S. 4825

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 4825 Introduced in Senate (IS)]

<DOC>

119th CONGRESS
2d Session
S. 4825

To amend the Internal Revenue Code of 1986 to impose an excise tax on 
systemically important AI activity, and for other purposes.

_______________________________________________________________________

IN THE SENATE OF THE UNITED STATES

June 18, 2026

Mr. Sanders introduced the following bill; which was read twice and 
referred to the Committee on Finance

_______________________________________________________________________

A BILL

To amend the Internal Revenue Code of 1986 to impose an excise tax on 
systemically important AI activity, and for other purposes.

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``American A.I. Sovereign Wealth Fund 
Act''.

SEC. 2. FINDINGS.

Congress makes the following findings:
(1) When a public resource generates wealth, the public 
should share in that wealth.
(2) Artificial intelligence is a public resource that 
derives its economic value from humanity's collective 
intelligence, including our books, songs, artwork, journalism, 
computer code, scientific research, videos, conversations, 
images, and ideas spanning generations.
(3) A small number of oligarchs have essentially stolen the 
creative work of hundreds of millions of people--writers, 
artists, musicians, journalists, teachers, scientists, and 
ordinary citizens--without permission, acknowledgment, or 
compensation in order to control the majority of economic value 
created by artificial intelligence.
(4) Artificial intelligence is built on the collective 
knowledge of humanity and the wealth it generates must benefit 
humanity.
(5) Sixty-seven countries throughout the world operate more 
than 100 sovereign wealth funds to ensure working families 
benefit from public resources and national wealth.
(6) Sovereign wealth funds have existed in the United 
States for more than 150 years.
(7) The Texas Permanent School Fund was established in 1845 
and distributed nearly $5,000,000,000 to Texas schools for the 
2026-2027 school year.
(8) The Alaska Permanent Fund was established 50 years ago 
from the State's oil revenues, and for decades it has paid 
dividends directly to Alaskans. In 2022, that dividend check 
was $3,284 per person; in 2023 it was $1,312; in 2024 it was 
$1,702; and in 2025 it was $1,000.
(9) Today, 6 States operate sovereign wealth funds that 
control over $300,000,000,000 in assets.
(10) Industry leaders support the creation of an artificial 
intelligence sovereign wealth fund to ensure the American 
people have a seat at the table to ensure artificial 
intelligence is developed safely and to benefit humanity, 
including--
(A) OpenAI, which has proposed a ``Public Wealth 
Fund that provides every citizen--including those not 
invested in financial markets--a stake in AI-driven 
economic growth'';
(B) Anthropic, which has proposed a sovereign 
wealth fund to ``shape the sector's behavior and 
distribute AI-derived wealth more equitably''; and
(C) Elon Musk, who has proposed ``universal HIGH 
INCOME via checks issued by the Federal Government'' to 
address unemployment caused by artificial intelligence.

SEC. 3. EXCISE TAX ON SYSTEMICALLY IMPORTANT AI COMPANIES.

(a) In General.--Subtitle D of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new chapter:

``CHAPTER 50B--SYSTEMICALLY IMPORTANT AI COMPANIES

``Sec. 5000E. Excise tax on systemically important AI activity.

``SEC. 5000E. EXCISE TAX ON SYSTEMICALLY IMPORTANT AI ACTIVITY.

