376 
† HR 1 EAS 
purposes of applying paragraphs (2) and (3) of 
section 856(c) to any taxable year for which such 
amount is taken into account under section 
951(a)(1), and 
‘‘(B) if the real estate investment trust elects 
the application of this subparagraph, notwith-
standing subsection (a), any amount required to 
be taken into account under section 951(a)(1) by 
reason of this section shall, in lieu of the taxable 
year in which it would otherwise be included in 
gross income ((for purposes of the computation of 
real estate investment trust taxable income under 
section 857(b)), be included in gross income as 
follows: 
‘‘(i) 8 percent of such amount in the 
case of each of the taxable years in the 5- 
taxable year period beginning with the tax-
able year in which such amount would oth-
erwise be included. 
‘‘(ii) 15 percent of such amount in the 
case of the 1st taxable year following such 
period. 
‘‘(iii) 20 percent of such amount in the 
case of the 2nd taxable year following such 
period.
377 
† HR 1 EAS 
‘‘(iv) 25 percent of such amount in the 
case of the 3rd taxable year following such 
period. 
‘‘(2) RULES FOR TRUSTS ELECTING DEFERRED 
INCLUSION.— 
‘‘(A) ELECTION.—Any election under para-
graph (1)(B) shall be made not later than the 
due date for the first taxable year in the 5-tax-
able year period described in clause (i) of para-
graph (1)(B) and shall be made in such manner 
as the Secretary shall provide. 
‘‘(B) SPECIAL RULES.—If an election under 
paragraph (1)(B) is in effect with respect to any 
real estate investment trust, the following rules 
shall apply: 
‘‘(i) APPLICATION
OF
PARTICIPATION 
EXEMPTION.—For purposes of subsection 
(c)(1)— 
‘‘(I) the aggregate amount to 
which subparagraph (A) or (B) of sub-
section (c)(1) applies shall be deter-
mined without regard to the election, 
‘‘(II) each such aggregate amount 
shall be allocated to each taxable year 
described in paragraph (1)(B) in the
378 
† HR 1 EAS 
same proportion as the amount in-
cluded in the gross income of such 
United States shareholder under sec-
tion 951(a)(1) by reason of this section 
is allocated to each such taxable year. 
‘‘(III) 
NO
INSTALLMENT
PAY-
MENTS.—The real estate investment 
trust may not make an election under 
subsection (g) for any taxable year de-
scribed in paragraph (1)(B). 
‘‘(ii) ACCELERATION OF INCLUSION.— 
If there is a liquidation or sale of substan-
tially all the assets of the real estate invest-
ment trust (including in a title 11 or simi-
lar case), a cessation of business by such 
trust, or any similar circumstance, then 
any amount not yet included in gross in-
come under paragraph (1)(B) shall be in-
cluded in gross income as of the day before 
the date of the event and the unpaid portion 
of any tax liability with respect to such in-
clusion shall be due on the date of such 
event (or in the case of a title 11 or similar 
case, the day before the petition is filed).
379 
† HR 1 EAS 
‘‘(n) ELECTION NOT TO APPLY NET OPERATING LOSS 
DEDUCTION.— 
‘‘(1) IN GENERAL.—If a United States share-
holder of a deferred foreign income corporation elects 
the application of this subsection for the taxable year 
described in subsection (a), then the amount described 
in paragraph (2) shall not be taken into account— 
‘‘(A) in determining the amount of the net 
operating loss deduction under section 172 of 
such shareholder for such taxable year, or 
‘‘(B) in determining the amount of taxable 
income for such taxable year which may be re-
duced by net operating loss carryovers or 
carrybacks to such taxable year under section 
172. 
‘‘(2) AMOUNT
DESCRIBED.—The amount de-
scribed in this paragraph is the sum of— 
‘‘(A) the amount required to be taken into 
account under section 951(a)(1) by reason of this 
section (determined after the application of sub-
section (c)), plus 
‘‘(B) in the case of a domestic corporation 
which chooses to have the benefits of subpart A 
of part III of subchapter N for the taxable year, 
the taxes deemed to be paid by such corporation
380 
† HR 1 EAS 
under subsections (a) and (b) of section 960 for 
such taxable year with respect to the amount de-
scribed in subparagraph (A) which are treated 
as a dividends under section 78. 
