What This Bill Does
This bill changes how the United States taxes income earned by American companies through foreign subsidiaries. It eliminates certain tax breaks for companies with overseas operations and increases taxes on foreign earnings. The bill also changes rules about deducting interest expenses for large international companies and treats certain foreign companies as U.S. companies for tax purposes.
##
Who It Affects
- U.S. corporations with foreign subsidiaries
- Domestic corporations in international business groups
- U.S. shareholders of foreign corporations
- Foreign corporations doing business in the United States
- Large multinational companies with consolidated financial statements showing average gross receipts over $100,000,000
##
Key Provisions
- The bill replaces "global intangible low-taxed income" rules with "net CFC tested income" rules, changing how foreign earnings are taxed to U.S. owners (Sec. 2)
- Requires that income from foreign subsidiaries be calculated separately for each country instead of combined globally (Sec. 2(b) and Sec. 3)
- Limits how much interest large international companies can deduct on their taxes if the group has average gross receipts exceeding $100,000,000 (Sec. 4)
- Treats certain foreign corporations managed and controlled in the United States as U.S. corporations for income tax purposes (Sec. 6)
- Treats foreign corporations acquired after December 22, 2017, as U.S. corporations if more than 50 percent is held by former shareholders or if management occurs primarily in the U.S. with significant domestic business activities (Sec. 5)
##
What Changes
If this bill becomes law, U.S. companies will pay taxes on foreign-earned income according to country-by-country calculations instead of global calculations. Companies will no longer receive reduced tax rates on certain foreign earnings. Large international companies will face stricter limits on deducting interest expenses. Foreign companies that are managed and controlled in the United States will be treated as American companies for tax purposes. Companies cannot carry forward unused foreign tax credits to prior years. Oil and gas income earned by foreign subsidiaries becomes subject to different tax treatment.
##
Important Definitions
- **CFC taxable unit** - A controlled foreign corporation or a branch of a U.S. shareholder located in a specific country (Sec. 2(b))
- **International financial reporting group** - A group of companies that includes at least one foreign and one domestic corporation or a foreign corporation doing business in the U.S., prepares consolidated financial statements, and reports average annual gross receipts exceeding $100,000,000 (Sec. 4)
- **Tax resident** - A person or entity subject to tax under the tax law of a country as a resident (Sec. 3)
- **Inverted domestic corporation** - A foreign corporation that acquires substantially all properties of a U.S. corporation or partnership after December 22, 2017, and where over 50 percent is held by former shareholders or management occurs primarily in the U.S. (Sec. 5)
- **EBITDA** - Earnings before interest, taxes, depreciation, and amortization as reported in consolidated financial statements or related books and records (Sec. 4)
##
Effective Date
Most provisions apply to taxable years of foreign corporations beginning after December 31, 2022, and to taxable years of U.S. shareholders ending in or with those years (Sec. 2(k)). Provisions about interest deduction limits and inverted corporations apply to taxable years beginning after December 31, 2022 (Sec. 4(c) and Sec. 5(c)). Rules for treating foreign corporations managed in the U.S. as domestic corporations apply to taxable years beginning on or after the date that is 2 years after the bill becomes law (Sec. 6(b)).
I
118TH CONGRESS
1ST SESSION
H. R. 884
To amend the Internal Revenue Code of 1986 to provide for current year
inclusion of net CFC tested income, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 9, 2023
Mr. DOGGETT (for himself, Ms. ADAMS, Ms. BARRAGA´N, Mrs. BEATTY, Mr.
