,,ii #aaith ,,congress #ast ,session ,s4 #dji ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,february #e1 #bjbe,mr4 ,whitehouse 7for himself1 ,mr4 ,durbin1 ,mr4 ,murphy1 ,mr4 ,reed1 ,ms4 ,baldwin1 ,ms4 ,warren1 ,mr4 ,merkley1 ,mr4 ,markey1 ,mr4 ,schatz1 ,mr4 ,fetterman1 ,mr4 ,blumenthal1 ,mr4 ,van ,hollen1 ,mr4 ,gallego1 ,ms4 ,hirono1 ,mr4 ,heinrich1 ,mr4 ,booker1 ,ms4 ,smith1 and ,ms4 ,duckworth7 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 ,country-by-country application of limitation on foreign tax credit based on taxable units4,sec4 #d4 ,limitation on deduction of interest by domestic corporations which are members of an international financial reporting group4,sec4 #e4 ,modifications to rules relating to inverted corporations4,sec4 #f4 ,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 by striking global intangible low-taxed income each place it appears and inserting net ,,cfc tested income4 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 ,country-by-,country application of section based on ,,cfc taxable units ,section #iea;,a is amended by adding at the end the following new subsection3 7g7 ,country-by-,country application of section based on ,,cfc taxable units 7#a7 ,in general ,if any ,,cfc taxable unit of a ,united ,states shareholder is a tax resident of 7or1 in the case of a branch1 is located in7 a country which is different from the country with respect to which any other ,,cfc taxable unit of such ,united ,states shareholder is a tax resident 7or1 in the case of a branch1 is located in7-- 7,a7 such shareholder's net ,,cfc tested income for purposes of subsection 7a7 shall be the sum of the amounts of net ,,cfc tested income determined separately with respect to each such country1 and 7,b7 for purposes of determining such separate amounts of net ,,cfc tested income-- 7i7 except as otherwise provided by the ,secretary1 any reference in subsection 7c7 to a controlled foreign corporation of such shareholder shall be treated as reference to a ,,cfc taxable unit of such shareholder1 and 7ii7 net ,,cfc tested income and such other items and amounts as the ,secretary may provide1 shall be determined separately with respect to each such country by determining such amounts with respect to the ,,cfc taxable units of such shareholder which are a tax resident of such country4 7#b7 ,definitions ,for purposes of this subsection-- 7,a7 ,,cfc taxable unit ,the term ,,cfc taxable unit means any taxable unit described in clause 7ii71 7iii71 or 7iv7 of section #ijd7;e77#b77;,b71 determined-- 7i7 by substituting controlled foreign corporation for foreign corporation each place it appears in such clauses1 and 7ii7 without regard to the references to the taxpayer in clauses 7iii7 and 7iv7 of such section4 7,b7 ,application of other definitions ,terms used in this subsection which are also used in section #ijd7;e7 shall have the same meaning as when used in section #ijd7;e74 7#c7 ,special rules ,for purposes of this subsection-- 7,a7 ,application of certain rules ,except as otherwise provided by the ,secretary1 rules similar to the rules of section #ijd7;e7 shall apply4 7,b7 ,allocation of net ,,cfc tested income to controlled foreign corporations ,except as otherwise provided by the ,secretary1 subsection 7f77#b7 shall be applied separately with respect to each ,,cfc taxable unit4 4 7c7 ,regulatory authority ,section #iea;,a1 as amended by subsection 7b71 is amended by adding at the end the following new subsection3 7h7 ,regulations ,the ,secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out1 or prevent the avoidance of1 the purposes of this section1 including regulations or guidance which provide for-- 7#a7 the treatment of property if such property is transferred1 or held1 temporarily1 7#b7 the treatment of property if the avoidance of the purposes of this section is a factor in the transfer or holding of such property1 7#c7 appropriate adjustments to the basis of stock and other ownership interests1 and to earnings and profits1 to reflect tested losses 7whether or not taken into account in determining net ,,cfc tested income71 7#d7 rules similar to the rules provided under the regulations or guidance issued under section #ijd7;e77#d71 7#e7 other appropriate basis adjustments1 7#f7 appropriate adjustments to be made1 and appropriate tax attributes and records to be maintained1 separately with respect to ,,cfc taxable units1 and 7#g7 appropriate adjustments in determining tested income or tested loss if property is transferred between related parties or amounts are paid or accrued between related parties4 4 7d7 ,coordination with other provisions ,section #iea;,a7f77#a7 is amended by adding at the end the following new subparagraph3 7,c7 ,treatment of certain references ,except as otherwise provided by the ,secretary1 references to section #iea or section #iea7;a7 in sections #iei1 #ifa1 #ifb1 and such other provisions as the ,secretary may identify shall include references to section #iea;,a or section #iea;,a7a71 respectively4 4 7e7 ,repeal of reduced rate of tax on net ,,cfc tested income and foreign-,derived intangible 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;,e77iii7 is amended by striking 1 #bba1 