[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 970 Introduced in Senate (IS)]


108th CONGRESS
  1st Session
                                 S. 970

    To amend the Internal Revenue Code of 1986 to preserve jobs and 
              production activities in the United States.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 1, 2003

 Mr. Hollings 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 preserve jobs and 
              production activities in the United States.

    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 ``Job Protection Act of 2003''.

SEC. 2. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL INCOME.

    (a) In General.--Section 114 of the Internal Revenue Code of 1986 
is hereby repealed.
    (b) Conforming Amendments.--
            (1) Subpart E of part III of subchapter N of chapter 1 of 
        such Code (relating to qualifying foreign trade income) is 
        hereby repealed.
            (2) The table of subparts for such part III is amended by 
        striking the item relating to subpart E.
            (3) The table of sections for part III of subchapter B of 
        chapter 1 of such Code is amended by striking the item relating 
        to section 114.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to transactions occurring after the date of the enactment 
        of this Act.
            (2) Binding contracts.--The amendments made by this section 
        shall not apply to any transaction in the ordinary course of a 
        trade or business which occurs pursuant to a binding contract--
                    (A) which is between the taxpayer and a person who 
                is not a related person (as defined in section 
                943(b)(3) of such Code, as in effect on the day before 
                the date of the enactment of this Act), and
                    (B) which is in effect on April 11, 2003, and at 
                all times thereafter.
        For purposes of this paragraph, a binding contract shall 
        include a purchase option, renewal option, or replacement 
        option which is included in such contract.
    (d) Revocation of Section 943(e) Elections.--
            (1) In general.--In the case of a corporation that elected 
        to be treated as a domestic corporation under section 943(e) of 
        the Internal Revenue Code of 1986 (as in effect on the day 
        before the date of the enactment of this Act)--
                    (A) the corporation may revoke such election, 
                effective as of the date of the enactment of this Act, 
                and
                    (B) if the corporation does revoke such election--
                            (i) such corporation shall be treated as a 
                        domestic corporation transferring (as of the 
                        date of the enactment of this Act) all of its 
                        property to a foreign corporation in connection 
                        with an exchange described in section 354 of 
                        the Internal Revenue Code of 1986, and
                            (ii) no gain or loss shall be recognized on 
                        such transfer.
            (2) Exception.--Subparagraph (B)(ii) of paragraph (1) shall 
        not apply to gain on any asset held by the revoking corporation 
        if--
                    (A) the basis of such asset is determined in whole 
                or in part by reference to the basis of such asset in 
                the hands of the person from whom the revoking 
                corporation acquired such asset,
                    (B) the asset was acquired by transfer (not as a 
                result of the election under section 943(e) of such 
                Code) occurring on or after the 1st day on which its 
                election under section 943(e) of such Code was 
                effective, and
                    (C) a principal purpose of the acquisition was the 
                reduction or avoidance of tax.
    (e) General Transition.--
            (1) In general.--In the case of a taxable year ending after 
        the date of the enactment of this Act and beginning before 
        January 1, 2009, for purposes of chapter 1 of such Code, each 
        current FSC/ETI beneficiary shall be allowed a deduction equal 
        to the transition amount determined under this subsection with 
        respect to such beneficiary for such year.
            (2) Current fsc/eti beneficiary.--The term ``current FSC/
        ETI beneficiary'' means any corporation which entered into one 
        or more transactions during its taxable year beginning in 
        calendar year 2001 with respect to which FSC/ETI benefits were 
allowable.
            (3) Transition amount.--For purposes of this subsection--
                    (A) In general.--The transition amount applicable 
                to any current FSC/ETI beneficiary for any taxable year 
                is the phaseout percentage of the adjusted base period 
                amount.
                    (B) Phaseout percentage.--
                            (i) In general.--In the case of a taxpayer 
                        using the calendar year as its taxable year, 
                        the phaseout percentage shall be determined 
                        under the following table:

