II
119THCONGRESS
1
STSESSION S. 409
To amend the Internal Revenue Code of 1986 to provide for current year
inclusion of net CFC tested income, and for other purposes.
IN THE SENATE OF THE UNITED STATES
FEBRUARY5, 2025
Mr. W
HITEHOUSE(for himself, Mr. DURBIN, Mr. MURPHY, Mr. REED, Ms.
B
ALDWIN, Ms. WARREN, Mr. MERKLEY, Mr. MARKEY, Mr. SCHATZ, Mr.
F
ETTERMAN, Mr. BLUMENTHAL, Mr. VANHOLLEN, Mr. GALLEGO, Ms.
H
IRONO, Mr. HEINRICH, Mr. BOOKER, Ms. SMITH, and Ms.
D
UCKWORTH) introduced the following bill; which was read twice and re-
ferred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to provide
for current year inclusion of net CFC tested income,
and for other purposes.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. SHORT TITLE, ETC. 3
(a) S
HORTTITLE.—This Act may be cited as the 4
‘‘No Tax Breaks for Outsourcing Act’’. 5
(b) A
MENDMENT OF 1986 CODE.—Except as other-6
wise expressly provided, whenever in this Act an amend-7
ment or repeal is expressed in terms of an amendment 8
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to, or repeal of, a section or other provision, the reference 1
shall be considered to be made to a section or other provi-2
sion of the Internal Revenue Code of 1986. 3
(c) T
ABLE OFCONTENTS.—The table of contents of 4
this Act is as follows: 5
Sec. 1. Short title, etc.
Sec. 2. Current year inclusion of net CFC tested income.
Sec. 3. Country-by-country application of limitation on foreign tax credit based
on taxable units.
Sec. 4. Limitation on deduction of interest by domestic corporations which are
members of an international financial reporting group.
Sec. 5. Modifications to rules relating to inverted corporations.
Sec. 6. Treatment of foreign corporations managed and controlled in the United
States as domestic corporations.
SEC. 2. CURRENT YEAR INCLUSION OF NET CFC TESTED IN-
6
COME. 7
(a) R
EPEAL OFTAX-FREEDEEMEDRETURN ONIN-8
VESTMENTS.— 9
(1) I
N GENERAL.—Section 951A(a) is amended 10
by striking ‘‘global intangible low-taxed income’’ and 11
inserting ‘‘net CFC tested income’’. 12
(2) C
ONFORMING AMENDMENTS .— 13
(A) Section 951A is amended by striking 14
subsections (b) and (d). 15
(B) Section 951A(e)(1) is amended by 16
striking ‘‘subsections (b), (c)(1)(A), and’’ and 17
inserting ‘‘subsections (c)(1)(A) and’’. 18
(C) Section 951A(f) is amended by strik-19
ing ‘‘global intangible low-taxed income’’ each 20
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place it appears and inserting ‘‘net CFC tested 1
income’’. 2
(D) Section 960(d)(2)(A) is amended by 3
striking ‘‘global intangible low-taxed income (as 4
defined in section 951A(b))’’ and inserting ‘‘net 5
CFC tested income (as defined in section 6
951A(c))’’. 7
(b) C
OUNTRY-BY-COUNTRYAPPLICATION OF SEC-8
TIONBASED ONCFC TAXABLEUNITS.—Section 951A is 9
amended by adding at the end the following new sub-10
section: 11
‘‘(g) C
OUNTRY-BY-COUNTRYAPPLICATION OFSEC-12
TIONBASED ONCFC TAXABLEUNITS.— 13
‘‘(1) I
N GENERAL.—If any CFC taxable unit of 14
a United States shareholder is a tax resident of (or, 15
in the case of a branch, is located in) a country 16
which is different from the country with respect to 17
which any other CFC taxable unit of such United 18
States shareholder is a tax resident (or, in the case 19
of a branch, is located in)— 20
‘‘(A) such shareholder’s net CFC tested in-21
come for purposes of subsection (a) shall be the 22
sum of the amounts of net CFC tested income 23
determined separately with respect to each such 24
country, and 25
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‘‘(B) for purposes of determining such sep-1
arate amounts of net CFC tested income— 2
‘‘(i) except as otherwise provided by 3
the Secretary, any reference in subsection 4
(c) to a controlled foreign corporation of 5
such shareholder shall be treated as ref-6
erence to a CFC taxable unit of such 7
shareholder, and 8
‘‘(ii) net CFC tested income and such 9
other items and amounts as the Secretary 10
may provide, shall be determined sepa-11
rately with respect to each such country by 12
determining such amounts with respect to 13
the CFC taxable units of such shareholder 14
which are a tax resident of such country. 15
‘‘(2) D
EFINITIONS.—For purposes of this sub-16
section— 17
‘‘(A) CFC
TAXABLE UNIT.—The term 18
‘CFC taxable unit’ means any taxable unit de-19
scribed in clause (ii), (iii), or (iv) of section 20
904(e)(2)(B), determined— 21
‘‘(i) by substituting ‘controlled foreign 22
corporation’ for ‘foreign corporation’ each 23
place it appears in such clauses, and 24
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‘‘(ii) without regard to the references 1
to the taxpayer in clauses (iii) and (iv) of 2
such section. 3
‘‘(B) A
PPLICATION OF OTHER DEFINI -4
TIONS.—Terms used in this subsection which 5
are also used in section 904(e) shall have the 6
same meaning as when used in section 904(e). 7
‘‘(3) S
PECIAL RULES.—For purposes of this 8
subsection— 9
‘‘(A) A
PPLICATION OF CERTAIN RULES .— 10
Except as otherwise provided by the Secretary, 11
rules similar to the rules of section 904(e) shall 12
apply. 13
‘‘(B) A
LLOCATION OF NET CFC TESTED 14
INCOME TO CONTROLLED FOREIGN CORPORA -15
TIONS.—Except as otherwise provided by the 16
Secretary, subsection (f)(2) shall be applied 17
separately with respect to each CFC taxable 18
unit.’’. 19
(c) R
