II 

117TH CONGRESS 

2D SESSION S. 4213 

To amend the Fair Labor Standards Act of 1938 to prohibit employers 

from paying employees in the garment industry by piece rate, to require 

manufacturers and contractors in the garment industry to register with 

the Department of Labor, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MAY 12, 2022 

Mrs. GILLIBRAND (for herself, Mr. BOOKER, Ms. WARREN, and Mr. SANDERS) introduced the following bill; which was read twice and referred to 

the Committee on Finance 

A BILL 

To amend the Fair Labor Standards Act of 1938 to prohibit 

employers from paying employees in the garment industry by piece rate, to require manufacturers and contractors in the garment industry to register with the Department of Labor, 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 ‘‘Fashioning Account5 ability and Building Real Institutional Change Act’’ or the 

6 ‘‘FABRIC Act’’. 


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1 SEC. 2. PAYMENT AND LIABILITY REQUIREMENTS IN THE 

2 GARMENT INDUSTRY. 

3 (a) IN GENERAL.—The Fair Labor Standards Act of 

4 1938 (29 U.S.C. 201 et seq.) is amended— 

5 (1) by inserting after section 7 (29 U.S.C. 207) 

6 the following: 

7 ‘‘SEC. 8. REQUIREMENTS FOR THE GARMENT INDUSTRY. 

8 ‘‘(a) PROHIBITION AGAINST PAYMENT BY PIECE

9 RATE.—No employer shall pay an employee employed in 

10 the garment industry, who in any workweek is engaged 

11 in commerce or in the production of goods for commerce, 

12 or is employed in an enterprise engaged in commerce or 

13 in the production of goods for commerce, by the piece or 

14 unit, or by piece rate. 

15 ‘‘(b) HOURLY RATES.— 

16 ‘‘(1) IN GENERAL.—An employer shall pay each 

17 employee employed in the garment industry, who in 

18 any workweek is engaged in commerce or in the pro19 duction of goods for commerce, or is employed in an 

20 enterprise engaged in commerce or in the production 

21 of goods for commerce, at an hourly rate that is not 

22 less than the rate in effect under section 6(a)(1). 

23 ‘‘(2) INCENTIVE BONUSES.—Nothing in this 

24 section shall be construed to prohibit incentive-based 

25 bonuses for employees employed in the garment in26 dustry. 


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1 ‘‘(c) JOINT AND SEVERAL LIABILITY OF BRAND

2 GUARANTORS.— 

3 ‘‘(1) IN GENERAL.—A brand guarantor who 

4 contracts with an employer of an employee described 

5 in paragraph (2) for the performance of services in 

6 the garment industry shall share joint and several li7 ability with such employer for any violations of the 

8 employer under this Act involving such employee. 

9 ‘‘(2) EMPLOYEES.—An employee described in 

10 this paragraph is any employee employed in the gar11 ment industry who in any workweek is engaged in 

12 commerce or in the production of goods for com13 merce, or is employed in an enterprise engaged in 

14 commerce or in the production of goods for com15 merce. 

16 ‘‘(3) SUBCONTRACTS.—For purposes of para17 graph (1), an employer of an employee described in 

18 paragraph (2) includes any other person who, 

19 through 1 or more subcontracts, subcontracts with 

20 the employer of such an employee for the perform21 ance of services in the garment industry. 

22 ‘‘(4) RULE OF CONSTRUCTION.—Nothing in 

23 this subsection shall be construed to preclude a de24 termination of joint employment, in the garment inVerDate Sep 11 2014 16:16 May 17, 2022 Jkt 029200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S4213.IS S4213

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1 dustry or otherwise, for entities other than brand 

2 guarantors. 

3 ‘‘(d) NONAPPLICABILITY.—Subsections (a) and (b) 

4 shall not apply for purposes of an employee employed in 

5 the garment industry who is covered by a bona fide collec6 tive bargaining agreement that expressly provides for— 

7 ‘‘(1) wages, hours of work, and working condi8 tions of the employee; 

9 ‘‘(2)(A) a wage rate for all hours worked by the 

10 employee in excess of 40 hours in a week that is 

11 greater than one- and one-half times the regular 

12 rate at which such employee is employed; and 

13 ‘‘(B) a minimum hourly rate of pay for the em14 ployee that is not less than 10 percent more than 

15 the higher of— 

16 ‘‘(i) the minimum wage rate under an ap17 plicable State law; or 

18 ‘‘(ii) the minimum wage rate in effect 

19 under section 6(a)(1); and 

20 ‘‘(3) a process to resolve disputes concerning 

21 nonpayment of wages. 

