Special rule for allocating distilled spirits taxes between puerto rico and the virgin islands

(a)

In general

Section 7652 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(i)

Treatment of certain subsidies with respect to distilled spirits

(1)

In general

If— (A)an amount would (but for this paragraph) be covered into the treasury of a specified government with respect to an article containing distilled spirits, and (B)the Secretary determines that such government provided an unreasonable subsidy with respect to the production of such article,

then such amount shall not be covered into the treasury of such government and shall be covered into the treasury of the other specified government.

(2)

Unreasonable subsidies

For purposes of this subsection— (A)

In general

A subsidy shall be considered unreasonable if the Secretary determines that the subsidy— (i)is excessive relative to the amount which would (without regard to this subsection) be covered into the treasury of the government providing the subsidy with respect to the articles to which the subsidy relates, and (ii)has the effect of encouraging the transfer of the production of such articles from the jurisdiction of the other specified government. (B)

Per se unreasonable subsidies

In no event may the Secretary determine that a subsidy is reasonable with respect to the production of articles if it exceeds an amount equal to 10 percent of the amount which would (without regard to this subsection) be covered into the treasury of the government providing the subsidy with respect to such articles. (3)

Specified government

For purposes of this paragraph, the term specified government means Puerto Rico and the Virgin Islands.

(b)

Effective date

The amendment made by this section shall apply to distilled spirits brought into the United States after the date of the enactment of this Act.