Title: American Assistance for American Companies Act
Policy area: Taxation

Summary:
American Assistance for American Companies Act
This bill disallows certain tax benefits for inverted domestic corporations. An inverted domestic corporation is a U.S. corporation that acquires foreign entities to reincorporate in a foreign jurisdiction with income tax rates lower than U.S. rates). Specifically, an inverted domestic corporation may not claim net operating loss carrybacks, increased deductibility of business interest, nor participate in Federal Reserve Lending Facilities.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 4067 Introduced in Senate (IS)]

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116th CONGRESS
  2d Session
                                S. 4067

   To prohibit certain assistance for inverted domestic corporations.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 24, 2020

Mr. Durbin (for himself, Ms. Duckworth, and Mr. Van Hollen) introduced 
the following bill; which was read twice and referred to the Committee 
                               on Finance

_______________________________________________________________________

                                 A BILL


 
   To prohibit certain assistance for inverted domestic corporations.

    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 ``American Assistance for American 
Companies Act''.

SEC. 2. PROHIBITION ON APPLICATION OF CERTAIN ASSISTANCE TO INVERTED 
              DOMESTIC CORPORATIONS.

    (a) Prohibition on Use of Certain Tax Incentives.--
            (1) Net operating loss carrybacks.--
                    (A) In general.--Section 172(b)(1)(D) of the 
                Internal Revenue Code of 1986 is amended by adding at 
                the end the following new clause:
                            ``(vi) Special rule for inverted domestic 
                        corporations.--Clause (i) shall not apply to 
                        any foreign corporation for any taxable year in 
                        which such corporation is an inverted domestic 
                        corporation (as defined in section 7701(p)(2)), 
                        or to any member of the expanded affiliated 
                        group (as defined in section 7874(c)(1)) of 
                        such a foreign corporation, unless such foreign 
                        corporation has made an election under section 
                        7701(p)(1).''.
                    (B) Effective date.--The amendment made by this 
                section shall take effect as if included in section 
                2303(b) of the CARES Act.
            (2) Increased limitation on business interest.--
                    (A) In general.--Section 163(j)(10) of the Internal 
                Revenue Code of 1986 is amended by adding at the end 
                the following new subparagraph:
                    ``(C) Special rule for inverted domestic 
                corporations.--Subparagraphs (A) and (B) shall not 
                apply to any foreign corporation for any taxable year 
                in which such corporation is an inverted domestic 
                corporation (as defined in section 7701(p)(2)), or to 
                any member of the expanded affiliated group (as defined 
                in section 7874(c)(1)) of such a foreign corporation, 
                unless such foreign corporation has made an election 
                under section 7701(p)(1).''.
                    (B) Effective date.--The amendment made by this 
                section shall take effect as if included in section 
                2306 of the CARES Act.
            (3) Federal reserve emergency lending facilities.--
                    (A) In general.--No inverted domestic corporation, 
                as defined in section 7701(p)(2) of the Internal 
                Revenue Code of 1986, or any member of the expanded 
                affiliated group (as defined in section 7874(c)(1) of 
                such Code) of such inverted domestic corporation, may 
                participate in any program or facility established by 
                the Board of Governors of the Federal Reserve System 
                under the authority of section 13(3) of the Federal 
                Reserve Act (12 U.S.C. 343) and with funding authorized 
                under section 4003 of the CARES Act (Public Law 116-
                136), including the Primary Market Corporate Credit 
                Facility and the Secondary Market Corporate Credit 
                Facility.
                    (B) Exception.--Subparagraph (A) shall not apply if 
                the inverted domestic corporation makes an election 
                under section 7701(p)(1) of the Internal Revenue Code 
                of 1986.
                    (C) Applicability.--This paragraph shall apply to 
                participation in any program or facility described in 
                subparagraph (A) established before, on, or after the 
                date of enactment of this Act.
    (b) Election To Treat Inverted Domestic Corporations as Domestic 
Corporations.--
            (1) Inverted domestic corporations.--Section 7701 of the 
        Internal Revenue Code of 1986 is amended by redesignating 
        subsection (p) as subsection (q) and by inserting after 
        subsection (o) the following new subsection:
    ``(p) Inverted Domestic Corporations.--
            ``(1) Election to be treated as a domestic corporation.--
                    ``(A) In general.--Notwithstanding paragraphs (4) 
                and (5) of subsection (a), an inverted domestic 
                corporation may elect to be treated as a domestic 
                corporation for taxable years beginning with the last 
