Support Ukraine Through Our Tax Code Act
This bill denies the foreign tax credit and the tax deduction for income, war profits, and excess profits taxes paid to Russia and Belarus.
The bill also denies certain other tax benefits in connection with the invasion of Ukraine, including any tax treaty benefits and exemptions from withholding requirements.
The bill suspends tax information exchanges for Russia and Belarus under a tax treaty or an intergovernmental agreement during the period of the Ukraine invasion.
[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7901 Introduced in House (IH)]
<DOC>
117th CONGRESS
2d Session
H. R. 7901
To amend the Internal Revenue Code of 1986 to deny foreign tax credits
or deductions with respect to taxes paid or accrued to the Russian
Federation and the Republic of Belarus, to provide for the denial of
certain other tax benefits in connection with the invasion of Ukraine,
and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 27, 2022
Mr. Schneider (for himself, Mr. Golden, Mr. Bacon, Mr. Carbajal, Mr.
Baird, and Mr. Kinzinger) 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 deny foreign tax credits
or deductions with respect to taxes paid or accrued to the Russian
Federation and the Republic of Belarus, to provide for the denial of
certain other tax benefits in connection with the invasion of Ukraine,
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 ``Support Ukraine Through Our Tax Code
Act''.
SEC. 2. DENIAL OF FOREIGN TAX CREDIT, ETC., WITH RESPECT TO TAXES PAID
OR ACCRUED TO THE RUSSIAN FEDERATION AND THE REPUBLIC OF
BELARUS.
(a) In General.--Section 901(j)(2) of the Internal Revenue Code of
1986 is amended by adding at the end the following new subparagraph:
``(C) Special rule for russia and belarus.--
``(i) In general.--This subsection shall
apply to the Russian Federation and the
Republic of Belarus during the period described
in clause (ii).
``(ii) Period of application.--The period
described in this clause with respect to any
country is the period--
``(I) beginning on the date that is
90 days after the date of the enactment
of this subparagraph, and
``(II) ending on the date on which
the resumption of the application of
the rates of duty set forth in column 1
of the Harmonized Tariff Schedule of
the United States to products of that
country takes effect pursuant to
section 4(b) of the Suspending Normal
Trade Relations with Russia and Belarus
Act.''.
(b) Deduction Denied.--
(1) In general.--Section 275(a) of the Internal Revenue
Code of 1986 is amended by inserting after paragraph (6) the
following new paragraph:
``(7) Income, war profits, and excess profits taxes paid or
accrued (or deemed paid under section 960) to any country
described in section 901(j)(2)(C)(i) with respect to income
attributable to any period described in section
901(j)(2)(C)(ii).''.
(2) Conforming amendment.--Section 901(j)(3) of such Code
is amended by adding at the end the following new sentence:
``The preceding sentence shall not apply to any taxes paid or
accrued (or deemed paid under section 960) to any country
described in paragraph (2)(C)(i) with respect to income
attributable to any period described in paragraph
(2)(C)(ii).''.
(c) Special Transition Rules for Taxpayers Exiting Countries for
Which Foreign Tax Credit Is Denied.--
(1) In general.--If--
(A) any portion of a taxable year of a taxpayer
occurs during the post-exit period, and
(B) such taxpayer is an applicable taxpayer for
such portion of the taxable year with respect to a
foreign country to which section 901(j)(2)(C) of the
Internal Revenue Code of 1986 (as added by subsection
(a)) applies,
then, notwithstanding such section 901(j)(2)(C), sections
901(j)(1)(B) and 952(a)(5) of such Code shall not apply to
income derived by the taxpayer from such foreign country during
such portion of such taxable year.
(2) Applicable taxpayer.--
(A) In general.--A taxpayer is an applicable
taxpayer with respect to a foreign country for any
portion of a taxable year occurring during the post-
exit period if--
(i) the gross receipts of the taxpayer for
such portion derived from such foreign country
(determined under rules substantially similar
to the rules of part I of subchapter N of
chapter 1 of the Internal Revenue Code of 1986)
are--
(I) in the case of the period
beginning with the first day of the
first month beginning after the first
day of the post-exit period and ending
with the last day of the first taxable
year ending on or after such date, less
than 15 percent of such gross receipts
derived during the pre-exit period, and
(II) in the case of any taxable
year beginning after the first day of
the post-exit period, less than 5
percent of such gross receipts derived
during the pre-exit period, or
(ii) the taxpayer meets such other
requirements as the Secretary of the Treasury
(or the Secretary's delegate) may by regulation
or guidance prescribe to determine whether a
taxpayer has exited from doing business in such
foreign country.