22 ‘‘(e) REGULATIONS.—The Secretary may prescribe 

23 such regulations or other guidance as may be necessary 

24 to carry out this section. 

25 ‘‘(f) DEFINITIONS.—In this section: 


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1 ‘‘(1) BRAND GUARANTOR.—The term ‘brand 

2 guarantor’ means any person contracting for the 

3 performance of garment manufacturing, including 

4 through licensing of a brand or name, regardless of 

5 whether the party with whom the person contracts 

6 performs the manufacturing operations or hires gar7 ment contractors to perform the manufacturing op8 erations. 

9 ‘‘(2) GARMENT.—The term ‘garment’ includes 

10 any article of wearing apparel or accessory designed 

11 or intended to be worn by an individual, including 

12 clothing, hats, gloves, handbags, hosiery, ties, scarfs, 

13 and belts. 

14 ‘‘(3) GARMENT CONTRACTOR.—The term ‘gar15 ment contractor’— 

16 ‘‘(A) means any person who, with the as17 sistance of an employee or any other individual, 

18 is primarily engaged in garment manufacturing 

19 for another person, including for another gar20 ment contractor, a garment manufacturer, or a 

21 brand guarantor; and 

22 ‘‘(B) includes a subcontractor that is pri23 marily engaged in garment manufacturing. 


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1 ‘‘(4) GARMENT INDUSTRY.—The term ‘garment 

2 industry’ means the industry of garment manufac3 turing. 

4 ‘‘(5) GARMENT MANUFACTURER.—The term 

5 ‘garment manufacturer’ means any person who is 

6 engaged in garment manufacturing who is not a gar7 ment contractor. 

8 ‘‘(6) GARMENT MANUFACTURING.— 

9 ‘‘(A) IN GENERAL.—The term ‘garment 

10 manufacturing’ means— 

11 ‘‘(i) sewing, cutting, making, proc12 essing, repairing, finishing, assembling, 

13 pressing, or dyeing a garment, including a 

14 section or component of a garment, de15 signed for or intended to be worn by an in16 dividual, which is to be sold or offered for 

17 sale or resale; 

18 ‘‘(ii) altering the design, or causing 

19 another person to alter the design, of a 

20 garment described in clause (i); 

21 ‘‘(iii) affixing a label to a garment de22 scribed in clause (i); 

23 ‘‘(iv) any other form of preparation of 

24 a garment described in clause (i) by any 


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1 person contracting for such preparation; 

2 and 

3 ‘‘(v) any other operation or practice 

4 as may be identified in regulations issued 

5 by the Secretary consistent with the pur6 poses of this section. 

7 ‘‘(B) EXCLUSIONS.—The term ‘garment 

8 manufacturing’ does not include— 

9 ‘‘(i) manufacturing of garments by an 

10 individual who manufactures the garments 

11 by his or herself without the assistance of 

12 a garment contractor, employee, or any 

13 other individual; 

14 ‘‘(ii) cleaning, altering, or tailoring 

15 any garment, including a section or compo16 nent of a garment, after the garment has 

17 been sold at retail; or 

18 ‘‘(iii) any other form of manufac19 turing as may be identified in regulations 

20 issued by the Secretary consistent with the 

21 purposes of this section.’’. 

22 (2) in section 15 (29 U.S.C. 215(a))— 

23 (A) in subsection (a)— 

24 (i) in paragraph (5), by striking the 

25 period and inserting ‘‘; or’’; and 


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1 (ii) by adding at the end the fol2 lowing: 

3 ‘‘(6) to violate section 8.’’; and 

4 (B) by adding at the end the following new 

5 subsection: 

6 ‘‘(c) For the purposes of subsection (a)(6), it shall 

7 be an affirmative defense to an action under such sub8 section against a brand guarantor (as defined in section 

