Federal

Disclosure of Tax Havens and Offshoring Act

Source: Congress.gov · 1,338 words in original text

What This Bill Does

This bill requires large multinational companies to report their financial information broken down by each country where they do business. The bill amends the Securities Exchange Act of 1934 to create these country-by-country reporting rules. Large companies that sell stock publicly will need to show where they make money, pay taxes and operate around the world.

Who It Affects

Large multinational companies whose stock is publicly traded and whose company groups have annual revenue above an amount to be determined by the Securities and Exchange Commission (the federal agency that oversees stock markets).

Key Provisions

• Large multinational companies must submit a report to the Securities and Exchange Commission that includes specific financial information for each country or tax jurisdiction where they operate (Sec. 2(a), subsection (t)(2)(A)) • Companies must report the complete legal name of each business unit, the country where it pays taxes, where it was incorporated, its main business activity, and its tax identification number (Sec. 2(a), subsection (t)(2)(B)(i)) • Companies must report aggregated financial data for each country including revenues from sales to other company units, revenues from outside sales, profits or losses before taxes, total taxes paid, employee count and tangible assets (Sec. 2(a), subsection (t)(2)(B)(ii)) • The Securities and Exchange Commission must create a proposed rule within 270 days of the bill becoming law and a final rule within one year (Sec. 2(b)(1)) • Companies must submit reports in a computer-readable format that the Securities and Exchange Commission will make publicly available online (Sec. 2(b)(2))

What Changes

If this bill becomes law, large multinational companies must begin submitting detailed financial reports showing their operations, profits and taxes broken down by country. These reports will become public information available online. The Securities and Exchange Commission must create specific rules for how companies format and submit this information.

Important Definitions

• "Covered issuer": A large multinational company whose stock trades publicly and meets minimum revenue requirements set by the Securities and Exchange Commission • "Constituent entity": Any separate business unit belonging to a covered issuer • "Tax jurisdiction": A location that has financial independence, including countries, territories and possessions of the United States that have financial independence

Effective Date

The reporting requirements take effect one year after the Securities and Exchange Commission issues its final rule (Sec. 2(b)(3)).