and #bej and inserting and #bba4 7f7 ,repeal of certain exclusions from the determination of tested income ,section #iea;,a7c77#b77;,a77i7 is amended-- 7#a7 by striking subclauses 7,,iii7 and 7,v71 7#b7 by redesignating subclause 7,,iv7 as subclause 7,,iii71 7#c7 by adding and at the end of subclause 7,,ii71 and 7#d7 by striking and at the end of subclause 7,,iii7 7as so redesignated7 and inserting over4 7g7 ,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 7h7 ,repeal of high tax exclusion for foreign base company income and insurance income 7#a7 ,in general ,section #ied7;b7 is amended by striking paragraph 7#d74 7#b7 ,conforming amendment ,section #ijd7;d77#c77;,e7 is amended by striking the last sentence4 7i7 ,elimination of carryback of foreign tax credit 7#a7 ,in general ,section #ijd7;c7 is amended-- 7,a7 by striking in the first preceding taxable year1 and in any of the first #aj succeeding taxable years1 in that order and inserting in any of the first #aj succeeding taxable years1 in order1 7,b7 by striking preceding or each place it appears1 and 7,c7 by striking ,carryback and in the heading thereof4 7#b7 ,application to limitation on foreign oil and gas taxes ,section #ijg7;f7 is amended-- 7,a7 in paragraph 7#a71 by striking in the first preceding taxable year and1 7,b7 in paragraph 7#b71 by striking preceding or in the matter preceding subparagraph 7,a71 7,c7 in paragraph 7#c77;,b7-- 7i7 by striking in a preceding or succeeding and inserting in a succeeding1 and 7ii7 by striking in such preceding or succeeding both places it appears and inserting in such succeeding1 and 7,d7 in the heading1 by striking ,carryback and4 7j7 ,treatment of foreign base company oil related income as subpart ,f income 7#a7 ,in general ,section #ied7;a7 is amended by striking and at the end of paragraph 7#b71 by striking the period at the end of paragraph 7#c7 and inserting 1 and1 and by adding at the end the following new paragraph3 7#d7 the foreign base company oil related income for the taxable year 7determined under subsection 7f7 and reduced as provided in subsection 7b77#e774 4 7#b7 ,foreign base company oil related income ,section #ied is amended by inserting after subsection 7e7 the following new subsection3 7f7 ,foreign base company oil related income ,for purposes of this section1 the term foreign base company oil related income means foreign oil related income 7within the meaning of paragraphs 7#b7 and 7#c7 of section #ijg7;c77 other than income derived from a source within a foreign country in connection with-- 7#a7 oil or gas which was extracted from an oil or gas well located in such foreign country1 or 7#b7 oil1 gas1 or a primary product of oil or gas which is sold by the foreign corporation or a related person for use or consumption within such country or is loaded in such country on a vessel or aircraft as fuel for such vessel or aircraft4 ,such term shall not include any foreign personal holding company income 7as defined in subsection 7c774 4 7#c7 ,conforming amendments 7,a7 ,section #ieb7;c77#a77;,b77iii7 is amended by redesignating subclauses 7,,iii7 and 7,,iv7 as subclauses 7,,iv7 and 7,v71 respectively1 and by inserting after subclause 7,,ii7 the following new subclause3 7,,iii7 foreign base company oil related income4 4 7,b7 ,section #ied7;b7 is amended-- 7i7 by striking and the foreign base company services income in paragraph 7#e7 and inserting the foreign base company services income1 and the foreign base company oil related income1 and 7ii7 by adding at the end the following new paragraph3 7#f7 ,foreign base company oil related income not treated as another kind of foreign base company income ,income of a corporation which is foreign base company oil related income shall not be considered foreign base company income of such corporation under paragraph 7#b7 or 7#c7 of subsection 7a74 4 7k7 ,effective dates 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 #bjbd1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 7#b7 ,regulatory authority and coordination with other provisions ,the amendments made by subsections 7c7 and 7d7 shall apply to taxable years of foreign corporations beginning after the date of the enactment of this ,act1 and to taxable years of ,united ,states shareholders in which or with which such taxable years of foreign corporations end4 7#c7 ,repeal of reduced rate of tax2 increase in deemed paid credit ,the amendments made by subsections 7e7 and 7g7 shall apply to taxable years beginning after ,december #ca1 #bjbd4 7#d7 ,elimination of carryback of foreign tax credit ,the amendment made by subsection 7i7 shall apply to credits arising in taxable years beginning after ,december #ca1 #bjbd4 7l7 ,no inference regarding certain modifications ,the amendments made by subsections 7c7 and 7d7 shall not be construed to create any inference with respect to the proper application of any provision of the ,internal ,revenue ,code of #aihf with respect to any taxable year beginning before the taxable years to which such amendments apply4 #c4 ,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 based on taxable units 7#a7 ,in general ,subsection 7d7 7and the provisions of this title referred to in paragraph 