Defending American Jobs and Investment Act

I 118TH CONGRESS 1ST SESSION H. R. 3665 To provide an enforcement of remedies against the extraterritorial taxes and discriminatory taxes of foreign countries. IN THE HOUSE OF REPRESENTATIVES MAY 25, 2023 Mr. SMITH of Missouri (for himself, Mr. BUCHANAN, Mr. SMITH of Nebraska, Mr. KELLY of Pennsylvania, Mr. SCHWEIKERT, Mr. LAHOOD, Mr. WENSTRUP, Mr. ARRINGTON, Mr. FERGUSON, Mr. ESTES, Mr. SMUCKER, Mr. HERN, Mrs. MILLER of West Virginia, Mr. MURPHY, Mr. KUSTOFF, Mr. FITZPATRICK, Mr. STEUBE, Ms. TENNEY, Mrs. FISCHBACH, Mr. MOORE of Utah, Mrs. STEEL, Ms. VAN DUYNE, Mr. FEENSTRA, Ms. MALLIOTAKIS, and Mr. CAREY) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Oversight and Accountability, for a period to be subsequently determined by the Speaker, in each case for consider- ation of such provisions as fall within the jurisdiction of the committee concerned A BILL To provide an enforcement of remedies against the extraterritorial taxes and discriminatory taxes of foreign countries. 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 ‘‘Defending American 4 Jobs and Investment Act’’. 5 VerDate Sep 11 2014 04:13 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3665.IH H3665 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •HR 3665 IH SEC. 2. ENFORCEMENT OF REMEDIES AGAINST 1 EXTRATERRITORIAL TAXES AND DISCRIMINA- 2 TORY TAXES. 3 (a) IN GENERAL.—Subpart D of part II of sub- 4 chapter N of chapter 1 is amended by adding at the end 5 the following new section: 6 ‘‘SEC. 899. ENFORCEMENT OF REMEDIES AGAINST 7 EXTRATERRITORIAL TAXES AND DISCRIMINA- 8 TORY TAXES. 9 ‘‘(a) REPORT ON EXTRATERRITORIAL TAXES AND 10 DISCRIMINATORY TAXES.— 11 ‘‘(1) IN GENERAL.—Not later than 90 days 12 after the date of the enactment of this section, and 13 not less frequently than once every 180 days there- 14 after, the Secretary shall submit to the appropriate 15 committees of Congress a report which lists each 16 foreign country that has (as of the date of the sub- 17 mission of such report) one or more extraterritorial 18 taxes or discriminatory taxes. 19 ‘‘(2) ADDITIONAL ITEMS.—Each report sub- 20 mitted under paragraph (1) shall include— 21 ‘‘(A) with respect to each extraterritorial 22 tax or discriminatory tax of any foreign country 23 listed in such report, a description of such tax 24 including the rate thereof and the dates on 25 VerDate Sep 11 2014 04:13 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3665.IH H3665 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •HR 3665 IH which such tax was enacted and takes effect, 1 and 2 ‘‘(B) if the Secretary determines that any 3 foreign country no longer has (as of the date of 4 the submission of such report) an 5 extraterritorial tax or discriminatory tax which 6 was described in any prior report submitted 7 under this subsection— 8 ‘‘(i) the dates on which the permanent 9 repeal or termination of such tax was en- 10 acted and takes effect, and 11 ‘‘(ii) whether such foreign country has 12 (as of such date) any other extraterritorial 13 taxes or discriminatory taxes. 14 ‘‘(3) DETERMINATION OF WHEN A FOREIGN 15 COUNTRY HAS AN EXTRATERRITORIAL TAX OR DIS- 16 CRIMINATORY TAX.—For purposes of this section, a 17 foreign country shall be treated as having an 18 extraterritorial tax or discriminatory tax during the 19 period— 20 ‘‘(A) beginning on the earlier of the date 21 on which such tax is enacted or takes effect, 22 and 23 VerDate Sep 11 2014 04:13 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3665.IH H3665 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •HR 3665 IH ‘‘(B) ending on the later of the date on 1 which the permanent repeal or termination of 2 such tax is enacted or takes effect. 