Northern Ireland Fair Employment Incentive Act of 1989

Northern Ireland Fair Employment Incentive Act of 1989 - Removes Internal Revenue Code limitations on the amount of the foreign tax credit available with respect to taxes imposed on foreign source income generated in connection with a manufacturing facility located in a high unemployment area of Northern Ireland if 40 percent or more of the facility's employees are members of a religious minority in Northern Ireland.

Reduces the foreign tax credit for entities that have operations in Northern Ireland and are in violation of a fair employment standard there during the pertinent taxable year. Prescribes these standards to include conditions to assure both avoidance of religious or political discrimination and the practice of equal opportunity and affirmative action programs. Requires affected taxpayers to present annual compliance reports to the Secretary of the Treasury. Penalizes entities that fail to report.

Revises the definition of "subpart F income" (types of income generally suited to tax haven activity) to exclude from tax deferral provisions amounts attributable to the Northern Ireland sourced income of entities in violation of the fair employment standards.

 
HR 156 IH
101st CONGRESS
1st Session
 H. R. 156
To amend the Internal Revenue Code of 1986 to create incentives for fair
employment in Northern Ireland, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
January 3, 1989
Mr. DONNELLY (for himself, Mrs. KENNELLY, Mr. MCGRATH, Mr. COYNE, Mr. DOWNEY,
and Mr. RUSSO) 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 create incentives for fair
employment in Northern Ireland, 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 `Northern Ireland Fair Employment Incentive
  Act of 1989'.
SEC. 2. FOREIGN TAX CREDIT LIMITATIONS NOT TO APPLY TO TAXES ON CERTAIN
NORTHERN IRELAND MANUFACTURING INCOME.
  Section 904 of the Internal Revenue Code of 1986 (relating to limitation on
  foreign tax credit) is amended by redesignating subsection (i) as subsection
  (j) and by inserting after subsection (h) the following new subsection:
  `(i) Limitations Not to Apply to Taxes on Certain Northern Ireland
  Manufacturing Income-
  `(1) IN GENERAL- In the case of qualified Northern Ireland taxes--
  `(A) the limitations of the preceding provisions of this section shall
  not apply, and
  `(B) the total amount of the credit taken under section 901(a) for qualified
  Northern Ireland taxes shall not exceed the tax against which such credit
  is taken.
Any excess of such taxes over the limitation of the preceding sentence shall
be allowed as a carryback or carryover under the principles of subsection (c).
  `(2) COORDINATION WITH LIMITATION ON OTHER TAXES- For purposes of applying
  this section to taxes other than qualified Northern Ireland taxes--
  `(A) qualified Northern Ireland income shall not be taken into account in
  determining taxable income, and
  `(B) the taxes against which the credit is taken shall be reduced by the
  amount of the credit for qualified Northern Ireland taxes.
  `(3) DEFINITIONS- For purposes of this subsection--
  `(A) QUALIFIED NORTHERN IRELAND TAXES- The term `qualified Northern
  Ireland taxes' means any income, war profits, and excess profits taxes
  paid or accrued to any foreign country (or deemed to have been paid under
  sections 902 and 960) to the extent such taxes were imposed with respect
  to qualified Northern Ireland income. Such term does not include any
  taxes imposed with respect to qualified Northern Ireland income if the
  rate at which such taxes were imposed (or the way in which such taxes are
  structured) results in materially greater taxes imposed on such income
  than the amount generally imposed on other income.
  `(B) Qualified northern ireland income-
  `(i) IN GENERAL- The term `qualified Northern Ireland income' means any
  income, from sources without the United States, derived in connection
  with the active conduct of a trade or business at a manufacturing facility
  located in Northern Ireland (as defined in subparagraph (C))--
  `(I) if 40 percent or more of the individuals employed at such facility
  are members of a religious minority in Northern Ireland, and
  `(II) such facility is located in an area of Northern Ireland of high
  unemployment.
For purposes of this subparagraph, income shall not be considered `qualified
Northern Ireland income', if, based on all the facts and circumstances
available in a taxable year, it appears that the taxpayer met the level of
employment specified in clause (I) by engaging in a pattern of behavior which
resulted in the dismissal of employees who are not members of a religious
minority (within the meaning of such clause).
  `(ii) LOOK-THRU IN CASE OF CONTROLLED FOREIGN CORPORATIONS- Any dividend,
  interest, rent, or royalty received by the taxpayer from a controlled
  foreign corporation in which the taxpayer is a United States shareholder,
  and any amount included in gross income under section 951(a)(1)(A), shall
  be treated as qualified Northern Ireland income of such controlled foreign
  corporation as determined under rules similar to the rules of subsection
  (d)(3).
  `(C) NORTHERN IRELAND DEFINED- For purposes of this subpart, the term
  `Northern Ireland' means the portion of the island of Ireland which is
  under the control of the United Kingdom.'
SEC. 3. REDUCTION OF FOREIGN TAX CREDIT IN CERTAIN CASES.
  (a) GENERAL RULE- Subpart A of part III of subchapter N of chapter 1 of
  the Internal Revenue Code of 1986 is amended by adding at the end thereof
  the following new section:
`SEC. 909. REDUCTION OF CREDIT FOR FAILURE TO COMPLY WITH FAIR EMPLOYMENT
