No Tax Breaks for Outsourcing Act

I 116TH CONGRESS 1ST SESSION H. R. 1711 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 13, 2019 Mr. DOGGETT (for himself, Ms. BARRAGA´N, Ms. BASS, Mr. BLUMENAUER, Mr. BRENDAN F. BOYLE of Pennsylvania, Mr. CARTWRIGHT, Ms. JUDY CHU of California, Mr. CICILLINE, Ms. CLARKE of New York, Mr. CLEAVER, Mr. COHEN, Mr. COURTNEY, Mr. CUMMINGS, Mr. DANNY K. DAVIS of Illinois, Mr. DEFAZIO, Ms. DELAURO, Mr. DESAULNIER, Mrs. DINGELL, Ms. ESHOO, Mr. ESPAILLAT, Mr. EVANS, Ms. FUDGE, Mr. GARAMENDI, Mr. GARCI´A of Illinois, Mr. GOMEZ, Mr. GRIJALVA, Mr. HASTINGS, Mr. HIGGINS of New York, Mr. HUFFMAN, Ms. JACKSON LEE, Ms. JAYAPAL, Ms. JOHNSON of Texas, Mr. JOHNSON of Georgia, Ms. KAPTUR, Ms. KELLY of Illinois, Mr. KHANNA, Mr. LANGEVIN, Mr. LAMB, Mrs. LAWRENCE, Ms. LEE of California, Mr. LEVIN of Michigan, Mr. LOWENTHAL, Mr. LYNCH, Mrs. CAROLYN B. MALONEY of New York, Ms. MCCOLLUM, Mr. MCGOVERN, Ms. MOORE, Mr. NADLER, Mrs. NAPOLITANO, Mr. NORCROSS, Ms. NORTON, Ms. OCASIO-CORTEZ, Mr. PALLONE, Mr. PASCRELL, Mr. PETERSON, Mr. POCAN, Ms. PORTER, Mr. RASKIN, Ms. ROYBAL-ALLARD, Mr. RUSH, Mr. RYAN, Mr. SARBANES, Ms. SCHAKOWSKY, Mr. SCOTT of Virginia, Mr. SERRANO, Mr. SIRES, Mr. SOTO, Mr. SUOZZI, Mr. TAKANO, Ms. TITUS, Ms. TLAIB, Mr. TONKO, Ms. VELA´ZQUEZ, Ms. WATERS, Mrs. WATSON COLEMAN, Mr. WELCH, Mr. YARMUTH, and Mr. LEWIS) 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 for current year inclusion of net CFC tested income, and for other purposes. VerDate Sep 11 2014 04:01 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\H1711.IH H1711 kjohnson on DSK79L0C42 with BILLS 2 •HR 1711 IH 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. Limitation on deduction of interest by domestic corporations which are members of an international financial reporting group. Sec. 4. Modifications to rules relating to inverted corporations. Sec. 5. 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 (1) IN GENERAL.—Section 951A(a) is amended 18 by striking ‘‘global intangible low-taxed income’’ and 19 inserting ‘‘net CFC tested income’’. 20 (2) CONFORMING AMENDMENTS.— 21 VerDate Sep 11 2014 04:01 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1711.IH H1711 kjohnson on DSK79L0C42 with BILLS 3 •HR 1711 IH (A) Section 951A is amended by striking 1 subsections (b) and (d). 2 (B) Section 951A(e)(1) is amended by 3 striking ‘‘subsections (b), (c)(1)(A), and’’ and 4 inserting ‘‘subsections (c)(1)(A) and’’. 5 (C) Section 951A(f) is amended to read as 6 follows: 7 ‘‘(f) TREATMENT AS SUBPART F INCOME FOR CER- 8 TAIN PURPOSES.— 9 ‘‘(1) IN GENERAL.—Except as provided in para- 10 graph (2), any net CFC tested income included in 11 gross income under subsection (a) shall be treated in 12 the same manner as an amount included under sec- 13 tion 951(a)(1)(A) for purposes of applying sections 14 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 15 961, 962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 16 1248(d)(1), 6501(e)(1)(C), 6654(d)(2)(D), and 17 6655(e)(4). 18 ‘‘(2) EXCEPTION.—The Secretary shall provide 19 rules for the application of paragraph (1) to other 20 provisions of this title in any case in which the de- 21 termination of subpart F income is required to be 22 made at the level of the controlled foreign corpora- 23 tion.’’. 24 VerDate Sep 11 2014 04:01 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1711.IH H1711 kjohnson on DSK79L0C42 with BILLS 4 •HR 1711 IH (D) Section 960(d)(2)(A) is amended by 1 striking ‘‘global intangible low-taxed income (as 2 defined in section 951A(b))’’ and inserting ‘‘net 3 CFC tested income (as defined in section 4 951A(c))’’. 5 (b) REPEAL OF REDUCED RATE OF TAX ON NET 6 CFC TESTED INCOME.— 7 (1) IN GENERAL.—Part VIII of subchapter B 8 of chapter 1 is amended by striking section 250 (and 9 by striking the item relating to such section in the 10 table of sections of such part). 11 (2) CONFORMING AMENDMENTS.— 12 (A) Section 59A(c)(4)(B)(i) is amended by 13 striking ‘‘section 172, 245A, or 250’’ and in- 14 serting ‘‘section 172 or 245A’’. 