Rebuilding American Manufacturing Act of 2015

To amend the Internal Revenue Code of 1986 to reduce the rate of tax on domestic manufacturing income to 20 percent. 1. Short title; findings (a) Short title This Act may be cited as the Rebuilding American Manufacturing Act of 2015 (b) Findings Congress finds the following: (1) American manufacturing is vital to our economy, and those who produce American goods and hire American workers should be a priority. (2) Manufacturing is an essential source of innovation that is critical to our continued prosperity in an increasingly competitive global economy. (3) Approximately 1.2 million Americans are employed by the manufacturing industry. (4) The manufacturing industry provides stable jobs with sustainable wages to Americans in every State. (5) Manufacturing jobs provide, on average, wages that are above the national average and provide a gateway to the middle class. (6) The effective tax rate of domestic manufacturers ranges from 27 to 31 percent, depending on location and the size of equipment used in production. (7) Tax reform must make the United States more competitive, boost economic growth, and foster the creation of sustainable American jobs. (8) Tax reform should particularly focus on those companies that grow, build, and create goods in the United States. (9) The tax rate of domestic manufacturers should reflect the industry’s contributions of employment, growth, innovation, and competition in the United States. 2. 20-percent income tax rate for domestic manufacturing income (a) In general Part VI of subchapter B of chapter 1 200. Domestic manufacturing income (a) Allowance of deduction There shall be allowed as a deduction an amount equal to 50.5 percent (43 percent in the case of a C corporation) of the lesser of— (1) the domestic manufacturing income of the taxpayer for the taxable year, or (2) taxable income (determined without regard to this section and section 199) for the taxable year. (b) Limitation based on domestic investment For purposes of this section— (1) In general The amount of the deduction allowable under subsection (a) for any taxable year shall not exceed 25 percent of the taxpayer’s qualifying domestic investment for the taxable year. (2) Qualifying domestic investment amount The term qualifying domestic investment (A) the W–2 wages of such taxpayer for such taxable year, (B) the sum of the deductions allowable under sections 167, 169, 179, and 179D to such taxpayer for such taxable year, plus (C) the deduction allowable under section 174 to such taxpayer for such taxable year. (3) W– 2 The term W–2 wages (4) Limitation to amounts attributable to domestic production The term qualifying domestic investment (5) Acquisitions and dispositions The Secretary shall provide for the application of this subsection in cases where the taxpayer acquires, or disposes of, the major portion of a trade or business or the major portion of a separate unit of a trade or business during the taxable year. (c) Domestic manufacturing income For purposes of this section— (1) In general The term domestic manufacturing income (A) the taxpayer’s domestic manufacturing gross receipts for such taxable year, over (B) the sum of— (i) the cost of goods sold that are allocable to such receipts, and (ii) other expenses, losses, or deductions (other than the deduction allowed under this section), which are properly allocable to such receipts. (2) Allocation method The Secretary shall prescribe rules for the proper allocation of items described in paragraph (1) for purposes of determining domestic manufacturing income. Such rules shall provide for the proper allocation of items whether or not such items are directly allocable to domestic manufacturing gross receipts. (3) Special rules for determining costs (A) In general For purposes of determining costs under clause (i) of paragraph (1)(B), any item or service brought into the United States shall be treated as acquired by purchase, and its cost shall be treated as not less than its value immediately after it entered the United States. A similar rule shall apply in determining the adjusted basis of leased or rented property where the lease or rental gives rise to domestic manufacturing gross receipts. (B) Exports for further manufacture In the case of any property described in subparagraph (A) that had been exported by the taxpayer for further manufacture, the increase in cost or adjusted basis under subparagraph (A) shall not exceed the difference between the value of the property when exported and the value of the property when brought back into the United States after the further manufacture. (4) Treatment of certain accelerated depreciation deductions In the case of property placed in service after December 31, 2007, and before the first taxable year of the taxpayer beginning after December 31, 2014, the deduction under section 168 with respect to such property which is treated as properly allocable to domestic manufacturing gross receipts of the taxpayer for any taxable year shall be determined without regard to section 168(k)(1). (5) Treatment of deferred compensation under nonqualified plans In the case of compensation paid or incurred by the taxpayer which is deferred under a nonqualified deferred compensation plan (as defined in section 409A(d)(1)), the amount under paragraph (1)(B)(ii) shall be determined as though the deduction for such compensation is allowed for the taxable year in which the services for which such compensation was paid or incurred are performed. This paragraph shall not apply with respect to compensation paid or incurred for services performed in taxable years beginning before the first taxable year of the taxpayer beginning after December 31, 2014. (d) Domestic manufacturing gross receipts For purposes of this section— (1) In general The term domestic manufacturing gross receipts (2) Special rule for certain government contracts Gross receipts derived from the manufacture or production of any property shall not fail to be treated as meeting the requirements of paragraph (1) solely because title or risk of loss with respect to such property is held by the Federal Government if— (A) such property is manufactured or produced by the taxpayer pursuant to a contract with the Federal Government, and (B) the Federal Acquisition Regulation requires that title or risk of loss with respect to such property be transferred to the Federal Government before the manufacture or production of such property is complete. (3) Qualified