Infrastructure and Global Tax Competitiveness Act of 2014 - Amends the Internal Revenue Code, with respect to the taxation of earnings and profits of a deferred foreign income corporation, to: (1) make such earnings and profit subject to taxation in the last taxable year prior to January 1, 2015, (2) reduce the rate of tax on such earnings and profits by allowing an exemption of 75%, and (3) allow such corporations to elect to pay such tax in eight installments.
Establishes the American Infrastructure Fund to provide assistance to states, local governments, and other public and private entities for investment in public infrastructure projects.
Appropriates tax revenues from this Act to the Highway Trust Fund.
Establishes the Highway Trust Fund Solvency Commission to propose recommendations and legislation for achieving long-term solvency of the Highway Trust Fund.
Establishes an 18-month deadline for the enactment of legislation that reforms the international tax system by eliminating the incentive to hold earnings in low-tax jurisdictions.
Sets forth provisions for the reform of the international tax system (to be effective if reform legislation is not enacted by the 18-month deadline established by this Act), including provisions relating to subpart F income and insurance income, gains and losses from the sale or exchange of stock in controlled foreign corporations, limitations on the foreign tax credit, and the tax treatment of previously deferred foreign income.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5857 Introduced in House (IH)]
113th CONGRESS
2d Session
H. R. 5857
To eliminate the incentive for corporations to continue to hold
accumulated earnings offshore, to invest in domestic infrastructure, to
provide for international tax reform, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
December 11, 2014
Mr. Delaney introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on
Transportation and Infrastructure, for a period to be subsequently
determined by the Speaker, in each case for consideration of such
provisions as fall within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To eliminate the incentive for corporations to continue to hold
accumulated earnings offshore, to invest in domestic infrastructure, to
provide for international tax reform, 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 ``Infrastructure and
Global Tax Competitiveness Act of 2014''.
(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 for this Act is as
follows:
Sec. 1. Short title; etc.
TITLE I--DEEMED REPATRIATION AND INVESTMENT IN DOMESTIC INFRASTRUCTURE
Sec. 101. Elimination of incentive for corporations to continue to hold
accumulated earnings offshore.
Sec. 102. American Infrastructure Fund.
Sec. 103. Dedication of remaining revenues to highway trust fund.
Sec. 104. Highway Trust Fund Solvency Commission.
TITLE II--DEADLINE FOR INTERNATIONAL TAX REFORM
Sec. 201. 18-month deadline for international tax reform.
TITLE III--FALLBACK INTERNATIONAL TAX REFORM
Sec. 300. General effective date of title.
Subtitle A--Reform of Taxation of Income Earned by Controlled Foreign
Corporations
Part I--General Provisions
Sec. 301. Modifications to subpart F income.
Part II--Foreign Tax Credit Limitations
Sec. 311. Reform of foreign tax credit limitation.
Sec. 312. Denial of credit and deduction for foreign taxes with respect
to excluded subpart F income.
Part III--Expense Disallowance
Sec. 321. Disallowance of deduction for expenses allocable to exempt
income of a controlled foreign corporation.
Part IV--Other Provisions Relating to Subpart F
subpart a--previously deferred foreign income
Sec. 331. Treatment of previously deferred foreign income.
subpart b--other provisions
Sec. 336. Elimination of 30-day requirement.
Sec. 337. Modification of definition of United States shareholder.
Subtitle B--Reform of Foreign Tax Credit Provisions
Sec. 341. Repeal of section 902 indirect foreign tax credits; foreign
tax credit related to subpart F income.
Sec. 342. Repeal of rule suspending foreign taxes and credits until
related income is taken into account.
TITLE I--DEEMED REPATRIATION AND INVESTMENT IN DOMESTIC INFRASTRUCTURE
SEC. 101. ELIMINATION OF INCENTIVE FOR CORPORATIONS TO CONTINUE TO HOLD
ACCUMULATED EARNINGS OFFSHORE.
(a) In General.--Section 965 is amended to read as follows:
``SEC. 965. ELIMINATION OF INCENTIVE TO HOLD ACCUMULATED EARNINGS AND
PROFITS OFFSHORE.
``(a) Treatment of Deferred Foreign Income as Subpart F Income.--In
the case of the last taxable year of a deferred foreign income
corporation which begins before January 1, 2015, the subpart F income
of such foreign corporation (as otherwise determined for such taxable
year under section 952) shall be increased by the accumulated post-1986
deferred foreign income of such corporation determined as of the close
of such taxable year.
``(b) Reduction in Amounts Included in Gross Income of United
States Shareholders of Specified Foreign Corporations With Deficits in
Earnings and Profits.--
``(1) In general.--In the case of a taxpayer which is a
United States shareholder with respect to at least one deferred
foreign income corporation and at least one E&P deficit foreign
corporation, the amount which would (but for this subsection)
be taken into account under section 951(a)(1) by reason of
subsection (a) as such United States shareholder's pro rata
share of the subpart F income of each deferred foreign income
corporation shall be reduced (but not below zero) by the amount
of such United States shareholder's aggregate foreign E&P
deficit which is allocated under paragraph (2) to such deferred
foreign income corporation.
``(2) Allocation of aggregate foreign e&p deficit.--The
aggregate foreign E&P deficit of any United States shareholder
shall be allocated among the deferred foreign income
corporations of such United States shareholder in an amount
which bears the same proportion to such aggregate as--
``(A) such United States shareholder's pro rata
share of the accumulated post-1986 deferred foreign
income of each such deferred foreign income
corporation, bears to
``(B) the aggregate of such United States
shareholder's pro rata share of the accumulated post-
1986 deferred foreign income of all deferred foreign
income corporations of such United States shareholder.
``(3) Definitions related to e&p deficits.--For purposes of
this subsection--
``(A) Aggregate foreign e&p deficit.--The term
`aggregate foreign E&P deficit' means, with respect to
any United States shareholder, the aggregate of such
shareholder's pro rata shares of the specified E&P
deficits of the E&P deficit foreign corporations of
such shareholder.
``(B) E&P deficit foreign corporation.--The term
`E&P deficit foreign corporation' means, with respect
to any taxpayer, any specified foreign corporation with
respect to which such taxpayer is a United States
shareholder, if--
``(i) such specified foreign corporation
has a deficit in post-1986 earnings and
profits, and
``(ii) as of the date of the introduction
of Infrastructure and Global Tax
Competitiveness Act of 2014--
``(I) such corporation was a
specified foreign corporation, and
``(II) such taxpayer was a United
States shareholder of such corporation.
``(C) Specified e&p deficit.--The term `specified
E&P deficit' means, with respect to any E&P deficit
foreign corporation, the amount of the deficit referred
to in subparagraph (B).
``(c) Deduction for Portion of Included Income.--In the case of a
United States shareholder of a deferred foreign income corporation,
there shall be allowed as a deduction for the taxable year in which an
amount is included in the gross income of such United States
shareholder under section 951(a)(1) by reason of this section an amount
equal to 75 percent of the amount so included in gross income.
``(d) Deferred Foreign Income Corporation; Accumulated Post-1986
Deferred Foreign Income.--For purposes of this section--
``(1) Deferred foreign income corporation.--The term
`deferred foreign income corporation' means, with respect to
any United States shareholder, any specified foreign
corporation of such United States shareholder which has
accumulated post-1986 deferred foreign income (as of the close
of the taxable year referred to in subsection (a)) greater than
zero.
``(2) Accumulated post-1986 deferred foreign income.--The
term `accumulated post-1986 deferred foreign income' means the
post-1986 earnings and profits except to the extent such
earnings--
``(A) are attributable to income of the specified
foreign corporation which is effectively connected with
the conduct of a trade or business within the United
States and subject to tax under this chapter,
``(B) if distributed, would--
``(i) in the case of a controlled foreign
corporation, be excluded from the gross income
of a United States shareholder under section
959, or
``(ii) in the case of any passive foreign
investment company (as defined in section 1297)
other than a controlled foreign corporation, be
treated as a distribution which is not a
dividend, or
``(C) in the case of any passive foreign investment
company (as so defined), is properly attributable to an
unreversed inclusion of a United States person under
section 1296.
To the extent provided in regulations or other guidance
prescribed by the Secretary, in the case of any controlled
foreign corporation which has shareholders which are not United
States shareholders, accumulated post-1986 deferred foreign
income shall be appropriately reduced by amounts which would be
described in subparagraph (B)(i) if such shareholders were
United States shareholders. Such regulations or other guidance
may provide a similar rule for purposes of subparagraph (B)(ii)
and (C).
``(3) Post-1986 earnings and profits.--The term `post-1986
earnings and profits' means the earnings and profits of the
foreign corporation (computed in accordance with sections
964(a) and 986) accumulated in taxable years beginning after
December 31, 1986, and determined--
``(A) as of the close the taxable year referred to
in subsection (a), and
``(B) without diminution by reason of dividends
distributed during such taxable year.
``(e) Specified Foreign Corporation.--
``(1) In general.--For purposes of this section, the term
`specified foreign corporation' means--
``(A) any controlled foreign corporation, and
``(B) any section 902 corporation (as defined in
section 909(d)(5)).
``(2) Application to section 902 corporations.--For
purposes of section 951, a section 902 corporation (as so
defined) shall be treated as a controlled foreign corporation
solely for purposes of taking into account the subpart F income
of such corporation under subsection (a) (and for purposes of
applying subsection (f)).
``(f) Determinations of Pro Rata Share.--For purposes of this
section, the determination of any United States shareholder's pro rata
share of any amount with respect to any specified foreign corporation
shall be determined under rules similar to the rules of section
951(a)(2) by treating such amount in the same manner as subpart F
income (and by treating such specified foreign corporation as a
controlled foreign corporation).
``(g) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section
901 for the applicable percentage of any taxes paid or accrued
(or treated as paid or accrued) with respect to any amount for
which a deduction is allowed under this section.
``(2) Applicable percentage.--For purposes of this
subsection, the term `applicable percentage' means the
percentage specified in subsection (c).
``(3) Denial of deduction.--No deduction shall be allowed
under this chapter for any tax for which credit is not
allowable under section 901 by reason of paragraph (1)
(determined by treating the taxpayer as having elected the
benefits of subpart A of part III of subchapter N).
``(4) Coordination with section 78.--Section 78 shall not
apply to any tax for which credit is not allowable under
section 901 by reason of paragraph (1).
``(h) Election To Pay Liability in Installments.--
``(1) In general.--In the case of a United States
shareholder of a deferred foreign income corporation, such
United States shareholder may elect to pay the net tax
liability under this section in 8 installments of the following
amounts:
``(A) 8 percent of the net tax liability in the
case of each of the first 5 of such installments,
``(B) 15 percent of the net tax liability in the
case of the 6th such installment,
``(C) 20 percent of the net tax liability in the
case of the 7th such installment, and
``(D) 25 percent of the net tax liability in the
case of the 8th such installment.
``(2) Date for payment of installments.--If an election is
made under paragraph (1), the first installment shall be paid
on the due date (determined without regard to any extension of
time for filing the return) for the return of tax for the
taxable year described in subsection (b) and each succeeding
installment shall be paid on the due date (as so determined)
for the return of tax for the taxable year following the
taxable year with respect to which the preceding installment
was made.
``(3) Acceleration of payment.--If there is an addition to
tax for failure to pay timely assessed with respect to any
installment required under this subsection, a liquidation or
sale of substantially all the assets of the taxpayer (including
in a title 11 or similar case), a cessation of business by the
taxpayer, or any similar circumstance, then the unpaid portion
of all remaining installments shall be due on the date of such
event (or in the case of a title 11 or similar case, the day
before the petition is filed). The preceding sentence shall not
apply to the sale of substantially all the assets of a taxpayer
to a buyer if such buyer enters into an agreement with the
Secretary under which such buyer is liable for the remaining
installments due under this subsection in the same manner as if
such buyer were the taxpayer.
``(4) Proration of deficiency to installments.--If an
election is made under paragraph (1) to pay the net tax
liability under this section in installments and a deficiency
has been assessed with respect to such net tax liability, the
deficiency shall be prorated to the installments payable under
paragraph (1). The part of the deficiency so prorated to any
installment the date for payment of which has not arrived shall
be collected at the same time as, and as a part of, such
installment. The part of the deficiency so prorated to any
installment the date for payment of which has arrived shall be
paid upon notice and demand from the Secretary. This subsection
shall not apply if the deficiency is due to negligence, to
intentional disregard of rules and regulations, or to fraud
with intent to evade tax.
``(5) Election.--Any election under paragraph (1) shall be
made not later than the due date for the return of tax for the
taxable year described in subsection (a) and shall be made in
such manner as the Secretary may provide.
``(6) Net tax liability under this section.--For purposes
of this subsection--
``(A) In general.--The net tax liability under this
section with respect to any United States shareholder
is the excess (if any) of--
``(i) such taxpayer's net income tax for
the taxable year described in subsection (a),
over
``(ii) such taxpayer's net income tax for
such taxable year determined without regard to
this section.
``(B) Net income tax.--The term `net income tax'
means the regular tax liability reduced by the credits
allowed under subparts A, B, and D of part IV of
subchapter A.
``(i) Inclusion of Deferred Foreign Income Under This Section Not
To Trigger Recapture of Overall Foreign Loss.--For purposes of section
904(f)(1), in the case of a United States shareholder of a deferred
foreign income corporation, such United States shareholder's taxable
income from sources without the United States shall be determined
without regard to this section.
``(j) Regulations.--The Secretary may prescribe such regulations or
other guidance as may be necessary or appropriate to carry out the
provisions of this section.''.
(b) Clerical Amendment.--The table of sections for subpart F of
part III of subchapter N of chapter 1 of such Code is amended by
striking the item relating to section 965 and inserting the following:
``Sec. 965. Elimination of incentive to hold accumulated earnings and
profits offshore.''.
SEC. 102. AMERICAN INFRASTRUCTURE FUND.
(a) American Infrastructure Fund.--
(1) In general.--There is established a wholly owned
Government corporation--
(A) which shall be called the American
Infrastructure Fund (referred to in this Act as the
``AIF'');
(B) which shall be headed by the Board of Trustees
established under subsection (b);
(C) which may have separate subaccounts or
subsidiaries for funds used to make loans, bond
guarantees, and equity investments under this section;
(D) which shall be available to the AIF to pay for
the costs of carrying out this section, including the
compensation of the Board and other employees of the
AIF; and
(E) the funds of which may be invested by the Board
in such manner as the Board determines appropriate.
(2) Deposits to aif.--All funds received from bond
issuances, loan payments, bond guarantee fees, and any other
funds received in carrying out this section shall be held by
AIF.
(3) Limitations.--The charter of the AIF shall limit its
activities to those activities described as the mission of the
Board under subsection (b)(2).
(4) Oversight.--The AIF shall register with the Securities
and Exchange Commission and the Chairman shall report to
Congress annually as to whether the AIF is fulfilling the
mission of the Board under subsection (b)(2).
(5) Treatment of aif.--
(A) Accounts.--Title 31, United States Code, is
amended in each of sections 9107(c)(3) and 9108(d)(2)--
(i) by inserting ``the American
Infrastructure Fund,'' after ``the Regional
Banks for Cooperatives,''; and
(ii) by striking ``those banks'' and
inserting ``those entities''.
(B) Bonds.--Section 149(b)(3)(A)(i) is amended by
inserting ``American Infrastructure Fund,'' after
``Federal Home Loan Mortgage Corporation,''.
(b) Board of Trustees.--
(1) In general.--There is established a Board of Trustees
of the AIF (referred to in this subsection as the ``Board''),
which shall be composed of 9 members who--
(A) have substantial experience in bond guarantees
or municipal credit; and
(B) to the greatest extent practicable, have
extensive experience working with municipal credit,
risk management, and infrastructure finance.
