,,ii #aahth ,,congress #b;d ,session ,s4 #djih ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,april #aj1 #bjbd,mr4 ,sanders 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 modify the treatment of foreign corporations1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,corporate ,tax ,dodging ,prevention ,act4 #b4 ,restoration of progressive corporate tax rate 7a7 ,in general ,section #aa7;b7 of the ,internal ,revenue ,code of #aihf is amended to read as follows3 7b7 ,amount of tax 7#a7 ,in general ,the amount of the tax imposed by subsection 7a7 shall be the sum of-- 7,a7 #ae percent of so much of the taxable income as does not exceed #ej1jjj1 7,b7 #be percent of so much of the taxable income as exceeds #ej1jjj but does not exceed #ge1jjj1 7,c7 #cd percent of so much of the taxable income as exceeds #ge1jjj but does not exceed #aj1jjj1jjj1 and 7,d7 #ce percent of so much of the taxable income as exceeds #aj1jjj1jjj4 ,in the case of a corporation which has taxable income in excess of #ajj1jjj for any taxable year1 the amount of tax determined under the preceding sentence for such taxable year shall be increased by the lesser of 7i7 #e percent of such excess1 or 7ii7 #aa1gej4 ,in the case of a corporation which has taxable income in excess of #ae1jjj1jjj1 the amount of the tax determined under the foregoing provisions of this paragraph shall be increased by an additional amount equal to the lesser of 7i7 #c percent of such excess1 or 7ii7 #ajj1jjj4 7#b7 ,certain personal service corporations not eligible for graduated rates ,notwithstanding paragraph 7#a71 the amount of the tax imposed by subsection 7a7 on the taxable income of a qualified personal service corporation 7as defined in section #ddh7;d77#b77 shall be equal to #ce percent of the taxable income4 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjbd4 #c4 ,equalization of tax rates on domestic and foreign income 7a7 ,in general ,section #ieb of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7e7 ,special application of subpart 7#a7 ,in general ,for taxable years beginning after ,december #ca1 #bjbd1 notwithstanding any other provision of this subpart1 the term subpart ,f income means1 in the case of any controlled foreign corporation1 the income of such corporation derived from any foreign country4 7#b7 ,applicable rules ,rules similar to the rules under the last sentence of subsection 7a7 and subsection 7d7 shall apply to this subsection4 4 7b7 ,treatment of previously deferred foreign income 7#a7 ,treatment of interest ,section #ife7;h7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#g7 ,rules relating to interest ,in the case of any amount of the net tax liability prorated to an installment under this subsection which has not been paid before the date of the enactment of this paragraph1 the last date prescribed for payment of any such installment for purposes of section #ffja shall be the earlier of such last date 7determined without regard to this paragraph7 or such date of enactment4 4 7#b7 ,rules for ,s corporations ,section #ife7;i77#b77;,a7 of such ,code is amended by adding at the end the following new clause3 7iv7 ,the date of the enactment of the ,corporate ,tax ,dodging ,prevention ,act4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years of foreign corporations beginning after ,december #ca1 #bjbd1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 #d4 ,country-by-country application of limitation on foreign tax credit based on taxable units 7a7 ,in general ,section #ijd is amended by inserting after subsection 7d7 the following new subsection3 7e7 ,country-by-,country application of section based on taxable units 7#a7 ,in general ,the provisions of subsections 7a71 7b71 7c71 and 7d7 and sections #ijg and #ifj shall be applied separately with respect to each country and possession by taking into account the aggregate items properly attributable or otherwise allocable to a taxable unit of the taxpayer which is a tax resident of such country or possession4 7#b7 ,taxable units 7,a7 ,in general ,unless otherwise provided by the ,secretary1 to the extent an item may be properly attributable or otherwise allocable to more than one taxable unit under paragraph 7#a71 such item shall be treated as properly attributable or otherwise allocable to the lowest-tier taxable unit of the taxpayer to which such item may be properly attributable or otherwise allocable4 ,no item shall be attributable or otherwise allocable to more than one taxable unit of the taxpayer4 7,b7 ,determination of taxable units ,except as otherwise provided by the ,secretary1 the taxable units of a taxpayer are as follows3 7i7 ,in general ,the general taxable unit of the taxpayer which is not otherwise described in a separate clause of this subparagraph4 7ii7 ,foreign branches ,each foreign branch the activities of which are carried on directly or indirectly 7through one or more pass-through entities7 by the taxpayer4 7iii7 ,controlled foreign corporations ,each controlled foreign corporation with respect to which the taxpayer is a ,united ,states shareholder4 7iv7 ,branches of controlled foreign corporations ,each branch the activities of which are carried on directly or indirectly 7through one or more pass-through entities7 by a controlled foreign corporation referred to in clause 7iii74 7v7 ,interests in pass-through entities 7,i7 ,in general ,each interest in a