S 1671 ISCommentsClose CommentsPermalink

112th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

S. 1671CommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to allow a temporary dividends received deduction for dividends received from a controlled foreign corporation.CommentsClose CommentsPermalink

IN THE SENATE OF THE UNITED STATESCommentsClose CommentsPermalink

October 6, 2011CommentsClose CommentsPermalink

Mrs. HAGAN (for herself, Mr. MCCAIN, Mrs. BOXER, Mr. BLUNT, Mr. GRAHAM, Mr. ISAKSON, Ms. MURKOWSKI, Mr. BROWN of Massachusetts, and Mr. MANCHIN) introduced the following bill; which was read twice and referred to the Committee on FinanceCommentsClose CommentsPermalink

A BILLCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to allow a temporary dividends received deduction for dividends received from a controlled foreign corporation.CommentsClose CommentsPermalink

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Foreign Earnings Reinvestment Act’.CommentsClose CommentsPermalink

SEC. 2. ALLOWANCE OF TEMPORARY DIVIDENDS RECEIVED DEDUCTION FOR DIVIDENDS RECEIVED FROM A CONTROLLED FOREIGN CORPORATION.

(a) Applicability of Provision-CommentsClose CommentsPermalink





(1) IN GENERAL- Subsection (f) of section 965 is amended to read as follows:CommentsClose CommentsPermalink





‘(f) Election; Election Year-CommentsClose CommentsPermalink





‘(1) IN GENERAL- The taxpayer may elect to apply this section to--CommentsClose CommentsPermalink





‘(A) the taxpayer’s last taxable year which begins before the date of the enactment of the Foreign Earnings Reinvestment Act, orCommentsClose CommentsPermalink





‘(B) the taxpayer’s first taxable year which begins during the 1-year period beginning on such date.CommentsClose CommentsPermalink





Such election may be made for a taxable year only if made on or before the due date (including extensions) for filing the return of tax for such taxable year.CommentsClose CommentsPermalink





‘(C) ELECTION YEAR- For purposes of this section, the term ‘election year’ means the taxable year--CommentsClose CommentsPermalink





‘(i) which begins after the date that is one year before the date of the enactment of the Foreign Earnings Reinvestment Act, andCommentsClose CommentsPermalink





‘(ii) to which the taxpayer elects under paragraph (1) to apply this section.’.CommentsClose CommentsPermalink





(2) CONFORMING AMENDMENTS-CommentsClose CommentsPermalink





(A) EXTRAORDINARY DIVIDENDS- Section 965(b)(2) of such Code is amended--CommentsClose CommentsPermalink





(i) by striking ‘June 30, 2003’ and inserting ‘September 30, 2011’, andCommentsClose CommentsPermalink





(ii) by adding at the end the following new sentence: ‘The amounts described in clauses (i), (ii), and (iii) shall not include any amounts which were taken into account in determining the deduction under subsection (a) for any prior taxable year.’.CommentsClose CommentsPermalink





(B) DETERMINATIONS RELATING TO RELATED PARTY INDEBTEDNESS- Section 965(b)(3)(B) of such Code is amended by striking ‘October 3, 2004’ and inserting ‘September 30, 2011’.CommentsClose CommentsPermalink





(C) DETERMINATIONS RELATING TO BASE PERIOD- Section 965(c)(2) of such Code is amended by striking ‘June 30, 2003’ and inserting ‘September 30, 2011’.CommentsClose CommentsPermalink





(b) Deduction Includes Current and Accumulated Foreign Earnings-CommentsClose CommentsPermalink





(1) IN GENERAL- Paragraph (1) of section 965(b) of the Internal Revenue Code of 1986 is amended to read as follows:CommentsClose CommentsPermalink





‘(1) IN GENERAL- The amount of dividends taken into account under subsection (a) shall not exceed the sum of the current and accumulated earnings and profits described in section 959(c)(3) for the year a deduction is claimed under subsection (a), without diminution by reason of any distributions made during the election year, for all controlled foreign corporations of the United States shareholder.’.CommentsClose CommentsPermalink





(2) CONFORMING AMENDMENTS-CommentsClose CommentsPermalink





(A) Section 965(c) of such Code, as amended by subsection (a), is amended by striking paragraph (1) and by redesignating paragraphs (2), (3), (4), and (5), as paragraphs (1), (2), (3), and (4), respectively.CommentsClose CommentsPermalink





(B) Paragraph (4) of section 965(c) of such Code, as redesignated by subparagraph (A), is amended to read as follows:CommentsClose CommentsPermalink





‘(4) CONTROLLED GROUPS- All United States shareholders which are members of an affiliated group filing a consolidated return under section 1501 shall be treated as one United States shareholder.’.CommentsClose CommentsPermalink





(c) Amount of Deduction-CommentsClose CommentsPermalink





(1) IN GENERAL- Paragraph (1) of section 965(a) of the Internal Revenue Code of 1986 is amended by striking ‘85 percent’ and inserting ‘75 percent’.CommentsClose CommentsPermalink





(2) BONUS DEDUCTION IN SUBSEQUENT TAXABLE YEAR FOR INCREASING JOBS- Section 965 of such Code is amended by adding at the end the following new subsection:CommentsClose CommentsPermalink





‘(g) Bonus Deduction-CommentsClose CommentsPermalink





‘(1) IN GENERAL- In the case of any taxpayer who makes an election to apply this section, there shall be allowed as a deduction for the first taxable year following the election year an amount equal to the applicable percentage of the cash dividends which are taken into account under subsection (a) with respect to such taxpayer for the election year.CommentsClose CommentsPermalink





