[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1688 Introduced in Senate (IS)]
108th CONGRESS
1st Session
S. 1688
To amend the Internal Revenue Code of 1986 to repeal the exclusion for
extraterritorial income and provide for a deduction relating to income
attributable to United States production activities, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 30 (legislative day, September 29), 2003
Mr. Rockefeller 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 repeal the exclusion for
extraterritorial income and provide for a deduction relating to income
attributable to United States production activities, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) Short Title.--This Act may be cited as the ``Securing American
Factory Employment (SAFE) Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
TITLE I--PROVISIONS RELATING TO REPEAL OF EXCLUSION FOR
EXTRATERRITORIAL INCOME
SEC. 101. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL INCOME.
(a) In General.--Section 114 is hereby repealed.
(b) Conforming Amendments.--
(1)(A) Subpart E of part III of subchapter N of chapter 1
(relating to qualifying foreign trade income) is hereby
repealed.
(B) The table of subparts for such part III is amended by
striking the item relating to subpart E.
(2) The table of sections for part III of subchapter B of
chapter 1 is amended by striking the item relating to section
114.
(3) The second sentence of section 56(g)(4)(B)(i) is
amended by striking ``or under section 114''.
(4) Section 275(a) is amended--
(A) by inserting ``or'' at the end of paragraph
(4)(A), by striking ``or'' at the end of paragraph
(4)(B) and inserting a period, and by striking
subparagraph (C), and
(B) by striking the last sentence.
(5) Paragraph (3) of section 864(e) is amended--
(A) by striking:
``(3) Tax-exempt assets not taken into account.--
``(A) In general.--For purposes of''; and
inserting:
``(3) Tax-exempt assets not taken into account.--For
purposes of'', and
(B) by striking subparagraph (B).
(6) Section 903 is amended by striking ``114, 164(a),'' and
inserting ``164(a)''.
(7) Section 999(c)(1) is amended by striking
``941(a)(5),''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to transactions occurring after the date of the enactment
of this Act.
(2) Binding contracts.--The amendments made by this section
shall not apply to any transaction in the ordinary course of a
trade or business which occurs pursuant to a binding contract--
(A) which is between the taxpayer and a person who
is not a related person (as defined in section
943(b)(3) of such Code, as in effect on the day before
the date of the enactment of this Act), and
(B) which is in effect on September 17, 2003, and
at all times thereafter.
(d) Revocation of Section 943(e) Elections.--
(1) In general.--In the case of a corporation that elected
to be treated as a domestic corporation under section 943(e) of
the Internal Revenue Code of 1986 (as in effect on the day
before the date of the enactment of this Act)--
(A) the corporation may, during the 1-year period
beginning on the date of the enactment of this Act,
revoke such election, effective as of such date of
enactment, and
(B) if the corporation does revoke such election--
(i) such corporation shall be treated as a
domestic corporation transferring (as of such
date of enactment) all of its property to a
foreign corporation in connection with an
exchange described in section 354 of such Code,
and
(ii) no gain or loss shall be recognized on
such transfer.
(2) Exception.--Subparagraph (B)(ii) of paragraph (1) shall
not apply to gain on any asset held by the revoking corporation
if--
(A) the basis of such asset is determined in whole
or in part by reference to the basis of such asset in
the hands of the person from whom the revoking
corporation acquired such asset,
(B) the asset was acquired by transfer (not as a
result of the election under section 943(e) of such
Code) occurring on or after the 1st day on which its
election under section 943(e) of such Code was
effective, and
(C) a principal purpose of the acquisition was the
reduction or avoidance of tax (other than a reduction
in tax under section 114 of such Code, as in effect on
the day before the date of the enactment of this Act).
(e) General Transition.--
(1) In general.--In the case of a taxable year ending after
the date of the enactment of this Act and beginning before
January 1, 2007, for purposes of chapter 1 of such Code, a
current FSC/ETI beneficiary shall be allowed a deduction equal
to the transition amount determined under this subsection with
respect to such beneficiary for such year.
(2) Current fsc/eti beneficiary.--The term ``current FSC/
ETI beneficiary'' means any corporation which entered into one
or more transactions during its taxable year beginning in
calendar year 2002 with respect to which FSC/ETI benefits were
allowable.
(3) Transition amount.--For purposes of this subsection--
(A) In general.--The transition amount applicable
to any current FSC/ETI beneficiary for any taxable year
is the phaseout percentage of the base period amount.
