,,ii #aafth ,,congress #ast ,session ,s4 #ghj ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,march #ac1 #bjai,mr4 ,whitehouse 7for himself and ,mr4 ,van ,hollen7 introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to provide for current year inclusion of net ,,cfc tested income1 and for other purposes4 #a4 ,short title1 etc 7a7 ,short title ,this ,act may be cited as the ,no ,tax ,breaks for ,outsourcing ,act4 7b7 ,amendment of #aihf code ,except as otherwise expressly provided1 whenever in this ,act an amendment or repeal is expressed in terms of an amendment to1 or repeal of1 a section or other provision1 the reference shall be considered to be made to a section or other provision of the ,internal ,revenue ,code of #aihf4 7c7 ,table of contents ,the table of contents of this ,act is as follows3 ,sec4 #a4 ,short title1 etc4,sec4 #b4 ,current year inclusion of net ,,cfc tested income4,sec4 #c4 ,limitation on deduction of interest by domestic corporations which are members of an international financial reporting group4,sec4 #d4 ,modifications to rules relating to inverted corporations4,sec4 #e4 ,treatment of foreign corporations managed and controlled in the ,united ,states as domestic corporations4 #b4 ,current year inclusion of net ,,cfc tested income 7a7 ,repeal of tax-,free deemed return on investments 7#a7 ,in general ,section #iea;,a7a7 is amended by striking global intangible low-taxed income and inserting net ,,cfc tested income4 7#b7 ,conforming amendments 7,a7 ,section #iea;,a is amended by striking subsections 7b7 and 7d74 7,b7 ,section #iea;,a7e77#a7 is amended by striking subsections 7b71 7c77#a77;,a71 and and inserting subsections 7c77#a77;,a7 and4 7,c7 ,section #iea;,a7f7 is amended to read as follows3 7f7 ,treatment as subpart ,f income for certain purposes 7#a7 ,in general ,except as provided in paragraph 7#b71 any net ,,cfc tested income included in gross income under subsection 7a7 shall be treated in the same manner as an amount included under section #iea7;a77#a77;,a7 for purposes of applying sections #afh7;h77#b77;,b71 #ece7;b77#aj71 #hea7;b71 #ijd7;h77#a71 #iei1 #ifa1 #ifb1 #iic7;a77#a77;,e71 #iif7;f77#a71 #abdh7;b77#a71 #abdh7;d77#a71 #feja7;e77#a77;,c71 #ffed7;d77#b77;,d71 and #ffee7;e77#d74 7#b7 ,exception ,the ,secretary shall provide rules for the application of paragraph 7#a7 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 corporation4 4 7,d7 ,section #ifj7;d77#b77;,a7 is amended by striking global intangible low-taxed income 7as defined in section #iea;,a7b77 and inserting net ,,cfc tested income 7as defined in section #iea;,a7c774 7b7 ,repeal of reduced rate of tax on net ,,cfc tested income 7#a7 ,in general ,part ,,viii of subchapter ,b of chapter #a is amended by striking section #bej 7and by striking the item relating to such section in the table of sections of such part74 7#b7 ,conforming amendments 7,a7 ,section #ei;,a7c77#d77;,b77i7 is amended by striking section #agb1 #bde;,a1 or #bej and inserting section #agb or #bde;,a4 7,b7 ,section #agb7;d7 is amended by striking paragraph 7#i74 7,c7 ,section #bdf7;b77#a7 is amended-- 7i7 by striking subsection 7a7 and 7b7 of section #bde1 and section #bej and inserting and subsection 7a7 and 7b7 of section #bde2 and 7ii7 by striking subsection 7a7 and 7b7 of section #bde1 and #bej and inserting and subsection 7a7 and 7b7 of section #bde4 7,d7 ,section #dfi7;i77#c77;,f77iii7 is amended by striking #bbb1 and #bej and inserting and #bbb4 7c7 ,net ,,cfc tested income determined without regard to high tax foreign income ,section #iea;,a7c77#b77;,a77i7 is amended by redesignating subclauses 7,,iv7 and 7,v7 as subclauses 7,v7 and 7,,vi71 respectively1 and by inserting after subclause 7,,iii7 the following new subclause3 7,,iv7 any item of income subject to an effective rate of income tax imposed by a foreign country greater than the maximum rate of tax specified in section #aa1 4 7d7 ,repeal of exclusion of foreign oil and gas extraction income from the determination of tested income ,section #iea;,a7c77#b77;,a77i71 as amended by subsection 7c7 is amended-- 7#a7 by adding and at the end of subclause 7,,iv72 7#b7 by striking and at the end of subclause 7,v7 and inserting over2 and 7#c7 by striking subclause 7,,vi74 7e7 ,increase in deemed paid credit for taxes properly attributable to tested income 7#a7 ,in general ,section #ifj7;d7 is amended by striking #hj percent of4 7#b7 ,conforming amendment ,section #gh is amended by striking 7determined without regard to the phrase 8#hj percent of0 in subsection 7d77#a7 thereof74 7f7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjah1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 