119-hr995

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 995 Introduced in House

    (IH) ]

<DOC>

119th CONGRESS
 1st Session
 H. R. 995

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 HOUSE OF REPRESENTATIVES

 February 5, 2025

 Mr. Doggett (for himself, Ms. Adams, Ms. Ansari, Ms. Balint, Ms. 
 Barragan, Mrs. Beatty, Mr. Bishop, Ms. Bonamici, Mr. Boyle of 
 Pennsylvania, Ms. Brown, Ms. Brownley, Ms. Budzinski, Mr. Carson, Mr. 
 Carter of Louisiana, Mr. Casar, Mr. Case, Ms. Chu, Ms. Clarke of New 
York, Mr. Cleaver, Mr. Cohen, Mr. Conaway, Ms. Crockett, Mr. Crow, Mr. 
 Davis of Illinois, Mr. Davis of North Carolina, Ms. Dean of 
 Pennsylvania, Mrs. McClain Delaney, Ms. DeLauro, Ms. DelBene, Mr. 
 Deluzio, Mr. DeSaulnier, Ms. Dexter, Mrs. Dingell, Ms. Escobar, Mr. 
Espaillat, Mr. Evans of Pennsylvania, Ms. Leger Fernandez, Mr. Foster, 
 Mrs. Foushee, Ms. Lois Frankel of Florida, Mr. Frost, Mr. Garamendi, 
Mr. Garcia of Illinois, Mr. Garcia of California, Ms. Garcia of Texas, 
 Mr. Golden of Maine, Mr. Goldman of New York, Mr. Gomez, Mr. Green of 
Texas, Mr. Grijalva, Mrs. Hayes, Mr. Horsford, Ms. Hoyle of Oregon, Mr. 
Huffman, Mr. Ivey, Mr. Jackson of Illinois, Ms. Jayapal, Mr. Johnson of 
 Georgia, Ms. Kaptur, Ms. Kelly of Illinois, Mr. Kennedy of New York, 
 Mr. Khanna, Mr. Landsman, Mr. Larson of Connecticut, Ms. Lee of 
 Pennsylvania, Mr. Lieu, Mr. Lynch, Mr. Magaziner, Mrs. McBath, Ms. 
 McBride, Ms. McCollum, Mr. McGarvey, Mr. McGovern, Mr. Meeks, Mr. 
Menendez, Ms. Meng, Mr. Mfume, Mr. Moulton, Mr. Mrvan, Mr. Nadler, Mr. 
 Neguse, Mr. Norcross, Ms. Norton, Ms. Ocasio-Cortez, Ms. Omar, Mr. 
Pallone, Ms. Perez, Ms. Pingree, Mr. Pocan, Ms. Pressley, Mrs. Ramirez, 
Mr. Raskin, Mr. Riley of New York, Ms. Ross, Mr. Ryan, Ms. Salinas, Ms. 
 Scanlon, Ms. Schakowsky, Mr. Sherman, Mr. Smith of Washington, Mr. 
Soto, Ms. Stansbury, Ms. Stevens, Mrs. Sykes, Mr. Takano, Mr. Thanedar, 
 Mr. Thompson of Mississippi, Ms. Titus, Ms. Tlaib, Ms. Tokuda, Mr. 
Tonko, Mrs. Torres of California, Mrs. Trahan, Mr. Turner of Texas, Mr. 
 Vargas, Ms. Velazquez, Ms. Wasserman Schultz, Ms. Waters, Mrs. Watson 
Coleman, Ms. Williams of Georgia, and Ms. Wilson of Florida) 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 provide for current year 
 inclusion of net CFC tested income, and for other purposes.

 Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE, ETC.

    (a) Short Title.--This Act may be cited as the ``No Tax Breaks for 
Outsourcing Act''.

    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
            (c) Table of Contents.--The table of contents of this Act is as 
follows:

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 INCOME.

    (a) Repeal of Tax-Free Deemed Return on Investments.--

    (1) In general.--

Section 951A

    (a) is amended by striking 
 ``global intangible low-taxed income'' and inserting ``net CFC 
 tested income''.

    (2) Conforming amendments.--
        (A) Section 951A is amended by striking subsections

    (b) and
            (d) .
        (B) Section 951A

    (e)

    (1) is amended by striking 
 ``subsections

    (b) ,
            (c) (1)
        (A) , and'' and inserting 
 ``subsections
            (c) (1)
        (A) and''.
            (C) Section 951A

    (f) is amended by striking ``global 
 intangible low-taxed income'' each place it appears and 
 inserting ``net CFC tested income''.
            (D) Section 960
            (d) (2)
        (A) is amended by striking 
 ``global intangible low-taxed income (as defined in 
 

section 951A

    (b) )'' and inserting ``net CFC tested 
 income (as defined in 

section 951A
            (c) )''.

