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[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 922 Introduced in Senate (IS)]

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.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Corporate Tax Dodging Prevention 
Act''.

SEC. 2. DEFERRAL OF ACTIVE INCOME OF CONTROLLED FOREIGN CORPORATIONS.

    Section 952 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subsection:
    ``(e) Special Application of Subpart.--
            ``(1) In general.--For taxable years beginning after 
        December 31, 2015, notwithstanding any other provision of this 
        subpart, the term `subpart F income' means, in the case of any 
        controlled foreign corporation, the income of such corporation 
        derived from any foreign country.
            ``(2) Applicable rules.--Rules similar to the rules under 
        the last sentence of subsection (a) and subsection (d) shall 
        apply to this subsection.''.

SEC. 3. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE TO LARGE 
              INTEGRATED OIL COMPANIES WHICH ARE DUAL CAPACITY 
              TAXPAYERS.

    (a) In General.--Section 901 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Special Rules Relating to Large Integrated Oil Companies 
Which Are Dual Capacity Taxpayers.--
            ``(1) General rule.--Notwithstanding any other provision of 
        this chapter, any amount paid or accrued by a dual capacity 
        taxpayer which is a large integrated oil company to a foreign 
        country or possession of the United States for any period shall 
        not be considered a tax--
                    ``(A) if, for such period, the foreign country or 
                possession does not impose a generally applicable 
                income tax, or
                    ``(B) to the extent such amount exceeds the amount 
                (determined in accordance with regulations) which--
                            ``(i) is paid by such dual capacity 
                        taxpayer pursuant to the generally applicable 
                        income tax imposed by the country or 
                        possession, or
                            ``(ii) would be paid if the generally 
                        applicable income tax imposed by the country or 
                        possession were applicable to such dual 
                        capacity taxpayer.
                Nothing in this paragraph shall be construed to imply 
                the proper treatment of any such amount not in excess 
                of the amount determined under subparagraph (B).
            ``(2) Dual capacity taxpayer.--For purposes of this 
        subsection, the term `dual capacity taxpayer' means, with 
        respect to any foreign country or possession of the United 
        States, a person who--
                    ``(A) is subject to a levy of such country or 
                possession, and
                    ``(B) receives (or will receive) directly or 
                indirectly a specific economic benefit (as determined 
                in accordance with regulations) from such country or 
                possession.
            ``(3) Generally applicable income tax.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `generally applicable 
                income tax' means an income tax (or a series of income 
                taxes) which is generally imposed under the laws of a 
                foreign country or possession on income derived from 
                the conduct of a trade or business within such country 
                or possession.
                    ``(B) Exceptions.--Such term shall not include a 
                tax unless it has substantial application, by its terms 
                and in practice, to--
                            ``(i) persons who are not dual capacity 
                        taxpayers, and
                            ``(ii) persons who are citizens or 
                        residents of the foreign country or possession.
            ``(4) Large integrated oil company.--For purposes of this 
        subsection, the term `large integrated oil company' means, with 
        respect to any taxable year, an integrated oil company (as 
        defined in section 291(b)(4)) which--
                    ``(A) had gross receipts in excess of 
                $1,000,000,000 for such taxable year, and
                    ``(B) has an average daily worldwide production of 
                crude oil of at least 500,000 barrels for such taxable 
                year.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxes paid or accrued in taxable years beginning after 
        the date of the enactment of this Act.
            (2) Contrary treaty obligations upheld.--The amendments 
        made by this section shall not apply to the extent contrary to 
        any treaty obligation of the United States.

SEC. 4. REINSTITUTION OF PER COUNTRY FOREIGN TAX CREDIT.

    (a) In General.--Subsection (a) of section 904 of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(a) Limitation.--The amount of the credit in respect of the tax 
paid or accrued to any foreign country or possession of the United 
States shall not exceed the same proportion of the tax against which 
such credit is taken which the taxpayer's taxable income from sources 
within such country or possession (but not in excess of the taxpayer's 
entire taxable income) bears to such taxpayer's entire taxable income 
for the same taxable year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2015.

SEC. 5. TREATMENT OF FOREIGN CORPORATIONS MANAGED AND CONTROLLED IN THE 
              UNITED STATES AS DOMESTIC CORPORATIONS.

