Sequester Delay and Stop Tax Haven Abuse Act

To alleviate the sequestration and to end offshore tax abuses, to preserve our national defense and protect American families and businesses from devastating cuts, and for other purposes. 1. Short title, etc (a) Short title This Act may be cited as the Sequester Delay and Stop Tax Haven Abuse Act (b) Amendment of 1986 code Except as otherwise expressly provided, whenever in titles II through IV of this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. (c) Table of contents The table of contents of this Act is as follows: Sec. 1. Short title, etc. Sec. 2. Findings. Title I—Extension of Sequestration Sec. 101. Repeal the 2014 and 2015 sequesters. Sec. 102. Modification of discretionary spending caps for fiscal year 2016. Title II—Deterring the use of tax havens for tax evasion Sec. 201. Authorizing special measures against foreign jurisdictions, financial institutions, and others that significantly impede United States tax enforcement. Sec. 202. Strengthening the Foreign Account Tax Compliance Act (FATCA). Sec. 203. Treatment of foreign corporations managed and controlled in the United States as domestic corporations. Sec. 204. Reporting United States beneficial owners of foreign owned financial accounts. Sec. 205. Swap payments made from the United States to persons offshore. Title III—Other measures To combat tax haven abuses Sec. 301. Country-by-country reporting. Sec. 302. Penalty for failing to disclose offshore holdings. Sec. 303. Deadline for anti-money laundering rule for investment advisers. Sec. 304. Anti-money laundering requirements for formation agents. Sec. 305. Strengthening John Doe summons proceedings. Sec. 306. Improving enforcement of foreign financial account reporting. Title IV—Ending corporate offshore tax avoidance Sec. 401. Allocation of expenses and taxes on basis of repatriation of foreign income. Sec. 402. Current taxation of royalties and other income from intangibles received from a controlled foreign corporation. Sec. 403. Limitations on income shifting through intangible property transfers. Sec. 404. Repeal of check-the-box rules for certain foreign entities and CFC look-thru rules. Sec. 405. Prohibition on offshore loan abuse. 2. Findings The Congress finds the following: (1) Over the last three years, Congress has enacted several rounds of spending cuts that are negatively impacting core government programs and services including medical research, education, public safety, and so much more. These cuts were made worse by sequestration, and the impact of sequestration in 2014 will be worse for the economy, as spending cuts will be larger, begin immediately, and build on the previous rounds of cuts. (2) If sequestration continues into 2014, discretionary spending subject to the Budget Control Act caps will be $123 billion or 11 percent lower than it was in 2010. (3) In October 2013, the International Monetary Fund downwardly revised the GDP growth forecast for the United States by 0.2 percent due to the expectation that sequestration would remain in place through 2014. (4) According to the Congressional Budget Office, repealing the 2014 sequestration cuts would increase real GDP by 0.6 percent and increase employment by 800,000 jobs. (5) The Sequester Delay and Stop Tax Haven Abuse Act (6) United States corporations are paying historically low Federal taxes while reaping all-time high profits. Corporate taxes in 2012 accounted for just 9.9 percent of total revenue, compared with 32.1 percent 60 years earlier, according to the Office of Budget and Management. In 2012, United States corporations kept an estimated $1.9 trillion in undistributed foreign earnings offshore. (7) Corporations avoid Federal taxation in part by using tax loopholes to shift their profits offshore through an increasing number of foreign subsidiaries. In 2008, the Government Accountability Office reported that 83 of the top 100 publicly traded companies had subsidiaries in offshore tax havens. More than two dozen large, profitable United States corporations paid no Federal taxes at all in 2011. (8) The United States is losing an estimated $150 billion a year in revenue to offshore tax-avoidance schemes. In 2008, the Government Accountability Office released information showing 18,857 corporations listed their address of incorporation as the Ugland House in the Cayman Islands, nearly 9,000 of which had a United States billing address. According to Audit Analytics, a private research firm, the estimated $1.9 trillion in United States profits being kept abroad untaxed represents a 70 percent increase over the last 5 years. (9) In 2008, according to an analysis by the Congressional Research Service, American multinational companies collectively reported 43 percent of their foreign earnings in five tax haven countries: Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland. Yet these countries accounted for only 4 percent of the companies’ foreign workforce and just 7 percent of their foreign investment. (10) According to the Congressional Budget Office, though the statutory corporate tax rate is 35 percent, corporations were actually taxed at an effective rate of 12.1 percent in 2011. (11) The corporate tax share of the American economy is less than the corporate tax share of the economies of our foreign competitors. At 2.7 percent, the United States ranked 17 out of 32 Organisation for Economic Co-operation and Development (OECD) countries, behind Great Britain, Canada, and Japan. (12) Corporate tax loopholes that allow United States corporations to use shell companies and accounting gimmicks to move profits offshore, encourage United States corporations to move jobs and operations overseas, and put domestic firms that pay taxes at a competitive disadvantage should be closed. I Extension of Sequestration 101. Repeal the 2014 and 2015 sequesters (a) Calculation of total deficit reduction and allocation to functions (1) Section 251A(3) of the Balanced Budget and Emergency Deficit Control Act of 1985 ( 2 U.S.C. 901a 2013 2016 (2) Paragraph (4) of such section is amended by striking 2014 2016 (3) Paragraphs (5) and (6) of such section are amended by striking 2013 2016 (b) Defense and nondefense function reductions Paragraphs (5) and (6) of section 251A of the Balanced Budget and Emergency Deficit Control Act of 1985 are amended by striking 2013 2016 (c) Implementing discretionary reductions Section 251A(7)(B) of such Act is amended by striking 2014 2016 (d) Conforming change Upon the date of enactment of this Act, the report entitled OMB Sequestration Preview Report to the President and Congress for Fiscal Year 2014 and OMB Report to the Congress on the Joint Committee Reductions for Fiscal Year 2014 102. Modification of discretionary spending caps for fiscal year 2016 Section 251(c)(5) of the Balanced Budget and Emergency Deficit Control Act of 1985 is amended by increasing the