Removing Incentives for Outsourcing Act

II 116TH CONGRESS 1ST SESSION S. 1610 To amend the Internal Revenue Code of 1986 to modify the global intangible low-taxed income by repealing the tax-free deemed return on investments and determining net CFC tested income on a per-country basis. IN THE SENATE OF THE UNITED STATES MAY 22, 2019 Ms. KLOBUCHAR (for herself, Mr. VAN HOLLEN, and Ms. DUCKWORTH) intro- duced the following bill; which was read twice and referred to the Com- mittee on Finance A BILL To amend the Internal Revenue Code of 1986 to modify the global intangible low-taxed income by repealing the tax-free deemed return on investments and determining net CFC tested income on a per-country basis. 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 ‘‘Removing Incentives 4 for Outsourcing Act’’. 5 VerDate Sep 11 2014 03:49 May 31, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1610.IS S1610 kjohnson on DSK79L0C42 with BILLS 2 •S 1610 IS SEC. 2. MODIFICATION OF TAX ON GLOBAL INTANGIBLE 1 LOW-TAXED INCOME. 2 (a) REPEAL OF TAX-FREE DEEMED RETURN ON IN- 3 VESTMENTS.— 4 (1) IN GENERAL.—Section 951A(a) of the In- 5 ternal Revenue Code of 1986 is amended by striking 6 ‘‘global intangible low-taxed income’’ and inserting 7 ‘‘net CFC tested income’’. 8 (2) CONFORMING AMENDMENTS.— 9 (A) Section 951A of such Code is amended 10 by striking subsections (b) and (d). 11 (B) Section 951A(e)(1) of such Code is 12 amended by striking ‘‘subsections (b), 13 (c)(1)(A), and’’ and inserting ‘‘subsections 14 (c)(1)(A) and’’. 15 (C) Section 951A(f) of such Code is 16 amended to read as follows: 17 ‘‘(f) TREATMENT AS SUBPART F INCOME FOR CER- 18 TAIN PURPOSES.— 19 ‘‘(1) IN GENERAL.—Except as provided in para- 20 graph (2), any net CFC tested income included in 21 gross income under subsection (a) shall be treated in 22 the same manner as an amount included under sec- 23 tion 951(a)(1)(A) for purposes of applying sections 24 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 25 961, 962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 26 VerDate Sep 11 2014 03:49 May 31, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1610.IS S1610 kjohnson on DSK79L0C42 with BILLS 3 •S 1610 IS 1248(d)(1), 6501(e)(1)(C), 6654(d)(2)(D), and 1 6655(e)(4). 2 ‘‘(2) EXCEPTION.—The Secretary shall provide 3 rules for the application of paragraph (1) to other 4 provisions of this title in any case in which the de- 5 termination of subpart F income is required to be 6 made at the level of the controlled foreign corpora- 7 tion.’’. 8 (D) Section 960(d)(2)(A) of such Code is 9 amended by striking ‘‘global intangible low- 10 taxed income (as defined in section 951A(b))’’ 11 and inserting ‘‘net CFC tested income (as de- 12 fined in section 951A(c))’’. 13 (b) DETERMINATION OF NET CFC TESTED INCOME 14 ON COUNTRY-BY-COUNTRY BASIS.—Section 951A of the 15 Internal Revenue Code of 1986 is amended by adding at 16 the end the following: 17 ‘‘(g) DETERMINATION MADE ON COUNTRY-BY-COUN- 18 TRY BASIS.— 19 ‘‘(1) IN GENERAL.—This section shall be ap- 20 plied with respect to a United States shareholder of 21 the controlled foreign corporation separately with re- 22 spect to each foreign country in which the controlled 23 foreign corporation conducts any trade or business. 24 ‘‘(2) SPECIAL RULES.— 25 VerDate Sep 11 2014 03:49 May 31, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1610.IS S1610 kjohnson on DSK79L0C42 with BILLS 4 •S 1610 IS ‘‘(A) IN GENERAL.—For purposes of mak- 1 ing country-by-country determinations under 2 this section and sections 904 and 960 with re- 3 spect to net CFC tested income for a taxable 4 year pursuant to paragraph (1)— 5 ‘‘(i) taxes paid or accrued to a foreign 6 country by the controlled foreign corpora- 7 tion shall be assigned to that country, and 8 ‘‘(ii) earnings to which such taxes re- 9 late shall be treated as income assigned to 10 the country to which those tax payments 11 are made. 12 ‘‘(B) EARNINGS ASSIGNED TO TWO OR 13 MORE COUNTRIES.—If the same earnings are 14 assigned to two or more countries under sub- 15 paragraph (A), for purposes of paragraph (1) 16 such earnings and the taxes related thereto 17 shall be treated as assigned to the country with 18 the highest statutory corporate tax rate. 19 ‘‘(3) EARNINGS NOT SUBJECT TO TAX.—If 20 earnings are not subject to tax by any country, then 21 with respect to those earnings paragraph (1) shall 22 not apply. 23 ‘‘(4) REGULATIONS.—The Secretary shall pre- 24 scribe such regulations as may be necessary or ap- 25 VerDate Sep 11 2014 03:49 May 31, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1610.IS S1610 kjohnson on DSK79L0C42 with BILLS 5 •S 1610 IS propriate to carry out this subsection, including the 1 time period in which foreign earnings and the associ- 2 ated foreign taxes are assigned to a country.’’. 3 (c) EFFECTIVE DATE.—The amendments made by 4 this section shall apply with respect to taxable years of 5 controlled foreign corporations beginning after December 6 31, 2019, and to taxable years of United States share- 7 holders in which or with which such taxable years of for- 8 eign corporations end. 9 SEC. 3. STUDY AND REPORT ON RESTRUCTURING INTER- 10 NATIONAL TAX LAWS. 11 (a) STUDY.—The Chief of Staff of the Joint Com- 12 mittee on Taxation shall study options for the reform of 13 laws related to the taxation of income from international 14 sources, including the provisions of sections 59A, 250, and 15 951A of the Internal Revenue Code of 1986. Such study 16 include an evaluation of each option considered with re- 17 spect to— 18 (1) the extent to which the option increases or 19 decreases opportunities for tax avoidance; and 20 (2) the extent to which the option increases or 21 decreases incentives for domestic businesses to shift 22 jobs and operations to other countries. 23 (b) REPORT.—Not later than 90 days after the date 24 of the enactment of this Act, the Chief of Staff on the 25 VerDate Sep 11 2014 03:49 May 31, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1610.IS S1610 kjohnson on DSK79L0C42 with BILLS 6 •S 1610 IS Joint Committee on Taxation shall submit to Congress a 1 report on the results of the study conducted under sub- 2 section (a). 3 Æ VerDate Sep 11 2014 03:49 May 31, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6301 E:\BILLS\S1610.IS S1610 kjohnson on DSK79L0C42 with BILLS