[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3933 Introduced in House (IH)]
103d CONGRESS
2d Session
H. R. 3933
To amend the Internal Revenue Code of 1986 to provide that
distributions from a controlled foreign corporation to a United States
shareholder shall be excluded from gross income if at least a portion
of the distribution is invested in certain property located in the
United States and in the employment of new employees in the United
States.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 1, 1994
Ms. Slaughter 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 provide that
distributions from a controlled foreign corporation to a United States
shareholder shall be excluded from gross income if at least a portion
of the distribution is invested in certain property located in the
United States and in the employment of new employees in the United
States.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. EXCLUSION FROM GROSS INCOME FOR DISTRIBUTIONS FROM
CONTROLLED FOREIGN CORPORATIONS WHICH ARE INVESTED IN
CERTAIN PROPERTY LOCATED IN THE UNITED STATES OR USED TO
HIRE NEW EMPLOYEES IN THE UNITED STATES.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to items specifically excluded
from gross income) is amended by redesignating section 137 as section
138 and by inserting after section 136 the following new section:
``SEC. 137. DISTRIBUTIONS FROM CONTROLLED FOREIGN CORPORATIONS WHICH
ARE INVESTED IN CERTAIN UNITED STATES PROPERTY OR WHICH
ARE USED TO HIRE NEW EMPLOYEES IN THE UNITED STATES.
``(a) Exclusion.--The gross income of a United States shareholder
of a controlled foreign corporation shall not include the amount of any
distribution received during the taxable year by such shareholder from
such corporation.
``(b) Maximum Exclusion.--
``(1) In general.--The amount distributed from a controlled
foreign corporation which is excluded from a shareholder's
gross income under subsection (a) for any taxable year shall
not exceed the excess (if any) of--
``(A) the amount equal to such shareholder's
ownership percentage of the excess passive assets of
such corporation for its base year, over
``(B) the aggregate amount distributed from such
corporation which was excluded from such shareholder's
gross income under subsection (a) for all prior taxable
years of such shareholder ending on or after the close
of the base year of such corporation.
``(2) Shareholder's ownership percentage.--For purposes of
paragraph (1), a shareholder's ownership percentage is the
percentage of the total combined voting power of all classes of
stock entitled to vote in the controlled foreign corporation
which the shareholder owns (within the meaning of section
958(a)) or is considered as owning under section 958(b). Such
percentage shall be determined as of the close of the base
year.
``(3) Base year.--For purposes of this subsection, the base
year is the controlled foreign corporation's first taxable year
ending after December 31, 1992.
``(4) Lower limitation if reduction in excess passive
assets.--If, for any taxable year of the corporation after the
base year, the excess passive assets of such corporation are
less than such excess passive assets for the base year, then,
for purposes of applying this subsection to any taxable year of
a United States shareholder ending after the close of such
taxable year of the corporation, the limitation under paragraph
(1) shall be the lesser of--
``(A) such limitation (determined without regard to
this paragraph), or
``(B) such limitation determined as if such taxable
year of the corporation were the base year of such
corporation.
``(5) Excess passive assets.--For purposes of this
subsection, the term `excess passive assets' has the meaning
given such term by section 956A(c).
``(6) Predecessors.--Under regulations prescribed by the
Secretary, to the extent necessary to carry out the purposes of
this subsection, any reference to a shareholder shall be
treated as including a reference to any predecessor of such
shareholder and to any person from whom such shareholder
acquired any portion of such shareholder's stock in such
corporation.
``(c) Reinvestment Requirements.--
``(1) In general.--If, as of the close of the reinvestment
period with respect to any distribution, the taxpayer fails to
meet--
``(A) the investment in property requirement of
subsection (d), or
``(B) the job creation requirement of subsection
(e),
then the taxpayer's tax imposed by this chapter for the taxable
year in which such reinvestment period ends shall be increased
by an amount equal to the recapture amount with respect to such
distribution.
``(2) Recapture amount.--For purposes of paragraph (1), the
term `recapture amount' means an amount equal to the sum of--
``(A) the shortfall percentage of the reduction in
the taxpayer's liability for tax under this chapter
which resulted from excluding such distribution from
gross income under subsection (a), plus
``(B) the aggregate amount of interest (determined
in the manner provided in subsection (f)(3)) on the
amount determined under subparagraph (A).
