Support Ukraine Through Our Tax Code Act
Bill: S.4218 | Sponsor: Sen. Wyden, Ron (D-OR)
Policy area: Taxation

Summary:
Support Ukraine Through Our Tax Code Act
This bill denies the foreign tax credit and the tax deduction for income, war profits, and excess profits taxes paid to Russia and Belarus.
The bill also denies certain other tax benefits in connection with the invasion of Ukraine, including any tax treaty benefits and exemptions from withholding requirements.
The bill suspends tax information exchanges for Russia and Belarus under a tax treaty or an intergovernmental agreement during the period of the Ukraine invasion.

To amend the Internal Revenue Code of 1986 to deny foreign tax credits 
  or deductions with respect to taxes paid or accrued to the Russian 
 Federation and the Republic of Belarus, to provide for the denial of 
certain other tax benefits in connection with the invasion of Ukraine, 
                        and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Support Ukraine Through Our Tax Code 
Act''.

SEC. 2. DENIAL OF FOREIGN TAX CREDIT, ETC., WITH RESPECT TO TAXES PAID 
              OR ACCRUED TO THE RUSSIAN FEDERATION AND THE REPUBLIC OF 
              BELARUS.

    (a) In General.--Section 901(j)(2) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new subparagraph:
                    ``(C) Special rule for russia and belarus.--
                            ``(i) In general.--This subsection shall 
                        apply to the Russian Federation and the 
                        Republic of Belarus during the period described 
                        in clause (ii).
                            ``(ii) Period of application.--The period 
                        described in this clause with respect to any 
                        country is the period--
                                    ``(I) beginning on the date that is 
                                90 days after the date of the enactment 
                                of this subparagraph, and
                                    ``(II) ending on the date on which 
                                the resumption of the application of 
                                the rates of duty set forth in column 1 
                                of the Harmonized Tariff Schedule of 
                                the United States to products of that 
                                country takes effect pursuant to 
                                section 4(b) of the Suspending Normal 
                                Trade Relations with Russia and Belarus 
                                Act.''.
    (b) Deduction Denied.--
            (1) In general.--Section 275(a) of the Internal Revenue 
        Code of 1986 is amended by inserting after paragraph (6) the 
        following new paragraph:
            ``(7) Income, war profits, and excess profits taxes paid or 
        accrued (or deemed paid under section 960) to any country 
        described in section 901(j)(2)(C)(i) with respect to income 
        attributable to any period described in section 
        901(j)(2)(C)(ii).''.
            (2) Conforming amendment.--Section 901(j)(3) of such Code 
        is amended by adding at the end the following new sentence: 
        ``The preceding sentence shall not apply to any taxes paid or 
        accrued (or deemed paid under section 960) to any country 
        described in paragraph (2)(C)(i) with respect to income 
        attributable to any period described in paragraph 
        (2)(C)(ii).''.
    (c) Special Transition Rules for Taxpayers Exiting Countries for 
Which Foreign Tax Credit Is Denied.--
            (1) In general.--If--
                    (A) any portion of a taxable year of a taxpayer 
                occurs during the post-exit period, and
                    (B) such taxpayer is an applicable taxpayer for 
                such portion of the taxable year with respect to a 
                foreign country to which section 901(j)(2)(C) of the 
                Internal Revenue Code of 1986 (as added by subsection 
                (a)) applies,
        then, notwithstanding such section 901(j)(2)(C), sections 
        901(j)(1)(B) and 952(a)(5) of such Code shall not apply to 
        income derived by the taxpayer from such foreign country during 
        such portion of such taxable year.
            (2) Applicable taxpayer.--
                    (A) In general.--A taxpayer is an applicable 
                taxpayer with respect to a foreign country for any 
                portion of a taxable year occurring during the post-
                exit period if--
                            (i) the gross receipts of the taxpayer for 
                        such portion derived from such foreign country 
                        (determined under rules substantially similar 
                        to the rules of part I of subchapter N of 
                        chapter 1 of the Internal Revenue Code of 1986) 
                        are--
                                    (I) in the case of the period 
                                beginning with the first day of the 
                                first month beginning after the first 
                                day of the post-exit period and ending 
                                with the last day of the first taxable 
                                year ending on or after such date, less 
                                than 15 percent of such gross receipts 
                                derived during the pre-exit period, and
                                    (II) in the case of any taxable 
                                year beginning after the first day of 
                                the post-exit period, less than 5 
                                percent of such gross receipts derived 
                                during the pre-exit period, or
                            (ii) the taxpayer meets such other 
                        requirements as the Secretary of the Treasury 
                        (or the Secretary's delegate) may by regulation 
                        or guidance prescribe to determine whether a 
                        taxpayer has exited from doing business in such 
                        foreign country.
                    (B) Rules for determining gross receipts.--
                            (i) Aggregation rules.--The rules of 
                        section 448(c)(2) shall apply for purposes of 
                        this paragraph, except that--
                                    (I) in applying section 52(a), the 
                                exception for foreign corporations 
                                under section 1563(b)(2)(C) shall be 
                                disregarded, and
                                    (II) in applying section 52(b), the 
                                principles which apply under section 
                                52(a) shall include the modification 
                                under subclause (I) and the term 
                                ``trade or business'' shall include any 
                                activity treated as a trade or business 
                                under paragraph (5) or (6) of section 
                                469(c) (determined without regard to 
                                the phrase, ``To the extent provided in 
                                regulations'' in such paragraph (6)).
                            (ii) Special rules.--The rules of section 
                        448(c)(3) shall apply for purposes of this 
                        paragraph, except that in applying subparagraph 
                        (B) thereof to a taxable year in which the 
                        entire taxable year does not occur during the 
                        post-exit period, the portion of the year 
                        during such period shall be treated as a short 
                        taxable year for purposes of determining 
                        annualized gross receipts.
                            (iii) Receipts related to humanitarian 
                        purposes.--For purposes of this subsection, 
                        gross receipts shall not include amounts--
                                    (I) which are covered under general 
                                or specific licenses of the Office of 
                                Foreign Assets Control of the 
                                Department of the Treasury which have 
                                been identified by the Secretary of the 
                                Treasury (or the Secretary's delegate) 
                                as licenses to which this clause 
                                applies, or
                                    (II) which the Secretary of the 
                                Treasury (or the Secretary's delegate) 
                                has otherwise identified as 
                                humanitarian in nature.
            (3) Periods.--For purposes of this subsection--
                    (A) Pre-exit period.--The term ``pre-exit period'' 
                means--
                            (i) except as provided in clause (ii), the 
                        12-month period ending on December 31, 2021, 
                        and
                            (ii) in the case of a taxpayer with a 
                        taxable year which ends on or after November 
                        30, 2021, and before February 24, 2022, such 
                        taxable year.
                    (B) Post-exit period.--The term ``post-exit 
                period'' means, with respect to any foreign country, 
                the period during which section 901(j)(2)(C) of the 
                Internal Revenue Code of 1986 (as added by subsection 
                (a)) applies to such foreign country (determined 
                without regard to this subsection).
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 3. DENIAL OF CERTAIN OTHER TAX BENEFITS IN CONNECTION WITH THE 
              INVASION OF UKRAINE.

