I

106TH CONGRESS

1ST SESSION H. R. 2138

To amend the Internal Revenue Code of 1986 to extend and modify the

credits for businesses operating in Puerto Rico and other possessions

of the United States.

IN THE HOUSE OF REPRESENTATIVES

JUNE 10, 1999

Mr. CRANE (for himself, Mr. RANGEL, Mr. ROMERO-BARCELO ́, and Mr.

WELLER) 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 extend

and modify the credits for businesses operating in Puerto

Rico and other possessions of the United States.

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 ‘‘Puerto Rico Economic

5 Activity Credit Improvement Act of 1999’’.

6 SEC. 2. MODIFICATIONS OF PUERTO RICO ECONOMIC AC7 TIVITY CREDIT.

8 (a) CREDIT NOT LIMITED TO EXISTING CLAIM9 ANTS.—Subsection (a) of section 30A of the Internal Rev-
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1 enue Code of 1986 is amended by striking paragraphs (2)

2 and (3) and inserting the following new paragraphs:

3 ‘‘(2) QUALIFIED DOMESTIC CORPORATION.—

4 For purposes of paragraph (1), the term ‘qualified

5 domestic corporation’ means a domestic corporation

6 with respect to which section 936(a)(4)(B) does not

7 apply for the taxable year.

8 ‘‘(3) SEPARATE APPLICATION.—For purposes of

9 determining the amount of the credit allowed under

10 this section, this section (and so much of section 936

11 as relates to this section) shall be applied separately

12 with respect to Puerto Rico.’’

13 (b) REPEAL OF BASE PERIOD CAP.—Section

14 30A(a)(1) of such Code is amended by striking the last

15 sentence.

16 (c) APPLICATION OF CREDIT.—Section 30A(g) of

17 such Code is amended to read as follows:

18 ‘‘(g) APPLICATION OF SECTION.—

19 ‘‘(1) IN GENERAL.—This section shall apply to

20 taxable years beginning after December 31, 1995,

21 and before the termination date.

22 ‘‘(2) TERMINATION DATE.—For purposes of

23 paragraph (1)—

24 ‘‘(A) IN GENERAL.—The termination date

25 is the first day of the 4th calendar year fol-
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1 lowing the close of the first period for which a

2 certification is issued by the Secretary under

3 subparagraph (B).

4 ‘‘(B) CERTIFICATION.—

5 ‘‘(i) IN GENERAL.—The Secretary

6 shall issue a certification under this sub7 paragraph for the first 3-consecutive cal8 endar year period beginning after Decem9 ber 31, 1999, for which the Secretary de10 termines that Puerto Rico has met the re11 quirements of clause (ii) for each calendar

12 year within the period.

13 ‘‘(ii) REQUIREMENTS.—The require14 ments of this clause are met with respect

15 to Puerto Rico for any calendar year if—

16 ‘‘(I) the average monthly rate of

17 unemployment in Puerto Rico does

18 not exceed 150 percent of the average

19 monthly rate of unemployment for the

20 United States for such year,

21 ‘‘(II) the per capita income of

22 Puerto Rico is at least 66 percent of

23 the per capita income of the United

24 States, and
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1 ‘‘(III) the poverty level within

2 Puerto Rico does not exceed 30 per3 cent.’’

4 (d) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to taxable years beginning after

6 December 31, 1999.

7 SEC. 3. COMPARABLE TREATMENT FOR OTHER CREDITS.

8 (a) CREDIT NOT LIMITED TO EXISTING CLAIM9 ANTS.—

10 (1) Subparagraph (A) of section 936(j)(2) of

11 the Internal Revenue Code of 1986 is amended to

12 read as follows:

13 ‘‘(A) ECONOMIC ACTIVITY CREDIT.—The

14 credit determined under subsection (a)(1)(A)—

15 ‘‘(i) with respect to a possession other

16 than Puerto Rico, and

17 ‘‘(ii) for a taxpayer to which sub18 section (a)(4)(B) does not apply,

19 shall be allowed for taxable years beginning

20 after December 31, 1995, and before January

21 1, 2002.’’