BLUMENAUER, Ms. BONAMICI, Mr. BOWMAN, Mr. BOYLE of Pennsyl-
vania, Ms. BROWN, Ms. BUDZINSKI, Ms. BUSH, Mr. CARSON, Mr. CAR-
TER of Louisiana, Mr. CARTWRIGHT, Mr. CASAR, Mr. CASE, Ms. CHU,
Mr. CICILLINE, Ms. CLARKE of New York, Mr. CLEAVER, Mr. COHEN,
Mr. COURTNEY, Mr. CROW, Mr. DAVIS of Illinois, Ms. DEAN of Pennsyl-
vania, Ms. DEGETTE, Ms. DELAURO, Mr. DELUZIO, Mr. DESAULNIER,
Mrs. DINGELL, Ms. ESCOBAR, Mr. ESPAILLAT, Mr. EVANS, Ms. LEGER
FERNANDEZ, Mr. FOSTER, Ms. LOIS FRANKEL of Florida, Mr. FROST,
Mr. GALLEGO, Mr. GARAMENDI, Mr. GARCI´A of Illinois, Mr. ROBERT
GARCIA of California, Ms. GARCIA of Texas, Mr. GOLDEN of Maine, Mr.
GOMEZ, Mr. GREEN of Texas, Mr. GRIJALVA, Mrs. HAYES, Mr. HIGGINS
of New York, Ms. HOYLE of Oregon, Mr. HUFFMAN, Mr. IVEY, Ms.
JACKSON LEE, Ms. JAYAPAL, Mr. JOHNSON of Georgia, Ms. KAPTUR,
Ms. KELLY of Illinois, Mr. KHANNA, Mr. KIM of New Jersey, Mr. LAR-
SON of Connecticut, Ms. LEE of California, Mr. LIEU, Mr. LYNCH, Ms.
MCCOLLUM, Mr. MCGOVERN, Mr. MEEKS, Ms. MENG, Mr. MFUME, Mr.
MOULTON, Mr. MRVAN, Mr. NADLER, Mrs. NAPOLITANO, Mr. NEGUSE,
Mr. NICKEL, Mr. NORCROSS, Ms. NORTON, Ms. OCASIO-CORTEZ, Ms.
OMAR, Mr. PALLONE, Ms. PINGREE, Mr. POCAN, Ms. PORTER, Mr.
VARGAS, Ms. VELA´ZQUEZ, Ms. WATERS, Mrs. WATSON COLEMAN, Ms.
WILD, Ms. WILLIAMS of Georgia, and Ms. WILSON of Florida) introduced
the following bill; which was referred to the Committee on Ways and
Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
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•HR 884 IH
for current year inclusion of net CFC tested income,
and for other purposes.
Be it enacted by the Senate and House of Representa-
1
tives of the United States of America in Congress assembled,
2
SECTION 1. SHORT TITLE, ETC.
3
(a) SHORT TITLE.—This Act may be cited as the
4
‘‘No Tax Breaks for Outsourcing Act’’.
5
(b) AMENDMENT OF 1986 CODE.—Except as other-
6
wise expressly provided, whenever in this Act an amend-
7
ment or repeal is expressed in terms of an amendment
8
to, or repeal of, a section or other provision, the reference
9
shall be considered to be made to a section or other provi-
10
sion of the Internal Revenue Code of 1986.
11
(c) TABLE OF CONTENTS.—The table of contents of
12
this Act is as follows:
13
Sec. 1. Short title, etc.
Sec. 2. Current year inclusion of net CFC tested income.
Sec. 3. Country-by-country application of limitation on foreign tax credit based
on taxable units.
Sec. 4. Limitation on deduction of interest by domestic corporations which are
members of an international financial reporting group.
Sec. 5. Modifications to rules relating to inverted corporations.
Sec. 6. Treatment of foreign corporations managed and controlled in the United
States as domestic corporations.
SEC. 2. CURRENT YEAR INCLUSION OF NET CFC TESTED IN-
14
COME.
15
(a) REPEAL OF TAX-FREE DEEMED RETURN ON IN-
16
VESTMENTS.—
17
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(1) IN GENERAL.—Section 951A(a) is amended
1
by striking ‘‘global intangible low-taxed income’’ and
2
inserting ‘‘net CFC tested income’’.
3
(2) CONFORMING AMENDMENTS.—
4
(A) Section 951A is amended by striking
5
subsections (b) and (d).
