American Assistance for American Companies Act

II 116TH CONGRESS 2D SESSION S. 4067 To prohibit certain assistance for inverted domestic corporations. IN THE SENATE OF THE UNITED STATES JUNE 24, 2020 Mr. DURBIN (for himself, Ms. DUCKWORTH, and Mr. VAN HOLLEN) intro- duced the following bill; which was read twice and referred to the Com- mittee on Finance A BILL To prohibit certain assistance for inverted domestic corporations. 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 ‘‘American Assistance 4 for American Companies Act’’. 5 SEC. 2. PROHIBITION ON APPLICATION OF CERTAIN AS- 6 SISTANCE TO INVERTED DOMESTIC COR- 7 PORATIONS. 8 (a) PROHIBITION ON USE OF CERTAIN TAX INCEN- 9 TIVES.— 10 VerDate Sep 11 2014 21:02 Jul 07, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S4067.IS S4067 tkelley on DSKBCP9HB2PROD with BILLS 2 •S 4067 IS (1) NET OPERATING LOSS CARRYBACKS.— 1 (A) IN GENERAL.—Section 172(b)(1)(D) 2 of the Internal Revenue Code of 1986 is 3 amended by adding at the end the following 4 new clause: 5 ‘‘(vi) SPECIAL RULE FOR INVERTED 6 DOMESTIC CORPORATIONS.—Clause (i) 7 shall not apply to any foreign corporation 8 for any taxable year in which such corpora- 9 tion is an inverted domestic corporation 10 (as defined in section 7701(p)(2)), or to 11 any member of the expanded affiliated 12 group (as defined in section 7874(c)(1)) of 13 such a foreign corporation, unless such for- 14 eign corporation has made an election 15 under section 7701(p)(1).’’. 16 (B) EFFECTIVE DATE.—The amendment 17 made by this section shall take effect as if in- 18 cluded in section 2303(b) of the CARES Act. 19 (2) INCREASED LIMITATION ON BUSINESS IN- 20 TEREST.— 21 (A) IN GENERAL.—Section 163(j)(10) of 22 the Internal Revenue Code of 1986 is amended 23 by adding at the end the following new sub- 24 paragraph: 25 VerDate Sep 11 2014 21:02 Jul 07, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S4067.IS S4067 tkelley on DSKBCP9HB2PROD with BILLS 3 •S 4067 IS ‘‘(C) SPECIAL RULE FOR INVERTED DO- 1 MESTIC CORPORATIONS.—Subparagraphs (A) 2 and (B) shall not apply to any foreign corpora- 3 tion for any taxable year in which such corpora- 4 tion is an inverted domestic corporation (as de- 5 fined in section 7701(p)(2)), or to any member 6 of the expanded affiliated group (as defined in 7 section 7874(c)(1)) of such a foreign corpora- 8 tion, unless such foreign corporation has made 9 an election under section 7701(p)(1).’’. 10 (B) EFFECTIVE DATE.—The amendment 11 made by this section shall take effect as if in- 12 cluded in section 2306 of the CARES Act. 13 (3) FEDERAL RESERVE EMERGENCY LENDING 14 FACILITIES.— 15 (A) IN GENERAL.—No inverted domestic 16 corporation, as defined in section 7701(p)(2) of 17 the Internal Revenue Code of 1986, or any 18 member of the expanded affiliated group (as de- 19 fined in section 7874(c)(1) of such Code) of 20 such inverted domestic corporation, may partici- 21 pate in any program or facility established by 22 the Board of Governors of the Federal Reserve 23 System under the authority of section 13(3) of 24 the Federal Reserve Act (12 U.S.C. 343) and 25 VerDate Sep 11 2014 21:02 Jul 07, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S4067.IS S4067 tkelley on DSKBCP9HB2PROD with BILLS 4 •S 4067 IS with funding authorized under section 4003 of 1 the CARES Act (Public Law 116–136), includ- 2 ing the Primary Market Corporate Credit Facil- 3 ity and the Secondary Market Corporate Credit 4 Facility. 5 (B) EXCEPTION.—Subparagraph (A) shall 6 not apply if the inverted domestic corporation 7 makes an election under section 7701(p)(1) of 8 the Internal Revenue Code of 1986. 9 (C) APPLICABILITY.