[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 corpor