II 117TH CONGRESS 1ST SESSION S. 725 To end offshore corporate tax avoidance, and for other purposes. IN THE SENATE OF THE UNITED STATES MARCH 11, 2021 Mr. WHITEHOUSE introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To end offshore corporate tax avoidance, 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 ‘‘Stop Tax Haven Abuse 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 VerDate Sep 11 2014 02:40 Apr 15, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S725.IS S725 pbinns on DSKJLVW7X2PROD with BILLS 2 •S 725 IS (c) TABLE OF CONTENTS.—The table of contents of 1 this Act is as follows: 2 Sec. 1. Short title, etc. TITLE I—ENDING CORPORATE OFFSHORE TAX AVOIDANCE Sec. 101. Repeal of check-the-box rules for certain foreign entities and CFC look-thru rules. Sec. 102. Swap payments made from the United States to persons offshore. Sec. 103. Requirement to disclose total corporate taxes paid. Sec. 104. Penalty for election to pay tax on deferred foreign income in install- ments. Sec. 105. Modifications to base erosion and anti-abuse tax. Sec. 106. Treatment of foreign base company oil related income as subpart F income. Sec. 107. Modifications of foreign tax credit rules applicable to dual capacity taxpayers. Sec. 108. Treatment of intangibles transferred to partnerships. TITLE II—ADDITIONAL MEASURES TO COMBAT TAX EVASION Sec. 201. Authorizing special measures against foreign jurisdictions, financial institutions, and others that significantly impede United States tax enforcement. Sec. 202. Strengthening the Foreign Account Tax Compliance Act (FATCA). Sec. 203. Reporting United States beneficial owners of foreign owned financial accounts. Sec. 204. Penalty for failing to disclose offshore holdings. Sec. 205. Deadline for anti-money laundering rule for investment advisers. Sec. 206. Anti-money laundering requirements for formation agents. Sec. 207. Strengthening John Doe summons proceedings. Sec. 208. Improving enforcement of foreign financial account reporting. TITLE I—ENDING CORPORATE 3 OFFSHORE TAX AVOIDANCE 4 SEC. 101. REPEAL OF CHECK-THE-BOX RULES FOR CERTAIN 5 FOREIGN ENTITIES AND CFC LOOK-THRU 6 RULES. 7 (a) CHECK-THE-BOX RULES.—Paragraph (3) of sec- 8 tion 7701(a) is amended— 9 (1) by striking ‘‘and’’, and 10 VerDate Sep 11 2014 02:40 Apr 15, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S725.IS S725 pbinns on DSKJLVW7X2PROD with BILLS 3 •S 725 IS (2) by inserting after ‘‘insurance companies’’ 1 the following: ‘‘, and any foreign business entity 2 that— 3 ‘‘(A) has a single owner that does not have 4 limited liability, or 5 ‘‘(B) has one or more members all of 6 which have limited liability’’. 7 (b) LOOK-THRU RULE.—Subparagraph (C) of sec- 8 tion 954(c)(6) is amended to read as follows: 9 ‘‘(C) TERMINATION.—Subparagraph (A) 10 shall not apply to dividends, interest, rents, and 11 royalties received or accrued after the date of 12 the enactment of the Stop Tax Haven Abuse 13 Act.’’. 14 (c) EFFECTIVE DATE.— 15 (1) The amendments made by subsection (a) 16 shall take effect on the date of the enactment of this 17 Act. 18 (2) The amendment made by subsection (b) 19 shall apply to payments received after the date of 20 the enactment of this Act. 21 SEC. 102. SWAP PAYMENTS MADE FROM THE UNITED 22 STATES TO PERSONS OFFSHORE. 23 (a) TAX ON SWAP PAYMENTS RECEIVED BY FOR- 24 EIGN PERSONS.—Section 871(a)(1) is amended— 25 VerDate Sep 11 2014 02:40 Apr 15, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S725.IS S725 pbinns on DSKJLVW7X2PROD with BILLS 4 •S 725 IS (1) by inserting ‘‘swap payments (as identified 1 in section 1256(b)(2)(B)),’’ after ‘‘annuities,’’ in 2 subparagraph (A), and 3 (2) by adding at the end the following new sen- 4 tence: ‘‘In the case of swap payments, the source of 5 a swap payment is determined by reference to the lo- 6 cation of the payor.’’. 7 (b) TAX ON SWAP PAYMENTS RECEIVED BY FOR- 8 EIGN CORPORATIONS.—Section 881(a) is amended— 9 (1) by inserting ‘‘swap payments (as identified 10 in section 1256(b)(2)(B)),’’ after ‘‘annuities,’’ in 11 paragraph (1), and 12 (2) by adding at the end the following new sen- 13 tence: ‘‘In the case of swap payments, the source of 14 a swap payment is determined by reference to the lo- 15 cation of the payor.’’. 16 SEC. 103. REQUIREMENT TO DISCLOSE TOTAL CORPORATE 17 TAXES PAID. 18 (a) IN GENERAL.—Section 13 of the Securities Ex- 19 change Act of 1934 (15 U.S.C. 78m) is amended by add- 20 ing at the end the following new subsection: 21 ‘‘(s) DISCLOSURE OF TOTAL CORPORATE TAXES 22 PAID.