EGULATORY AUTHORITY.—Section 951A, as 20
amended by subsection (b), is amended by adding at the 21
end the following new subsection: 22
‘‘(h) R
EGULATIONS.—The Secretary shall issue such 23
regulations or other guidance as may be necessary or ap-24
propriate to carry out, or prevent the avoidance of, the 25
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purposes of this section, including regulations or guidance 1
which provide for— 2
‘‘(1) the treatment of property if such property 3
is transferred, or held, temporarily, 4
‘‘(2) the treatment of property if the avoidance 5
of the purposes of this section is a factor in the 6
transfer or holding of such property, 7
‘‘(3) appropriate adjustments to the basis of 8
stock and other ownership interests, and to earnings 9
and profits, to reflect tested losses (whether or not 10
taken into account in determining net CFC tested 11
income), 12
‘‘(4) rules similar to the rules provided under 13
the regulations or guidance issued under section 14
904(e)(4), 15
‘‘(5) other appropriate basis adjustments, 16
‘‘(6) appropriate adjustments to be made, and 17
appropriate tax attributes and records to be main-18
tained, separately with respect to CFC taxable units, 19
and 20
‘‘(7) appropriate adjustments in determining 21
tested income or tested loss if property is trans-22
ferred between related parties or amounts are paid 23
or accrued between related parties.’’. 24
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(d) COORDINATIONWITHOTHERPROVISIONS.—Sec-1
tion 951A(f)(1) is amended by adding at the end the fol-2
lowing new subparagraph: 3
‘‘(C) T
REATMENT OF CERTAIN REF -4
ERENCES.—Except as otherwise provided by the 5
Secretary, references to section 951 or section 6
951(a) in sections 959, 961, 962, and such 7
other provisions as the Secretary may identify 8
shall include references to section 951A or sec-9
tion 951A(a), respectively.’’. 10
(e) R
EPEAL OFREDUCEDRATE OFTAX ONNET 11
CFC T
ESTEDINCOME AND FOREIGN-DERIVEDINTAN-12
GIBLEINCOME.— 13
(1) I
N GENERAL.—Part VIII of subchapter B 14
of chapter 1 is amended by striking section 250 (and 15
by striking the item relating to such section in the 16
table of sections of such part). 17
(2) C
ONFORMING AMENDMENTS .— 18
(A) Section 59A(c)(4)(B)(i) is amended by 19
striking ‘‘section 172, 245A, or 250’’ and in-20
serting ‘‘section 172 or 245A’’. 21
(B) Section 172(d) is amended by striking 22
paragraph (9). 23
(C) Section 246(b)(1) is amended— 24
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(i) by striking ‘‘subsection (a) and (b) 1
of section 245, and section 250’’ and in-2
serting ‘‘and subsection (a) and (b) of sec-3
tion 245’’; and 4
(ii) by striking ‘‘subsection (a) and 5
(b) of section 245, and 250’’ and inserting 6
‘‘and subsection (a) and (b) of section 7
245’’. 8
(D) Section 469(i)(3)(E)(iii) is amended 9
by striking ‘‘, 221, and 250’’ and inserting 10
‘‘and 221’’. 11
(f) R
EPEAL OFCERTAINEXCLUSIONSFROM THE 12
D
ETERMINATION OF TESTED INCOME.—Section 13
951A(c)(2)(A)(i) is amended— 14
(1) by striking subclauses (III) and (V), 15
(2) by redesignating subclause (IV) as sub-16
clause (III), 17
(3) by adding ‘‘and’’ at the end of subclause 18
(II), and 19
(4) by striking ‘‘and’’ at the end of subclause 20
(III) (as so redesignated) and inserting ‘‘over’’. 21
(g) I
NCREASE INDEEMEDPAIDCREDIT FORTAXES 22
P
ROPERLYATTRIBUTABLE TOTESTEDINCOME.— 23
(1) I
N GENERAL.—Section 960(d) is amended 24
by striking ‘‘80 percent of’’. 25
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(2) CONFORMING AMENDMENT .—Section 78 is 1
amended by striking ‘‘(determined without regard to 2
the phrase ‘‘80 percent of’’ in subsection (d)(1) 3
thereof)’’. 4
(h) R
EPEAL OFHIGHTAXEXCLUSION FORFOREIGN 5
B
ASECOMPANYINCOME ANDINSURANCEINCOME.— 6
(1) I
N GENERAL.—Section 954(b) is amended 7
by striking paragraph (4). 8
(2) C
ONFORMING AMENDMENT .—Section 9
904(d)(3)(E) is amended by striking the last sen-10
tence. 11
(i) E
LIMINATION OFCARRYBACK OFFOREIGNTAX 12
C
REDIT.— 13
(1) I
N GENERAL.—Section 904(c) is amended— 14
(A) by striking ‘‘in the first preceding tax-15
able year, and in any of the first 10 succeeding 16
taxable years, in that order’’ and inserting ‘‘in 17
any of the first 10 succeeding taxable years, in 18
order’’, 19
(B) by striking ‘‘preceding or’’ each place 20
it appears, and 21
(C) by striking ‘‘C
ARRYBACK AND’’ in the 22
heading thereof. 23
(2) A
PPLICATION TO LIMITATION ON FOREIGN 24
OIL AND GAS TAXES.—Section 907(f) is amended— 25
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(A) in paragraph (1), by striking ‘‘in the 1
first preceding taxable year and’’, 2
(B) in paragraph (2), by striking ‘‘pre-3
ceding or’’ in the matter preceding subpara-4
graph (A), 5
(C) in paragraph (3)(B)— 6
(i) by striking ‘‘in a preceding or suc-7
ceeding’’ and inserting ‘‘in a succeeding’’, 8
and 9
(ii) by striking ‘‘in such preceding or 10
succeeding’’ both places it appears and in-11
serting ‘‘in such succeeding’’, and 12
(D) in the heading, by striking 13
‘‘C
ARRYBACK AND’’. 14
(j) T
REATMENT OF FOREIGNBASECOMPANYOIL 15
R
ELATEDINCOME ASSUBPARTF INCOME.— 16
(1) I
N GENERAL.—Section 954(a) is amended 17
by striking ‘‘and’’ at the end of paragraph (2), by 18
striking the period at the end of paragraph (3) and 19
inserting ‘‘, and’’, and by adding at the end the fol-20
