I 

108TH CONGRESS 

1ST SESSION H. R. 737

To amend the Internal Revenue Code of 1986 to prevent corporate 

expatriation to avoid United States income taxes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 12, 2003

Mr. NEAL of Massachusetts (for himself, Ms. PELOSI, Mr. HOYER, Mr. 

MENENDEZ, Mr. RANGEL, Mr. STARK, Mr. MATSUI, Mr. LEVIN, Mr. 

MCDERMOTT, Mr. KLECZKA, Mr. LEWIS of Georgia, Mr. MCNULTY, Mr. 

JEFFERSON, Mr. DOGGETT, Mrs. JONES of Ohio, Mr. ABERCROMBIE, 

Mr. ACKERMAN, Mr. ALLEN, Mr. BACA, Ms. BALDWIN, Ms. BERKLEY, 

Mr. BERMAN, Mr. BERRY, Mr. BISHOP of New York, Ms. CORRINE

BROWN of Florida, Mr. BROWN of Ohio, Mrs. CAPPS, Mr. CAPUANO, Mr. 

CARDOZA, Ms. CARSON of Indiana, Mr. CLAY, Mr. CONYERS, Mr. 

COSTELLO, Mr. CROWLEY, Mr. DEFAZIO, Mr. DELAHUNT, Ms. 

DELAURO, Mr. DEUTSCH, Mr. DINGELL, Mr. ENGEL, Mr. EVANS, Mr. 

FARR, Mr. FILNER, Mr. FORD, Mr. FRANK of Massachusetts, Mr. 

FROST, Mr. GEPHARDT, Mr. GORDON, Mr. GRIJALVA, Mr. HASTINGS of 

Florida, Mr. HINCHEY, Mr. HOEFFEL, Mr. HOLDEN, Mrs. JOHNSON of 

Connecticut, Mr. ISRAEL, Ms. KAPTUR, Mr. KILDEE, Mr. KIND, Mr. 

LAMPSON, Mr. LANGEVIN, Mr. LANTOS, Mr. LARSON of Connecticut, Ms. 

LEE, Ms. LOFGREN, Mrs. LOWEY, Mr. LYNCH, Mr. MARKEY, Ms. 

MCCARTHY of Missouri, Ms. MCCOLLUM, Mr. MCGOVERN, Mr. MEEHAN, 

Mr. MICHAUD, Mr. GEORGE MILLER of California, Mr. NADLER, Mrs. 

NAPOLITANO, Ms. NORTON, Mr. OBERSTAR, Mr. OBEY, Mr. OLVER, Mr. 

PALLONE, Mr. PASCRELL, Mr. PASTOR, Mr. PAYNE, Mr. RAHALL, Mr. 

RODRIGUEZ, Mr. ROSS, Ms. ROYBAL-ALLARD, Mr. RUSH, Mr. RYAN of 

Ohio, Mr. SABO, Ms. LORETTA SANCHEZ of California, Ms. LINDA T. 

SA ́NCHEZ of California, Mr. SANDERS, Ms. SCHAKOWSKY, Mr. SCHIFF, 

Mr. SCOTT of Virginia, Mr. SERRANO, Mr. SHERMAN, Mr. SKELTON, Ms. 

SOLIS, Mr. STRICKLAND, Mr. STUPAK, Mr. TAYLOR of Mississippi, Mr. 

THOMPSON of Mississippi, Mr. TIERNEY, Mr. TOWNS, Mr. UDALL of Colorado, Mr. UDALL of New Mexico, Mr. VAN HOLLEN, Ms. VELA ́ZQUEZ, 

Mr. VISCLOSKY, Ms. WATSON, Mr. WAXMAN, Mr. WEXLER, Ms. WOOLSEY, and Mr. WYNN) introduced the following bill; which was referred to 

the Committee on Ways and Means 
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A BILL

To amend the Internal Revenue Code of 1986 to prevent 

corporate expatriation to avoid United States income taxes.

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 ‘‘Corporate Patriot En5 forcement Act of 2003’’.

6 SEC. 2. PREVENTION OF CORPORATE EXPATRIATION TO 

7 AVOID UNITED STATES INCOME TAX. 

8 (a) IN GENERAL.—Paragraph (4) of section 7701(a) 

9 of the Internal Revenue Code of 1986 (defining domestic) 

10 is amended to read as follows: 

11 ‘‘(4) DOMESTIC.—

12 ‘‘(A) IN GENERAL.—Except as provided in 

13 subparagraph (B), the term ‘domestic’ when ap14 plied to a corporation or partnership means cre15 ated or organized in the United States or under 

16 the law of the United States or of any State 

17 unless, in the case of a partnership, the Sec18 retary provides otherwise by regulations. 