— 23 ‘‘(1) ISSUER DISCLOSURE REQUIREMENT.— 24 Each issuer required to file an annual or quarterly 25 VerDate Sep 11 2014 02:40 Apr 15, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S725.IS S725 pbinns on DSKJLVW7X2PROD with BILLS 5 •S 725 IS report under subsection (a) shall disclose in that re- 1 port— 2 ‘‘(A) the total pre-tax profit of the issuer 3 during the period covered by the report; 4 ‘‘(B) the total amount paid by the issuer 5 in State taxes during the period covered by the 6 report; 7 ‘‘(C) the total amount paid by the issuer in 8 Federal taxes during the period covered by the 9 report; and 10 ‘‘(D) the total amount paid by the issuer 11 in foreign taxes during the period covered by 12 the report. 13 ‘‘(2) DISCLOSURE OF COUNTRY-BY-COUNTRY 14 REPORTING INFORMATION.—Each issuer required to 15 file an annual or quarterly report under subsection 16 (a) shall disclose in that report, for each of its sub- 17 sidiaries and aggregated on a country-by-country 18 basis— 19 ‘‘(A) revenues generated from transactions 20 with other constituent entities; 21 ‘‘(B) revenues not generated from trans- 22 actions with other constituent entities; 23 ‘‘(C) profit or loss before income tax; 24 VerDate Sep 11 2014 02:40 Apr 15, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S725.IS S725 pbinns on DSKJLVW7X2PROD with BILLS 6 •S 725 IS ‘‘(D) total income tax paid on a cash basis 1 to all tax jurisdictions, and any taxes withheld 2 on payments received by the constituent enti- 3 ties; 4 ‘‘(E) total accrued tax expense recorded on 5 taxable profits or losses, reflecting only oper- 6 ations in the relevant annual period and exclud- 7 ing deferred taxes or provisions for uncertain 8 tax liabilities; 9 ‘‘(F) stated capital, except that the stated 10 capital of a permanent establishment must be 11 reported in the tax jurisdiction of residence of 12 the legal entity of which it is a permanent es- 13 tablishment unless there is a defined capital re- 14 quirement in the permanent establishment tax 15 jurisdiction for regulatory purposes; 16 ‘‘(G) total accumulated earnings, except 17 that accumulated earnings of a permanent es- 18 tablishment must be reported by the legal entity 19 of which it is a permanent establishment; 20 ‘‘(H) total number of employees on a full- 21 time equivalent basis; and 22 ‘‘(I) net book value of tangible assets, 23 which, for purposes of this section, does not in- 24 VerDate Sep 11 2014 02:40 Apr 15, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S725.IS S725 pbinns on DSKJLVW7X2PROD with BILLS 7 •S 725 IS clude cash or cash equivalents, intangibles, or 1 financial assets. 2 ‘‘(3) AVAILABILITY OF INFORMATION.—The 3 Commission shall make the information filed with 4 the Commission pursuant to this subsection publicly 5 available through the Commission website in a man- 6 ner that is searchable, sortable, and downloadable.’’. 7 (b) EFFECTIVE DATE.—The amendment made by 8 this section shall apply to disclosures made after the date 9 of the enactment of this Act. 10 SEC. 104. PENALTY FOR ELECTION TO PAY TAX ON DE- 11 FERRED FOREIGN INCOME IN INSTALL- 12 MENTS. 13 (a) IN GENERAL.—Section 965(h) is amended by 14 adding at the end the following new paragraph: 15 ‘‘(7) PENALTY.—Interest on installments under 16 this subsection shall be payable as determined under 17 section 6601 by treating the last date prescribed for 18 payment for any installment as the date for payment 19 of the first installment under this subsection.’’. 20 (b) EFFECTIVE DATE.—The amendment made by 21 subsection (a) shall take effect as if included in section 22 14103 of Public Law 115–97. 23 VerDate Sep 11 2014 02:40 Apr 15, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S725.IS S725 pbinns on DSKJLVW7X2PROD with BILLS 8 •S 725 IS SEC. 105. MODIFICATIONS TO BASE EROSION AND ANTI- 1 ABUSE TAX. 2 (a) REDUCTION OF EXEMPTION BASED ON ANNUAL 3 GROSS RECEIPTS.—Section 59A(e)(1)(B) is amended by 4 striking ‘‘$500,000,000’’ and inserting ‘‘$100,000,000’’. 5 (b) ELIMINATION OF EXCEPTION BASED ON BASE 6 EROSION PERCENTAGE.—Section 59(e)(1) is amended by 7 inserting ‘‘and’’ at the end of subparagraph (A), by strik- 8 ing ‘‘, and’’ at the end of subparagraph (B) and inserting 9 a period, and by striking subparagraph (C). 10 (c) CERTAIN CAPITALIZED AMOUNTS INCLUDED AS 11 BASE EROSION PAYMENTS.—Section 59A(d) is amended 12 by redesignating paragraphs (4) and (5) as paragraphs 13 (5) and (6), respectively, and by inserting after paragraph 14 (3) the following new paragraph: 15 ‘‘(4) CERTAIN CAPITALIZED AMOUNTS.