H.R. 3665

[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3665 Introduced in House (IH)]

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118th CONGRESS
1st Session
H. R. 3665

To provide an enforcement of remedies against the extraterritorial 
taxes and discriminatory taxes of foreign countries.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

May 25, 2023

Mr. Smith of Missouri (for himself, Mr. Buchanan, Mr. Smith of 
Nebraska, Mr. Kelly of Pennsylvania, Mr. Schweikert, Mr. LaHood, Mr. 
Wenstrup, Mr. Arrington, Mr. Ferguson, Mr. Estes, Mr. Smucker, Mr. 
Hern, Mrs. Miller of West Virginia, Mr. Murphy, Mr. Kustoff, Mr. 
Fitzpatrick, Mr. Steube, Ms. Tenney, Mrs. Fischbach, Mr. Moore of Utah, 
Mrs. Steel, Ms. Van Duyne, Mr. Feenstra, Ms. Malliotakis, and Mr. 
Carey) introduced the following bill; which was referred to the 
Committee on Ways and Means, and in addition to the Committee on 
Oversight and Accountability, for a period to be subsequently 
determined by the Speaker, in each case for consideration of such 
provisions as fall within the jurisdiction of the committee concerned

_______________________________________________________________________

A BILL

To provide an enforcement of remedies against the extraterritorial 
taxes and discriminatory taxes of foreign countries.

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 ``Defending American Jobs and 
Investment Act''.

SEC. 2. ENFORCEMENT OF REMEDIES AGAINST EXTRATERRITORIAL TAXES AND 
DISCRIMINATORY TAXES.

(a) In General.--Subpart D of part II of subchapter N of chapter 1 
is amended by adding at the end the following new section:

``SEC. 899. ENFORCEMENT OF REMEDIES AGAINST EXTRATERRITORIAL TAXES AND 
DISCRIMINATORY TAXES.