lowing new paragraph: 21
‘‘(4) the foreign base company oil related in-22
come for the taxable year (determined under sub-23
section (f) and reduced as provided in subsection 24
(b)(5)).’’. 25
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(2) FOREIGN BASE COMPANY OIL RELATED IN -1
COME.—Section 954 is amended by inserting after 2
subsection (e) the following new subsection: 3
‘‘(f) F
OREIGNBASECOMPANYOILRELATEDIN-4
COME.—For purposes of this section, the term ‘foreign 5
base company oil related income’ means foreign oil related 6
income (within the meaning of paragraphs (2) and (3) of 7
section 907(c)) other than income derived from a source 8
within a foreign country in connection with— 9
‘‘(1) oil or gas which was extracted from an oil 10
or gas well located in such foreign country, or 11
‘‘(2) oil, gas, or a primary product of oil or gas 12
which is sold by the foreign corporation or a related 13
person for use or consumption within such country 14
or is loaded in such country on a vessel or aircraft 15
as fuel for such vessel or aircraft. 16
Such term shall not include any foreign personal holding 17
company income (as defined in subsection (c)).’’. 18
(3) C
ONFORMING AMENDMENTS .— 19
(A) Section 952(c)(1)(B)(iii) is amended 20
by redesignating subclauses (III) and (IV) as 21
subclauses (IV) and (V), respectively, and by 22
inserting after subclause (II) the following new 23
subclause: 24
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‘‘(III) foreign base company oil 1
related income.’’. 2
(B) Section 954(b) is amended— 3
(i) by striking ‘‘and the foreign base 4
company services income’’ in paragraph 5
(5) and inserting ‘‘the foreign base com-6
pany services income, and the foreign base 7
company oil related income’’, and 8
(ii) by adding at the end the following 9
new paragraph: 10
‘‘(6) F
OREIGN BASE COMPANY OIL RELATED IN -11
COME NOT TREATED AS ANOTHER KIND OF FOREIGN 12
BASE COMPANY INCOME .—Income of a corporation 13
which is foreign base company oil related income 14
shall not be considered foreign base company income 15
of such corporation under paragraph (2) or (3) of 16
subsection (a).’’. 17
(k) E
FFECTIVEDATES.— 18
(1) I
N GENERAL.—Except as otherwise pro-19
vided in this subsection, the amendments made by 20
this section shall apply to taxable years of foreign 21
corporations beginning after December 31, 2024, 22
and to taxable years of United States shareholders 23
in which or with which such taxable years of foreign 24
corporations end. 25
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(2) REGULATORY AUTHORITY AND COORDINA -1
TION WITH OTHER PROVISIONS .—The amendments 2
made by subsections (c) and (d) shall apply to tax-3
able years of foreign corporations beginning after 4
the date of the enactment of this Act, and to taxable 5
years of United States shareholders in which or with 6
which such taxable years of foreign corporations 7
end. 8
(3) R
EPEAL OF REDUCED RATE OF TAX ; IN-9
CREASE IN DEEMED PAID CREDIT .—The amend-10
ments made by subsections (e) and (g) shall apply 11
to taxable years beginning after December 31, 2024. 12
(4) E
LIMINATION OF CARRYBACK OF FOREIGN 13
TAX CREDIT.—The amendment made by subsection 14
(i) shall apply to credits arising in taxable years be-15
ginning after December 31, 2024. 16
(l) N
OINFERENCEREGARDINGCERTAINMODIFICA-17
TIONS.—The amendments made by subsections (c) and 18
(d) shall not be construed to create any inference with re-19
spect to the proper application of any provision of the In-20
ternal Revenue Code of 1986 with respect to any taxable 21
year beginning before the taxable years to which such 22
amendments apply. 23
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SEC. 3. COUNTRY-BY-COUNTRY APPLICATION OF LIMITA-1
TION ON FOREIGN TAX CREDIT BASED ON 2
TAXABLE UNITS. 3
(a) I
NGENERAL.—Section 904 is amended by insert-4
ing after subsection (d) the following new subsection: 5
‘‘(e) C
OUNTRY-BY-COUNTRYAPPLICATIONBASED ON 6
T
AXABLEUNITS.— 7
‘‘(1) I
N GENERAL.—Subsection (d) (and the 8
provisions of this title referred to in paragraph (1) 9
of such subsection) shall be applied separately with 10
respect to each country by taking into account the 11
aggregate income properly attributable or otherwise 12
allocable to a taxable unit of the taxpayer which is 13
a tax resident of (or, in the case of a branch, is lo-14
cated in) such country. 15
‘‘(2) T
AXABLE UNITS.— 16
‘‘(A) I
N GENERAL.—Except as otherwise 17
provided by the Secretary, each item shall be 18
attributable or otherwise allocable to exactly 19
one taxable unit of the taxpayer. 20
‘‘(B) D
ETERMINATION OF TAXABLE 21
UNITS.—Except as otherwise provided by the 22
Secretary, the taxable units of a taxpayer are 23
as follows: 24
‘‘(i) G
ENERAL TAXABLE UNIT .—The 25
person that is the taxpayer and that is not 26
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otherwise described in a separate clause of 1
this subparagraph. 2
‘‘(ii) C
ERTAIN FOREIGN CORPORA -3
TIONS.—Each foreign corporation with re-4
spect to which the taxpayer is a United 5
States shareholder. 6
‘‘(iii) I
NTERESTS IN PASS -THROUGH 7
ENTITIES.—Each interest held (directly or 8
indirectly) by the taxpayer or any foreign 9
corporation referred to in clause (ii) in a 10
pass-through entity if such pass-through 11
entity is a tax resident of a country other 12