7#b7 ,repeal of reduced rate of tax2 increase in deemed paid credit ,the amendments made by subsection 7b7 and 7e7 shall apply to taxable years beginning after ,december #ca1 #bjah4 #c4 ,limitation on deduction of interest by domestic corporations which are members of an international financial reporting group 7a7 ,in general ,section #afc is amended by redesignating subsection 7n7 as subsection 7p7 and by inserting after subsection 7m7 the following new subsection3 7n7 ,limitation on deduction of interest by domestic corporations in international financial reporting groups 7#a7 ,in general ,in the case of any domestic corporation which is a member of any international financial reporting group1 the deduction under this chapter for interest paid or accrued during the taxable year shall not exceed the sum of-- 7,a7 the allowable percentage of #aaj percent of the excess 7if any7 of-- 7i7 the amount of such interest so paid or accrued1 over 7ii7 the amount described in subparagraph 7,b71 plus 7,b7 the amount of interest includible in gross income of such corporation for such taxable year4 7#b7 ,international financial reporting group 7,a7 ,for purposes of this subsection1 the term international financial reporting group means1 with respect to any reporting year1 any group of entities which-- 7i7 includes-- 7,i7 at least one foreign corporation engaged in a trade or business within the ,united ,states1 or 7,,ii7 at least one domestic corporation and one foreign corporation1 7ii7 prepares consolidated financial statements with respect to such year1 and 7iii7 reports in such statements average annual gross receipts 7determined in the aggregate with respect to all entities which are part of such group7 for the #c-reporting-year period ending with such reporting year in excess of #ajj1jjj1jjj4 7,b7 ,rules relating to determination of average gross receipts ,for purposes of subparagraph 7,a77iii71 rules similar to the rules of section #ddh7;c77#c7 shall apply4 7#c7 ,allowable percentage ,for purposes of this subsection-- 7,a7 ,in general ,the term allowable percentage means1 with respect to any domestic corporation for any taxable year1 the ratio 7expressed as a percentage and not greater than #ajj percent7 of-- 7i7 such corporation's allocable share of the international financial reporting group's reported net interest expense for the reporting year of such group which ends in or with such taxable year of such corporation1 over 7ii7 such corporation's reported net interest expense for such reporting year of such group4 7,b7 ,reported net interest expense ,the term reported net interest expense means-- 7i7 with respect to any international financial reporting group for any reporting year1 the excess of-- 7,i7 the aggregate amount of interest expense reported in such group's consolidated financial statements for such taxable year1 over 7,,ii7 the aggregate amount of interest income reported in such group's consolidated financial statements for such taxable year1 and 7ii7 with respect to any domestic corporation for any reporting year1 the excess of-- 7,i7 the amount of interest expense of such corporation reported in the books and records of the international financial reporting group which are used in preparing such group's consolidated financial statements for such taxable year1 over 7,,ii7 the amount of interest income of such corporation reported in such books and records4 7,c7 ,allocable share of reported net interest expense ,with respect to any domestic corporation which is a member of any international financial reporting group1 such corporation's allocable share of such group's reported net interest expense for any reporting year is the portion of such expense which bears the same ratio to such expense as-- 7i7 the ,,ebitda of such corporation for such reporting year1 bears to 7ii7 the ,,ebitda of such group for such reporting year4 7,d7 ,,ebitda 7i7 ,in general ,the term ,,ebitda means1 with respect to any reporting year1 earnings before interest1 taxes1 depreciation1 and amortization-- 7,i7 as determined in the international financial reporting group's consolidated financial statements for such year1 or 7,,ii7 for purposes of subparagraph 7,a77i71 as determined in the books and records of the international financial reporting group which are used in preparing such statements if not determined in such statements4 7ii7 ,treatment of disregarded entities ,the ,,ebitda of any domestic corporation shall not fail to include the ,,ebitda of any entity which is disregarded for purposes of this chapter4 7iii7 ,treatment of intra-group distributions ,the ,,ebitda of any domestic corporation shall be determined without regard to any distribution received by such corporation from any other member of the international financial reporting group4 7,e7 ,special rules for non-positive ,,ebitda 7i7 ,non-positive group ,,ebitda ,in the case of any international financial reporting group the ,,ebitda of which is zero or less1 paragraph 7#a7 shall not apply to any member of such group the ,,ebitda of which is above zero4 7ii7 ,non-positive entity ,,ebitda ,in the case of any group member the ,,ebitda of which is zero or less1 paragraph 7#a7 shall be applied without regard to subparagraph 7,a7 thereof4 7#d7 ,consolidated financial statement ,for purposes of this subsection1 the term consolidated financial statement means any consolidated financial statement described in paragraph 7#b77;,a77ii7 if such statement is-- 7,a7 a financial statement which is certified as being prepared in accordance with generally accepted accounting principles1 international financial reporting standards1 or any other comparable method of accounting identified by the ,secretary1 and which is-- 7i7 a #aj-,k 7or successor form71 or annual statement to shareholders1 required to be filed with the ,united ,states ,securities and ,exchange ,commission1 7ii7 an audited financial statement which is used for-- 7,i7 credit purposes1 7,,ii7 reporting to shareholders1 partners1 or other proprietors1 or to beneficiaries1 or 7,,iii7 any other substantial nontax purpose1 but only if there is no statement described in clause 7i71 or 7iii7 filed with any other ,federal or ,state agency for nontax purposes1 but only if there is no statement described in clause 7i7 or 7ii71 or 7,b7 a financial statement which-- 7i7 is used for a purpose described in subclause 7,i71 7,,ii71 or 7,,iii7 of subparagraph 7,a77ii71 or 7ii7 filed with any regulatory or governmental body 7whether domestic or foreign7 specified by the ,secretary1 but only if there is no statement described in subparagraph 7,a74 7#e7 ,reporting year ,for purposes of this subsection1 the term reporting year means1 with respect to any international financial reporting group1 the year with respect to which the consolidated financial statements are prepared4 7#f7 ,application to certain entities 7,a7 ,partnerships ,except as otherwise provided by the ,secretary in paragraph 7#g71 this subsection and subsection 7o7 shall apply to any partnership which is a member of any international financial reporting group under rules similar to the rules of section #afc7;j77#d74 7,b7 ,foreign corporations engaged in trade or business within the ,united ,states ,except as otherwise provided by the ,secretary in paragraph 7#g71 any deduction for interest paid or accrued by a foreign corporation engaged in a trade or business within the ,united ,states shall be limited in a manner consistent with the principles of this subsection4 7,c7 ,consolidated groups ,for purposes of this subsection1 the members of any group that file 7or are required to file7 a consolidated return with respect to the tax imposed by chapter #a for a taxable year shall be treated as a single corporation4 7#g7 ,regulations ,the ,secretary may issue such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection4 4 7b7 ,carryforward of disallowed interest 7#a7 ,in general ,section #afc is amended by inserting after subsection 7n71 as added by subsection 7a71 the following new subsection3 7o7 ,carryforward of certain disallowed interest ,the amount of any interest not allowed as a deduction for any taxable year by reason of subsection 7j77#a7 or 7n77#a7 7whichever imposes the lower limitation with respect to such taxable year7 shall be treated as interest 7and as business interest for purposes of subsection 7j77#a77 paid or accrued in the succeeding taxable year4 ,interest paid or accrued in any taxable year 7determined without regard to the preceding sentence7 shall not be carried past the fifth taxable year following such taxable year1 determined by treating interest as allowed as a deduction on a first-in1 first-out basis4 4 7#b7 ,conforming amendments 7,a7 ,section #afc7;j77#b7 is amended to read as follows3 7#b7 ,carryforward cross-reference ,for carryforward treatment1 see subsection 7o74 4 7,b7 ,section #afc7;j77#d77;,b77i77,i7 is amended by striking paragraph 7#b7 and inserting subsection 7o74 7,c7 ,section #cha7;c77#bj7 is amended to read as follows3 7#bj7 ,carryforward of disallowed interest ,the carryover of disallowed interest described in section #afc7o7 to taxable years ending after the date of distribution or transfer4 4 7,d7 ,section #chb7;d77#c7 is amended to read as