I 
109TH CONGRESS 
1ST SESSION H. R. 1303
To amend the Internal Revenue Code of 1986 to prevent corporations from 
exploiting tax treaties to evade taxation of United States income and 
to prevent manipulation of transfer prices by deflection of income to 
tax havens. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 15, 2005
Mr. DOGGETT (for himself, Mr. LEVIN, Mr. NEAL of Massachusetts, Mr. 
LEWIS of Georgia, Mr. MCDERMOTT, Mr. MCNULTY, Mr. JEFFERSON, 
Mr. STARK, Mr. ABERCROMBIE, Mr. ACKERMAN, Mr. ANDREWS, Mr. 
BAIRD, Ms. BALDWIN, Ms. CORRINE BROWN of Florida, Mr. BROWN of 
Ohio, Mrs. CAPPS, Mr. CAPUANO, Ms. CARSON, Mr. CONYERS, Mr. 
CROWLEY, Mr. DAVIS of Illinois, Mr. DEFAZIO, Ms. DEGETTE, Mr. 
DELAHUNT, Ms. DELAURO, Mr. EDWARDS, Mr. EVANS, Mr. FARR, Mr. 
FATTAH, Mr. FILNER, Mr. GENE GREEN of Texas, Mr. GRIJALVA, Mr. 
HASTINGS of Florida, Mr. HINCHEY, Mr. HINOJOSA, Mr. HOLT, Ms. 
HOOLEY, Mr. JACKSON of Illinois, Ms. JACKSON-LEE of Texas, Ms. KAP-
TUR, Mr. KENNEDY of Rhode Island, Ms. KILPATRICK of Michigan, Mr. 
KIND, Mr. KUCINICH, Ms. LEE, Mr. MARKEY, Mr. MCGOVERN, Mr. 
MEEHAN, Mr. MEEK of Florida, Ms. MILLENDER-MCDONALD, Mr. 
GEORGE MILLER of California, Mr. NADLER, Mr. OLVER, Mr. OWENS, 
Mr. PALLONE, Mr. PASCRELL, Ms. ROYBAL-ALLARD, Mr. RUSH, Mr. 
RYAN of Ohio, Ms. LINDA T. SA´NCHEZ of California, Ms. LORETTA 
SANCHEZ of California, Mr. SANDERS, Ms. SCHAKOWSKY, Mr. SCHIFF, 
Mr. SHERMAN, Ms. SLAUGHTER, Ms. SOLIS, Mr. STRICKLAND, Mr. 
TIERNEY, Mrs. JONES of Ohio, Mr. UDALL of New Mexico, Ms. 
VELA´ZQUEZ, Ms. WATERS, Ms. WATSON, and Mr. WAXMAN) 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 prevent
corporations from exploiting tax treaties to evade tax-
ation of United States income and to prevent manipula-
tion of transfer prices by deflection of income to tax 
havens.
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 ‘‘Fairness and Account-
ability in International Taxation Act of 2005’’. 
SEC. 2. DENIAL OF TREATY BENEFITS FOR CERTAIN DE-
DUCTIBLE 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) DENIAL OF TREATY BENEFITS FOR CERTAIN 
DEDUCTIBLE PAYMENTS.—
‘‘(1) IN GENERAL.—A foreign entity shall not 
be entitled under any income tax treaty of the 
United States with a foreign country to any reduced 
rate of any withholding tax imposed by this title on 
any deductible foreign payment unless such entity is 
predominantly owned by individuals who are resi-
dents of such foreign country.
‘‘(2) DEDUCTIBLE
FOREIGN
PAYMENT.—For 
purposes of paragraph (1), the term ‘deductible for-
eign payment’ means any payment—
‘‘(A) which is made by a domestic entity 
directly or indirectly to a related person which 
is a foreign entity, and 
‘‘(B) which is allowable as a deduction 
under this chapter. 
‘‘(3) DOMESTIC AND FOREIGN ENTITIES; RE-
LATED PERSON.—For purposes of this subsection—
‘‘(A) DOMESTIC ENTITY.—The term ‘do-
mestic entity’ means any domestic corporation 
or domestic partnership. 
‘‘(B) FOREIGN
ENTITY.—The term ‘for-
eign entity’ means any foreign corporation or 
foreign partnership. 
‘‘(C) RELATED
PERSON.—The term ‘re-
lated person’ has the meaning given such term 
by section 954(d)(3) (determined by sub-
stituting ‘domestic entity’ for ‘controlled foreign 
corporation’ each place it appears). 
‘‘(4) PREDOMINANT
OWNERSHIP.—For pur-
poses of this subsection—
‘‘(A) IN GENERAL.—An entity is predomi-
nantly owned by individuals who are residents 
of a foreign country if—
‘‘(i) in the case of a corporation, more 
than 50 percent (by value) of the stock of 
such corporation is owned (within the 
meaning of section 883(c)(4)) by individ-
uals who are residents of such foreign 
country, or 
‘‘(ii) in the case of a partnership, 
more than 50 percent (by value) of the 
beneficial interests in such partnership are 
so owned. 
‘‘(B) PUBLICLY TRADED CORPORATIONS.—
A foreign corporation also shall be treated as 
predominantly owned by individuals who are 
residents of a foreign country if—
‘‘(i)(I) the stock of such corporation is 
primarily and regularly traded on an estab-
lished securities market in such foreign 
country, and 
‘‘(II) such corporation has activities 
within such foreign country which are sub-
stantial in relation to the total activities of
such corporation and its related persons, 
or 
‘‘(ii) such corporation is wholly owned 
(directly or indirectly) by another foreign 
corporation which is described in clause (i). 
‘‘(C) SPECIAL RULE.—
‘‘(i) IN GENERAL.—A foreign corpora-
tion shall be treated as meeting the re-
quirements of subparagraph (A) if—
‘‘(I) such requirements would be 
met if ‘30 percent’ were substituted 
for ‘50 percent’ in subparagraph 
(A)(i), 
‘‘(II) the treaty country is a 
member of a multinational economic 
association such as the European 
Union, and 
‘‘(III) at least 50 percent of the 
value of the stock of the corporation is 
owned (within the meaning of section 
883(c)(4)) by individuals who are resi-
dents of the treaty country or other 
qualified foreign countries. 
‘‘(ii) 
QUALIFIED
FOREIGN
COUN-
TRY.—For purposes of this subparagraph,