9 8(f)) if such brand guarantor shows no knowledge of the 

10 violation of section 8 alleged in such action.’’; and 

11 (3) in section 16 (29 U.S.C. 216)— 

12 (A) in subsection (b)— 

13 (i) by inserting after the third sen14 tence the following: ‘‘Any person who vio15 lates section 8 shall be liable for such legal 

16 or equitable relief as may be appropriate to 

17 effectuate the purposes of such section, in18 cluding the payment of wages lost and an 

19 additional equal amount as liquidated dam20 ages.’’; and 

21 (ii) in the last sentence, by inserting 

22 before the period at the end ‘‘or 8’’; and 

23 (B) in subsection (c), by adding at the end 

24 the following: ‘‘The authority and requirements 

25 described in this subsection shall apply with reVerDate Sep 11 2014 16:16 May 17, 2022 Jkt 029200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S4213.IS S4213

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1 spect to a violation of section 8, as appropriate, 

2 and the person in such violation shall be liable 

3 for such legal or equitable relief as may be ap4 propriate to effectuate the purposes of such sec5 tion, including the payment of wages lost and 

6 an additional equal amount as liquidated dam7 ages.’’. 

8 (b) CONFORMING AMENDMENT.—Section 10 of the 

9 Fair Labor Standards Act of 1938 (29 U.S.C. 210) is re10 pealed. 

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

12 this section shall take effect on the date that is 6 months 

13 after the date of enactment of this Act. 

14 SEC. 3. REGISTRATION OF GARMENT MANUFACTURERS 

15 AND CONTRACTORS. 

16 (a) DEFINITIONS.—In this section: 

17 (1) EMPLOYEE.—The term ‘‘employee’’ has the 

18 meaning given the term in section 3 of the Fair 

19 Labor Standards Act of 1938 (29 U.S.C. 203). 

20 (2) GARMENT CONTRACTOR; GARMENT INDUS21 TRY; GARMENT MANUFACTURER; GARMENT MANU22 FACTURING.—The terms ‘‘garment contractor’’, 

23 ‘‘garment industry’’, ‘‘garment manufacturer’’, and 

24 ‘‘garment manufacturing’’ have the meanings given 


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1 such terms in section 8(f) of the Fair Labor Stand2 ards Act of 1938 (29 U.S.C. 208(f)). 

3 (3) PRODUCTION EMPLOYEE.—The term ‘‘pro4 duction employee’’, with respect to a garment manu5 facturer or garment contractor, means any employee 

6 of the manufacturer or contractor who is engaged in 

7 the garment industry. 

8 (4) SECRETARY.—The term ‘‘Secretary’’ means 

9 the Secretary of Labor, acting through the Under10 secretary of the Garment Industry appointed under 

11 section 4(b). 

12 (b) REQUIREMENT TO REGISTER WITH THE DE13 PARTMENT OF LABOR.—Beginning on the date that is 6 

14 months after the date of enactment of this Act, no gar15 ment manufacturer or garment contractor shall engage in 

16 the garment industry during any year unless the manufac17 turer or contractor has registered for such year with the 

18 Secretary in accordance with this section. 

19 (c) REGISTRATION REQUIREMENTS.— 

20 (1) IN GENERAL.—A garment manufacturer or 

21 garment contractor registering under this section 

22 shall submit to the Secretary— 

23 (A) a form, in writing, containing the in24 formation described in paragraph (2); 


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1 (B) photographic verification of the iden2 tify of— 

3 (i) each owner or partner of the gar4 ment manufacturer or garment contractor; 

5 and 

6 (ii) in the case the garment manufac7 turer or garment contractor is a corpora8 tion, each officer of the corporation; 

9 (C) verification that the garment manufac10 turer or garment contractor has in effect a 

11 workers’ compensation insurance policy for all 

12 production employees of the manufacturer or 

13 contractor; and 

14 (D) payment of the applicable registration 

15 fee described in paragraph (3). 

16 (2) INFORMATION IN FORM.—The information 

17 described in this paragraph is each of the following: 

18 (A) A statement of whether the garment 

19 manufacturer or garment contractor is a sole 

20 proprietorship, partnership, or corporation. 

21 (B) The name, residential address, and 

22 phone number of all production employees of 

23 the garment manufacturer or garment con24 tractor. 


