[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 196 Introduced in Senate (IS)]
109th CONGRESS
1st Session
S. 196
To amend the Internal Revenue Code of 1986 to provide for the taxation
of income of controlled foreign corporations attributable to imported
property.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
January 26, 2005
Mr. Dorgan (for himself, Ms. Mikulski, Mr. Feingold, Mr. Kohl, Mr.
Harkin, Mr. Kennedy, Mr. Leahy, Mr. Levin, and Mr. Johnson) introduced
the following bill; which was read twice and referred to the Committee
on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide for the taxation
of income of controlled foreign corporations attributable to imported
property.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. TAXATION OF INCOME OF CONTROLLED FOREIGN CORPORATIONS
ATTRIBUTABLE TO IMPORTED PROPERTY.
(a) General Rule.--Subsection (a) of section 954 of the Internal
Revenue Code of 1986 (defining foreign base company income) is amended
by striking ``and'' at the end of paragraph (4), by striking the period
at the end of paragraph (5) and inserting ``, and'', and by adding at
the end the following new paragraph:
``(6) imported property income for the taxable year
(determined under subsection (j) and reduced as provided in
subsection (b)(5)).''.
(b) Definition of Imported Property Income.--Section 954 of the
Internal Revenue Code of 1986 is amended by adding at the end the
following new subsection:
``(j) Imported Property Income.--
``(1) In general.--For purposes of subsection (a)(6), the
term `imported property income' means income (whether in the
form of profits, commissions, fees, or otherwise) derived in
connection with--
``(A) manufacturing, producing, growing, or
extracting imported property;
``(B) the sale, exchange, or other disposition of
imported property; or
``(C) the lease, rental, or licensing of imported
property.
Such term shall not include any foreign oil and gas extraction
income (within the meaning of section 907(c)) or any foreign
oil related income (within the meaning of section 907(c)).
``(2) Imported property.--For purposes of this subsection--
``(A) In general.--Except as otherwise provided in
this paragraph, the term `imported property' means
property which is imported into the United States by
the controlled foreign corporation or a related person.
``(B) Imported property includes certain property
imported by unrelated persons.--The term `imported
property' includes any property imported into the
United States by an unrelated person if, when such
property was sold to the unrelated person by the
controlled foreign corporation (or a related person),
it was reasonable to expect that--
``(i) such property would be imported into
the United States; or
``(ii) such property would be used as a
component in other property which would be
imported into the United States.
``(C) Exception for property subsequently
exported.--The term `imported property' does not
include any property which is imported into the United
States and which--
``(i) before substantial use in the United
States, is sold, leased, or rented by the
controlled foreign corporation or a related
person for direct use, consumption, or
disposition outside the United States; or
``(ii) is used by the controlled foreign
corporation or a related person as a component
in other property which is so sold, leased, or
rented.
``(3) Definitions and special rules.--
``(A) Import.--For purposes of this subsection, the
term `import' means entering, or withdrawal from
warehouse, for consumption or use. Such term includes
any grant of the right to use intangible property (as
defined in section 936(h)(3)(B)) in the United States.
``(B) United states.--For purposes of this
subsection, the term `United States' includes the
Commonwealth of Puerto Rico, the Virgin Islands of the
United States, Guam, American Samoa, and the
Commonwealth of the Northern Mariana Islands.
``(C) Unrelated person.--For purposes of this
subsection, the term `unrelated person' means any
person who is not a related person with respect to the
controlled foreign corporation.
``(D) Coordination with foreign base company sales
income.--For purposes of this section, the term
`foreign base company sales income' shall not include
any imported property income.''.
(c) Separate Application of Limitations on Foreign Tax Credit for
Imported Property Income.--
(1) Before 2007.--
(A) In general.--Paragraph (1) of section 904(d) of
the Internal Revenue Code of 1986 (relating to separate
application of section with respect to certain
categories of income), as in effect for taxable years
beginning before January 1, 2007, is amended by
striking ``and'' at the end of subparagraph (H), by
redesignating subparagraph (I) as subparagraph (J), and
by inserting after subparagraph (H) the following new
subparagraph:
``(I) imported property income, and''.
(B) Imported property income defined.--Paragraph
(2) of section 904(d) of such Code, as so in effect, is
amended by redesignating subparagraphs (H) and (I) as
subparagraphs (I) and (J), respectively, and by
inserting after subparagraph (G) the following new
subparagraph:
``(H) Imported property income.--The term `imported
property income' means any income received or accrued
by any person which is of a kind which would be
imported property income (as defined in section
954(j)).''.
(C) Look-thru rules to apply.--Subparagraph (F) of
section 904(d)(3) of such Code, as so in effect, is
amended by striking ``or (D)'' and inserting ``(D), or
(I)''.
(2) After 2006.--
(A) In general.--Paragraph (1) of section 904(d) of
such Code (relating to separate application of section
with respect to certain categories of income), as in
effect for taxable years beginning after December 31,
2006, is amended by striking ``and'' at the end of
subparagraph (A), by redesignating subparagraph (B) as
subparagraph (C), and by inserting after subparagraph
(A) the following new subparagraph:
``(B) imported property income, and''.
(B) Imported property income defined.--Paragraph
(2) of section 904(d) of such Code, as so in effect, is
amended by redesignating subparagraphs (I) and (J) as
subparagraphs (J) and (K), respectively, and by
inserting after subparagraph (H) the following new
subparagraph:
``(I) Imported property income.--The term `imported
property income' means any income received or accrued
by any person which is of a kind which would be
imported property income (as defined in section
954(j)).''.
(C) Conforming amendment.--Clause (ii) of section
904(d)(2)(A) of such Code, as so in effect, is amended
by inserting ``or imported property income'' after
``passive category income''.
(d) Technical Amendments.--
(1) Clause (iii) of section 952(c)(1)(B) of the Internal
Revenue Code of 1986 (relating to certain prior year deficits
may be taken into account) is amended--
(A) by redesignating subclauses (II), (III), (IV),
and (V) as subclauses (III), (IV), (V), and (VI), and
(B) by inserting after subclause (I) the following
new subclause:
``(II) imported property income,''.
(2) Paragraph (5) of section 954(b) of such Code (relating
to deductions to be taken into account) is amended by striking
``and the foreign base company oil related income'' and
inserting ``the foreign base company oil related income, and
the imported property income''.
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years of
foreign corporations beginning after the date of the enactment
of this Act, and to taxable years of United States shareholders
within which or with which such taxable years of such foreign
corporations end.
(2) Subsection (c).--The amendments made by subsection
(c)(1) shall apply to taxable years beginning after the date of
the enactment of this Act and before January 1, 2007, and the
amendments made by subsection (c)(2) shall apply to taxable
years beginning after December 31, 2006.
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