text: SECTION 1. EXCLUSION FROM GROSS INCOME FOR DISTRIBUTIONS FROM 
                CONTROLLED FOREIGN CORPORATIONS WHICH ARE INVESTED IN 
                CERTAIN PROPERTY LOCATED IN THE UNITED STATES OR USED TO 
                HIRE NEW EMPLOYEES IN THE UNITED STATES.
  
      (a) In General.--Part III of subchapter B of chapter 1 of the 
  Internal Revenue Code of 1986 (relating to items specifically excluded 
  from gross income) is amended by redesignating section 137 as section 
  138 and by inserting after section 136 the following new section:
  
  ``SEC. 137. DISTRIBUTIONS FROM CONTROLLED FOREIGN CORPORATIONS WHICH 
                ARE INVESTED IN CERTAIN UNITED STATES PROPERTY OR WHICH 
                ARE USED TO HIRE NEW EMPLOYEES IN THE UNITED STATES.
  
      ``(a) Exclusion.--The gross income of a United States shareholder 
  of a controlled foreign corporation shall not include the amount of any 
  qualified distribution received during the taxable year by such 
  shareholder from such corporation.
      ``(b) Reinvestment Requirements.--
              ``(1) In general.--If, as of the close of the reinvestment 
          period with respect to any distribution, the taxpayer fails to 
          meet--
                      ``(A) the investment in property requirement of 
                  subsection (c), or
                      ``(B) the job creation requirement of subsection 
                  (d),
          then the taxpayer's tax imposed by this chapter for the taxable 
          year in which such reinvestment period ends shall be increased 
          by an amount equal to the recapture amount with respect to such 
          distribution.
              ``(2) Recapture amount.--For purposes of paragraph (1), the 
          term `recapture amount' means an amount equal to the sum of--
                      ``(A) the shortfall percentage of the reduction in 
                  the taxpayer's liability for tax under this chapter 
                  which resulted from excluding such distribution from 
                  gross income under subsection (a), plus
                      ``(B) the aggregate amount of interest (determined 
                  in the manner provided in subsection (e)(4)) on the 
                  amount determined under subparagraph (A).
              ``(3) Shortfall percentage.--For purposes of paragraph (2), 
          the term `shortfall percentage' means the greater of--
                      ``(A) the investment in property shortfall 
                  percentage, or
                      ``(B) the job creation shortfall percentage.
              ``(4) Investment in property shortfall percentage.--For 
          purposes of paragraph (3), the term `investment in property 
          shortfall percentage' means the percentage which--
                      ``(A) the excess (if any) of--
                              ``(i) an amount equal to 50 percent of the 
                          distribution involved, over
                              ``(ii) the amount of qualified investment 
                          made during the reinvestment period which 
                          allocable to such distribution, bears to
                      ``(B) the amount described in subparagraph (A)(i).
              ``(5) Job creation shortfall percentage.--For purposes of 
          paragraph (3), the term `job creation shortfall percentage' 
          means the percentage which--
                      ``(A) the excess (if any) of--
                              ``(i) an amount equal to 12.5 percent of 
                          the distribution involved, over
                              ``(ii) the amount of new employee wages 
                          paid during the last taxable year of the 
                          reinvestment period allocable to such 
                          distribution, bears to
                      ``(B) the amount described in subparagraph (A)(i).
      ``(c) Investment in Property Requirement.--For purposes of this 
  section--
              ``(1) Requirement.--A taxpayer meets the investment in 
          property requirement of this subsection if the qualified 
          investment of the taxpayer during the reinvestment period (to 
          the extent not taken into account under this paragraph with 
          respect to any prior distribution) is not less than 50 percent 
          of the amount of the distribution.
              ``(2) Qualified investment.--The term `qualified 
          investment' means the sum of--
                      ``(A) the aggregate bases of new qualified property 
                  placed in service by the taxpayer, and
                      ``(B) the aggregate cost of used qualified property 
                  placed in service by the taxpayer.
          Rules similar to the rules of subsections (b) and (c) of 
          section 48 (as in effect on the day before the date of the 
          enactment of the Revenue Reconciliation Act of 1990) shall 
          apply for purposes of this paragraph.
              ``(3) Qualified property.--For purposes of paragraph (2), 
          the term `qualified property' means--
                      ``(A) section 38 property (as defined by section 
                  48(a) as in effect on the day before the date of the 
                  enactment of the Omnibus Budget Reconciliation Act of 
                  1990), and
                      ``(B) real property (not described in subparagraph 
                  (A)) used as an integral part of manufacturing facility 
                  (as defined in section 144(a)(12)(C)).