(B) Phaseout percentage.--
(i) In general.--In the case of a taxpayer
using the calendar year as its taxable year,
the phaseout percentage shall be determined
under the following table:
The phaseout
Years: percentage is:
2004.......................................... 80
2005.......................................... 80
2006.......................................... 60.
(ii) Special rule for 2003.--The phaseout
percentage for 2003 shall be the amount that
bears the same ratio to 100 percent as the
number of days after the date of the enactment
of this Act bears to 365.
(iii) Special rule for fiscal year
taxpayers.--In the case of a taxpayer not using
the calendar year as its taxable year, the
phaseout percentage is the weighted average of
the phaseout percentages determined under the
preceding provisions of this paragraph with
respect to calendar years any portion of which
is included in the taxpayer's taxable year. The
weighted average shall be determined on the
basis of the respective portions of the taxable
year in each calendar year.
(4) Base period amount.--For purposes of this subsection,
the base period amount is the aggregate FSC/ETI benefits for
the taxpayer's taxable year beginning in calendar year 2002.
(5) FSC/ETI benefit.--For purposes of this subsection, the
term ``FSC/ETI benefit'' means--
(A) amounts excludable from gross income under
section 114 of such Code, and
(B) the exempt foreign trade income of related
foreign sales corporations from property acquired from
the taxpayer (determined without regard to section
923(a)(5) of such Code (relating to special rule for
military property), as in effect on the day before the
date of the enactment of the FSC Repeal and
Extraterritorial Income Exclusion Act of 2000).
In determining the FSC/ETI benefit there shall be excluded any
amount attributable to a transaction with respect to which the
taxpayer is the lessor unless the leased property was
manufactured or produced in whole or in part by the taxpayer.
(6) Special rule for farm cooperatives.--Determinations
under this subsection with respect to an organization described
in section 943(g)(1) of such Code, as in effect on the day
before the date of the enactment of this Act, shall be made at
the cooperative level and the purposes of this subsection shall
be carried out in a manner similar to section 250(h) of such
Code, as added by this Act. Such determinations shall be in
accordance with such requirements and procedures as the
Secretary may prescribe.
(7) Certain rules to apply.--Rules similar to the rules of
section 41(f) of such Code shall apply for purposes of this
subsection.
(8) Coordination with binding contract rule.--The deduction
determined under paragraph (1) for any taxable year shall be
reduced by the phaseout percentage of any FSC/ETI benefit
realized for the taxable year by reason of subsection (c)(2),
except that for purposes of this paragraph the phaseout
percentage for 2003 shall be treated as being equal to 100
percent.
(9) Special rule for taxable year which includes date of
enactment.--In the case of a taxable year which includes the
date of the enactment of this Act, the deduction allowed under
this subsection to any current FSC/ETI beneficiary shall in no
event exceed--
(A) 100 percent of such beneficiary's base period
amount for calendar year 2003, reduced by
(B) the aggregate FSC/ETI benefits of such
beneficiary with respect to transactions occurring
during the portion of the taxable year ending on the
date of the enactment of this Act.
SEC. 102. DEDUCTION RELATING TO INCOME ATTRIBUTABLE TO UNITED STATES
PRODUCTION ACTIVITIES.
(a) In General.--Part VI of subchapter B of chapter 1 (relating to
itemized deductions for individuals and corporations) is amended by
adding at the end the following new section:
``SEC. 199. INCOME ATTRIBUTABLE TO DOMESTIC PRODUCTION ACTIVITIES.
``(a) In General.--There shall be allowed as a deduction an amount
equal to 9 percent of the qualified production activities income of the
taxpayer for the taxable year.
``(b) Phasein.--In the case of taxable years beginning in 2004,
2005, 2006, 2007, or 2008, subsection (a) shall be applied by
substituting for the `9 percent' the transition percentage determined
under the following table:
``Taxable years The transition
beginning in: percentage is:
2004.......................................... 1
2005.......................................... 2
2006.......................................... 3
2007 or 2008.................................. 6.
``(c) Qualified Production Activities Income.--For purposes of this
section, the term `qualified production activities income' means an
amount equal to the portion of the modified taxable income of the
taxpayer which is attributable to domestic production activities.
``(d) Determination of Income Attributable to Domestic Production
Activities.--For purposes of this section--
``(1) In general.--The portion of the modified taxable
income which is attributable to domestic production activities
is so much of the modified taxable income for the taxable year
as does not exceed--
``(A) the taxpayer's domestic production gross
receipts for such taxable year, reduced by
``(B) the sum of--
``(i) the costs of goods sold that are
allocable to such receipts,
``(ii) other deductions, expenses, or
losses directly allocable to such receipts, and
``(iii) a proper share of other deductions,
expenses, and losses that are not directly
allocable to such receipts or another class of
income.
