American Assistance for American Companies Act

Bill: 116-s-4067
Sponsor: full_name: Sen. Durbin, Richard J. [D-IL]
Introduced: 2020-06-24
Policy area: Taxation
Subjects: Administrative law and regulatory procedures

Corporate finance and management

Department of the Treasury

Federal Reserve System

Foreign and international corporations

Government lending and loan guarantees

Income tax deductions

Income tax rates

Interest, dividends, interest rates

Taxation of foreign income
Latest action: action_date: 2020-06-24
text: Read twice and referred to the Committee on Finance. (text: CR S3209-3210)

Summaries:
action_date: 2020-06-24
action_desc: Introduced in Senate
text: <p><b>American Assistance for American Companies Act</b></p> <p>This bill disallows certain tax benefits for inverted domestic corporations. An<i> inverted domestic corporation</i> 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. </p> The bill allows an inverted domestic corporation to elect to be treated as a domestic corporation for U.S. tax purposes.

tv_txt: II 116th CONGRESS 2d Session S. 4067 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.

1. Short title This Act may be cited as the American Assistance for American Companies Act . 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. .