II 

113TH CONGRESS 

2D SESSION S. 2540 

To amend the Internal Revenue Code of 1986 to provide a tax credit to 

Patriot employers, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 26, 2014 

Mr. DURBIN (for himself, Mr. BROWN, Mr. REED, Ms. WARREN, Ms. BALDWIN, and Mr. SANDERS) 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 provide 

a tax credit to Patriot employers, 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 ‘‘Patriot Employer Tax 

5 Credit Act’’. 

6 SEC. 2. PATRIOT EMPLOYER TAX CREDIT. 

7 (a) IN GENERAL.—Subpart D of part IV of sub8 chapter A of chapter 1 of the Internal Revenue Code of 

9 1986 is amended by adding at the end the following new 

10 section: 


rfrederick on DSK6VPTVN1PROD with BILLS
2 

•S 2540 IS

1 ‘‘SEC. 45S. PATRIOT EMPLOYER TAX CREDIT. 

2 ‘‘(a) DETERMINATION OF AMOUNT.— 

3 ‘‘(1) IN GENERAL.—For purposes of section 38, 

4 the Patriot employer credit determined under this 

5 section with respect to any taxpayer who is a Patriot 

6 employer for any taxable year shall be equal to 10 

7 percent of the qualified wages paid or incurred by 

8 the Patriot employer. 

9 ‘‘(2) LIMITATION.—The amount of qualified 

10 wages which may be taken into account under para11 graph (1) with respect to any employee for any tax12 able year shall not exceed $15,000. 

13 ‘‘(b) PATRIOT EMPLOYER.— 

14 ‘‘(1) IN GENERAL.—For purposes of subsection 

15 (a), the term ‘Patriot employer’ means, with respect 

16 to any taxable year, any taxpayer— 

17 ‘‘(A) which— 

18 ‘‘(i) maintains its headquarters in the 

19 United States if the taxpayer (or any pred20 ecessor) has ever been headquartered in 

21 the United States, and 

22 ‘‘(ii) is not (and no predecessor of 

23 which is) an expatriated entity (as defined 

24 in section 7874(a)(2)) for the taxable year 

25 or any preceding taxable year ending after 

26 March 4, 2003, 


rfrederick on DSK6VPTVN1PROD with BILLS
3 

•S 2540 IS

1 ‘‘(B) with respect to which no assessable 

2 payment has been imposed under section 

3 4980H with respect to any month occurring 

4 during the taxable year, and 

5 ‘‘(C) in the case of— 

6 ‘‘(i) a taxpayer which employs an av7 erage of more than 50 employees on busi8 ness days during the taxable year, which— 

9 ‘‘(I) provides compensation for at 

10 least 90 percent of its employees for 

11 services provided by such employees 

12 during the taxable year at an hourly 

13 rate (or equivalent thereof) not less 

14 than an amount equal to 150 percent 

15 of the Federal poverty level for a fam16 ily of three for the calendar year in 

17 which the taxable year begins divided 

18 by 2,080, 

19 ‘‘(II) meets the retirement plan 

20 requirements of subsection (c) with 

21 respect to at least 90 percent of its 

22 employees providing services during 

23 the taxable year who are not highly 

24 compensated employees, and 


rfrederick on DSK6VPTVN1PROD with BILLS
4 

•S 2540 IS

1 ‘‘(III) meets the additional re2 quirements of subparagraphs (A) and 

3 (B) of paragraph (2), or 

4 ‘‘(ii) any other taxpayer, which meets 

5 the requirements of either subclause (I) or 

6 (II) of clause (i) for the taxable year. 