property The term qualified property (A) any tangible personal property other than— (i) oil, gas, and primary products thereof (within the meaning of section 199(d)(9)(C)), (ii) property with respect to which section 613 applies, (iii) property described in paragraph (3) or (4) of section 168(f), and (iv) electricity and potable water, and (B) any computer software other than video games rated M, AO, RP, or any similar rating as determined by the Secretary, by the Entertainment Software Rating Board. (4) Partnerships owned by expanded affiliated groups For purposes of this subsection, if all of the interests in the capital and profits of a partnership are owned by members of a single expanded affiliated group at all times during the taxable year of such partnership, the partnership and all members of such group shall be treated as a single taxpayer during such period. (5) Related persons (A) In general The term domestic manufacturing gross receipts (B) Related person For purposes of subparagraph (A), a person shall be treated as related to another person if such persons are treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414, except that determinations under subsections (a) and (b) of section 52 shall be made without regard to section 1563(b). (e) Special rules (1) Elective application of deduction Except as otherwise provided by the Secretary, the taxpayer may elect not to take any item of income into account as domestic manufacturing gross receipts for purposes of this section. (2) Coordination with section 199 If a deduction is allowed under this section with respect to any taxpayer for any taxable year, any gross receipts of the taxpayer which are taken into account under this section for such taxable year (and any items properly allocable thereto under subsections (b) or (c)) shall not be taken into account under section 199 for such taxable year. (3) Application of section to pass-thru entities (A) Partnerships and S corporations In the case of a partnership or S corporation— (i) this section shall be applied at the partner or shareholder level, (ii) each partner or shareholder shall take into account such person’s allocable share of each item described in subparagraph (A) or (B) of subsection (c)(1) (determined without regard to whether the items described in such subparagraph (A) exceed the items described in such subparagraph (B)), and (iii) each partner or shareholder shall be treated for purposes of subsection (b) as having an amount of each item taken into account in determining qualifying domestic investment of the partnership or S corporation for the taxable year equal to such person’s allocable share of such item (as determined under regulations prescribed by the Secretary). (B) Trust and estates In the case of a trust or estate— (i) the items referred to in subparagraph (A)(ii) (as determined therein) and the qualifying domestic investment of the trust or estate for the taxable year, shall be apportioned between the beneficiaries and the fiduciary (and among the beneficiaries) under regulations prescribed by the Secretary, and (ii) for purposes of paragraph (4), adjusted gross income of the trust or estate shall be determined as provided in section 67(e) with the adjustments described in such paragraph. (C) Regulations The Secretary may prescribe rules requiring or restricting the allocation of items and qualifying domestic investment under this paragraph and may prescribe such reporting requirements as the Secretary determines appropriate. (4) Application to individuals In the case of an individual, subsection (a)(2) shall be applied by substituting adjusted gross income taxable income (A) after application of sections 86, 135, 137, 219, 221, 222, and 469, and (B) without regard to this section and section 199. (5) Application of other rules Rules similar to the rules of paragraphs (3), (4), (5), (6), (7), and (10) of section 199(d) shall apply for purposes of this section. . (b) Conforming amendments (1) Section 56(d)(1)(A) of such Code is amended by striking deduction under section 199 deductions under sections 199 and 200 (2) Section 56(g)(4)(C) of such Code is amended by adding at the end the following new clause: (vii) Deduction for domestic business income Clause (i) shall not apply to any amount allowable as a deduction under section 200. . (3) The following provisions of such Code are each amended by inserting 200, 199, (A) Section 86(b)(2)(A). (B) Section 135(c)(4)(A). (C) Section 137(b)(3)(A). (D) Section 219(g)(3)(A)(ii). (E) Section 221(b)(2)(C)(i). (F) Section 222 (b)(2)(C)(i). (G) Section 246(b)(1). (H) Section 469(i)(3)(F)(iii). (4) Section 163(j)(6)(A)(i) of such Code is amended by striking and (V) any deduction allowable under section 200, and . (5) Section 170(b)(2)(C) of such Code is amended by striking and , and (vi) section 200. . (6) Section 172(d) of such Code is amended by adding at the end the following new paragraph: (8) Domestic business income The deduction under section 200 shall not be allowed. . (7) Section 199(d)(2)(A) of such Code is amended by inserting 200, 137, (8) Section 613(a) of such Code is amended by striking deduction under section 199 deductions under sections 199 and 200 (9) Section 613A(d)(1) of such Code is amended by redesignating subparagraphs (C), (D), and (E) as subparagraphs (D), (E), and (F), respectively, and by inserting after subparagraph (B) the following new subparagraph: (C) any deduction allowable under section 200, . (10) Section 1402(a) of such Code is amended by striking and (17) the deduction provided by section 200 shall not be allowed; and . (11) The table of sections for part VI of subchapter B of chapter 1 of such Code is amended by adding at the end the following new item: Sec. 200. Domestic manufacturing income. . (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2014.

Summary: Rebuilding American Manufacturing Act of 2015 Amends the Internal Revenue Code to allow taxpayers engaged in domestic manufacturing in the United States a tax deduction equal to 50.5% (43% for C corporations) of the lesser of their domestic manufacturing income or their taxable income for the taxable year (thus effectively reducing their income tax rate to approximately 20%). Limits the amount of such deduction to 25% of such taxpayer's qualifying domestic investment (defined as the sum of the taxpayer's W-2 wages and certain allowable tax deductions, excluding any amounts not properly allocable to the taxpayer's domestic manufacturing gross receipts).