I 

112TH CONGRESS 

1ST SESSION H. R. 3020 

To amend the Internal Revenue Code of 1986 to allow certain Puerto Rico 

corporations to elect to be treated as domestic corporations. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 22, 2011 

Mr. PIERLUISI (for himself, Mr. YOUNG of Alaska, and Mr. SERRANO) 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 allow certain Puerto Rico corporations to elect to be treated as 

domestic corporations. 

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 Invest5 ment Promotion Act of 2011’’. 


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1 SEC. 2. CERTAIN PUERTO RICO CORPORATIONS MAY 

2 ELECT TO BE TREATED AS DOMESTIC COR3 PORATIONS. 

4 (a) IN GENERAL.—Subpart D of part III of sub5 chapter N of chapter 1 of the Internal Revenue Code of 

6 1986 (relating to possessions of the United States) is 

7 amended by inserting after section 933 the following new 

8 section: 

9 ‘‘SEC. 933A. ELECTION BY PUERTO RICO CORPORATIONS 

10 TO BE TREATED AS DOMESTIC CORPORA11 TIONS. 

12 ‘‘(a) IN GENERAL.—A qualified Puerto Rico corpora13 tion for which an election under this section is in effect 

14 for any taxable year shall be treated for such year as a 

15 domestic corporation for purposes of this title. 

16 ‘‘(b) QUALIFIED PUERTO RICO CORPORATION.—For 

17 purposes of this section, the term ‘qualified Puerto Rico 

18 corporation’ means any corporation if— 

19 ‘‘(1) the corporation is incorporated under the 

20 laws of Puerto Rico, and 

21 ‘‘(2) at least 50 percent of its gross income (de22 termined without regard to subsection (c)) for the 

23 taxable year is derived from sources within Puerto 

24 Rico. 

25 ‘‘(c) EXCLUSION OF PUERTO RICO SOURCE IN26 COME.— 


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1 ‘‘(1) IN GENERAL.—In the case of a qualified 

2 Puerto Rico corporation for which an election under 

3 this section is in effect for any taxable year, gross 

4 income for such year shall not include income de5 rived from sources within Puerto Rico. 

6 ‘‘(2) DENIAL OF CERTAIN FOREIGN TAX CRED7 ITS.—No credit shall be allowed for the amount of 

8 taxes paid or accrued to a foreign country or posses9 sion of the United States to the extent such taxes 

10 are properly allocable to amounts excluded from 

11 gross income under paragraph (1). 

12 ‘‘(d) RULES RELATING TO ELECTION.— 

13 ‘‘(1) PERIOD ELECTION IN EFFECT.— 

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

15 provided in this paragraph, an election under 

16 this section shall apply to the taxable year for 

17 which made and all subsequent taxable years. 

18 ‘‘(B) REVOCATION.— 

19 ‘‘(i) REVOCATION BY CORPORATION.— 

20 A corporation may revoke an election 

21 under this section for any taxable year 

22 only if the election has been in effect for 

23 at least the 3 most recent preceding tax24 able years. 


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1 ‘‘(ii) CEASING TO BE QUALIFIED.—An 

2 election under this section shall be revoked 

3 by the Secretary for any taxable year for 

4 which the corporation fails to meet the re5 quirements of subsection (b). 

6 ‘‘(iii) EFFECT OF REVOCATION.—Ex7 cept as provided in subparagraph (C), a 

8 revocation under this subparagraph shall 

9 apply to the taxable year for which revoked 

10 and all subsequent taxable years. 

11 ‘‘(C) ELECTION AFTER REVOCATION.—An 

12 election under this section may be made after 

13 a revocation under subparagraph (B), but the 

14 election may not apply to any taxable year be15 fore the 4th taxable year following the most re16 cent preceding taxable year for which the elec17 tion was in effect. 

18 ‘‘(2) EFFECT OF MAKING AND TERMINATING

19 ELECTION.— 

20 ‘‘(A) MAKING ELECTION.—For purposes of 

21 section 367, any qualified Puerto Rico corpora22 tion making an election under this section shall 

23 be treated as transferring (as of the 1st day of 

24 the 1st taxable year to which such election ap25 plies) all of its assets to a domestic corporation 


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1 in connection with an exchange to which section 

2 354 applies. 

3 ‘‘(B) EFFECT OF TERMINATION.—For pur4 poses of section 367, if an election is made by 

5 a corporation under this section for any taxable 

6 year and such election ceases to apply for any 

7 subsequent taxable year, such corporation shall 

8 be treated as a domestic corporation transfer9 ring (as of the 1st day of such subsequent tax10 able year) all of its property to a foreign cor11 poration in connection with an exchange to 

12 which section 354 applies. 

13 ‘‘(C) INTANGIBLES.—For purposes of sec14 tion 367(d) and the second sentence of section 

15 482, any election made under this section shall 

16 be disregarded. 

17 ‘‘(e) DENIAL OF INCLUSION IN CONSOLIDATED RE18 TURN.—A qualified Puerto Rico corporation for which an 

19 election under this section is in effect for any taxable year 

20 may not be included in any consolidated return under 

21 chapter 6.’’. 

22 (b) CLERICAL AMENDMENT.—The table of sections 

23 for such subpart D is amended by inserting after the item 

24 relating to section 933 the following new item: 

‘‘Sec. 933A. Election by Puerto Rico corporations to be treated as domestic 

corporations.’’. 


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

2 this section shall apply to taxable years beginning after 

3 September 30, 2011. 

Æ 


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