II 

114TH CONGRESS 

1ST SESSION S. 922 

To amend the Internal Revenue Code of 1986 to modify the treatment 

of foreign corporations, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

APRIL 14, 2015 

Mr. SANDERS 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 treatment of foreign corporations, 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 ‘‘Corporate Tax Dodg5 ing Prevention Act’’. 

6 SEC. 2. DEFERRAL OF ACTIVE INCOME OF CONTROLLED 

7 FOREIGN CORPORATIONS. 

8 Section 952 of the Internal Revenue Code of 1986 

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


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1 ‘‘(e) SPECIAL APPLICATION OF SUBPART.— 

2 ‘‘(1) IN GENERAL.—For taxable years begin3 ning after December 31, 2015, notwithstanding any 

4 other provision of this subpart, the term ‘subpart F 

5 income’ means, in the case of any controlled foreign 

6 corporation, the income of such corporation derived 

7 from any foreign country. 

8 ‘‘(2) APPLICABLE RULES.—Rules similar to the 

9 rules under the last sentence of subsection (a) and 

10 subsection (d) shall apply to this subsection.’’. 

11 SEC. 3. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 

12 APPLICABLE TO LARGE INTEGRATED OIL 

13 COMPANIES WHICH ARE DUAL CAPACITY 

14 TAXPAYERS. 

15 (a) IN GENERAL.—Section 901 of the Internal Rev16 enue Code of 1986 is amended by redesignating subsection 

17 (n) as subsection (o) and by inserting after subsection (m) 

18 the following new subsection: 

19 ‘‘(n) SPECIAL RULES RELATING TO LARGE INTE20 GRATED OIL COMPANIES WHICH ARE DUAL CAPACITY

21 TAXPAYERS.— 

22 ‘‘(1) GENERAL RULE.—Notwithstanding any 

23 other provision of this chapter, any amount paid or 

24 accrued by a dual capacity taxpayer which is a large 

25 integrated oil company to a foreign country or posVerDate Sep 11 2014 00:06 Apr 17, 2015 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S922.IS S922

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1 session of the United States for any period shall not 

2 be considered a tax— 

3 ‘‘(A) if, for such period, the foreign coun4 try or possession does not impose a generally 

5 applicable income tax, or 

6 ‘‘(B) to the extent such amount exceeds 

7 the amount (determined in accordance with reg8 ulations) which— 

9 ‘‘(i) is paid by such dual capacity tax10 payer pursuant to the generally applicable 

11 income tax imposed by the country or pos12 session, or 

13 ‘‘(ii) would be paid if the generally ap14 plicable income tax imposed by the country 

15 or possession were applicable to such dual 

16 capacity taxpayer. 

17 Nothing in this paragraph shall be construed to 

18 imply the proper treatment of any such amount 

19 not in excess of the amount determined under 

20 subparagraph (B). 

21 ‘‘(2) DUAL CAPACITY TAXPAYER.—For pur22 poses of this subsection, the term ‘dual capacity tax23 payer’ means, with respect to any foreign country or 

24 possession of the United States, a person who— 


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1 ‘‘(A) is subject to a levy of such country or 

2 possession, and 

3 ‘‘(B) receives (or will receive) directly or 

4 indirectly a specific economic benefit (as deter5 mined in accordance with regulations) from 

6 such country or possession. 

7 ‘‘(3) GENERALLY APPLICABLE INCOME TAX.— 

8 For purposes of this subsection— 

9 ‘‘(A) IN GENERAL.—The term ‘generally 

10 applicable income tax’ means an income tax (or 

11 a series of income taxes) which is generally im12 posed under the laws of a foreign country or 

13 possession on income derived from the conduct 

14 of a trade or business within such country or 

15 possession. 

16 ‘‘(B) EXCEPTIONS.—Such term shall not 

17 include a tax unless it has substantial applica18 tion, by its terms and in practice, to— 

19 ‘‘(i) persons who are not dual capacity 

20 taxpayers, and 

21 ‘‘(ii) persons who are citizens or resi22 dents of the foreign country or possession. 