than the country with respect to which 13
such taxpayer or foreign corporation (as 14
the case may be) is a tax resident. 15
‘‘(iv) B
RANCHES.—Each branch (or 16
portion thereof) the activities of which are 17
directly or indirectly carried on by the tax-18
payer or any foreign corporation referred 19
to in clause (ii) and which give rise to a 20
taxable presence in a country other than 21
the country with respect to which such tax-22
payer or foreign corporation (as the case 23
may be) is a tax resident. 24
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‘‘(3) DEFINITIONS AND SPECIAL RULES .—For 1
purposes of this subsection— 2
‘‘(A) T
AX RESIDENT.—Except as otherwise 3
provided by the Secretary, the term ‘tax resi-4
dent’ means a person or entity subject to tax 5
under the tax law of a country as a resident. If 6
an entity is organized under the law of a coun-7
try, or resident in a country, that does not im-8
pose an income tax with respect to such enti-9
ties, such entity shall, except as provided by the 10
Secretary, be treated as subject to tax under 11
the tax law of such country for the purposes of 12
the preceding sentence. 13
‘‘(B) P
ASS-THROUGH ENTITY .—Except as 14
otherwise provided by the Secretary, the term 15
‘pass-through entity’ includes any partnership 16
or other entity to the extent that income, gain, 17
deduction, or loss of the entity is taken into ac-18
count in determining the income or loss of a 19
person that owns (directly or indirectly) an in-20
terest in such entity. 21
‘‘(C) B
RANCH.—Except as otherwise pro-22
vided by the Secretary, the term ‘branch’ means 23
a taxable presence of a tax resident in a coun-24
try other than its country of residence as deter-25
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mined under such other country’s tax law. The 1
Secretary shall provide regulations or other 2
guidance applying such term to activities in a 3
country that do not give rise to a taxable pres-4
ence. 5
‘‘(D) T
REATMENT OF FISCALLY AUTONO -6
MOUS JURISDICTIONS .—Any fiscally autono-7
mous jurisdiction shall be treated as a separate 8
country. Any possession of the United States 9
shall also be treated as a separate country. 10
‘‘(E) P
OSSESSION OF THE UNITED 11
STATES.—The term ‘possession of the United 12
States’ means each of American Samoa, the 13
Commonwealth of the Northern Mariana Is-14
lands, the Commonwealth of Puerto Rico, 15
Guam, and the Virgin Islands. 16
‘‘(4) R
EGULATIONS.—The Secretary shall issue 17
such regulations or other guidance as may be nec-18
essary or appropriate to carry out, or prevent avoid-19
ance of, the purposes of this subsection, including 20
regulations or other guidance— 21
‘‘(A) providing for the application of this 22
subsection to an entity or arrangement that is 23
considered a tax resident of more than one 24
country or of no country, 25
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‘‘(B) providing for the application of this 1
subsection to hybrid entities or hybrid trans-2
actions (as such terms are used for purposes of 3
section 267A), pass-through entities, passive 4
foreign investment companies, trusts, and other 5
entities or arrangements not otherwise de-6
scribed in this subsection, and 7
‘‘(C) providing for the assignment of any 8
item (including foreign taxes and deductions) to 9
taxable units, including in the case of amounts 10
not otherwise taken into account in determining 11
taxable income under this chapter.’’. 12
(b) T
REATMENT OF INADEQUATE SUBSTAN-13
TIATION.—Section 904(d)(4)(C)(ii) is amended by strik-14
ing ‘‘paragraph (1)(A)’’ and inserting ‘‘paragraph 15
(1)(C)’’. 16
(c) A
PPLICATION OFFOREIGNTAXCREDITLIMITA-17
TIONWITHRESPECT TOFOREIGNBRANCHES.—Section 18
904(d)(2)(J)(i) is amended— 19
(1) by striking ‘‘qualified business units (as de-20
fined in section 989(a)) in 1 or more foreign coun-21
tries’’ and inserting ‘‘foreign branches described in 22
section 904(e)(2)(B)(iv)’’, and 23
(2) by striking ‘‘a qualified business unit’’ and 24
inserting ‘‘a foreign branch’’. 25
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(d) EFFECTIVEDATE.—The amendments made by 1
this section shall apply to taxable years beginning after 2
December 31, 2024. 3
SEC. 4. LIMITATION ON DEDUCTION OF INTEREST BY DO-4
MESTIC CORPORATIONS WHICH ARE MEM-5
BERS OF AN INTERNATIONAL FINANCIAL RE-6
PORTING GROUP. 7
(a) I
NGENERAL.—Section 163 is amended by redes-8
ignating subsection (n) as subsection (p) and by inserting 9
after subsection (m) the following new subsection: 10
‘‘(n) L
IMITATION ONDEDUCTION OFINTEREST BY 11
D
OMESTICCORPORATIONS IN INTERNATIONAL FINAN-12
CIALREPORTINGGROUPS.— 13
‘‘(1) I
N GENERAL.—In the case of any domestic 14
corporation which is a member of any international 15
financial reporting group, the deduction under this 16
chapter for interest paid or accrued during the tax-17
able year shall not exceed the sum of— 18
‘‘(A) the allowable percentage of 110 per-19
cent of the excess (if any) of— 20
‘‘(i) the amount of such interest so 21
paid or accrued, over 22
‘‘(ii) the amount described in subpara-23
graph (B), plus 24
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•S 409 IS
‘‘(B) the amount of interest includible in 1
gross income of such corporation for such tax-2
able year. 3
‘‘(2) I
NTERNATIONAL FINANCIAL REPORTING 4
