I

105TH CONGRESS

1ST SESSION H. R. 775

To amend the Internal Revenue Code of 1986 to discourage American businesses from moving jobs overseas and to encourage the creation of

new jobs in the United States, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 13, 1997

Ms. MCKINNEY (for herself, Mr. BONIOR, Mr. BORSKI, Mr. BROWN of Ohio,

Mrs. CLAYTON, Mr. CONYERS, Mr. CUMMINGS, Mr. DAVIS of Illinois, Mr.

DELLUMS, Mr. EVANS, Mr. FATTAH, Mr. FILNER, Mr. FOGLIETTA, Mr.

HILLIARD, Ms. JACKSON-LEE of Texas, Ms. EDDIE BERNICE JOHNSON

of Texas, Mr. LIPINSKI, Mrs. MEEK of Florida, Ms. NORTON, Mr.

OWENS, Mr. RUSH, Mr. STUPAK, Mr. TOWNS, Mr. WATT of North Carolina, and Mr. WYNN) 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 discourage

American businesses from moving jobs overseas and to

encourage the creation of new jobs in the United States,

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; AMENDMENT OF 1986 CODE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘American Jobs Act’’.
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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment

4 to, or repeal of, a section or other provision, the reference

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986.

7 SEC. 2. TAXATION OF INCOME OF CONTROLLED FOREIGN

8 CORPORATIONS ATTRIBUTABLE TO IM9 PORTED PROPERTY.

10 (a) GENERAL RULE.—Subsection (a) of section 954

11 (defining foreign base company income) is amended by

12 striking ‘‘and’’ at the end of paragraph (4), by striking

13 the period at the end of paragraph (5) and inserting

14 ‘‘, and’’, and by adding at the end the following new para15 graph:

16 ‘‘(6) imported property income for the taxable

17 year (determined under subsection (h) and reduced

18 as provided in subsection (b)(5)).’’

19 (b) DEFINITION OF IMPORTED PROPERTY IN20 COME.—Section 954 is amended by adding at the end the

21 following new subsection:

22 ‘‘(h) IMPORTED PROPERTY INCOME.—

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

24 (a)(6), the term ‘imported property income’ means
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1 income (whether in the form of profits, commissions,

2 fees, or otherwise) derived in connection with—

3 ‘‘(A) manufacturing, producing, growing,

4 or extracting imported property,

5 ‘‘(B) the sale, exchange, or other disposi6 tion of imported property, or

7 ‘‘(C) the lease, rental, or licensing of im8 ported property.

9 Such term shall not include any foreign oil and gas

10 extraction income (within the meaning of section

11 907(c)) or any foreign oil related income (within the

12 meaning of section 907(c)).

13 ‘‘(2) IMPORTED PROPERTY.—For purposes of

14 this subsection—

15 ‘‘(A) IN GENERAL.—Except as otherwise

16 provided in this paragraph, the term ‘imported

17 property’ means property which is imported

18 into the United States by the controlled foreign

19 corporation or a related person.

20 ‘‘(B) IMPORTED PROPERTY INCLUDES CER21 TAIN PROPERTY IMPORTED BY UNRELATED

22 PERSONS.—The term ‘imported property’ in23 cludes any property imported into the United

24 States by an unrelated person if, when such

25 property was sold to the unrelated person by
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1 the controlled foreign corporation (or a related

2 person), it was reasonable to expect that—

3 ‘‘(i) such property would be imported

4 into the United States, or

5 ‘‘(ii) such property would be used as

6 a component in other property which would

7 be imported into the United States.

8 ‘‘(C) EXCEPTION FOR PROPERTY SUBSE9 QUENTLY EXPORTED.—The term ‘imported

10 property’ does not include any property which is

11 imported into the United States and which—

12 ‘‘(i) before substantial use in the

13 United States, is sold, leased, or rented by

14 the controlled foreign corporation or a re15 lated person for direct use, consumption,

16 or disposition outside the United States, or

17 ‘‘(ii) is used by the controlled foreign

18 corporation or a related person as a com19 ponent in other property which is so sold,

20 leased, or rented.