23 ‘‘(4) LARGE INTEGRATED OIL COMPANY.—For 

24 purposes of this subsection, the term ‘large inte25 grated oil company’ means, with respect to any taxVerDate Sep 11 2014 00:06 Apr 17, 2015 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S922.IS S922

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1 able year, an integrated oil company (as defined in 

2 section 291(b)(4)) which— 

3 ‘‘(A) had gross receipts in excess of 

4 $1,000,000,000 for such taxable year, and 

5 ‘‘(B) has an average daily worldwide pro6 duction of crude oil of at least 500,000 barrels 

7 for such taxable year.’’. 

8 (b) EFFECTIVE DATE.— 

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

10 this section shall apply to taxes paid or accrued in 

11 taxable years beginning after the date of the enact12 ment of this Act. 

13 (2) CONTRARY TREATY OBLIGATIONS

14 UPHELD.—The amendments made by this section 

15 shall not apply to the extent contrary to any treaty 

16 obligation of the United States. 

17 SEC. 4. REINSTITUTION OF PER COUNTRY FOREIGN TAX 

18 CREDIT. 

19 (a) IN GENERAL.—Subsection (a) of section 904 of 

20 the Internal Revenue Code of 1986 is amended to read 

21 as follows: 

22 ‘‘(a) LIMITATION.—The amount of the credit in re23 spect of the tax paid or accrued to any foreign country 

24 or possession of the United States shall not exceed the 

25 same proportion of the tax against which such credit is 


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1 taken which the taxpayer’s taxable income from sources 

2 within such country or possession (but not in excess of 

3 the taxpayer’s entire taxable income) bears to such tax4 payer’s entire taxable income for the same taxable year.’’. 

5 (b) EFFECTIVE DATE.—The amendment made by 

6 this section shall apply to taxable years beginning after 

7 December 31, 2015. 

8 SEC. 5. TREATMENT OF FOREIGN CORPORATIONS MAN9 AGED AND CONTROLLED IN THE UNITED 

10 STATES AS DOMESTIC CORPORATIONS. 

11 (a) IN GENERAL.—Section 7701 of the Internal Rev12 enue Code of 1986 is amended by redesignating subsection 

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

14 the following new subsection: 

15 ‘‘(p) CERTAIN CORPORATIONS MANAGED AND CON16 TROLLED IN THE UNITED STATES TREATED AS DOMES17 TIC FOR INCOME TAX.— 

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

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

20 paragraph (2) if— 

21 ‘‘(A) the corporation would not otherwise 

22 be treated as a domestic corporation for pur23 poses of this title, but 


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

2 corporation occurs, directly or indirectly, pri3 marily within the United States, 

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

5 provision of this title relating to chapter 1), the cor6 poration shall be treated as a domestic corporation. 

7 ‘‘(2) CORPORATION DESCRIBED.— 

8 ‘‘(A) IN GENERAL.—A corporation is de9 scribed in this paragraph if— 

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

11 regularly traded on an established securi12 ties market, or 

13 ‘‘(ii) the aggregate gross assets of 

14 such corporation (or any predecessor there15 of), including assets under management 

16 for investors, whether held directly or indi17 rectly, at any time during the taxable year 

18 or any preceding taxable year is 

19 $50,000,000 or more. 

20 ‘‘(B) GENERAL EXCEPTION.—A corpora21 tion shall not be treated as described in this 

22 paragraph if— 

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

24 corporation described in this paragraph in 

25 a preceding taxable year, 


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1 ‘‘(ii) such corporation— 

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

3 established securities market, and 

4 ‘‘(II) has, and is reasonably ex5 pected to continue to have, aggregate 

6 gross assets (including assets under 

7 management for investors, whether 

8 held directly or indirectly) of less than 

9 $50,000,000, and 

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

11 such corporation under this subparagraph. 

12 ‘‘(3) MANAGEMENT AND CONTROL.— 

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

14 prescribe regulations for purposes of deter15 mining cases in which the management and 

16 control of a corporation is to be treated as oc17 curring primarily within the United States. 

