I 
117TH CONGRESS 
1ST SESSION H. R. 1785 
To amend the Internal Revenue Code of 1986 to provide for current year 
inclusion of net CFC tested income, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 11, 2021 
Mr. DOGGETT (for himself, Ms. BARRAGA´N, Mrs. BEATTY, Mr. BLUMENAUER, 
Ms. BONAMICI, Mr. BRENDAN F. BOYLE of Pennsylvania, Mrs. BUSTOS, 
Ms. CHU, Mr. CICILLINE, Mr. CLEAVER, Mr. COHEN, Mr. COOPER, Mr. 
COURTNEY, Mr. CRIST, Mr. CROW, Mr. DANNY K. DAVIS of Illinois, Mr. 
DEFAZIO, Ms. DELAURO, Mr. DESAULNIER, Mr. DEUTCH, Mrs. DIN-
GELL, Mr. MICHAEL F. DOYLE of Pennsylvania, Ms. ESHOO, Mr. 
ESPAILLAT, Mr. EVANS, Mr. FOSTER, Mr. GALLEGO, Mr. GARAMENDI, 
Mr. GARCI´A of Illinois, Mr. GOMEZ, Mr. GRIJALVA, Mr. HASTINGS, Mrs. 
HAYES, Mr. HIGGINS of New York, Mr. HUFFMAN, Ms. JACKSON LEE, 
Ms. JAYAPAL, Mr. JEFFRIES, Ms. JOHNSON of Texas, Mr. JOHNSON of 
Georgia, Ms. KAPTUR, Ms. KELLY of Illinois, Mr. KHANNA, Mr. KIM of 
New Jersey, Mrs. KIRKPATRICK, Mr. LANGEVIN, Mr. LAMB, Mrs. LAW-
RENCE, Ms. LEE of California, Mr. LEVIN of Michigan, Mr. LOWENTHAL, 
Mrs. LURIA, Mr. LYNCH, Mrs. CAROLYN B. MALONEY of New York, Ms. 
MCCOLLUM, Mr. MCGOVERN, Mr. MRVAN, Mr. MEEKS, Ms. MENG, Mr. 
JONES, Mr. MOULTON, Mr. MFUME, Mr. NADLER, Mrs. NAPOLITANO, 
Mr. NEGUSE, Mr. NORCROSS, Ms. NORTON, Ms. OMAR, Mr. PALLONE, 
Mr. PANETTA, Mr. PAPPAS, Mr. PERLMUTTER, Ms. PINGREE, Mr. 
POCAN, Ms. PORTER, Ms. PRESSLEY, Mr. RASKIN, Ms. ROYBAL-ALLARD, 
Mr. RYAN, Mr. SARBANES, Ms. SCANLON, Ms. SCHAKOWSKY, Mr. SHER-
MAN, Mr. SIRES, Mr. SUOZZI, Mr. TAKANO, Ms. TITUS, Ms. TLAIB, Mr. 
TONKO, Ms. VELA´ZQUEZ, Ms. WATERS, Mrs. WATSON COLEMAN, Mr. 
WELCH, Ms. WILD, Mr. YARMUTH, Mr. CARTWRIGHT, Mr. PASCRELL, 
Ms. BASS, Mr. GREEN of Texas, Mr. DAVID SCOTT of Georgia, Mr. 
CASE, Ms. CLARKE of New York, and Ms. ESCOBAR) introduced the fol-
lowing bill; which was referred to the Committee on Ways and Means 
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A BILL 
To amend the Internal Revenue Code of 1986 to provide 
for current year inclusion of net CFC tested income, 
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, ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘No Tax Breaks for Outsourcing Act’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows: 
Sec. 1. Short title, etc. 
Sec. 2. Current year inclusion of net CFC tested income. 
Sec. 3. Country-by-country application of limitation on foreign tax credit based 
on taxable units. 
Sec. 4. Limitation on deduction of interest by domestic corporations which are 
members of an international financial reporting group. 
Sec. 5. Modifications to rules relating to inverted corporations. 
Sec. 6. Treatment of foreign corporations managed and controlled in the United 
States as domestic corporations. 
