II 

111TH CONGRESS 

1ST SESSION S. 260 

To amend the Internal Revenue Code of 1986 to provide for the taxation 

of income of controlled foreign corporations attributable to imported property. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 15, 2009 

Mr. DORGAN (for himself, Ms. MIKULSKI, Mr. FEINGOLD, Mr. DURBIN, Mr. 

JOHNSON, Mr. BROWN, Mr. LEAHY, Mr. HARKIN, Mr. KENNEDY, Mr. 

WHITEHOUSE, Mr. KOHL, Ms. STABENOW, and Mrs. FEINSTEIN) 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 provide 

for the taxation of income of controlled foreign corporations attributable to imported property. 

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

3 SECTION 1. TAXATION OF INCOME OF CONTROLLED FOR4 EIGN CORPORATIONS ATTRIBUTABLE TO IM5 PORTED PROPERTY. 

6 (a) GENERAL RULE.—Subsection (a) of section 954 

7 of the Internal Revenue Code of 1986 (defining foreign 

8 base company income) is amended by striking the period 


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1 at the end of paragraph (5) and inserting ‘‘, and’’, by re2 designating paragraph (5) as paragraph (4), and by add3 ing at the end the following new paragraph: 

4 ‘‘(5) imported property income for the taxable 

5 year (determined under subsection (j) and reduced 

6 as provided in subsection (b)(5)).’’. 

7 (b) DEFINITION OF IMPORTED PROPERTY IN8 COME.—Section 954 of the Internal Revenue Code of 1986 

9 is amended by adding at the end the following new sub10 section: 

11 ‘‘(j) IMPORTED PROPERTY INCOME.— 

12 ‘‘(1) IN GENERAL.—For purposes of subsection 

13 (a)(5), the term ‘imported property income’ means 

14 income (whether in the form of profits, commissions, 

15 fees, or otherwise) derived in connection with— 

16 ‘‘(A) manufacturing, producing, growing, 

17 or extracting imported property; 

18 ‘‘(B) the sale, exchange, or other disposi19 tion of imported property; or 

20 ‘‘(C) the lease, rental, or licensing of im21 ported property. 

22 Such term shall not include any foreign oil and gas 

23 extraction income (within the meaning of section 

24 907(c)) or any foreign oil related income (within the 

25 meaning of section 907(c)). 


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1 ‘‘(2) IMPORTED PROPERTY.—For purposes of 

2 this subsection— 

3 ‘‘(A) IN GENERAL.—Except as otherwise 

4 provided in this paragraph, the term ‘imported 

5 property’ means property which is imported 

6 into the United States by the controlled foreign 

7 corporation or a related person. 

8 ‘‘(B) IMPORTED PROPERTY INCLUDES CER9 TAIN PROPERTY IMPORTED BY UNRELATED

10 PERSONS.—The term ‘imported property’ in11 cludes any property imported into the United 

12 States by an unrelated person if, when such 

13 property was sold to the unrelated person by 

14 the controlled foreign corporation (or a related 

15 person), it was reasonable to expect that— 

16 ‘‘(i) such property would be imported 

17 into the United States; or 

18 ‘‘(ii) such property would be used as 

19 a component in other property which would 

20 be imported into the United States. 

21 ‘‘(C) EXCEPTION FOR PROPERTY SUBSE22 QUENTLY EXPORTED.—The term ‘imported 

23 property’ does not include any property which is 

24 imported into the United States and which— 


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1 ‘‘(i) before substantial use in the 

2 United States, is sold, leased, or rented by 

3 the controlled foreign corporation or a re4 lated person for direct use, consumption, 

5 or disposition outside the United States; or 

6 ‘‘(ii) is used by the controlled foreign 

7 corporation or a related person as a com8 ponent in other property which is so sold, 

9 leased, or rented. 

10 ‘‘(D) EXCEPTION FOR CERTAIN AGRICUL11 TURAL COMMODITIES.—The term ‘imported 

12 property’ does not include any agricultural com13 modity which is not grown in the United States 

14 in commercially marketable quantities. 

