I 

111TH CONGRESS 

2D SESSION H. R. 5857 

To amend the Internal Revenue Code of 1986 to decrease the top marginal 

corporate rate to 28 percent and to prevent corporations from exploiting 

tax treaties to evade taxation of United States income. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 26, 2010 

Mr. DJOU 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 decrease 

the top marginal corporate rate to 28 percent and to 

prevent corporations from exploiting tax treaties to evade 

taxation of United States income. 

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 ‘‘Fair American Cor5 porate Tax Act’’ or ‘‘FACT Act’’. 

6 SEC. 2. DECREASE IN TOP MARGINAL RATE. 

7 (a) IN GENERAL.—Paragraph (1) of section 11(b) of 

8 the Internal Revenue Code of 1986 is amended— 


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1 (1) by inserting ‘‘and’’ at the end of subpara2 graph (B), 

3 (2) by striking subparagraphs (C) and (D) and 

4 inserting the following subparagraph: 

5 ‘‘(C) 28 percent of so much of the taxable 

6 income as exceeds $75,000.’’, 

7 (3) by striking ‘‘of $100,000’’ and inserting ‘‘of 

8 $75,000’’, 

9 (4) by striking ‘‘$11,750’’ and inserting 

10 ‘‘$7,250’’, and 

11 (5) by striking the third sentence. 

12 (b) CERTAIN PERSONAL SERVICE CORPORATIONS.— 

13 Paragraph (2) of section 11(b) of such Code is amended 

14 by striking ‘‘35 percent’’ and inserting ‘‘28 percent’’. 

15 (c) CONFORMING AMENDMENTS.— 

16 (1) Subsection (a) of section 1201 of such Code 

17 is amended by striking ‘‘35 percent’’ each place it 

18 appears and inserting ‘‘28 percent’’. 

19 (2) Paragraphs (1), (2), and (6) of section 

20 1445(e) of such Code are each amended by striking 

21 ‘‘35 percent’’ and inserting ‘‘28 percent’’. 

22 (d) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to taxable years beginning after 

24 December 31, 2010. 


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1 SEC. 3. LIMITATION ON TREATY BENEFITS FOR CERTAIN 

2 DEDUCTIBLE PAYMENTS. 

3 (a) IN GENERAL.—Section 894 of the Internal Rev4 enue Code of 1986 (relating to income affected by treaty) 

5 is amended by adding at the end the following new sub6 section: 

7 ‘‘(d) LIMITATION ON TREATY BENEFITS FOR CER8 TAIN DEDUCTIBLE PAYMENTS.— 

9 ‘‘(1) IN GENERAL.—In the case of any deduct10 ible related-party payment, the amount of any with11 holding tax imposed under chapter 3 (and any tax 

12 imposed under subpart A or B of this part) with re13 spect to such payment shall not be less than the 

14 amount which would be imposed if the payment were 

15 made directly to the foreign parent corporation (tak16 ing into account any income tax treaty between the 

17 United States and the country in which the foreign 

18 parent corporation is resident). 

19 ‘‘(2) DEDUCTIBLE RELATED-PARTY PAY20 MENT.—For purposes of this subsection, the term 

21 ‘deductible related-party payment’ means any pay22 ment made, directly or indirectly, by any person to 

23 any other person if the payment is allowable as a de24 duction under this chapter and both persons are 

25 members of the same foreign controlled group of en26 tities. 


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1 ‘‘(3) FOREIGN CONTROLLED GROUP OF ENTI2 TIES.—For purposes of this subsection— 

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

4 controlled group of entities’ means a controlled 

5 group of entities the common parent of which 

6 is a foreign corporation. 

7 ‘‘(B) CONTROLLED GROUP OF ENTITIES.— 

8 The term ‘controlled group of entities’ means a 

9 controlled group of corporations as defined in 

10 section 1563(a)(1), except that— 

11 ‘‘(i) ‘more than 50 percent’ shall be 

12 substituted for ‘at least 80 percent’ each 

13 place it appears therein, and 

14 ‘‘(ii) the determination shall be made 

15 without regard to subsections (a)(4) and 

16 (b)(2) of section 1563. 

17 A partnership or any other entity (other than a 

18 corporation) shall be treated as a member of a 

19 controlled group of entities if such entity is con20 trolled (within the meaning of section 

21 954(d)(3)) by members of such group (includ22 ing any entity treated as a member of such 

23 group by reason of this sentence). 

24 ‘‘(4) FOREIGN PARENT CORPORATION.—For 

25 purposes of this subsection, the term ‘foreign parent 


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1 corporation’ means, with respect to any deductible 

2 related-party payment, the common parent of the 

3 foreign controlled group of entities referred to in 

4 paragraph (3)(A). 

5 ‘‘(5) REGULATIONS.—The Secretary may pre6 scribe such regulations or other guidance as are nec7 essary or appropriate to carry out the purposes of 

8 this subsection, including regulations or other guid9 ance which provide for— 

10 ‘‘(A) the treatment of two or more persons 

11 as members of a foreign controlled group of en12 tities if such persons would be the common par13 ent of such group if treated as one corporation, 

14 and 

15 ‘‘(B) the treatment of any member of a 

16 foreign controlled group of entities as the com17 mon parent of such group if such treatment is 

18 appropriate taking into account the economic 

19 relationships among such entities.’’. 

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

21 this section shall apply to payments made after the date 

22 of the enactment of this Act. 

Æ 


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