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[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 33 Engrossed in House (EH)]

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119th CONGRESS
  1st Session
                                 H. R. 33

_______________________________________________________________________

                                 AN ACT

 
To amend the Internal Revenue Code of 1986 to provide special rules for 
 the taxation of certain residents of Taiwan with income from sources 
                       within the United States.

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

     TITLE I--UNITED STATES-TAIWAN EXPEDITED DOUBLE-TAX RELIEF ACT

SEC. 101. SHORT TITLE.

    This title may be cited as the ``United States-Taiwan Expedited 
Double-Tax Relief Act''.

SEC. 102. SPECIAL RULES FOR TAXATION OF CERTAIN RESIDENTS OF TAIWAN.

    (a) In General.--Subpart D of part II of subchapter N of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 894 the following new section:

``SEC. 894A. SPECIAL RULES FOR QUALIFIED RESIDENTS OF TAIWAN.

    ``(a) Certain Income From United States Sources.--
            ``(1) Interest, dividends, and royalties, etc.--
                    ``(A) In general.--In the case of interest (other 
                than original issue discount), dividends, royalties, 
                amounts described in section 871(a)(1)(C), and gains 
                described in section 871(a)(1)(D) received by or paid 
                to a qualified resident of Taiwan--
                            ``(i) sections 871(a), 881(a), 1441(a), 
                        1441(c)(5), and 1442(a) shall each be applied 
                        by substituting `the applicable percentage (as 
                        defined in section 894A(a)(1)(C))' for `30 
                        percent' each place it appears, and
                            ``(ii) sections 871(a), 881(a), and 
                        1441(c)(1) shall each be applied by 
                        substituting `a United States permanent 
                        establishment of a qualified resident of 
                        Taiwan' for `a trade or business within the 
                        United States' each place it appears.
                    ``(B) Exceptions.--
                            ``(i) In general.--Subparagraph (A) shall 
                        not apply to--
                                    ``(I) any dividend received from or 
                                paid by a real estate investment trust 
                                which is not a qualified REIT dividend,
                                    ``(II) any amount subject to 
                                section 897,
                                    ``(III) any amount received from or 
                                paid by an expatriated entity (as 
                                defined in section 7874(a)(2)) to a 
                                foreign related person (as defined in 
                                section 7874(d)(3)), and
                                    ``(IV) any amount which is included 
                                in income under section 860C to the 
                                extent that such amount does not exceed 
                                an excess inclusion with respect to a 
                                REMIC.
                            ``(ii) Qualified reit dividend.--For 
                        purposes of clause (i)(I), the term `qualified 
                        REIT dividend' means any dividend received from 
                        or paid by a real estate investment trust if 
                        such dividend is paid with respect to a class 
                        of shares that is publicly traded and the 
                        recipient of the dividend is a person who holds 
                        an interest in any class of shares of the real 
                        estate investment trust of not more than 5 
                        percent.
                    ``(C) Applicable percentage.--For purposes of 
                applying subparagraph (A)(i)--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the term `applicable percentage' 
                        means 10 percent.
                            ``(ii) Special rules for dividends.-- In 
                        the case of any dividend in respect of stock 
                        received by or paid to a qualified resident of 
                        Taiwan, the applicable percentage shall be 15 
                        percent (10 percent in the case of a dividend 
                        which meets the requirements of subparagraph 
                        (D) and is received by or paid to an entity 
                        taxed as a corporation in Taiwan).
                    ``(D) Requirements for lower dividend rate.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met with respect to any 
                        dividend in respect of stock in a corporation 
                        if, at all times during the 12-month period 
                        ending on the date such stock becomes ex-
                        dividend with respect to such dividend--
                                    ``(I) the dividend is derived by a 
                                qualified resident of Taiwan, and
                                    ``(II) such qualified resident of 
                                Taiwan has held directly at least 10 
                                percent (by vote and value) of the 
                                total outstanding shares of stock in 
                                such corporation.
                        For purposes of subclause (II), a person shall 
                        be treated as directly holding a share of stock 
                        during any period described in the preceding 
                        sentence if the share was held by a corporation 
                        from which such person later acquired that 
                        share and such corporation was, at the time the 
                        share was acquired, both a connected person to 
                        such person and a qualified resident of Taiwan.
                            ``(ii) Exception for rics and reits.--
                        Notwithstanding clause (i), the requirements of 
                        this subparagraph shall not be treated as met 
                        with respect to any dividend paid by a 
                        regulated investment company or a real estate 
                        investment trust.
            ``(2) Qualified wages.--
                    ``(A) In general.--No tax shall be imposed under 
                this chapter (and no amount shall be withheld under 
