S.Amdt. 2881

SA 2881. Mr. DURBIN (for himself, Mr. Reed, Mr. Whitehouse, and Mr.
Sanders) submitted an amendment intended to be proposed by him to the
bill H.R. 3762, to provide for reconciliation pursuant to section 2002
of the concurrent resolution on the budget for fiscal year 2016; which
was ordered to lie on the table; as follows:

At the appropriate place, insert the following:

SEC. __. MODIFICATIONS TO RULES RELATING TO INVERTED
CORPORATIONS.

(a) In General.--Subsection (b) of section 7874 of the
Internal Revenue Code of 1986 is amended to read as follows:
``(b) Inverted Corporations Treated as Domestic
Corporations.--
``(1) In general.--Notwithstanding section 7701(a)(4), a
foreign corporation shall be treated for purposes of this
title as a domestic corporation if--
``(A) such corporation would be a surrogate foreign
corporation if subsection (a)(2) were applied by substituting
`80 percent' for `60 percent', or
``(B) such corporation is an inverted domestic corporation.
``(2) Inverted domestic corporation.--For purposes of this
subsection, a foreign corporation shall be treated as an
inverted domestic corporation if, pursuant to a plan (or a
series of related transactions)--
``(A) the entity completes after May 8, 2014, the direct or
indirect acquisition of--
``(i) substantially all of the properties held directly or
indirectly by a domestic corporation, or
``(ii) substantially all of the assets of, or substantially
all of the properties constituting a trade or business of, a
domestic partnership, and
``(B) after the acquisition, more than 50 percent of the
stock (by vote or value) of the entity is held--
``(i) in the case of an acquisition with respect to a
domestic corporation, by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation, or
``(ii) in the case of an acquisition with respect to a
domestic partnership, by former partners of the domestic
partnership by reason of holding a capital or profits
interest in the domestic partnership.
``(3) Exception for corporations with substantial business
activities in foreign country of organization.--A foreign
corporation described in paragraph (2) shall not be treated
as an inverted domestic corporation if after the acquisition
the expanded affiliated group which includes the entity has
substantial business activities in the foreign country in
which or under the law of which the entity is created or
organized when compared to the total business activities of
such expanded affiliated group. For purposes of subsection
(a)(2)(B)(iii) and the preceding sentence, the term
`substantial business activities' shall have the meaning
given such term under regulations in effect on May 8, 2014,
except that the Secretary may issue regulations increasing
the threshold percent in any of the tests under such
regulations for determining if business activities constitute
substantial business activities for purposes of this
paragraph.''.
(b) Conforming Amendments.--
(1) Clause (i) of section 7874(a)(2)(B) of such Code is
amended by striking ``after March 4, 2003,'' and inserting
``after March 4, 2003, and before May 9, 2014,''.
(2) Subsection (c) of section 7874 of such Code is
amended--
(A) in paragraph (2)--
(i) by striking ``subsection (a)(2)(B)(ii)'' and inserting
``subsections (a)(2)(B)(ii) and (b)(2)(B)'', and
(ii) by inserting ``or (b)(2)(A)'' after ``(a)(2)(B)(i)''
in subparagraph (B),
(B) in paragraph (3), by inserting ``or (b)(2)(B), as the
case may be,'' after ``(a)(2)(B)(ii)'',
(C) in paragraph (5), by striking ``subsection
(a)(2)(B)(ii)'' and inserting ``subsections (a)(2)(B)(ii) and
(b)(2)(B)'', and
(D) in paragraph (6), by inserting ``or inverted domestic
corporation, as the case may be,'' after ``surrogate foreign
corporation''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after May 8, 2014.
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