119-s1605

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 1605 Introduced in Senate

    (IS) ]

<DOC>

119th CONGRESS
 1st Session
 S. 1605

To amend the Internal Revenue Code of 1986 to modify certain provisions 
 relating to the taxation of international entities.

_______________________________________________________________________

 IN THE SENATE OF THE UNITED STATES

 May 6, 2025

 Mr. Tillis introduced the following bill; which was read twice and 
 referred to the Committee on Finance

_______________________________________________________________________

 A BILL

To amend the Internal Revenue Code of 1986 to modify certain provisions 
 relating to the taxation of international entities.

 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 ``International 
Competition for American Jobs 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.

SEC. 2. PERMANENT EXTENSION OF LOOK-THRU RULE FOR CONTROLLED FOREIGN 
 CORPORATIONS.

    (a) In General.--

Section 954
            (c) (6)
            (C) is amended by striking ``and 
before January 1, 2026,''.

    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years of foreign corporations beginning after December 31, 
2025, and to taxable years of United States shareholders with or within 
which such taxable years of foreign corporations end.

SEC. 3. MODIFICATION OF DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME 
 AND GLOBAL INTANGIBLE LOW-TAXED INCOME.

    (a) In General.--

Section 250

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

    (a) Allowance of Deduction.--In the case of a domestic 
corporation for any taxable year, there shall be allowed as a deduction 
an amount equal to the sum of--
 ``

    (1) 37.5 percent of the foreign-derived intangible income 
 of such domestic corporation for such taxable year, plus
 ``

    (2) 50 percent of--
 ``
        (A) the global intangible low-taxed income amount 
 (if any) which is included in the gross income of such 
 domestic corporation under 

section 951A for such 
 taxable year, and
 ``
        (B) the amount treated as a dividend received by 
 such corporation under 

section 78 which is attributable 
 to the amount described in subparagraph
        (A) .''.

    (b) Deduction Not To Apply Against Dividends Received Deduction 
Limitation.--

Section 246

    (b)

    (1) is amended by striking ``subsection

    (a) and

    (b) of 

section 245, and 

section 250'' the first place it appears 
and inserting ``and subsection

    (a) and

    (b) of 

section 245''.
            (c) Deduction Taken Into Account in Determining Net Operating Loss 
Deduction.--

Section 172
            (d) is amended by striking paragraph

    (9) .
            (d) Expense Apportionment Limited to Directly Related Expenses .--

Section 250

    (b)

    (3)
        (A)
            (ii) is amended to read as follows:
 ``
            (ii) expenses and deductions (including 
 taxes) directly related to such gross 
 income.''.

    (e) Deduction for Foreign-Derived Deduction Eligible Income.--

    (1) In general.--

Section 250

    (a)

    (1) , as amended by 
 subsection

    (a) , is amended by striking ``foreign-derived 
 intangible income'' and inserting ``foreign-derived deduction 
 eligible income''.

    (2) Conforming amendments.--
        (A) Section 250

    (b) , as amended by subsection
            (c) , 
 is amended--
            (i) by striking paragraphs

    (1) and

    (2) ,
            (ii) by redesignating paragraphs

    (4) and

    (5) as paragraphs

    (1) and

    (2) , respectively, 
 and by moving such paragraphs before paragraph

    (3) ,
            (iii) in paragraph

    (2)
        (B)
            (ii) , as so 
 redesignated, by striking ``paragraph

    (4)
        (B) '' 
 and inserting ``paragraph

    (1)
        (B) '', and
            (iv) by striking ``Intangible'' in the 
 heading thereof and inserting ``Deduction 
 Eligible''.
        (B)
            (i) The heading for 

section 250 is amended by 
 striking ``intangible'' in the heading thereof and 
 inserting ``deduction eligible''.
            (ii) The item relating to 

section 250 in the table 
 of sections for part VIII of subchapter B of chapter 1 
 is amended by striking ``intangible'' and inserting 
 ``deduction eligible''.

