section 999(c) is amended— 

14 (A) by striking ‘‘, 952(a)(3)’’ in paragraph 

15 (1), and 

16 (B) by striking ‘‘, the addition to subpart 

17 F income under section 952(a)(3),’’ in para18 graph (2). 

19 (18) Section 1296(f)(2) is amended— 

20 (A) by striking ‘‘foreign personal holding 

21 company income described in section 

22 954(c)(1)(A)’’ in subparagraph (A) and insert23 ing ‘‘passive income (as defined in section 

24 954(a))’’, and 


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1 (B) by striking ‘‘foreign personal holding 

2 company income so described’’ and inserting 

3 ‘‘such passive income’’. 

4 (19) Section 1297(b) is amended to read as fol5 lows: 

6 ‘‘(b) PASSIVE INCOME.— 

7 ‘‘(1) IN GENERAL.—Except as provided in para8 graph (2), the term ‘passive income’ means any in9 come received or accrued by any foreign corporation 

10 which is of a kind which would be passive income as 

11 defined in section 954 if the foreign corporation 

12 were a controlled foreign corporation. 

13 ‘‘(2) EXCEPTION.—Except as provided in regu14 lations, the term ‘passive income’ does not include 

15 any income which is interest, a dividend, or a rent 

16 or royalty, which is received or accrued from a re17 lated person (within the meaning of section 954(b)) 

18 to the extent that such amount is properly allocable 

19 (under regulations prescribed by the Secretary) to 

20 income of such related person which is not passive 

21 income.’’. 

22 (20) Section 2057(e)(2)(D)(ii) is amended by 

23 striking ‘‘section 954(c)(1)’’ and inserting ‘‘section 

24 954(a)(1)’’. 


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1 (21) The following sections are amended by 

2 striking ‘‘954(d)(3)’’ each place it appears and in3 serting ‘‘954(b)’’: 

4 (A) Section 861(c)(2)(B). 

5 (B) Section 958(b). 

6 (C) Section 988(a)(3)(C). 

7 (D) Subsections (d)(3)(A) and (e)(2)(B)(i) 

8 of section 1298. 

9 (E) Section 1471(e)(2). 

10 (F) Section 3121(z)(2). 

11 (22) The table of sections for subpart F of part 

12 III of subchapter 1 is amended by striking the items 

13 relating to sections 952 through 956 and inserting 

14 the following: 

‘‘Sec. 952. Subpart F income defined. 

‘‘Sec. 953. Active foreign market income. 

‘‘Sec. 954. Definition of passive income. 

‘‘Sec. 955. Definition of insurance income. 

‘‘Sec. 956. Special rule for certain captive insurance companies.’’. 

15 (h) EFFECTIVE DATES.— 

16 (1) IN GENERAL.—Except as provided in para17 graph (2), the amendments made by this section 

18 shall apply to taxable years of foreign corporations 

19 beginning on or after the applicable date, and to tax20 able years of United States shareholders with or 

21 within which such taxable years of foreign corpora22 tions end. 


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1 (2) GAINS AND LOSSES FROM THE SALE OF CFC

2 STOCK; REPEAL OF SECTION 1248.—The amend3 ments made by subsections (c) and (d) shall apply 

4 to sales or exchanges on or after the applicable date. 

5 SEC. 302. DEEMED REPATRIATION UPON TRANSITION TO 

6 FALLBACK INTERNATIONAL TAX REFORM. 

7 (a) IN GENERAL.—Subpart F of part III of sub8 chapter N of chapter 1 of the Internal Revenue Code of 

9 1986 is amended by adding at the end the following new 

10 section: 

11 ‘‘SEC. 966. DEEMED REPATRIATION UPON TRANSITION TO 

12 FALLBACK INTERNATIONAL TAX REFORM. 

13 ‘‘(a) TREATMENT OF DEFERRED FOREIGN INCOME

14 AS SUBPART F INCOME.—In the case of the last taxable 

15 year of a deferred foreign income corporation which begins 

16 before the applicable date (as defined in section 300 of 

17 the Infrastructure 2.0 Act), the subpart F income of such 

18 foreign corporation (as otherwise determined for such tax19 able year under section 952) shall be increased by the in20 clusion percentage (as defined in section 952(d) as in ef21 fect for taxable years beginning on or after the applicable 

22 date (as so defined))) of the accumulated post-1986 de23 ferred foreign income of such corporation determined as 

24 of the close of such last taxable year. 


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1 ‘‘(b) APPLICATION OF CERTAIN RULES.—Rules simi2 lar to the rules of subsections (b), (f), (g), (i), and (j) 

3 of section 965 shall apply for purposes of this section. 

4 ‘‘(c) DEFINITIONS.—Terms used in this section 

5 which are also used in section 965 shall have the same 

6 meanings when used in this section as when such terms 

7 are used in section 965.’’. 

8 (b) CLERICAL AMENDMENT.—The table of sections 

9 for subpart F of part III of subchapter N of chapter 1 

10 of such Code is amended by adding at the end the fol11 lowing: 

‘‘Sec. 966. Deemed repatriation upon transition to fallback international tax reform.’’. 

12 PART II—FOREIGN TAX CREDIT LIMITATIONS 

13 SEC. 311. REFORM OF FOREIGN TAX CREDIT LIMITATION. 

14 (a) IN GENERAL.—Subsection (d) of section 904 is 

15 amended to read as follows: 

16 ‘‘(d) SEPARATE APPLICATION OF SECTION WITH RE17 SPECT TO CERTAIN CATEGORIES OF INCOME.— 

18 ‘‘(1) IN GENERAL.—The provisions of sub19 sections (a), (b), and (c) and section 907 and 960 

20 shall be applied separately with respect to— 

21 ‘‘(A) amounts included under section 

22 951(a) which are attributable to active foreign 

23 market income (as defined in section 953), 

24 ‘‘(B) passive category income, and 


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1 ‘‘(C) income other than income described 

2 in either of the preceding subparagraphs. 

3 ‘‘(2) DEFINITIONS AND SPECIAL RULES.— 

4 ‘‘(A) PASSIVE CATEGORY INCOME.— 

5 ‘‘(i) IN GENERAL.—The term ‘passive 

6 category income’ means— 

7 ‘‘(I) United States taxpayer pas8 sive income described in subparagraph 

9 (B), and 

10 ‘‘(II) income which is included in 

11 gross income of the taxpayer under 

12 section 951(a)(1) to the extent such 

13 income is attributable to passive in14 come (as defined in section 954(a)). 

