International Competition for American Jobs Act
This bill modifies provisions relating to the taxation of foreign entities.
Among other provisions, the bill
[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 5349 Introduced in Senate (IS)]
<DOC>
117th CONGRESS
2d Session
S. 5349
To amend the Internal Revenue Code of 1986 to modify certain provisions
relating to the taxation of international entities.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
December 21, 2022
Mr. Portman introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to modify certain provisions
relating to the taxation of international entities.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE, ETC.
(a) Short Title.--This Act may be cited as the ``International
Competition for American Jobs Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
SEC. 2. PERMANENT EXTENSION OF LOOK-THRU RULE FOR CONTROLLED FOREIGN
CORPORATIONS.
(a) In General.--Section 954(c)(6)(C) is amended by striking ``and
before January 1, 2026,''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years of foreign corporations beginning after December 31,
2022, and to taxable years of United States shareholders with or within
which such taxable years of foreign corporations end.
SEC. 3. MODIFICATION OF DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME
AND GLOBAL INTANGIBLE LOW-TAXED INCOME.
(a) In General.--Section 250(a) is amended to read as follows:
``(a) Allowance of Deduction.--In the case of a domestic
corporation for any taxable year, there shall be allowed as a deduction
an amount equal to the sum of--
``(1) 37.5 percent of the foreign-derived intangible income
of such domestic corporation for such taxable year, plus
``(2) 50 percent of--
``(A) the global intangible low-taxed income amount
(if any) which is included in the gross income of such
domestic corporation under section 951A for such
taxable year, and
``(B) the amount treated as a dividend received by
such corporation under section 78 which is attributable
to the amount described in subparagraph (A).''.
(b) Deduction Taken Into Account in Determining Net Operating Loss
Deduction.--Section 172(d) is amended by striking paragraph (9).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2022.
SEC. 4. MODIFICATIONS TO BASE EROSION MINIMUM TAX.
(a) Base Erosion Minimum Tax Amount Determined Without Regard to
Credits.--
(1) In general.--Section 59A(b)(1)(B) is amended to read as
follows:
``(B) an amount equal to the regular tax liability
(as defined in section 26(b)) of the taxpayer for the
taxable year.''.
(2) Conforming amendment.--Section 59A(b) is amended by
striking paragraph (4).
(b) Elimination of Modifications for Taxable Years After 2025.--
(1) In general.--Section 59A(b) is amended by striking
paragraph (2) and redesignating paragraph (3) as paragraph (2).
(2) Conforming amendments.--
(A) Section 59A(b)(1) is amended by striking
``paragraphs (2) and (3)'' and inserting ``paragraph
(2)''.
(B) Paragraph (2) of section 59A(b), as
redesignated by paragraph (1), is amended by striking
``under paragraphs (1)(A) and (2)(A) shall each be
increased'' and inserting ``under paragraph (1)(A)
shall be increased''.
(C) Section 59A(e)(1)(C) is amended by striking
``subsection (b)(3)(B)'' and inserting ``subsection
(b)(2)(B)''.
(c) Expansion and Consolidation of Rules To Exempt Certain Payments
From Treatment as Base Erosion Payments.--
(1) In general.--Section 59A is amended by redesignating
subsection (i) as subsection (j) and by inserting after
subsection (h) the following new subsection:
``(i) Certain Payment Not Treated as Base Erosion Payments.--
``(1) Exception for payments on which tax is imposed.--
``(A) In general.--An amount shall not be treated
as a base erosion payment if tax is (or was at the time
of payment or accrual) imposed by this chapter with
respect to such amount (other than by this section).
``(B) Treatment of certain deductions.--For
purposes of subparagraph (A), tax shall be treated as
imposed by this chapter without regard to any deduction
allowed under part VIII of subchapter B.
``(C) Application of certain rules.--The amount not
treated as a base erosion payment by reason of this
paragraph shall be determined under rules similar to
the rules of section 163(j)(5) (as in effect before the
date of the enactment of Public Law 115-97).