‘‘(3) ELECTION.—Any election under this sub-
section shall be made not later than the due date (in-
cluding extensions) for filing the return of tax for the 
taxable year and shall be made in such manner as the 
Secretary shall prescribe. 
‘‘(o) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be necessary or 
appropriate to carry out the provisions of this section or 
to prevent the avoidance of the purposes of this section, in-
cluding through a reduction in earnings and profits 
through changes in entity classification, changes in ac-
counting methods, or otherwise.’’. 
(b) CLERICAL AMENDMENT.—The table of sections for 
subpart F of part III of subchapter N of chapter 1 is 
amended by striking the item relating to section 965 and 
inserting the following: 
‘‘Sec. 965. Treatment of deferred foreign income upon transition to participation 
exemption system of taxation.’’.
381 
† HR 1 EAS 
Subpart B—Rules Related to Passive and Mobile 
Income 
CHAPTER 1—TAXATION OF FOREIGN-DE-
RIVED 
INTANGIBLE 
INCOME 
AND 
GLOBAL INTANGIBLE LOW-TAXED IN-
COME 
SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTAN-
GIBLE 
LOW-TAXED 
INCOME 
BY 
UNITED 
STATES SHAREHOLDERS. 
(a) IN GENERAL.—Subpart F of part III of subchapter 
N of chapter 1 is amended by inserting after section 951 
the following new section: 
‘‘SEC. 951A. GLOBAL INTANGIBLE LOW-TAXED INCOME IN-
CLUDED 
IN 
GROSS 
INCOME 
OF 
UNITED 
STATES SHAREHOLDERS. 
‘‘(a) IN GENERAL.—Each person who is a United 
States shareholder of any controlled foreign corporation for 
any taxable year of such United States shareholder shall 
include in gross income such shareholder’s global intangible 
low-taxed income for such taxable year. 
‘‘(b) GLOBAL INTANGIBLE LOW-TAXED INCOME.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘global intangible 
low-taxed income’ means, with respect to any United 
States shareholder for any taxable year of such 
United States shareholder, the excess (if any) of—
382 
† HR 1 EAS 
‘‘(A) such shareholder’s net CFC tested in-
come for such taxable year, over 
‘‘(B) such shareholder’s net deemed tangible 
income return for such taxable year. 
‘‘(2) NET DEEMED TANGIBLE INCOME RETURN.— 
The term ‘net deemed tangible income return’ means, 
with respect to any United States shareholder for any 
taxable year, an amount equal to 10 percent of the 
aggregate of such shareholder’s pro rata share of the 
qualified business asset investment of each controlled 
foreign corporation with respect to which such share-
holder is a United States shareholder for such taxable 
year (determined for each taxable year of each such 
controlled foreign corporation which ends in or with 
such taxable year of such United States shareholder). 
‘‘(c) NET CFC TESTED INCOME.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—The term ‘net CFC tested in-
come’ means, with respect to any United States share-
holder for any taxable year of such United States 
shareholder, the excess (if any) of— 
‘‘(A) the aggregate of such shareholder’s pro 
rata share of the tested income of each controlled 
foreign corporation with respect to which such 
shareholder is a United States shareholder for
383 
† HR 1 EAS 
such taxable year of such United States share-
holder (determined for each taxable year of such 
controlled foreign corporation which ends in or 
with such taxable year of such United States 
shareholder), over 
‘‘(B) the aggregate of such shareholder’s pro 
rata share of the tested loss of each controlled for-
eign corporation with respect to which such 
shareholder is a United States shareholder for 
such taxable year of such United States share-
holder (determined for each taxable year of such 
controlled foreign corporation which ends in or 
with such taxable year of such United States 
shareholder). 
‘‘(2) TESTED INCOME; TESTED LOSS.—For pur-
poses of this section— 
‘‘(A) TESTED INCOME.—The term ‘tested in-
come’ means, with respect to any controlled for-
eign corporation for any taxable year of such 
controlled foreign corporation, the excess (if any) 
of— 
‘‘(i) the gross income of such corpora-
tion determined without regard to— 
‘‘(I) any item of income described 
in section 952(b),
384 
† HR 1 EAS 
‘‘(II) any gross income taken into 
account in determining the subpart F 
income of such corporation, 
‘‘(III) any gross income excluded 
from the foreign base company income 
(as defined in section 954) and the in-
surance income (as defined in section 
953) of such corporation by reason of 
section 954(b)(4), 
‘‘(IV) any dividend received from 
a related person (as defined in section 
954(d)(3)), and 
‘‘(V) any foreign oil and gas ex-
traction income (as defined in section 
907(c)(1)) of such corporation, over 
‘‘(ii) the deductions (including taxes) 
properly allocable to such gross income 
under rules similar to the rules of section 
954(b)(5). 