SEC. 2. CURRENT YEAR INCLUSION OF NET CFC TESTED IN-
COME. 
(a) REPEAL OF TAX-FREE DEEMED RETURN ON IN-
VESTMENTS.— 
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(1) IN GENERAL.—Section 951A(a) is amended 
by striking ‘‘global intangible low-taxed income’’ and 
inserting ‘‘net CFC tested income’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 951A is amended by striking 
subsections (b) and (d). 
(B) Section 951A(e)(1) is amended by 
striking ‘‘subsections (b), (c)(1)(A), and’’ and 
inserting ‘‘subsections (c)(1)(A) and’’. 
(C) Section 951A(f) is amended by strik-
ing ‘‘global intangible low-taxed income’’ each 
place it appears and inserting ‘‘net CFC tested 
income’’. 
(D) Section 960(d)(2)(A) is amended by 
striking ‘‘global intangible low-taxed income (as 
defined in section 951A(b))’’ and inserting ‘‘net 
CFC tested income (as defined in section 
951A(c))’’. 
(b) REPEAL OF REDUCED RATE OF TAX ON NET 
CFC TESTED INCOME AND FOREIGN-DERIVED INTAN-
GIBLE INCOME.— 
(1) IN GENERAL.—Part VIII of subchapter B 
of chapter 1 is amended by striking section 250 (and 
by striking the item relating to such section in the 
table of sections of such part). 
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(2) CONFORMING AMENDMENTS.— 
(A) Section 59A(c)(4)(B)(i) is amended by 
striking ‘‘section 172, 245A, or 250’’ and in-
serting ‘‘section 172 or 245A’’. 
(B) Section 172(d) is amended by striking 
paragraph (9). 
(C) Section 246(b)(1) is amended— 
(i) by striking ‘‘subsection (a) and (b) 
of section 245, and section 250’’ and in-
serting ‘‘and subsection (a) and (b) of sec-
tion 245’’; and 
(ii) by striking ‘‘subsection (a) and 
(b) of section 245, and 250’’ and inserting 
‘‘and subsection (a) and (b) of section 
245’’. 
(D) Section 469(i)(3)(F)(iii) is amended 
by striking ‘‘222, and 250’’ and inserting ‘‘and 
222’’. 
(c) REPEAL OF CERTAIN EXCLUSIONS FROM THE 
DETERMINATION
OF
TESTED
INCOME.—Section 
951A(c)(2)(A)(i) is amended— 
(1) by striking subclauses (III) and (V), 
(2) by redesignating subclause (IV) as sub-
clause (III), 
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(3) by adding ‘‘and’’ at the end of subclause 
(II), and 
(4) by striking ‘‘and’’ at the end of subclause 
(III) (as so redesignated) and inserting ‘‘over’’. 
(d) INCREASE IN DEEMED PAID CREDIT FOR TAXES 
PROPERLY ATTRIBUTABLE TO TESTED INCOME.— 
(1) IN GENERAL.—Section 960(d) is amended 
by striking ‘‘80 percent of’’. 
(2) CONFORMING AMENDMENT.—Section 78 is 
amended by striking ‘‘(determined without regard to 
the phrase ‘‘80 percent of’’ in subsection (d)(1) 
thereof)’’. 
(e) REPEAL OF HIGH TAX EXCLUSION FOR FOREIGN 
BASE COMPANY INCOME AND INSURANCE INCOME.— 
(1) IN GENERAL.—Section 954(b) is amended 
by striking paragraph (4). 
(2) 
CONFORMING
AMENDMENT.—Section 
904(d)(3)(E) is amended by striking the last sen-
tence. 
(f) ELIMINATION OF CARRYBACK OF FOREIGN TAX 
CREDIT.—Section 904(c) is amended— 
(1) by striking ‘‘in the first preceding taxable 
year, and in any of the first 10 succeeding taxable 
years, in that order’’ and inserting ‘‘in any of the 
first 10 succeeding taxable years, in order’’, 
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(2) by striking ‘‘preceding or’’ each place it ap-
pears, and 
(3) by striking ‘‘CARRYBACK AND’’ in the head-
ing thereof. 