15 ‘‘(ii) EXCEPTION FOR HIGH-TAXED

16 INCOME.—Passive category income shall 

17 not include any high-taxed income. 

18 ‘‘(iii) CLARIFICATION OF APPLICATION

19 OF SECTION 864(d)(6).—In determining 

20 whether any income is passive category in21 come, the rules of section 864(d)(6) shall 

22 apply only in the case of income of a con23 trolled foreign corporation. 

24 ‘‘(B) UNITED STATES TAXPAYER PASSIVE

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1 come described in this subparagraph is income 

2 received or accrued by the taxpayer which is of 

3 a kind that would be passive income as defined 

4 under section 954(a) if such taxpayer were a 

5 controlled foreign corporation. 

6 ‘‘(C) TREATMENT OF FINANCIAL SERVICES

7 INCOME AND COMPANIES.— 

8 ‘‘(i) IN GENERAL.—Financial services 

9 income which is not active foreign market 

10 category income shall be treated as income 

11 described in paragraph (1)(C) in the case 

12 of— 

13 ‘‘(I) a member of a financial 

14 services group, and 

15 ‘‘(II) any other person if such 

16 person is predominantly engaged in 

17 the active conduct of a banking, insur18 ance, financing, or similar business. 

19 ‘‘(ii) FINANCIAL SERVICES GROUP.— 

20 The term ‘financial services group’ means 

21 any affiliated group (as defined in section 

22 1504(a) without regard to paragraphs (2) 

23 and (3) of section 1504(b)) which is pre24 dominantly engaged in the active conduct 

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1 lar business. In determining whether such 

2 a group is so engaged, there shall be taken 

3 into account only the income of members 

4 of the group that are— 

5 ‘‘(I) United States corporations, 

6 or 

7 ‘‘(II) controlled foreign corpora8 tions in which such United States cor9 porations own, directly or indirectly, 

10 at least 80 percent of the total voting 

11 power and value of the stock. 

12 ‘‘(iii) PASS-THRU ENTITIES.—The 

13 Secretary shall by regulation specify for 

14 purposes of this subparagraph the treat15 ment of financial services income received 

16 or accrued by partnerships and by other 

17 pass-thru entities which are not members 

18 of a financial services group. 

19 ‘‘(D) FINANCIAL SERVICES INCOME.— 

20 ‘‘(i) IN GENERAL.—Except as other21 wise provided in this subparagraph, the 

22 term ‘financial services income’ means any 

23 income which is received or accrued by any 

24 person predominantly engaged in the active 


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1 conduct of a banking, insurance, financing, 

2 or similar business, and which is— 

3 ‘‘(I) described in clause (ii), or 

4 ‘‘(II) United States taxpayer pas5 sive income (determined without re6 gard to subparagraph (A)(ii)). 

7 ‘‘(ii) GENERAL DESCRIPTION OF FI8 NANCIAL SERVICES INCOME.—Income is 

9 described in this clause if such income is— 

10 ‘‘(I) derived in the active conduct 

11 of a banking, financing, or similar 

12 business, 

13 ‘‘(II) derived from the investment 

14 by an insurance company of its un15 earned premiums or reserves ordinary 

16 and necessary for the proper conduct 

17 of its insurance business, or 

18 ‘‘(III) of a kind which would be 

19 insurance income as defined in section 

20 955(a). 

21 ‘‘(E) HIGH-TAXED INCOME.—The term 

22 ‘high-taxed income’ means any income which 

23 (but for this subparagraph) would be passive 

24 category income if the sum of— 


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1 ‘‘(i) the foreign income taxes paid or 

2 accrued by the taxpayer with respect to 

3 such income, and 

4 ‘‘(ii) the foreign income taxes deemed 

5 paid by the taxpayer with respect to such 

6 income under section 960, 

7 exceeds the highest rate of tax specified in sec8 tion 1 or 11 (whichever applies) multiplied by 

9 the amount of such income (determined with re10 gard to section 78). For purposes of the pre11 ceding sentence, the term ‘foreign income taxes’ 

12 means any income, war profits, or excess profits 

13 tax imposed by any foreign country or posses14 sion of the United States. 

15 ‘‘(F) TREATMENT OF INCOME TAX BASE

16 DIFFERENCES.— 

17 ‘‘(i) IN GENERAL.—In the case of tax18 able years beginning after December 31, 

19 2006, tax imposed under the law of a for20 eign country or possession of the United 

21 States on an amount which does not con22 stitute income under United States tax 

23 principles shall be treated as imposed on 

24 income described in paragraph (1)(C). 


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1 ‘‘(ii) SPECIAL RULES FOR YEARS

2 AFTER 2006 AND BEFORE THE APPLICABLE

3 DATE.—In the case of taxable years begin4 ning after December 31, 2006, and on or 

5 before the applicable date (as defined in 

6 section 300 of the Infrastructure 2.0 Act), 

7 tax imposed under the law of a foreign 

8 country or possession of the United States 

9 on an amount which does not constitute in10 come under United States tax principles 

11 shall be treated as imposed on income de12 scribed in paragraph (1)(B) (as in effect 

13 for taxable years beginning the day before 

14 such applicable date). 

15 ‘‘(iii) SPECIAL RULE FOR YEARS BE16 FORE 2007.— 

17 ‘‘(I) IN GENERAL.—In the case 

18 of taxes paid or accrued in taxable 

19 years beginning after December 31, 

20 2004, and before January 1, 2007, a 

21 taxpayer may elect to treat tax im22 posed under the law of a foreign coun23 try or possession of the United States 

24 on an amount which does not con25 stitute income under United States 


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1 tax principles as tax imposed on in2 come described in subparagraph (C) 

3 or (I) of paragraph (1) (as in effect 

4 for taxable years beginning in 2006). 

5 ‘‘(II) REVOCATION.—Any such 

6 election shall apply to the taxable year 

7 for which made and all subsequent 

8 taxable years described in subclause 

9 (I) unless revoked with the consent of 

10 the Secretary. 

