Tax on base erosion payments of taxpayers with substantial gross receipts

There is hereby imposed on each applicable taxpayer for any taxable year a tax equal to the base erosion minimum tax amount for the taxable year. Such tax shall be in addition to any other tax imposed by this subtitle. For purposes of this section— Except as provided in paragraph (2), the term “base erosion minimum tax amount” means, with respect to any applicable taxpayer for any taxable year, the excess (if any) of— an amount equal to the regular tax liability (as defined in section 26(b)) of the taxpayer for the taxable year, reduced (but not below zero) by the excess (if any) of— the sum of— In the case of a taxpayer described in subparagraph (B) who is an applicable taxpayer for any taxable year, the percentages otherwise in effect under paragraph (1)(A) shall be increased by one percentage point. A taxpayer is described in this subparagraph if such taxpayer is a member of an affiliated group (as defined in section 1504(a)(1)) which includes— For purposes of paragraph (1)(B)(ii)(II), the term “applicable section 38 credits” means the credit allowed under section 38 for the taxable year which is properly allocable to— For purposes of this section— The term “modified taxable income” means the taxable income of the taxpayer computed under this chapter for the taxable year, determined without regard to— The term “base erosion tax benefit” means— in the case of a base erosion payment described in subsection (d)(3)— Except as provided in clause (ii), any base erosion tax benefit attributable to any base erosion payment— The amount not taken into account in computing modified taxable income by reason of clause (i) shall be reduced under rules similar to the rules under section 163(j)(5)(B) (as in effect before the date of the enactment of the Tax Cuts and Jobs Act). For purposes of applying paragraph (1), in the case of a taxpayer to which section 163(j) applies for the taxable year, the reduction in the amount of interest for which a deduction is allowed by reason of such subsection shall be treated as allocable first to interest paid or accrued to persons who are not related parties with respect to the taxpayer and then to such related parties. For purposes of paragraph (1)(B)— The term “base erosion percentage” means, for any taxable year, the percentage determined by dividing— the sum of— The amount under subparagraph (A)(ii) shall be determined by not taking into account— For purposes of this section— The term “base erosion payment” means any amount paid or accrued by the taxpayer to a foreign person which is a related party of the taxpayer and with respect to which a deduction is allowable under this chapter. Such term shall also include any amount paid or accrued by the taxpayer to a foreign person which is a related party of the taxpayer in connection with the acquisition by the taxpayer from such person of property of a character subject to the allowance for depreciation (or amortization in lieu of depreciation). Such term shall also include any premium or other consideration paid or accrued by the taxpayer to a foreign person which is a related party of the taxpayer for any reinsurance payments which are taken into account under sections 803(a)(1)(B) or 832(b)(4)(A). Such term shall also include any amount paid or accrued by the taxpayer with respect to a person described in subparagraph (B) which results in a reduction of the gross receipts of the taxpayer. A person is described in this subparagraph if such person is a— For purposes of this paragraph— The term “surrogate foreign corporation” has the meaning given such term by section 7874(a)(2)(B) but does not include a foreign corporation treated as a domestic corporation under section 7874(b). The term “expanded affiliated group” has the meaning given such term by section 7874(c)(1). Paragraph (1) shall not apply to any amount paid or accrued by a taxpayer for services if— For purposes of this section— The term “applicable taxpayer” means, with respect to any taxable year, a taxpayer— In the case of a foreign person the gross receipts of which are taken into account for purposes of paragraph (1)(B), only gross receipts which are taken into account in determining income which is effectively connected with the conduct of a trade or business within the United States shall be taken into account. In the case of a taxpayer which is a foreign person, the preceding sentence shall not apply to the gross receipts of any United States person which are aggregated with the taxpayer’s gross receipts by reason of paragraph (3). Rules similar to the rules of subparagraphs (B), (C), and (D) of section 448(c)(3) shall apply in determining gross receipts for purposes of this section. All persons treated as a single employer under subsection (a) of section 52 shall be treated as 1 person for purposes of this subsection and subsection (c)(4), except that in applying section 1563 for purposes of section 52, the exception for foreign corporations under section 1563(b)(2)(C) shall be disregarded. For purposes of this section, the term “foreign person” has the meaning given such term by section 6038A(c)(3). For purposes of this section— The term “related party” means, with respect to any applicable taxpayer— The term “25-percent owner” means, with respect to any corporation, any person who owns at least 25 percent of— Section 318 shall apply for purposes of paragraphs (1) and (2), except that— For purposes of this section— Except as provided in paragraph (3), any qualified derivative payment shall not be treated as a base erosion payment. The term “qualified derivative payment” means any payment made by a taxpayer pursuant to a derivative with respect to which the taxpayer— No payments shall be treated as qualified derivative payments under subparagraph (A) for any taxable year unless the taxpayer includes in the information required to be reported under section 6038A(b)(2) with respect to such taxable year such information as is necessary to identify the payments to be so treated and such other information as the Secretary determines necessary to carry out the provisions of this subsection. This subsection shall not apply to any qualified derivative payment if— For purposes of this subsection— The term “derivative” means any contract (including any option, forward contract, futures contract, short position, swap, or similar contract) the value of which, or any payment or other transfer with respect to which, is (directly or indirectly) determined by reference to one or more of the following: Except as otherwise provided by the Secretary, for purposes of this part, American depository receipts (and similar instruments) with respect to shares of stock in foreign corporations shall be treated as shares of stock in such foreign corporations. Such term shall not include any insurance, annuity, or endowment contract issued by an insurance company to which subchapter L applies (or issued by any foreign corporation to which such subchapter would apply if such foreign corporation were a domestic corporation). The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section, including regulations— providing for such adjustments to the application of this section as are necessary to prevent the avoidance of the purposes of this section, including through— transactions or arrangements designed, in whole or in part—