    (f) Look-Thru for Interest Payments.--

Section 250

    (b)

    (2) , as 
redesignated under subsection

    (e) , is amended by adding at the end the 
following:
 ``For purposes of this subsection, foreign-derived deduction 
 eligible income shall include interest paid by a controlled 
 foreign corporation to corporation that is a United States 
 shareholder with respect to such foreign corporation if such 
 controlled foreign corporation is related (within the meaning 
 of 

section 954
            (d) ) to such United States shareholder and such 
 interest is an amount which is described in 

section 951A
            (c) (2)
        (A)
            (ii) with respect to such controlled foreign 
 corporation. To the extent provided by the Secretary in 
 regulations, the preceding sentence shall not apply to interest 
 paid by a controlled foreign corporation to a related United 
 States shareholder if such interest is directly related to 
 interest expense of such shareholder (or another related 
 person).''.

    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2025.

SEC. 4. MODIFICATIONS TO BASE EROSION MINIMUM TAX.

    (a) Base Erosion Minimum Tax Amount Determined Without Regard to 
Credits.--

    (1) In general.--

Section 59A

    (b)

    (1)
        (B) is amended to read as 
 follows:
 ``
        (B) an amount equal to the regular tax liability 
 (as defined in 

section 26

    (b) ) of the taxpayer for the 
 taxable year.''.

    (2) Conforming amendment.--

Section 59A

    (b) is amended by 
 striking paragraph

    (4) .

    (b) Application of General Business Credit Against Beat.--The 
second sentence of 

section 38
            (c) (1) is amended by striking ``and the 
tax imposed by 

section 55'' and inserting ``, the tax imposed by 

section 55, and the tax imposed by 

section 59A''.
            (c) Elimination of Modifications for Taxable Years After 2025.--

    (1) In general.--

Section 59A

    (b) is amended by striking 
 paragraph

    (2) and redesignating paragraph

    (3) as paragraph

    (2) .

    (2) Conforming amendments.--
        (A) Section 59A

    (b)

    (1) is amended by striking 
 ``paragraphs

    (2) and

    (3) '' and inserting ``paragraph

    (2) ''.
        (B) Paragraph

    (2) of 

section 59A

    (b) , as 
 redesignated by paragraph

    (1) , is amended by striking 
 ``under paragraphs

    (1)
        (A) and

    (2)
        (A) shall each be 
 increased'' and inserting ``under paragraph

    (1)
        (A) shall be increased''.
            (C) Section 59A

    (e)

    (1)
            (C) is amended by striking 
 ``subsection

    (b)

    (3)
        (B) '' and inserting ``subsection

    (b)

    (2)
        (B) ''.
            (d) Expansion and Consolidation of Rules To Exempt Certain Payments 
From Treatment as Base Erosion Payments.--

    (1) In general.--

Section 59A is amended by redesignating 
 subsection
            (i) as subsection

    (j) and by inserting after 
 subsection

    (h) the following new subsection:
 ``
            (i) Certain Payments Not Treated as Base Erosion Payments.--
 ``

    (1) Exception for payments on which tax is imposed.--
 ``
        (A) In general.--An amount shall not be treated 
 as a base erosion payment if tax is (or was at the time 
 of payment or accrual) imposed by this chapter with 
 respect to such amount (other than by this section).
 ``
        (B) Treatment of certain deductions.--For 
 purposes of subparagraph
        (A) , tax shall be treated as 
 imposed by this chapter without regard to any deduction 
 allowed under part VIII of subchapter B.
 ``
            (C) Application of certain rules.--The amount not 
 treated as a base erosion payment by reason of this 
 paragraph shall be determined under rules similar to 
 the rules of 

section 163

    (j)

    (5) (as in effect before the 
 date of the enactment of Public Law 115-97).
 ``

    (2) Exception for certain payments subject to sufficient 
 foreign tax.--
 ``
        (A) In general.--An amount shall not be treated 
 as a base erosion payment if the taxpayer establishes 
 to the satisfaction of the Secretary that such amount 
 was made to a foreign person which is a related party 
 of the taxpayer that is subject to an effective rate of 
 foreign income tax (as defined in 

section 904
            (d) (2)
        (F) ) 
 which is not less than 18.9 percent.
 ``
        (B) Certain payments to related parties.--To the 
 extent provided by the Secretary in regulations, an 
 amount paid to a foreign person which is a related 
 party of the taxpayer shall be treated as paid to 
 another foreign person which is a related party of the 
 taxpayer if such second foreign person is subject to an 
 effective rate of foreign income tax (as defined in 
 

section 904
            (d) (2)
        (F) ) which is less than 18.9 percent, 
 to the extent the amount so paid directly or indirectly 
 funds a payment to such second foreign person.
 ``
            (C) Determination on basis of applicable 
 financial statements.--Except as otherwise provided by 
 the Secretary under subparagraph
            (D) , the effective 
 rate of foreign income tax with respect to any amount 
 may be established on the basis of applicable financial 
 statements (as defined in 

section 451

    (b)