11 ‘‘(G) TRANSITION RULES FOR CERTAIN

12 CARRYFORWARDS AND CARRYBACKS.—For pur13 poses of paragraph (1)— 

14 ‘‘(i) in the case of any taxes carried 

15 from any taxable year beginning before the 

16 applicable date (as defined in section 300 

17 of the Infrastructure 2.0 Act), to any tax18 able year beginning on or after such 

19 date— 

20 ‘‘(I) if such taxes were treated as 

21 attributable to income described in 

22 paragraph (1)(A) (as in effect for tax23 able years beginning the day before 

24 such applicable date), such taxes shall 


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1 be treated as attributable to income 

2 described in paragraph (1)(B), and 

3 ‘‘(II) if such taxes were treated 

4 as attributable to income described in 

5 paragraph (1)(B) (as in effect for tax6 able years beginning the day before 

7 such applicable date), such taxes shall 

8 be treated as attributable to income 

9 described in paragraph (1)(C), and 

10 ‘‘(ii) the Secretary may by regulations 

11 provide for the allocation of any carryback 

12 of taxes with respect to income from a tax13 able year beginning on or after such appli14 cable date, to a taxable year beginning be15 fore such date for purposes of allocating 

16 such income among the separate categories 

17 in effect for the taxable year to which car18 ried. 

19 ‘‘(3) CONTROLLED FOREIGN CORPORATION; 

20 UNITED STATES SHAREHOLDER.—For purposes of 

21 this subsection— 

22 ‘‘(A) CONTROLLED FOREIGN CORPORA23 TION.—The term ‘controlled foreign corpora24 tion’ has the meaning given such term by sec25 tion 957 (taking into account section 956(a)). 


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1 ‘‘(B) UNITED STATES SHAREHOLDER.— 

2 The term ‘United States shareholder’ has the 

3 meaning given such term by section 951(b) 

4 (taking into account section 956(a)). 

5 ‘‘(4) SEPARATE APPLICATION TO ITEMS

6 RESOURCED UNDER TREATIES.— 

7 ‘‘(A) IN GENERAL.—If— 

8 ‘‘(i) without regard to any treaty obli9 gation of the United States, any item of 

10 income would be treated as derived from 

11 sources within the United States, 

12 ‘‘(ii) under a treaty obligation of the 

13 United States, such item would be treated 

14 as arising from sources outside the United 

15 States, and 

16 ‘‘(iii) the taxpayer chooses the bene17 fits of such treaty obligation, 

18 subsections (a), (b), and (c) of this section and 

19 sections 907 and 960 shall be applied sepa20 rately with respect to each such item. 

21 ‘‘(B) COORDINATION WITH OTHER PROVI22 SIONS.—This paragraph shall not apply to any 

23 item of income to which subsection (h)(10) or 

24 section 865(h) applies. 


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1 ‘‘(C) REGULATIONS.—The Secretary may 

2 issue such regulations as may be necessary or 

3 appropriate to carry out the purposes of this 

4 paragraph, including regulations which provide 

5 that related items of income may be aggregated 

6 for purposes of this paragraph. 

7 ‘‘(5) REGULATIONS.—The Secretary shall pre8 scribe such regulations as may be necessary or ap9 propriate for the purposes of this subsection, includ10 ing preventing the manipulation of the character of 

11 income the effect of which is to avoid the purposes 

12 of this subsection.’’. 

13 (b) APPLICATION OF PER COUNTRY LIMITATION.— 

14 Section 904 is amended by inserting after subsection (d) 

15 the following new subsection: 

16 ‘‘(e) LIMITATIONS APPLIED ON A PER COUNTRY

17 BASIS.—The provisions of subsections (a), (b), (c), and 

18 (d) and sections 907 and 960 shall be applied separately 

19 with respect to each foreign country or possession with 

20 respect to which taxes described in section 901(b) are paid 

21 or accrued.’’. 

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

23 this section shall apply to taxable years beginning on or 

24 after the applicable date. 


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1 SEC. 312. DENIAL OF CREDIT AND DEDUCTION FOR FOR2 EIGN TAXES WITH RESPECT TO EXCLUDED 

3 SUBPART F INCOME. 

4 (a) IN GENERAL.—Section 901 is amended by redes5 ignating subsection (n) as subsection (o) and by inserting 

6 after subsection (m) the following: 

7 ‘‘(n) DENIAL OF FOREIGN TAX CREDIT AND DEDUC8 TION WITH RESPECT TO EXCLUDED SUBPART F IN9 COME.— 

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

11 960(b), no credit shall be allowed under subsection 

12 (a) for any income, war profits, or excess profits 

13 taxes paid or accrued (or deemed paid or accrued 

14 under section 960) with respect to the excludable 

15 portion of subpart F income or any distribution re16 ceived by a United States shareholder (as defined in 

17 section 951(b)) which is properly attributable to 

18 such excludable portion. No deduction shall be al19 lowed to a taxpayer under this chapter for any tax 

20 for which a credit is not allowable by reason of the 

21 preceding sentence. 

22 ‘‘(2) EXCLUDABLE PORTION.—The term ‘ex23 cludable portion’ has the meaning given such term 

24 by section 959(g)(3)(B). 

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1 able as a credit under this section by reason of this 

2 subsection.’’. 

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

4 this section shall apply to taxable years of foreign corpora5 tions beginning on or after the applicable date, and to tax6 able years of United States shareholders with or within 

7 which such taxable years of foreign corporations end. 

8 PART III—EXPENSE DISALLOWANCE 

9 SEC. 321. DISALLOWANCE OF DEDUCTION FOR EXPENSES 

10 ALLOCABLE TO EXEMPT INCOME OF A CON11 TROLLED FOREIGN CORPORATION. 

12 (a) IN GENERAL.—Part IX of subchapter B of chap13 ter 1 is amended by adding at the end the following: 

14 ‘‘SEC. 265A. EXPENSES ALLOCABLE TO EXEMPT INCOME OF 

15 A CONTROLLED FOREIGN CORPORATION. 

16 ‘‘(a) IN GENERAL.—In the case of a United States 

17 shareholder of a controlled foreign corporation for any tax18 able year, no deduction shall be allowed under this chapter 

19 for— 

20 ‘‘(1) the disallowed portion of any allocable 

21 CFC interest, or 

22 ‘‘(2) expenses directly allocable to the exclud23 able portion of subpart F income (as defined in sec24 tion 959(g)(3)(B)). 