``(2) Exception for certain payments subject to sufficient
foreign tax.--
``(A) In general.--An amount shall not be treated
as a base erosion payment if the taxpayer establishes
to the satisfaction of the Secretary that such amount
was made to a foreign person which is a related party
of the taxpayer that is subject to an effective rate of
foreign income tax (as defined in section 904(d)(2)(F))
which is not less than 18.9 percent.
``(B) Certain payments to related parties.--To the
extent provided by the Secretary in regulations, an
amount paid to a foreign person which is a related
party of the taxpayer shall be treated as paid to
another foreign person which is a related party of the
taxpayer if such second foreign person is subject to an
effective rate of foreign income tax (as defined in
section 904(d)(2)(F)) which is less than 18.9 percent,
to the extent the amount so paid directly or indirectly
funds a payment to such second foreign person.
``(C) Determination on basis of applicable
financial statements.--Except as otherwise provided by
the Secretary under subparagraph (D), the effective
rate of foreign income tax with respect to any amount
may be established on the basis of applicable financial
statements (as defined in section 451(b)(3)).
``(D) Regulations.--The Secretary shall issue such
regulations or other guidance as may be necessary or
appropriate to carry out the purposes of this
paragraph, including regulations or other guidance
providing procedures for determining the effective rate
of foreign income tax to which any amount is subject.
Such procedures may require that any transaction or
series of transactions among multiple parties be
recharacterized as one or more transactions directly
among any 2 or more of such parties where the Secretary
determines that such recharacterization is appropriate
to carry out, or prevent avoidance of, the purposes of
this section.
``(3) Exception for certain amounts with respect to
services.--Subsections (d)(1) and (d)(2) shall not apply to so
much of any amount paid or accrued by a taxpayer for services
as does not exceed the total services cost of such services.
The preceding sentence shall not apply unless such services
meet the requirements for eligibility for use of the services
cost method under section 482 (determined without regard to the
requirement that the services not contribute significantly to
fundamental risks of business success or failure).''.
(2) Conforming amendment.--Section 59A(d) is amended by
striking paragraph (5).
(d) Other Modifications.--
(1) Section 59A(b)(3)(B)(ii) is amended by striking
``registered securities dealer'' and inserting ``securities
dealer registered''.
(2) Section 59A(h)(2)(B) is amended by striking ``section
6038B(b)(2)'' and inserting ``section 6038A(b)(2)''.
(3) Section 59A(j)(2), as redesignated by subsection (b),
is amended by striking ``subsection (g)(3)'' and inserting
``subsection (h)(3)''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2022.
SEC. 5. RULES FOR ALLOCATION OF CERTAIN DEDUCTIONS TO FOREIGN SOURCE
GLOBAL INTANGIBLE LOW-TAXED INCOME FOR PURPOSES OF
FOREIGN TAX CREDIT LIMITATION.
(a) In General.--Section 904(b) is amended by adding at the end the
following new paragraph:
``(5) Deductions treated as allocable to foreign source
global intangible low-taxed income.--In the case of a domestic
corporation and solely for purposes of the application of
subsection (a) with respect to amounts described in subsection
(d)(1)(A), the taxpayer's taxable income from sources without
the United States shall be determined--
``(A) by allocating and apportioning any deduction
allowed under section 250(a)(2) (and any deduction
allowed under section 164(a)(3) for taxes imposed on
amounts described in section 250(a)(2)) to such income,
and
``(B) by allocating and apportioning any other
deduction to such income only if the Secretary
determines that such deduction is directly allocable to
such income.
Any deduction which would (but for subparagraph (B)) have been
allocated or apportioned to such income shall only be allocated
or apportioned to income which is from sources within the
United States.''.
(b) Application of Separate Limitation Losses With Respect to
Global Intangible Low-Taxed Income.--
(1) In general.--Section 904(f)(5)(B) is amended to read as
follows:
``(B) Allocation of losses.--Except as otherwise
provided in this subparagraph, the separate limitation
losses for any taxable year (to the extent such losses
do not exceed the separate limitation incomes for such
year) shall be allocated among (and operate to reduce)
such incomes on a proportionate basis. In the case of a
separate limitation loss for any taxable year in any
category other than subparagraph (d)(1)(A), the amount
of such separate limitation loss shall be allocated
among (and operate to reduce) separate limitation
income in any category other than income described in
subparagraph (d)(1)(A) on a proportionate basis
(without regard to income described in subparagraph
(d)(1)(A)). The remaining separate limitation losses
may reduce separate limitation income described in
subparagraph (d)(1)(A) only to the extent that the
aggregate amount of such losses exceeds the aggregate
amount of separate limitation incomes (other than
income described in subparagraph (d)(1)(A)) for such
taxable year.''.
