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Territorial Economic Recovery Act
To amend the Internal Revenue Code of 1986 to exclude certain amounts from the tested income of controlled foreign corporations, and for other purposes.
Summary
This bill amends the Internal Revenue Code to exclude certain income from the taxable income of controlled foreign corporations if they meet specified criteria related to U.S. territories. A qualified possession corporation is defined as a foreign corporation where at least 80 percent of gross income comes from U.S. possessions like Puerto Rico and the Virgin Islands, and at least 75 percent is connected to active business operations in those territories. The exclusion applies to taxable years beginning after December 31, 2023. This change reduces the amount of foreign corporation income subject to U.S. taxation if the income is derived from and connected to operations in qualifying U.S. territories.
AI-generated plain-language summary of the bill text — neutral, and may be imperfect. See the full text below for the exact wording.
Sponsor (1)
Actions (2)
- Jan 13, 2025 Referred to the House Committee on Ways and Means. · house
- Jan 13, 2025 Introduced in House
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Text versions (1)
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Full text
IN THE HOUSE OF REPRESENTATIVES
January 13, 2025
Ms. Plaskett introduced the following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to exclude certain amounts from the tested income of controlled foreign corporations, and for other purposes.
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 “Territorial Economic Recovery Act”.
SEC. 2. INCOME OF CERTAIN QUALIFIED POSSESSION CORPORATIONS EXCLUDED FROM TESTED INCOME.
(a) In General.—Section 951A of the Internal Revenue Code of 1986 is amended—
(1) in subsection (c)(2)(A)(i), by striking “and” at the end of subclause (IV), by striking “over” at the end of subclause (V) and inserting “and”, and by adding at the end the following new subclause:
“(VI) any income of a qualified possession corporation that is effectively connected with the active conduct of a trade or business within a possession of the United States, over”; and
(2) by adding at the end the following new subsections:
“(g) Possession of the United States.—For purposes of this section, the term ‘possession of the United States’ means Puerto Rico, the Virgin Islands, and any specified possession described in section 931(c).
“(h) Qualified Possession Corporation.—For purposes of this section, the term ‘qualified possession corporation’ means any controlled foreign corporation for any taxable year, if, for the 3-year period (or the period during which the controlled foreign corporation has been in existence, if shorter) ending in the taxable year preceding the taxable year in which the determination is made—
“(1) 80 percent or more of the gross income of such corporation was derived from sources within a possession of the United States, and
“(2) 75 percent or more of the gross income of such corporation was effectively connected with the active conduct of a trade or business within a possession of the United States.”.
(b) Effective Date.—The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2023, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end. <all>
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