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1 ‘‘(b) DISALLOWED PORTION.—For purposes of this 

2 section— 

3 ‘‘(1) IN GENERAL.—The term ‘disallowed por4 tion’ means, with respect to any allocable CFC inter5 est in connection with a controlled foreign corpora6 tion, the exclusion percentage of the amount which 

7 bears the same ratio to the amount of such interest 

8 as— 

9 ‘‘(A) the corporation’s modified active in10 come (as defined in section 952) for the appli11 cable taxable year, bears to 

12 ‘‘(B) the corporation’s current earnings 

13 and profits. 

14 ‘‘(2) CURRENT EARNINGS AND PROFITS.—For 

15 purposes of this subsection— 

16 ‘‘(A) IN GENERAL.—The term ‘current 

17 earnings and profits’ means the earnings and 

18 profits of the controlled foreign corporation for 

19 the applicable taxable year, without diminution 

20 by reason of distributions made during the tax21 able year. 

22 ‘‘(B) SPECIAL RULE FOR DETERMINING

23 EARNINGS AND PROFITS.—Earnings and profits 

24 of any controlled foreign corporation shall be 

25 determined without regard to paragraphs (4), 


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1 (5), and (6) of section 312(n). Under regula2 tions, the preceding sentence shall not apply to 

3 the extent it would increase earnings and prof4 its by an amount which was previously distrib5 uted by the controlled foreign corporation. 

6 ‘‘(3) EXCLUSION PERCENTAGE.—The term ‘ex7 clusion percentage’ means, with respect to any con8 trolled foreign corporation for any taxable year, the 

9 number of percentage points by which 100 percent 

10 exceeds the inclusion percentage determined under 

11 section 952(d) with respect to such controlled for12 eign corporation for such taxable year. 

13 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur14 poses of this section— 

15 ‘‘(1) ALLOCABLE CFC INTEREST.—The term 

16 ‘allocable CFC interest’ means any interest expense 

17 paid or accrued during the taxable year by a United 

18 States shareholder of a controlled foreign corpora19 tion which under section 861, and subsection (e) or 

20 (f) of section 864 (whichever is applicable), is appor21 tioned to income of the controlled foreign corpora22 tion. 

23 ‘‘(2) APPLICABLE TAXABLE YEAR.—The term 

24 ‘applicable taxable year’ means, with respect to any 

25 controlled foreign corporation, the taxable year of 


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1 such corporation which ends with or within the tax2 able year of the United States shareholder described 

3 in subsection (a). 

4 ‘‘(3) UNITED STATES SHAREHOLDER; CON5 TROLLED FOREIGN CORPORATION.—The term 

6 ‘United States shareholder’ has the meaning given 

7 such term by section 951(b) and the term ‘controlled 

8 foreign corporation’ shall have the meaning given 

9 such term by section 957(a). 

10 ‘‘(4) SPECIAL RULE FOR MEMBERS OF AN AF11 FILIATED GROUP.—If a United States shareholder 

12 to which subsection (a) applies is a domestic cor13 poration which is a member of a group all members 

14 of which are treated as a single corporation under 

15 subsection (e) or (f) of section 864, whichever is ap16 plicable, all domestic corporations which are mem17 bers of such group shall be treated as a single cor18 poration for purposes of this section. 

19 ‘‘(5) SPECIAL RULES.— 

20 ‘‘(A) COORDINATION WITH OTHER PROVI21 SIONS.—Except as provided in regulations, this 

22 section shall be applied before any other provi23 sion of this chapter limiting the deductibility of 

24 any allocable CFC interest. 


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1 ‘‘(B) SEPARATE APPLICATION TO INCOME

2 IN SEPARATE BASKETS.—This section shall be 

3 applied separately with respect to the categories 

4 of income under section 904(d)(1). 

5 ‘‘(d) REGULATIONS.—The Secretary shall prescribe 

6 such regulations as may be necessary to carry out the pur7 poses of this section, including regulations providing— 

8 ‘‘(1) for the sharing of information between 

9 shareholders if necessary to carry out the provisions 

10 of this section, 

11 ‘‘(2) for directly associating interest or other 

12 expenses disallowed under this section with income 

13 of a controlled foreign corporation and for coordi14 nating this section with other provisions of this 

15 chapter limiting the deductibility of interest or other 

16 expenses, and 

17 ‘‘(3) for the proper application of this section 

18 with respect to the taxpayer’s share of net operating 

19 losses of a controlled foreign corporation.’’. 

20 (b) CONFORMING AMENDMENT.—The table of sec21 tions for part IX of subchapter B of chapter 1 is amended 

22 by inserting after the item relating to section 265 the fol23 lowing: 

‘‘Sec. 265A. Expense allocable to exempt income of a controlled foreign corporation.’’. 


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

2 this section shall apply to taxable years of foreign corpora3 tions beginning on or after the applicable date, and to tax4 able years of United States shareholders with or within 

5 which such taxable years of foreign corporations end. 

6 PART IV—OTHER PROVISIONS RELATING TO 

7 SUBPART F 

8 Subpart A—Previously Deferred Foreign Income 

9 SEC. 331. TREATMENT OF PREVIOUSLY DEFERRED FOR10 EIGN INCOME. 

11 (a) IN GENERAL.—Subpart F of part III of sub12 chapter N of chapter 1 is amended by adding at the end 

13 the following new section: 

14 ‘‘SEC. 966. INCLUSION OF PREVIOUSLY DEFERRED FOR15 EIGN INCOME. 

16 ‘‘(a) INCLUSION AS SUBPART F INCOME.— 

17 ‘‘(1) IN GENERAL.—Subject to the provisions of 

18 paragraph (2), the subpart F income (determined 

19 under section 952 without regard to this section) of 

20 a controlled foreign corporation for its last taxable 

21 year beginning before the applicable date (as defined 

22 in section 300 of the Infrastructure 2.0 Act), shall 

23 be increased by the accumulated deferred foreign in24 come of the corporation. 


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1 ‘‘(2) INCLUSION ONLY TO APPLY TO DOMESTIC

2 CORPORATIONS.—In the case of any increase in sub3 part F income of a controlled foreign corporation by 

4 reason of paragraph (1)— 

5 ‘‘(A) notwithstanding section 951(a)(1), 

6 the inclusion in gross income under such section 

7 of a United States shareholder’s pro rata por8 tion (as determined under section 951(a)(2)) of 

9 such increased subpart F income shall only 

10 apply if the United States shareholder is a do11 mestic corporation, and 

12 ‘‘(B) there shall be allowed as a deduction 

13 for the taxable year of such United States 

14 shareholder in which such increased subpart F 

15 income is included in such shareholder’s gross 

16 income under section 951(a)(1) an amount 

17 equal to the applicable percentage of the 

18 amount of the income so included. 