    (3) ).
 ``
            (D) Regulations.--The Secretary shall issue such 
 regulations or other guidance as may be necessary or 
 appropriate to carry out the purposes of this 
 paragraph, including regulations or other guidance 
 providing procedures for determining the effective rate 
 of foreign income tax to which any amount is subject. 
 Such procedures may require that any transaction or 
 series of transactions among multiple parties be 
 recharacterized as one or more transactions directly 
 among any 2 or more of such parties where the Secretary 
 determines that such recharacterization is appropriate 
 to carry out, or prevent avoidance of, the purposes of 
 this section.
 ``

    (3) Exception for certain amounts with respect to 
 services.--Subsections
            (d) (1) and
            (d) (2) shall not apply to so 
 much of any amount paid or accrued by a taxpayer for services 
 as does not exceed the total services cost of such services. 
 The preceding sentence shall not apply unless such services 
 meet the requirements for eligibility for use of the services 
 cost method under 

section 482 (determined without regard to the 
 requirement that the services not contribute significantly to 
 fundamental risks of business success or failure).''.

    (2) Conforming amendment.--

Section 59A
            (d) is amended by 
 striking paragraph

    (5) .

    (e) Other Modifications.--

    (1) Section 59A

    (b)

    (3)
        (B)
            (ii) is amended by striking 
 ``registered securities dealer'' and inserting ``securities 
 dealer registered''.

    (2) Section 59A

    (h)

    (2)
        (B) is amended by striking ``

section 6038B

    (b)

    (2) '' and inserting ``

section 6038A

    (b)

    (2) ''.

    (3) Section 59A

    (j)

    (2) , as redesignated by subsection
            (c) , 
 is amended by striking ``subsection

    (g)

    (3) '' and inserting 
 ``subsection

    (h)

    (3) ''.

    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2025.

SEC. 5. MODIFICATION OF FOREIGN TAX CREDIT LIMITATION BASKETS.

    (a) Modification of Foreign Tax Credit Limitation Baskets.--

    (1) In general.--

Section 904
            (d) (1) is amended by striking 
 subparagraphs
        (A) and
        (B) and by redesignating subparagraphs
            (C) and
            (D) as subparagraphs
        (A) and
        (B) , respectively.

    (2) Conforming amendments.--
        (A) Section 904
            (d) (2)
        (A)
            (ii) is amended by striking 
 ``income described in paragraph

    (1)
        (A) , foreign branch 
 income, and''.
        (B) Section 904
            (c) is amended by striking the last 
 sentence.
            (C) 
            (i) Section 904
            (d) (2) is amended by striking 
 subparagraph
        (J) and by redesignating subparagraph
        (K) as subparagraph
        (J) .
            (ii) Section 250

    (b)

    (3)
        (A)
            (i) 
            (VI) is amended to read 
 as follows:
 ``
            (VI) the business profits of such 
 corporation which are attributable 
 (under rules established by the 
 Secretary) to 1 or more qualified 
 business units (as defined in 

section 989

    (a) ) in 1 or more foreign countries, 
 over''.
            (D) Section 904
            (d) (2)
        (J) , as redesignated by 
 subparagraph
            (C) 
            (i) , is amended by striking ``2007'' 
 each place it appears in the text and in the heading 
 and inserting ``2026''.

    (3) Transition rule.--The Secretary of the Treasury (or the 
 Secretary's delegate) shall establish rules for the application 
 of 

section 960
            (c) (2) with respect to categories of income 
 described in subparagraphs
        (A) and
        (B) of 

section 904
            (d) (2) (as 
 in effect for taxable years beginning before January 1, 2026).