pass-through entity held directly or indirectly by the taxpayer or a controlled foreign corporation referred to in clause 7iii7 if such entity is a tax resident of a foreign country4 7,,ii7 ,certain interests held by controlled foreign corporations ,each interest in a pass-through entity held directly or indirectly by a controlled foreign corporation referred to in clause 7iii7 if such entity is a tax resident of a foreign country or such entity is treated as a corporation 7or other entity that is not fiscally transparent7 for purposes of the tax law of a foreign country in which such controlled foreign corporation is a tax resident4 7#c7 ,tax resident ,for purposes of this subsection1 a taxable unit shall be treated as a tax resident of a country or possession if such taxable unit is liable to tax under the tax law of such country or possession as a resident4 7#d7 ,pass-through entity ,for purposes of this subsection1 the term pass-through entity means any partnership and any other type of entity 7other than a corporation7 identified by the ,secretary as a pass-through entity for purposes of this subsection4 7#e7 ,regulations ,the ,secretary shall issue such regulations or other guidance as the ,secretary determines necessary or appropriate to carry out the purposes of this subsection1 including regulations or other guidance-- 7,a7 for determining the country or possession with respect to which any taxable unit is a tax resident1 including-- 7i7 determining such country or possession on the basis of location if such taxable unit would not otherwise be a tax resident of any country or possession1 and 7ii7 ensuring that such taxable unit is a tax resident of not more than #a country or possession1 7,b7 applying this section to hybrid entities1 passive foreign investment companies1 tiered structures1 and branches1 including branches that do not give rise to a taxable presence under the tax law of the country where the branch is located1 and 7,c7 determining whether any entity is not fiscally transparent within the meaning of paragraph 7#b77;,b77v77,,ii74 4 7b7 ,application of foreign tax credit limitation with respect to foreign branches ,section #ijd7;d77#b77;,j77i7 is amended-- 7#a7 by striking qualified business units 7as defined in section #ihi7;a77 in #a or more foreign countries and inserting foreign branches described in section #ijd7;e77#b77;,b77ii71 and 7#b7 by striking a qualified business unit and inserting a foreign branch4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjbd4 #e4 ,repeal of check-the-box rules for certain foreign entities and ,,cfc look-thru rules 7a7 ,check-the-,box rules ,paragraph 7#c7 of section #ggja7;a7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking and1 and 7#b7 by inserting after insurance companies the following3 1 and any foreign business entity that has one or more owners all of which have limited liability44 7b7 ,look-,thru rule ,subparagraph 7,c7 of section #ied7;c77#f7 of such ,code is amended to read as follows3 7,c7 ,termination ,subparagraph 7,a7 shall not apply to dividends1 interest1 rents1 and royalties received or accrued after the date of the enactment of the ,corporate ,tax ,dodging ,prevention ,act4 4 7c7 ,effective date ,the amendments made by this section shall take effect on the date of the enactment of this ,act4 #f4 ,limitation on deduction of interest by domestic corporations which are members of an international financial reporting group 7a7 ,in general ,section #afc of the ,internal ,revenue ,code of #aihf is amended by redesignating subsection 7n7 as subsection 7o7 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 #aje 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 #be1jjj1jjj4 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 form7 or annual statement to shareholders 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 ,the secretary shall prescribe rules for application of this subsection to any partnership which is a member of any international financial reporting group4 ,such rules shall treat any such partnership in a manner similar to the way such partnership would be treated under this subsection if it were a domestic corporation which is a member of any international financial reporting group4 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 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4 #g4 ,modifications to rules relating to inverted corporations 7a7 ,in general ,subsection 7b7 of section #ghgd of the ,internal ,revenue ,code of #aihf 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 ,may #h1 #bjad1 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 more than #ej percent of the stock 7by vote or value7 of the entity is held-- 7i7 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 7ii7 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 partnership4 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 ,may #h1 #bjad1 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 4 7b7 ,conforming amendments 7#a7 ,clause 7i7 of section #ghgd7;a77#b77;,b7 of the ,internal ,revenue ,code of #aihf is amended by striking after ,march #d1 #bjjc1 and inserting after ,march #d1 #bjjc1 and before ,may #i1 #bjad14 7#b7 ,subsection 7c7 of section #ghgd of such ,code is amended-- 7,a7 in paragraph 7#b7-- 7i7 by striking subsection 7a77#b77;,b77ii7 and inserting subsections 7a77#b77;,b77ii7 and 7b77#b77;,b71 and 7ii7 by inserting or 