Fair International Tax Act

Fair International Tax Act - States that if a foreign corporation is a controlled foreign corporation for an uninterrupted period of thirty days and more during any taxable year, every United States shareholder of such corporation who owns stock in such corporation on the last day in such year on which such corporation is a controlled foreign corporation shall include in its gross income, for its taxable year in which or with which such taxable year of the corporation ends, its pro rata share of the corporation's earnings and profits for such year.

Provides that the earnings and profits of any foreign corporation, and the deficit in earnings and profits of any foreign corporation, for any taxable year: (1) shall be determined according to rules substantially similar to those applicable to domestic corporations; (2) shall be appropriately adjusted for deficits in earnings and profits of such corporation for any priortaxable year beginning after December 31, 1973; (3) shall not include any item of income which is effectively connected with the conduct by such corporation of a trade or business within the United States unless such item is exempt from taxation (or is subject to a reduced rate of tax) pursuant to a treaty obligation of the United States; (4) shall not include any amount of earnings and profits which could not have been distributed by such corporation because of currency or other restrictions or limitations imposed under the laws of any foreign country.

Excludes from gross income of a United States shareholder: (1) the amount received as a result of an election by a foreign investment company to distribute income currently and; (2) the amount he must claim as income the amount he would have received as a divedend determined as if any distribution in liquidation actually made in such taxable year had not been made) if on such last day there had been distributed by the company, and received by the shareholders, an amount which bears the same ratio to the undistributed foreign personal holding company income of the company for the taxable year as the portion of such taxable year up to and including such last day bears to the entire taxable year.

Defines the terms "United States shareholder", "controlled foreign corporation". and "pro rata share of earnings and profits".

Establishes rules for determining stock ownership.

Excludes from gross income the earnings and profits for a taxable year of a foreign corporation attributable to amounts which are, or have been, already included in the gross income of a United States shareholder because of earlier provisions of this act dealing with controlled foreign corporations and their subsidiaries. Requires amounts so excluded to be treated as a distribution which is not a dividend.

Increase the basis of a United States shareholder's stock in a controlled foreign corporation by the amount required to be included in gross income by preceeding provisions in this act. Reduces the basis of stock on other property by the amount excluded from gross income in earlier provisions of this act.

States that the Secretary of the Treasury may by regulations require each person who is, or has been, a United States shareholder of a controlled foreign corporation to maintain such records and accounts as may be prescribed by such regulations as necessary to carry the provisions of this Act.

Specifies various technical and conforming amendments.

Prohibits corporations from claiming a credit for payment of taxes to a foreign country.

States that for the purposes for computing the earnings and profits of a foreign corporation the amount of depreciation which would be allowable for the taxable year with respect to any property shall be determined on the basis of the useful life of such property in the hands of such foreign corporation.

Provides that in the case of any property located outside, or used predominantly outside the United States, the reasonable allowance for depreciation shall be computed under the straight line method on the basis of the useful life of the property in the hands of the taxpayer.

Recognizes as a gain for forign corporations any transfer of a patent, invention, model, design, copyright, secret formula or process, or any other similar property right.

Provides that the amount excluded from gross income as income earned from sources without the United States shall not apply to amounts received for services performed (1) for a domestic corporation or a domestic partnership, or (2) for a controlled foreign corporation.

Requires the Treasury Department to submit to the Congress no later than December 31, 1974, a report on the administration of the income tax imposed by the Internal Revenue Code as it applies to business activities carried on outside the United States by United States corporations, whether directly or through foreign entities.