[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 356 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                 S. 356

 To amend the Internal Revenue Code of 1986 to replace the possession 
          tax credit with a wage-based employment tax credit.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

             February 16 (legislative day, January 5), 1993

   Mr. Pryor 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 replace the possession 
          tax credit with a wage-based employment tax credit.

    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 ``Possessions Wage Credit Act of 
1993''.

SEC. 2. REPLACEMENT OF POSSESSION TAX CREDIT WITH WAGE-BASED EMPLOYMENT 
              CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45A. POSSESSIONS EMPLOYMENT CREDIT.

    ``(a) Amount of Credit.--For purposes of section 38, the amount of 
the possessions employment credit determined under this section with 
respect to any eligible employer for any taxable year is 40 percent of 
the qualified possession wages paid or incurred during such taxable 
year.
    ``(b) Qualified Possession Wages.--For purposes of this section, 
the term `qualified possession wages' means any wages paid or incurred 
by an employer for services performed by an employee while such 
employee is a qualified possession employee to the extent such wages do 
not exceed $20,000.
    ``(c) Qualified Possession Employee.--For purposes of this 
section--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `qualified possession employee' means, 
        with respect to any period, any employee of an eligible 
        employer if--
                    ``(A) substantially all of the services performed 
                during such period by such employee for such employer 
                are performed within a possession of the United States 
                in a trade or business of the employer,
                    ``(B) such employee is a bona fide resident of such 
                possession, and
                    ``(C) such employee is subject to tax by such 
                possession on income from sources within and without 
                such possession.
            ``(2) Certain individuals not eligible.--The term 
        `qualified possession employee' shall not include--
                    ``(A) any individual described in subparagraph (A), 
                (B), or (C) of section 51(i)(1),
                    ``(B) any 5-percent owner (as defined in section 
                416(i)(1)(B)), and
                    ``(C) any individual unless such individual 
                either--
                            ``(i) is employed by the employer at least 
                        90 days, or
                            ``(ii) has completed at least 120 hours of 
                        services performed for the employer.
    ``(d) Eligible Employer.--For purposes of this section--
            ``(1) In general.--The term `eligible employer' means a 
        domestic corporation which--
                    ``(A) elects the application of this section, and
                    ``(B) meets the conditions of both subparagraphs 
                (A) and (B) of paragraph (2).
            ``(2) Conditions which must be satisfied.--The conditions 
        referred to in paragraph (1) are as follows:
                    ``(A) 3-year period.--If 80 percent or more of the 
                gross income of such domestic corporation for the 3-
                year period immediately preceding the close of the 
                taxable year (or for such part of such period 
                immediately preceding the close of such taxable year as 
                may be applicable) was derived from sources within a 
                possession of the United States (determined without 
                regard to section 904(f)).
                    ``(B) Trade or business.--If 75 percent or more of 
                the gross income of such domestic corporation for such 
                period or such part thereof was derived from the active 
                conduct of a trade or business within a possession of 
                the United States.
    ``(e) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Possession.--The term `possession of the United 
        States' includes the Commonwealth of Puerto Rico and the Virgin 
        Islands.
            ``(2) Wages.--The term `wages' has the same meaning as when 
        used in section 51, except that paragraph (4) of section 51(c) 
        shall not apply.
            ``(3) Treatment of certain foreign taxes.--For purposes of 
        this title, any tax of a foreign country or possession of the 
        United States which is paid or accrued with respect to taxable 
        income of an eligible employer for any taxable year for which 
        an election is in effect under this section shall not be 
        treated as income, war profits, or excess profits paid or 
        accrued to a foreign country or possession of the United 
        States. The preceding sentence shall not apply to the extent 
        such amounts exceed the amount of the credit determined under 
        subsection (a) for such taxable year.
            ``(4) Controlled groups.--
                    ``(A) Treated as single employer.--All employers 
                treated as a single employer under subsection (a) or 
                (b) of section 52 shall be treated as a single employer 
                for purposes of this section.
                    ``(B) Proportionate share.--The credit (if any) 
                determined under this section with respect to each 
                employer described in subparagraph (A) shall be such 
                employer's proportionate share of the wages giving rise 
                to such credit.
            ``(5) Denial of double benefit.--No credit or deduction 
        shall be allowable under any other provision of this title with 
        respect to any wages taken into account in computing the credit 
        allowed by this section.
            ``(6) Certain other rules made applicable.--Rules similar 
        to the rules of section 51(k) and subsections (c), (d), and (e) 
        of section 52 shall apply.
    ``(f) Transition Rules.--For purposes of this section--
            ``(1) In general.--In the case of a taxpayer for which a 
        credit is allowed under section 936 for its last taxable year 
        ending before February 16, 1993, the credit determined under 
        subsection (a) for each of the 5 taxable years in the 
        transition period shall not be less than the lesser of--
                    ``(A) the old section 936 amount, or
                    ``(B) the adjusted wage credit.
            ``(2) Old section 936 amount.--For purposes of paragraph 
        (1)(A)--
                    ``(A) In general.--The term `old section 936 
                amount' means, with respect to any taxable year, the 
                applicable percentage of the lesser of--
                            ``(i) the amount of the credit which would 
                        have been determined under section 936 but for 
                        section 936(i), or
                            ``(ii) 115 percent of the average amount of 
                        the credit under section 936 of the taxpayer 
                        and its predecessors for the 3-taxable-year 
                        period ending with the taxpayer's last taxable 
                        year ending before February 16, 1993 (not 
                        taking into account years in which the taxpayer 
                        or any predecessor was not in existence).
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage shall be 
                determined as follows:

                    ``In the case of the following 
                    year in
                                                           The percent-
                      the transition period:
                                                                age is:
                    1st..............................         100      
                    2d...............................         100      
                    3d...............................          75      
                    4th..............................          50      
                    5th..............................         25.      
            ``(3) Adjusted wage credit.--For purposes of paragraph 
        (1)(B)--
                    ``(A) In general.--The term `adjusted wage credit' 
                means, with respect to any taxable year, the amount 
                determined under subsection (a) by substituting the 
                applicable percentage for 40 percent.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage shall be 
                determined as follows:

                    ``In the case of the following 
                    year in
                                                           The percent-
                      the transition period:
                                                                age is:
                    1st..............................         100      
                    2d...............................         100      
                    3d...............................          85      
                    4th..............................          70      
                    5th..............................         55.      
            ``(4) Treatment of additional credit.--If an additional 
        credit is allowed to a taxpayer for any taxable year by reason 
        of this subsection, then, for purposes of this title--
                    ``(A) an election under section 936 shall be 
                treated as in effect with respect to such taxpayer for 
                such taxable year, and
                    ``(B) the excess of the credit allowed under this 
                section for such taxable year over the amount of the 
                credit which would have been allowed without regard to 
                this subsection shall be treated as a credit allowed by 
                section 936.
            ``(5) Transition period.--For purposes of this subsection, 
        the term `transition period' means the 5-taxable-year period 
        beginning with the taxable year which includes February 16, 
        1993.''.
    (b) Termination of Section 936 Credit.--
            (1) In general.--Section 936 of such Code is amended by 
        adding at the end the following new subsection:
    ``(i) Termination.--Except as provided in section 45A(f)(4), no 
credit shall be allowed under this section for any taxable year ending 
on or after February 16, 1993.''.
            (2) Conforming amendment.--Section 27(b) of such Code is 
        amended by adding at the end the following new sentence: 
        ``Except as provided in section 45A(f)(4), no credit shall be 
        allowed under this subsection for any taxable year ending on or 
        after February 16, 1993.''.
    (c) Credit Allowed as Business Credit.--
            (1) In general.--Section 38(b) of such Code is amended by 
        striking ``plus'' at the end of paragraph (7), by striking the 
        period at the end of paragraph (8) and inserting ``, plus'', 
        and by adding at the end the following new paragraph:
            ``(9) the possessions employment credit under section 
        45A(a).''.
            (2) Transition.--Section 39(d) of such Code is amended by 
        adding at the end the following new paragraph:
            ``(4) No carryback of possessions employment credit.--No 
        portion of the unused business credit for any taxable year 
        which is attributable to the credit determined under section 
        45A may be carried back to any taxable year ending before 
        February 16, 1993.''.
    (d) Conforming Amendments.--
            (1) Sections 243(b)(1)(B)(ii) and 1361(b)(2)(D) of such 
        Code are each amended by inserting ``45A or'' before ``936''.
            (2) Section 1504(b)(4) of such Code is amended by inserting 
        ``section 45A (relating to possessions employment credit) or'' 
        before ``section 936''.
            (3) Clause (ii) of section 6091(b)(2)(B) of such Code is 
        amended by inserting ``section 45A (relating to possessions 
        employment credit) or'' before ``section 936''.
            (4) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following new item:

                              ``Sec. 45A. Possessions employment 
                                        credit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years ending on or after February 16, 1993.

SEC. 3. EXTENSION AND MODIFICATION OF DEDUCTION OF HEALTH INSURANCE 
              COSTS OF SELF-EMPLOYED INDIVIDUALS.

    (a) 18-Month Extension.--Paragraph (6) of section 162(l) of the 
Internal Revenue Code of 1986 (relating to special rules for health 
insurance costs of self-employed individuals) is amended by striking 
``June 30, 1992'' and inserting ``December 31, 1993''.
    (b) Increase in Amount of Deduction.--Section 162(l)(1) of such 
Code is amended by striking ``25 percent of''.
    (c) Conforming Amendment.--Paragraph (2) of section 110(a) of the 
Tax Extension Act of 1991 is hereby repealed.
    (d) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years ending after June 30, 1992.
            (2) Increase.--The amendment made by subsection (b) shall 
        apply to taxable years beginning after December 31, 1992.

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