follows3 7#c7 ,application to carryforward of disallowed interest ,the term pre-change loss shall include any carryover of disallowed interest described in section #afc7o7 under rules similar to the rules of paragraph 7#a74 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjah4 #d4 ,modifications to rules relating to inverted corporations 7a7 ,in general ,subsection 7b7 of section #ghgd is amended to read as follows3 7b7 ,inverted corporations treated as domestic corporations 7#a7 ,in general ,notwithstanding section #ggja7;a77#d71 a foreign corporation shall be treated for purposes of this title as a domestic corporation if-- 7,a7 such corporation would be a surrogate foreign corporation if subsection 7a77#b7 were applied by substituting #hj percent for #fj percent1 or 7,b7 such corporation is an inverted domestic corporation4 7#b7 ,inverted domestic corporation ,for purposes of this subsection1 a foreign corporation shall be treated as an inverted domestic corporation if1 pursuant to a plan 7or a series of related transactions7-- 7,a7 the entity completes after ,december #bb1 #bjag1 the direct or indirect acquisition of-- 7i7 substantially all of the properties held directly or indirectly by a domestic corporation1 or 7ii7 substantially all of the assets of1 or substantially all of the properties constituting a trade or business of1 a domestic partnership1 and 7,b7 after the acquisition1 either-- 7i7 more than #ej percent of the stock 7by vote or value7 of the entity is held-- 7,i7 in the case of an acquisition with respect to a domestic corporation1 by former shareholders of the domestic corporation by reason of holding stock in the domestic corporation1 or 7,,ii7 in the case of an acquisition with respect to a domestic partnership1 by former partners of the domestic partnership by reason of holding a capital or profits interest in the domestic partnership1 or 7ii7 the management and control of the expanded affiliated group which includes the entity occurs1 directly or indirectly1 primarily within the ,united ,states1 and such expanded affiliated group has significant domestic business activities4 7#c7 ,exception for corporations with substantial business activities in foreign country of organization ,a foreign corporation described in paragraph 7#b7 shall not be treated as an inverted domestic corporation if after the acquisition the expanded affiliated group which includes the entity has substantial business activities in the foreign country in which or under the law of which the entity is created or organized when compared to the total business activities of such expanded affiliated group4 ,for purposes of subsection 7a77#b77;,b77iii7 and the preceding sentence1 the term substantial business activities shall have the meaning given such term under regulations in effect on ,december #bb1 #bjag1 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 paragraph4 7#d7 ,management and control ,for purposes of paragraph 7#b77;,b77ii7-- 7,a7 ,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 occurring1 directly or indirectly1 primarily within the ,united ,states4 ,the regulations prescribed under the preceding sentence shall apply to periods after ,december #bb1 #bjag4 7,b7 ,executive officers and senior management ,such regulations shall provide that the management and control of an expanded affiliated group shall be treated as occurring1 directly or indirectly1 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 strategic1 financial1 and operational policies of the expanded affiliated group are based or primarily located within the ,united ,states4 ,individuals who in fact exercise such day-to-day responsibilities shall be treated as executive officers and senior management regardless of their title4 7#e7 ,significant domestic business activities ,for purposes of paragraph 7#b77;,b77ii71 an expanded affiliated group has significant domestic business activities if at least #be percent of-- 7,a7 the employees of the group are based in the ,united ,states1 7,b7 the employee compensation incurred by the group is incurred with respect to employees based in the ,united ,states1 7,c7 the assets of the group are located in the ,united ,states1 or 7,d7 the income of the group is derived in the ,united ,states1 determined in the same manner as such determinations are made for purposes of determining substantial business activities under regulations referred to in paragraph 7#c7 as in effect on ,december #bb1 #bjag1 but applied by treating all references in such regulations to foreign country and relevant foreign country as references to the ,united ,states4 ,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 