19 ‘‘(B) CERTAIN CORPORATIONS TREATED

20 AS DOMESTIC.—

21 ‘‘(i) IN GENERAL.—The acquiring cor22 poration in a corporate expatriation trans-
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1 action shall be treated as a domestic cor2 poration. 

3 ‘‘(ii) CORPORATE EXPATRIATION

4 TRANSACTION.—For purposes of this sub5 paragraph, the term ‘corporate expatria6 tion transaction’ means any transaction 

7 if—

8 ‘‘(I) a nominally foreign corpora9 tion (referred to in this subparagraph 

10 as the ‘acquiring corporation’) ac11 quires, as a result of such transaction, 

12 directly or indirectly substantially all 

13 of the properties held directly or indi14 rectly by a domestic corporation, and 

15 ‘‘(II) immediately after the trans16 action, more than 80 percent of the 

17 stock (by vote or value) of the acquir18 ing corporation is held by former 

19 shareholders of the domestic corpora20 tion by reason of holding stock in the 

21 domestic corporation. 

22 ‘‘(iii) LOWER STOCK OWNERSHIP RE23 QUIREMENT IN CERTAIN CASES.—Sub24 clause (II) of clause (ii) shall be applied by 

25 substituting ‘50 percent’ for ‘80 percent’ 
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1 with respect to any nominally foreign cor2 poration if—

3 ‘‘(I) such corporation does not 

4 have substantial business activities 

5 (when compared to the total business 

6 activities of the expanded affiliated 

7 group) in the foreign country in which 

8 or under the law of which the corpora9 tion is created or organized, and 

10 ‘‘(II) the stock of the corporation 

11 is publicly traded and the principal 

12 market for the public trading of such 

13 stock is in the United States. 

14 ‘‘(iv) PARTNERSHIP TRANSACTIONS.—

15 The term ‘corporate expatriation trans16 action’ includes any transaction if—

17 ‘‘(I) a nominally foreign corpora18 tion (referred to in this subparagraph 

19 as the ‘acquiring corporation’) ac20 quires, as a result of such transaction, 

21 directly or indirectly properties consti22 tuting a trade or business of a domes23 tic partnership, 

24 ‘‘(II) immediately after the trans25 action, more than 80 percent of the 
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1 stock (by vote or value) of the acquir2 ing corporation is held by former 

3 partners of the domestic partnership 

4 or related foreign partnerships (deter5 mined without regard to stock of the 

6 acquiring corporation which is sold in 

7 a public offering related to the trans8 action), and 

9 ‘‘(III) the acquiring corporation 

10 meets the requirements of subclauses 

11 (I) and (II) of clause (iii). 

12 ‘‘(v) SPECIAL RULES.—For purposes 

13 of this subparagraph—

14 ‘‘(I) a series of related trans15 actions shall be treated as 1 trans16 action, and 

17 ‘‘(II) stock held by members of 

18 the expanded affiliated group which 

19 includes the acquiring corporation 

20 shall not be taken into account in de21 termining ownership. 

22 ‘‘(vi) OTHER DEFINITIONS.—For pur23 poses of this subparagraph—

24 ‘‘(I) NOMINALLY FOREIGN COR25 PORATION.—The term ‘nominally for-
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1 eign corporation’ means any corpora2 tion which would (but for this sub3 paragraph) be treated as a foreign 

4 corporation. 

5 ‘‘(II) EXPANDED AFFILIATED

6 GROUP.—The term ‘expanded affili7 ated group’ means an affiliated group 

8 (as defined in section 1504(a) without 

9 regard to section 1504(b)). 

10 ‘‘(III) RELATED FOREIGN PART11 NERSHIP.—A foreign partnership is 

12 related to a domestic partnership if 

13 they are under common control (with14 in the meaning of section 482), or 

15 they shared the same trademark or 

16 tradename.’’

17 (b) EFFECTIVE DATES.—

18 (1) IN GENERAL.—The amendment made by 

19 this section shall apply to corporate expatriation 

20 transactions completed after September 11, 2001. 

21 (2) SPECIAL RULE.—The amendment made by 

22 this section shall also apply to corporate expatriation 

23 transactions completed on or before September 11, 

24 2001, but only with respect to taxable years of the 
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1 acquiring corporation beginning after December 31, 

2 2003.

Æ