Section 1 Short title
This Act may be cited as the “Support Ukraine Through Our Tax Code Act”.
Support Ukraine Through Our Tax Code Act
A BILL
To amend the Internal Revenue Code of 1986 to deny foreign tax credits or deductions with respect to taxes paid or accrued to the Russian Federation and the Republic of Belarus, to provide for the denial of certain other tax benefits in connection with the invasion of Ukraine, and for other purposes.
Sec. 2 Denial of foreign tax credit, etc., with respect to taxes paid or accrued to the Russian Federation and the Republic of Belarus
In general— Section 901(j)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:
“(C) Special rule for Russia and Belarus
“(i) In general—This subsection shall apply to the Russian Federation and the Republic of Belarus during the period described in clause (ii).
“(ii) Period of application—The period described in this clause with respect to any country is the period—
“(I) beginning on the date that is 90 days after the date of the enactment of this subparagraph, and
“(II) ending on the date on which the resumption of the application of the rates of duty set forth in column 1 of the Harmonized Tariff Schedule of the United States to products of that country takes effect pursuant to section 4(b) of the Suspending Normal Trade Relations with Russia and Belarus Act.”
Deduction denied—
In general— Section 275(a) of the Internal Revenue Code of 1986 is amended by inserting after paragraph (6) the following new paragraph:
“(7) Income, war profits, and excess profits taxes paid or accrued (or deemed paid under section 960) to any country described in section 901(j)(2)(C)(i) with respect to income attributable to any period described in section 901(j)(2)(C)(ii).”
Conforming amendment— Section 901(j)(3) of such Code is amended by adding at the end the following new sentence: “The preceding sentence shall not apply to any taxes paid or accrued (or deemed paid under section 960) to any country described in paragraph (2)(C)(i) with respect to income attributable to any period described in paragraph (2)(C)(ii).”.
Special transition rules for taxpayers exiting countries for which foreign tax credit is denied—
In general— If—
any portion of a taxable year of a taxpayer occurs during the post-exit period, and
such taxpayer is an applicable taxpayer for such portion of the taxable year with respect to a foreign country to which section 901(j)(2)(C) of the Internal Revenue Code of 1986 (as added by subsection (a)) applies,
Applicable taxpayer—
In general— A taxpayer is an applicable taxpayer with respect to a foreign country for any portion of a taxable year occurring during the post-exit period if—
the gross receipts of the taxpayer for such portion derived from such foreign country (determined under rules substantially similar to the rules of part I of subchapter N of chapter 1 of the Internal Revenue Code of 1986) are—
in the case of the period beginning with the first day of the first month beginning after the first day of the post-exit period and ending with the last day of the first taxable year ending on or after such date, less than 15 percent of such gross receipts derived during the pre-exit period, and
in the case of any taxable year beginning after the first day of the post-exit period, less than 5 percent of such gross receipts derived during the pre-exit period, or
the taxpayer meets such other requirements as the Secretary of the Treasury (or the Secretary's delegate) may by regulation or guidance prescribe to determine whether a taxpayer has exited from doing business in such foreign country.
Rules for determining gross receipts—
Aggregation rules— The rules of section 448(c)(2) shall apply for purposes of this paragraph, except that—
in applying section 52(a), the exception for foreign corporations under section 1563(b)(2)(C) shall be disregarded, and
in applying section 52(b), the principles which apply under section 52(a) shall include the modification under subclause (I) and 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)).
Special rules— The rules of section 448(c)(3) shall apply for purposes of this paragraph, except that in applying subparagraph (B) thereof to a taxable year in which the entire taxable year does not occur during the post-exit period, the portion of the year during such period shall be treated as a short taxable year for purposes of determining annualized gross receipts.
Receipts related to humanitarian purposes— For purposes of this subsection, gross receipts shall not include amounts—
which are covered under general or specific licenses of the Office of Foreign Assets Control of the Department of the Treasury which have been identified by the Secretary of the Treasury (or the Secretary's delegate) as licenses to which this clause applies, or
which the Secretary of the Treasury (or the Secretary's delegate) has otherwise identified as humanitarian in nature.
Periods— For purposes of this subsection—
Pre-exit period— The term pre-exit period means—
except as provided in clause (ii), the 12-month period ending on December 31, 2021, and
in the case of a taxpayer with a taxable year which ends on or after November 30, 2021, and before February 24, 2022, such taxable year.
Post-exit period— The term post-exit period means, with respect to any foreign country, the period during which section 901(j)(2)(C) of the Internal Revenue Code of 1986 (as added by subsection (a)) applies to such foreign country (determined without regard to this subsection).
Effective date— The amendments made by this section shall take effect on the date of the enactment of this Act.