                                                The phaseout
            ``Years:                            percentage is:
                2004 and 2005......
                                                        100
                2006...............
                                                         75
                2007...............
                                                         75
                2008...............
                                                         50
                2009 and thereafter
                                                          0.''
                            (ii) Special rule for 2003.--The phaseout 
                        percentage for 2003 shall be the amount that 
                        bears the same ratio to 100 percent as the 
number of days after the date of the enactment of this Act bears to 
365.
                            (iii) Special rule for fiscal year 
                        taxpayers.--In the case of a taxpayer not using 
                        the calendar year as its taxable year, the 
                        phaseout percentage is the weighted average of 
                        the phaseout percentages determined under the 
                        preceding provisions of this paragraph with 
                        respect to calendar years any portion of which 
                        is included in the taxpayer's taxable year. The 
                        weighted average shall be determined on the 
                        basis of the respective portions of the taxable 
                        year in each calendar year.
            (4) Adjusted base period amount.--For purposes of this 
        subsection--
                    (A) In general.--In the case of a taxpayer using 
                the calendar year as its taxable year, the adjusted 
                base period amount for any taxable year is the base 
                period amount multiplied by the applicable percentage, 
                as determined in the following table:

                                                The applicable
            ``Years:                            percentage is:
                2003...............
                                                        100
                2004...............
                                                        100
                2005...............
                                                        105
                2006...............
                                                        110
                2007...............
                                                        115
                2008...............
                                                        120
                2009 and thereafter
                                                          0.''
                    (B) Base period amount.--The base period amount is 
                the aggregate FSC/ETI benefits for the taxpayer's 
                taxable year beginning in calendar year 2001.
                    (C) Special rules for fiscal year taxpayers, etc.--
                Rules similar to rules of clauses (ii) and (iii) of 
                paragraph (3)(B) shall apply for purposes of this 
                paragraph.
            (5) FSC/ETI benefit.--For purposes of this subsection, the 
        term ``FSC/ETI benefit'' means--
                    (A) amounts excludable from gross income under 
                section 114 of such Code, and
                    (B) the exempt foreign trade income of related 
                foreign sales corporations from property acquired from 
                the taxpayer (determined without regard to section 
                923(a)(5) of such Code (relating to special rule for 
                military property), as in effect on the day before the 
                date of the enactment of the FSC Repeal and 
                Extraterritorial Income Exclusion Act of 2000).
        In determining the FSC/ETI benefit there shall be excluded any 
        amount attributable to a transaction with respect to which the 
        taxpayer is the lessor unless the leased property was 
        manufactured or produced in whole or in part by the taxpayer.
            (6) Special rule for farm cooperatives.--Under regulations 
        prescribed by the Secretary, determinations under this 
        subsection with respect to an organization described in section 
        943(g)(1) of such Code, as in effect on the day before the date 
        of the enactment of this Act, shall be made at the cooperative 
        level and the purposes of this subsection shall be carried out 
        by excluding amounts from the gross income of its patrons.
            (7) Certain rules to apply.--Rules similar to the rules of 
        section 41(f) of such Code shall apply for purposes of this 
        subsection.
            (8) Coordination with binding contract rule.--The deduction 
        determined under paragraph (1) for any taxable year shall be 
        reduced by the phaseout percentage of any FSC/ETI benefit 
        realized for the taxable year by reason of subsection (c)(2). 
        The preceding sentence shall not apply to any FSC/ETI benefit 
        attributable to a transaction described in the last sentence of 
        paragraph (5).
            (9) Special rule for taxable year which includes date of 
        enactment.--In the case of a taxable year which includes the 
        date of the enactment of this Act, the deduction allowed under 
        this subsection to any current FSC/ETI beneficiary shall in no 
        event exceed--
                    (A) 100 percent of such beneficiary's adjusted base 
                period amount for calendar year 2003, reduced by
                    (B) the aggregate FSC/ETI benefits of such 
                beneficiary with respect to transactions occurring 
                during the portion of the taxable year ending on the 
                date of the enactment of this Act.

SEC. 3. DEDUCTION RELATING TO INCOME ATTRIBUTABLE TO UNITED STATES 
              PRODUCTION ACTIVITIES.

    (a) In General.--Part VIII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to special deductions for 
corporations) is amended by adding at the end the following new 
section:

``SEC. 250. INCOME ATTRIBUTABLE TO DOMESTIC PRODUCTION ACTIVITIES.

