Supply Chain Security Act

I 118TH CONGRESS 1ST SESSION H. R. 4029 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. IN THE HOUSE OF REPRESENTATIVES JUNE 12, 2023 Mr. HERN (for himself, Mr. ESTES, Mrs. MILLER of West Virginia, Ms. TENNEY, Mr. FERGUSON, Mr. SCHWEIKERT, Mr. SMITH of Nebraska, and Mr. FEENSTRA) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To secure the supply chain by providing an election to deter- mine foreign income taxes paid or incurred to certain Western Hemisphere countries without regard to certain regulations. 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 ‘‘Supply Chain Security 4 Act’’. 5 VerDate Sep 11 2014 01:10 Jul 12, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4029.IH H4029 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 4029 IH SEC. 2. ELECTION TO DETERMINE FOREIGN INCOME TAXES 1 PAID OR INCURRED TO CERTAIN WESTERN 2 HEMISPHERE COUNTRIES WITHOUT REGARD 3 TO CERTAIN REGULATIONS. 4 (a) ELECTION WITH RESPECT TO DETERMINING 5 CERTAIN FOREIGN INCOME TAXES.—In the case of any 6 taxpayer which elects (at such time and in such manner 7 as the Secretary may provide) the application of this sub- 8 section, the determination of whether any Western Hemi- 9 sphere tax paid or accrued by such taxpayer is an income, 10 war profits, or excess profits tax for purposes of any provi- 11 sion of the Internal Revenue Code of 1986 shall be made 12 without regard to any specified regulation. 13 (b) SEPARATE ELECTION WITH RESPECT TO ALLO- 14 CATION AND APPORTIONMENT OF FOREIGN INCOME 15 TAXES RELATING TO DISREGARDED PAYMENTS FROM 16 CERTAIN DISREGARDED ENTITIES.— 17 (1) IN GENERAL.—If the owner of any specified 18 disregarded entity elects (at such time and in such 19 manner as the Secretary may provide) the applica- 20 tion of this subsection with respect to such entity, 21 then for purposes of allocating and apportioning any 22 foreign income taxes (as defined in section 986(a)(4) 23 of the Internal Revenue Code of 1986 and deter- 24 mined after the application of subsection (a) of this 25 section) paid or accrued by reason of any remittance 26 VerDate Sep 11 2014 01:10 Jul 12, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4029.IH H4029 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 4029 IH made by such entity to such owner during the appli- 1 cable period, any items of foreign gross income in- 2 cluded by reason of the receipt of such remittance 3 shall be assigned to a category based on current and 4 accumulated earnings and profits of such entity (in 5 lieu of being assigned on the basis of the tax book 6 value method described in a specified regulation). 7 (2) SPECIFIED DISREGARDED ENTITY.—For 8 purposes of this subsection, the term ‘‘specified dis- 9 regarded entity’’ means any entity (including any 10 trade or business) if— 11 (A) such entity is disregarded as an entity 12 separate from its owner for purposes of apply- 13 ing chapter 1 of the Internal Revenue Code of 14 1986, 15 (B) such entity is created or organized in 16 a possession of the United States or a foreign 17 country described in subsection (d)(1)(B), 18 (C) at all times after December 31, 2019 19 (or, if later, the date on which such entity is 20 created or organized), substantially all of the 21 income of such entity is derived from trades or 22 businesses conducted in the possession or coun- 23 try referred to in subparagraph (B), and 24 VerDate Sep 11 2014 01:10 Jul 12, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4029.IH H4029 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 4029 IH (D) at all times after the date on which 1 such entity is created or organized, such entity 2 maintains separate books and records. 3 (c) APPLICATION TO DEEMED PAID CREDIT.—In the 4 case of any tax paid or accrued by a controlled foreign 5 corporation and deemed to have been paid by a United 6 States shareholder under section 960 of the Internal Rev- 7 enue Code of 1986— 8 (1) any election under subsection (a) or (b) 9 shall be made by such controlled foreign corporation 10 and shall be binding on all United States share- 11 holders of such controlled foreign corporation, and 12 (2) the applicable period under subsection (d) 13 shall be determined with respect to the taxable years 14 of such controlled foreign corporation. 15 (d) WESTERN HEMISPHERE TAX.—For purposes of 16 this section— 17 (1) IN GENERAL.—The term ‘‘Western Hemi- 18 sphere tax’’ means any tax which is paid or accrued 19 for a taxable year which is in the applicable period 20 to— 21 (A) any possession of the United States, or 22 (B) any foreign country (other than Cuba 23 and Venezuela) which is located in North, Cen- 24 VerDate Sep 11 2014 01:10 Jul 12, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4029.IH H4029 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 4029 IH tral, or South America (including the West In- 1 dies). 2 (2) APPLICABLE PERIOD.—The term ‘‘applica- 3 ble period’’ means— 4 (A) in the case of any election made under 5 subsection (a), all taxable years beginning after 6 December 31, 2021, and before January 1, 7 2027, and 8 (B) in the case of any election made under 9 subsection (b), all taxable years beginning after 10 December 31, 2019, and before January 1, 11 2027. 12 (3) DETERMINATION BASED ON TAXABLE YEAR 13 FOR WHICH TAX ACTUALLY PAID OR ACCRUED.— 14 The determination of the taxable year for which any 15 tax is paid or accrued for purposes of determining 16 whether a foreign tax is paid or accrued for a tax- 17 able year which is in the applicable period shall be 18 made without regard to any taxable year with re- 19 spect to which such tax is deemed to have been paid 20 under section 904(c) or 960 of the Internal Revenue 21 Code of 1986. 22 (e) SPECIFIED REGULATION.—For purposes of this 23 section, the term ‘‘specified regulation’’ means— 24 VerDate Sep 11 2014 01:10 Jul 12, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4029.IH H4029 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 4029 IH (1) Treasury Regulations relating to ‘‘Guidance 1 Related to the Foreign Tax Credit; Clarification of 2 Foreign-Derived Intangible Income’’ (87 Fed. Reg. 3 276; published on January 4, 2022), 4 (2) proposed Treasury Regulations relating to 5 ‘‘Guidance Related to the Foreign Tax Credit’’ (87 6 Fed. Reg. 71271; published on November 22, 2022), 7 and 8 (3) any regulation or other guidance published 9 after January 4, 2022, to the extent that such regu- 10 lation or other guidance is substantially similar to, 11 or predicated upon, any portion of the regulations 12 referred to in paragraph (1) or (2). 13 In the case of any regulation or other guidance which is 14 published after the date of the enactment of this Act and 15 any portion of which is described in paragraph (3), the 16 Secretary shall identify such regulation or guidance (or 17 portion thereof) as not applying with respect to taxpayers 18 which have elected the application of subsection (a) or (b), 19 as the case may be. 20 (f) SECRETARY.—For purposes of this section, the 21 term ‘‘Secretary’’ means the Secretary of the Treasury or 22 the Secretary’s delegate. 23 Æ VerDate Sep 11 2014 01:10 Jul 12, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6301 E:\BILLS\H4029.IH H4029 kjohnson on DSK79L0C42PROD with BILLS