I 

113TH CONGRESS 

2D SESSION H. R. 5338 

To repeal the revised annuity employee and further revised annuity employee 

categories within the Federal Employees Retirement System, and for 

other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 31, 2014 

Ms. EDWARDS (for herself, Mr. CONNOLLY, Mr. CUMMINGS, Ms. NORTON, Ms. 

KAPTUR, Mr. LYNCH, Mr. ELLISON, and Mr. RANGEL) introduced the 

following bill; which was referred to the Committee on Ways and Means, 

and in addition to the Committees on Oversight and Government Reform 

and Foreign Affairs, for a period to be subsequently determined by the 

Speaker, in each case for consideration of such provisions as fall within 

the jurisdiction of the committee concerned 

A BILL 

To repeal the revised annuity employee and further revised 

annuity employee categories within the Federal Employees Retirement System, 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 ‘‘Federal Employee Pen5 sion Fairness Act’’. 


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1 SEC. 2. REPEAL OF FERS REVISED AND FURTHER REVISED 

2 ANNUITANT CATEGORIES. 

3 (a) REPEAL OF ANNUITY COMPUTATION.—Section 

4 8415 of title 5, United States Code, is amended by strik5 ing subsection (d). 

6 (b) REPEAL OF ANNUITANT CATEGORIES.—Section 

7 8422(a)(3) of title 5, United States Code, is amended— 

8 (1) by striking ‘‘other than revised annuity em9 ployees or further revised annuity employees’’; and 

10 (2) by striking subparagraphs (B) and (C). 

11 (c) REPEAL OF GOVERNMENT CONTRIBUTIONS.— 

12 Section 8423(a) of title 5, United States Code, is amended 

13 by striking paragraph (2) and inserting the following: 

14 ‘‘(2) In determining any normal-cost percentage 

15 to be applied under this subsection, amounts pro16 vided for under section 8422 shall be taken into ac17 count.’’. 

18 (d) CONFORMING AMENDMENTS.—Section 8401 of 

19 title 5, United States Code, is amended— 

20 (1) in paragraph (35)(B), by striking the semi21 colon at the end and inserting ‘‘; and’’; 

22 (2) in paragraph (36), by striking ‘‘; and’’ at 

23 the end and inserting a period; and 

24 (3) by striking paragraphs (37) and (38). 

25 (e) APPLICATION.— 


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

2 this section shall apply on the first day of the first 

3 pay period beginning after the date of enactment of 

4 this Act. 

5 (2) TREATMENT OF FORMER REVISED OR FUR6 THER REVISED ANNUITANTS.—Any individual who, 

7 as of the date of enactment of this Act, was a re8 vised annuity employee or a further revised annuity 

9 employee (but for the amendments made by this sec10 tion) shall be deemed to be an employee or Member 

11 (as those terms are defined in section 8401 of title 

12 5, United States Code) for purposes of chapter 84 

13 of such title. 

14 SEC. 3. REPEAL OF FOREIGN SERVICE REVISED OR FUR15 THER REVISED ANNUITY PARTICIPANT CAT16 EGORIES. 

17 (a) REPEAL OF ANNUITANT CATEGORIES.—Section 

18 856(a) of the Foreign Service Act of 1980 (22 U.S.C. 

19 4071e(a)) is amended by striking paragraph (2) and in20 serting the following: 

21 ‘‘(2) The applicable percentage for a participant 

22 other than a revised annuity participant or a further re23 vised annuity participant shall be as follows: 

‘‘7.5 Before January 1, 1999. 

7.75 January 1, 1999, to December 31, 1999. 

7.9 January 1, 2000, to December 31, 2000. 

7.55 After January 11, 2003.’’. 


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1 (b) GOVERNMENT CONTRIBUTION.—Section 857 of 

2 the Foreign Service Act of 1980 (22 U.S.C. 4071f) is 

3 amended by striking subsection (c). 

4 (c) CONFORMING AMENDMENTS.—Section 852 of 

5 such Act is amended (22 U.S.C. 4071a)— 

6 (1) by striking paragraphs (7) and (8); and 

7 (2) by redesignating paragraphs (9), (10), and 

8 (11) as paragraphs (7), (8), and (9), respectively. 

9 (d) APPLICATION.— 

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

11 this section shall apply on the first day of the first 

12 pay period beginning after the date of enactment of 

13 this Act. 

14 (2) TREATMENT OF FORMER REVISED OR FUR15 THER REVISED ANNUITANTS.—Any individual who, 

16 as of the date of enactment of this Act, was a re17 vised annuity participant or a further revised annu18 ity participant (but for the amendments made by 

19 this section) shall be deemed to be a participant (as 

20 that term is defined in section 852 of the Foreign 

21 Service Act of 1980 (22 U.S.C. 4071a)) for pur22 poses of the Foreign Service pension system. 


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1 SEC. 4. TREATMENT OF FOREIGN CORPORATIONS MAN2 AGED AND CONTROLLED IN THE UNITED 

3 STATES AS DOMESTIC CORPORATIONS. 

4 (a) IN GENERAL.—Section 7701 of the Internal Rev5 enue Code of 1986 is amended by redesignating subsection 

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

7 the following new subsection: 

8 ‘‘(p) CERTAIN CORPORATIONS MANAGED AND CON9 TROLLED IN THE UNITED STATES TREATED AS DOMES10 TIC FOR INCOME TAX.— 

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

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

13 paragraph (2) if— 

14 ‘‘(A) the corporation would not otherwise 

15 be treated as a domestic corporation for pur16 poses of this title, but 

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

18 corporation occurs, directly or indirectly, pri19 marily within the United States, 

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

21 provision of this title relating to chapter 1), the cor22 poration shall be treated as a domestic corporation. 

23 ‘‘(2) CORPORATION DESCRIBED.— 

24 ‘‘(A) IN GENERAL.—A corporation is de25 scribed in this paragraph if— 


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

2 regularly traded on an established securi3 ties market, or 

4 ‘‘(ii) the aggregate gross assets of 

5 such corporation (or any predecessor there6 of), including assets under management 

7 for investors, whether held directly or indi8 rectly, at any time during the taxable year 

9 or any preceding taxable year is 

10 $50,000,000 or more. 

11 ‘‘(B) GENERAL EXCEPTION.—A corpora12 tion shall not be treated as described in this 

13 paragraph if— 

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

15 corporation described in this paragraph in 

16 a preceding taxable year, 

17 ‘‘(ii) such corporation— 

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

19 established securities market, and 

20 ‘‘(II) has, and is reasonably ex21 pected to continue to have, aggregate 

22 gross assets (including assets under 

23 management for investors, whether 

24 held directly or indirectly) of less than 

25 $50,000,000, and 


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

2 such corporation under this subparagraph. 

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, whether or not regulations are issued 

22 under section 7701(p)(3) of the Internal Revenue Code 

23 of 1986, as added by this section. 


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1 SEC. 5. 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 May 8, 2014, ex15 cept that the Secretary may issue regulations in16 creasing the threshold percent in any of the tests 

17 under such regulations for determining if business 

18 activities constitute substantial business activities for 

19 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 May 8, 2014, but 

14 applied by treating all references in such regulations 

15 to ‘foreign country’ and ‘relevant foreign country’ as 

16 references to ‘the United States’. The Secretary may 

17 issue regulations decreasing the threshold percent in 

18 any of the tests under such regulations for deter19 mining if business activities constitute significant 

20 domestic business activities for purposes of this 

21 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 9, 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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