(2) Mission.--The mission of the Board is--
(A) to operate the AIF and its subsidiaries to be a
low cost provider of bond guarantees, loans, and equity
investments to State and local governments and
infrastructure providers for urban and rural
infrastructure projects that--
(i) provide a positive economic impact; and
(ii) meet such other standards as the Board
may develop;
(B) to operate the AIF in a self-sustaining manner;
(C) to not have a profit motive, but to seek at all
times to pursue its mission of providing low cost bond
guarantees and loans while--
(i) covering its costs;
(ii) maintaining such reserves as may be
needed; and
(iii) applying prudent underwriting
standards;
(D) to only consider projects put forth by State
and local governments and not to seek projects
directly; and
(E) to engage in no other activities other than
those permitted under this section.
(3) Membership.--
(A) Initial members.--
(i) Appointment.--Not later than 150 days
after the date of the enactment of this Act,
the President shall appoint, with the advice
and consent of the Senate, as members of the
Board--
(I) 2 individuals from a list of at
least 5 individuals selected by the
Speaker of the House of
Representatives;
(II) 2 individuals from a list of
at least 5 individuals selected by the
Minority Leader of the House of
Representatives;
(III) 2 individuals from a list of
at least 5 individuals selected by the
Majority Leader of the Senate;
(IV) 2 individuals from a list of
at least 5 individuals selected by the
Minority Leader of the Senate; and
(V) 1 individual selected at will
by the President.
(ii) Submission of lists.--Each of the
lists described in clause (i) shall be
submitted to the President not later than 90
days after the date of the enactment of this
Act. If any of such lists are submitted after
the date required under this clause, the
President may appoint the 2 members of the
Board who were to be selected from such list at
will.
(B) Staggered terms.--The members of the Board
appointed pursuant to subparagraph (A)(i) shall serve
staggered terms, with 2 each of the initial members of
the Board serving for terms of 5, 6, 7, and 8 years,
respectively, and the initial Chair selected under
subparagraph (D) serving for 9 years. The decision of
which Board members, other than the Chair, serve for
which initial terms shall be made by the members of the
Board drawing lots.
(C) Additional members.--
(i) In general.--Except as provided in
subparagraph (A), if the term of a member of
the Board expires or otherwise becomes vacant,
the President shall appoint a replacement for
such member, with the advice and consent of the
Senate, from among a list of at least 5
individuals submitted by the Board.
(ii) Term of service.--
(I) In general.--Each member of the
Board appointed to replace a member
whose term is expiring shall serve for
a 7-year term.
(II) Vacancies.--Any member of the
Board appointed to fill a vacancy
occurring before the expiration of the
term to which that member's predecessor
was appointed shall be appointed only
for the remainder of the term.
(D) Chair.--The members of the Board shall choose 1
member to serve as the Chair of the Board for a term of
7 years, except that the initial Chair shall serve for
a term of 9 years, pursuant to subsection (B).
(E) Continuation of service.--Each member of the
Board may continue to serve after the expiration of the
term of office to which that member was appointed until
a successor has been appointed.
(F) Conflicts of interest.--No member of the Board
may have a financial interest in, or be employed by, a
Qualified Infrastructure Project (``QIP'') related to
assistance provided under this section. Owning
municipal credit of any State or local government or
owning the securities of a diversified company that
engages in infrastructure activities, provided those
activities constitute less than 20 percent of the
company's revenues, or investing in broadly held
investment funds shall not be deemed to create a
conflict of interest. The Board may issue regulations
to define terms used under this subparagraph.
(4) Compensation.--The members of the Board shall be
compensated at an amount to be set by the Board, but under no
circumstances may such compensation be higher than the rate
prescribed for level IV of the Executive Schedule under section
5315 of title 5, United States Code.
(5) Staff.--The Board shall employ and set compensation for
such staff as the Board determines as is necessary to carry out
the activities and mission of the AIF, and such staff may be
paid without regard to the provisions of chapter 51 and
subchapter III of chapter 53, United States Code, relating to
classification and General Schedule pay rates.
(6) Procedures.--The Board shall establish such procedures
as are necessary to carry out this section.
(7) Corporate governance standards.--
(A) Board committees generally.--The Board shall
maintain all of the committees required to be
maintained by the board of directors of an issuer
listed on the New York Stock Exchange as of the date of
the enactment of this section.
(B) Risk management committee.--The Board shall
maintain a risk management committee, which shall--
(i) employ additional staff who are
certified by the Board as having significant
and relevant experience in insurance
underwriting and credit risk management; and
(ii) establish the risk management policies
used by the Board.
(C) Standards.--The Board shall, to the extent
practicable, follow all standards with respect to
corporate governance that are required to be followed
by the board of directors of an issuer listed on the
New York Stock Exchange as of the date of the enactment
of this section.
(8) Biennial reports.--Not less frequently than once every
2 years, the Board shall produce a report that describes, of
the materials, goods, and products that were used to construct,
or to support the construction of, qualified infrastructure
projects (as described in subsection (c)) and received
financing from the American Infrastructure Fund within the most
recent 2 calendar years, the percentage of such materials,
goods, and products that were created, sourced, or manufactured
in the United States.
(c) Infrastructure Investment.--
(1) Entities eligible for assistance.--The AIF may provide
assistance to State and local government entities, nonprofit
infrastructure providers, private parties, and public-private
partnerships (referred to in this section as ``eligible
entities'') to help finance qualified infrastructure projects
(referred to in this subsection as ``QIPs'').
(2) Forms of assistance.--The AIF may--
(A) provide bond guarantees to debt issued by
eligible entities;
(B) make loans, including subordinated loans, to
eligible entities; and
(C) make equity investments in QIPs.
(3) Qualified infrastructure projects.--A project qualifies
as a QIP under this section if--
(A) the project is sponsored by a State or local
government;
(B) the infrastructure is, or will be, owned by a
State or local government;
(C) the project involves the construction,
maintenance, improvement, or repair of a
transportation, energy, water, communications, or
educational facility;
(D) the recipient of bond guarantees, loans, equity
investments, or any other innovative financing
technique authorized under this Act provides written
assurances prescribed by the AIF that the project will
be performed in compliance with the requirements of all
Federal laws that would otherwise apply to similar
projects to which the United States is a party; and
(E) in the case of a public transportation capital
project as defined in section 5302 of title 49, United
States Code, the recipient of bond guarantees, loans,
equity investments, or any other innovative financing
technique authorized under this Act complies with the
grant requirements of section 5309 of such title.
(4) Application for assistance.--
(A) In general.--A State or local government that
wishes to receive a loan or bond guarantee under this
section shall submit an application to the Board in
such form and manner and containing such information as
the Board may require.
(B) Requirement for public sponsorship of private
entities.--A private entity may only receive a bond
guarantee, loan, or equity investment under this
section if the State or local government for the
jurisdiction in which the nonprofit infrastructure
provider or private partner is located submits an
application pursuant to subparagraph (A) on behalf of
such nonprofit infrastructure provider or private
partner.
(5) Limitations on single state awards.--
(A) Annual limitation.--The Board shall set an
annual limit, as a percentage of total assistance
provided under this section during a year, on the
amount of assistance a single State (including local
governments and other infrastructure providers within
such State) may receive in assistance provided under
this section.
(B) Cumulative limitation.--The Board shall set a
limit, as a percentage of total assistance provided
under this section outstanding at any one time, on the
amount of assistance a single State (including local
governments and other infrastructure providers within
such State) may receive in assistance provided under
this section.
(6) Loan specifications.--Loans made under this section
shall have such maturity and carry such interest rate as the
Board determines appropriate.
(7) Bond guarantee.--The Board shall charge such fees for
Bond guarantees made under this section as the Board determines
appropriate.
(8) Equity investments.--With respect to a QIP, the amount
of an equity investment made by the AIF in such QIP may not
exceed 20 percent of the total cost of the QIP.
(9) Public-private partnership requirements.--At least 35
percent of the assistance provided under this section shall be
provided to QIPs for which at least 10 percent of the financing
for such QIPs comes from private debt or equity.
(10) Prohibition on principal forgiveness.--With respect to
a loan made under this section, the Board may not forgive any
amount of principal on such loan.
(d) Definitions.--For purposes of this section:
(1) Infrastructure provider.--The term ``infrastructure
provider'' means an entity that seeks to finance a QIP.
(2) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
(3) State.--The term ``State'' means each of the several
States, the District of Columbia, any territory or possession
of the United States, and each federally recognized Indian
tribe.
(e) Appropriation.--Out of money in the Treasury not otherwise
appropriated, there is hereby appropriated $50,000,000,000 to the
American Infrastructure Fund. Amounts appropriated under this
subsection shall remain available without fiscal year limitation.
SEC. 103. DEDICATION OF REMAINING REVENUES TO HIGHWAY TRUST FUND.
(a) In General.--Section 9503(f) is amended by redesignating
paragraph (5) as paragraph (6) and by inserting after paragraph (4) the
following new paragraph:
``(5) Appropriation of revenues attributable to section
965.--
``(A) Initial appropriation.--Out of money in the
Treasury not otherwise appropriated, there is hereby
appropriated $100,000,000,000 to the Highway Trust
Fund.
``(B) Remaining revenues.--
``(i) In general.--Out of money in the
Treasury not otherwise appropriated, there are
hereby appropriated to the Highway Trust Fund
the excess of--
``(I) amounts equivalent to the
aggregate net tax liabilities under
section 965 (as defined in such
section) received in the Treasury, over
``(II) $150,000,000,000.
``(ii) Additional transfers only after
revenues equaling initial transfers have been
received in the treasury.--For purposes of
applying section 9601 to clause (i), no
transfer shall be made under clause (i) until
the Secretary estimates that the amount
described in clause (i)(I) has exceeded the
amount described in clause (i)(II).''.
(b) Transfers to Mass Transit Account.--Section 9503(e)(2) of such
Code is amended by striking ``the mass transit portion'' and inserting
``, 20 percent of the amounts appropriated to the Highway Trust Fund
under subsection (f)(5), and the mass transit portion''.
SEC. 104. HIGHWAY TRUST FUND SOLVENCY COMMISSION.
(a) Establishment.--There is established in the legislative branch
a commission to be known as the ``Highway Trust Fund Solvency
Commission'' (in this section referred to as the ``Commission'').
(b) Duty of the Commission.--Not later than 1 year after the
initial meeting of the Commission, the Commission shall transmit to
Congress a written report that includes recommendations and proposed
legislation for achieving long-term solvency of the Highway Trust Fund.
(c) Members.--
(1) Number and appointment.--The Commission shall be
composed of 9 members. Of the members of the Commission--
(A) 1 member shall be appointed by the President of
the United States;
(B) 1 member shall be appointed by the chairman of
the Committee on Finance of the Senate;
(C) 1 member shall be appointed by the ranking
minority member of the Committee on Finance of the
Senate;
(D) 1 member shall be appointed by the chairman of
the Committee on Ways and Means of the House of
Representatives;
(E) 1 member shall be appointed by the ranking
minority member of the Committee on Ways and Means of
the House of Representatives;
(F) 1 member shall be appointed by the chairman of
the Committee on Environment and Public Works of the
Senate;
(G) 1 member shall be appointed by the ranking
minority member of the Committee on Environment and
Public Works of the Senate;
(H) 1 member shall be appointed by the chairman of
the Committee on Transportation and Infrastructure of
the House of Representatives; and
(I) 1 member shall be appointed by the ranking
minority member of the Committee on Transportation and
Infrastructure of the House of Representatives.
(2) Timing of appointments.--Each of the appointments made
under paragraph (1) shall be made not later than 45 days after
the date of the enactment of this Act.
(3) Terms; vacancies.--Each member shall be appointed for
the life of the Commission, and a vacancy in the Commission
shall be filled in the manner in which the original appointment
was made.
(4) Compensation.--
(A) In general.--Members of the Commission shall
serve without pay.
(B) Travel expenses.--Each member shall receive
travel expenses, including per diem in lieu of
subsistence, in accordance with applicable provisions
under subchapter I of chapter 57 of title 5, United
States Code.
(d) Operation and Powers of the Commission.--
(1) Chair.--The chairperson of the Commission shall be
elected by the members of the Commission.
(2) Meetings.--The Commission shall meet not later than 30
days after the members of the Commission have been appointed,
and at such times thereafter as the chairperson shall
determine.
(3) Rules of procedure.--The chairperson shall, with the
approval of a majority of the members of the Commission,
establish written rules of procedure for the Commission, which
shall include a quorum requirement to conduct the business of
the Commission.
(4) Hearings.--The Commission may, for the purpose of
carrying out this section, hold hearings, sit and act at times
and places, take testimony, and receive evidence as the
Commission considers appropriate.
(5) Obtaining official data.--The Commission may secure
directly from any department or agency of the United States,
including the Congressional Budget Office and the Government
Accountability Office, any information or technical assistance
necessary to enable it to carry out this section. Upon request
of the chairperson of the Commission, the head of that
department or agency shall furnish that information or
technical assistance to the Commission.
(6) Contract authority.--The Commission may contract with
and compensate government and private agencies or persons for
any purpose necessary to enable it to carry out this section.
(7) Mails.--The Commission may use the United States mails
in the same manner and under the same conditions as other
departments and agencies of the United States.
(e) Personnel.--
(1) Director.--The Commission shall have a Director who
shall be appointed by the Commission. The Director shall be
paid at a rate of pay equivalent to the annual rate of basic
pay for a comparable position paid under the Executive
Schedule, subject to the approval of the chairperson of the
Commission.
(2) Staff.--The Director may appoint and fix the pay of
additional staff as the Director considers appropriate.
(3) Experts and consultants.--The Commission may procure
temporary and intermittent services under section 3109(b) of
title 5, United States Code, but at rates for individuals not
to exceed the daily equivalent of the annual rate of basic pay
for a comparable position paid under the Executive Schedule.
(4) Staff of federal agencies.--Upon request of the
Commission, the head of any Federal department or agency may
detail, without reimbursement, any of the personnel of that
department or agency to the Commission to assist it in carrying
out its duties under this section.
(5) Administrative support services.--Upon the request of
the Commission, the Administrator of General Services shall
provide to the Commission, on a reimbursable basis, the
administrative support services necessary for the Commission to
carry out its responsibilities under this section.
(f) Termination.--The Commission shall terminate not later than 60
days after the submission of the report described in subsection (b).
(g) Authorization of Appropriations.--There is authorized to be
appropriated such sums as may be necessary to carry out this section.
TITLE II--DEADLINE FOR INTERNATIONAL TAX REFORM
SEC. 201. 18-MONTH DEADLINE FOR INTERNATIONAL TAX REFORM.
Notwithstanding any provision of title III, the provisions of, and
amendments made by, title III shall not take effect if a bill which
reforms the corporate international tax system by eliminating the
incentive to hold earnings in low-tax foreign jurisdictions is enacted
into law during the 18-month period which begins on the date of the
enactment of this Act.
TITLE III--FALLBACK INTERNATIONAL TAX REFORM
SEC. 300. GENERAL EFFECTIVE DATE OF TITLE.
For purposes of this title, the term ``applicable date'' means the
date which is 18 months after the date of the enactment of this Act.
Subtitle A--Reform of Taxation of Income Earned by Controlled Foreign
Corporations
PART I--GENERAL PROVISIONS
SEC. 301. MODIFICATIONS TO SUBPART F INCOME.
(a) In General.--Subpart F of part III of subchapter N of chapter 1
is amended by striking sections 952 through 956 and inserting the
following:
``SEC. 952. SUBPART F INCOME DEFINED.
``(a) In General.--For purposes of this subpart, the term `subpart
F income' means, with respect to any controlled foreign corporation,
the sum of--
``(1) the inclusion percentage of the corporation's
modified active income, plus
``(2) 100 percent of the corporation's modified nonactive
income.
