Restoration of limitation on downward attribution of stock ownership in applying constructive ownership rules

(a) In general Section 958(b) is amended— (1) by inserting after paragraph (3) the following: (4) Subparagraphs (A), (B), and (C) of section 318(a)(3) shall not be applied so as to consider a United States person as owning stock which is owned by a person who is not a United States person., and (2) by striking Paragraph (1) in the last sentence and inserting Paragraphs (1) and (4). (b) Foreign controlled United States shareholders Subpart F of part III of subchapter N of chapter 1 is amended by inserting after section 951A the following new section: 951B. Amounts included in gross income of foreign controlled United States shareholders (a) In general In the case of any foreign controlled United States shareholder of a foreign controlled foreign corporation— (1) this subpart (other than sections 951A, 951(b), and 957) shall be applied with respect to such shareholder (separately from, and in addition to, the application of this subpart without regard to this section)— (A) by substituting foreign controlled United States shareholder for United States shareholder each place it appears therein, and (B) by substituting foreign controlled foreign corporation for controlled foreign corporation each place it appears therein, and (2) section 951A (and such other provisions of this subpart as provided by the Secretary) shall be applied with respect to such shareholder— (A) by treating each reference to United States shareholder in such section as including a reference to such shareholder, and (B) by treating each reference to controlled foreign corporation in such section as including a reference to such foreign controlled foreign corporation. (b) Foreign controlled United States shareholder For purposes of this section, the term foreign controlled United States shareholder means, with respect to any foreign corporation, any United States person which would be a United States shareholder with respect to such foreign corporation if— (1) section 951(b) were applied by substituting more than 50 percent for 10 percent or more, and (2) section 958(b) were applied without regard to paragraph (4) thereof. (c) Foreign controlled foreign corporation For purposes of this section, the term foreign controlled foreign corporation means a foreign corporation, other than a controlled foreign corporation, which would be a controlled foreign corporation if section 957(a) were applied— (1) by substituting foreign controlled United States shareholders for United States shareholders, and (2) by substituting section 958(b) (other than paragraph (4) thereof) for section 958(b). (d) Regulations The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance— (1) to treat a foreign controlled United States shareholder or a foreign controlled foreign corporation as a United States shareholder or as a controlled foreign corporation, respectively, for purposes of provisions of this title other than this subpart (including any reporting requirement), and (2) with respect to the treatment of foreign controlled foreign corporations that are passive foreign investment companies (as defined in section 1297).. (c) Clerical amendment The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by inserting after the item relating to section 951A the following new item: Sec. 951B. Amounts included in gross income of foreign controlled United States shareholders.. (d) Effective date The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2025. (e) Special rule (1) In general Except to the extent provided by the Secretary of the Treasury (or the Secretary's delegate), the effective date of any amendment to the Internal Revenue Code of 1986 shall be applied by treating references to United States shareholders as including references to foreign controlled United States shareholders, and by treating references to controlled foreign corporations as including references to foreign controlled foreign corporations. (2) Definitions Any term used in paragraph (1) which is used in subpart F of part III of subchapter N of chapter 1 of the Internal Revenue Code of 1986 (as amended by this section) shall have the meaning given such term in such subpart. (f) No inference The amendments made by this section shall not be construed to create any inference with respect to the proper application of any provision of the Internal Revenue Code of 1986 with respect to taxable years beginning before the taxable years to which such amendments apply.

(a) In general Section 958(b) is amended— (1) by inserting after paragraph (3) the following: (4) Subparagraphs (A), (B), and (C) of section 318(a)(3) shall not be applied so as to consider a United States person as owning stock which is owned by a person who is not a United States person., and (2) by striking Paragraph (1) in the last sentence and inserting Paragraphs (1) and (4). (b) Foreign controlled United States shareholders Subpart F of part III of subchapter N of chapter 1 is amended by inserting after section 951A the following new section: 951B. Amounts included in gross income of foreign controlled United States shareholders (a) In general In the case of any foreign controlled United States shareholder of a foreign controlled foreign corporation— (1) this subpart (other than sections 951A, 951(b), and 957) shall be applied with respect to such shareholder (separately from, and in addition to, the application of this subpart without regard to this section)— (A) by substituting foreign controlled United States shareholder for United States shareholder each place it appears therein, and (B) by substituting foreign controlled foreign corporation for controlled foreign corporation each place it appears therein, and (2) section 951A (and such other provisions of this subpart as provided by the Secretary) shall be applied with respect to such shareholder— (A) by treating each reference to United States shareholder in such section as including a reference to such shareholder, and (B) by treating each reference to controlled foreign corporation in such section as including a reference to such foreign controlled foreign corporation. (b) Foreign controlled United States shareholder For purposes of this section, the term foreign controlled United States shareholder means, with respect to any foreign corporation, any United States person which would be a United States shareholder with respect to such foreign corporation if— (1) section 951(b) were applied by substituting more than 50 percent for 10 percent or more, and (2) section 958(b) were applied without regard to paragraph (4) thereof. (c) Foreign controlled foreign corporation For purposes of this section, the term foreign controlled foreign corporation means a foreign corporation, other than a controlled foreign corporation, which would be a controlled foreign corporation if section 957(a) were applied— (1) by substituting foreign controlled United States shareholders for United States shareholders, and (2) by substituting section 958(b) (other than paragraph (4) thereof) for section 958(b). (d) Regulations The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance— (1) to treat a foreign controlled United States shareholder or a foreign controlled foreign corporation as a United States shareholder or as a controlled foreign corporation, respectively, for purposes of provisions of this title other than this subpart (including any reporting requirement), and (2) with respect to the treatment of foreign controlled foreign corporations that are passive foreign investment companies (as defined in section 1297).. (c) Clerical amendment The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by inserting after the item relating to section 951A the following new item: Sec. 951B. Amounts included in gross income of foreign controlled United States shareholders.. (d) Effective date The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2025. (e) Special rule (1) In general Except to the extent provided by the Secretary of the Treasury (or the Secretary's delegate), the effective date of any amendment to the Internal Revenue Code of 1986 shall be applied by treating references to United States shareholders as including references to foreign controlled United States shareholders, and by treating references to controlled foreign corporations as including references to foreign controlled foreign corporations. (2) Definitions Any term used in paragraph (1) which is used in subpart F of part III of subchapter N of chapter 1 of the Internal Revenue Code of 1986 (as amended by this section) shall have the meaning given such term in such subpart. (f) No inference The amendments made by this section shall not be construed to create any inference with respect to the proper application of any provision of the Internal Revenue Code of 1986 with respect to taxable years beginning before the taxable years to which such amendments apply.