6
(B) Section 951A(e)(1) is amended by
7
striking ‘‘subsections (b), (c)(1)(A), and’’ and
8
inserting ‘‘subsections (c)(1)(A) and’’.
9
(C) Section 951A(f) is amended by strik-
10
ing ‘‘global intangible low-taxed income’’ each
11
place it appears and inserting ‘‘net CFC tested
12
income’’.
13
(D) Section 960(d)(2)(A) is amended by
14
striking ‘‘global intangible low-taxed income (as
15
defined in section 951A(b))’’ and inserting ‘‘net
16
CFC tested income (as defined in section
17
951A(c))’’.
18
(b) COUNTRY-BY-COUNTRY APPLICATION
OF SEC-
19
TION BASED ON CFC TAXABLE UNITS.—Section 951A is
20
amended by adding at the end the following new sub-
21
section:
22
‘‘(g) COUNTRY-BY-COUNTRY APPLICATION OF SEC-
23
TION BASED ON CFC TAXABLE UNITS.—
24
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•HR 884 IH
‘‘(1) IN GENERAL.—If any CFC taxable unit of
1
a United States shareholder is a tax resident of (or,
2
in the case of a branch, is located in) a country
3
which is different from the country with respect to
4
which any other CFC taxable unit of such United
5
States shareholder is a tax resident (or, in the case
6
of a branch, is located in)—
7
‘‘(A) such shareholder’s net CFC tested in-
8
come for purposes of subsection (a) shall be the
9
sum of the amounts of net CFC tested income
10
determined separately with respect to each such
11
country, and
12
‘‘(B) for purposes of determining such sep-
13
arate amounts of net CFC tested income—
14
‘‘(i) except as otherwise provided by
15
the Secretary, any reference in subsection
16
(c) to a controlled foreign corporation of
17
such shareholder shall be treated as ref-
18
erence to a CFC taxable unit of such
19
shareholder, and
20
‘‘(ii) net CFC tested income and such
21
other items and amounts as the Secretary
22
may provide, shall be determined sepa-
23
rately with respect to each such country by
24
determining such amounts with respect to
25
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•HR 884 IH
the CFC taxable units of such shareholder
1
which are a tax resident of such country.
2
‘‘(2) DEFINITIONS.—For purposes of this sub-
3
section—
4
‘‘(A) CFC
TAXABLE
UNIT.—The term
5
‘CFC taxable unit’ means any taxable unit de-
6
scribed in clause (ii), (iii), or (iv) of section
7
904(e)(2)(B), determined—
8
‘‘(i) by substituting ‘controlled foreign
9
corporation’ for ‘foreign corporation’ each
10
place it appears in such clauses, and
11
‘‘(ii) without regard to the references
12
to the taxpayer in clauses (iii) and (iv) of
13
such section.
14
‘‘(B) APPLICATION
OF
OTHER
DEFINI-
15
TIONS.—Terms used in this subsection which
16
are also used in section 904(e) shall have the
17
same meaning as when used in section 904(e).
18
‘‘(3) SPECIAL
RULES.—For purposes of this
19
subsection—
20
‘‘(A) APPLICATION OF CERTAIN RULES.—
21
Except as otherwise provided by the Secretary,
22
rules similar to the rules of section 904(e) shall
23
apply.
24
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•HR 884 IH
‘‘(B) ALLOCATION
OF
NET
CFC
TESTED
1
INCOME TO CONTROLLED FOREIGN CORPORA-
2
TIONS.—Except as otherwise provided by the
3
Secretary, subsection (f)(2) shall be applied
4
separately with respect to each CFC taxable
5
unit.’’.