    (b) Country-by-Country Application of Section Based on CFC Taxable 
Units.--

Section 951A is amended by adding at the end the following new 
subsection:
 ``

    (g) Country-by-Country Application of Section Based on CFC 
Taxable Units.--
 ``

    (1) In general.--If any CFC taxable unit of a United 
 States shareholder is a tax resident of (or, in the case of a 
 branch, is located in) 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 (or, in the 
 case of a branch, is located in)--
 ``
        (A) such shareholder's net CFC tested income for 
 purposes of subsection

    (a) shall be the sum of the 
 amounts of net CFC tested income determined separately 
 with respect to each such country, and
 ``
        (B) for purposes of determining such separate 
 amounts of net CFC tested income--
 ``
            (i) except as otherwise provided by the 
 Secretary, any reference in subsection
            (c) to a 
 controlled foreign corporation of such 
 shareholder shall be treated as reference to a 
 CFC taxable unit of such shareholder, and
 ``
            (ii) net CFC tested income and such other 
 items and amounts as the Secretary may provide, 
 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 
 country.
 ``

    (2) === Definitions. ===
-For purposes of this subsection--
 ``
        (A) CFC taxable unit.--The term `CFC taxable 
 unit' means any taxable unit described in clause
            (ii) ,
            (iii) , or
            (iv) of 

section 904

    (e)

    (2)
        (B) , determined--
 ``
            (i) by substituting `controlled foreign 
 corporation' for `foreign corporation' each 
 place it appears in such clauses, and
 ``
            (ii) without regard to the references to 
 the taxpayer in clauses
            (iii) and
            (iv) of such 
 section.
 ``
        (B) Application of other 

=== definitions. ===
-Terms used 
 in this subsection which are also used in 

section 904

    (e) shall have the same meaning as when used in 
 

section 904

    (e) .
 ``

    (3) Special rules.--For purposes of this subsection--
 ``
        (A) Application of certain rules.--Except as 
 otherwise provided by the Secretary, rules similar to 
 the rules of 

section 904

    (e) shall apply.
 ``
        (B) Allocation of net cfc tested income to 
 controlled foreign corporations.--Except as otherwise 
 provided by the Secretary, subsection

    (f)

    (2) shall be 
 applied separately with respect to each CFC taxable 
 unit.''.
            (c) Regulatory Authority.--

Section 951A, as amended by subsection

    (b) , is amended by adding at the end the following new subsection:
 ``

    (h) Regulations.--The Secretary shall issue such regulations or 
other guidance as may be necessary or appropriate to carry out, or 
prevent the avoidance of, the purposes of this section, including 
regulations or guidance which provide for--
 ``

    (1) the treatment of property if such property is 
 transferred, or held, temporarily,
 ``

    (2) the treatment of property if the avoidance of the 
 purposes of this section is a factor in the transfer or holding 
 of such property,
 ``

    (3) appropriate adjustments to the basis of stock and 
 other ownership interests, and to earnings and profits, to 
 reflect tested losses (whether or not taken into account in 
 determining net CFC tested income),
 ``

    (4) rules similar to the rules provided under the 
 regulations or guidance issued under 

section 904

    (e)

    (4) ,
 ``

    (5) other appropriate basis adjustments,
 ``

    (6) appropriate adjustments to be made, and appropriate 
 tax attributes and records to be maintained, separately with 
 respect to CFC taxable units, and
 ``

    (7) appropriate adjustments in determining tested income 
 or tested loss if property is transferred between related 
 parties or amounts are paid or accrued between related 
 parties.''.
            (d) Coordination With Other Provisions.--

Section 951A

    (f)

    (1) is 
amended by adding at the end the following new subparagraph:
 ``
            (C) Treatment of certain references.--Except as 
 otherwise provided by the Secretary, references to 
 

section 951 or 

section 951

    (a) in sections 959, 961, 
 962, and such other provisions as the Secretary may 
 identify shall include references to 

section 951A or 
 

section 951A

    (a) , respectively.''.

    (e) Repeal of Reduced Rate of Tax on Net CFC Tested Income and 
Foreign-Derived Intangible Income.--

    (1) In general.--Part VIII of subchapter B of chapter 1 is 
 amended by striking 

section 250 (and by striking the item 
 relating to such section in the table of sections of such 
 part).

