I 
117TH CONGRESS 
1ST SESSION H. R. 2254 
To amend the Internal Revenue Code of 1986 to modify the treatment 
of foreign corporations, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 26, 2021 
Ms. SCHAKOWSKY introduced the following bill; which was referred to the 
Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to modify 
the treatment of foreign corporations, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Corporate Tax Dodg-
ing Prevention Act’’. 
SEC. 2. RESTORATION OF PROGRESSIVE CORPORATE TAX 
RATE. 
(a) IN GENERAL.—Section 11(b) of the Internal Rev-
enue Code of 1986 is amended to read as follows: 
‘‘(b) AMOUNT OF TAX.— 
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‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) shall be the sum of— 
‘‘(A) 15 percent of so much of the taxable 
income as does not exceed $50,000, 
‘‘(B) 25 percent of so much of the taxable 
income as exceeds $50,000 but does not exceed 
$75,000, 
‘‘(C) 34 percent of so much of the taxable 
income as exceeds $75,000 but does not exceed 
$10,000,000, and 
‘‘(D) 35 percent of so much of the taxable 
income as exceeds $10,000,000. 
In the case of a corporation which has taxable in-
come in excess of $100,000 for any taxable year, the 
amount of tax determined under the preceding sen-
tence for such taxable year shall be increased by the 
lesser of (i) 5 percent of such excess, or (ii) $11,750. 
In the case of a corporation which has taxable in-
come in excess of $15,000,000, the amount of the 
tax determined under the foregoing provisions of 
this paragraph shall be increased by an additional 
amount equal to the lesser of (i) 3 percent of such 
excess, or (ii) $100,000. 
‘‘(2) CERTAIN
PERSONAL
SERVICE
CORPORA-
TIONS
NOT
ELIGIBLE
FOR
GRADUATED
RATES.— 
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Notwithstanding paragraph (1), the amount of the 
tax imposed by subsection (a) on the taxable income 
of a qualified personal service corporation (as de-
fined in section 448(d)(2)) shall be equal to 35 per-
cent of the taxable income.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 3. EQUALIZATION OF TAX RATES ON DOMESTIC AND 
FOREIGN INCOME. 
(a) IN GENERAL.—Section 952 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subsection: 
‘‘(e) SPECIAL APPLICATION OF SUBPART.— 
‘‘(1) IN GENERAL.—For taxable years begin-
ning after December 31, 2021, notwithstanding any 
other provision of this subpart, the term ‘subpart F 
income’ means, in the case of any controlled foreign 
corporation, the income of such corporation derived 
from any foreign country. 
‘‘(2) APPLICABLE RULES.—Rules similar to the 
rules under the last sentence of subsection (a) and 
subsection (d) shall apply to this subsection.’’. 
(b) TREATMENT OF PREVIOUSLY DEFERRED FOR-
EIGN INCOME.— 
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(1) TREATMENT OF INTEREST.—Section 965(h) 
of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new paragraph: 
‘‘(7) RULES RELATING TO INTEREST.—In the 
case of any amount of the net tax liability prorated 
to an installment under this subsection which has 
not been paid before the date of the enactment of 
this paragraph, the last date prescribed for payment 
of any such installment for purposes of section 6601 
shall be the earlier of such last date (determined 
without regard to this paragraph) or such date of 
enactment.’’. 
(2) RULES
FOR
S
CORPORATIONS.—Section 
965(i)(2)(A) of such Code is amended by adding at 
the end the following new clause: 
‘‘(iv) The date of the enactment of the 
Corporate Tax Dodging Prevention Act.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2021, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
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SEC. 4. COUNTRY-BY-COUNTRY APPLICATION OF LIMITA-
TION ON FOREIGN TAX CREDIT BASED ON 
TAXABLE UNITS. 
(a) IN GENERAL.—Section 904 is amended by insert-
ing after subsection (d) the following new subsection: 
‘‘(e) COUNTRY-BY-COUNTRY APPLICATION OF SEC-
TION BASED ON TAXABLE UNITS.— 
‘‘(1) IN
GENERAL.—The provisions of sub-
sections (a), (b), (c), and (d) and sections 907 and 
960 shall be applied separately with respect to each 
country and possession by taking into account the 
aggregate items properly attributable or otherwise 
allocable to a taxable unit of the taxpayer which is 
a tax resident of such country or possession. 