``(b) Modified Active Income.--
``(1) In general.--The term `modified active income' means,
with respect to any controlled foreign corporation, the excess
(if any) of--
``(A) the corporation's active foreign market
income, over
``(B) the amount of the reduction under subsection
(e) for deductions properly allocable to such income.
``(2) Reduction for certain losses.--
``(A) In general.--The modified active income
determined under paragraph (1) for any taxable year
shall be reduced (but not below zero)--
``(i) first by any active foreign market
loss for any prior taxable year, and
``(ii) then by any qualified loss for such
taxable year (or for any prior taxable year to
the extent provided in subsection (c)(3)(B)).
``(B) Limitation.--An active foreign market loss or
qualified loss for any prior taxable year shall only be
taken into account under subparagraph (A)--
``(i) if the prior taxable year is a
taxable year which begins on or after the
applicable date (as defined in section 300 of
the Infrastructure and Global Tax
Competitiveness Act of 2014), and for which the
controlled foreign corporation was a controlled
foreign corporation, and
``(ii) to the extent such loss has not been
previously taken into account under this
subsection.
``(3) Active foreign market loss.--The term `active foreign
market loss' means, with respect to any taxable year, the
amount by which the amount determined under paragraph (1)(B)
exceeds the amount determined under paragraph (1)(A).
``(c) Modified Nonactive Income.--
``(1) In general.--The term `modified nonactive income'
means, with respect to any controlled foreign corporation, the
excess (if any) of--
``(A) the corporation's gross income determined
without regard to active foreign market income, over
``(B) the amount of the reduction under subsection
(e) for deductions properly allocable to such gross
income.
``(2) Reduction for qualified losses.--The amount
determined under paragraph (1) for any taxable year shall be
reduced (but not below zero) by any qualified loss for any
prior taxable year beginning on or after the applicable date
(as defined in section 300 of the Infrastructure and Global Tax
Competitiveness Act of 2014), for which the controlled foreign
corporation was a controlled foreign corporation, but only to
the extent such loss has not been previously taken into account
under subsection (b)(2) or this subsection.
``(3) Qualified loss.--For purposes of this section--
``(A) In general.--The term `qualified loss' means,
with respect to any taxable year, the amount by which
the amount determined under paragraph (1)(B) exceeds
the amount determined under paragraph (1)(A).
``(B) Ordering rule for losses carried from prior
taxable years.--In the case of any qualified losses
carried to a taxable year from 1 or more prior taxable
years, such losses shall be taken into account--
``(i) first under paragraph (2), and
``(ii) then under subsection (b)(2)(B) to
the extent such losses exceed the amount
determined under paragraph (1).
``(d) Inclusion Percentage.--For purposes of this section--
``(1) In general.--The term `inclusion percentage' means 20
percent increased by the number of percentage points (if any)
determined under paragraph (2).
``(2) Additional inclusion for earnings not subject to oecd
average foreign tax.--The number of percentage points
determined under this paragraph with respect to any controlled
foreign corporation for any taxable year, is the number of
percentage points (not less than zero nor more than 15) which
bears the same ratio to 15 as--
``(A) the number of percentage points by which 25
percent exceeds the aggregate foreign rate of tax
imposed on the modified active income of such
controlled foreign corporation for such taxable year,
bears to
``(B) 25.
``(e) Exclusion of United States Income.--For purposes of this
subpart, any item of income of the controlled foreign corporation which
is effectively connected with the conduct by such corporation of a
trade or business within the United States shall not be taken into
account in computing the subpart F income of such corporation unless
such item is exempt from taxation (or is subject to a reduced rate of
tax) pursuant to a treaty obligation of the United States. For purposes
of this subsection, any exemption (or reductions) with respect to the
tax imposed by section 884 shall not be taken into account.
``(f) Deductions.--For purposes of subsections (b)(1)(B) and
(c)(1)(B), the active foreign market income, and gross income other
than active foreign market income, of a controlled foreign corporation
shall each be reduced, under regulations prescribed by the Secretary,
by any deductions (including taxes) of such corporation properly
allocable to items of income taken into account in computing such
income.
``SEC. 953. ACTIVE FOREIGN MARKET INCOME.
``(a) Active Foreign Market Income Defined.--For purposes of this
subpart, the term `active foreign market income' means, with respect to
any controlled foreign corporation, the aggregate of all items of
income which are--
``(1) attributable to economically significant activities
with respect to a qualified trade or business, and
``(2) derived in connection with--
``(A) property which is sold, exchanged, or
otherwise disposed of for use, consumption, or
disposition outside of the United States, or
``(B) services which are provided outside of the
United States with respect to persons or property
located outside of the United States.
``(b) Treatment of Passive Income.--
``(1) In general.--Except as otherwise provided in this
subsection, the term `active foreign market income' shall not
include the passive income (as defined in section 954) of a
controlled foreign corporation.
``(2) Active foreign market income includes certain
income.--The term `active foreign market income' shall
include--
``(A) if the controlled foreign corporation or a
qualified business unit of the corporation is an
eligible controlled foreign corporation (as defined in
section 954(c)), any item of income of the corporation
or unit which is qualified banking or financing income
(as so defined),
``(B) if the controlled foreign corporation or a
qualified business unit of the corporation is a
qualifying insurance company (as defined in section
954(d)) or a qualifying insurance company branch (as so
defined), any item of income of the corporation or unit
which is qualified insurance income (as so defined),
``(C) any item of income which is rents or
royalties derived from the ownership and operation
(including leasing) of real or personal property which
is not treated as passive income under section
954(a)(2)(A), and
``(D) in the case of a regular dealer in property
which is property described in section 954(a)(1)(B),
forward contracts, option contracts, or similar
financial instruments (including notional principal
contracts and all instruments referenced to
commodities), any item of income from any transaction
(including hedging transactions and transactions
involving physical settlement) entered into in the
ordinary course of such dealer's trade or business as
such a dealer.
``(3) Gain or loss from sales of stock in other cfcs.--If a
controlled foreign corporation sells, exchanges, or otherwise
disposes of stock in another controlled foreign corporation
which is a related person to the selling corporation--
``(A) gain from such sale, exchange, or disposition
shall be treated as active foreign market income to the
extent that such gain would have been excluded from
gross income under section 1203 if the selling
corporation were a United States shareholder in the
other controlled foreign corporation, and
``(B) loss from such sale, exchange, or disposition
shall not be allowed to the extent such loss would have
been disallowed under section 1213 if the selling
corporation were a United States shareholder in the
other controlled foreign corporation.
``(4) Gain or loss from sales of interests in 25-percent
owned partnerships.--
``(A) In general.--
``(i) Portion treated as active foreign
market income.--In the case of any sale or
exchange by a controlled foreign corporation of
an interest in a partnership with respect to
which such corporation is a 25-percent owner,
gain or loss on such sale shall be taken into
account in determining active foreign market
income in the amount which bears the same ratio
to the amount of such gain or loss as the
controlled foreign corporation's distributable
share of the active foreign market income from
the partnership over the applicable period
bears to the controlled foreign corporation's
distributable share of gross income from the
partnership over such period. The Secretary
shall prescribe such regulations as may be
appropriate to prevent abuse of the purposes of
this paragraph, including regulations providing
for coordination of this paragraph with the
provisions of subchapter K.
``(ii) Applicable period.--For purposes of
this subparagraph, the term `applicable period'
means, with respect to any interest in a
partnership, the shorter of the 3-taxable year
period immediately preceding the taxable year
of the sale or exchange or the controlled
foreign corporation's holding period in the
interest. In no event shall the applicable
period include any portion of any taxable year
beginning before the applicable date (as
defined in section 300 of the Infrastructure
and Global Tax Competitiveness Act of 2014).
``(B) 25-percent owner.--For purposes of this
paragraph, the term `25-percent owner' means a
controlled foreign corporation which owns directly 25
percent or more of the capital or profits interest in a
partnership. For purposes of the preceding sentence, if
a controlled foreign corporation is a shareholder or
partner of a corporation or a partnership, the
controlled foreign corporation shall be treated as
owning directly its proportionate share of any capital
or profits interest in any partnership held directly or
indirectly by such corporation or partnership. If a
controlled foreign corporation is treated as owning a
capital or profits interest in a partnership under
constructive ownership rules similar to the rules of
section 958(b), the controlled foreign corporation
shall be treated as owning such interest directly for
purposes of this subparagraph.
``(c) Treatment of Insurance Income.--
``(1) In general.--Except as otherwise provided in this
subsection, the term `active foreign market income' shall not
include the insurance income (as defined in section 955(a)) of
a controlled foreign corporation.
``(2) Active foreign market income includes exempt
insurance income.--The term `active foreign market income'
shall include exempt insurance income (as defined in section
955(c)) shall be treated as active foreign market income.
``(d) Treatment of Income From Property Used, Consumed, or Disposed
of in the United States.--For purposes of subsection (a)(2)(A)--
``(1) In general.--The term `active foreign market income'
shall not include income derived in connection with property
which is sold, exchanged, or otherwise disposed of to any
person if it was reasonable for the controlled foreign
corporation (or a related person) to expect that--
``(A) such property would be used, consumed, or
disposed of in the United States, or
``(B) such property would be used in the
manufacture or production of, or as a component part
in, other property which would be used, consumed, or
disposed of in the United States.
``(2) Chain of related persons.--If--
``(A) property is ultimately used, consumed, or
disposed of as described in subparagraph (A) or (B) of
paragraph (1), and
``(B) all sales, exchanges, or dispositions of such
property (or of the other property described in
paragraph (1)(B)) before the sale for use, consumption,
or disposition in the United States are between related
persons,
then, for purposes of paragraph (1), there shall be deemed to
have been a reasonable expectation that the property (or the
other property described in paragraph (1)(B)) would be used,
consumed, or disposed of in the United States.
``(3) Exception for property subsequently exported.--
Paragraphs (1) and (2) shall not apply with respect to property
which, after entry into the United States is--
``(A) sold, leased, rented, or licensed by the
controlled foreign corporation or a related person for
direct use, consumption, or disposition outside the
United States, or
``(B) used by the controlled foreign corporation or
a related person as a component in other property which
is so sold, leased, rented, or licensed.
``(4) Related person defined.--For purposes of this
subsection, the term `related person' has the meaning given
such term under section 954(b).
``(e) Economically Significant Activities.--For purposes of this
section, the term `economically significant activities' means, with
respect to any item of income, activities--
``(1) performed outside the United States,
``(2) performed by officers or employees of the controlled
foreign corporation which are part of the management and
operational functions of the corporation, and
``(3) which make a substantial contribution to the
production of such item of income.
``(f) Qualified Trade or Business.--For purposes of this section--
``(1) In general.--The term `qualified trade or business'
means any trade or business which consists of--
``(A) manufacturing, producing, growing, or
extracting property outside of the United States, or
``(B) providing services outside of the United
States.
``(2) Special rule for substantial contributions to
manufacturing and services.--If a trade or business consists of
making a substantial contribution through the activities of the
officers and employees of the controlled foreign corporation to
a qualified trade or business which is described in
subparagraph (A) or (B) of paragraph (1) of another person,
then the trade or business shall be treated as a qualified
trade or business described in subparagraph (A) or (B) of
paragraph (1), whichever is applicable.
``SEC. 954. DEFINITION OF PASSIVE INCOME.
``(a) Passive Income.--
``(1) In general.--For purposes of this part, the term
`passive income' means the portion of the gross income which
consists of:
``(A) Dividends, etc.--Dividends, interest,
royalties, rents, and annuities.
``(B) Certain property transactions.--The excess of
gains over losses from the sale or exchange of
property--
``(i) which gives rise to income described
in subparagraph (A) (after application of
paragraph (2)(A)) other than property which
gives rise to income not treated as passive
income by reason of subsection (c) or (d) for
the taxable year,
``(ii) which is an interest in a trust,
partnership, or REMIC, or
``(iii) which does not give rise to any
income.
Gains and losses from the sale or exchange of any
property which, in the hands of the controlled foreign
corporation, is property described in section
1221(a)(1) shall not be taken into account under this
subparagraph.
``(C) Commodities transactions.--The excess of
gains over losses from transactions (including futures,
forward, and similar transactions) in any commodities.
This subparagraph shall not apply to gains or losses
which--
``(i) arise out of commodity hedging
transactions (as defined in paragraph (5)(A)),
``(ii) are active business gains or losses
from the sale of commodities, but only if
substantially all of the controlled foreign
corporation's commodities are property
described in paragraph (1), (2), or (8) of
section 1221(a), or
``(iii) are foreign currency gains or
losses (as defined in section 988(b))
attributable to any section 988 transactions.
``(D) Foreign currency gains.--The excess of
foreign currency gains over foreign currency losses (as
defined in section 988(b)) attributable to any section
988 transactions. This subparagraph shall not apply in
the case of any transaction, other than a borrowing,
directly related to the business needs of the
controlled foreign corporation.
``(E) Income equivalent to interest.--Any income
equivalent to interest, including income from
commitment fees (or similar amounts) for loans actually
made.
``(F) Income from notional principal contracts.--
``(i) In general.--Net income from notional
principal contracts.
``(ii) Coordination with other categories
of passive income.--Any item of income, gain,
deduction, or loss from a notional principal
contract entered into for purposes of hedging
any item described in any preceding
subparagraph shall not be taken into account
for purposes of this subparagraph but shall be
taken into account under such other
subparagraph.
``(G) Payments in lieu of dividends.--Payments in
lieu of dividends which are made pursuant to an
agreement to which section 1058 applies.
``(H) Personal service contracts.--
``(i) Amounts received under a contract
under which the corporation is to furnish
personal services if--
``(I) some person other than the
corporation has the right to designate
(by name or by description) the
individual who is to perform the
services, or
``(II) the individual who is to
perform the services is designated (by
name or by description) in the
contract, and
``(ii) amounts received from the sale or
other disposition of such a contract.
This subparagraph shall apply with respect to amounts
received for services under a particular contract only
if at some time during the taxable year 25 percent or
more in value of the outstanding stock of the
corporation is owned, directly or indirectly, by or for
the individual who has performed, is to perform, or may
be designated (by name or by description) as the one to
perform, such services.
``(2) Exception for certain amounts.--
``(A) Rents and royalties derived in active
business.--Passive income shall not include rents and
royalties which are derived in the active conduct of a
trade or business and which are received from a person
other than a related person. For purposes of the
preceding sentence, rents derived from leasing an
aircraft or vessel in foreign commerce shall not fail
to be treated as derived in the active conduct of a
trade or business if, as determined under regulations
prescribed by the Secretary, the active leasing
expenses are not less than 10 percent of the profit on
the lease.
``(B) Exception for dealers.--Except as provided by
regulations, in the case of a regular dealer in
property which is property described in paragraph
(1)(B), forward contracts, option contracts, or similar
financial instruments (including notional principal
contracts and all instruments referenced to
commodities), there shall not be taken into account in
computing passive income any item of income, gain,
deduction, or loss from any transaction (including
hedging transactions and transactions involving
physical settlement) entered into in the ordinary
course of such dealer's trade or business as such a
dealer.
``(3) Look-thru rule for certain partnership sales.--
``(A) In general.--In the case of any sale or
exchange by a controlled foreign corporation of an
interest in a partnership with respect to which such
corporation is a 25-percent owner, gain or loss on such
sale shall be treated as being described in paragraph
(1)(B)(ii) in the amount which bears the same ratio to
the amount of such gain or loss as the controlled
foreign corporation's distributable share of passive
income from the partnership over the applicable period
(as defined in section 953(b)(4)(A)(ii)) bears to the
controlled foreign corporation's distributable share of
gross income from the partnership over such period. The
Secretary shall prescribe such regulations as may be
appropriate to prevent abuse of the purposes of this
paragraph, including regulations providing for the
coordination of this paragraph with the provisions of
subchapter K.
