article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Fair American Corporate Tax Act'' or ``FACT Act''. SEC. 2. DECREASE IN TOP MARGINAL RATE. (a) In General.--Paragraph (1) of section 11(b) of the Internal Revenue Code of 1986 is amended-- (1) by inserting ``and'' at the end of subparagraph (B), (2) by striking subparagraphs (C) and (D) and inserting the following subparagraph: ``(C) 28 percent of so much of the taxable income as exceeds $75,000.'', (3) by striking ``of $100,000'' and inserting ``of $75,000'', (4) by striking ``$11,750'' and inserting ``$7,250'', and (5) by striking the third sentence. (b) Certain Personal Service Corporations.--Paragraph (2) of section 11(b) of such Code is amended by striking ``35 percent'' and inserting ``28 percent''. (c) Conforming Amendments.-- (1) Subsection (a) of section 1201 of such Code is amended by striking ``35 percent'' each place it appears and inserting ``28 percent''. (2) Paragraphs (1), (2), and (6) of section 1445(e) of such Code are each amended by striking ``35 percent'' and inserting ``28 percent''. (d) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2010. SEC. 3. LIMITATION ON TREATY BENEFITS FOR CERTAIN DEDUCTIBLE PAYMENTS. (a) In General.--Section 894 of the Internal Revenue Code of 1986 (relating to income affected by treaty) is amended by adding at the end the following new subsection: ``(d) Limitation on Treaty Benefits for Certain Deductible Payments.-- ``(1) In general.--In the case of any deductible related- party payment, the amount of any withholding tax imposed under chapter 3 (and any tax imposed under subpart A or B of this part) with respect to such payment shall not be less than the amount which would be imposed if the payment were made directly to the foreign parent corporation (taking into account any income tax treaty between the United States and the country in which the foreign parent corporation is resident). ``(2) Deductible related-party payment.--For purposes of this subsection, the term `deductible related-party payment' means any payment made, directly or indirectly, by any person to any other person if the payment is allowable as a deduction under this chapter and both persons are members of the same foreign controlled group of entities. ``(3) Foreign controlled group of entities.--For purposes of this subsection-- ``(A) In general.--The term `foreign controlled group of entities' means a controlled group of entities the common parent of which is a foreign corporation. ``(B) Controlled group of entities.--The term `controlled group of entities' means a controlled group of corporations as defined in section 1563(a)(1), except that-- ``(i) `more than 50 percent' shall be substituted for `at least 80 percent' each place it appears therein, and ``(ii) the determination shall be made without regard to subsections (a)(4) and (b)(2) of section 1563. A partnership or any other entity (other than a corporation) shall be treated as a member of a controlled group of entities if such entity is controlled (within the meaning of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this sentence). ``(4) Foreign parent corporation.--For purposes of this subsection, the term `foreign parent corporation' means, with respect to any deductible related-party payment, the common parent of the foreign controlled group of entities referred to in paragraph (3)(A). ``(5) Regulations.--The Secretary may prescribe such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provide for-- ``(A) the treatment of two or more persons as members of a foreign controlled group of entities if such persons would be the common parent of such group if treated as one corporation, and ``(B) the treatment of any member of a foreign controlled group of entities as the common parent of such group if such treatment is appropriate taking into account the economic relationships among such entities.''. (b) Effective Date.--The amendment made by this section shall apply to payments made after the date of the enactment of this Act.
summary: Fair American Corporate Tax Act or FACT Act - Amends the Internal Revenue Code to: (1) decrease from 35% to 28% the top marginal income tax rate for corporations (including personal service corporations); and (2) provide that the amount of any tax withholding for deductible payments made by a U.S. subsidiary of a foreign parent corporation to a related subsidiary in any country that has a tax treaty with the United States shall not be less than the amount which would be imposed if the payment were made directly to the foreign parent corporation.