``(3) Shortfall percentage.--For purposes of paragraph (2),
the term `shortfall percentage' means the greater of--
``(A) the investment in property shortfall
percentage, or
``(B) the job creation shortfall percentage.
``(4) Investment in property shortfall percentage.--For
purposes of paragraph (3), the term `investment in property
shortfall percentage' means the percentage which--
``(A) the excess (if any) of--
``(i) an amount equal to 50 percent of the
distribution involved, over
``(ii) the amount of qualified investment
made during the reinvestment period which
allocable to such distribution, bears to
``(B) the amount described in subparagraph (A)(i).
``(5) Job creation shortfall percentage.--For purposes of
paragraph (3), the term `job creation shortfall percentage'
means the percentage which--
``(A) the excess (if any) of--
``(i) an amount equal to 12.5 percent of
the distribution involved, over
``(ii) the amount of new employee wages
paid during the last taxable year of the
reinvestment period allocable to such
distribution, bears to
``(B) the amount described in subparagraph (A)(i).
``(d) Investment in Property Requirement.--For purposes of this
section--
``(1) Requirement.--A taxpayer meets the investment in
property requirement of this subsection if the qualified
investment of the taxpayer during the reinvestment period (to
the extent not taken into account under this paragraph with
respect to any prior distribution) is not less than 50 percent
of the amount of the distribution.
``(2) Qualified investment.--The term `qualified
investment' means the sum of--
``(A) the aggregate bases of new qualified property
placed in service by the taxpayer, and
``(B) the aggregate cost of used qualified property
placed in service by the taxpayer.
Rules similar to the rules of subsections (b) and (c) of
section 48 (as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990) shall
apply for purposes of this paragraph.
``(3) Qualified property.--For purposes of paragraph (2),
the term `qualified property' means--
``(A) section 38 property (as defined by section
48(a) as in effect on the day before the date of the
enactment of the Omnibus Budget Reconciliation Act of
1990), and
``(B) real property (not described in subparagraph
(A)) used as an integral part of manufacturing facility
(as defined in section 144(a)(12)(C)).
The term `qualified property' shall not include any property if
the taxpayer is the lessor of the property.
``(4) Recapture if property disposed of, etc.--
``(A) In general.--If any qualified property is
disposed of, or otherwise ceases to be qualified
property with respect to the taxpayer, before the close
of the recapture period, then the taxpayer's tax
imposed by this chapter for the taxable year in which
such disposition or cessation occurs shall be increased
by the sum of--
``(i) the recapture percentage of such
property's share of the tax benefit under this
section, plus
``(ii) the aggregate amount of interest
(determined in the manner provided in
subsection (f)(3)) on the amount determined
under subparagraph (A).
``(B) Definitions.--For purposes of this
paragraph--
``(i) Recapture period.--The term
`recapture period' means, with respect to any
property, the period consisting of the first
full year after the property is placed in
service and--
``(I) the 2 succeeding full years
in the case of 3-year property (within
the meaning of section 168),
``(II) the 4 succeeding full years
in the case of section 38 property
other than 3-year property, and
``(III) the 9 succeeding full years
in the case of property referred to in
paragraph (2)(B).
``(ii) Recapture percentage.--The term
`recapture percentage' means the percentage
determined under section 50(a)(1)(B); except
that--
``(I) in the case of 3-year
property, the percentage set forth in
clause (ii) of the table contained in
paragraph (1)(B) shall be 66 percent,
the percentage set forth in clause
(iii) of such table shall be 33
percent, and clauses (iv) and (v) of
such table shall not apply, and
``(II) in the case of property
referred to in paragraph (2)(B), the
percentage shall be 100 percent for the
first full year of the recapture period
and, for each full year thereafter,
shall be 10 percentage points less than
the recapture percentage for the prior
year.
``(C) Property's share of tax benefit.--A
property's share of the tax benefit under this section
shall be--
``(i) an amount which bears the same ratio
to the reduction in the taxpayer's liability
for tax under this chapter which resulted from
excluding the distribution involved from gross
income under subsection (a), as
``(ii) the unadjusted basis of such
property bears to the aggregate unadjusted
bases of all qualified property placed in
service during the reinvestment period with
respect to such distribution.
``(e) Job Creation Requirement.--For purposes of this section--
``(1) Requirement.--A taxpayer meets the job creation
requirement of this subsection if the new employee wages paid
by the taxpayer during the last taxable year of the
reinvestment period (to the extent not taken into account under
this paragraph with respect to any prior distribution) is not
less than 12.5 percent of the amount of the distribution.