—Such 16 term shall also include any interest, royalty, or any 17 other amount identified by the Secretary that is paid 18 or accrued by the taxpayer to a foreign person which 19 is a related party of the taxpayer and with respect 20 to which the taxpayer increases the value of property 21 under section 1016 or any other provision of this 22 title.’’. 23 (d) EFFECTIVE DATE.—The amendments made by 24 this section shall apply to taxable years beginning after 25 the date of the enactment of this Act. 26 VerDate Sep 11 2014 02:40 Apr 15, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S725.IS S725 pbinns on DSKJLVW7X2PROD with BILLS 9 •S 725 IS SEC. 106. TREATMENT OF FOREIGN BASE COMPANY OIL RE- 1 LATED INCOME AS SUBPART F INCOME. 2 (a) IN GENERAL.—Section 954(a) is amended by 3 striking ‘‘and’’ at the end of paragraph (2), by striking 4 the period at the end of paragraph (3) and inserting ‘‘, 5 and’’, and by adding at the end the following new para- 6 graph: 7 ‘‘(4) the foreign base company oil related in- 8 come for the taxable year (determined under sub- 9 section (g) and reduced as provided in subsection 10 (b)(5)).’’. 11 (b) FOREIGN BASE COMPANY OIL RELATED IN- 12 COME.—Section 954 is amended by inserting after sub- 13 section (e) the following new subsection: 14 ‘‘(g) 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 VerDate Sep 11 2014 02:40 Apr 15, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S725.IS S725 pbinns on DSKJLVW7X2PROD with BILLS 10 •S 725 IS 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 (c) CONFORMING AMENDMENTS.— 5 (1) Section 952(c)(1)(B)(iii) is amended by re- 6 designating subclauses (III) and (IV) as subclauses 7 (IV) and (V), respectively, and by inserting after 8 subclause (II) the following new subclause: 9 ‘‘(III) foreign base company oil 10 related income.’’. 11 (2) Section 954(b) is amended— 12 (A) by striking ‘‘and the foreign base com- 13 pany services income’’ in paragraph (5) and in- 14 serting ‘‘the foreign base company services in- 15 come, and the foreign base company oil related 16 income’’, and 17 (B) by adding at the end the following new 18 paragraph: 19 ‘‘(6) FOREIGN BASE COMPANY OIL RELATED IN- 20 COME NOT TREATED AS ANOTHER KIND OF BASE 21 COMPANY INCOME.—Income of a corporation which 22 is foreign base company oil related income shall not 23 be considered foreign base company income of such 24 VerDate Sep 11 2014 02:40 Apr 15, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S725.IS S725 pbinns on DSKJLVW7X2PROD with BILLS 11 •S 725 IS corporation under paragraph (2) or (3) of subsection 1 (a).’’. 2 (d) EFFECTIVE DATE.—The amendments made by 3 this section shall apply to taxable years of foreign corpora- 4 tions beginning after the date of the enactment of this 5 Act, and to taxable years of United States shareholders 6 in which or with which such taxable years of foreign cor- 7 porations end. 8 SEC. 107. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 9 APPLICABLE TO DUAL CAPACITY TAXPAYERS. 10 (a) IN GENERAL.—Section 901 of the Internal Rev- 11 enue Code of 1986 is amended by redesignating subsection 12 (n) as subsection (o) and by inserting after subsection (m) 13 the following new subsection: 14 ‘‘(n) SPECIAL RULES RELATING TO DUAL CAPACITY 15 TAXPAYERS.— 16 ‘‘(1) GENERAL RULE.—Notwithstanding any 17 other provision of this chapter, any amount paid or 18 accrued by a dual capacity taxpayer to a foreign 19 country or possession of the United States for any 20 period with respect to combined foreign oil and gas 21 income (as defined in section 907(b)(1)) shall not be 22 considered a tax to the extent such amount exceeds 23 the amount (determined in accordance with regula- 24 VerDate Sep 11 2014 02:40 Apr 15, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S725.IS S725 pbinns on DSKJLVW7X2PROD with BILLS 12 •S 725 IS tions) which would have been required to be paid if 1 the taxpayer were not a dual capacity taxpayer. 2 ‘‘(2) DUAL CAPACITY TAXPAYER.—For pur- 3 poses of this subsection, the term ‘dual capacity tax- 4 payer’ means, with respect to any foreign country or 5 possession of the United States, a person who— 6 ‘‘(A) is subject to a levy of such country or 7 possession, and 8 ‘‘(B) receives (or will receive) directly or 9 indirectly a specific economic [Text truncated for display. 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