3 ‘‘(b) ENGAGEMENT WITH TRADING PARTNERS ON 4 EXTRATERRITORIAL TAXES AND DISCRIMINATORY 5 TAXES.—The Secretary shall commence enhanced bilat- 6 eral engagement with each foreign country included in the 7 report submitted under subsection (a), in order to, as ap- 8 propriate— 9 ‘‘(1) express the concern of the United States 10 with respect to the adverse trade and economic ef- 11 fects of tax policies that violate bilateral tax treaties 12 and international tax norms, 13 ‘‘(2) urge repeal of extraterritorial taxes and 14 discriminatory taxes that target United States per- 15 sons, and 16 ‘‘(3) advise such foreign country of the remedial 17 actions under subsection (c). 18 ‘‘(c) REMEDIAL ACTIONS.— 19 ‘‘(1) INCREASED RATE OF TAX ON FOREIGN 20 CITIZENS AND FOREIGN CORPORATIONS.— 21 ‘‘(A) INCOME TAXES.— 22 ‘‘(i) IN GENERAL.—In the case of any 23 applicable person for any taxable year be- 24 ginning after the applicable date, each 25 VerDate Sep 11 2014 04:13 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3665.IH H3665 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •HR 3665 IH specified rate of income tax shall be in- 1 creased by the applicable number of per- 2 centage points. 3 ‘‘(ii) SPECIFIED RATE OF INCOME 4 TAX.—For purposes of this subparagraph, 5 the term ‘specified rate of income tax’ 6 means— 7 ‘‘(I) the rates of tax specified in 8 paragraphs (1) and (2) of section 9 871(a), 10 ‘‘(II) in the case of any applica- 11 ble person to which section 871(b) ap- 12 plies, each rate of tax in effect under 13 section 1, 14 ‘‘(III) the rate of tax specified in 15 section 881(a), 16 ‘‘(IV) in the case of any applica- 17 ble person to which section 882(a) ap- 18 plies, each rate of tax in effect under 19 section 11, and 20 ‘‘(V) the rate of tax specified in 21 section 884(a). 22 ‘‘(iii) APPLICATION OF INCREASED 23 RATES TO EFFECTIVELY CONNECTED IN- 24 COME OF NONRESIDENT ALIEN INDIVID- 25 VerDate Sep 11 2014 04:13 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3665.IH H3665 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •HR 3665 IH UALS LIMITED TO GAINS ON UNITED 1 STATES REAL PROPERTY INTERESTS.—In 2 the case of any individual to whom clause 3 (i) applies, the tax imposed under section 4 1 on such individual (after application of 5 clause (ii)(II)) shall be reduced (but not 6 below zero) by the excess of— 7 ‘‘(I) the tax which would be im- 8 posed under such section (after appli- 9 cation of clause (ii)(II)) if FIRPTA 10 items were not taken into account, 11 over 12 ‘‘(II) the tax which would be im- 13 posed under such section if FIRPTA 14 items were not taken into account, 15 and clause (ii)(II) did not apply. 16 For purposes of this clause, the term 17 ‘FIRPTA items’ means gains and losses 18 taken into account under section 871(b)(1) 19 by reason of section 897(a)(1)(A). 20 ‘‘(B) WITHHOLDING TAXES.— 21 ‘‘(i) IN GENERAL.—In the case of any 22 payment to an applicable person after the 23 applicable date, the rate of tax specified in 24 sections 1441(a) and 1442(a) (other than 25 VerDate Sep 11 2014 04:13 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3665.IH H3665 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •HR 3665 IH the 14 percent rate of tax specified in sec- 1 tion 1441(a)) shall each be increased by 2 the applicable number of percentage 3 points. 4 ‘‘(ii) DISPOSITION OF UNITED STATES 5 REAL PROPERTY INTERESTS.