Territorial Economic Recovery Act
Sponsored By: Representative Plaskett, Stacey E. [D-VI-At Large]
Introduced
Summary
This bill would create a new rule that excludes active, possession-based income from GILTI for qualifying possession corporations. It targets companies operating in Puerto Rico, the U.S. Virgin Islands, and other specified U.S. possessions and narrows which foreign earnings count toward GILTI.
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- Possession-based corporations that qualify as a "qualified possession corporation" would have income that is effectively connected with active trade or business in a possession excluded from a controlled foreign corporation's GILTI tested income. Qualification uses a 3-year lookback with two thresholds: at least 80% of gross income from possession sources and at least 75% of gross income effectively connected to active business in the possession.
- U.S. shareholders of those controlled foreign corporations would generally face lower GILTI inclusion for the years the foreign entity meets the tests, reducing the portion of foreign earnings counted under GILTI for U.S. tax purposes.
- The rule would apply to foreign corporations' taxable years beginning after December 31, 2023, and to U.S. shareholder years that include or align with those foreign tax years. The change works within existing concepts of source and effectively connected income and does not create new credits or appropriations.
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Bill Overview
Analyzed Economic Effects
1 provisions identified: 1 benefits, 0 costs, 0 mixed.
Lower U.S. tax on possession business income
This bill would change how GILTI is figured for some companies in U.S. possessions. U.S. shareholders of a qualified possession corporation would not count its income tied to active business in the possession when figuring GILTI. A company would qualify if, over the last 3 years (or since it began), at least 80% of its gross income is from a U.S. possession and at least 75% is from active business there. For this rule, a possession includes Puerto Rico, the U.S. Virgin Islands, and any specified possession described in section 931(c). If enacted, this would apply to foreign companies’ tax years beginning after December 31, 2023, and to U.S. shareholders’ tax years that include those years.
Sponsors & CoSponsors
Sponsor
Plaskett, Stacey E. [D-VI-At Large]
VI • D
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
No roll call votes available for this bill.
View on Congress.gov