‘‘(e) SPECIAL APPLICATION OF SUBPART.— 
‘‘(1) IN GENERAL.—For taxable years begin-
ning after December 31, 2017, 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.— 
(1) IN GENERAL.—Section 965 of the Internal 
Revenue Code of 1986 is amended to read as fol-
lows: 
‘‘SEC. 965. INCLUSION OF PREVIOUSLY DEFERRED FOR-
EIGN INCOME. 
‘‘(a) INCLUSION AS SUBPART F INCOME.—The sub-
part F income (determined under section 952 without re-
gard to this section) of a controlled foreign corporation 
for its last taxable year beginning before January 1, 2018, 
shall be increased by the accumulated deferred foreign in-
come of the corporation. 
‘‘(b) 
ACCUMULATED
DEFERRED
FOREIGN
IN-
COME.—For purposes of this section— 
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‘‘(1) IN GENERAL.—The term ‘accumulated de-
ferred foreign income’ means the excess of— 
‘‘(A) the undistributed earnings of the con-
trolled foreign corporation, over 
‘‘(B) the undistributed U.S. earnings of 
such controlled foreign corporation. 
‘‘(2) UNDISTRIBUTED EARNINGS.— 
‘‘(A) IN GENERAL.—The term ‘undistrib-
uted earnings’ means the earnings and profits 
of the controlled foreign corporation described 
in section 959(c)(3), determined— 
‘‘(i) as of the close of the taxable year 
described in subsection (a)(1), 
‘‘(ii) without diminution by reason of 
distributions made during such taxable 
year, and 
‘‘(iii) without regard to this section. 
‘‘(B) SPECIAL RULE FOR CURRENT YEAR 
DISTRIBUTIONS.—For purposes of this chapter, 
any determination with respect to the treatment 
of distributions described in subparagraph 
(A)(ii) shall be made after the application of 
this section to the earnings and profits de-
scribed in subparagraph (A). 
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‘‘(3) UNDISTRIBUTED
U.S. 
EARNINGS.—The 
term ‘undistributed U.S. earnings’ has the meaning 
given the term ‘post-1986 undistributed U.S. earn-
ings’ in section 245(a)(5) (as in effect for taxable 
years beginning before 2018), determined— 
‘‘(A) without regard to ‘post-1986’ each 
place it appears in the matter before subpara-
graph (A), and 
‘‘(B) without regard to the last sentence 
thereof. 
‘‘(c) ELECTION TO PAY LIABILITY
IN INSTALL-
MENTS.— 
‘‘(1) IN GENERAL.—In the case of a United 
States shareholder with respect to one or more con-
trolled foreign corporations to which subsection (a) 
applies, such United States shareholder may elect to 
pay the net tax liability under this section in two or 
more (but not exceeding eight) equal installments. 
‘‘(2) DATE FOR PAYMENT OF INSTALLMENTS.— 
If an election is made under paragraph (1), the due 
date for the first installment shall be the due date 
(determined without regard to any extension of time 
for filing the return) for the return of tax for the 
taxable year of such United States shareholder in 
which the increase in subpart F income under sub-
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section (a) is included in such shareholder’s gross in-
come under section 951(a)(1) and the due date for 
each succeeding installment shall be the due date (as 
so determined) for the return of tax for the taxable 
year following the taxable year with respect to which 
the preceding installment was made. 
‘‘(3) ACCELERATION
OF
PAYMENT.—If there 
is— 
‘‘(A) an assessment of an addition to tax 
for failure to pay timely with respect to any in-
stallment required under this subsection, 
‘‘(B) a liquidation or sale of substantially 
all the assets of the taxpayer (including in a 
title 11 or similar case), 
‘‘(C) a cessation of business by the tax-
payer, or 
‘‘(D) any similar circumstance, 
then the unpaid portion of all remaining installments 
shall be due on the date of such event (or in the case 
of a title 11 or similar case, the day before the peti-
tion is filed). 
‘‘(4) PRORATION OF DEFICIENCY TO INSTALL-
MENTS.—If an election is made under paragraph (1) 
to pay the net tax liability under this section in in-
stallments and a deficiency has been assessed, the 
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deficiency shall be prorated to the installments pay-
able under paragraph (1). The part of the deficiency 
so prorated to any installment the date for payment 
of which has not arrived shall be collected at the 
same time as, and as a part of, such installment. 
