S. 1673 - Pay What You Owe Before You Go Act

115TH CONGRESS
1ST SESSION

S. 1673

To amend the Internal Revenue Code to include in income the
unrepatriated earnings of groups that include an inverted corporation.

IN THE SENATE OF THE UNITED STATES

JULY 31, 2017

Mr. BROWN (for himself, Mr. DURBIN, and Mr. VAN HOLLEN)
introduced the following bill; which was read twice and referred
to the Committee on Finance

A BILL

To amend the Internal Revenue Code to include in income the unrepatriated earnings of groups that include an inverted corporation.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Pay What You Owe Before You Go Act’’.

SEC. 2. RECAPTURE OF UNREPATRIATED EARNINGS OF GROUPS INCLUDING AN INVERTED CORPORATION.

(a) IN GENERAL. — Section 7874 of the Internal Revenue Code of 1986 is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following new subsection:

‘‘(g) RECAPTURE OF TAX ON UNREPATRIATED EARNINGS. —

‘‘(1) IN GENERAL. — The subpart F income of any applicable controlled foreign corporation for its last taxable year ending before the acquisition date shall be increased by the accumulated deferred foreign income of the corporation.

‘‘(2) APPLICABLE CONTROLLED FOREIGN CORPORATION. — For purposes of this subsection —

‘‘(A) IN GENERAL. — The term ‘applicable controlled foreign corporation’ means any controlled foreign corporation with respect to which —

‘‘(i) a covered entity was a United States shareholder at any time during the 5-year period ending on the acquisition date, or

‘‘(ii) a member of the same expanded affiliated group as a covered entity was a United States shareholder at any time during the 5-year period ending on the acquisition date.

‘‘(B) COVERED ENTITY. — The term ‘covered entity’ means, with respect to a controlled foreign corporation, any entity which —

‘‘(i) is treated as a surrogate foreign corporation under subsection (a)(2)(B), determined —

‘‘(I) by substituting ‘July 24, 2017’ for ‘March 4, 2003’ each place it appears,

‘‘(II) by substituting ‘more than 50 percent’ for ‘at least 60 percent’ in clause (ii) thereof, and

‘‘(III) by disregarding clause (iii) thereof, and

‘‘(ii) is not treated as a domestic corporation by reason of subsection (b).

‘‘(3) ACCUMULATED DEFERRED FOREIGN INCOME. — For purposes of this section —

‘‘(A) IN GENERAL. — The term ‘accumulated deferred foreign income’ means the excess of —

‘‘(i) the undistributed earnings of the controlled foreign corporation, over

‘‘(ii) the undistributed U.S. earnings of such controlled foreign corporation.

‘‘(B) UNDISTRIBUTED EARNINGS. — The term ‘undistributed earnings’ means the earnings and profits of the controlled foreign corporation described in section 959(c)(3), determined —

‘‘(i) as of the close of the taxable year described in paragraph (1),

‘‘(ii) without diminution by reason of distributions made during such taxable year, and

‘‘(iii) without regard to this subsection.

For purposes of this chapter, any determination with respect to the treatment of distributions described in clause (ii) shall be made after the application of this subsection to the earnings and profits described in the matter preceding clause (i).

‘‘(C) UNDISTRIBUTED U.S. EARNINGS. — The term ‘undistributed U.S. earnings’ has the meaning given the term ‘post-1986 undistributed U.S. earnings’ in section 245(a)(5), determined —

‘‘(i) as of the close of the taxable year described in paragraph (1), and

‘‘(ii) without regard to ‘post-1986’ each place it appears in the matter before subparagraph (A).

‘‘(4) ACQUISITION DATE. — For purposes of this section, the term ‘acquisition date’ means the date the covered entity completes the acquisition described in subsection (a)(2)(B)(i) (after the application of paragraph (2)(B)(i) of this subsection).’’.

(b) EFFECTIVE DATE. — The amendments made by this section shall apply with respect to taxable years ending after July 24, 2017.