‘‘(2) TAXABLE UNITS.— 
‘‘(A) IN GENERAL.—Unless otherwise pro-
vided by the Secretary, to the extent an item 
may be properly attributable or otherwise allo-
cable to more than one taxable unit under para-
graph (1), such item shall be treated as prop-
erly attributable or otherwise allocable to the 
lowest-tier taxable unit of the taxpayer to which 
such item may be properly attributable or oth-
erwise allocable. No item shall be attributable 
or otherwise allocable to more than one taxable 
unit of the taxpayer. 
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‘‘(B) 
DETERMINATION
OF
TAXABLE 
UNITS.—Except as otherwise provided by the 
Secretary, the taxable units of a taxpayer are 
as follows: 
‘‘(i) IN GENERAL.—The general tax-
able unit of the taxpayer which is not oth-
erwise described in a separate clause of 
this subparagraph. 
‘‘(ii) FOREIGN BRANCHES.—Each for-
eign branch the activities of which are car-
ried on directly or indirectly (through one 
or more pass-through entities) by the tax-
payer. 
‘‘(iii) CONTROLLED
FOREIGN
COR-
PORATIONS.—Each controlled foreign cor-
poration with respect to which the tax-
payer is a United States shareholder. 
‘‘(iv) BRANCHES
OF
CONTROLLED 
FOREIGN
CORPORATIONS.—Each branch 
the activities of which are carried on di-
rectly or indirectly (through one or more 
pass-through entities) by a controlled for-
eign corporation referred to in clause (iii). 
‘‘(v) INTERESTS
IN
PASS-THROUGH 
ENTITIES.— 
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‘‘(I) IN GENERAL.—Each interest 
in a pass-through entity held directly 
or indirectly by the taxpayer or a con-
trolled foreign corporation referred to 
in clause (iii) if such entity is a tax 
resident of a foreign country. 
‘‘(II) CERTAIN INTERESTS HELD 
BY CONTROLLED FOREIGN CORPORA-
TIONS.—Each interest in a pass- 
through entity held directly or indi-
rectly by a controlled foreign corpora-
tion referred to in clause (iii) if such 
entity is a tax resident of a foreign 
country or such entity is treated as a 
corporation (or other entity that is 
not fiscally transparent) for purposes 
of the tax law of a foreign country in 
which such controlled foreign corpora-
tion is a tax resident. 
‘‘(3) TAX
RESIDENT.—For purposes of this 
subsection, a taxable unit shall be treated as a tax 
resident of a country or possession if such taxable 
unit is liable to tax under the tax law of such coun-
try or possession as a resident. 
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‘‘(4) PASS-THROUGH ENTITY.—For purposes of 
this subsection, the term ‘pass-through entity’ means 
any partnership and any other type of entity (other 
than a corporation) identified by the Secretary as a 
pass-through entity for purposes of this subsection. 
‘‘(5) REGULATIONS.—The Secretary shall issue 
such regulations or other guidance as the Secretary 
determines necessary or appropriate to carry out the 
purposes of this subsection, including regulations or 
other guidance— 
‘‘(A) for determining the country or pos-
session with respect to which any taxable unit 
is a tax resident, including— 
‘‘(i) determining such country or pos-
session on the basis of location if such tax-
able unit would not otherwise be a tax resi-
dent of any country or possession, and 
‘‘(ii) ensuring that such taxable unit 
is a tax resident of not more than 1 coun-
try or possession, 
‘‘(B) applying this section to hybrid enti-
ties, passive foreign investment companies, 
tiered structures, and branches, including 
branches that do not give rise to a taxable pres-
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ence under the tax law of the country where the 
branch is located, and 
‘‘(C) determining whether any entity is not 
fiscally transparent within the meaning of para-
graph (2)(B)(v)(II).’’. 
(b) APPLICATION OF FOREIGN TAX CREDIT LIMITA-
TION WITH RESPECT TO FOREIGN BRANCHES.—Section 
904(d)(2)(J)(i) is amended— 
(1) by striking ‘‘qualified business units (as de-
fined in section 989(a)) in 1 or more foreign coun-
tries’’ and inserting ‘‘foreign branches described in 
section 904(e)(2)(B)(ii)’’, and 
(2) by striking ‘‘a qualified business unit’’ and 
inserting ‘‘a foreign branch’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 5. REPEAL OF CHECK-THE-BOX RULES FOR CERTAIN 
FOREIGN ENTITIES AND CFC LOOK-THRU 
RULES. 