21 ‘‘(3) DEFINITIONS AND SPECIAL RULES.—

22 ‘‘(A) IMPORT.—For purposes of this sub23 section, the term ‘import’ means entering, or

24 withdrawal from warehouse, for consumption or

25 use. Such term includes any grant of the right
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1 to use an intangible (as defined in section

2 936(b)(3)(B)) in the United States.

3 ‘‘(B) UNRELATED PERSON.—For purposes

4 of this subsection, the term ‘unrelated person’

5 means any person who is not a related person

6 with respect to the controlled foreign corpora7 tion.

8 ‘‘(C) COORDINATION WITH FOREIGN BASE

9 COMPANY SALES INCOME.—For purposes of this

10 section, the term ‘foreign base company sales

11 income’ shall not include any imported property

12 income.’’

13 (c) SEPARATE APPLICATION OF LIMITATIONS ON

14 FOREIGN TAX CREDIT FOR IMPORTED PROPERTY IN15 COME.—

16 (1) IN GENERAL.—Paragraph (1) of section

17 904(d) (relating to separate application of section

18 with respect to certain categories of income) is

19 amended by striking ‘‘and’’ at the end of subpara20 graph (H), by redesignating subparagraph (I) as

21 subparagraph (J), and by inserting after subpara22 graph (H) the following new subparagraph:

23 ‘‘(I) imported property income, and’’.
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1 (2) IMPORTED PROPERTY INCOME DEFINED.—

2 Paragraph (2) of section 904(d) is amended by re3 designating subparagraphs (H) and (I) as subpara4 graphs (I) and (J), respectively, and by inserting

5 after subparagraph (G) the following new subpara6 graph:

7 ‘‘(H) IMPORTED PROPERTY INCOME.—The

8 term ‘imported property income’ means any in9 come received or accrued by any person which

10 is of a kind which would be imported property

11 income (as defined in section 954(h)).’’

12 (3) LOOK-THRU RULES TO APPLY.—Subpara13 graph (F) of section 904(d)(3) is amended by strik14 ing ‘‘or (E)’’ and inserting ‘‘(E), or (H)’’.

15 (d) TECHNICAL AMENDMENTS.—

16 (1) Clause (iii) of section 952(c)(1)(B) (relating

17 to certain prior year deficits may be taken into ac18 count) is amended by inserting the following sub19 clause after subclause (II) (and by redesignating the

20 following subclauses accordingly):

21 ‘‘(III) imported property income,’’.

22 (2) Paragraph (5) of section 954(b) (relating to

23 deductions to be taken into account) is amended by

24 striking ‘‘and the foreign base company oil related
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1 income’’ and inserting ‘‘the foreign base company oil

2 related income, and the imported property income’’.

3 (e) EFFECTIVE DATE.—

4 (1) IN GENERAL.—Except as provided in para5 graph (2), the amendments made by this section

6 shall apply to taxable years of foreign corporations

7 beginning after December 31, 1995, and to taxable

8 years of United States shareholders within which or

9 with which such taxable years of such foreign cor10 porations end.

11 (2) SUBSECTION (c).—The amendments made

12 by subsection (c) shall apply to taxable years begin13 ning after December 31, 1995.

14 SEC. 3. REFUNDABLE CREDIT FOR NEW EMPLOYEES.

15 (a) IN GENERAL.—Subpart C of part IV of sub16 chapter A of chapter 1 (relating to refundable credits) is

17 amended by redesignating section 35 as section 36 and

18 by inserting after section 34 the following new section:

19 ‘‘SEC. 35. CREDIT FOR NEW EMPLOYEES.

