II
117th CONGRESS
2d Session
S. 5349
IN THE SENATE OF THE UNITED STATES
December 21, 2022
Mr. Portman 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 modify certain provisions relating to the taxation of international entities.
Short title, etc
Short title
This Act may be cited as the International Competition for American Jobs Act
.
Amendment of 1986 code
Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
Permanent extension of look-thru rule for controlled foreign corporations
In general
Section 954(c)(6)(C) is amended by striking and before January 1, 2026,
.
Effective date
The amendment made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2022, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.
Modification of deduction for foreign-derived intangible income and global intangible low-taxed income
In general
Section 250(a) is amended to read as follows:
Allowance of deduction
In the case of a domestic corporation for any taxable year, there shall be allowed as a deduction an amount equal to the sum of—
37.5 percent of the foreign-derived intangible income of such domestic corporation for such taxable year, plus
50 percent of—
the global intangible low-taxed income amount (if any) which is included in the gross income of such domestic corporation under section 951A for such taxable year, and
the amount treated as a dividend received by such corporation under section 78 which is attributable to the amount described in subparagraph (A).
.
Deduction taken into account in determining net operating loss deduction
Section 172(d) is amended by striking paragraph (9).
Effective date
The amendments made by this section shall apply to taxable years beginning after December 31, 2022.
Modifications to base erosion minimum tax
Base erosion minimum tax amount determined without regard to credits
In general
Section 59A(b)(1)(B) is amended to read as follows:
an amount equal to the regular tax liability (as defined in section 26(b)) of the taxpayer for the taxable year.
.
Conforming amendment
Section 59A(b) is amended by striking paragraph (4).
Elimination of modifications for taxable years after 2025
In general
Section 59A(b) is amended by striking paragraph (2) and redesignating paragraph (3) as paragraph (2).
Conforming amendments
Section 59A(b)(1) is amended by striking paragraphs (2) and (3)
and inserting paragraph (2)
.
Paragraph (2) of section 59A(b), as redesignated by paragraph (1), is amended by striking under paragraphs (1)(A) and (2)(A) shall each be increased
and inserting under paragraph (1)(A) shall be increased
.
Section 59A(e)(1)(C) is amended by striking subsection (b)(3)(B)
and inserting subsection (b)(2)(B)
.
Expansion and consolidation of rules To exempt certain payments from treatment as base erosion payments
In general
Section 59A is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:
Certain payment not treated as base erosion payments
Exception for payments on which tax is imposed
In general
An amount shall not be treated as a base erosion payment if tax is (or was at the time of payment or accrual) imposed by this chapter with respect to such amount (other than by this section).
Treatment of certain deductions
For purposes of subparagraph (A), tax shall be treated as imposed by this chapter without regard to any deduction allowed under part VIII of subchapter B.
Application of certain rules
The amount not treated as a base erosion payment by reason of this paragraph shall be determined under rules similar to the rules of section 163(j)(5) (as in effect before the date of the enactment of Public Law 115–97).
Exception for certain payments subject to sufficient foreign tax
In general
An amount shall not be treated as a base erosion payment if the taxpayer establishes to the satisfaction of the Secretary that such amount was made to a foreign person which is a related party of the taxpayer that is subject to an effective rate of foreign income tax (as defined in section 904(d)(2)(F)) which is not less than 18.9 percent.
Certain payments to related parties
To the extent provided by the Secretary in regulations, an amount paid to a foreign person which is a related party of the taxpayer shall be treated as paid to another foreign person which is a related party of the taxpayer if such second foreign person is subject to an effective rate of foreign income tax (as defined in section 904(d)(2)(F)) which is less than 18.9 percent, to the extent the amount so paid directly or indirectly funds a payment to such second foreign person.
Determination on basis of applicable financial statements
Except as otherwise provided by the Secretary under subparagraph (D), the effective rate of foreign income tax with respect to any amount may be established on the basis of applicable financial statements (as defined in section 451(b)(3)).
Regulations
The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this paragraph, including regulations or other guidance providing procedures for determining the effective rate of foreign income tax to which any amount is subject. Such procedures may require that any transaction or series of transactions among multiple parties be recharacterized as one or more transactions directly among any 2 or more of such parties where the Secretary determines that such recharacterization is appropriate to carry out, or prevent avoidance of, the purposes of this section.
