S2021-119

2. Modification to determination of net deemed intangible income return Section 951A(b)(2)(A) of the Internal Revenue Code of 1986 is amended— by striking 10 percent of the aggregate of and inserting 10 percent of the excess (if any) of— the aggregate of by adding at the end the following new clause: an amount equal to the product of the amount determined under clause (i) and the round-tripping ratio, over Section 951A(b) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: For purposes of this subsection— The round-tripping ratio means, with respect to any United States shareholder for any taxable year, the percentage (not greater than 100 percent) which is equal to the ratio which— the shareholder’s round-tripped net CFC tested income for such taxable year determined under subparagraph (B), bears to the shareholder’s net CFC tested income for such taxable year, determined without regard to this paragraph. For purposes of subparagraph (A)(i), a United States shareholder’s round-tripped net CFC tested income for any taxable year is the net CFC tested income of such shareholder which would be determined under subsection (c) for such taxable year if— the only income taken into account under clause (i) of subsection (c)(2)(A) in determining the tested income or tested loss of each controlled foreign corporation taken into account by such shareholder under subsection (c)(1) for such taxable year were income described in such clause which is derived in connection with— property— which is sold by the taxpayer to any person who is a United States person, or which the taxpayer cannot establish to the satisfaction of the Secretary is for foreign use, or services provided by the taxpayer which the taxpayer cannot establish to the satisfaction of the Secretary are provided to any person, or with respect to property, not located within the United States, and the only deductions taken into account under clause (ii) of subsection (c)(2)(A) in determining such tested income or tested loss were deductions properly allocable to income described in clause (i). For purposes of this subsection, the determination of whether property is for a foreign use shall be made in the same manner as under section 250(b). In the case of any United States shareholder described in clause (ii), the round-tripping ratio shall be 0 percent. A United States shareholder is described in this clause if the average annual gross receipts of such United States shareholder for the 3-taxable year period ending with the taxable year which precedes such taxable year does not exceed $100,000,000. Rules similar to the rules of paragraphs (2)(B) and (3) of section 59A(e) shall apply for purposes of this clause. The amendments made by this section shall apply taxable years of foreign corporations beginning after the date of the enactment of this Act, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end. 10 percent of the excess (if any) of— (i)the aggregate of, and (ii)an amount equal to the product of the amount determined under clause (i) and the round-tripping ratio, over. (3)Round-tripping ratioFor purposes of this subsection— (A)In generalThe round-tripping ratio means, with respect to any United States shareholder for any taxable year, the percentage (not greater than 100 percent) which is equal to the ratio which— (i)the shareholder’s round-tripped net CFC tested income for such taxable year determined under subparagraph (B), bears to (ii)the shareholder’s net CFC tested income for such taxable year, determined without regard to this paragraph. (B)Shareholder’s round-tripped net CFC tested incomeFor purposes of subparagraph (A)(i), a United States shareholder’s round-tripped net CFC tested income for any taxable year is the net CFC tested income of such shareholder which would be determined under subsection (c) for such taxable year if— (i)the only income taken into account under clause (i) of subsection (c)(2)(A) in determining the tested income or tested loss of each controlled foreign corporation taken into account by such shareholder under subsection (c)(1) for such taxable year were income described in such clause which is derived in connection with— (I)property— (aa)which is sold by the taxpayer to any person who is a United States person, or (bb)which the taxpayer cannot establish to the satisfaction of the Secretary is for foreign use, or (II)services provided by the taxpayer which the taxpayer cannot establish to the satisfaction of the Secretary are provided to any person, or with respect to property, not located within the United States, and (ii)the only deductions taken into account under clause (ii) of subsection (c)(2)(A) in determining such tested income or tested loss were deductions properly allocable to income described in clause (i). (C)Foreign useFor purposes of this subsection, the determination of whether property is for a foreign use shall be made in the same manner as under section 250(b). (D)Exception for certain small taxpayers (i)In generalIn the case of any United States shareholder described in clause (ii), the round-tripping ratio shall be 0 percent. (ii)Taxpayer described (I)In generalA United States shareholder is described in this clause if the average annual gross receipts of such United States shareholder for the 3-taxable year period ending with the taxable year which precedes such taxable year does not exceed $100,000,000. (II)Application of certain rulesRules similar to the rules of paragraphs (2)(B) and (3) of section 59A(e) shall apply for purposes of this clause..