7 ‘‘(2) ADDITIONAL REQUIREMENTS FOR LARGE

8 EMPLOYERS.— 

9 ‘‘(A) UNITED STATES EMPLOYMENT.—The 

10 requirements of this subparagraph are met for 

11 any taxable year if— 

12 ‘‘(i) in any case in which the taxpayer 

13 increases the number of employees per14 forming substantially all of their services 

15 for the taxable year outside the United 

16 States, the taxpayer either— 

17 ‘‘(I) increases the number of em18 ployees performing substantially all of 

19 their services inside the United States 

20 by an amount not less than the in21 crease in such number for employees 

22 outside the United States, or 

23 ‘‘(II) has a percentage increase 

24 in such employees inside the United 

25 States which is not less than the perVerDate Mar 15 2010 03:47 Jul 04, 2014 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2540.IS S2540

rfrederick on DSK6VPTVN1PROD with BILLS
5 

•S 2540 IS

1 centage increase in such employees 

2 outside the United States, 

3 ‘‘(ii) in any case in which the taxpayer 

4 decreases the number of employees per5 forming substantially all of their services 

6 for the taxable year inside the United 

7 States, the taxpayer either— 

8 ‘‘(I) decreases the number of em9 ployees performing substantially all of 

10 their services outside the United 

11 States by an amount not less than the 

12 decrease in such number for employ13 ees inside the United States, or 

14 ‘‘(II) has a percentage decrease 

15 in employees outside the United 

16 States which is not less than the per17 centage decrease in such employees 

18 inside the United States, and 

19 ‘‘(iii) there is not a decrease in the 

20 number of employees performing substan21 tially all of their services for the taxable 

22 year inside the United States by reason of 

23 the taxpayer contracting out such services 

24 to persons who are not employees of the 

25 taxpayer. 


rfrederick on DSK6VPTVN1PROD with BILLS
6 

•S 2540 IS

1 ‘‘(B) TREATMENT OF INDIVIDUALS IN THE

2 UNIFORMED SERVICES AND THE DISABLED.— 

3 The requirements of this subparagraph are met 

4 for any taxable year if— 

5 ‘‘(i) the taxpayer provides differential 

6 wage payments (as defined in section 

7 3401(h)(2)) to each employee described in 

8 section 3401(h)(2)(A) for any period dur9 ing the taxable year in an amount not less 

10 than the difference between the wages 

11 which would have been received from the 

12 employer during such period and the 

13 amount of pay and allowances which the 

14 employee receives for service in the uni15 formed services during such period, and 

16 ‘‘(ii) the taxpayer has in place at all 

17 times during the taxable year a written 

18 policy for the recruitment of employees 

19 who have served in the uniformed services 

20 or who are disabled. 

21 ‘‘(3) SPECIAL RULES FOR APPLYING THE MIN22 IMUM WAGE AND RETIREMENT PLAN REQUIRE23 MENTS.— 

24 ‘‘(A) MINIMUM WAGE.—In determining 

25 whether the minimum wage requirements of 


rfrederick on DSK6VPTVN1PROD with BILLS
7 

•S 2540 IS

1 paragraph (1)(C)(i)(I) are met with respect to 

2 90 percent of a taxpayer’s employees for any 

3 taxable year— 

4 ‘‘(i) a taxpayer may elect to exclude 

5 from such determination apprentices or 

6 learners that an employer may exclude 

7 under the regulations under section 14(a) 

8 of the Fair Labor Standards Act of 1938, 

9 and 

10 ‘‘(ii) if a taxpayer meets the require11 ments of paragraph (2)(B)(i) with respect 

12 to providing differential wage payments to 

13 any employee for any period (without re14 gard to whether such requirements apply 

15 to the taxpayer), the hourly rate (or equiv16 alent thereof) for such payments shall be 

17 determined on the basis of the wages which 

18 would have been paid by the employer dur19 ing such period if the employee had not 

20 been providing service in the uniformed 

21 services. 

22 ‘‘(B) RETIREMENT PLAN.—In determining 

23 whether the retirement plan requirements of 

24 paragraph (1)(C)(i)(II) are met with respect to 

25 90 percent of a taxpayer’s employees for any 


rfrederick on DSK6VPTVN1PROD with BILLS
8 

•S 2540 IS

1 taxable year, a taxpayer may elect to exclude 

2 from such determination— 

3 ‘‘(i) employees not meeting the age or 

4 service requirements under section 

5 410(a)(1) (or such lower age or service re6 quirements as the employer provides), and 

7 ‘‘(ii) employees described in section 

8 410(b)(3). 

