I
119THCONGRESS
1
STSESSION H. R. 2186
To amend the Internal Revenue Code of 1986 to restore the limitation
on downward attribution of stock ownership in applying constructive
ownership rules.
IN THE HOUSE OF REPRESENTATIVES
MARCH18, 2025
Mr. E
STES(for himself and Ms. MOOREof Wisconsin) introduced the
following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to restore
the limitation on downward attribution of stock owner-
ship in applying constructive ownership rules.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. RESTORATION OF LIMITATION ON DOWNWARD 3
ATTRIBUTION OF STOCK OWNERSHIP IN AP-4
PLYING CONSTRUCTIVE OWNERSHIP RULES. 5
(a) I
NGENERAL.—Section 958(b) of the Internal 6
Revenue Code of 1986 is amended— 7
(1) by inserting after paragraph (3) the fol-8
lowing: 9
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‘‘(4) Subparagraphs (A), (B), and (C) of sec-1
tion 318(a)(3) shall not be applied so as to consider 2
a United States person as owning stock which is 3
owned by a person who is not a United States per-4
son.’’, and 5
(2) by striking ‘‘Paragraph (1)’’ in the last sen-6
tence and inserting ‘‘Paragraphs (1) and (4)’’. 7
(b) F
OREIGNCONTROLLEDUNITEDSTATESSHARE-8
HOLDERS.—Subpart F of part III of subchapter N of 9
chapter 1 of such Code is amended by inserting after sec-10
tion 951A the following new section: 11
‘‘SEC. 951B. AMOUNTS INCLUDED IN GROSS INCOME OF 12
FOREIGN CONTROLLED UNITED STATES 13
SHAREHOLDERS. 14
‘‘(a) I
NGENERAL.—In the case of any foreign con-15
trolled United States shareholder of a foreign controlled 16
foreign corporation— 17
‘‘(1) this subpart (other than sections 951A, 18
951(b), and 957) shall be applied with respect to 19
such shareholder (separately from, and in addition 20
to, the application of this subpart without regard to 21
this section)— 22
‘‘(A) by substituting ‘foreign controlled 23
United States shareholder’ for ‘United States 24
shareholder’ each place it appears therein, and 25
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‘‘(B) by substituting ‘foreign controlled 1
foreign corporation’ for ‘controlled foreign cor-2
poration’ each place it appears therein, and 3
‘‘(2) section 951A shall be applied with respect 4
to such shareholder— 5
‘‘(A) by treating each reference to ‘United 6
States shareholder’ in such section as including 7
a reference to such shareholder, and 8
‘‘(B) by treating each reference to ‘con-9
trolled foreign corporation’ in such section as 10
including a reference to such foreign controlled 11
foreign corporation. 12
‘‘(b) F
OREIGNCONTROLLED UNITEDSTATES 13
S
HAREHOLDER.—For purposes of this section, the term 14
‘foreign controlled United States shareholder’ means, with 15
respect to any foreign corporation, any United States per-16
son which would be a United States shareholder with re-17
spect to such foreign corporation if— 18
‘‘(1) section 951(b) were applied by substituting 19
‘more than 50 percent’ for ‘10 percent or more’, and 20
‘‘(2) section 958(b) were applied without regard 21
to paragraph (4) thereof. 22
‘‘(c) F
OREIGNCONTROLLED FOREIGNCORPORA-23
TION.—For purposes of this section, the term ‘foreign con-24
trolled foreign corporation’ means a foreign corporation, 25
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other than a controlled foreign corporation, which would 1
be a controlled foreign corporation if section 957(a) were 2
applied— 3
‘‘(1) by substituting ‘foreign controlled United 4
States shareholders’ for ‘United States share-5
holders’, and 6
‘‘(2) by substituting ‘section 958(b) (other than 7
paragraph (4) thereof)’ for ‘section 958(b)’. 8
‘‘(d) R
EGULATIONS.—The Secretary shall prescribe 9
such regulations or other guidance as may be necessary 10
or appropriate to carry out the purposes of this section, 11
including regulations or other guidance— 12
‘‘(1) to treat a foreign controlled United States 13
shareholder or a foreign controlled foreign corpora-14
tion as a United States shareholder or as a con-15
trolled foreign corporation, respectively, for purposes 16
of provisions of this title other than this subpart, 17
and 18
‘‘(2) to prevent the avoidance of the purposes of 19
this section.’’. 20
(c) C
LERICALAMENDMENT.—The table of sections 21
for subpart F of part III of subchapter N of chapter 1 22
is amended by inserting after the item relating to section 23
951A the following new item: 24
‘‘Sec. 951B. Amounts included in gross income of foreign controlled United
States shareholders.’’.
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(d) EFFECTIVEDATE.—The amendments made by 1
this section shall apply to— 2
(1) the last taxable year of foreign corporations 3
beginning before January 1, 2025, and each subse-4
quent taxable year of such foreign corporations, and 5
(2) taxable years of United States persons in 6
which or with which such taxable years of foreign 7
corporations end. 8
(e) N
OINFERENCE.—The amendments made by this 9
section shall not be construed to create any inference with 10
respect to the proper application of any provision of the 11
Internal Revenue Code of 1986 with respect to taxable 12
years beginning before the taxable years to which such 13
amendments apply. 14
Æ
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