Exception for certain amounts with respect to services
Subsections (d)(1) and (d)(2) shall not apply to so much of any amount paid or accrued by a taxpayer for services as does not exceed the total services cost of such services. The preceding sentence shall not apply unless such services meet the requirements for eligibility for use of the services cost method under section 482 (determined without regard to the requirement that the services not contribute significantly to fundamental risks of business success or failure).
.
Conforming amendment
Section 59A(d) is amended by striking paragraph (5).
Other modifications
Section 59A(b)(3)(B)(ii) is amended by striking registered securities dealer
and inserting securities dealer registered
.
Section 59A(h)(2)(B) is amended by striking section 6038B(b)(2)
and inserting section 6038A(b)(2)
.
Section 59A(j)(2), as redesignated by subsection (b), is amended by striking subsection (g)(3)
and inserting subsection (h)(3)
.
Effective date
The amendments made by this section shall apply to taxable years beginning after December 31, 2022.
Rules for allocation of certain deductions to foreign source global intangible low-taxed income for purposes of foreign tax credit limitation
In general
Section 904(b) is amended by adding at the end the following new paragraph:
Deductions treated as allocable to foreign source global intangible low-taxed income
In the case of a domestic corporation and solely for purposes of the application of subsection (a) with respect to amounts described in subsection (d)(1)(A), the taxpayer’s taxable income from sources without the United States shall be determined—
by allocating and apportioning any deduction allowed under section 250(a)(2) (and any deduction allowed under section 164(a)(3) for taxes imposed on amounts described in section 250(a)(2)) to such income, and
by allocating and apportioning any other deduction to such income only if the Secretary determines that such deduction is directly allocable to such income.
.
Application of separate limitation losses with respect to global intangible low-Taxed income
In general
Section 904(f)(5)(B) is amended to read as follows:
Allocation of losses
Except as otherwise provided in this subparagraph, the separate limitation losses for any taxable year (to the extent such losses do not exceed the separate limitation incomes for such year) shall be allocated among (and operate to reduce) such incomes on a proportionate basis. In the case of a separate limitation loss for any taxable year in any category other than subparagraph (d)(1)(A), the amount of such separate limitation loss shall be allocated among (and operate to reduce) separate limitation income in any category other than income described in subparagraph (d)(1)(A) on a proportionate basis (without regard to income described in subparagraph (d)(1)(A)). The remaining separate limitation losses may reduce separate limitation income described in subparagraph (d)(1)(A) only to the extent that the aggregate amount of such losses exceeds the aggregate amount of separate limitation incomes (other than income described in subparagraph (d)(1)(A)) for such taxable year.
.
Income category
Section 904(f)(5)(E)(i) is amended to read as follows:
Income category
The term income category means each category of income with respect to which this section is required to be applied separately by reason of any provision of this title.
.
Separate limitation loss
Section 904(f)(5)(E)(iii) is amended to read as follows:
Separate limitation loss
The term separate limitation loss means, with respect to any income category, the amount by which the gross income from sources outside the United States is exceeded by the sum of the deductions properly allocated and apportioned thereto.
.
Application of carryforward to taxes on global intangible low-Taxed income
Section 904(c) is amended by striking the last sentence.
Effective date
In general
Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2022.
Modification of foreign tax credit carryback and carryforward
The amendment made by subsection (c) shall apply to taxes paid or accrued in taxable years beginning after December 31, 2022.
Restoration of limitation on downward attribution of stock ownership in applying constructive ownership rules
In general
Section 958(b) is amended—
by inserting after paragraph (3) the following:
Subparagraphs (A), (B), and (C) of section 318(a)(3) shall not be applied so as to consider a United States person as owning stock which is owned by a person who is not a United States person.
, and
by striking Paragraph (1)
in the last sentence and inserting Paragraphs (1) and (4)
.
Foreign controlled United States shareholders
Subpart F of part III of subchapter N of chapter 1 is amended by inserting after section 951A the following new section:
Amounts included in gross income of foreign controlled United States shareholders
In general
In the case of any foreign controlled United States shareholder of a foreign controlled foreign corporation—
this subpart (other than sections 951A, 951(b), and 957) shall be applied with respect to such shareholder (separately from, and in addition to, the application of this subpart without regard to this section)—
by substituting foreign controlled United States shareholder
for United States shareholder
each place it appears therein, and
by substituting foreign controlled foreign corporation
for controlled foreign corporation
each place it appears therein, and
section 951A shall be applied with respect to such shareholder—
by treating each reference to United States shareholder
in such section as including a reference to such shareholder, and
by treating each reference to controlled foreign corporation
in such section as including a reference to such foreign controlled foreign corporation.