GROUP.— 5
‘‘(A) For purposes of this subsection, the 6
term ‘international financial reporting group’ 7
means, with respect to any reporting year, any 8
group of entities which— 9
‘‘(i) includes— 10
‘‘(I) at least one foreign corpora-11
tion engaged in a trade or business 12
within the United States, or 13
‘‘(II) at least one domestic cor-14
poration and one foreign corporation, 15
‘‘(ii) prepares consolidated financial 16
statements with respect to such year, and 17
‘‘(iii) reports in such statements aver-18
age annual gross receipts (determined in 19
the aggregate with respect to all entities 20
which are part of such group) for the 3-re-21
porting-year period ending with such re-22
porting year in excess of $100,000,000. 23
‘‘(B) R
ULES RELATING TO DETERMINA -24
TION OF AVERAGE GROSS RECEIPTS .—For pur-25
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•S 409 IS
poses of subparagraph (A)(iii), rules similar to 1
the rules of section 448(c)(3) shall apply. 2
‘‘(3) A
LLOWABLE PERCENTAGE .—For purposes 3
of this subsection— 4
‘‘(A) I
N GENERAL.—The term ‘allowable 5
percentage’ means, with respect to any domestic 6
corporation for any taxable year, the ratio (ex-7
pressed as a percentage and not greater than 8
100 percent) of— 9
‘‘(i) such corporation’s allocable share 10
of the international financial reporting 11
group’s reported net interest expense for 12
the reporting year of such group which 13
ends in or with such taxable year of such 14
corporation, over 15
‘‘(ii) such corporation’s reported net 16
interest expense for such reporting year of 17
such group. 18
‘‘(B) R
EPORTED NET INTEREST EX -19
PENSE.—The term ‘reported net interest ex-20
pense’ means— 21
‘‘(i) with respect to any international 22
financial reporting group for any reporting 23
year, the excess of— 24
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•S 409 IS
‘‘(I) the aggregate amount of in-1
terest expense reported in such 2
group’s consolidated financial state-3
ments for such taxable year, over 4
‘‘(II) the aggregate amount of in-5
terest income reported in such group’s 6
consolidated financial statements for 7
such taxable year, and 8
‘‘(ii) with respect to any domestic cor-9
poration for any reporting year, the excess 10
of— 11
‘‘(I) the amount of interest ex-12
pense of such corporation reported in 13
the books and records of the inter-14
national financial reporting group 15
which are used in preparing such 16
group’s consolidated financial state-17
ments for such taxable year, over 18
‘‘(II) the amount of interest in-19
come of such corporation reported in 20
such books and records. 21
‘‘(C) A
LLOCABLE SHARE OF REPORTED 22
NET INTEREST EXPENSE .—With respect to any 23
domestic corporation which is a member of any 24
international financial reporting group, such 25
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•S 409 IS
corporation’s allocable share of such group’s re-1
ported net interest expense for any reporting 2
year is the portion of such expense which bears 3
the same ratio to such expense as— 4
‘‘(i) the EBITDA of such corporation 5
for such reporting year, bears to 6
‘‘(ii) the EBITDA of such group for 7
such reporting year. 8
‘‘(D) EBITDA.— 9
‘‘(i) I
N GENERAL .—The term 10
‘EBITDA’ means, with respect to any re-11
porting year, earnings before interest, 12
taxes, depreciation, and amortization— 13
‘‘(I) as determined in the inter-14
national financial reporting group’s 15
consolidated financial statements for 16
such year, or 17
‘‘(II) for purposes of subpara-18
graph (A)(i), as determined in the 19
books and records of the international 20
financial reporting group which are 21
used in preparing such statements if 22
not determined in such statements. 23
‘‘(ii) T
REATMENT OF DISREGARDED 24
ENTITIES.—The EBITDA of any domestic 25
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•S 409 IS
corporation shall not fail to include the 1
EBITDA of any entity which is dis-2
regarded for purposes of this chapter. 3
‘‘(iii) T
REATMENT OF INTRA -GROUP 4
DISTRIBUTIONS.—The EBITDA of any do-5
mestic corporation shall be determined 6
without regard to any distribution received 7
by such corporation from any other mem-8
ber of the international financial reporting 9
group. 10
‘‘(E) S
PECIAL RULES FOR NON -POSITIVE 11
EBITDA.— 12
‘‘(i) N
ON-POSITIVE GROUP EBITDA .— 13
In the case of any international financial 14
reporting group the EBITDA of which is 15
zero or less, paragraph (1) shall not apply 16
to any member of such group the EBITDA 17
of which is above zero. 18
‘‘(ii) N
ON-POSITIVE ENTITY 19
EBITDA.—In the case of any group mem-20
ber the EBITDA of which is zero or less, 21
paragraph (1) shall be applied without re-22
gard to subparagraph (A) thereof. 23
‘‘(4) C
ONSOLIDATED FINANCIAL STATEMENT .— 24
For purposes of this subsection, the term ‘consoli-25
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•S 409 IS
dated financial statement’ means any consolidated 1
financial statement described in paragraph (2)(A)(ii) 2
if such statement is— 3
‘‘(A) a financial statement which is cer-4
tified as being prepared in accordance with gen-5
erally accepted accounting principles, inter-6
national financial reporting standards, or any 7
other comparable method of accounting identi-8
fied by the Secretary, and which is— 9
‘‘(i) a 10–K (or successor form), or 10