``(a) In General.--
``(1) Initial tax.--There is hereby imposed on any 
applicable AI company a tax equal to the amount determined 
under subsection (b).
``(2) Additional tax.--
``(A) In general.--In any case in which an 
applicable AI company issues equity interests 
(including equity interests issued as, or in settlement 
of, employee or other service-provider compensation) 
after the date on which the tax is first imposed on 
such applicable AI company under paragraph (1), there 
shall be imposed a tax equal to the amount determined 
under subsection (b) by taking into account only the 
equity interests so issued.
``(B) Special rule.--For the purposes of this 
paragraph, equity interests transferred or delivered in 
connection with the settlement, exercise, or vesting of 
any stock option, restricted stock unit, or other 
equity-based compensation award shall be treated as 
additional equity interests issued at the time of such 
transfer or delivery without regard to when the award 
was granted.
``(3) Coordination with separation requirement.--
``(A) In general.--In the case of an applicable AI 
company that is required to separate its applicable AI 
trade or business pursuant to section 4 of the American 
A.I. Sovereign Wealth Fund Act, no tax shall be imposed 
under this section until such separation is complete, 
and upon completion the tax shall apply only to the 
separated entity that holds the applicable AI trade or 
business.
``(B) Separation period.--The tax under this 
section shall be imposed on the separated entity as of 
the date the separation is complete or the date by 
which structural separation is required under section 4 
of the American A.I. Sovereign Wealth Fund Act, 
whichever is earlier.
``(b) Amount of Tax; Remittance.--
``(1) In general.--The amount of tax imposed by subsection 
(a) is of such amount that immediately after the tax has been 
paid, the Secretary shall hold 50 percent of all outstanding 
equity interests in the applicable AI company, to be remitted 
in exact proportion of the outstanding equity interests 
(including by class of interest) in such entity immediately 
prior to the tax being paid.
``(2) Form of remittance.--All equity interests remitted in 
satisfaction of the tax imposed by this section shall be equity 
interests newly issued by the applicable AI company for 
purposes of such remittance. No previously outstanding, 
treasury, or repurchased equity interest may be used to satisfy 
the tax. Notwithstanding any provision of the certificate of 
incorporation, bylaws, or other governing document of the 
applicable AI company, including any limitation on the number 
of authorized equity interests or any requirement of approval 
for issuance, the company shall issue and remit the equity 
interests required under this section.
``(3) Treatment of repurchases and new issuances.--Equity 
interests issued and remitted under paragraph (2) shall not be 
treated as an issuance of additional equity interests for 
purposes of subsection (a)(2). Any repurchase or redemption of 
equity interests by the applicable AI company shall not reduce 
the number of outstanding equity interests taken into account 
in determining the amount required to be remitted under this 
subsection.
``(c) Applicable AI Company.--For purposes of this section--
``(1) In general.--The term `applicable AI company' means 
any corporation or partnership--
``(A) which is engaged in 1 or more applicable AI 
trades or businesses for any taxable year beginning 
after December 31, 2025, and
``(B) with respect to which the aggregate gross 
receipts from such trades or businesses for the 
calendar year in which such taxable year begins exceed 
$200,000,000.
``(2) Applicable ai trade or business.--
``(A) In general.--The term `applicable AI trade or 
business' means any trade or business engaged in 
activities related to one or more of the following:
``(i) AI data centers.
``(ii) AI computing infrastructure.
``(iii) AI services.
``(iv) Researching, producing, or 
manufacturing advanced robotics.
``(B) Trade or business.--For purposes of this 
paragraph, the term `trade or business' shall include 
any activity treated as a trade or business under 
paragraph (5) or (6) of section 469(c) (determined 
without regard to the phrase `To the extent provided in 
regulations' in such paragraph (6)).
``(3) Special rules.--For purposes of paragraph (1)(B)--
``(A) Aggregation rules.--For purposes of 
determining aggregate gross receipts, all persons which 
are treated as a single employer under subsections (a) 
and (b) of section 52 shall be treated as a single 
person.
``(B) Election to use taxable year.--
``(i) In general.--If an applicable AI 
company makes an election under this 
subparagraph, paragraph (1)(B) shall be applied 
by substituting `such taxable year' for `the 
calendar year in which such taxable year 
begins'.
``(ii) Election.--An election under this 
subparagraph shall be made at such time and 
manner as the Secretary may provide and, once 
made, may be revoked only with the consent of 
the Secretary.
``(C) Gross receipts.--Rules similar to the rules 
of subparagraphs (B), (C), and (D) of section 448(c)(3) 
shall apply in determining gross receipts.
``(d) Other Definitions.--For purposes of this section--
``(1) AI data center.--The term `AI data center' means all 
the buildings, equipment, structures, and other stationary 
items, such as server racks, that--
``(A) are located on a single site or on 
contiguous, adjacent, or otherwise connected sites,
``(B) are owned or operated by the same entity or 
by any entity that controls, is controlled by, or is 
under the common control of that entity, regardless of 
whether the site is a single-occupant or multi-occupant 
facility, and
``(C)(i) are used for the development or operation 
of artificial intelligence models at scale, or
``(ii)(I) have a maximum rated power capacity or 
total peak power load in excess of 20 megawatts, and
``(II) are designed or equipped--
``(aa) to deliver 20 kilowatts or more of 
electrical power to a single server rack, or
``(bb) to utilize cooling systems that 
circulate liquid to individual hardware 
components or submerge electronic hardware in 
liquid.
``(2) AI computing infrastructure.--The term `AI computing 
infrastructure' means semiconductors, integrated circuits, and 
products containing integrated circuits, including computers, 
networking equipment, and data storage systems, that will be 
used:
``(A) in an artificial intelligence data center, or
``(B) in the training or deployment of artificial 
intelligence models at scale.
``(3) AI services.--
``(A) In general.--The term `AI services' means the 
development, distribution, or sale of an artificial 
intelligence model that was trained using a quantity of 
computing power greater than or equal to 10\25\ integer 
or floating-point operations.
``(B) Adjustment.--The Secretary shall annually, in 
coordination with the Secretary of Commerce, adjust the 
computing power threshold under subparagraph (A) to 
reflect changes in the efficiency of training methods 
or other technological developments made after the date 
of enactment of this section to maintain equivalency 
with 10\25\ integer or floating-point operations.
``(4) Advanced robotics.--The term `advanced robotics' 
means an automated or semi-automated mechanical system that 
uses artificial intelligence to perform tasks with partial or 
full independence from direct human control for commercial or 
industrial applications.
``(5) Equity interests.--The term `equity interests' 
means--
``(A) in the case of a corporation, stock in such 
corporation, and
``(B) in the case of a partnership, any capital or 
profits interest.
``(e) Regulations and Guidance.--The Secretary shall prescribe such 
regulations or other guidance as the Secretary determines necessary or 
appropriate to carry out this section.''.
(b) American A.I. Sovereign Wealth Fund.--
(1) Establishment of fund.--Subchapter A of chapter 98 of 
the Internal Revenue Code of 1986 is amended by adding at the 
end the following new section:

``SEC. 9512. AMERICAN A.I. SOVEREIGN WEALTH FUND.

``(a) Creation of Trust Fund.--There is established in the Treasury 
of the United States a trust fund to be known as the American A.I. 
Sovereign Wealth Fund (in this section referred to as the `Fund'), 
consisting of such amounts as may be transferred to such Trust Fund as 
provided in this section or section 9602(b).
``(b) Transfers to Fund.--There is hereby transferred to the Fund 
the equity interests collected as taxes under section 5000E and any 
income or gain from such equity interests.
``(c) Management of Fund.--The assets of the Fund shall be managed 
by the Independent Commission for Democratic AI.
``(d) Distributions From Fund.--
``(1) In general.--
``(A) Annual amount.--There are authorized to be 
appropriated from the Fund for each fiscal year amounts 
equal to 5 percent of the average market value of the 
Fund for the fiscal year, reduced by the reasonable 
costs of administering the Fund.
``(B) Average market value.--For purposes of 
subparagraph (A), the average market value of the Fund 
for a fiscal year is the average of the market values 
of the Fund determined as of the last day of each 
calendar month ending in such fiscal year during which 
the Fund held assets.
``(C) Determination of market value.--In 
determining the market value of the Fund--
``(i) equity interests for which there is a 
readily ascertainable market price shall be 
valued at such price, and
``(ii) equity interests for which there is 
no readily ascertainable market price shall be 
valued by the Secretary using the most recent 
transaction price, appraisal, or other 
reasonable valuation method the Secretary 
determines appropriate, and shall be revalued 
not less frequently than annually.
``(2) Use of distributions.--Amounts appropriated from the 
Fund shall be used, as provided in appropriations Act or law, 
to provide for direct payments to the American people and to 
ensure that every man, woman and child in the United States has 
a decent and dignified standard of living, including health 
care, education, housing, and a healthy and habitable 
environment, in such manner as Congress may provide.
``(3) Preservation of equity interests.--No distribution or 
amount appropriated from the Fund under this subsection shall 
require the sale or other disposition of, the equity interests 
held in the Fund.
``(4) No bailout.--No amounts in the Fund may be used to 
provide financial assistance to, or for the benefit of, any 
applicable AI company (as defined in section 5000E) or other 
firm that is insolvent or for the purpose of preventing the 
failure, insolvency, or liquidation of any such firm.''.
(2) Independent commission for democratic ai.--
(A) In general.--
(i) Establishment.--There is established 
within the Department of the Treasury the 
Independent Commission for Democratic AI (in 
this paragraph referred to as the 
``Commission'').
(ii) Commissioners.--The Commission shall 
consist of 7 commissioners appointed by the 
President, by and with the advice and consent 
of the Senate, of whom--
(I) 1 shall be designated as the 
Chairperson of the Commission and shall 
be selected from a list submitted by 
the Majority Leader of the Senate;
(II) 1 shall be designated as Vice-
Chairperson of the Commission and shall 
be selected from a list submitted by 
the Speaker of the House of 
Representatives;
(III) 1 shall be appointed as a 
representative of labor interests and 
shall be selected from a list submitted 
by the Majority Leader of the Senate in 
consultation with the chair and ranking 
member of the Committee on Health, 
Education, Labor, and Pensions of the 
Senate;
(IV) 1 shall be appointed from 
among persons who have demonstrated 
experience in the management of a 
public pension fund, endowment, 
sovereign wealth fund, or comparable 
institutional fund subject to fiduciary 
obligations and shall be selected from 
a list submitted by the Speaker of the 
House of Representatives in 
consultation with the chair and ranking 
member of the Committee on Ways and 
Means of the House of Representatives;
(V) 1 shall be appointed from among 
persons who have demonstrated 
experience in the development, 
deployment, or governance of artificial 
intelligence systems and shall be 
selected from a list submitted by the 
Majority Leader of the Senate in 
consultation with the chair and ranking 
member of the Committee on Commerce, 
Science, and Transportation of the 
Senate;
(VI) 1 shall be appointed from 