                section 1441(a) or chapter 24) with respect to 
                qualified wages paid to a qualified resident of Taiwan 
                who--
                            ``(i) is not a resident of the United 
                        States (determined without regard to subsection 
                        (c)(3)(E)), or
                            ``(ii) is employed as a member of the 
                        regular component of a ship or aircraft 
                        operated in international traffic.
                    ``(B) Qualified wages.--
                            ``(i) In general.--The term `qualified 
                        wages' means wages, salaries, or similar 
                        remunerations with respect to employment 
                        involving the performance of personal services 
                        within the United States which--
                                    ``(I) are paid by (or on behalf of) 
                                any employer other than a United States 
                                person, and
                                    ``(II) are not borne by a United 
                                States permanent establishment of any 
                                person other than a United States 
                                person.
                            ``(ii) Exceptions.--Such term shall not 
                        include directors' fees, income derived as an 
                        entertainer or athlete, income derived as a 
                        student or trainee, pensions, amounts paid with 
                        respect to employment with the United States, 
                        any State (or political subdivision thereof), 
                        or any possession of the United States (or any 
                        political subdivision thereof), or other 
                        amounts specified in regulations or guidance 
                        under subsection (f)(1)(F).
            ``(3) Income derived from entertainment or athletic 
        activities.--
                    ``(A) In general.--No tax shall be imposed under 
                this chapter (and no amount shall be withheld under 
                section 1441(a) or chapter 24) with respect to income 
                derived by an entertainer or athlete who is a qualified 
                resident of Taiwan from personal activities as such 
                performed in the United States if the aggregate amount 
                of gross receipts from such activities for the taxable 
                year do not exceed $30,000.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                with respect to--
                            ``(i) income which is qualified wages (as 
                        defined in paragraph (2)(B), determined without 
                        regard to clause (ii) thereof), or
                            ``(ii) income which is effectively 
                        connected with a United States permanent 
                        establishment.
    ``(b) Income Connected With a United States Permanent Establishment 
of a Qualified Resident of Taiwan.--
            ``(1) In general.--
                    ``(A) In general.--In lieu of applying sections 
                871(b) and 882, a qualified resident of Taiwan that 
                carries on a trade or business within the United States 
                through a United States permanent establishment shall 
                be taxable as provided in section 1, 11, 55, or 59A, on 
                its taxable income which is effectively connected with 
                such permanent establishment.
                    ``(B) Determination of taxable income.--In 
                determining taxable income for purposes of paragraph 
                (1), gross income includes only gross income which is 
                effectively connected with the permanent establishment.
            ``(2) Treatment of dispositions of united states real 
        property.--In the case of a qualified resident of Taiwan, 
        section 897(a) shall be applied--
                    ``(A) by substituting `carried on a trade or 
                business within the United States through a United 
                States permanent establishment' for `were engaged in a 
                trade or business within the United States', and
                    ``(B) by substituting `such United States permanent 
                establishment' for `such trade or business'.
            ``(3) Treatment of branch profits taxes.--In the case of 
        any corporation which is a qualified resident of Taiwan, 
        section 884 shall be applied--
                    ``(A) by substituting `10 percent' for `30 percent' 
                in subsection (a) thereof, and
                    ``(B) by substituting `a United States permanent 
                establishment of a qualified resident of Taiwan' for 
                `the conduct of a trade or business within the United 
                States' in subsection (d)(1) thereof.
            ``(4) Special rule with respect to income derived from 
        certain entertainment or athletic activities.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                the extent that the income is derived--
                            ``(i) in respect of entertainment or 
                        athletic activities performed in the United 
                        States, and
                            ``(ii) by a qualified resident of Taiwan 
                        who is not the entertainer or athlete 
                        performing such activities.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                if the person described in subparagraph (A)(ii) is 
                contractually authorized to designate the individual 
                who is to perform such activities.
            ``(5) Special rule with respect to certain amounts.--
        Paragraph (1) shall not apply to any income which is wages, 
        salaries, or similar remuneration with respect to employment or 
        with respect to any amount which is described in subsection 
        (a)(2)(B)(ii).
    ``(c) Qualified Resident of Taiwan.--For purposes of this section--
            ``(1) In general.--The term `qualified resident of Taiwan' 
        means any person who--
                    ``(A) is liable to tax under the laws of Taiwan by 
                reason of such person's domicile, residence, place of 
                management, place of incorporation, or any similar 
                criterion,
                    ``(B) is not a United States person (determined 
                without regard to paragraph (3)(E)), and
                    ``(C) in the case of an entity taxed as a 
                corporation in Taiwan, meets the requirements of 