annual statement to shareholders, required 11
to be filed with the United States Securi-12
ties and Exchange Commission, 13
‘‘(ii) an audited financial statement 14
which is used for— 15
‘‘(I) credit purposes, 16
‘‘(II) reporting to shareholders, 17
partners, or other proprietors, or to 18
beneficiaries, or 19
‘‘(III) any other substantial 20
nontax purpose, 21
but only if there is no statement described 22
in clause (i), or 23
‘‘(iii) filed with any other Federal or 24
State agency for nontax purposes, but only 25
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•S 409 IS
if there is no statement described in clause 1
(i) or (ii), or 2
‘‘(B) a financial statement which— 3
‘‘(i) is used for a purpose described in 4
subclause (I), (II), or (III) of subpara-5
graph (A)(ii), or 6
‘‘(ii) filed with any regulatory or gov-7
ernmental body (whether domestic or for-8
eign) specified by the Secretary, 9
but only if there is no statement described in 10
subparagraph (A). 11
‘‘(5) R
EPORTING YEAR.—For purposes of this 12
subsection, the term ‘reporting year’ means, with re-13
spect to any international financial reporting group, 14
the year with respect to which the consolidated fi-15
nancial statements are prepared. 16
‘‘(6) A
PPLICATION TO CERTAIN ENTITIES .— 17
‘‘(A) P
ARTNERSHIPS.—Except as other-18
wise provided by the Secretary in paragraph 19
(7), this subsection and subsection (o) shall 20
apply to any partnership which is a member of 21
any international financial reporting group 22
under rules similar to the rules of section 23
163(j)(4). 24
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•S 409 IS
‘‘(B) FOREIGN CORPORATIONS ENGAGED 1
IN TRADE OR BUSINESS WITHIN THE UNITED 2
STATES.—Except as otherwise provided by the 3
Secretary in paragraph (7), any deduction for 4
interest paid or accrued by a foreign corpora-5
tion engaged in a trade or business within the 6
United States shall be limited in a manner con-7
sistent with the principles of this subsection. 8
‘‘(C) C
ONSOLIDATED GROUPS .—For pur-9
poses of this subsection, the members of any 10
group that file (or are required to file) a con-11
solidated return with respect to the tax imposed 12
by chapter 1 for a taxable year shall be treated 13
as a single corporation. 14
‘‘(7) R
EGULATIONS.—The Secretary may issue 15
such regulations or other guidance as are necessary 16
or appropriate to carry out the purposes of this sub-17
section.’’. 18
(b) C
ARRYFORWARD OF DISALLOWEDINTEREST.— 19
(1) I
N GENERAL.—Section 163 is amended by 20
inserting after subsection (n), as added by sub-21
section (a), the following new subsection: 22
‘‘(o) C
ARRYFORWARD OF CERTAINDISALLOWEDIN-23
TEREST.—The amount of any interest not allowed as a 24
deduction for any taxable year by reason of subsection 25
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•S 409 IS
(j)(1) or (n)(1) (whichever imposes the lower limitation 1
with respect to such taxable year) shall be treated as inter-2
est (and as business interest for purposes of subsection 3
(j)(1)) paid or accrued (and as interest expense reported 4
as described in clause (i)(I) or (ii)(I) of subsection 5
(n)(3)(B), as the case may be) in the succeeding taxable 6
year. Interest paid or accrued in any taxable year (deter-7
mined without regard to the preceding sentence) shall not 8
be carried past the fifth taxable year following such tax-9
able year, determined by treating interest as allowed as 10
a deduction on a first-in, first-out basis.’’. 11
(2) C
ONFORMING AMENDMENTS .— 12
(A) Section 163(j)(2) is amended to read 13
as follows: 14
‘‘(2) C
ARRYFORWARD CROSS -REFERENCE.—For 15
carryforward treatment, see subsection (o).’’. 16
(B) Section 163(j)(4)(B)(i)(I) is amended 17
by striking ‘‘paragraph (2)’’ and inserting ‘‘sub-18
section (o)’’. 19
(C) Section 381(c)(20) is amended to read 20
as follows: 21
‘‘(20) C
ARRYFORWARD OF DISALLOWED INTER -22
EST.—The carryover of disallowed interest described 23
in section 163(o) to taxable years ending after the 24
date of distribution or transfer.’’. 25
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•S 409 IS
(D) Section 382(d)(3) is amended to read 1
as follows: 2
‘‘(3) A
PPLICATION TO CARRYFORWARD OF DIS -3
ALLOWED INTEREST .—The term ‘pre-change loss’ 4
shall include any carryover of disallowed interest de-5
scribed in section 163(o) under rules similar to the 6
rules of paragraph (1).’’. 7
(c) E
FFECTIVEDATE.—The amendments made by 8
this section shall apply to taxable years beginning after 9
December 31, 2024. 10
SEC. 5. MODIFICATIONS TO RULES RELATING TO IN-11
VERTED CORPORATIONS. 12
(a) I
NGENERAL.—Subsection (b) of section 7874 is 13
amended to read as follows: 14
‘‘(b) I
NVERTEDCORPORATIONSTREATED ASDO-15
MESTICCORPORATIONS.— 16
‘‘(1) I
N GENERAL.—Notwithstanding section 17
7701(a)(4), a foreign corporation shall be treated for 18
purposes of this title as a domestic corporation if— 19
‘‘(A) such corporation would be a surro-20
gate foreign corporation if subsection (a)(2) 21
were applied by substituting ‘80 percent’ for 22
‘60 percent’, or 23
‘‘(B) such corporation is an inverted do-24
mestic corporation. 25
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•S 409 IS
‘‘(2) INVERTED DOMESTIC CORPORATION .—For 1
purposes of this subsection, a foreign corporation 2
shall be treated as an inverted domestic corporation 3