among persons who have demonstrated 
experience in privacy and data 
protection and shall be selected from a 
list submitted by the Speaker of the 
House of Representatives in 
consultation with the chair and ranking 
member of the Committee on the 
Judiciary of the House of 
Representatives; and
(VII) 1 shall be appointed as a 
representative of public safety or 
national security interests and shall 
be selected from a list submitted by 
the Majority Leader of the Senate in 
consultation with the chair and ranking 
member of the Committee on Armed 
Services of the Senate.
Of the commissioners appointed under the 
preceding sentence, not more than 4 shall be 
affiliated with the same political party.
(iii) Timing of appointment.--The President 
shall nominate a commissioner under each 
subclause of clause (ii) not later than 30 days 
after a list is submitted under such subclause.
(iv) Qualifications.--
(I) Financial interests.--No 
commissioner, and no spouse or 
dependent of a commissioner, may hold 
any equity or other financial interest 
in any applicable AI company during the 
commissioner's service. Each 
commissioner shall divest any such 
interest upon appointment.
(II) Prior employment.--No 
individual may be appointed to the 
Commission if the individual was 
employed by an applicable AI company at 
any time during the two-year period 
preceding appointment.
(III) Prohibition on service on 
company boards.--No person shall be a 
commissioner if such person, or the 
spouse or any dependent of such person, 
serves on the board of directors of an 
applicable AI company.
(v) Terms.--A commissioner shall be 
appointed for a term of 5 years.
(vi) Vacancies.--
(I) In general.--A vacancy on the 
Commission shall be filled in the 
manner in which the original 
appointment was made and shall be 
subject to any conditions that applied 
with respect to the original 
appointment.
(II) Filling unexpired term.--An 
individual chosen to fill a vacancy 
shall be appointed for the unexpired 
term of the commissioner replaced.
(vii) Removal.--A commissioner may be 
removed by the President only for inefficiency, 
neglect of duty, or malfeasance in office.
(B) Duties and powers.--
(i) In general.--The Commission shall--
(I) exercise all voting and 
governance rights attached to the 
equity interests held in the American 
A.I. Sovereign Wealth Fund; and
(II) manage the American A.I. 
Sovereign Wealth Fund, in consultation 
with the Secretary of Labor, in such 
manner as to effectively promote the 
goals of worker welfare, public safety, 
fair competition among applicable AI 
companies (as defined in section 5000E 
of the Internal Revenue Code of 1986), 
environmental sustainability, and 
financial solvency.
(ii) Designation of representatives.--
(I) In general.--The Commission 
shall designate qualified individuals 
to serve as representatives of the Fund 
on the board of directors of each 
applicable AI company in which the Fund 
holds equity interests, and shall 
exercise the voting and governance 
rights attached to those interests to 
cause such individuals to be elected, 
appointed, or designated to the board 
of directors of the company, in the 
largest number the Fund's equity 
interests entitle it to elect, appoint, 
or designate.
(II) Duties of representatives.--A 
representative designated under this 
section shall act to advance the goals 
described in clause (i)(II).
(III) Fiduciary duties.--
Notwithstanding any other provision of 
law, any provision of the certificate 
of incorporation, bylaws, or other 
governing document of the company, or 
any duty owed under the law of the 
company's jurisdiction of organization 
(including any duty to balance 
interests under a public benefit 
corporation statute), advancing the 
goals described in clause (i)(II) shall 
be a proper purpose consistent with the 
fiduciary and other duties of a 
representative, even where doing so 
conflicts with the financial interests 
of the company or its other equity 
holders. No representative, and no 
action of a board of directors taken in 
accordance with this clause, shall be 
subject to liability or challenge on 
the ground that it advanced those 
goals.
(iii) No coordination among competitors.--
The Commission shall not exercise the voting or 
governance rights attached to equity interests 
in two or more applicable AI companies that 
compete in the same market in any manner that 
coordinates, or has the effect of coordinating, 
the competitive conduct of such companies.
