II 

110TH CONGRESS 

1ST SESSION S. 396 

To amend the Internal Revenue Code of 1986 to treat controlled foreign 

corporations established in tax havens as domestic corporations. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 25, 2007 

Mr. DORGAN (for himself, Mr. LEVIN, and Mr. FEINGOLD) 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 treat controlled foreign corporations established in tax havens as 

domestic corporations. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. TAX TREATMENT OF CONTROLLED FOREIGN 

4 CORPORATIONS ESTABLISHED IN TAX HA5 VENS. 

6 (a) IN GENERAL.—Subchapter C of chapter 80 of the 

7 Internal Revenue Code of 1986 (relating to provisions af8 fecting more than one subtitle) is amended by adding at 

9 the end the following new section: 


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1 ‘‘SEC. 7875. CONTROLLED FOREIGN CORPORATIONS IN TAX 

2 HAVENS TREATED AS DOMESTIC CORPORA3 TIONS. 

4 ‘‘(a) GENERAL RULE.—If a controlled foreign cor5 poration is a tax-haven CFC, then, notwithstanding sec6 tion 7701(a)(4), such corporation shall be treated for pur7 poses of this title as a domestic corporation. 

8 ‘‘(b) TAX-HAVEN CFC.—For purposes of this sec9 tion— 

10 ‘‘(1) IN GENERAL.—The term ‘tax-haven CFC’ 

11 means, with respect to any taxable year, a foreign 

12 corporation which— 

13 ‘‘(A) was created or organized under the 

14 laws of a tax-haven country, and 

15 ‘‘(B) is a controlled foreign corporation 

16 (determined without regard to this section) for 

17 an uninterrupted period of 30 days or more 

18 during the taxable year. 

19 ‘‘(2) EXCEPTION.—The term ‘tax-haven CFC’ 

20 does not include a foreign corporation for any tax21 able year if substantially all of its income for the 

22 taxable year is derived from the active conduct of 

23 trades or businesses within the country under the 

24 laws of which the corporation was created or orga25 nized. 


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1 ‘‘(c) TAX-HAVEN COUNTRY.—For purposes of this 

2 section— 

3 ‘‘(1) IN GENERAL.—The term ‘tax-haven coun4 try’ means any of the following: 

‘‘Andorra Guernsey Panama 

Anguilla Isle of Man Samoa 

Antigua and Barbuda Jersey San Marino 

Aruba Liberia Federation of 

Commonwealth of the Principality of Saint ChristBahamas Liechtenstein opher

Bahrain Republic of the and Nevis 

Barbados Maldives Saint Lucia 

Belize Malta Saint Vincent 

Bermuda Republic of the and the 

British Virgin Islands Marshall Islands Grenadines 

Cayman Islands Mauritius Republic of the 

Cook Islands Principality of Monaco Seychelles 

Cyprus Montserrat Tonga 

Commonwealth of the Republic of Nauru Turks and Caicos 

Dominica Netherlands Republic of 

Gibraltar Antilles Vanuatu 

Grenada Niue 

5 ‘‘(2) SECRETARIAL AUTHORITY.—The Secretary 

6 may remove or add a foreign jurisdiction from the 

7 list of tax-haven countries under paragraph (1) if 

8 the Secretary determines such removal or addition is 

9 consistent with the purposes of this section.’’. 

10 (b) CONFORMING AMENDMENT.—The table of sec11 tions for subchapter C of chapter 80 of the Internal Rev12 enue Code of 1986 is amended by adding at the end the 

13 following new item: 

‘‘Sec. 7875. Controlled foreign corporations in tax havens treated as domestic 

corporations.’’. 

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

15 this section shall apply to taxable years beginning after 

16 December 31, 2008. 

Æ 


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