Territorial Economic Growth and Recovery Act of 2016

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Territorial Economic Growth and 
Recovery Act of 2016''.

SEC. 2. REPEAL OF LIMITATION ON COVER OVER OF DISTILLED SPIRITS TAXES.

    (a) In General.--Section 7652(f) of the Internal Revenue Code of 
1986 is repealed.
    (b) Effective Date.--The amendment made by this section shall apply 
to distilled spirits brought into the United States after December 31, 
2015.

SEC. 3. PAYMENTS TO UNITED STATES TERRITORIES AND POSSESSIONS.

    (a) Earned Income Credit.--Section 32 of the Internal Revenue Code 
of 1986 is amended by adding at the end the following:
    ``(n) Treatment of Possessions.--
            ``(1) Payments to possessions.--
                    ``(A) Mirror code possession.--The Secretary of the 
                Treasury shall periodically (but not less frequently 
                than annually) pay to each possession of the United 
                States with a mirror code tax system amounts equal to 
                the loss to that possession by reason of the 
                application of this section (determined without regard 
                to paragraph (2)) with respect to taxable years 
                beginning after December 31, 2015. Such amounts shall 
                be determined by the Secretary of the Treasury based on 
                information provided by the government of the 
                respective possession.
                    ``(B) Other possessions.--The Secretary of the 
                Treasury shall periodically (but no less frequently 
                than annually) pay to each possession of the United 
                States which does not have a mirror code tax system 
                amounts estimated by the Secretary of the Treasury as 
                being equal to the aggregate benefits that would have 
                been provided to residents of such possession by reason 
                of the application of this section for taxable years 
                beginning after December 31, 2015, if a mirror code tax 
                system had been in effect in such possession. The 
                preceding sentence shall not apply with respect to any 
                possession of the United States unless such possession 
                has a plan, which has been approved by the Secretary of 
                the Treasury, under which such possession will promptly 
                distribute such payments to the residents of such 
                possession.
            ``(2) Coordination with credit allowed against united 
        states income taxes.--No credit shall be allowed under this 
        section for any taxable year to any person--
                    ``(A) to whom a credit is allowed against taxes 
                imposed by the possession by reason of this section 
                (determined without regard to this paragraph) for such 
                taxable year, or
                    ``(B) who is eligible for a payment under a plan 
                described in paragraph (1)(B) with respect to such 
                taxable year.
            ``(3) Definitions and special rules.--
                    ``(A) Possession of the united states.--For 
                purposes of this subsection, the term `possession of 
                the United States' includes the Commonwealth of Puerto 
                Rico and the Commonwealth of the Northern Mariana 
                Islands.
                    ``(B) Mirror code tax system.--For purposes of this 
                subsection, the term `mirror code tax system' means, 
                with respect to any possession of the United States, 
                the income tax system of such possession if the income 
                tax liability of the residents of such possession under 
                such system is determined by reference to the income 
                tax laws of the United States as if such possession 
                were the United States, and such system includes a tax 
                credit substantially identical to the credit allowed 
                under this section.
                    ``(C) Treatment of payments.--For purposes of 
                section 1324(b)(2) of title 31, United States Code, or 
                any similar rule of law, any payment made under this 
                subsection shall be treated in the same manner as a 
                refund due from the credit allowed under this 
                section.''.
    (b) Child Tax Credit.--Section 24 of such Code is amended by adding 
at the end the following:
    ``(h) Payments to Virgin Islands and Guam for Lost Revenue.--The 
Secretary shall make annual payments to the Virgin Islands and to Guam 
in amounts equal to the aggregate loss to the Virgin Islands or Guam, 
as the case may be, by reason of the application of this section with 
respect to taxable years beginning after 2015. Such amounts shall be 
determined by the Secretary based on information provided by the Virgin 
Islands and Guam. For purposes of section 1324(b)(2) of title 31, 
United States Code, the payments under this subsection shall be treated 
in the same manner as a refund due from the credit allowed under this 
section.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to taxable years beginning after December 31, 2015.

SEC. 4. STUDY AND REPORT REGARDING VIRGIN ISLANDS PUBLIC PENSION PLANS.

    Not later than 6 months after the date of the enactment of this 
Act, the Joint Board for the Enrollment of Actuaries established under 
section 3041 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1241) shall report to the Office of Domestic Finance of the 
Department of the Treasury on recommendations on actions that would be 
necessary to ensure that the public pension plans of the Virgin Islands 
can be sustainably maintained and funded by the government of the 
Virgin Islands for the next 20 years.

Summary: Territorial Economic Growth and Recovery Act of 2016  This bill amends the Internal Revenue Code to repeal the limitation on the amount of distilled spirits excise taxes covered over (paid into) to the treasuries of the Virgin Islands and Puerto Rico.  If Puerto Rico or the Northern Mariana Islands has a tax system that mirrors federal tax law (mirror code tax system), the Department of the Treasury must pay each possession amounts equal to the loss to the possession due to the application of the Earned Income Tax Credit (EITC).  If the possession does not have a mirror code tax system, Treasury must pay to the possession an amount equal to the aggregate benefits that would have been provided to residents of the possession by applying the EITC if a mirror code tax system had been in effect.  Treasury must pay to the Virgin Islands and Guam amounts equal to the aggregate loss to the Virgin Islands or Guam due to the Child Tax Credit.  The Joint Board for the Enrollment of Actuaries must submit to Treasury's Office of Domestic Finance recommendations for actions that would be necessary to ensure that the public pension plans of the Virgin Islands can be sustainably maintained and funded by the government of the Virgin Islands for the next 20 years.