I 

114TH CONGRESS 

1ST SESSION H. R. 1790 

To amend the Internal Revenue Code of 1986 to modify the treatment 

of foreign corporations, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 14, 2015 

Ms. SCHAKOWSKY 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 modify 

the treatment of foreign corporations, 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. 

4 This Act may be cited as the ‘‘Corporate Tax Dodg5 ing Prevention Act’’. 

6 SEC. 2. DEFERRAL OF ACTIVE INCOME OF CONTROLLED 

7 FOREIGN CORPORATIONS. 

8 Section 952 of the Internal Revenue Code of 1986 

9 is amended by adding at the end the following new sub10 section: 


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1 ‘‘(e) SPECIAL APPLICATION OF SUBPART.— 

2 ‘‘(1) IN GENERAL.—For taxable years begin3 ning after December 31, 2015, notwithstanding any 

4 other provision of this subpart, the term ‘subpart F 

5 income’ means, in the case of any controlled foreign 

6 corporation, the income of such corporation derived 

7 from any foreign country. 

8 ‘‘(2) APPLICABLE RULES.—Rules similar to the 

9 rules under the last sentence of subsection (a) and 

10 subsection (d) shall apply to this subsection.’’. 

11 SEC. 3. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 

12 APPLICABLE TO LARGE INTEGRATED OIL 

13 COMPANIES WHICH ARE DUAL CAPACITY 

14 TAXPAYERS. 

15 (a) IN GENERAL.—Section 901 of the Internal Rev16 enue Code of 1986 is amended by redesignating subsection 

17 (n) as subsection (o) and by inserting after subsection (m) 

18 the following new subsection: 

19 ‘‘(n) SPECIAL RULES RELATING TO LARGE INTE20 GRATED OIL COMPANIES WHICH ARE DUAL CAPACITY

21 TAXPAYERS.— 

22 ‘‘(1) GENERAL RULE.—Notwithstanding any 

23 other provision of this chapter, any amount paid or 

24 accrued by a dual capacity taxpayer which is a large 

25 integrated oil company to a foreign country or posVerDate Sep 11 2014 02:05 Apr 17, 2015 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1790.IH H1790

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1 session of the United States for any period shall not 

2 be considered a tax— 

3 ‘‘(A) if, for such period, the foreign coun4 try or possession does not impose a generally 

5 applicable income tax, or 

6 ‘‘(B) to the extent such amount exceeds 

7 the amount (determined in accordance with reg8 ulations) which— 

9 ‘‘(i) is paid by such dual capacity tax10 payer pursuant to the generally applicable 

11 income tax imposed by the country or pos12 session, or 

13 ‘‘(ii) would be paid if the generally ap14 plicable income tax imposed by the country 

15 or possession were applicable to such dual 

16 capacity taxpayer. 

17 Nothing in this paragraph shall be construed to 

18 imply the proper treatment of any such amount 

19 not in excess of the amount determined under 

20 subparagraph (B). 

21 ‘‘(2) DUAL CAPACITY TAXPAYER.—For pur22 poses of this subsection, the term ‘dual capacity tax23 payer’ means, with respect to any foreign country or 

24 possession of the United States, a person who— 


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1 ‘‘(A) is subject to a levy of such country or 

2 possession, and 

3 ‘‘(B) receives (or will receive) directly or 

4 indirectly a specific economic benefit (as deter5 mined in accordance with regulations) from 

6 such country or possession. 

7 ‘‘(3) GENERALLY APPLICABLE INCOME TAX.— 

8 For purposes of this subsection— 

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

10 applicable income tax’ means an income tax (or 

11 a series of income taxes) which is generally im12 posed under the laws of a foreign country or 

13 possession on income derived from the conduct 

14 of a trade or business within such country or 

15 possession. 

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

17 include a tax unless it has substantial applica18 tion, by its terms and in practice, to— 

19 ‘‘(i) persons who are not dual capacity 

20 taxpayers, and 

21 ‘‘(ii) persons who are citizens or resi22 dents of the foreign country or possession. 