(a) CHECK-THE-BOX RULES.—Paragraph (3) of sec-
tion 7701(a) of the Internal Revenue Code of 1986 is 
amended— 
(1) by striking ‘‘and’’, and 
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(2) by inserting after ‘‘insurance companies’’ 
the following: ‘‘, and any foreign business entity that 
has one or more owners all of which have limited li-
ability.’’. 
(b) LOOK-THRU RULE.—Subparagraph (C) of sec-
tion 954(c)(6) of such Code 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 Corporate Tax Dodging 
Prevention Act.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 6. LIMITATION ON DEDUCTION OF INTEREST BY DO-
MESTIC CORPORATIONS WHICH ARE MEM-
BERS OF AN INTERNATIONAL FINANCIAL RE-
PORTING GROUP. 
(a) IN GENERAL.—Section 163 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection 
(n) as subsection (o) and by inserting after subsection (m) 
the following new subsection: 
‘‘(n) LIMITATION ON DEDUCTION OF INTEREST BY 
DOMESTIC CORPORATIONS
IN INTERNATIONAL FINAN-
CIAL REPORTING GROUPS.— 
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‘‘(1) IN GENERAL.—In the case of any domestic 
corporation which is a member of any international 
financial reporting group, the deduction under this 
chapter for interest paid or accrued during the tax-
able year shall not exceed the sum of— 
‘‘(A) the allowable percentage of 105 per-
cent of the excess (if any) of— 
‘‘(i) the amount of such interest so 
paid or accrued, over 
‘‘(ii) the amount described in subpara-
graph (B), plus 
‘‘(B) the amount of interest includible in 
gross income of such corporation for such tax-
able year. 
‘‘(2) INTERNATIONAL
FINANCIAL
REPORTING 
GROUP.— 
‘‘(A) For purposes of this subsection, the 
term ‘international financial reporting group’ 
means, with respect to any reporting year, any 
group of entities which— 
‘‘(i) includes— 
‘‘(I) at least one foreign corpora-
tion engaged in a trade or business 
within the United States, or 
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‘‘(II) at least one domestic cor-
poration and one foreign corporation, 
‘‘(ii) prepares consolidated financial 
statements with respect to such year, and 
‘‘(iii) reports in such statements aver-
age annual gross receipts (determined in 
the aggregate with respect to all entities 
which are part of such group) for the 3-re-
porting-year period ending with such re-
porting year in excess of $25,000,000. 
‘‘(B) RULES
RELATING
TO
DETERMINA-
TION OF AVERAGE GROSS RECEIPTS.—For pur-
poses of subparagraph (A)(iii), rules similar to 
the rules of section 448(c)(3) shall apply. 
‘‘(3) ALLOWABLE PERCENTAGE.—For purposes 
of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘allowable 
percentage’ means, with respect to any domestic 
corporation for any taxable year, the ratio (ex-
pressed as a percentage and not greater than 
100 percent) of— 
‘‘(i) such corporation’s allocable share 
of the international financial reporting 
group’s reported net interest expense for 
the reporting year of such group which 
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ends in or with such taxable year of such 
corporation, over 
‘‘(ii) such corporation’s reported net 
interest expense for such reporting year of 
such group. 
‘‘(B) 
REPORTED
NET
INTEREST
EX-
PENSE.—The term ‘reported net interest ex-
pense’ means— 
‘‘(i) with respect to any international 
financial reporting group for any reporting 
year, the excess of— 
‘‘(I) the aggregate amount of in-
terest 
expense 
reported 
in 
such 
group’s consolidated financial state-
ments for such taxable year, over 
‘‘(II) the aggregate amount of in-
terest income reported in such group’s 
consolidated financial statements for 
such taxable year, and 
‘‘(ii) with respect to any domestic cor-
poration for any reporting year, the excess 
of— 
‘‘(I) the amount of interest ex-
pense of such corporation reported in 
the books and records of the inter-
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national financial reporting group 
which are used in preparing such 
group’s consolidated financial state-
ments for such taxable year, over 
‘‘(II) the amount of interest in-
come of such corporation reported in 
such books and records. 