7b77#b77;,a7 after 7a77#b77;,b77i7 in subparagraph 7,b71 7,b7 in paragraph 7#c71 by inserting or 7b77#b77;,b71 as the case may be1 after 7a77#b77;,b77ii71 7,c7 in paragraph 7#e71 by striking subsection 7a77#b77;,b77ii7 and inserting subsections 7a77#b77;,b77ii7 and 7b77#b77;,b71 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 ,may #h1 #bjad4 #h4 ,treatment of foreign corporations managed and controlled in the ,united ,states as domestic corporations 7a7 ,in general ,section #ggja of the ,internal ,revenue ,code of #aihf 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 ,act4 #i4 ,modifications to base erosion and anti-abuse tax 7a7 ,acceleration of modifications ,section #ei;,a7b7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 in paragraph 7#a77;,a71 by striking #aj percent 7#e percent in the case of taxable years beginning in calendar year #bjah7 and inserting #ab4e percent1 7#b7 in paragraph 7#a77;,b71 by striking by the excess of and all that follows and inserting by the aggregate amount of the credits allowed under this chapter against such regular tax liability41 7#c7 by striking paragraphs 7#b7 and 7#d7 and redesignating paragraph 7#c7 as paragraph 7#b71 and 7#d7 in paragraph 7#b77;,a7 7as so redesignated71 by striking paragraphs 7#a77;,a7 and 7#b77;,a7 shall each and inserting paragraph 7#a77;,a7 shall4 7b7 ,modifications to definition of applicable taxpayer ,section #ei;,a7e77#a7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking #ejj1jjj1jjj in subparagraph 7,b7 and inserting #be1jjj1jjj1 and 7#b7 by inserting and at the end of subparagraph 7,a71 by striking 1 and at the end of subparagraph 7,b7 and inserting a period1 and by striking subparagraph 7,c74 7c7 ,exceptions to definition of base erosion payment ,section #ei;,a7d7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#f7 ,exception for certain payments includible in gross income of payee 7,a7 ,in general ,paragraph 7#a7 shall not apply to any portion of an amount-- 7i7 which is paid or accrued by the taxpayer to a foreign person who is a member of the same controlled group of corporations as the taxpayer1 and 7ii7 which-- 7,i7 is treated by the foreign person as an amount of income from sources within the ,united ,states which is effectively connected with the conduct by such person of a trade or business within the ,united ,states1 or 7,,ii7 if the foreign person is a controlled foreign corporation1 is included in the income of a ,united ,states shareholder of such controlled foreign corporation under section #iea7;a74 7,b7 ,controlled group of corporations ,for purposes of this paragraph1 the term controlled group of corporations has the same meaning given to such term by section #aefc7;a71 except that-- 7i7 more than #ej percent shall be substituted for at least #hj percent each place it appears in section #aefc7;a77#a71 and 7ii7 the determination shall be made without regard to subsections 7a77#d71 7b77#b77;,c71 and 7e77#c77;,c7 of section #aefc4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning in calendar years beginning after the date of the enactment of this ,act4 #aj4 ,modifications of foreign tax credit rules applicable to oil1 gas1 mining1 gambling and other industry taxpayers receiving specific economic benefits 7a7 ,in general ,section #ija of the ,internal ,revenue ,code of #aihf is amended by redesignating subsection 7n7 as subsection 7o7 and by inserting after subsection 7m7 the following new subsection3 7n7 ,special rules relating to dual capacity taxpayers 7#a7 ,general rule ,notwithstanding any other provision of this chapter1 any amount paid or accrued by a dual capacity taxpayer to a foreign country or possession of the ,united ,states for any period shall not be considered a tax-- 7,a7 if1 for such period1 the foreign country or possession does not impose a generally applicable income tax1 or 7,b7 to the extent such amount exceeds the amount 7determined in accordance with regulations7 which-- 7i7 is paid by such dual capacity taxpayer pursuant to the generally applicable income tax imposed by the country or possession1 or 7ii7 would be paid if the generally applicable income tax imposed by the country or possession were applicable to such dual capacity taxpayer4 ,nothing in this paragraph shall be construed to imply the proper treatment of any such amount not in excess of the amount determined under subparagraph 7,b74 7#b7 ,dual capacity taxpayer ,for purposes of this subsection1 the term dual capacity taxpayer means1 with respect to any foreign country or possession of the ,united ,states1 a person who-- 7,a7 is subject to a levy of such country or possession1 and 7,b7 receives 7or will receive7 directly or indirectly a specific economic benefit 7as determined in accordance with regulations7 from such country or possession4 7#c7 ,generally applicable income tax ,for purposes of this subsection-- 7,a7 ,in general ,the term generally applicable income tax means an income tax 7or a series of income taxes7 which is generally imposed under the laws of a foreign country or possession on income derived from the conduct of a trade or business within such country or possession4 7,b7 ,exceptions ,such term shall not include a tax unless it has substantial application1 by its terms and in practice1 to-- 7i7 persons who are not dual capacity taxpayers1 and 7ii7 persons who are citizens or residents of the foreign country or possession4 