Sec. 14102. Special rules relating to sales or transfers involving specified 10-percent owned foreign corporations

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Section 1248 is amended by redesignating subsection

(j)as subsection

(k)and by inserting after subsection

(i)the following new subsection: In the case of the sale or exchange by a domestic corporation of stock in a foreign corporation held for 1 year or more, any amount received by the domestic corporation which is treated as a dividend by reason of this section shall be treated as a dividend for purposes of applying section 245A. . Section 961 is amended by adding at the end the following new subsection: If a domestic corporation receives a dividend from a specified 10-percent owned foreign corporation (as defined in section 245A) in any taxable year, solely for purposes of determining loss on any disposition of stock of such foreign corporation in such taxable year or any subsequent taxable year, the basis of such domestic corporation in such stock shall be reduced (but not below zero) by the amount of any deduction allowable to such domestic corporation under section 245A with respect to such stock. . The amendments made by this subsection shall apply to dividends received in taxable years beginning after December 31, 2017. Section 964(e) is amended by adding at the end the following new paragraph: If, for any taxable year of a controlled foreign corporation beginning after December 31, 2017, any amount is treated as a dividend under paragraph

(1)by reason of a sale or exchange by the controlled foreign corporation of stock in another foreign corporation held for 1 year or more, then, notwithstanding any other provision of this title— the foreign-source portion of such dividend shall be treated for purposes of section 951(a)(1)(A) as subpart F income of the selling controlled foreign corporation for such taxable year, a United States shareholder with respect to the selling controlled foreign corporation shall include in gross income for the taxable year of the shareholder with or within which such taxable year of the controlled foreign corporation ends an amount equal to the shareholder's pro rata share (determined in the same manner as under section 951(a)(2)) of the amount treated as subpart F income under clause (i), and the deduction under section 245A(a) shall be allowable to the United States shareholder with respect to the subpart F income included in gross income under clause

(ii)in the same manner as if such subpart F income were a dividend received by the shareholder from the selling controlled foreign corporation. For purposes of this title, in the case of a sale or exchange by a controlled foreign corporation of stock in another foreign corporation in a taxable year of the selling controlled foreign corporation beginning after December 31, 2017, to which this paragraph would apply if gain were recognized, the earnings and profits of the selling controlled foreign corporation shall not be reduced by reason of any loss from such sale or exchange. For purposes of this paragraph, the foreign-source portion of any amount treated as a dividend under paragraph

(1)shall be determined in the same manner as under section 245A(c). . Part II of subchapter B of chapter 1 is amended by adding at the end the following new section: If a domestic corporation transfers substantially all of the assets of a foreign branch (within the meaning of section 367(a)(3)(C), as in effect before the date of the enactment of the Tax Cuts and Jobs Act ) to a specified 10-percent owned foreign corporation (as defined in section 245A) with respect to which it is a United States shareholder after such transfer, such domestic corporation shall include in gross income for the taxable year which includes such transfer an amount equal to the transferred loss amount with respect to such transfer. The amount included in the gross income of the taxpayer under subsection

(a)for any taxable year shall not exceed the amount allowed as a deduction under section 245A for such taxable year (taking into account dividends received from all specified 10-percent owned foreign corporations with respect to which the taxpayer is a United States shareholder). Any amount not included in gross income for any taxable year by reason of paragraph

(1)shall, subject to the application of paragraph

(1)to the succeeding taxable year, be included in gross income for the succeeding taxable year. For purposes of this section, the term transferred loss amount means, with respect to any transfer of substantially all of the assets of a foreign branch, the excess (if any) of— the sum of losses— which were incurred by the foreign branch after December 31, 2017, and before the transfer, and with respect to which a deduction was allowed to the taxpayer, over the sum of— any taxable income of such branch for a taxable year after the taxable year in which the loss was incurred and through the close of the taxable year of the transfer, and any amount which is recognized under section 904(f)(3) on account of the transfer. The transferred loss amount shall be reduced (but not below zero) by the amount of gain recognized by the taxpayer on account of the transfer (other than amounts taken into account under subsection (c)(2)(B)). Amounts included in gross income under this section shall be treated as derived from sources within the United States. Consistent with such regulations or other guidance as the Secretary shall prescribe, proper adjustments shall be made in the adjusted basis of the taxpayer’s stock in the specified 10-percent owned foreign corporation to which the transfer is made, and in the transferee’s adjusted basis in the property transferred, to reflect amounts included in gross income under this section. . The table of sections for part II of subchapter B of chapter 1 is amended by adding at the end the following new item: Sec. 91. Certain foreign branch losses transferred to specified 10-percent owned foreign corporations. . The amendments made by this subsection shall apply to transfers after December 31, 2017. Section 367(a) is amended by striking paragraph

(3)and redesignating paragraphs (4), (5), and

(6)as paragraphs (3), (4), and (5), respectively Section 367(a)(4), as redesignated by paragraph (1), is amended— by striking Paragraphs

(2)and

(3)and inserting Paragraph

(2), and by striking in the heading and inserting Paragraphs

(2)and

(3). Paragraph

(2)The amendments made by this subsection shall apply to transfers after December 31, 2017.