    (a) In General.--Section 7701 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (p) as subsection (q) and by 
inserting after subsection (o) the following new subsection:
    ``(p) Certain Corporations Managed and Controlled in the United 
States Treated as Domestic for Income Tax.--
            ``(1) In general.--Notwithstanding subsection (a)(4), in 
        the case of a corporation described in paragraph (2) if--
                    ``(A) the corporation would not otherwise be 
                treated as a domestic corporation for purposes of this 
                title, but
                    ``(B) the management and control of the corporation 
                occurs, directly or indirectly, primarily within the 
                United States,
        then, solely for purposes of chapter 1 (and any other provision 
        of this title relating to chapter 1), the corporation shall be 
        treated as a domestic corporation.
            ``(2) Corporation described.--
                    ``(A) In general.--A corporation is described in 
                this paragraph if--
                            ``(i) the stock of such corporation is 
                        regularly traded on an established securities 
                        market, or
                            ``(ii) the aggregate gross assets of such 
                        corporation (or any predecessor thereof), 
                        including assets under management for 
                        investors, whether held directly or indirectly, 
                        at any time during the taxable year or any 
                        preceding taxable year is $50,000,000 or more.
                    ``(B) General exception.--A corporation shall not 
                be treated as described in this paragraph if--
                            ``(i) such corporation was treated as a 
                        corporation described in this paragraph in a 
                        preceding taxable year,
                            ``(ii) such corporation--
                                    ``(I) is not regularly traded on an 
                                established securities market, and
                                    ``(II) has, and is reasonably 
                                expected to continue to have, aggregate 
                                gross assets (including assets under 
                                management for investors, whether held 
                                directly or indirectly) of less than 
                                $50,000,000, and
                            ``(iii) the Secretary grants a waiver to 
                        such corporation under this subparagraph.
            ``(3) Management and control.--
                    ``(A) In general.--The Secretary shall prescribe 
                regulations for purposes of determining cases in which 
                the management and control of a corporation is to be 
                treated as occurring primarily within the United 
                States.
                    ``(B) Executive officers and senior management.--
                Such regulations shall provide that--
                            ``(i) the management and control of a 
                        corporation shall be treated as occurring 
                        primarily within the United States if 
                        substantially all of the executive officers and 
                        senior management of the corporation who 
                        exercise day-to-day responsibility for making 
                        decisions involving strategic, financial, and 
                        operational policies of the corporation are 
                        located primarily within the United States, and
                            ``(ii) individuals who are not executive 
                        officers and senior management of the 
                        corporation (including individuals who are 
                        officers or employees of other corporations in 
                        the same chain of corporations as the 
                        corporation) shall be treated as executive 
                        officers and senior management if such 
                        individuals exercise the day-to-day 
                        responsibilities of the corporation described 
                        in clause (i).
                    ``(C) Corporations primarily holding investment 
                assets.--Such regulations shall also provide that the 
                management and control of a corporation shall be 
                treated as occurring primarily within the United States 
                if--
                            ``(i) the assets of such corporation 
                        (directly or indirectly) consist primarily of 
                        assets being managed on behalf of investors, 
                        and
                            ``(ii) decisions about how to invest the 
                        assets are made in the United States.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning on or after the date which is 2 years 
after the date of the enactment of this Act.

SEC. 6. RESTRICTIONS ON DEDUCTION FOR INTEREST EXPENSE OF MEMBERS OF 
              FINANCIAL REPORTING GROUPS WITH EXCESS DOMESTIC 
              INDEBTEDNESS.