if, pursuant to a plan (or a series of related trans-4
actions)— 5
‘‘(A) the entity completes after December 6
22, 2017, the direct or indirect acquisition of— 7
‘‘(i) substantially all of the properties 8
held directly or indirectly by a domestic 9
corporation, or 10
‘‘(ii) substantially all of the assets of, 11
or substantially all of the properties consti-12
tuting a trade or business of, a domestic 13
partnership, and 14
‘‘(B) after the acquisition, either— 15
‘‘(i) more than 50 percent of the stock 16
(by vote or value) of the entity is held— 17
‘‘(I) in the case of an acquisition 18
with respect to a domestic corpora-19
tion, by former shareholders of the 20
domestic corporation by reason of 21
holding stock in the domestic corpora-22
tion, or 23
‘‘(II) in the case of an acquisition 24
with respect to a domestic partner-25
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•S 409 IS
ship, by former partners of the do-1
mestic partnership by reason of hold-2
ing a capital or profits interest in the 3
domestic partnership, or 4
‘‘(ii) the management and control of 5
the expanded affiliated group which in-6
cludes the entity occurs, directly or indi-7
rectly, primarily within the United States, 8
and such expanded affiliated group has 9
significant domestic business activities. 10
‘‘(3) E
XCEPTION FOR CORPORATIONS WITH 11
SUBSTANTIAL BUSINESS ACTIVITIES IN FOREIGN 12
COUNTRY OF ORGANIZATION .—A foreign corporation 13
described in paragraph (2) shall not be treated as an 14
inverted domestic corporation if after the acquisition 15
the expanded affiliated group which includes the en-16
tity has substantial business activities in the foreign 17
country in which or under the law of which the enti-18
ty is created or organized when compared to the 19
total business activities of such expanded affiliated 20
group. For purposes of subsection (a)(2)(B)(iii) and 21
the preceding sentence, the term ‘substantial busi-22
ness activities’ shall have the meaning given such 23
term under regulations in effect on December 22, 24
2017, except that the Secretary may issue regula-25
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•S 409 IS
tions increasing the threshold percent in any of the 1
tests under such regulations for determining if busi-2
ness activities constitute substantial business activi-3
ties for purposes of this paragraph. 4
‘‘(4) M
ANAGEMENT AND CONTROL .—For pur-5
poses of paragraph (2)(B)(ii)— 6
‘‘(A) I
N GENERAL.—The Secretary shall 7
prescribe regulations for purposes of deter-8
mining cases in which the management and 9
control of an expanded affiliated group is to be 10
treated as occurring, directly or indirectly, pri-11
marily within the United States. The regula-12
tions prescribed under the preceding sentence 13
shall apply to periods after December 22, 2017. 14
‘‘(B) E
XECUTIVE OFFICERS AND SENIOR 15
MANAGEMENT.—Such regulations shall provide 16
that the management and control of an ex-17
panded affiliated group shall be treated as oc-18
curring, directly or indirectly, primarily within 19
the United States if substantially all of the ex-20
ecutive officers and senior management of the 21
expanded affiliated group who exercise day-to- 22
day responsibility for making decisions involving 23
strategic, financial, and operational policies of 24
the expanded affiliated group are based or pri-25
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•S 409 IS
marily located within the United States. Indi-1
viduals who in fact exercise such day-to-day re-2
sponsibilities shall be treated as executive offi-3
cers and senior management regardless of their 4
title. 5
‘‘(5) S
IGNIFICANT DOMESTIC BUSINESS ACTIVI -6
TIES.—For purposes of paragraph (2)(B)(ii), an ex-7
panded affiliated group has significant domestic 8
business activities if at least 25 percent of— 9
‘‘(A) the employees of the group are based 10
in the United States, 11
‘‘(B) the employee compensation incurred 12
by the group is incurred with respect to employ-13
ees based in the United States, 14
‘‘(C) the assets of the group are located in 15
the United States, or 16
‘‘(D) the income of the group is derived in 17
the United States, 18
determined in the same manner as such determina-19
tions are made for purposes of determining substan-20
tial business activities under regulations referred to 21
in paragraph (3) as in effect on December 22, 2017, 22
but applied by treating all references in such regula-23
tions to ‘foreign country’ and ‘relevant foreign coun-24
try’ as references to ‘the United States’. The Sec-25
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•S 409 IS
retary may issue regulations decreasing the thresh-1
old percent in any of the tests under such regula-2
tions for determining if business activities constitute 3
significant domestic business activities for purposes 4
of this paragraph.’’. 5
(b) C
ONFORMINGAMENDMENTS.— 6
(1) Clause (i) of section 7874(a)(2)(B) is 7
amended by striking ‘‘after March 4, 2003,’’ and in-8
serting ‘‘after March 4, 2003, and before December 9
23, 2017,’’. 10
(2) Subsection (c) of section 7874 is amend-11
ed— 12
(A) in paragraph (2)— 13
(i) by striking ‘‘subsection 14
(a)(2)(B)(ii)’’ and inserting ‘‘subsections 15
(a)(2)(B)(ii) and (b)(2)(B)(i)’’; and 16
(ii) by inserting ‘‘or (b)(2)(A)’’ after 17
