A bill to amend the Internal Revenue Code of 1954 to clarify the extent to which a State, or political subdivision, may tax certain income from sources outside the United States.

Amends the Internal Revenue Code to prohibit any State, or political subdivision thereof, which imposes an income tax on a corporation from taking into account any amount of income belonging to, or attributable to, any foreign corporation which is also a member of an affiliated group to which the domestic corporation belongs, unless such amount is subject to Federal income tax.

Prohibits any State, or political subdivision thereof, from taxing or otherwise taking into account a certain percentage (determined according to specified formulae) of any dividend received by a corporation from a foreign corporation (or by a domestic corporation treated as having received such a dividend). Allows such State, or political subdivision, to take into account only a tax for which a Federal foreign tax credit would be allowed.