    (a) In General.--In the case of any person to whom this section 
applies--
            (1) section 892(a) of the Internal Revenue Code of 1986 
        (relating to income of foreign governments) shall not apply to 
        income received during the period this section applies to such 
        person,
            (2) notwithstanding section 894 of such Code, such Code 
        shall be applied to such person without regard to any treaty 
        obligation of the United States during the period this section 
        applies to such person,
            (3) section 895 of such Code (relating to income derived by 
        a foreign central bank of issue from obligations of the United 
        States or from bank deposits) shall not apply to any central 
        bank of such person,
            (4) sections 871(h) (relating to repeal of tax on interest 
        of nonresident alien individuals received from certain 
        portfolio debt investments) and 881(c) (relating to repeal of 
        tax on interest of foreign corporations received from certain 
        portfolio debt investments) of such Code shall not apply to 
        interest received during the period this section applies to 
        such person,
            (5) section 864(b) of such Code (relating to trade or 
        business within the United States) shall be applied without 
        regard to paragraph (2) thereof (relating to exception for 
        trading in securities or commodities) with respect to the 
        period during which this section applies to such person,
            (6) section 883 of such Code (relating to exclusion of 
        income from shipping, etc.) shall not apply to income or 
        earnings received during the period this section applies to 
        such person, and
            (7) notwithstanding section 897(l) of such Code, any trust, 
        corporation, or other organization or arrangement established 
        by such person shall not be treated as a qualified foreign 
        pension fund under section 897 of such Code during the period 
        this section applies to such person.
    (b) Persons to Whom This Section Applies.--
            (1) In general.--This section shall apply to--
                    (A) any person with respect to which sanctions have 
                been imposed by the United States in relation to the 
                invasion of Ukraine by the Russian Federation that 
                began on February 24, 2022,
                    (B) the government of any foreign country to which 
                section 901(j)(2)(C) of the Internal Revenue Code of 
                1986 applies, and
                    (C) any other person identified by the Secretary 
                as--
                            (i) a person described in paragraph (2), 
                        and
                            (ii) a person with respect to which the 
                        application of this section would advance 
                        efforts to restore and maintain the peace, 
                        security, stability, sovereignty, and 
                        territorial integrity of Ukraine (as determined 
                        by the Secretary in consultation with the 
                        Secretary of State).
            (2) Persons described.--A person is described in this 
        paragraph if such person--
                    (A) is a person that--
                            (i) is participating or has participated in 
                        the invasion of Ukraine, and
                            (ii) either--
                                    (I) owns, directly or indirectly, 
                                at least $1,000,000 of assets in the 
                                United States, or
                                    (II) has, for the most recent 
                                calendar year, at least $1,000,000 of 
                                income from sources within the United 
                                States,
                    (B) is an entity that--
                            (i) is organized in, or a tax resident of, 
                        a foreign country (including any subdivision 
                        thereof) to which section 901(j)(2)(C) of such 
                        Code applies,
                            (ii) is not a controlled foreign 
                        corporation (as defined in section 957 of such 
                        Code), and
                            (iii) has provided or sold goods or 
                        services to a government (including any 
                        instrumentality thereof) to which section 
                        901(j)(2)(C) of such Code applies,
                    (C) is an executive, board member, or officer of an 
                entity described in subparagraph (B), or
                    (D) is a person that is related to any other person 
                to which this section applies.
            (3) Special rules for controlled entities.--Under 
        regulations provided by the Secretary--
                    (A) In general.--The Secretary may treat a person 
                controlled (within the meaning of section 954(d)(3) of 
                the Internal Revenue Code of 1986) by a person 
                described in paragraph (1) as a person to whom this 
                section applies without regard to whether such 
                controlled person has been identified by the Secretary 
                under paragraph (1)(C).
                    (B) Notification.--
                            (i) In general.--The Secretary may require 
                        any person treated as a person to whom this 