‘‘(C) ALLOCABLE
SHARE
OF
REPORTED 
NET INTEREST EXPENSE.—With respect to any 
domestic corporation which is a member of any 
international financial reporting group, such 
corporation’s allocable share of such group’s re-
ported net interest expense for any reporting 
year is the portion of such expense which bears 
the same ratio to such expense as— 
‘‘(i) the EBITDA of such corporation 
for such reporting year, bears to 
‘‘(ii) the EBITDA of such group for 
such reporting year. 
‘‘(D) EBITDA.— 
‘‘(i) 
IN
GENERAL.—The 
term 
‘EBITDA’ means, with respect to any re-
porting year, earnings before interest, 
taxes, depreciation, and amortization— 
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‘‘(I) as determined in the inter-
national financial reporting group’s 
consolidated financial statements for 
such year, or 
‘‘(II) for purposes of subpara-
graph (A)(i), as determined in the 
books and records of the international 
financial reporting group which are 
used in preparing such statements if 
not determined in such statements. 
‘‘(ii) TREATMENT
OF
DISREGARDED 
ENTITIES.—The EBITDA of any domestic 
corporation shall not fail to include the 
EBITDA of any entity which is dis-
regarded for purposes of this chapter. 
‘‘(iii) TREATMENT
OF
INTRA-GROUP 
DISTRIBUTIONS.—The EBITDA of any do-
mestic corporation shall be determined 
without regard to any distribution received 
by such corporation from any other mem-
ber of the international financial reporting 
group. 
‘‘(E) SPECIAL RULES FOR NON-POSITIVE 
EBITDA.— 
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‘‘(i) NON-POSITIVE GROUP EBITDA.— 
In the case of any international financial 
reporting group the EBITDA of which is 
zero or less, paragraph (1) shall not apply 
to any member of such group the EBITDA 
of which is above zero. 
‘‘(ii) 
NON-POSITIVE
ENTITY 
EBITDA.—In the case of any group mem-
ber the EBITDA of which is zero or less, 
paragraph (1) shall be applied without re-
gard to subparagraph (A) thereof. 
‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 
For purposes of this subsection, the term ‘consoli-
dated financial statement’ means any consolidated 
financial statement described in paragraph (2)(A)(ii) 
if such statement is— 
‘‘(A) a financial statement which is cer-
tified as being prepared in accordance with gen-
erally accepted accounting principles, inter-
national financial reporting standards, or any 
other comparable method of accounting identi-
fied by the Secretary, and which is— 
‘‘(i) a 10–K (or successor form) or 
annual statement to shareholders required 
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to be filed with the United States Securi-
ties and Exchange Commission, 
‘‘(ii) an audited financial statement 
which is used for— 
‘‘(I) credit purposes, 
‘‘(II) reporting to shareholders, 
partners, or other proprietors, or to 
beneficiaries, or 
‘‘(III) 
any 
other 
substantial 
nontax purpose, 
but only if there is no statement described 
in clause (i), or 
‘‘(iii) filed with any other Federal or 
State agency for nontax purposes, but only 
if there is no statement described in clause 
(i) or (ii), or 
‘‘(B) a financial statement which— 
‘‘(i) is used for a purpose described in 
subclause (I), (II), or (III) of subpara-
graph (A)(ii), or 
‘‘(ii) filed with any regulatory or gov-
ernmental body (whether domestic or for-
eign) specified by the Secretary, 
but only if there is no statement described in 
subparagraph (A). 
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‘‘(5) REPORTING YEAR.—For purposes of this 
subsection, the term ‘reporting year’ means, with re-
spect to any international financial reporting group, 
the year with respect to which the consolidated fi-
nancial statements are prepared. 
‘‘(6) APPLICATION TO CERTAIN ENTITIES.— 
‘‘(A) PARTNERSHIPS.—The secretary shall 
prescribe rules for application of this subsection 
to any partnership which is a member of any 
international financial reporting group. Such 
rules shall treat any such partnership in a man-
ner similar to the way such partnership would 
be treated under this subsection if it were a do-
mestic corporation which is a member of any 
international financial reporting group. 