    (b) Rules for Allocation of Certain Deductions to Foreign Source 
Global Intangible Low-taxed Income for Purposes of Foreign Tax Credit 
Limitation.--

Section 904

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

    (5) Deductions treated as allocable to foreign source 
 global intangible low-taxed income.--In the case of a domestic 
 corporation and solely for purposes of the application of 
 subsection

    (a) with respect to amounts includible inc gross 
 income by reason of 

section 951A (other than passive category 
 income), the taxpayer's taxable income from sources without the 
 United States shall be determined--
 ``
        (A) by allocating and apportioning any deduction 
 allowed under 

section 250

    (a)

    (2) (and any deduction 
 allowed under 

section 164

    (a)

    (3) for taxes imposed on 
 amounts described in 

section 250

    (a)

    (2) ) to such income, 
 and
 ``
        (B) by allocating and apportioning any other 
 deduction to such income only if the Secretary 
 determines that such deduction is directly allocable to 
 such income.
 Any deduction which would (but for subparagraph
        (B) ) have been 
 allocated or apportioned to such income shall only be allocated 
 or apportioned to income which is from sources within the 
 United States.''.
            (c) Effective Date.--

    (1) In general.--Except as provided in paragraph

    (2) , the 
 amendments made by this section shall apply to taxable years 
 beginning after December 31, 2025.

    (2) Modification of foreign tax credit carryback and 
 carryforward.--The amendment made by subsection

    (a)

    (2)
        (B) shall 
 apply to taxes paid or accrued in taxable years beginning after 
 December 31, 2025.

SEC. 6. RESTORATION OF LIMITATION ON DOWNWARD ATTRIBUTION OF STOCK 
 OWNERSHIP IN APPLYING CONSTRUCTIVE OWNERSHIP RULES.

    (a) In General.--

Section 958

    (b) is amended--

    (1) by inserting after paragraph

    (3) the following:
 ``

    (4) Subparagraphs
        (A) ,
        (B) , and
            (C) of 

section 318

    (a)

    (3) shall not be applied so as to consider a United States person 
 as owning stock which is owned by a person who is not a United 
 States person.'', and

    (2) by striking ``Paragraph

    (1) '' in the last sentence and 
 inserting ``Paragraphs

    (1) and

    (4) ''.

    (b) Foreign Controlled United States Shareholders.--Subpart F of 
part III of subchapter N of chapter 1 is amended by inserting after 

section 951A the following new section:

``

SEC. 951B. AMOUNTS INCLUDED IN GROSS INCOME OF FOREIGN CONTROLLED 
 UNITED STATES SHAREHOLDERS.

 ``

    (a) In General.--In the case of any foreign controlled United 
States shareholder of a foreign controlled foreign corporation--
 ``

    (1) this subpart (other than sections 951A, 951

    (b) , and 
 957) shall be applied with respect to such shareholder 
 (separately from, and in addition to, the application of this 
 subpart without regard to this section)--
 ``
        (A) by substituting `foreign controlled United 
 States shareholder' for `United States shareholder' 
 each place it appears therein, and
 ``
        (B) by substituting `foreign controlled foreign 
 corporation' for `controlled foreign corporation' each 
 place it appears therein, and
 ``

    (2) section 951A shall be applied with respect to such 
 shareholder--
 ``
        (A) by treating each reference to `United States 
 shareholder' in such section as including a reference 
 to such shareholder, and
 ``
        (B) by treating each reference to `controlled 
 foreign corporation' in such section as including a 
 reference to such foreign controlled foreign 
 corporation.
 ``

    (b) Foreign Controlled United States Shareholder.--For purposes 
of this section, the term `foreign controlled United States 
shareholder' means, with respect to any foreign corporation, any United 
States person which would be a United States shareholder with respect 
to such foreign corporation if--
 ``

    (1) section 951

    (b) were applied by substituting `more 
 than 50 percent' for `10 percent or more', and
 ``

    (2) section 958

    (b) were applied without regard to 
 paragraph

    (4) thereof.
 ``
            (c) Foreign Controlled Foreign Corporation.--For purposes of this 
section, the term `foreign controlled foreign corporation' means a 
foreign corporation, other than a controlled foreign corporation, which 
would be a controlled foreign corporation if 

section 957

    (a) were 
applied--
 ``

    (1) by substituting `foreign controlled United States 
 shareholders' for `United States shareholders', and
 ``

