I 117TH CONGRESS 1ST SESSION H. R. 1785 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 MARCH 11, 2021 Mr. DOGGETT (for himself, Ms. BARRAGA´N, Mrs. BEATTY, Mr. BLUMENAUER, Ms. BONAMICI, Mr. BRENDAN F. BOYLE of Pennsylvania, Mrs. BUSTOS, Ms. CHU, Mr. CICILLINE, Mr. CLEAVER, Mr. COHEN, Mr. COOPER, Mr. COURTNEY, Mr. CRIST, Mr. CROW, Mr. DANNY K. DAVIS of Illinois, Mr. DEFAZIO, Ms. DELAURO, Mr. DESAULNIER, Mr. DEUTCH, Mrs. DIN- GELL, Mr. MICHAEL F. DOYLE of Pennsylvania, Ms. ESHOO, Mr. ESPAILLAT, Mr. EVANS, Mr. FOSTER, Mr. GALLEGO, Mr. GARAMENDI, Mr. GARCI´A of Illinois, Mr. GOMEZ, Mr. GRIJALVA, Mr. HASTINGS, Mrs. HAYES, Mr. HIGGINS of New York, Mr. HUFFMAN, Ms. JACKSON LEE, Ms. JAYAPAL, Mr. JEFFRIES, Ms. JOHNSON of Texas, Mr. JOHNSON of Georgia, Ms. KAPTUR, Ms. KELLY of Illinois, Mr. KHANNA, Mr. KIM of New Jersey, Mrs. KIRKPATRICK, Mr. LANGEVIN, Mr. LAMB, Mrs. LAW- RENCE, Ms. LEE of California, Mr. LEVIN of Michigan, Mr. LOWENTHAL, Mrs. LURIA, Mr. LYNCH, Mrs. CAROLYN B. MALONEY of New York, Ms. MCCOLLUM, Mr. MCGOVERN, Mr. MRVAN, Mr. MEEKS, Ms. MENG, Mr. JONES, Mr. MOULTON, Mr. MFUME, Mr. NADLER, Mrs. NAPOLITANO, Mr. NEGUSE, Mr. NORCROSS, Ms. NORTON, Ms. OMAR, Mr. PALLONE, Mr. PANETTA, Mr. PAPPAS, Mr. PERLMUTTER, Ms. PINGREE, Mr. POCAN, Ms. PORTER, Ms. PRESSLEY, Mr. RASKIN, Ms. ROYBAL-ALLARD, Mr. RYAN, Mr. SARBANES, Ms. SCANLON, Ms. SCHAKOWSKY, Mr. SHER- MAN, Mr. SIRES, Mr. SUOZZI, Mr. TAKANO, Ms. TITUS, Ms. TLAIB, Mr. TONKO, Ms. VELA´ZQUEZ, Ms. WATERS, Mrs. WATSON COLEMAN, Mr. WELCH, Ms. WILD, Mr. YARMUTH, Mr. CARTWRIGHT, Mr. PASCRELL, Ms. BASS, Mr. GREEN of Texas, Mr. DAVID SCOTT of Georgia, Mr. CASE, Ms. CLARKE of New York, and Ms. ESCOBAR) introduced the fol- lowing bill; which was referred to the Committee on Ways and Means VerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\H1785.IH H1785 pbinns on DSKJLVW7X2PROD with BILLS 2 •HR 1785 IH A BILL To amend the Internal Revenue Code of 1986 to provide 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 VerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 pbinns on DSKJLVW7X2PROD with BILLS 3 •HR 1785 IH (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) REPEAL OF REDUCED RATE OF TAX ON NET 19 CFC TESTED INCOME AND FOREIGN-DERIVED INTAN- 20 GIBLE INCOME.— 21 (1) IN GENERAL.—Part VIII of subchapter B 22 of chapter 1 is amended by striking section 250 (and 23 by striking the item relating to such section in the 24 table of sections of such part). 25 VerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 pbinns on DSKJLVW7X2PROD with BILLS 4 •HR 1785 IH (2) CONFORMING AMENDMENTS.— 1 (A) Section 59A(c)(4)(B)(i) is amended by 2 striking ‘‘section 172, 245A, or 250’’ and in- 3 serting ‘‘section 172 or 245A’’. 4 (B) Section 172(d) is amended by striking 5 paragraph (9). 6 (C) Section 246(b)(1) is amended— 7 (i) by striking ‘‘subsection (a) and (b) 8 of section 245, and section 250’’ and in- 9 serting ‘‘and subsection (a) and (b) of sec- 10 tion 245’’; and 11 (ii) by striking ‘‘subsection (a) and 12 (b) of section 245, and 250’’ and inserting 13 ‘‘and subsection (a) and (b) of section 14 245’’. 15 (D) Section 469(i)(3)(F)(iii) is amended 16 by striking ‘‘222, and 250’’ and inserting ‘‘and 17 222’’. 18 (c) REPEAL OF CERTAIN EXCLUSIONS FROM THE 19 DETERMINATION OF TESTED INCOME.—Section 20 951A(c)(2)(A)(i) is amended— 21 (1) by striking subclauses (III) and (V), 22 (2) by redesignating subclause (IV) as sub- 23 clause (III), 24 VerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 pbinns on DSKJLVW7X2PROD with BILLS 5 •HR 1785 IH (3) by adding ‘‘and’’ at the end of subclause 1 (II), and 2 (4) by striking ‘‘and’’ at the end of subclause 3 (III) (as so redesignated) and inserting ‘‘over’’. 4 (d) INCREASE IN DEEMED PAID CREDIT FOR TAXES 5 PROPERLY ATTRIBUTABLE TO TESTED INCOME.— 6 (1) IN GENERAL.—Section 960(d) is amended 7 by striking ‘‘80 percent of’’. 8 (2) CONFORMING AMENDMENT.—Section 78 is 9 amended by striking ‘‘(determined without regard to 10 the phrase ‘‘80 percent of’’ in subsection (d)(1) 11 thereof)’’. 