    (a) In General.--Section 163 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Restriction on Deduction for Interest Expense of Members of 
Financial Reporting Groups With Excess Domestic Indebtedness.--
            ``(1) In general.--In the case of any corporation which is 
        a member of an applicable financial reporting group the common 
        parent of which is a foreign corporation, the deduction allowed 
        under this chapter for interest paid or accrued by the 
        corporation during the taxable year shall not exceed the 
        applicable limitation for the taxable year.
            ``(2) Carryforward.--Any amount disallowed under paragraph 
        (1) for any taxable year shall be treated as interest paid or 
        accrued in the succeeding taxable year.
            ``(3) Applicable limitation.--For purposes of this 
        subsection--
                    ``(A) In general.--The applicable limitation with 
                respect to a taxpayer for any taxable year is the sum 
                of--
                            ``(i) the greater of--
                                    ``(I) the taxpayer's allocable 
                                share of the applicable financial 
                                reporting group's net interest expense 
                                for the taxable year, or
                                    ``(II) 10 percent of the taxpayer's 
                                adjusted taxable income for the taxable 
                                year, plus
                            ``(ii) the excess limitation carryforwards 
                        to the taxable year from any preceding taxable 
                        year.
                    ``(B) Limitation not less than includible 
                interest.--The applicable limitation under subparagraph 
                (A) for any taxable year shall not be less than the 
                amount of interest includible in the gross income of 
                the taxpayer for the taxable year.
                    ``(C) Excess limitation carryforward.--If the 
                applicable limitation of a taxpayer for any taxable 
                year (determined without regard to carryforwards under 
                subparagraph (A)(ii)) exceeds the interest paid or 
                accrued by the taxpayer during the taxable year, such 
                excess shall be an excess limitation carryforward to 
                the 1st succeeding taxable year and the 2nd and 3rd 
                succeeding taxable years to the extent not previously 
                taken into account under this paragraph.
            ``(4) Allocable share of net interest expense.--For 
        purposes of this subsection--
                    ``(A) In general.--A taxpayer's allocable share of 
                an applicable financial reporting group's net interest 
                expense for any taxable year shall be the amount (not 
                less than zero) which bears the same ratio to such net 
                interest expense as--
                            ``(i) the net earnings of the taxpayer, 
                        bears to
                            ``(ii) the aggregate net earnings of all 
                        members of the applicable financial reporting 
                        group.
                    ``(B) Net earnings.--The term `net earnings' means, 
                with respect to any taxpayer, the earnings of the 
                taxpayer--
                            ``(i) computed without regard to any 
                        reduction allowable for--
                                    ``(I) net interest expense,
                                    ``(II) taxes, or
                                    ``(III) depreciation, amortization, 
                                or depletion, and
                            ``(ii) computed with such other adjustments 
                        as the Secretary may by regulations prescribe.
                    ``(C) Burden on taxpayer.--If a taxpayer elects not 
                to compute its allocable share, or fails to establish 
                to the satisfaction of the Secretary the amount of its 
                allocable share, for any taxable year, the allocable 
                share shall be zero.
            ``(5) Net interest expense and net earnings 
        determinations.--For purposes of this subsection--
                    ``(A) Net interest expense.--Any determination of 
                net interest expense for any taxable year shall be 
                made--
                            ``(i) on the basis of the applicable 
                        financial statement of the applicable financial 
                        reporting group for the last financial 
                        reporting year ending with or within the 
                        taxable year, and
                            ``(ii) under United States tax principles.
                    ``(B) Net earnings.--Any determination of net 
                earnings for any taxable year shall be made on the 
                basis of the applicable financial statement of the 
                applicable financial reporting group for the last 
                financial reporting year ending with or within the 
                taxable year.
                    ``(C) Applicable financial statement.--The term 
                `applicable financial statement' means a statement for 
                financial reporting purposes which is made on the basis 
                of--
                            ``(i) generally accepted accounting 
                        principles,
                            ``(ii) international financial reporting 
                        standards, or
                            ``(iii) any other method specified by the 
                        Secretary in regulations.
                A statement under clause (ii) or (iii) may be used as 
                an applicable financial statement by a group only if 
                there is no statement of the group under any preceding 
                clause.
            ``(6) Applicable financial reporting group.--For purposes 
        of this subsection--
                    ``(A) In general.--The term `applicable financial 
                reporting group' means, with respect to any 
                corporation, a group of which such corporation is a 
                member and which files an applicable financial 
                statement.
                    ``(B) Exception for groups with minimal domestic 
                net interest expense.--Such term shall not include a 
                group if the aggregate net interest expense for which a 
                deduction is allowable to all members of the group 
                under this chapter (determined without regard to this 
                subsection or any other limitation on deductibility of 
                interest under this chapter) is less than $5,000,000.
                    ``(C) Exception for certain financial entities.--A 
                corporation which is described in section 864(f)(4)(B), 
                or is treated as described in section 864(f)(4)(B) by 
                reason of paragraph (4)(C) or (5)(A) of section 864(f) 
                (without regard to whether an election is made under 
                such paragraph (5)(A)), shall not be treated as a 
                member of an applicable financial reporting group of 
                which it is otherwise a member and this subsection 
                shall not apply to such corporation.
            ``(7) Other definitions and rules.--For purposes of this 
        subsection--
                    ``(A) Adjusted taxable income.--The term `adjusted 
                taxable income' has the meaning given such term by 
                subsection (j)(6)(A).
                    ``(B) Net interest expense.--The term `net interest 
                expense' has the meaning given such term by subsection 
                (j)(6)(B).
                    ``(C) Treatment of affiliated group.--All members 
                of the same affiliated group (within the meaning of 
                section 1504(a)) shall be treated as 1 taxpayer.
            ``(8) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this section, including regulations providing--
                    ``(A) for the coordination of the application of 
                this subsection and other provisions of this chapter 
                relating to the deductibility of interest,
                    ``(B) for the waiver of certain adjustments 
                required under United States tax principles in 
                appropriate cases for purposes of applying this 
                subsection,
                    ``(C) for the determination of which financial 
                institutions are eligible for the exception from 
                membership in an applicable financial reporting group 
                under paragraph (6)(C) and the application of this 
                subsection to the other members of the group which are 
                not so excepted, and
                    ``(D) for the application of this subsection in the 
                case of pass thru entities and for the treatment of 
                pass thru entities as corporations in cases where 
                necessary to prevent the avoidance of the purposes of 
                this subsection.''.
    (b) Coordination With Limitation on Related Party Indebtedness.--
Paragraph (2) of section 163(j) of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subparagraph:
                    ``(D) Coordination with limitation on excess 
                domestic indebtedness.--This subsection shall not apply 
                to any corporation for any taxable year to which 
                subsection (n) applies to such corporation.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2015.