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1 (C) The name, residential address, phone 

2 number, and social security number of— 

3 (i) each owner or partner of the gar4 ment manufacturer or garment contractor; 

5 (ii) if applicable, each officer of the 

6 garment manufacturer or garment con7 tractor; and 

8 (iii) if applicable, each of the 10 larg9 est shareholders of the garment manufac10 turer or garment contractor. 

11 (D) The name, residential address, and so12 cial security number of each person with a fi13 nancial interest in the business of the garment 

14 manufacturer in the garment industry, and the 

15 amount of that interest (if any). 

16 (E) In the case in which the garment man17 ufacturer or garment contractor is a corpora18 tion, a statement ensuring that no shares of the 

19 corporation are listed on a national securities 

20 exchange or regularly quoted in an over-the21 counter market by one or more members of a 

22 national or an affiliated securities association. 

23 (F) A statement of how long the garment 

24 manufacturer or garment contractor has been 

25 in business in the garment industry. 


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1 (G) If applicable, the tax identification 

2 number of the garment manufacturer or gar3 ment contractor. 

4 (H) A statement of the status of the gar5 ment manufacturer or garment contractor as a 

6 manufacturer or contractor. 

7 (I) A statement of whether the garment 

8 manufacturer or garment contractor has con9 tracted with a labor organization, and, if so, the 

10 name and address of such labor organization. 

11 (J)(i) A statement as to whether, within 

12 the preceding 3-year period, any of the fol13 lowing persons or entities have been found by a 

14 court or the Secretary to have violated the Fair 

15 Labor Standards Act of 1938 (29 U.S.C. 201 

16 et seq.): 

17 (I) The garment manufacturer or gar18 ment contractor. 

19 (II) Any owner of or any partner of 

20 the garment manufacturer or garment con21 tractor. 

22 (III) In the case the garment manu23 facturer or garment contractor is a cor24 poration, any officer of the corporation or 


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1 any of the 10 largest shareholders of the 

2 corporation. 

3 (ii) If any person or entity described in 

4 any of subclauses (I) through (III) of clause (i) 

5 has violated the Fair Labor Standards Act of 

6 1938 within the period described in such clause, 

7 a statement of the nature of such violation and 

8 the date on which such violation occurred. 

9 (K) In the case of a contractor, a state10 ment of whether the contractor has subcon11 tracted for the cutting, sewing, dyeing, or as12 sembling of textiles or apparel or sections or 

13 components of apparel. 

14 (3) REGISTRATION FEE.— 

15 (A) IN GENERAL.—The registration fee re16 quired under this subsection for each year shall 

17 be $200. 

18 (B) PRORATED FEES.—The Secretary may 

19 prorate the registration fee under subparagraph 

20 (A) for any registration described in subsection 

21 (d)(2)(B)(i). 

22 (C) USE.—The Secretary shall use the 

23 total amount of each registration fee required 

24 under this subsection for carrying out this sec25 tion. 


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1 (d) SUBMISSION.— 

2 (1) CONSOLIDATION.—Each division, subsidiary 

3 corporation, or related company of a garment manu4 facturer or garment contractor may, at the option of 

5 the manufacturer or contractor, be named and in6 cluded under 1 registration under this section. 

7 (2) TIMING.— 

8 (A) IN GENERAL.—Except as provided 

9 under subparagraph (B), each registration sub10 mitted under this section shall be filed not later 

11 than the date that is 6 months after the date 

12 of enactment of this Act and annually there13 after on a date determined by the Secretary. 

14 (B) NEW MANUFACTURERS OR CONTRAC15 TORS.—In the case of a garment manufacturer 

16 or garment contractor that begins garment 

17 manufacturing operations or enters into a con18 tract for such operations for the first time after 

19 the date of enactment of this Act, the registra20 tion required under this section shall be sub21 mitted— 

22 (i) not later than 6 months after the 

23 date on which the garment manufacturing 

24 operations begin or the contractor enters 

25 into the contract for such operations; and 


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1 (ii) annually thereafter on a date de2 termined by the Secretary. 

3 (e) CERTIFICATES.— 

4 (1) IN GENERAL.—The Secretary shall issue a 

5 certificate of registration to each garment manufac6 turer or garment contractor that submits a registra7 tion meeting the requirements under this section. 