                        section applies by reason of subparagraph (A) 
                        to provide notice to the Secretary and to each 
                        withholding agent of such person that this 
                        section applies to such person.
                            (ii) Penalties.--For purposes of applying 
                        part II of subchapter B of chapter 68 of the 
                        Internal Revenue Code of 1986--
                                    (I) any notice required to be 
                                provided to the Secretary under clause 
                                (i) shall be treated as an information 
                                return described in section 6724(d)(1) 
                                of such Code, and
                                    (II) any notice required to be 
                                provided to a withholding agent under 
                                clause (i) shall be treated as a payee 
                                statement described in section 
                                6724(d)(2) of such Code.
    (c) Period for Which This Section Applies.--For purposes of this 
section--
            (1) In general.--This section applies to any person 
        described in subsection (b) during the period--
                    (A) except as provided in paragraph (2), beginning 
                on the date that is 30 days after the later of--
                            (i) the date of the enactment of this Act, 
                        or
                            (ii) the date such person is first 
                        described in subsection (b), and
                    (B) ending on the date such person is no longer 
                described in subsection (b).
            (2) Special rules for portfolio interest.--
                    (A) In general.--For purposes of applying 
                subsection (a)(4), except as provided in subparagraph 
                (B), the period described in paragraph (1) shall begin 
                on the later of--
                            (i) the date that is 180 days (60 days in 
                        the case of obligations issued on or after the 
                        date of the enactment of this Act) after the 
                        date of enactment of this Act, or
                            (ii) 60 days after the date such person 
                        first becomes described in subsection (b).
                    (B) Significant modifications.--If, after the date 
                of the enactment of this Act, there is a significant 
                modification of an obligation issued before the date of 
                the enactment of this Act, then, for purposes of 
                applying subsection (a)(4), the period described in 
                paragraph (1) shall begin on the later of--
                            (i) the earlier of--
                                    (I) the day that is 60 days after 
                                the date of such significant 
                                modification, or
                                    (II) the day that is 180 days after 
                                the date of the enactment of this Act, 
                                or
                            (ii) the date that is 60 days after the 
                        date such person first become described in 
                        subsection (b).
    (d) Definitions.--For purposes of this section--
            (1) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (2) Related.--A person (hereinafter in this paragraph 
        referred to as the ``related person'') is related to any person 
        if--
                    (A) the related person bears a relationship to such 
                person which is--
                            (i) specified in section 267(b) or 
                        707(b)(1) of the Internal Revenue Code of 1986, 
                        or
                            (ii) specified in the regulations 
                        prescribed under subsection (f), or
                    (B) the related person and such person are engaged 
                in trades or businesses under common control (within 
                the meaning of subsections (a) and (b) of section 52 of 
                such Code, determined after the application of the 
                rules of section 2(c)(2)(B)(i)).
    (e) Reports.--Not later than 1 year after the date of the enactment 
of this Act, and annually thereafter, the Secretary shall submit to 
Congress a report detailing the parameters, processes, and 
justifications by which a person is identified by the Secretary under 
(b)(1)(C) of this section.
    (f) Regulations.--The Secretary shall prescribe such regulations, 
rules, or other guidance as the Secretary determines necessary or 
appropriate to carry out the purposes of this section.

SEC. 4. SUSPENSION OF TAX INFORMATION EXCHANGES.

    If there is a tax convention (within the meaning of section 
6105(c)(2) of the Internal Revenue Code of 1986) providing for the 
exchange of tax information between the United States and any foreign 
country to which section 901(j)(2)(C) of such Code (as added by section 
2(a)) applies, the Secretary of the Treasury (or the Secretary's 
delegate) shall not exchange such tax information with such foreign 
country during the period that such section applies to such foreign 
country.

SEC. 5. TREATY OBLIGATIONS.

    This Act and the amendments made by this Act shall be applied 
without regard to any treaty obligation of the United States.
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