``(a) Report on Extraterritorial Taxes and Discriminatory Taxes.--
``(1) In general.--Not later than 90 days after the date of 
the enactment of this section, and not less frequently than 
once every 180 days thereafter, the Secretary shall submit to 
the appropriate committees of Congress a report which lists 
each foreign country that has (as of the date of the submission 
of such report) one or more extraterritorial taxes or 
discriminatory taxes.
``(2) Additional items.--Each report submitted under 
paragraph (1) shall include--
``(A) with respect to each extraterritorial tax or 
discriminatory tax of any foreign country listed in 
such report, a description of such tax including the 
rate thereof and the dates on which such tax was 
enacted and takes effect, and
``(B) if the Secretary determines that any foreign 
country no longer has (as of the date of the submission 
of such report) an extraterritorial tax or 
discriminatory tax which was described in any prior 
report submitted under this subsection--
``(i) the dates on which the permanent 
repeal or termination of such tax was enacted 
and takes effect, and
``(ii) whether such foreign country has (as 
of such date) any other extraterritorial taxes 
or discriminatory taxes.
``(3) Determination of when a foreign country has an 
extraterritorial tax or discriminatory tax.--For purposes of 
this section, a foreign country shall be treated as having an 
extraterritorial tax or discriminatory tax during the period--
``(A) beginning on the earlier of the date on which 
such tax is enacted or takes effect, and
``(B) ending on the later of the date on which the 
permanent repeal or termination of such tax is enacted 
or takes effect.
``(b) Engagement With Trading Partners on Extraterritorial Taxes 
and Discriminatory Taxes.--The Secretary shall commence enhanced 
bilateral engagement with each foreign country included in the report 
submitted under subsection (a), in order to, as appropriate--
``(1) express the concern of the United States with respect 
to the adverse trade and economic effects of tax policies that 
violate bilateral tax treaties and international tax norms,
``(2) urge repeal of extraterritorial taxes and 
discriminatory taxes that target United States persons, and
``(3) advise such foreign country of the remedial actions 
under subsection (c).
``(c) Remedial Actions.--
``(1) Increased rate of tax on foreign citizens and foreign 
corporations.--
``(A) Income taxes.--
``(i) In general.--In the case of any 
applicable person for any taxable year 
beginning after the applicable date, each 
specified rate of income tax shall be increased 
by the applicable number of percentage points.
``(ii) Specified rate of income tax.--For 
purposes of this subparagraph, the term 
`specified rate of income tax' means--
``(I) the rates of tax specified in 
paragraphs (1) and (2) of section 
871(a),
``(II) in the case of any 
applicable person to which section 
871(b) applies, each rate of tax in 
effect under section 1,
``(III) the rate of tax specified 
in section 881(a),
``(IV) in the case of any 
applicable person to which section 
882(a) applies, each rate of tax in 
effect under section 11, and
``(V) the rate of tax specified in 
section 884(a).
``(iii) Application of increased rates to 
effectively connected income of nonresident 
alien individuals limited to gains on united 
states real property interests.--In the case of 
any individual to whom clause (i) applies, the 
tax imposed under section 1 on such individual 
(after application of clause (ii)(II)) shall be 
reduced (but not below zero) by the excess of--
``(I) the tax which would be 
imposed under such section (after 
application of clause (ii)(II)) if 
FIRPTA items were not taken into 
account, over
``(II) the tax which would be 
imposed under such section if FIRPTA 
items were not taken into account, and 
clause (ii)(II) did not apply.
For purposes of this clause, the term `FIRPTA 
items' means gains and losses taken into 
account under section 871(b)(1) by reason of 
section 897(a)(1)(A).
``(B) Withholding taxes.--
``(i) In general.--In the case of any 
payment to an applicable person after the 
applicable date, the rate of tax specified in 
sections 1441(a) and 1442(a) (other than the 14 
percent rate of tax specified in section 
1441(a)) shall each be increased by the 
applicable number of percentage points.
``(ii) Disposition of united states real 
property interests.--In the case of any 
disposition of a United States real property 
interest (as defined in section 897(c)) by an 
applicable person after the applicable date, 
the rate of tax specified in section 1445(a) 
shall be increased by the applicable number of 
percentage points.
``(iii) Other dispositions and 
distributions related to united states real 
property interests.--In the case of any 
disposition or distribution described in any 
paragraph of section 1445(e) made after the 
applicable date, each rate of tax in such 
paragraph shall be increased by the applicable 
number of percentage points if--
``(I) in the case of section 
1445(e)(1), the foreign person referred 
to in subparagraph (A) or (B) of such 
section is an applicable person,
``(II) in the case of section 
1445(e)(2), the foreign corporation 
referred to in such section is an 
applicable person,
``(III) in the case of section 
1445(e)(3), the foreign shareholder 
referred to in such section is an 
applicable person,
``(IV) in the case of section 
1445(e)(4), the foreign person referred 
to in such section is an applicable 
person,
``(V) in the case of section 
1445(e)(5), the Secretary issues 
regulations or other guidance providing 
for such increase, and
``(VI) in the case of section 
1445(e)(6), the nonresident alien 
individual or foreign corporation 
referred to in such section is an 
applicable person.
``(C) Applicable person.--For purposes of this 
paragraph, the term `applicable person' means--
``(i) any individual (other than a citizen 
or resident of the United States) who is a 
citizen of a foreign country listed in a report 
under subsection (a),
``(ii) any foreign corporation (other than 
a specified 10-percent owned foreign 
corporation, as defined in section 245A(b)) 
which is created or organized in such a foreign 
country or subject to the income tax laws of 
such foreign country, and
``(iii) in the case of the application of 
subparagraph (B)(i) with respect to section 
1441(a), foreign partnerships to the extent 
provided by the Secretary (and taking into 
account the rules of section 1441(d)).
``(D) Applicable date.--For purposes of this 
paragraph. the term `applicable date' means with 
respect to any foreign country, the day after the 180-
day period beginning on the date of the submission of 
the first report under subsection (a) which lists such 
foreign country.
``(E) Applicable number of percentage points.--For 
purposes of this paragraph--
``(i) In general.--The term `applicable 
number of percentage points' means, with 
respect to any foreign country--
``(I) with respect to the 1-year 
period beginning on the applicable date 
with respect to such foreign country, 5 
percentage points,
``(II) with respect to the 1-year 
period beginning with the close of the 
period described in subclause (I), 10 
percentage points,
``(III) with respect to the 1-year 
period beginning with the close of the 
period described in subclause (II), 15 
percentage points, and
``(IV) with respect to any time 
after the close of the period described 
in subclause (III), 20 percentage 
points.
``(ii) Application to taxable years.--For 
purposes of subparagraph (A), the applicable 
