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S. 397 (114th): Foreign Earnings Reinvestment Act


The text of the bill below is as of Feb 5, 2015 (Introduced). The bill was not enacted into law.


II

114th CONGRESS

1st Session

S. 397

IN THE SENATE OF THE UNITED STATES

February 5, 2015

introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

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

1.

Short title

This Act may be cited as the Foreign Earnings Reinvestment Act.

2.

Allowance of temporary dividends received deduction for dividends received from a controlled foreign corporation

(a)

Applicability of provision

(1)

In general

Subsection (f) of section 965 of the Internal Revenue Code of 1986 is amended to read as follows:

(f)

Election; election year

(1)

In general

The taxpayer may elect to apply this section to—

(A)

the taxpayer's last taxable year which begins before the date of the enactment of the Foreign Earnings Reinvestment Act, or

(B)

the taxpayer's first taxable year which begins during the 1-year period beginning on such date.

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.
(C)

Election year

For purposes of this section, the term election year means the taxable year—

(i)

which begins after the date that is one year before the date of the enactment of the Foreign Earnings Reinvestment Act, and

(ii)

to which the taxpayer elects under paragraph (1) to apply this section.

.

(2)

Conforming amendments

(A)

Extraordinary dividends

Section 965(b)(2) of such Code is amended—

(i)

by striking June 30, 2003 and inserting December 31, 2014, and

(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..

(B)

Determinations relating to related party indebtedness

Section 965(b)(3)(B) of such Code is amended by striking October 3, 2004 and inserting December 31, 2014.

(C)

Determinations relating to base period

Section 965(c)(2) of such Code is amended by striking June 30, 2003 and inserting December 31, 2014.

(b)

Deduction includes current and accumulated foreign earnings

(1)

In general

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

(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.

.

(2)

Conforming amendments

(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.

(B)

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

(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.

.

(c)

Amount of deduction

(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.

(2)

Bonus deduction in subsequent taxable year for increasing jobs

Section 965 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(g)

Bonus deduction

(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.

(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—

(A)

the excess (if any) of—

(i)

the qualified payroll of the taxpayer for the calendar year which begins with or within the first taxable year following the election year, over

(ii)

the qualified payroll of the taxpayer for calendar year 2014, bears to

(B)

10 percent of the qualified payroll of the taxpayer for calendar year 2014.

(3)

Qualified payroll

For purposes of this paragraph:

(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.

(B)

Exception for changes in ownership of trades or businesses

(i)

Acquisitions

If, after December 31, 2013, 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.

(ii)

Dispositions

If, after December 31, 2013, and before the close of the first taxable year following the election year, a taxpayer disposes of a trade or business, then—

(I)

the qualified payroll of such taxpayer for calendar year 2014 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, and

(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.

(C)

Special rule

For purposes of determining qualified payroll for any calendar year after calendar year 2015, such term shall not include wages paid to any individual if such individual received compensation from the taxpayer for services performed—

(i)

after the date of the enactment of this paragraph, and

(ii)

at a time when such individual was not an employee of the taxpayer.

.

(3)

Reduction for failure to maintain employment levels

Paragraph (4) of section 965(b) of such Code is amended to read as follows:

(4)

Reduction in benefits for failure to maintain employment levels

(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.

(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.

(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).

(D)

Full-time United States employee

For purposes of this paragraph—

(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.

(ii)

Exception for changes in ownership of trades or businesses

Such term does not include—

(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), and

(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).

(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.

.

(d)

Effective date

The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.