To amend the Internal Revenue Code of 1986 to restore the limitation on downward attribution of stock ownership in applying constructive ownership rules.
This bill amends the Internal Revenue Code to (1) restore a limitation on downward attribution of stock ownership when applying constructive ownership rules, and (2) create a new framework (Section 951B) for how foreign-controlled United States shareholders and foreign-controlled foreign corporations are treated under Subpart F and related provisions. In practical terms, the bill would prevent US persons from being treated as owning stock that is actually owned by a non-US person for purposes of certain tax rules, and it would introduce specific rules to tax or integrate Subpart F aspects for situations where foreign control is involved. The amendments are intended to narrow how ownership can be attributed across foreign ownership chains and to address cross-border control scenarios in Subpart F. The changes would apply to foreign corporations’ last taxable years beginning before January 1, 2025, and to related US-year ends, with regulatory guidance to implement them.
Key Points
- 1Restores limitation on downward attribution (amending 958(b)): Adds a new paragraph that says subparagraphs of 318(a)(3) shall not be applied so as to treat a United States person as owning stock that is owned by a person who is not a United States person, and updates the last sentence to reflect this addition. This prevents US persons from being attributed ownership through foreign holders in certain constructive-ownership contexts.
- 2New Section 951B: Adds a new rule to Subpart F for foreign-controlled United States shareholders of foreign-controlled foreign corporations. The section requires applying Subpart F (excluding certain sections) with respect to such shareholders, substituting terms to reflect foreign-controlled conditions, and applying 951A in a manner that includes the foreign-controlled shareholders.
- 3Definitions for foreign-controlled concepts: Establishes what counts as a foreign-controlled United States shareholder and what counts as a foreign-controlled foreign corporation, including how these would be identified for purposes of 951(b) and 958(b) (with a higher threshold than 10% in the testing context) and how they would be treated in relation to Subpart F.
- 4Regulations and guidance: Directs the Secretary to prescribe regulations or guidance to implement the new rules, including how to treat foreign-controlled entities for purposes of other provisions and to prevent avoidance of the section’s purposes.
- 5Clerical and effective-date changes: Amends the table of sections accordingly, and specifies the effective date to apply to the last taxable year of foreign corporations beginning before January 1, 2025, and to related US-year ends; includes a no-inference clause to avoid implying changes for years prior to the amendments.
- 6Sponsorship and status: Introduced in the House on March 18, 2025, by Rep. Estes (for himself and Rep. Moore of Wisconsin); referred to the Committee on Ways and Means.