[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1922 Introduced in Senate (IS)]
1st Session
S. 1922
To amend the Internal Revenue Code of 1986 to comply with the World
Trade Organization rulings on the FSC/ETI benefit in a manner that
preserves manufacturing jobs and production activities in the United
States, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
November 21, 2003
Mr. Smith (for himself and Mr. Breaux) 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 comply with the World
Trade Organization rulings on the FSC/ETI benefit in a manner that
preserves manufacturing jobs and production activities in the United
States, 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 ``American
Manufacturing Jobs Act of 2003''.
(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.
SEC. 2. 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(a) In General.--Section 114 is hereby repealed.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repealed.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:
Years: The phaseout 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.
(C) Short taxable year.--The Secretary shall
prescribe guidance for the computation of the
transition amount in the case of a short taxable year.
(4) Base period amount.--For purposes of this subsection,
the base period amount is the FSC/ETI benefit 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 significant part by the
taxpayer.
(6) Special rule for agricultural and horticultural
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 199(h)(2) 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) or
section 5(c)(1)(B) of the FSC Repeal and Extraterritorial
Income Exclusion Act of 2000, 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 FSC/ETI benefit 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. 3. 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) Allowance of Deduction.--
``(1) 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.
``(2) Phasein.--In the case of taxable years beginning in
2003, 2004, 2005, 2006, 2007, or 2008, paragraph (1) shall be
applied by substituting for the percentage contained therein
the transition percentage determined under the following table:
``Taxable years beginning in: The transition percentage is:
2003 or 2004........................................... 1
2005................................................... 2
2006................................................... 3
2007 or 2008........................................... 6.
``(b) Deduction Limited to Wages Paid.--
``(1) In general.--The amount of the deduction allowable
under subsection (a) for any taxable year shall not exceed 50
percent of the W-2 wages of the employer for the taxable year.
``(2) W-2 wages.--For purposes of paragraph (1), the term
`W-2 wages' means the sum of the aggregate amounts the taxpayer
is required to include on statements under paragraphs (3) and
(8) of section 6051(a) with respect to employment of employees
of the taxpayer during the taxpayer's taxable year.
``(3) Special rules.--
``(A) Pass-thru entities.--In the case of an S
corporation, partnership, estate or trust, or other
pass-thru entity, the limitation under this subsection
shall apply at the entity level.
``(B) Acquisitions and dispositions.--The Secretary
shall provide for the application of this subsection in
cases where the taxpayer acquires, or disposes of, the
major portion of a trade or business or the major
portion of a separate unit of a trade or business
during the taxable year.
``(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 shall be treated
as acquired by purchase, and its cost shall be treated
as not less than its fair market value immediately
after 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--
``(1) In general.--The term `domestic production gross
receipts' means the gross receipts of the taxpayer which are
derived from--
``(A) any sale, exchange, or other disposition of,
or
``(B) 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.
``(2) Special rules for certain property.--In the case of
any qualifying production property described in subsection
(f)(1)(C)--
``(A) such property shall be treated for purposes
of paragraph (1) as produced in significant part by the
taxpayer within the United States if more than 50
percent of the aggregate development and production
costs are incurred by the taxpayer within the United
States, and
``(B) if a taxpayer acquires such property before
such property begins to generate substantial gross
receipts, any development or production costs incurred
before the acquisition shall be treated as incurred by
the taxpayer for purposes of subparagraph (A) and
paragraph (1).
``(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), including any underlying copyright or
trademark.
``(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) oil or gas,
``(C) electricity,
``(D) water supplied by pipeline to the consumer,
``(E) utility services, or
``(F) any 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) Application of section to pass-thru entities.--In the
case of an S corporation, partnership, estate or trust, or
other pass-thru entity--
``(A) subject to the provisions of paragraph (2)
and subsection (b)(3)(A), this section shall be applied
at the shareholder, partner, or similar level, and
``(B) the Secretary shall prescribe rules for the
application of this section, including rules relating
to--
``(i) restrictions on the allocation of the
deduction to taxpayers at the partner or
similar level, and
``(ii) additional reporting requirements.
``(2) Exclusion for patrons of agricultural and
horticultural 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 which is engaged in the marketing of
agricultural or horticultural products, 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(d),
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) Special rule for affiliated groups.--
``(A) In general.--All members of an expanded
affiliated group shall be treated as a single
corporation for purposes of this section.
``(B) Expanded affiliated group.--The term
`expanded affiliated group' means an affiliated group
as defined in section 1504(a), determined--
``(i) by substituting `50 percent' for `80
percent' each place it appears, and
``(ii) without regard to paragraphs (2) and
(4) of section 1504(b).
``(4) 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.
``(5) Ordering rule.--The amount of any other deduction
allowable under this chapter shall be determined as if this
section had not been enacted.
``(6) Trade or business requirement.--This section shall be
applied by only taking into account items which are
attributable to the actual conduct of a trade or business.
``(7) Possessions, etc.--
``(A) In general.--For purposes of subsections (d)
and (e), the term `United States' includes the
Commonwealth of Puerto Rico, Guam, American Samoa, the
Commonwealth of the Northern Mariana Islands, and the
Virgin Islands of the United States.
``(B) Special rules for applying wage limitation.--
For purposes of applying the limitation under
subsection (b) for any taxable year--
``(i) the determination of W-2 wages of a
taxpayer shall be made without regard to any
exclusion under section 3401(a)(8) for
remuneration paid for services performed in a
jurisdiction described in subparagraph (A), and
``(ii) in determining the amount of any
credit allowable under section 30A or 936 for
the taxable year, there shall not be taken into
account any wages which are taken into account
in applying such limitation.
``(8) 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 2(c)(2)
of the American Manufacturing Jobs Act of 2003 applies
to such transaction, and
``(B) any deduction allowed under section 2(e) of
such Act shall be disregarded in determining the
portion of the taxable income which is attributable to
domestic production gross receipts.''.
(b) 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.''.
(c) 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.''.
(d) 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.
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