I 

118TH CONGRESS 

1ST SESSION H. R. 5109 

To impose restrictions on the investment in Chinese companies by tax-exempt 

entities. 

IN THE HOUSE OF REPRESENTATIVES 

AUGUST 1, 2023 

Mr. GALLAGHER (for himself, Mr. LAHOOD, Mr. WITTMAN, and Mr. 

MOOLENAAR) introduced the following bill; which was referred to the 

Committee on Ways and Means, and in addition to the Committee on 

Foreign Affairs, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To impose restrictions on the investment in Chinese 

companies by tax-exempt entities. 

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 ‘‘Dump Investments in 

5 Troublesome Communist Holdings Act’’ or as the 

6 ‘‘DITCH Act’’. 


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1 SEC. 2. RESTRICTION ON INVESTMENT IN CHINESE COMPA2 NIES BY TAX-EXEMPT ENTITIES. 

3 (a) IN GENERAL.—Section 501 of the Internal Rev4 enue Code of 1986 is amended by adding at the end the 

5 following new subsection: 

6 ‘‘(s) RESTRICTION ON INVESTMENT IN CHINESE

7 COMPANIES.— 

8 ‘‘(1) IN GENERAL.—An organization shall not 

9 be treated as described in subsection (c) or (d) or 

10 section 401(a) for any taxable year if— 

11 ‘‘(A) such organization holds any interest 

12 in a disqualified Chinese company at any time 

13 during such taxable year, or 

14 ‘‘(B) fails to timely transmit the annual re15 port described in paragraph (5) for such tax16 able year. 

17 ‘‘(2) DISQUALIFIED CHINESE COMPANY.—For 

18 purposes of this subsection— 

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

20 Chinese company’ means any corporation— 

21 ‘‘(i) that is incorporated in China, or 

22 ‘‘(ii) more than 10 percent of the 

23 stock of which (determined by vote or 

24 value) is held (directly or indirectly 

25 through any chain of ownership) by any of 

26 the following (or combination thereof): 


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1 ‘‘(I) 1 or more corporations de2 scribed in clause (i). 

3 ‘‘(II) China or any governmental 

4 agency thereof. 

5 ‘‘(III) Provincial, regional, mu6 nicipal, Special Administrative Re7 gions, prefecture, county, township, 

8 village, or any other Chinese sub-na9 tional governmental entity or agency. 

10 ‘‘(IV) Any entity controlled (di11 rectly or indirectly) by the Chinese 

12 Communist Party or any Chinese 

13 Communist Party organ. 

14 ‘‘(V) Any Chinese national. 

15 ‘‘(B) APPLICATION TO ENTITIES OTHER

16 THAN CORPORATIONS.—In the case of any busi17 ness organization which is not a corporation, 

18 subparagraph (A) shall apply to such organiza19 tion in the same manner as though such organi20 zation were a corporation. 

21 ‘‘(C) APPLICATION TO INDIRECT, DERIVA22 TIVE, OR OTHER CONTRACTUAL INTERESTS, 

23 ETC.—For purposes of this subsection, an orga24 nization shall be treated as holding an interest 


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1 in a disqualified Chinese company if such orga2 nization— 

3 ‘‘(i) holds such interest (or any instru4 ment described in subparagraph (A)) di5 rectly or indirectly through any chain of 

6 ownership, or 

7 ‘‘(ii) holds any derivative financial in8 strument or other contractual arrangement 

9 with respect to such interest or company 

10 (including any financial instrument or 

11 other contract which seeks to replicate any 

12 financial return with respect to such inter13 est or such company). 

14 ‘‘(D) PUBLICATION OF LIST BY SEC15 RETARY.—The Secretary shall, not later than 

16 120 days after the date of the enactment of this 

17 Act, establish a process for the periodic pub18 lishing of a list of certified pooled investments, 

19 including exchange traded funds and mutual 

20 funds, that do not have exposure to disqualified 

21 Chinese companies. 

22 ‘‘(3) WAIVERS.— 

23 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

24 not apply with respect to any interest in a dis25 qualified Chinese company held by any organiVerDate Sep 11 2014 21:15 Aug 21, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5109.IH H5109

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1 zation during any taxable year if the Secretary 

2 issues a waiver to such organization with re3 spect to such interest for such taxable year 

4 under this paragraph. Any waiver issued under 

5 this paragraph shall be subject to renewal or 

6 expiration on a biannual basis. 