The part of the deficiency so prorated to any install-
ment the date for payment of which has arrived 
shall be paid upon notice and demand from the Sec-
retary. This paragraph shall not apply if the defi-
ciency is due to negligence, to intentional disregard 
of rules and regulations, or to fraud with intent to 
evade tax. 
‘‘(5) RULES RELATING TO INTEREST.— 
‘‘(A) IN GENERAL.—In the case of any net 
tax liability prorated to an installment under 
this subsection, the last date prescribed for pay-
ment of the tax for purposes of section 6601(a) 
shall be the last date for payment of the install-
ment rather than the last date for payment of 
tax for the taxable year in which the net tax li-
ability arose. 
‘‘(B) 
SPECIAL
RULES
FOR
DEFI-
CIENCIES.— 
‘‘(i) INTEREST PAYABLE FOR ENTIRE 
PERIOD.—Subparagraph 
(A) 
shall 
not 
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apply to any deficiency prorated to an in-
stallment under paragraph (4). 
‘‘(ii) PAYMENT OF INTEREST ATTRIB-
UTABLE TO PRIOR PERIODS.—In the case 
of a deficiency to which paragraph (4) ap-
plies, interest with respect to such defi-
ciency which is assigned under paragraph 
(4) to any installment the date for pay-
ment of which has arrived on or before the 
date of the assessment of the deficiency, 
shall be paid upon notice and demand from 
the Secretary. 
‘‘(6) 
PERIOD
OF
ASSESSMENT.—Notwith-
standing section 6501, the period for assessing the 
net tax liability under this section for which an elec-
tion is made under paragraph (1) shall not expire 
before the due date for the last installment. 
‘‘(7) ELECTION.—Any election under paragraph 
(1) shall be made not later than the due date for the 
return of tax for the taxable year of such United 
States shareholder in which the increase in subpart 
F income under subsection (a) is included in such 
shareholder’s gross income under section 951(a)(1) 
and shall be made in such manner as the Secretary 
may provide. 
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‘‘(8) NET
TAX
LIABILITY
UNDER
THIS
SEC-
TION.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The net tax liability 
under this section with respect to any United 
States shareholder is the excess (if any) of— 
‘‘(i) such taxpayer’s net income tax 
for the taxable year, over 
‘‘(ii) such taxpayer’s net income tax 
for such taxable year determined without 
regard to this section. 
‘‘(B) NET INCOME TAX.—The term ‘net 
income tax’ means the net income tax (as de-
fined in section 38(c)(1)) reduced by the credit 
allowed under section 38. 
‘‘(C) REGULATIONS.—The Secretary shall 
prescribe such regulations as may be necessary 
for the determination under this subsection of 
the net tax liability under this section in the 
case of any pass-thru entity. 
‘‘(d) REGULATIONS.—The Secretary shall promul-
gate such regulations as necessary to carry out the pur-
poses of this section, including regulations for the applica-
tion of this section to pass-through entities all or part of 
which are owned by one or more domestic corporations.’’. 
(2) CONFORMING AMENDMENTS.— 
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(A) Section 56(g)(4)(C) of the Internal 
Revenue Code of 1986 is amended by striking 
clause (vi). 
(B) Paragraph (3) of section 245(a) of 
such Code is amended— 
(i) by striking ‘‘post-1986’’ in sub-
paragraph (A), and 
(ii) by striking ‘‘total post-1986’’ in 
subparagraph (B). 
(C) Paragraph (4) of section 245(a) of 
such Code is amended to read as follows: 
‘‘(4) UNDISTRIBUTED
EARNINGS.—The term 
‘undistributed earnings’ means the amount of the 
earnings and profits of the controlled foreign cor-
poration (computed in accordance with sections 
964(a) and 986)— 
‘‘(A) as of the close of the taxable year of 
the controlled foreign corporation in which the 
dividend is distributed, and 
‘‘(B) without diminution by reason of divi-
dends distributed during such taxable year.’’. 
(D) Paragraph (5) of section 245(a) of 
such Code is amended— 
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(i) by striking ‘‘post-1986’’ both 
places it appears in the matter preceding 
subparagraph (A), and 
(ii) by striking ‘‘POST-1986 UNDIS-
TRIBUTED’’ in the heading thereof and in-
serting ‘‘UNDISTRIBUTED’’. 
(E) Paragraph (6) of section 245(a) of 
such Code is amended— 
(i) by striking ‘‘beginning after De-
cember 31, 1986’’ and inserting ‘‘which is 
after the first taxable year of such corpora-
tion’’, and 
(ii) by striking ‘‘post-1986’’ both 
places it appears. 