paragraph4 4 7b7 ,conforming amendments 7#a7 ,clause 7i7 of section #ghgd7;a77#b77;,b7 is amended by striking after ,march #d1 #bjjc1 and inserting after ,march #d1 #bjjc1 and before ,december #bc1 #bjag14 7#b7 ,subsection 7c7 of section #ghgd is amended-- 7,a7 in paragraph 7#b7-- 7i7 by striking subsection 7a77#b77;,b77ii7 and inserting subsections 7a77#b77;,b77ii7 and 7b77#b77;,b77i72 and 7ii7 by inserting or 7b77#b77;,a7 after 7a77#b77;,b77i7 in subparagraph 7,b72 7,b7 in paragraph 7#c71 by inserting or 7b77#b77;,b77i71 as the case may be1 after 7a77#b77;,b77ii72 7,c7 in paragraph 7#e71 by striking subsection 7a77#b77;,b77ii7 and inserting subsections 7a77#b77;,b77ii7 and 7b77#b77;,b77i72 and 7,d7 in paragraph 7#f71 by inserting or inverted domestic corporation1 as the case may be1 after surrogate foreign corporation4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years ending after ,december #bb1 #bjag4 #e4 ,treatment of foreign corporations managed and controlled in the ,united ,states as domestic corporations 7a7 ,in general ,section #ggja is amended by redesignating subsection 7p7 as subsection 7q7 and by inserting after subsection 7o7 the following new subsection3 7p7 ,certain corporations managed and controlled in the ,united ,states treated as domestic for income tax 7#a7 ,in general ,notwithstanding subsection 7a77#d71 in the case of a corporation described in paragraph 7#b7 if-- 7,a7 the corporation would not otherwise be treated as a domestic corporation for purposes of this title1 but 7,b7 the management and control of the corporation occurs1 directly or indirectly1 primarily within the ,united ,states1 then1 solely for purposes of chapter #a 7and any other provision of this title relating to chapter #a71 the corporation shall be treated as a domestic corporation4 7#b7 ,corporation described 7,a7 ,in general ,a corporation is described in this paragraph if-- 7i7 the stock of such corporation is regularly traded on an established securities market1 or 7ii7 the aggregate gross assets of such corporation 7or any predecessor thereof71 including assets under management for investors1 whether held directly or indirectly1 at any time during the taxable year or any preceding taxable year is #ej1jjj1jjj or more4 7,b7 ,general exception ,a corporation shall not be treated as described in this paragraph if-- 7i7 such corporation was treated as a corporation described in this paragraph in a preceding taxable year1 7ii7 such corporation-- 7,i7 is not regularly traded on an established securities market1 and 7,,ii7 has1 and is reasonably expected to continue to have1 aggregate gross assets 7including assets under management for investors1 whether held directly or indirectly7 of less than #ej1jjj1jjj1 and 7iii7 the ,secretary grants a waiver to such corporation under this subparagraph4 7#c7 ,management and control 7,a7 ,in general ,the ,secretary shall prescribe regulations for purposes of determining cases in which the management and control of a corporation is to be treated as occurring primarily within the ,united ,states4 7,b7 ,executive officers and senior management ,such regulations shall provide that-- 7i7 the management and control of a corporation shall be treated as occurring primarily within the ,united ,states if substantially all of the executive officers and senior management of the corporation who exercise day-to-day responsibility for making decisions involving strategic1 financial1 and operational policies of the corporation are located primarily within the ,united ,states1 and 7ii7 individuals who are not executive officers and senior management of the corporation 7including individuals who are officers or employees of other corporations in the same chain of corporations as the corporation7 shall be treated as executive officers and senior management if such individuals exercise the day-to-day responsibilities of the corporation described in clause 7i74 7,c7 ,corporations primarily holding investment assets ,such regulations shall also provide that the management and control of a corporation shall be treated as occurring primarily within the ,united ,states if-- 7i7 the assets of such corporation 7directly or indirectly7 consist primarily of assets being managed on behalf of investors1 and 7ii7 decisions about how to invest the assets are made in the ,united ,states4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning on or after the date which is #b years after the date of the enactment of this ,act1 whether or not regulations are issued under section #ggja7p77#c7 of the ,internal ,revenue ,code of #aihf1 as added by this section4