9 ‘‘(c) RETIREMENT PLAN REQUIREMENTS.— 

10 ‘‘(1) IN GENERAL.—The requirements of this 

11 subsection are met for any taxable year with respect 

12 to an employee of the taxpayer who is not a highly 

13 compensated employee if the employee is eligible to 

14 participate in 1 or more applicable eligible retire15 ment plans maintained by the employer for a plan 

16 year ending with or within the taxable year. 

17 ‘‘(2) APPLICABLE ELIGIBLE RETIREMENT

18 PLAN.—For purposes of this subsection, the term 

19 ‘applicable eligible retirement plan’ means an eligible 

20 retirement plan which, with respect to the plan year 

21 described in paragraph (1), is either— 

22 ‘‘(A) a defined contribution plan which— 

23 ‘‘(i) requires the employer to make 

24 nonelective contributions of at least 5 perVerDate Mar 15 2010 03:47 Jul 04, 2014 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2540.IS S2540

rfrederick on DSK6VPTVN1PROD with BILLS
9 

•S 2540 IS

1 cent of the compensation of the employee, 

2 or 

3 ‘‘(ii) both— 

4 ‘‘(I) includes an eligible auto5 matic contribution arrangement (as 

6 defined in section 414(w)(3)) under 

7 which the uniform percentage de8 scribed in section 414(w)(3)(B) is at 

9 least 5 percent, and 

10 ‘‘(II) requires the employer to 

11 make matching contributions of 100 

12 percent of the elective deferrals (as 

13 defined in section 414(u)(2)(C)) of 

14 the employee to the extent such defer15 rals do not exceed the percentage 

16 specified by the plan (not less than 5 

17 percent) of the employee’s compensa18 tion, or 

19 ‘‘(B) a defined benefit plan— 

20 ‘‘(i) with respect to which the accrued 

21 benefit of the employee derived from em22 ployer contributions, when expressed as an 

23 annual retirement benefit, is not less than 

24 the product of— 


rfrederick on DSK6VPTVN1PROD with BILLS
10 

•S 2540 IS

1 ‘‘(I) the lesser of 2 percent multi2 plied by the employee’s years of serv3 ice (determined under the rules of 

4 paragraphs (4), (5), and (6) of section 

5 411(a)) with the employer or 20 per6 cent, multiplied by 

7 ‘‘(II) the employee’s final average 

8 pay, or 

9 ‘‘(ii) which is an applicable defined 

10 benefit plan (as defined in section 

11 411(a)(13)(B))— 

12 ‘‘(I) which meets the interest 

13 credit requirements of section 

14 411(b)(5)(B)(i) with respect to the 

15 plan year, and 

16 ‘‘(II) under which the employee 

17 receives a pay credit for the plan year 

18 which is not less than 5 percent of 

19 compensation. 

20 ‘‘(3) DEFINITIONS AND SPECIAL RULES.—For 

21 purposes of this subsection— 

22 ‘‘(A) ELIGIBLE RETIREMENT PLAN.—The 

23 term ‘eligible retirement plan’ has the meaning 

24 given such term by section 402(c)(8)(B), except 

25 that in the case of an account or annuity deVerDate Mar 15 2010 03:47 Jul 04, 2014 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2540.IS S2540

rfrederick on DSK6VPTVN1PROD with BILLS
11 

•S 2540 IS

1 scribed in clause (i) or (ii) thereof, such term 

2 shall only include an account or annuity which 

3 is a simplified employee pension (as defined in 

4 section 408(k)). 

5 ‘‘(B) FINAL AVERAGE PAY.—For purposes 

6 of paragraph (2)(B)(i)(II), final average pay 

7 shall be determined using the period of consecu8 tive years (not exceeding 5) during which the 

9 employee had the greatest compensation from 

10 the taxpayer. 

11 ‘‘(C) ALTERNATIVE PLAN DESIGNS.—The 

12 Secretary may prescribe regulations for a tax13 payer to meet the requirements of this sub14 section through a combination of defined con15 tribution plans or defined benefit plans de16 scribed in paragraph (1) or through a combina17 tion of both such types of plans. 