``(B) 25-percent owner.--For purposes of this
paragraph, the term `25-percent owner' has the meaning
given such term under section 953(b)(4)(B).
``(4) Definition and special rules relating to commodity
transactions.--
``(A) Commodity hedging transactions.--For purposes
of paragraph (1)(C)(i), the term `commodity hedging
transaction' means any transaction with respect to a
commodity if such transaction--
``(i) is a hedging transaction as defined
in section 1221(b)(2), determined--
``(I) without regard to
subparagraph (A)(ii) thereof,
``(II) by applying subparagraph
(A)(i) thereof by substituting
`ordinary property or property
described in section 1231(b)' for
`ordinary property', and
``(III) by substituting `controlled
foreign corporation' for `taxpayer'
each place it appears, and
``(ii) is clearly identified as such in
accordance with section 1221(a)(7).
``(B) Treatment of dealer activities under
paragraph (1)(c).--Commodities with respect to which
gains and losses are not taken into account under
paragraph (2)(B) in computing a controlled foreign
corporation's passive income shall not be taken into
account in applying the substantially all test under
paragraph (1)(C)(ii) to such corporation.
``(C) Regulations.--The Secretary shall prescribe
such regulations as are appropriate to carry out the
purposes of paragraph (1)(C) in the case of
transactions involving related persons.
``(b) 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.
``(c) Special Rule for Income Derived in the Active Conduct of
Banking, Financing, or Similar Businesses.--
``(1) In general.--For purposes of subsection (a)(1),
passive income shall not include qualified banking or financing
income of an eligible controlled foreign corporation.
``(2) Eligible controlled foreign corporation.--For
purposes of this subsection, the term `eligible controlled
foreign corporation' means any controlled foreign corporation
if--
``(A) more than 80 percent of the gross income of
the controlled foreign corporation is derived directly
from the active and regular conduct of a lending,
finance, or financial services business from
transactions with customers which are located outside
the United States and are not related persons, or
``(B) it is a regulated financial institution.
``(3) Qualified banking or financing income.--For purposes
of this subsection--
``(A) In general.--The term `qualified banking or
financing income' means income of an eligible
controlled foreign corporation which--
``(i) is derived in the active conduct of a
banking, financing, or similar business by such
eligible controlled foreign corporation,
``(ii) is derived from one or more
transactions--
``(I) with customers located in a
country other than the United States,
and
``(II) substantially all of the
activities in connection with which are
conducted directly by the corporation
in its home country, and
``(iii) is treated as earned by such
corporation in its home country for purposes of
such country's tax laws.
``(B) Income derived from customers to include
certain investment income.--For purposes of
subparagraph (A), in the case of a regulated financial
institution, income derived from customers includes
income derived from--
``(i) reserves that are required to be held
pursuant to banking regulations,
``(ii) deposits placed with the central
bank (or equivalent thereof) in the
corporation's home country, and
``(iii) investments in debt instruments
issued by the home country.
``(C) Substantial activity requirement for cross
border income.--The term `qualified banking or
financing income' shall not include income derived from
1 or more transactions with customers located in a
country other than the home country of the eligible
controlled foreign corporation unless such corporation
conducts substantial activity with respect to a
banking, financing, or similar business in its home
country.
``(D) Direct conduct of activities.--For purposes
of subparagraph (A)(ii)(II), an activity shall be
treated as conducted directly by an eligible controlled
foreign corporation in its home country if the activity
is performed by employees of a related person and--
``(i) the related person is a resident
subject to tax under the laws of the home
country of the corporation to which
subparagraph (A)(ii)(II) is being applied,
``(ii) the activity is performed in such
home country, and
``(iii) the related person is compensated
on an arm's-length basis for the performance of
the activity by its employees and such
compensation is treated as earned by such
person in such home country for purposes of the
home country's tax laws.
``(4) Lending, finance, or financial services business.--
For purposes of this subsection, except as provided in
regulations, the term `lending, finance, or financial services
business' means the business of--
``(A) making loans,
``(B) purchasing, selling, discounting, or
negotiating on a regular basis accounts receivable,
notes, or installment obligations,
``(C) engaging in leasing (including entering into
leases and purchasing, servicing, and disposing of
leases and leased assets),
``(D) issuing letters of credit or providing
guarantees,
``(E) providing charge and credit card services,
``(F) performing trust services, including as a
fiduciary, agent, or custodian, other than trust
services provided by a broker or dealer in stock,
securities, or other financial instruments,
``(G) arranging interest rate or currency futures,
forwards, options, or notional principal contracts for,
or entering into such transactions with, customers,
``(H) providing traveler's check and money order
services for customers,
``(I) providing correspondent bank services for
customers,
``(J) engaging in hedging activities directly
related to an activity described in any other
subparagraph of this paragraph,
``(K) underwriting issues of stock, debt, or other
securities for customers,
``(L) providing financial, investment advisory, or
investment management services,
``(M) purchasing or selling stock, debt
instruments, interest rate or currency futures, or
other securities or derivative financial products
(including notional principal contracts) from or to
customers and holding such stock, debt instruments,
futures, or other securities or products as inventory
for sale to customers, unless such stock, debt
instruments, futures, or other securities or products
are not held in a dealer capacity,
``(N) effecting transactions in securities for
customers as a securities broker, or
``(O) rendering services or making facilities
available in connection with activities described in
subparagraphs (A) through (N) carried on by--
``(i) the corporation rendering services or
making facilities available, or
``(ii) another corporation which is a
member of the same affiliated group (as defined
in section 1504, but determined without regard
to section 1504(b)(3)).
``(5) Other definitions.--For purposes of this subsection--
``(A) Customer.--The term `customer' means, with
respect to any controlled foreign corporation, any
person which has a customer relationship with such
corporation and which is acting in its capacity as
such.
``(B) Home country.--Except as provided in
regulations, the term `home country' means, with
respect to any entity, the country with respect to
which the entity is a resident for purposes of the
country's income tax laws.
``(C) Located.--Except as provided in regulations,
for purposes of paragraph (3)(A)--
``(i) if a customer is a natural person,
the customer is considered to be located in the
country in which the customer is physically
located when entering into the transaction, and
``(ii) if a customer is not a natural
person, the customer is considered to be
located in the country from which the customer
enters into the transaction.
``(D) Qualified business unit.--The term `qualified
business unit' has the meaning given such term by
section 989(a).
``(E) Regulated financial institution.--Except as
provided in regulations, the term `regulated financial
institution' means a controlled foreign corporation
which--
``(i) is engaged in the active conduct of a
banking business and is an institution licensed
to do business as a bank in the United States
(or is any other corporation not so licensed
which is specified by the Secretary in
regulations), or
``(ii) satisfies each of the following
conditions:
``(I) The corporation is directly
or indirectly wholly owned by a
domestic corporation that is a bank (as
defined in section 581) or a depository
institution holding company (as defined
in section 3(w)(1) of the Federal
Deposit Insurance Act (12 U.S.C.
1813(w)(1))).
``(II) The corporation is subject
to bank regulatory supervision in a
jurisdiction the central bank of which
(or equivalent thereof) is a member of
the Basel Committee on Banking
Supervision.
``(III) The corporation is licensed
and regulated in such jurisdiction as a
bank.
``(6) Separate application to qualified business units.--
``(A) In general.--If a controlled foreign
corporation has 1 or more qualified business units--
``(i) this subsection shall be applied
separately to each such unit in the same manner
as if it were a controlled foreign corporation,
and
``(ii) if any such unit is treated as an
eligible controlled foreign corporation after
application of clause (i), the qualified
banking or financing income of such unit shall
be treated as qualified banking or financing
income of the controlled foreign corporation of
which such unit is a part.
``(B) Determinations made separately.--For purposes
of the separate application of this subsection to a
controlled foreign corporation and its qualified
business units--
``(i) in the case of the controlled foreign
corporation, only activities and items of
income, deduction, gain, or loss and activities
of such corporation not properly allocable or
attributable to any qualified business unit of
such corporation shall be taken into account,
and
``(ii) in the case of a qualified business
unit, only activities and items of income,
deduction, gain, or loss and activities
properly allocable or attributable to such unit
shall be taken into account.
``(C) Home country.--For purposes of this
subsection, except as provided in regulations,
notwithstanding paragraph (5)(B), the home country with
respect to any qualified business unit treated as a
controlled foreign corporation under subparagraph (A)
shall be the country in which such unit maintains its
principal office.
``(7) Anti-abuse rules.--For purposes of applying this
subsection--
``(A) there shall be disregarded any item of
income, gain, loss, or deduction with respect to any
transaction or series of transactions one of the
principal purposes of which is qualifying income or
gain for the exclusion under this section, including
any transaction or series of transactions a principal
purpose of which is the acceleration or deferral of any
item in order to claim the benefits of such exclusion
through the application of this subsection,
``(B) there shall be disregarded any item of
income, gain, loss, or deduction of an entity which is
not engaged in regular and continuous transactions with
customers which are not related persons,
``(C) there shall be disregarded any item of
income, gain, loss, or deduction with respect to any
transaction or series of transactions utilizing, or
doing business with--
``(i) one or more entities in order to
satisfy any home country requirement under this
subsection, or
``(ii) a special purpose entity or
arrangement, including a securitization,
financing, or similar entity or arrangement,
if one of the principal purposes of such transaction or
series of transactions is qualifying income or gain for
the exclusion under this subsection, and
``(D) a related person, an officer, a director, or
an employee with respect to any controlled foreign
corporation which would otherwise be treated as a
customer of such corporation with respect to any
transaction shall not be so treated if a principal
purpose of such transaction is to satisfy any
requirement of this subsection.
``(8) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this subsection and subsection (a)(1)(B)(i).
``(d) Special Rule for Income Derived in the Active Conduct of
Insurance Business.--
``(1) In general.--For purposes of subsection (a)(1),
passive income shall not include qualified insurance income of
a qualifying insurance company.
``(2) Qualified insurance income.--For purposes of this
subsection, the term `qualified insurance income' means income
of a qualifying insurance company which is--
``(A) received from a person other than a related
person and derived from the investments made by a
qualifying insurance company or a qualifying insurance
company branch of its reserves allocable to exempt
contracts or of 80 percent of its unearned premiums
from exempt contracts (as both are determined in the
manner prescribed under paragraph (4)), or
``(B) received from a person other than a related
person and derived from investments made by a
qualifying insurance company or a qualifying insurance
company branch of an amount of its assets allocable to
exempt contracts equal to--
``(i) in the case of property, casualty, or
health insurance contracts, one-third of its
premiums earned on such insurance contracts
during the taxable year (as defined in section
832(b)(4)), and
``(ii) in the case of life insurance or
annuity contracts, 10 percent of the reserves
described in subparagraph (A) for such
contracts.
``(3) Principles for determining qualified insurance
income.--Except as provided by the Secretary, for purposes of
subparagraphs (A) and (B) of paragraph (2)--
``(A) in the case of any contract which is a
separate account-type contract (including any variable
contract not meeting the requirements of section 817),
income credited under such contract shall be allocable
only to such contract, and
``(B) income not allocable under subparagraph (A)
shall be allocated ratably among contracts not
described in subparagraph (A).
``(4) Methods for determining unearned premiums and
reserves.--For purposes of paragraph (2)(A)--
``(A) Property and casualty contracts.--The
unearned premiums and reserves of a qualifying
insurance company or a qualifying insurance company
branch with respect to property, casualty, or health
insurance contracts shall be determined using the same
methods and interest rates which would be used if such
company or branch were subject to tax under subchapter
L, except that--
``(i) the interest rate determined for the
functional currency of the company or branch,
and which, except as provided by the Secretary,
is calculated in the same manner as the Federal
mid-term rate under section 1274(d), shall be
substituted for the applicable Federal interest
rate, and
``(ii) such company or branch shall use the
appropriate foreign loss payment pattern.
``(B) Life insurance and annuity contracts.--
``(i) In general.--Except as provided in
clause (ii), the amount of the reserve of a
qualifying insurance company or qualifying
insurance company branch for any life insurance
or annuity contract shall be equal to the
greater of--
``(I) the net surrender value of
such contract (as defined in section
807(e)(1)(A)), or
``(II) the reserve determined under
paragraph (5).
``(ii) Ruling request, etc.--The amount of
the reserve under clause (i) shall be the
foreign statement reserve for the contract
(less any catastrophe, deficiency,
equalization, or similar reserves), if,
pursuant to a ruling request submitted by the
taxpayer or as provided in published guidance,
the Secretary determines that the factors taken
into account in determining the foreign
statement reserve provide an appropriate means
of measuring income.
``(C) Limitation on reserves.--In no event shall
the reserve determined under this paragraph for any
contract as of any time exceed the amount which would
be taken into account with respect to such contract as
of such time in determining foreign statement reserves
(less any catastrophe, deficiency, equalization, or
similar reserves).
``(5) Amount of reserve.--The amount of the reserve
determined under this paragraph with respect to any contract
shall be determined in the same manner as it would be
determined if the qualifying insurance company or qualifying
insurance company branch were subject to tax under subchapter
L, except that in applying such subchapter--
``(A) the interest rate determined for the
functional currency of the company or branch, and
which, except as provided by the Secretary, is
calculated in the same manner as the Federal mid-term
rate under section 1274(d), shall be substituted for
the applicable Federal interest rate,
``(B) the highest assumed interest rate permitted
to be used in determining foreign statement reserves
shall be substituted for the prevailing State assumed
interest rate, and
``(C) tables for mortality and morbidity which
reasonably reflect the current mortality and morbidity
risks in the company's or branch's home country shall
be substituted for the mortality and morbidity tables
otherwise used for such subchapter.
The Secretary may provide that the interest rate and mortality
and morbidity tables of a qualifying insurance company may be
used for 1 or more of its qualifying insurance company branches
when appropriate.
``(6) Definitions.--For purposes of this section, any term
used in this subsection which is also used in section 955(c)
shall have the meaning given such term under section 955(c).
``SEC. 955. DEFINITION OF INSURANCE INCOME.
``(a) Insurance Income.--
``(1) In general.--For purposes of section 953(c), the term
`insurance income' means the gross income which--
``(A) is attributable to the issuing (or
reinsuring) of an insurance or annuity contract, and
``(B) is of a kind that would be subject to tax
under subchapter L of this chapter if such income were
the income of a domestic insurance company.
``(2) Exception.--Such term shall not include any exempt
insurance income (as defined in subsection (c)).
``(b) Special Rules for Determination of Gross Income and Allocable
Deductions.--For purposes of determining gross income under subsection
(a) and deductions allocable to insurance income under section 952(e),
the following rules shall apply:
``(1) Certain deductions not allowed.--The following
provisions of subchapter L shall not apply:
``(A) The small life insurance company deduction.
``(B) Section 805(a)(5) (relating to operations
loss deduction).
``(C) Section 832(c)(5) (relating to certain
capital losses).
``(2) Special rules for amounts included in income.--The
items referred to in--
``(A) section 803(a)(1) (relating to gross amount
of premiums and other considerations),
``(B) section 803(a)(2) (relating to net decrease
in reserves),
``(C) section 805(a)(2) (relating to net increase
in reserves), and
``(D) section 832(b)(4) (relating to premiums
earned on insurance contracts),
shall be taken into account only to the extent they are in
respect of any reinsurance or the issuing of any insurance or
annuity contract described in subsection (a)(1).
``(3) Treatment of reserves.--Reserves for any insurance or
annuity contract shall be determined in the same manner as
under section 954(d).