budget authority for fiscal year 2016 for the security category by $22,992,000,000,000 and for the nonsecurity category by $15,652,000,000,000. II Deterring the use of tax havens for tax evasion 201. Authorizing special measures against foreign jurisdictions, financial institutions, and others that significantly impede United States tax enforcement Section 5318A (1) by striking the section heading and inserting the following: 5318A. Special measures for jurisdictions, financial institutions, or international transactions that are of primary money laundering concern or significantly impede United States tax enforcement ; (2) in subsection (a), by striking the subsection heading and inserting the following: (a) Special measures To counter money laundering and efforts to significantly impede United States tax enforcement ; (3) in subsection (c)— (A) by striking the subsection heading and inserting the following: (c) Consultations and information To be considered in finding jurisdictions, institutions, types of accounts, or transactions To be of primary money laundering concern or To be significantly impeding United States tax enforcement ; and (B) by inserting at the end of paragraph (2) thereof the following new subparagraph: (C) Other considerations The fact that a jurisdiction or financial institution is cooperating with the United States on implementing the requirements specified in chapter 4 ; (4) in subsection (a)(1), by inserting or is significantly impeding United States tax enforcement primary money laundering concern (5) in subsection (a)(4)— (A) in subparagraph (A)— (i) by inserting in matters involving money laundering, shall consult (ii) by striking and (B) by redesignating subparagraph (B) as subparagraph (C); and (C) by inserting after subparagraph (A) the following: (B) in matters involving United States tax enforcement, shall consult with the Commissioner of the Internal Revenue, the Secretary of State, the Attorney General of the United States, and in the sole discretion of the Secretary, such other agencies and interested parties as the Secretary may find to be appropriate; and ; (6) in each of paragraphs (1)(A), (2), (3), and (4) of subsection (b), by inserting or to be significantly impeding United States tax enforcement primary money laundering concern (7) in subsection (b), by striking paragraph (5) and inserting the following: (5) Prohibitions or conditions on opening or maintaining certain correspondent or payable-through accounts or authorizing certain payment cards If the Secretary finds a jurisdiction outside of the United States, 1 or more financial institutions operating outside of the United States, or 1 or more classes of transactions within or involving a jurisdiction outside of the United States to be of primary money laundering concern or to be significantly impeding United States tax enforcement, the Secretary, in consultation with the Secretary of State, the Attorney General of the United States, and the Chairman of the Board of Governors of the Federal Reserve System, may prohibit, or impose conditions upon— (A) the opening or maintaining in the United States of a correspondent account or payable-through account; or (B) the authorization, approval, or use in the United States of a credit card, charge card, debit card, or similar credit or debit financial instrument by any domestic financial institution, financial agency, or credit card company or association, for or on behalf of a foreign banking institution, if such correspondent account, payable-through account, credit card, charge card, debit card, or similar credit or debit financial instrument, involves any such jurisdiction or institution, or if any such transaction may be conducted through such correspondent account, payable-through account, credit card, charge card, debit card, or similar credit or debit financial instrument. ; and (8) in subsection (c)(1), by inserting or is significantly impeding United States tax enforcement primary money laundering concern (9) in subsection (c)(2)(A)— (A) in clause (ii), by striking bank secrecy or special regulatory advantages bank, tax, corporate, trust, or financial secrecy or regulatory advantages (B) in clause (iii), by striking supervisory and counter-money supervisory, international tax enforcement, and counter-money (C) in clause (v), by striking banking or secrecy banking, tax, or secrecy (D) in clause (vi), by inserting , tax treaty, or tax information exchange agreement treaty (10) in subsection (c)(2)(B)— (A) in clause (i), by inserting or tax evasion money laundering (B) in clause (iii), by inserting , tax evasion, money laundering (11) in subsection (d), by inserting involving money laundering, and shall notify, in writing, the Committee on Finance of the Senate and the Committee on Ways and Means of the House of Representatives of any such action involving United States tax enforcement such action 202. Strengthening the Foreign Account Tax Compliance Act (FATCA) (a) Reporting activities with respect to passive foreign investment companies Section 1298(f) is amended by inserting , or who directly or indirectly forms, transfers assets to, is a beneficiary of, has a beneficial interest in, or receives money or property or the use thereof from, shareholder of (b) Withholdable payments to foreign financial institutions Section 1471(d) is amended— (1) by inserting or transaction any depository (2) by striking or any interest derivatives, or any interest (including a futures or forward contract, swap, or option) in such securities, partnership interests, commodities, or derivatives. (c) Withholdable payments to other foreign financial institutions Section 1472 is amended— (1) by inserting as a result of any customer identification, anti-money laundering, anti-corruption, or similar obligation to identify account holders, reason to know, (2) by inserting as posing a low risk of tax evasion this subsection (d) Definitions Clauses (i) and (ii) of section 1473(2)(A) are each amended by inserting or as a beneficial owner indirectly (e) Special rules Section 1474(c) is amended— (1) by inserting , except that information provided under sections 1471(c) or 1472(b) may be disclosed to any Federal law enforcement agency, upon request or upon the initiation of the Secretary, to investigate or address a possible violation of United States law shall apply (2) by inserting , or has had an agreement terminated under such section, section 1471(b) (f) Information with respect to foreign financial assets Section 6038D(a) is amended by inserting ownership or beneficial ownership holds any (g) Establishing presumptions for entities and transactions involving non-FATCA institutions (1) Presumptions for tax purposes (A) In general Chapter 76 is amended by inserting after section 7491 the following new subchapter: F Presumptions for certain legal proceedings Sec. 7492. Presumptions pertaining to entities and transactions involving non-FATCA institutions. 