    (2) by substituting `

section 958

    (b) (other than paragraph

    (4) thereof)' for `

section 958

    (b) '.
 ``
            (d) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
purposes of this section, including regulations or other guidance--
 ``

    (1) to treat a foreign controlled United States 
 shareholder or a foreign controlled foreign corporation as a 
 United States shareholder or as a controlled foreign 
 corporation, respectively, for purposes of provisions of this 
 title other than this subpart, and
 ``

    (2) to prevent the avoidance of the purposes of this 
 section.''.
            (c) Clerical Amendment.--The table of sections for subpart F of 
part III of subchapter N of chapter 1 is amended by inserting after the 
item relating to 

section 951A the following new item:

``

Sec. 951B. Amounts included in gross income of foreign controlled 
 United States shareholders.''.
            (d) Effective Date.--The amendments made by this section shall 
apply to--

    (1) the last taxable year of foreign corporations beginning 
 before January 1, 2026, and each subsequent taxable year of 
 such foreign corporations, and

    (2) taxable years of United States persons in which or with 
 which such taxable years of foreign corporations end.

    (e) No Inference.--The amendments made by this section 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 taxable years beginning before the taxable years to which 
such amendments apply.

SEC. 7. CARRYOVER OF NET CFC TESTED LOSS.

    (a) In General.--

Section 951A
            (c) is amended by adding at the end 
the following new paragraph:
 ``

    (3) Carryover of net cfc tested loss.--
 ``
        (A) In general.--If the amount described in 
 paragraph

    (1)
        (B) with respect to any United States 
 shareholder for any taxable year of such United States 
 shareholder (determined after the application of this 
 paragraph with respect to amounts arising in preceding 
 taxable years) exceeds the amount described in 
 paragraph

    (1)
        (A) with respect to such shareholder of 
 such taxable year, the amount otherwise described in 
 paragraph

    (1)
        (B) with respect to such shareholder for 
 the succeeding taxable year shall be increased by the 
 amount of such excess.
 ``
        (B) Proper adjustment in allocations of global 
 intangible low-taxed income to controlled foreign 
 corporations.--Proper adjustments shall be made in the 
 application of subsection

    (f)

    (2)
        (B) to take into 
 account any decrease in global intangible low-taxed 
 income by reason of the application of subparagraph
        (A) .''.

    (b) Application of Rules With Respect to Ownership Changes.--

Section 382
            (d) is amended by adding at the end the following new 
paragraph:
 ``

    (4) Application to carryover of net cfc tested loss.--The 
 term `pre-change loss' shall include any excess carried over 
 under 

section 951A
            (c) (3) under rules similar to the rules of 
 paragraph

    (1) .''.
            (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2025, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 8. REDETERMINATION OF FOREIGN TAXES AND RELATED CLAIMS.

    (a) In General.--

Section 905
            (c) is amended--

    (1) in paragraph

    (1) , by striking ``or'' at the end of 
 subparagraph
        (B) and by inserting after subparagraph
            (C) the 
 following new subparagraphs:
 ``
            (D) the taxpayer makes a timely change in its 
 choice to claim a credit or deduction for taxes paid or 
 accrued, or
 ``
        (E) there is any other change in the amount, or 
 treatment, of taxes, which affects the taxpayer's tax 
 liability under this chapter,'',

    (2) in paragraph

    (2)
        (B)
            (i) , by inserting ``, except as 
 otherwise provided by the Secretary,'' after ``shall'', and

    (3) by striking ``Accrued'' in the heading thereof.

    (b) Modification to Time for Claiming Credit or Deduction.--

Section 901

    (a) is amended by striking the second sentence and inserting the 
following: ``Such choice for any taxable year may be made or changed at 
any time before the expiration of the applicable period prescribed by 

section 6511 for making a claim for credit or refund of an overpayment 
of the tax imposed by this chapter for such taxable year that is 
attributable to such amounts.''.
            (c) Modification to Special Period of Limitation.--

Section 6511
            (d) (3) is amended--

    (1) in subparagraph
        (A) --
        (A) by inserting ``a change in the liability for'' 
 before ``any taxes paid or accrued'',
        (B) by striking ``actually paid'' and inserting 
 ``paid (or deemed paid under 

section 960)'', and
            (C) by inserting ``change in the liability for'' 
 before ``foreign taxes'' in the heading thereof, and

    (2) in subparagraph
        (B) , by striking ``the allowance of a 
 credit for the taxes'' and inserting ``the allowance of an 
 additional credit by reason of the change in liability for the 
 taxes''.
            (d) Effective Date.--

    (1) In general.--Except as otherwise provided in this 
 subsection, the amendments made by this section shall apply to 
 taxes paid or accrued in taxable years beginning after December 
 31, 2025.