          The term `qualified property' shall not include any property if 
          the taxpayer is the lessor of the property.
              ``(4) Recapture if property disposed of, etc.--
                      ``(A) In general.--If any qualified property is 
                  disposed of, or otherwise ceases to be qualified 
                  property with respect to the taxpayer, before the close 
                  of the recapture period, then the taxpayer's tax 
                  imposed by this chapter for the taxable year in which 
                  such disposition or cessation occurs shall be increased 
                  by the sum of--
                              ``(i) the recapture percentage of such 
                          property's share of the tax benefit under this 
                          section, plus
                              ``(ii) the aggregate amount of interest 
                          (determined in the manner provided in 
                          subsection (e)(4)) on the amount determined 
                          under subparagraph (A).
                      ``(B) Definitions.--For purposes of this 
                  paragraph--
                              ``(i) Recapture period.--The term 
                          `recapture period' means, with respect to any 
                          property, the period consisting of the first 
                          full year after the property is placed in 
                          service and--
                                      ``(I) the 2 succeeding full years 
                                  in the case of 3-year property (within 
                                  the meaning of section 168),
                                      ``(II) the 4 succeeding full years 
                                  in the case of section 38 property 
                                  other than 3-year property, and
                                      ``(III) the 9 succeeding full years 
                                  in the case of property referred to in 
                                  paragraph (2)(B).
                              ``(ii) Recapture percentage.--The term 
                          `recapture percentage' means the percentage 
                          determined under section 50(a)(1)(B); except 
                          that--
                                      ``(I) in the case of 3-year 
                                  property, the percentage set forth in 
                                  clause (ii) of the table contained in 
                                  paragraph (1)(B) shall be 66 percent, 
                                  the percentage set forth in clause 
                                  (iii) of such table shall be 33 
                                  percent, and clauses (iv) and (v) of 
                                  such table shall not apply, and
                                      ``(II) in the case of property 
                                  referred to in paragraph (2)(B), the 
                                  percentage shall be 100 percent for the 
                                  first full year of the recapture period 
                                  and, for each full year thereafter, 
                                  shall be 10 percentage points less than 
                                  the recapture percentage for the prior 
                                  year.
                      ``(C) Property's share of tax benefit.--A 
                  property's share of the tax benefit under this section 
                  shall be--
                              ``(i) an amount which bears the same ratio 
                          to the reduction in the taxpayer's liability 
                          for tax under this chapter which resulted from 
                          excluding the distribution involved from gross 
                          income under subsection (a), as
                              ``(ii) the unadjusted basis of such 
                          property bears to the aggregate unadjusted 
                          bases of all qualified property placed in 
                          service during the reinvestment period with 
                          respect to such distribution.
      ``(d) Job Creation Requirement.--For purposes of this section--
              ``(1) Requirement.--A taxpayer meets the job creation 
          requirement of this subsection if the new employee wages paid 
          by the taxpayer during the last taxable year of the 
          reinvestment period (to the extent not taken into account under 
          this paragraph with respect to any prior distribution) is not 
          less than 12.5 percent of the amount of the distribution.
              ``(2) New employee wages.--The term `new employee wages' 
          means, with respect to any distribution, wages paid to 
          employees--
                      ``(A) who are first hired after the date of such 
                  distribution, and
                      ``(B) whose employment represents an increase in 
                  the aggregate number of employees of the taxpayer in 
                  the United States.
              ``(3) Wages.--The term `wages' has the same meaning as when 
          used in section 51.
              ``(4) Increased employment must be maintained for 4 
          years.--
                      ``(A) In general.--If for any taxable year in the 
                  employment maintenance period (hereafter in this 
                  paragraph referred to as the `redetermination year') 
                  the new employee wages with respect to any distribution 
                  are less than the new employee wages for the last 
                  taxable year of the reinvestment period with respect to 
                  such distribution, the taxpayer's tax imposed by this 
                  chapter for the redetermination year shall be increased 
                  by an amount equal to the adjusted recapture amount 
                  with respect to such distribution.
                      ``(B) Adjusted recapture amount.--For purposes of 
                  subparagraph (A), the term `adjusted recapture amount' 
                  means an amount equal to the sum of--
                      ``(A) the excess (if any) of--
                              ``(i) the job creation shortfall percentage 
                          of the reduction in the taxpayer's liability 
                          for tax under this chapter which resulted from 
                          excluding such distribution from gross income 
                          under subsection (a) (determined for the 
                          redetermination year), over
                              ``(ii) the amount determined under 
                          subsection (b)(2)(A) (increased by any prior 
                          increase in tax under this paragraph with 
                          respect to such distribution), plus
                      ``(B) the aggregate amount of interest (determined 
                  in the manner provided in subsection (e)(4)) on the 
                  excess determined under subparagraph (A).