7492. Presumptions pertaining to entities and transactions involving non-FATCA institutions (a) Control For purposes of any United States civil judicial or administrative proceeding to determine or collect tax, there shall be a rebuttable presumption that a United States person who, directly or indirectly, formed, transferred assets to, was a beneficiary of, had a beneficial interest in, or received money or property or the use thereof from an entity, including a trust, corporation, limited liability company, partnership, or foundation, that holds an account, or in any other manner has assets, in a non-FATCA institution, exercised control over such entity. The presumption of control created by this subsection shall not be applied to prevent the Secretary from determining or arguing the absence of control. (b) Transfers of income For purposes of any United States civil judicial or administrative proceeding to determine or collect tax, there shall be a rebuttable presumption that any amount or thing of value received by a United States person directly or indirectly from an account or from an entity that holds an account, or in any other manner has assets, in a non-FATCA institution, constitutes income of such person taxable in the year of receipt; and any amount or thing of value paid or transferred by or on behalf of a United States person directly or indirectly to an account, or entity that holds an account, or in any other manner has assets, in a non-FATCA institution, represents previously unreported income of such person taxable in the year of the transfer. (c) Rebutting the presumptions The presumptions established in this section may be rebutted only by clear and convincing evidence, including detailed documentary, testimonial, and transactional evidence, establishing that— (1) in subsection (a), such taxpayer exercised no control, directly or indirectly, over account or entity at the time in question, and (2) in subsection (b), such amounts or things of value did not represent income related to such United States person. Any court having jurisdiction of a civil proceeding in which control of such an offshore account or offshore entity or the income character of such receipts or amounts transferred is an issue shall prohibit the introduction by the taxpayer of any foreign based document that is not authenticated in open court by a person with knowledge of such document, or any other evidence supplied by a person outside the jurisdiction of a United States court, unless such person appears before the court. . (B) The table of subchapters for chapter 76 is amended by inserting after the item relating to subchapter E the following new item: Subchapter F—Presumptions for certain legal proceedings . (2) Definition of non-fatca institution Section 7701(a) is amended by adding at the end the following new paragraph: (51) Non-fatca institution The term non-FATCA institution . (3) Presumptions for securities law purposes Section 21 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78u (j) Presumptions pertaining to control and beneficial ownership (1) Control For purposes of any civil judicial or administrative proceeding under this title, there shall be a rebuttable presumption that a United States person who, directly or indirectly, formed, transferred assets to, was a beneficiary of, had a beneficial interest in, or received money or property or the use thereof from an entity, including a trust, corporation, limited liability company, partnership, or foundation, that holds an account, or in any other manner has assets, in a non-FATCA institution (as defined in section 7701(a)(51) (2) Beneficial ownership For purposes of any civil judicial or administrative proceeding under this title, there shall be a rebuttable presumption that securities that are nominally owned by an entity, including a trust, corporation, limited liability company, partnership, or foundation, and that are held in a non-FATCA institution (as so defined), are beneficially owned by any United States person who directly or indirectly exercised control over such entity. The presumption of beneficial ownership created by this paragraph shall not be applied to prevent the Commission from determining or arguing the absence of beneficial ownership. . (4) Presumption for reporting purposes relating to foreign financial accounts Section 5314 (d) Rebuttable presumption For purposes of this section, there shall be a rebuttable presumption that any account with a non-FATCA institution (as defined in section 7701(a)(51) . (5) Regulatory authority Not later than 180 days after the date of enactment of this Act, the Secretary of the Treasury and the Chairman of the Securities and Exchange Commission shall each adopt regulations or other guidance necessary to implement the amendments made by this subsection. The Secretary and the Chairman may, by regulation or guidance, provide that the presumption of control shall not extend to particular classes of transactions, such as corporate reorganizations or transactions below a specified dollar threshold, if either determines that applying such amendments to such transactions is not necessary to carry out the purposes of such amendments. (h) Effective date The amendments made by this section shall take effect on the date which is 180 days after the date of enactment of this Act, whether or not regulations are issued under subsection (g)(5). 203. Treatment of foreign corporations managed and controlled in the United States as domestic corporations (a) In general Section 7701 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, whether or not regulations are issued under section 7701(p)(3) 204. Reporting United States beneficial owners of foreign owned financial accounts (a) In general Subpart B of part III of subchapter A of chapter 61 is amended by inserting after section 6045B the following new sections: 6045C. Returns regarding United States beneficial owners of financial accounts located in the United States and held in the name of a foreign entity (a) Requirement of return If— (1) any withholding agent under sections 1441 and 1442 has the control, receipt, custody, disposal, or payment of any amount constituting gross income from sources within the United States of any foreign entity, including a trust, corporation, limited liability company, partnership, or foundation (other than an entity with shares regularly traded on an established securities market), and (2) such withholding agent determines for purposes of titles 14, 18, or 31 of the United States Code that a United States person has any beneficial interest in the foreign entity or in the account in such entity's name (hereafter in this section referred to as United States beneficial owner then the withholding agent shall make a return according to the forms or regulations prescribed by the Secretary. (b) Required