12 (e) REPEAL OF HIGH TAX EXCLUSION FOR FOREIGN 13 BASE COMPANY INCOME AND INSURANCE INCOME.— 14 (1) IN GENERAL.—Section 954(b) is amended 15 by striking paragraph (4). 16 (2) CONFORMING AMENDMENT.—Section 17 904(d)(3)(E) is amended by striking the last sen- 18 tence. 19 (f) ELIMINATION OF CARRYBACK OF FOREIGN TAX 20 CREDIT.—Section 904(c) is amended— 21 (1) by striking ‘‘in the first preceding taxable 22 year, and in any of the first 10 succeeding taxable 23 years, in that order’’ and inserting ‘‘in any of the 24 first 10 succeeding taxable years, in order’’, 25 VerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 pbinns on DSKJLVW7X2PROD with BILLS 6 •HR 1785 IH (2) by striking ‘‘preceding or’’ each place it ap- 1 pears, and 2 (3) by striking ‘‘CARRYBACK AND’’ in the head- 3 ing thereof. 4 (g) TREATMENT OF FOREIGN BASE COMPANY OIL 5 RELATED INCOME AS SUBPART F INCOME.— 6 (1) IN GENERAL.—Section 954(a) is amended 7 by striking ‘‘and’’ at the end of paragraph (2), by 8 striking the period at the end of paragraph (3) and 9 inserting ‘‘, and’’, and by adding at the end the fol- 10 lowing new paragraph: 11 ‘‘(4) the foreign base company oil related in- 12 come for the taxable year (determined under sub- 13 section (g) and reduced as provided in subsection 14 (b)(5)).’’. 15 (2) FOREIGN BASE COMPANY OIL RELATED IN- 16 COME.—Section 954 is amended by inserting after 17 subsection (e) the following new subsection: 18 ‘‘(g) FOREIGN BASE COMPANY OIL RELATED IN- 19 COME.—For purposes of this section, the term ‘foreign 20 base company oil related income’ means foreign oil related 21 income (within the meaning of paragraphs (2) and (3) of 22 section 907(c)) other than income derived from a source 23 within a foreign country in connection with— 24 VerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 pbinns on DSKJLVW7X2PROD with BILLS 7 •HR 1785 IH ‘‘(1) oil or gas which was extracted from an oil 1 or gas well located in such foreign country, or 2 ‘‘(2) oil, gas, or a primary product of oil or gas 3 which is sold by the foreign corporation or a related 4 person for use or consumption within such country 5 or is loaded in such country on a vessel or aircraft 6 as fuel for such vessel or aircraft. 7 Such term shall not include any foreign personal holding 8 company income (as defined in subsection (c)).’’. 9 (3) CONFORMING AMENDMENTS.— 10 (A) Section 952(c)(1)(B)(iii) is amended 11 by redesignating subclauses (III) and (IV) as 12 subclauses (IV) and (V), respectively, and by 13 inserting after subclause (II) the following new 14 subclause: 15 ‘‘(III) foreign base company oil 16 related income.’’. 17 (B) Section 954(b) is amended— 18 (i) by striking ‘‘and the foreign base 19 company services income’’ in paragraph 20 (5) and inserting ‘‘the foreign base com- 21 pany services income, and the foreign base 22 company oil related income’’, and 23 (ii) by adding at the end the following 24 new paragraph: 25 VerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 pbinns on DSKJLVW7X2PROD with BILLS 8 •HR 1785 IH ‘‘(6) FOREIGN BASE COMPANY OIL RELATED IN- 1 COME NOT TREATED AS ANOTHER KIND OF FOREIGN 2 BASE COMPANY INCOME.—Income of a corporation 3 which is foreign base company oil related income 4 shall not be considered foreign base company income 5 of such corporation under paragraph (2) or (3) of 6 subsection (a).’’. 7 (h) EFFECTIVE DATES.— 8 (1) IN GENERAL.—Except as otherwise pro- 9 vided in this subsection, the amendments made by 10 this section shall apply to taxable years of foreign 11 corporations beginning after December 31, 2020, 12 and to taxable years of United States shareholders 13 in which or with which such taxable years of foreign 14 corporations end. 15 (2) REPEAL OF REDUCED RATE OF TAX; IN- 16 CREASE IN DEEMED PAID CREDIT.—The amend- 17 ments made by subsection (b) and (d) shall apply to 18 taxable years beginning after December 31, 2020. 19 (3) REPEAL OF HIGH TAX EXCLUSION FOR 20 FOREIGN BASE COMPANY INCOME AND INSURANCE 21 INCOME.