23 ‘‘(4) LARGE INTEGRATED OIL COMPANY.—For 

24 purposes of this subsection, the term ‘large inte25 grated oil company’ means, with respect to any taxVerDate Sep 11 2014 02:05 Apr 17, 2015 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1790.IH H1790

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1 able year, an integrated oil company (as defined in 

2 section 291(b)(4)) which— 

3 ‘‘(A) had gross receipts in excess of 

4 $1,000,000,000 for such taxable year, and 

5 ‘‘(B) has an average daily worldwide pro6 duction of crude oil of at least 500,000 barrels 

7 for such taxable year.’’. 

8 (b) EFFECTIVE DATE.— 

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

10 this section shall apply to taxes paid or accrued in 

11 taxable years beginning after the date of the enact12 ment of this Act. 

13 (2) CONTRARY TREATY OBLIGATIONS

14 UPHELD.—The amendments made by this section 

15 shall not apply to the extent contrary to any treaty 

16 obligation of the United States. 

17 SEC. 4. REINSTITUTION OF PER COUNTRY FOREIGN TAX 

18 CREDIT. 

19 (a) IN GENERAL.—Subsection (a) of section 904 of 

20 the Internal Revenue Code of 1986 is amended to read 

21 as follows: 

22 ‘‘(a) LIMITATION.—The amount of the credit in re23 spect of the tax paid or accrued to any foreign country 

24 or possession of the United States shall not exceed the 

25 same proportion of the tax against which such credit is 


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1 taken which the taxpayer’s taxable income from sources 

2 within such country or possession (but not in excess of 

3 the taxpayer’s entire taxable income) bears to such tax4 payer’s entire taxable income for the same taxable year.’’. 

5 (b) EFFECTIVE DATE.—The amendment made by 

6 this section shall apply to taxable years beginning after 

7 December 31, 2015. 

8 SEC. 5. TREATMENT OF FOREIGN CORPORATIONS MAN9 AGED AND CONTROLLED IN THE UNITED 

10 STATES AS DOMESTIC CORPORATIONS. 

11 (a) IN GENERAL.—Section 7701 of the Internal Rev12 enue Code of 1986 is amended by redesignating subsection 

13 (p) as subsection (q) and by inserting after subsection (o) 

14 the following new subsection: 

15 ‘‘(p) CERTAIN CORPORATIONS MANAGED AND CON16 TROLLED IN THE UNITED STATES TREATED AS DOMES17 TIC FOR INCOME TAX.— 

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

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

20 paragraph (2) if— 

21 ‘‘(A) the corporation would not otherwise 

22 be treated as a domestic corporation for pur23 poses of this title, but 


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

2 corporation occurs, directly or indirectly, pri3 marily within the United States, 

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

5 provision of this title relating to chapter 1), the cor6 poration shall be treated as a domestic corporation. 

7 ‘‘(2) CORPORATION DESCRIBED.— 

8 ‘‘(A) IN GENERAL.—A corporation is de9 scribed in this paragraph if— 

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

11 regularly traded on an established securi12 ties market, or 

13 ‘‘(ii) the aggregate gross assets of 

14 such corporation (or any predecessor there15 of), including assets under management 

16 for investors, whether held directly or indi17 rectly, at any time during the taxable year 

18 or any preceding taxable year is 

19 $50,000,000 or more. 

20 ‘‘(B) GENERAL EXCEPTION.—A corpora21 tion shall not be treated as described in this 

22 paragraph if— 

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

24 corporation described in this paragraph in 

25 a preceding taxable year, 


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1 ‘‘(ii) such corporation— 

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

3 established securities market, and 

4 ‘‘(II) has, and is reasonably ex5 pected to continue to have, aggregate 

6 gross assets (including assets under 

7 management for investors, whether 

8 held directly or indirectly) of less than 

9 $50,000,000, and 

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

11 such corporation under this subparagraph. 

12 ‘‘(C) EXCEPTION FROM GROSS ASSETS

13 TEST.—Subparagraph (A)(ii) shall not apply to 

14 a corporation which is a controlled foreign cor15 poration (as defined in section 957) and which 

16 is a member of an affiliated group (as defined 

17 section 1504, but determined without regard to 

18 section 1504(b)(3)) the common parent of 

19 which— 

20 ‘‘(i) is a domestic corporation (deter21 mined without regard to this subsection), 

22 and 

23 ‘‘(ii) has substantial assets (other 

24 than cash and cash equivalents and other 

25 than stock of foreign subsidiaries) held for 


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1 use in the active conduct of a trade or 

2 business in the United States. 

