MN HF665

Eliminates preferential tax treatment for foreign source income and repeals the subtraction for foreign royalties paid to foreign operating corporations, effective for returns filed after December 31, 2010.

Expands the definition of "domestic corporation" to include foreign corporations incorporated in tax havens, foreign corporations with 20 percent or more of income attributable to business in tax havens, and foreign corporations with average property, payroll, and sales factors of 20 percent or more within the 50 states and District of Columbia.

Establishes a list of 34 designated tax havens (including Cayman Islands, Bahamas, Panama, and others) whose status can be removed if the United States enters into a tax treaty with the jurisdiction providing for automatic exchange of tax information.

Repeals the "foreign operating corporation" classification and related provisions that allowed deemed dividend treatment and special deductions for foreign corporations, eliminating various add-backs and subtractions tied to foreign operating corporation income effective January 1, 2011.

Amends corporate filing requirements to remove the exemption for foreign operating corporations from mandatory return filing and updates unitary business rules to exclude foreign corporations from combined reporting, except as specifically provided.