18 ‘‘(D) PLANS MUST MEET REQUIREMENTS

19 WITHOUT TAKING INTO ACCOUNT SOCIAL SECU20 RITY AND SIMILAR CONTRIBUTIONS AND BENE21 FITS.—A rule similar to the rule of section 

22 416(e) shall apply. 

23 ‘‘(d) QUALIFIED WAGES AND COMPENSATION.—For 

24 purposes of this section— 


rfrederick on DSK6VPTVN1PROD with BILLS
12 

•S 2540 IS

1 ‘‘(1) IN GENERAL.—The term ‘qualified wages’ 

2 means wages (as defined in section 51(c), deter3 mined without regard to paragraph (4) thereof) paid 

4 or incurred by the Patriot employer during the tax5 able year to employees— 

6 ‘‘(A) who perform substantially all of their 

7 services for such Patriot employer inside the 

8 United States, and 

9 ‘‘(B) with respect to whom— 

10 ‘‘(i) in the case of a Patriot employer 

11 which employs an average of more than 50 

12 employees on business days during the tax13 able year, the requirements of subclauses 

14 (I) and (II) of subsection (b)(1)(C)(i) are 

15 met, and 

16 ‘‘(ii) in the case of any other Patriot 

17 employer, the requirements of either sub18 clause (I) or (II) of subsection (b)(1)(C)(i) 

19 are met. 

20 ‘‘(2) SPECIAL RULES FOR AGRICULTURAL

21 LABOR AND RAILWAY LABOR.—Rules similar to the 

22 rules of section 51(h) shall apply. 

23 ‘‘(3) COMPENSATION.—For purposes of sub24 sections (b)(1)(C)(i)(I) and (c), the term ‘compensa25 tion’ has the same meaning as qualified wages, exVerDate Mar 15 2010 03:47 Jul 04, 2014 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S2540.IS S2540

rfrederick on DSK6VPTVN1PROD with BILLS
13 

•S 2540 IS

1 cept that section 51(c)(2) shall be disregarded in de2 termining the amount of such wages. 

3 ‘‘(e) AGGREGATION RULES.—For purposes of this 

4 section— 

5 ‘‘(1) IN GENERAL.—All persons treated as a 

6 single employer under subsection (a) or (b) of sec7 tion 52 shall be treated as a single taxpayer. 

8 ‘‘(2) SPECIAL RULES FOR CERTAIN REQUIRE9 MENTS.—For purposes of applying paragraphs 

10 (1)(A) and (2)(A) of subsection (b)— 

11 ‘‘(A) the determination under subsections 

12 (a) and (b) of section 52 for purposes of para13 graph (1) shall be made without regard to sec14 tion 1563(b)(2)(C) (relating to exclusion of for15 eign corporations), and 

16 ‘‘(B) if any person treated as a single tax17 payer under this subsection (after application of 

18 subparagraph (A)), or any predecessor of such 

19 person, was an expatriated entity (as defined in 

20 section 7874(a)(2)) for any taxable year ending 

21 after March 4, 2003, then all persons treated 

22 as a single taxpayer with such person shall be 

23 treated as expatriated entities. 

24 ‘‘(f) ELECTION TO HAVE CREDIT NOT APPLY.— 


rfrederick on DSK6VPTVN1PROD with BILLS
14 

•S 2540 IS

1 ‘‘(1) IN GENERAL.—A taxpayer may elect to 

2 have this section not apply for any taxable year. 

3 ‘‘(2) TIME FOR MAKING ELECTION.—An elec4 tion under paragraph (1) for any taxable year may 

5 be made (or revoked) at any time before the expira6 tion of the 3-year period beginning on the last date 

7 prescribed by law for filing the return for such tax8 able year (determined without regard to extensions). 

9 ‘‘(3) MANNER OF MAKING ELECTION.—An elec10 tion under paragraph (1) (or revocation thereof) 

11 shall be made in such manner as the Secretary may 

12 by regulations prescribe.’’. 

