Title: A bill to amend the Internal Revenue Code of 1986 to make the earned income tax credit available to residents of possessions of the United States.
Policy area: Taxation

Summary:
This bill directs the Department of the Treasury to make payments to Puerto Rico for expenditures by its taxpayer relating to the earned income tax credit (EITC). The bill also requires payments to U.S. possessions with mirror code tax systems (i.e., the Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands) for a specified percentage of the cost of the EITC in calendar years 2020-2024.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 3883 Introduced in Senate (IS)]

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116th CONGRESS
  2d Session
                                S. 3883

 To amend the Internal Revenue Code of 1986 to make the earned income 
 tax credit available to residents of possessions of the United States.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              June 3, 2020

Mr. Menendez (for himself, Mr. Schumer, Mr. Blumenthal, Ms. Warren, Mr. 
Sanders, and Mrs. Gillibrand) introduced the following bill; which was 
          read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to make the earned income 
 tax credit available to residents of possessions of the United States.

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

SECTION 1. APPLICATION OF EARNED INCOME TAX CREDIT IN POSSESSIONS OF 
              UNITED STATES.

    (a) In General.--Chapter 77 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new section:

``SEC. 7530. APPLICATION OF EARNED INCOME TAX CREDIT TO POSSESSIONS OF 
              THE UNITED STATES.

