I 

114TH CONGRESS 

2D SESSION H. R. 5261 

To amend the Internal Revenue Code of 1986 to prevent the avoidance 

of the rules related to investment of earnings in United States property 

through corporate expatriation or the use of corporate structures in 

which the common parent is a foreign corporation. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 17, 2016 

Mr. LEVIN (for himself, Mr. VAN HOLLEN, Mr. RANGEL, Mr. MCDERMOTT, 

Mr. THOMPSON of California, Mr. PASCRELL, and Mr. DANNY K. DAVIS

of Illinois) introduced the following bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to prevent 

the avoidance of the rules related to investment of earnings in United States property through corporate expatriation or the use of corporate structures in which the 

common parent is a foreign corporation. 

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. 

4 This Act may be cited as the ‘‘Protecting the U.S. 

5 Corporate Tax Base Act of 2016’’. 


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1 SEC. 2. INCLUSION IN SUBPART F INCOME OF INVEST2 MENTS BY CONTROLLED FOREIGN CORPORA3 TIONS WITH RESPECT TO MEMBERS OF FOR4 EIGN GROUP WHICH INCLUDES UNITED 

5 STATES SHAREHOLDER. 

6 (a) IN GENERAL.—Section 956(a)(1)(A) of the Inter7 nal Revenue Code of 1986 is amended to read as follows: 

8 ‘‘(A) such shareholder’s pro rata share of 

9 the sum of— 

10 ‘‘(i) the average of the amounts of 

11 United States property held (directly or in12 directly) by the controlled foreign corpora13 tion as of the close of each quarter of such 

14 taxable year, and 

15 ‘‘(ii) in the case of a controlled foreign 

16 corporation which is a member of an ex17 panded affiliated group the common parent 

18 of which is not a domestic corporation, the 

19 average of the amounts of foreign group 

20 property held (directly or indirectly) by the 

21 controlled foreign corporation as of the 

22 close of each quarter of such taxable year, 

23 over’’. 

24 (b) FOREIGN GROUP PROPERTY.—Section 956 of 

25 such Code is amended by redesignating subsections (d) 


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1 and (e) as subsections (e) and (f), respectively, and by in2 serting after subsection (c) the following new subsection: 

3 ‘‘(d) FOREIGN GROUP PROPERTY; EXPANDED AF4 FILIATED GROUP.—For purposes of this section— 

5 ‘‘(1) FOREIGN GROUP PROPERTY.— 

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

7 group property’ means any stock or obligation 

8 of any foreign person which is not a controlled 

9 foreign corporation. 

10 ‘‘(B) EXCEPTIONS.—Such term shall not 

11 include— 

12 ‘‘(i) the stock or obligation of any en13 tity if less than 25 percent of the total 

14 combined voting power of such entity, im15 mediately after the acquisition of any stock 

16 in such entity by the controlled foreign cor17 poration, is owned (directly or indirectly) 

18 by the common parent referred to in sub19 section (a)(1)(A)(ii), and 

20 ‘‘(ii) property described in subpara21 graph (C), (I), (J), (K) or (L) of sub22 section (c)(2), applied— 

23 ‘‘(I) by substituting ‘foreign per24 son’ for ‘United States person’ in 

25 such subparagraphs (C), (J), and (L), 


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1 ‘‘(II) by substituting ‘foreign cor2 poration’ for ‘domestic corporation’ in 

3 subsection (c)(2)(L)(i), and 

4 ‘‘(III) by treating a foreign per5 son as a United States shareholder 

6 described in subsection (c)(2)(L)(ii)(I) 

7 if such foreign person would be so de8 scribed if such person were a United 

9 States person. 

10 ‘‘(C) LIMITATION ON TREATMENT AS A

11 CONTROLLED FOREIGN CORPORATION.—A for12 eign corporation shall not be treated as a con13 trolled foreign corporation for purposes of sub14 paragraph (A) unless more than 50 percent of 

15 the total combined voting power of all classes of 

16 stock of such corporation entitled to vote, and 

17 more than 50 percent of the total value of the 

18 stock of such corporation, is owned (directly or 

19 indirectly) by United States persons described 

20 in subparagraph (A) or (C) of section 

21 7701(a)(30). 