20 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al21 lowed as a credit against the tax imposed by this subtitle

22 for any taxable year an amount equal to 20 percent of

23 the qualified social security taxes paid or incurred by the

24 taxpayer during the taxable year.
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1 ‘‘(b) QUALIFIED SOCIAL SECURITY TAXES.—For

2 purposes of this section—

3 ‘‘(1) IN GENERAL.—The term ‘qualified social

4 security taxes’ means the amount of taxes imposed

5 by section 3111(a) with respect to wages of an em6 ployee for employment during the 2-year period be7 ginning with the day the employee begins work for

8 the employer.

9 ‘‘(2) APPLICATION TO RAILROAD RETIRE10 MENT.—Such term shall also include taxes imposed

11 by section 3221(a) with respect to compensation

12 during such 2-year period but only to the extent at13 tributable to the rate of tax in effect under section

14 3111(a).

15 ‘‘(3) EXCEPTION FOR EMPLOYMENT OUTSIDE

16 THE UNITED STATES.—Such term shall not include

17 taxes paid with respect to employment described in

18 section 3121(b)(B) (relating to employment outside

19 the United States by citizens and residents).

20 ‘‘(c) CERTAIN EMPLOYEES INELIGIBLE.—

21 ‘‘(1) OVERALL EMPLOYMENT MUST IN22 CREASE.—

23 ‘‘(A) IN GENERAL.—An employer may take

24 into account for purposes of this section only

25 that number of employees hired by the employer
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1 during a taxable year which does not exceed the

2 number of employees determined under sub3 paragraph (B). The employer shall designate

4 which employees shall be taken into account.

5 Such designation shall apply for such taxable

6 year and any succeeding taxable year.

7 ‘‘(B) MAXIMUM NUMBER OF EMPLOY8 EES.—For purposes of subparagraph (A), the

9 number of employees determined under this

10 subparagraph for a taxable year is an amount

11 equal to the excess (if any) of—

12 ‘‘(i) the average daily number of full13 time equivalent employees of the taxpayer

14 for such taxable year, over

15 ‘‘(ii) the average daily number of full16 time equivalent employees of the taxpayer

17 (or any predecessor) for the 3-taxable-year

18 period immediately preceding such taxable

19 year.

20 ‘‘(2) OTHER INELIGIBLE EMPLOYEES.—Quali21 fied social security taxes paid with respect to any

22 employee shall not be taken into account under sub23 section (a) if such employee—

24 ‘‘(A) is a member of a targeted group with

25 respect to whom the employer has taken into
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1 account wages in determining the amount of

2 the targeted jobs credit under section 51,

3 ‘‘(B) is described in paragraph (1) of sec4 tion 51(i) (relating to related individuals), or

5 ‘‘(C) is employed by the employer for less

6 than 120 days or has not completed at least

7 120 hours of service.

8 ‘‘(d) OTHER SPECIAL RULES.—For purposes of this

9 section—

10 ‘‘(1) CONTROLLED GROUPS.—All employers

11 treated as a single employer under subsection (a) or

12 (b) of section 52 shall be treated as a single em13 ployer.

14 ‘‘(2) OTHER RULES.—Rules similar to the rules

15 of section 51(k) and subsections (c), (d), and (e) of

16 section 52 shall apply.’’

17 (b) CONFORMING AMENDMENTS.—The table of sec18 tions for subpart C of part IV of subchapter A of chapter

19 1 is amended by striking the item relating to section 35

20 and inserting the following new items:

‘‘Sec. 35. Credit for new employees.

‘‘Sec. 36. Overpayments of tax.’’

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

22 this section shall apply to taxable years beginning after

23 December 31, 1995.
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1 SEC. 4. REPORT ON ELIMINATION OF BUSINESS TAX PREF2 ERENCES.

3 The Secretary of the Treasury shall, as soon as prac4 ticable after the date of the enactment of this Act, report

5 to the Committee on Ways and Means of the House of

6 Representatives and the Committee on Finance of the

7 Senate recommendations as to the elimination of, or

8 changes in, business tax preferences. Such recommenda9 tions shall provide an increase in Federal revenues suffi10 cient to offset any overall decrease in Federal revenues

11 under the other provisions of this Act.

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