the Commonwealth of Puerto Rico and the 
Commonwealth of the Northern Mariana Is-
lands. 
(B) MIRROR CODE TAX SYSTEM.—For pur-
poses of this section, the term ‘‘mirror code tax 
system’’ means, with respect to any possession 
of the United States, the income tax system of 
such possession if the income tax liability of the 
residents of such possession under such system 
is determined by reference to the income tax 
laws of the United States as if such possession 
were the United States. 
(C) TREATMENT OF PAYMENTS.—For pur-
poses of section 1324(b)(2) of title 31, United 
States Code, the payments under this section 
shall be treated in the same manner as a refund 
due from sections referred to in such section 
1324(b)(2). 
SEC. 3. DENIAL OF DEDUCTION FOR OUTSOURCING EX-
PENSES. 
(a) IN GENERAL.—Part IX of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by adding at the end the following new section: 
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‘‘SEC. 280I. OUTSOURCING EXPENSES. 
‘‘(a) IN GENERAL.—No deduction otherwise allow-
able under this chapter shall be allowed for any specified 
outsourcing expense. 
‘‘(b) SPECIFIED OUTSOURCING EXPENSE.—For pur-
poses of this section— 
‘‘(1) IN
GENERAL.—The term ‘specified out-
sourcing expense’ means— 
‘‘(A) any eligible expense paid or incurred 
by the taxpayer in connection with the elimi-
nation of any business unit of the taxpayer (or 
of any member of any expanded affiliated group 
in which the taxpayer is also a member) located 
within the United States, and 
‘‘(B) any eligible expense paid or incurred 
by the taxpayer in connection with the estab-
lishment of any business unit of the taxpayer 
(or of any member of any expanded affiliated 
group in which the taxpayer is also a member) 
located outside the United States, 
if such establishment constitutes the relocation of 
business unit so eliminated. For purposes of the pre-
ceding sentence, a relocation shall not be treated as 
failing to occur merely because such elimination oc-
curs in a different taxable year than such establish-
ment. 
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‘‘(2) APPLICATION
OF
CERTAIN
DEFINITIONS 
AND RULES.— 
‘‘(A) DEFINITIONS.—For purposes of this 
section, the terms ‘eligible expenses’, ‘business 
unit’, and ‘expanded affiliated group’ shall have 
the respective meanings given such terms by 
section 45S(b). 
‘‘(B) OPERATING EXPENSES NOT TAKEN 
INTO ACCOUNT.—A rule similar to the rule of 
section 45S(b)(6) shall apply for purposes of 
this section. 
‘‘(c) SPECIAL RULES.— 
‘‘(1) APPLICATION
TO
DEDUCTIONS
FOR
DE-
PRECIATION
AND
AMORTIZATION.—In the case of 
any portion of a specified outsourcing expense which 
is not deductible in the taxable year in which paid 
or incurred, such portion shall neither be chargeable 
to capital account nor amortizable. 
‘‘(2) POSSESSIONS TREATED AS PART OF THE 
UNITED STATES.—For purposes of this section, the 
term ‘United States’ shall be treated as including 
each possession of the United States (including the 
Commonwealth of Puerto Rico and the Common-
wealth of the Northern Mariana Islands). 
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‘‘(d) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the purposes of this section, 
including regulations which provide (or create a rebuttable 
presumption) that certain establishments of business units 
outside the United States will be treated as relocations 
(based on timing or such other factors as the Secretary 
may provide) of business units eliminated within the 
United States.’’. 
(b) LIMITATION ON SUBPART F INCOME OF CON-
TROLLED FOREIGN CORPORATIONS DETERMINED WITH-
OUT REGARD TO SPECIFIED OUTSOURCING EXPENSES.— 
Subsection (c) of section 952 of such Code is amended 
by adding at the end the following new paragraph: 
‘‘(4) EARNINGS
AND
PROFITS
DETERMINED 
WITHOUT REGARD TO SPECIFIED OUTSOURCING EX-
PENSES.—For purposes of this subsection, earnings 
and profits of any controlled foreign corporation 
shall be determined without regard to any specified 
outsourcing 
expense 
(as 
defined 
in 
section 
280I(b)).’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for part IX of subchapter B of chapter 1 of such Code 
is amended by adding at the end the following new item: 
‘‘Sec. 280I. Outsourcing expenses.’’. 
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(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred after 
the date of the enactment of this Act. 
SEC. 4. TREATMENT OF SECURITIES OF A CONTROLLED 
CORPORATION EXCHANGED FOR ASSETS IN 
CERTAIN REORGANIZATIONS. 
(a) IN GENERAL.—Section 361 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subsection: 
‘‘(d) SPECIAL RULES FOR TRANSACTIONS INVOLVING 
SECTION 355 DISTRIBUTIONS.—In the case of a reorga-
nization described in section 368(a)(1)(D) with respect to 
which stock or securities of the corporation to which the 
assets are transferred are distributed in a transaction 
which qualifies under section 355— 
‘‘(1) this section shall be applied by substituting 
‘stock other than nonqualified preferred stock (as 
defined in section 351(g)(2))’ for ‘stock or securities’ 
in subsections (a) and (b)(1), and 
‘‘(2) the first sentence of subsection (b)(3) shall 
apply only to the extent that the sum of the money 
and the fair market value of the other property 
transferred to such creditors does not exceed the ad-
justed bases of such assets transferred (reduced by 
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the amount of the liabilities assumed (within the 
meaning of section 357(c))).’’. 
(b) CONFORMING AMENDMENT.—Paragraph (3) of 
section 361(b) of such Code is amended by striking the 
last sentence. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to exchanges after the date of the enact-
ment of this Act. 
(2) 
TRANSITION
RULE.—The 
amendments 
made by this section shall not apply to any exchange 
pursuant to a transaction which is— 
(A) made pursuant to a written agreement 
which was binding on February 6, 2012, and at 
all times thereafter; 
(B) described in a ruling request submitted 
to the Internal Revenue Service on or before 
February 6, 2012; or 
(C) described on or before February 6, 
2012, in a public announcement or in a filing 
with the Securities and Exchange Commission. 
Æ 
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