22 ‘‘(D) FOREIGN PERSON.—For purposes of 

23 this paragraph, the term ‘foreign person’ means 

24 any person who is not a United States person 

25 (as defined in section 7701(a)(30)). 


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1 ‘‘(2) EXPANDED AFFILIATED GROUP.—The 

2 term ‘expanded affiliated group’ means an affiliated 

3 group as defined in section 1504(a), determined— 

4 ‘‘(A) by substituting ‘more than 50 per5 cent’ for ‘at least 80 percent’ each place it ap6 pears, and 

7 ‘‘(B) without regard to paragraphs (2) and 

8 (3) of section 1504(b). 

9 A partnership or any other entity (other than a cor10 poration) shall be treated as a member of an ex11 panded affiliated group if such entity controls (as 

12 determined under section 954(d)(3)), or is controlled 

13 by (as so determined), members of such group (in14 cluding any entity treated as a member of such 

15 group by reason of this sentence). 

16 ‘‘(3) APPLICATION TO NON-CORPORATE ENTI17 TIES.—In the case of any entity which is not a cor18 poration— 

19 ‘‘(A) any reference in this subsection to 

20 stock shall be treated as a reference to any eq21 uity or profits interest in such entity, and 

22 ‘‘(B) except as otherwise provided by the 

23 Secretary, paragraph (1)(B)(i) shall be applied 

24 by substituting ‘25 percent (by value) of the 

25 beneficial interests in such entity’ for ‘25 perVerDate Sep 11 2014 21:07 May 18, 2016 Jkt 059200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5261.IH H5261

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1 cent of the total combined voting power of such 

2 entity’.’’. 

3 (c) APPLICATION OF RULES FOR PLEDGES AND

4 GUARANTEES.—Section 956(e) of such Code, as so redes5 ignated, is amended to read as follows: 

6 ‘‘(e) PLEDGES AND GUARANTEES.—For purposes of 

7 subsection (a), a controlled foreign corporation shall, 

8 under regulations prescribed by the Secretary, be consid9 ered as holding— 

10 ‘‘(1) an obligation of a United States person if 

11 such controlled foreign corporation is a pledgor or 

12 guarantor of such obligation, and 

13 ‘‘(2) an obligation of a foreign person if such 

14 controlled foreign corporation or, to the extent pro15 vided under such regulations, any United States 

16 shareholder of such controlled foreign corporation, is 

17 a pledgor or guarantor of such obligation.’’. 

18 (d) TERMINATION OF RULE WHICH PERMITS USE

19 OF RELATED-PARTY TRANSACTIONS TO AVOID TREAT20 MENT AS A CONTROLLED FOREIGN CORPORATION.—Sec21 tion 958(b)(4) of such Code is amended by inserting ‘‘if 

22 such stock was acquired by such person on or before May 

23 17, 2016’’ before the period at the end. 

24 (e) APPLICATION OF LIMITATION ON AMOUNT OF

25 FOREIGN TAXES DEEMED PAID WITH RESPECT TO SECVerDate Sep 11 2014 21:07 May 18, 2016 Jkt 059200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5261.IH H5261

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1 TION 956 INCLUSIONS.—Notwithstanding section 214(b) 

2 of Public Law 111–226, section 960(c) of the Internal 

3 Revenue Code of 1986 shall apply to acquisitions of for4 eign group property (as defined in 956(d) of such Code, 

5 as amended by this section) after December 31, 2010, in 

6 addition to acquisitions of United States property (as de7 fined in section 956(c) of such Code) after such date. 

8 (f) EFFECTIVE DATE.— 

9 (1) IN GENERAL.—Except as provided in para10 graph (2), the amendments made by this section 

11 shall apply to taxable years of controlled foreign cor12 porations ending after the date of the enactment of 

13 this Act and to taxable years of United States share14 holders in which or with which such taxable years of 

15 controlled foreign corporations end. 

16 (2) TERMINATION OF RULE WHICH PERMITS

17 USE OF RELATED-PARTY TRANSACTIONS TO AVOID

18 TREATMENT AS A CONTROLLED FOREIGN CORPORA19 TION.—The amendment made by subsection (d) 

20 shall apply to taxable years of controlled foreign cor21 porations ending on or after May 17, 2016, and to 

22 taxable years of United States shareholders in which 

23 or with which such taxable years of controlled for24 eign corporations end. 

Æ 


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