II 116TH CONGRESS 1ST SESSION S. 779 To end offshore corporate tax avoidance, and for other purposes. IN THE SENATE OF THE UNITED STATES MARCH 13, 2019 Mr. WHITEHOUSE (for himself and Mrs. SHAHEEN) 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 18:15 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S779.IS S779 pamtmann on DSKBFK8HB2PROD with BILLS 2 •S 779 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. Limitation on deduction of interest by domestic corporations which are members of an international financial reporting group. Sec. 103. Treatment of foreign corporations managed and controlled in the United States as domestic corporations. Sec. 104. Swap payments made from the United States to persons offshore. Sec. 105. Modifications to rules relating to inverted corporations. Sec. 106. Requirement to disclose total corporate taxes paid. Sec. 107. Penalty for election to pay tax on deferred foreign income in install- ments. 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 18:15 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S779.IS S779 pamtmann on DSKBFK8HB2PROD with BILLS 3 •S 779 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 VerDate Sep 11 2014 18:15 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S779.IS S779 pamtmann on DSKBFK8HB2PROD with BILLS 4 •S 779 IS SEC. 102. LIMITATION ON DEDUCTION OF INTEREST BY DO- 1 MESTIC CORPORATIONS WHICH ARE MEM- 2 BERS OF AN INTERNATIONAL FINANCIAL RE- 3 PORTING GROUP. 4 (a) IN GENERAL.—Section 163 is amended by redes- 5 ignating subsection (n) as subsection (p) and by inserting 6 after subsection (m) the following new subsection: 7 ‘‘(n) LIMITATION ON DEDUCTION OF INTEREST BY 8 DOMESTIC CORPORATIONS IN INTERNATIONAL FINAN- 9 CIAL REPORTING GROUPS.— 10 ‘‘(1) IN GENERAL.—In the case of any domestic 11 corporation which is a member of any international 12 financial reporting group, the deduction under this 13 chapter for interest paid or accrued during the tax- 14 able year shall not exceed the sum of— 15 ‘‘(A) the allowable percentage of 110 per- 16 cent of the excess (if any) of— 17 ‘‘(i) the amount of such interest so 18 paid or accrued, over 19 ‘‘(ii) the amount described in subpara- 20 graph (B), plus 21 ‘‘(B) the amount of interest includible in 22 gross income of such corporation for such tax- 23 able year. 24 ‘‘(2) INTERNATIONAL FINANCIAL REPORTING 25 GROUP.— 26 VerDate Sep 11 2014 18:15 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S779.IS S779 pamtmann on DSKBFK8HB2PROD with BILLS 5 •S 779 IS ‘‘(A) For purposes of this subsection, the 1 term ‘international financial reporting group’ 2 means, with respect to any reporting year, any 3 group of entities which— 4 ‘‘(i) includes— 5 ‘‘(I) at least one foreign corpora- 6 tion engaged in a trade or business 7 within the United States, or 8 ‘‘(II) at least one domestic cor- 9 poration and one foreign corporation, 10 ‘‘(ii) prepares consolidated financial 11 statements with respect to such year, and 12 ‘‘(iii) reports in such statements aver- 13 age annual gross receipts (determined in 14 the aggregate with respect to all entities 15 which are part of such group) for the 3-re- 16 porting-year period ending with such re- 17 porting year in excess of $100,000,000. 18 ‘‘(B) RULES RELATING TO DETERMINA- 19 TION OF AVERAGE GROSS RECEIPTS.—For pur- 20 poses of subparagraph (A)(iii), rules similar to 21 the rules of section 448(c)(3) shall apply. 22 ‘‘(3) ALLOWABLE PERCENTAGE.—For purposes 23 of this subsection— 24 VerDate Sep 11 2014 18:15 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S779.IS S779 pamtmann on DSKBFK8HB2PROD with BILLS 6 •S 779 IS ‘‘(A) IN GENERAL.—The term ‘allowable 1 percentage’ means, with respect to any domestic 2 corporation for any taxable year, the ratio (ex- 3 pressed as a percentage and not greater than 4 100 percent) of— 5 ‘‘(i) such corporation’s allocable share 6 of the international financial reporting 7 group’s reported net interest expense for 8 the reporting year of such group which 9 ends in or with such taxable year of such 10 corporation, over 11 ‘‘(ii) such corporation’s reported net 12 interest expense for such reporting year of 13 such group. 