Sec. 3 Denial of certain other tax benefits in connection with the invasion of Ukraine
In general— In the case of any person to whom this section applies—
section 892(a) of the Internal Revenue Code of 1986 (relating to income of foreign governments) shall not apply to income received during the period this section applies to such person,
notwithstanding section 894 of such Code, such Code shall be applied to such person without regard to any treaty obligation of the United States during the period this section applies to such person,
section 895 of such Code (relating to income derived by a foreign central bank of issue from obligations of the United States or from bank deposits) shall not apply to any central bank of such person,
sections 871(h) (relating to repeal of tax on interest of nonresident alien individuals received from certain portfolio debt investments) and 881(c) (relating to repeal of tax on interest of foreign corporations received from certain portfolio debt investments) of such Code shall not apply to interest received during the period this section applies to such person,
section 864(b) of such Code (relating to trade or business within the United States) shall be applied without regard to paragraph (2) thereof (relating to exception for trading in securities or commodities) with respect to the period during which this section applies to such person,
section 883 of such Code (relating to exclusion of income from shipping, etc.) shall not apply to income or earnings received during the period this section applies to such person, and
notwithstanding section 897(l) of such Code, any trust, corporation, or other organization or arrangement established by such person shall not be treated as a qualified foreign pension fund under section 897 of such Code during the period this section applies to such person.
Persons to whom this section applies—
In general— This section shall apply to—
any person with respect to which sanctions have been imposed by the United States in relation to the invasion of Ukraine by the Russian Federation that began on February 24, 2022,
the government of any foreign country to which section 901(j)(2)(C) of the Internal Revenue Code of 1986 applies, and
any other person identified by the Secretary as—
a person described in paragraph (2), and
a person with respect to which the application of this section would advance efforts to restore and maintain the peace, security, stability, sovereignty, and territorial integrity of Ukraine (as determined by the Secretary in consultation with the Secretary of State).
Persons described— A person is described in this paragraph if such person—
is a person that—
is participating or has participated in the invasion of Ukraine, and
either—
owns, directly or indirectly, at least $1,000,000 of assets in the United States, or
has, for the most recent calendar year, at least $1,000,000 of income from sources within the United States,
is an entity that—
is organized in, or a tax resident of, a foreign country (including any subdivision thereof) to which section 901(j)(2)(C) of such Code applies,
is not a controlled foreign corporation (as defined in section 957 of such Code), and
has provided or sold goods or services to a government (including any instrumentality thereof) to which section 901(j)(2)(C) of such Code applies,
is an executive, board member, or officer of an entity described in subparagraph (B), or
is a person that is related to any other person to which this section applies.
Special rules for controlled entities— Under regulations provided by the Secretary—
In general— The Secretary may treat a person controlled (within the meaning of section 954(d)(3) of the Internal Revenue Code of 1986) by a person described in paragraph (1) as a person to whom this section applies without regard to whether such controlled person has been identified by the Secretary under paragraph (1)(C).
Notification—
In general— The Secretary may require any person treated as a person to whom this section applies by reason of subparagraph (A) to provide notice to the Secretary and to each withholding agent of such person that this section applies to such person.
Penalties— For purposes of applying part II of subchapter B of chapter 68 of the Internal Revenue Code of 1986—
any notice required to be provided to the Secretary under clause (i) shall be treated as an information return described in section 6724(d)(1) of such Code, and
any notice required to be provided to a withholding agent under clause (i) shall be treated as a payee statement described in section 6724(d)(2) of such Code.
Period for which this section applies— For purposes of this section—
In general— This section applies to any person described in subsection (b) during the period—
except as provided in paragraph (2), beginning on the date that is 30 days after the later of—
the date of the enactment of this Act, or
the date such person is first described in subsection (b), and
ending on the date such person is no longer described in subsection (b).
Special rules for portfolio interest—
In general— For purposes of applying subsection (a)(4), except as provided in subparagraph (B), the period described in paragraph (1) shall begin on the later of—
the date that is 180 days (60 days in the case of obligations issued on or after the date of the enactment of this Act) after the date of enactment of this Act, or
60 days after the date such person first becomes described in subsection (b).
Significant modifications— If, after the date of the enactment of this Act, there is a significant modification of an obligation issued before the date of the enactment of this Act, then, for purposes of applying subsection (a)(4), the period described in paragraph (1) shall begin on the later of—
the earlier of—
the day that is 60 days after the date of such significant modification, or
the day that is 180 days after the date of the enactment of this Act, or
the date that is 60 days after the date such person first becomes described in subsection (b).
Definitions— For purposes of this section—
Secretary— The term Secretary means the Secretary of the Treasury.
Related— A person (hereinafter in this paragraph referred to as the related person) is related to any person if—
the related person bears a relationship to such person which is—
specified in section 267(b) or 707(b)(1) of the Internal Revenue Code of 1986, or
specified in the regulations prescribed under subsection (f), or
the related person and such person are engaged in trades or businesses under common control (within the meaning of subsections (a) and (b) of section 52 of such Code, determined after the application of the rules of section 2(c)(2)(B)(i)).
Reports— Not later than 1 year after the date of the enactment of this Act, and annually thereafter, the Secretary shall submit to Congress a report detailing the parameters, processes, and justifications by which a person is identified by the Secretary under (b)(1)(C) of this section.
Regulations— The Secretary shall prescribe such regulations, rules, or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this section.
Sec. 4 Suspension of tax information exchanges
If there is a tax convention (within the meaning of section 6105(c)(2) of the Internal Revenue Code of 1986) providing for the exchange of tax information between the United States and any foreign country to which section 901(j)(2)(C) of such Code (as added by section 2(a)) applies, the Secretary of the Treasury (or the Secretary's delegate) shall not exchange such tax information with such foreign country during the period that such section applies to such foreign country.
Sec. 5 Treaty obligations
This Act and the amendments made by this Act shall be applied without regard to any treaty obligation of the United States.