8 (2) APPLICABILITY.— 

9 (A) IN GENERAL.—Except as provided in 

10 subparagraph (B), each certificate issued under 

11 paragraph (1) shall be effective for a period of 

12 12 months. 

13 (B) NEW MANUFACTURERS OR CONTRAC14 TORS.—A certificate with respect to a registra15 tion submitted under subsection (d)(2)(B)(i) 

16 shall be effective until the following registration 

17 date as determined by the Secretary. 

18 (3) POSTING.—Each garment manufacturer or 

19 garment contractor receiving a certificate under 

20 paragraph (1) shall post such certificate in a place 

21 where it may be read by any employee of the manu22 facturer or contractor during the workday. 

23 (4) SUSPENSION OR REVOCATION.—The Sec24 retary may suspend or revoke a certificate of reg25 istration issued under paragraph (1) if the garment 


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1 manufacturer or garment contractor that submitted 

2 the registration— 

3 (A) has knowingly made any misrepresen4 tation in the application for such certificate; or 

5 (B) has failed to comply with this Act or 

6 any regulation under this Act. 

7 (f) RECORDKEEPING.—The Secretary shall, through 

8 regulations, establish requirements for recordkeeping for 

9 all garment manufacturers and garment contractors en10 gaging in the garment industry in order to assist in en11 forcing the requirements of this section. 

12 (g) ENFORCEMENT.— 

13 (1) IN GENERAL.—The Secretary may impose a 

14 civil money penalty of not more than $50,000,000 

15 against any person who violates a requirement under 

16 this section. 

17 (2) CONSIDERATIONS.—In assessing the 

18 amount of a penalty under this subsection, the Sec19 retary shall give consideration to— 

20 (A) the size of the business of the person; 

21 (B) whether the violation of the person 

22 was committed in good faith; 

23 (C) the gravity of the violation; 

24 (D) the history of any previous violations 

25 of the person under this section; and 


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1 (E) the history of the person in complying 

2 with the recordkeeping requirements under sub3 section (f). 

4 (h) REGULATIONS.—The Secretary may prescribe 

5 such regulations or other guidance as may be necessary 

6 to carry out this section. 

7 SEC. 4. UNDERSECRETARY OF THE GARMENT INDUSTRY. 

8 (a) IN GENERAL.—There is established in the De9 partment of Labor the Office of the Garment Industry (re10 ferred to in this section as the ‘‘Office’’). 

11 (b) UNDERSECRETARY.— 

12 (1) IN GENERAL.—The Secretary of Labor shall 

13 appoint an Undersecretary of the Garment Industry 

14 (referred to in this section as the ‘‘Undersecretary’’) 

15 to head the Office. 

16 (2) FUNCTIONS.—The Undersecretary shall— 

17 (A) carry out section 3 using sums appro18 priated under subsection (c); 

19 (B) carry out the national domestic gar20 ment manufacturing support program under 

21 section 5; and 

22 (C) provide assistance to the Administrator 

23 of the Wage and Hour Division in enforcing 

24 section 8 of the Fair Labor Standards Act of 

25 1938 (29 U.S.C. 208). 


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1 (c) AUTHORIZATION OF APPROPRIATIONS.— 

2 (1) IN GENERAL.—There is authorized to be 

3 appropriated to the Secretary of the Labor— 

4 (A) $10,000,000 for fiscal year 2022, to 

5 establish the Office and carry out the functions 

6 described in subparagraphs (A) and (C) of sub7 section (b)(2); and 

8 (B) $3,000,000 for each of fiscal years 

9 2023 through 2027, to carry out the functions 

10 described in subparagraphs (A) and (C) of sub11 section (b)(2). 

12 (2) AVAILABILITY.—Any sums appropriated 

13 under the authorization contained in this subsection 

14 shall remain available, without fiscal year limitation, 

15 until expended. 

16 SEC. 5. NATIONAL DOMESTIC GARMENT MANUFACTURING 

17 SUPPORT PROGRAM. 

18 (a) DEFINITIONS.—In this section: 

19 (1) ELIGIBLE ENTITY.—The term ‘‘eligible enti20 ty’’ means an entity that is— 

21 (A) a garment manufacturer that is incor22 porated in and performs garment manufac23 turing within the United States; or 


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1 (B) a nonprofit organization that provides 

2 workforce development opportunities with re3 spect to the garment industry. 