14 ‘‘(B) REPORTED NET INTEREST EX- 15 PENSE.—The term ‘reported net interest ex- 16 pense’ means— 17 ‘‘(i) with respect to any international 18 financial reporting group for any reporting 19 year, the excess of— 20 ‘‘(I) the aggregate amount of in- 21 terest expense reported in such 22 group’s consolidated financial state- 23 ments for such taxable year, over 24 VerDate Sep 11 2014 18:15 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S779.IS S779 pamtmann on DSKBFK8HB2PROD with BILLS 7 •S 779 IS ‘‘(II) the aggregate amount of in- 1 terest income reported in such group’s 2 consolidated financial statements for 3 such taxable year, and 4 ‘‘(ii) with respect to any domestic cor- 5 poration for any reporting year, the excess 6 of— 7 ‘‘(I) the amount of interest ex- 8 pense of such corporation reported in 9 the books and records of the inter- 10 national financial reporting group 11 which are used in preparing such 12 group’s consolidated financial state- 13 ments for such taxable year, over 14 ‘‘(II) the amount of interest in- 15 come of such corporation reported in 16 such books and records. 17 ‘‘(C) ALLOCABLE SHARE OF REPORTED 18 NET INTEREST EXPENSE.—With respect to any 19 domestic corporation which is a member of any 20 international financial reporting group, such 21 corporation’s allocable share of such group’s re- 22 ported net interest expense for any reporting 23 year is the portion of such expense which bears 24 the same ratio to such expense as— 25 VerDate Sep 11 2014 18:15 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S779.IS S779 pamtmann on DSKBFK8HB2PROD with BILLS 8 •S 779 IS ‘‘(i) the EBITDA of such corporation 1 for such reporting year, bears to 2 ‘‘(ii) the EBITDA of such group for 3 such reporting year. 4 ‘‘(D) EBITDA.— 5 ‘‘(i) IN GENERAL.—The term 6 ‘EBITDA’ means, with respect to any re- 7 porting year, earnings before interest, 8 taxes, depreciation, and amortization— 9 ‘‘(I) as determined in the inter- 10 national financial reporting group’s 11 consolidated financial statements for 12 such year, or 13 ‘‘(II) for purposes of subpara- 14 graph (A)(i), as determined in the 15 books and records of the international 16 financial reporting group which are 17 used in preparing such statements if 18 not determined in such statements. 19 ‘‘(ii) TREATMENT OF DISREGARDED 20 ENTITIES.—The EBITDA of any domestic 21 corporation shall not fail to include the 22 EBITDA of any entity which is dis- 23 regarded for purposes of this chapter. 24 VerDate Sep 11 2014 18:15 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S779.IS S779 pamtmann on DSKBFK8HB2PROD with BILLS 9 •S 779 IS ‘‘(iii) TREATMENT OF INTRA-GROUP 1 DISTRIBUTIONS.—The EBITDA of any do- 2 mestic corporation shall be determined 3 without regard to any distribution received 4 by such corporation from any other mem- 5 ber of the international financial reporting 6 group. 7 ‘‘(E) SPECIAL RULES FOR NON-POSITIVE 8 EBITDA.— 9 ‘‘(i) NON-POSITIVE GROUP EBITDA.— 10 In the case of any international financial 11 reporting group the EBITDA of which is 12 zero or less, paragraph (1) shall not apply 13 to any member of such group the EBITDA 14 of which is above zero. 15 ‘‘(ii) NON-POSITIVE ENTITY 16 EBITDA.—In the case of any group mem- 17 ber the EBITDA of which is zero or less, 18 paragraph (1) shall be applied without re- 19 gard to subparagraph (A) thereof. 