                paragraph (2).
            ``(2) Limitation on benefits for corporate entities of 
        taiwan.--
                    ``(A) In general.--Subject to subparagraphs (E) and 
                (F), an entity meets the requirements of this paragraph 
                only if it--
                            ``(i) meets the ownership and income 
                        requirements of subparagraph (B),
                            ``(ii) meets the publicly traded 
                        requirements of subparagraph (C), or
                            ``(iii) meets the qualified subsidiary 
                        requirements of subparagraph (D).
                    ``(B) Ownership and income requirements.--The 
                requirements of this subparagraph are met for an entity 
                if--
                            ``(i) at least 50 percent (by vote and 
                        value) of the total outstanding shares of stock 
                        in such entity are owned directly or indirectly 
                        by qualified residents of Taiwan, and
                            ``(ii) less than 50 percent of such 
                        entity's gross income (and in the case of an 
                        entity that is a member of a tested group, less 
                        than 50 percent of the tested group's gross 
                        income) is paid or accrued, directly or 
                        indirectly, in the form of payments that are 
                        deductible for purposes of the income taxes 
                        imposed by Taiwan, to persons who are not--
                                    ``(I) qualified residents of 
                                Taiwan, or
                                    ``(II) United States persons who 
                                meet such requirements with respect to 
                                the United States as determined by the 
                                Secretary to be equivalent to the 
                                requirements of this subsection 
                                (determined without regard to paragraph 
                                (1)(B)) with respect to residents of 
                                Taiwan.
                    ``(C) Publicly traded requirements.--An entity 
                meets the requirements of this subparagraph if--
                            ``(i) the principal class of its shares 
                        (and any disproportionate class of shares) of 
                        such entity are primarily and regularly traded 
                        on an established securities market in Taiwan, 
                        or
                            ``(ii) the primary place of management and 
                        control of the entity is in Taiwan and all 
                        classes of its outstanding shares described in 
                        clause (i) are regularly traded on an 
                        established securities market in Taiwan.
                    ``(D) Qualified subsidiary requirements.--An entity 
                meets the requirement of this subparagraph if--
                            ``(i) at least 50 percent (by vote and 
                        value) of the total outstanding shares of the 
                        stock of such entity are owned directly or 
                        indirectly by 5 or fewer entities--
                                    ``(I) which meet the requirements 
                                of subparagraph (C), or
                                    ``(II) which are United States 
                                persons the principal class of the 
                                shares (and any disproportionate class 
                                of shares) of which are primarily and 
                                regularly traded on an established 
                                securities market in the United States, 
                                and
                            ``(ii) the entity meets the requirements of 
                        clause (ii) of subparagraph (B).
                    ``(E) Only indirect ownership through qualifying 
                intermediaries counted.--
                            ``(i) In general.--Stock in an entity owned 
                        by a person indirectly through 1 or more other 
                        persons shall not be treated as owned by such 
                        person in determining whether the person meets 
                        the requirements of subparagraph (B)(i) or 
                        (D)(i) unless all such other persons are 
                        qualifying intermediate owners.
                            ``(ii) Qualifying intermediate owners.--The 
                        term `qualifying intermediate owner' means a 
                        person that is--
                                    ``(I) a qualified resident of 
                                Taiwan, or
                                    ``(II) a resident of any other 
                                foreign country (other than a foreign 
                                country that is a foreign country of 
                                concern) that has in effect a 
                                comprehensive convention with the 
                                United States for the avoidance of 
                                double taxation.
                            ``(iii) Special rule for qualified 
                        subsidiaries.--For purposes of applying 
                        subparagraph (D)(i), the term `qualifying 
                        intermediate owner' shall include any person 
                        who is a United States person who meets such 
                        requirements with respect to the United States 
                        as determined by the Secretary to be equivalent 
                        to the requirements of this subsection 
                        (determined without regard to paragraph (1)(B)) 
                        with respect to residents of Taiwan.
                    ``(F) Certain payments not included.--In 
                determining whether the requirements of subparagraph 
                (B)(ii) or (D)(ii) are met with respect to an entity, 
                the following payments shall not be taken into account:
                            ``(i) Arm's-length payments by the entity 
                        in the ordinary course of business for services 
                        or tangible property.
                            ``(ii) In the case of a tested group, 
                        intra-group transactions.
            ``(3) Dual residents.--
                    ``(A) Rules for determination of status.--
