S.Amdt. 1668

SA 1668. Mr. PERDUE 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 14101 of the Act and insert the following:

SEC. 14101 DEDUCTION FOR FOREIGN-SOURCE PORTION OF DIVIDENDS
RECEIVED BY DOMESTIC CORPORATIONS FROM
SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.

(a) In General--Part VIII of subchapter B of chapter 1 is
amended by inserting after section 245 the following new
section:

SEC. 245A. DEDUCTION FOR FOREIGN SOURCE-PORTION OF DIVIDENDS
RECEIVED BY DOMESTIC CORPORATIONS FROM
SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.

(a) In General--In the case of any dividend received from a
specified 10-percent owned foreign corporation by a domestic
corporation which is a United States shareholder with respect
to such foreign corporation, there shall be allowed as a
deduction an amount equal to the foreign-sources portion of
such dividend.
(b) Specified 10-Percent Owned Foreign Corporation.--for
purposes of this section--
(1) In general--The term `specified 10-percent owned
foreign corporation' means any foreign corporation with
respect to which any domestic corporation is a United States
shareholder with respect to such corporation.
(2) Exclusion of passive foreign investment companies--Such
term shall not include any corporation which is a passive
foreign investment company (as defined in section 1297) with
respect to the shareholder and which is not a controlled
foreign corporation.
(c) Foreign-Source Portion--for purposes of the section--
(1) In general.--The foreign-source portion of any dividend
form a specified 10-percent owned foreign corporation is an
amount which bears the same ratio to such dividend as--
(A) the undistributed foreign earnings of the specified 10-
percent owned foreign corporation, bears to
(B) the total undistributed earnings of such foreign
corporation.
(2) Undistributed earnings.--The term `undistributed
earnings' means the amount of the earnings and profits of the
specified 10-percent owned foreign corporation (computed in
accordance with sections 964(a) and 986)--
(A) As of the close of the taxable year of the specified
10-percent owned foreign corporation in which the dividend is
distributed, and
(B) Without diminution by reason of dividends distributed
during such taxable year.
(3) Undistributed foreign earnings.--The term
`undistributed foreign earnings' means the portion of the
undistributed earnings which is attributable to neither--
(A) Income described in subparagraph (A) of section 245
(a)(5), nor
(B) Dividends described in subparagraph or such section
(determined without regard to section 245(a)(12)).
(4) Dividends from lower-tier specified 10-percent owned
foreign corporation.--In the case of any dividend received
from a specified 10-percent owned foreign corporation by a
specified 10-percent owned foreign corporation, the specified
10-percent owned foreign corporation receiving the dividend
shall be treated as a domestic corporation for purposes of
determining whether the deduction under section 245A(a) shall
be allowed to such specified 10-percent owned foreign
corporation.''
(d) Disallowance of Foreign Tax Credit, Etc.--
(1) In general--No credit shall be allowed under section
901 for any taxes paid or accrued (or treated as paid or
accrued) with respect to any distribution any portion of
which constitutes a dividend for which a deduction is allowed
under this section.

[[Page S7574]]