(F) Paragraph (2) of section 6601(b) of 
such Code is amended— 
(i) by striking ‘‘section 6156(a)’’ in 
the matter preceding subparagraph (A) 
and 
inserting 
‘‘section 
965(c)(1) 
or 
6156(a)’’, and 
(ii) by striking ‘‘section 6156(b)’’ in 
subparagraph (A) and inserting ‘‘section 
965(c)(2) or 6156(b), as the case may be’’. 
(G) The table of sections for subpart F of 
part III of subchapter N of chapter 1 of such 
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Code is amended by striking the item relating 
to section 965 and inserting the following: 
‘‘Sec. 965. Inclusion of previously deferred foreign income.’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to taxable years begin-
ning after December 31, 2017. 
SEC. 3. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 
APPLICABLE TO LARGE INTEGRATED OIL 
COMPANIES WHICH ARE DUAL CAPACITY 
TAXPAYERS. 
(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: 
‘‘(n) SPECIAL RULES RELATING TO LARGE INTE-
GRATED OIL COMPANIES WHICH ARE DUAL CAPACITY 
TAXPAYERS.— 
‘‘(1) GENERAL
RULE.—Notwithstanding any 
other provision of this chapter, any amount paid or 
accrued by a dual capacity taxpayer which is a large 
integrated oil company to a foreign country or pos-
session 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 
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‘‘(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). 
‘‘(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. 
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‘‘(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 
‘‘(ii) persons who are citizens or resi-
dents of the foreign country or possession. 
‘‘(4) LARGE INTEGRATED OIL COMPANY.—For 
purposes of this subsection, the term ‘large inte-
grated oil company’ means, with respect to any tax-
able year, an integrated oil company (as defined in 
section 291(b)(4)) which— 
‘‘(A) had gross receipts in excess of 
$1,000,000,000 for such taxable year, and 
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‘‘(B) has an average daily worldwide pro-
duction of crude oil of at least 500,000 barrels 
for such taxable year.’’. 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxes paid or accrued in 
taxable years beginning after the date of the enact-
ment of this Act. 
(2) 
CONTRARY
TREATY
OBLIGATIONS 
UPHELD.—The amendments made by this section 
shall not apply to the extent contrary to any treaty 
obligation of the United States. 
SEC. 4. REINSTITUTION OF PER COUNTRY FOREIGN TAX 
CREDIT. 
(a) IN GENERAL.—Subsection (a) of section 904 of 
the Internal Revenue Code of 1986 is amended to read 
as follows: 
‘‘(a) LIMITATION.—The amount of the credit in re-
spect of the tax paid or accrued to any foreign country 
or possession of the United States shall not exceed the 
same proportion of the tax against which such credit is 
taken which the taxpayer’s taxable income from sources 
within such country or possession (but not in excess of 
the taxpayer’s entire taxable income) bears to such tax-
payer’s entire taxable income for the same taxable year.’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 5. TREATMENT OF FOREIGN CORPORATIONS MAN-
AGED AND CONTROLLED IN THE UNITED 
STATES AS DOMESTIC CORPORATIONS. 
(a) IN GENERAL.—Section 7701 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection 
(p) as subsection (q) and by inserting after subsection (o) 
the following new subsection: 
‘‘(p) CERTAIN CORPORATIONS MANAGED AND CON-
TROLLED IN THE UNITED STATES TREATED AS DOMES-
TIC 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 pur-
poses of this title, but 
‘‘(B) the management and control of the 
corporation occurs, directly or indirectly, pri-
marily within the United States, 
then, solely for purposes of chapter 1 (and any other 
provision of this title relating to chapter 1), the cor-
poration shall be treated as a domestic corporation. 
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‘‘(2) CORPORATION DESCRIBED.— 
‘‘(A) IN GENERAL.—A corporation is de-
scribed in this paragraph if— 
‘‘(i) the stock of such corporation is 
regularly traded on an established securi-
ties market, or 
‘‘(ii) the aggregate gross assets of 
such corporation (or any predecessor there-
of), including assets under management 
for investors, whether held directly or indi-
rectly, at any time during the taxable year 
or 
any 
preceding 
taxable 
year 
is 
$50,000,000 or more. 