(g) TREATMENT OF FOREIGN BASE COMPANY OIL 
RELATED INCOME AS SUBPART F INCOME.— 
(1) IN GENERAL.—Section 954(a) is amended 
by striking ‘‘and’’ at the end of paragraph (2), by 
striking the period at the end of paragraph (3) and 
inserting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(4) the foreign base company oil related in-
come for the taxable year (determined under sub-
section (g) and reduced as provided in subsection 
(b)(5)).’’. 
(2) FOREIGN BASE COMPANY OIL RELATED IN-
COME.—Section 954 is amended by inserting after 
subsection (e) the following new subsection: 
‘‘(g) FOREIGN BASE COMPANY OIL RELATED IN-
COME.—For purposes of this section, the term ‘foreign 
base company oil related income’ means foreign oil related 
income (within the meaning of paragraphs (2) and (3) of 
section 907(c)) other than income derived from a source 
within a foreign country in connection with— 
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‘‘(1) oil or gas which was extracted from an oil 
or gas well located in such foreign country, or 
‘‘(2) oil, gas, or a primary product of oil or gas 
which is sold by the foreign corporation or a related 
person for use or consumption within such country 
or is loaded in such country on a vessel or aircraft 
as fuel for such vessel or aircraft. 
Such term shall not include any foreign personal holding 
company income (as defined in subsection (c)).’’. 
(3) CONFORMING AMENDMENTS.— 
(A) Section 952(c)(1)(B)(iii) is amended 
by redesignating subclauses (III) and (IV) as 
subclauses (IV) and (V), respectively, and by 
inserting after subclause (II) the following new 
subclause: 
‘‘(III) foreign base company oil 
related income.’’. 
(B) Section 954(b) is amended— 
(i) by striking ‘‘and the foreign base 
company services income’’ in paragraph 
(5) and inserting ‘‘the foreign base com-
pany services income, and the foreign base 
company oil related income’’, and 
(ii) by adding at the end the following 
new paragraph: 
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‘‘(6) FOREIGN BASE COMPANY OIL RELATED IN-
COME NOT TREATED AS ANOTHER KIND OF FOREIGN 
BASE COMPANY INCOME.—Income of a corporation 
which is foreign base company oil related income 
shall not be considered foreign base company income 
of such corporation under paragraph (2) or (3) of 
subsection (a).’’. 
(h) EFFECTIVE DATES.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years of foreign 
corporations beginning after December 31, 2020, 
and to taxable years of United States shareholders 
in which or with which such taxable years of foreign 
corporations end. 
(2) REPEAL OF REDUCED RATE OF TAX; IN-
CREASE
IN
DEEMED
PAID
CREDIT.—The amend-
ments made by subsection (b) and (d) shall apply to 
taxable years beginning after December 31, 2020. 
(3) REPEAL
OF
HIGH
TAX
EXCLUSION
FOR 
FOREIGN BASE COMPANY INCOME AND INSURANCE 
INCOME.—The amendment made by subsection (e) 
shall apply to taxable years of foreign corporations 
beginning after December 31, 2020, and to taxable 
years of United States shareholders in which or with 
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which such taxable years of foreign corporations 
end. 
(4) ELIMINATION OF CARRYBACK OF FOREIGN 
TAX CREDIT.—The amendment made by subsection 
(f) shall apply to credits arising in taxable years be-
ginning after December 31, 2020. 
SEC. 3. 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-
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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. 
‘‘(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. 
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‘‘(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.— 
‘‘(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 
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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. 
‘‘(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 
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‘‘(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-
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, 2020. 
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SEC. 4. 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 is amended by redes-
ignating subsection (n) as subsection (p) 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.— 
‘‘(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 110 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.— 
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‘‘(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 
‘‘(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 $100,000,000. 
‘‘(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— 
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‘‘(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 
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 
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‘‘(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-
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— 
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‘‘(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.— 
‘‘(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— 
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‘‘(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 
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— 
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‘‘(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). 