                      ``(C) Employment maintenance period.--For purposes 
                  of this paragraph, the term `employment maintenance 
                  period' means any period of 4 consecutive taxable years 
                  selected by the taxpayer so long as at least 1 of such 
                  taxable years is during the reinvestment period.
      ``(e) Other Definitions and Special Rules.--For purposes of this 
  section--
              ``(1) Qualified distribution.--The term `qualified 
          distribution' means any distribution to the extent that the 
          amount thereof reduces the amount includible in gross income 
          under section 956A (relating to earnings invested in excess 
          passive assets).
              ``(2) Reinvestment period.--The term `reinvestment period' 
          means, with respect to any distribution received during a 
          taxable year, such taxable year and the 4 succeeding taxable 
          years.
              ``(3) United States shareholder; controlled foreign 
          corporation.--The terms `United States shareholder' and 
          `controlled foreign corporation' have the respective meanings 
          given such terms by sections 951 and 957.
              ``(4) Rules relating to determination of interest.--
                      ``(A) In general.--The amount of interest referred 
                  to in subsections (b)(2), (c)(4), and (d)(3) for any 
                  taxable year shall be determined for the period--
                              ``(i) beginning on the due date for taxable 
                          year during which the distribution involved was 
                          made, and
                              ``(ii) ending on the due date for the 
                          taxable year for which the increase in tax is 
                          being determined,
                  by using the rates and method applicable under section 
                  6621 for underpayment of tax for such period.
                      ``(B) Due date.--For purposes of subparagraph (A), 
                  the term `due date' means the date prescribed by law 
                  (determined without regard to extensions) for filing 
                  the return of the tax imposed by this chapter for the 
                  taxable year.
                      ``(C) Treatment of increase in tax attributable to 
                  interest as interest.--Any increase in tax imposed by 
                  this chapter for a taxable year by reason of this 
                  section to the extent attributable to an amount 
                  referred to in subsection (b)(2)(B), (c)(4)(A)(ii), or 
                  (d)(3)(B) shall be treated as interest paid under 
                  section 6601 on the due date for such taxable year.
              ``(5) Controlled Groups.--All taxpayers treated as a single 
          employer under subsection (a) or (b) of section 52 shall be 
          treated as a single taxpayer.
      ``(f) Basis Adjustment.--
              ``(1) In general.--For purposes of this subtitle, the basis 
          of any qualified property placed in service during any taxable 
          year for which an amount was excluded from gross income under 
          this section shall be reduced by an amount equal to such 
          property's share of such exclusion (determined under subsection 
          (c)(3)).
              ``(2) Certain dispositions.--If there is an increase in tax 
          by reason of this section for any taxable year, proper 
          adjustments shall be made under regulations prescribed by the 
          Secretary with respect to any property the basis of which was 
          reduced under paragraph (1).''
      (b) Technical Amendment.--Subsection (a) of section 1016 of such 
  Code is amended by striking ``and'' at the end of paragraph (24), by 
  striking the period at the end of paragraph (25) and inserting ``, 
  and'', and by adding at the end thereof the following new paragraph:
              ``(26) to the extent provided in section 137(f).''
      (c) Clerical Amendment.--The table of sections for part III of 
  subchapter B of chapter 1 of such Code is amended by striking the last 
  item and inserting the following new items:
  
                                ``Sec. 137. Distributions from controlled 
                                          foreign corporations which are 
                                          invested in certain United 
                                          States property or which are 
                                          used to hire new employees in 
                                          the United States.
                                ``Sec. 138. Cross references to other 
                                          Acts.''
      (d) Effective Date.--The amendments made by this section shall 
  apply to distributions received after the date of the enactment of this 
  Act in taxable years ending after such date.
target: Amends the Internal Revenue Code to exclude from the gross income of shareholders of controlled foreign corporations the amount of any distribution received from such corporation, if the shareholder meets the requirements for reinvestment in U.S. property or the creation of domestic jobs.
feat_title: To amend the Internal Revenue Code of 1986 to provide that distributions from a controlled foreign corporation to a United States shareholder shall be excluded from gross income if at least a portion of the distribution is invested in certain property located in the United States and in the employment of new employees in the United States.