‘‘(B) GENERAL
EXCEPTION.—A corpora-
tion 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 ex-
pected to continue to have, aggregate 
gross assets (including assets under 
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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 deter-
mining cases in which the management and 
control of a corporation is to be treated as oc-
curring 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 sub-
stantially all of the executive officers and 
senior management of the corporation who 
exercise day-to-day responsibility for mak-
ing decisions involving strategic, financial, 
and operational policies of the corporation 
are located primarily within the United 
States, and 
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‘‘(ii) individuals who are not executive 
officers and senior management of the cor-
poration (including individuals who are of-
ficers or employees of other corporations in 
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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SEC. 6. RESTRICTIONS ON DEDUCTION FOR INTEREST EX-
PENSE OF MEMBERS OF FINANCIAL REPORT-
ING GROUPS WITH EXCESS DOMESTIC IN-
DEBTEDNESS. 
(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) RESTRICTION ON DEDUCTION FOR INTEREST 
EXPENSE
OF
MEMBERS
OF
FINANCIAL
REPORTING 
GROUPS WITH EXCESS DOMESTIC INDEBTEDNESS.— 
‘‘(1) IN GENERAL.—In the case of any corpora-
tion which is a member of an applicable financial re-
porting group the common parent of which is a for-
eign corporation, the deduction allowed under this 
chapter for interest paid or accrued by the corpora-
tion during the taxable year shall not exceed the ap-
plicable limitation for the taxable year. 
‘‘(2) CARRYFORWARD.—Any amount disallowed 
under paragraph (1) for any taxable year shall be 
treated as interest paid or accrued in the succeeding 
taxable year. 
‘‘(3) APPLICABLE LIMITATION.—For purposes 
of this subsection— 
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‘‘(A) IN GENERAL.—The applicable limita-
tion with respect to a taxpayer for any taxable 
year is the sum of— 
‘‘(i) the greater of— 
‘‘(I) 
the 
taxpayer’s 
allocable 
share of the applicable financial re-
porting group’s net interest expense 
for the taxable year, or 
‘‘(II) 10 percent of the taxpayer’s 
adjusted taxable income for the tax-
able year, plus 
‘‘(ii) 
the 
excess 
limitation 
carryforwards to the taxable year from any 
preceding taxable year. 
‘‘(B) LIMITATION
NOT
LESS
THAN
IN-
CLUDIBLE
INTEREST.—The applicable limita-
tion under subparagraph (A) for any taxable 
year shall not be less than the amount of inter-
est includible in the gross income of the tax-
payer for the taxable year. 
‘‘(C) 
EXCESS
LIMITATION 
CARRYFORWARD.—If the applicable limitation 
of a taxpayer for any taxable year (determined 
without regard to carryforwards under subpara-
graph (A)(ii)) exceeds the interest paid or ac-
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crued by the taxpayer during the taxable year, 
such excess shall be an excess limitation 
carryforward to the 1st succeeding taxable year 
and the 2nd and 3rd succeeding taxable years 
to the extent not previously taken into account 
under this paragraph. 
‘‘(4) ALLOCABLE SHARE OF NET INTEREST EX-
PENSE.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—A taxpayer’s allocable 
share of an applicable financial reporting 
group’s net interest expense for any taxable 
year shall be the amount (not less than zero) 
which bears the same ratio to such net interest 
expense as— 
‘‘(i) the net earnings of the taxpayer, 
bears to 
‘‘(ii) the aggregate net earnings of all 
members of the applicable financial report-
ing group. 
‘‘(B) NET
EARNINGS.—The term ‘net 
earnings’ means, with respect to any taxpayer, 
the earnings of the taxpayer— 
‘‘(i) computed without regard to any 
reduction allowable for— 
‘‘(I) net interest expense, 
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‘‘(II) taxes, or 
‘‘(III) depreciation, amortization, 
or depletion, and 
‘‘(ii) computed with such other adjust-
ments as the Secretary may by regulations 
prescribe. 
‘‘(C) BURDEN ON TAXPAYER.—If a tax-
payer elects not to compute its allocable share, 
or fails to establish to the satisfaction of the 
Secretary the amount of its allocable share, for 
any taxable year, the allocable share shall be 
zero. 
‘‘(5) NET INTEREST EXPENSE AND NET EARN-
INGS DETERMINATIONS.—For purposes of this sub-
section— 
‘‘(A) NET INTEREST EXPENSE.—Any de-
termination of net interest expense for any tax-
able year shall be made— 
‘‘(i) on the basis of the applicable fi-
nancial statement of the applicable finan-
cial reporting group for the last financial 
reporting year ending with or within the 
taxable year, and 
‘‘(ii) under United States tax prin-
ciples. 