(B) Rules for determining gross receipts.--
(i) Aggregation rules.--The rules of
section 448(c)(2) shall apply for purposes of
this paragraph, except that--
(I) in applying section 52(a), the
exception for foreign corporations
under section 1563(b)(2)(C) shall be
disregarded, and
(II) in applying section 52(b), the
principles which apply under section
52(a) shall include the modification
under subclause (I) and the term
``trade or business'' shall include any
activity treated as a trade or business
under paragraph (5) or (6) of section
469(c) (determined without regard to
the phrase, ``To the extent provided in
regulations'' in such paragraph (6)).
(ii) Special rules.--The rules of section
448(c)(3) shall apply for purposes of this
paragraph, except that in applying subparagraph
(B) thereof to a taxable year in which the
entire taxable year does not occur during the
post-exit period, the portion of the year
during such period shall be treated as a short
taxable year for purposes of determining
annualized gross receipts.
(iii) Receipts related to humanitarian
purposes.--For purposes of this subsection,
gross receipts shall not include amounts--
(I) which are covered under general
or specific licenses of the Office of
Foreign Assets Control of the
Department of the Treasury which have
been identified by the Secretary of the
Treasury (or the Secretary's delegate)
as licenses to which this clause
applies, or
(II) which the Secretary of the
Treasury (or the Secretary's delegate)
has otherwise identified as
humanitarian in nature.
(3) Periods.--For purposes of this subsection--
(A) Pre-exit period.--The term ``pre-exit period''
means--
(i) except as provided in clause (ii), the
12-month period ending on December 31, 2021,
and
(ii) in the case of a taxpayer with a
taxable year which ends on or after November
30, 2021, and before February 24, 2022, such
taxable year.
(B) Post-exit period.--The term ``post-exit
period'' means, with respect to any foreign country,
the period during which section 901(j)(2)(C) of the
Internal Revenue Code of 1986 (as added by subsection
(a)) applies to such foreign country (determined
without regard to this subsection).
(d) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
SEC. 3. DENIAL OF CERTAIN OTHER TAX BENEFITS IN CONNECTION WITH THE
INVASION OF UKRAINE.
(a) In General.--In the case of any person to whom this section
applies--
(1) section 892(a) of the Internal Revenue Code of 1986
(relating to income of foreign governments) shall not apply to
income received during the period this section applies to such
person,
(2) notwithstanding section 894 of such Code, such Code
shall be applied to such person without regard to any treaty
obligation of the United States during the period this section
applies to such person,
(3) section 895 of such Code (relating to income derived by
a foreign central bank of issue from obligations of the United
States or from bank deposits) shall not apply to any central
bank of such person,
(4) sections 871(h) (relating to repeal of tax on interest
of nonresident alien individuals received from certain
portfolio debt investments) and 881(c) (relating to repeal of
tax on interest of foreign corporations received from certain
portfolio debt investments) of such Code shall not apply to
interest received during the period this section applies to
such person,
(5) section 864(b) of such Code (relating to trade or
business within the United States) shall be applied without
regard to paragraph (2) thereof (relating to exception for
trading in securities or commodities) with respect to the
period during which this section applies to such person,
(6) section 883 of such Code (relating to exclusion of
income from shipping, etc.) shall not apply to income or
earnings received during the period this section applies to
such person, and
(7) notwithstanding section 897(l) of such Code, any trust,
corporation, or other organization or arrangement established
by such person shall not be treated as a qualified foreign
pension fund under section 897 of such Code during the period
this section applies to such person.
(b) Persons to Whom This Section Applies.--
(1) In general.--This section shall apply to--
(A) any person with respect to which sanctions have
been imposed by the United States in relation to the
invasion of Ukraine by the Russian Federation that
began on February 24, 2022,
(B) the government of any foreign country to which
section 901(j)(2)(C) of the Internal Revenue Code of
1986 applies, and
(C) any other person identified by the Secretary
as--
(i) a person described in paragraph (2),
and
(ii) a person with respect to which the
application of this section would advance
efforts to restore and maintain the peace,
security, stability, sovereignty, and
territorial integrity of Ukraine (as determined
by the Secretary in consultation with the
Secretary of State).