20 ‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 21 For purposes of this subsection, the term ‘consoli- 22 dated financial statement’ means any consolidated 23 financial statement described in paragraph (2)(A)(ii) 24 if such statement is— 25 VerDate Sep 11 2014 18:15 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S779.IS S779 pamtmann on DSKBFK8HB2PROD with BILLS 10 •S 779 IS ‘‘(A) a financial statement which is cer- 1 tified as being prepared in accordance with gen- 2 erally accepted accounting principles, inter- 3 national financial reporting standards, or any 4 other comparable method of accounting identi- 5 fied by the Secretary, and which is— 6 ‘‘(i) a 10–K (or successor form), or 7 annual statement to shareholders, required 8 to be filed with the United States Securi- 9 ties and Exchange Commission, 10 ‘‘(ii) an audited financial statement 11 which is used for— 12 ‘‘(I) credit purposes, 13 ‘‘(II) reporting to shareholders, 14 partners, or other proprietors, or to 15 beneficiaries, or 16 ‘‘(III) any other substantial 17 nontax purpose, 18 but only if there is no statement described 19 in clause (i), or 20 ‘‘(iii) filed with any other Federal or 21 State agency for nontax purposes, but only 22 if there is no statement described in clause 23 (i) or (ii), or 24 ‘‘(B) a financial statement which— 25 VerDate Sep 11 2014 18:15 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S779.IS S779 pamtmann on DSKBFK8HB2PROD with BILLS 11 •S 779 IS ‘‘(i) is used for a purpose described in 1 subclause (I), (II), or (III) of subpara- 2 graph (A)(ii), or 3 ‘‘(ii) filed with any regulatory or gov- 4 ernmental body (whether domestic or for- 5 eign) specified by the Secretary, 6 but only if there is no statement described in 7 subparagraph (A). 8 ‘‘(5) REPORTING YEAR.—For purposes of this 9 subsection, the term ‘reporting year’ means, with re- 10 spect to any international financial reporting group, 11 the year with respect to which the consolidated fi- 12 nancial statements are prepared. 13 ‘‘(6) APPLICATION TO CERTAIN ENTITIES.— 14 ‘‘(A) PARTNERSHIPS.—Except as other- 15 wise provided by the Secretary in paragraph 16 (7), this subsection and subsection (o) shall 17 apply to any partnership which is a member of 18 any international financial reporting group 19 under rules similar to the rules of section 20 163(j)(4). 21 ‘‘(B) FOREIGN CORPORATIONS ENGAGED 22 IN TRADE OR BUSINESS WITHIN THE UNITED 23 STATES.—Except as otherwise provided by the 24 Secretary in paragraph (7), any deduction for 25 VerDate Sep 11 2014 18:15 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S779.IS S779 pamtmann on DSKBFK8HB2PROD with BILLS 12 •S 779 IS interest paid or accrued by a foreign corpora- 1 tion engaged in a trade or business within the 2 United States shall be limited in a manner con- 3 sistent with the principles of this subsection. 4 ‘‘(C) CONSOLIDATED GROUPS.—For pur- 5 poses of this subsection, the members of any 6 group that file (or are required to file) a con- 7 solidated return with respect to the tax imposed 8 by chapter 1 for a taxable year shall be treated 9 as a single corporation. 10 ‘‘(7) REGULATIONS.—The Secretary may issue 11 such regulations or other guidance as are necessary 12 or appropriate to carry out the purposes of this sub- 13 section.’’. 14 (b) CARRYFORWARD OF DISALLOWED INTEREST.— 15 (1) IN GENERAL.—Section 163 is amended by 16 inserting after subsection (n), as added by sub- 17 section (a), the following new subsection: 18 ‘‘(o) CARRYFORWARD OF CERTAIN DISALLOWED IN- 19 TEREST.—The amount of any interest not allowed as a 20 deduction for any taxable year by reason of subsection 21 (j)(1) or (n)(1) (whichever imposes the lower limitation 22 with respect to such taxable year) shall be treated as inter- 23 est (and as business interest for purposes of subsection 24 (j)(1)) paid or accrued in the succeeding taxable year. In- 25 VerDate Sep 11 2014 18:15 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S779.IS S779 pamtmann on DSKBFK8HB2PROD with BILLS 13 •S 779 IS terest paid or accrued in any taxable year (determined 1 without regard to the preceding sentence) shall not be car- 2 ried past the fifth taxable year following such taxable year, 3 determined by treating interest as allowed as a deduction 4 on a first-in, first-out basis.’’. 5 (2) CONFORMIN [Text truncated for display. Full text available on Congress.gov.]