‘‘(B) TESTED LOSS.— 
‘‘(i) IN
GENERAL.—The term ‘tested 
loss’ means, with respect to any controlled 
foreign corporation for any taxable year of 
such controlled foreign corporation, the ex-
cess (if any) of the amount described in sub-
385 
† HR 1 EAS 
paragraph (A)(ii) over the amount de-
scribed in subparagraph (A)(i). 
‘‘(ii) COORDINATION WITH SUBPART F 
TO DENY DOUBLE BENEFIT OF LOSSES.— 
Section 952(c)(1)(A) shall be applied by in-
creasing the earnings and profits of the con-
trolled foreign corporation by the tested loss 
of such corporation. 
‘‘(d) QUALIFIED BUSINESS ASSET INVESTMENT.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified business 
asset investment’ means, with respect to any corpora-
tion for any taxable year of such controlled foreign 
corporation, the average of the aggregate of the cor-
poration’s adjusted bases as of the close of each quar-
ter of such taxable year in specified tangible prop-
erty— 
‘‘(A) used in a trade or business of the cor-
poration, and 
‘‘(B) of a type with respect to which a de-
duction is allowable under section 167. 
‘‘(2) SPECIFIED TANGIBLE PROPERTY.— 
‘‘(A) IN GENERAL.—The term ‘specified tan-
gible property’ means, except as provided in sub-
386 
† HR 1 EAS 
paragraph (B), any tangible property used in 
the production of tested income. 
‘‘(B) DUAL USE PROPERTY.—In the case of 
property used both in the production of tested in-
come and income which is not tested income, 
such property shall be treated as specified tan-
gible property in the same proportion that the 
gross income described in subsection (c)(1)(A) 
produced with respect to such property bears to 
the total gross income produced with respect to 
such property. 
‘‘(3) DETERMINATION OF ADJUSTED BASIS.—For 
purposes of this subsection, notwithstanding any pro-
vision of this title (or any other provision of law) 
which is enacted after the date of the enactment of 
this section, the adjusted basis in any property shall 
be determined using the alternative depreciation sys-
tem under section 168(g). 
‘‘(4) REGULATIONS.—The Secretary shall issue 
such regulations or other guidance as the Secretary 
determines appropriate to prevent the avoidance of 
the purposes of this subsection, including regulations 
or other guidance which provide for the treatment of 
property if—
387 
† HR 1 EAS 
‘‘(A) such property is transferred, or held, 
temporarily, or 
‘‘(B) the avoidance of the purposes of this 
paragraph is a factor in the transfer or holding 
of such property. 
‘‘(e) DETERMINATION OF PRO RATA SHARE, ETC.— 
For purposes of this section— 
‘‘(1) IN GENERAL.—The pro rata shares referred 
to in subsections (b), (c)(1)(A), and (c)(1)(B), respec-
tively, shall be determined under the rules of section 
951(a)(2) in the same manner as such section applies 
to subpart F income and shall be taken into account 
in the taxable year of the United States shareholder 
in which or with which the taxable year of the con-
trolled foreign corporation ends. 
‘‘(2) TREATMENT
AS
UNITED
STATES
SHARE-
HOLDER.—For purposes of paragraph (1), a person 
shall be treated as a United States shareholder of a 
controlled foreign corporation for any taxable year 
only if such person owns (within the meaning of sec-
tion 958(a)) stock in such foreign corporation on the 
last day, in such year, on which such foreign corpora-
tion is a controlled foreign corporation. 
‘‘(3) TREATMENT AS CONTROLLED FOREIGN COR-
PORATION.—A foreign corporation shall be treated as
388 
† HR 1 EAS 
a controlled foreign corporation for any taxable year 
if such foreign corporation is a controlled foreign cor-
poration at any time during such taxable year. 
