I 116TH CONGRESS 1ST SESSION H. R. 1712 To end offshore corporate tax avoidance, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MARCH 13, 2019 Mr. DOGGETT (for himself, Mr. BLUMENAUER, Mr. CARTWRIGHT, Ms. JUDY CHU of California, Mr. COHEN, Mr. COURTNEY, Mr. DANNY K. DAVIS of Illinois, Mr. DEFAZIO, Ms. DELAURO, Mr. DEUTCH, Mr. GARAMENDI, Mr. GRIJALVA, Mr. HIGGINS of New York, Mr. HUFFMAN, Ms. JAYAPAL, Ms. JOHNSON of Texas, Mr. JOHNSON of Georgia, Ms. KAPTUR, Ms. KELLY of Illinois, Mr. LANGEVIN, Mr. LARSON of Connecticut, Ms. LEE of California, Mr. TED LIEU of California, Mr. LOEBSACK, Mr. LYNCH, Mr. MCGOVERN, Ms. MOORE, Mr. NADLER, Mrs. NAPOLITANO, Ms. NOR- TON, Ms. OCASIO-CORTEZ, Ms. PINGREE, Mr. RASKIN, Mr. RUSH, Mr. RYAN, Mr. SARBANES, Ms. SCHAKOWSKY, Mr. TAKANO, Ms. TLAIB, Mr. TONKO, Mrs. WATSON COLEMAN, Ms. WILD, Mr. YARMUTH, Mr. LEWIS, and Mr. GARCI´A of Illinois) introduced the following bill; which was re- ferred to the Committee on Ways and Means, and in addition to the Committee on Financial Services, for a period to be subsequently deter- mined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 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 VerDate Sep 11 2014 18:14 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1712.IH H1712 pamtmann on DSKBFK8HB2PROD with BILLS 2 •HR 1712 IH SECTION 1. SHORT TITLE, ETC. 1 (a) SHORT TITLE.—This Act may be cited as the 2 ‘‘Stop Tax Haven Abuse Act’’. 3 (b) AMENDMENT OF 1986 CODE.—Except as other- 4 wise expressly provided, whenever in this Act an amend- 5 ment or repeal is expressed in terms of an amendment 6 to, or repeal of, a section or other provision, the reference 7 shall be considered to be made to a section or other provi- 8 sion of the Internal Revenue Code of 1986. 9 (c) TABLE OF CONTENTS.—The table of contents of 10 this Act is as follows: 11 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. VerDate Sep 11 2014 18:14 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6211 E:\BILLS\H1712.IH H1712 pamtmann on DSKBFK8HB2PROD with BILLS 3 •HR 1712 IH TITLE I—ENDING CORPORATE 1 OFFSHORE TAX AVOIDANCE 2 SEC. 101. REPEAL OF CHECK-THE-BOX RULES FOR CERTAIN 3 FOREIGN ENTITIES AND CFC LOOK-THRU 4 RULES. 5 (a) CHECK-THE-BOX RULES.—Paragraph (3) of sec- 6 tion 7701(a) is amended— 7 (1) by striking ‘‘and’’, and 8 (2) by inserting after ‘‘insurance companies’’ 9 the following: ‘‘, and any foreign business entity 10 that— 11 ‘‘(A) has a single owner that does not have 12 limited liability, or 13 ‘‘(B) has one or more members all of 14 which have limited liability’’. 15 (b) LOOK-THRU RULE.—Subparagraph (C) of sec- 16 tion 954(c)(6) is amended to read as follows: 17 ‘‘(C) TERMINATION.—Subparagraph (A) 18 shall not apply to dividends, interest, rents, and 19 royalties received or accrued after the date of 20 the enactment of the Stop Tax Haven Abuse 21 Act.’’. 22 (c) EFFECTIVE DATE.— 23 VerDate Sep 11 2014 18:14 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1712.IH H1712 pamtmann on DSKBFK8HB2PROD with BILLS 4 •HR 1712 IH (1) The amendments made by subsection (a) 1 shall take effect on the date of the enactment of this 2 Act. 3 (2) The amendment made by subsection (b) 4 shall apply to payments received after the date of 5 the enactment of this Act. 6 SEC. 102. LIMITATION ON DEDUCTION OF INTEREST BY DO- 7 MESTIC CORPORATIONS WHICH ARE MEM- 8 BERS OF AN INTERNATIONAL FINANCIAL RE- 9 PORTING GROUP. 10 (a) IN GENERAL.—Section 163 is amended by redes- 11 ignating subsection (n) as subsection (p) and by inserting 12 after subsection (m) the following new subsection: 13 ‘‘(n) LIMITATION ON DEDUCTION OF INTEREST BY 14 DOMESTIC CORPORATIONS IN INTERNATIONAL FINAN- 15 CIAL REPORTING GROUPS.— 16 ‘‘(1) IN GENERAL.—In the case of any domestic 17 corporation which is a member of any international 18 financial reporting group, the deduction under this 19 chapter for interest paid or accrued during the tax- 20 able year shall not exceed the sum of— 21 ‘‘(A) the allowable percentage of 110 per- 22 cent of the excess (if any) of— 23 ‘‘(i) the amount of such interest so 24 paid or accrued, over 25 VerDate Sep 11 2014 18:14 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1712.IH H1712 pamtmann on DSKBFK8HB2PROD with BILLS 5 •HR 1712 IH ‘‘(ii) the amount described in subpara- 1 graph (B), plus 2 ‘‘(B) the amount of interest includible in 3 gross income of such corporation for such tax- 4 able year. 5 ‘‘(2) INTERNATIONAL FINANCIAL REPORTING 6 GROUP.