‘‘(B) FOREIGN
CORPORATIONS
ENGAGED 
IN TRADE OR BUSINESS WITHIN THE UNITED 
STATES.—Except as otherwise provided by the 
Secretary in paragraph (7), any deduction for 
interest paid or accrued by a foreign corpora-
tion engaged in a trade or business within the 
United States shall be limited in a manner con-
sistent with the principles of this subsection. 
‘‘(C) CONSOLIDATED
GROUPS.—For pur-
poses of this subsection, the members of any 
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group that file (or are required to file) a con-
solidated return with respect to the tax imposed 
by chapter 1 for a taxable year shall be treated 
as a single corporation. 
‘‘(7) REGULATIONS.—The Secretary may issue 
such regulations or other guidance as are necessary 
or appropriate to carry out the purposes of this sub-
section.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 7. MODIFICATIONS TO RULES RELATING TO IN-
VERTED CORPORATIONS. 
(a) IN GENERAL.—Subsection (b) of section 7874 of 
the Internal Revenue Code of 1986 is amended to read 
as follows: 
‘‘(b) INVERTED CORPORATIONS TREATED AS DO-
MESTIC 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 surro-
gate foreign corporation if subsection (a)(2) 
were applied by substituting ‘80 percent’ for 
‘60 percent’, or 
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‘‘(B) such corporation is an inverted do-
mestic 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 trans-
actions)— 
‘‘(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 consti-
tuting a trade or business of, a domestic 
partnership, and 
‘‘(B) after the acquisition, more than 50 
percent of the stock (by vote or value) of the 
entity is held— 
‘‘(i) in the case of an acquisition with 
respect to a domestic corporation, by 
former shareholders of the domestic cor-
poration by reason of holding stock in the 
domestic corporation, or 
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‘‘(ii) in the case of an acquisition with 
respect to a domestic partnership, by 
former partners of the domestic partner-
ship by reason of holding a capital or prof-
its interest in the domestic partnership. 
‘‘(3) EXCEPTION
FOR
CORPORATIONS
WITH 
SUBSTANTIAL
BUSINESS
ACTIVITIES
IN
FOREIGN 
COUNTRY OF ORGANIZATION.—A foreign corporation 
described in paragraph (2) shall not be treated as an 
inverted domestic corporation if after the acquisition 
the expanded affiliated group which includes the en-
tity has substantial business activities in the foreign 
country in which or under the law of which the enti-
ty 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 busi-
ness activities’ shall have the meaning given such 
term under regulations in effect on May 8, 2014, ex-
cept that the Secretary may issue regulations in-
creasing the threshold percent in any of the tests 
under such regulations for determining if business 
activities constitute substantial business activities for 
purposes of this paragraph.’’. 
(b) CONFORMING AMENDMENTS.— 
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the same chain of corporations as the cor-
poration) shall be treated as executive offi-
cers and senior management if such indi-
viduals exercise the day-to-day responsibil-
ities 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 (di-
rectly or indirectly) consist primarily of as-
sets 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 enact-
ment of this Act. 
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paragraph (B) and inserting a period, and by strik-
ing subparagraph (C). 
(c) EXCEPTIONS TO DEFINITION OF BASE EROSION 
PAYMENT.—Section 59A(d) of the Internal Revenue Code 
of 1986 is amended by adding at the end the following 
new paragraph: 
‘‘(6) EXCEPTION FOR CERTAIN PAYMENTS IN-
CLUDIBLE IN GROSS INCOME OF PAYEE.— 
‘‘(A) IN
GENERAL.—Paragraph (1) shall 
not apply to any portion of an amount— 
‘‘(i) which is paid or accrued by the 
taxpayer to a foreign person who is a 
member of the same controlled group of 
corporations as the taxpayer, and 
‘‘(ii) which— 
‘‘(I) is treated by the foreign per-
son as an amount of income from 
sources within the United States 
which is effectively connected with the 
conduct by such person of a trade or 
business within the United States, or 
‘‘(II) if the foreign person is a 
controlled foreign corporation, is in-
cluded in the income of a United 
States shareholder of such controlled 
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foreign 
corporation 
under 
section 
951(a). 