    ``(a) In General.--In the case of a corporation, there shall be 
allowed as a deduction an amount equal to 10 percent of the qualified 
production activities income of the corporation for the taxable year.
    ``(b) Phasein.--In the case of taxable years beginning in 2006, 
2007, 2008 or 2009, subsection (a) shall be applied by substituting for 
the percentage contained therein the transition percentage determined 
under the following table:

            ``Taxable years                     The transition
            beginning in:                       percentage is:
                2006...............
                                                        1
                2007...............
                                                        2
                2008...............
                                                        4
                2009...............
                                                        9
    ``(c) Qualified Production Activities Income.--For purposes of this 
section, the term `qualified production activities income' means the 
product of--
            ``(1) the portion of the modified taxable income of the 
        taxpayer which is attributable to domestic production 
        activities, and
            ``(2) the domestic/foreign fraction.
    ``(d) Determination of Income Attributable to Domestic Production 
Activities.--For purposes of this section--
            ``(1) In general.--The portion of the modified taxable 
        income which is attributable to domestic production activities 
        is so much of the modified taxable income for the taxable year 
        as does not exceed--
                    ``(A) the taxpayer's domestic production gross 
                receipts for such taxable year, reduced by
                    ``(B) the sum of--
                            ``(i) the costs of goods sold that are 
                        allocable to such receipts,
                            ``(ii) other deductions, expenses, or 
                        losses directly allocable to such receipts, and
                            ``(iii) a ratable portion of other 
                        deductions, expenses, and losses that are not 
                        directly allocable to such receipts or another 
                        class of income.
            ``(2) Allocation method.--Except as provided in 
        regulations, allocations under clauses (ii) and (iii) of 
        paragraph (1)(B) shall be made under the principles used in 
        determining the portion of taxable income from sources within 
        and without the United States.
            ``(3) Special rule.--
                    ``(A) For purposes of determining costs under 
                clause (i) of paragraph (1)(B), any item or service 
                brought into the United States without a transfer price 
                meeting the requirements of section 482 shall be 
                treated as acquired by purchase, and its cost shall be 
                treated as not less than its value when it entered the 
                United States. A similar rule shall apply in 
                determining the adjusted basis of leased or rented 
                property where the lease or rental gives rise to 
                domestic production gross receipts.
                    ``(B) In the case of any property described in 
                subparagraph (A) that had been exported by the taxpayer 
                for further manufacture, the increase in cost (or 
                adjusted basis) under subparagraph (A) shall not exceed 
                the difference between the value of the property when 
                exported and the value of the property when brought 
                back into the United States after the further 
                manufacture.
            ``(4) Modified taxable income.--The term `modified taxable 
        income' means taxable income computed without regard to the 
        deduction allowable under this section.
    ``(e) Domestic Production Gross Receipts.--For purposes of this 
section--
            ``(1) In general.--The term `domestic production gross 
        receipts' means the gross receipts of the taxpayer which are 
        derived from--
                    ``(A) any sale, exchange, or other disposition of, 
                or
                    ``(B) any lease, rental or license of,
        qualifying production property which was manufactured, 
        produced, grown, or extracted in whole or in significant part 
        by the taxpayer within the United States.
            ``(2) Special rule.--The term `domestic production gross 
        receipts' includes gross receipts of the taxpayer from the 
        sale, exchange, or other disposition of replacement parts if--
                    ``(A) such parts are sold by the taxpayer as 
                replacement parts for qualified production property 
                produced or manufactured in whole or significant part 
                by the taxpayer in the United States, and
                    ``(B) the taxpayer (or a related party) owns the 
                designs for such parts.
            ``(3) Related party.--The term `related party' means any 
        corporation which is a member of the taxpayer's expanded 
        affiliated group.
    ``(f) Qualifying Production Property.--For purposes of this 
section--
            ``(1) In general.--Except as otherwise provided in this 
        paragraph, the term `qualifying production property' means--
                    ``(A) any tangible personal property,
                    ``(B) any computer software, and
                    ``(C) any films, tapes, records, or similar 
                reproductions.
            ``(2) Exclusions from qualifying production property.--The 
        term `qualifying production property' shall not include--
                    ``(A) consumable property that is sold, leased, or 
                licensed by the taxpayer as an integral part of the 
                provision of services,
                    ``(B) oil or gas (or any primary product thereof),
