Section 1 Short title
This Act may be cited as the “Supply Chain Security Act”.
Supply Chain Security Act
A BILL
To secure the supply chain by providing an election to determine foreign income taxes paid or incurred to certain Western Hemisphere countries without regard to certain regulations.
Sec. 2 Election to determine foreign income taxes paid or incurred to certain Western Hemisphere countries without regard to certain regulations
Election with respect to determining certain foreign income taxes— In the case of any taxpayer which elects (at such time and in such manner as the Secretary may provide) the application of this subsection, the determination of whether any Western Hemisphere tax paid or accrued by such taxpayer is an income, war profits, or excess profits tax for purposes of any provision of the Internal Revenue Code of 1986 shall be made without regard to any specified regulation.
Separate election with respect to allocation and apportionment of foreign income taxes relating to disregarded payments from certain disregarded entities—
In general— If the owner of any specified disregarded entity elects (at such time and in such manner as the Secretary may provide) the application of this subsection with respect to such entity, then for purposes of allocating and apportioning any foreign income taxes (as defined in section 986(a)(4) of the Internal Revenue Code of 1986 and determined after the application of subsection (a) of this section) paid or accrued by reason of any remittance made by such entity to such owner during the applicable period, any items of foreign gross income included by reason of the receipt of such remittance shall be assigned to a category based on current and accumulated earnings and profits of such entity (in lieu of being assigned on the basis of the tax book value method described in a specified regulation).
Specified disregarded entity— For purposes of this subsection, the term “specified disregarded entity” means any entity (including any trade or business) if—
such entity is disregarded as an entity separate from its owner for purposes of applying chapter 1 of the Internal Revenue Code of 1986,
such entity is created or organized in a possession of the United States or a foreign country described in subsection (d)(1)(B),
at all times after December 31, 2019 (or, if later, the date on which such entity is created or organized), substantially all of the income of such entity is derived from trades or businesses conducted in the possession or country referred to in subparagraph (B), and
at all times after the date on which such entity is created or organized, such entity maintains separate books and records.
Application to deemed paid credit— In the case of any tax paid or accrued by a controlled foreign corporation and deemed to have been paid by a United States shareholder under section 960 of the Internal Revenue Code of 1986—
any election under subsection (a) or (b) shall be made by such controlled foreign corporation and shall be binding on all United States shareholders of such controlled foreign corporation, and
the applicable period under subsection (d) shall be determined with respect to the taxable years of such controlled foreign corporation.
Western Hemisphere tax— For purposes of this section—
In general— The term “Western Hemisphere tax” means any tax which is paid or accrued for a taxable year which is in the applicable period to—
any possession of the United States, or
any foreign country (other than Cuba and Venezuela) which is located in North, Central, or South America (including the West Indies).
Applicable period— The term “applicable period” means—
in the case of any election made under subsection (a), all taxable years beginning after December 31, 2021, and before January 1, 2027, and
in the case of any election made under subsection (b), all taxable years beginning after December 31, 2019, and before January 1, 2027.
Determination based on taxable year for which tax actually paid or accrued— The determination of the taxable year for which any tax is paid or accrued for purposes of determining whether a foreign tax is paid or accrued for a taxable year which is in the applicable period shall be made without regard to any taxable year with respect to which such tax is deemed to have been paid under section 904(c) or 960 of the Internal Revenue Code of 1986.
Specified regulation— For purposes of this section, the term “specified regulation” means—
Treasury Regulations relating to “Guidance Related to the Foreign Tax Credit; Clarification of Foreign-Derived Intangible Income” (87 Fed. Reg. 276; published on January 4, 2022),
proposed Treasury Regulations relating to “Guidance Related to the Foreign Tax Credit” (87 Fed. Reg. 71271; published on November 22, 2022), and
any regulation or other guidance published after January 4, 2022, to the extent that such regulation or other guidance is substantially similar to, or predicated upon, any portion of the regulations referred to in paragraph (1) or (2).
Secretary— For purposes of this section, the term “Secretary” means the Secretary of the Treasury or the Secretary’s delegate.