Foreign controlled United States shareholder
For purposes of this section, the term foreign controlled United States shareholder
means, with respect to any foreign corporation, any United States person which would be a United States shareholder with respect to such foreign corporation if—
section 951(b) were applied by substituting more than 50 percent
for 10 percent or more
, and
section 958(b) were applied without regard to paragraph (4) thereof.
Foreign controlled foreign corporation
For purposes of this section, the term foreign controlled foreign corporation
means a foreign corporation, other than a controlled foreign corporation, which would be a controlled foreign corporation if section 957(a) were applied—
by substituting foreign controlled United States shareholders
for United States shareholders
, and
by substituting section 958(b) (other than paragraph (4) thereof)
for section 958(b)
.
Regulations
The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance—
to treat a foreign controlled United States shareholder or a foreign controlled foreign corporation as a United States shareholder or as a controlled foreign corporation, respectively, for purposes of provisions of this title other than this subpart, and
to prevent the avoidance of the purposes of this section.
.
Clerical amendment
The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by inserting after the item relating to section 951A the following new item:
Sec. 951B. Amounts included in gross income of foreign controlled United States shareholders.
.
Effective date
The amendments made by this section shall apply to—
the last taxable year of foreign corporations beginning before January 1, 2023, and each subsequent taxable year of such foreign corporations, and
taxable years of United States persons in which or with which such taxable years of foreign corporations end.
No inference
The amendments made by this section shall not be construed to create any inference with respect to the proper application of any provision of the Internal Revenue Code of 1986 with respect to taxable years beginning before the taxable years to which such amendments apply.
Carryover of net CFC tested loss
In general
Section 951A(c) is amended by adding at the end the following new paragraph:
Carryover of net CFC tested loss
In general
If the amount described in paragraph (1)(B) with respect to any United States shareholder for any taxable year of such United States shareholder (determined after the application of this paragraph with respect to amounts arising in preceding taxable years) exceeds the amount described in paragraph (1)(A) with respect to such shareholder of such taxable year, the amount otherwise described in paragraph (1)(B) with respect to such shareholder for the succeeding taxable year shall be increased by the amount of such excess.
Proper adjustment in allocations of global intangible low-taxed income to controlled foreign corporations
Proper adjustments shall be made in the application of subsection (f)(2)(B) to take into account any decrease in global intangible low-taxed income by reason of the application of subparagraph (A).
.
Application of rules with respect to ownership changes
Section 382(d) is amended by adding at the end the following new paragraph:
Application to carryover of net CFC tested loss
The term pre-change loss
shall include any excess carried over under section 951A(c)(3) under rules similar to the rules of paragraph (1).
.
Effective date
The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2022, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.
Redetermination of foreign taxes and related claims
In general
Section 905(c) is amended—
in paragraph (1), by striking or
at the end of subparagraph (B) and by inserting after subparagraph (C) the following new subparagraphs:
the taxpayer makes a timely change in its choice to claim a credit or deduction for taxes paid or accrued, or
there is any other change in the amount, or treatment, of taxes, which affects the taxpayer’s tax liability under this chapter,
,
in paragraph (2)(B)(i), by inserting , except as otherwise provided by the Secretary,
after shall
, and
by striking accrued
in the heading thereof.
Modification to time for claiming credit or deduction
Section 901(a) is amended by striking the second sentence and inserting the following: Such choice for any taxable year may be made or changed at any time before the expiration of the applicable period prescribed by section 6511 for making a claim for credit or refund of an overpayment of the tax imposed by this chapter for such taxable year that is attributable to such amounts.
.
Modification to special period of limitation
Section 6511(d)(3) is amended—
in subparagraph (A)—
by inserting a change in the liability for
before any taxes paid or accrued
,
by striking actually paid
and inserting paid (or deemed paid under section 960)
, and
by inserting change in the liability for
before foreign taxes
in the heading thereof, and
in subparagraph (B), by striking the allowance of a credit for the taxes
and inserting the allowance of an additional credit by reason of the change in liability for the taxes
.
Effective date
In general
Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxes paid or accrued in taxable years beginning after December 31, 2022.
Certain changes
The amendments made by paragraphs (1) and (3) of subsection (a) shall apply to changes that occur on or after the date which is 60 days after the date of the enactment of this Act.
Modification to special period of limitation
The amendments made by subsection (c) shall apply to taxes paid, accrued, or deemed paid in taxable years beginning after December 31, 2022.