I
103D CONGRESS
1ST SESSION
H. R. 1210
To amend the Internal Revenue Code of 1986 to deny the benefits of the
Puerto Rico and possession tax credit in the case of runaway plants.
IN THE HOUSE OF REPRESENTATIVES
MARCH 3, 1993
Mr. STARK (for himself and Mr. ROEMER) 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 deny the
benefits of the Puerto Rico and possession tax credit
in the case of runaway plants.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. LIMITATION ON PUERTO RICO AND POSSES-
SION TAX CREDIT.
(a) GENERAL RULE.—Section 936 of the Internal
Revenue Code of 1986 (relating to Puerto Rico and pos-
session tax credit) is amended by adding at the end there-
of the following new subsection:
‘‘(i) DENIAL
OF CREDIT
FOR INCOME ATTRIB-
UTABLE TO RUNAWAY PLANTS.—
‘‘(1) IN GENERAL.—
‘‘(A) INCOME ATTRIBUTABLE TO SHARE-
HOLDERS.—The runaway plant income of a cor-
poration electing the application of this section
for any taxable year (hereinafter in this sub-
section referred to as the ‘electing corporation’)
shall be included on a pro rata basis in the
gross income of all shareholders of such electing
corporation at the close of the taxable year of
such electing corporation as income from
sources within the United States for the taxable
year of such shareholder in which or with which
the taxable year of such electing corporation
ends.
‘‘(B) EXCLUSION FROM THE INCOME OF
AN ELECTING CORPORATION.—The taxable in-
come of an electing corporation shall be reduced
by the amount which is included in the gross
income of a shareholder of such corporation by
reason of subparagraph (A).
‘‘(2) FOREIGN
SHAREHOLDERS; SHAREHOLD-
ERS NOT SUBJECT TO TAX.—
‘‘(A) IN
GENERAL.—Paragraph (1)(A)
shall not apply with respect to any share-
holder—
‘‘(i) who is not a United States per-
son, or
‘‘(ii) who is not subject to tax under
this title on runaway plant income which
would be allocated to such shareholder (but
for this subparagraph).
‘‘(B) 
TREATMENT
OF
NONALLOCATED
RUNAWAY
PLANT
INCOME.—For purposes of
this subtitle, runaway plant income of an elect-
ing corporation which is not included in the
gross income of a shareholder of such corpora-
tion by reason of subparagraph (A) shall be
treated as taxable income from sources within
the United States.
‘‘(3) EXCLUSION OF INCOME FOR QUALIFICA-
TION TESTS.—Any gross income taken into account
in determining the amount of the runaway plant in-
come of any electing corporation shall not be taken
into account for purposes of subsection (a)(2).
‘‘(4) RUNAWAY PLANT INCOME.—For purposes
of this subsection, the term ‘runaway plant income’
means the portion of the taxable income of the elect-
ing corporation which is attributable to a disquali-
fied facility.
‘‘(5) DISQUALIFIED
FACILITY.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—The term ‘disqualified
facility’ means any facility at which operations
are commenced with respect to the electing cor-
poration after March 3, 1993 unless—
‘‘(i) the Secretary determines that op-
erations at such facility—
‘‘(I) will not result in a substan-
tial adverse effect on the level of em-
ployment at any facility in the United
States operated by the electing cor-
poration or a person related to the
electing corporation, and
‘‘(II) will not result in such an
effect with respect to any other facil-
ity in the United States on account of
changes in a supplier relationship to
the electing corporation or a person
related to the electing corporation,
and
‘‘(ii) the electing corporation files a
request with the Secretary for a determina-
tion under clause (i) on or before the ear-
lier of—
‘‘(I) the day 90 days after the
date on which an application is sub-
mitted to the possession for tax incen-
tives for such facility, or
‘‘(II) the day 1 year before the
date on which operations at such fa-
cility commence.
The Secretary may treat a request not filed be-
fore the time required under clause (ii) as time-
ly filed if the Secretary determines that there
was reasonable cause for not filing the request
before the time required.
