S.Amdt. 1665

SA 1665. Ms. CANTWELL (for herself, Mr. Menendez, Mr. Van Hollen, Mr.
Blumenthal, Mr. Udall, Mr. Leahy, Ms. Harris, and Mr. Cardin) submitted
an amendment intended to be proposed to amendment SA 1618 proposed by
Mr. McConnell (for Mr. Hatch (for himself and Ms. Murkowski)) to the
bill H.R. 1, to provide for reconciliation pursuant to titles II and V
of the concurrent resolution on the budget for fiscal year 2018; which
was ordered to lie on the table; as follows:

Strike section 11042 and insert the following:

SEC. 11042. MODIFICATION OF TREATMENT OF DEFERRED FOREIGN
INCOME UPON TRANSITION TO PARTICIPATION
EXEMPTION SYSTEM OF TAXATION.

(a) In General.--
(1) Repeal of treatment.--The amendments made by section
14103 of this Act shall be null and void.
(2) Modified treatment.--Section 965 of the Internal
Revenue Code of 1986 is amended to read as follows:

``SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON
TRANSITION TO PARTICIPATION SYSTEM OF TAXATION.

``(a) Treatment of Deferred Foreign Income as Subpart F
Income.--In the case of the last taxable year of a deferred
foreign income corporation which begins before January 1,
2018--
``(1) all property of such foreign corporation shall be
treated as sold on the last day of such taxable year for its
fair market value, and, notwithstanding any other provision
of this title, any gain or loss arising from such sale shall
be taken into account for such taxable year to the extent
otherwise provided by this title (except that section 1091
shall not apply to any such loss), and
``(2) the subpart F income of such foreign corporation (as
otherwise determined for such taxable year under section 952
without regard to this paragraph and after application of
paragraph (1)) shall be increased by the accumulated post-
1986 deferred foreign income of such corporation determined
as of the close of such taxable year.
Proper adjustments shall be made in the amount of any gain or
loss subsequently realized for gain or loss taken into
account under paragraph (1).
``(b) Reduction in Tax Rate.--In the case of a United
States shareholder of a deferred foreign income corporation,
there shall be allowed as a deduction for the taxable year in
which an amount is included in the gross income of such
United States shareholder under section 951(a)(1) by reason
of subsection (a)(2) an amount equal to 43 percent of the
amount so included in income.
``(c) Accumulated Post-1986 Deferred Foreign Income.--For
purposes of this section--
``(1) In general.--The term `accumulated post-1986 deferred
foreign income' means the post-1986 earnings and profits
except to the extent such earnings--
``(A) are attributable to income of the deferred foreign
income corporation which is effectively connected with the
conduct of a trade or business within the United States and
subject to tax under this chapter,
``(B) if distributed, would be excluded from the gross
income of a United States shareholder under section 959, or
``(C) in the case of any deferred foreign income
corporation described in subsection (d)(1)(B) and which is a
passive foreign investment company (as defined in section
1297)--
``(i) if distributed, would have been treated as a
distribution which is not a dividend, or
``(ii) would have been properly attributable to an
unreversed inclusion of a United States person under section
1296.
To the extent provided in regulations or other guidance
prescribed by the Secretary, in the case of any controlled
foreign corporation which has shareholders which are not
United States shareholders, accumulated post-1986 deferred
foreign income shall be appropriately reduced by amounts
which would be described in subparagraph (B) if such
shareholders were United States shareholders. Such
regulations or other guidance may provide a similar rule for
purposes of subparagraph (C).
``(2) Post-1986 earnings and profits.--The term `post-1986
earnings and profits' means the earnings and profits of the
foreign corporation (computed in accordance with sections
964(a) and 986) accumulated in taxable years beginning after
December 31, 1986, and determined--
``(A) as of the close the taxable year referred to in
subsection (a) and after application of subsection (a)(1),
and
``(B) without diminution by reason of dividends distributed
during such taxable year.
``(d) Deferred Foreign Income Corporation.--
``(1) In general.--For purposes of this section, the term
`deferred foreign income corporation' means--
``(A) any controlled foreign corporation, and
``(B) any section 902 corporation (as defined in section
909(d)(5) as in effect before the date of the enactment of
the Tax Cuts and Jobs Act).
``(2) Application to section 902 corporations.--
``(A) In general.--For purposes of section 951, a section
902 corporation (as so defined) shall be treated as a
controlled foreign corporation solely for purposes of taking
into account the subpart F income of such corporation under
subsection (a), making proper adjustments in the amount of
subsequent gains or losses to reflect such gains and losses
(including through application of section 961), and applying
subsection (f).
``(B) United states shareholder.--For purposes of this
section and the application of subparagraph (A), in the case
of a section 902 corporation (as so defined), a shareholder
which is a domestic corporation which owns 10 percent or more
of the voting stock of such section 902 corporation shall be
treated as a United States shareholder.
``(e) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section
901 for the applicable percentage of the taxes paid or
accrued (or treated as paid or accrued) with respect to any
amount which is included in gross income under section 951(a)
by reason of subsection (a).
``(2) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage is the amount (expressed as a
percentage) equal to 0.43 multiplied by the ratio of--
``(A) the amount included in gross income under section
951(a) by reason of subsection (a)(2), to
``(B) the amount included in gross income under section
951(a) by reason of subsection (a).
``(3) Denial of deduction.--No deduction shall be allowed
under this chapter for the portion of any tax for which
credit is not allowable under section 901 by reason of
paragraph (1) (determined by treating the taxpayer as having
elected the benefits of subpart A of part III of subchapter
N).
``(4) Coordination with section 78.--Section 78 shall not
apply to any tax for which credit is not allowable under
section 901 by reason of paragraph (1).
``(f) Election To Pay Liability in Installments.--
``(1) In general.--In the case of a United States
shareholder of a deferred foreign income corporation, such
United States shareholder may elect to pay the net tax
liability under this section in 8 installments of the
following amounts:
``(A) 8 percent of the net tax liability in the case of
each of the first 5 of such installments,
``(B) 15 percent of the net tax liability in the case of
the 6th such installment,
``(C) 20 percent of the net tax liability in the case of
the 7th such installment, and

