Protecting the U.S. Corporate Tax Base Act of 2016

“(A) such shareholder’s pro rata share of the sum of—

“(i) the average of the amounts of United States property held (directly or indirectly) by the controlled foreign corporation as of the close of each quarter of such taxable year, and

“(ii) in the case of a controlled foreign corporation which is a member of an expanded affiliated group the common parent of which is not a domestic corporation, the average of the amounts of foreign group property held (directly or indirectly) by the controlled foreign corporation as of the close of each quarter of such taxable year, over”

“(d) Foreign group property; expanded affiliated group—For purposes of this section—

“(1) Foreign group property

“(A) In general—The term “foreign group property” means any stock or obligation of any foreign person which is not a controlled foreign corporation.

“(B) Exceptions—Such term shall not include—

“(i) the stock or obligation of any entity if less than 25 percent of the total combined voting power of such entity, immediately after the acquisition of any stock in such entity by the controlled foreign corporation, is owned (directly or indirectly) by the common parent referred to in subsection (a)(1)(A)(ii), and

“(ii) property described in subparagraph (C), (I), (J), (K) or (L) of subsection (c)(2), applied—

“(I) by substituting “foreign person” for “United States person” in such subparagraphs (C), (J), and (L),

“(II) by substituting “foreign corporation” for “domestic corporation” in subsection (c)(2)(L)(i), and

“(III) by treating a foreign person as a United States shareholder described in subsection (c)(2)(L)(ii)(I) if such foreign person would be so described if such person were a United States person.

“(C) Limitation on treatment as a controlled foreign corporation—A foreign corporation shall not be treated as a controlled foreign corporation for purposes of subparagraph (A) unless more than 50 percent of the total combined voting power of all classes of stock of such corporation entitled to vote, and more than 50 percent of the total value of the stock of such corporation, is owned (directly or indirectly) by United States persons described in subparagraph (A) or (C) of section 7701(a)(30).

“(D) Foreign person—For purposes of this paragraph, the term “foreign person” means any person who is not a United States person (as defined in section 7701(a)(30)).

“(2) Expanded affiliated group—The term “expanded affiliated group” means an affiliated group as defined in section 1504(a), determined—

“(A) by substituting “more than 50 percent” for “at least 80 percent” each place it appears, and

“(B) without regard to paragraphs (2) and (3) of section 1504(b).

“(3) Application to non-corporate entities—In the case of any entity which is not a corporation—

“(A) any reference in this subsection to stock shall be treated as a reference to any equity or profits interest in such entity, and

“(B) except as otherwise provided by the Secretary, paragraph (1)(B)(i) shall be applied by substituting “25 percent (by value) of the beneficial interests in such entity” for “25 percent of the total combined voting power of such entity”.”

“(e) Pledges and guarantees—For purposes of subsection (a), a controlled foreign corporation shall, under regulations prescribed by the Secretary, be considered as holding—

“(1) an obligation of a United States person if such controlled foreign corporation is a pledgor or guarantor of such obligation, and

“(2) an obligation of a foreign person if such controlled foreign corporation or, to the extent provided under such regulations, any United States shareholder of such controlled foreign corporation, is a pledgor or guarantor of such obligation.”