Bill > S2360

This bill, titled the "Stop Corporate Inversions Act of 2014," aims to modify the rules surrounding "inverted corporations," which are foreign companies that effectively operate as U.S. companies for tax purposes. The key provision treats certain foreign corporations as domestic corporations if they acquire a U.S. company or partnership after May 8, 2014, and before May 9, 2016, and either more than 50 percent of their stock is held by former shareholders or partners of the U.S. entity, or the management and control of the expanded group (which includes the foreign corporation and its affiliates) primarily occurs within the United States and the group has significant domestic business activities. An exception exists if the expanded group has substantial business activities in the foreign country where it is organized compared to its total business activities. The bill also clarifies what constitutes "management and control" primarily within the U.S. by looking at the location of executive officers and senior management responsible for day-to-day strategic, financial, and operational decisions, and defines "significant domestic business activities" as having at least 25 percent of employees, employee compensation, assets, or income located or derived in the U.S. These changes are intended to prevent U.S. companies from reincorporating in lower-tax foreign jurisdictions while still maintaining their primary operations and management in the United States, and are effective for taxable years ending after May 8, 2014.