``(2) New employee wages.--The term `new employee wages'
means, with respect to any distribution, wages paid to
employees--
``(A) who are first hired after the date of such
distribution, and
``(B) whose employment represents an increase in
the aggregate number of employees of the taxpayer in
the United States.
``(3) Wages.--The term `wages' has the same meaning as when
used in section 51.
``(4) Increased employment must be maintained for 4
years.--
``(A) In general.--If for any taxable year in the
employment maintenance period (hereafter in this
paragraph referred to as the `redetermination year')
the new employee wages with respect to any distribution
are less than the new employee wages for the last
taxable year of the reinvestment period with respect to
such distribution, the taxpayer's tax imposed by this
chapter for the redetermination year shall be increased
by an amount equal to the adjusted recapture amount
with respect to such distribution.
``(B) Adjusted recapture amount.--For purposes of
subparagraph (A), the term `adjusted recapture amount'
means an amount equal to the sum of--
``(i) the excess (if any) of--
``(I) the job creation shortfall
percentage of the reduction in the
taxpayer's liability for tax under this
chapter which resulted from excluding
such distribution from gross income
under subsection (a) (determined for
the redetermination year), over
``(II) the amount determined under
subsection (c)(2)(A) (increased by any
prior increase in tax under this
paragraph with respect to such
distribution), plus
``(ii) the aggregate amount of interest
(determined in the manner provided in
subsection (f)(3)) on the excess determined
under clause (i).
``(C) Employment maintenance period.--For purposes
of this paragraph, the term `employment maintenance
period' means any period of 4 consecutive taxable years
selected by the taxpayer so long as at least 1 of such
taxable years is during the reinvestment period.
``(f) Other Definitions and Special Rules.--For purposes of this
section--
``(1) Reinvestment period.--The term `reinvestment period'
means, with respect to any distribution received during a
taxable year, such taxable year and the 4 succeeding taxable
years.
``(2) United states shareholder; controlled foreign
corporation.--The terms `United States shareholder' and
`controlled foreign corporation' have the respective meanings
given such terms by sections 951 and 957.
``(3) Rules relating to determination of interest.--
``(A) In general.--The amount of interest referred
to in subsections (c)(2), (d)(4), and (e)(3) for any
taxable year shall be determined for the period--
``(i) beginning on the due date for taxable
year during which the distribution involved was
made, and
``(ii) ending on the due date for the
taxable year for which the increase in tax is
being determined,
by using the rates and method applicable under section
6621 for underpayment of tax for such period.
``(B) Due date.--For purposes of subparagraph (A),
the term `due date' means the date prescribed by law
(determined without regard to extensions) for filing
the return of the tax imposed by this chapter for the
taxable year.
``(C) Treatment of increase in tax attributable to
interest as interest.--Any increase in tax imposed by
this chapter for a taxable year by reason of this
section to the extent attributable to an amount
referred to in subsection (c)(2)(B), (d)(4)(A)(ii), or
(e)(3)(B) shall be treated as interest paid under
section 6601 on the due date for such taxable year.
``(4) Controlled groups.--All taxpayers treated as a single
employer under subsection (a) or (b) of section 52 shall be
treated as a single taxpayer.
``(g) Basis Adjustment.--
``(1) In general.--For purposes of this subtitle, the basis
of any qualified property placed in service during any taxable
year for which an amount was excluded from gross income under
this section shall be reduced by an amount equal to such
property's share of such exclusion (determined under subsection
(d)(4)).
``(2) Certain dispositions.--If there is an increase in tax
by reason of this section for any taxable year, proper
adjustments shall be made under regulations prescribed by the
Secretary with respect to any property the basis of which was
reduced under paragraph (1).''
(b) Technical Amendment.--Subsection (a) of section 1016 of such
Code is amended by striking ``and'' at the end of paragraph (24), by
striking the period at the end of paragraph (25) and inserting ``,
and'', and by adding at the end thereof the following new paragraph:
``(26) to the extent provided in section 137(g).''
(c) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 of such Code is amended by striking the last
item and inserting the following new items:
``Sec. 137. Distributions from controlled
foreign corporations which are
invested in certain United
States property or which are
used to hire new employees in
the United States.
``Sec. 138. Cross references to other
Acts.''
(d) Effective Date.--The amendments made by this section shall
apply to distributions received after the date of the enactment of this
Act in taxable years ending after such date.
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