(2) Persons described.--A person is described in this
paragraph if such person--
(A) is a person that--
(i) is participating or has participated in
the invasion of Ukraine, and
(ii) either--
(I) owns, directly or indirectly,
at least $1,000,000 of assets in the
United States, or
(II) has, for the most recent
calendar year, at least $1,000,000 of
income from sources within the United
States,
(B) is an entity that--
(i) is organized in, or a tax resident of,
a foreign country (including any subdivision
thereof) to which section 901(j)(2)(C) of such
Code applies,
(ii) is not a controlled foreign
corporation (as defined in section 957 of such
Code), and
(iii) has provided or sold goods or
services to a government (including any
instrumentality thereof) to which section
901(j)(2)(C) of such Code applies,
(C) is an executive, board member, or officer of an
entity described in subparagraph (B), or
(D) is a person that is related to any other person
to which this section applies.
(3) Special rules for controlled entities.--Under
regulations provided by the Secretary--
(A) In general.--The Secretary may treat a person
controlled (within the meaning of section 954(d)(3) of
the Internal Revenue Code of 1986) by a person
described in paragraph (1) as a person to whom this
section applies without regard to whether such
controlled person has been identified by the Secretary
under paragraph (1)(C).
(B) Notification.--
(i) In general.--The Secretary may require
any person treated as a person to whom this
section applies by reason of subparagraph (A)
to provide notice to the Secretary and to each
withholding agent of such person that this
section applies to such person.
(ii) Penalties.--For purposes of applying
part II of subchapter B of chapter 68 of the
Internal Revenue Code of 1986--
(I) any notice required to be
provided to the Secretary under clause
(i) shall be treated as an information
return described in section 6724(d)(1)
of such Code, and
(II) any notice required to be
provided to a withholding agent under
clause (i) shall be treated as a payee
statement described in section
6724(d)(2) of such Code.
(c) Period for Which This Section Applies.--For purposes of this
section--
(1) In general.--This section applies to any person
described in subsection (b) during the period--
(A) except as provided in paragraph (2), beginning
on the date that is 30 days after the later of--
(i) the date of the enactment of this Act,
or
(ii) the date such person is first
described in subsection (b), and
(B) ending on the date such person is no longer
described in subsection (b).
(2) Special rules for portfolio interest.--
(A) In general.--For purposes of applying
subsection (a)(4), except as provided in subparagraph
(B), the period described in paragraph (1) shall begin
on the later of--
(i) the date that is 180 days (60 days in
the case of obligations issued on or after the
date of the enactment of this Act) after the
date of enactment of this Act, or
(ii) 60 days after the date such person
first becomes described in subsection (b).
(B) Significant modifications.--If, after the date
of the enactment of this Act, there is a significant
modification of an obligation issued before the date of
the enactment of this Act, then, for purposes of
applying subsection (a)(4), the period described in
paragraph (1) shall begin on the later of--
(i) the earlier of--
(I) the day that is 60 days after
the date of such significant
modification, or
(II) the day that is 180 days after
the date of the enactment of this Act,
or
(ii) the date that is 60 days after the
date such person first becomes described in
subsection (b).
(d) Definitions.--For purposes of this section--
(1) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
(2) Related.--A person (hereinafter in this paragraph
referred to as the ``related person'') is related to any person
if--
(A) the related person bears a relationship to such
person which is--
(i) specified in section 267(b) or
707(b)(1) of the Internal Revenue Code of 1986,
or
(ii) specified in the regulations
prescribed under subsection (f), or
(B) the related person and such person are engaged
in trades or businesses under common control (within
the meaning of subsections (a) and (b) of section 52 of
such Code, determined after the application of the
rules of section 2(c)(2)(B)(i)).
(e) Reports.--Not later than 1 year after the date of the enactment
of this Act, and annually thereafter, the Secretary shall submit to
Congress a report detailing the parameters, processes, and
justifications by which a person is identified by the Secretary under
(b)(1)(C) of this section.
(f) Regulations.--The Secretary shall prescribe such regulations,
rules, or other guidance as the Secretary determines necessary or
appropriate to carry out the purposes of this section.
SEC. 4. SUSPENSION OF TAX INFORMATION EXCHANGES.
If there is a tax convention (within the meaning of section
6105(c)(2) of the Internal Revenue Code of 1986) providing for the
exchange of tax information between the United States and any foreign
country to which section 901(j)(2)(C) of such Code (as added by section
2(a)) applies, the Secretary of the Treasury (or the Secretary's
delegate) shall not exchange such tax information with such foreign
country during the period that such section applies to such foreign
country.
SEC. 5. TREATY OBLIGATIONS.
This Act and the amendments made by this Act shall be applied
without regard to any treaty obligation of the United States.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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