19 ‘‘(b) ACCUMULATED DEFERRED FOREIGN IN20 COME.—For purposes of this section— 

21 ‘‘(1) IN GENERAL.—The term ‘accumulated de22 ferred foreign income’ means the excess of— 

23 ‘‘(A) the undistributed earnings of the con24 trolled foreign corporation, over 


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1 ‘‘(B) the undistributed U.S. earnings of 

2 such controlled foreign corporation. 

3 ‘‘(2) UNDISTRIBUTED EARNINGS.— 

4 ‘‘(A) IN GENERAL.—The term ‘undistrib5 uted earnings’ means the earnings and profits 

6 of the controlled foreign corporation described 

7 in section 959(c)(3), determined— 

8 ‘‘(i) as of the close of the taxable year 

9 described in subsection (a)(1), 

10 ‘‘(ii) without diminution by reason of 

11 distributions made during such taxable 

12 year, and 

13 ‘‘(iii) without regard to this section. 

14 ‘‘(B) SPECIAL RULE FOR CURRENT YEAR

15 DISTRIBUTIONS.—For purposes of this chapter, 

16 any determination with respect to the treatment 

17 of distributions described in subparagraph 

18 (A)(ii) shall be made after the application of 

19 this section to the earnings and profits de20 scribed in subparagraph (A). 

21 ‘‘(3) UNDISTRIBUTED U.S. EARNINGS.—The 

22 term ‘undistributed U.S. earnings’ has the meaning 

23 given the term ‘post-1986 undistributed U.S. earn24 ings’ in section 245(a)(5) (as in effect for taxable 

25 years beginning the day before the applicable date 


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1 (as defined in section 300 of the Infrastructure 2.0 

2 Act)), determined— 

3 ‘‘(A) without regard to ‘post-1986’ each 

4 place it appears in the matter before subpara5 graph (A), and 

6 ‘‘(B) without regard to the last sentence 

7 thereof. 

8 ‘‘(c) DISALLOWANCE OF FOREIGN TAX CREDIT, 

9 ETC.— 

10 ‘‘(1) IN GENERAL.—No credit shall be allowed 

11 under section 901 to a United States shareholder of 

12 a controlled foreign corporation for any taxes paid 

13 or accrued (or treated as paid or accrued) with re14 spect to the deductible portion of— 

15 ‘‘(A) the increased subpart F income of 

16 the corporation included in the gross income of 

17 the shareholder under subsection (a)(2)(A), or 

18 ‘‘(B) any distribution received by the 

19 shareholder which is properly attributable to 

20 such increased subpart F income. 

21 ‘‘(2) DENIAL OF DEDUCTION.—No deduction 

22 shall be allowed under this chapter to a United 

23 States shareholder of a controlled foreign corpora24 tion for any tax for which a credit is not allowable 

25 under section 901 by reason of paragraph (1). 


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1 ‘‘(3) DEDUCTIBLE PORTION.—For purposes of 

2 this subsection, the term ‘deductible portion’ means, 

3 with respect to the increased subpart F income of 

4 the corporation included in the gross income of the 

5 shareholder under subsection (a)(2)(A), the applica6 ble percentage of such income with respect to which 

7 a deduction is allowable under subsection (a)(2)(B). 

8 ‘‘(4) COORDINATION WITH SECTION 78.—Sec9 tion 78 shall not apply to the portion of any tax for 

10 which credit is not allowable under section 901 by 

11 reason of paragraph (1). 

12 ‘‘(d) APPLICABLE PERCENTAGE.—For purposes of 

13 this section, the term ‘applicable percentage’ means the 

14 percentage which is equal to the ratio of— 

15 ‘‘(1) the excess of— 

16 ‘‘(A) the highest rate of tax in effect under 

17 section 11(b) for the taxable year of the United 

18 States shareholder described in subsection 

19 (a)(2)(B), over 

20 ‘‘(B) 20 percent, to 

21 ‘‘(2) the highest rate of tax in effect under sec22 tion 11(b) for the taxable year of the United States 

23 shareholder described in subsection (a)(2)(B). 

24 The percentage determined under the preceding sentence 

25 shall be rounded to the nearest whole percentage point. 


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1 ‘‘(e) ELECTION TO PAY LIABILITY IN INSTALL2 MENTS.— 

3 ‘‘(1) IN GENERAL.—In the case of a United 

4 States shareholder with respect to one or more con5 trolled foreign corporations to which subsection (a) 

6 applies, such United States shareholder may elect to 

7 pay the net tax liability under this section in 2 or 

8 more (but not exceeding 8) equal installments. 

9 ‘‘(2) DATE FOR PAYMENT OF INSTALLMENTS.— 

10 If an election is made under paragraph (1), the due 

11 date for the first installment shall be the due date 

12 (determined without regard to any extension of time 

13 for filing the return) for the return of tax for the 

14 taxable year described in subsection (a)(2)(B) and 

15 the due date for each succeeding installment shall be 

16 the due date (as so determined) for the return of tax 

17 for the taxable year following the taxable year with 

18 respect to which the preceding installment was 

19 made. 

20 ‘‘(3) ACCELERATION OF PAYMENT.—If there 

21 is— 

22 ‘‘(A) an assessment of an addition to tax 

23 for failure to pay timely with respect to any in24 stallment required under this subsection, 


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1 ‘‘(B) a liquidation or sale of substantially 

2 all the assets of the taxpayer (including in a 

3 title 11 or similar case), 

4 ‘‘(C) a cessation of business by the tax5 payer, or 

6 ‘‘(D) any similar circumstance, 

7 then the unpaid portion of all remaining installments 

8 shall be due on the date of such event (or in the case 

9 of a title 11 or similar case, the day before the peti10 tion is filed). 

11 ‘‘(4) PRORATION OF DEFICIENCY TO INSTALL12 MENTS.—If an election is made under paragraph (1) 

13 to pay the net tax liability under this section in in14 stallments and a deficiency has been assessed, the 

15 deficiency shall be prorated to the installments pay16 able under paragraph (1). The part of the deficiency 

17 so prorated to any installment the date for payment 

18 of which has not arrived shall be collected at the 

19 same time as, and as a part of, such installment. 