``(2) Allocation method.--The Secretary shall prescribe
rules for the proper allocation of items of income, deduction,
expense, and loss for purposes of determining income
attributable to domestic production activities.
``(3) Special rules for determining costs.--
``(A) In general.--For purposes of determining
costs under clause (i) of paragraph (1)(B), any item or
service brought into the United States without a
transfer price meeting the requirements of section 482
shall be treated as acquired by purchase, and its cost
shall be treated as not less than its value when it
entered the United States. A similar rule shall apply
in determining the adjusted basis of leased or rented
property where the lease or rental gives rise to
domestic production gross receipts.
``(B) Exports for further manufacture.--In the case
of any property described in subparagraph (A) that had
been exported by the taxpayer for further manufacture,
the increase in cost or adjusted basis under
subparagraph (A) shall not exceed the difference
between the value of the property when exported and the
value of the property when brought back into the United
States after the further manufacture.
``(4) Modified taxable income.--The term `modified taxable
income' means taxable income computed without regard to the
deduction allowable under this section.
``(e) Domestic Production Gross Receipts.--For purposes of this
section, the term `domestic production gross receipts' means the gross
receipts of the taxpayer which are derived from--
``(1) any sale, exchange, or other disposition of, or
``(2) any lease, rental, or license of,
qualifying production property which was manufactured, produced, grown,
or extracted in whole or in significant part by the taxpayer within the
United States.
``(f) Qualifying Production Property.--For purposes of this
section--
``(1) In general.--Except as otherwise provided in this
paragraph, the term `qualifying production property' means--
``(A) any tangible personal property,
``(B) any computer software, and
``(C) any property described in section 168(f) (3)
or (4).
``(2) Exclusions from qualifying production property.--The
term `qualifying production property' shall not include--
``(A) consumable property that is sold, leased, or
licensed by the taxpayer as an integral part of the
provision of services,
``(B) electricity,
``(C) water supplied by pipeline to the consumer,
``(D) utility services, or
``(E) any property (not described in paragraph
(1)(B)) which is a film, tape, recording, book,
magazine, newspaper, or similar property the market for
which is primarily topical or otherwise essentially
transitory in nature.
``(g) Definitions and Special Rules.--
``(1) Treatment of pass-thru entities.--The Secretary shall
prescribe rules for the proper application of this section in
the case of pass-thru entities other than cooperatives to which
paragraph (2) applies and subchapter S corporations.
``(2) Exclusion for patrons of cooperatives.--
``(A) In general.--If any amount described in
paragraph (1) or (3) of section 1385 (a)--
``(i) is received by a person from an
organization to which part I of subchapter T
applies, and
``(ii) is allocable to the portion of the
qualified production activities income of the
organization which is deductible under
subsection (a) and designated as such by the
organization in a written notice mailed to its
patrons during the payment period described in
section 1382(a),
then such person shall be allowed an exclusion from
gross income with respect to such amount. The taxable
income of the organization shall not be reduced under
section 1382 by the portion of any such amount with
respect to which an exclusion is allowable to a person
by reason of this paragraph.
``(B) Special rules.--For purposes of applying
subparagraph (A), in determining the qualified
production activities income of the organization under
this section--
``(i) there shall not be taken into account
in computing the organization's modified
taxable income any deduction allowable under
subsection (b) or (c) of section 1382 (relating
to patronage dividends, per-unit retain
allocations, and nonpatronage distributions),
and
``(ii) the organization shall be treated as
having manufactured, produced, grown, or
extracted in whole or significant part any
qualifying production property marketed by the
organization which its patrons have so
manufactured, produced, grown, or extracted.
``(3) Coordination with minimum tax.--The deduction under
this section shall be allowed for purposes of the tax imposed
by section 55; except that for purposes of section 55,
alternative minimum taxable income shall be taken into account
in determining the deduction under this section.
``(4) Ordering rule.--The amount of any other deduction
allowable under this chapter shall be determined as if this
section had not been enacted.
``(5) Coordination with transition rules.--For purposes of
this section--
``(A) domestic production gross receipts shall not
include gross receipts from any transaction if the
binding contract transition relief of section 101(c)(2)
of the Securing American Factory Employment (SAFE) Act
applies to such transaction, and
``(B) any deduction allowed under section 101(e) of
such Act shall be disregarded in determining the
portion of the taxable income which is attributable to
domestic production gross receipts.''.