(2) Income category.--Section 904(f)(5)(E)(i) is amended to
read as follows:
``(i) Income category.--The term `income
category' means each category of income with
respect to which this section is required to be
applied separately by reason of any provision
of this title.''.
(3) Separate limitation loss.--Section 904(f)(5)(E)(iii) is
amended to read as follows:
``(iii) Separate limitation loss.--The term
`separate limitation loss' means, with respect
to any income category, the amount by which the
gross income from sources outside the United
States is exceeded by the sum of the deductions
properly allocated and apportioned thereto.''.
(c) Application of Carryforward to Taxes on Global Intangible Low-
Taxed Income.--Section 904(c) is amended by striking the last sentence.
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2022.
(2) Modification of foreign tax credit carryback and
carryforward.--The amendment made by subsection (c) shall apply
to taxes paid or accrued in taxable years beginning after
December 31, 2022.
SEC. 6. RESTORATION OF LIMITATION ON DOWNWARD ATTRIBUTION OF STOCK
OWNERSHIP IN APPLYING CONSTRUCTIVE OWNERSHIP RULES.
(a) In General.--Section 958(b) is amended--
(1) by inserting after paragraph (3) the following:
``(4) Subparagraphs (A), (B), and (C) of section 318(a)(3)
shall not be applied so as to consider a United States person
as owning stock which is owned by a person who is not a United
States person.'', and
(2) by striking ``Paragraph (1)'' in the last sentence and
inserting ``Paragraphs (1) and (4)''.
(b) Foreign Controlled United States Shareholders.--Subpart F of
part III of subchapter N of chapter 1 is amended by inserting after
section 951A the following new section:
``SEC. 951B. AMOUNTS INCLUDED IN GROSS INCOME OF FOREIGN CONTROLLED
UNITED STATES SHAREHOLDERS.
``(a) In General.--In the case of any foreign controlled United
States shareholder of a foreign controlled foreign corporation--
``(1) this subpart (other than sections 951A, 951(b), and
957) shall be applied with respect to such shareholder
(separately from, and in addition to, the application of this
subpart without regard to this section)--
``(A) by substituting `foreign controlled United
States shareholder' for `United States shareholder'
each place it appears therein, and
``(B) by substituting `foreign controlled foreign
corporation' for `controlled foreign corporation' each
place it appears therein, and
``(2) section 951A shall be applied with respect to such
shareholder--
``(A) by treating each reference to `United States
shareholder' in such section as including a reference
to such shareholder, and
``(B) by treating each reference to `controlled
foreign corporation' in such section as including a
reference to such foreign controlled foreign
corporation.
``(b) Foreign Controlled United States Shareholder.--For purposes
of this section, the term `foreign controlled United States
shareholder' means, with respect to any foreign corporation, any United
States person which would be a United States shareholder with respect
to such foreign corporation if--
``(1) section 951(b) were applied by substituting `more
than 50 percent' for `10 percent or more', and
``(2) section 958(b) were applied without regard to
paragraph (4) thereof.
``(c) Foreign Controlled Foreign Corporation.--For purposes of this
section, the term `foreign controlled foreign corporation' means a
foreign corporation, other than a controlled foreign corporation, which
would be a controlled foreign corporation if section 957(a) were
applied--
``(1) by substituting `foreign controlled United States
shareholders' for `United States shareholders', and
``(2) by substituting `section 958(b) (other than paragraph
(4) thereof)' for `section 958(b)'.
``(d) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
purposes of this section, including regulations or other guidance--
``(1) to treat a foreign controlled United States
shareholder or a foreign controlled foreign corporation as a
United States shareholder or as a controlled foreign
corporation, respectively, for purposes of provisions of this
title other than this subpart, and
``(2) to prevent the avoidance of the purposes of this
section.''.