``(c) Exempt Insurance Income.--For purposes of this section--
``(1) Exempt insurance income defined.--
``(A) In general.--The term `exempt insurance
income' means income derived by a qualifying insurance
company which--
``(i) is attributable to the issuing (or
reinsuring) of an exempt contract by such
company or a qualifying insurance company
branch of such company, and
``(ii) is treated as earned by such company
or branch in its home country for purposes of
such country's tax laws.
``(B) Exception for certain arrangements.--Such
term shall not include income attributable to the
issuing (or reinsuring) of an exempt contract as the
result of any arrangement whereby another corporation
receives a substantially equal amount of premiums or
other consideration in respect of issuing (or
reinsuring) a contract which is not an exempt contract.
``(C) Determinations made separately.--For purposes
of this subsection and section 954(d), the exempt
insurance income and exempt contracts of a qualifying
insurance company or any qualifying insurance company
branch of such company shall be determined separately
for such company and each such branch by taking into
account--
``(i) in the case of the qualifying
insurance company, only items of income,
deduction, gain, or loss, and activities of
such company not properly allocable or
attributable to any qualifying insurance
company branch of such company, and
``(ii) in the case of a qualifying
insurance company branch, only items of income,
deduction, gain, or loss and activities
properly allocable or attributable to such
branch.
``(2) Exempt contract.--
``(A) In general.--The term `exempt contract' means
an insurance or annuity contract issued or reinsured by
a qualifying insurance company or qualifying insurance
company branch in connection with property in,
liability arising out of activity in, or the lives or
health of residents of, a country other than the United
States.
``(B) Minimum non-related income required.--No
contract of a qualifying insurance company or of a
qualifying insurance company branch shall be treated as
an exempt contract unless such company or branch
derives more than 30 percent of its net written
premiums from exempt contracts (determined without
regard to this subparagraph) with respect to which no
policyholder, insured, annuitant, or beneficiary is a
related person (as defined in section 954(b)).
``(C) Substantial activity requirements.--A
contract issued by a qualifying insurance company or
qualifying insurance company branch shall not be
treated as an exempt contract unless such company or
branch, as the case may be--
``(i) conducts substantial activity with
respect to an insurance business in its home
country, and
``(ii) performs in its home country
substantially all of the activities necessary
to give rise to the income generated by such
contract.
``(3) Qualifying insurance company.--
``(A) In general.--The term `qualifying insurance
company' means any controlled foreign corporation--
``(i) which--
``(I) is subject to regulation as
an insurance (or reinsurance) company
by its home country, and is licensed,
authorized, or regulated by the
applicable insurance regulatory body
for its home country to sell insurance,
reinsurance, or annuity contracts to
persons other than related persons
(within the meaning of section 954(b))
in such home country, and
``(II) is engaged in the insurance
business and would be subject to tax
under subchapter L if it were a
domestic corporation,
``(ii) which derives more than 50 percent
of its aggregate net written premiums from the
issuance or reinsurance by such controlled
foreign corporation and each of its qualifying
insurance company branches of contracts with
respect to which no policyholder, insured,
annuitant, or beneficiary is a related person
(as defined in section 954(b)), except that in
the case of a branch, such premiums shall only
be taken into account to the extent such
premiums are treated as earned by such branch
in its home country for purposes of such
country's tax laws,
``(iii) more than 50 percent of the gross
receipts of which for the taxable year--
``(I) consist of premiums for
insurance or reinsurance in connection
with property, liability, or the lives
or health of individuals, and
``(II) are treated as earned by
such controlled foreign corporation in
its home country for purposes of such
country's tax laws, and
``(iv) the applicable insurance liabilities
of which constitute more than 35 percent of its
total assets as reported on the company's
applicable financial statement for the year
with which or in which the taxable year ends.
``(B) Applicable insurance liabilities.--For
purposes of subparagraph (A)(iv), the term `applicable
insurance liabilities' means--
``(i) loss and loss adjustment expenses,
``(ii) unearned premiums, and
``(iii) reserves (other than any
catastrophe, deficiency, equalization, or
similar reserves) for life and health insurance
risks and life and health insurance claims with
respect to contracts providing coverage for
mortality or morbidity risks (not to exceed the
amount of such reserve that is required to be
reported to the home country insurance
regulatory body).
``(C) Applicable financial statement.--For purposes
of subparagraph (A)(iv), the term `applicable financial
statement' means a statement for financial reporting
purposes which--
``(i) is made on the basis of generally
accepted accounting principles,
``(ii) is made on the basis of
international financial reporting standards,
but only if there is no statement that meets
the requirement of clause (i), or
``(iii) except as otherwise provided by the
Secretary in regulations, is the annual
statement which is required to be filed with
the home country insurance regulatory body, but
only if there is no statement which meets the
requirements of clause (i) or (ii).
``(D) Regulations.--The Secretary shall prescribe
such regulations as necessary to carry out the purposes
of this paragraph.
``(4) Qualifying insurance company branch.--The term
`qualifying insurance company branch' means a qualified
business unit (within the meaning of section 989(a)) of a
controlled foreign corporation if--
``(A) such unit is licensed, authorized, or
regulated by the applicable insurance regulatory body
for its home country to sell insurance, reinsurance, or
annuity contracts to persons other than related persons
(within the meaning of section 954(b)) in such home
country, and
``(B) such controlled foreign corporation is a
qualifying insurance company, determined under
paragraph (3) as if such unit were a qualifying
insurance company branch.
``(5) Life insurance or annuity contract.--For purposes of
this section and section 954, the determination of whether a
contract issued by a controlled foreign corporation or a
qualifying insurance company branch is a life insurance
contract or an annuity contract shall be made without regard to
sections 72(s), 101(f), 817(h), and 7702 if--
``(A) such contract is regulated as a life
insurance or annuity contract by the corporation's or
branch's home country, and
``(B) no policyholder, insured, annuitant, or
beneficiary with respect to the contract is a United
States person.
``(6) Home country.--For purposes of this subsection,
except as provided in regulations--
``(A) Controlled foreign corporation.--The term
`home country' means, with respect to a controlled
foreign corporation, the country in which such
corporation is created or organized.
``(B) Qualifying insurance company branch.--The
term `home country' means, with respect to a qualifying
insurance company branch, the country in which the
principal office of such branch is located and in which
such branch is licensed, authorized, or regulated by
the applicable insurance regulatory body to sell
insurance, reinsurance, or annuity contracts to persons
other than related persons (as defined in section
954(b)) in such country.
``(7) Anti-abuse rules.--For purposes of applying this
subsection and section 954(d)--
``(A) the rules of section 954(c)(7) (other than
subparagraph (B) thereof) shall apply,
``(B) there shall be disregarded any item of
income, gain, loss, or deduction of, or derived from,
an entity which is not engaged in regular and
continuous transactions with persons which are not
related persons,
``(C) there shall be disregarded any change in the
method of computing reserves a principal purpose of
which is the acceleration or deferral of any item in
order to claim the benefits of this subsection or
section 954(d),
``(D) a contract of insurance or reinsurance shall
not be treated as an exempt contract (and premiums from
such contract shall not be taken into account for
purposes of paragraph (2)(B) or (3)) if--
``(i) any policyholder, insured, annuitant,
or beneficiary is a resident of the United
States and such contract was marketed to such
resident and was written to cover a risk
outside the United States, or
``(ii) the contract covers risks located
within and without the United States and the
qualifying insurance company or qualifying
insurance company branch does not maintain such
contemporaneous records, and file such reports,
with respect to such contract as the Secretary
may require,
``(E) the Secretary may prescribe rules for the
allocation of contracts (and income from contracts)
among 2 or more qualifying insurance company branches
of a qualifying insurance company in order to clearly
reflect the income of such branches, and
``(F) premiums from a contract shall not be taken
into account for purposes of paragraph (2)(B) or (3) if
such contract reinsures a contract issued or reinsured
by a related person (as defined in section 954(b)).
``(8) Coordination with section 956(a).--
``(A) In general.--In determining insurance income
for purposes of section 956(a), exempt insurance income
shall not include income derived from exempt contracts
which cover risks other than applicable home country
risks.
``(B) Applicable home country risks.--For purposes
of subparagraph (A), the term `applicable home country
risks' means risks in connection with property in,
liability arising out of activity in, or the lives or
health of residents of, the home country of the
qualifying insurance company or qualifying insurance
company branch, as the case may be, issuing or
reinsuring the contract covering the risks.
``(9) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this subsection and section 954(d).
``(10) Cross reference.--For treatment of certain
investment income derived by qualifying insurance companies,
see section 954(d).
``SEC. 956. SPECIAL RULE FOR CERTAIN CAPTIVE INSURANCE COMPANIES.
``(a) Treatment as Controlled Foreign Corporations and United
States Shareholders.--
``(1) In general.--For purposes only of taking into account
related person insurance income--
``(A) the term `United States shareholder' means,
with respect to any foreign corporation, a United
States person (as defined in section 957(c)) who owns
(within the meaning of section 958(a)) any stock of the
foreign corporation,
``(B) the term `controlled foreign corporation' has
the meaning given to such term by section 957(a)
determined by substituting `25 percent or more' for
`more than 50 percent', and
``(C) the pro rata share referred to in section
951(a)(1) shall be determined under paragraph (5) of
this subsection.
``(2) Related person insurance income.--For purposes of
this subsection, the term `related person insurance income'
means any insurance income (within the meaning of section
955(a)) attributable to a policy of insurance or reinsurance
with respect to which the person (directly or indirectly)
insured is a United States shareholder in the foreign
corporation or a related person to such a shareholder.
``(3) Exceptions.--
``(A) Corporations not held by insured.--Paragraph
(1) shall not apply to any foreign corporation if at
all times during the taxable year of such foreign
corporation--
``(i) less than 20 percent of the total
combined voting power of all classes of stock
of such corporation entitled to vote, and
``(ii) less than 20 percent of the total
value of such corporation,
is owned (directly or indirectly under the principles
of section 883(c)(4)) by persons who are (directly or
indirectly) insured under any policy of insurance or
reinsurance issued by such corporation or who are
related persons to any such person.
``(B) De minimis exception.--Paragraph (1) shall
not apply to any foreign corporation for a taxable year
of such corporation if the related person insurance
income (determined on a gross basis) of such
corporation for such taxable year is less than 20
percent of its insurance income (as so determined) for
such taxable year.
``(C) Election to treat income as effectively
connected.--Paragraph (1) shall not apply to any
foreign corporation for any taxable year if--
``(i) such corporation elects (at such time
and in such manner as the Secretary may
prescribe)--
``(I) to treat its related person
insurance income for such taxable year
as income effectively connected with
the conduct of a trade or business in
the United States, and
``(II) to waive all benefits (other
than with respect to section 884) with
respect to related person insurance
income granted by the United States
under any treaty between the United
States and any foreign country, and
``(ii) such corporation meets such
requirements as the Secretary shall prescribe
to ensure that the tax imposed by this chapter
on such income is paid.
An election under this subparagraph made for any
taxable year shall not be effective if the corporation
(or any predecessor thereof) was a disqualified
corporation for the taxable year for which the election
was made or for any prior taxable year beginning after
1986.
``(D) Special rules for subparagraph (C).--
``(i) Period during which election in
effect.--
``(I) In general.--Except as
provided in subclause (II), any
election under subparagraph (C) shall
apply to the taxable year for which
made and all subsequent taxable years
unless revoked with the consent of the
Secretary.
``(II) Termination.--If a foreign
corporation which made an election
under subparagraph (C) for any taxable
year is a disqualified corporation for
any subsequent taxable year, such
election shall not apply to any taxable
year beginning after such subsequent
taxable year.
``(ii) Exemption from tax imposed by
section 4371.--The tax imposed by section 4371
shall not apply with respect to any related
person insurance income treated as effectively
connected with the conduct of a trade or
business within the United States under
subparagraph (C).
``(E) Disqualified corporation.--For purposes of
this paragraph the term `disqualified corporation'
means, with respect to any taxable year, any foreign
corporation which is a controlled foreign corporation
at any time during such taxable year (determined
without regard to this subsection) but only if a United
States shareholder (determined without regard to this
subsection) owns (within the meaning of section 958(a))
stock in such corporation at some time during such
taxable year.
``(4) Treatment of mutual insurance companies.--In the case
of a mutual insurance company--
``(A) this subsection shall apply,
``(B) policyholders of such company shall be
treated as shareholders, and
``(C) appropriate adjustments in the application of
this subpart shall be made under regulations prescribed
by the Secretary.
``(5) Determination of pro rata share.--
``(A) In general.--The pro rata share determined
under this paragraph for any United States shareholder
is the lesser of--
``(i) the amount which would be determined
under paragraph (2) of section 951(a) if--
``(I) only related person insurance
income were taken into account,
``(II) stock owned (within the
meaning of section 958(a)) by United
States shareholders on the last day of
the taxable year were the only stock in
the foreign corporation, and
``(III) only distributions received
by United States shareholders were
taken into account under subparagraph
(B) of such paragraph (2), or
``(ii) the amount which would be determined
under paragraph (2) of section 951(a) if the
entire earnings and profits of the foreign
corporation for the taxable year were subpart F
income.
``(B) Coordination with other provisions.--The
Secretary shall prescribe regulations providing for
such modifications to the provisions of this subpart as
may be necessary or appropriate by reason of
subparagraph (A).
``(6) Related person.--For purposes of this subsection--
``(A) In general.--Except as provided in
subparagraph (B), the term `related person' has the
meaning given such term by section 954(b).
``(B) Treatment of certain liability insurance
policies.--In the case of any policy of insurance
covering liability arising from services performed as a
director, officer, or employee of a corporation or as a
partner or employee of a partnership, the person
performing such services and the entity for which such
services are performed shall be treated as related
persons.
``(7) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
this subsection, including--
``(A) regulations preventing the avoidance of this
subsection through cross insurance arrangements or
otherwise, and
``(B) regulations which may provide that a person
will not be treated as a United States shareholder
under paragraph (1) with respect to any foreign
corporation if neither such person (nor any related
person to such person) is (directly or indirectly)
insured under any policy of insurance or reinsurance
issued by such foreign corporation.
``(b) Election by Foreign Insurance Company To Be Treated as
Domestic Corporation.--
``(1) In general.--If--
``(A) a foreign corporation is a controlled foreign
corporation (as defined in section 957(a) by
substituting `25 percent or more' for `more than 50
percent' and by using the definition of United States
shareholder under subsection (a)(1)(B)),
``(B) such foreign corporation would qualify under
part I or II of subchapter L for the taxable year if it
were a domestic corporation,
``(C) such foreign corporation meets such
requirements as the Secretary shall prescribe to ensure
that the taxes imposed by this chapter on such foreign
corporation are paid, and
``(D) such foreign corporation makes an election to
have this paragraph apply and waives all benefits to
such corporation granted by the United States under any
treaty,
for purposes of this title, such corporation shall be treated
as a domestic corporation.
``(2) Period during which election is in effect.--
``(A) In general.--Except as provided in
subparagraph (B), an election under paragraph (1) shall
apply to the taxable year for which made and all
subsequent taxable years unless revoked with the
consent of the Secretary.
``(B) Termination.--If a corporation which made an
election under paragraph (1) for any taxable year fails
to meet the requirements of subparagraphs (A), (B), and
(C) of paragraph (1) for any subsequent taxable year,
such election shall not apply to any taxable year
beginning after such subsequent taxable year.
``(3) Effect of election.--
``(A) In general.--For purposes of section 367, any
foreign corporation making an election under paragraph
(1) shall be treated as transferring (as of the 1st day
of the 1st taxable year to which such election applies)
all of its assets to a domestic corporation in
connection with an exchange to which section 354
applies.