‘‘(f) TREATMENT AS SUBPART F INCOME FOR CERTAIN 
PURPOSES.— 
‘‘(1) IN GENERAL.— 
‘‘(A) APPLICATION.—Except as provided in 
subparagraph (B), any global intangible low- 
taxed income included in gross income under 
subsection (a) shall be treated in the same man-
ner as an amount included under section 
951(a)(1)(A) for purposes of applying sections 
168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 
961, 962(c), 962(d), 993(a)(1)(E), 996(f)(1), 
1248(b)(1), 
1248(d)(1), 
6501(e)(1)(C), 
6654(d)(2)(D), and 6655(e)(4). 
‘‘(B) EXCEPTION.—The Secretary shall pro-
vide rules for the application of subparagraph 
(A) to other provisions of this title in any case 
in which the determination of subpart F income 
is required to be made at the level of the con-
trolled foreign corporation. 
‘‘(2) ALLOCATION OF GLOBAL INTANGIBLE LOW- 
TAXED INCOME TO CONTROLLED FOREIGN CORPORA-
TIONS.—For purposes of the sections referred to in
389 
† HR 1 EAS 
paragraph (1), with respect to any controlled foreign 
corporation any pro rata amount from which is taken 
into account in determining the global intangible low- 
taxed income included in gross income of a United 
States shareholder under subsection (a), the portion of 
such global intangible low-taxed income which is 
treated as being with respect to such controlled foreign 
corporation is— 
‘‘(A) in the case of a controlled foreign cor-
poration with no tested income, zero, and 
‘‘(B) in the case of a controlled foreign cor-
poration with tested income, the portion of such 
global intangible low-taxed income which bears 
the same ratio to such global intangible low- 
taxed income as— 
‘‘(i) such United States shareholder’s 
pro rata amount of the tested income of 
such controlled foreign corporation, bears to 
‘‘(ii) the aggregate amount described in 
subsection (c)(1)(A) with respect to such 
United States shareholder.’’. 
(b) FOREIGN TAX CREDIT.— 
(1) APPLICATION OF DEEMED PAID FOREIGN TAX 
CREDIT.—Section 960 is amended adding at the end 
the following new subsection:
390 
† HR 1 EAS 
‘‘(d) DEEMED PAID CREDIT FOR TAXES PROPERLY 
ATTRIBUTABLE TO TESTED INCOME.— 
‘‘(1) IN GENERAL.—For purposes of this subpart, 
if any amount is includible in the gross income of a 
domestic corporation under section 951A, such domes-
tic corporation shall be deemed to have paid foreign 
income taxes equal to 80 percent of the product of— 
‘‘(A) such domestic corporation’s inclusion 
percentage, multiplied by 
‘‘(B) the aggregate tested foreign income 
taxes paid or accrued by controlled foreign cor-
porations. 
‘‘(2) INCLUSION PERCENTAGE.—For purposes of 
paragraph (1), the term ‘inclusion percentage’ means, 
with respect to any domestic corporation, the ratio 
(expressed as a percentage) of— 
‘‘(A) such corporation’s global intangible 
low-taxed income (as defined in section 951A(b)), 
divided by 
‘‘(B) the aggregate amount described in sec-
tion 951A(c)(1)(A) with respect to such corpora-
tion. 
‘‘(3) TESTED
FOREIGN
INCOME
TAXES.—For 
purposes of paragraph (1), the term ‘tested foreign in-
come taxes’ means, with respect to any domestic cor-
391 
† HR 1 EAS 
poration which is a United States shareholder of a 
controlled foreign corporation, the foreign income 
taxes paid or accrued by such foreign corporation 
which are properly attributable to the tested income 
of such foreign corporation taken into account by such 
domestic corporation under section 951A.’’. 
(2) APPLICATION OF FOREIGN TAX CREDIT LIMI-
TATION.— 
(A) SEPARATE BASKET FOR GLOBAL INTAN-
GIBLE
LOW-TAXED
INCOME.—Section 904(d)(1) 
is amended by redesignating subparagraphs (A) 
and (B) as subparagraphs (B) and (C), respec-
tively, and by inserting before subparagraph (B) 
(as so redesignated) the following new subpara-
graph: 
‘‘(A) any amount includible in gross income 
under section 951A (other than passive category 
income),’’. 
(B) EXCLUSION FROM GENERAL CATEGORY 
INCOME.—Section 904(d)(2)(A)(ii) is amended 
by inserting ‘‘income described in paragraph 
(1)(A) and’’ before ‘‘passive category income’’. 