6
(c) REGULATORY AUTHORITY.—Section 951A, as
7
amended by subsection (b), is amended by adding at the
8
end the following new subsection:
9
‘‘(h) REGULATIONS.—The Secretary shall issue such
10
regulations or other guidance as may be necessary or ap-
11
propriate to carry out, or prevent the avoidance of, the
12
purposes of this section, including regulations or guidance
13
which provide for—
14
‘‘(1) the treatment of property if such property
15
is transferred, or held, temporarily,
16
‘‘(2) the treatment of property if the avoidance
17
of the purposes of this section is a factor in the
18
transfer or holding of such property,
19
‘‘(3) appropriate adjustments to the basis of
20
stock and other ownership interests, and to earnings
21
and profits, to reflect tested losses (whether or not
22
taken into account in determining net CFC tested
23
income),
24
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•HR 884 IH
‘‘(4) rules similar to the rules provided under
1
the regulations or guidance issued under section
2
904(e)(4),
3
‘‘(5) other appropriate basis adjustments,
4
‘‘(6) appropriate adjustments to be made, and
5
appropriate tax attributes and records to be main-
6
tained, separately with respect to CFC taxable units,
7
and
8
‘‘(7) appropriate adjustments in determining
9
tested income or tested loss if property is trans-
10
ferred between related parties or amounts are paid
11
or accrued between related parties.’’.
12
(d) COORDINATION WITH OTHER PROVISIONS.—Sec-
13
tion 951A(f)(1) is amended by adding at the end the fol-
14
lowing new subparagraph:
15
‘‘(C)
TREATMENT
OF
CERTAIN
REF-
16
ERENCES.—Except as otherwise provided by the
17
Secretary, references to section 951 or section
18
951(a) in sections 959, 961, 962, and such
19
other provisions as the Secretary may identify
20
shall include references to section 951A or sec-
21
tion 951A(a), respectively.’’.
22
(e) REPEAL OF REDUCED RATE OF TAX ON NET
23
CFC TESTED INCOME AND FOREIGN-DERIVED INTAN-
24
GIBLE INCOME.—
25
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•HR 884 IH
(1) IN GENERAL.—Part VIII of subchapter B
1
of chapter 1 is amended by striking section 250 (and
2
by striking the item relating to such section in the
3
table of sections of such part).
4
(2) CONFORMING AMENDMENTS.—
5
(A) Section 59A(c)(4)(B)(i) is amended by
6
striking ‘‘section 172, 245A, or 250’’ and in-
7
serting ‘‘section 172 or 245A’’.
8
(B) Section 172(d) is amended by striking
9
paragraph (9).
10
(C) Section 246(b)(1) is amended—
11
(i) by striking ‘‘subsection (a) and (b)
12
of section 245, and section 250’’ and in-
13
serting ‘‘and subsection (a) and (b) of sec-
14
tion 245’’; and
15
(ii) by striking ‘‘subsection (a) and
16
(b) of section 245, and 250’’ and inserting
17
‘‘and subsection (a) and (b) of section
18
245’’.
19
(D) Section 469(i)(3)(E)(iii) is amended
20
by striking ‘‘, 221, and 250’’ and inserting
21
‘‘and 221’’.
22
(f) REPEAL OF CERTAIN EXCLUSIONS FROM THE
23
DETERMINATION
OF
TESTED
INCOME.—Section
24
951A(c)(2)(A)(i) is amended—
25
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•HR 884 IH
(1) by striking subclauses (III) and (V),
1
(2) by redesignating subclause (IV) as sub-
2
clause (III),
3
(3) by adding ‘‘and’’ at the end of subclause
4
(II), and
5
(4) by striking ‘‘and’’ at the end of subclause
6
(III) (as so redesignated) and inserting ‘‘over’’.
7
(g) INCREASE IN DEEMED PAID CREDIT FOR TAXES
8
PROPERLY ATTRIBUTABLE TO TESTED INCOME.—
9
(1) IN GENERAL.—Section 960(d) is amended
10
by striking ‘‘80 percent of’’.
11
(2) CONFORMING AMENDMENT.—Section 78 is
12
amended by striking ‘‘(determined without regard to
13
the phrase ‘‘80 percent of’’ in subsection (d)(1)
14
thereof)’’.
