[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 5188 Introduced in Senate (IS)]
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118th CONGRESS
2d Session
S. 5188
To amend the Internal Revenue Code of 1986 to incentivize the
divestiture of certain securities connected to the People's Republic of
China.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 25, 2024
Mr. Rubio introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to incentivize the
divestiture of certain securities connected to the People's Republic of
China.
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 ``Patriotic Investment Act''.
SEC. 2. INCENTIVES TO DIVEST DISQUALIFIED PRC SECURITIES.
(a) Treatment as Ordinary Gain.--Part IV of subchapter P of chapter
1 of the Internal Revenue Code of 1986 is amended by adding at the end
the following new section:
``SEC. 1261. GAIN FROM DISPOSITION OF DISQUALIFIED PRC SECURITIES.
``(a) In General.--Any gain on the disposition of any disqualified
PRC security shall be treated as ordinary income and shall be
recognized notwithstanding any other provision of this subtitle.
``(b) Definitions.--For purposes of this section--
``(1) Disqualified prc security.--The term `disqualified
PRC security' means any specified interest held directly or
indirectly with respect to any of the following:
``(A) The Government of the People's Republic of
China or any other governmental entity based in the
People's Republic of China.
``(B) The Chinese Communist Party or any
subdivision or affiliate thereof.
``(C) A person who is a citizen, national, or
resident of the People's Republic of China, provided
that such person is not an individual who is--
``(i) a citizen or lawful permanent
resident of the United States, or
``(ii) domiciled in Taiwan possessing a
valid identification card or number issued by
the government of Taiwan.
``(D) A person (including a legal entity)
headquartered, organized under the laws of, or having
its principal place of business in the People's
Republic of China.
``(E) A person at least 15 percent of the
outstanding voting interest of which is held directly
or indirectly by an entity described in subparagraphs
(A)-(D).
``(F) A person at least 25 percent of the
outstanding voting interest of which is held directly
or indirectly by any combination of persons described
in subparagraphs (A)-(E).
``(2) Specified interest.--The term `specified interest'--
``(A) means, with respect to a person--
``(i) stock or any other equity or profits
interest of such person,
``(ii) debt issued by such person, and
``(iii) any contract or derivative with
respect to an interest described in clause (i)
or (ii), and
``(B) includes any interest held, directly or
indirectly, through--
``(i) a regulated investment company,
exchange traded fund, or other pooled
investment, or
``(ii) any derivative financial instrument
or other contractual arrangement with respect
to such interest (including any financial
instrument or other contract which seeks to
replicate any financial return with respect to
such interest).
``(3) People's republic of china.--The term `People's
Republic of China' includes Special Administrative Regions,
including Hong Kong and Macau, but does not include Taiwan.''.
(b) Net PRC Securities Gain Subject to Highest Rate of Income
Tax.--
(1) Individuals.--Section 1 of such Code is amended by
adding at the end the following subsection:
``(k) Net PRC Securities Gain Subject to Highest Rate of Income
Tax.--
``(1) In general.--The tax imposed under subsections (a),
(b), (c), (d), and (e) shall be increased by the product of--
``(A) the highest rate of tax in effect under such
subsection, multiplied by
``(B) the net PRC securities gain of the taxpayer
for the taxable year.
``(2) Prevention of double taxation.--For purposes of
subsections (a), (b), (c), (d) and (e), taxable income
(determined without regard to this paragraph) shall be reduced
by the net PRC securities gain of the taxpayer for the taxable
year.
``(3) Net prc securities gain.--For purposes of this
subsection, the term `net PRC securities gain' means the excess
(if any) of--
``(A) the taxpayer's aggregate gains on the
dispositions of disqualified PRC securities for the
taxable year, over
``(B) the taxpayer's aggregate losses on the
dispositions of disqualified PRC securities for such
taxable year.''.
(2) Corporations.--Section 11(b) of such Code is amended to
read as follows:
``(b) Amount of Tax.--The amount of the tax imposed by subsection
(a) shall be the sum of--
``(1) 21 percent of the excess (if any) of--
``(A) taxable income, over
``(B) net PRC securities gain, plus
``(2) the product of--
``(A) the highest rate of tax in effect under
section 1, multiplied by
``(B) the lesser of taxable income or net PRC
securities gain (as defined in section 1(k)(3)).''.
(c) Clerical Amendment.--The table of sections for part IV of
subchapter P of chapter 1 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new item:
``Sec. 1261. Gains from disposition of disqualified PRC securities.''.