                            ``(i) In general.--An individual who is an 
                        applicable dual resident and who is described 
                        in subparagraph (B), (C), or (D) shall be 
                        treated as a qualified resident of Taiwan.
                            ``(ii) Applicable dual resident.--For 
                        purposes of this paragraph, the term 
                        `applicable dual resident' means an individual 
                        who--
                                    ``(I) is not a United States 
                                citizen,
                                    ``(II) is a resident of the United 
                                States (determined without regard to 
                                subparagraph (E)), and
                                    ``(III) would be a qualified 
                                resident of Taiwan but for paragraph 
                                (1)(B).
                    ``(B) Permanent home.--An individual is described 
                in this subparagraph if such individual--
                            ``(i) has a permanent home available to 
                        such individual in Taiwan, and
                            ``(ii) does not have a permanent home 
                        available to such individual in the United 
                        States.
                    ``(C) Center of vital interests.--An individual is 
                described in this subparagraph if--
                            ``(i) such individual has a permanent home 
                        available to such individual in both Taiwan and 
                        the United States, and
                            ``(ii) such individual's personal and 
                        economic relations (center of vital interests) 
                        are closer to Taiwan than to the United States.
                    ``(D) Habitual abode.--An individual is described 
                in this subparagraph if--
                            ``(i) such individual--
                                    ``(I) does not have a permanent 
                                home available to such individual in 
                                either Taiwan or the United States, or
                                    ``(II) has a permanent home 
                                available to such individual in both 
                                Taiwan and the United States but such 
                                individual's center of vital interests 
                                under subparagraph (C)(ii) cannot be 
                                determined, and
                            ``(ii) such individual has a habitual abode 
                        in Taiwan and not the United States.
                    ``(E) United states tax treatment of qualified 
                resident of taiwan.--Notwithstanding section 7701, an 
                individual who is treated as a qualified resident of 
                Taiwan by reason of this paragraph for all or any 
                portion of a taxable year shall not be treated as a 
                resident of the United States for purposes of computing 
                such individual's United States income tax liability 
                for such taxable year or portion thereof.
            ``(4) Rules of special application.--
                    ``(A) Dividends.--For purposes of applying this 
                section to any dividend, paragraph (2)(D) shall be 
                applied without regard to clause (ii) thereof.
                    ``(B) Items of income emanating from an active 
                trade or business in taiwan.--For purposes of this 
                section--
                            ``(i) In general.--Notwithstanding the 
                        preceding paragraphs of this subsection, if an 
                        entity taxed as a corporation in Taiwan is not 
                        a qualified resident of Taiwan but meets the 
                        requirements of subparagraphs (A) and (B) of 
                        paragraph (1), any qualified item of income 
                        such entity derived from the United States 
                        shall be treated as income of a qualified 
                        resident of Taiwan.
                            ``(ii) Qualified items of income.--
                                    ``(I) In general.--The term 
                                `qualified item of income' means any 
                                item of income which emanates from, or 
                                is incidental to, the conduct of an 
                                active trade or business in Taiwan 
                                (other than operating as a holding 
                                company, providing overall supervision 
                                or administration of a group of 
                                companies, providing group financing, 
                                or making or managing investments 
                                (unless such making or managing 
                                investments is carried on by a bank, 
                                insurance company, or registered 
                                securities dealer in the ordinary 
                                course of its business as such)).
                                    ``(II) Substantial activity 
                                requirement.--An item of income which 
                                is derived from a trade or business 
                                conducted in the United States or from 
                                a connected person shall be a qualified 
                                item of income only if the trade or 
                                business activity conducted in Taiwan 
                                to which the item is related is 
                                substantial in relation to the same or 
                                a complementary trade or business 
                                activity carried on in the United 
                                States. For purposes of applying this 
                                subclause, activities conducted by 
                                persons that are connected to the 
                                entity described in clause (i) shall be 
                                deemed to be conducted by such entity.
                            ``(iii) Exception.--This subparagraph shall 
                        not apply to any item of income derived by an 
                        entity if at least 50 percent (by vote or 
                        value) of such entity is owned (directly or 
