Territorial Economic Recovery Act

II 116TH CONGRESS 2D SESSION S. 3940 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 SENATE OF THE UNITED STATES JUNE 11, 2020 Mr. WICKER introduced the following bill; which was read twice and referred to the Committee on Finance 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 06:45 Jun 26, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S3940.IS S3940 ctelli on DSK30NT082PROD with BILLS 2 •S 3940 IS 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 06:45 Jun 26, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S3940.IS S3940 ctelli on DSK30NT082PROD with BILLS 3 •S 3940 IS 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 taxable years of foreign corpora- 11 tions beginning after December 31, 2019, 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 06:45 Jun 26, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6301 E:\BILLS\S3940.IS S3940 ctelli on DSK30NT082PROD with BILLS