‘‘(B) CONTROLLED
GROUP
OF
CORPORA-
TIONS.—For purposes of this paragraph, the 
term ‘controlled group of corporations’ has the 
same meaning given to such term by section 
1563(a), except that— 
‘‘(i) ‘more than 50 percent’ shall be 
substituted for ‘at least 80 percent’ each 
place it appears in section 1563(a)(1), and 
‘‘(ii) the determination shall be made 
without regard to subsections (a)(4), 
(b)(2)(C), and (e)(3)(C) of section 1563.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning in cal-
endar years beginning after the date of the enactment of 
this Act. 
SEC. 10. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 
APPLICABLE TO OIL, GAS, MINING, GAM-
BLING AND OTHER INDUSTRY TAXPAYERS 
RECEIVING SPECIFIC ECONOMIC BENEFITS. 
(a) IN GENERAL.—Section 901 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection 
(n) as subsection (o) and by inserting after subsection (m) 
the following new subsection: 
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‘‘(n) SPECIAL RULES RELATING TO DUAL CAPACITY 
TAXPAYERS.— 
‘‘(1) GENERAL
RULE.—Notwithstanding any 
other provision of this chapter, any amount paid or 
accrued by a dual capacity taxpayer to a foreign 
country or possession of the United States for any 
period shall not be considered a tax— 
‘‘(A) if, for such period, the foreign coun-
try or possession does not impose a generally 
applicable income tax, or 
‘‘(B) to the extent such amount exceeds 
the amount (determined in accordance with reg-
ulations) which— 
‘‘(i) is paid by such dual capacity tax-
payer pursuant to the generally applicable 
income tax imposed by the country or pos-
session, or 
‘‘(ii) would be paid if the generally ap-
plicable income tax imposed by the country 
or possession were applicable to such dual 
capacity taxpayer. 
Nothing in this paragraph shall be construed to 
imply the proper treatment of any such amount 
not in excess of the amount determined under 
subparagraph (B). 
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‘‘(2) DUAL
CAPACITY
TAXPAYER.—For pur-
poses of this subsection, the term ‘dual capacity tax-
payer’ means, with respect to any foreign country or 
possession of the United States, a person who— 
‘‘(A) is subject to a levy of such country or 
possession, and 
‘‘(B) receives (or will receive) directly or 
indirectly a specific economic benefit (as deter-
mined in accordance with regulations) from 
such country or possession. 
‘‘(3) GENERALLY APPLICABLE INCOME TAX.— 
For purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘generally 
applicable income tax’ means an income tax (or 
a series of income taxes) which is generally im-
posed under the laws of a foreign country or 
possession on income derived from the conduct 
of a trade or business within such country or 
possession. 
‘‘(B) EXCEPTIONS.—Such term shall not 
include a tax unless it has substantial applica-
tion, by its terms and in practice, to— 
‘‘(i) persons who are not dual capacity 
taxpayers, and 
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‘‘(ii) persons who are citizens or resi-
dents of the foreign country or posses-
sion.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxes paid or accrued in taxable 
years beginning after the date of the enactment of this 
Act. 
(c) 
SPECIAL
RULE
FOR
TREATIES.—Notwith-
standing sections 894 or 7852(d) of the Internal Revenue 
Code of 1986, the amendments made by this section shall 
apply without regard to any treaty obligation of the 
United States. 
SEC. 11. LIMITATIONS ON TREATY BENEFITS. 
(a) LIMITATION FOR CERTAIN DEDUCTIBLE PAY-
MENTS.—Section 894 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
subsection: 
‘‘(d) LIMITATION ON TREATY BENEFITS FOR CER-
TAIN DEDUCTIBLE PAYMENTS.— 
‘‘(1) IN GENERAL.—In the case of any deduct-
ible related-party payment, any withholding tax im-
posed under chapter 3 (and any tax imposed under 
subpart A or B of this part) with respect to such 
payment may not be reduced under any treaty of the 
United States unless any such withholding tax would 
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be reduced under a treaty of the United States if 
such payment were made directly to the foreign par-
ent corporation. 
‘‘(2) 
DEDUCTIBLE
RELATED-PARTY
PAY-
MENT.—For purposes of this subsection, the term 
‘deductible related-party payment’ means any pay-
ment made, directly or indirectly, by any person to 
any other person if the payment is allowable as a de-
duction under this chapter and both persons are 
members of the same foreign controlled group of en-
tities. 
