Territorial Economic Recovery Act

I 117TH CONGRESS 1ST SESSION H. R. 1426 To amend the Internal Revenue Code of 1986 to exclude certain amounts from the tested income of controlled foreign corporations, and for other purposes. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 26, 2021 Ms. PLASKETT (for herself and Ms. VELA´ZQUEZ) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to exclude certain amounts from the tested income of controlled foreign corporations, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Territorial Economic 4 Recovery Act’’. 5 VerDate Sep 11 2014 18:27 Apr 06, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1426.IH H1426 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 1426 IH SEC. 2. INCOME OF CERTAIN QUALIFIED POSSESSION COR- 1 PORATIONS EXCLUDED FROM TESTED IN- 2 COME. 3 (a) IN GENERAL.—Section 951A of the Internal Rev- 4 enue Code of 1986 is amended— 5 (1) in subsection (c)(2)(A)(i), by striking ‘‘and’’ 6 at the end of subclause (IV), by striking ‘‘over’’ at 7 the end of subclause (V) and inserting ‘‘and’’, and 8 by adding at the end the following new subclause: 9 ‘‘(VI) any income of a qualified 10 possession corporation that is effec- 11 tively connected with the active con- 12 duct of a trade or business within a 13 possession of the United States, 14 over’’; and 15 (2) by adding at the end the following new sub- 16 sections: 17 ‘‘(g) POSSESSION OF THE UNITED STATES.—For 18 purposes of this section, the term ‘possession of the United 19 States’ means Puerto Rico, the Virgin Islands, and any 20 specified possession described in section 931(c). 21 ‘‘(h) QUALIFIED POSSESSION CORPORATION.—For 22 purposes of this section, the term ‘qualified possession cor- 23 poration’ means any controlled foreign corporation for any 24 taxable year, if, for the 3-year period (or the period during 25 which the controlled foreign corporation has been in exist- 26 VerDate Sep 11 2014 18:27 Apr 06, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1426.IH H1426 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 1426 IH ence, if shorter) ending in the taxable year preceding the 1 taxable year in which the determination is made— 2 ‘‘(1) 80 percent or more of the gross income of 3 such corporation was derived from sources within a 4 possession of the United States, and 5 ‘‘(2) 75 percent or more of the gross income of 6 such corporation was effectively connected with the 7 active conduct of a trade or business within a pos- 8 session of the United States.’’. 9 (b) EFFECTIVE DATE.—The amendments made by 10 this section shall apply to taxable years of foreign corpora- 11 tions beginning after December 31, 2020, and to taxable 12 years of United States shareholders in which or with which 13 such taxable years of foreign corporations end. 14 Æ VerDate Sep 11 2014 18:27 Apr 06, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6301 E:\BILLS\H1426.IH H1426 pamtmann on DSKBC07HB2PROD with BILLS