    (2) Certain changes.--The amendments made by paragraphs

    (1) and

    (3) of subsection

    (a) shall apply to changes that occur on 
 or after the date which is 60 days after the date of the 
 enactment of this Act.

    (3) Modification to special period of limitation.--The 
 amendments made by subsection
            (c) shall apply to taxes paid, 
 accrued, or deemed paid in taxable years beginning after 
 December 31, 2025.

SEC. 9. REPEAL OF FOREIGN TAX CREDIT HAIRCUT FOR GLOBAL INTANGIBLE LOW-
 TAXED INCOME.

    (a) In General.--

Section 960
            (d) (1) is amended by striking ``80 
percent of''.

    (b) Conforming Amendment.--

Section 78 is amended by striking 
``(determined without regard to the phrase `80 percent of' in 
subsection
            (d) (1) thereof)''.
            (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2025, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 10. APPLICATION OF FOREIGN-SOURCE DIVIDEND DEDUCTION TO AMOUNTS 
 RECEIVED BY CONTROLLED FOREIGN CORPORATIONS.

    (a) In General.--

Section 245A is amended by redesignating 
subsection

    (g) as subsection

    (h) and by inserting after subsection

    (f) the following new subsection:
 ``

    (g) Application to Certain Dividends Received by Controlled 
Foreign Corporations From Specified 10-Percent Owned Foreign 
Corporations.--Except as otherwise provided by the Secretary in 
regulations or other guidance, if a controlled foreign corporation with 
respect to which a domestic corporation is a United States shareholder 
receives a dividend (other than a hybrid dividend) from a specified 10-
percent owned foreign corporation with respect to which such domestic 
corporation is also a United States shareholder, the amount includible 
in the gross income of such United States shareholder under 

section 951

    (a)

    (1)
        (A) by reason of the foreign-source portion of such dividend 
shall be treated for purposes of this section in the same manner as if 
such amount were the foreign-source portion of a dividend received by 
such United States shareholder from such specified 10-percent owned 
foreign corporation.''.

    (b) Effective Date.--The amendments made by this section shall 
apply to distributions made in taxable years of foreign corporations 
beginning after December 31, 2025, and to taxable years of United 
States shareholders in which or with which such taxable years of 
foreign corporations end.
            (c) No Inference.--Nothing in the amendments made by subsection

    (a) shall be construed to create any inference with respect to the 
treatment of dividends described in 

section 245A

    (g) of the Internal 
Revenue Code of 1986 (as added by subsection

    (a) ) in taxable years 
beginning before the taxable year described in subsection

    (b) .

SEC. 11. ELIMINATION OF INCLUSION OF FOREIGN BASE COMPANY SALES INCOME 
 AND FOREIGN BASE COMPANY SERVICES INCOME.

    (a) Repeal.--Subsection

    (a) of 

section 954 is amended--

    (1) by striking ``the sum of'' and all that follows through 
 ``the foreign personal holding company income'' in paragraph

    (1) and inserting ``the foreign personal holding company 
 income'',

    (2) by striking the comma after ``subsection
            (c) and 
 reduced as provided in subsection

    (b)

    (5) )'' and inserting a 
 period, and

    (3) by striking paragraphs

    (2) and

    (3) .