18 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR

19 MANAGEMENT.—Such regulations shall provide 

20 that— 

21 ‘‘(i) the management and control of a 

22 corporation shall be treated as occurring 

23 primarily within the United States if sub24 stantially all of the executive officers and 

25 senior management of the corporation who 


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1 exercise day-to-day responsibility for mak2 ing decisions involving strategic, financial, 

3 and operational policies of the corporation 

4 are located primarily within the United 

5 States, and 

6 ‘‘(ii) individuals who are not executive 

7 officers and senior management of the cor8 poration (including individuals who are of9 ficers or employees of other corporations in 

10 the same chain of corporations as the cor11 poration) shall be treated as executive offi12 cers and senior management if such indi13 viduals exercise the day-to-day responsibil14 ities of the corporation described in clause 

15 (i). 

16 ‘‘(C) CORPORATIONS PRIMARILY HOLDING

17 INVESTMENT ASSETS.—Such regulations shall 

18 also provide that the management and control 

19 of a corporation shall be treated as occurring 

20 primarily within the United States if— 

21 ‘‘(i) the assets of such corporation (di22 rectly or indirectly) consist primarily of as23 sets being managed on behalf of investors, 

24 and 


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1 ‘‘(ii) decisions about how to invest the 

2 assets are made in the United States.’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to taxable years beginning on or 

5 after the date which is 2 years after the date of the enact6 ment of this Act. 

7 SEC. 6. RESTRICTIONS ON DEDUCTION FOR INTEREST EX8 PENSE OF MEMBERS OF FINANCIAL REPORT9 ING GROUPS WITH EXCESS DOMESTIC IN10 DEBTEDNESS. 

11 (a) IN GENERAL.—Section 163 of the Internal Rev12 enue Code of 1986 is amended by redesignating subsection 

13 (n) as subsection (o) and by inserting after subsection (m) 

14 the following new subsection: 

15 ‘‘(n) RESTRICTION ON DEDUCTION FOR INTEREST

16 EXPENSE OF MEMBERS OF FINANCIAL REPORTING

17 GROUPS WITH EXCESS DOMESTIC INDEBTEDNESS.— 

18 ‘‘(1) IN GENERAL.—In the case of any corpora19 tion which is a member of an applicable financial re20 porting group the common parent of which is a for21 eign corporation, the deduction allowed under this 

22 chapter for interest paid or accrued by the corpora23 tion during the taxable year shall not exceed the ap24 plicable limitation for the taxable year. 


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1 ‘‘(2) CARRYFORWARD.—Any amount disallowed 

2 under paragraph (1) for any taxable year shall be 

3 treated as interest paid or accrued in the succeeding 

4 taxable year. 

5 ‘‘(3) APPLICABLE LIMITATION.—For purposes 

6 of this subsection— 

7 ‘‘(A) IN GENERAL.—The applicable limita8 tion with respect to a taxpayer for any taxable 

9 year is the sum of— 

10 ‘‘(i) the greater of— 

11 ‘‘(I) the taxpayer’s allocable 

12 share of the applicable financial re13 porting group’s net interest expense 

14 for the taxable year, or 

15 ‘‘(II) 10 percent of the taxpayer’s 

16 adjusted taxable income for the tax17 able year, plus 

18 ‘‘(ii) the excess limitation 

19 carryforwards to the taxable year from any 

20 preceding taxable year. 

21 ‘‘(B) LIMITATION NOT LESS THAN IN22 CLUDIBLE INTEREST.—The applicable limita23 tion under subparagraph (A) for any taxable 

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1 est includible in the gross income of the tax2 payer for the taxable year. 

3 ‘‘(C) EXCESS LIMITATION

4 CARRYFORWARD.—If the applicable limitation 

5 of a taxpayer for any taxable year (determined 

6 without regard to carryforwards under subpara7 graph (A)(ii)) exceeds the interest paid or ac8 crued by the taxpayer during the taxable year, 

9 such excess shall be an excess limitation 

10 carryforward to the 1st succeeding taxable year 

11 and the 2nd and 3rd succeeding taxable years 

12 to the extent not previously taken into account 

13 under this paragraph. 

14 ‘‘(4) ALLOCABLE SHARE OF NET INTEREST EX15 PENSE.—For purposes of this subsection— 

16 ‘‘(A) IN GENERAL.—A taxpayer’s allocable 

17 share of an applicable financial reporting 

18 group’s net interest expense for any taxable 

19 year shall be the amount (not less than zero) 

20 which bears the same ratio to such net interest 

21 expense as— 

22 ‘‘(i) the net earnings of the taxpayer, 

23 bears to 


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1 ‘‘(ii) the aggregate net earnings of all 

2 members of the applicable financial report3 ing group. 

