To amend the Internal Revenue Code of 1986 to provide for payments to possessions of the United States related to the application of the earned income tax credit in such possessions.

I 116TH CONGRESS 1ST SESSION H. R. 3307 To amend the Internal Revenue Code of 1986 to provide for payments to possessions of the United States related to the application of the earned income tax credit in such possessions. IN THE HOUSE OF REPRESENTATIVES JUNE 18, 2019 Mr. PASCRELL (for himself, Miss GONZA´LEZ-COLO´N of Puerto Rico, Mr. BEYER, Ms. DELBENE, Mrs. WATSON COLEMAN, Mr. SOTO, Ms. LEE of California, Ms. VELA´ZQUEZ, Mr. HIGGINS of New York, Mr. SABLAN, Mr. SAN NICOLAS, and Mr. DANNY K. DAVIS of Illinois) 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 provide for payments to possessions of the United States related to the application of the earned income tax credit in such possessions. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. APPLICATION OF EARNED INCOME TAX CREDIT 3 IN POSSESSIONS OF THE UNITED STATES. 4 (a) IN GENERAL.—Chapter 77 of the Internal Rev- 5 enue Code of 1986 is amended by adding at the end the 6 following new section: 7 VerDate Sep 11 2014 03:05 Jun 21, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3307.IH H3307 pamtmann on DSKBFK8HB2PROD with BILLS 2 •HR 3307 IH ‘‘SEC. 7529. APPLICATION OF EARNED INCOME TAX CREDIT 1 TO POSSESSIONS OF THE UNITED STATES. 2 ‘‘(a) PUERTO RICO.— 3 ‘‘(1) IN GENERAL.—With respect to calendar 4 year 2020 and each calendar year thereafter, the 5 Secretary shall, except as otherwise provided in this 6 subsection, make payments to Puerto Rico equal 7 to— 8 ‘‘(A) the specified matching amount for 9 such calendar year, plus 10 ‘‘(B) in the case of calendar years 2020 11 through 2024, the lesser of— 12 ‘‘(i) the expenditures made by Puerto 13 Rico during such calendar year for edu- 14 cation efforts with respect to individual 15 taxpayers and tax return preparers relat- 16 ing to the earned income tax credit, or 17 ‘‘(ii) $1,000,000. 18 ‘‘(2) REQUIREMENT TO REFORM EARNED IN- 19 COME TAX CREDIT.—The Secretary shall not make 20 any payments under paragraph (1) with respect to 21 any calendar year unless Puerto Rico has in effect 22 an earned income tax credit for taxable years begin- 23 ning in or with such calendar year which (relative to 24 the earned income tax credit which was in effect for 25 taxable years beginning in or with calendar year 26 VerDate Sep 11 2014 03:05 Jun 21, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3307.IH H3307 pamtmann on DSKBFK8HB2PROD with BILLS 3 •HR 3307 IH 2019) increases the percentage of earned income 1 which is allowed as a credit for each group of indi- 2 viduals with respect to which such percentage is sep- 3 arately stated or determined in a manner designed 4 to substantially increase workforce participation. 5 ‘‘(3) SPECIFIED MATCHING AMOUNT.—For pur- 6 poses of this subsection— 7 ‘‘(A) IN GENERAL.—The term ‘specified 8 matching amount’ means, with respect to any 9 calendar year, the lesser of— 10 ‘‘(i) the excess (if any) of— 11 ‘‘(I) the cost to Puerto Rico of 12 the earned income tax credit for tax- 13 able years beginning in or with such 14 calendar year, over 15 ‘‘(II) the base amount for such 16 calendar year, or 17 ‘‘(ii) the product of 3, multiplied by 18 the base amount for such calendar year. 19 ‘‘(B) BASE AMOUNT.— 20 ‘‘(i) BASE AMOUNT FOR 2020.—In the 21 case of calendar year 2020, the term ‘base 22 amount’ means the greater of— 23 ‘‘(I) the cost to Puerto Rico of 24 the earned income tax credit for tax- 25 VerDate Sep 11 2014 03:05 Jun 21, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3307.IH H3307 pamtmann on DSKBFK8HB2PROD with BILLS 4 •HR 3307 IH able years beginning in or with cal- 1 endar year 2019 (rounded to the 2 nearest multiple of $1,000,000), or 3 ‘‘(II) $200,000,000. 