7 ‘‘(B) WAIVER PROCESS.— 

8 ‘‘(i) APPLICATION.—Not later than 60 

9 days after the date of the enactment of 

10 this subsection, the Secretary shall estab11 lish a process under which an organization 

12 may submit a written application for a 

13 waiver under this paragraph. Such applica14 tion shall be made publicly available and 

15 shall include: 

16 ‘‘(I) An explanation of the need 

17 for such waiver and the reasons that 

18 the need for such waiver outweigh the 

19 threat posed to the United States by 

20 China and the lack of separation be21 tween China and the disqualified Chi22 nese company involved. 

23 ‘‘(II) The type (including sector 

24 of the economy), amount, and duraVerDate Sep 11 2014 21:15 Aug 21, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5109.IH H5109

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1 tion of the investment in the disquali2 fied Chinese company. 

3 ‘‘(III) The relationship between 

4 the disqualified Chinese company and 

5 China. 

6 ‘‘(IV) The extenuating cir7 cumstances justifying the applicant’s 

8 need to invest in the disqualified Chi9 nese company. 

10 ‘‘(ii) RESPONSE.—The Secretary shall 

11 provide a written response to each com12 pleted application under clause (i) not later 

13 than 60 days after receipt of such applica14 tion. Such written response shall be made 

15 publicly available and shall include: 

16 ‘‘(I) A statement of whether the 

17 waiver has been provided or withheld. 

18 ‘‘(II) The reasons for providing 

19 or withholding the waiver. 

20 ‘‘(III) The identification of any 

21 future investments with respect to 

22 which such waiver applies. 

23 ‘‘(IV) The date on which such 

24 waiver expires (which may not be later 

25 than the earlier of the termination of 


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1 the extenuating circumstances re2 ferred to in clause (i)(IV) or the end 

3 of the biannual period referred to in 

4 subparagraph (A)). 

5 ‘‘(C) STANDARDS FOR DETERMINING IF

6 WAIVER IS PROVIDED.—The Secretary may pro7 vide a waiver under this paragraph only if the 

8 Secretary independently determines that— 

9 ‘‘(i) the need for such waiver, and the 

10 reasons for the need for such waiver, out11 weigh the threat posed to the United 

12 States by China and the lack of separation 

13 between China and the disqualified Chinese 

14 company involved, and 

15 ‘‘(ii) extenuating circumstances justify 

16 the applicant’s need to invest in the dis17 qualified Chinese company. 

18 For purposes of this subparagraph, the Sec19 retary shall not consider the past or future fi20 nancial returns of any investment in any dis21 qualified Chinese company, or any other jus22 tification based on the applicant’s own financial 

23 needs, as an extenuating circumstance justi24 fying such an investment. 


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1 ‘‘(D) PUBLICATION OF WAIVERS PRO2 VIDED.—With respect to each calendar quarter, 

3 the Secretary shall publish and make publicly 

4 available a list of the waivers provided by the 

5 Secretary under this paragraph during such 

6 quarter. 

7 ‘‘(4) CHINA.—For purposes of this section, the 

8 term ‘China’ means the People’s Republic of China 

9 and includes any subordinate Special Administrative 

10 Regions thereof. 

11 ‘‘(5) ANNUAL REPORT.—Each organization de12 scribed in paragraph (1) with respect to each taxable 

13 year shall, not later than the due date for the return 

14 of tax for such taxable year, transmit to the Sec15 retary a written report including— 

16 ‘‘(A) a description of each interest in a dis17 qualified Chinese company held by such organi18 zation during such taxable year, 

19 ‘‘(B) the period for any such interest that 

20 was so held, and 

21 ‘‘(C) whether such organization has a 

22 waiver under paragraph (3) to hold such inter23 est during such period.’’. 

24 (b) EFFECTIVE DATE.— 


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1 (1) IN GENERAL.—The amendments made by 

2 this section shall apply to taxable years ending after 

3 the date of the enactment of this Act, except that 

4 only periods after the date that is 270 days after the 

5 date of the enactment of this Act shall be taken into 

6 account in determining whether the requirement of 

7 section 501(s) of the Internal Revenue Code of 1986 

8 (as added by this section) is met with respect to any 

9 taxable year. 

10 (2) 1-YEAR GRACE PERIOD UNDER CERTAIN

11 CIRCUMSTANCES.—In the case of any organization 

12 that, after intensive due diligence, is unaware of the 

13 failure to satisfy the requirement of such section 

14 501(s), paragraph (1) shall be applied by sub15 stituting ‘‘1 year’’ for ‘‘270 days’’. 

16 (c) PUBLIC REPORT.—Not later than 360 days after 

17 the date of the enactment of this Act, and annually there18 after, the Secretary of the Treasury (or the Secretary’s 

19 delegate) shall publicly release a report describing the pat20 terns of United States outbound investment in China, in21 cluding such investment by organizations described in sec22 tion 501(s)(1) of the Internal Revenue Code of 1986 (as 

23 added by this section). Such report shall detail the sectoral 

24 breadkown of such investments. 

Æ 


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