``(B) Exception for pre-1988 earnings and
profits.--
``(i) In general.--Earnings and profits of
the foreign corporation accumulated in taxable
years beginning before January 1, 1988, shall
not be included in the gross income of the
persons holding stock in such corporation by
reason of subparagraph (A).
``(ii) Treatment of distributions.--For
purposes of this title, any distribution made
by a corporation to which an election under
paragraph (1) applies out of earnings and
profits accumulated in taxable years beginning
before January 1, 1988, shall be treated as a
distribution made by a foreign corporation.
``(iii) Certain rules to continue to apply
to pre-1988 earnings.--Section 884 to the
extent the foreign corporation reinvested 1987
earnings and profits in United States assets
shall be applied without regard to paragraph
(1), except that, in the case of a corporation
to which an election under paragraph (1)
applies, only earnings and profits accumulated
in taxable years beginning before January 1,
1988, shall be taken into account.
``(4) Effect of termination.--For purposes of section 367,
if--
``(A) an election is made by a corporation under
paragraph (1) for any taxable year, and
``(B) such election ceases to apply for any
subsequent taxable year,
such corporation shall be treated as a domestic corporation
transferring (as of the 1st day of such subsequent taxable
year) all of its property to a foreign corporation in
connection with an exchange to which section 354 applies.
``(5) Additional tax on corporation making election.--
``(A) In general.--If a corporation makes an
election under paragraph (1), the amount of tax imposed
by this chapter for the 1st taxable year to which such
election applies shall be increased by the amount
determined under subparagraph (B).
``(B) Amount of tax.--The amount of tax determined
under this paragraph shall be equal to the lesser of--
``(i) \3/4\ of 1 percent of the aggregate
amount of capital and accumulated surplus of
the corporation as of December 31, 1987, or
``(ii) $1,500,000.''.
(b) Treatment of Certain Excluded Subpart F Income as Previously
Taxed Income.--Section 959(g), as added by section 331, is amended to
read as follows:
``(g) Special Rules for Nontaxed Portion of Certain Income.--For
purposes of this section--
``(1) In general.--A United States shareholder's pro rata
share of the excludable portion of the controlled foreign
corporation's subpart F income shall be treated as an amount
which has been included in gross income under section 951(a).
``(2) Ordering rule.--Notwithstanding subsection (c), for
purposes of subsections (a) and (b), section 316(a) shall be
applied by applying paragraph (2) thereof and then paragraph
(1) thereof--
``(A) first to the deductible portion (as defined
in section 965(c)(3)) of the increase in subpart F
income described in section 965(a)(1) included in the
gross income of United States shareholders under
section 951(a)(1) (after application of section
965(a)(2)(A)),
``(B) second to the excludable portion of the
controlled foreign corporation's subpart F income, and
``(C) then to the amounts described in paragraphs
(1), (2), or (3) of subsection (c) in accordance with
the provisions of subsection (c).
``(3) Definitions.--For purposes of this subsection--
``(A) Deductible portion.--The term `deductible
portion' has the meaning given such term by section
965(c)(3).
``(B) Excludable portion.--The term `excludable
portion' means, with respect to the subpart F income of
a controlled foreign corporation, so much of such
controlled foreign corporation's modified active income
as is not taken into account in computing subpart F
income under section 952(a)(1).''.
(c) Gains and Losses From the Sale of CFC Stock.--
(1) Gains.--
(A) In general.--Part I of subchapter P of chapter
1 is amended by adding at the end the following new
section:
``SEC. 1203. GAINS FROM SALES OR EXCHANGES OF STOCK IN CONTROLLED
FOREIGN CORPORATIONS.
``(a) In General.--In the case of a United States shareholder (as
defined in section 951), there shall be excluded from gross income an
amount equal to the applicable portion of the amount of any gain
recognized from the sale or exchange of stock in a controlled foreign
corporation.
``(b) Applicable Portion.--For purposes of this section--
``(1) In general.--The term `applicable portion' means the
amount which bears the same ratio to the gain recognized from
such sale or exchange as--
``(A) the shareholder's pro rata share (determined
under section 951(a)(2)) of the excludable portion of
the aggregate subpart F income of the controlled
foreign corporation for the applicable period, bears to
``(B) the sum of the amount determined under
subparagraph (A) plus the shareholder's pro rata share
(determined under section 951(a)(2)) of the aggregate
subpart F income of the controlled foreign corporation
for the applicable period.
``(2) Excludable portion.--For purposes of this section,
the term `excludable portion' has the meaning given such term
by section 959(g)(3)(B).
``(3) Applicable period.--The term `applicable period'
means, with respect to any stock, the shorter of the 3-taxable
year period immediately preceding the taxable year of the sale
or exchange or the shareholder's holding period in the stock.
In no event shall the applicable period include any portion of
any taxable year beginning before the applicable date (as
defined in section 300 of the Infrastructure and Global Tax
Competitiveness Act of 2014).''.
(B) Clerical amendment.--The table of sections for
part I of subchapter P of chapter 1 is amended by
adding at the end the following new item:
``Sec. 1203. Gains from sales or exchanges of stock in controlled
foreign corporations.''.
(2) Losses.--
(A) In general.--Part II of subchapter P of chapter
1 is amended by adding at the end the following new
section:
``SEC. 1213. LOSSES FROM SALES OR EXCHANGES OF STOCK IN CONTROLLED
FOREIGN CORPORATIONS.
``(a) In General.--In the case of a United States shareholder (as
defined in section 951), any loss from the sale or exchange of stock in
a controlled foreign corporation shall be reduced (but not below zero)
by an amount equal to the shareholder's aggregate pro rata share
(determined under section 951(a)(2)) of the excludable portion of the
subpart F income of the controlled foreign corporation during the
shareholder's holding period in the stock.
``(b) Excludable Portion.--For purposes of this section, the term
`excludable portion' has the meaning given such term by section
959(g)(3)(B).''.
(B) Clerical amendment.--The table of sections for
part I of subchapter P of chapter 1 is amended by
adding at the end the following new item:
``Sec. 1213. Losses from sales or exchanges of stock in controlled
foreign corporations.''.
(d) Repeal of Ordinary Income Treatment for Gains From the Sale of
Stock in Certain Foreign Corporations.--
(1) In general.--Part IV of subchapter P of chapter 1 is
amended by striking section 1248.
(2) Conforming amendments.--
(A) Section (a) is amended by striking paragraph
(11).
(B) Section 338(h) is amended--
(i) in paragraph (6)(B)(ii), by striking
``or described in section 1248(e)'', and
(ii) in paragraph (16), by striking the
second sentence.
(C) Section 751 is amended--
(i) in subsection (c), by striking ``stock
in certain foreign corporations (as described
in section 1248),'', and
(ii) by striking subsection (e) and
redesignating subsection (f) as subsection (e).
(D) Section 865(k) is amended to read as follows:
``(k) Cross Reference.--For sourcing of income from certain foreign
currency transactions, see section 988.''.
(E) Section 904(h)(7) is amended by striking ``or
as a dividend under section 1248''.
(F) Section 951(a)(2) is amended by striking the
last sentence thereof.
(G) Section 964 is amended by striking subsection
(e).
(H) Section 989(b) is amended by striking paragraph
(2) and by redesignating paragraphs (3) and (4) as
paragraphs (2) and (3), respectively.
(e) Coordination With Amounts Included in Gross Income of United
States Shareholders.--
(1) In general.--Paragraph (1) of section 951(a) is amended
by striking ``such taxable year of the corporation ends--'' and
all that follows through the end period and inserting: ``such
taxable year of the corporation ends, the shareholder's pro
rata share (determined under paragraph (2)) of the
corporation's subpart F income for such taxable year.''.
(2) Conforming amendments.--
(A) Section 951(a) is amended--
(i) by striking ``paragraph (1)(A)(i)'' in
paragraph (2) and inserting ``paragraph (1)'',
and
(ii) by striking paragraph (3).
(B) Subparagraph (A) of section 512(b)(17) is
amended by striking ``951(a)(1)(A)'' and inserting
``951(a)(1)''.
(C) Section 851(b) is amended by striking
``951(a)(1)(A)(i)'' in the first sentence following
paragraph (3) and inserting ``951(a)(1)''.
(D) Section 959(a) is amended--
(i) by striking ``shall not, when'' and all
that follows through ``such shareholder'' and
inserting ``shall not, when actually
distributed to such shareholder'', and
(ii) by striking ``and the rules of
subsection (f) shall apply for purposes of
paragraph (2) of this subsection''.
(E) Section 959(c) is amended by adding at the end
the following: ``References in this subsection and
subsection (f) to section 951(a)(1)(B) shall be treated
as references to such provisions as in effect on the
day before the enactment of the Infrastructure and
Global Tax Competitiveness Act of 2014.''.
(F) Section 959(e) is amended by striking
``951(a)(1)(A)'' and inserting ``951(a)(1)''.
(G) Section 989(b)(3) is amended by striking
``951(a)(1)(A)'' and inserting ``951(a)(1)''.
(H) Section 1298(b) is amended by striking
paragraph (8).
(f) Application of Anti-Loss Importation Rules.--Section
362(e)(1)(B) is amended by adding at the end the following new
sentence: ``For purposes of clause (i), except as provided under
regulations, a controlled foreign corporation shall be considered to be
subject to tax under this subtitle.''.
(g) Other Conforming Amendments.--
(1) Sections 163(e)(3)(B)(i) and 267(a)(3)(B)(i) are each
amended by striking ``and qualified deficits under section
952(c)(1)(B)'' and inserting ``and loss carryforwards under
sections 952(d) and 953(b)''.
(2) Section 304(b)(5)(B)(ii) is amended by striking
``953(c)'' and inserting ``956(a)''.
(3) Section 355(g)(2)(B)(ii)(I) is amended by striking
``section 954(h)(4)'' and inserting ``section 954(c)(4)''.
(4) Section 512(b)(17) is amended by striking ``953'' and
inserting ``section 955''.
(5) Section 864(d)(8) is amended by striking ``or section
956(b)(3)''.
(6) Section 864(d)(5)(A) is amended--
(A) by striking clause (iii) and redesignating
clause (iv) as clause (iii), and
(B) by striking ``954(c)(3)(A)'' in clause (iii)
(as redesignated by subparagraph (A)) and inserting
``954(a)(3)(A)''.
(7) Section 864(d)(7)(B) is amended by striking ``foreign
base company income (as defined in section 954(a), determined
without regard to section 954(b)(3)(A))'' and inserting
``passive income (as defined in section 954(a))''.
(8) Section 881(c)(5)(A)(iii) is amended by striking
``954(c)(3)(A)'' and inserting ``954(a)(3)(A)''.
(9) Section 884(d)(2)(D) is amended by striking
``953(c)(3)(C)'' and inserting ``956(a)(3)(C)''.
(10) Section 898(b)(3) is amended--
(A) by striking ``953(c)(2)'' and inserting
``956(a)(2)'', and
(B) by striking ``953(c)(1)'' and inserting
``956(a)(1)''.
(11) Section 936(h)(5) is amended--
(A) by inserting ``(as in effect on the day before
the enactment of the Infrastructure and Global Tax
Competitiveness Act of 2014)'' after ``section 954'' in
the last sentence of subparagraph (B)(ii), and
(B) in subparagraph (F)(iv)(II)--
(i) by inserting ``(as in effect on the day
before the enactment of the Infrastructure and
Global Tax Competitiveness Act of 2014)'' after
``section 954'', and
(ii) by inserting ``(as so in effect)''
after ``section 954(a)''.
(12) Section 957(b) is amended--
(A) by striking ``income described in section
953(a)'' and inserting ``income described in section
955(a)'', and
(B) by striking ``contracts described in section
953(a)(1)'' and inserting ``contracts described in
section 955(a)(1)''.
(13) Section 958(b) is amended--
(A) by striking ``956(c)(2),'' before ``and 957'',
(B) by striking ``to treat the stock of a domestic
corporation as owned by a United States shareholder of
the controlled foreign corporation for purposes of
section 956(c)(2),'', and
(C) by striking the last sentence.
(14) Section 964(b) is amended by striking ``sections 952,
955, and 956'' and inserting ``section 952''.
(15) Section 964(e)(2) is amended by striking
``954(c)(3)(A)'' and inserting ``954(a)(3)(A)''.
(16)(A) Part III of subchapter N of chapter 1 is amended by
striking subpart G.
(B) Section 865(e)(2)(A) is amended by striking the last
sentence.
(C) The table of subparts for part III of subchapter N of
chapter 1 is amended by striking the item relating to subpart
G.
(17) Section 999(c) is amended--
(A) by striking ``, 952(a)(3)'' in paragraph (1),
and
(B) by striking ``, the addition to subpart F
income under section 952(a)(3),'' in paragraph (2).
(18) Section 1296(f)(2) is amended--
(A) by striking ``foreign personal holding company
income described in section 954(c)(1)(A)'' in
subparagraph (A) and inserting ``passive income (as
defined in section 954(a))'', and
(B) by striking ``foreign personal holding company
income so described'' and inserting ``such passive
income''.
(19) Section 1297(b) is amended to read as follows:
``(b) Passive Income.--
``(1) In general.--Except as provided in paragraph (2), the
term `passive income' means any income received or accrued by
any foreign corporation which is of a kind which would be
passive income as defined in section 954 if the foreign
corporation were a controlled foreign corporation.
``(2) Exception.--Except as provided in regulations, the
term `passive income' does not include any income which is
interest, a dividend, or a rent or royalty, which is received
or accrued from a related person (within the meaning of section
954(b)) to the extent that such amount is properly allocable
(under regulations prescribed by the Secretary) to income of
such related person which is not passive income.''.
(20) Section 2057(e)(2)(D)(ii) is amended by striking
``section 954(c)(1)'' and inserting ``section 954(a)(1)''.
(21) The following sections are amended by striking
``954(d)(3)'' each place it appears and inserting ``954(b)'':
(A) Section 861(c)(2)(B).
(B) Section 958(b).
(C) Section 988(a)(3)(C).
(D) Subsections (d)(3)(A) and (e)(2)(B)(i) of
section 1298.
(E) Section 1471(e)(2).
(F) Section 3121(z)(2).
(22) The table of sections for subpart F of part III of
subchapter 1 is amended by striking the items relating to
sections 952 through 956 and inserting the following:
``Sec. 952. Subpart F income defined.
``Sec. 953. Active foreign market income.
``Sec. 954. Definition of passive income.
``Sec. 955. Definition of insurance income.
``Sec. 956. Special rule for certain captive insurance companies.''.
(h) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years of
foreign corporations beginning on or after the applicable date,
and to taxable years of United States shareholders with or
within which such taxable years of foreign corporations end.
(2) Gains and losses from the sale of cfc stock; repeal of
section 1248.--The amendments made by subsections (c) and (d)
shall apply to sales or exchanges on or after the applicable
date.
PART II--FOREIGN TAX CREDIT LIMITATIONS
SEC. 311. REFORM OF FOREIGN TAX CREDIT LIMITATION.
(a) In General.--Subsection (d) of section 904 is amended to read
as follows:
``(d) Separate Application of Section With Respect to Certain
Categories of Income.--
``(1) In general.--The provisions of subsections (a), (b),
and (c) and section 907 and 960 shall be applied separately
with respect to--
``(A) amounts included under section 951(a) which
are attributable to active foreign market income (as
defined in section 953),
``(B) passive category income, and
``(C) income other than income described in either
of the preceding subparagraphs.
``(2) Definitions and special rules.--
``(A) Passive category income.--
``(i) In general.--The term `passive
category income' means--
``(I) United States taxpayer
passive income described in
subparagraph (B), and
``(II) income which is included in
gross income of the taxpayer under
section 951(a)(1) to the extent such
income is attributable to passive
income (as defined in section 954(a)).
