H.R. 4695 - Unfair Tax Prevention Act

118TH CONGRESS
1ST SESSION

H.R. 4695

To amend the Internal Revenue Code of 1986 to modify the application
of the base erosion and anti-abuse tax with respect to certain entities
connected to jurisdictions which have implemented an extraterritorial tax.

IN THE HOUSE OF REPRESENTATIVES

JULY 18, 2023

Mr. ESTES (for himself, Mr. SMITH of Missouri, Mr. SMITH of Nebraska,
Mr. KELLY of Pennsylvania, Mr. SMUCKER, Mrs. MILLER of West Virginia,
Mr. MOORE of Utah, Mrs. STEEL, Ms. VAN DUYNE, Mr. FEENSTRA,
and Mr. BUCHANAN) 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 modify the application of the base erosion and anti-abuse tax with respect to certain entities connected to jurisdictions which have implemented an extraterritorial tax.

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

SECTION 1. SHORT TITLE.

This Act may be cited as the "Unfair Tax Prevention Act".

SEC. 2. APPLICATION OF THE BASE EROSION AND ANTI-ABUSE TAX WITH RESPECT TO CERTAIN ENTITIES CONNECTED TO EXTRATERRITORIAL TAX JURISDICTIONS.

(a) IN GENERAL. — Section 59A of the Internal Revenue Code of 1986 is amended by redesignating subsection (i) as subsection (j) and inserting after subsection (h) the following new subsection:

“(i) SPECIAL RULES FOR FOREIGN-OWNED EXTRATERRITORIAL TAX REGIME ENTITIES. —

“(1) IN GENERAL. — In the case of any foreign-owned extraterritorial tax regime entity —

“(A) such entity shall be treated as described in subparagraphs (B) and (C) of subsection (e)(1) for purposes of determining whether such entity is an applicable taxpayer,

“(B) subsection (b)(2) shall be applied by substituting 'the date of the enactment of subsection (i)' for 'December 31, 2025',

“(C) subsections (c)(2)(B), (c)(4)(B)(ii), and (d)(5) shall not apply, and

“(D) 50 percent of such entity's cost of goods sold shall be treated as a base erosion tax benefit with respect to a base erosion payment.

“(2) FOREIGN-OWNED EXTRATERRITORIAL TAX REGIME ENTITY. — For purposes of this subsection —

“(A) IN GENERAL. — The term 'foreign-owned extraterritorial tax regime entity' means any taxpayer which is controlled by a foreign entity (other than a foreign entity controlled by any domestic corporation) if any of the following entities is subject to an extraterritorial tax:

“(i) Any foreign entity which controls the taxpayer.

“(ii) Any foreign entity which is controlled by —

“(I) the taxpayer, or

“(II) any foreign entity described in clause (i).

“(iii) Any trade or business of any foreign entity described in clause (i) or (ii).

“(B) EXTRATERRITORIAL TAX. —

“(i) IN GENERAL. — The term 'extraterritorial tax' means any tax imposed by a foreign country on a corporation (including any trade or business of such corporation) which is determined by reference to any income or profits received by any person (including any trade or business of any person) by reason of such person being connected to such corporation through any chain of ownership, determined without regard to the ownership interests of any individual, and other than by reason of such corporation having a direct or indirect ownership interest in such person.

“(ii) TAX. — The term 'tax' includes any increase in tax whether effectuated by an increase in the rate or base of a tax, by a denial of deductions or credits, or otherwise.

“(C) FOREIGN ENTITY. — The term 'foreign entity' means any foreign person other than an individual.

“(D) CONTROL. — Control has the same meaning given such term under section 954(d)(3).".

(b) EFFECTIVE DATE. — The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.