    (2) Conforming amendments.--
        (A) Section 59A
            (c) (4)
        (B)
            (i) is amended by striking 
 ``

section 172, 245A, or 250'' and inserting ``

section 172 or 245A''.
        (B) Section 172
            (d) is amended by striking paragraph

    (9) .
            (C) Section 246

    (b)

    (1) is amended--
            (i) by striking ``subsection

    (a) and

    (b) of 
 

section 245, and 

section 250'' and inserting 
 ``and subsection

    (a) and

    (b) of 

section 245''; 
 and
            (ii) by striking ``subsection

    (a) and

    (b) of 

section 245, and 250'' and inserting ``and 
 subsection

    (a) and

    (b) of 

section 245''.
            (D) Section 469
            (i) (3)
        (E)
            (iii) is amended by 
 striking ``, 221, and 250'' and inserting ``and 221''.

    (f) Repeal of Certain Exclusions From the Determination of Tested 
Income.--

Section 951A
            (c) (2)
        (A)
            (i) is amended--

    (1) by striking subclauses
            (III) and
            (V) ,

    (2) by redesignating subclause
            (IV) as subclause
            (III) ,

    (3) by adding ``and'' at the end of subclause
            (II) , and

    (4) by striking ``and'' at the end of subclause
            (III) (as 
 so redesignated) and inserting ``over''.

    (g) Increase in Deemed Paid Credit for Taxes Properly Attributable 
to Tested Income.--

    (1) In general.--

Section 960
            (d) is amended by striking ``80 
 percent of''.

    (2) Conforming amendment.--

Section 78 is amended by 
 striking ``(determined without regard to the phrase ``80 
 percent of'' in subsection
            (d) (1) thereof)''.

    (h) Repeal of High Tax Exclusion for Foreign Base Company Income 
and Insurance Income.--

    (1) In general.--

Section 954

    (b) is amended by striking 
 paragraph

    (4) .

    (2) Conforming amendment.--

Section 904
            (d) (3)
        (E) is amended 
 by striking the last sentence.
            (i) Elimination of Carryback of Foreign Tax Credit.--

    (1) In general.--

Section 904
            (c) is amended--
        (A) by striking ``in the first preceding taxable 
 year and in any of the first 10 succeeding taxable 
 years, in that order'' and inserting ``in any of the 
 first 10 succeeding taxable years, in order'',
        (B) by striking ``preceding or'' each place it 
 appears, and
            (C) by striking ``Carryback and'' in the heading 
 thereof.

    (2) Application to limitation on foreign oil and gas 
 taxes.--

Section 907

    (f) is amended--
        (A) in paragraph

    (1) , by striking ``in the first 
 preceding taxable year and'',
        (B) in paragraph

    (2) , by striking ``preceding or'' 
 in the matter preceding subparagraph
        (A) ,
            (C) in paragraph

    (3)
        (B) --
            (i) by striking ``in a preceding or 
 succeeding'' and inserting ``in a succeeding'', 
 and
            (ii) by striking ``in such preceding or 
 succeeding'' both places it appears and 
 inserting ``in such succeeding'', and
            (D) in the heading, by striking ``Carryback and''.

    (j) Treatment of Foreign Base Company Oil Related Income as Subpart 
F Income.--

    (1) In general.--

Section 954

    (a) is amended by striking 
 ``and'' at the end of paragraph

    (2) , by striking the period at 
 the end of paragraph

    (3) and inserting ``, and'', and by adding 
 at the end the following new paragraph:
 ``

    (4) the foreign base company oil related income for the 
 taxable year (determined under subsection

    (f) and reduced as 
 provided in subsection

    (b)

    (5) ).''.

    (2) Foreign base company oil related income.--

Section 954 
 is amended by inserting after subsection

    (e) the following new 
 subsection:
 ``

    (f) Foreign Base Company Oil Related Income.--For purposes of 
this section, the term `foreign base company oil related income' means 
foreign oil related income (within the meaning of paragraphs

    (2) and

    (3) of 

section 907
            (c) ) other than income derived from a source within a 
foreign country in connection with--
 ``

    (1) oil or gas which was extracted from an oil or gas 
 well located in such foreign country, or
 ``

    (2) oil, gas, 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 aircraft.
Such term shall not include any foreign personal holding company income 
(as defined in subsection
            (c) ).''.

    (3) Conforming amendments.--
        (A) Section 952
            (c) (1)
        (B)
            (iii) is amended by 
 redesignating subclauses
            (III) and
            (IV) as subclauses
            (IV) and
            (V) , respectively, and by inserting after 
 subclause
            (II) the following new subclause:
 ``
            (III) foreign base company oil 
 related income.''.
        (B) Section 954

    (b) is amended--
            (i) by striking ``and the foreign base 
 company services income'' in paragraph

    (5) and 
 inserting ``the foreign base company services 
 income, and the foreign base company oil 
 related income'', and
            (ii) by adding at the end the following new 
 paragraph:
 ``

    (6) 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

    (2) or

    (3) of subsection

    (a) .''.