                        indirectly) or controlled by residents of a 
                        foreign country of concern.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) United states permanent establishment.--
                    ``(A) In general.--The term `United States 
                permanent establishment' means, with respect to a 
                qualified resident of Taiwan, a permanent establishment 
                of such resident which is within the United States.
                    ``(B) Special rule.--The determination of whether 
                there is a permanent establishment of a qualified 
                resident of Taiwan within the United States shall be 
                made without regard to whether an entity which is taxed 
                as a corporation in Taiwan and which is a qualified 
                resident of Taiwan controls or is controlled by--
                            ``(i) a domestic corporation, or
                            ``(ii) any other person that carries on 
                        business in the United States (whether through 
                        a permanent establishment or otherwise).
            ``(2) Permanent establishment.--
                    ``(A) In general.--The term `permanent 
                establishment' means a fixed place of business through 
                which a trade or business is wholly or partly carried 
                on. Such term shall include--
                            ``(i) a place of management,
                            ``(ii) a branch,
                            ``(iii) an office,
                            ``(iv) a factory,
                            ``(v) a workshop, and
                            ``(vi) a mine, an oil or gas well, a 
                        quarry, or any other place of extraction of 
                        natural resources.
                    ``(B) Special rules for certain temporary 
                projects.--
                            ``(i) In general.--A building site or 
                        construction or installation project, or an 
                        installation or drilling rig or ship used for 
                        the exploration or exploitation of the sea bed 
                        and its subsoil and their natural resources, 
                        constitutes a permanent establishment only if 
                        it lasts, or the activities of the rig or ship 
                        lasts, for more than 12 months.
                            ``(ii) Determination of 12-month period.--
                        For purposes of clause (i), the period over 
                        which a building site or construction or 
                        installation project of a person lasts shall 
                        include any period of more than 30 days during 
                        which such person does not carry on activities 
                        at such building site or construction or 
                        installation project but connected activities 
                        are carried on at such building site or 
                        construction or installation project by one or 
                        more connected persons.
                    ``(C) Habitual exercise of contract authority 
                treated as permanent establishment.--Notwithstanding 
                subparagraphs (A) and (B), where a person (other than 
                an agent of an independent status to whom subparagraph 
                (D)(ii) applies) is acting on behalf of a trade or 
                business of a qualified resident of Taiwan and has and 
                habitually exercises an authority to conclude contracts 
                that are binding on the trade or business, that trade 
                or business shall be deemed to have a permanent 
                establishment in the country in which such authority is 
                exercised in respect of any activities that the person 
                undertakes for the trade or business, unless the 
                activities of such person are limited to those 
                described in subparagraph (D)(i) that, if exercised 
                through a fixed place of business, would not make this 
                fixed place of business a permanent establishment under 
                the provisions of that subparagraph.
                    ``(D) Exclusions.--
                            ``(i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), the term `permanent 
                        establishment' shall not include--
                                    ``(I) the use of facilities solely 
                                for the purpose of storage, display, or 
                                delivery of goods or merchandise 
                                belonging to the trade or business,
                                    ``(II) the maintenance of a stock 
                                of goods or merchandise belonging to 
                                the trade or business solely for the 
                                purpose of storage, display, or 
                                delivery,
                                    ``(III) the maintenance of a stock 
                                of goods or merchandise belonging to 
                                the trade or business solely for the 
                                purpose of processing by another trade 
                                or business,
                                    ``(IV) the maintenance of a fixed 
                                place of business solely for the 
                                purpose of purchasing goods or 
                                merchandise, or of collecting 
                                information, for the trade or business,
                                    ``(V) the maintenance of a fixed 
                                place of business solely for the 
                                purpose of carrying on, for the trade 
                                or business, any other activity of a 
                                preparatory or auxiliary character, or
                                    ``(VI) the maintenance of a fixed 
                                place of business solely for any 
                                combination of the activities mentioned 
                                in subclauses (I) through (V), provided 
                                that the overall activity of the fixed 
                                place of business resulting from this 
                                combination is of a preparatory or 
                                auxiliary character.
                            ``(ii) Brokers and other independent 
                        agents.--A trade or business shall not be 
