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S. 3816 (111th): Creating American Jobs and Ending Offshoring Act

The text of the bill below is as of Sep 22, 2010 (Placed on Calendar in the Senate).


II

Calendar No. 578

111th CONGRESS

2d Session

S. 3816

IN THE SENATE OF THE UNITED STATES

September 21, 2010

(for himself, Mr. Reid, Mr. Schumer, Mr. Dorgan, Mrs. Boxer, Mr. Brown of Ohio, and Mr. Leahy) introduced the following bill; which was read the first time

September 22, 2010

Read the second time and placed on the calendar

A BILL

To amend the Internal Revenue Code of 1986 to create American jobs and to prevent the offshoring of such jobs overseas.

1.

Short title

This Act may be cited as the Creating American Jobs and Ending Offshoring Act.

I

Incentives to create American jobs

101.

Payroll tax holiday for employers moving jobs to the United States from overseas

(a)

In general

Section 3111 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(e)

Special exemption for certain individuals hired to replace employees whose jobs were overseas

(1)

In general

Subsection (a) shall not apply to wages paid by a qualified employer with respect to employment during the applicable 24-month period with respect to any qualified replacement individual for services performed—

(A)

in a trade or business of such qualified employer, or

(B)

in the case of a qualified employer exempt from tax under section 501(a), in furtherance of the activities related to the purpose or function constituting the basis of the employer’s exemption under section 501.

(2)

Qualified employer

For purposes of this subsection, the term qualified employer has the meaning given such term by subsection (d)(2).

(3)

Qualified replacement individual

For purposes of this subsection—

(A)

In general

The term qualified replacement individual means any individual—

(i)

who begins employment with a qualified employer after September 21, 2010, and before September 22, 2013,

(ii)

with respect to whom the qualified employer certifies that such individual has been employed by the qualified employer to replace another employee—

(I)

who was not a citizen or lawfully present resident of the United States, and

(II)

substantially all of whose services for the employer were performed outside of the United States,

(iii)

with respect to whom the qualified employer certifies that substantially all of the services the individual will perform for the employer will be performed within the United States, and

(iv)

who is not an individual described in section 51(i)(1) (applied by substituting qualified employer for taxpayer each place it appears).

For purposes of this paragraph, only 1 individual may be treated as a qualified replacement individual with respect to any employee described in clause (ii) being replaced by the qualified employer. Any certification under clause (ii) or (iii) shall be made by signed affidavit, under penalties of perjury.
(B)

Employer

All employers treated as a single employer under subsection (a) or (b) of section 52 shall be treated as a single employer for purposes of subparagraph (A)(ii), except that section 1563(b)(2)(C) shall be disregarded in applying section 1563 for purposes of such section.

(4)

Applicable 24-month period

For purposes of this subsection, the term applicable 24-month period means, with respect to any qualified replacement individual of a qualified employer, the 24-month period beginning on the hiring date of such individual by the employer.

(5)

Election

A qualified employer may elect to have this subsection not apply. Such election shall be made in such manner as the Secretary may require.

(6)

Special rule for third calendar quarter of 2010

(A)

Nonapplication of exemption during third quarter

Paragraph (1) shall not apply with respect to wages paid during the third calendar quarter of 2010.

(B)

Crediting of first quarter exemption during fourth quarter

The amount by which the tax imposed under subsection (a) would (but for subparagraph (A)) have been reduced with respect to wages paid by a qualified employer during the third calendar quarter of 2010 shall be treated as a payment against the tax imposed under subsection (a) with respect to the qualified employer for the fourth calendar quarter of 2010 which is made on the date that such tax is due.

(7)

Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including regulations necessary to prevent the avoidance of such purposes through the transfer and retransfer of employees within and without the United States or otherwise.

.

(b)

Coordination with work opportunity credit

Section 51(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(6)

Coordination with payroll tax forgiveness of qualified replacement individuals

The term wages shall not include any amount paid or incurred to a qualified replacement individual (as defined in section 3111(e)(3)) during the 2-year period beginning on the hiring date of such individual by an employer unless such employer makes an election not to have section 3111(e) apply.

