Section 1 Short title
This Act may be cited as the “Preventing Investment in Terrorist Regimes Act”.
Preventing Investment in Terrorist Regimes Act
A BILL
To amend the Internal Revenue Code of 1986 to modify the application of certain rules with respect to certain foreign countries.
Sec. 2 Modification of application of certain rules with respect to certain foreign countries
Limitation on waiver authority— Section 901(j)(5)(A) of the Internal Revenue Code of 1986 is amended by inserting “(other than a country described in paragraph (2)(A)(iv))” after “a country”.
Denial of foreign tax credit with respect to income derived from certain foreign countries without regard to which country tax is paid— Subparagraph (A) of section 901(j)(1) of such Code is amended by striking “to any country” and all that follows and inserting
“(i) any foreign country to which this subsection applies if such taxes are with respect to income attributable to a period during which this subsection applies to such foreign country, and
“(ii) any foreign country (without regard to whether this subsection applies to such foreign country) if such taxes are with respect to income derived from any foreign country to which this subsection applies during a period for which this subsection so applies (determined under rules similar to the rules of section 952(d)), and”
Denial of deduction for taxes for which foreign tax credit is denied, etc— Section 901(j)(3) of such Code is amended to read as follows:
“(3) Denial of deduction for taxes for which foreign tax credit is denied, etc
“(A) In general—No deduction shall be allowed under this chapter for any tax for which credit is not allowable under this section by reason of paragraph (1)(A).
“(B) Denial of deduction parity—Solely for purposes of section 78, the taxes deemed to be paid under section 902(a) and 960(a)(1) shall be determined without regard to this subsection.”
Application of denial of deduction for taxes paid by controlled foreign corporations—
Determination of subpart F income— Section 952(a) of such Code is amended by striking “(including taxes)” in the last sentence and inserting “(including taxes other than taxes for which credit is not allowed under section 901 by reason of section 901(j)(1)(A))”.
Determination of earnings and profits— Section 964(a) of such Code is amended by inserting “, or any taxes for which credit is not allowed under section 901 by reason of section 901(j)(1)(A),” after “other payment (within the meaning of section 162(c))”.
Clarification regarding country from which income is derived— Section 952(d) of such Code is amended by striking “The Secretary” and inserting the following:
“(1) In general—For purposes of subsection (a)(5), income shall be treated as derived from a foreign country if such income is derived in connection with—
“(A) property which is sold—
“(i) for use, consumption, or disposition in such foreign country, or
“(ii) to any foreign person which is created, organized, or controlled in such foreign country or to a citizen or resident of such foreign country, or
“(B) services provided with respect to persons or property located in such foreign country or with respect to persons described in subparagraph (A)(ii).
“(2) Special rules—For purposes of this subsection—
“(A) Ultimate disposition—Property shall not fail to be treated as described in paragraph (1)(A) if the controlled foreign corporation or any related person knew, or had reason to know, that such property would be ultimately sold—
“(i) for use, consumption, or disposition in such foreign country, or
“(ii) to any person described in paragraph (1)(A)(ii).
“(B) Sales to related parties—If property is sold to a related person, such sale shall not fail to be treated as described in paragraph (1)(A) unless—
“(i) such property is ultimately sold—
“(I) for use, consumption or disposition outside such foreign country, or
“(II) to a person not described in paragraph (1)(A)(ii), or
“(ii) such property is resold to an unrelated person not described in paragraph (1)(A)(ii) and neither the controlled foreign corporation nor any related person knew or had reason to know that such property would be ultimately sold in a sale described in paragraph (1)(A).
“(C) Application to services—Rules similar to the rules of subparagraphs (A) and (B) shall apply with respect to services described in paragraph (1)(B).
“(D) Related person—The term “related person” has the meaning given such term by section 954(d)(3).
“(3) Regulations—The Secretary”
Doubling of rates of tax with respect to certain foreign countries—
Doubling of rates of tax on citizens and corporations of certain foreign countries— Section 891 of such Code is amended—
by striking “Whenever the President” and inserting the following:
“(a) Doubling of rates of tax on citizens and corporations of certain foreign countries
“(1) Presidential proclamation—Whenever the President”
by adding at the end the following new paragraph:
“(2) Statutory application—In the case of any foreign country to which section 901(j) applies for any period, paragraph (1) shall apply with respect to such country in the same manner as if the President had made a proclamation described in the first sentence of paragraph (1) with respect to such country at the beginning of such period and a proclamation described in the last sentence of paragraph (1) with respect to such country at the end of such period.”
Doubling of rates of tax on income derived from certain foreign countries— Section 891 of such Code, as amended by paragraph (1), is amended by adding at the end the following new subsection:
“(b) Doubling of rates of tax on income derived from certain foreign countries
“(1) In general—In the case of any foreign country to which section 901(j) applies for any period, the rates of tax imposed by sections 1, 11, 801, 831, 852, 871, and 881 with respect to any taxpayer shall be doubled in the case of income derived from such foreign country during such period (determined under rules similar to the rules of section 952(d)). In any case in which the manner in which income is stacked would change the rate of tax which is treated as applying to income described in the preceding sentence, such income shall be stacked in the manner which results in the highest rate of tax applying to the income so described.
“(2) Coordination with doubling of rates of tax on citizens and corporations of certain foreign countries—Paragraph (1) shall not apply to any taxpayer for any period for which subsection (a) applies to such taxpayer.”
Conforming amendments—
The heading of section 891 of such Code is amended by striking “on citizens and corporations of” and inserting “with respect to”.
The item relating to section 891 in the table of sections for subpart D of part II of subchapter N of chapter 1 of such Code is amended to read as follows:
Prohibition on agreements To delegate certain reporting to certain foreign countries— Section 1474(f) of such Code is amended—
by striking “The Secretary” and inserting the following:
“(1) In general—The Secretary”
by adding at the end the following new paragraph:
“(2) Prohibition on intergovernmental agreements with certain foreign countries—The Secretary may not enter into any intergovernmental agreement to carry out section 1471(b) with any country to which section 901(j) applies.”
Effective date—
In general— Except as otherwise provided in this subsection, the amendments made by subsections (a), (b), and (c) shall apply to taxes paid or incurred in taxable years ending after the date of the introduction of this Act.
Amendments related to controlled foreign corporations— The amendments made by—
subsections (a), (b), and (c) to the extent such amendments relate to section 952(a)(5) of the Internal Revenue Code of 1986 or to taxes deemed to have been paid under section 902 or 960 of such Code, and
subsections (d) and (e),
Amendments related to doubling of tax on citizens and corporations of certain foreign countries— The amendments made by subsection (g) shall apply to taxable years ending after the date of the introduction of this Act (without regard to whether the period described in subsection (a)(2) or (b)(1) of section 891 of the Internal Revenue Code of 1986, as added by subsection (f), begins before such date).
Amendments related to prohibition on agreements to delegate certain reporting to certain foreign countries— The amendments made by subsection (g) shall take effect on the date of the enactment of this Act.