20 The part of the deficiency so prorated to any install21 ment the date for payment of which has arrived 

22 shall be paid upon notice and demand from the Sec23 retary. This paragraph shall not apply if the defi24 ciency is due to negligence, to intentional disregard 


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1 of rules and regulations, or to fraud with intent to 

2 evade tax. 

3 ‘‘(5) RULES RELATING TO INTEREST.— 

4 ‘‘(A) IN GENERAL.—In the case of any net 

5 tax liability prorated to an installment under 

6 this subsection, the last date prescribed for pay7 ment of the tax for purposes of section 6601(a) 

8 shall be the last date for payment of the install9 ment rather than the last date for payment of 

10 tax for the taxable year in which the net tax li11 ability arose. 

12 ‘‘(B) SPECIAL RULES FOR DEFI13 CIENCIES.— 

14 ‘‘(i) INTEREST PAYABLE FOR ENTIRE

15 PERIOD.—Subparagraph (A) shall not 

16 apply to any deficiency prorated to an in17 stallment under paragraph (4). 

18 ‘‘(ii) PAYMENT OF INTEREST ATTRIB19 UTABLE TO PRIOR PERIODS.—In the case 

20 of a deficiency to which paragraph (4) ap21 plies, interest with respect to such defi22 ciency which is assigned under paragraph 

23 (4) to any installment the date for pay24 ment of which has arrived on or before the 

25 date of the assessment of the deficiency, 


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1 shall be paid upon notice and demand from 

2 the Secretary. 

3 ‘‘(6) PERIOD OF ASSESSMENT.—Notwith4 standing section 6501, the period for assessing the 

5 net tax liability under this section for which an elec6 tion is made under paragraph (1) shall not expire 

7 before the due date for the last installment. 

8 ‘‘(7) ELECTION.—Any election under paragraph 

9 (1) shall be made not later than the due date for the 

10 return of tax for the taxable year of the United 

11 States shareholder described in subsection (a)(2)(B) 

12 and shall be made in such manner as the Secretary 

13 may provide. 

14 ‘‘(8) NET TAX LIABILITY UNDER THIS SEC15 TION.—For purposes of this subsection— 

16 ‘‘(A) IN GENERAL.—The net tax liability 

17 under this section with respect to any United 

18 States shareholder is the excess (if any) of— 

19 ‘‘(i) such taxpayer’s net income tax 

20 for the taxable year, over 

21 ‘‘(ii) such taxpayer’s net income tax 

22 for such taxable year determined without 

23 regard to this section. 

24 ‘‘(B) NET INCOME TAX.—The term ‘net 

25 income tax’ means the net income tax (as deVerDate Sep 11 2014 22:09 Feb 06, 2015 Jkt 049200 PO 00000 Frm 00150 Fmt 6652 Sfmt 6201 E:\BILLS\H625.IH H625

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1 fined in section 38(c)(1)) reduced by the credit 

2 allowed under section 38. 

3 ‘‘(C) REGULATIONS.—The Secretary shall 

4 prescribe such regulations as may be necessary 

5 for the determination under this subsection of 

6 the net tax liability under this section in the 

7 case of any pass-thru entity. 

8 ‘‘(f) REGULATIONS.—The Secretary shall promulgate 

9 such regulations as necessary to carry out the purposes 

10 of this section, including regulations for the application 

11 of this section to pass-through entities all or part of which 

12 are owned by 1 or more domestic corporations.’’. 

13 (b) ORDERING RULE FOR PURPOSES OF TREATMENT

14 OF PREVIOUSLY TAXED INCOME.— 

15 (1) IN GENERAL.—Section 959 is amended by 

16 adding at the end the following new subsection: 

17 ‘‘(g) SPECIAL ORDERING RULE.—Notwithstanding 

18 subsection (c), for purposes of subsections (a) and (b), sec19 tion 316(a) shall be applied by applying paragraph (2) 

20 thereof and then paragraph (1) thereof— 

21 ‘‘(1) first to the deductible portion (as defined 

22 in section 965(c)(3)) of the increase in subpart F in23 come described in section 965(a)(1) included in the 

24 gross income of United States shareholders under 


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1 section 951(a)(1) (after application of section 

2 965(a)(2)(A)), and 

3 ‘‘(2) then to amounts described in paragraphs 

4 (1), (2), or (3) of subsection (c).’’. 

5 (2) CONFORMING AMENDMENT.—Section 

6 959(c) is amended by inserting ‘‘except as provided 

7 in subsection (g),’’ after ‘‘subsections (a) and (b),’’. 

8 (c) CONFORMING AMENDMENTS.— 

9 (1) Clause (vi) of section 56(g)(4)(C) is amend10 ed— 

11 (A) by inserting ‘‘or section 966(a)(2)’’ 

12 after ‘‘section 965’’, and 

13 (B) by inserting ‘‘AND INCLUSIONS’’ after 

14 ‘‘CERTAIN DISTRIBUTIONS’’ in the heading 

15 thereof. 

16 (2) Paragraph (3) of section 245(a) is amend17 ed— 

18 (A) by striking ‘‘post-1986’’ in subpara19 graph (A), and 

20 (B) by striking ‘‘total post-1986’’ in sub21 paragraph (B). 

22 (3) Paragraph (4) of section 245(a) is amended 

23 to read as follows: 

24 ‘‘(4) UNDISTRIBUTED EARNINGS.—The term 

25 ‘undistributed earnings’ means the amount of the 


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1 earnings and profits of the controlled foreign cor2 poration (computed in accordance with sections 

3 964(a) and 986)— 

4 ‘‘(A) as of the close of the taxable year of 

5 the controlled foreign corporation in which the 

6 dividend is distributed, and 

7 ‘‘(B) without diminution by reason of divi8 dends distributed during such taxable year.’’. 

9 (4) Paragraph (5) of section 245(a) is amend10 ed— 

11 (A) by striking ‘‘post-1986’’ both places it 

12 appears in the matter preceding subparagraph 

13 (A), and 

14 (B) by striking ‘‘POST-1986 UNDISTRIB15 UTED’’ in the heading thereof and inserting 

16 ‘‘UNDISTRIBUTED’’. 

