II 

112TH CONGRESS 

1ST SESSION S. 986 

To amend the Internal Revenue Code of 1986 to regulate the subsidies 

paid to rum producers in Puerto Rico and the Virgin Islands, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MAY 12, 2011 

Mr. MENENDEZ 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 regulate 

the subsidies paid to rum producers in Puerto Rico and 

the Virgin Islands, and for other purposes. 

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 ‘‘Investing in U.S. Ter5 ritories, Not Corporations Act of 2011’’. 

6 SEC. 2. LIMITATION ON GOVERNMENT ASSISTANCE TO RUM 

7 PRODUCERS. 

8 Subsection (e) of section 7652 of the Internal Rev9 enue Code of 1986 (relating to shipments of rum to the 


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1 United States) is amended by redesignating paragraphs 

2 (3) and (4) as paragraphs (4) and (5), respectively, and 

3 by inserting after paragraph (2) the following new para4 graph: 

5 ‘‘(3) LIMITATION ON GOVERNMENT ASSISTANCE

6 TO RUM PRODUCERS.— 

7 ‘‘(A) IN GENERAL.—If the amount of di8 rect and indirect government assistance paid or 

9 incurred by any covered government during any 

10 calendar year to persons producing rum within 

11 the jurisdiction of such government exceeds the 

12 limitation under subparagraph (B), the amount 

13 which would (but for this paragraph) be covered 

14 into the treasury of such government under this 

15 subsection shall be reduced for each of the 2 

16 succeeding calendar years by the amount of 

17 such excess. 

18 ‘‘(B) LIMITATION.—The limitation under 

19 this subparagraph is the amount equal to 15 

20 percent of the amount which would (but for this 

21 paragraph) be covered into the treasury of such 

22 government under this section for the calendar 

23 year. 

24 ‘‘(C) SEPARATE APPLICATION TO EACH

25 PRODUCER.—The provisions of subparagraphs 


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1 (A) and (B) shall also be applied separately to 

2 each rum producer, taking into account only the 

3 assistance paid or incurred by any covered gov4 ernment to such producer and only such pro5 ducer’s production to which subsection (a)(3) or 

6 (b)(3) applies, whichever is applicable. 

7 ‘‘(D) GOVERNMENT ASSISTANCE.—For 

8 purposes of this paragraph— 

9 ‘‘(i) DIRECT GOVERNMENT ASSIST10 ANCE.—The term ‘direct government as11 sistance’ includes any transfer of funds, 

12 grant, subsidy (other than any generally 

13 available tax subsidy), loan, equity invest14 ment, loan guarantee, production or mar15 keting incentive, income or price support, 

16 provision of goods or services (other than 

17 generally available infrastructure and pub18 lic services), and such other assistance pro19 vided by a covered government as the Sec20 retary identifies as consistent with the pur21 poses of this paragraph. 

22 ‘‘(ii) INDIRECT GOVERNMENT ASSIST23 ANCE.—The term ‘indirect government as24 sistance’ includes any amounts expended 

25 by a covered government— 


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1 ‘‘(I) to promote, market, or oth2 erwise support the rum industry with3 in the jurisdiction of such govern4 ment, 

5 ‘‘(II) to pay principal and inter6 est on, and expenses related to, in7 debtedness incurred, the proceeds of 

8 which are used to provide rum sub9 sidies, or 

10 ‘‘(III) for any other purpose 

11 identified by the Secretary as con12 sistent with the purposes of this para13 graph. 

14 ‘‘(iii) CERTAIN DEBT-FINANCED PAY15 MENTS EXCLUDED.—The terms ‘direct 

16 government assistance’ and ‘indirect gov17 ernment assistance’ shall not include any 

18 payment made by a covered government to 

19 a rum producer out of funds raised 

20 through a loan (including the issuance of a 

21 debt instrument), but shall include any 

22 payment of principal and interest on the 

23 loan (or debt instrument). 

24 ‘‘(E) ANNUAL REPORTS.—Each covered 

25 government shall, for each calendar year, subVerDate Mar 15 2010 04:34 May 19, 2011 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986

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1 mit a report to the Secretary detailing the 

2 amount and type of direct and indirect govern3 ment assistance provided by such government 

4 to each rum producer during such calendar year 

5 and to rum producers in the aggregate during 

6 such year. Such report shall be submitted at 

7 such time, and in such form, as is prescribed by 

8 the Secretary. 

9 ‘‘(F) COVERED GOVERNMENT.—For pur10 poses of this paragraph, the term ‘covered gov11 ernment’ means the government of Puerto Rico 

12 and the government of the Virgin Islands.’’. 

13 SEC. 3. MAXIMUM AND MINIMUM ALLOCATIONS OF RUM 

14 EXCISE TAXES BETWEEN PUERTO RICO AND 

15 THE VIRGIN ISLANDS. 

16 Section 7652 of the Internal Revenue Code of 1986 

17 is amended by inserting after subsection (h) the following 

18 new subsection: 

19 ‘‘(i) LIMITATIONS ON ALLOCATION OF RUM EXCISE

20 TAXES BETWEEN PUERTO RICO AND THE VIRGIN IS21 LANDS.— 

22 ‘‘(1) IN GENERAL.—Notwithstanding sub23 sections (a), (b), and (e), if, without regard to this 

24 subsection and subsection (e)(3)), the Secretary de25 termines that the respective shares of Puerto Rico 


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1 and the Virgin Islands of the aggregate amount to 

2 be covered into their treasuries under this section 

3 for any calendar year are not within the parameters 

4 of paragraph (2), the Secretary shall increase or de5 crease such shares to the extent necessary to bring 

6 them within such parameters. 

7 ‘‘(2) PARAMETERS.—The parameters of this 

8 paragraph are that— 

9 ‘‘(A) Puerto Rico’s share shall be at least 

10 65 percent but not more than 70 percent of 

11 such aggregate amount, and 

12 ‘‘(B) the Virgin Island’s share shall be at 

13 least 30 percent but not more than 35 percent 

14 of such aggregate amount. 

15 ‘‘(3) APPLICATION WITH SUBSECTION (e)(3).— 

16 This subsection shall be applied before subsection 

17 (e)(3).’’. 

18 SEC. 4. DENIAL OF COVER OVER FOR RUM REDISTILLED 

19 INTO CANE NEUTRAL SPIRITS. 

20 Section 7652 of the Internal Revenue Code of 1986 

21 is amended by inserting after subsection (i) the following 

22 new subsection: 

23 ‘‘(j) DENIAL OF COVER OVER FOR RUM REDIS24 TILLED INTO CANE NEUTRAL SPIRITS.—No amount shall 

25 be covered over under subsection (a) or (b) with respect 


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1 to rum which is redistilled into cane neutral spirits after 

2 being brought into the United States. The Secretary shall 

3 prescribe such information reporting as the Secretary de4 termines necessary to carry out the preceding sentence.’’. 

5 SEC. 5. EFFECTIVE DATE. 

6 (a) IN GENERAL.—Except as provided in subsection 

7 (b), the amendments made by this section shall apply to 

8 calendar years after 2011. 

9 (b) DENIAL OF COVER OVER FOR RUM REDISTILLED

10 INTO CANE NEUTRAL SPIRITS.—The amendment made 

11 by section 4 shall apply to rum brought into the United 

12 States after the date of the enactment of this Act. 

Æ 


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