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to dispositions after the date which is 6 months after
the date of the enactment of this Act.
(2) Application to first taxable year.--For purposes of
determining net PRC securities gain with respect to any taxable
year which includes the date which is 6 months after the date
of the enactment of this Act, only dispositions of disqualified
PRC securities (as defined in section 1261(b)(1) of the
Internal Revenue Code of 1986, as amended by this section)
after such date shall be taken into account.
(e) Election To Pay Tax Liability Attributable to Dispositions Made
in Anticipation of Increased Tax in Installments.--
(1) In general.--In the case of any taxpayer which has a
net PRC tax liability for any taxable year, such taxpayer may
elect to pay such liability in 3 equal installments.
(2) Date for payment of installments.-- If an election is
made under paragraph (1), the first installment shall be paid
on the due date (determined without regard to any extension of
time for filing the return) for the return of tax for the
taxable year referred to in paragraph (1) and each succeeding
installment shall be paid on the due date (as so determined)
for the return of tax for the taxable year following the
taxable year with respect to which the preceding installment
was made.
(3) Acceleration of payment.--If there is an addition to
tax for failure to timely pay any installment required under
this subsection, a liquidation or sale of substantially all the
assets of the taxpayer (including in a title 11 or similar
case), a cessation of business by the taxpayer, or any similar
circumstance, then the unpaid portion of all remaining
installments shall be due on the date of such event (or in the
case of a title 11 or similar case, the day before the petition
is filed). The preceding sentence shall not apply to the sale
of substantially all the assets of a taxpayer to a buyer if
such buyer enters into an agreement with the Secretary of the
Treasury (or the Secretary's delegate) under which such buyer
is liable for the remaining installments due under this
subsection in the same manner as if such buyer were the
taxpayer.
(4) Proration of deficiency to installments.--If an
election is made under paragraph (1) to pay the net PRC tax
liability in installments and a deficiency has been assessed
with respect to such liability, the deficiency shall be
prorated to the installments payable under paragraph (1). The
part of the deficiency so prorated to any installment the date
for payment of which has not arrived shall be collected at the
same time as, and as a part of, such installment. The part of
the deficiency so prorated to any installment the date for
payment of which has arrived shall be paid upon notice and
demand from the Secretary of the Treasury (or the Secretary's
delegate). This subsection shall not apply if the deficiency is
due to negligence, to intentional disregard of rules and
regulations, or to fraud with intent to evade tax.
(5) Election.--Any election under paragraph (1) shall be
made not later than the due date for the return of tax for the
taxable year referred to in paragraph (1) and shall be made in
such manner as the Secretary of the Treasury (or the
Secretary's delegate) shall provide.
(6) Net prc tax liability.--For purposes of this
subsection--
(A) In general.--The term ``net PRC tax liability''
means, with respect to any taxpayer for any taxable
year, the excess (if any) of--
(i) such taxpayer's net income tax for such
taxable year, over
(ii) such taxpayer's net income tax for
such taxable year determined without regard to
any gains or losses from the disposition of
disqualified PRC securities (as defined in
section 1261(b)(1) of the Internal Revenue Code
of 1986, as added by this section) during the
6-month period beginning on the date of the
enactment of this Act.
(B) Net income tax.--The term ``net income tax''
means the regular tax liability reduced by the credits
allowed under subparts A, B, and D of part IV of
subchapter A.
(7) Installments treated as tax.--For purposes of subtitle
F of the Internal Revenue Code of 1986, any installment due
under this subsection shall be treated in the same manner as
tax except as otherwise provided in this subsection.
SEC. 3. DENIAL OF FOREIGN TAX CREDIT FOR INCOME ATTRIBUTABLE TO
DISPOSITION OF DISQUALIFIED PRC SECURITIES.
(a) In General.--Section 901 of the Internal Revenue Code of 1986
is amended by redesignating subsection (n) as subsection (o) and by
inserting after subsection (m) the following new subsection:
``(n) Denial of Foreign Tax Credit With Respect to Income
Attributable to Disposition of Disqualified PRC Securities.--No credit
shall be allowed under subsection (a) with respect to any foreign
income tax on income attributable to gain from the disposition of a
disqualified PRC security (as defined in section 1261(b)(1)).''.
(b) Effective Date.--The amendments made by this section shall
apply to dispositions after the date which is 6 months after the date
of the enactment of this Act.
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