H.R. 1834 – Reading Mode

112th CONGRESS

1st Session

H. R. 1834

IN THE HOUSE OF REPRESENTATIVES

May 11, 2011

Mr. Brady of Texas (for himself, Mr. Matheson, Mr. Dold, Mr. Cooper, Mr. Nunes, and Mr. Polis) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to allow a temporary dividends received deduction for 2011 or 2012.

Short title

This Act may be cited as the Freedom to Invest Act of 2011.

Temporary dividends received deduction allowed for 2011 or 2012

(a)

Election

Subsection (f) of section 965 of the Internal Revenue Code of 1986 (relating to election) is amended to read as follows:

(f)

Election

The taxpayer may elect to apply this section to—

(1)

the taxpayer’s last taxable year which begins before the date of the enactment of this subsection, or

(2)

the taxpayer’s first taxable year which begins during the 1-year period beginning on such date.

Such election may be made for a taxable year only if made on or before the due date (including extensions) for filing the return of tax for such taxable year.

(b)

Limitation

Paragraph (1) of section 965(b) of such Code is amended to read as follows:

(1)

In general

The amount of dividends taken into account under subsection (a) shall not exceed the sum of the current and accumulated earnings and profits described in section 959(c)(3) for the year a deduction is claimed under subsection (a), without diminution by reason of any distributions made during the election year, for all controlled foreign corporations of the United States shareholder.

(c)

Failure To maintain employment levels

Paragraph (4) of section 965(b) of such Code (relating to limitations) is amended to read as follows:

(4)

Reduction in benefits for failure to maintain employment levels

(A)

In general

If, during the period consisting of the calendar month in which the taxpayer first receives a distribution described in subsection (a)(1) and the succeeding 23 calendar months, the taxpayer does not maintain an average employment level at least equal to the taxpayer’s prior average employment, an additional amount equal to $25,000 multiplied by the number of employees by which the taxpayer’s average employment level during such period falls below the prior average employment (but not exceeding the aggregate amount allowed as a deduction pursuant to subsection (a)(1)) shall be taken into income by the taxpayer during the taxable year that includes the final day of such period.

(B)

Average employment level

For purposes of this paragraph, the taxpayer’s average employment level for a period shall be the average number of full-time United States employees of the taxpayer, measured at the end of each month during the period.

(C)

Prior average employment

For purposes of this paragraph, the taxpayer’s prior average employment shall be the average number of full-time United States employees of the taxpayer during the period consisting of the 24 calendar months immediately preceding the calendar month in which the taxpayer first receives a distribution described in subsection (a)(1).

(D)

Full-time United States employee

For purposes of this paragraph—

(i)

In general

The term full-time United States employee means an individual who provides services in the United States as a full-time employee, based on the employer’s standards and practices; except that regardless of the employer’s classification of the employee, an employee whose normal schedule is 40 hours or more per week is considered a full-time employee.

(ii)

Exception for changes in ownership of trades or businesses

Such term does not include—

(I)

any individual who was an employee, on the date of acquisition, of any trade or business acquired by the taxpayer during the 24-month period referred to in subparagraph (A); and

(II)

any individual who was an employee of any trade or business disposed of by the taxpayer during the 24-month period referred to in subparagraph (A) or the 24-month period referred to in subparagraph (C).

(E)

Aggregation rules

In determining the taxpayer’s average employment level and prior average employment, all domestic members of a controlled group shall be treated as a single taxpayer.

(d)

Threshold period

Section 965 of such Code is amended by striking June 30, 2003 each place it occurs and inserting June 30, 2010.

(e)

Base period

Paragraph (2) of subsection 965(c) of such Code is amended by inserting at the end of subparagraph (A) the following flush sentence: For purposes of this paragraph, taxable years shall not include any year for which an election under section 965 was in effect..

(f)

Indebtedness determination date

Subparagraph (B) of section 965(b)(3) of such Code is amended by striking October 3, 2004 and inserting January 19, 2011.

(g)

Conforming amendments

(1)

Subsection 965(c) of such Code, as amended by subsection (e), is amended by striking paragraph (1) and redesignating paragraphs (2), (3), (4), and (5) as paragraphs (1), (2), (3), and (4), respectively.

(2)

Paragraph 965(c)(4) of such Code, as redesignated by paragraph (1), is amended to read as follows:

(4)

Controlled groups

All United States shareholders which are members of an affiliated group filing a consolidated return under section 1501 shall be treated as one United States shareholder.

(h)

Effective date

The amendments made by this section shall apply to taxable years ending on or after the date of the enactment of this Act.