(c) Clerical Amendment.--The table of sections for subpart F of
part III of subchapter N of chapter 1 is amended by inserting after the
item relating to section 951A the following new item:
``Sec. 951B. Amounts included in gross income of foreign controlled
United States shareholders.''.
(d) Effective Date.--The amendments made by this section shall
apply to--
(1) the last taxable year of foreign corporations beginning
before January 1, 2023, and each subsequent taxable year of
such foreign corporations, and
(2) taxable years of United States persons in which or with
which such taxable years of foreign corporations end.
(e) No Inference.--The amendments made by this section shall not be
construed to create any inference with respect to the proper
application of any provision of the Internal Revenue Code of 1986 with
respect to taxable years beginning before the taxable years to which
such amendments apply.
SEC. 7. CARRYOVER OF NET CFC TESTED LOSS.
(a) In General.--Section 951A(c) is amended by adding at the end
the following new paragraph:
``(3) Carryover of net cfc tested loss.--
``(A) In general.--If the amount described in
paragraph (1)(B) with respect to any United States
shareholder for any taxable year of such United States
shareholder (determined after the application of this
paragraph with respect to amounts arising in preceding
taxable years) exceeds the amount described in
paragraph (1)(A) with respect to such shareholder of
such taxable year, the amount otherwise described in
paragraph (1)(B) with respect to such shareholder for
the succeeding taxable year shall be increased by the
amount of such excess.
``(B) Proper adjustment in allocations of global
intangible low-taxed income to controlled foreign
corporations.--Proper adjustments shall be made in the
application of subsection (f)(2)(B) to take into
account any decrease in global intangible low-taxed
income by reason of the application of subparagraph
(A).''.
(b) Application of Rules With Respect to Ownership Changes.--
Section 382(d) is amended by adding at the end the following new
paragraph:
``(4) Application to carryover of net cfc tested loss.--The
term `pre-change loss' shall include any excess carried over
under section 951A(c)(3) under rules similar to the rules of
paragraph (1).''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning after December
31, 2022, and to taxable years of United States shareholders in which
or with which such taxable years of foreign corporations end.
SEC. 8. REDETERMINATION OF FOREIGN TAXES AND RELATED CLAIMS.
(a) In General.--Section 905(c) is amended--
(1) in paragraph (1), by striking ``or'' at the end of
subparagraph (B) and by inserting after subparagraph (C) the
following new subparagraphs:
``(D) the taxpayer makes a timely change in its
choice to claim a credit or deduction for taxes paid or
accrued, or
``(E) there is any other change in the amount, or
treatment, of taxes, which affects the taxpayer's tax
liability under this chapter,'',
(2) in paragraph (2)(B)(i), by inserting ``, except as
otherwise provided by the Secretary,'' after ``shall'', and
(3) by striking ``Accrued'' in the heading thereof.
(b) Modification to Time for Claiming Credit or Deduction.--Section
901(a) is amended by striking the second sentence and inserting the
following: ``Such choice for any taxable year may be made or changed at
any time before the expiration of the applicable period prescribed by
section 6511 for making a claim for credit or refund of an overpayment
of the tax imposed by this chapter for such taxable year that is
attributable to such amounts.''.
(c) Modification to Special Period of Limitation.--Section
6511(d)(3) is amended--
(1) in subparagraph (A)--
(A) by inserting ``a change in the liability for''
before ``any taxes paid or accrued'',
(B) by striking ``actually paid'' and inserting
``paid (or deemed paid under section 960)'', and
(C) by inserting ``change in the liability for''
before ``foreign taxes'' in the heading thereof, and
(2) in subparagraph (B), by striking ``the allowance of a
credit for the taxes'' and inserting ``the allowance of an
additional credit by reason of the change in liability for the
taxes''.
(d) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
taxes paid or accrued in taxable years beginning after December
31, 2022.
(2) Certain changes.--The amendments made by paragraphs (1)
and (3) of subsection (a) shall apply to changes that occur on
or after the date which is 60 days after the date of the
enactment of this Act.
(3) Modification to special period of limitation.--The
amendments made by subsection (c) shall apply to taxes paid,
accrued, or deemed paid in taxable years beginning after
December 31, 2022.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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