II 

112TH CONGRESS 

1ST SESSION S. 45 

To amend the Internal Revenue Code of 1986 to provide for the taxation 

of income of controlled foreign corporations attributable to imported property. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 25 (legislative day, JANUARY 5), 2011 

Mr. WHITEHOUSE (for himself, Mr. LEAHY, Mr. SANDERS, Mrs. BOXER, Mr. 

DURBIN, Mr. BROWN of Ohio, and Mr. HARKIN) introduced the following 

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

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

for the taxation of income of controlled foreign corporations attributable to imported property. 

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 ‘‘Offshoring Prevention 

5 Act’’. 


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1 SEC. 2. TAXATION OF INCOME OF CONTROLLED FOREIGN 

2 CORPORATIONS ATTRIBUTABLE TO IM3 PORTED PROPERTY. 

4 (a) GENERAL RULE.—Subsection (a) of section 954 

5 of the Internal Revenue Code of 1986 is amended by strik6 ing the period at the end of paragraph (5) and inserting 

7 ‘‘, and’’, by redesignating paragraph (5) as paragraph (4), 

8 and by adding at the end the following new paragraph: 

9 ‘‘(5) imported property income for the taxable 

10 year (determined under subsection (j) and reduced 

11 as provided in subsection (b)(5)).’’. 

12 (b) DEFINITION OF IMPORTED PROPERTY IN13 COME.—Section 954 of the Internal Revenue Code of 1986 

14 is amended by adding at the end the following new sub15 section: 

16 ‘‘(j) IMPORTED PROPERTY INCOME.— 

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

18 (a)(5), the term ‘imported property income’ means 

19 income (whether in the form of profits, commissions, 

20 fees, or otherwise) derived in connection with— 

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

22 or extracting imported property; 

23 ‘‘(B) the sale, exchange, or other disposi24 tion of imported property; or 

25 ‘‘(C) the lease, rental, or licensing of im26 ported property. 


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1 Such term shall not include any foreign oil and gas 

2 extraction income (within the meaning of section 

3 907(c)) or any foreign oil related income (within the 

4 meaning of section 907(c)). 

5 ‘‘(2) IMPORTED PROPERTY.—For purposes of 

6 this subsection— 

7 ‘‘(A) IN GENERAL.—Except as otherwise 

8 provided in this paragraph, the term ‘imported 

9 property’ means property which is imported 

10 into the United States by the controlled foreign 

11 corporation or a related person. 

12 ‘‘(B) IMPORTED PROPERTY INCLUDES CER13 TAIN PROPERTY IMPORTED BY UNRELATED

14 PERSONS.—The term ‘imported property’ in15 cludes any property imported into the United 

16 States by an unrelated person if, when such 

17 property was sold to the unrelated person by 

18 the controlled foreign corporation (or a related 

19 person), it was reasonable to expect that— 

20 ‘‘(i) such property would be imported 

21 into the United States; or 

22 ‘‘(ii) such property would be used as 

23 a component in other property which would 

24 be imported into the United States. 


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1 ‘‘(C) EXCEPTION FOR PROPERTY SUBSE2 QUENTLY EXPORTED.—The term ‘imported 

3 property’ does not include any property which is 

4 imported into the United States and which— 

5 ‘‘(i) before substantial use in the 

6 United States, is sold, leased, or rented by 

7 the controlled foreign corporation or a re8 lated person for direct use, consumption, 

9 or disposition outside the United States; or 

10 ‘‘(ii) is used by the controlled foreign 

11 corporation or a related person as a com12 ponent in other property which is so sold, 

13 leased, or rented. 

14 ‘‘(D) EXCEPTION FOR CERTAIN AGRICUL15 TURAL COMMODITIES.—The term ‘imported 

16 property’ does not include any agricultural com17 modity which is not grown in the United States 

18 in commercially marketable quantities. 

19 ‘‘(3) DEFINITIONS AND SPECIAL RULES.— 

20 ‘‘(A) IMPORT.—For purposes of this sub21 section, the term ‘import’ means entering, or 

22 withdrawal from warehouse, for consumption or 

23 use. Such term includes any grant of the right 

24 to use intangible property (as defined in section 

25 936(h)(3)(B)) in the United States. 


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1 ‘‘(B) UNITED STATES.—For purposes of 

2 this subsection, the term ‘United States’ in3 cludes the Commonwealth of Puerto Rico, the 

4 Virgin Islands of the United States, Guam, 

5 American Samoa, and the Commonwealth of 

6 the Northern Mariana Islands. 

7 ‘‘(C) UNRELATED PERSON.—For purposes 

8 of this subsection, the term ‘unrelated person’ 

9 means any person who is not a related person 

10 with respect to the controlled foreign corpora11 tion. 

12 ‘‘(D) COORDINATION WITH FOREIGN BASE

13 COMPANY SALES INCOME.—For purposes of this 

14 section, the term ‘foreign base company sales 

15 income’ shall not include any imported property 

16 income.’’. 

17 (c) SEPARATE APPLICATION OF LIMITATIONS ON

18 FOREIGN TAX CREDIT FOR IMPORTED PROPERTY IN19 COME.— 

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

21 904(d) of the Internal Revenue Code of 1986 is 

22 amended by striking ‘‘and’’ at the end of subpara23 graph (A), by redesignating subparagraph (B) as 

24 subparagraph (C), and by inserting after subpara25 graph (A) the following new subparagraph: 


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1 ‘‘(B) imported property income, and’’. 

2 (2) IMPORTED PROPERTY INCOME DEFINED.— 

3 Paragraph (2) of section 904(d) of such Code is 

4 amended by redesignating subparagraphs (I), (J), 

5 and (K) as subparagraphs (J), (K), and (L), respec6 tively, and by inserting after subparagraph (H) the 

7 following new subparagraph: 

8 ‘‘(I) IMPORTED PROPERTY INCOME.—The 

9 term ‘imported property income’ means any in10 come received or accrued by any person which 

11 is of a kind which would be imported property 

12 income (as defined in section 954(j)).’’. 

13 (3) CONFORMING AMENDMENT.—Clause (ii) of 

14 section 904(d)(2)(A) of such Code is amended by in15 serting ‘‘or imported property income’’ after ‘‘pas16 sive category income’’. 

17 (d) TECHNICAL AMENDMENTS.— 

18 (1) Clause (iii) of section 952(c)(1)(B) of the 

19 Internal Revenue Code of 1986 is amended— 

20 (A) by redesignating subclauses (II), (III), 

21 (IV), and (V) as subclauses (III), (IV), (V), and 

22 (VI), and 

23 (B) by inserting after subclause (I) the fol24 lowing new subclause: 


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1 ‘‘(II) imported property in2 come,’’. 

3 (2) The last sentence of paragraph (4) of sec4 tion 954(b) of such Code is amended by striking 

5 ‘‘subsection (a)(5)’’ and inserting ‘‘subsection 

6 (a)(4)’’. 

7 (3) Paragraph (5) of section 954(b) of such 

8 Code is amended by striking ‘‘and the foreign base 

9 company oil related income’’ and inserting ‘‘the for10 eign base company oil related income, and the im11 ported property income’’. 

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

13 this section shall apply to taxable years of foreign corpora14 tions beginning after the date of the enactment of this 

15 Act, and to taxable years of United States shareholders 

16 within which or with which such taxable years of such for17 eign corporations end. 

Æ 


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