4 (2) GARMENT INDUSTRY; GARMENT MANUFAC5 TURER; GARMENT MANUFACTURING.—The terms 

6 ‘‘garment industry’’, ‘‘garment manufacturer’’, and 

7 ‘‘garment manufacturing’’ have the meanings given 

8 such terms in section 8(f) of the Fair Labor Stand9 ards Act of 1938 (29 U.S.C. 208(f)). 

10 (3) SECRETARY.—The term ‘‘Secretary’’ means 

11 the Secretary of Labor, acting through the Under12 secretary of the Garment Industry appointed under 

13 section 4(b). 

14 (b) IN GENERAL.—From amounts made available 

15 under subsection (g), the Secretary shall award grants, on 

16 a competitive basis, to eligible entities to support garment 

17 manufacturing in the United States. 

18 (c) APPLICATION.—An eligible entity seeking a grant 

19 under this section shall submit to the Secretary an appli20 cation at such time, in such manner, and containing such 

21 information as the Secretary may require, including— 

22 (1) a description of the project that the eligible 

23 entity proposes to carry out using such grant; and 

24 (2) an implementation plan of such project that 

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1 ship with, applicable labor organizations and rel2 evant community stakeholders. 

3 (d) AWARD.— 

4 (1) SELECTION.—In awarding grants under 

5 this section to eligible entities, the Secretary shall 

6 give priority to eligible entities— 

7 (A) with a workforce that is covered by a 

8 collective bargaining agreement; 

9 (B) that are certified by a State in which 

10 such eligible entity operates as minority-owned 

11 businesses, women-owned businesses, or vet12 eran-owned businesses; or 

13 (C) who have operated as a garment man14 ufacturer within the United States for more 

15 than 5 years. 

16 (2) AMOUNT.—The amount of a grant awarded 

17 under this section may not be more than 

18 $5,000,000. 

19 (e) USE OF FUNDS.—An eligible entity receiving a 

20 grant under this section shall use the grant funds to sup21 port— 

22 (1) investments in training and workforce devel23 opment for employees within the garment industry; 


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1 (2) the acquisition of relevant tools and equip2 ment for garment manufacturing in the United 

3 States; 

4 (3) the acquisition of, and capital improvements 

5 to, facilities for garment manufacturing in the 

6 United States and to promote the health and safety 

7 of employees in such facilities; or 

8 (4) efforts to assist in educating employees 

9 about rights under this Act and other relevant Fed10 eral, State, or local laws. 

11 (f) REPORT.—Not later than 6 months after the date 

12 on which an eligible entity receives a grant under this sec13 tion, the eligible entity shall submit to the Secretary a re14 port that includes an account of the use of grant funds 

15 awarded under this section. 

16 (g) AUTHORIZATION OF APPROPRIATIONS.—There is 

17 authorized to be appropriated $40,000,000 to carry out 

18 this section. 

19 SEC. 6. CREDIT FOR INSOURCING EXPENSES. 

20 (a) IN GENERAL.—Subpart D of part IV of sub21 chapter A of chapter 1 of the Internal Revenue Code of 

22 1986 is amended by adding at the end the following new 

23 section: 


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1 ‘‘SEC. 45U. CREDIT FOR INSOURCING EXPENSES. 

2 ‘‘(a) IN GENERAL.—For purposes of section 38, the 

3 insourcing expenses credit for any taxable year is an 

4 amount equal to 30 percent of the eligible insourcing ex5 penses of the taxpayer which are taken into account in 

6 such taxable year under subsection (d). 