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‘‘(B) NET EARNINGS.—Any determination 
of net earnings for any taxable year shall be 
made on the basis of the applicable financial 
statement of the applicable financial reporting 
group for the last financial reporting year end-
ing with or within the taxable year. 
‘‘(C) 
APPLICABLE
FINANCIAL
STATE-
MENT.—The term ‘applicable financial state-
ment’ means a statement for financial reporting 
purposes which is made on the basis of— 
‘‘(i) generally accepted accounting 
principles, 
‘‘(ii) international financial reporting 
standards, or 
‘‘(iii) any other method specified by 
the Secretary in regulations. 
A statement under clause (ii) or (iii) may be 
used as an applicable financial statement by a 
group only if there is no statement of the group 
under any preceding clause. 
‘‘(6) 
APPLICABLE
FINANCIAL
REPORTING 
GROUP.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘applicable 
financial reporting group’ means, with respect 
to any corporation, a group of which such cor-
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poration is a member and which files an appli-
cable financial statement. 
‘‘(B) EXCEPTION FOR GROUPS WITH MINI-
MAL
DOMESTIC
NET
INTEREST
EXPENSE.— 
Such term shall not include a group if the ag-
gregate net interest expense for which a deduc-
tion is allowable to all members of the group 
under this chapter (determined without regard 
to this subsection or any other limitation on de-
ductibility of interest under this chapter) is less 
than $5,000,000. 
‘‘(C) EXCEPTION FOR CERTAIN FINANCIAL 
ENTITIES.—A corporation which is described in 
section 864(f)(4)(B), or is treated as described 
in section 864(f)(4)(B) by reason of paragraph 
(4)(C) or (5)(A) of section 864(f) (without re-
gard to whether an election is made under such 
paragraph (5)(A)), shall not be treated as a 
member of an applicable financial reporting 
group of which it is otherwise a member and 
this subsection shall not apply to such corpora-
tion. 
‘‘(7) OTHER
DEFINITIONS
AND
RULES.—For 
purposes of this subsection— 
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‘‘(A) ADJUSTED TAXABLE INCOME.—The 
term ‘adjusted taxable income’ has the meaning 
given such term by subsection (j)(6)(A). 
‘‘(B) NET INTEREST EXPENSE.—The term 
‘net interest expense’ has the meaning given 
such term by subsection (j)(6)(B). 
‘‘(C) 
TREATMENT
OF
AFFILIATED 
GROUP.—All members of the same affiliated 
group (within the meaning of section 1504(a)) 
shall be treated as 1 taxpayer. 
‘‘(8) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry 
out the purposes of this section, including regula-
tions providing— 
‘‘(A) for the coordination of the application 
of this subsection and other provisions of this 
chapter relating to the deductibility of interest, 
‘‘(B) for the waiver of certain adjustments 
required under United States tax principles in 
appropriate cases for purposes of applying this 
subsection, 
‘‘(C) for the determination of which finan-
cial institutions are eligible for the exception 
from membership in an applicable financial re-
porting group under paragraph (6)(C) and the 
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application of this subsection to the other mem-
bers of the group which are not so excepted, 
and 
‘‘(D) for the application of this subsection 
in the case of pass thru entities and for the 
treatment of pass thru entities as corporations 
in cases where necessary to prevent the avoid-
ance of the purposes of this subsection.’’. 
(b) COORDINATION WITH LIMITATION ON RELATED 
PARTY INDEBTEDNESS.—Paragraph (2) of section 163(j) 
of the Internal Revenue Code of 1986 is amended by add-
ing at the end the following new subparagraph: 
‘‘(D) COORDINATION WITH LIMITATION ON 
EXCESS DOMESTIC INDEBTEDNESS.—This sub-
section shall not apply to any corporation for 
any taxable year to which subsection (n) applies 
to such corporation.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
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: 
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‘‘(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 
‘‘(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-
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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.— 
(1) Clause (i) of section 7874(a)(2)(B) of the 
Internal Revenue Code of 1986 is amended by strik-
ing ‘‘after March 4, 2003,’’ and inserting ‘‘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)’’ and inserting ‘‘subsections 
(a)(2)(B)(ii) and (b)(2)(B)’’, 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), 
as 
the 
case 
may 
be,’’ 
after 
‘‘(a)(2)(B)(ii)’’, 
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(C) in paragraph (5), by striking ‘‘sub-
section (a)(2)(B)(ii)’’ and inserting ‘‘sub-
sections (a)(2)(B)(ii) and (b)(2)(B)’’, 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 
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