``(ii) Exception for high-taxed income.--
Passive category income shall not include any
high-taxed income.
``(iii) Clarification of application of
section 864(d)(6).--In determining whether any
income is passive category income, the rules of
section 864(d)(6) shall apply only in the case
of income of a controlled foreign corporation.
``(B) United states taxpayer passive income.--
United States taxpayer passive income described in this
subparagraph is income received or accrued by the
taxpayer which is of a kind that would be passive
income as defined under section 954(a) if such taxpayer
were a controlled foreign corporation.
``(C) Treatment of financial services income and
companies.--
``(i) In general.--Financial services
income which is not active foreign market
category income shall be treated as income
described in paragraph (1)(C) in the case of--
``(I) a member of a financial
services group, and
``(II) any other person if such
person is predominantly engaged in the
active conduct of a banking, insurance,
financing, or similar business.
``(ii) Financial services group.--The term
`financial services group' means any affiliated
group (as defined in section 1504(a) without
regard to paragraphs (2) and (3) of section
1504(b)) which is predominantly engaged in the
active conduct of a banking, insurance,
financing, or similar business. In determining
whether such a group is so engaged, there shall
be taken into account only the income of
members of the group that are--
``(I) United States corporations,
or
``(II) controlled foreign
corporations in which such United
States corporations own, directly or
indirectly, at least 80 percent of the
total voting power and value of the
stock.
``(iii) Pass-thru entities.--The Secretary
shall by regulation specify for purposes of
this subparagraph the treatment of financial
services income received or accrued by
partnerships and by other pass-thru entities
which are not members of a financial services
group.
``(D) Financial services income.--
``(i) In general.--Except as otherwise
provided in this subparagraph, the term
`financial services income' means any income
which is received or accrued by any person
predominantly engaged in the active conduct of
a banking, insurance, financing, or similar
business, and which is--
``(I) described in clause (ii), or
``(II) United States taxpayer
passive income (determined without
regard to subparagraph (A)(ii)).
``(ii) General description of financial
services income.--Income is described in this
clause if such income is--
``(I) derived in the active conduct
of a banking, financing, or similar
business,
``(II) derived from the investment
by an insurance company of its unearned
premiums or reserves ordinary and
necessary for the proper conduct of its
insurance business, or
``(III) of a kind which would be
insurance income as defined in section
955(a).
``(E) High-taxed income.--The term `high-taxed
income' means any income which (but for this
subparagraph) would be passive category income if the
sum of--
``(i) the foreign income taxes paid or
accrued by the taxpayer with respect to such
income, and
``(ii) the foreign income taxes deemed paid
by the taxpayer with respect to such income
under section 960,
exceeds the highest rate of tax specified in section 1
or 11 (whichever applies) multiplied by the amount of
such income (determined with regard to section 78). For
purposes of the preceding sentence, the term `foreign
income taxes' means any income, war profits, or excess
profits tax imposed by any foreign country or
possession of the United States.
``(F) Treatment of income tax base differences.--
``(i) In general.--In the case of taxable
years beginning after December 31, 2006, tax
imposed under the law of a foreign country or
possession of the United States on an amount
which does not constitute income under United
States tax principles shall be treated as
imposed on income described in paragraph
(1)(C).
``(ii) Special rules for years after 2006
and before the applicable date.--In the case of
taxable years beginning after December 31,
2006, and on or before the applicable date (as
defined in section 300 of the Infrastructure
and Global Tax Competitiveness Act of 2014),
tax imposed under the law of a foreign country
or possession of the United States on an amount
which does not constitute income under United
States tax principles shall be treated as
imposed on income described in paragraph (1)(B)
(as in effect for taxable years beginning the
day before such applicable date).
``(iii) Special rule for years before
2007.--
``(I) In general.--In the case of
taxes paid or accrued in taxable years
beginning after December 31, 2004, and
before January 1, 2007, a taxpayer may
elect to treat tax imposed under the
law of a foreign country or possession
of the United States on an amount which
does not constitute income under United
States tax principles as tax imposed on
income described in subparagraph (C) or
(I) of paragraph (1) (as in effect for
taxable years beginning in 2006).
``(II) Revocation.--Any such
election shall apply to the taxable
year for which made and all subsequent
taxable years described in subclause
(I) unless revoked with the consent of
the Secretary.
``(G) Transition rules for certain carryforwards
and carrybacks.--For purposes of paragraph (1)--
``(i) in the case of any taxes carried from
any taxable year beginning before the
applicable date (as defined in section 300 of
the Infrastructure and Global Tax
Competitiveness Act of 2014), to any taxable
year beginning on or after such date--
``(I) if such taxes were treated as
attributable to income described in
paragraph (1)(A) (as in effect for
taxable years beginning the day before
such applicable date), such taxes shall
be treated as attributable to income
described in paragraph (1)(B), and
``(II) if such taxes were treated
as attributable to income described in
paragraph (1)(B) (as in effect for
taxable years beginning the day before
such applicable date), such taxes shall
be treated as attributable to income
described in paragraph (1)(C), and
``(ii) the Secretary may by regulations
provide for the allocation of any carryback of
taxes with respect to income from a taxable
year beginning on or after such applicable
date, to a taxable year beginning before such
date for purposes of allocating such income
among the separate categories in effect for the
taxable year to which carried.
``(3) Controlled foreign corporation; united states
shareholder.--For purposes of this subsection--
``(A) Controlled foreign corporation.--The term
`controlled foreign corporation' has the meaning given
such term by section 957 (taking into account section
956(a)).
``(B) United states shareholder.--The term `United
States shareholder' has the meaning given such term by
section 951(b) (taking into account section 956(a)).
``(4) Separate application to items resourced under
treaties.--
``(A) In general.--If--
``(i) without regard to any treaty
obligation of the United States, any item of
income would be treated as derived from sources
within the United States,
``(ii) under a treaty obligation of the
United States, such item would be treated as
arising from sources outside the United States,
and
``(iii) the taxpayer chooses the benefits
of such treaty obligation,
subsections (a), (b), and (c) of this section and
sections 907 and 960 shall be applied separately with
respect to each such item.
``(B) Coordination with other provisions.--This
paragraph shall not apply to any item of income to
which subsection (h)(10) or section 865(h) applies.
``(C) Regulations.--The Secretary may issue such
regulations as may be necessary or appropriate to carry
out the purposes of this paragraph, including
regulations which provide that related items of income
may be aggregated for purposes of this paragraph.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate for the purposes
of this subsection, including preventing the manipulation of
the character of income the effect of which is to avoid the
purposes of this subsection.''.
(b) Application of Per Country Limitation.--Section 904 is amended
by inserting after subsection (d) the following new subsection:
``(e) Limitations Applied on a Per Country Basis.--The provisions
of subsections (a), (b), (c), and (d) and sections 907 and 960 shall be
applied separately with respect to each foreign country or possession
with respect to which taxes described in section 901(b) are paid or
accrued.''.
(c) Effective Date.--The amendment made by this section shall apply
to taxable years beginning on or after the applicable date.
SEC. 312. DENIAL OF CREDIT AND DEDUCTION FOR FOREIGN TAXES WITH RESPECT
TO EXCLUDED SUBPART F INCOME.
(a) In General.--Section 901 is amended by redesignating subsection
(n) as subsection (o) and by inserting after subsection (m) the
following:
``(n) Denial of Foreign Tax Credit and Deduction With Respect to
Excluded Subpart F Income.--
``(1) In general.--Notwithstanding section 960(b), no
credit shall be allowed under subsection (a) for any income,
war profits, or excess profits taxes paid or accrued (or deemed
paid or accrued under section 960) with respect to the
excludable portion of subpart F income or any distribution
received by a United States shareholder (as defined in section
951(b)) which is properly attributable to such excludable
portion. No deduction shall be allowed to a taxpayer under this
chapter for any tax for which a credit is not allowable by
reason of the preceding sentence.
``(2) Excludable portion.--The term `excludable portion'
has the meaning given such term by section 959(g)(3)(B).
``(3) Coordination with section 78.--Section 78 shall not
apply to any tax which is not allowable as a credit under this
section by reason of this subsection.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning on or after
the applicable date, and to taxable years of United States shareholders
with or within which such taxable years of foreign corporations end.
PART III--EXPENSE DISALLOWANCE
SEC. 321. DISALLOWANCE OF DEDUCTION FOR EXPENSES ALLOCABLE TO EXEMPT
INCOME OF A CONTROLLED FOREIGN CORPORATION.
(a) In General.--Part IX of subchapter B of chapter 1 is amended by
adding at the end the following:
``SEC. 265A. EXPENSES ALLOCABLE TO EXEMPT INCOME OF A CONTROLLED
FOREIGN CORPORATION.
``(a) In General.--In the case of a United States shareholder of a
controlled foreign corporation for any taxable year, no deduction shall
be allowed under this chapter for--
``(1) the disallowed portion of any allocable CFC interest,
or
``(2) expenses directly allocable to the excludable portion
of subpart F income (as defined in section 959(g)(3)(B)).
``(b) Disallowed Portion.--For purposes of this section--
``(1) In general.--The term `disallowed portion' means,
with respect to any allocable CFC interest in connection with a
controlled foreign corporation, the exclusion percentage of the
amount which bears the same ratio to the amount of such
interest as--
``(A) the corporation's modified active income (as
defined in section 952) for the applicable taxable
year, bears to
``(B) the corporation's current earnings and
profits.
``(2) Current earnings and profits.--For purposes of this
subsection--
``(A) In general.--The term `current earnings and
profits' means the earnings and profits of the
controlled foreign corporation for the applicable
taxable year, without diminution by reason of
distributions made during the taxable year.
``(B) Special rule for determining earnings and
profits.--Earnings and profits of any controlled
foreign corporation shall be determined without regard
to paragraphs (4), (5), and (6) of section 312(n).
Under regulations, the preceding sentence shall not
apply to the extent it would increase earnings and
profits by an amount which was previously distributed
by the controlled foreign corporation.
``(3) Exclusion percentage.--The term `exclusion
percentage' means, with respect to any controlled foreign
corporation for any taxable year, the number of percentage
points by which 100 percent exceeds the inclusion percentage
determined under section 952(d) with respect to such controlled
foreign corporation for such taxable year.
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) Allocable cfc interest.--The term `allocable CFC
interest' means any interest expense paid or accrued during the
taxable year by a United States shareholder of a controlled
foreign corporation which under section 861, and subsection (e)
or (f) of section 864 (whichever is applicable), is apportioned
to income of the controlled foreign corporation.
``(2) Applicable taxable year.--The term `applicable
taxable year' means, with respect to any controlled foreign
corporation, the taxable year of such corporation which ends
with or within the taxable year of the United States
shareholder described in subsection (a).
``(3) United states shareholder; controlled foreign
corporation.--The term `United States shareholder' has the
meaning given such term by section 951(b) and the term
`controlled foreign corporation' shall have the meaning given
such term by section 957(a).
``(4) Special rule for members of an affiliated group.--If
a United States shareholder to which subsection (a) applies is
a domestic corporation which is a member of a group all members
of which are treated as a single corporation under subsection
(e) or (f) of section 864, whichever is applicable, all
domestic corporations which are members of such group shall be
treated as a single corporation for purposes of this section.
``(5) Special rules.--
``(A) Coordination with other provisions.--Except
as provided in regulations, this section shall be
applied before any other provision of this chapter
limiting the deductibility of any allocable CFC
interest.
``(B) Separate application to income in separate
baskets.--This section shall be applied separately with
respect to the categories of income under section
904(d)(1).
``(d) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to carry out the purposes of this section,
including regulations providing--
``(1) for the sharing of information between shareholders
if necessary to carry out the provisions of this section,
``(2) for directly associating interest or other expenses
disallowed under this section with income of a controlled
foreign corporation and for coordinating this section with
other provisions of this chapter limiting the deductibility of
interest or other expenses, and
``(3) for the proper application of this section with
respect to the taxpayer's share of net operating losses of a
controlled foreign corporation.''.
(b) Conforming Amendment.--The table of sections for part IX of
subchapter B of chapter 1 is amended by inserting after the item
relating to section 265 the following:
``Sec. 265A. Expense allocable to exempt income of a controlled foreign
corporation.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning on or after
the applicable date, and to taxable years of United States shareholders
with or within which such taxable years of foreign corporations end.
PART IV--OTHER PROVISIONS RELATING TO SUBPART F
Subpart A--Previously Deferred Foreign Income
SEC. 331. TREATMENT OF PREVIOUSLY DEFERRED FOREIGN INCOME.
(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. INCLUSION OF PREVIOUSLY DEFERRED FOREIGN INCOME.
``(a) Inclusion as Subpart F Income.--
``(1) In general.--Subject to the provisions of paragraph
(2), the subpart F income (determined under section 952 without
regard to this section) of a controlled foreign corporation for
its last taxable year beginning before the applicable date (as
defined in section 300 of the Infrastructure and Global Tax
Competitiveness Act of 2014), shall be increased by the
accumulated deferred foreign income of the corporation.
``(2) Inclusion only to apply to domestic corporations.--In
the case of any increase in subpart F income of a controlled
foreign corporation by reason of paragraph (1)--
``(A) notwithstanding section 951(a)(1), the
inclusion in gross income under such section of a
United States shareholder's pro rata portion (as
determined under section 951(a)(2)) of such increased
subpart F income shall only apply if the United States
shareholder is a domestic corporation, and
``(B) there shall be allowed as a deduction for the
taxable year of such United States shareholder in which
such increased subpart F income is included in such
shareholder's gross income under section 951(a)(1) an
amount equal to the applicable percentage of the amount
of the income so included.
``(b) Accumulated Deferred Foreign Income.--For purposes of this
section--
``(1) In general.--The term `accumulated deferred foreign
income' means the excess of--
``(A) the undistributed earnings of the controlled
foreign corporation, over
``(B) the undistributed U.S. earnings of such
controlled foreign corporation.
``(2) Undistributed earnings.--
``(A) In general.--The term `undistributed
earnings' means the earnings and profits of the
controlled foreign corporation described in section
959(c)(3), determined--
``(i) as of the close of the taxable year
described in subsection (a)(1),
``(ii) without diminution by reason of
distributions made during such taxable year,
and
``(iii) without regard to this section.
``(B) Special rule for current year
distributions.--For purposes of this chapter, any
determination with respect to the treatment of
distributions described in subparagraph (A)(ii) shall
be made after the application of this section to the
earnings and profits described in subparagraph (A).
``(3) Undistributed u.s. earnings.--The term `undistributed
U.S. earnings' has the meaning given the term `post-1986
undistributed U.S. earnings' in section 245(a)(5) (as in effect
for taxable years beginning the day before the applicable date
(as defined in section 300 of the Infrastructure and Global Tax
Competitiveness Act of 2014)), determined--
``(A) without regard to `post-1986' each place it
appears in the matter before subparagraph (A), and
``(B) without regard to the last sentence thereof.
``(c) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section
901 to a United States shareholder of a controlled foreign
corporation for any taxes paid or accrued (or treated as paid
or accrued) with respect to the deductible portion of--
``(A) the increased subpart F income of the
corporation included in the gross income of the
shareholder under subsection (a)(2)(A), or
``(B) any distribution received by the shareholder
which is properly attributable to such increased
subpart F income.
``(2) Denial of deduction.--No deduction shall be allowed
under this chapter to a United States shareholder of a
controlled foreign corporation for any tax for which a credit
is not allowable under section 901 by reason of paragraph (1).
``(3) Deductible portion.--For purposes of this subsection,
the term `deductible portion' means, with respect to the
increased subpart F income of the corporation included in the
gross income of the shareholder under subsection (a)(2)(A), the
applicable percentage of such income with respect to which a
deduction is allowable under subsection (a)(2)(B).