15 ‘‘(3) DEFINITIONS AND SPECIAL RULES.— 

16 ‘‘(A) IMPORT.—For purposes of this sub17 section, the term ‘import’ means entering, or 

18 withdrawal from warehouse, for consumption or 

19 use. Such term includes any grant of the right 

20 to use intangible property (as defined in section 

21 936(h)(3)(B)) in the United States. 

22 ‘‘(B) UNITED STATES.—For purposes of 

23 this subsection, the term ‘United States’ in24 cludes the Commonwealth of Puerto Rico, the 

25 Virgin Islands of the United States, Guam, 


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1 American Samoa, and the Commonwealth of 

2 the Northern Mariana Islands. 

3 ‘‘(C) UNRELATED PERSON.—For purposes 

4 of this subsection, the term ‘unrelated person’ 

5 means any person who is not a related person 

6 with respect to the controlled foreign corpora7 tion. 

8 ‘‘(D) COORDINATION WITH FOREIGN BASE

9 COMPANY SALES INCOME.—For purposes of this 

10 section, the term ‘foreign base company sales 

11 income’ shall not include any imported property 

12 income.’’. 

13 (c) SEPARATE APPLICATION OF LIMITATIONS ON

14 FOREIGN TAX CREDIT FOR IMPORTED PROPERTY IN15 COME.— 

16 (1) IN GENERAL.—Paragraph (1) of section 

17 904(d) of the Internal Revenue Code of 1986 (relat18 ing to separate application of section with respect to 

19 certain categories of income) is amended by striking 

20 ‘‘and’’ at the end of subparagraph (A), by redesig21 nating subparagraph (B) as subparagraph (C), and 

22 by inserting after subparagraph (A) the following 

23 new subparagraph: 

24 ‘‘(B) imported property income, and’’. 


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1 (2) IMPORTED PROPERTY INCOME DEFINED.— 

2 Paragraph (2) of section 904(d) of such Code is 

3 amended by redesignating subparagraphs (I), (J), 

4 and (K) as subparagraphs (J), (K), and (L), respec5 tively, and by inserting after subparagraph (H) the 

6 following new subparagraph: 

7 ‘‘(I) IMPORTED PROPERTY INCOME.—The 

8 term ‘imported property income’ means any in9 come received or accrued by any person which 

10 is of a kind which would be imported property 

11 income (as defined in section 954(j)).’’. 

12 (3) CONFORMING AMENDMENT.—Clause (ii) of 

13 section 904(d)(2)(A) of such Code is amended by in14 serting ‘‘or imported property income’’ after ‘‘pas15 sive category income’’. 

16 (d) TECHNICAL AMENDMENTS.— 

17 (1) Clause (iii) of section 952(c)(1)(B) of the 

18 Internal Revenue Code of 1986 (relating to certain 

19 prior year deficits may be taken into account) is 

20 amended— 

21 (A) by redesignating subclauses (II), (III), 

22 (IV), and (V) as subclauses (III), (IV), (V), and 

23 (VI), and 

24 (B) by inserting after subclause (I) the fol25 lowing new subclause: 


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1 ‘‘(II) imported property in2 come,’’. 

3 (2) The last sentence of paragraph (4) of sec4 tion 954(b) of such Code (relating to exception for 

5 certain income subject to high foreign taxes) is 

6 amended by striking ‘‘subsection (a)(5)’’ and insert7 ing ‘‘subsection (a)(4)’’. 

8 (3) Paragraph (5) of section 954(b) of such 

9 Code (relating to deductions to be taken into ac10 count) is amended by striking ‘‘and the foreign base 

11 company oil related income’’ and inserting ‘‘the for12 eign base company oil related income, and the im13 ported property income’’. 

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

15 this section shall apply to taxable years of foreign corpora16 tions beginning after the date of the enactment of this 

17 Act, and to taxable years of United States shareholders 

18 within which or with which such taxable years of such for19 eign corporations end. 

Æ 


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