(b) Deduction Allowed to Shareholders of S Corporations.--
(1) In general.--Section 1363(b) (relating to computation
of S corporation's taxable income) is amended by striking
``and'' at the end of paragraph (3), by striking the period at
the end of paragraph (4) and inserting ``, and'', and by adding
at the end the following new paragraph:
``(5) the deduction under section 199 shall be allowed to
the S corporation.''
(2) Increase in basis.--Section 1367(a)(1) (relating to
increases in basis) is amended by striking ``and'' at the end
of subparagraph (B), by striking the period at the end of
subparagraph (C) and inserting ``, and'', and by adding at the
end the following new subparagraph:
``(D) any deduction allowed under section 199.''
(c) Minimum Tax.--Section 56(g)(4)(C) (relating to disallowance of
items not deductible in computing earnings and profits) is amended by
adding at the end the following new clause:
``(v) Deduction for domestic production.--
Clause (i) shall not apply to any amount
allowable as a deduction under section 199.''
(d) Clerical Amendment.--The table of sections for part VI of
subchapter B of chapter 1 is amended by adding at the end the following
new item:
``Sec. 199. Income attributable to
domestic production
activities.''
(e) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years ending after the date of the enactment
of this Act.
(2) Application of section 15.--Section 15 of the Internal
Revenue Code of 1986 shall apply to the amendments made by this
section as if they were changes in a rate of tax.
TITLE II--EMPLOYER-PROVIDED RETIRED EMPLOYEE HEALTH CARE TAX CREDIT
SEC. 201. TAX CREDIT FOR 75 PERCENT OF EMPLOYER-PROVIDED RETIRED
EMPLOYEE HEALTH PREMIUMS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business-related credits) is amended by adding at the end
the following:
``SEC. 45G. RETIRED EMPLOYEE HEALTH INSURANCE EXPENSES.
``(a) General Rule.--For purposes of section 38, in the case of a
qualified employer, the retired employee health insurance expenses
credit determined under this section is an amount equal to 75 percent
of the amount paid by the taxpayer during the taxable year for
qualified retired employee health insurance expenses.
``(b) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualified employer.--The term `qualified employer'
means any employer which is eligible for the deduction
allowable under section 199 for the taxable year.
``(2) Qualified retired employee health insurance
expenses.--
``(A) In general.--The term `qualified retired
employee health insurance expenses' means any amount
paid by an employer for health insurance coverage to
the extent such amount is attributable to coverage
provided to any retired employee and such retired
employee's spouse and dependents.
``(B) Exception for amounts paid under salary
reduction arrangements.--No amount paid or incurred for
health insurance coverage pursuant to a salary
reduction arrangement shall be taken into account under
subparagraph (A).
``(C) Health insurance coverage.--The term `health
insurance coverage' has the meaning given such term by
paragraph (1) of section 9832(b) (determined by
disregarding the last sentence of paragraph (2) of such
section).
``(3) Retired employee--The term `retired employee' means
an individual who has met any years of service or disability
requirements under an employee benefit plan of the employer.
``(c) Certain Rules Made Applicable.--For purposes of this section,
rules similar to the rules of section 52 shall apply.
``(d) Denial of Double Benefit.--No deduction or credit under any
other provision of this chapter shall be allowed with respect to
qualified retired employee health insurance expenses taken into account
under subsection (a).
``(e) Termination.--This section shall not apply to taxable years
beginning after December 31, 2003.''.
(b) Credit To Be Part of General Business Credit.--Section 38(b)
(relating to current year business credit) is amended by striking
``plus'' at the end of paragraph (14), by striking the period at the
end of paragraph (15) and inserting ``, plus'', and by adding at the
end the following:
``(16) the retired employee health insurance expenses
credit determined under section 45G.''.
(c) No Carrybacks.--Subsection (d) of section 39 (relating to
carryback and carryforward of unused credits) is amended by adding at
the end the following:
``(11) No carryback of section 45g credit before effective
date.--No portion of the unused business credit for any taxable
year which is attributable to the retired employee health
insurance expenses credit determined under section 45G may be
carried back to a taxable year ending before the date of the
enactment of section 45G.''.
(d) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 is amended by adding at the end
the following:
``Sec. 45G. Retired employee health
insurance expenses.''.
(e) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred in taxable years beginning after
December 31, 2003.
TITLE III--AMENDMENTS TO TITLE VII OF THE TARIFF ACT OF 1930
SEC. 301. CAPTIVE PRODUCTION.