15
(h) REPEAL OF HIGH TAX EXCLUSION FOR FOREIGN
16
BASE COMPANY INCOME AND INSURANCE INCOME.—
17
(1) IN GENERAL.—Section 954(b) is amended
18
by striking paragraph (4).
19
(2)
CONFORMING
AMENDMENT.—Section
20
904(d)(3)(E) is amended by striking the last sen-
21
tence.
22
(i) ELIMINATION OF CARRYBACK OF FOREIGN TAX
23
CREDIT.—
24
(1) IN GENERAL.—Section 904(c) is amended—
25
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•HR 884 IH
(A) by striking ‘‘in the first preceding tax-
1
able year and in any of the first 10 succeeding
2
taxable years, in that order’’ and inserting ‘‘in
3
any of the first 10 succeeding taxable years, in
4
order’’,
5
(B) by striking ‘‘preceding or’’ each place
6
it appears, and
7
(C) by striking ‘‘CARRYBACK AND’’ in the
8
heading thereof.
9
(2) APPLICATION TO LIMITATION ON FOREIGN
10
OIL AND GAS TAXES.—Section 907(f) is amended—
11
(A) in paragraph (1), by striking ‘‘in the
12
first preceding taxable year and’’,
13
(B) in paragraph (2), by striking ‘‘pre-
14
ceding or’’ in the matter preceding subpara-
15
graph (A),
16
(C) in paragraph (3)(B)—
17
(i) by striking ‘‘in a preceding or suc-
18
ceeding’’ and inserting ‘‘in a succeeding’’,
19
and
20
(ii) by striking ‘‘in such preceding or
21
succeeding’’ both places it appears and in-
22
serting ‘‘in such succeeding’’, and
23
(D)
in
the
heading,
by
striking
24
‘‘CARRYBACK AND’’.
25
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•HR 884 IH
(j) TREATMENT OF FOREIGN BASE COMPANY OIL
1
RELATED INCOME AS SUBPART F INCOME.—
2
(1) IN GENERAL.—Section 954(a) is amended
3
by striking ‘‘and’’ at the end of paragraph (2), by
4
striking the period at the end of paragraph (3) and
5
inserting ‘‘, and’’, and by adding at the end the fol-
6
lowing new paragraph:
7
‘‘(4) the foreign base company oil related in-
8
come for the taxable year (determined under sub-
9
section (f) and reduced as provided in subsection
10
(b)(5)).’’.
11
(2) FOREIGN BASE COMPANY OIL RELATED IN-
12
COME.—Section 954 is amended by inserting after
13
subsection (e) the following new subsection:
14
‘‘(f) FOREIGN BASE COMPANY OIL RELATED IN-
15
COME.—For purposes of this section, the term ‘foreign
16
base company oil related income’ means foreign oil related
17
income (within the meaning of paragraphs (2) and (3) of
18
section 907(c)) other than income derived from a source
19
within a foreign country in connection with—
20
‘‘(1) oil or gas which was extracted from an oil
21
or gas well located in such foreign country, or
22
‘‘(2) oil, gas, or a primary product of oil or gas
23
which is sold by the foreign corporation or a related
24
person for use or consumption within such country
25
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•HR 884 IH
or is loaded in such country on a vessel or aircraft
1
as fuel for such vessel or aircraft.
2
Such term shall not include any foreign personal holding
3
company income (as defined in subsection (c)).’’.
4
(3) CONFORMING AMENDMENTS.—
5
(A) Section 952(c)(1)(B)(iii) is amended
6
by redesignating subclauses (III) and (IV) as
7
subclauses (IV) and (V), respectively, and by
8
inserting after subclause (II) the following new
9
subclause:
10
‘‘(III) foreign base company oil
11
related income.’’.
12
(B) Section 954(b) is amended
[Text truncated for display. Full text available on Congress.gov.]