—The amendment made by subsection (e) 22 shall apply to taxable years of foreign corporations 23 beginning after December 31, 2020, and to taxable 24 years of United States shareholders in which or with 25 VerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 pbinns on DSKJLVW7X2PROD with BILLS 9 •HR 1785 IH which such taxable years of foreign corporations 1 end. 2 (4) ELIMINATION OF CARRYBACK OF FOREIGN 3 TAX CREDIT.—The amendment made by subsection 4 (f) shall apply to credits arising in taxable years be- 5 ginning after December 31, 2020. 6 SEC. 3. COUNTRY-BY-COUNTRY APPLICATION OF LIMITA- 7 TION ON FOREIGN TAX CREDIT BASED ON 8 TAXABLE UNITS. 9 (a) IN GENERAL.—Section 904 is amended by insert- 10 ing after subsection (d) the following new subsection: 11 ‘‘(e) COUNTRY-BY-COUNTRY APPLICATION OF SEC- 12 TION BASED ON TAXABLE UNITS.— 13 ‘‘(1) IN GENERAL.—The provisions of sub- 14 sections (a), (b), (c), and (d) and sections 907 and 15 960 shall be applied separately with respect to each 16 country and possession by taking into account the 17 aggregate items properly attributable or otherwise 18 allocable to a taxable unit of the taxpayer which is 19 a tax resident of such country or possession. 20 ‘‘(2) TAXABLE UNITS.— 21 ‘‘(A) IN GENERAL.—Unless otherwise pro- 22 vided by the Secretary, to the extent an item 23 may be properly attributable or otherwise allo- 24 cable to more than one taxable unit under para- 25 VerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 pbinns on DSKJLVW7X2PROD with BILLS 10 •HR 1785 IH graph (1), such item shall be treated as prop- 1 erly attributable or otherwise allocable to the 2 lowest-tier taxable unit of the taxpayer to which 3 such item may be properly attributable or oth- 4 erwise allocable. No item shall be attributable 5 or otherwise allocable to more than one taxable 6 unit of the taxpayer. 7 ‘‘(B) DETERMINATION OF TAXABLE 8 UNITS.—Except as otherwise provided by the 9 Secretary, the taxable units of a taxpayer are 10 as follows: 11 ‘‘(i) IN GENERAL.—The general tax- 12 able unit of the taxpayer which is not oth- 13 erwise described in a separate clause of 14 this subparagraph. 15 ‘‘(ii) FOREIGN BRANCHES.—Each for- 16 eign branch the activities of which are car- 17 ried on directly or indirectly (through one 18 or more pass-through entities) by the tax- 19 payer. 20 ‘‘(iii) CONTROLLED FOREIGN COR- 21 PORATIONS.—Each controlled foreign cor- 22 poration with respect to which the tax- 23 payer is a United States shareholder. 24 VerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 pbinns on DSKJLVW7X2PROD with BILLS 11 •HR 1785 IH ‘‘(iv) BRANCHES OF CONTROLLED 1 FOREIGN CORPORATIONS.—Each branch 2 the activities of which are carried on di- 3 rectly or indirectly (through one or more 4 pass-through entities) by a controlled for- 5 eign corporation referred to in clause (iii). 6 ‘‘(v) INTERESTS IN PASS-THROUGH 7 ENTITIES.— 8 ‘‘(I) IN GENERAL.—Each interest 9 in a pass-through entity held directly 10 or indirectly by the taxpayer or a con- 11 trolled foreign corporation referred to 12 in clause (iii) if such entity is a tax 13 resident of a foreign country. 14 ‘‘(II) CERTAIN INTERESTS HELD 15 BY CONTROLLED FOREIGN CORPORA- 16 TIONS.—Each interest in a pass- 17 through entity held directly or indi- 18 rectly by a controlled foreign corpora- 19 tion referred to in clause (iii) if such 20 entity is a tax resident of a foreign 21 country or such entity is treated as a 22 corporation (or other entity that is 23 not fiscally transparent) for purposes 24 of the tax law of a foreign country in 25 VerDate Sep 11 2014 23:00 May 24, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 pbinns on DSKJLVW7X2PROD with BILLS 12 •HR 1785 IH which such controlled foreign corpora- 1 tion is a tax resident. 2 ‘‘(3) TAX RESIDENT.—For purposes of this 3 subsection, a taxable unit shall be treated as a tax 4 resident of a country or possession if such taxable 5 unit is liable to tax under the tax law of such coun- 6 try or possessio [Text truncated for display. 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