II 118TH CONGRESS 1ST SESSION S. 638 To amend the Securities Act of 1934 to require country-by-country reporting. IN THE SENATE OF THE UNITED STATES MARCH 2, 2023 Mr. VAN HOLLEN (for himself, Mr. DURBIN, Mr. SANDERS, Mr. WHITE- HOUSE, Ms. SMITH, Ms. KLOBUCHAR, Mr. CASEY, Mr. BLUMENTHAL, Ms. BALDWIN, Ms. DUCKWORTH, and Ms. WARREN) introduced the fol- lowing bill; which was read twice and referred to the Committee on Bank- ing, Housing, and Urban Affairs A BILL To amend the Securities Act of 1934 to require country- by-country reporting. 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. 3 This Act may be cited as the ‘‘Disclosure of Tax Ha- 4 vens and Offshoring Act’’. 5 SEC. 2. COUNTRY-BY-COUNTRY REPORTING. 6 (a) COUNTRY-BY-COUNTRY REPORTING.—Section 13 7 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) 8 is amended by adding at the end the following: 9 VerDate Sep 11 2014 00:55 Mar 16, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S638.IS S638 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •S 638 IS ‘‘(t) DISCLOSURE OF FINANCIAL PERFORMANCE ON 1 A COUNTRY-BY-COUNTRY BASIS.— 2 ‘‘(1) DEFINITIONS.—In this subsection— 3 ‘‘(A) the term ‘constituent entity’ means, 4 with respect to a covered issuer, any separate 5 business entity of the covered issuer; 6 ‘‘(B) the term ‘covered issuer’ means an 7 issuer that is a member of a multinational en- 8 terprise group that has annual revenue for the 9 preceding calendar year of not less than an 10 amount determined by the Commission to con- 11 form to United States or international stand- 12 ards for country-by-country reporting; and 13 ‘‘(C) the term ‘tax jurisdiction’— 14 ‘‘(i) means a jurisdiction that— 15 ‘‘(I) is not a country; and 16 ‘‘(II) has fiscal autonomy; and 17 ‘‘(ii) includes a territory or possession 18 of the United States that has fiscal auton- 19 omy. 20 ‘‘(2) DISCLOSURE.— 21 ‘‘(A) IN GENERAL.—Each covered issuer 22 shall submit to the Commission a report that 23 includes information described in subparagraph 24 (B), and any other information required by the 25 VerDate Sep 11 2014 00:55 Mar 16, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S638.IS S638 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •S 638 IS Commission, with respect to the reporting pe- 1 riod described in subparagraph (C). 2 ‘‘(B) INFORMATION REQUIRED.—The in- 3 formation described in this subparagraph is as 4 follows: 5 ‘‘(i) CONSTITUENT ENTITY INFORMA- 6 TION.—Information on the constituent en- 7 tity, including the following: 8 ‘‘(I) The complete legal name of 9 the constituent entity. 10 ‘‘(II) The tax jurisdiction, if any, 11 in which the constituent entity is resi- 12 dent for tax purposes. 13 ‘‘(III) The tax jurisdiction in 14 which the constituent entity is orga- 15 nized or incorporated (if different 16 from the tax jurisdiction of residence). 17 ‘‘(IV) The tax identification num- 18 ber, if any, used for the constituent 19 entity by the tax administration of the 20 jurisdiction of residence of the con- 21 stituent entity. 22 ‘‘(V) The main business activity 23 or activities of the constituent entity. 24 VerDate Sep 11 2014 00:55 Mar 16, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S638.IS S638 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •S 638 IS ‘‘(ii) TAX JURISDICTION.—Informa- 1 tion on each tax jurisdiction in which 1 or 2 more constituent entities is resident, pre- 3 sented as an aggregated or consolidated 4 form of the information for the constituent 5 entities resident in each tax jurisdiction, 6 including the following: 7 ‘‘(I) Revenues generated from 8 transactions with other constituent 9 entities. 10 ‘‘(II) Revenues not generated 11 from transactions with other con- 12 stituent entities. 13 ‘‘(III) Profit or loss before in- 14 come tax. 15 ‘‘(IV) Total income tax paid on a 16 cash basis to all tax jurisdictions. 17 ‘‘(V) Total accrued tax expense 18 recorded on taxable profits or losses. 19 ‘‘(VI) Stated capital. 20 ‘‘(VII) Total accumulated earn- 21 ings. 22 ‘‘(VIII) Total number of employ- 23 ees on a full-time equivalent basis. 24 VerDate Sep 11 2014 00:55 Mar 16, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S638.IS S638 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •S 638 IS ‘‘(IX) Net book value of tangible 1 assets, not including cash or cash 2 equivalents, intangibles, or financial 3 assets. 4 ‘‘(iii) SPECIAL RULES.—The informa- 5 tion listed in clause (ii) shall be provided, 6 in aggregated or consolidated form, for any 7 constituent entity or entities that have no 8 tax jurisdiction of residence. If a con- 9 stituent entity is an owner of a constituent 10 entity that does not have a jurisdiction of 11 tax residence, then the share of the owner 12 of the revenues and profits of the entity 13 shall be aggregated or consolidated with 14 the information for the tax jurisdiction of 15 residence of the owner. 16 ‘‘(C) REPORTING PERIOD.—The reporting 17 period covered by this paragraph is the period 18 of the applicable financial statement of the cov- 19 ered entity prepared for the 12-month period 20 that ends with or within the taxable year of the 21 covered issuer. If the covered issuer does not 22 prepare an annual applicable financial state- 23 ment, the reporting period covered by this para- 24 graph is the 12-month period that ends on the 25 VerDate Sep 11 2014 00:55 Mar 16, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S638.IS S638 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •S 638 IS last day of the taxable year of the covered 1 issuer. 2 ‘‘(D) FILING DEADLINE.—Each covered 3 issuer shall submit to the Commission a report 4 required under this section on or before the due 5 date (including extensions) for filing the tax re- 6 turn of the covered issuer in the tax jurisdiction 7 in which the multinational enterprise group of 8 the covered issuer is resident. 9 ‘‘(E) REGULATIONS.—The Commission 10 shall promulgate regulations carrying out this 11 section that conform to United States or inter- 12 national standards for country-by-country re- 13 porting, including regulations promulgated by 14 the Internal Revenue Service.’’. 15 (b) RULEMAKING.— 16 (1) DEADLINES.—The Securities and Exchange 17 Commission (in this section referred to as the ‘‘Com- 18 mission’’) shall— 19 (A) not later than 270 days after the date 20 of enactment of this Act, issue a proposed rule 21 to carry out this section and the amendments 22 made by this section; and 23 (B) not later than 1 year after the date of 24 enactment of this Act, issue a final rule to 25 VerDate Sep 11 2014 00:55 Mar 16, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S638.IS S638 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •S 638 IS carry out this section and the amendments 1 made by this section. 2 (2) DATA FORMAT.—The information required 3 to be provided under subsection (t) of section 13 of 4 the Securities Exchange Act of 1934, as added by 5 subsection (a) of this section, shall be provided by 6 the issuer in a report in a machine readable format 7 prescribed by the Commission, which shall be made 8 available to the public online, in such machine read- 9 able format as the Commission shall prescribe. 10 (3) EFFECTIVE DATE.—Subsection (t) of sec- 11 tion 13 of the Securities Exchange Act of 1934, as 12 added by subsection (a) of this section, shall take ef- 13 fect on the date that is 1 year after the date on 14 which the Commission issues a final rule under 15 paragraph (1)(B). 16 Æ VerDate Sep 11 2014 00:55 Mar 16, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6301 E:\BILLS\S638.IS S638 pbinns on DSKJLVW7X2PROD with $$_JOB

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