To amend the Internal Revenue Code of 1986 to allow certain credits and deductions to be taken as a refundable tax credit by Puerto Rico businesses or residents, and to extend such credits and deductions to possessions of the United States.

“(e) Application of credit in possessions

“(1) Mirror code possessions

“(A) In general—The Secretary shall pay to each possession of the United States with a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the application of this section (determined without regard to this subsection) with respect to taxable years beginning after December 31, 2022. Such amounts shall be determined by the Secretary based on information provided by the government of the respective possession.

“(B) Mirror code tax system—For purposes of this paragraph, the term “mirror code tax system” means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.

“(2) Credit made refundable for residents of Puerto Rico—In the case of any taxable year beginning after December 31, 2022, if the taxpayer is a bona fide resident of Puerto Rico (within the meaning of section 937(a)) or a corporation or partnership organized in Puerto Rico or under the law of Puerto Rico for such taxable year, the credit determined under subsection (a) shall be allowable to such resident, corporation, or partnership under subpart C (and not allowed under this subpart).

“(3) American Samoa—The Secretary shall pay to American Samoa amounts estimated by the Secretary as being equal to the aggregate benefits that would have been provided to residents of American Samoa by reason of the application of this section for taxable years beginning after December 31, 2022, if the provisions of this section had been in effect in American Samoa. The preceding sentence shall not apply unless American Samoa has a plan, which has been approved by the Secretary, under which such possession will promptly distribute such payments to its residents.

“(4) Coordination with credit allowed against United States income taxes—No credit shall be allowed under this section for any taxable year to any person—

“(A) to whom a credit is allowable against taxes imposed by a possession of the United States with a mirror code tax system by reason of the application of this section in such possession for such taxable year, or

“(B) who is eligible for a payment under a plan described in paragraph (3).

“(5) Treatment of payments—For purposes of section 1324(b)(2) of title 31, United States Code, the payments under this subsection shall be treated in the same manner as a refund due from credit provisions described in such section.”

“(d) Election To take deduction as refundable credit for residents of Puerto Rico—In the case of a taxpayer (in the case of a joint return, either spouse) who is a bona fide resident of Puerto Rico (within the meaning of section 937(a)) or a corporation or partnership organized in Puerto Rico or under the law of Puerto Rico for the taxable year, 21 percent of the amounts otherwise allowed as a deduction under this section shall be allowed as a credit under subpart C.

“(e) Application of deduction in possessions

“(1) Mirror code possessions

“(A) In general—The Secretary shall pay to each possession of the United States with a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the application of this section (determined without regard to this subsection) with respect to taxable years beginning after December 31, 2022. Such amounts shall be determined by the Secretary based on information provided by the government of the respective possession.

“(B) Mirror code tax system—For purposes of this paragraph, the term “mirror code tax system” means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.

“(2) American Samoa—The Secretary shall pay to American Samoa amounts estimated by the Secretary as being equal to the aggregate benefits that would have been provided to residents of American Samoa by reason of the application of this section for taxable years beginning after December 31, 2022, if the provisions of this section had been in effect in American Samoa. The preceding sentence shall not apply unless American Samoa has a plan, which has been approved by the Secretary, under which such possession will promptly distribute such payments to its residents.

“(3) Coordination with credit allowed against United States income taxes—No deduction shall be allowed under this section for any taxable year to any person—

“(A) to whom a credit is allowable against taxes imposed by a possession of the United States with a mirror code tax system by reason of the application of this section in such possession for such taxable year, or

“(B) who is eligible for a payment under a plan described in paragraph (2).

“(4) Treatment of payments—For purposes of section 1324(b)(2) of title 31, United States Code, the payments under this subsection shall be treated in the same manner as a refund due from credit provisions described in such section.”