II 

116TH CONGRESS 

1ST SESSION S. 2140 

To amend the Internal Revenue Code of 1986 to modify the rules relating 

to inverted corporations. 

IN THE SENATE OF THE UNITED STATES 

JULY 17, 2019 

Mr. DURBIN (for himself, Mr. REED, Ms. WARREN, Mr. BROWN, Ms. BALDWIN, Mr. WHITEHOUSE, Mr. MERKLEY, Mrs. FEINSTEIN, Ms. 

DUCKWORTH, Mr. SANDERS, and Mr. BLUMENTHAL) 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 modify 

the rules relating to inverted 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. SHORT TITLE. 

4 This Act may be cited as the ‘‘Stop Corporate Inver5 sions Act of 2019’’. 


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1 SEC. 2. MODIFICATIONS TO RULES RELATING TO IN2 VERTED CORPORATIONS. 

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

4 the Internal Revenue Code of 1986 is amended to read 

5 as follows: 

6 ‘‘(b) INVERTED CORPORATIONS TREATED AS DO7 MESTIC CORPORATIONS.— 

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

9 7701(a)(4), a foreign corporation shall be treated for 

10 purposes of this title as a domestic corporation if— 

11 ‘‘(A) such corporation would be a surro12 gate foreign corporation if subsection (a)(2) 

13 were applied by substituting ‘80 percent’ for 

14 ‘60 percent’, or 

15 ‘‘(B) such corporation is an inverted do16 mestic corporation. 

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

18 purposes of this subsection, a foreign corporation 

19 shall be treated as an inverted domestic corporation 

20 if, pursuant to a plan (or a series of related trans21 actions)— 

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

23 2014, the direct or indirect acquisition of— 

24 ‘‘(i) substantially all of the properties 

25 held directly or indirectly by a domestic 

26 corporation, or 


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

2 or substantially all of the properties consti3 tuting a trade or business of, a domestic 

4 partnership, and 

5 ‘‘(B) after the acquisition, either— 

6 ‘‘(i) more than 50 percent of the stock 

7 (by vote or value) of the entity is held— 

8 ‘‘(I) in the case of an acquisition 

9 with respect to a domestic corpora10 tion, by former shareholders of the 

11 domestic corporation by reason of 

12 holding stock in the domestic corpora13 tion, or 

14 ‘‘(II) in the case of an acquisition 

15 with respect to a domestic partner16 ship, by former partners of the do17 mestic partnership by reason of hold18 ing a capital or profits interest in the 

19 domestic partnership, or 

20 ‘‘(ii) the management and control of 

21 the expanded affiliated group which in22 cludes the entity occurs, directly or indi23 rectly, primarily within the United States, 

24 and such expanded affiliated group has 

25 significant domestic business activities. 


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1 ‘‘(3) EXCEPTION FOR CORPORATIONS WITH

2 SUBSTANTIAL BUSINESS ACTIVITIES IN FOREIGN

3 COUNTRY OF ORGANIZATION.—A foreign corporation 

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

5 inverted domestic corporation if after the acquisition 

6 the expanded affiliated group which includes the en7 tity has substantial business activities in the foreign 

8 country in which or under the law of which the enti9 ty is created or organized when compared to the 

10 total business activities of such expanded affiliated 

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

12 the preceding sentence, the term ‘substantial busi13 ness activities’ shall have the meaning given such 

14 term under regulations in effect on January 18, 

15 2017, except that the Secretary may issue regula16 tions increasing the threshold percent in any of the 

17 tests under such regulations for determining if busi18 ness activities constitute substantial business activi19 ties for purposes of this paragraph. 

20 ‘‘(4) MANAGEMENT AND CONTROL.—For pur21 poses of paragraph (2)(B)(ii)— 

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

23 prescribe regulations for purposes of deter24 mining cases in which the management and 

25 control of an expanded affiliated group is to be 


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1 treated as occurring, directly or indirectly, pri2 marily within the United States. The regula3 tions prescribed under the preceding sentence 

4 shall apply to periods after May 8, 2014. 

5 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

6 MANAGEMENT.—Such regulations shall provide 

7 that the management and control of an ex8 panded affiliated group shall be treated as oc9 curring, directly or indirectly, primarily within 

10 the United States if substantially all of the ex11 ecutive officers and senior management of the 

12 expanded affiliated group who exercise day-to13 day responsibility for making decisions involving 

14 strategic, financial, and operational policies of 

15 the expanded affiliated group are based or pri16 marily located within the United States. Indi17 viduals who in fact exercise such day-to-day re18 sponsibilities shall be treated as executive offi19 cers and senior management regardless of their 

20 title. 

21 ‘‘(5) SIGNIFICANT DOMESTIC BUSINESS ACTIVI22 TIES.—For purposes of paragraph (2)(B)(ii), an ex23 panded affiliated group has significant domestic 

24 business activities if at least 25 percent of— 


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1 ‘‘(A) the employees of the group are based 

2 in the United States, 

3 ‘‘(B) the employee compensation incurred 

4 by the group is incurred with respect to employ5 ees based in the United States, 

6 ‘‘(C) the assets of the group are located in 

7 the United States, or 

8 ‘‘(D) the income of the group is derived in 

9 the United States, 

10 determined in the same manner as such determina11 tions are made for purposes of determining substan12 tial business activities under regulations referred to 

13 in paragraph (3) as in effect on January 18, 2017, 

14 but applied by treating all references in such regula15 tions to ‘foreign country’ and ‘relevant foreign coun16 try’ as references to ‘the United States’. The Sec17 retary may issue regulations decreasing the thresh18 old percent in any of the tests under such regula19 tions for determining if business activities constitute 

20 significant domestic business activities for purposes 

21 of this paragraph.’’. 

22 (b) CONFORMING AMENDMENTS.— 

23 (1) Clause (i) of section 7874(a)(2)(B) of such 

24 Code is amended by striking ‘‘after March 4, 2003,’’ 


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1 and inserting ‘‘after March 4, 2003, and before May 

2 8, 2014,’’. 

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

4 is amended— 

5 (A) in paragraph (2)— 

6 (i) by striking ‘‘subsection 

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

8 (a)(2)(B)(ii) and (b)(2)(B)(i)’’; and 

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

10 ‘‘(a)(2)(B)(i)’’ in subparagraph (B); 

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

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

13 ‘‘(a)(2)(B)(ii)’’; 

14 (C) in paragraph (5), by striking ‘‘sub15 section (a)(2)(B)(ii)’’ and inserting ‘‘sub16 sections (a)(2)(B)(ii) and (b)(2)(B)(i)’’; and 

17 (D) in paragraph (6), by inserting ‘‘or in18 verted domestic corporation, as the case may 

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

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

21 this section shall apply to taxable years ending after May 

22 8, 2014. 

Æ 


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