    (b) Conforming Amendments.--

    (1)
        (A) Section 954
            (d) is amended to read as follows:
 ``
            (d) Related Person Defined.--For purposes of this section, a 
person is a related person with respect to a controlled foreign 
corporation, if--
 ``

    (1) such person is an individual, corporation, 
 partnership, trust, or estate which controls, or is controlled 
 by, the controlled foreign corporation, or
 ``

    (2) such person is a corporation, partnership, trust, or 
 estate which is controlled by the same person or persons which 
 control the controlled foreign corporation.
For purposes of the preceding sentence, control means, with respect to 
a corporation, the ownership, directly or indirectly, of stock 
possessing more than 50 percent of the total voting power of all 
classes of stock entitled to vote or of the total value of stock of 
such corporation. In the case of a partnership, trust, or estate, 
control means the ownership, directly or indirectly, of more than 50 
percent (by value) of the beneficial interests in such partnership, 
trust, or estate. For purposes of this subsection, rules similar to the 
rules of 

section 958 shall apply.''.
        (B) The following sections are amended by striking 
 ``954
            (d) (3) '' each place it appears and inserting ``954
            (d) '':
            (i) Section 162

    (r)

    (6)
        (B)
            (ii) .
            (ii) Section 250

    (b)

    (2)
            (D) (as redesignated by 
 

section 3).
            (iii) Section 267A

    (b)

    (2) .
            (iv) Section 904
            (d) (2)
            (I) .
            (v) Section 951A
            (c) (2)
        (A)
            (i) 
            (IV) .
            (vi) Section 953.
            (vii) Section 956
            (c) (2)
            (L) 
            (ii) 
            (II) .
            (viii) Section 958

    (b) .
            (ix) Section 971

    (f) .
            (x) Section 988

    (a)

    (3)
            (C) .
            (xi) Section 1297

    (b)

    (2) .
            (xii) Subsections
            (d) (3)
        (A) and

    (e)

    (2)
        (B)
            (i) of 
 

section 1298.
            (xiii) Section 1471

    (e)

    (2) .
            (xiv) Section 3121

    (z)

    (2) .
            (C) Section 954

    (h)

    (5)
        (E) is amended by striking 
 ``subsection
            (d) (3) '' and inserting ``subsection
            (d) ''.
            (D) Subparagraphs
        (A) and
        (B) of 

section 954
            (i) (2) are each 
 amended by striking ``subsection
            (d) (3) '' and inserting 
 ``subsection
            (d) ''.

    (2) Section 954 is amended by striking subsections

    (e) and

    (g) .
            (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2025, and to taxable years of United States shareholders with or 
within which such taxable years of foreign corporations end.

SEC. 12. CORPORATIONS EXEMPT FROM SUBPART F INCLUSION FOR INVESTMENT IN 
 UNITED STATES PROPERTY.

    (a) In General.--

Section 956

    (a) is amended by inserting ``(other 
than a corporation)'' after ``United States shareholder'' in the matter 
preceding paragraph

    (1) .

    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years of controlled foreign corporations ending after 
December 31, 2025, and to taxable years of United States shareholders 
with or within which such taxable years of controlled foreign 
corporations end.

SEC. 13. OTHER MODIFICATIONS RELATING TO FOREIGN TAX CREDIT.

    (a) Creditable Taxes.--

Section 901 is amended by redesignating 
subsection

    (n) as subsection

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

    (n) Determination of Income Taxes.--For purposes of this section, 
a foreign tax shall be treated as an income tax if the predominant 
character of the tax is an income tax. The determinations made under 
the preceding sentence and under 

section 903 shall be made without 
regard to whether the income or other base of the tax bears a nexus to 
the jurisdiction imposing the tax.''.

    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2025.

SEC. 14. SPECIAL RULES FOR TRANSFERS OF INTANGIBLE PROPERTY FROM 
 CONTROLLED FOREIGN CORPORATIONS TO UNITED STATES 
 SHAREHOLDERS.

    (a) In General.--Subpart F of part III of subchapter N of chapter 1 
is amended by adding at the end the following new section:

``

SEC. 966. TRANSFERS OF INTANGIBLE PROPERTY TO UNITED STATES 
 SHAREHOLDERS.

