I

103D CONGRESS

1ST SESSION H. R. 1210

To amend the Internal Revenue Code of 1986 to deny the benefits of the

Puerto Rico and possession tax credit in the case of runaway plants.

IN THE HOUSE OF REPRESENTATIVES

MARCH 3, 1993

Mr. STARK (for himself and Mr. ROEMER) introduced the following bill; which

was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to deny the

benefits of the Puerto Rico and possession tax credit

in the case of runaway plants.

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

3 SECTION 1. LIMITATION ON PUERTO RICO AND POSSES4 SION TAX CREDIT.

5 (a) GENERAL RULE.—Section 936 of the Internal

6 Revenue Code of 1986 (relating to Puerto Rico and pos7 session tax credit) is amended by adding at the end there8 of the following new subsection:

9 ‘‘(i) DENIAL OF CREDIT FOR INCOME ATTRIB10 UTABLE TO RUNAWAY PLANTS.—
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1 ‘‘(1) IN GENERAL.—

2 ‘‘(A) INCOME ATTRIBUTABLE TO SHARE3 HOLDERS.—The runaway plant income of a cor4 poration electing the application of this section

5 for any taxable year (hereinafter in this sub6 section referred to as the ‘electing corporation’)

7 shall be included on a pro rata basis in the

8 gross income of all shareholders of such electing

9 corporation at the close of the taxable year of

10 such electing corporation as income from

11 sources within the United States for the taxable

12 year of such shareholder in which or with which

13 the taxable year of such electing corporation

14 ends.

15 ‘‘(B) EXCLUSION FROM THE INCOME OF

16 AN ELECTING CORPORATION.—The taxable in17 come of an electing corporation shall be reduced

18 by the amount which is included in the gross

19 income of a shareholder of such corporation by

20 reason of subparagraph (A).

21 ‘‘(2) FOREIGN SHAREHOLDERS; SHAREHOLD22 ERS NOT SUBJECT TO TAX.—

23 ‘‘(A) IN GENERAL.—Paragraph (1)(A)

24 shall not apply with respect to any share25 holder—
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1 ‘‘(i) who is not a United States per2 son, or

3 ‘‘(ii) who is not subject to tax under

4 this title on runaway plant income which

5 would be allocated to such shareholder (but

6 for this subparagraph).

7 ‘‘(B) TREATMENT OF NONALLOCATED

8 RUNAWAY PLANT INCOME.—For purposes of

9 this subtitle, runaway plant income of an elect10 ing corporation which is not included in the

11 gross income of a shareholder of such corpora12 tion by reason of subparagraph (A) shall be

13 treated as taxable income from sources within

14 the United States.

15 ‘‘(3) EXCLUSION OF INCOME FOR QUALIFICA16 TION TESTS.—Any gross income taken into account

17 in determining the amount of the runaway plant in18 come of any electing corporation shall not be taken

19 into account for purposes of subsection (a)(2).

20 ‘‘(4) RUNAWAY PLANT INCOME.—For purposes

21 of this subsection, the term ‘runaway plant income’

22 means the portion of the taxable income of the elect23 ing corporation which is attributable to a disquali24 fied facility.
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1 ‘‘(5) DISQUALIFIED FACILITY.—For purposes

2 of this subsection—

3 ‘‘(A) IN GENERAL.—The term ‘disqualified

4 facility’ means any facility at which operations

5 are commenced with respect to the electing cor6 poration after March 3, 1993 unless—

7 ‘‘(i) the Secretary determines that op8 erations at such facility—

9 ‘‘(I) will not result in a substan10 tial adverse effect on the level of em11 ployment at any facility in the United

12 States operated by the electing cor13 poration or a person related to the

14 electing corporation, and

15 ‘‘(II) will not result in such an

16 effect with respect to any other facil17 ity in the United States on account of

18 changes in a supplier relationship to

19 the electing corporation or a person

20 related to the electing corporation,

21 and

22 ‘‘(ii) the electing corporation files a

23 request with the Secretary for a determina24 tion under clause (i) on or before the ear25 lier of—
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1 ‘‘(I) the day 90 days after the

2 date on which an application is sub3 mitted to the possession for tax incen4 tives for such facility, or

5 ‘‘(II) the day 1 year before the

6 date on which operations at such fa7 cility commence.

8 The Secretary may treat a request not filed be9 fore the time required under clause (ii) as time10 ly filed if the Secretary determines that there

11 was reasonable cause for not filing the request

12 before the time required.

