Removing Incentives for Outsourcing Act
Bill: S.20 | Sponsor: Sen. Klobuchar, Amy (D-MN)
Policy area: Taxation

Summary:
Removing Incentives for Outsourcing Act
This bill modifies the tax treatment of foreign source income of domestic corporations to (1) eliminate a provision that allows companies to deduct a portion of the tangible assets of their controlled foreign corporations (CFCs) before the tax on foreign income applies, and (2) require net CFC tested income to be determined on a country-by-country basis rather than globally.
The bill also requires the Joint Committee on Taxation to study options for reforming laws related to the taxation of income from international sources.

To amend the Internal Revenue Code of 1986 to modify the global 
intangible low-taxed income by repealing the tax-free deemed return on 
  investments and determining net CFC tested income on a per-country 
                                 basis.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Removing Incentives for Outsourcing 
Act''.

SEC. 2. MODIFICATION OF TAX ON GLOBAL INTANGIBLE LOW-TAXED INCOME.

    (a) Repeal of Tax-Free Deemed Return on Investments.--
            (1) In general.--Section 951A(a) of the Internal Revenue 
        Code of 1986 is amended by striking ``global intangible low-
        taxed income'' and inserting ``net CFC tested income''.
            (2) Conforming amendments.--
                    (A) Section 951A of such Code is amended by 
                striking subsections (b) and (d).
                    (B) Section 951A(e)(1) of such Code is amended by 
                striking ``subsections (b), (c)(1)(A), and'' and 
                inserting ``subsections (c)(1)(A) and''.
                    (C) Section 951A(f) of such Code is amended to read 
                as follows:
    ``(f) Treatment as Subpart F Income for Certain Purposes.--
            ``(1) In general.--Except as provided in paragraph (2), any 
        net CFC tested income included in gross income under subsection 
        (a) shall be treated in the same manner as an amount included 
        under section 951(a)(1)(A) for purposes of applying sections 
        168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 961, 962, 
        993(a)(1)(E), 996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 
        6654(d)(2)(D), and 6655(e)(4).
            ``(2) Exception.--The Secretary shall provide rules for the 
        application of paragraph (1) to other provisions of this title 
        in any case in which the determination of subpart F income is 
        required to be made at the level of the controlled foreign 
        corporation.''.
                    (D) Section 960(d)(2)(A) of such Code 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) Determination of Net CFC Tested Income on Country-by-Country 
Basis.--Section 951A of the Internal Revenue Code of 1986 is amended by 
adding at the end the following:
    ``(g) Determination Made on Country-by-Country Basis.--
            ``(1) In general.--This section shall be applied with 
        respect to a United States shareholder of the controlled 
        foreign corporation separately with respect to each foreign 
        country in which the controlled foreign corporation conducts 
        any trade or business.
            ``(2) Special rules.--
                    ``(A) In general.--For purposes of making country-
                by-country determinations under this section and 
                sections 904 and 960 with respect to net CFC tested 
                income for a taxable year pursuant to paragraph (1)--
                            ``(i) taxes paid or accrued to a foreign 
                        country by the controlled foreign corporation 
                        shall be assigned to that country, and
                            ``(ii) earnings to which such taxes relate 
                        shall be treated as income assigned to the 
                        country to which those tax payments are made.
                    ``(B) Earnings assigned to two or more countries.--
                If the same earnings are assigned to two or more 
                countries under subparagraph (A), for purposes of 
                paragraph (1) such earnings and the taxes related 
                thereto shall be treated as assigned to the country 
                with the highest statutory corporate tax rate.
            ``(3) Earnings not subject to tax.--If earnings are not 
        subject to tax by any country, then with respect to those 
        earnings paragraph (1) shall not apply.
            ``(4) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out 
        this subsection, including the time period in which foreign 
        earnings and the associated foreign taxes are assigned to a 
        country.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to taxable years of controlled foreign corporations 
beginning after December 31, 2021, and to taxable years of United 
States shareholders in which or with which such taxable years of 
foreign corporations end.

SEC. 3. STUDY AND REPORT ON RESTRUCTURING INTERNATIONAL TAX LAWS.

    (a) Study.--The Chief of Staff of the Joint Committee on Taxation 
shall study options for the reform of laws related to the taxation of 
income from international sources, including the provisions of sections 
59A, 250, and 951A of the Internal Revenue Code of 1986. Such study 
include an evaluation of each option considered with respect to--
            (1) the extent to which the option increases or decreases 
        opportunities for tax avoidance; and
            (2) the extent to which the option increases or decreases 
        incentives for domestic businesses to shift jobs and operations 
        to other countries.
    (b) Report.--Not later than 90 days after the date of the enactment 
of this Act, the Chief of Staff on the Joint Committee on Taxation 
shall submit to Congress a report on the results of the study conducted 
under subsection (a).
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