17 (5) Paragraph (6) of section 245(a) is amend18 ed— 

19 (A) by striking ‘‘beginning after December 

20 31, 1986’’ and inserting ‘‘which is after the 

21 first taxable year of such corporation’’, and 

22 (B) by striking ‘‘post-1986’’ both places it 

23 appears. 

24 (6) Paragraph (2) of section 6601(b) is amend25 ed— 


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1 (A) by striking ‘‘section 6156(a)’’ in the 

2 matter preceding subparagraph (A) and insert3 ing ‘‘section 965(d)(1) or 6156(a)’’, and 

4 (B) by striking ‘‘section 6156(b)’’ in sub5 paragraph (A) and inserting ‘‘section 965(d)(2) 

6 or 6156(b), as the case may be’’. 

7 (7) The table of sections for subpart F of part 

8 III of subchapter N of chapter 1 is amended by 

9 striking the item relating to section 965 and insert10 ing the following: 

‘‘Sec. 965. Inclusion of previously deferred foreign income.’’. 

11 (d) EFFECTIVE DATE.— 

12 (1) IN GENERAL.—Except as provided in para13 graph (2), the amendments made by this section 

14 shall apply to the last taxable year of foreign cor15 porations beginning before the applicable date, and 

16 to taxable years of United States shareholders with 

17 or within which such taxable years of foreign cor18 porations end. 

19 (2) CONFORMING AMENDMENTS RELATED TO

20 SECTION 245.—The amendments made by para21 graphs (2), (3), (4), and (5) of subsection (c) shall 

22 apply to taxable years of foreign corporations begin23 ning on or after the applicable date, and to taxable 

24 years of United States shareholders with or within 


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1 which such taxable years of foreign corporations 

2 end. 

3 Subpart B—Other Provisions 

4 SEC. 336. ELIMINATION OF 30-DAY REQUIREMENT. 

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

6 striking ‘‘for an uninterrupted period of 30 days or more’’ 

7 and inserting ‘‘at any time’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall apply to taxable years of foreign corpora10 tions beginning on or after the applicable date, and to tax11 able years of United States shareholders with or within 

12 which such taxable years of foreign corporations end. 

13 SEC. 337. MODIFICATION OF DEFINITION OF UNITED 

14 STATES SHAREHOLDER. 

15 (a) IN GENERAL.—Section 951(b) is amended by in16 serting ‘‘, or 10 percent or more of the total value of 

17 shares of all classes of stock of such foreign corporation’’ 

18 after ‘‘such foreign corporation’’. 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 this section shall apply to taxable years of foreign corpora21 tions beginning on or after the applicable date, and to tax22 able years of United States shareholders with or within 

23 which such taxable years of foreign corporations end. 


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1 Subtitle B—Reform of Foreign Tax 

2 Credit Provisions 

3 SEC. 341. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX 

4 CREDITS; FOREIGN TAX CREDIT RELATED TO 

5 SUBPART F INCOME. 

6 (a) REPEAL OF SECTION 902 INDIRECT FOREIGN

7 TAX CREDITS.—Subpart A of part III of subchapter N 

8 of chapter 1 is amended by striking section 902. 

9 (b) FOREIGN TAX CREDIT RELATED TO SUBPART F 

10 INCOME.— 

11 (1) IN GENERAL.—Section 960 is amended by 

12 redesignating subsections (b) and (c) as subsections 

13 (c) and (d), respectively, and by striking subsection 

14 (a) and inserting the following: 

15 ‘‘(a) DETERMINATION OF CREDIT ON CURRENT

16 YEAR BASIS.—For purposes of this subpart, if there is 

17 included in the gross income of a domestic corporation any 

18 amount under section 951(a) with respect to any con19 trolled foreign corporation with respect to which such do20 mestic corporation is a United States shareholder, such 

21 domestic corporation shall be deemed to have paid so 

22 much of such foreign corporation’s foreign income taxes 

23 as are properly attributable to the amount so included. 

24 ‘‘(b) TREATMENT OF FOREIGN TAXES NOT PRE25 VIOUSLY DEEMED PAID.—For purposes of this subpart— 


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1 ‘‘(1) IN GENERAL.—If any portion of a dis2 tribution from a controlled foreign corporation re3 ceived by a domestic corporation is excluded from 

4 gross income under section 959(a), such domestic 

5 corporation shall be deemed to have paid so much of 

6 such foreign corporation’s foreign income taxes as 

7 are properly attributable to the amount so excluded 

8 to the extent such taxes were not deemed paid by 

9 the domestic corporation under this section for any 

10 prior taxable year. 

11 ‘‘(2) TAXES OF LOWER-TIER CFCS.—If a con12 trolled foreign corporation receives a distribution 

13 any portion of which is described in section 959(b) 

14 from another controlled foreign corporation, such 

15 foreign corporation shall be deemed to have paid so 

16 much of such other foreign corporation’s foreign in17 come taxes as are properly attributable to the 

18 amount so described to the extent such taxes were 

19 not deemed paid by a domestic corporation under 

20 this section for any prior taxable year.’’. 

21 (2) APPLICATION WITH RESPECT TO FOREIGN

22 TAX CREDIT LIMITATION.—Section 960(c), as redes23 ignated by paragraph (1), is amended by adding at 

24 the end the following new paragraph: 


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1 ‘‘(6) APPLICATION WITH RESPECT TO FOREIGN

2 TAX CREDIT LIMITATION.—This subsection shall be 

3 applied separately with respect to each category of 

4 income described in section 904(d)(1).’’. 

5 (3) CONFORMING AMENDMENTS.— 

6 (A) Section 960 is amended by striking 

7 subsection (d), as redesignated by paragraph 

8 (1), and inserting the following: 

9 ‘‘(d) FOREIGN INCOME TAXES.—For purposes of this 

10 section, the term ‘foreign income taxes’ means any income, 

11 war profits, or excess profits taxes paid or accrued by a 

12 foreign corporation to any foreign country or possession 

13 of the United States. 

14 ‘‘(e) REGULATIONS.—The Secretary shall provide 

15 such regulations as may be necessary or appropriate to 

16 carry out the provisions of this section, including rules for 

17 the application of this section to domestic partnerships 

18 with partners that are domestic corporations.’’. 