SEC. 7. MODIFICATIONS TO RULES RELATING TO INVERTED CORPORATIONS.

    (a) In General.--Subsection (b) of section 7874 of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(b) Inverted Corporations Treated as Domestic Corporations.--
            ``(1) In general.--Notwithstanding section 7701(a)(4), a 
        foreign corporation shall be treated for purposes of this title 
        as a domestic corporation if--
                    ``(A) such corporation would be a surrogate foreign 
                corporation if subsection (a)(2) were applied by 
                substituting `80 percent' for `60 percent', or
                    ``(B) such corporation is an inverted domestic 
                corporation.
            ``(2) Inverted domestic corporation.--For purposes of this 
        subsection, a foreign corporation shall be treated as an 
        inverted domestic corporation if, pursuant to a plan (or a 
        series of related transactions)--
                    ``(A) the entity completes after May 8, 2014, the 
                direct or indirect acquisition of--
                            ``(i) substantially all of the properties 
                        held directly or indirectly by a domestic 
                        corporation, or
                            ``(ii) substantially all of the assets of, 
                        or substantially all of the properties 
                        constituting a trade or business of, a domestic 
                        partnership, and
                    ``(B) after the acquisition, more than 50 percent 
                of the stock (by vote or value) of the entity is held--
                            ``(i) in the case of an acquisition with 
                        respect to a domestic corporation, by former 
                        shareholders of the domestic corporation by 
                        reason of holding stock in the domestic 
                        corporation, or
                            ``(ii) in the case of an acquisition with 
                        respect to a domestic partnership, by former 
                        partners of the domestic partnership by reason 
                        of holding a capital or profits interest in the 
                        domestic partnership.
            ``(3) Exception for corporations with substantial business 
        activities in foreign country of organization.--A foreign 
        corporation described in paragraph (2) shall not be treated as 
        an inverted domestic corporation if after the acquisition the 
        expanded affiliated group which includes the entity has 
        substantial business activities in the foreign country in which 
        or under the law of which the entity is created or organized 
        when compared to the total business activities of such expanded 
        affiliated group. For purposes of subsection (a)(2)(B)(iii) and 
        the preceding sentence, the term `substantial business 
        activities' shall have the meaning given such term under 
        regulations in effect on May 8, 2014, except that the Secretary 
        may issue regulations increasing the threshold percent in any 
        of the tests under such regulations for determining if business 
        activities constitute substantial business activities for 
        purposes of this paragraph.''.
    (b) Conforming Amendments.--
            (1) Clause (i) of section 7874(a)(2)(B) of the Internal 
        Revenue Code of 1986 is amended by striking ``after March 4, 
        2003,'' and inserting ``after March 4, 2003, and before May 9, 
        2014,''.
            (2) Subsection (c) of section 7874 of such Code is 
        amended--
                    (A) in paragraph (2)--
                            (i) by striking ``subsection 
                        (a)(2)(B)(ii)'' and inserting ``subsections 
                        (a)(2)(B)(ii) and (b)(2)(B)'', and
                            (ii) by inserting ``or (b)(2)(A)'' after 
                        ``(a)(2)(B)(i)'' in subparagraph (B),
                    (B) in paragraph (3), by inserting ``or (b)(2)(B), 
                as the case may be,'' after ``(a)(2)(B)(ii)'',
                    (C) in paragraph (5), by striking ``subsection 
                (a)(2)(B)(ii)'' and inserting ``subsections 
                (a)(2)(B)(ii) and (b)(2)(B)'', and
                    (D) in paragraph (6), by inserting ``or inverted 
                domestic corporation, as the case may be,'' after 
                ``surrogate foreign corporation''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after May 8, 2014.
                                 <all>
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