‘‘(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 January 18, 
2017, except that the Secretary may issue regula-
tions increasing the threshold percent in any of the 
tests under such regulations for determining if busi-
ness activities constitute substantial business activi-
ties for purposes of this paragraph. 
‘‘(4) MANAGEMENT AND CONTROL.—For pur-
poses of paragraph (2)(B)(ii)— 
‘‘(A) IN
GENERAL.—The Secretary shall 
prescribe regulations for purposes of deter-
mining cases in which the management and 
control of an expanded affiliated group is to be 
VerDate Sep 11 2014 
22:53 Jun 09, 2021
Jkt 019200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\H2976.IH
H2976
pamtmann on DSKBC07HB2PROD with BILLS
treated as occurring, directly or indirectly, pri-
marily within the United States. The regula-
tions 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 ex-
panded affiliated group shall be treated as oc-
curring, directly or indirectly, primarily within 
the United States if substantially all of the ex-
ecutive 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 pri-
marily located within the United States. Indi-
viduals who in fact exercise such day-to-day re-
sponsibilities shall be treated as executive offi-
cers and senior management regardless of their 
title. 
‘‘(5) SIGNIFICANT DOMESTIC BUSINESS ACTIVI-
TIES.—For purposes of paragraph (2)(B)(ii), an ex-
panded affiliated group has significant domestic 
business activities if at least 25 percent of— 
VerDate Sep 11 2014 
22:53 Jun 09, 2021
Jkt 019200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\H2976.IH
H2976
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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 employ-
ees 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 determina-
tions are made for purposes of determining substan-
tial business activities under regulations referred to 
in paragraph (3) as in effect on January 18, 2017, 
but applied by treating all references in such regula-
tions to ‘foreign country’ and ‘relevant foreign coun-
try’ as references to ‘the United States’. The Sec-
retary may issue regulations decreasing the thresh-
old percent in any of the tests under such regula-
tions for determining if business activities constitute 
significant domestic business activities for purposes 
of this paragraph.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Clause (i) of section 7874(a)(2)(B) of such 
Code is amended by striking ‘‘after March 4, 2003,’’ 
VerDate Sep 11 2014 
22:53 Jun 09, 2021
Jkt 019200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6201
E:\BILLS\H2976.IH
H2976
pamtmann on DSKBC07HB2PROD with BILLS
and inserting ‘‘after March 4, 2003, and before May 
8, 2014,’’. 
(2) Subsection (c) of section 7874 of such Code 
is amended— 
(A) in paragraph (2)— 
(i) 
by 
striking 
‘‘subsection 
(a)(2)(B)(ii)’’ and inserting ‘‘subsections 
(a)(2)(B)(ii) and (b)(2)(B)(i)’’; and 
(ii) by inserting ‘‘or (b)(2)(A)’’ after 
‘‘(a)(2)(B)(i)’’ in subparagraph (B); 
(B) in paragraph (3), by inserting ‘‘or 
(b)(2)(B)(i), as the case may be,’’ after 
‘‘(a)(2)(B)(ii)’’; 
(C) in paragraph (5), by striking ‘‘sub-
section (a)(2)(B)(ii)’’ and inserting ‘‘sub-
sections (a)(2)(B)(ii) and (b)(2)(B)(i)’’; and 
(D) in paragraph (6), by inserting ‘‘or in-
verted domestic corporation, as the case may 
be,’’ after ‘‘surrogate foreign corporation’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after May 
8, 2014. 
Æ 
VerDate Sep 11 2014 
22:53 Jun 09, 2021
Jkt 019200
PO 00000
Frm 00007
Fmt 6652
Sfmt 6301
E:\BILLS\H2976.IH
H2976
pamtmann on DSKBC07HB2PROD with BILLS