                    ``(C) electricity,
                    ``(D) water supplied by pipeline to the consumer,
                    ``(E) any unprocessed timber which is softwood,
                    ``(F) utility services, or
                    ``(G) any property (not described in paragraph 
                (1)(B)) which is a film, tape, recording, book, 
                magazine, newspaper, or similar property the market for 
                which is primarily topical or otherwise essentially 
                transitory in nature.
        For purposes of subparagraph (E), the term `unprocessed timber' 
        means any log, cant, or similar form of timber.
    ``(g) Domestic/Foreign Fraction.--For purposes of this section--
            ``(1) In general.--The term `domestic/foreign fraction' 
        means a fraction--
                    ``(A) the numerator of which is the value of the 
                domestic production of the taxpayer, and
                    ``(B) the denominator of which is the value of the 
                worldwide production of the taxpayer.
            ``(2) Value of domestic production.--The value of domestic 
        production is the excess of--
                    ``(A) the domestic production gross receipts, over
                    ``(B) the cost of purchased inputs allocable to 
                such receipts that are deductible under this chapter 
                for the taxable year.
            ``(3) Purchased inputs.--
                    ``(A) In general.--Purchased inputs are any of the 
                following items acquired by purchase:
                            ``(i) Services (other than services of 
                        employees) used in manufacture, production, 
                        growth, or extraction activities.
                            ``(ii) Items consumed in connection with 
                        such activities.
                            ``(iii) Items incorporated as part of the 
                        property being manufactured, produced, grown, 
                        or extracted.
                    ``(B) Special rule.--Rules similar to the rules of 
                subsection (d)(3) shall apply for purposes of this 
                subsection.
            ``(4) Value of worldwide production.--
                    ``(A) In general.--The value of worldwide 
                production shall be determined under the principles of 
                paragraph (2), except that--
                            ``(i) worldwide production gross receipts 
                        shall be taken into account, and
                            ``(ii) paragraph (3)(B) shall not apply.
                    ``(B) Worldwide production gross receipts.--The 
                worldwide production gross receipts is the amount that 
                would be determined under subsection (e) if such 
                subsection were applied without any reference to the 
                United States.
            ``(5) Special rule for affiliated groups.--
                    ``(A) In general.--In the case of a taxpayer that 
                is a member of an expanded affiliated group, the 
                domestic/foreign fraction shall be the amount 
                determined under the preceding provisions of this 
                subsection by treating all members of such group as a 
                single corporation.
                    ``(B) Expanded affiliated group.--The term 
                `expanded affiliated group' means an affiliated group 
                as defined in section 1504(a), determined--
                            ``(i) by substituting `50 percent' for `80 
                        percent' each place it appears, and
                            ``(ii) without regard to paragraphs (2), 
                        (3), and (4) of section 1504(b).
    ``(h) Definitions and Special Rules.--
            ``(1) United states.--For purposes of this section, the 
        term `United States' includes the Commonwealth of Puerto Rico 
        and any other possession of the United States.
            ``(2) Special rule for partnerships.--For purposes of this 
        section, a corporation's distributive share of any partnership 
        item shall be taken into account as if directly realized by the 
        corporation.
            ``(3) Coordination with minimum tax.--The deduction under 
        this section shall be allowed for purposes of the tax imposed 
        by section 55; except that for purposes of section 55, 
        alternative minimum taxable income shall be taken into account 
        in determining the deduction under this section.
            ``(4) Ordering rule.--The amount of any other deduction 
        allowable under this chapter shall be determined as if this 
        section had not been enacted.
            ``(5) Coordination with transition rules.--For purposes of 
        this section--
                    ``(A) domestic production gross receipts shall not 
                include gross receipts from any transaction if the 
                binding contract transition relief of section 2(c)(2) 
                of the Job Protection Act of 2003 applies to such 
                transaction, and
                    ``(B) any deduction allowed under section 2(e) of 
                such Act shall be disregarded in determining the 
                portion of the taxable income which is attributable to 
                domestic production gross receipts.''.
    (b) Clerical Amendment.--The table of sections for part VIII of 
subchapter B of chapter 1 of such Code is amended by adding at the end 
the following new item:

                              ``Sec. 250. Income attributable to 
                                        domestic production 
                                        activities.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after 2005.
            (2) Application of section 15.--Section 15 of the Internal 
        Revenue Code of 1986 shall apply to the amendments made by this 
        section as if they were changes in a rate of tax.
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