‘(2) APPLICABLE PERCENTAGE- For purposes of paragraph (1), the applicable percentage is the amount which bears the same ratio (not greater than 1) to 10 percent as--CommentsClose CommentsPermalink





‘(A) the excess (if any) of--CommentsClose CommentsPermalink





‘(i) the qualified payroll of the taxpayer for the calendar year which begins with or within the first taxable year following the election year, overCommentsClose CommentsPermalink





‘(ii) the qualified payroll of the taxpayer for calendar year 2010, bears toCommentsClose CommentsPermalink





‘(B) 10 percent of the qualified payroll of the taxpayer for calendar year 2010.’CommentsClose CommentsPermalink





‘(3) QUALIFIED PAYROLL- For purposes of this paragraph:CommentsClose CommentsPermalink





‘(A) IN GENERAL- The term ‘qualified payroll’ means, with respect to a taxpayer for any calendar year, the aggregate wages (as defined in section 3121(a)) paid by the corporation during such calendar year.CommentsClose CommentsPermalink





‘(B) EXCEPTION FOR CHANGES IN OWNERSHIP OF TRADES OR BUSINESSES-CommentsClose CommentsPermalink





‘(i) ACQUISITIONS- If, after December 31, 2009, and before the close of the first taxable year following the election year, a taxpayer acquires the trade or business of a predecessor, then the qualified payroll of such taxpayer for any calendar year shall be increased by so much of the qualified payroll of the predecessor for such calendar year as was attributable to the trade or business acquired by the taxpayer.CommentsClose CommentsPermalink





‘(ii) DISPOSITIONS- If, after December 31, 2009, and before the close of the first taxable year following the election year, a taxpayer disposes of a trade or business, then--CommentsClose CommentsPermalink





‘(I) the qualified payroll of such taxpayer for calendar year 2010 shall be decreased by the amount of wages for such calendar year as were attributable to the trade or business which was disposed of by the taxpayer, andCommentsClose CommentsPermalink





‘(II) if the disposition occurs after the beginning of the first taxable year following the election year, the qualified payroll of such taxpayer for the calendar year which begins with or within such taxable year shall be decreased by the amount of wages for such calendar year as were attributable to the trade or business which was disposed of by the taxpayer.CommentsClose CommentsPermalink





‘(C) SPECIAL RULE- For purposes of determining qualified payroll for any calendar year after calendar year 2011, such term shall not include wages paid to any individual if such individual received compensation from the taxpayer for services performed--CommentsClose CommentsPermalink





‘(i) after the date of the enactment of this paragraph, andCommentsClose CommentsPermalink





‘(ii) at a time when such individual was not an employee of the taxpayer.’.CommentsClose CommentsPermalink





(3) REDUCTION FOR FAILURE TO MAINTAIN EMPLOYMENT LEVELS- Paragraph (4) of section 965(b) of such Code (relating to limitations) is amended to read as follows:CommentsClose CommentsPermalink





‘(4) REDUCTION IN BENEFITS FOR FAILURE TO MAINTAIN EMPLOYMENT LEVELS-CommentsClose CommentsPermalink





‘(A) IN GENERAL- If, during the period consisting of the calendar month in which the taxpayer first receives a distribution described in subsection (a)(1) and the succeeding 23 calendar months, the taxpayer does not maintain an average employment level at least equal to the taxpayer’s prior average employment, an additional amount equal to $75,000 multiplied by the number of employees by which the taxpayer’s average employment level during such period falls below the prior average employment (but not exceeding the aggregate amount allowed as a deduction pursuant to subsection (a)(1)) shall be taken into income by the taxpayer during the taxable year that includes the final day of such period.CommentsClose CommentsPermalink





‘(B) AVERAGE EMPLOYMENT LEVEL- For purposes of this paragraph, the taxpayer’s average employment level for a period shall be the average number of full-time United States employees of the taxpayer, measured at the end of each month during the period.CommentsClose CommentsPermalink





‘(C) PRIOR AVERAGE EMPLOYMENT- For purposes of this paragraph, the taxpayer’s ‘prior average employment’ shall be the average number of full-time United States employees of the taxpayer during the period consisting of the 24 calendar months immediately preceding the calendar month in which the taxpayer first receives a distribution described in subsection (a)(1).CommentsClose CommentsPermalink





‘(D) FULL-TIME UNITED STATES EMPLOYEE- For purposes of this paragraph--CommentsClose CommentsPermalink





‘(i) IN GENERAL- The term ‘full-time United States employee’ means an individual who provides services in the United States as a full-time employee, based on the employer’s standards and practices; except that regardless of the employer’s classification of the employee, an employee whose normal schedule is 40 hours or more per week is considered a full-time employee.CommentsClose CommentsPermalink





‘(ii) EXCEPTION FOR CHANGES IN OWNERSHIP OF TRADES OR BUSINESSES- Such term does not include--CommentsClose CommentsPermalink





‘(I) any individual who was an employee, on the date of acquisition, of any trade or business acquired by the taxpayer during the 24-month period referred to in subparagraph (A), andCommentsClose CommentsPermalink





‘(II) any individual who was an employee of any trade or business disposed of by the taxpayer during the 24-month period referred to in subparagraph (A) or the 24-month period referred to in subparagraph (C).CommentsClose CommentsPermalink





‘(E) AGGREGATION RULES- In determining the taxpayer’s average employment level and prior average employment, all domestic members of a controlled group shall be treated as a single taxpayer.’.CommentsClose CommentsPermalink





(d) Effective Date- The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.CommentsClose CommentsPermalink