(iv) Recusal.--A commissioner shall recuse 
himself or herself from any decision uniquely 
affecting a company by which the commissioner, 
or the spouse or any dependent of such 
commissioner, was formerly employed during the 
2-year period after the commissioner was first 
appointed to the Commission.
(v) Transparency.--
(I) Disclosure of votes.--The 
Commission shall make publicly 
available, not less frequently than 
quarterly, a complete record of how it 
exercised the voting rights attached to 
the equity interests held by the 
American A.I. Sovereign Wealth Fund in 
each applicable AI company, including 
the matter voted upon and the manner in 
which the Commission voted.
(II) Disclosure of governance 
activity.--The Commission shall make 
publicly available, not less frequently 
than annually, a report describing the 
significant positions taken and actions 
directed by each commissioner serving 
on the board of directors of an 
applicable AI company to the extent 
such disclosure is not prohibited by 
applicable law and does not require the 
disclosure of material nonpublic 
information of the company.
(III) Form of disclosure.--
Disclosures under this clause shall be 
made in a manner that is publicly 
accessible and machine-readable.
(C) Personnel matters.--
(i) Compensation of commissioners.--A 
commissioner who is not an officer or employee 
of the Federal Government shall be compensated 
at a rate equal to the daily equivalent of the 
annual rate of basic pay prescribed for level 
IV of the Executive Schedule under section 5315 
of title 5, United States Code, for each day 
(including travel time) during which the 
commissioner is engaged in the performance of 
the duties of the Commission.
(ii) Travel expenses.--A commissioner shall 
be allowed travel expenses, including per diem 
in lieu of subsistence, at rates authorized for 
employees of agencies under subchapter I of 
chapter 57 of title 5, United States Code, 
while away from their homes or regular places 
of business in the performance of services for 
the Commission.
(iii) Staff.--
(I) In general.--The Chairperson of 
the Commission may, without regard to 
the civil service laws (including 
regulations), appoint and terminate an 
executive director and such other 
additional personnel as may be 
necessary to enable the Commission to 
perform its duties, except that the 
employment of an executive director 
shall be subject to confirmation by the 
Commission.
(II) Compensation.--The Chairperson 
of the Commission may fix the 
compensation of the executive director 
and other personnel without regard to 
chapter 51 and subchapter III of 
chapter 53 of title 5, United States 
Code, relating to classification of 
positions and General Schedule pay 
rates, except that the rate of pay for 
the executive director and other 
personnel may not exceed the rate 
payable for level V of the Executive 
Schedule under section 5316 of that 
title.
(iv) Detail of government employees.--A 
Federal Government employee may be detailed to 
the Commission without reimbursement, and such 
detail shall be without interruption or loss of 
civil service status or privilege.
(v) Procurement of temporary and 
intermittent services.--The Chairperson of the 
Commission may procure temporary and 
intermittent services under section 3109(b) of 
title 5, United States Code, at rates for 
individuals that do not exceed the daily 
equivalent of the annual rate of basic pay 
prescribed for level V of the Executive 
Schedule under section 5316 of that title.
(vi) Conflicts of interest.--
(I) Financial holdings.--Any equity 
investments of a commissioner shall be 
held in a blind trust during any period 
in which such commissioner serves on 
the Commission.
(II) Subsequent employment.--A 
former commissioner of the Commission 
may not accept employment or 
compensation from any applicable AI 
company or begin service on the board 
of directors of such company during the 
5-year period following the 
commissioner's service on the 
Commission.
(D) Funding.--The costs of the operation of the 
Commission shall be paid from the assets and income of 
the American A.I. Sovereign Wealth Fund.
(E) Applicable ai company.--For purposes of this 
paragraph, the term ``applicable AI company'' has the 
meaning given such term under section 5000E of the 
Internal Revenue Code of 1986.
(c) Information Reporting.--
(1) In general.--Subpart B of part III of subchapter A of 
chapter 61 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new section:

``SEC. 6050BB. PURCHASES FROM AI BUSINESSES.

``(a) In General.--Any person--
``(1) who is engaged in a trade or business, and
``(2) who in the course of such trade or businesses 
purchases during the taxable year AI data centers, AI computing 
infrastructure, AI services, or advanced robotics in excess of 
the amount in effect under section 448(c)(1) for such taxable 
year,
shall make a return according to the forms or regulations prescribed by 
the Secretary, setting forth the amount of such purchases and the name 
and address of the person from whom such AI data center, AI computing 
infrastructure, AI services, or advanced robotics were purchased.
``(b) Statement To Be Furnished to Persons With Respect to Whom 
Information Is Required.--Every person required to make a return under 
subsection (a) shall furnish to each corporation or partnership whose 
name is required to be set forth in such return a written statement 
showing--
``(1) the name, address, and phone number of the 
information contact of the person required to make such return, 
and
``(2) the aggregate amount of purchases from such 
corporation or partnership required to be shown on the return.
The written statement required under the preceding sentence shall be 
furnished (either in person or in a statement mailing by first-class 
mail which includes adequate notice that the statement is enclosed) to 
the person at such time and in such form as the Secretary may prescribe 
by regulations.
``(c) Definitions.--Any term used in this section which is used in 
section 5000E shall have the meaning given such term under section 
5000E.''.
(2) Penalties.--Section 6724(d) of such Code is amended--
(A) in paragraph (1)(B), by striking ``or'' at the 
end of clause (xxviii), by inserting ``or'' at the end 
of clause (xxix), and by adding at the end the 
following new clause:
``(xxx) section 6050BB(a) (relating to 
purchases from AI businesses),'', and
(B) in paragraph (2), by striking ``or'' at the end 
of subparagraph (NN), by striking the period at the end 
of subparagraph (OO) and inserting ``, or'', and by 
inserting after subparagraph (OO) the following new 
subparagraph:

``(PP) section 
6050BB(b) (relating to 
purchases from AI 
businesses).''.