22 (2) Paragraphs (2)(B)(i) and (8)(A) of section

23 936(j) of such Code are each amended by striking

24 ‘‘an existing claimant’’ and inserting ‘‘a taxpayer’’.
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1 (b) ADDITIONAL RESTRICTED CREDIT NOT LIMITED

2 TO EXISTING CLAIMANTS; REPEAL OF BASE PERIOD

3 CAP.—

4 (1) IN GENERAL.—Subparagraph (A) of section

5 936(j)(3) of such Code is amended to read as fol6 lows:

7 ‘‘(A) IN GENERAL.—The credit under sub8 section (a)(1)(A) shall be allowed for the period

9 beginning with the first taxable year after the

10 last taxable year to which subparagraph (A) or

11 (B) of paragraph (2), whichever is appropriate,

12 applied and ending with the last taxable year

13 beginning before January 1, 2006.’’

14 (2) CONFORMING AMENDMENTS.—

15 (A) Subsection (j) of section 936 of such

16 Code is amended by striking paragraphs (4),

17 (5), (6), (7), and (9) and by redesignating

18 paragraphs (8) and (10) as paragraphs (4) and

19 (5), respectively.

20 (B) Paragraph (5) of section 936(j) of

21 such Code (as redesignated by subparagraph

22 (A)) is amended to read as follows:

23 ‘‘(5) SEPARATE APPLICATION TO EACH POSSES24 SION.—For purposes of determining the amount of

25 the credit allowed under this section, this subsection
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1 (and so much of this section as relates to this sub2 section) shall be applied separately with respect to

3 each possession.’’

4 (c) APPLICATION OF CREDIT.—

5 (1) IN GENERAL.—Section 936(j)(3)(A) of such

6 Code (as amended by subsection (b)) is amended by

7 striking ‘‘January 1, 2006’’ and inserting ‘‘the ter8 mination date (as defined in paragraph (6))’’.

9 (2) CERTAIN OTHER POSSESSIONS.—Section

10 936(j)(4)(A) of such Code (as redesignated by sub11 section (b)) is amended by striking ‘‘January 1,

12 2006’’ and inserting ‘‘the termination date (as de13 fined in paragraph (6))’’.

14 (3) TERMINATION DATE.—Section 936(j) of

15 such Code (as amended by subsection (b)) is amend16 ed by adding at the end the following new para17 graph.

18 ‘‘(6) TERMINATION DATE.—For purposes of

19 paragraphs (3)(A) and (4)(A)—

20 ‘‘(A) IN GENERAL.—The termination date

21 for any possession is the first day of the 4th

22 calendar year following the close of the first pe23 riod for which a certification is issued by the

24 Secretary under subparagraph (B).

25 ‘‘(B) CERTIFICATION.—
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1 ‘‘(i) IN GENERAL.—The Secretary

2 shall issue a certification for a possession

3 under this subparagraph for the first 3-

4 consecutive calendar year period beginning

5 after December 31, 1999, for which the

6 Secretary determines that the possession

7 has met the requirements of clause (ii) for

8 each calendar year within the period.

9 ‘‘(ii) REQUIREMENTS.—The require10 ments of this clause are met with respect

11 to a possession for any calendar year if—

12 ‘‘(I) the average monthly rate of

13 unemployment in the possession does

14 not exceed 150 percent of the average

15 monthly rate of unemployment for the

16 United States for such year,

17 ‘‘(II) the per capita income of the

18 possession is at least 66 percent of

19 the per capita income of the United

20 States, and

21 ‘‘(III) the poverty level within the

22 possession does not exceed 30 per23 cent.’’
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1 (d) ELECTION NOT TO CLAIM REDUCED CREDIT.—

2 Clause (ii) of section 936(j)(2)(B) of such Code is

3 amended—

4 (1) by striking ‘‘1997’’ in the heading and in5 serting ‘‘2005’’, and

6 (2) by striking ‘‘unless’’ in the text and all that

7 follows and inserting ‘‘unless it is revoked for a tax8 able year before the taxpayer’s first taxable year be9 ginning in 2006 and applies to the taxable year for

10 which revoked and all subsequent taxable years.’’

11 (e) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to taxable years beginning after

13 December 31, 1999.

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