13 ‘‘(B) CERTAIN REVOCATIONS REQUIRED.—

14 ‘‘(i) IN GENERAL.—The Secretary

15 shall revoke a determination under sub16 paragraph (A)(i) at any time before the

17 close of the 3-year period beginning on the

18 date on which operations at the facility

19 commenced if the Secretary determines

20 that, on the basis of the facts and cir21 cumstances then known, the requirements

22 of subparagraph (A)(i) are not satisfied.

23 ‘‘(ii) MISREPRESENTATIONS, ETC.—

24 The Secretary shall, at any time, revoke a

25 determination under subparagraph (A)(i)
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1 if, in connection with the request for such

2 determination, there was a misrepresenta3 tion with respect to (or a failure to dis4 close) any material information by the

5 electing corporation or a related person.

6 ‘‘(iii) REVOCATIONS RETROACTIVE.—

7 If any determination is revoked under this

8 subparagraph, this subsection (other than

9 paragraph (8) thereof) shall be applied as

10 if such determination had never been

11 made.

12 ‘‘(C) OPPORTUNITY FOR PUBLIC COM13 MENT.—No determination may be made under

14 subparagraph (A)(i) unless the Secretary allows

15 an opportunity for public comment on the re16 quest for such determination.

17 ‘‘(6) EXPANSIONS TREATED AS SEPARATE FA18 CILITIES.—

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

20 subsection, any substantial increase in employ21 ment at a facility shall be treated as a separate

22 facility at which operations are commenced with

23 respect to the electing corporation as of the

24 date of such increase.
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1 ‘‘(B) SUBSTANTIAL INCREASE IN EMPLOY2 MENT.—For purposes of subparagraph (A),

3 there shall be deemed to be a substantial in4 crease in employment as of any day at any fa5 cility if—

6 ‘‘(i) such day is the last day of a pay7 roll period and the average number of em8 ployees performing services at such facility

9 during such period exceeds 110 percent of

10 the average number of employees perform11 ing services at such facility during the cor12 responding payroll period in the preceding

13 calendar year, or

14 ‘‘(ii) there is an expansion in such fa15 cility or the operations at such facility with

16 respect to which a separate or supple17 mental application or other request relat18 ing to tax incentives for such expansion is

19 made to governmental authorities of the

20 possession.

21 Appropriate adjustments in the application of

22 clause (i) shall be made in the case of employ23 ees not performing services on a full-time basis.

24 ‘‘(7) SPECIAL RULES.—
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1 ‘‘(A) DISTRIBUTIONS TO MEET QUALIFICA2 TION STANDARDS.—Rules similar to the rules

3 of subsection (h)(4) shall apply for purposes of

4 this subsection.

5 ‘‘(B) RELATED PERSON.—For purposes of

6 this subsection, the rules of subparagraphs (D)

7 and (E) of subsection (h)(3) shall apply in de8 termining whether any person is related to the

9 electing corporation.

10 ‘‘(8) PUBLIC DISCLOSURE.—

11 ‘‘(A) PUBLICATION IN FEDERAL REG12 ISTER.—The Secretary shall publish in the Fed13 eral Register—

14 ‘‘(i) a notification of each request for

15 a determination under paragraph (5)(A)(i),

16 and

17 ‘‘(ii) a notification of the Secretary’s

18 determination in the case of each such re19 quest.

20 ‘‘(B) PUBLIC INSPECTION OF DETERMINA21 TION.—

22 ‘‘(i) IN GENERAL.—Notwithstanding

23 section 6103, the text of any determination

24 made by the Secretary under paragraph

25 (5)(A)(i) and any background file docu-
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1 ment relating to such determination shall

2 be open to public inspection at such place

3 as the Secretary may prescribe.

4 ‘‘(ii) EXEMPTIONS FROM DISCLO5 SURE.—Rules similar to the rules of sec6 tion 6110(c) (other than paragraph (1)

7 thereof) shall apply for purposes of clause

8 (i).

9 ‘‘(iii) BACKGROUND FILE DOCU10 MENT.—For purposes of this subpara11 graph, the term ‘background file docu12 ment’ has the meaning given such term by

13 section 6110(b)(2) determined by treating

14 the determination under paragraph (2) as

15 a written determination.’’

16 (b) EFFECTIVE DATE.—

17 (1) IN GENERAL.—The amendment made by

18 subsection (a) shall apply to taxable years ending

19 after March 3, 1993.

20 (2) TIME FOR FILING REQUEST.—The time for

21 filing a request under section 936(i)(5)(A)(ii) shall

22 in no event expire before the date 90 days after the

23 date of the enactment of this Act.

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