13 (b) ALLOWANCE AS GENERAL BUSINESS CREDIT.— 

14 Section 38(b) of the Internal Revenue Code of 1986 is 

15 amended by striking ‘‘plus’’ at the end of paragraph (35), 

16 by striking the period at the end of paragraph (36) and 

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

18 ‘‘(37) in the case of a Patriot employer (as de19 fined in section 45S(b)) for any taxable year, the 

20 Patriot employer credit determined under section 

21 45S(a).’’. 

22 (c) DENIAL OF DOUBLE BENEFIT.—Subsection (a) 

23 of section 280C of the Internal Revenue Code of 1986 is 

24 amended by inserting ‘‘45S(a),’’ after ‘‘45P(a)’’. 


rfrederick on DSK6VPTVN1PROD with BILLS
15 

•S 2540 IS

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

2 this section shall apply to taxable years beginning after 

3 December 31, 2014. 

4 SEC. 3. DEFER DEDUCTION OF INTEREST EXPENSE RE5 LATED TO DEFERRED INCOME. 

6 (a) IN GENERAL.—Section 163 of the Internal Rev7 enue Code of 1986 (relating to deductions for interest ex8 pense) is amended by redesignating subsection (n) as sub9 section (o) and by inserting after subsection (m) the fol10 lowing new subsection: 

11 ‘‘(n) DEFERRAL OF DEDUCTION FOR INTEREST EX12 PENSE RELATED TO DEFERRED INCOME.— 

13 ‘‘(1) GENERAL RULE.—The amount of foreign14 related interest expense of any taxpayer allowed as 

15 a deduction under this chapter for any taxable year 

16 shall not exceed an amount equal to the applicable 

17 percentage of the sum of— 

18 ‘‘(A) the taxpayer’s foreign-related interest 

19 expense for the taxable year, plus 

20 ‘‘(B) the taxpayer’s deferred foreign-re21 lated interest expense. 

22 For purposes of the paragraph, the applicable per23 centage is the percentage equal to the current inclu24 sion ratio. 


rfrederick on DSK6VPTVN1PROD with BILLS
16 

•S 2540 IS

1 ‘‘(2) TREATMENT OF DEFERRED DEDUC2 TIONS.—If, for any taxable year, the amount of the 

3 limitation determined under paragraph (1) exceeds 

4 the taxpayer’s foreign-related interest expense for 

5 the taxable year, there shall be allowed as a deduc6 tion for the taxable year an amount equal to the 

7 lesser of— 

8 ‘‘(A) such excess, or 

9 ‘‘(B) the taxpayer’s deferred foreign-re10 lated interest expense. 

11 ‘‘(3) DEFINITIONS AND SPECIAL RULE.—For 

12 purposes of this subsection— 

13 ‘‘(A) FOREIGN-RELATED INTEREST EX14 PENSE.—The term ‘foreign-related interest ex15 pense’ means, with respect to any taxpayer for 

16 any taxable year, the amount which bears the 

17 same ratio to the amount of interest expense 

18 for such taxable year allocated and apportioned 

19 under sections 861, 864(e), and 864(f) to in20 come from sources outside the United States 

21 as— 

22 ‘‘(i) the value of all stock held by the 

23 taxpayer in all section 902 corporations 

24 with respect to which the taxpayer meets 


rfrederick on DSK6VPTVN1PROD with BILLS
17 

•S 2540 IS

1 the ownership requirements of subsection 

2 (a) or (b) of section 902, bears to 

3 ‘‘(ii) the value of all assets of the tax4 payer which generate gross income from 

5 sources outside the United States. 

6 ‘‘(B) DEFERRED FOREIGN-RELATED IN7 TEREST EXPENSE.—The term ‘deferred foreign8 related interest expense’ means the excess, if 

9 any, of the aggregate foreign-related interest 

10 expense for all prior taxable years beginning 

11 after December 31, 2014, over the aggregate 

12 amount allowed as a deduction under para13 graphs (1) and (2) for all such prior taxable 

14 years. 