    (k) Effective Dates.--

    (1) In general.--Except as otherwise provided in this 
 subsection, the amendments made by this section shall apply to 
 taxable years of foreign corporations beginning after December 
 31, 2024, and to taxable years of United States shareholders in 
 which or with which such taxable years of foreign corporations 
 end.

    (2) Regulatory authority and coordination with other 
 provisions.--The amendments made by subsections
            (c) and
            (d) shall apply to taxable years of foreign corporations beginning 
 after the date of the enactment of this Act, and to taxable 
 years of United States shareholders in which or with which such 
 taxable years of foreign corporations end.

    (3) Repeal of reduced rate of tax; increase in deemed paid 
 credit.--The amendments made by subsections

    (e) and

    (g) shall 
 apply to taxable years beginning after December 31, 2024.

    (4) Elimination of carryback of foreign tax credit.--The 
 amendment made by subsection
            (i) shall apply to credits arising 
 in taxable years beginning after December 31, 2024.
            (l) No Inference Regarding Certain Modifications.--The amendments 
made by subsections
            (c) and
            (d) shall not be construed to create any 
inference with respect to the proper application of any provision of 
the Internal Revenue Code of 1986 with respect to any taxable year 
beginning before the taxable years to which such amendments apply.

SEC. 3. COUNTRY-BY-COUNTRY APPLICATION OF LIMITATION ON FOREIGN TAX 
 CREDIT BASED ON TAXABLE UNITS.

    (a) In General.--

Section 904 is amended by inserting after 
subsection
            (d) the following new subsection:
 ``

    (e) Country-by-Country Application Based on Taxable Units.--
 ``

    (1) In general.--Subsection
            (d) (and the provisions of 
 this title referred to in paragraph

    (1) of such subsection) 
 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 (or, in the case of a branch, is located 
 in) such country.
 ``

    (2) Taxable units.--
 ``
        (A) In general.--Except as otherwise provided by 
 the Secretary, each item shall be attributable or 
 otherwise allocable to exactly one taxable unit of the 
 taxpayer.
 ``
        (B) Determination of taxable units.--Except as 
 otherwise provided by the Secretary, the taxable units 
 of a taxpayer are as follows:
 ``
            (i) General taxable unit.--The person 
 that is the taxpayer and that is not otherwise 
 described in a separate clause of this 
 subparagraph.
 ``
            (ii) Certain foreign corporations.--Each 
 foreign corporation with respect to which the 
 taxpayer is a United States shareholder.
 ``
            (iii) Interests in pass-through 
 entities.--Each interest held (directly or 
 indirectly) by the taxpayer or any foreign 
 corporation referred to in clause
            (ii) 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 (as the case may be) is a 
 tax resident.
 ``
            (iv) Branches.--Each branch (or portion 
 thereof) the activities of which are directly 
 or indirectly carried on by the taxpayer or any 
 foreign corporation referred to in clause
            (ii) and which give rise to a taxable presence in a 
 country other than the country with respect to 
 which such taxpayer or foreign corporation (as 
 the case may be) is a tax resident.
 ``

    (3) Definitions and special rules.--For purposes of this 
 subsection--
 ``
        (A) Tax resident.--Except as otherwise provided 
 by the Secretary, the term `tax resident' means a 
 person or entity subject to tax under the tax law of a 
 country as a resident. If an entity is organized under 
 the law of a country, or resident in a country, that 
 does not impose an income tax with respect to such 
 entities, such entity shall, except as provided by the 
 Secretary, be treated as subject to tax under the tax 
 law of such country for the purposes of the preceding 
 sentence.
 ``
        (B) Pass-through entity.--Except as otherwise 
 provided by the Secretary, the term `pass-through 
 entity' includes any partnership or other entity to the 
 extent that income, gain, deduction, or loss of the 
 entity is taken into account in determining the income 
 or loss of a person that owns (directly or indirectly) 
 an interest in such entity.
 ``
            (C) Branch.--Except as otherwise provided by the 
 Secretary, 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 law. The Secretary shall provide regulations or 
 other guidance applying such term to activities in a 
 country that do not give rise to a taxable presence.
 ``
            (D) Treatment of fiscally autonomous 
 jurisdictions.--Any fiscally autonomous jurisdiction 
 shall be treated as a separate country. Any possession 
 of the United States shall also be treated as a 
 separate country.
 ``
        (E) Possession of the united states.--The term 
 `possession of the United States' means each of 
 American Samoa, the Commonwealth of the Northern 
 Mariana Islands, the Commonwealth of Puerto Rico, Guam, 
 and the Virgin Islands.
 ``

    (4) Regulations.--The Secretary shall issue such 
 regulations or other guidance as may be necessary or 
 appropriate to carry out, or prevent avoidance of, the purposes 
 of this subsection, including regulations or other guidance--
 ``
        (A) 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 country,
 ``
        (B) providing for the application of this 
 subsection to hybrid entities or hybrid transactions 
 (as such terms are used for purposes of 

section 267A), 
 pass-through entities, passive foreign investment 
 companies, trusts, and other entities or arrangements 
 not otherwise described in this subsection, and
 ``
            (C) providing for the assignment of any item 
 (including foreign taxes and deductions) to taxable 
 units, including in the case of amounts not otherwise 
 taken into account in determining taxable income under 
 this chapter.''.