4 ‘‘(B) NET EARNINGS.—The term ‘net 

5 earnings’ means, with respect to any taxpayer, 

6 the earnings of the taxpayer— 

7 ‘‘(i) computed without regard to any 

8 reduction allowable for— 

9 ‘‘(I) net interest expense, 

10 ‘‘(II) taxes, or 

11 ‘‘(III) depreciation, amortization, 

12 or depletion, and 

13 ‘‘(ii) computed with such other adjust14 ments as the Secretary may by regulations 

15 prescribe. 

16 ‘‘(C) BURDEN ON TAXPAYER.—If a tax17 payer elects not to compute its allocable share, 

18 or fails to establish to the satisfaction of the 

19 Secretary the amount of its allocable share, for 

20 any taxable year, the allocable share shall be 

21 zero. 

22 ‘‘(5) NET INTEREST EXPENSE AND NET EARN23 INGS DETERMINATIONS.—For purposes of this sub24 section— 


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1 ‘‘(A) NET INTEREST EXPENSE.—Any de2 termination of net interest expense for any tax3 able year shall be made— 

4 ‘‘(i) on the basis of the applicable fi5 nancial statement of the applicable finan6 cial reporting group for the last financial 

7 reporting year ending with or within the 

8 taxable year, and 

9 ‘‘(ii) under United States tax prin10 ciples. 

11 ‘‘(B) NET EARNINGS.—Any determination 

12 of net earnings for any taxable year shall be 

13 made on the basis of the applicable financial 

14 statement of the applicable financial reporting 

15 group for the last financial reporting year end16 ing with or within the taxable year. 

17 ‘‘(C) APPLICABLE FINANCIAL STATE18 MENT.—The term ‘applicable financial state19 ment’ means a statement for financial reporting 

20 purposes which is made on the basis of— 

21 ‘‘(i) generally accepted accounting 

22 principles, 

23 ‘‘(ii) international financial reporting 

24 standards, or 


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1 ‘‘(iii) any other method specified by 

2 the Secretary in regulations. 

3 A statement under clause (ii) or (iii) may be 

4 used as an applicable financial statement by a 

5 group only if there is no statement of the group 

6 under any preceding clause. 

7 ‘‘(6) APPLICABLE FINANCIAL REPORTING

8 GROUP.—For purposes of this subsection— 

9 ‘‘(A) IN GENERAL.—The term ‘applicable 

10 financial reporting group’ means, with respect 

11 to any corporation, a group of which such cor12 poration is a member and which files an appli13 cable financial statement. 

14 ‘‘(B) EXCEPTION FOR GROUPS WITH MINI15 MAL DOMESTIC NET INTEREST EXPENSE.— 

16 Such term shall not include a group if the ag17 gregate net interest expense for which a deduc18 tion is allowable to all members of the group 

19 under this chapter (determined without regard 

20 to this subsection or any other limitation on de21 ductibility of interest under this chapter) is less 

22 than $5,000,000. 

23 ‘‘(C) EXCEPTION FOR CERTAIN FINANCIAL

24 ENTITIES.—A corporation which is described in 

25 section 864(f)(4)(B), or is treated as described 


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1 in section 864(f)(4)(B) by reason of paragraph 

2 (4)(C) or (5)(A) of section 864(f) (without re3 gard to whether an election is made under such 

4 paragraph (5)(A)), shall not be treated as a 

5 member of an applicable financial reporting 

6 group of which it is otherwise a member and 

7 this subsection shall not apply to such corpora8 tion. 

9 ‘‘(7) OTHER DEFINITIONS AND RULES.—For 

10 purposes of this subsection— 

11 ‘‘(A) ADJUSTED TAXABLE INCOME.—The 

12 term ‘adjusted taxable income’ has the meaning 

13 given such term by subsection (j)(6)(A). 

14 ‘‘(B) NET INTEREST EXPENSE.—The term 

15 ‘net interest expense’ has the meaning given 

16 such term by subsection (j)(6)(B). 

17 ‘‘(C) TREATMENT OF AFFILIATED

18 GROUP.—All members of the same affiliated 

19 group (within the meaning of section 1504(a)) 

20 shall be treated as 1 taxpayer. 