.

(c)

Transfers to Federal Old-Age and Survivors Insurance Trust Fund

There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund established under section 201 of the Social Security Act (42 U.S.C. 401) amounts equal to the reduction in revenues to the Treasury by reason of the amendments made by subsection (a). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted.

(d)

Effective date

The amendments made by this section shall apply to wages paid after September 21, 2010.

II

Disincentives to moving American jobs overseas

201.

Disallowance of deduction, loss, or credit for certain items incurred in moving American jobs offshore

(a)

In general

Part IX of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

280I.

Expenditures incurred in moving American jobs offshore

(a)

Disallowance

No deduction, loss, or credit shall be allowed under this title for any taxable year for any disallowed amount.

(b)

Disallowed amount

For purposes of this section—

(1)

In general

The term disallowed amount means any amount which is paid or incurred during the taxable year which is properly allocable to an American jobs offshoring transaction.

(2)

Losses

Such term shall include any loss from any sale, exchange, abandonment, or other disposition of property in connection with an American jobs offshoring transaction.

(3)

Exception for costs related to displaced workers

Such term shall not include any amount paid or incurred for assistance to employees within the United States whose jobs are being lost as part of an American jobs offshoring transaction, including any severance pay, outplacement services, or employee retraining.

(c)

American jobs offshoring transaction

For purposes of this section—

(1)

In general

The term American jobs offshoring transaction means any transaction (or series of transactions) in which the taxpayer reduces or eliminates the operation of a trade or business (or line of business) within the United States in connection with the start up or expansion of such trade or business (or such line of business) by the taxpayer outside of the United States.

(2)

Exception

A transaction (or series of transactions) shall not be treated as an American jobs offshoring transaction if the taxpayer establishes to the satisfaction of the Secretary that such transaction (or series of transactions) will not result in the loss of employment for employees of the taxpayer within the United States.

(d)

Aggregation rule

All employers treated as a single employer under subsection (a) or (b) of section 52 shall be treated as a single taxpayer for purposes of this section, except that section 1563(b)(2)(C) shall be disregarded in applying section 1563 for purposes of section 52.

(e)

Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section, including regulations necessary to prevent the avoidance of such purposes and the application of this section in the case of mergers, acquisitions, and dispositions and in the case of contract employees.

.

(b)

Conforming amendment

The table of sections for part IX of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

Sec. 280I. Expenditures incurred in moving American jobs offshore..

(c)

Effective dates

(1)

In general

The amendments made by this section shall apply to transactions occurring after the date of the enactment of this Act.

(2)

Exception for existing transactions

The amendments made by this section shall not apply to transactions occurring after the date of the enactment of this Act if the taxpayer establishes to the satisfaction of the Secretary of the Treasury or the Secretary's delegate that on or before such date the taxpayer publicly identified the transaction in sufficient detail that the nature and scope of the transaction could be identified.

202.

Taxation of income of controlled foreign corporations attributable to imported property produced by employees in American jobs moved offshore

(a)

General Rule

Subsection (a) of section 954 of the Internal Revenue Code of 1986 (defining foreign base company income) is amended by striking the period at the end of paragraph (5) and inserting , and, by redesignating paragraph (5) as paragraph (4), and by adding at the end the following new paragraph:

(5)

imported property offshored income for the taxable year (determined under subsection (j) and reduced as provided in subsection (b)(5)).

.

(b)

Definition of Imported Property Offshored Income

Section 954 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(j)

Imported property offshored income

(1)

In general

For purposes of subsection (a)(5), the term imported property offshored income means offshored income (whether in the form of profits, commissions, fees, or otherwise) received from a controlled foreign corporation and derived in connection with—

(A)

manufacturing, producing, growing, or extracting imported property;

(B)

the sale, exchange, or other disposition of imported property; or

(C)

the lease, rental, or licensing of imported property.