15 (B) Section 172(d) is amended by striking 16 paragraph (9). 17 (C) Section 246(b)(1) is amended— 18 (i) by striking ‘‘subsection (a) and (b) 19 of section 245, and section 250’’ and in- 20 serting ‘‘and subsection (a) and (b) of sec- 21 tion 245’’; and 22 (ii) by striking ‘‘subsection (a) and 23 (b) of section 245, and 250’’ and inserting 24 VerDate Sep 11 2014 04:01 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1711.IH H1711 kjohnson on DSK79L0C42 with BILLS 5 •HR 1711 IH ‘‘and subsection (a) and (b) of section 1 245’’. 2 (D) Section 469(i)(3)(F)(iii) is amended 3 by striking ‘‘222, and 250’’ and inserting ‘‘and 4 222’’. 5 (c) NET CFC TESTED INCOME DETERMINED WITH- 6 OUT REGARD TO HIGH TAX FOREIGN INCOME.—Section 7 951A(c)(2)(A)(i) is amended by redesignating subclauses 8 (IV) and (V) as subclauses (V) and (VI), respectively, and 9 by inserting after subclause (III) the following new sub- 10 clause: 11 ‘‘(IV) any item of income subject 12 to an effective rate of income tax im- 13 posed by a foreign country greater 14 than the maximum rate of tax speci- 15 fied in section 11,’’. 16 (d) REPEAL OF EXCLUSION OF FOREIGN OIL AND 17 GAS EXTRACTION INCOME FROM THE DETERMINATION 18 OF TESTED INCOME.—Section 951A(c)(2)(A)(i), as 19 amended by subsection (c) is amended— 20 (1) by adding ‘‘and’’ at the end of subclause 21 (IV); 22 (2) by striking ‘‘and’’ at the end of subclause 23 (V) and inserting ‘‘over’’; and 24 (3) by striking subclause (VI). 25 VerDate Sep 11 2014 04:01 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1711.IH H1711 kjohnson on DSK79L0C42 with BILLS 6 •HR 1711 IH (e) INCREASE IN DEEMED PAID CREDIT FOR TAXES 1 PROPERLY ATTRIBUTABLE TO TESTED INCOME.— 2 (1) IN GENERAL.—Section 960(d) is amended 3 by striking ‘‘80 percent of’’. 4 (2) CONFORMING AMENDMENT.—Section 78 is 5 amended by striking ‘‘(determined without regard to 6 the phrase ‘‘80 percent of’’ in subsection (d)(1) 7 thereof)’’. 8 (f) EFFECTIVE DATE.— 9 (1) IN GENERAL.—Except as otherwise pro- 10 vided in this subsection, the amendments made by 11 this section shall apply to taxable years of foreign 12 corporations beginning after December 31, 2018, 13 and to taxable years of United States shareholders 14 in which or with which such taxable years of foreign 15 corporations end. 16 (2) REPEAL OF REDUCED RATE OF TAX; IN- 17 CREASE IN DEEMED PAID CREDIT.—The amend- 18 ments made by subsection (b) and (e) shall apply to 19 taxable years beginning after December 31, 2018. 20 VerDate Sep 11 2014 04:01 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1711.IH H1711 kjohnson on DSK79L0C42 with BILLS 7 •HR 1711 IH SEC. 3. 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 04:01 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1711.IH H1711 kjohnson on DSK79L0C42 with BILLS 8 •HR 1711 IH ‘‘(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 04:01 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1711.IH H1711 kjohnson on DSK79L0C42 with BILLS 9 •HR 1711 IH ‘‘(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 04:01 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1711.IH H1711 kjohnson on DSK79L0C42 with BILLS 10 •HR 1711 IH ‘‘(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 04:01 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1711.IH H1711 kjohnson on DSK79L0C42 with BILLS 11 •HR 1711 IH ‘‘(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 04:01 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1711.IH H1711 kjohnson on DSK79L0C42 with BILLS 12 •HR 1711 IH ‘‘(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 04:01 Mar 23, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H1711.IH H1711 kjohnson on DSK79L0C42 with BILLS 13 •HR 1711 IH ‘‘(A) a financial statement which is cer- 1 tified as being prepared in accordance with gen- 2 erally accepted accounting principles, inter- [Text truncated for display. 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