4 ‘‘(ii) INFLATION ADJUSTMENT.—In 5 the case of any calendar year after 2020, 6 the term ‘base amount’ means the dollar 7 amount determined under clause (i) in- 8 creased by an amount equal to— 9 ‘‘(I) such dollar amount, multi- 10 plied by— 11 ‘‘(II) the cost-of-living adjust- 12 ment determined under section 1(f)(3) 13 for such calendar year, determined by 14 substituting ‘calendar year 2019’ for 15 ‘calendar year 2016’ in subparagraph 16 (A)(ii) thereof. 17 Any amount determined under this clause 18 shall be rounded to the nearest multiple of 19 $1,000,000. 20 ‘‘(4) RULES RELATED TO PAYMENTS AND RE- 21 PORTS.— 22 ‘‘(A) TIMING OF PAYMENTS.—The Sec- 23 retary shall make payments under paragraph 24 (1) for any calendar year— 25 VerDate Sep 11 2014 03:05 Jun 21, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3307.IH H3307 pamtmann on DSKBFK8HB2PROD with BILLS 5 •HR 3307 IH ‘‘(i) after receipt of the report de- 1 scribed in subparagraph (B) for such cal- 2 endar year, and 3 ‘‘(ii) except as provided in clause (i), 4 within a reasonable period of time before 5 the due date for individual income tax re- 6 turns (as determined under the laws of 7 Puerto Rico) for taxable years which began 8 on the first day of such calendar year. 9 ‘‘(B) ANNUAL REPORTS.—With respect to 10 calendar year 2020 and each calendar year 11 thereafter, Puerto Rico shall provide to the Sec- 12 retary a report which shall include— 13 ‘‘(i) an estimate of the costs described 14 in paragraphs (1)(B)(i) and (3)(A)(i)(I) 15 with respect to such calendar year, and 16 ‘‘(ii) a statement of such costs with 17 respect to the preceding calendar year. 18 ‘‘(C) ADJUSTMENTS.— 19 ‘‘(i) IN GENERAL.—In the event that 20 any estimate of an amount is more or less 21 than the actual amount as later deter- 22 mined and any payment under paragraph 23 (1) was determined on the basis of such 24 estimate, proper payment shall be made 25 VerDate Sep 11 2014 03:05 Jun 21, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3307.IH H3307 pamtmann on DSKBFK8HB2PROD with BILLS 6 •HR 3307 IH by, or to, the Secretary (as the case may 1 be) as soon as practicable after the deter- 2 mination that such estimate was inac- 3 curate. Proper adjustment shall be made in 4 the amount of any subsequent payments 5 made under paragraph (1) to the extent 6 that proper payment is not made under the 7 preceding sentence before such subsequent 8 payments. 9 ‘‘(ii) ADDITIONAL REPORTS.—The 10 Secretary may require such additional peri- 11 odic reports of the information described in 12 subparagraph (B) as the Secretary deter- 13 mines appropriate to facilitate timely ad- 14 justments under clause (i). 15 ‘‘(D) DETERMINATION OF COST OF 16 EARNED INCOME TAX CREDIT.—For purposes 17 of this subsection, the cost to Puerto Rico of 18 the earned income tax credit shall be deter- 19 mined by the Secretary on the basis of the laws 20 of Puerto Rico and shall include reductions in 21 revenues received by Puerto Rico by reason of 22 such credit and refunds attributable to such 23 credit, but shall not include any administrative 24 costs with respect to such credit. 25 VerDate Sep 11 2014 03:05 Jun 21, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3307.IH H3307 pamtmann on DSKBFK8HB2PROD with BILLS 7 •HR 3307 IH ‘‘(E) PREVENTION OF MANIPULATION OF 1 BASE AMOUNT.—No payments shall be made 2 under paragraph (1) if the earned income tax 3 credit as in effect in Puerto Rico for taxable 4 years beginning in or with calendar year 2019 5 is modified after the date of the enactment of 6 this subsection. 7 ‘‘(b) POSSESSIONS WITH MIRROR CODE TAX SYS- 8 TEMS.— 9 ‘‘(1) IN GENERAL.—With respect to calendar 10 year 2020 and each calendar year thereafter, the 11 Secretary shall, except as otherwise provided in this 12 subsection, make payments to the Virgin Islands, 13 Guam, and the Commonwealth of the Northern Mar- 14 iana Islands equal to— 15 ‘‘(A) 75 percent of the cost to such posses- 16 sion of the earned income tax credit for taxable 17 years beginning in or with such calendar year, 18 plus 19 ‘‘(B) in the case of calendar years 2020 20 through 2024, the lesser of— 21 ‘‘(i) the expenditures made by such 22 possession during such calendar year for 23 education efforts with respect to individual 24 VerDate Sep 11 2014 03:05 Jun 21, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3307.IH H3307 pamtmann on DSKBFK8HB2PROD with BILLS 8 •HR 3307 IH taxpayers and tax return preparers relat- 1 ing to such earned income tax credit, or 2 ‘‘(ii) $50,000. 3 ‘‘(2) APPLICATION OF CERTAIN RULES.—Rules 4 similar to the rules of subparagraphs (A), (B), (C), 5 and (D) of subsection (a)(4) shall apply for purposes 6 of this subsection. 7 ‘‘(c) AMERICAN SAMOA.— 8 ‘‘(1) IN GENERAL.—With respect to calendar 9 year 2020 and each calendar year thereafter, the 10 Secretary shall, except as otherwise provided in this 11 subsection, make payments to American Samoa 12 equal to— 13 ‘‘(A) the lesser of— 14 ‘‘(i) 75 percent of the cost to Amer- 15 ican Samoa of the earned income tax cred- 16 it for taxable years beginning in or with 17 such calendar year, or 18 ‘‘(ii) $12,000,000, plus 19 ‘‘(B) in the case of calendar years 2020 20 through 2024, the lesser of— 21 ‘‘(i) the expenditures made by Amer- 22 ican Samoa during such calendar year for 23 education efforts with respect to individual 24 VerDate Sep 11 2014 03:05 Jun 21, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3307.IH H3307 pamtmann on DSKBFK8HB2PROD with BILLS 9 •HR 3307 IH taxpayers and tax return preparers relat- 1 ing to such earned income tax credit, or 2 ‘‘(ii) $50,000. 3 ‘‘(2) REQUIREMENT TO ENACT AND MAINTAIN 4 AN EARNED INCOME TAX CREDIT.—The Secretary 5 shall not make any payments under paragraph (1) 6 with respect to any calendar year unless American 7 Samoa has in effect an earned income tax credit for 8 taxable years beginning in or with such calendar 9 year which allows a refundable tax credit to individ- 10 uals on the basis of the taxpayer’s earned income 11 which is designed to substantially increase workforce 12 participation. 13 ‘‘(3) INFLATION ADJUSTMENT.—In the case of 14 any calendar year after 2020, the $12,000,000 15 amount in paragraph (1)(A)(ii) shall be increased by 16 an amount equal to— 17 ‘‘(A) such dollar amount, multiplied by— 18 ‘‘(B) the cost-of-living adjustment deter- 19 mined under section 1(f)(3) for such calendar 20 year, determined by substituting ‘calendar year 21 2019’ for ‘calendar year 2016’ in subparagraph 22 (A)(ii) thereof. 23 Any increase determined under this clause shall be 24 rounded to the nearest multiple of $100,000. 25 VerDate Sep 11 2014 03:05 Jun 21, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3307.IH H3307 pamtmann on DSKBFK8HB2PROD with BILLS 10 •HR 3307 IH ‘‘(4) APPLICATION OF CERTAIN RULES.—Rules 1 similar to the rules of subparagraphs (A), (B), (C), 2 and (D) of subsection (a)(4) shall apply for purposes 3 of this subsection. 4 ‘‘(d) TREATMENT OF PAYMENTS.—For purposes of 5 section 1324 of title 31, United States Code, the payments 6 under this section shall be treated in the same manner 7 as a refund due from a credit provision referred to in sub- 8 section (b)(2) of such section.’’. 9 (b) CLERICAL AMENDMENT.—The table of sections 10 for chapter 77 of such Code is amended by adding at the 11 end the following new item: 12 ‘‘Sec. 7529. Application of earned income tax credit to possessions of the United States.’’. Æ VerDate Sep 11 2014 03:05 Jun 21, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6301 E:\BILLS\H3307.IH H3307 pamtmann on DSKBFK8HB2PROD with BILLS