STANDARDS IN NORTHERN IRELAND.
  `(a) IN GENERAL- If a person, or a member of a controlled group (within the
  meaning of section 933(a)) which includes such person, having operations
  in Northern Ireland is in violation of a fair employment standard (within
  the meaning of subsection (b)) during the taxable year with respect to
  the employment of employees in Northern Ireland (as determined by the
  Secretary under subsection (c)), the amount of the credit allowable under
  section 901 to such person or to United States shareholders of such person
  (as provided in sections 902 and 960) for foreign taxes paid during such
  taxable year shall be reduced by an amount equal to the product of--
  `(1) the amount of the credit which, but for this section, would be allowed
  under section 901 for the taxable year, multiplied by
  `(2) the fair employment factor (determined under subsection (d)).
  `(b) FAIR EMPLOYMENT STANDARDS- For purposes of this section, a person
  shall be in violation of a fair employment standard if such person does not,
  with respect to its employees in Northern Ireland--
  `(1) take steps to insure that no direct or indirect discrimination on
  religious or political grounds exists in employment,
  `(2) end any employment requirements or conditions which place members of
  one religious group at a disadvantage,
  `(3) actively practice equality of opportunity in employment, and
  `(4) take advantage of affirmative action programs (including the setting
  of goals and timetables) designed to give under-represented groups better
  access to employment and training opportunities.
For purposes of the preceding sentence, the failure of a person to comply
with any standard in the Code of Practice promulgated by the Northern Ireland
Fair Employment Commission (as determined by such Commission or the Northern
Island Fair Employment Tribunal) shall be a conclusive presumption that such
person is in violation of a fair employment standard.
  `(c) DETERMINATIONS BY THE SECRETARY- The Secretary shall determine, not
  later than July 1 of each year, beginning with 1990, whether any person
  or member of a controlled group described in subsection (a) has been in
  violation of a fair employment standard during the year preceding such
  date. In the case of such a violation, the Secretary shall determine the
  time period during which the person or member was in violation.
  `(d) FAIR EMPLOYMENT FACTOR- For purposes of subsection (a), the fair
  employment factor is a fraction, determined under regulations prescribed
  by the Secretary, the numerator of which reflects the operation of a
  person (or, in the case of a controlled group, within the meaning of
  section 993(a), which includes such person, of the group) in Northern
  Ireland which are operations in which a violation of a fair employment
  standard has occurred during the taxable year, and the denominator of
  which reflects the operations of such person or group in all countries
  other than the United States during the taxable year.
  `(e) REPORTS BY TAXPAYERS- If a person, or a member of a controlled
  group (within the meaning of section 993(a)) which includes such person,
  has operations in Northern Ireland, such person shall make an annual
  report to the Secretary at such time and in such manner as the Secretary
  may prescribe, on the extent of its compliance with the fair employment
  standards set forth in subsection (b) as they apply to the employees of
  such person or member in Northern Ireland.
  `(f) WILLFUL FAILURE TO REPORT- Any person (within the meaning of section
  6671(b)) required to report under subsection (e) who willfully fails to
  make such report shall, in addition to other penalties provided by law, be
  fined not more than $25,000, imprisoned for not more than one year, or both.
  `(g) NORTHERN IRELAND- The term `Northern Ireland' has the same meaning
  as defined in section 904(i)(3)(C).
  `(h) COORDINATION WITH OTHER PROVISIONS-
  `(1) SECTION 908- This section shall be applied after the application of
  section 908.
  `(2) SECTION 275(a)- Sections 275(a)(4) and 78 shall not apply to any
  taxes denied credit under subsection (a).'
  (b) CLERICAL AMENDMENT- The table of sections for subpart A of part III
  of subchapter N of chapter 1 of such Code is amended by inserting after
  the item relating to section 908 the following new item:
`Sec. 909. Reduction of credit for failure to comply with fair employment
standards in Northern Ireland.'
SEC. 3. REPEAL OF DEFERRAL WHERE FAILURE TO COMPLY WITH FAIR EMPLOYMENT
STANDARDS.
  Subsection (a) of section 952 of the Internal Revenue Code of 1986 (defining
  subpart F income) is amended--
  (1) by striking `by reason of this paragraph' in paragraph (3)(A)(i)
  and inserting `by reason of this paragraph or paragraph (6)',
  (2) by striking `and' at the end of paragraph (4),
  (3) by striking the period at the end of paragraph (5) and inserting `,
  and', and
  (4) by inserting after paragraph (5) the following new paragraph:
  `(6) an amount equal to the product of--
  `(A) the income of such corporation other than income which--
  `(i) is attributable to earnings and profits of the foreign corporation
  included in the gross income of a United States person under section 951
  (other than by reason of this paragraph or paragraph (3)), or
  `(ii) is described in subsection (b), multiplied by
  `(B) the fair employment factor (as defined under section 909(d)).'
SEC. 5. EFFECTIVE DATE.
  The amendments made by this Act shall apply to taxes paid or accrued,
  and income received or accrued, after December 31, 1989.