                        considered to have a permanent establishment in 
                        a country merely because it carries on business 
                        in such country through a broker, general 
                        commission agent, or any other agent of an 
                        independent status, provided that such persons 
                        are acting in the ordinary course of their 
                        business as independent agents.
            ``(3) Tested group.--The term `tested group' includes, with 
        respect to any entity taxed as a corporation in Taiwan, such 
        entity and any other entity taxed as a corporation in Taiwan 
        that--
                    ``(A) participates as a member with such entity in 
                a tax consolidation, fiscal unity, or similar regime 
                that requires members of the group to share profits or 
                losses, or
                    ``(B) shares losses with such entity pursuant to a 
                group relief or other loss sharing regime.
            ``(4) Connected person.--Two persons shall be `connected 
        persons' if one owns, directly or indirectly, at least 50 
        percent of the interests in the other (or, in the case of a 
        corporation, at least 50 percent of the aggregate vote and 
        value of the corporation's shares) or another person owns, 
        directly or indirectly, at least 50 percent of the interests 
        (or, in the case of a corporation, at least 50 percent of the 
        aggregate vote and value of the corporation's shares) in each 
        person. In any case, a person shall be connected to another if, 
        based on all the relevant facts and circumstances, one has 
        control of the other or both are under the control of the same 
        person or persons.
            ``(5) Foreign country of concern.--The term `foreign 
        country of concern' has the meaning given such term under 
        paragraph (7) of section 9901 of the William M. (Mac) 
        Thornberry National Defense Authorization Act for Fiscal Year 
        2021 (15 U.S.C. 4651(7)), as added by section 103(a)(4) of the 
        CHIPS Act of 2022).
            ``(6) Partnerships; beneficiaries of estates and trusts.--
        For purposes of this section--
                    ``(A) a qualified resident of Taiwan which is a 
                partner of a partnership which carries on a trade or 
                business within the United States through a United 
                States permanent establishment shall be treated as 
                carrying on such trade or business through such 
                permanent establishment, and
                    ``(B) a qualified resident of Taiwan which is a 
                beneficiary of an estate or trust which carries on a 
                trade or business within the United States through a 
                United States permanent establishment shall be treated 
                as carrying on such trade or business through such 
                permanent establishment.
            ``(7) Denial of benefits for certain payments through 
        hybrid entities.--For purposes of this section, rules similar 
        to the rules of section 894(c) shall apply.
    ``(e) Application.--
            ``(1) In general.--This section shall not apply to any 
        period unless the Secretary has determined that Taiwan has 
        provided benefits to United States persons for such period that 
        are reciprocal to the benefits provided to qualified residents 
        of Taiwan under this section.
            ``(2) Provision of reciprocity.--The President or his 
        designee is authorized to exchange letters, enter into an 
        agreement, or take other necessary and appropriate steps 
        relative to Taiwan for the reciprocal provision of the benefits 
        described in this section.
    ``(f) Regulations or Other Guidance.--
            ``(1) In general.--The Secretary shall issue such 
        regulations or other guidance as may be necessary or 
        appropriate to carry out the provisions of this section, 
        including such regulations or guidance for--
                    ``(A) determining--
                            ``(i) what constitutes a United States 
                        permanent establishment of a qualified resident 
                        of Taiwan, and
                            ``(ii) income that is effectively connected 
                        with such a permanent establishment,
                    ``(B) preventing the abuse of the provisions of 
                this section by persons who are not (or who should not 
                be treated as) qualified residents of Taiwan,
                    ``(C) requirements for record keeping and 
                reporting,
                    ``(D) rules to assist withholding agents or 
                employers in determining whether a foreign person is a 
                qualified resident of Taiwan for purposes of 
                determining whether withholding or reporting is 
                required for a payment (and, if withholding is 
                required, whether it should be applied at a reduced 
                rate),
                    ``(E) the application of subsection (a)(1)(D)(i) to 
                stock held by predecessor owners,
                    ``(F) determining what amounts are to be treated as 
                qualified wages for purposes of subsection (a)(2),
                    ``(G) determining the amounts to which subsection 
                (a)(3) applies,
                    ``(H) defining established securities market for 
                purposes of subsection (c),
                    ``(I) the application of the rules of subsection 
                (c)(4)(B),
                    ``(J) the application of subsection (d)(6) and 
                section 1446,
                    ``(K) determining ownership interests held by 
                residents of a foreign country of concern, and
                    ``(L) determining the starting and ending dates for 
                periods with respect to the application of this section 
                under subsection (e), which may be separate dates for 
                taxes withheld at the source and other taxes.
            ``(2) Regulations to be consistent with model treaty.--Any 
        regulations or other guidance issued under this section shall, 
        to the extent practical, be consistent with the provisions of 
        the United States model income tax convention dated February 7, 
        2016.''.
    (b) Conforming Amendment to Withholding Tax.--Subchapter A of 
chapter 3 of the Internal Revenue Code of 1986 is amended by adding at 
the end the following new section:

``SEC. 1447. WITHHOLDING FOR QUALIFIED RESIDENTS OF TAIWAN.

    ``For reduced rates of withholding for certain residents of Taiwan, 
see section 894A.''.
    (c) Clerical Amendments.--
            (1) The table of sections for subpart D of part II of 
        subchapter N of chapter 1 of the Internal Revenue Code of 1986 
        is amended by inserting after the item relating to section 894 
        the following new item:

``Sec. 894A. Special rules for qualified residents of Taiwan.''.
            (2) The table of sections for subchapter A of chapter 3 of 
        such Code is amended by adding at the end the following new 
        item:

``Sec. 1447. Withholding for qualified residents of Taiwan.''.

     TITLE II--UNITED STATES-TAIWAN TAX AGREEMENT AUTHORIZATION ACT

SEC. 201. SHORT TITLE.

    This title may be cited as the ``United States-Taiwan Tax Agreement 
Authorization Act''.

SEC. 202. DEFINITIONS.

    In this title:
            (1) Agreement.--The term ``Agreement'' means the tax 
        agreement authorized by section 203(a).
            (2) Appropriate congressional committees.--The term 
        ``appropriate congressional committees'' means--
                    (A) the Committee on Foreign Relations and the 
                Committee on Finance of the Senate; and
                    (B) the Committee on Ways and Means of the House of 
                Representatives.
            (3) Approval legislation.--The term ``approval 
        legislation'' means legislation that approves the Agreement.
            (4) Implementing legislation.--The term ``implementing 
        legislation'' means legislation that makes any changes to the 
        Internal Revenue Code of 1986 necessary to implement the 
        Agreement.

SEC. 203. AUTHORIZATION TO NEGOTIATE AND ENTER INTO AGREEMENT.

    (a) In General.--Subsequent to a determination under section 
894A(e)(1) of the Internal Revenue Code of 1986 (as added by the United 
States-Taiwan Expedited Double-Tax Relief Act), the President is 
authorized to negotiate and enter into a tax agreement relative to 
Taiwan.
    (b) Elements of Agreement.--
            (1) Conformity with bilateral income tax conventions.--The 
        President shall ensure that--
                    (A) any provisions included in the Agreement 
                conform with provisions customarily contained in United 
                States bilateral income tax conventions, as exemplified 
                by the 2016 United States Model Income Tax Convention; 
                and
                    (B) the Agreement does not include elements outside 
                the scope of the 2016 United States Model Income Tax 
                Convention.
            (2) Incorporation of tax agreements and laws.--
        Notwithstanding paragraph (1), the Agreement may incorporate 
        and restate provisions of any agreement, or existing United 
        States law, addressing double taxation for residents of the 
        United States and Taiwan.
            (3) Authority.--The Agreement shall include the following 
        statement: ``The Agreement is entered into pursuant to the 
        United States-Taiwan Tax Agreement Authorization Act.''
            (4) Entry into force.--The Agreement shall include a 
        provision conditioning entry into force upon--
                    (A) enactment of approval legislation and 
                implementing legislation pursuant to section 207; and
                    (B) confirmation by the Secretary of the Treasury 
                that the relevant authority in Taiwan has approved and 
                taken appropriate steps required to implement the 
                Agreement.

SEC. 204. CONSULTATIONS WITH CONGRESS.

    (a) Notification Upon Commencement of Negotiations.--The President 
shall provide written notification to the appropriate congressional 
committees of the commencement of negotiations between the United 
States and Taiwan on the Agreement at least 15 calendar days before 
commencing such negotiations.
    (b) Consultations During Negotiations.--
            (1) Briefings.--Not later than 90 days after commencement 
        of negotiations with respect to the Agreement, and every 180 
        days thereafter until the President enters into the Agreement, 
        the President shall provide a briefing to the appropriate 
        congressional committees on the status of the negotiations, 
        including a description of elements under negotiation.
            (2) Meetings and other consultations.--
                    (A) In general.--In the course of negotiations with 
                respect to the Agreement, the Secretary of the 
                Treasury, in coordination with the Secretary of State, 
                shall--
                            (i) meet, upon request, with the chairman 
                        or ranking member of any of the appropriate 
                        congressional committees regarding negotiating 
                        objectives and the status of negotiations in 
                        progress; and
                            (ii) consult closely and on a timely basis 
                        with, and keep fully apprised of the 
                        negotiations, the appropriate congressional 
                        committees.
                    (B) Elements of consultations.--The consultations 
                described in subparagraph (A) shall include 
                consultations with respect to--
                            (i) the nature of the contemplated 
                        Agreement;
                            (ii) how and to what extent the 
                        contemplated Agreement is consistent with the 
                        elements set forth in section 203(b); and
                            (iii) the implementation of the 
                        contemplated Agreement, including--
                                    (I) the general effect of the 
                                contemplated Agreement on existing 
                                laws;
                                    (II) proposed changes to any 
                                existing laws to implement the 
                                contemplated Agreement; and
                                    (III) proposed administrative 
                                actions to implement the contemplated 
                                Agreement.

SEC. 205. APPROVAL AND IMPLEMENTATION OF AGREEMENT.

    (a) In General.--The Agreement may not enter into force unless--
            (1) the President, at least 60 days before the day on which 
        the President enters into the Agreement, publishes the text of 
        the contemplated Agreement on a publicly available website of 
        the Department of the Treasury; and
            (2) there is enacted into law, with respect to the 
        Agreement, approval legislation and implementing legislation 
        pursuant to section 207.
    (b) Entry Into Force.--The President may provide for the Agreement 
to enter into force upon--
            (1) enactment of approval legislation and implementing 
        legislation pursuant to section 207; and
            (2) confirmation by the Secretary of the Treasury that the 
        relevant authority in Taiwan has approved and taken appropriate 
        steps required to implement the Agreement.

SEC. 206. SUBMISSION TO CONGRESS OF AGREEMENT AND IMPLEMENTATION 
              POLICY.