—In the case 6 of any disposition of a United States real 7 property interest (as defined in section 8 897(c)) by an applicable person after the 9 applicable date, the rate of tax specified in 10 section 1445(a) shall be increased by the 11 applicable number of percentage points. 12 ‘‘(iii) OTHER DISPOSITIONS AND DIS- 13 TRIBUTIONS RELATED TO UNITED STATES 14 REAL PROPERTY INTERESTS.—In the case 15 of any disposition or distribution described 16 in any paragraph of section 1445(e) made 17 after the applicable date, each rate of tax 18 in such paragraph shall be increased by 19 the applicable number of percentage points 20 if— 21 ‘‘(I) in the case of section 22 1445(e)(1), the foreign person re- 23 ferred to in subparagraph (A) or (B) 24 VerDate Sep 11 2014 04:13 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3665.IH H3665 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •HR 3665 IH of such section is an applicable per- 1 son, 2 ‘‘(II) in the case of section 3 1445(e)(2), the foreign corporation re- 4 ferred to in such section is an applica- 5 ble person, 6 ‘‘(III) in the case of section 7 1445(e)(3), the foreign shareholder 8 referred to in such section is an appli- 9 cable person, 10 ‘‘(IV) in the case of section 11 1445(e)(4), the foreign person re- 12 ferred to in such section is an applica- 13 ble person, 14 ‘‘(V) in the case of section 15 1445(e)(5), the Secretary issues regu- 16 lations or other guidance providing for 17 such increase, and 18 ‘‘(VI) in the case of section 19 1445(e)(6), the nonresident alien indi- 20 vidual or foreign corporation referred 21 to in such section is an applicable per- 22 son. 23 VerDate Sep 11 2014 04:13 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3665.IH H3665 pbinns on DSKJLVW7X2PROD with $$_JOB 9 •HR 3665 IH ‘‘(C) APPLICABLE PERSON.—For purposes 1 of this paragraph, the term ‘applicable person’ 2 means— 3 ‘‘(i) any individual (other than a cit- 4 izen or resident of the United States) who 5 is a citizen of a foreign country listed in a 6 report under subsection (a), 7 ‘‘(ii) any foreign corporation (other 8 than a specified 10-percent owned foreign 9 corporation, as defined in section 245A(b)) 10 which is created or organized in such a 11 foreign country or subject to the income 12 tax laws of such foreign country, and 13 ‘‘(iii) in the case of the application of 14 subparagraph (B)(i) with respect to section 15 1441(a), foreign partnerships to the extent 16 provided by the Secretary (and taking into 17 account the rules of section 1441(d)). 18 ‘‘(D) APPLICABLE DATE.—For purposes of 19 this paragraph. the term ‘applicable date’ 20 means with respect to any foreign country, the 21 day after the 180-day period beginning on the 22 date of the submission of the first report under 23 subsection (a) which lists such foreign country. 24 VerDate Sep 11 2014 04:13 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3665.IH H3665 pbinns on DSKJLVW7X2PROD with $$_JOB 10 •HR 3665 IH ‘‘(E) APPLICABLE NUMBER OF PERCENT- 1 AGE POINTS.—For purposes of this para- 2 graph— 3 ‘‘(i) IN GENERAL.—The term ‘applica- 4 ble number of percentage points’ means, 5 with respect to any foreign country— 6 ‘‘(I) with respect to the 1-year 7 period beginning on the applicable 8 date with respect to such foreign 9 country, 5 percentage points, 10 ‘‘(II) with respect to the 1-year 11 period beginning with the close of the 12 period described in subclause (I), 10 13 percentage points, 14 ‘‘(III) with respect to the 1-year 15 period beginning with the close of the 16 period described in subclause (II), 15 17 percentage points, and 18 ‘‘(IV) with respect to any time 19 after the close of the period described 20 in subclause (III), 20 percentage 21 points. 