‘‘(3) FOREIGN CONTROLLED GROUP OF ENTI-
TIES.—For purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘foreign 
controlled group of entities’ means a controlled 
group of entities the common parent of which 
is a foreign corporation. 
‘‘(B) CONTROLLED GROUP OF ENTITIES.— 
The term ‘controlled group of entities’ means a 
controlled group of corporations as defined in 
section 1563(a)(1), except that— 
‘‘(i) ‘more than 50 percent’ shall be 
substituted for ‘at least 80 percent’ each 
place it appears therein, and 
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‘‘(ii) the determination shall be made 
without regard to subsections (a)(4) and 
(b)(2) of section 1563. 
A partnership or any other entity (other than a 
corporation) shall be treated as a member of a 
controlled group of entities if such entity is con-
trolled 
(within 
the 
meaning 
of 
section 
954(d)(3)) by members of such group (includ-
ing any entity treated as a member of such 
group by reason of this sentence). 
‘‘(4) FOREIGN
PARENT
CORPORATION.—For 
purposes of this subsection, the term ‘foreign parent 
corporation’ means, with respect to any deductible 
related-party payment, the common parent of the 
foreign controlled group of entities referred to in 
paragraph (3)(A). 
‘‘(5) REGULATIONS.—The Secretary may pre-
scribe such regulations or other guidance as are nec-
essary or appropriate to carry out the purposes of 
this subsection, including regulations or other guid-
ance which provide for— 
‘‘(A) the treatment of two or more persons 
as members of a foreign controlled group of en-
tities if such persons would be the common par-
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ent of such group if treated as one corporation, 
and 
‘‘(B) the treatment of any member of a 
foreign controlled group of entities as the com-
mon parent of such group if such treatment is 
appropriate taking into account the economic 
relationships among such entities.’’. 
(b) LIMITATION
FOR CERTAIN INCOME ATTRIB-
UTABLE TO PERMANENT ESTABLISHMENTS IN A THIRD 
COUNTRY.—Section 894 of such Code, as amended by 
subsection (a), is amended by adding at the end the fol-
lowing new subsection: 
‘‘(e) DENIAL OF TREATY BENEFITS WITH RESPECT 
TO CERTAIN INCOME ATTRIBUTABLE TO A PERMANENT 
ESTABLISHMENT IN A THIRD COUNTRY.—A foreign per-
son shall not be entitled under any income tax treaty of 
the United States with a foreign country to any exemption 
from, or reduction of, any tax with respect to income if— 
‘‘(1) such income is income from sources within 
the United States, and 
‘‘(2) such income is attributable to a permanent 
establishment which is outside of such foreign coun-
try and— 
‘‘(A) the profits of which are subject to a 
combined aggregate effective rate of tax in such 
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foreign country and the country of the perma-
nent establishment that is less than the lesser 
of— 
‘‘(i) 15 percent, or 
‘‘(ii) 60 percent of the general statu-
tory rate of tax on income on corporations 
in such foreign country, or 
‘‘(B) which is located in a foreign country 
with which the United States does not have an 
income tax treaty and is not taxed by the for-
eign country which is a party to the treaty.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to payments made after the date 
of the enactment of this Act. 
(d) SPECIAL
RULE
FOR
TREATIES.—Notwith-
standing sections 894 or 7852(d) of the Internal Revenue 
Code of 1986, the amendments made by this section shall 
apply without regard to any treaty obligation of the 
United States. 
SEC. 12. REPEAL OF DEDUCTION FOR FOREIGN-DERIVED 
INTANGIBLE INCOME. 
(a) IN GENERAL.—Part VIII of subchapter B of 
chapter 1 of the Internal Revenue Code of 1986 is amend-
ed by striking section 250 (and the item related to such 
section in the table of sections for such part). 
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(b) CONFORMING AMENDMENTS.— 
(1) Section 172(d) of the Internal Revenue 
Code of 1986 is amended by striking paragraph (9). 
(2) Section 246 of such Code is amended— 
(A) by striking the comma after ‘‘section 
243(a)(1)’’ the first place it appears and insert-
ing ‘‘and’’ and by striking ‘‘and section 250’’, 
and 
(B) by insert after ‘‘section 243(a)(1)’’ the 
second place it appears and by striking ‘‘, and 
250’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
Æ 
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