‘‘(a)(2)(B)(i)’’ in subparagraph (B); 18
(B) in paragraph (3), by inserting ‘‘or 19
(b)(2)(B)(i), as the case may be,’’ after 20
‘‘(a)(2)(B)(ii)’’; 21
(C) in paragraph (5), by striking ‘‘sub-22
section (a)(2)(B)(ii)’’ and inserting ‘‘sub-23
sections (a)(2)(B)(ii) and (b)(2)(B)(i)’’; and 24
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•S 409 IS
(D) in paragraph (6), by inserting ‘‘or in-1
verted domestic corporation, as the case may 2
be,’’ after ‘‘surrogate foreign corporation’’. 3
(c) E
FFECTIVEDATE.—The amendments made by 4
this section shall apply to taxable years ending after De-5
cember 22, 2017. 6
(d) E
XTENSION OFLIMITATION ONASSESSMENT.— 7
If the period of limitation on assessment of tax resulting 8
from the amendments made by subsection (a) expires be-9
fore the end of the 3-year period beginning on the date 10
of the enactment of this Act, such assessment (to the ex-11
tent attributable to such amendments) may, nevertheless, 12
be made before the close of such 3-year period. 13
SEC. 6. TREATMENT OF FOREIGN CORPORATIONS MAN-14
AGED AND CONTROLLED IN THE UNITED 15
STATES AS DOMESTIC CORPORATIONS. 16
(a) I
NGENERAL.—Section 7701 is amended by re-17
designating subsection (p) as subsection (q) and by insert-18
ing after subsection (o) the following new subsection: 19
‘‘(p) C
ERTAINCORPORATIONSMANAGED ANDCON-20
TROLLED IN THE UNITEDSTATESTREATED ASDOMES-21
TIC FORINCOMETAX.— 22
‘‘(1) I
N GENERAL.—Notwithstanding subsection 23
(a)(4), in the case of a corporation described in 24
paragraph (2) if— 25
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•S 409 IS
‘‘(A) the corporation would not otherwise 1
be treated as a domestic corporation for pur-2
poses of this title, but 3
‘‘(B) the management and control of the 4
corporation occurs, directly or indirectly, pri-5
marily within the United States, 6
then, solely for purposes of chapter 1 (and any other 7
provision of this title relating to chapter 1), the cor-8
poration shall be treated as a domestic corporation. 9
‘‘(2) C
ORPORATION DESCRIBED .— 10
‘‘(A) I
N GENERAL.—A corporation is de-11
scribed in this paragraph if— 12
‘‘(i) the stock of such corporation is 13
regularly traded on an established securi-14
ties market, or 15
‘‘(ii) the aggregate gross assets of 16
such corporation (or any predecessor there-17
of), including assets under management 18
for investors, whether held directly or indi-19
rectly, at any time during the taxable year 20
or any preceding taxable year is 21
$50,000,000 or more. 22
‘‘(B) G
ENERAL EXCEPTION .—A corpora-23
tion shall not be treated as described in this 24
paragraph if— 25
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•S 409 IS
‘‘(i) such corporation was treated as a 1
corporation described in this paragraph in 2
a preceding taxable year, 3
‘‘(ii) such corporation— 4
‘‘(I) is not regularly traded on an 5
established securities market, and 6
‘‘(II) has, and is reasonably ex-7
pected to continue to have, aggregate 8
gross assets (including assets under 9
management for investors, whether 10
held directly or indirectly) of less than 11
$50,000,000, and 12
‘‘(iii) the Secretary grants a waiver to 13
such corporation under this subparagraph. 14
‘‘(3) M
ANAGEMENT AND CONTROL .— 15
‘‘(A) I
N GENERAL.—The Secretary shall 16
prescribe regulations for purposes of deter-17
mining cases in which the management and 18
control of a corporation is to be treated as oc-19
curring primarily within the United States. 20
‘‘(B) E
XECUTIVE OFFICERS AND SENIOR 21
MANAGEMENT.—Such regulations shall provide 22
that— 23
‘‘(i) the management and control of a 24
corporation shall be treated as occurring 25
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•S 409 IS
primarily within the United States if sub-1
stantially all of the executive officers and 2
senior management of the corporation who 3
exercise day-to-day responsibility for mak-4
ing decisions involving strategic, financial, 5
and operational policies of the corporation 6
are located primarily within the United 7
States, and 8
‘‘(ii) individuals who are not executive 9
officers and senior management of the cor-10
poration (including individuals who are of-11
ficers or employees of other corporations in 12
the same chain of corporations as the cor-13
poration) shall be treated as executive offi-14
cers and senior management if such indi-15
viduals exercise the day-to-day responsibil-16
ities of the corporation described in clause 17
(i). 18
‘‘(C) C
ORPORATIONS PRIMARILY HOLDING 19
INVESTMENT ASSETS .—Such regulations shall 20
also provide that the management and control 21
of a corporation shall be treated as occurring 22
primarily within the United States if— 23
‘‘(i) the assets of such corporation (di-24
rectly or indirectly) consist primarily of as-25
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•S 409 IS
sets being managed on behalf of investors, 1
and 2
‘‘(ii) decisions about how to invest the 3
assets are made in the United States.’’. 4
(b) E
FFECTIVEDATE.—The amendments made by 5
this section shall apply to taxable years beginning on or 6
after the date which is 2 years after the date of the enact-7
ment of this Act, whether or not regulations are issued 8
under section 7701(p)(3) of the Internal Revenue Code 9
of 1986, as added by this section. 10
Æ
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