3 ‘‘(3) MANAGEMENT AND CONTROL.— 

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

5 prescribe regulations for purposes of deter6 mining cases in which the management and 

7 control of a corporation is to be treated as oc8 curring primarily within the United States. 

9 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

10 MANAGEMENT.—Such regulations shall provide 

11 that— 

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

13 corporation shall be treated as occurring 

14 primarily within the United States if sub15 stantially all of the executive officers and 

16 senior management of the corporation who 

17 exercise day-to-day responsibility for mak18 ing decisions involving strategic, financial, 

19 and operational policies of the corporation 

20 are located primarily within the United 

21 States, and 

22 ‘‘(ii) individuals who are not executive 

23 officers and senior management of the cor24 poration (including individuals who are of25 ficers or employees of other corporations in 


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1 the same chain of corporations as the cor2 poration) shall be treated as executive offi3 cers and senior management if such indi4 viduals exercise the day-to-day responsibil5 ities of the corporation described in clause 

6 (i). 

7 ‘‘(C) CORPORATIONS PRIMARILY HOLDING

8 INVESTMENT ASSETS.—Such regulations shall 

9 also provide that the management and control 

10 of a corporation shall be treated as occurring 

11 primarily within the United States if— 

12 ‘‘(i) the assets of such corporation (di13 rectly or indirectly) consist primarily of as14 sets being managed on behalf of investors, 

15 and 

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

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

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

19 this section shall apply to taxable years beginning on or 

20 after the date which is 2 years after the date of the enact21 ment of this Act. 


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1 SEC. 6. RESTRICTIONS ON DEDUCTION FOR INTEREST EX2 PENSE OF MEMBERS OF FINANCIAL REPORT3 ING GROUPS WITH EXCESS DOMESTIC IN4 DEBTEDNESS. 

5 (a) IN GENERAL.—Section 163 of the Internal Rev6 enue Code of 1986 is amended by redesignating subsection 

7 (n) as subsection (o) and by inserting after subsection (m) 

8 the following new subsection: 

9 ‘‘(n) RESTRICTION ON DEDUCTION FOR INTEREST

10 EXPENSE OF MEMBERS OF FINANCIAL REPORTING

11 GROUPS WITH EXCESS DOMESTIC INDEBTEDNESS.— 

12 ‘‘(1) IN GENERAL.—In the case of any corpora13 tion which is a member of an applicable financial re14 porting group the common parent of which is a for15 eign corporation, the deduction allowed under this 

16 chapter for interest paid or accrued by the corpora17 tion during the taxable year shall not exceed the ap18 plicable limitation for the taxable year. 

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

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

21 treated as interest paid or accrued in the succeeding 

22 taxable year. 

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

24 of this subsection— 


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1 ‘‘(A) IN GENERAL.—The applicable limita2 tion with respect to a taxpayer for any taxable 

3 year is the sum of— 

4 ‘‘(i) the greater of— 

5 ‘‘(I) the taxpayer’s allocable 

6 share of the applicable financial re7 porting group’s net interest expense 

8 for the taxable year, or 

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

10 adjusted taxable income for the tax11 able year, plus 

12 ‘‘(ii) the excess limitation 

13 carryforwards to the taxable year from any 

14 preceding taxable year. 

15 ‘‘(B) LIMITATION NOT LESS THAN IN16 CLUDIBLE INTEREST.—The applicable limita17 tion under subparagraph (A) for any taxable 

18 year shall not be less than the amount of inter19 est includible in the gross income of the tax20 payer for the taxable year. 

21 ‘‘(C) EXCESS LIMITATION

22 CARRYFORWARD.—If the applicable limitation 

23 of a taxpayer for any taxable year (determined 

24 without regard to carryforwards under subpara25 graph (A)(ii)) exceeds the interest paid or acVerDate Sep 11 2014 02:05 Apr 17, 2015 Jkt 049200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H1790.IH H1790

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1 crued by the taxpayer during the taxable year, 

2 such excess shall be an excess limitation 

3 carryforward to the 1st succeeding taxable year 

4 and the 2nd and 3rd succeeding taxable years 

5 to the extent not previously taken into account 

6 under this paragraph. 