7 ‘‘(b) ELIGIBLE INSOURCING EXPENSES.—For pur8 poses of this section— 

9 ‘‘(1) IN GENERAL.—The term ‘eligible 

10 insourcing expenses’ means— 

11 ‘‘(A) eligible expenses paid or incurred by 

12 the taxpayer in connection with the elimination 

13 of any business unit of the taxpayer (or of any 

14 member of any expanded affiliated group in 

15 which the taxpayer is also a member) located 

16 outside the United States, and 

17 ‘‘(B) eligible expenses paid or incurred by 

18 the taxpayer in connection with the establish19 ment of any business unit of the taxpayer (or 

20 of any member of any expanded affiliated group 

21 in which the taxpayer is also a member) located 

22 within— 

23 ‘‘(i) a HUBZone (as defined in sec24 tion 31(b) of the Small Business Act (15 

25 U.S.C. 657a(b))), or 


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1 ‘‘(ii) a low-income community (as de2 scribed in section 45D(e)), 

3 if such establishment constitutes the relocation 

4 of the business unit so eliminated. For purposes 

5 of the preceding sentence, a relocation shall not 

6 be treated as failing to occur merely because 

7 such elimination occurs in a different taxable 

8 year than such establishment. 

9 ‘‘(2) ELIGIBLE EXPENSES.—The term ‘eligible 

10 expenses’ means— 

11 ‘‘(A) any amount for which a deduction is 

12 allowed to the taxpayer under section 162, and 

13 ‘‘(B) permit and license fees, lease broker14 age fees, equipment installation costs, and, to 

15 the extent provided by the Secretary, other 

16 similar expenses. 

17 Such term does not include any compensation which 

18 is paid or incurred in connection with severance 

19 from employment and, to the extent provided by the 

20 Secretary, any similar amount. 

21 ‘‘(3) BUSINESS UNIT.—The term ‘business unit’ 

22 means— 

23 ‘‘(A) any trade or business within the gar24 ment industry (as defined in section 8(f) of the 

25 Fair Labor Standards Act of 1938), and 


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1 ‘‘(B) any line of business, or functional 

2 unit, which is part of any trade or business de3 scribed in subparagraph (A). 

4 ‘‘(4) EXPANDED AFFILIATED GROUP.—The 

5 term ‘expanded affiliated group’ means an affiliated 

6 group as defined in section 1504(a), determined 

7 without regard to section 1504(b)(3) and by sub8 stituting ‘more than 50 percent’ for ‘at least 80 per9 cent’ each place it appears in section 1504(a). A 

10 partnership or any other entity (other than a cor11 poration) shall be treated as a member of an ex12 panded affiliated group if such entity is controlled 

13 (within the meaning of section 954(d)(3)) by mem14 bers of such group (including any entity treated as 

15 a member of such group by reason of this para16 graph). 

17 ‘‘(5) EXPENSES MUST BE PURSUANT TO

18 INSOURCING PLAN.—Amounts shall be taken into ac19 count under paragraph (1) only to the extent that 

20 such amounts are paid or incurred pursuant to a 

21 written plan to carry out the relocation described in 

22 paragraph (1). 

23 ‘‘(6) OPERATING EXPENSES NOT TAKEN INTO

24 ACCOUNT.—Any amount paid or incurred in connec25 tion with the on-going operation of a business unit 


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1 shall not be treated as an amount paid or incurred 

2 in connection with the establishment or elimination 

3 of such business unit. 

4 ‘‘(c) INCREASED DOMESTIC EMPLOYMENT REQUIRE5 MENT.—No credit shall be allowed under this section un6 less the number of full-time equivalent employees of the 

7 taxpayer for the taxable year for which the credit is 

8 claimed exceeds the number of full-time equivalent em9 ployees of the taxpayer for the last taxable year ending 

10 before the first taxable year in which such eligible 

11 insourcing expenses were paid or incurred. For purposes 

12 of this subsection, full-time equivalent employees has the 

13 meaning given such term under section 45R(d) (and the 

14 applicable rules of section 45R(e)). All employers treated 

15 as a single employer under subsection (b), (c), (m), or (o) 

16 of section 414 shall be treated as a single employer for 

17 purposes of this subsection. 

18 ‘‘(d) CREDIT ALLOWED UPON COMPLETION OF

19 INSOURCING PLAN.— 

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (2), eligible insourcing expenses shall be taken 

22 into account under subsection (a) in the taxable year 

23 during which the plan described in subsection (b)(5) 

24 has been completed and all eligible insourcing exVerDate Sep 11 2014 16:16 May 17, 2022 Jkt 029200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\S4213.IS S4213

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1 penses pursuant to such plan have been paid or in2 curred. 