21 ‘‘(8) REGULATIONS.—The Secretary shall pre22 scribe such regulations as may be necessary to carry 

23 out the purposes of this section, including regula24 tions providing— 


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1 ‘‘(A) for the coordination of the application 

2 of this subsection and other provisions of this 

3 chapter relating to the deductibility of interest, 

4 ‘‘(B) for the waiver of certain adjustments 

5 required under United States tax principles in 

6 appropriate cases for purposes of applying this 

7 subsection, 

8 ‘‘(C) for the determination of which finan9 cial institutions are eligible for the exception 

10 from membership in an applicable financial re11 porting group under paragraph (6)(C) and the 

12 application of this subsection to the other mem13 bers of the group which are not so excepted, 

14 and 

15 ‘‘(D) for the application of this subsection 

16 in the case of pass thru entities and for the 

17 treatment of pass thru entities as corporations 

18 in cases where necessary to prevent the avoid19 ance of the purposes of this subsection.’’. 

20 (b) COORDINATION WITH LIMITATION ON RELATED

21 PARTY INDEBTEDNESS.—Paragraph (2) of section 163(j) 

22 of the Internal Revenue Code of 1986 is amended by add23 ing at the end the following new subparagraph: 

24 ‘‘(D) COORDINATION WITH LIMITATION ON

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1 section shall not apply to any corporation for 

2 any taxable year to which subsection (n) applies 

3 to such corporation.’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2015. 

7 SEC. 7. MODIFICATIONS TO RULES RELATING TO IN8 VERTED CORPORATIONS. 

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

10 the Internal Revenue Code of 1986 is amended to read 

11 as follows: 

12 ‘‘(b) INVERTED CORPORATIONS TREATED AS DO13 MESTIC CORPORATIONS.— 

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

15 7701(a)(4), a foreign corporation shall be treated for 

16 purposes of this title as a domestic corporation if— 

17 ‘‘(A) such corporation would be a surro18 gate foreign corporation if subsection (a)(2) 

19 were applied by substituting ‘80 percent’ for 

20 ‘60 percent’, or 

21 ‘‘(B) such corporation is an inverted do22 mestic corporation. 

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

24 purposes of this subsection, a foreign corporation 

25 shall be treated as an inverted domestic corporation 


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1 if, pursuant to a plan (or a series of related trans2 actions)— 

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

4 2014, the direct or indirect acquisition of— 

5 ‘‘(i) substantially all of the properties 

6 held directly or indirectly by a domestic 

7 corporation, or 

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

9 or substantially all of the properties consti10 tuting a trade or business of, a domestic 

11 partnership, and 

12 ‘‘(B) after the acquisition, more than 50 

13 percent of the stock (by vote or value) of the 

14 entity is held— 

15 ‘‘(i) in the case of an acquisition with 

16 respect to a domestic corporation, by 

17 former shareholders of the domestic cor18 poration by reason of holding stock in the 

19 domestic corporation, or 

20 ‘‘(ii) in the case of an acquisition with 

21 respect to a domestic partnership, by 

22 former partners of the domestic partner23 ship by reason of holding a capital or prof24 its interest in the domestic partnership. 


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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 (b) CONFORMING AMENDMENTS.— 

21 (1) Clause (i) of section 7874(a)(2)(B) of the 

22 Internal Revenue Code of 1986 is amended by strik23 ing ‘‘after March 4, 2003,’’ and inserting ‘‘after 

24 March 4, 2003, and before May 9, 2014,’’. 


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

2 is amended— 

3 (A) in paragraph (2)— 

4 (i) by striking ‘‘subsection 

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

6 (a)(2)(B)(ii) and (b)(2)(B)’’, and 

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

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

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

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

11 ‘‘(a)(2)(B)(ii)’’, 

12 (C) in paragraph (5), by striking ‘‘sub13 section (a)(2)(B)(ii)’’ and inserting ‘‘sub14 sections (a)(2)(B)(ii) and (b)(2)(B)’’, and 

15 (D) in paragraph (6), by inserting ‘‘or in16 verted domestic corporation, as the case may 

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

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

19 this section shall apply to taxable years ending after May 

20 8, 2014. 

Æ 


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