information For purposes of subsection (a) the information required to be included on the return shall include— (1) the name, address, and, if known, the taxpayer identification number of the United States beneficial owner, (2) the known facts pertaining to the relationship of such United States beneficial owner to the foreign entity and the account, (3) the gross amount of income from sources within the United States (including gross proceeds from brokerage transactions), and (4) such other information as the Secretary may by forms or regulations provide. (c) Statements To Be furnished to beneficial owners with respect to whom information is required To Be reported A withholding agent required to make a return under subsection (a) shall furnish to each United States beneficial owner whose name is required to be set forth in such return a statement showing— (1) the name, address, and telephone number of the information contact of the person required to make such return, and (2) the information required to be shown on such return with respect to such United States beneficial owner. The written statement required under the preceding sentence shall be furnished to the United States beneficial owner on or before January 31 of the year following the calendar year for which the return under subsection (a) was required to be made. In the event the person filing such return does not have a current address for the United States beneficial owner, such written statement may be mailed to the address of the foreign entity. 6045D. Returns by financial institutions regarding establishment of accounts in non-FATCA institutions (a) Requirement of return Any financial institution directly or indirectly opening a bank, brokerage, or other financial account for or on behalf of an offshore entity, including a trust, corporation, limited liability company, partnership, or foundation (other than an entity with shares regularly traded on an established securities market), in a non-FATCA institution (as defined in section 7701(a)(51)) at the direction of, on behalf of, or for the benefit of a United States person shall make a return according to the forms or regulations prescribed by the Secretary. (b) Required information For purposes of subsection (a) the information required to be included on the return shall include— (1) the name, address, and taxpayer identification number of such United States person, (2) the name and address of the financial institution at which a financial account is opened, the type of account, the account number, the name under which the account was opened, and the amount of the initial deposit, (3) if the account is held in the name of an entity, the name and address of such entity, the type of entity, and the name and address of any company formation agent or other professional employed to form or acquire the entity, and (4) such other information as the Secretary may by forms or regulations provide. (c) Statements To be furnished to United States persons with respect to whom information is required To be reported A financial institution required to make a return under subsection (a) shall furnish to each United States person whose name is required to be set forth in such return a statement showing— (1) the name, address, and telephone number of the information contact of the person required to make such return, and (2) the information required to be shown on such return with respect to such United States person. The written statement required under the preceding sentence shall be furnished to such United States person on or before January 31 of the year following the calendar year for which the return under subsection (a) was required to be made. (d) Exemption The Secretary may by regulations exempt any class of United States persons or any class of accounts or entities from the requirements of this section if the Secretary determines that applying this section to such persons, accounts, or entities is not necessary to carry out the purposes of this section. . (b) Penalties (1) Returns Section 6724(d)(1)(B) is amended by striking or and (xxvi) section 6045C(a) (relating to returns regarding United States beneficial owners of financial accounts located in the United States and held in the name of a foreign entity), or (xxvii) section 6045D(a) (relating to returns by financial institutions regarding establishment of accounts at non-FATCA institutions), and . (2) Payee statements Section 6724(d)(2) is amended by striking or (II) section 6045C(c) (relating to returns regarding United States beneficial owners of financial accounts located in the United States and held in the name of a foreign entity), (JJ) section 6045D(c) (relating to returns by financial institutions regarding establishment of accounts at non-FATCA institutions). . (c) Clerical amendment The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6045B the following new items: Sec. 6045C. Returns regarding United States beneficial owners of financial accounts located in the United States and held in the name of a foreign entity. Sec. 6045D. Returns by financial institutions regarding establishment of accounts at non-FATCA institutions. . (d) Additional penalties (1) Additional penalties on banks Section 5239(b)(1) of the Revised Statutes of the United States ( 12 U.S.C. 93(b)(1) or any of the provisions of section 6045D any regulation issued pursuant to, (2) Additional penalties on securities firms Section 21(d)(3)(A) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78u(d)(3)(A) any of the provisions of section 6045D the rules or regulations thereunder, (e) Regulatory authority and effective date (1) Regulatory Authority Not later than 180 days after the date of the enactment of this Act, the Secretary of the Treasury shall adopt regulations, forms, or other guidance necessary to implement this section. (2) Effective Date Section 6045C 205. Swap payments made from the United States to persons offshore (a) Tax on swap payments received by foreign persons Section 871(a)(1) is amended— (1) by inserting swap payments (as identified in section 1256(b)(2)(B)), annuities, (2) by adding at the end the following new sentence: In the case of swap payments, the source of a swap payment is determined by reference to the location of the payor. (b) Tax on swap payments received by foreign corporations Section 881(a) is amended— (1) by inserting swap payments (as identified in section 1256(b)(2)(B)), annuities, (2) by adding at the end the following new sentence: In the case of swap payments, the source of a swap payment is determined by reference to the location of the payor. III Other measures To combat tax haven abuses 301. Country-by-country reporting (a) Country-by-Country reporting Section 13 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m (s) Disclosure of financial performance on a country-by-Country basis (1) Definitions In this subsection— (A) the