Bill Summary
This legislation, known as the "Bill to Amend the Internal Revenue Code," aims to make changes to the tax laws in order to prevent individuals and corporations from avoiding paying taxes by using foreign entities. It specifically restores the limitation on downward attribution of stock ownership in applying the constructive ownership rules to controlled foreign corporations. This means that a person or entity cannot avoid taxes by owning stock in a foreign company through a third party or by using other complicated ownership structures. The bill also includes provisions for how this limitation will be applied and regulated, as well as the effective date for these changes to take place.
Possible Impacts
1. This legislation may affect individuals who own stock in a foreign corporation, as it changes the rules for how stock ownership is attributed when applying the constructive ownership rules. This could potentially impact their tax liability and reporting requirements.
2. Foreign controlled United States shareholders may be required to include certain amounts in their gross income, as this legislation expands the definition of a "foreign controlled United States shareholder" and applies certain provisions to them separately.
3. The Secretary of the Treasury will be required to create regulations to prevent the avoidance of the purposes of this section, which could potentially impact the actions of individuals or corporations who were previously able to avoid certain tax obligations.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4509 Introduced in House (IH)]
<DOC>
116th CONGRESS
1st Session
H. R. 4509
To amend the Internal Revenue Code of 1986 to restore the limitation on
downward attribution of stock ownership in applying the constructive
ownership rules to controlled foreign corporations, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 26, 2019
Mr. Lewis (for himself, Ms. Moore, Mr. Schneider, Mr. Estes, Mr.
Holding, and Mr. Ferguson) 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 the constructive
ownership rules to controlled foreign corporations, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 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:
``SEC. 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), 957,
and 965) 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) sections 951A and 965 shall be applied with respect
to such shareholder--
``(A) by treating each reference to `United States
shareholder' in such sections as including a reference
to such shareholder, and
``(B) by treating each reference to `controlled
foreign corporation' in such sections 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 of such Code 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, 2018, 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.
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