Such term shall not include any foreign oil and gas extraction income (within the meaning of section 907(c)) or any foreign oil related income (within the meaning of section 907(c)).
(2)

Imported property

For purposes of this subsection—

(A)

In general

Except as otherwise provided in this paragraph, the term imported property means property which is imported into the United States by the offshored controlled foreign corporation or a related person.

(B)

Imported property includes certain property imported by unrelated persons

The term imported property includes any property imported into the United States by an unrelated person if, when such property was sold to the unrelated person by the controlled foreign corporation (or a related person), it was reasonable to expect that—

(i)

such property would be imported into the United States; or

(ii)

such property would be used as a component in other property which would be imported into the United States.

(C)

Exception for property subsequently exported

The term imported property does not include any property which is imported into the United States and which—

(i)

before substantial use in the United States, is sold, leased, or rented by the controlled foreign corporation or a related person for direct use, consumption, or disposition outside the United States; or

(ii)

is used by the offshored controlled foreign corporation or a related person as a component in other property which is so sold, leased, or rented.

(D)

Exception for certain agricultural commodities

The term imported property does not include any agricultural commodity which is not grown in the United States in commercially marketable quantities.

(3)

Offshored income

For purposes of this section, the term offshored income means income described in paragraph (1) that is directly or indirectly derived from the operation of a trade or business (or line of business) which was started or expanded outside the United States as part of an American jobs offshoring transaction (as defined in section 280I(c)) to which the provisions of section 280I apply.

(4)

Definitions and special rules

(A)

Import

For purposes of this subsection, the term import means entering, or withdrawal from warehouse, for consumption or use. Such term includes any grant of the right to use intangible property (as defined in section 936(h)(3)(B)) in the United States.

(B)

United States

For purposes of this subsection, the term United States includes the Commonwealth of Puerto Rico, the Virgin Islands of the United States, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.

(C)

Unrelated person

For purposes of this subsection, the term unrelated person means any person who is not a related person with respect to the controlled foreign corporation.

(D)

Coordination with foreign base company sales income

For purposes of this section, the term foreign base company sales income shall not include any imported property income.

.

(c)

Separate application of limitations on foreign tax credit for imported property offshored income

(1)

In general

Paragraph (1) of section 904(d) of the Internal Revenue Code of 1986 (relating to separate application of section with respect to certain categories of income) is amended by striking and at the end of subparagraph (A), by redesignating subparagraph (B) as subparagraph (C), and by inserting after subparagraph (A) the following new subparagraph:

(B)

imported property offshored income, and

.

(2)

Imported property offshored income defined

Paragraph (2) of section 904(d) of such Code is amended by redesignating subparagraphs (I), (J), and (K) as subparagraphs (J), (K), and (L), respectively, and by inserting after subparagraph (H) the following new subparagraph:

(I)

Imported property offshored income

The term imported property offshored income means any income received or accrued by any person which is of a kind which would be imported property offshored income (as defined in section 954(j)).

.

(3)

Conforming amendment

Clause (ii) of section 904(d)(2)(A) of such Code is amended by inserting or imported property offshored income after passive category income.

(d)

Technical Amendments

(1)

Clause (iii) of section 952(c)(1)(B) of the Internal Revenue Code of 1986 (relating to certain prior year deficits may be taken into account) is amended—

(A)

by redesignating subclauses (II), (III), (IV), and (V) as subclauses (III), (IV), (V), and (VI), and

(B)

by inserting after subclause (I) the following new subclause:

(II)

imported property offshored income,

.

(2)

The last sentence of paragraph (4) of section 954(b) of such Code (relating to exception for certain income subject to high foreign taxes) is amended by striking subsection (a)(5) and inserting subsection (a)(4).

(3)

Paragraph (5) of section 954(b) of such Code (relating to deductions to be taken into account) is amended by striking and the foreign base company oil related income and inserting the foreign base company oil related income, and the imported property offshored income.

(e)

Effective Date

The amendments made by this section shall apply to taxable years of foreign corporations beginning after the date of the enactment of this Act, and to taxable years of United States shareholders within which or with which such taxable years of such foreign corporations end.

September 22, 2010

Read the second time and placed on the calendar