[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 409 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
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
February 5, 2025
Mr. Whitehouse (for himself, Mr. Durbin, Mr. Murphy, Mr. Reed, Ms.
Baldwin, Ms. Warren, Mr. Merkley, Mr. Markey, Mr. Schatz, Mr.
Fetterman, Mr. Blumenthal, Mr. Van Hollen, Mr. Gallego, Ms. Hirono, Mr.
Heinrich, Mr. Booker, Ms. Smith, and Ms. Duckworth) 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 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
pers