—This paragraph shall 10 apply to participation in any program or facility 11 described in subparagraph (A) established be- 12 fore, on, or after the date of enactment of this 13 Act. 14 (b) ELECTION TO TREAT INVERTED DOMESTIC COR- 15 PORATIONS AS DOMESTIC CORPORATIONS.— 16 (1) INVERTED DOMESTIC CORPORATIONS.—Sec- 17 tion 7701 of the Internal Revenue Code of 1986 is 18 amended by redesignating subsection (p) as sub- 19 section (q) and by inserting after subsection (o) the 20 following new subsection: 21 ‘‘(p) INVERTED DOMESTIC CORPORATIONS.— 22 ‘‘(1) ELECTION TO BE TREATED AS A DOMES- 23 TIC CORPORATION.— 24 VerDate Sep 11 2014 21:02 Jul 07, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S4067.IS S4067 tkelley on DSKBCP9HB2PROD with BILLS 5 •S 4067 IS ‘‘(A) IN GENERAL.—Notwithstanding pa- 1 ragraphs (4) and (5) of subsection (a), an in- 2 verted domestic corporation may elect to be 3 treated as a domestic corporation for taxable 4 years beginning with the last taxable year which 5 begins before January 1, 2018. 6 ‘‘(B) ELECTION.—An election under this 7 subsection— 8 ‘‘(i) shall be made not later than 30 9 days after the date of the enactment of 10 this subsection, and 11 ‘‘(ii) once made, shall be irrevocable. 12 ‘‘(C) TIME FOR FILING RETURNS AND PAY- 13 MENT OF TAXES.—Notwithstanding sections 14 6072 and 6151, any return for any taxable year 15 ending before the date described in subpara- 16 graph (B)(i), and any payment of taxes or pen- 17 alties, shall not be considered due before Janu- 18 ary 1, 2021. 19 ‘‘(2) INVERTED DOMESTIC CORPORATION.—For 20 purposes of this subsection, the term ‘inverted do- 21 mestic corporation’ means any foreign corporation 22 which, pursuant to a plan (or a series of related 23 transactions)— 24 VerDate Sep 11 2014 21:02 Jul 07, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S4067.IS S4067 tkelley on DSKBCP9HB2PROD with BILLS 6 •S 4067 IS ‘‘(A) completes after March 4, 2003, the 1 direct or indirect acquisition of— 2 ‘‘(i) substantially all of the properties 3 held directly or indirectly by a domestic 4 corporation, or 5 ‘‘(ii) substantially all of the assets of, 6 or substantially all of the properties consti- 7 tuting a trade or business of, a domestic 8 partnership, and 9 ‘‘(B) after the acquisition, either— 10 ‘‘(i) more than 50 percent of the stock 11 (by vote or value) of the corporation is 12 held— 13 ‘‘(I) in the case of an acquisition 14 with respect to a domestic corpora- 15 tion, by former shareholders of the 16 domestic corporation by reason of 17 holding stock in the domestic corpora- 18 tion, or 19 ‘‘(II) in the case of an acquisition 20 with respect to a domestic partner- 21 ship, by former partners of the do- 22 mestic partnership by reason of hold- 23 ing a capital or profits interest in the 24 domestic partnership, or 25 VerDate Sep 11 2014 21:02 Jul 07, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S4067.IS S4067 tkelley on DSKBCP9HB2PROD with BILLS 7 •S 4067 IS ‘‘(ii) the management and control of 1 the expanded affiliated group which in- 2 cludes the corporation occurs, directly or 3 indirectly, primarily within the United 4 States, and such expanded affiliated group 5 has significant domestic business activities. 6 ‘‘(3) EXCEPTION FOR CORPORATIONS WITH 7 SUBSTANTIAL BUSINESS ACTIVITIES IN FOREIGN 8 COUNTRY OF ORGANIZATION.—Such term shall not 9 include a foreign corporation described in paragraph 10 (2) if after the acquisition the expanded affiliated 11 group which includes the corporation has substantial 12 business activities in the foreign country in which or 13 under the law of which the corporation is created or 14 organized when compared to the total business ac- 15 tivities of such expanded affiliated group. For pur- 16 poses of the preceding sentence, the term ‘substan- 17 tial business activities’ shall have the meaning given 18 such term under regulations in effect on January 19 18, 2017, except that the Secretary may issue regu- 20 lations increasing the threshold percent in any of the 21 tests under such regulations for determining if busi- 22 ness activities constitute substantial business activi- 23 ties for purposes of this paragraph. 