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H.R. 5857 (111th): FACT Act

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The text of the bill below is as of Jul 26, 2010 (Introduced). The bill was not enacted into law.

I

111th CONGRESS

2d Session

H. R. 5857

IN THE HOUSE OF REPRESENTATIVES

July 26, 2010

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 decrease the top marginal corporate rate to 28 percent and to prevent corporations from exploiting tax treaties to evade taxation of United States income.

1.

Short Title

This Act may be cited as the Fair American Corporate Tax Act or FACT Act.

2.

Decrease in top marginal rate

(a)

In General

Paragraph (1) of section 11(b) of the Internal Revenue Code of 1986 is amended—

(1)

by inserting and at the end of subparagraph (B),

(2)

by striking subparagraphs (C) and (D) and inserting the following subparagraph:

(C)

28 percent of so much of the taxable income as exceeds $75,000.

,

(3)

by striking of $100,000 and inserting of $75,000,

(4)

by striking $11,750 and inserting $7,250, and

(5)

by striking the third sentence.

(b)

Certain Personal Service Corporations

Paragraph (2) of section 11(b) of such Code is amended by striking 35 percent and inserting 28 percent.

(c)

Conforming Amendments

(1)

Subsection (a) of section 1201 of such Code is amended by striking 35 percent each place it appears and inserting 28 percent.

(2)

Paragraphs (1), (2), and (6) of section 1445(e) of such Code are each amended by striking 35 percent and inserting 28 percent.

(d)

Effective Date

The amendments made by this section shall apply to taxable years beginning after December 31, 2010.

3.

Limitation on treaty benefits for certain deductible payments

(a)

In general

Section 894 of the Internal Revenue Code of 1986 (relating to income affected by treaty) is amended by adding at the end the following new subsection:

(d)

Limitation on treaty benefits for certain deductible payments

(1)

In general

In the case of any deductible related-party payment, the amount of any withholding tax imposed under chapter 3 (and any tax imposed under subpart A or B of this part) with respect to such payment shall not be less than the amount which would be imposed if the payment were made directly to the foreign parent corporation (taking into account any income tax treaty between the United States and the country in which the foreign parent corporation is resident).

(2)

Deductible related-party payment

For purposes of this subsection, the term deductible related-party payment means any payment made, directly or indirectly, by any person to any other person if the payment is allowable as a deduction under this chapter and both persons are members of the same foreign controlled group of entities.

(3)

Foreign controlled group of entities

For purposes of this subsection—

(A)

In general

The term foreign controlled group of entities means a controlled group of entities the common parent of which is a foreign corporation.

(B)

Controlled group of entities

The term controlled group of entities means a controlled group of corporations as defined in section 1563(a)(1), except that—

(i)

more than 50 percent shall be substituted for at least 80 percent each place it appears therein, and

(ii)

the determination shall be made without regard to subsections (a)(4) and (b)(2) of section 1563.

A partnership or any other entity (other than a corporation) shall be treated as a member of a controlled group of entities if such entity is controlled (within the meaning of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this sentence).
(4)

Foreign parent corporation

For purposes of this subsection, the term foreign parent corporation means, with respect to any deductible related-party payment, the common parent of the foreign controlled group of entities referred to in paragraph (3)(A).

(5)

Regulations

The Secretary may prescribe such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provide for—

(A)

the treatment of two or more persons as members of a foreign controlled group of entities if such persons would be the common parent of such group if treated as one corporation, and

(B)

the treatment of any member of a foreign controlled group of entities as the common parent of such group if such treatment is appropriate taking into account the economic relationships among such entities.

.

(b)

Effective date

The amendment made by this section shall apply to payments made after the date of the enactment of this Act.