 ``

    (a) In General.--In the case of any distribution of intangible 
property which is held by a controlled foreign corporation on the date 
of enactment of this section and which is described in subsection

    (b) --
 ``

    (1) for purposes of part I of subchapter C and any other 
 provision of this title specified by the Secretary, the fair 
 market value of such property on the date of such distribution 
 shall be treated as not exceeding the adjusted basis of such 
 property immediately before such distribution, and
 ``

    (2) if the distribution is not a dividend--
 ``
        (A) the United States shareholder's adjusted 
 basis in the stock of the controlled foreign 
 corporation with respect to which such distribution is 
 made shall be increased by the amount (if any) of such 
 distribution which would (but for this subsection) be 
 includible in gross income, and
 ``
        (B) the adjusted basis of such property in the 
 hands of such United States shareholder immediately 
 after such distribution shall be such adjusted basis 
 immediately before such distribution reduced by the 
 amount of the increase described in subparagraph
        (A) .
 ``

    (b) Distribution.--A distribution is described in this section if 
the distribution is--
 ``

    (1) received by a domestic corporation from a controlled 
 foreign corporation with respect to which such corporation is a 
 United States shareholder, and
 ``

    (2) made by the controlled foreign corporation before the 
 last day of the third taxable year of the controlled foreign 
 corporation beginning after December 31, 2025.
 ``
            (c) Intangible Property.--For purposes of this subsection, the 
term `intangible property' has the meaning given such term by 

section 367
            (d) (4) or which is computer software described in 

section 197

    (e)

    (3)
        (B) .''.

    (b) Conforming Amendments.--

    (1) Section 197

    (f)

    (2)
        (B)
            (i) is amended by inserting 
 ``966

    (a) ,'' after ``731,''.

    (2) The table of sections for subpart F of part III of 
 subchapter N of chapter 1 is amended by adding at the end the 
 following new item:

``

Sec. 966. Transfers of intangible property to United States 
 shareholders.''.
            (c) Effective Date.--The amendments made by this section shall 
apply to distributions made in taxable years of foreign corporations 
beginning after December 31, 2025, and to taxable years of United 
States shareholders in which or with which such taxable years of 
foreign corporations end.

SEC. 15. GLOBAL INTANGIBLE LOW-TAXED INCOME DETERMINED WITHOUT REGARD 
 TO CERTAIN INCOME DERIVED FROM SERVICES PERFORMED IN THE 
 VIRGIN ISLANDS.

    (a) In General.--

Section 951A
            (c) (2)
        (A)
            (i) is amended by striking 
``and'' at the end of subclause
            (IV) , by striking the period at the end 
of subclause
            (V) and inserting ``, and'', and by adding at the end the 
following new subclause:
 ``
            (VI) in the case of any specified 
 United States shareholder, any 
 qualified Virgin Islands services 
 income.''.

    (b) Definitions and Special Rules.--

Section 951A
            (c) (2) is amended 
by adding at the end the following new subparagraph:
 ``
            (C) Provisions related to qualified virgin 
 islands services income.--For purposes of subparagraph
        (A)
            (i) 
            (VI) --
 ``
            (i) Qualified virgin islands services 
 income.--The term `qualified Virgin Islands 
 services income' means any gross income which 
 satisfies all of the following requirements:
 ``
            (I) Such gross income is 
 compensation for labor or personal 
 services (within the meaning of 

section 862

    (a)

    (3) ) performed in the Virgin 
 Islands by a corporation formed under 
 the laws of the Virgin Islands.
 ``
            (II) Such gross income is 
 attributable to services performed from 
 within the Virgin Islands by 
 individuals for the benefit of such 
 corporation.
 ``
            (III) Such gross income is 
 effectively connected with the conduct 
 of a trade or business within the 
 Virgin Islands.
 ``
            (ii) Specified united states 
 shareholder.--The term `specified United States 
 shareholder' means any United States 
 shareholder which is--
 ``
            (I) an individual, trust, or 
 estate, or
 ``
            (II) a closely held C corporation 
 (as defined in 

section 469

    (j)

    (1) ) if 
 such corporation acquired its direct or 
 indirect equity interest in the foreign 
 corporation which derived the qualified 
 Virgin Islands services income before 
 December 31, 2023.
 ``
            (iii) Regulations.--The Secretary shall 
 prescribe such regulations or other guidance as 
 may be necessary or appropriate to carry out 
 this subparagraph and subparagraph
        (A)
            (i) 
            (VI) , 
 including regulations or other guidance to 
 prevent the abuse of such subparagraphs.''.
            (c) Effective Date.--The amendments made by this section 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 with or within which such taxable years of foreign 
corporations end.
 <all>