number of percentage points shall be determined 
with respect to the date on which the taxable 
year begins.
``(iii) Application to withholding taxes.--
For purposes of subparagraph (B), the 
applicable number of percentage points shall be 
determined with respect to the date of the 
payment or disposition, as the case may be.
``(F) Effect of permanent repeal or termination of 
extraterritorial and discriminatory taxes.--If the 
Secretary determines under subsection (a)(2)(B)(ii) 
that any foreign country no longer has any 
extraterritorial or discriminatory taxes, then in the 
case of any taxable year beginning, or payment or 
disposition made, after the date of the submission of 
the report which includes such determination, this 
section shall be applied with respect to such foreign 
country by not taking into account any report submitted 
before such date.
``(2) Other remedies.--
``(A) Procurement.--
``(i) In general.--The President may 
prohibit the Federal Government from procuring, 
or entering into any contract for the 
procurement of, goods or services from 
applicable persons during the period beginning 
on the applicable date and ending on the date 
of any determination described in paragraph 
(1)(F) by the Secretary with respect to such 
foreign country.
``(ii) Congressional notification.--If the 
President takes any action described in clause 
(i), the President shall, not later than 30 
days after the date of such action, notify the 
appropriate committees of Congress of such 
action.
``(B) Tax treaties.--
``(i) In general.--The Secretary shall take 
into account the extraterritorial taxes and 
discriminatory taxes of any foreign country in 
assessing whether to enter into a bilateral tax 
treaty with such foreign country or to 
participate in negotiations with respect to 
updating a bilateral tax treaty with such 
foreign country.
``(ii) Congressional notification.--If the 
Secretary begins negotiations with respect to 
entering into or updating any bilateral tax 
treaty with any foreign country that imposes 
one or more extraterritorial or discriminatory 
taxes, the Secretary shall, not later than 30 
days after beginning such negotiations, notify 
the appropriate committees of Congress of such 
action. Such notification shall include a 
description of the manner in which such taxes 
are being taken into account as required under 
clause (i).
``(C) Trade agreements.--
``(i) In general.--The United States Trade 
Representative and the Secretary of Commerce 
shall each take into account the 
extraterritorial taxes and discriminatory taxes 
of any foreign government in assessing whether 
to enter into any free trade agreement or 
Executive agreement on trade with such foreign 
country.
``(ii) Congressional notification.--If the 
United States Trade Representative or the 
Secretary of Commerce begins negotiations with 
respect to entering into any free trade 
agreement or Executive agreement on trade with 
any foreign country that imposes one or more 
extraterritorial or discriminatory taxes, the 
United States Trade Representative or the 
Secretary of Commerce (as the case may be) 
shall, not later than 30 days after beginning 
such negotiations, notify the appropriate 
committees of Congress of such action. Such 
notification shall include a description of the 
manner in which such taxes are being taken into 
account as required under clause (i).
``(d) Definitions.--For purposes of this section--
``(1) Extraterritorial tax.--
``(A) In general.--The term `extraterritorial tax' 
means any tax imposed by a foreign country on a 
corporation (including any trade or business of such 
corporation) which is determined by reference to any 
income or profits received by any person (including any 
trade or business of any person) by reason of such 
person being connected to such corporation through any 
chain of ownership, determined without regard to the 
ownership interests of any individual, and other than 
by reason of such corporation having a direct or 
indirect ownership interest in such person.
``(B) Tax.--The term `tax' includes any increase in 
tax whether effectuated by an increase in the rate or 
base of a tax, by a denial of deductions or credits, or 
otherwise.
``(2) Discriminatory tax.--
``(A) In general.--Except as otherwise provided in 
subparagraph (B), the term `discriminatory tax' means 
any tax imposed by a foreign country if--
``(i) such tax applies to items of income 
that would not be considered to be from sources 
within the foreign country under the rules of 
part I of this subchapter if such part were 
applied by treating such foreign country as 
though it were the United States,
``(ii) such tax is imposed on a base other 
than net income and is not computed by 
permitting recovery of costs and expenses,
``(iii) such tax is exclusively or 
predominantly applicable, in practice or by its 
terms, to nonresident individuals and foreign 
corporations or partnerships (as determined 
under rules similar to paragraphs (4) and (5) 
of section 7701(a) by treating the foreign 
country as though it were the United States) 
because of the application of revenue 
thresholds, exemptions or exclusions for 
taxpayers subject to such foreign country's 
corporate income tax, or restrictions of scope 
that ensure that substantially all residents 
(other than foreign corporations and 
partnerships (as so determined)) supplying 
comparable goods or services are excluded from 
the application of such tax, or
``(iv) such tax is not treated as an income 
tax under the laws of such foreign country or 
is otherwise treated by such foreign country as 
outside the scope of any agreements that are in 
force between such foreign country and one or 
more other jurisdictions for the avoidance of 
double taxation with respect to taxes on 
income.
``(B) Exceptions.--Except as otherwise provided by 
the Secretary, the term `discriminatory taxes' shall 
not include any generally applicable tax which 
constitutes--
``(i) a withholding tax on amounts 
described in sections 871(a)(1) and 881(a),
``(ii) a value added tax, goods and 
services tax, sales tax, or other similar tax 
on consumption,
``(iii) a tax imposed with respect to 
transactions on a per-unit or per-transaction 
basis rather than on an ad valorem basis, or
``(iv) any other similar tax identified by 
the Secretary for purposes of this 
subparagraph.
``(3) Foreign country.--The term `foreign country' means a 
foreign country or a dependent territory or possession of a 
foreign country. Such term does not include any possession of 
the United States.
``(4) Appropriate committees of congress.--The term 
`appropriate committees of Congress' means--
``(A) the Committee on Finance and the Committee on 
Foreign Relations of the Senate, and
``(B) the Committee on Foreign Affairs and the 
Committee on Ways and Means of the House of 
Representatives.
``(5) Secretary.--The term `Secretary' means the Secretary 
of the Treasury or the Secretary's delegate.
``(e) Regulations and Other Guidance.--The Secretary may issue such 
regulations or other guidance as may be necessary or appropriate to 
carry out the purposes of this section, including regulations or other 
guidance which provide for such adjustments to the application of this 
section as are necessary to prevent the avoidance of the purposes of 
this section.''.
(b) Clerical Amendment.--The table of sections for subpart D of 
part II of subchapter N of chapter 1 is amended by adding at the end 
the following new item:

``Sec. 899. Enforcement of remedies against extraterritorial taxes and 
discriminatory taxes.''.
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