(C) NO CARRYOVER OR CARRYBACK OF EX-
CESS
TAXES.—Section 904(c) is amended by 
adding at the end the following: ‘‘This subsection
392 
† HR 1 EAS 
shall not apply to taxes paid or accrued with re-
spect 
to 
amounts 
described 
in 
subsection 
(d)(1)(A).’’. 
(c) CLERICAL AMENDMENT.—The table of sections for 
subpart F of part III of subchapter N of chapter 1 is 
amended by inserting after the item relating to section 951 
the following new item: 
‘‘Sec. 951A. Global intangible low-taxed income included in gross income of 
United States shareholders.’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years of foreign corporations 
beginning after December 31, 2017, and to taxable years 
of United States shareholders in which or with which such 
taxable years of foreign corporations end. 
SEC. 14202. DEDUCTION FOR FOREIGN-DERIVED INTAN-
GIBLE INCOME AND GLOBAL INTANGIBLE 
LOW-TAXED INCOME. 
(a) IN GENERAL.—Part VIII of subchapter B of chap-
ter 1 is amended by adding at the end the following new 
section: 
‘‘SEC. 250. FOREIGN-DERIVED INTANGIBLE INCOME AND 
GLOBAL INTANGIBLE LOW-TAXED INCOME. 
‘‘(a) ALLOWANCE OF DEDUCTION.— 
‘‘(1) IN GENERAL.—In the case of a domestic 
corporation for any taxable year, there shall be al-
393 
† HR 1 EAS 
lowed as a deduction an amount equal to the sum 
of— 
‘‘(A) 37.5 percent of the foreign-derived in-
tangible income of such domestic corporation for 
such taxable year, plus 
‘‘(B) 50 percent of the global intangible low- 
taxed income amount (if any) which is included 
in the gross income of such domestic corporation 
under section 951A for such taxable year. 
‘‘(2) LIMITATION BASED ON TAXABLE INCOME.— 
‘‘(A) IN
GENERAL.—If, for any taxable 
year— 
‘‘(i) the sum of the foreign-derived in-
tangible income and the global intangible 
low-taxed income amount otherwise taken 
into account by the domestic corporation 
under paragraph (1), exceeds 
‘‘(ii) the taxable income of the domestic 
corporation (determined without regard to 
this section), 
then the amount of the foreign-derived intangible 
income and the global intangible low-taxed in-
come amount so taken into account shall be re-
duced as provided in subparagraph (B).
394 
† HR 1 EAS 
‘‘(B) REDUCTION.—For purposes of sub-
paragraph (A)— 
‘‘(i) foreign-derived intangible income 
shall be reduced by an amount which bears 
the same ratio to the excess described in 
subparagraph (A) as such foreign-derived 
intangible income bears to the sum de-
scribed in subparagraph (A)(i), and 
‘‘(ii) the global intangible low-taxed 
income amount shall be reduced by the re-
mainder of such excess. 
‘‘(3) REDUCTION IN DEDUCTION FOR TAXABLE 
YEARS AFTER 2025.—In the case of any taxable year 
beginning after December 31, 2025, paragraph (1) 
shall be applied by substituting— 
‘‘(A) ‘21.875 percent’ for ‘37.5 percent’ in 
subparagraph (A), and 
‘‘(B) ‘37.5 percent’ for ‘50 percent’ in sub-
paragraph (B). 
‘‘(b) FOREIGN-DERIVED INTANGIBLE INCOME.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—The foreign-derived intan-
gible income of any domestic corporation is the 
amount which bears the same ratio to the deemed in-
tangible income of such corporation as—
395 
† HR 1 EAS 
‘‘(A) the foreign-derived deduction eligible 
income of such corporation, bears to 
‘‘(B) the deduction eligible income of such 
corporation. 
‘‘(2) DEEMED INTANGIBLE INCOME.—For pur-
poses of this subsection— 
‘‘(A) IN GENERAL.—The term ‘deemed in-
tangible income’ means the excess (if any) of— 
‘‘(i) the deduction eligible income of the 
domestic corporation, over 
‘‘(ii) the deemed tangible income re-
turn of the corporation. 
‘‘(B) 
DEEMED
TANGIBLE
INCOME
RE-
TURN.—The term ‘deemed tangible income re-
turn’ means, with respect to any corporation, an 
amount equal to 10 percent of the corporation’s 
qualified business asset investment (as defined in 
section 951A(d), determined by substituting ‘de-
duction eligible income’ for ‘tested income’ in 
paragraph (2) thereof). 