Section 771(7)(C)(iv) of the Tariff Act of 1930 (19 U.S.C.
1677(7)(C)(iv)) is amended to read as follows:
``(iv) Captive production.--If domestic
producers transfer internally, including to
affiliated persons as defined in paragraph
(33), significant production of the domestic
like product for the production of a downstream
article and sell significant production of the
domestic like product in the merchant market,
then the Commission, in determining market
share and the factors affecting financial
performance set forth in clause (iii), shall
focus primarily on the merchant market for the
domestic like product.''.
SEC. 302. PRICE.
Section 771(7)(C)(ii) of the Tariff Act of 1930 (19 U.S.C.
1677(7)(C)(ii)) is amended by adding at the end the following flush
sentence:
``Imports of the subject merchandise may have a
significant effect on prices irrespective of
whether the magnitude of, or change in the
volume of, imports of the subject merchandise
is significant.''.
SEC. 303. VULNERABILITY OF INDUSTRY.
Section 771(7)(C)(iii) of the Tariff Act of 1930 (19 U.S.C.
1677(7)(C)(iii)) is amended in the last sentence by striking the period
at the end and inserting ``, including whether the industry is
vulnerable to the effects of imports of the subject merchandise.''.
SEC. 304. CAUSAL RELATIONSHIP BETWEEN IMPORTS AND INJURY.
Section 771(7)(E)(ii) of the Tariff Act of 1930 (19 U.S.C.
1677(7)(E)(ii)) is amended by adding at the end the following: ``The
Commission need not determine the significance of imports of the
subject merchandise relative to other economic factors.''.
SEC. 305. PREVENTION OF CIRCUMVENTION.
Section 781(c) of the Tariff Act of 1930 (19 U.S.C. 1677j(c)) is
amended by adding at the end the following new paragraph:
``(3) Special rule.--The administering authority shall
apply paragraph (1) with respect to altered merchandise
excluded from, or not specifically included in, the merchandise
description used in an outstanding order or finding, if such
application is not inconsistent with the affirmative
determination of the Commission on which the order or finding
is based.''.
SEC. 306. FULL RECOGNITION OF SUBSIDY CONFERRED THROUGH PROVISION OF
GOODS AND SERVICES AND PURCHASE OF GOODS.
Section 771(5)(E) of the Tariff Act of 1930 (19 U.S.C. 1677(5)(E))
is amended by adding at the end the following: ``If transactions in the
country which is the subject of the investigation or review do not
reflect market conditions due to government action associated with
provision of the good or service or purchase of the goods,
determination of the adequacy of remuneration shall be through
comparison with the most comparable market price elsewhere in the
world.''.
SEC. 307. PROHIBITION ON MASKING REIMBURSEMENT OF DUTIES.
Section 772(d) of the Tariff Act of 1930 (19 U.S.C. 1677a(d)) is
amended--
(1) by striking ``and'' at the end of paragraph (2);
(2) by striking the period at the end of paragraph (3) and
inserting ``; and''; and
(3) by adding at the end the following new paragraphs:
``(4) if the importer is the producer or exporter, or the
importer and the producer or exporter are affiliated persons,
an amount equal to the dumping margin calculated under section
771(35)(A), unless the producer or exporter is able to
demonstrate that the importer was in no way reimbursed for any
antidumping duties paid; and
``(5) if the importer is the producer or exporter, or the
importer and the producer or exporter are affiliated persons,
an amount equal to the net countervailable subsidy calculated
under section 771(6), unless the producer or exporter is able
to demonstrate that the importer was in no way reimbursed for
any countervailing duties paid.''.
SEC. 308. EXPORT PRICE AND CONSTRUCTED EXPORT PRICE.
Section 772(c)(2)(A) of the Tariff Act of 1930 (19 U.S.C.
1677a(c)(2)(A)) is amended by inserting ``(including countervailing
duties imposed under this title)'' after ``duties''.
SEC. 309. APPLICATION TO CANADA AND MEXICO.
Pursuant to article 1902 of the North American Free Trade Agreement
and section 408 of the North American Free Trade Agreement
Implementation Act, the amendments made by this title shall apply with
respect to goods from Canada and Mexico.
SEC. 310. EFFECTIVE DATE.
The amendments made by this title shall apply with respect to
determinations made under title VII of the Tariff Act of 1930 that--
(1) are made with respect to investigations initiated or
petitions filed after the date of enactment of this Act; or
(2) have not become final as of such date of enactment.
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