15 ‘‘(C) VALUE OF ASSETS.—Except as other16 wise provided by the Secretary, for purposes of 

17 subparagraph (A)(ii), the value of any asset 

18 shall be the amount with respect to such asset 

19 determined for purposes of allocating and ap20 portioning interest expense under sections 861, 

21 864(e), and 864(f). 

22 ‘‘(D) CURRENT INCLUSION RATIO.—The 

23 term ‘current inclusion ratio’ means, with re24 spect to any domestic corporation which meets 

25 the ownership requirements of subsection (a) or 


rfrederick on DSK6VPTVN1PROD with BILLS
18 

•S 2540 IS

1 (b) of section 902 with respect to one or more 

2 section 902 corporations for any taxable year, 

3 the ratio (expressed as a percentage) of— 

4 ‘‘(i) the sum of all dividends received 

5 by the domestic corporation from all such 

6 section 902 corporations during the taxable 

7 year plus amounts includible in gross in8 come under section 951(a) from all such 

9 section 902 corporations, in each case com10 puted without regard to section 78, divided 

11 by 

12 ‘‘(ii) the aggregate amount of post13 1986 undistributed earnings. 

14 ‘‘(E) AGGREGATE AMOUNT OF POST-1986

15 UNDISTRIBUTED EARNINGS.—The term ‘aggre16 gate amount of post-1986 undistributed earn17 ings’ means, with respect to any domestic cor18 poration which meets the ownership require19 ments of subsection (a) or (b) of section 902 

20 with respect to one or more section 902 cor21 porations, the domestic corporation’s pro rata 

22 share of the post-1986 undistributed earnings 

23 (as defined in section 902(c)(1)) of all such sec24 tion 902 corporations. 


rfrederick on DSK6VPTVN1PROD with BILLS
19 

•S 2540 IS

1 ‘‘(F) FOREIGN CURRENCY CONVERSION.— 

2 For purposes of determining the current inclu3 sion ratio, and except as otherwise provided by 

4 the Secretary, the aggregate amount of post5 1986 undistributed earnings for the taxable 

6 year shall be determined by translating each 

7 section 902 corporation’s post-1986 undistrib8 uted earnings into dollars using the average ex9 change rate for such year. 

10 ‘‘(G) SECTION 902 CORPORATION.—The 

11 term ‘section 902 corporation’ has the meaning 

12 given to such term by section 909(d)(5). 

13 ‘‘(4) TREATMENT OF AFFILIATED GROUPS.— 

14 The current inclusion ratio of each member of an af15 filiated group (as defined in section 864(e)(5)(A)) 

16 shall be determined as if all members of such group 

17 were a single corporation. 

18 ‘‘(5) APPLICATION TO SEPARATE CATEGORIES

19 OF INCOME.—This subsection shall be applied sepa20 rately with respect to the categories of income speci21 fied in section 904(d)(1). 

22 ‘‘(6) REGULATIONS.—The Secretary may pre23 scribe such regulations or other guidance as is nec24 essary or appropriate to carry out the purposes of 


rfrederick on DSK6VPTVN1PROD with BILLS
20 

•S 2540 IS

1 this subsection, including regulations or other guid2 ance providing— 

3 ‘‘(A) for the proper application of this sub4 section with respect to changes in ownership of 

5 a section 902 corporation, 

6 ‘‘(B) that certain corporations that other7 wise would not be members of the affiliated 

8 group will be treated as members of the affili9 ated group for purposes of this subsection, 

10 ‘‘(C) for the proper application of this sub11 section with respect to the taxpayer’s share of 

12 a deficit in earnings and profits of a section 

13 902 corporation, 

14 ‘‘(D) for appropriate adjustments to the 

15 determination of the value of stock in any sec16 tion 902 corporation for purposes of this sub17 section or to the foreign-related interest expense 

18 to account for income that is subject to tax 

19 under section 882(a)(1), and 

20 ‘‘(E) for the proper application of this sub21 section with respect to interest expense that is 

22 directly allocable to income with respect to cer23 tain assets.’’. 


rfrederick on DSK6VPTVN1PROD with BILLS
21 

•S 2540 IS

1 (b) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2014. 

Æ 


rfrederick on DSK6VPTVN1PROD with BILLS