S 779 — Stop Tax Haven Abuse Act

Summary

Stop Tax Haven Abuse Act This bill authorizes the Department of the Treasury to impose restrictions on foreign jurisdictions or financial institutions to counter money laundering and efforts to significantly impede U.S. tax enforcement. The bill amends the Internal Revenue Code to expand reporting requirements for certain foreign investments and accounts held by U.S. persons, establish a rebuttable presumption against the validity of transactions by institutions that do not comply with reporting requirements under the Foreign Account Tax Compliance Act, treat certain foreign corporations managed and controlled primarily in the United States as domestic corporations for tax purposes, treat swap payments sent offshore as taxable U.S. source income, require reporting of United States beneficial owners of foreign-owned financial accounts, impose additional requirements for third party summonses used to obtain information in tax investigations that do not identify the person with respect to whose liability the summons is issued (i.e., John Doe summons), and modify the rules for the taxation of inverted corporations (U.S. corporations that acquire foreign companies to reincorporate in a foreign jurisdiction with income tax rates lower than the United States). The bill amends the Securities Exchange Act of 1934 to (1) require corporations to disclose certain financial information on a country-by-country basis, and (2) impose penalties for failing to disclose offshore holdings. The bill makes investment advisers and persons engaged in forming new business entities subject to new anti-money laundering requirements.

Bill Text

• Introduced Introduced in Senate Current html March 13, 2019

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The bill amends existing tax laws to eliminate certain tax avoidance strategies used by corporations and establish stricter regulations on tax deductions and reporting.

• Section 7701(a)

  and → and any foreign business entity that-- (A) has a single owner that does not have limited liability, or (B) has one or more members all of which have limited liability

  This change broadens the definition of entities subject to check-the-box rules.

• Section 954(c)(6)

  Subparagraph (A) shall not apply to dividends, interest, rents, and royalties received or accrued after the date of the enactment of the Stop Tax Haven Abuse Act. → Terminated.

  This amendment eliminates the look-thru rule for certain income from foreign corporations.

• Section 163

  (n) as subsection (p) and → (n) Limitation on Deduction of Interest by Domestic Corporations in International Financial Reporting Groups.-- (1) In general.--In the case of any domestic corporation which is a member of any international financial reporting group, the deduction under this chapter for interest paid or accrued during the taxable year shall not exceed the sum of--

  This change introduces a limitation on interest deductions for domestic corporations that are part of international financial reporting groups.

• Section 163

  (2) International financial reporting group.-- (A) For purposes of this subsection, the term `international financial reporting group' means, with respect to any reporting year, any group of entities which-- (i) includes-- (I) at least one foreign corporation engaged in a trade or business within the United States, or (II) at least one domestic corporation and one foreign corporation, (ii) prepares consolidated financial statements with respect to such year, and (iii) reports in such statements average annual gross receipts (determined in the aggregate with respect to all entities which are part of such group) for the 3-reporting-year period ending with such reporting year in excess of $100,000,000.

  This definition establishes criteria for identifying what constitutes an international financial reporting group.

• Section 163

  The term `allowable percentage' means, with respect to any domestic corporation for any taxable year, the ratio (expressed as a percentage and not greater than 100 percent) of-- (i) such corporation's allocable share of the international financial reporting group's reported net interest expense for the reporting year of such group which ends in or with such taxable year, over (ii) such corporation's reported net interest expense for such reporting year of such group.

  This establishes a formula for calculating the allowable percentage of interest expenses that can be deducted by a domestic corporation.

• Section 163

  (C) Allocable share of reported net interest expense.--With respect to any domestic corporation which is a member of any international financial reporting group, such corporation's allocable share of such group's reported net interest expense for any reporting year is the portion of such expense which bears the same ratio to such expense as-- (i) the EBITDA of such corporation for such reporting year, bears to (ii) the EBITDA of such group for such reporting year.

  This amendment specifies how to allocate net interest expense among members of an international financial reporting group based on EBITDA.

Action History

1. March 13, 2019

   Introduced in Senate

2. March 13, 2019

   Read twice and referred to the Committee on Finance.

Sponsors

• Jeanne Shaheen · Cosponsor
• Sheldon Whitehouse · Primary

Subjects