[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9385 Introduced in House (IH)]

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117th CONGRESS
  2d Session
                                H. R. 9385

 To impose restrictions on the investment in Chinese companies by tax-
                            exempt entities.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            December 1, 2022

Mr. Gallagher introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committee on 
  Foreign Affairs, 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 impose restrictions on the investment in Chinese companies by tax-
                            exempt entities.

    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 ``Dump Investments in Troublesome 
Communist Holdings Act'' or as the ``DITCH Act''.

SEC. 2. RESTRICTION ON INVESTMENT IN CHINESE COMPANIES BY TAX-EXEMPT 
              ENTITIES.

    (a) In General.--Section 501 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(s) Restriction on Investment in Chinese Companies.--
            ``(1) In general.--An organization shall not be treated as 
        described in subsection (c) or (d) or section 401(a) for any 
        taxable year if--
                    ``(A) such organization holds any interest in a 
                disqualified Chinese company at any time during such 
                taxable year, or
                    ``(B) fails to timely transmit the annual report 
                described in paragraph (5) for such taxable year.
            ``(2) Disqualified chinese company.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `disqualified Chinese 
                company' means any corporation--
                            ``(i) that is incorporated in China, or
                            ``(ii) more than 10 percent of the stock of 
                        which (determined by vote or value) is held 
                        (directly or indirectly through any chain of 
                        ownership) by any of the following (or 
                        combination thereof):
                                    ``(I) 1 or more corporations 
                                described in clause (i).
                                    ``(II) China or any governmental 
                                agency thereof.
                                    ``(III) Provincial, regional, 
                                municipal, Special Administrative 
                                Regions, prefecture, county, township, 
                                village, or any other Chinese sub-
                                national governmental entity or agency.
                                    ``(IV) Any entity controlled 
                                (directly or indirectly) by the Chinese 
                                Communist Party or any Chinese 
                                Communist Party organ.
                                    ``(V) Any Chinese national.
                    ``(B) Application to entities other than 
                corporations.--In the case of any business organization 
                which is not a corporation, subparagraph (A) shall 
                apply to such organization in the same manner as though 
                such organization were a corporation.
                    ``(C) Application to indirect, derivative, or other 
                contractual interests, etc.--For purposes of this 
                subsection, an organization shall be treated as holding 
                an interest in a disqualified Chinese company if such 
                organization--
                            ``(i) holds such interest (or any 
                        instrument described in subparagraph (A)) 
                        directly or indirectly through any chain of 
                        ownership, or
                            ``(ii) holds any derivative financial 
                        instrument or other contractual arrangement 
                        with respect to such interest or company 
                        (including any financial instrument or other 
                        contract which seeks to replicate any financial 
                        return with respect to such interest or such 
                        company).
                    ``(D) Publication of list by secretary.--The 
                Secretary shall, not later than 120 days after the date 
                of the enactment of this Act, establish a process for 
                the periodic publishing of a list of certified pooled 
                investments, including exchange traded funds and mutual 
                funds, that do not have exposure to disqualified 
                Chinese companies.
            ``(3) Waivers.--
                    ``(A) In general.--Paragraph (1) shall not apply 
                with respect to any interest in a disqualified Chinese 
                company held by any organization during any taxable 
                year if the Secretary issues a waiver to such 
                organization with respect to such interest for such 
                taxable year under this paragraph. Any waiver issued 
                under this paragraph shall be subject to renewal or 
                expiration on a biannual basis.
                    ``(B) Waiver process.--
                            ``(i) Application.--Not later than 60 days 
                        after the date of the enactment of this 
                        subsection, the Secretary shall establish a 
                        process under which an organization may submit 
                        a written application for a waiver under this 
                        paragraph. Such application shall be made 
                        publicly available and shall include:
                                    ``(I) An explanation of the need 
                                for such waiver and the reasons that 
                                the need for such waiver outweigh the 
                                threat posed to the United States by 
                                China and the lack of separation 
                                between China and the disqualified 
                                Chinese company involved.
                                    ``(II) The type (including sector 
                                of the economy), amount, and duration 
                                of the investment in the disqualified 
                                Chinese company.
                                    ``(III) The relationship between 
                                the disqualified Chinese company and 
                                China.
                                    ``(IV) The extenuating 
                                circumstances justifying the 
                                applicant's need to invest in the 
                                disqualified Chinese company.
                            ``(ii) Response.--The Secretary shall 
                        provide a written response to each completed 
                        application under clause (i) not later than 60 
                        days after receipt of such application. Such 
                        written response shall be made publicly 
                        available and shall include:
                                    ``(I) A statement of whether the 
                                waiver has been provided or withheld.
                                    ``(II) The reasons for providing or 
                                withholding the waiver.
                                    ``(III) The identification of any 
                                future investments with respect to 
                                which such waiver applies.
                                    ``(IV) The date on which such 
                                waiver expires (which may not be later 
                                than the earlier of the termination of 
                                the extenuating circumstances referred 
                                to in clause (i)(IV) or the end of the 
                                biannual period referred to in 
                                subparagraph (A)).
                    ``(C) Standards for determining if waiver is 
                provided.--The Secretary may provide a waiver under 
                this paragraph only if the Secretary independently 
                determines that--
                            ``(i) the need for such waiver, and the 
                        reasons for the need for such waiver, outweigh 
                        the threat posed to the United States by China 
                        and the lack of separation between China and 
                        the disqualified Chinese company involved, and
                            ``(ii) extenuating circumstances justify 
                        the applicant's need to invest in the 
                        disqualified Chinese company.
                For purposes of this subparagraph, the Secretary shall 
                not consider the past or future financial returns of 
                any investment in any disqualified Chinese company, or 
                any other justification based on the applicant's own 
                financial needs, as an extenuating circumstance 
                justifying such an investment.
                    ``(D) Publication of waivers provided.--With 
                respect to each calendar quarter, the Secretary shall 
                publish and make publicly available a list of the 
                waivers provided by the Secretary under this paragraph 
                during such quarter.
            ``(4) China.--For purposes of this section, the term 
        `China' means the People's Republic of China and includes any 
        subordinate Special Administrative Regions thereof.
            ``(5) Annual report.--Each organization described in 
        paragraph (1) with respect to each taxable year shall, not 
        later than the due date for the return of tax for such taxable 
        year, transmit to the Secretary a written report including--
                    ``(A) a description of each interest in a 
                disqualified Chinese company held by such organization 
                during such taxable year,
                    ``(B) the period for any such interest that was so 
                held, and
                    ``(C) whether such organization has a waiver under 
                paragraph (3) to hold such interest during such 
                period.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years ending after the date of the enactment 
        of this Act, except that only periods after the date that is 
        270 days after the date of the enactment of this Act shall be 
        taken into account in determining whether the requirement of 
        section 501(s) of the Internal Revenue Code of 1986 (as added 
        by this section) is met with respect to any taxable year.
            (2) 1-year grace period under certain circumstances.--In 
        the case of any organization that, after intensive due 
        diligence, is unaware of the failure to satisfy the requirement 
        of such section 501(s), paragraph (1) shall be applied by 
        substituting ``1 year'' for ``270 days''.
    (c) Public Report.--Not later than 360 days after the date of the 
enactment of this Act, and annually thereafter, the Secretary of the 
Treasury (or the Secretary's delegate) shall publicly release a report 
describing the patterns of United States outbound investment in China, 
including such investment by organizations described in section 
501(s)(1) of the Internal Revenue Code of 1986 (as added by this 
section). Such report shall detail the sectoral breadkown of such 
investments.
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