22 ‘‘(ii) APPLICATION TO TAXABLE 23 YEARS.—For purposes of subparagraph 24 (A), the applicable number of percentage 25 VerDate Sep 11 2014 04:13 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3665.IH H3665 pbinns on DSKJLVW7X2PROD with $$_JOB 11 •HR 3665 IH points shall be determined with respect to 1 the date on which the taxable year begins. 2 ‘‘(iii) APPLICATION TO WITHHOLDING 3 TAXES.—For purposes of subparagraph 4 (B), the applicable number of percentage 5 points shall be determined with respect to 6 the date of the payment or disposition, as 7 the case may be. 8 ‘‘(F) EFFECT OF PERMANENT REPEAL OR 9 TERMINATION OF EXTRATERRITORIAL AND DIS- 10 CRIMINATORY TAXES.—If the Secretary deter- 11 mines under subsection (a)(2)(B)(ii) that any 12 foreign country no longer has any 13 extraterritorial or discriminatory taxes, then in 14 the case of any taxable year beginning, or pay- 15 ment or disposition made, after the date of the 16 submission of the report which includes such 17 determination, this section shall be applied with 18 respect to such foreign country by not taking 19 into account any report submitted before such 20 date. 21 ‘‘(2) OTHER REMEDIES.— 22 ‘‘(A) PROCUREMENT.— 23 ‘‘(i) IN GENERAL.—The President 24 may prohibit the Federal Government from 25 VerDate Sep 11 2014 04:13 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H3665.IH H3665 pbinns on DSKJLVW7X2PROD with $$_JOB 12 •HR 3665 IH procuring, or entering into any contract for 1 the procurement of, goods or services from 2 applicable persons during the period begin- 3 ning on the applicable date and ending on 4 the date of any determination described in 5 paragraph (1)(F) by the Secretary with re- 6 spect to such foreign country. 7 ‘‘(ii) CONGRESSIONAL NOTIFICA- 8 TION.—If the President takes any action 9 described in clause (i), the President shall, 10 not later than 30 days after the date of 11 such action, notify the appropriate commit- 12 tees of Congress of such action. 13 ‘‘(B) TAX TREATIES.— 14 ‘‘(i) IN GENERAL.—The Secretary 15 shall take into account the extraterritorial 16 taxes and discriminatory taxes of any for- 17 eign country in assessing whether to enter 18 into a bilateral tax treaty with such foreign 19 country or to participate in negotiations 20 with respect to updating a bilateral tax 21 treaty with such foreign country. 22 ‘‘(ii) CONGRESSIONAL NOTIFICA- 23 TION.—If the Secretary begins negotia- 24 tions with respect to entering into or up- 25 VerDate Sep 11 2014 04:13 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H3665.IH H3665 pbinns on DSKJLVW7X2PROD with $$_JOB 13 •HR 3665 IH dating any bilateral tax treaty with any 1 foreign country that imposes one or more 2 extraterritorial or discriminatory taxes, the 3 Secretary shall, not later than 30 days 4 after beginning such negotiations, notify 5 the appropriate committees of Congress of 6 such action. Such notification shall include 7 a description of the manner in which such 8 taxes are being taken into account as re- 9 quired under clause (i). 10 ‘‘(C) TRADE AGREEMENTS.— 11 ‘‘(i) IN GENERAL.—The United States 12 Trade Representative and the Secretary of 13 Commerce shall each take into account the 14 extraterritorial taxes and discriminatory 15 taxes of any foreign government in assess- 16 ing whether to enter into any free trade 17 agreement or Executive agreement on 18 trade with such foreign country. 19 ‘‘(ii) CONGRESSIONAL NOTIFICA- 20 TION.—If the United States Trade Rep- 21 resentativ [Text truncated for display. Full text available on Congress.gov.]