    (b) Treatment of Inadequate Substantiation.--

Section 904
            (d) (4)
            (C) 
            (ii) is amended by striking ``paragraph

    (1)
        (A) '' and 
inserting ``paragraph

    (1)
            (C) ''.
            (c) Application of Foreign Tax Credit Limitation With Respect to 
Foreign Branches.--

Section 904
            (d) (2)
        (J)
            (i) is amended--

    (1) by striking ``qualified business units (as defined in 
 

section 989

    (a) ) in 1 or more foreign countries'' and inserting 
 ``foreign branches described in 

section 904

    (e)

    (2)
        (B)
            (iv) '', and

    (2) by striking ``a qualified business unit'' and inserting 
 ``a foreign branch''.
            (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2024.

SEC. 4. LIMITATION ON DEDUCTION OF INTEREST BY DOMESTIC CORPORATIONS 
 WHICH ARE MEMBERS OF AN INTERNATIONAL FINANCIAL REPORTING 
 GROUP.

    (a) In General.--

Section 163 is amended by redesignating subsection

    (n) as subsection

    (p) and by inserting after subsection
            (m) the 
following new subsection:
 ``

    (n) Limitation on Deduction of Interest by Domestic Corporations 
in International Financial Reporting Groups.--
 ``

    (1) In general.--In the case of any domestic corporation 
 which is a member of any international financial reporting 
 group, the deduction under this chapter for interest paid or 
 accrued during the taxable year shall not exceed the sum of--
 ``
        (A) the allowable percentage of 110 percent of 
 the excess (if any) of--
 ``
            (i) the amount of such interest so paid 
 or accrued, over
 ``
            (ii) the amount described in subparagraph
        (B) , plus
 ``
        (B) the amount of interest includible in gross 
 income of such corporation for such taxable year.
 ``

    (2) International financial reporting group.--
 ``
        (A) For purposes of this subsection, the term 
 `international financial reporting group' means, with 
 respect to any reporting year, any group of entities 
 which--
 ``
            (i) includes--
 ``
            (I) at least one foreign 
 corporation engaged in a trade or 
 business within the United States, or
 ``
            (II) at least one domestic 
 corporation and one foreign 
 corporation,
 ``
            (ii) prepares consolidated financial 
 statements with respect to such year, and
 ``
            (iii) reports in such statements average 
 annual gross receipts (determined in the 
 aggregate with respect to all entities which 
 are part of such group) for the 3-reporting-
 year period ending with such reporting year in 
 excess of $100,000,000.
 ``
        (B) Rules relating to determination of average 
 gross receipts.--For purposes of subparagraph
        (A)
            (iii) , 
 rules similar to the rules of 

section 448
            (c) (3) shall 
 apply.
 ``

    (3) Allowable percentage.--For purposes of this 
 subsection--
 ``
        (A) In general.--The term `allowable percentage' 
 means, with respect to any domestic corporation for any 
 taxable year, the ratio (expressed as a percentage and 
 not greater than 100 percent) of--
 ``
            (i) 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 corporation, over
 ``
            (ii) such corporation's reported net 
 interest expense for such reporting year of 
 such group.
 ``
        (B) Reported net interest expense.--The term 
 `reported net interest expense' means--
 ``
            (i) with respect to any international 
 financial reporting group for any reporting 
 year, the excess of--
 ``
            (I) the aggregate amount of 
 interest expense reported in such 
 group's consolidated financial 
 statements for such taxable year, over
 ``
            (II) the aggregate amount of 
 interest income reported in such 
 group's consolidated financial 
 statements for such taxable year, and
 ``
            (ii) with respect to any domestic 
 corporation for any reporting year, the excess 
 of--
 ``
            (I) 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 year, over
 ``
            (II) the amount of interest 
 income of such corporation reported in 
 such books and records.
 ``
            (C) Allocable share of reported net interest 
 expense.--With respect to any domestic corporation 
 which is a member of any international financial 
 reporting group, 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--
 ``
            (i) the EBITDA of such corporation for 
 such reporting year, bears to
 ``
            (ii) the EBITDA of such group for such 
 reporting year.
 ``
            (D) EBITDA.--
 ``
            (i) In general.--The term `EBITDA' means, 
 with respect to any reporting year, earnings 
 before interest, taxes, depreciation, and 
 amortization--
 ``
            (I) as determined in the 
 international financial reporting 
 group's consolidated financial 
 statements for such year, or
 ``
            (II) for purposes of subparagraph
        (A)
            (i) , 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 statements.
 ``
            (ii) 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 
 chapter.
 ``
            (iii) 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 group.
 ``
        (E) Special rules for non-positive ebitda.--
 ``
            (i) Non-positive group ebitda.--In the 
 case of any international financial reporting 
 group the EBITDA of which is zero or less, 
 paragraph

