II 

118TH CONGRESS 

1ST SESSION S. 3486 

To amend the Internal Revenue Code of 1986 to disallow companies associated with foreign adversaries from receiving the advanced manufacturing 

production credit. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 13, 2023 

Mr. RUBIO 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 disallow 

companies associated with foreign adversaries from receiving the advanced manufacturing production credit. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Protecting American 

5 Advanced Manufacturing Act’’. 

2 

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1 SEC. 2. PROHIBITION ON ALLOWANCE OF ADVANCED MAN2 UFACTURING PRODUCTION CREDIT FOR ELI3 GIBLE COMPONENTS PRODUCED BY COMPA4 NIES ASSOCIATED WITH FOREIGN ADVER5 SARIES. 

6 (a) IN GENERAL.—Section 45X of the Internal Rev7 enue Code of 1986 is amended by adding at the end the 

8 following new subsection: 

9 ‘‘(e) PROHIBITION ON ALLOWANCE OF CREDIT FOR

10 ELIGIBLE COMPONENTS PRODUCED BY COMPANIES AS11 SOCIATED WITH FOREIGN ADVERSARIES.— 

12 ‘‘(1) IN GENERAL.—No credit shall be allowed 

13 under subsection (a) with respect to any eligible 

14 component which is produced by a disqualified enti15 ty. 

16 ‘‘(2) DISQUALIFIED ENTITY.— 

17 ‘‘(A) IN GENERAL.—For purposes of this 

18 subsection, the term ‘disqualified entity’ means 

19 any entity described in subparagraphs (B) 

20 through (D). 

21 ‘‘(B) FOREIGN ADVERSARY PARTIES.—The 

22 entities described in this subparagraph consist 

23 of the following: 

24 ‘‘(i) The government of a foreign ad25 versary, any agency or government instru26 mentality of a foreign adversary, or any 

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1 entity which is directly or indirectly owned, 

2 controlled, or directed by any such govern3 ment, agency, or government instrumen4 tality. 

5 ‘‘(ii) Any entity organized under the 

6 laws of a foreign adversary (or any polit7 ical subdivision thereof) or whose head8 quarters is located within a foreign adver9 sary. 

10 ‘‘(C) OWNED, CONTROLLED, DIRECTED, OR

11 INFLUENCED BY FOREIGN ADVERSARY PAR12 TIES.—The entities described in this subpara13 graph consist of the following: 

14 ‘‘(i) Any entity for which, on any date 

15 during the taxable year, not less than 10 

16 percent of the outstanding equity interests 

17 (by value, voting, governance, board ap18 pointment, or similar rights or influence) 

19 are held directly or indirectly by, or on be20 half of, 1 or more of the entities described 

21 in subparagraph (B), including through in22 terests in co-investment vehicles, joint ven23 tures, or similar arrangements. 

24 ‘‘(ii) Any entity which is directly or 

25 indirectly controlled, directed, or materially 

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1 influenced by any entity described in sub2 paragraph (B). 

3 ‘‘(iii) Any entity for which the actions, 

4 management, ownership, or operations of 

5 such entity are subject to the direct influ6 ence of an entity described in subpara7 graph (B). 

8 ‘‘(iv) Any entity for which an interest 

9 in such entity is held by an entity de10 scribed in subparagraph (B) (referred to in 

11 this clause as the ‘beneficiary firm’) as a 

12 derivative financial instrument or through 

13 a contractual arrangement between the 

14 beneficiary firm and such entity, including 

15 any financial instrument or other contract 

16 between the beneficiary firm and the entity 

17 which seeks to replicate any financial re18 turn with respect to such entity or interest 

19 in such entity. 

20 ‘‘(D) DEBT OR OTHER ARRANGEMENTS

21 WITH FOREIGN ADVERSARY PARTIES.— 

22 ‘‘(i) IN GENERAL.—An entity is de23 scribed in this subparagraph if, as a result 

24 of any prohibited obligation or arrange25 ment— 

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1 ‘‘(I) the actions, management, or 

2 operations of such entity are subject 

3 to the direct or indirect influence of 1 

4 or more entities described in subpara5 graph (B) or (C), or 

6 ‘‘(II) such entity provides a sub7 stantial benefit to 1 or more entities 

8 described in subparagraph (B) or (C). 

9 ‘‘(ii) PROHIBITED OBLIGATION OR AR10 RANGEMENT.—For purposes of this sub11 paragraph, the term ‘prohibited obligation 

12 or arrangement’ means any— 

13 ‘‘(I) debt, 

14 ‘‘(II) lease or sublease arrange15 ment, 

16 ‘‘(III) management or operating 

17 arrangement, 

18 ‘‘(IV) contract manufacturing ar19 rangement, 

20 ‘‘(V) license or sublicense agree21 ment, or 

22 ‘‘(VI) financial derivative. 

23 ‘‘(iii) EXCEPTION.—For purposes of 

24 clause (i)(II), the purchase of equipment 

25 or manufacturing inputs in an arm’sVerDate Sep 11 2014 03:51 Dec 29, 2023 Jkt 049200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S3486.IS S3486
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1 length transaction shall not, in and of 

2 itself, be deemed to provide a substantial 

3 benefit. 

4 ‘‘(E) OTHER DEFINITIONS.—For purposes 

5 of this paragraph— 

6 ‘‘(i) CONTROL.—The term ‘control’ 

7 has the meaning given in section 800.208 

8 of title 31, Code of Federal Regulations 

9 (as in effect on the date of enactment of 

10 the Protecting American Advanced Manu11 facturing Act). 

12 ‘‘(ii) FOREIGN ADVERSARY.—The 

13 term ‘foreign adversary’ has the meaning 

14 given the term ‘covered nation’ in section 

15 4872(d)(2) of title 10, United States Code. 

16 ‘‘(3) ADMINISTRATION.—The Secretary may 

17 issue such guidance as is necessary to carry out the 

18 purposes of this subsection, including establishment 

19 of rules for— 

20 ‘‘(A) implementation of paragraph 

21 (2)(C)(i) for determination of whether the per22 centage requirements with respect to out23 standing equity interests have been satisfied in 

24 the case of an entity for which the stock of such 

25 entity is traded on an established securities 

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1 market in the United States or any foreign 

2 country, and 

3 ‘‘(B) preventing entities from evading, cir4 cumventing, or abusing the application of the 

5 requirements under this subsection.’’. 

6 (b) EFFECTIVE DATE.—The amendment made by 

7 this section shall apply to taxable years beginning after 

8 the date of enactment of this Act. 

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