Sec. 138124. Modifications to foreign tax credit limitations
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/bill/117/hr/5376/rh/section-138124·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Section 904 is amended by inserting after subsection
(d)the following new subsection: The provisions of subsections (a), (b), (c), and
(d)and sections 907 and 960 shall be applied separately with respect to each country by taking into account the aggregate income properly attributable or otherwise allocable to a taxable unit of the taxpayer which is a tax resident of such country. Except as otherwise provided by the Secretary, each item shall be attributable or otherwise allocable to exactly one taxable unit of the taxpayer. Except as otherwise provided by the Secretary, the taxable units of a taxpayer are as follows: The person that is the taxpayer and that is not otherwise described in a separate clause of this subparagraph. Each controlled foreign corporation with respect to which the taxpayer is a United States shareholder. Each interest held (directly or indirectly) by the taxpayer or any controlled foreign corporation referred to in clause
(ii)in a pass-through entity if such pass-through entity is a tax resident of a country other than the country with respect to which such taxpayer or controlled foreign corporation (as the case may be) is a tax resident. Each branch (or portion thereof) the activities of which are directly or indirectly carried on by the taxpayer or any controlled foreign corporation referred to in clause
(ii)and which give rise to a taxable presence in a country other than the country in which the taxpayer or any such controlled foreign corporation (as the case may be) is a tax resident. For purposes of this subsection— Except as otherwise provided by the Secretary, the term tax resident means a person or arrangement subject to tax under the tax law of a country as a resident, or a person or arrangement that gives rise to a taxable presence by reason of its activities in such country. If an entity is organized under the law of a country, or resident in a country, that does not impose an income tax with respect to such entity, such entity shall, except as provided by the Secretary, be treated as subject to tax under the tax law of such country for the purposes of the preceding sentence. Except as otherwise provided by the Secretary, the term pass-through entity includes any partnership or other entity or arrangement to the extent that income, gain, deduction, or loss of the entity is taken into account in determining the income or loss of a person that owns (directly or indirectly) an interest in such entity. Except as otherwise provided by the Secretary, the term branch means a taxable presence of a tax resident in a country other than its country of residence as determined under such other country’s tax law. The Secretary shall provide regulations or other guidance applying such term to activities in a country that does not subject income to tax on the basis of residence or taxable presence. Any fiscally autonomous jurisdiction shall be treated as a separate country. Any possession of the United States shall also be treated as separate country. For purposes of the preceding sentence, the term possession of the United States means each of American Samoa, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, Guam, and the Virgin Islands. The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out, or prevent avoidance of, the purposes of this subsection, including regulations or other guidance— providing for the application of this subsection to entities, arrangements, and branches that are otherwise considered a resident of more than one country or no country, providing for the application of this subsection to hybrid entities or hybrid transactions (as such terms are used for purposes of section 267A), pass-through entities, passive foreign investment companies, trusts, and other entities or arrangements not otherwise described in this subsection, and providing for the assignment of any item (including foreign taxes and deductions) to taxable units, including in the case of amounts not otherwise taken into account in determining taxable income under this chapter. . Section 904(f)(5)(E)(i) is amended by inserting applied separately with respect to each country (within the meaning of subsection (e)) as provided in subsection
(e)before the period at the end. Section 904(f)(5) is amended by adding at the end the following new subparagraph: The amount of the separate limitation losses for any taxable year shall reduce income described in subparagraph (d)(1)(A) for such taxable year only to the extent the aggregate amount of such losses exceeds the aggregate amount of the separate limitation incomes for such taxable year. For purposes of this subparagraph, separate limitation income shall exclude income described in subparagraph (d)(1)(A) for the taxable year. . Section 904(d)(1) is amended by striking subparagraph
(B)and redesignating subparagraphs
(C)and
(D)as subparagraph
(B)and (C). Section 205(b)(3)(A) is amended— by striking subclause
(VI)of clause
(i)and inserting the following new subclause: the income of a United States person which is attributable to 1 or more branches (which would be referred to in clause
(iv)of section 904(e)(2)(B) if such clause were applied without regard to any reference to a controlled foreign corporation) or pass-through entities (which would be referred to in clause
(iii)of section 904(e)(2)(B) if such clause were applied without regard to any reference to a controlled foreign corporation) in 1 or more foreign countries, over , and by adding at the end the following flush sentence: For purposes of clause (i)(VI), the amount of income attributable to a branch or pass-through entity shall be determined under rules established by the Secretary. . Section 904(d)(2)(A)(ii) is amended by striking , foreign branch income, . Section 904(d)(2) is amended by striking subparagraph (J). Section 904(c) is amended by striking 10 succeeding taxable years and inserting 5 succeeding taxable years . Section 6511(d)(3)(A) is amended by striking 10 years and inserting 5 years . Section 904(c) is amended— by striking in the first preceding taxable year, and , by striking preceding or each place it appears, and by striking in the heading thereof. Carryback and Section 904(c) is amended by striking the last sentence. Section 907(f)(1) is amended— by striking in the first preceding taxable year and , and by striking first 10 and inserting first 5 . Section 904(b) is amended by striking paragraph (4). Section 864(e)(3) is amended by striking or 245(a) and inserting , 245(a), or 245A . Section 904(b), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph: 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 any deduction allowed under section 250 to such income, and by treating any expense of such domestic corporation as not allocable to such income. . Section 904(b), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph: Except as otherwise provided by the Secretary, in the case of any covered asset disposition, the principles of section 338(h)(16) shall apply in determining the source and character of any item for purposes of this part. For purposes of this paragraph, the term covered asset disposition means any transaction which— is treated as a disposition of assets for purposes of subchapter N of this chapter, and is treated as a disposition of stock of a corporation (or is disregarded) for purposes of the tax laws of the relevant foreign country or possession of the United States. The Secretary shall issue such regulations or other guidance as is necessary or appropriate to carry out, or to the prevent the avoidance of, the purposes of this paragraph. . Section 905(c)(1) is amended 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. . Section 901(a) is amended by striking the second sentence and inserting the following: The choice to claim a credit for such amounts may be made at any time before the expiration of the period prescribed by section 6511(d)(3)(A), and the choice to claim a deduction in lieu of a credit may be made at any time before the expiration of the period prescribed by section 6511(a), for making a claim for refund or credit of the tax imposed by this chapter for such taxable year, or such later period prescribed by section 6511(c) if the period is extended by agreement. . Section 6511(d)(3)(A) is amended— by inserting 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 before change in the liability for in the heading thereof. foreign taxes Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2021. Except as otherwise provided in paragraph (3), the amendments made by subsection
(c)shall apply to taxes paid or accrued in taxable years beginning after December 31, 2021. The amendment made by subsection (c)(4)(B) shall apply to taxable years of foreign corporations beginning after December 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end. The amendments made by subsection
(g)shall take effect on the date which is 60 days after the date of the enactment of this Act. The Secretary shall prescribe rules providing for the application of subsection
(e)of section 904 of the Internal Revenue Code of 1986, as added by this section, to any amounts carried over under subsection
(c)of such section from a taxable year with respect to which such subsection
(e)did not apply to a taxable year with respect to which such subsection
(e)does apply.