4 7b7 ,effective date ,the amendments made by this section shall apply to taxes paid or accrued in taxable years beginning after the date of the enactment of this ,act4 7c7 ,special rule for treaties ,notwithstanding sections #hid or #gheb7;d7 of the ,internal ,revenue ,code of #aihf1 the amendments made by this section shall apply without regard to any treaty obligation of the ,united ,states4 #aa4 ,limitations on treaty benefits 7a7 ,limitation for certain deductible payments ,section #hid of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7d7 ,limitation on treaty benefits for certain deductible payments 7#a7 ,in general ,in the case of any deductible related-party payment1 any withholding tax imposed under chapter #c 7and any tax imposed under subpart ,a or ,b of this part7 with respect to such payment may not be reduced under any treaty of the ,united ,states unless any such withholding tax would be reduced under a treaty of the ,united ,states if such payment were made directly to the foreign parent corporation4 7#b7 ,deductible related-party payment ,for purposes of this subsection1 the term deductible related-party payment means any payment made1 directly or indirectly1 by any person to any other person if the payment is allowable as a deduction under this chapter and both persons are members of the same foreign controlled group of entities4 7#c7 ,foreign controlled group of entities ,for purposes of this subsection-- 7,a7 ,in general ,the term foreign controlled group of entities means a controlled group of entities the common parent of which is a foreign corporation4 7,b7 ,controlled group of entities ,the term controlled group of entities means a controlled group of corporations as defined in section #aefc7;a77#a71 except that-- 7i7 more than #ej percent shall be substituted for at least #hj percent each place it appears therein1 and 7ii7 the determination shall be made without regard to subsections 7a77#d7 and 7b77#b7 of section #aefc4 ,a partnership or any other entity 7other than a corporation7 shall be treated as a member of a controlled group of entities if such entity is controlled 7within the meaning of section #ied7;d77#c77 by members of such group 7including any entity treated as a member of such group by reason of this sentence74 7#d7 ,foreign parent corporation ,for purposes of this subsection1 the term foreign parent corporation means1 with respect to any deductible related-party payment1 the common parent of the foreign controlled group of entities referred to in paragraph 7#c77;,a74 7#e7 ,regulations ,the ,secretary may prescribe such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection1 including regulations or other guidance which provide for-- 7,a7 the treatment of two or more persons as members of a foreign controlled group of entities if such persons would be the common parent of such group if treated as one corporation1 and 7,b7 the treatment of any member of a foreign controlled group of entities as the common parent of such group if such treatment is appropriate taking into account the economic relationships among such entities4 4 7b7 ,limitation for certain income attributable to permanent establishments in a third country ,section #hid of such ,code1 as amended by subsection 7a71 is amended by adding at the end the following new subsection3 7e7 ,denial of treaty benefits with respect to certain income attributable to a permanent establishment in a third country ,a foreign person shall not be entitled under any income tax treaty of the ,united ,states with a foreign country to any exemption from1 or reduction of1 any tax with respect to income if-- 7#a7 such income is income from sources within the ,united ,states1 and 7#b7 such income is attributable to a permanent establishment which is outside of such foreign country and-- 7,a7 the profits of which are subject to a combined aggregate effective rate of tax in such foreign country and the country of the permanent establishment that is less than the lesser of-- 7i7 #ae percent1 or 7ii7 #fj percent of the general statutory rate of tax on income on corporations in such foreign country1 or 7,b7 which is located in a foreign country with which the ,united ,states does not have an income tax treaty and is not taxed by the foreign country which is a party to the treaty4 4 7c7 ,effective date ,the amendments made by this section shall apply to payments made after the date of the enactment of this ,act4 7d7 ,special rule for treaties ,notwithstanding sections #hid or #gheb7;d7 of the ,internal ,revenue ,code of #aihf1 the amendments made by this section shall apply without regard to any treaty obligation of the ,united ,states4 #ab4 ,repeal of deduction for foreign-derived intangible income 7a7 ,in general ,part ,,viii of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by striking section #bej 7and the item related to such section in the table of sections for such part74 7b7 ,conforming amendments 7#a7 ,section #agb7;d7 of the ,internal ,revenue ,code of #aihf is amended by striking paragraph 7#i74 7#b7 ,section #bdf7;b7 of such ,code is amended-- 7,a7 by striking the comma after section #bdc7;a77#a7 the first place it appears and inserting and and by striking and section #bej1 and 7,b7 by inserting and after section #bdc7;a77#a7 the second place it appears and by striking 1 and #bej4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjbd4