Federal Employee Pension Fairness Act

To repeal the revised annuity employee and further revised annuity employee categories within the Federal Employees Retirement System, and for other purposes. 1. Short title This Act may be cited as the Federal Employee Pension Fairness Act 2. Repeal of FERS revised and further revised annuitant categories (a) Repeal of annuity computation Section 8415 (b) Repeal of annuitant categories Section 8422(a)(3) (1) by striking other than revised annuity employees or further revised annuity employees (2) by striking subparagraphs (B) and (C). (c) Repeal of Government contributions Section 8423(a) (2) In determining any normal-cost percentage to be applied under this subsection, amounts provided for under section 8422 shall be taken into account. . (d) Conforming amendments Section 8401 (1) in paragraph (35)(B), by striking the semi-colon at the end and inserting ; and (2) in paragraph (36), by striking ; and (3) by striking paragraphs (37) and (38). (e) Application (1) In general The amendments made by this section shall apply on the first day of the first pay period beginning after the date of enactment of this Act. (2) Treatment of former revised or further revised annuitants Any individual who, as of the date of enactment of this Act, was a revised annuity employee or a further revised annuity employee (but for the amendments made by this section) shall be deemed to be an employee or Member (as those terms are defined in section 8401 3. Repeal of Foreign Service revised or further revised annuity participant categories (a) Repeal of annuitant categories Section 856(a) of the Foreign Service Act of 1980 ( 22 U.S.C. 4071e(a) (2) The applicable percentage for a participant other than a revised annuity participant or a further revised annuity participant shall be as follows: 7.5 Before January 1, 1999. 7.75 January 1, 1999, to December 31, 1999. 7.9 January 1, 2000, to December 31, 2000. 7.55 After January 11, 2003. . (b) Government contribution Section 857 of the Foreign Service Act of 1980 ( 22 U.S.C. 4071f (c) Conforming amendments Section 852 of such Act is amended ( 22 U.S.C. 4071a (1) by striking paragraphs (7) and (8); and (2) by redesignating paragraphs (9), (10), and (11) as paragraphs (7), (8), and (9), respectively. (d) Application (1) In general The amendments made by this section shall apply on the first day of the first pay period beginning after the date of enactment of this Act. (2) Treatment of former revised or further revised annuitants Any individual who, as of the date of enactment of this Act, was a revised annuity participant or a further revised annuity participant (but for the amendments made by this section) shall be deemed to be a participant (as that term is defined in section 852 of the Foreign Service Act of 1980 ( 22 U.S.C. 4071a 4. Treatment of foreign corporations managed and controlled in the United States as domestic corporations (a) In general Section 7701 (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) of the Internal Revenue Code of 1986, as added by this section. 5. Modifications to rules relating to inverted corporations (a) In general Subsection (b) of section 7874 (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 60 percent (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, either— (i) 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, or (ii) the management and control of the expanded affiliated group which includes the entity occurs, directly or indirectly, primarily within the United States, and such expanded affiliated group has significant domestic business activities. (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 (4) Management and control For purposes of paragraph (2)(B)(ii)— (A) In general The Secretary shall prescribe regulations for purposes of determining cases in which the management and control of an expanded affiliated group is to be treated as occurring, directly or indirectly, primarily within the United States. The regulations prescribed under the preceding sentence shall apply to periods after May 8, 2014. (B) Executive officers and senior management Such regulations shall provide that the management and control of an expanded affiliated group shall be treated as occurring, directly or indirectly, primarily within the United States if substantially all of the executive officers and senior management of the expanded affiliated group who exercise day-to-day responsibility for making decisions involving strategic, financial, and operational policies of the expanded affiliated group are based or primarily located within the United States. Individuals who in fact exercise such day-to-day responsibilities shall be treated as executive officers and senior management regardless of their title. (5) Significant domestic business activities For purposes of paragraph (2)(B)(ii), an expanded affiliated group has significant domestic business activities if at least 25 percent of— (A) the employees of the group are based in the United States, (B) the employee compensation incurred by the group is incurred with respect to employees based in the United States, (C) the assets of the group are located in the United States, or (D) the income of the group is derived in the United States, determined in the same manner as such determinations are made for purposes of determining substantial business activities under regulations referred to in paragraph (3) as in effect on May 8, 2014, but applied by treating all references in such regulations to foreign country relevant foreign country the United States . (b) Conforming amendments (1) Clause (i) of section 7874(a)(2)(B) of such Code is amended by striking after March 4, 2003, 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) subsections (a)(2)(B)(ii) and (b)(2)(B)(i) (ii) by inserting or (b)(2)(A) (a)(2)(B)(i) (B) in paragraph (3), by inserting or (b)(2)(B)(i), as the case may be, (a)(2)(B)(ii) (C) in paragraph (5), by striking subsection (a)(2)(B)(ii) subsections (a)(2)(B)(ii) and (b)(2)(B)(i) (D) in paragraph (6), by inserting or inverted domestic corporation, as the case may be, surrogate foreign corporation (c) Effective date The amendments made by this section shall apply to taxable years ending after May 8, 2014.

Summary: Federal Employee Pension Fairness Act - Repeals provisions requiring federal employees, including foreign service employees, who began service after 2012 to pay an increased contribution (4.4%) for funding their annuities under the Federal Employees Retirement System (FERS). Amends the Internal Revenue Code to: (1) treat certain foreign corporations managed and controlled primarily in the United States as domestic corporations for U.S. tax purposes; and (2) revise rules for the taxation of inverted corporations (i.e., U.S. corporations that acquire foreign companies to reincorporate in a foreign jurisdiction with lower income tax rates than the United States).