7#a7 of such subsection7 shall be applied separately with respect to each country by taking into account the aggregate income properly attributable or otherwise allocable to a taxable unit of the taxpayer which is a tax resident of 7or1 in the case of a branch1 is located in7 such country4 7#b7 ,taxable units 7,a7 ,in general ,except as otherwise provided by the ,secretary1 each item shall be attributable or otherwise allocable to exactly 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 ,general taxable unit ,the person that is the taxpayer and that is not otherwise described in a separate clause of this subparagraph4 7ii7 ,certain foreign corporations ,each foreign corporation with respect to which the taxpayer is a ,united ,states shareholder4 7iii7 ,interests in pass-through entities ,each interest held 7directly or indirectly7 by the taxpayer or any foreign corporation referred to in clause 7ii7 in a pass-through entity if such pass-through entity is a tax resident of a country other than the country with respect to which such taxpayer or foreign corporation 7as the case may be7 is a tax resident4 7iv7 ,branches ,each branch 7or portion thereof7 the activities of which are directly or indirectly carried on by the taxpayer or any foreign corporation referred to in clause 7ii7 and which give rise to a taxable presence in a country other than the country with respect to which such taxpayer or foreign corporation 7as the case may be7 is a tax resident4 7#c7 ,definitions and special rules ,for purposes of this subsection-- 7,a7 ,tax resident ,except as otherwise provided by the ,secretary1 the term tax resident means a person or entity subject to tax under the tax law of a country as a resident4 ,if an entity is organized under the law of a country1 or resident in a country1 that does not impose an income tax with respect to such entities1 such entity shall1 except as provided by the ,secretary1 be treated as subject to tax under the tax law of such country for the purposes of the preceding sentence4 7,b7 ,pass-through entity ,except as otherwise provided by the ,secretary1 the term pass-through entity includes any partnership or other entity to the extent that income1 gain1 deduction1 or loss of the entity is taken into account in determining the income or loss of a person that owns 7directly or indirectly7 an interest in such entity4 7,c7 ,branch ,except as otherwise provided by the ,secretary1 the term branch means a taxable presence of a tax resident in a country other than its country of residence as determined under such other country's tax law4 ,the ,secretary shall provide regulations or other guidance applying such term to activities in a country that do not give rise to a taxable presence4 7,d7 ,treatment of fiscally autonomous jurisdictions ,any fiscally autonomous jurisdiction shall be treated as a separate country4 ,any possession of the ,united ,states shall also be treated as a separate country4 7,e7 ,possession of the ,united ,states ,the term possession of the ,united ,states means each of ,american ,samoa1 the ,commonwealth of the ,northern ,mariana ,islands1 the ,commonwealth of ,puerto ,rico1 ,guam1 and the ,virgin ,islands4 7#d7 ,regulations ,the ,secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out1 or prevent avoidance of1 the purposes of this subsection1 including regulations or other guidance-- 7,a7 providing for the application of this subsection to an entity or arrangement that is considered a tax resident of more than one country or of no country1 7,b7 providing for the application of this subsection to hybrid entities or hybrid transactions 7as such terms are used for purposes of section #bfg;,a71 pass-through entities1 passive foreign investment companies1 trusts1 and other entities or arrangements not otherwise described in this subsection1 and 7,c7 providing for the assignment of any item 7including foreign taxes and deductions7 to taxable units1 including in the case of amounts not otherwise taken into account in determining taxable income under this chapter4 4 7b7 ,treatment of inadequate substantiation ,section #ijd7;d77#d77;,c77ii7 is amended by striking paragraph 7#a77;,a7 and inserting paragraph 7#a77;,c74 7c7 ,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;,b77iv71 and 7#b7 by striking a qualified business unit and inserting a foreign branch4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjbd4 #d4 ,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 7and as interest expense reported as described in clause 7i77,i7 or 7ii77,i7 of subsection 7n77#c77;,b71 as the case may be7 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 7o7 4 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 #bjbd4 #e4 ,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 7d7 ,extension of limitation on assessment ,if the period of limitation on assessment of tax resulting from the amendments made by subsection 7a7 expires before the end of the #c-year period beginning on the date of the enactment of this ,act1 such assessment 7to the extent attributable to such amendments7 may1 nevertheless1 be made before the close of such #c-year period4 #f4 ,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