term issuer group (B) the term country of operation (2) Rules required The Commission shall issue rules that require each issuer to include in an annual report filed by the issuer with the Commission information on a country-by-country basis during the covered period, consisting of— (A) a list of each country of operation and the name of each entity of the issuer group domiciled in each country of operation; (B) the number of employees physically working in each country of operation; (C) the total pre-tax gross revenues of each member of the issuer group in each country of operation; (D) the total amount of payments made to governments by each member of the issuer group in each country of operation, without exception, including, and set forth according to— (i) total Federal, regional, local, and other tax assessed against each member of the issuer group with respect to each country of operation during the covered period; and (ii) after any tax deductions, tax credits, tax forgiveness, or other tax benefits or waivers, the total amount of tax paid from the treasury of each member of the issuer group to the government of each country of operation during the covered period; and (E) such other financial information as the Commission may determine is necessary or appropriate in the public interest or for the protection of investors. . (b) Rulemaking (1) Deadlines The Securities and Exchange Commission (in this section referred to as the Commission (A) not later than 270 days after the date of enactment of this Act, issue a proposed rule to carry out this section and the amendment made by this section; and (B) not later than 1 year after the date of enactment of this Act, issue a final rule to carry out this section and the amendment made by this section. (2) Data format The information required to be provided by this section shall be provided by the issuer in a report in a format prescribed by the Commission, and such report shall be made available to the public online, in such format as the Commission shall prescribe. (3) Effective date Subsection (s) of section 13 of the Securities Exchange Act of 1934, as added by this section, shall become effective 1 year after the date on which the Commission issues a final rule under this section. 302. Penalty for failing to disclose offshore holdings (a) Securities Exchange Act of 1934 Section 21(d)(3)(B) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78u(d)(3)(B) (iv) Fourth tier Notwithstanding clauses (i), (ii), and (iii), for each violation, the amount of the penalty shall not exceed $1,000,000 for any natural person or $10,000,000 for any other person, if— (I) such person directly or indirectly controlled any foreign entity, including any trust, corporation, limited liability company, partnership, or foundation through which an issuer purchased, sold, or held equity or debt instruments; (II) such person knowingly or recklessly failed to disclose any such holding, purchase, or sale by the issuer; and (III) the holding, purchase, or sale would have been otherwise subject to disclosure by the issuer or such person under this title. . (b) Securities Act of 1933 Section 20(d)(2) of the Securities Act of 1933 ( 15 U.S.C. 77t(d)(2) (D) Fourth tier Notwithstanding subparagraphs (A), (B), and (C), for each violation, the amount of the penalty shall not exceed $1,000,000 for any natural person or $10,000,000 for any other person, if— (i) such person directly or indirectly controlled any foreign entity, including any trust, corporation, limited liability company, partnership, or foundation through which an issuer purchased, sold, or held equity or debt instruments; (ii) such person knowingly or recklessly failed to disclose any such holding, purchase, or sale by the issuer; and (iii) the holding, purchase, or sale would have been otherwise subject to disclosure by the issuer or such person under this title. . (c) Investment Advisers Act of 1940 Section 203(i)(2) of the Investment Advisers Act of 1940 ( 15 U.S.C. 80b–3(i)(2) (D) Fourth tier Notwithstanding subparagraphs (A), (B), and (C), for each violation, the amount of the penalty shall not exceed $1,000,000 for any natural person or $10,000,000 for any other person, if— (i) such person directly or indirectly controlled any foreign entity, including any trust, corporation, limited liability company, partnership, or foundation through which an issuer purchased, sold, or held equity or debt instruments; (ii) such person knowingly or recklessly failed to disclose any such holding, purchase, or sale by the issuer; and (iii) the holding, purchase, or sale would have been otherwise subject to disclosure by the issuer or such person under this title. . 303. Deadline for anti-money laundering rule for investment advisers (a) Anti-Money laundering obligations for investment advisers Section 5312(a)(2) (1) in subparagraph (Y), by striking or (2) by redesignating subparagraph (Z) as subparagraph (BB); and (3) by inserting after subparagraph (Y) the following: (Z) an investment adviser; . (b) Rules required The Secretary of the Treasury shall— (1) in consultation with the Chairman of the Securities and Exchange Commission and the Chairman of the Commodity Futures Trading Commission, not later than 270 days after the date of enactment of this Act, publish a proposed rule in the Federal Register to carry out the amendments made by this section; and (2) not later than 180 days after the date of enactment of this Act, publish a final rule in the Federal Register on the matter described in paragraph (1). (c) Contents The final rule published under this section shall require, at a minimum, each investment adviser (as defined in section 202(a)(11) of the Investment Advisers Act of 1940 ( 15 U.S.C. 80b–2(a)(11) 15 U.S.C. 80b–3 (1) to submit suspicious activity reports and establish an anti-money laundering program under subsections (g) and (h), respectively, of section 5318 (2) to comply with— (A) the customer identification program requirements under section 5318(l) (B) the due diligence requirements under section 5318(i) 304. Anti-money laundering requirements for formation agents (a) Anti-Money laundering obligations for formation agents Section 5312(a)(2) (AA) any person engaged in the business of forming new corporations, limited liability companies, partnerships, trusts, or other legal entities; or . (b) Deadline for anti-Money laundering rule for formation agents (1) Proposed rule The Secretary of the Treasury, in consultation with the Attorney General of the United States, the Secretary of Homeland Security, and the Commissioner of Internal Revenue, shall— (A) not later than 120 days after the date of enactment of this Act, publish a proposed rule in the Federal Register requiring persons described in section 5312(a)(2)(AA) (B) not later than 270 days after the date of enactment of this Act, publish a final rule in the Federal Register on the matter described in subparagraph (A). (2) Exclusions The rule promulgated under this subsection shall exclude from the category of persons engaged in the business of forming new corporations or other entities— (A) any government agency; and (B) any attorney or law firm that uses a paid formation agent operating within the United States to form such corporations or other entities. 305. Strengthening John Doe summons proceedings (a) In general Subsection (f) of section 7609 is amended to read as follows: (f) Additional requirement in the case of a John Doe summons (1) General Rule Any summons described in subsection (c)(1) which does not identify the person with respect to whose liability the summons is issued may be served only after a court proceeding in which the Secretary establishes that— (A) the summons relates to the investigation of a particular person or ascertainable group or class of persons, (B) there is a reasonable basis for believing that such person or group or class of persons may fail or may have failed to comply with any provision of any internal revenue law, and (C) the information sought to be obtained from the examination of the records or testimony (and the identity of the person or persons with respect to whose liability the summons is issued) is not readily available from other sources. (2) Exception Paragraph (1) shall not apply to any summons which specifies that it is limited to information regarding a United States correspondent account (as defined in section 5318A(e)(1)(B) (3) Presumption in cases involving non-fatca institutions For purposes of this section, in any case in which the particular person or ascertainable group or class of persons have financial accounts in or transactions related to a non-FATCA institution (as defined in section 7701(a)(51)), there shall be a presumption that there is a reasonable basis for believing that such person or group or class of persons may fail or may have failed to comply with provisions of internal revenue law. (4) Project John Doe summonses (A) In general Notwithstanding the requirements of paragraph (1), the Secretary may issue a summons described in paragraph (1) if the summons— (i) relates to a project which is approved under subparagraph (B), (ii) is issued to a person who is a member of the group or class established under subparagraph (B)(i), and (iii) is issued within 3 years of the date on which such project was approved under subparagraph (B). (B) Approval of projects A project may only be approved under this subparagraph after a court proceeding in which the Secretary establishes that— (i) any summons issued with respect to the project will be issued to a member of an ascertainable group or class of persons, and (ii) any summons issued with respect to such project will meet the requirements of paragraph (1). (C) Extension Upon application of the Secretary, the court may extend the time for issuing such summonses under subparagraph (A)(i) for additional 3-year periods, but only if the court continues to exercise oversight of such project under subparagraph (D). (D) Ongoing court oversight During any period in which the Secretary is authorized to issue summonses in relation to a project approved under subparagraph (B) (including during any extension under subparagraph (C)), the Secretary shall report annually to the court on the use of such authority, provide copies of all summonses with such report, and comply with the court's direction with respect to the issuance of any John Doe summons under such project. . (b) Jurisdiction of court (1) In general Paragraph (1) of section 7609(h) is amended by inserting after the first sentence the following new sentence: Any United States district court in which a member of the group or class to which a summons may be issued resides or is found shall have jurisdiction to hear and determine the approval of a project under subsection (f)(2)(B). (2) Conforming amendment The first sentence of section 7609(h)(1) is amended by striking (f) (f)(1) (c) Effective date The amendments made by this section shall apply to summonses issued after the date of the enactment of this Act. 306. Improving enforcement of foreign financial account reporting (a) Clarifying the connection of foreign financial account reporting to tax administration Paragraph (4) of section 6103(b) is amended by adding at the end the following new sentence: For purposes of subparagraph (A)(i), section 5314 . (b) Simplifying the calculation of foreign financial account reporting penalties Section 5321(a)(5)(D)(ii) the balance in the account at the time of the violation the highest balance in the account during the reporting period to which the violation relates (c) Clarifying the use of suspicious activity reports under the Bank Secrecy Act for civil tax law enforcement Section 5319 the civil and criminal enforcement divisions of the Internal Revenue Service, including IV Ending corporate offshore tax avoidance 401. Allocation of expenses and taxes on basis of repatriation of foreign income (a) In general Part III of subchapter N of chapter 1 is amended by inserting after subpart G the following new subpart: H Special Rules for Allocation of Foreign-Related Deductions and Foreign Tax Credits Sec. 975. Deductions allocated to deferred foreign income may not offset United States source income. Sec. 976. Amount of foreign taxes computed on overall basis. Sec. 977. Application of subpart. 975. Deductions allocated to deferred foreign income may not offset United States source income (a) Current year deductions For purposes of this chapter, foreign-related deductions for any taxable year— (1) shall be taken into account for such taxable year only to the extent that such deductions are allocable to currently-taxed foreign income, and (2) to the extent not so allowed, shall be taken into account in subsequent taxable years as provided in subsection (b). Foreign-related deductions shall be allocated to currently taxed foreign income in the same proportion which currently taxed foreign income bears to the sum of currently taxed foreign income and deferred foreign income. (b) Deductions related to repatriated deferred foreign income (1) In general If there is repatriated foreign income for a taxable year, the portion of the previously deferred deductions allocated to the repatriated foreign income shall be taken into account for the taxable year as a deduction allocated to income from sources outside the United States. Any such amount shall not be included in foreign-related deductions for purposes of applying subsection (a) to such taxable year. (2) Portion of previously deferred deductions For purposes of paragraph (1), the portion of the previously deferred deductions allocated to repatriated foreign income is— (A) the amount which bears the same proportion to such deductions, as (B) the repatriated income bears to the previously deferred foreign income. (c) Definitions and special rule For purposes of this section— (1) Foreign-related deductions The term foreign-related deductions (2) Currently-taxed foreign income The term currently-taxed foreign income (3) Deferred foreign income The term deferred foreign income (A) the amount that would be includible in gross income under subpart F of this part for the taxable year if— (i) all controlled foreign corporations were treated as one controlled foreign corporation, and (ii) all earnings and profits of all controlled foreign corporations were subpart F income (as defined in section 952), over (B) the sum of— (i) all dividends received during the taxable year from controlled foreign corporations, plus (ii) amounts includible in gross income under section 951(a). (4) Previously deferred foreign income The term previously deferred foreign income (5) Repatriated foreign income The term repatriated foreign income (6) Previously deferred deductions The term previously deferred deductions (7) Treatment of certain foreign taxes (A) Paid by controlled foreign corporation Section 78 shall not apply for purposes of determining currently-taxed foreign income and deferred foreign income. (B) Paid by taxpayer For purposes of determining currently-taxed foreign income, gross income from sources without the United States shall be reduced by the aggregate amount of taxes described in the applicable paragraph of section 901(b) which are paid by the taxpayer (without regard to sections 902 and 960) during the taxable year. (8) Coordination with section 976 In determining currently-taxed foreign income and deferred foreign income, the amount of deemed foreign tax credits shall be determined with regard to section 976. 976. Amount of foreign taxes computed on overall basis (a) Current year allowance For purposes of this chapter, the amount taken into account as foreign income taxes for any taxable year shall be an amount which bears the same ratio to the total foreign income taxes for that taxable year as— (1) the currently-taxed foreign income for such taxable year, bears to (2) the sum of the currently-taxed foreign income and deferred foreign income for such year. The portion of the total foreign income taxes for any taxable year not taken into account under the preceding sentence for a taxable year shall only be taken into account as provided in subsection (b) (and shall not be taken into account for purposes of applying sections 902 and 960). (b) Allowance related to repatriated deferred foreign income (1) In general If there is repatriated foreign income for any taxable year, the portion of the previously deferred foreign income taxes paid or accrued during such taxable year shall be taken into account for the taxable year as foreign taxes paid or accrued. Any such taxes so taken into account shall not be included in foreign income taxes for purposes of applying subsection (a) to such taxable year. (2) Portion of previously deferred foreign income taxes For purposes of paragraph (1), the portion of the previously deferred foreign income taxes allocated to repatriated deferred foreign income is— (A) the amount which bears the same proportion to such taxes, as (B) the repatriated deferred income bears to the previously deferred foreign income. (c) Definitions and special rule For purposes of this section— (1) Previously deferred foreign income taxes The term previously deferred foreign income taxes (2) Total foreign income taxes The term total foreign income taxes (A) all controlled foreign corporations were treated as one controlled foreign corporation, and (B) all earnings and profits of all controlled foreign corporations were subpart F income (as defined in section 952). (3) Foreign income taxes The term foreign income taxes (4) Currently-taxed foreign income and deferred foreign income The terms currently-taxed foreign income deferred foreign income 977. Application of subpart This subpart— (1) shall be applied before subpart A, and (2) shall be applied separately with respect to the categories of income specified in section 904(d)(1). . (b) Clerical amendment The table of subparts for part III of subpart N of chapter 1 is amended by inserting after the item relating to subpart G the following new item: Subpart H. Special Rules for Allocation of Foreign-Related Deductions and Foreign Tax Credits . (c) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. 402. Current taxation of royalties and other income from intangibles received from a controlled foreign corporation (a) Repeal of look-Thru rule for royalties received from controlled foreign corporations Paragraph (6) of section 954(c) is amended— (1) by striking rents, and royalties and rents (2) by striking , rent, or royalty or rent (b) Entities not permitted To be disregarded in determining royalties Subsection (c) of section 954 is amended by adding at the end the following new paragraph: (7) All royalties taken into account For purposes of determining the foreign personal holding company income which consists of royalties, this subsection shall be applied without regard to any election to disregard any entity which would be taken into account for Federal income tax purposes but for such election. . (c) Certain other income derived from united states intangibles taken into account as subpart f income Subsection (d) of section 954 is amended by adding at the end the following new paragraph: (5) Special rule for certain products produced pursuant to intangibles made available by united states persons For purposes of this subsection, personal property shall be treated as having been purchased from a related person if any intangible property (within the meaning of section 936(h)(3)(B)) made available to a controlled foreign corporation, directly or indirectly, by a related person which is a United States person contributes, directly or indirectly, to the production of such personal property by the controlled foreign corporation. The preceding sentence shall not apply to any personal property produced directly by the controlled foreign corporation, without regard to any election to disregard any entity which would be taken into account for Federal income tax purposes but for such election. . (d) Effective date The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2013, and to taxable years of United States shareholders within which or with which such tax years of such foreign corporations end. 403. Limitations on income shifting through intangible property transfers (a) Clarification of definition of intangible asset Clause (vi) of section 936(h)(3)(B) is amended by inserting (including any section 197 intangible described in subparagraph (A), (B), or (C)(i) of subsection (d)(1) of such section) item (b) Clarification of allowable valuation methods (1) Foreign corporations Paragraph (2) of section 367(d) is amended by adding at the end the following new subparagraph: (D) Regulatory