To provide Federal contracting preferences for, and a reduction in the rate of income tax imposed on, Patriot corporations, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Patriot Corporations of America Act 
of 2006''.

SEC. 2. FEDERAL CONTRACTING PREFERENCE FOR PATRIOT CORPORATIONS.

    In the evaluation of bids or proposals for a contract for the 
procurement of goods or services, the Federal Government shall provide 
a preference to any entity that is a Patriot corporation (as defined in 
section 11(e) of the Internal Revenue Code of 1986, as added by section 
3 of this Act), unless the award of the contract to such entity would 
jeopardize the national security interests of the United States.

SEC. 3. REDUCTION IN RATE OF INCOME TAX FOR PATRIOT CORPORATIONS.

    (a) In General.--Section 11 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subsection:
    ``(e) Patriot Corporations.--
            ``(1) Rate reduction for patriot corporations.--In the case 
        of a Patriot corporation, the amount of the tax imposed under 
        subsection (a) (determined without regard to this paragraph) 
        shall be reduced by an amount equal to 5 percent of the taxable 
        income of such corporation.
            ``(2) Patriot corporation defined.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `Patriot corporation' 
                means, with respect to any taxable year, any 
                corporation which is certified by the Secretary as 
                meeting the requirements of subparagraph (B) for such 
                taxable and the preceding taxable year.
                    ``(B) Requirements.--A corporation meets the 
                requirements of this subparagraph, with respect to any 
                taxable year, if such corporation--
                            ``(i) produces in the United States at 
                        least 90 percent of the goods and services sold 
                        by such corporation during such taxable year,
                            ``(ii) does not provide compensation to any 
                        management personnel of such corporation at a 
                        level of compensation which exceeds 10,000 
                        percent of the level of compensation of the 
                        full-time employee of such corporation with the 
                        lowest level of compensation during such 
                        taxable year,
                            ``(iii) conducts at least 50 percent of the 
                        research and development conducted by such 
                        corporation during such taxable year 
                        (determined on the basis of cost) in the United 
                        States,
                            ``(iv) has contributed at least 5 percent 
                        of wages paid by the corporation during the 
                        taxable year to a portable pension fund for the 
                        benefit of employees of the corporation,
                            ``(v) has paid at least 70 percent of the 
                        cost of a standardized health insurance plan 
                        for the benefit of employees of the corporation 
                        during such taxable year,
                            ``(vi) has maintained at all times during 
                        such taxable year neutrality in employee 
                        organizing drives and has in effect a policy to 
                        that effect,
                            ``(vii) has not been (at any time during 
                        such taxable year) in violation of appropriate 
                        Federal regulations including those related to 
                        the environment, workplace safety, labor 
                        relations, and consumer protections, as 
                        determined by the Secretary, and
                            ``(viii) has not been in violation of any 
                        other regulations specified by the Secretary.
                    ``(C) Certification process.--Not later than 90 
                days after the date of the enactment of this 
                subsection, the Secretary shall establish an 
                application and certification process to annually 
                certify corporations as Patriot corporations. Such 
                certifications shall be made at such time and on the 
                basis of such materials as the Secretary determines 
                appropriate.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2007.
    (c) Certification Allowed for Year Preceding Effective Date of Rate 
Reduction.--For purposes of section 11(e) of the Internal Revenue Code 
of 1986, as added by this section, the Secretary may certify a 
corporation as a Patriot corporation for the last taxable year of the 
corporation beginning on or before December 31, 2007, if the 
corporation meets the requirements of paragraph (2)(B) of such section 
for such taxable year.

SEC. 4. TAX AVOIDANCE FOREIGN CORPORATIONS SUBJECT TO UNITED STATES 
              INCOME TAX.

    (a) In General.--Paragraph (4) of section 7701(a) of the Internal 
Revenue Code of 1986 (defining domestic) is amended to read as follows:
            ``(4) Domestic.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `domestic' when applied to a 
                corporation or partnership means created or organized 
                in the United States or under the law of the United 
                States or of any State unless, in the case of a 
                partnership, the Secretary provides otherwise by 
                regulations.
                    ``(B) Tax avoidance foreign corporations treated as 
                domestic.--Any corporation which would (but for this 
                subparagraph) be treated as a foreign corporation shall 
                be treated as a domestic corporation if the Secretary 
                determines that such corporation was created or 
                organized as a foreign corporation (instead of as a 
                domestic corporation) principally for the purpose of 
                avoiding being treated as a domestic corporation under 
                this title.''.
    (b) Effective Dates.--The amendment made by this section shall also 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 5. REDUCTION IN BENEFIT OF RATE REDUCTION FOR FAMILIES WITH 
              INCOMES OVER $1,000,000.

    (a) General Rule.--Section 1 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(j) Reduction in Benefit of Rate Reduction for Families With 
Incomes Over $1,000,000.--
            ``(1) In general.--If the adjusted gross income of a 
        taxpayer exceeds the threshold amount, the tax imposed by this 
        section (determined without regard to this subsection) shall be 
        increased by an amount equal to the applicable percentage of so 
        much of the adjusted gross income as exceeds the threshold 
        amount.
            ``(2) Threshold amounts.--For purposes of this subsection, 
        the term `threshold amount' means--
                    ``(A) $1,000,000 in the case of a joint return, and
                    ``(B) $500,000 in the case of any other return.
            ``(3) Applicable percentage.--For purposes of this 
        subsection, the term `applicable percentage' means, with 
        respect to any taxable year, such percentage as is estimated by 
        the Secretary to result in an increase in the revenues to the 
        Treasury for such taxable year which is equal to the excess 
        of--
                    ``(A) the decrease (if any) in the revenues to the 
                Treasury that the Secretary estimates results from the 
                application of section 11(e) for such taxable year, 
                over
                    ``(B) the increase (if any) in the revenues to the 
                Treasury that the Secretary estimates results from the 
                application of section 7701(a)(4)(B) for such taxable 
                year.
            ``(4) Tax not to apply to estates and trusts.--This 
        subsection shall not apply to an estate or trust.
            ``(5) Special rule.--For purposes of section 55, the amount 
        of the regular tax shall be determined without regard to this 
        subsection.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2006.
    (c) Application of EGTRRA Sunset.--The amendment made by this 
section shall be subject to title IX of the Economic Growth and Tax 
Relief Reconciliation Act of 2001 to the same extent and in the same 
manner as section 101 of such Act.
    (d) Section 15 Not to Apply.--The amendment made by subsection (a) 
shall not be treated as a change in a rate of tax for purposes of 
section 15 of the Internal Revenue Code of 1986.

Summary: Patriot Corporations of America Act of 2006 - Grants a preference to Patriot corporations in the evaluation of bids or proposals for federal contracts. Defines " Patriot corporation" as a corporation which: (1) produces at least 90% of its goods and services in the United States; (2) does not pay its its management-level employees at a rate more than 10,000% of the compensation of its lowest paid employee; (3) conducts at least 50% of its research and development in the United States; (4) contributes at least 5% of its payroll to a portable pension fund for its employees; (5) pays at least 70% of its employee health insurance costs; (6) maintains a policy of neutrality in employee organizing drives; and (7) has not violated federal regulations, including regulations relating to the environment, workplace safety, labor relations, and consumer protections.

Amends the Internal Revenue Code to: (1) reduce the income tax rate for Patriot corporation; (2) reclassify foreign corporations created or organized to avoid federal taxation as domestic corporations for income tax purposes; and (3) increase, for the period between January 1, 2007, and December 31, 2010, income taxes for individual taxpayers with adjusted gross incomes of $500,000 or more ($1 million or more for joint returns).