    (1) shall not apply to any member of 
 such group the EBITDA of which is above zero.
 ``
            (ii) Non-positive entity ebitda.--In the 
 case of any group member the EBITDA of which is 
 zero or less, paragraph

    (1) shall be applied 
 without regard to subparagraph
        (A) thereof.
 ``

    (4) Consolidated financial statement.--For purposes of 
 this subsection, the term `consolidated financial statement' 
 means any consolidated financial statement described in 
 paragraph

    (2)
        (A)
            (ii) if such statement is--
 ``
        (A) a financial statement which is certified as 
 being prepared in accordance with generally accepted 
 accounting principles, international financial 
 reporting standards, or any other comparable method of 
 accounting identified by the Secretary, and which is--
 ``
            (i) a 10-K (or successor form), or annual 
 statement to shareholders, required to be filed 
 with the United States Securities and Exchange 
 Commission,
 ``
            (ii) an audited financial statement which 
 is used for--
 ``
            (I) credit purposes,
 ``
            (II) reporting to shareholders, 
 partners, or other proprietors, or to 
 beneficiaries, or
 ``
            (III) any other substantial 
 nontax purpose,
 but only if there is no statement described in 
 clause
            (i) , or
 ``
            (iii) filed with any other Federal or 
 State agency for nontax purposes, but only if 
 there is no statement described in clause
            (i) or
            (ii) , or
 ``
        (B) a financial statement which--
 ``
            (i) is used for a purpose described in 
 subclause
            (I) ,
            (II) , or
            (III) of subparagraph
        (A)
            (ii) , or
 ``
            (ii) filed with any regulatory or 
 governmental body (whether domestic or foreign) 
 specified by the Secretary,
 but only if there is no statement described in 
 subparagraph
        (A) .
 ``

    (5) Reporting year.--For purposes of this subsection, the 
 term `reporting year' means, with respect to any international 
 financial reporting group, the year with respect to which the 
 consolidated financial statements are prepared.
 ``

    (6) Application to certain entities.--
 ``
        (A) Partnerships.--Except as otherwise provided 
 by the Secretary in paragraph

    (7) , this subsection and 
 subsection

    (o) shall apply to any partnership which is 
 a member of any international financial reporting group 
 under rules similar to the rules of 

section 163

    (j)

    (4) .
 ``
        (B) Foreign corporations engaged in trade or 
 business within the united states.--Except as otherwise 
 provided by the Secretary in paragraph

    (7) , 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 subsection.
 ``
            (C) Consolidated groups.--For purposes of this 
 subsection, the members of any group that file (or are 
 required to file) a consolidated return with respect to 
 the tax imposed by chapter 1 for a taxable year shall 
 be treated as a single corporation.
 ``

    (7) Regulations.--The Secretary may issue such 
 regulations or other guidance as are necessary or appropriate 
 to carry out the purposes of this subsection.''.

    (b) Carryforward of Disallowed Interest.--

    (1) In general.--

Section 163 is amended by inserting after 
 subsection

    (n) , as added by subsection

    (a) , the following new 
 subsection:
 ``

    (o) Carryforward of Certain Disallowed Interest.--The amount of 
any interest not allowed as a deduction for any taxable year by reason 
of subsection

    (j)

    (1) or

    (n)

    (1) (whichever imposes the lower limitation 
with respect to such taxable year) shall be treated as interest (and as 
business interest for purposes of subsection

    (j)

    (1) ) paid or accrued 
(and as interest expense reported as described in clause
            (i) 
            (I) or
            (ii) 
            (I) of subsection

    (n)

    (3)
        (B) , as the case may be) in the succeeding 
taxable year. Interest paid or accrued in any taxable year (determined 
without regard to the preceding sentence) shall not be carried past the 
fifth taxable year following such taxable year, determined by treating 
interest as allowed as a deduction on a first-in, first-out basis.''.