                taxable year which begins before January 1, 2018.
                    ``(B) Election.--An election under this 
                subsection--
                            ``(i) shall be made not later than 30 days 
                        after the date of the enactment of this 
                        subsection, and
                            ``(ii) once made, shall be irrevocable.
                    ``(C) Time for filing returns and payment of 
                taxes.--Notwithstanding sections 6072 and 6151, any 
                return for any taxable year ending before the date 
                described in subparagraph (B)(i), and any payment of 
                taxes or penalties, shall not be considered due before 
                January 1, 2021.
            ``(2) Inverted domestic corporation.--For purposes of this 
        subsection, the term `inverted domestic corporation' means any 
        foreign corporation which, pursuant to a plan (or a series of 
        related transactions)--
                    ``(A) completes after March 4, 2003, 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 
                        constituting 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 corporation is held--
                                    ``(I) in the case of an acquisition 
                                with respect to a domestic corporation, 
                                by former shareholders of the domestic 
                                corporation by reason of holding stock 
                                in the domestic corporation, or
                                    ``(II) in the case of an 
                                acquisition with respect to a domestic 
                                partnership, by former partners of the 
                                domestic partnership by reason of 
                                holding a capital or profits interest 
                                in the domestic partnership, or
                            ``(ii) the management and control of the 
                        expanded affiliated group which includes the 
                        corporation occurs, directly or indirectly, 
                        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.--Such term shall 
        not include a foreign corporation described in paragraph (2) if 
        after the acquisition the expanded affiliated group which 
        includes the corporation has substantial business activities in 
        the foreign country in which or under the law of which the 
        corporation is created or organized when compared to the total 
        business activities of such expanded affiliated group. For 
        purposes of the preceding sentence, the term `substantial 
        business activities' shall have the meaning given such term 
        under regulations in effect on January 18, 2017, except that 
        the Secretary may issue regulations increasing the threshold 
        percent in any of the tests under such regulations for 
        determining if business activities constitute substantial 
        business activities for purposes of this paragraph.
            ``(4) Management and control.--For purposes of paragraph 
        (2)(B)(ii)--
                    ``(A) In general.--The Secretary shall prescribe 
                regulations for purposes of determining cases in which 
                the management and control of an expanded affiliated 
                group is to be treated as occurring, directly or 
                indirectly, primarily within the United States. The 
                regulations prescribed under the preceding sentence 
                shall apply to periods after March 4, 2003.
                    ``(B) Executive officers and senior management.--
                Such regulations shall provide that the management and 
                control of an expanded affiliated group shall be 
                treated as occurring, directly or indirectly, primarily 
                within the United States if substantially all of the 
                executive 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 primarily 
                located within the United States. Individuals who in 
                fact exercise such day-to-day responsibilities shall be 
                treated as executive officers and senior management 
                regardless of their title.
            ``(5) Significant domestic business activities.--For 
        purposes of paragraph (2)(B)(ii), an expanded 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 employees 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 determinations are made 
        for purposes of determining substantial business activities 
        under regulations referred to in paragraph (3) as in effect on 
        January 18, 2017, but applied by treating all references in 
        such regulations to `foreign country' and `relevant foreign 
        country' as references to `the United States'. The Secretary 
        may issue regulations decreasing the threshold percent in any 
        of the tests under such regulations for determining if business 
        activities constitute significant domestic business activities 
        for purposes of this paragraph.
            ``(6) Definitions and other rules.--
                    ``(A) Expanded affiliated group.--The term 
                `expanded affiliated group' has the meaning give such 
                term under section 7874(c)(1).
                    ``(B) Other rules.--Rules similar to the rules of 
                paragraphs (2), (3), (5), and (6) of section 7874(c) 
                shall apply for purposes of this subsection.''.
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