(2) Denial of deduction--No deduction shall be allowed
under this chapter for any tax for which credit is not
allowable under section 901 by reason of paragraph (1)
(determined by treating the taxpayer a having elected the
benefits of subpart A of part III of subchapter N).
(e) Special Rules For Hybrid Dividends--
(1) In general--Subsection (a) shall not apply to any
dividend received by a United States shareholder from a
controlled foreign corporation if the dividend is a hybrid
dividend.
(2) Hybrid dividends of tiered corporations.--If a
controlled foreign corporation with respect to which a
domestic corporation is a United States shareholder receives
a hybrid dividends form any other controlled foreign
corporation with respect to which such domestic corporation
is also a Untied States shareholder, then, notwithstanding
any other provisions of this title--
(A) The hybrid dividend shall be treated for purposes of
section 951(a)(1)(A) as subpart F income of the receiving
controlled foreign corporation for the taxable year of the
controlled foreign corporation with which the dividend was
received, and
(B) The United States shareholder shall include in gross
income an amount equal to the shareholder's pro rata share
(determined in the same manner as under section 951(a)(2)) of
the subpart F income described in subparagraph (A).
(3) Denial of foreign tax credit, Etc.--The rules of
subsection (d) shall apply to any hybrid dividend received
by, or any amount included under paragraph (2) In the gross
income of, a United States shareholder
(4) Hybrid dividend--The term `hybrid dividend' means an
amount received from a controlled foreign corporation--
(A) for which a deduction would be allowed under subsection
(a) but for this subsection, and
(B) for which the controlled foreign corporation received a
deduction (or other tax benefit) from taxes imposed by any
foreign country.
(f) Special Rule for Purging Distributions of Passive
Foreign Investment Companies--Any amount which is treated as
a dividend under section 1291(d)(2)(B) shall not be treated
as a dividend for purposes of this section.
(g) Regulations.--The Secretary shall prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out the provisions of this section,
including regulations for the treatment of United States
shareholders owning stock of a specified 10 percent owned
foreign corporation through a partnership.''.
(b) Application of Holding Period Requirement.--Subsection
(c) of section 246 is amended--
(1) by striking ``or 245'' in paragraph (1) and inserting
``245, or 245A'', and
(2) by adding at the end the following new paragraph''
``(5) Special rules for foreign source portion of dividends
received from specified 10-percent owned foreign
corporations.--
``(A) 1-year holding period requirement--For purposes of
Section 245A--
``(i) paragraph (1)(A) shall be applied--
``(I) by substituting `365 days' for `45 days' each place
it appears,
and
``(II) by substituting `731-day period' for `91-day
period', and
``(ii) paragraph (2) shall not apply
``(B) Status must be maintained during the holding
period.--For purposes of applying paragraph (1) with respect
to section 245A, the taxpayer shall be treated as holding the
stock referred to in paragraph (1) for any period only if--
``(i) the specified 10-percent owned foreign corporation
referred to in section 245A(a) is a specified 10-percent
owned foreign corporation at all times during such period,
and
``(ii) the taxpayer is a United States shareholder with
respect to such a specified 10-percent owned foreign
corporation at all times during such period.''.
(C) Application of rules generally applicable to deductions
for dividends received.--
(1) Treatment of dividends from certain corporations.--
Paragraph( 1) of section 246(a) is amended by striking ``and
245'' and inserting ``245, and 245A''.
(2) Assets generating tax-exempt portion of dividend not
taken into account in allocating and apportioning deductible
expenses.--Paragraph (3) of section 864(e) is amended by
striking ``or 245(a)'' and inserting ``245(a), or 245A''.
(3) Coordination with section 1059.--Sub-paragraph (B) of
section 1059(b) (2) is amended by striking ``or 245'' and
inserting ``245A''.
(d) Coordination With Foreign Tax Credit Limitation.--
Subsection (b) of section 904 is amended by adding at the end
the following new paragraph:
``(5) Treatment of dividends for which deduction is allowed
under section 245A.--For purposes of subsection (a), in the
case of a domestic corporation which is a United States
shareholder with respect to a specified 10-percent owned
foreign corporation, such domestic corporation's taxable
income from sources without the United States shall be
determined without regard to--
``(A) the foreign-source portion of any dividend received
from such foreign corporation, and
``(B) any deductions properly allocable to such portion.
Any term which is used in section 245A and in this
paragraph shall have the same meaning for purposes of this
paragraph as when used in such section.''.
(e) Conforming Amendments.--
(1) Subsection (b) of section 951 is amended by striking
``subpart'' and inserting ``title''.
(2) Subsection (a) of section 957 is amended by striking
``subpart'' in the matter preceding paragraph (1) and
inserting ``title''.
(3) The table of sections for part VIII of sub-chapter B of
chapter 1 is amended by inserting after the item relating to
section 245 the following new item:

``Sec 245A. Dividends received by domestic corporations from certain
foreign corporations''.

(f) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
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