— 7 ‘‘(A) For purposes of this subsection, the 8 term ‘international financial reporting group’ 9 means, with respect to any reporting year, any 10 group of entities which— 11 ‘‘(i) includes— 12 ‘‘(I) at least one foreign corpora- 13 tion engaged in a trade or business 14 within the United States, or 15 ‘‘(II) at least one domestic cor- 16 poration and one foreign corporation, 17 ‘‘(ii) prepares consolidated financial 18 statements with respect to such year, and 19 ‘‘(iii) reports in such statements aver- 20 age annual gross receipts (determined in 21 the aggregate with respect to all entities 22 which are part of such group) for the 3-re- 23 porting-year period ending with such re- 24 porting year in excess of $100,000,000. 25 VerDate Sep 11 2014 18:14 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1712.IH H1712 pamtmann on DSKBFK8HB2PROD with BILLS 6 •HR 1712 IH ‘‘(B) RULES RELATING TO DETERMINA- 1 TION OF AVERAGE GROSS RECEIPTS.—For pur- 2 poses of subparagraph (A)(iii), rules similar to 3 the rules of section 448(c)(3) shall apply. 4 ‘‘(3) ALLOWABLE PERCENTAGE.—For purposes 5 of this subsection— 6 ‘‘(A) IN GENERAL.—The term ‘allowable 7 percentage’ means, with respect to any domestic 8 corporation for any taxable year, the ratio (ex- 9 pressed as a percentage and not greater than 10 100 percent) of— 11 ‘‘(i) such corporation’s allocable share 12 of the international financial reporting 13 group’s reported net interest expense for 14 the reporting year of such group which 15 ends in or with such taxable year of such 16 corporation, over 17 ‘‘(ii) such corporation’s reported net 18 interest expense for such reporting year of 19 such group. 20 ‘‘(B) REPORTED NET INTEREST EX- 21 PENSE.—The term ‘reported net interest ex- 22 pense’ means— 23 VerDate Sep 11 2014 18:14 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1712.IH H1712 pamtmann on DSKBFK8HB2PROD with BILLS 7 •HR 1712 IH ‘‘(i) with respect to any international 1 financial reporting group for any reporting 2 year, the excess of— 3 ‘‘(I) the aggregate amount of in- 4 terest expense reported in such 5 group’s consolidated financial state- 6 ments for such taxable year, over 7 ‘‘(II) the aggregate amount of in- 8 terest income reported in such group’s 9 consolidated financial statements for 10 such taxable year, and 11 ‘‘(ii) with respect to any domestic cor- 12 poration for any reporting year, the excess 13 of— 14 ‘‘(I) the amount of interest ex- 15 pense of such corporation reported in 16 the books and records of the inter- 17 national financial reporting group 18 which are used in preparing such 19 group’s consolidated financial state- 20 ments for such taxable year, over 21 ‘‘(II) the amount of interest in- 22 come of such corporation reported in 23 such books and records. 24 VerDate Sep 11 2014 18:14 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1712.IH H1712 pamtmann on DSKBFK8HB2PROD with BILLS 8 •HR 1712 IH ‘‘(C) ALLOCABLE SHARE OF REPORTED 1 NET INTEREST EXPENSE.—With respect to any 2 domestic corporation which is a member of any 3 international financial reporting group, such 4 corporation’s allocable share of such group’s re- 5 ported net interest expense for any reporting 6 year is the portion of such expense which bears 7 the same ratio to such expense as— 8 ‘‘(i) the EBITDA of such corporation 9 for such reporting year, bears to 10 ‘‘(ii) the EBITDA of such group for 11 such reporting year. 12 ‘‘(D) EBITDA.— 13 ‘‘(i) IN GENERAL.—The term 14 ‘EBITDA’ means, with respect to any re- 15 porting year, earnings before interest, 16 taxes, depreciation, and amortization— 17 ‘‘(I) as determined in the inter- 18 national financial reporting group’s 19 consolidated financial statements for 20 such year, or 21 ‘‘(II) for purposes of subpara- 22 graph (A)(i), as determined in the 23 books and records of the international 24 financial reporting group which are 25 VerDate Sep 11 2014 18:14 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1712.IH H1712 pamtmann on DSKBFK8HB2PROD with BILLS 9 •HR 1712 IH used in preparing such statements if 1 not determined in such statements. 2 ‘‘(ii) TREATMENT OF DISREGARDED 3 ENTITIES.