19 (B) Section 960 is amended by striking the 

20 heading and inserting ‘‘DEEMED PAID CRED21 IT FOR SUBPART F INCLUSIONS’’. 

22 (c) MODIFICATION TO SECTION 78 GROSS UP.—Sec23 tion 78 is amended to read as follows: 


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1 ‘‘SEC. 78. AMOUNTS RECEIVED FROM CERTAIN FOREIGN 

2 CORPORATIONS BY DOMESTIC CORPORA3 TIONS CHOOSING FOREIGN TAX CREDIT. 

4 ‘‘If a domestic corporation which is a United States 

5 shareholder chooses to have the benefits of subpart A of 

6 part III of subchapter N (relating to foreign tax credits) 

7 for any taxable year, an amount equal to the taxes deemed 

8 to be paid by such corporation under section 960 for such 

9 taxable year— 

10 ‘‘(1) shall be treated as an amount included in 

11 the gross income under section 951(a), and 

12 ‘‘(2) for purposes of section 904, shall be 

13 deemed to be attributable to the same category of 

14 income described in section 904(d)(1) as the income 

15 which gave rise to the taxes deemed paid by such 

16 corporation.’’. 

17 (d) CONFORMING AMENDMENTS.— 

18 (1) Subclause (III) of section 56(g)(4)(C)(iii) is 

19 amended by inserting ‘‘as in effect before its repeal’’ 

20 after ‘‘section 902’’. 

21 (2) Sections 535(b)(1) and 545(b)(1) are each 

22 amended by striking ‘‘section 902(a) or 960(a)(1)’’ 

23 and inserting ‘‘section 960’’. 

24 (3) Subparagraph (B) of section 814(f)(1) is 

25 repealed. 


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1 (4) Subsection (a) of section 901 is amended by 

2 striking ‘‘sections 902 and 960’’ and inserting ‘‘sec3 tion 960’’. 

4 (5) Paragraph (2) of section 901(e) is amended 

5 by striking ‘‘but is not limited to—’’ and all that fol6 lows through ‘‘that portion’’ and inserting ‘‘but is 

7 not limited to that portion’’. 

8 (6) Subsection (f) of section 901 is amended by 

9 striking ‘‘sections 902 and 960’’ and inserting ‘‘sec10 tion 960’’. 

11 (7) Subparagraph (A) of section 901(j)(1) is 

12 amended by striking ‘‘902 or’’. 

13 (8) Subparagraph (A) of section 904(h)(10) is 

14 amended by striking ‘‘sections 902, 907, and 960’’ 

15 and inserting ‘‘sections 907 and 960’’. 

16 (9) Subsection (k) of section 904 is amended to 

17 read as follows: 

18 ‘‘(k) CROSS REFERENCE.—For modification of limi19 tation under subsection (a) for purposes of determining 

20 the amount of credit which can be taken against the alter21 native minimum tax, see section 59(a).’’. 

22 (10) Paragraph (1) of section 905(c) is amend23 ed by striking the last sentence. 

24 (11) Subclause (I) of section 905(c)(2)(B) is 

25 amended by striking ‘‘902 or’’. 


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1 (12) Subsection (a) of section 906 is amended 

2 by striking ‘‘(or deemed, under section 902, paid or 

3 accrued during the taxable year)’’. 

4 (13) Subsection (b) of section 906 is amended 

5 by striking paragraphs (4) and (5). 

6 (14) Subparagraph (B) of section 907(b)(2) is 

7 amended by striking ‘‘902 or’’. 

8 (15) Paragraph (3) of section 907(c) is amend9 ed— 

10 (A) by striking subparagraph (A) and re11 designating subparagraphs (B) and (C) as sub12 paragraphs (A) and (B), respectively, and 

13 (B) by striking ‘‘section 960(a)’’ in sub14 paragraph (A) (as so redesignated) and insert15 ing ‘‘section 960’’. 

16 (16) Paragraph (5) of section 907(c) is amend17 ed by striking ‘‘902 or’’. 

18 (17) Clause (i) of section 907(f)(2)(B) is 

19 amended by striking ‘‘902 or’’. 

20 (18) Subsection (a) of section 908 is amended 

21 by striking ‘‘902 or’’. 

22 (19) Paragraph (1) of section 958(a) is amend23 ed by striking ‘‘960(a)(1)’’ and inserting ‘‘960’’. 

24 (20) Subparagraph (B) of section 6038(c)(1) is 

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1 eign tax credit for corporate stockholder in foreign 

2 corporation) and 960 (relating to special rules for 

3 foreign tax credit)’’ and inserting ‘‘section 960’’. 

4 (21) Paragraph (4) of section 6038(c) is 

5 amended by striking subparagraph (C). 

6 (22) The table of sections for subpart A of part 

7 III of subchapter N of chapter 1 is amended by 

8 striking the item relating to section 902. 

9 (23) The table of sections for part II of sub10 chapter B of chapter 1 is amended by striking 

11 ‘‘Dividends’’ in the item relating to section 78 and 

12 inserting ‘‘Amounts’’. 

13 (24) The table of sections for subpart F of part 

14 III of subchapter N of chapter 1 is amended by 

15 striking the item relating to section 960 and insert16 ing the following: 

‘‘Sec. 960. Deemed paid credit for subpart F inclusions.’’. 

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

18 this section shall apply to taxable years of foreign corpora19 tions beginning on or after the applicable date, and to tax20 able years of United States shareholders with or within 

21 which such taxable years of foreign corporations end. 


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1 SEC. 342. REPEAL OF RULE SUSPENDING FOREIGN TAXES 

2 AND CREDITS UNTIL RELATED INCOME IS 

3 TAKEN INTO ACCOUNT. 

4 (a) IN GENERAL.—Subpart A of part III of sub5 chapter N of chapter 1 is amended by striking section 909. 

6 (b) CONFORMING AMENDMENTS.— 

7 (1) Section 901(m)(1)(B) is amended by strik8 ing ‘‘a section 902 corporation (as defined in section 

9 909(d)(5))’’ and inserting ‘‘a controlled foreign cor10 poration (as defined in section 957(a))’’. 

11 (2) The table of sections of subpart A of part 

12 III of subchapter N of chapter 1 is amended by 

13 striking the item relating to section 909. 

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

15 this section shall apply to foreign taxes paid or accrued 

16 in taxable years beginning on or after the applicable date. 

Æ 


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