(d) Accuracy Related Penalties.--Section 6662 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subsection:
``(n) Application to Excise Tax on Systemically Important AI 
Companies.--In the case of any underpayment of tax required under 
section 5000E, there shall be added to the tax under such section an 
amount equal to the excess of--
``(1) the amount determined under section 5000E(b) 
(determined by substituting `60 percent' for `50 percent'), 
over
``(2) the amount of tax remitted.''.
(e) Failure To File.--Section 6651 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new subsection:
``(k) Application to Excise Tax on Systemically Important AI 
Companies.--In the case of any failure to file any return of tax 
imposed under section 5000E, subsection (a) shall not apply and there 
shall be added to the amount required to be shown as tax on such return 
$1,000,000.''.
(f) Rules for Expatriated Entities.--
(1) In general.--Subsection (b) of section 7874 of the 
Internal Revenue Code of 1986 is amended to read as follows:
``(b) Inverted Corporations Treated as Domestic Corporations.--
``(1) In general.--Notwithstanding section 7701(a)(4), a 
foreign corporation shall be treated for purposes of this title 
as a domestic corporation if--
``(A) such corporation would be a surrogate foreign 
corporation if subsection (a)(2) were applied by 
substituting `80 percent' for `60 percent', or
``(B) such corporation is an inverted applicable AI 
company.
``(2) Inverted applicable ai company.--For purposes of this 
subsection, a foreign corporation shall be treated as an 
inverted applicable AI company if, pursuant to a plan (or a 
series of related transactions)--
``(A) the entity completes the direct or indirect 
acquisition of--
``(i) substantially all of the properties 
held directly or indirectly by a domestic 
corporation which is an applicable AI company, 
or
``(ii) substantially all of the assets of, 
or substantially all of the properties 
constituting a trade or business of, a domestic 
partnership which is an applicable AI company, 
and
``(B) after the acquisition, either--
``(i) more than 50 percent of the stock (by 
vote or value) of the entity is held--
``(I) in the case of an acquisition 
with respect to a domestic corporation, 
by former shareholders of the 
applicable AI company by reason of 
holding stock in the applicable AI 
company, or
``(II) in the case of an 
acquisition with respect to a domestic 
partnership, by former partners of the 
applicable AI company by reason of 
holding a capital or profits interest 
in the applicable AI company, or
``(ii) the management and control of the 
expanded affiliated group which includes the 
entity occurs, directly or indirectly, 
primarily within the United States, and such 
expanded affiliated group has significant 
domestic business activities.
``(3) Exception for corporations with substantial business 
activities in foreign country of organization.--A foreign 
corporation described in paragraph (2) shall not be treated as 
an inverted applicable AI company if after the acquisition the 
expanded affiliated group which includes the entity has 
substantial business activities in the foreign country in which 
or under the law of which the entity is created or organized 
when compared to the total business activities of such expanded 
affiliated group. For purposes of subsection (a)(2)(B)(iii) and 
the preceding sentence, the term `substantial business 
activities' shall have the meaning given such term under 
regulations in effect on January 18, 2017, except that the 
Secretary may issue regulations increasing the threshold 
percent in any of the tests under such regulations for 
determining if business activities constitute substantial 
business activities for purposes of this paragraph.
``(4) Management and control.--For purposes of paragraph 
(2)(B)(ii)--
``(A) In general.--The Secretary shall prescribe 
regulations for purposes of determining cases in which 
the management and control of an expanded affiliated 
group is to be treated as occurring, directly or 
indirectly, primarily within the United States.
``(B) Executive officers and senior management.--
Such regulations shall provide that the management and 
control of an expanded affiliated group shall be 
treated as occurring, directly or indirectly, primarily 
within the United States if substantially all of the 
executive officers and senior management of the 
expanded affiliated group who exercise day-to-day 
responsibility for making decisions involving 
strategic, financial, and operational policies of the 
expanded affiliated group are based or primarily 
located within the United States. Individuals who in 
fact exercise such day-to-day responsibilities shall be 
treated as executive officers and senior management 
regardless of their title.
``(5) Significant domestic business activities.--For 
purposes of paragraph (2)(B)(ii), an expanded affiliated group 
has significant domestic business activities if at least 25 
percent of--
``(A) the employees of the group are based in the 
United States,
``(B) the employee compensation incurred by the 
group is incurred with respect to employees based in 
the United States,
``(C) the assets of the group are located in the 
United States, or
``(D) the income of the group is derived in the 
United States,
determined in the same manner as such determinations are made 
for purposes of determining substantial business activities 
under regulations referred to in paragraph (3) as in effect on 
January 18, 2017, but applied by treating all references in 
such regulations to `foreign country' and `relevant foreign 
country' as references to `the United States'. The Secretary 
may issue regulations decreasing the threshold percent in any 
of the tests under such regulations for determining if business 
activities constitute significant domestic business activities 
for purposes of this paragraph.
``(6) Applicable ai company.--For purposes of this section, 
the term `applicable AI company' has the meaning given such 
term under section 5000E.''.
(2) Conforming amendments.--Subsection (c) of section 7874 
of such Code is amended--
(A) in paragraph (2)--
(i) by striking ``subsection 
(a)(2)(B)(ii)'' and inserting ``subsections 
(a)(2)(B)(ii) and (b)(2)(B)(i)''; and
(ii) by inserting ``or (b)(2)(A)'' after 
``(a)(2)(B)(i)'' in subparagraph (B);
(B) in paragraph (3), by inserting ``or 
(b)(2)(B)(i), as the case may be,'' after 
``(a)(2)(B)(ii)'';
(C) in paragraph (5), by striking ``subsection 
(a)(2)(B)(ii)'' and inserting ``subsections 
(a)(2)(B)(ii) and (b)(2)(B)(i)''; and
(D) in paragraph (6), by inserting ``or inverted 
applicable AI company, as the case may be,'' after 
``surrogate foreign corporation''.
(g) Clerical Amendments.--
(1) The table of chapters for subtitle D of the Internal 
Revenue Code of 1986 is amended by adding at the end the 
following new item:

``Chapter 50B--Systemically Important AI Companies''.

(2) The table of sections for subchapter A of chapter 98 of 
such Code is amended by adding at the end the following new 
item:

``Sec. 9512. American A.I. Sovereign Wealth Fund.''.
(3) The table of sections for subpart B of part III of 
subchapter A of chapter 61 of such Code is amended by adding at 
the end the following new item:

``Sec. 6050BB. Purchases from AI businesses.''.
(h) Effective Date.--The amendments made by this section shall take 
effect on the date that is 90 days after the date of the enactment of 
this Act.

SEC. 4. STRUCTURAL SEPARATION.

(a) Definitions.--
(1) Applicable ai company; applicable ai trade or 
business.--The terms ``applicable AI company'' and ``applicable 
AI trade or business'' have the meanings given those terms, 
respectively, in section 5000E of the Internal Revenue Code of 
1986 (as added by section 3 of this Act).
(2) Structural separation.--The term ``structural 
separation'', with respect to an applicable AI company, means 
adoption of an operating structure under which the applicable 
AI company--
(A) does not conduct any business that is not an 
applicable AI trade or business;
(B) does not hold equity in, provide credit to, or 
otherwise provide financing to any business other than 
the applicable AI trade or business;
(C) is not held by any entity engaged in any 
business other than the applicable AI trade or 
business;
(D) does not share any officer or director with any 
entity that is not an applicable AI company; and
(E) does not participate in any joint ventures with 
an entity that is not an applicable AI company.
(b) Structural Separation Required.--The Federal Trade Commission 
shall require that each applicable AI company complete structural 
separation--
(1) with respect to an applicable AI company in existence 
on the date of enactment of this Act, not later than 90 days 
after the date of enactment of this Act; and
(2) with respect to an applicable AI company established on 
or after the date of enactment of this Act, not later than 90 
days after meeting the definition of an applicable AI company.
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