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H.R. 2186House119th Congress (2025-2027)In Committee

To amend the Internal Revenue Code of 1986 to restore the limitation on downward attribution of stock ownership in applying constructive ownership rules.

Sponsored by Ron EstesRep. Ron Estes (R-KS)
Introduced March 18, 2025

AI-Generated Summary

Updated November 24, 2025 at 1:49 AM UTC

The bill restores a rule that prevents U.S. taxpayers from being treated as owners of stock that is actually owned by non‑U.S. persons, reversing a recent change to the constructive ownership rules. It also adds new provisions that pull certain foreign‑controlled U.S. shareholders and foreign corporations into the U.S. tax regime, making them subject to Subpart F and related anti‑deferral rules. The changes take effect for foreign corporations with tax years starting before 2025 and for the related U.S. taxpayers’ years.

Key Provisions

  • Amends section 958(b) of the tax code to add a new paragraph that stops a U.S. person from being treated as owning stock that is actually owned by a non‑U.S. person, restoring the previous limitation on “downward” attribution.
  • Creates a new section 951B that defines a “foreign‑controlled United States shareholder” and a “foreign‑controlled foreign corporation” and requires Subpart F (including section 951A) to treat these entities as if they were U.S. shareholders or controlled foreign corporations for tax purposes.
  • Specifies how the new definitions work by substituting the new terms into existing provisions, effectively pulling certain foreign‑controlled entities into the U.S. shareholder regime.
  • Directs the Treasury Secretary to issue regulations to implement these changes and to prevent avoidance.
  • Updates the table of sections to list the new section 951B and sets the changes to apply to foreign corporations with taxable years beginning before Jan 1 2025 and to the corresponding U.S. taxpayers’ years.

Legislative Activity

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HouseIntro Referral Latest Action

Referred to the House Committee on Ways and Means.

Ways and Means Committee

March 18, 2025

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HouseIntro Referral

Introduced in House

March 18, 2025

HouseIntro Referral

Referred to the House Committee on Ways and Means.

Ways and Means Committee

March 18, 2025

Bill Text

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Introduced in HouseIssued March 18, 2025

I

119th CONGRESS

1st Session

H. R. 2186

IN THE HOUSE OF REPRESENTATIVES

March 18, 2025

Mr. Estes (for himself and Ms. Moore of Wisconsin) 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 restore the limitation on downward attribution of stock ownership in applying constructive ownership rules.

1.

Restoration of limitation on downward attribution of stock ownership in applying constructive ownership rules

(a)

In general

Section 958(b) of the Internal Revenue Code of 1986 is amended—

(1)

by inserting after paragraph (3) the following:

(4)

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

(2)

by striking Paragraph (1) in the last sentence and inserting Paragraphs (1) and (4).

(b)

Foreign controlled United States shareholders

Subpart F of part III of subchapter N of chapter 1 of such Code is amended by inserting after section 951A the following new section:

951B.

Amounts included in gross income of foreign controlled United States shareholders

(a)

In general

In the case of any foreign controlled United States shareholder of a foreign controlled foreign corporation—

(1)

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)—

(A)

by substituting foreign controlled United States shareholder for United States shareholder each place it appears therein, and

(B)

by substituting foreign controlled foreign corporation for controlled foreign corporation each place it appears therein, and

(2)

section 951A shall be applied with respect to such shareholder—

(A)

by treating each reference to United States shareholder in such section as including a reference to such shareholder, and

(B)

by treating each reference to controlled foreign corporation in such section as including a reference to such foreign controlled foreign corporation.

(b)

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—

(1)

section 951(b) were applied by substituting more than 50 percent for 10 percent or more, and

(2)

section 958(b) were applied without regard to paragraph (4) thereof.

(c)

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—

(1)

by substituting foreign controlled United States shareholders for United States shareholders, and

(2)

by substituting section 958(b) (other than paragraph (4) thereof) for section 958(b).

(d)

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—

(1)

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

(2)

to prevent the avoidance of the purposes of this section.

.

(c)

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.

.

(d)

Effective date

The amendments made by this section shall apply to—

(1)

the last taxable year of foreign corporations beginning before January 1, 2025, and each subsequent taxable year of such foreign corporations, and

(2)

taxable years of United States persons in which or with which such taxable years of foreign corporations end.

(e)

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.