authority For purposes of the last sentence of subparagraph (A), the Secretary may require— (i) the valuation of transfers of intangible property on an aggregate basis, or (ii) the valuation of such a transfer on the basis of the realistic alternatives to such a transfer, in any case in which the Secretary determines that such basis is the most reliable means of valuation of such transfers. . (2) Allocation among taxpayers Section 482 is amended by adding at the end the following: For purposes of the preceding sentence, the Secretary may require the valuation of transfers of intangible property on an aggregate basis or the valuation of such a transfer on the basis of the realistic alternatives to such a transfer, in any case in which the Secretary determines that such basis is the most reliable means of valuation of such transfers. (c) Effective date (1) In general The amendments made by this section shall apply to transfers in taxable years beginning after the date of the enactment of this Act. (2) No inference Nothing in the amendment made by subsection (a) shall be construed to create any inference with respect to the application of section 936(h)(3) 404. Repeal of check-the-box rules for certain foreign entities and CFC look-thru rules (a) Check-the-Box rules Paragraph (3) of section 7701(a) is amended— (1) by striking and (2) by inserting after insurance companies , and any foreign business entity that— (A) has a single owner that does not have limited liability, or (B) has one or more members all of which have limited liability . (b) Look-Thru rule Subparagraph (C) of section 954(c)(6) is amended to read as follows: (C) Termination Subparagraph (A) shall not apply to dividends, interest, rents, and royalties received or accrued after the date of the enactment of the Sequester Delay and Stop Tax Haven Abuse Act . 405. Prohibition on offshore loan abuse (a) In general Subpart F of part III of subchapter N of chapter 1 is amended by adding at the end the following new section: 966. Income inclusion for loans to United States shareholders from controlled foreign corporations (a) In general In the case of a United States shareholder, there shall be included in income for the taxable year an amount equal to the disqualified CFC loan amount. (b) Disqualified CFC loan amount (1) In general For purposes of this section, the disqualified CFC loan amount for any taxable year is an amount equal to the lesser of— (A) the aggregate amount of obligations of the United States shareholder which originated in such taxable year and are held (directly or indirectly) by controlled foreign corporations, or (B) the foreign group earnings amount. (2) Exception In determining the amount of obligations under subparagraph (A), there shall be excluded any obligation described in section 956(c)(2)(C). (3) Carryforward of certain amounts If, for any taxable year, the amount under subparagraph (A) exceeds the amount under subparagraph (B), such excess shall be taken into account as an obligation to which subparagraph (A) applies for the succeeding taxable year. (4) Foreign group earnings amount For purposes of this section, the term foreign group earnings amount (A) as of the last day of the taxable year of the United States shareholder, and (B) without regard to any distributions made during such taxable year. (c) Denial of interest deduction No deduction shall be allowed for interest paid or accrued with respect to obligations taken into account under subsection (b). (d) Treatment of income source Any amount included in income under subsection (a) shall be treated as income from sources within the United States. . (b) Coordination with section 956 Paragraph (2) of section 956(c) is amended by striking and ; and (M) any obligation which is taken into account in determining the disqualified CFC loan amount under section 966. . (c) Clerical amendment The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by adding at the end the following new item: Sec. 966. Income inclusion for loans to certain United States shareholders from controlled foreign corporations. . (d) Effective date The amendments made by this section shall apply to obligations originated after the date of the of this Act.

Summary: Sequester Delay and Stop Tax Haven Abuse Act - Title I: Extension of Sequestration - Amends the Balanced Budget and Emergency Deficit Control Act of 1985 to: (1) repeal the&nbsp;across-the-board reductions in discretionary spending mandated by such Act in FY2014 and FY2015, and (2) increase the budget authority in FY2016 for the security and nonsecurity budget categories. Title II: Deterring the Use of Tax Havens for Tax Evasion - Authorizes the Secretary of the Treasury to impose restrictions on foreign jurisdictions or financial institutions operating in the United States that are of primary money laundering concern or that significantly impede U.S. tax enforcement. Amends the Internal Revenue Code to: expand reporting requirements for U.S. persons who hold an interest in a passive foreign investment company; establish a rebuttable presumption against the validity of transactions by institutions that do not comply with reporting requirements under the Foreign Account Tax Compliance Act; treat certain foreign corporations managed and controlled primarily in the United States as domestic corporations for U.S. tax purposes; require tax withholding agents and financial institutions to report certain information about beneficial owners of foreign-owned financial accounts; treat swap payments sent offshore as taxable U.S. source income; and impose additional requirements for third party summonses used to obtain information in tax investigations that do not identify the person with respect to whose liability the summons is issued (i.e., John Doe summons). Title III: Other Measures to Combat Tax Haven Abuses - Amends the Securities Exchange Act of 1934 to: (1) require corporations registered with the Securities and Exchange Commission (SEC) to report annually, on a country-by country basis, on employees, gross revenues, payments made to governments, and other financial information; and (2) impose a fine for failure to disclose any holdings or transactions involving equity or debt instruments known to involve a foreign entity that would otherwise be subject to disclosure requirements. Makes investment advisers and persons engaged in forming new business entities subject to anti-money laundering requirements. Title IV Ending Corporate Offshore Tax Avoidance - Imposes new restrictions on U.S. corporations and other entities with foreign income with respect to: (1) tax deductions allocable to deferred foreign income, (2) the recalculation of foreign income taxes, (3) intangible property transferred overseas, (4) tax evasion activities by U.S. corporations reincorporating in a foreign country, and (5) loans to U.S. shareholders from controlled foreign corporations.