    ``(a) Puerto Rico.--
            ``(1) In general.--With respect to calendar year 2021 and 
        each calendar year thereafter, the Secretary shall, except as 
        otherwise provided in this subsection, make payments to Puerto 
        Rico equal to--
                    ``(A) the specified matching amount for such 
                calendar year, plus
                    ``(B) in the case of calendar years 2021 through 
                2025, the lesser of--
                            ``(i) the expenditures made by Puerto Rico 
                        during such calendar year for education efforts 
                        with respect to individual taxpayers and tax 
                        return preparers relating to the earned income 
                        tax credit, or
                            ``(ii) $1,000,000.
            ``(2) Requirement to reform earned income tax credit.--The 
        Secretary shall not make any payments under paragraph (1) with 
        respect to any calendar year unless Puerto Rico has in effect 
        an earned income tax credit for taxable years beginning in or 
        with such calendar year which (relative to the earned income 
        tax credit which was in effect for taxable years beginning in 
        or with calendar year 2019) increases the percentage of earned 
        income which is allowed as a credit for each group of 
        individuals with respect to which such percentage is separately 
        stated or determined in a manner designed to substantially 
        increase workforce participation.
            ``(3) Specified matching amount.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `specified matching 
                amount' means, with respect to any calendar year, the 
                lesser of--
                            ``(i) the excess (if any) of--
                                    ``(I) the cost to Puerto Rico of 
                                the earned income tax credit for 
                                taxable years beginning in or with such 
                                calendar year, over
                                    ``(II) the base amount for such 
                                calendar year, or
                            ``(ii) the product of 3, multiplied by the 
                        base amount for such calendar year.
                    ``(B) Base amount.--
                            ``(i) Base amount for 2020.--In the case of 
                        calendar year 2020, the term `base amount' 
                        means the greater of--
                                    ``(I) the cost to Puerto Rico of 
                                the earned income tax credit for 
                                taxable years beginning in or with 
                                calendar year 2019 (rounded to the 
                                nearest multiple of $1,000,000), or
                                    ``(II) $200,000,000.
                            ``(ii) Inflation adjustment.--In the case 
                        of any calendar year after 2021, the term `base 
                        amount' means the dollar amount determined 
                        under clause (i) increased by an amount equal 
                        to--
                                    ``(I) such dollar amount, 
                                multiplied by--
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for such calendar year, 
                                determined by substituting `calendar 
                                year 2020' for `calendar year 2016' in 
                                subparagraph (A)(ii) thereof.
                        Any amount determined under this clause shall 
                        be rounded to the nearest multiple of 
                        $1,000,000.
            ``(4) Rules related to payments and reports.--
                    ``(A) Timing of payments.--The Secretary shall make 
                payments under paragraph (1) for any calendar year--
                            ``(i) after receipt of the report described 
                        in subparagraph (B) for such calendar year, and
                            ``(ii) except as provided in clause (i), 
                        within a reasonable period of time before the 
                        due date for individual income tax returns (as 
                        determined under the laws of Puerto Rico) for 
                        taxable years which began on the first day of 
                        such calendar year.
                    ``(B) Annual reports.--With respect to calendar 
                year 2021 and each calendar year thereafter, Puerto 
                Rico shall provide to the Secretary a report which 
                shall include--
                            ``(i) an estimate of the costs described in 
                        paragraphs (1)(B)(i) and (3)(A)(i)(I) with 
                        respect to such calendar year, and
                            ``(ii) a statement of such costs with 
                        respect to the preceding calendar year.
                    ``(C) Adjustments.--
                            ``(i) In general.--In the event that any 
                        estimate of an amount is more or less than the 
                        actual amount as later determined and any 
                        payment under paragraph (1) was determined on 
                        the basis of such estimate, proper payment 
                        shall be made by, or to, the Secretary (as the 
                        case may be) as soon as practicable after the 
                        determination that such estimate was 
                        inaccurate. Proper adjustment shall be made in 
                        the amount of any subsequent payments made 
                        under paragraph (1) to the extent that proper 
                        payment is not made under the preceding 
                        sentence before such subsequent payments.
                            ``(ii) Additional reports.--The Secretary 
                        may require such additional periodic reports of 
                        the information described in subparagraph (B) 
                        as the Secretary determines appropriate to 
                        facilitate timely adjustments under clause (i).
                    ``(D) Determination of cost of earned income tax 
                credit.--For purposes of this subsection, the cost to 
                Puerto Rico of the earned income tax credit shall be 
                determined by the Secretary on the basis of the laws of 
                Puerto Rico and shall include reductions in revenues 
                received by Puerto Rico by reason of such credit and 
                refunds attributable to such credit, but shall not 
                include any administrative costs with respect to such 
                credit.
                    ``(E) Prevention of manipulation of base amount.--
                No payments shall be made under paragraph (1) if the 
                earned income tax credit as in effect in Puerto Rico 
                for taxable years beginning in or with calendar year 
                2019 is modified after the date of the enactment of 
                this subsection.
    ``(b) Possessions With Mirror Code Tax Systems.--
            ``(1) In general.--With respect to calendar year 2020 and 
        each calendar year thereafter, the Secretary shall, except as 
        otherwise provided in this subsection, make payments to the 
        Virgin Islands, Guam, and the Commonwealth of the Northern 
        Mariana Islands equal to--
                    ``(A) 75 percent of the cost to such possession of 
                the earned income tax credit for taxable years 
                beginning in or with such calendar year, plus
                    ``(B) in the case of calendar years 2020 through 
                2024, the lesser of--
                            ``(i) the expenditures made by such 
                        possession during such calendar year for 
                        education efforts with respect to individual 
                        taxpayers and tax return preparers relating to 
                        such earned income tax credit, or
                            ``(ii) $50,000.
            ``(2) Application of certain rules.--Rules similar to the 
        rules of subparagraphs (A), (B), (C), and (D) of subsection 
        (a)(4) shall apply for purposes of this subsection.
    ``(c) American Samoa.--
            ``(1) In general.--With respect to calendar year 2020 and 
        each calendar year thereafter, the Secretary shall, except as 
        otherwise provided in this subsection, make payments to 
        American Samoa equal to--
                    ``(A) the lesser of--
                            ``(i) 75 percent of the cost to American 
                        Samoa of the earned income tax credit for 
                        taxable years beginning in or with such 
                        calendar year, or
                            ``(ii) $12,000,000, plus
                    ``(B) in the case of calendar years 2020 through 
                2024, the lesser of--
                            ``(i) the expenditures made by American 
                        Samoa during such calendar year for education 
                        efforts with respect to individual taxpayers 
                        and tax return preparers relating to such 
                        earned income tax credit, or
                            ``(ii) $50,000.
            ``(2) Requirement to enact and maintain an earned income 
        tax credit.--The Secretary shall not make any payments under 
        paragraph (1) with respect to any calendar year unless American 
        Samoa has in effect an earned income tax credit for taxable 
        years beginning in or with such calendar year which allows a 
        refundable tax credit to individuals on the basis of the 
        taxpayer's earned income which is designed to substantially 
        increase workforce participation.
            ``(3) Inflation adjustment.--In the case of any calendar 
        year after 2020, the $12,000,000 amount in paragraph (1)(A)(ii) 
        shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by--
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year, 
                determined by substituting `calendar year 2019' for 
                `calendar year 2016' in subparagraph (A)(ii) thereof.
        Any increase determined under this clause shall be rounded to 
        the nearest multiple of $100,000.
            ``(4) Application of certain rules.--Rules similar to the 
        rules of subparagraphs (A), (B), (C), and (D) of subsection 
        (a)(4) shall apply for purposes of this subsection.
    ``(d) Treatment of Payments.--For purposes of section 1324 of title 
31, United States Code, the payments under this section shall be 
treated in the same manner as a refund due from a credit provision 
referred to in subsection (b)(2) of such section.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 of 
the Internal Revenue Code of 1986 is amended by adding at the end the 
following new item:

``Sec. 7530. Application of earned income tax credit to possessions of 
                            the United States.''.
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