``(4) Coordination with section 78.--Section 78 shall not
apply to the portion of any tax for which credit is not
allowable under section 901 by reason of paragraph (1).
``(d) Applicable Percentage.--For purposes of this section, the
term `applicable percentage' means the percentage which is equal to the
ratio of--
``(1) the excess of--
``(A) the highest rate of tax in effect under
section 11(b) for the taxable year of the United States
shareholder described in subsection (a)(2)(B), over
``(B) 20 percent, to
``(2) the highest rate of tax in effect under section 11(b)
for the taxable year of the United States shareholder described
in subsection (a)(2)(B).
The percentage determined under the preceding sentence shall be rounded
to the nearest whole percentage point.
``(e) Election To Pay Liability in Installments.--
``(1) In general.--In the case of a United States
shareholder with respect to one or more controlled foreign
corporations to which subsection (a) applies, such United
States shareholder may elect to pay the net tax liability under
this section in 2 or more (but not exceeding 8) equal
installments.
``(2) Date for payment of installments.--If an election is
made under paragraph (1), the due date for the first
installment shall be the due date (determined without regard to
any extension of time for filing the return) for the return of
tax for the taxable year described in subsection (a)(2)(B) and
the due date for each succeeding installment shall be the due
date (as so determined) for the return of tax for the taxable
year following the taxable year with respect to which the
preceding installment was made.
``(3) Acceleration of payment.--If there is--
``(A) an assessment of an addition to tax for
failure to pay timely with respect to any installment
required under this subsection,
``(B) a liquidation or sale of substantially all
the assets of the taxpayer (including in a title 11 or
similar case),
``(C) a cessation of business by the taxpayer, or
``(D) any similar circumstance,
then the unpaid portion of all remaining installments shall be
due on the date of such event (or in the case of a title 11 or
similar case, the day before the petition is filed).
``(4) Proration of deficiency to installments.--If an
election is made under paragraph (1) to pay the net tax
liability under this section in installments and a deficiency
has been assessed, the deficiency shall be prorated to the
installments payable under paragraph (1). The part of the
deficiency so prorated to any installment the date for payment
of which has not arrived shall be collected at the same time
as, and as a part of, such installment. The part of the
deficiency so prorated to any installment the date for payment
of which has arrived shall be paid upon notice and demand from
the Secretary. This paragraph shall not apply if the deficiency
is due to negligence, to intentional disregard of rules and
regulations, or to fraud with intent to evade tax.
``(5) Rules relating to interest.--
``(A) In general.--In the case of any net tax
liability prorated to an installment under this
subsection, the last date prescribed for payment of the
tax for purposes of section 6601(a) shall be the last
date for payment of the installment rather than the
last date for payment of tax for the taxable year in
which the net tax liability arose.
``(B) Special rules for deficiencies.--
``(i) Interest payable for entire period.--
Subparagraph (A) shall not apply to any
deficiency prorated to an installment under
paragraph (4).
``(ii) Payment of interest attributable to
prior periods.--In the case of a deficiency to
which paragraph (4) applies, interest with
respect to such deficiency which is assigned
under paragraph (4) to any installment the date
for payment of which has arrived on or before
the date of the assessment of the deficiency,
shall be paid upon notice and demand from the
Secretary.
``(6) Period of assessment.--Notwithstanding section 6501,
the period for assessing the net tax liability under this
section for which an election is made under paragraph (1) shall
not expire before the due date for the last installment.
``(7) Election.--Any election under paragraph (1) shall be
made not later than the due date for the return of tax for the
taxable year of the United States shareholder described in
subsection (a)(2)(B) and shall be made in such manner as the
Secretary may provide.
``(8) Net tax liability under this section.--For purposes
of this subsection--
``(A) In general.--The net tax liability under this
section with respect to any United States shareholder
is the excess (if any) of--
``(i) such taxpayer's net income tax for
the taxable year, over
``(ii) such taxpayer's net income tax for
such taxable year determined without regard to
this section.
``(B) Net income tax.--The term `net income tax'
means the net income tax (as defined in section
38(c)(1)) reduced by the credit allowed under section
38.
``(C) Regulations.--The Secretary shall prescribe
such regulations as may be necessary for the
determination under this subsection of the net tax
liability under this section in the case of any pass-
thru entity.
``(f) Regulations.--The Secretary shall promulgate such regulations
as necessary to carry out the purposes of this section, including
regulations for the application of this section to pass-through
entities all or part of which are owned by 1 or more domestic
corporations.''.
(b) Ordering Rule for Purposes of Treatment of Previously Taxed
Income.--
(1) In general.--Section 959 is amended by adding at the
end the following new subsection:
``(g) Special Ordering Rule.--Notwithstanding subsection (c), for
purposes of subsections (a) and (b), section 316(a) shall be applied by
applying paragraph (2) thereof and then paragraph (1) thereof--
``(1) first to the deductible portion (as defined in
section 965(c)(3)) of the increase in subpart F income
described in section 965(a)(1) included in the gross income of
United States shareholders under section 951(a)(1) (after
application of section 965(a)(2)(A)), and
``(2) then to amounts described in paragraphs (1), (2), or
(3) of subsection (c).''.
(2) Conforming amendment.--Section 959(c) is amended by
inserting ``except as provided in subsection (g),'' after
``subsections (a) and (b),''.
(c) Conforming Amendments.--
(1) Clause (vi) of section 56(g)(4)(C) is amended--
(A) by inserting ``or section 966(a)(2)'' after
``section 965'', and
(B) by inserting ``and inclusions'' after ``certain
distributions'' in the heading thereof.
(2) Paragraph (3) of section 245(a) is amended--
(A) by striking ``post-1986'' in subparagraph (A),
and
(B) by striking ``total post-1986'' in subparagraph
(B).
(3) Paragraph (4) of section 245(a) is amended to read as
follows:
``(4) Undistributed earnings.--The term `undistributed
earnings' means the amount of the earnings and profits of the
controlled foreign corporation (computed in accordance with
sections 964(a) and 986)--
``(A) as of the close of the taxable year of the
controlled foreign corporation in which the dividend is
distributed, and
``(B) without diminution by reason of dividends
distributed during such taxable year.''.
(4) Paragraph (5) of section 245(a) is amended--
(A) by striking ``post-1986'' both places it
appears in the matter preceding subparagraph (A), and
(B) by striking ``Post-1986 undistributed'' in the
heading thereof and inserting ``Undistributed''.
(5) Paragraph (6) of section 245(a) is amended--
(A) by striking ``beginning after December 31,
1986'' and inserting ``which is after the first taxable
year of such corporation'', and
(B) by striking ``post-1986'' both places it
appears.
(6) Paragraph (2) of section 6601(b) is amended--
(A) by striking ``section 6156(a)'' in the matter
preceding subparagraph (A) and inserting ``section
965(d)(1) or 6156(a)'', and
(B) by striking ``section 6156(b)'' in subparagraph
(A) and inserting ``section 965(d)(2) or 6156(b), as
the case may be''.
(7) The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 965 and inserting the following:
``Sec. 965. Inclusion of previously deferred foreign income.''.
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to the last taxable
year of foreign corporations beginning before the applicable
date, and to taxable years of United States shareholders with
or within which such taxable years of foreign corporations end.
(2) Conforming amendments related to section 245.--The
amendments made by paragraphs (2), (3), (4), and (5) of
subsection (c) shall apply to taxable years of foreign
corporations beginning on or after the applicable date, and to
taxable years of United States shareholders with or within
which such taxable years of foreign corporations end.
Subpart B--Other Provisions
SEC. 336. ELIMINATION OF 30-DAY REQUIREMENT.
(a) In General.--Section 951(a)(1) is amended by striking ``for an
uninterrupted period of 30 days or more'' and inserting ``at any
time''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years of foreign corporations beginning on or after the
applicable date, and to taxable years of United States shareholders
with or within which such taxable years of foreign corporations end.
SEC. 337. MODIFICATION OF DEFINITION OF UNITED STATES SHAREHOLDER.
(a) In General.--Section 951(b) is amended by inserting ``, or 10
percent or more of the total value of shares of all classes of stock of
such foreign corporation'' after ``such foreign corporation''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years of foreign corporations beginning on or after the
applicable date, and to taxable years of United States shareholders
with or within which such taxable years of foreign corporations end.
Subtitle B--Reform of Foreign Tax Credit Provisions
SEC. 341. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX CREDITS; FOREIGN
TAX CREDIT RELATED TO SUBPART F INCOME.
(a) Repeal of Section 902 Indirect Foreign Tax Credits.--Subpart A
of part III of subchapter N of chapter 1 is amended by striking section
902.
(b) Foreign Tax Credit Related to Subpart F Income.--
(1) In general.--Section 960 is amended by redesignating
subsections (b) and (c) as subsections (c) and (d),
respectively, and by striking subsection (a) and inserting the
following:
``(a) Determination of Credit on Current Year Basis.--For purposes
of this subpart, if there is included in the gross income of a domestic
corporation any amount under section 951(a) with respect to any
controlled foreign corporation with respect to which such domestic
corporation is a United States shareholder, such domestic corporation
shall be deemed to have paid so much of such foreign corporation's
foreign income taxes as are properly attributable to the amount so
included.
``(b) Treatment of Foreign Taxes Not Previously Deemed Paid.--For
purposes of this subpart--
``(1) In general.--If any portion of a distribution from a
controlled foreign corporation received by a domestic
corporation is excluded from gross income under section 959(a),
such domestic corporation shall be deemed to have paid so much
of such foreign corporation's foreign income taxes as are
properly attributable to the amount so excluded to the extent
such taxes were not deemed paid by the domestic corporation
under this section for any prior taxable year.
``(2) Taxes of lower-tier cfcs.--If a controlled foreign
corporation receives a distribution any portion of which is
described in section 959(b) from another controlled foreign
corporation, such foreign corporation shall be deemed to have
paid so much of such other foreign corporation's foreign income
taxes as are properly attributable to the amount so described
to the extent such taxes were not deemed paid by a domestic
corporation under this section for any prior taxable year.''.
(2) Application with respect to foreign tax credit
limitation.--Section 960(c), as redesignated by paragraph (1),
is amended by adding at the end the following new paragraph:
``(6) Application with respect to foreign tax credit
limitation.--This subsection shall be applied separately with
respect to each category of income described in section
904(d)(1).''.
(3) Conforming amendments.--
(A) Section 960 is amended by striking subsection
(d), as redesignated by paragraph (1), and inserting
the following:
``(d) Foreign Income Taxes.--For purposes of this section, the term
`foreign income taxes' means any income, war profits, or excess profits
taxes paid or accrued by a foreign corporation to any foreign country
or possession of the United States.
``(e) Regulations.--The Secretary shall provide such regulations as
may be necessary or appropriate to carry out the provisions of this
section, including rules for the application of this section to
domestic partnerships with partners that are domestic corporations.''.
(B) Section 960 is amended by striking the heading
and inserting ``deemed paid credit for subpart f
inclusions''.
(c) Modification to Section 78 Gross Up.--Section 78 is amended to
read as follows:
``SEC. 78. AMOUNTS RECEIVED FROM CERTAIN FOREIGN CORPORATIONS BY
DOMESTIC CORPORATIONS CHOOSING FOREIGN TAX CREDIT.
``If a domestic corporation which is a United States shareholder
chooses to have the benefits of subpart A of part III of subchapter N
(relating to foreign tax credits) for any taxable year, an amount equal
to the taxes deemed to be paid by such corporation under section 960
for such taxable year--
``(1) shall be treated as an amount included in the gross
income under section 951(a), and
``(2) for purposes of section 904, shall be deemed to be
attributable to the same category of income described in
section 904(d)(1) as the income which gave rise to the taxes
deemed paid by such corporation.''.
(d) Conforming Amendments.--
(1) Subclause (III) of section 56(g)(4)(C)(iii) is amended
by inserting ``as in effect before its repeal'' after ``section
902''.
(2) Sections 535(b)(1) and 545(b)(1) are each amended by
striking ``section 902(a) or 960(a)(1)'' and inserting
``section 960''.
(3) Subparagraph (B) of section 814(f)(1) is repealed.
(4) Subsection (a) of section 901 is amended by striking
``sections 902 and 960'' and inserting ``section 960''.
(5) Paragraph (2) of section 901(e) is amended by striking
``but is not limited to--'' and all that follows through ``that
portion'' and inserting ``but is not limited to that portion''.
(6) Subsection (f) of section 901 is amended by striking
``sections 902 and 960'' and inserting ``section 960''.
(7) Subparagraph (A) of section 901(j)(1) is amended by
striking ``902 or''.
(8) Subparagraph (A) of section 904(h)(10) is amended by
striking ``sections 902, 907, and 960'' and inserting
``sections 907 and 960''.
(9) Subsection (k) of section 904 is amended to read as
follows:
``(k) Cross Reference.--For modification of limitation under
subsection (a) for purposes of determining the amount of credit which
can be taken against the alternative minimum tax, see section 59(a).''.
(10) Paragraph (1) of section 905(c) is amended by striking
the last sentence.
(11) Subclause (I) of section 905(c)(2)(B) is amended by
striking ``902 or''.
(12) Subsection (a) of section 906 is amended by striking
``(or deemed, under section 902, paid or accrued during the
taxable year)''.
(13) Subsection (b) of section 906 is amended by striking
paragraphs (4) and (5).
(14) Subparagraph (B) of section 907(b)(2) is amended by
striking ``902 or''.
(15) Paragraph (3) of section 907(c) is amended--
(A) by striking subparagraph (A) and redesignating
subparagraphs (B) and (C) as subparagraphs (A) and (B),
respectively, and
(B) by striking ``section 960(a)'' in subparagraph
(A) (as so redesignated) and inserting ``section 960''.
(16) Paragraph (5) of section 907(c) is amended by striking
``902 or''.
(17) Clause (i) of section 907(f)(2)(B) is amended by
striking ``902 or''.
(18) Subsection (a) of section 908 is amended by striking
``902 or''.
(19) Paragraph (1) of section 958(a) is amended by striking
``960(a)(1)'' and inserting ``960''.
(20) Subparagraph (B) of section 6038(c)(1) is amended by
striking ``sections 902 (relating to foreign tax credit for
corporate stockholder in foreign corporation) and 960 (relating
to special rules for foreign tax credit)'' and inserting
``section 960''.
(21) Paragraph (4) of section 6038(c) is amended by
striking subparagraph (C).
(22) The table of sections for subpart A of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 902.
(23) The table of sections for part II of subchapter B of
chapter 1 is amended by striking ``Dividends'' in the item
relating to section 78 and inserting ``Amounts''.
(24) The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 960 and inserting the following:
``Sec. 960. Deemed paid credit for subpart F inclusions.''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning on or after
the applicable date, and to taxable years of United States shareholders
with or within which such taxable years of foreign corporations end.
SEC. 342. REPEAL OF RULE SUSPENDING FOREIGN TAXES AND CREDITS UNTIL
RELATED INCOME IS TAKEN INTO ACCOUNT.
(a) In General.--Subpart A of part III of subchapter N of chapter 1
is amended by striking section 909.
(b) Conforming Amendments.--
(1) Section 901(m)(1)(B) is amended by striking ``a section
902 corporation (as defined in section 909(d)(5))'' and
inserting ``a controlled foreign corporation (as defined in
section 957(a))''.
(2) The table of sections of subpart A of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 909.
(c) Effective Date.--The amendments made by this section shall
apply to foreign taxes paid or accrued in taxable years beginning on or
after the applicable date.
<all>
Introduced in House
Introduced in House
Referred to the Committee on Ways and Means, and in addition to the Committee on Transportation and Infrastructure, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committee on Transportation and Infrastructure, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Subcommittee on Highways and Transit.
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