3 ‘‘(2) ELECTION TO APPLY EMPLOYMENT TEST

4 AND CLAIM CREDIT IN FIRST FULL TAXABLE YEAR

5 AFTER COMPLETION OF PLAN.—If the taxpayer 

6 elects the application of this paragraph, eligible 

7 insourcing expenses shall be taken into account 

8 under subsection (a) in the first taxable year after 

9 the taxable year described in paragraph (1). 

10 ‘‘(e) POSSESSIONS TREATED AS PART OF THE

11 UNITED STATES.—For purposes of this section, the term 

12 ‘United States’ shall be treated as including each posses13 sion of the United States (including the Commonwealth 

14 of Puerto Rico and the Commonwealth of the Northern 

15 Mariana Islands). 

16 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

17 such regulations or other guidance as may be necessary 

18 or appropriate to carry out the purposes of this section.’’. 

19 (b) CREDIT TO BE PART OF GENERAL BUSINESS

20 CREDIT.—Subsection (b) of section 38 of such Code is 

21 amended by striking ‘‘plus’’ at the end of paragraph (32), 

22 by striking the period at the end of paragraph (33) and 

23 inserting ‘‘, plus’’, and by adding at the end the following 

24 new paragraph: 


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1 ‘‘(34) the insourcing expenses credit determined 

2 under section 45U(a).’’. 

3 (c) CLERICAL AMENDMENT.—The table of sections 

4 for subpart D of part IV of subchapter A of chapter 1 

5 of such Code is amended by adding at the end the fol6 lowing new item: 

‘‘Sec. 45U. Credit for insourcing expenses.’’. 

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

8 this section shall apply to amounts paid or incurred after 

9 the date of the enactment of this Act. 

10 (e) APPLICATION TO UNITED STATES POSSES11 SIONS.— 

12 (1) PAYMENTS TO POSSESSIONS.— 

13 (A) MIRROR CODE POSSESSIONS.—The 

14 Secretary of the Treasury shall make periodic 

15 payments to each possession of the United 

16 States with a mirror code tax system in an 

17 amount equal to the loss to that possession by 

18 reason of section 45U of the Internal Revenue 

19 Code of 1986. Such amount shall be determined 

20 by the Secretary of the Treasury based on in21 formation provided by the government of the re22 spective possession. 

23 (B) OTHER POSSESSIONS.—The Secretary 

24 of the Treasury shall make annual payments to 

25 each possession of the United States which does 


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1 not have a mirror code tax system in an 

2 amount estimated by the Secretary of the 

3 Treasury as being equal to the aggregate bene4 fits that would have been provided to residents 

5 of such possession by reason of section 45U of 

6 such Code if a mirror code tax system had been 

7 in effect in such possession. The preceding sen8 tence shall not apply with respect to any posses9 sion of the United States unless such possession 

10 has a plan, which has been approved by the 

11 Secretary of the Treasury, under which such 

12 possession will promptly distribute such pay13 ment to the residents of such possession. 

14 (2) COORDINATION WITH CREDIT ALLOWED

15 AGAINST UNITED STATES INCOME TAXES.—No cred16 it shall be allowed against United States income 

17 taxes under section 45U of such Code to any per18 son— 

19 (A) to whom a credit is allowed against 

20 taxes imposed by the possession by reason of 

21 such section, or 

22 (B) who is eligible for a payment under a 

23 plan described in paragraph (1)(B). 

24 (3) DEFINITIONS AND SPECIAL RULES.— 


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1 (A) POSSESSIONS OF THE UNITED

2 STATES.—For purposes of this section, the 

3 term ‘‘possession of the United States’’ includes 

4 the Commonwealth of Puerto Rico and the 

5 Commonwealth of the Northern Mariana Is6 lands. 

7 (B) MIRROR CODE TAX SYSTEM.—For pur8 poses of this section, the term ‘‘mirror code tax 

9 system’’ means, with respect to any possession 

10 of the United States, the income tax system of 

11 such possession if the income tax liability of the 

12 residents of such possession under such system 

13 is determined by reference to the income tax 

14 laws of the United States as if such possession 

15 were the United States. 

16 (C) TREATMENT OF PAYMENTS.—For pur17 poses of section 1324(b)(2) of title 31, United 

18 States Code, the payments under this section 

19 shall be treated in the same manner as a refund 

20 due from sections referred to in such section 

21 1324(b)(2). 

Æ 


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