7 ‘‘(4) ALLOCABLE SHARE OF NET INTEREST EX8 PENSE.—For purposes of this subsection— 

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

10 share of an applicable financial reporting 

11 group’s net interest expense for any taxable 

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

13 which bears the same ratio to such net interest 

14 expense as— 

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

16 bears to 

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

18 members of the applicable financial report19 ing group. 

20 ‘‘(B) NET EARNINGS.—The term ‘net 

21 earnings’ means, with respect to any taxpayer, 

22 the earnings of the taxpayer— 

23 ‘‘(i) computed without regard to any 

24 reduction allowable for— 

25 ‘‘(I) net interest expense, 


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1 ‘‘(II) taxes, or 

2 ‘‘(III) depreciation, amortization, 

3 or depletion, and 

4 ‘‘(ii) computed with such other adjust5 ments as the Secretary may by regulations 

6 prescribe. 

7 ‘‘(C) BURDEN ON TAXPAYER.—If a tax8 payer elects not to compute its allocable share, 

9 or fails to establish to the satisfaction of the 

10 Secretary the amount of its allocable share, for 

11 any taxable year, the allocable share shall be 

12 zero. 

13 ‘‘(5) NET INTEREST EXPENSE AND NET EARN14 INGS DETERMINATIONS.—For purposes of this sub15 section— 

16 ‘‘(A) NET INTEREST EXPENSE.—Any de17 termination of net interest expense for any tax18 able year shall be made— 

19 ‘‘(i) on the basis of the applicable fi20 nancial statement of the applicable finan21 cial reporting group for the last financial 

22 reporting year ending with or within the 

23 taxable year, and 

24 ‘‘(ii) under United States tax prin25 ciples. 


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

2 of net earnings for any taxable year shall be 

3 made on the basis of the applicable financial 

4 statement of the applicable financial reporting 

5 group for the last financial reporting year end6 ing with or within the taxable year. 

7 ‘‘(C) APPLICABLE FINANCIAL STATE8 MENT.—The term ‘applicable financial state9 ment’ means a statement for financial reporting 

10 purposes which is made on the basis of— 

11 ‘‘(i) generally accepted accounting 

12 principles, 

13 ‘‘(ii) international financial reporting 

14 standards, or 

15 ‘‘(iii) any other method specified by 

16 the Secretary in regulations. 

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

18 used as an applicable financial statement by a 

19 group only if there is no statement of the group 

20 under any preceding clause. 

21 ‘‘(6) APPLICABLE FINANCIAL REPORTING

22 GROUP.—For purposes of this subsection— 

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

24 financial reporting group’ means, with respect 

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1 poration is a member and which files an appli2 cable financial statement. 

3 ‘‘(B) EXCEPTION FOR GROUPS WITH MINI4 MAL DOMESTIC NET INTEREST EXPENSE.— 

5 Such term shall not include a group if the ag6 gregate net interest expense for which a deduc7 tion is allowable to all members of the group 

8 under this chapter (determined without regard 

9 to this subsection or any other limitation on de10 ductibility of interest under this chapter) is less 

11 than $5,000,000. 

12 ‘‘(C) EXCEPTION FOR CERTAIN FINANCIAL

13 ENTITIES.—A corporation which is described in 

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

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

16 (4)(C) or (5)(A) of section 864(f) (without re17 gard to whether an election is made under such 

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

19 member of an applicable financial reporting 

20 group of which it is otherwise a member and 

21 this subsection shall not apply to such corpora22 tion. 

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

24 purposes of this subsection— 


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1 ‘‘(A) ADJUSTED TAXABLE INCOME.—The 

2 term ‘adjusted taxable income’ has the meaning 

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

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

5 ‘net interest expense’ has the meaning given 

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

7 ‘‘(C) TREATMENT OF AFFILIATED

8 GROUP.—All members of the same affiliated 

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

10 shall be treated as 1 taxpayer. 

11 ‘‘(8) REGULATIONS.—The Secretary shall pre12 scribe such regulations as may be necessary to carry 

13 out the purposes of this section, including regula14 tions providing— 

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

16 of this subsection and other provisions of this 

17 chapter relating to the deductibility of interest, 

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

19 required under United States tax principles in 

20 appropriate cases for purposes of applying this 

21 subsection, 

22 ‘‘(C) for the determination of which finan23 cial institutions are eligible for the exception 

24 from membership in an applicable financial re25 porting group under paragraph (6)(C) and the 


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1 application of this subsection to the other mem2 bers of the group which are not so excepted, 

3 and 

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

5 in the case of pass thru entities and for the 

6 treatment of pass thru entities as corporations 

7 in cases where necessary to prevent the avoid8 ance of the purposes of this subsection.’’. 