24 VerDate Sep 11 2014 21:02 Jul 07, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S4067.IS S4067 tkelley on DSKBCP9HB2PROD with BILLS 8 •S 4067 IS ‘‘(4) MANAGEMENT AND CONTROL.—For pur- 1 poses of paragraph (2)(B)(ii)— 2 ‘‘(A) IN GENERAL.—The Secretary shall 3 prescribe regulations for purposes of deter- 4 mining cases in which the management and 5 control of an expanded affiliated group is to be 6 treated as occurring, directly or indirectly, pri- 7 marily within the United States. The regula- 8 tions prescribed under the preceding sentence 9 shall apply to periods after March 4, 2003. 10 ‘‘(B) EXECUTIVE OFFICERS AND SENIOR 11 MANAGEMENT.—Such regulations shall provide 12 that the management and control of an ex- 13 panded affiliated group shall be treated as oc- 14 curring, directly or indirectly, primarily within 15 the United States if substantially all of the ex- 16 ecutive officers and senior management of the 17 expanded affiliated group who exercise day-to- 18 day responsibility for making decisions involving 19 strategic, financial, and operational policies of 20 the expanded affiliated group are based or pri- 21 marily located within the United States. Indi- 22 viduals who in fact exercise such day-to-day re- 23 sponsibilities shall be treated as executive offi- 24 VerDate Sep 11 2014 21:02 Jul 07, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S4067.IS S4067 tkelley on DSKBCP9HB2PROD with BILLS 9 •S 4067 IS cers and senior management regardless of their 1 title. 2 ‘‘(5) SIGNIFICANT DOMESTIC BUSINESS ACTIVI- 3 TIES.—For purposes of paragraph (2)(B)(ii), an ex- 4 panded affiliated group has significant domestic 5 business activities if at least 25 percent of— 6 ‘‘(A) the employees of the group are based 7 in the United States, 8 ‘‘(B) the employee compensation incurred 9 by the group is incurred with respect to employ- 10 ees based in the United States, 11 ‘‘(C) the assets of the group are located in 12 the United States, or 13 ‘‘(D) the income of the group is derived in 14 the United States, 15 determined in the same manner as such determina- 16 tions are made for purposes of determining substan- 17 tial business activities under regulations referred to 18 in paragraph (3) as in effect on January 18, 2017, 19 but applied by treating all references in such regula- 20 tions to ‘foreign country’ and ‘relevant foreign coun- 21 try’ as references to ‘the United States’. The Sec- 22 retary may issue regulations decreasing the thresh- 23 old percent in any of the tests under such regula- 24 tions for determining if business activities constitute 25 VerDate Sep 11 2014 21:02 Jul 07, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S4067.IS S4067 tkelley on DSKBCP9HB2PROD with BILLS 10 •S 4067 IS significant domestic business activities for purposes 1 of this paragraph. 2 ‘‘(6) DEFINITIONS AND OTHER RULES.— 3 ‘‘(A) EXPANDED AFFILIATED GROUP.— 4 The term ‘expanded affiliated group’ has the 5 meaning give such term under section 6 7874(c)(1). 7 ‘‘(B) OTHER RULES.—Rules similar to the 8 rules of paragraphs (2), (3), (5), and (6) of sec- 9 tion 7874(c) shall apply for purposes of this 10 subsection.’’. 11 Æ VerDate Sep 11 2014 21:02 Jul 07, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6301 E:\BILLS\S4067.IS S4067 tkelley on DSKBCP9HB2PROD with BILLS