    (a) Submission of Agreement.--Not later than 270 days after the 
President enters into the Agreement, the President or the President's 
designee shall submit to Congress--
            (1) the final text of the Agreement; and
            (2) a technical explanation of the Agreement.
    (b) Submission of Implementation Policy.--Not later than 270 days 
after the President enters into the Agreement, the Secretary of the 
Treasury shall submit to Congress--
            (1) a description of those changes to existing laws that 
        the President considers would be required in order to ensure 
        that the United States acts in a manner consistent with the 
        Agreement; and
            (2) a statement of anticipated administrative action 
        proposed to implement the Agreement.

SEC. 207. CONSIDERATION OF APPROVAL LEGISLATION AND IMPLEMENTING 
              LEGISLATION.

    (a) In General.--The approval legislation with respect to the 
Agreement shall include the following: ``Congress approves the 
Agreement submitted to Congress pursuant to section 206 of the United 
States-Taiwan Tax Agreement Authorization Act on ____.'', with the 
blank space being filled with the appropriate date.
    (b) Approval Legislation Committee Referral.--The approval 
legislation shall--
            (1) in the Senate, be referred to the Committee on Foreign 
        Relations; and
            (2) in the House of Representatives, be referred to the 
        Committee on Ways and Means.
    (c) Implementing Legislation Committee Referral.--The implementing 
legislation shall--
            (1) in the Senate, be referred to the Committee on Finance; 
        and
            (2) in the House of Representatives, be referred to the 
        Committee on Ways and Means.

SEC. 208. RELATIONSHIP OF AGREEMENT TO INTERNAL REVENUE CODE OF 1986.

    (a) Internal Revenue Code of 1986 to Control.--No provision of the 
Agreement or approval legislation, nor the application of any such 
provision to any person or circumstance, which is inconsistent with any 
provision of the Internal Revenue Code of 1986, shall have effect.
    (b) Construction.--Nothing in this title shall be construed--
            (1) to amend or modify any law of the United States; or
            (2) to limit any authority conferred under any law of the 
        United States,
unless specifically provided for in this title.

SEC. 209. AUTHORIZATION OF SUBSEQUENT TAX AGREEMENTS RELATIVE TO 
              TAIWAN.

    (a) In General.--Subsequent to the enactment of approval 
legislation and implementing legislation pursuant to section 207--
            (1) the term ``tax agreement'' in section 203(a) shall be 
        treated as including any tax agreement relative to Taiwan which 
        supplements or supersedes the Agreement to which such approval 
        legislation and implementing legislation relates, and
            (2) the term ``Agreement'' shall be treated as including 
        such tax agreement.
    (b) Requirements, etc., to Apply Separately.--The provisions of 
this title (including section 204) shall be applied separately with 
respect to each tax agreement referred to in subsection (a).

SEC. 210. UNITED STATES TREATMENT OF DOUBLE TAXATION MATTERS WITH 
              RESPECT TO TAIWAN.

    (a) Findings.--Congress makes the following findings:
            (1) The United States addresses issues with respect to 
        double taxation with foreign countries by entering into 
        bilateral income tax conventions (known as tax treaties) with 
        such countries, subject to the advice and consent of the Senate 
        to ratification pursuant to article II of the Constitution.
            (2) The United States has entered into more than sixty such 
        tax treaties, which facilitate economic activity, strengthen 
        bilateral cooperation, and benefit United States workers, 
        businesses, and other United States taxpayers.
            (3) Due to Taiwan's unique status, the United States is 
        unable to enter into an article II tax treaty with Taiwan, 
        necessitating an agreement to address issues with respect to 
        double taxation.
    (b) Statement of Policy.--It is the policy of the United States 
to--
            (1) provide for additional bilateral tax relief with 
        respect to Taiwan, beyond that provided for in section 894A of 
        the Internal Revenue Code of 1986 (as added by the United 
        States-Taiwan Expedited Double-Tax Relief Act), only after 
        entry into force of an Agreement, as provided for in section 
        205, and only in a manner consistent with such Agreement; and
            (2) continue to provide for bilateral tax relief with 
        sovereign states to address double taxation and other related 
        matters through entering into bilateral income tax conventions, 
        subject to the Senate's advice and consent to ratification 
        pursuant to article II of the Constitution.

            Passed the House of Representatives January 15, 2025.

            Attest:

                                                                 Clerk.
119th CONGRESS

  1st Session

                                H. R. 33

_______________________________________________________________________

                                 AN ACT

To amend the Internal Revenue Code of 1986 to provide special rules for 
 the taxation of certain residents of Taiwan with income from sources 
                       within the United States.
```