‘‘(B) CERTAIN REVOCATIONS REQUIRED.—
‘‘(i) IN
GENERAL.—The Secretary
shall revoke a determination under sub-
paragraph (A)(i) at any time before the
close of the 3-year period beginning on the
date on which operations at the facility
commenced if the Secretary determines
that, on the basis of the facts and cir-
cumstances then known, the requirements
of subparagraph (A)(i) are not satisfied.
‘‘(ii) MISREPRESENTATIONS, ETC.—
The Secretary shall, at any time, revoke a
determination under subparagraph (A)(i)
if, in connection with the request for such
determination, there was a misrepresenta-
tion with respect to (or a failure to dis-
close) any material information by the
electing corporation or a related person.
‘‘(iii) REVOCATIONS RETROACTIVE.—
If any determination is revoked under this
subparagraph, this subsection (other than
paragraph (8) thereof) shall be applied as
if such determination had never been
made.
‘‘(C) OPPORTUNITY
FOR
PUBLIC
COM-
MENT.—No determination may be made under
subparagraph (A)(i) unless the Secretary allows
an opportunity for public comment on the re-
quest for such determination.
‘‘(6) EXPANSIONS TREATED AS SEPARATE FA-
CILITIES.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, any substantial increase in employ-
ment at a facility shall be treated as a separate
facility at which operations are commenced with
respect to the electing corporation as of the
date of such increase.
‘‘(B) SUBSTANTIAL INCREASE IN EMPLOY-
MENT.—For purposes of subparagraph (A),
there shall be deemed to be a substantial in-
crease in employment as of any day at any fa-
cility if—
‘‘(i) such day is the last day of a pay-
roll period and the average number of em-
ployees performing services at such facility
during such period exceeds 110 percent of
the average number of employees perform-
ing services at such facility during the cor-
responding payroll period in the preceding
calendar year, or
‘‘(ii) there is an expansion in such fa-
cility or the operations at such facility with
respect to which a separate or supple-
mental application or other request relat-
ing to tax incentives for such expansion is
made to governmental authorities of the
possession.
Appropriate adjustments in the application of
clause (i) shall be made in the case of employ-
ees not performing services on a full-time basis.
‘‘(7) SPECIAL RULES.—
‘‘(A) DISTRIBUTIONS TO MEET QUALIFICA-
TION STANDARDS.—Rules similar to the rules
of subsection (h)(4) shall apply for purposes of
this subsection.
‘‘(B) RELATED PERSON.—For purposes of
this subsection, the rules of subparagraphs (D)
and (E) of subsection (h)(3) shall apply in de-
termining whether any person is related to the
electing corporation.
‘‘(8) PUBLIC DISCLOSURE.—
‘‘(A) PUBLICATION
IN
FEDERAL
REG-
ISTER.—The Secretary shall publish in the Fed-
eral Register—
‘‘(i) a notification of each request for
a determination under paragraph (5)(A)(i),
and
‘‘(ii) a notification of the Secretary’s
determination in the case of each such re-
quest.
‘‘(B) PUBLIC INSPECTION OF DETERMINA-
TION.—
‘‘(i) IN
GENERAL.—Notwithstanding
section 6103, the text of any determination
made by the Secretary under paragraph
(5)(A)(i) and any background file docu-
ment relating to such determination shall
be open to public inspection at such place
as the Secretary may prescribe.
‘‘(ii) 
EXEMPTIONS
FROM
DISCLO-
SURE.—Rules similar to the rules of sec-
tion 6110(c) (other than paragraph (1)
thereof) shall apply for purposes of clause
(i).
‘‘(iii) 
BACKGROUND
FILE
DOCU-
MENT.—For purposes of this subpara-
graph, the term ‘background file docu-
ment’ has the meaning given such term by
section 6110(b)(2) determined by treating
the determination under paragraph (2) as
a written determination.’’
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
subsection (a) shall apply to taxable years ending
after March 3, 1993.
(2) TIME FOR FILING REQUEST.—The time for
filing a request under section 936(i)(5)(A)(ii) shall
in no event expire before the date 90 days after the
date of the enactment of this Act.
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