    (2) Conforming amendments.--
        (A) Section 163

    (j)

    (2) is amended to read as 
 follows:
 ``

    (2) Carryforward cross-reference.--For carryforward 
 treatment, see subsection

    (o) .''.
        (B) Section 163

    (j)

    (4)
        (B)
            (i) 
            (I) is amended by 
 striking ``paragraph

    (2) '' and inserting ``subsection

    (o) ''.
            (C) Section 381
            (c) (20) is amended to read as 
 follows:
 ``

    (20) Carryforward of disallowed interest.--The carryover 
 of disallowed interest described in 

section 163

    (o) to taxable 
 years ending after the date of distribution or transfer.''.
            (D) Section 382
            (d) (3) is amended to read as 
 follows:
 ``

    (3) Application to carryforward of disallowed interest.--
 The term `pre-change loss' shall include any carryover of 
 disallowed interest described in 

section 163

    (o) under rules 
 similar to the rules of paragraph

    (1) .''.
            (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2024.

SEC. 5. MODIFICATIONS TO RULES RELATING TO INVERTED CORPORATIONS.

    (a) In General.--Subsection

    (b) of 

section 7874 is amended to read 
as follows:
 ``

    (b) Inverted Corporations Treated as Domestic Corporations.--
 ``

    (1) In general.--Notwithstanding 

section 7701

    (a)

    (4) , a 
 foreign corporation shall be treated for purposes of this title 
 as a domestic corporation if--
 ``
        (A) such corporation would be a surrogate foreign 
 corporation if subsection

    (a)

    (2) were applied by 
 substituting `80 percent' for `60 percent', or
 ``
        (B) such corporation is an inverted domestic 
 corporation.
 ``

    (2) Inverted domestic corporation.--For purposes of this 
 subsection, a foreign corporation shall be treated as an 
 inverted domestic corporation if, pursuant to a plan (or a 
 series of related transactions)--
 ``
        (A) the entity completes after December 22, 2017, 
 the direct or indirect acquisition of--
 ``
            (i) substantially all of the properties 
 held directly or indirectly by a domestic 
 corporation, or
 ``
            (ii) substantially all of the assets of, 
 or substantially all of the properties 
 constituting a trade or business of, a domestic 
 partnership, and
 ``
        (B) after the acquisition, either--
 ``
            (i) more than 50 percent of the stock (by 
 vote or value) of the entity is held--
 ``
            (I) in the case of an acquisition 
 with respect to a domestic corporation, 
 by former shareholders of the domestic 
 corporation by reason of holding stock 
 in the domestic corporation, or
 ``
            (II) in the case of an 
 acquisition with respect to a domestic 
 partnership, by former partners of the 
 domestic partnership by reason of 
 holding a capital or profits interest 
 in the domestic partnership, or
 ``
            (ii) the management and control of the 
 expanded affiliated group which includes the 
 entity occurs, directly or indirectly, 
 primarily within the United States, and such 
 expanded affiliated group has significant 
 domestic business activities.
 ``

    (3) Exception for corporations with substantial business 
 activities in foreign country of organization.--A foreign 
 corporation described in paragraph

    (2) 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 group. For purposes of subsection

    (a)

    (2)
        (B)
            (iii) and 
 the preceding sentence, the term `substantial business 
 activities' shall have the meaning given such term under 
 regulations in effect on December 22, 2017, 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 paragraph.
 ``

    (4) Management and control.--For purposes of paragraph

    (2)
        (B)
            (ii) --
 ``
        (A) 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 occurring, directly or 
 indirectly, primarily within the United States. The 
 regulations prescribed under the preceding sentence 
 shall apply to periods after December 22, 2017.
 ``
        (B) Executive officers and senior management.--
 Such regulations shall provide that the management and 
 control of an expanded affiliated group shall be 
 treated as occurring, directly or indirectly, 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 
 strategic, financial, and operational policies of the 
 expanded affiliated group are based or primarily 
 located within the United States. Individuals who in 
 fact exercise such day-to-day responsibilities shall be 
 treated as executive officers and senior management 
 regardless of their title.
 ``

    (5) Significant domestic business activities.--For 
 purposes of paragraph

    (2)
        (B)
            (ii) , an expanded affiliated group 
 has significant domestic business activities if at least 25 
 percent of--
 ``
        (A) the employees of the group are based in the 
 United States,
 ``
        (B) the employee compensation incurred by the 
 group is incurred with respect to employees based in 
 the United States,
 ``
            (C) the assets of the group are located in the 
 United States, or
 ``
            (D) the income of the group is derived in the 
 United States,
 determined in the same manner as such determinations are made 
 for purposes of determining substantial business activities 
 under regulations referred to in paragraph

    (3) as in effect on 
 December 22, 2017, but applied by treating all references in 
 such regulations to `foreign country' and `relevant foreign 
 country' as references to `the United States'. 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 paragraph.''.

    (b) Conforming Amendments.--

    (1) Clause
            (i) of 

section 7874

    (a)

    (2)
        (B) is amended by 
 striking ``after March 4, 2003,'' and inserting ``after March 
 4, 2003, and before December 23, 2017,''.