‘‘(3) DEDUCTION ELIGIBLE INCOME.— 
‘‘(A) IN GENERAL.—The term ‘deduction el-
igible income’ means, with respect to any domes-
tic corporation, the excess (if any) of—
396 
† HR 1 EAS 
‘‘(i) gross income of such corporation 
determined without regard to— 
‘‘(I) the subpart F income of such 
corporation determined under section 
951, 
‘‘(II) the global intangible low- 
taxed income determined under section 
951A, 
‘‘(III) any financial services in-
come 
(as 
defined 
in 
section 
904(d)(2)(D)) 
of 
such 
corporation 
which is not described in clause (ii), 
‘‘(IV) any dividend received from 
a corporation which is a controlled for-
eign corporation of such domestic cor-
poration, 
‘‘(V) any domestic oil and gas ex-
traction income of such corporation, 
and 
‘‘(VI) any foreign branch income 
(as defined in section 904(d)(2)(J)), 
over 
‘‘(ii) the deductions (including taxes) 
properly allocable to such gross income
397 
† HR 1 EAS 
under rules similar to the rules of section 
954(b)(5). 
‘‘(B) DOMESTIC OIL AND GAS EXTRACTION 
INCOME.—For purposes of subparagraph (A), the 
term ‘domestic oil and gas extraction income’ 
means income described in section 907(c)(1), de-
termined by substituting ‘within the United 
States’ for ‘without the United States’. 
‘‘(4) FOREIGN-DERIVED
DEDUCTION
ELIGIBLE 
INCOME.—The term ‘foreign-derived deduction eligible 
income’ means, with respect to any taxpayer for any 
taxable year, any deduction eligible income of such 
taxpayer which is derived in connection with— 
‘‘(A) property— 
‘‘(i) which is sold by the taxpayer to 
any person who is not a United States per-
son, and 
‘‘(ii) which the taxpayer establishes to 
the satisfaction of the Secretary is for a for-
eign use, or 
‘‘(B) services provided by the taxpayer 
which the taxpayer establishes to the satisfaction 
of the Secretary are provided to any person, or 
with respect to property, not located within the 
United States.
398 
† HR 1 EAS 
‘‘(5) RULES RELATING TO FOREIGN USE PROP-
ERTY
OR
SERVICES.—For purposes of this sub-
section— 
‘‘(A) FOREIGN USE.—The term ‘foreign use’ 
means any use, consumption, or disposition 
which is not within the United States. 
‘‘(B) PROPERTY OR SERVICES PROVIDED TO 
DOMESTIC INTERMEDIARIES.— 
‘‘(i) PROPERTY.—If a taxpayer sells 
property to another person (other than a re-
lated party) for further manufacture or 
other modification within the United States, 
such property shall not be treated as sold 
for a foreign use even if such other person 
subsequently uses such property for a for-
eign use. 
‘‘(ii) SERVICES.—If a taxpayer pro-
vides services to another person (other than 
a related party) located within the United 
States, such services shall not be treated as 
described in paragraph (4)(B) even if such 
other person uses such services in providing 
services which are so described. 
‘‘(C) SPECIAL RULES WITH RESPECT TO RE-
LATED PARTY TRANSACTIONS.—
448 
† HR 1 EAS 
‘‘(2) 25-PERCENT OWNER.—The term ‘25-percent 
owner’ means, with respect to any corporation, any 
person who owns at least 25 percent of— 
‘‘(A) the total voting power of all classes of 
stock of a corporation entitled to vote, or 
‘‘(B) the total value of all classes of stock of 
such corporation. 
‘‘(3) SECTION 318 TO APPLY.—Section 318 shall 
apply for purposes of paragraphs (1) and (2), except 
that— 
‘‘(A) ‘10 percent’ shall be substituted for ‘50 
percent’ in section 318(a)(2)(C), and 
‘‘(B) subparagraphs (A), (B), and (C) of 
section 318(a)(3) shall not be applied so as to 
consider a United States person as owning stock 
which is owned by a person who is not a United 
States person. 
‘‘(h) EXCEPTION FOR CERTAIN PAYMENTS MADE IN 
THE ORDINARY COURSE OF TRADE OR BUSINESS.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (3), any qualified derivative payment shall not 
be treated as a base erosion payment. 
‘‘(2) QUALIFIED DERIVATIVE PAYMENT.—