I 
111TH CONGRESS 
2D SESSION 
H. R. 5857 
To amend the Internal Revenue Code of 1986 to decrease the top marginal 
corporate rate to 28 percent and to prevent corporations from exploiting 
tax treaties to evade taxation of United States income. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 26, 2010 
Mr. DJOU 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 decrease 
the top marginal corporate rate to 28 percent and to 
prevent corporations from exploiting tax treaties to evade 
taxation of United States income. 
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 ‘‘Fair American Cor-
porate Tax Act’’ or ‘‘FACT Act’’. 
SEC. 2. DECREASE IN TOP MARGINAL RATE. 
(a) IN GENERAL.—Paragraph (1) of section 11(b) of 
the Internal Revenue Code of 1986 is amended— 
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(1) by inserting ‘‘and’’ at the end of subpara-
graph (B), 
(2) by striking subparagraphs (C) and (D) and 
inserting the following subparagraph: 
‘‘(C) 28 percent of so much of the taxable 
income as exceeds $75,000.’’, 
(3) by striking ‘‘of $100,000’’ and inserting ‘‘of 
$75,000’’, 
(4) by striking ‘‘$11,750’’ and inserting 
‘‘$7,250’’, and 
(5) by striking the third sentence. 
(b) CERTAIN PERSONAL SERVICE CORPORATIONS.— 
Paragraph (2) of section 11(b) of such Code is amended 
by striking ‘‘35 percent’’ and inserting ‘‘28 percent’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Subsection (a) of section 1201 of such Code 
is amended by striking ‘‘35 percent’’ each place it 
appears and inserting ‘‘28 percent’’. 
(2) Paragraphs (1), (2), and (6) of section 
1445(e) of such Code are each amended by striking 
‘‘35 percent’’ and inserting ‘‘28 percent’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2010. 
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SEC. 3. LIMITATION ON TREATY BENEFITS FOR CERTAIN 
DEDUCTIBLE PAYMENTS. 
(a) IN GENERAL.—Section 894 of the Internal Rev-
enue Code of 1986 (relating to income affected by treaty) 
is amended by adding at the end the following new sub-
section: 
‘‘(d) LIMITATION ON TREATY BENEFITS FOR CER-
TAIN DEDUCTIBLE PAYMENTS.— 
‘‘(1) IN GENERAL.—In the case of any deduct-
ible related-party payment, the amount of any with-
holding tax imposed under chapter 3 (and any tax 
imposed under subpart A or B of this part) with re-
spect to such payment shall not be less than the 
amount which would be imposed if the payment were 
made directly to the foreign parent corporation (tak-
ing into account any income tax treaty between the 
United States and the country in which the foreign 
parent corporation is resident). 
‘‘(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. 
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‘‘(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 
‘‘(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 
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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-
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) EFFECTIVE DATE.—The amendment made by 
this section shall apply to payments made after the date 
of the enactment of this Act. 
Æ 
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