    (2) Subsection
            (c) of 

section 7874 is amended--
        (A) in paragraph

    (2) --
            (i) by striking ``subsection

    (a)

    (2)
        (B)
            (ii) '' and inserting ``subsections

    (a)

    (2)
        (B)
            (ii) and

    (b)

    (2)
        (B)
            (i) ''; and
            (ii) by inserting ``or

    (b)

    (2)
        (A) '' after 
 ``

    (a)

    (2)
        (B)
            (i) '' in subparagraph
        (B) ;
        (B) in paragraph

    (3) , by inserting ``or

    (b)

    (2)
        (B)
            (i) , as the case may be,'' after 
 ``

    (a)

    (2)
        (B)
            (ii) '';
            (C) in paragraph

    (5) , by striking ``subsection

    (a)

    (2)
        (B)
            (ii) '' and inserting ``subsections

    (a)

    (2)
        (B)
            (ii) and

    (b)

    (2)
        (B)
            (i) ''; and
            (D) in paragraph

    (6) , by inserting ``or inverted 
 domestic corporation, as the case may be,'' after 
 ``surrogate foreign corporation''.
            (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 22, 2017.
            (d) Extension of Limitation on Assessment.--If the period of 
limitation on assessment of tax resulting from the amendments made by 
subsection

    (a) expires before the end of the 3-year period beginning on 
the date of the enactment of this Act, such assessment (to the extent 
attributable to such amendments) may, nevertheless, be made before the 
close of such 3-year period.

SEC. 6. TREATMENT OF FOREIGN CORPORATIONS MANAGED AND CONTROLLED IN THE 
 UNITED STATES AS DOMESTIC CORPORATIONS.

    (a) In General.--

Section 7701 is amended by redesignating 
subsection

    (p) as subsection

    (q) and by inserting after subsection

    (o) the following new subsection:
 ``

    (p) Certain Corporations Managed and Controlled in the United 
States Treated as Domestic for Income Tax.--
 ``

    (1) In general.--Notwithstanding subsection

    (a)

    (4) , in 
 the case of a corporation described in paragraph

    (2) if--
 ``
        (A) the corporation would not otherwise be 
 treated as a domestic corporation for purposes of this 
 title, but
 ``
        (B) the management and control of the corporation 
 occurs, directly or indirectly, primarily within the 
 United States,
 then, solely for purposes of chapter 1 (and any other provision 
 of this title relating to chapter 1), the corporation shall be 
 treated as a domestic corporation.
 ``

    (2) Corporation described.--
 ``
        (A) In general.--A corporation is described in 
 this paragraph if--
 ``
            (i) the stock of such corporation is 
 regularly traded on an established securities 
 market, or
 ``
            (ii) the aggregate gross assets of such 
 corporation (or any predecessor thereof), 
 including assets under management for 
 investors, whether held directly or indirectly, 
 at any time during the taxable year or any 
 preceding taxable year is $50,000,000 or more.
 ``
        (B) General exception.--A corporation shall not 
 be treated as described in this paragraph if--
 ``
            (i) such corporation was treated as a 
 corporation described in this paragraph in a 
 preceding taxable year,
 ``
            (ii) such corporation--
 ``
            (I) is not regularly traded on an 
 established securities market, and
 ``
            (II) has, and is reasonably 
 expected to continue to have, aggregate 
 gross assets (including assets under 
 management for investors, whether held 
 directly or indirectly) of less than 
 $50,000,000, and
 ``
            (iii) the Secretary grants a waiver to 
 such corporation under this subparagraph.
 ``

    (3) Management and control.--
 ``
        (A) 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 
 States.
 ``
        (B) Executive officers and senior management.--
 Such regulations shall provide that--
 ``
            (i) 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 strategic, financial, and 
 operational policies of the corporation are 
 located primarily within the United States, and
 ``
            (ii) individuals who are not executive 
 officers and senior management of the 
 corporation (including individuals who are 
 officers or employees of other corporations in 
 the same chain of corporations as the 
 corporation) shall be treated as executive 
 officers and senior management if such 
 individuals exercise the day-to-day 
 responsibilities of the corporation described 
 in clause
            (i) .
 ``
            (C) 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--
 ``
            (i) the assets of such corporation 
 (directly or indirectly) consist primarily of 
 assets being managed on behalf of investors, 
 and
 ``
            (ii) decisions about how to invest the 
 assets are made in the United States.''.

    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning on or after the date which is 2 years 
after the date of the enactment of this Act, whether or not regulations 
are issued under 

section 7701

    (p)

    (3) of the Internal Revenue Code of 
1986, as added by this section.
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