[[Page S7573]]

``(D) 25 percent of the net tax liability in the case of
the 8th such installment.
``(2) Date for payment of installments.--If an election is
made under paragraph (1), the first installment shall be paid
on the due date (determined without regard to any extension
of time for filing the return) for the return of tax for the
taxable year described in subsection (a) and each succeeding
installment shall be paid on the due date (as so determined)
for the return of tax for the taxable year following the
taxable year with respect to which the preceding installment
was made.
``(3) Acceleration of payment.--If there is an addition to
tax for failure to pay timely assessed with respect to any
installment required under this subsection, a liquidation or
sale of substantially all the assets of the taxpayer
(including in a title 11 or similar case), a cessation of
business by the taxpayer, or any similar circumstance, then
the unpaid portion of all remaining installments shall be due
on the date of such event (or in the case of a title 11 or
similar case, the day before the petition is filed). The
preceding sentence shall not apply to the sale of
substantially all the assets of a taxpayer to a buyer if such
buyer enters into an agreement with the Secretary under which
such buyer is liable for the remaining installments due under
this subsection in the same manner as if such buyer were the
taxpayer.
``(4) Proration of deficiency to installments.--If an
election is made under paragraph (1) to pay the net tax
liability under this section in installments and a deficiency
has been assessed with respect to such net tax liability, the
deficiency shall be prorated to the installments payable
under paragraph (1). The part of the deficiency so prorated
to any installment the date for payment of which has not
arrived shall be collected at the same time as, and as a part
of, such installment. The part of the deficiency so prorated
to any installment the date for payment of which has arrived
shall be paid upon notice and demand from the Secretary. This
subsection shall not apply if the deficiency is due to
negligence, to intentional disregard of rules and
regulations, or to fraud with intent to evade tax.
``(5) Election.--Any election under paragraph (1) shall be
made not later than the due date for the return of tax for
the taxable year described in subsection (a) and shall be
made in such manner as the Secretary may provide.
``(6) Net tax liability under this section.--For purposes
of this subsection--
``(A) In general.--The net tax liability under this section
with respect to any United States shareholder is the excess
(if any) of--
``(i) such taxpayer's net income tax for the taxable year
described in subsection (a), over
``(ii) such taxpayer's net income tax for such taxable year
determined without regard to this section.
``(B) Net income tax.--The term `net income tax' means the
regular tax liability reduced by the credits allowed under
subparts A, B, and D of part IV of subchapter A.
``(g) Regulations.--The Secretary may prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out the provisions of this section,
including rules to disregard any transfer of properties or
liabilities (including by contribution and distribution) a
substantial purpose of which is the avoidance of the purposes
of this section.''.
(b) Clerical Amendment.--The table of section for subpart F
of part III of subchapter N of chapter 1 of such Code is
amended by striking the item relating to section 965 and
inserting the following:

``Sec. 965. Treatment of deferred foreign income upon transition to
participation exemption system of taxation.''.
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