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

<DOC>






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.''.
                                 <all>