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Q: SECTION 1. SHORT TITLE.

This Act may be cited as the ''Protecting the U.S. Corporate Tax
Base Act of 2016''.

SEC. 2. INCLUSION IN SUBPART F INCOME OF INVESTMENTS BY CONTROLLED
FOREIGN CORPORATIONS WITH RESPECT TO MEMBERS OF FOREIGN
GROUP WHICH INCLUDES UNITED STATES SHAREHOLDER.

(a) In General.--Section 956(a)(1)(A) of the Internal Revenue Code
of 1986 is amended to read as follows:
''(A) such shareholder's pro rata share of the sum
of--
''(i) the average of the amounts of United
States property held (directly or indirectly)
by the controlled foreign corporation as of the
close of each quarter of such taxable year, and
''(ii) in the case of a controlled foreign
corporation which is a member of an expanded
affiliated group the common parent of which is
not a domestic corporation, the average of the
amounts of foreign group property held
(directly or indirectly) by the controlled
foreign corporation as of the close of each
quarter of such taxable year, over''.
(b) Foreign Group Property.--Section 956 of such Code is amended by
redesignating subsections (d) and (e) as subsections (e) and (f),
respectively, and by inserting after subsection (c) the following new
subsection:
''(d) Foreign Group Property; Expanded Affiliated Group.--For
purposes of this section--
''(1) Foreign group property.--
''(A) In general.--The term 'foreign group
property' means any stock or obligation of any foreign
person which is not a controlled foreign corporation.
''(B) Exceptions.--Such term shall not include--
''(i) the stock or obligation of any entity
if less than 25 percent of the total combined
voting power of such entity, immediately after
the acquisition of any stock in such entity by
the controlled foreign corporation, is owned
(directly or indirectly) by the common parent
referred to in subsection (a)(1)(A)(ii), and
''(ii) property described in subparagraph
(C), (I), (J), (K) or (L) of subsection (c)(2),
applied--
''(I) by substituting 'foreign
person' for 'United States person' in
such subparagraphs (C), (J), and (L),
''(II) by substituting 'foreign
corporation' for 'domestic corporation'
in subsection (c)(2)(L)(i), and
''(III) by treating a foreign
person as a United States shareholder
described in subsection
(c)(2)(L)(ii)(I) if such foreign person
would be so described if such person
were a United States person.
''(C) Limitation on treatment as a controlled
foreign corporation.--A foreign corporation shall not
be treated as a controlled foreign corporation for
purposes of subparagraph (A) unless more than 50
percent of the total combined voting power of all
classes of stock of such corporation entitled to vote,
and more than 50 percent of the total value of the
stock of such corporation, is owned (directly or
indirectly) by United States persons described in
subparagraph (A) or (C) of section 7701(a)(30).
''(D) Foreign person.--For purposes of this
paragraph, the term 'foreign person' means any person
who is not a United States person (as defined in
section 7701(a)(30)).
''(2) Expanded affiliated group.--The term 'expanded
affiliated group' means an affiliated group as defined in
section 1504(a), determined--
''(A) by substituting 'more than 50 percent' for
'at least 80 percent' each place it appears, and
''(B) without regard to paragraphs (2) and (3) of
section 1504(b).
A partnership or any other entity (other than a corporation)
shall be treated as a member of an expanded affiliated group if
such entity controls (as determined under section 954(d)(3)),
or is controlled by (as so determined), members of such group
(including any entity treated as a member of such group by
reason of this sentence).
''(3) Application to non-corporate entities.--In the case
of any entity which is not a corporation--
''(A) any reference in this subsection to stock
shall be treated as a reference to any equity or
profits interest in such entity, and
''(B) except as otherwise provided by the
Secretary, paragraph (1)(B)(i) shall be applied by
substituting '25 percent (by value) of the beneficial
interests in such entity' for '25 percent of the total
combined voting power of such entity'.''.
(c) Application of Rules for Pledges and Guarantees.--Section
956(e) of such Code, as so redesignated, is amended to read as follows:
''(e) Pledges and Guarantees.--For purposes of subsection (a), a
controlled foreign corporation shall, under regulations prescribed by
the Secretary, be considered as holding--
''(1) an obligation of a United States person if such
controlled foreign corporation is a pledgor or guarantor of
such obligation, and
''(2) an obligation of a foreign person if such controlled
foreign corporation or, to the extent provided under such
regulations, any United States shareholder of such controlled
foreign corporation, is a pledgor or guarantor of such
obligation.''.
(d) Termination of Rule Which Permits Use of Related-Party
Transactions To Avoid Treatment as a Controlled Foreign Corporation.--
Section 958(b)(4) of such Code is amended by inserting ''if such stock
was acquired by such person on or before May 17, 2016'' before the
period at the end.
(e) Application of Limitation on Amount of Foreign Taxes Deemed
Paid With Respect to Section 956 Inclusions.--Notwithstanding section
214(b) of Public Law 111-226, section 960(c) of the Internal Revenue
Code of 1986 shall apply to acquisitions of foreign group property (as
defined in 956(d) of such Code, as amended by this section) after
December 31, 2010, in addition to acquisitions of United States
property (as defined in section 956(c) of such Code) after such date.
(f) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years of
controlled foreign corporations ending after the date of the
enactment of this Act and to taxable years of United States
shareholders in which or with which such taxable years of
controlled foreign corporations end.
(2) Termination of rule which permits use of related-party
transactions to avoid treatment as a controlled foreign
corporation.--The amendment made by subsection (d) shall apply
to taxable years of controlled foreign corporations ending on
or after May 17, 2016, and to taxable years of United States
shareholders in which or with which such taxable years of
controlled foreign corporations end.
A:
Protecting the U.S. Corporate Tax Base Act of 2016 This bill amends the Internal Revenue Code to revise the rules for taxing the earnings and determining the stock ownership of certain controlled foreign corporations (CFCs). The bill provides that, in the case of certain CFCs, subpart F income (income of a CFC earned outside the United States that is not tax deferred) includes a U.S. shareholder's pro rata share of any increase in the CFC's investment of earnings in certain foreign property. The bill also revises the rules for determining stock ownership to prohibit a CFC from transferring stock to a foreign affiliate to reduce the portion of stock owned by U.S. shareholders below the level required to be considered a CFC.