—The EBITDA of any domestic 4 corporation shall not fail to include the 5 EBITDA of any entity which is dis- 6 regarded for purposes of this chapter. 7 ‘‘(iii) TREATMENT OF INTRA-GROUP 8 DISTRIBUTIONS.—The EBITDA of any do- 9 mestic corporation shall be determined 10 without regard to any distribution received 11 by such corporation from any other mem- 12 ber of the international financial reporting 13 group. 14 ‘‘(E) SPECIAL RULES FOR NON-POSITIVE 15 EBITDA.— 16 ‘‘(i) NON-POSITIVE GROUP EBITDA.— 17 In the case of any international financial 18 reporting group the EBITDA of which is 19 zero or less, paragraph (1) shall not apply 20 to any member of such group the EBITDA 21 of which is above zero. 22 ‘‘(ii) NON-POSITIVE ENTITY 23 EBITDA.—In the case of any group mem- 24 ber the EBITDA of which is zero or less, 25 VerDate Sep 11 2014 18:14 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1712.IH H1712 pamtmann on DSKBFK8HB2PROD with BILLS 10 •HR 1712 IH paragraph (1) shall be applied without re- 1 gard to subparagraph (A) thereof. 2 ‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 3 For purposes of this subsection, the term ‘consoli- 4 dated financial statement’ means any consolidated 5 financial statement described in paragraph (2)(A)(ii) 6 if such statement is— 7 ‘‘(A) a financial statement which is cer- 8 tified as being prepared in accordance with gen- 9 erally accepted accounting principles, inter- 10 national financial reporting standards, or any 11 other comparable method of accounting identi- 12 fied by the Secretary, and which is— 13 ‘‘(i) a 10–K (or successor form), or 14 annual statement to shareholders, required 15 to be filed with the United States Securi- 16 ties and Exchange Commission, 17 ‘‘(ii) an audited financial statement 18 which is used for— 19 ‘‘(I) credit purposes, 20 ‘‘(II) reporting to shareholders, 21 partners, or other proprietors, or to 22 beneficiaries, or 23 ‘‘(III) any other substantial 24 nontax purpose, 25 VerDate Sep 11 2014 18:14 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1712.IH H1712 pamtmann on DSKBFK8HB2PROD with BILLS 11 •HR 1712 IH but only if there is no statement described 1 in clause (i), or 2 ‘‘(iii) filed with any other Federal or 3 State agency for nontax purposes, but only 4 if there is no statement described in clause 5 (i) or (ii), or 6 ‘‘(B) a financial statement which— 7 ‘‘(i) is used for a purpose described in 8 subclause (I), (II), or (III) of subpara- 9 graph (A)(ii), or 10 ‘‘(ii) filed with any regulatory or gov- 11 ernmental body (whether domestic or for- 12 eign) specified by the Secretary, 13 but only if there is no statement described in 14 subparagraph (A). 15 ‘‘(5) REPORTING YEAR.—For purposes of this 16 subsection, the term ‘reporting year’ means, with re- 17 spect to any international financial reporting group, 18 the year with respect to which the consolidated fi- 19 nancial statements are prepared. 20 ‘‘(6) APPLICATION TO CERTAIN ENTITIES.— 21 ‘‘(A) PARTNERSHIPS.—Except as other- 22 wise provided by the Secretary in paragraph 23 (7), this subsection and subsection (o) shall 24 apply to any partnership which is a member of 25 VerDate Sep 11 2014 18:14 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1712.IH H1712 pamtmann on DSKBFK8HB2PROD with BILLS 12 •HR 1712 IH any international financial reporting group 1 under rules similar to the rules of section 2 163(j)(4). 3 ‘‘(B) FOREIGN CORPORATIONS ENGAGED 4 IN TRADE OR BUSINESS WITHIN THE UNITED 5 STATES.—Except as otherwise provided by the 6 Secretary in paragraph (7), any deduction for 7 interest paid or accrued by a foreign corpora- 8 tion engaged in a trade or business within the 9 United States shall be limited in a manner con- 10 sistent with the principles of this subsection. 11 ‘‘(C) CONSOLIDATED GROUPS.—For pur- 12 poses of this subsection, the members of any 13 group that file (or are required to file) a con- 14 solidated return with respect to the tax imposed 15 by chapter 1 for a taxable year shall be treated 16 as a single corporation. 17 ‘‘(7) REGULATIONS.—The Secretary may issue 18 such regulations or other guidance as are necessary 19 or appropriate to carry out the purposes of this sub- 20 section.’’. 21 (b) CARRYFORWARD OF DISALLOWED INTEREST.— 22 (1) IN GENERAL.—Section 163 is amended by [Text truncated for display. 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