9 (b) COORDINATION WITH LIMITATION ON RELATED

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

11 of the Internal Revenue Code of 1986 is amended by add12 ing at the end the following new subparagraph: 

13 ‘‘(D) COORDINATION WITH LIMITATION ON

14 EXCESS DOMESTIC INDEBTEDNESS.—This sub15 section shall not apply to any corporation for 

16 any taxable year to which subsection (n) applies 

17 to such corporation.’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2015. 

21 SEC. 7. MODIFICATIONS TO RULES RELATING TO IN22 VERTED CORPORATIONS. 

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

24 the Internal Revenue Code of 1986 is amended to read 

25 as follows: 


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1 ‘‘(b) INVERTED CORPORATIONS TREATED AS DO2 MESTIC CORPORATIONS.— 

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

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

5 purposes of this title as a domestic corporation if— 

6 ‘‘(A) such corporation would be a surro7 gate foreign corporation if subsection (a)(2) 

8 were applied by substituting ‘80 percent’ for 

9 ‘60 percent’, or 

10 ‘‘(B) such corporation is an inverted do11 mestic corporation. 

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

13 purposes of this subsection, a foreign corporation 

14 shall be treated as an inverted domestic corporation 

15 if, pursuant to a plan (or a series of related trans16 actions)— 

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

18 2014, the direct or indirect acquisition of— 

19 ‘‘(i) substantially all of the properties 

20 held directly or indirectly by a domestic 

21 corporation, or 

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

23 or substantially all of the properties consti24 tuting a trade or business of, a domestic 

25 partnership, and 


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1 ‘‘(B) after the acquisition, more than 50 

2 percent of the stock (by vote or value) of the 

3 entity is held— 

4 ‘‘(i) in the case of an acquisition with 

5 respect to a domestic corporation, by 

6 former shareholders of the domestic cor7 poration by reason of holding stock in the 

8 domestic corporation, or 

9 ‘‘(ii) in the case of an acquisition with 

10 respect to a domestic partnership, by 

11 former partners of the domestic partner12 ship by reason of holding a capital or prof13 its interest in the domestic partnership. 

14 ‘‘(3) EXCEPTION FOR CORPORATIONS WITH

15 SUBSTANTIAL BUSINESS ACTIVITIES IN FOREIGN

16 COUNTRY OF ORGANIZATION.—A foreign corporation 

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

18 inverted domestic corporation if after the acquisition 

19 the expanded affiliated group which includes the en20 tity has substantial business activities in the foreign 

21 country in which or under the law of which the enti22 ty is created or organized when compared to the 

23 total business activities of such expanded affiliated 

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

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1 ness activities’ shall have the meaning given such 

2 term under regulations in effect on May 8, 2014, ex3 cept that the Secretary may issue regulations in4 creasing the threshold percent in any of the tests 

5 under such regulations for determining if business 

6 activities constitute substantial business activities for 

7 purposes of this paragraph.’’. 

8 (b) CONFORMING AMENDMENTS.— 

9 (1) Clause (i) of section 7874(a)(2)(B) of the 

10 Internal Revenue Code of 1986 is amended by strik11 ing ‘‘after March 4, 2003,’’ and inserting ‘‘after 

12 March 4, 2003, and before May 9, 2014,’’. 

13 (2) Subsection (c) of section 7874 of such Code 

14 is amended— 

15 (A) in paragraph (2)— 

16 (i) by striking ‘‘subsection 

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

18 (a)(2)(B)(ii) and (b)(2)(B)’’, and 

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

20 ‘‘(a)(2)(B)(i)’’ in subparagraph (B), 

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

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

23 ‘‘(a)(2)(B)(ii)’’, 


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1 (C) in paragraph (5), by striking ‘‘sub2 section (a)(2)(B)(ii)’’ and inserting ‘‘sub3 sections (a)(2)(B)(ii) and (b)(2)(B)’’, and 

4 (D) in paragraph (6), by inserting ‘‘or in5 verted domestic corporation, as the case may 

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

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

8 this section shall apply to taxable years ending after May 

9 8, 2014. 

Æ 


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