II 

113TH CONGRESS 

2D SESSION S. 2360 

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

to inverted corporations. 

IN THE SENATE OF THE UNITED STATES 

MAY 20, 2014 

Mr. LEVIN (for himself, Mr. WHITEHOUSE, Mr. ROCKEFELLER, Mr. CARDIN, 

Mrs. BOXER, Mr. NELSON, Mr. JOHNSON of South Dakota, Mrs. FEINSTEIN, Mr. KAINE, Ms. HIRONO, Mr. KING, Ms. STABENOW, Mr. 

SCHATZ, Ms. WARREN, Mr. REED, Mr. HARKIN, Mr. FRANKEN, Mr. 

DURBIN, Mr. WALSH, and Ms. KLOBUCHAR) 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 2014’’. 


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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, and before May 9, 2016, the direct or in24 direct acquisition of— 


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1 ‘‘(i) substantially all of the properties 

2 held directly or indirectly by a domestic 

3 corporation, or 

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

5 or substantially all of the properties consti6 tuting a trade or business of, a domestic 

7 partnership, and 

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

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

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

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

12 with respect to a domestic corpora13 tion, by former shareholders of the 

14 domestic corporation by reason of 

15 holding stock in the domestic corpora16 tion, or 

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

18 with respect to a domestic partner19 ship, by former partners of the do20 mestic partnership by reason of hold21 ing a capital or profits interest in the 

22 domestic partnership, or 

23 ‘‘(ii) the management and control of 

24 the expanded affiliated group which in25 cludes the entity occurs, directly or indiVerDate Mar 15 2010 03:17 May 23, 2014 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2360.IS S2360

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1 rectly, primarily within the United States, 

2 and such expanded affiliated group has 

3 significant domestic business activities. 

4 ‘‘(3) EXCEPTION FOR CORPORATIONS WITH

5 SUBSTANTIAL BUSINESS ACTIVITIES IN FOREIGN

6 COUNTRY OF ORGANIZATION.—A foreign corporation 

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

8 inverted domestic corporation if after the acquisition 

9 the expanded affiliated group which includes the en10 tity has substantial business activities in the foreign 

11 country in which or under the law of which the enti12 ty is created or organized when compared to the 

13 total business activities of such expanded affiliated 

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

15 the preceding sentence, the term ‘substantial busi16 ness activities’ shall have the meaning given such 

17 term under regulations in effect on May 8, 2014, ex18 cept that the Secretary may issue regulations in19 creasing the threshold percent in any of the tests 

20 under such regulations for determining if business 

21 activities constitute substantial business activities for 

22 purposes of this paragraph. 

23 ‘‘(4) MANAGEMENT AND CONTROL.—For pur24 poses of paragraph (2)(B)(ii)— 


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

2 prescribe regulations for purposes of deter3 mining cases in which the management and 

4 control of an expanded affiliated group is to be 

5 treated as occurring, directly or indirectly, pri6 marily within the United States. The regula7 tions prescribed under the preceding sentence 

8 shall apply to periods after May 8, 2014. 

9 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

10 MANAGEMENT.—Such regulations shall provide 

11 that the management and control of an ex12 panded affiliated group shall be treated as oc13 curring, directly or indirectly, primarily within 

14 the United States if substantially all of the ex15 ecutive officers and senior management of the 

16 expanded affiliated group who exercise day-to17 day responsibility for making decisions involving 

18 strategic, financial, and operational policies of 

19 the expanded affiliated group are based or pri20 marily located within the United States. Indi21 viduals who in fact exercise such day-to-day re22 sponsibilities shall be treated as executive offi23 cers and senior management regardless of their 

24 title. 


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1 ‘‘(5) SIGNIFICANT DOMESTIC BUSINESS ACTIVI2 TIES.—For purposes of paragraph (2)(B)(ii), an ex3 panded affiliated group has significant domestic 

4 business activities if at least 25 percent of— 

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

6 in the United States, 

7 ‘‘(B) the employee compensation incurred 

8 by the group is incurred with respect to employ9 ees based in the United States, 

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

11 the United States, or 

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

13 the United States, 

14 determined in the same manner as such determina15 tions are made for purposes of determining substan16 tial business activities under regulations referred to 

17 in paragraph (3) as in effect on May 8, 2014, but 

18 applied by treating all references in such regulations 

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

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

21 issue regulations decreasing the threshold percent in 

22 any of the tests under such regulations for deter23 mining if business activities constitute significant 

24 domestic business activities for purposes of this 

25 paragraph.’’. 


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1 (b) CONFORMING AMENDMENTS.— 

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

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

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

5 9, 2014, or after May 8, 2016,’’. 

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

7 is amended— 

8 (A) in paragraph (2)— 

9 (i) by striking ‘‘subsection 

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

11 (a)(2)(B)(ii) and (b)(2)(B)(i)’’, and 

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

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

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

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

16 ‘‘(a)(2)(B)(ii)’’, 

17 (C) in paragraph (5), by striking ‘‘sub18 section (a)(2)(B)(ii)’’ and inserting ‘‘sub19 sections (a)(2)(B)(ii) and (b)(2)(B)(i)’’, and 

20 (D) in paragraph (6), by inserting ‘‘or in21 verted domestic corporation, as the case may 

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


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

2 this section shall apply to taxable years ending after May 

3 8, 2014. 

Æ 


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