‘‘(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.—Except as other-
wise provided by the Secretary in paragraph 
(7), this subsection and subsection (o) shall 
apply to any partnership which is a member of 
any international financial reporting group 
under rules similar to the rules of section 
163(j)(4). 
‘‘(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 
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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 
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) CARRYFORWARD OF DISALLOWED INTEREST.— 
(1) IN GENERAL.—Section 163 is amended by 
inserting after subsection (n), as added by sub-
section (a), the following new subsection: 
‘‘(o) CARRYFORWARD OF CERTAIN DISALLOWED IN-
TEREST.—The amount of any interest not allowed as a 
deduction for any taxable year by reason of subsection 
(j)(1) or (n)(1) (whichever imposes the lower limitation 
with respect to such taxable year) shall be treated as inter-
est (and as business interest for purposes of subsection 
(j)(1)) paid or accrued in the succeeding taxable year. In-
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terest paid or accrued in any taxable year (determined 
without regard to the preceding sentence) shall not be car-
ried past the fifth taxable year following such taxable year, 
determined by treating interest as allowed as a deduction 
on a first-in, first-out basis.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 163(j)(2) is amended to read 
as follows: 
‘‘(2) CARRYFORWARD CROSS-REFERENCE.—For 
carryforward treatment, see subsection (o).’’. 
(B) Section 163(j)(4)(B)(i)(I) is amended 
by striking ‘‘paragraph (2)’’ and inserting ‘‘sub-
section (o)’’. 
(C) Section 381(c)(20) is amended to read 
as follows: 
‘‘(20) CARRYFORWARD OF DISALLOWED INTER-
EST.—The carryover of disallowed interest described 
in section 163(o) to taxable years ending after the 
date of distribution or transfer.’’. 
(D) Section 382(d)(3) is amended to read 
as follows: 
‘‘(3) APPLICATION TO CARRYFORWARD OF DIS-
ALLOWED
INTEREST.—The term ‘pre-change loss’ 
shall include any carryover of disallowed interest de-
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scribed in section 163(o) under rules similar to the 
rules of paragraph (1).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2020. 
SEC. 5. MODIFICATIONS TO RULES RELATING TO IN-
VERTED CORPORATIONS. 
(a) IN GENERAL.—Subsection (b) of section 7874 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 
‘‘(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)— 
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‘‘(A) the entity completes after December 
22, 2017, 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, either— 
‘‘(i) 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 corpora-
tion, by former shareholders of the 
domestic corporation by reason of 
holding stock in the domestic corpora-
tion, or 
‘‘(II) in the case of an acquisition 
with respect to a domestic partner-
ship, by former partners of the do-
mestic partnership by reason of hold-
ing a capital or profits interest in the 
domestic partnership, or 
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‘‘(ii) the management and control of 
the expanded affiliated group which in-
cludes the entity occurs, directly or indi-
rectly, primarily within the United States, 
and such expanded affiliated group has 
significant domestic business activities. 
‘‘(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 December 22, 
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. 
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‘‘(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 
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 December 22, 2017. 
‘‘(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-
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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— 
‘‘(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 December 22, 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 
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significant domestic business activities for purposes 
of this paragraph.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Clause (i) of section 7874(a)(2)(B) is 
amended by striking ‘‘after March 4, 2003,’’ and in-
serting ‘‘after March 4, 2003, and before December 
23, 2017,’’. 
(2) Subsection (c) of section 7874 is amend-
ed— 
(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’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after De-
cember 22, 2017. 
SEC. 6. TREATMENT OF FOREIGN CORPORATIONS MAN-
AGED AND CONTROLLED IN THE UNITED 
STATES AS DOMESTIC CORPORATIONS. 
(a) IN GENERAL.—Section 7701 is amended by re-
designating subsection (p) as subsection (q) and by insert-
ing 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. 
‘‘(2) CORPORATION DESCRIBED.— 
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‘‘(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 
management for investors, whether 
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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 
‘‘(ii) individuals who are not executive 
officers and senior management of the cor-
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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, whether or not regulations are issued 
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under section 7701(p)(3) of the Internal Revenue Code 
of 1986, as added by this section. 
Æ 
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