Title: A bill to amend the Internal Revenue Code of 1986 to restore the limitation on downward attribution of stock ownership in applying the constructive ownership rules to controlled foreign corporations, and for other purposes.
Policy area: Taxation

Summary:
This bill amends the Internal Revenue Code to limit the scope of downward attribution rules to 50% of stock ownership in applying constructive ownership rules to controlled foreign corporations.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 2589 Introduced in Senate (IS)]

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116th CONGRESS
  1st Session
                                S. 2589

To amend the Internal Revenue Code of 1986 to restore the limitation on 
 downward attribution of stock ownership in applying the constructive 
   ownership rules to controlled foreign corporations, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 26, 2019

  Mr. Isakson introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to restore the limitation on 
 downward attribution of stock ownership in applying the constructive 
   ownership rules to controlled foreign corporations, and for other 
                               purposes.

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

SECTION 1. RESTORATION OF LIMITATION ON DOWNWARD ATTRIBUTION OF STOCK 
              OWNERSHIP IN APPLYING CONSTRUCTIVE OWNERSHIP RULES.

    (a) In General.--Section 958(b) of the Internal Revenue Code of 
1986 is amended--
            (1) by inserting after paragraph (3) the following:
            ``(4) Subparagraphs (A), (B), and (C) of section 318(a)(3) 
        shall not be applied so as to consider a United States person 
        as owning stock which is owned by a person who is not a United 
        States person.'', and
            (2) by striking ``Paragraph (1)'' in the last sentence and 
        inserting ``Paragraphs (1) and (4)''.
    (b) Foreign Controlled United States Shareholders.--Subpart F of 
part III of subchapter N of chapter 1 of such Code is amended by 
inserting after section 951A the following new section:

``SEC. 951B. AMOUNTS INCLUDED IN GROSS INCOME OF FOREIGN CONTROLLED 
              UNITED STATES SHAREHOLDERS.

    ``(a) In General.--In the case of any foreign controlled United 
States shareholder of a foreign controlled foreign corporation--
            ``(1) this subpart (other than sections 951A, 951(b), 957, 
        and 965) shall be applied with respect to such shareholder 
        (separately from, and in addition to, the application of this 
        subpart without regard to this section)--
                    ``(A) by substituting `foreign controlled United 
                States shareholder' for `United States shareholder' 
                each place it appears therein, and
                    ``(B) by substituting `foreign controlled foreign 
                corporation' for `controlled foreign corporation' each 
                place it appears therein, and
            ``(2) sections 951A and 965 shall be applied with respect 
        to such shareholder --
                    ``(A) by treating each reference to `United States 
                shareholder' in such sections as including a reference 
                to such shareholder, and
                    ``(B) by treating each reference to `controlled 
                foreign corporation' in such sections as including a 
                reference to such foreign controlled foreign 
                corporation.
    ``(b) Foreign Controlled United States Shareholder.--For purposes 
of this section, the term `foreign controlled United States 
shareholder' means, with respect to any foreign corporation, any United 
States person which would be a United States shareholder with respect 
to such foreign corporation if--
            ``(1) section 951(b) were applied by substituting `more 
        than 50 percent' for `10 percent or more', and
            ``(2) section 958(b) were applied without regard to 
        paragraph (4) thereof.
    ``(c) Foreign Controlled Foreign Corporation.--For purposes of this 
section, the term `foreign controlled foreign corporation' means a 
foreign corporation, other than a controlled foreign corporation, which 
would be a controlled foreign corporation if section 957(a) were 
applied--
            ``(1) by substituting `foreign controlled United States 
        shareholders' for `United States shareholders', and
            ``(2) by substituting `section 958(b) (other than paragraph 
        (4) thereof)' for `section 958(b)'.
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
purposes of this section, including regulations or other guidance--
            ``(1) to treat a foreign controlled United States 
        shareholder or a foreign controlled foreign corporation as a 
        United States shareholder or as a controlled foreign 
        corporation, respectively, for purposes of provisions of this 
        title other than this subpart, and
            ``(2) to prevent the avoidance of the purposes of this 
        section.''.
    (c) Clerical Amendment.--The table of sections for subpart F of 
part III of subchapter N of chapter 1 of such Code is amended by 
inserting after the item relating to section 951A the following new 
item:

``Sec. 951B. Amounts included in gross income of foreign controlled 
                            United States shareholders.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to--
            (1) the last taxable year of foreign corporations beginning 
        before January 1, 2018, and each subsequent taxable year of 
        such foreign corporations, and
            (2) taxable years of United States persons in which or with 
        which such taxable years of foreign corporations end.
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