H. R. 2534
IN THE HOUSE OF REPRESENTATIVES
May 18, 2017
Mr. Kind (for himself, Mr. Pascrell, and Ms. DelBene) introduced the following bill; which was referred to the Committee on Ways and Means
To amend the Internal Revenue Code of 1986 to reduce the rate of tax on domestic manufacturing income to 20 percent.
Short title; findings
This Act may be cited as the
Rebuilding American Manufacturing Act of 2017.
Congress finds the following:
American manufacturing is vital to our economy, and those who produce American goods and hire American workers should be a priority.
Manufacturing is an essential source of innovation that is critical to our continued prosperity in an increasingly competitive global economy.
Approximately 12 million Americans are employed by the manufacturing industry.
The manufacturing industry provides stable jobs with sustainable wages to Americans in every State.
Manufacturing jobs provide, on average, wages that are above the national average and provide a gateway to the middle class.
The effective tax rate of domestic manufacturers ranges from 27 to 31 percent, depending on location and the size of equipment used in production.
Tax reform must make the United States more competitive, boost economic growth, and foster the creation of sustainable American jobs.
Tax reform should particularly focus on those companies that grow, build, and create goods in the United States.
The tax rate of domestic manufacturers should reflect the industry’s contributions of employment, growth, innovation, and competition in the United States.
20-percent income tax rate for domestic manufacturing income
Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:
Domestic manufacturing income
Allowance of deduction
There shall be allowed as a deduction an amount equal to 50.5 percent (43 percent in the case of a C corporation) of the lesser of—
the domestic manufacturing income of the taxpayer for the taxable year, or
taxable income (determined without regard to this section and section 199) for the taxable year.
Limitation based on domestic investment
For purposes of this section—
The amount of the deduction allowable under subsection (a) for any taxable year shall not exceed 25 percent of the taxpayer’s qualifying domestic investment for the taxable year.
Qualifying domestic investment amount
qualifying domestic investment means, with respect to any taxpayer for any taxable year, the sum of—
the W–2 wages of such taxpayer for such taxable year,
the sum of the deductions allowable under sections 167, 169, 179, and 179D to such taxpayer for such taxable year, plus
the deduction allowable under section 174 to such taxpayer for such taxable year.
W–2 wages means, with respect to any person for any taxable year, the sum of the amounts described in paragraphs (3) and (8) of section 6051(a) paid by such person with respect to employment of employees by such person during the calendar year ending during such taxable year. Such term shall not include any amount which is not properly included in a return filed with the Social Security Administration on or before the 60th day after the due date (including extensions) for such return.
Limitation to amounts attributable to domestic production
qualifying domestic investment shall not include any amount which is not properly allocable to domestic manufacturing gross receipts for purposes of subsection (c) (and shall include any amount which is so allocable under subsection (c)(4)).
Acquisitions and dispositions
The Secretary shall provide for the application of this subsection in cases where the taxpayer acquires, or disposes of, the major portion of a trade or business or the major portion of a separate unit of a trade or business during the taxable year.
Domestic manufacturing income
For purposes of this section—
domestic manufacturing income for any taxable year means an amount equal to the excess (if any) of—
the taxpayer’s domestic manufacturing gross receipts for such taxable year, over
the sum of—
the cost of goods sold that are allocable to such receipts, and
other expenses, losses, or deductions (other than the deduction allowed under this section), which are properly allocable to such receipts.
The Secretary shall prescribe rules for the proper allocation of items described in paragraph (1) for purposes of determining domestic manufacturing income. Such rules shall provide for the proper allocation of items whether or not such items are directly allocable to domestic manufacturing gross receipts.
Special rules for determining costs
For purposes of determining costs under clause (i) of paragraph (1)(B), any item or service brought into the United States shall be treated as acquired by purchase, and its cost shall be treated as not less than its value immediately after it entered the United States. A similar rule shall apply in determining the adjusted basis of leased or rented property where the lease or rental gives rise to domestic manufacturing gross receipts.
Exports for further manufacture
In the case of any property described in subparagraph (A) that had been exported by the taxpayer for further manufacture, the increase in cost or adjusted basis under subparagraph (A) shall not exceed the difference between the value of the property when exported and the value of the property when brought back into the United States after the further manufacture.
Treatment of certain accelerated depreciation deductions
In the case of property placed in service after December 31, 2007, and before the first taxable year of the taxpayer beginning after December 31, 2016, the deduction under section 168 with respect to such property which is treated as properly allocable to domestic manufacturing gross receipts of the taxpayer for any taxable year shall be determined without regard to section 168(k)(1).
Treatment of deferred compensation under nonqualified plans
In the case of compensation paid or incurred by the taxpayer which is deferred under a nonqualified deferred compensation plan (as defined in section 409A(d)(1)), the amount under paragraph (1)(B)(ii) shall be determined as though the deduction for such compensation is allowed for the taxable year in which the services for which such compensation was paid or incurred are performed. This paragraph shall not apply with respect to compensation paid or incurred for services performed in taxable years beginning before the first taxable year of the taxpayer beginning after December 31, 2016.
Domestic manufacturing gross receipts
For purposes of this section—
domestic manufacturing gross receipts means the gross receipts of the taxpayer which are derived from any lease, rental, license, sale, exchange, or other disposition of qualified property which was manufactured, produced, or grown by the taxpayer in whole or in significant part within the United States. Such term shall not include gross receipts of the taxpayer which are derived from the sale of food and beverages prepared by the taxpayer at a retail establishment.
Special rule for certain government contracts
Gross receipts derived from the manufacture or production of any property shall not fail to be treated as meeting the requirements of paragraph (1) solely because title or risk of loss with respect to such property is held by the Federal Government if—
such property is manufactured or produced by the taxpayer pursuant to a contract with the Federal Government, and
the Federal Acquisition Regulation requires that title or risk of loss with respect to such property be transferred to the Federal Government before the manufacture or production of such property is complete.
qualified property means—
any tangible personal property other than—
oil, gas, and primary products thereof (within the meaning of section 199(d)(9)(C)),
property with respect to which section 613 applies,
property described in paragraph (3) or (4) of section 168(f), and
electricity and potable water, and
any computer software other than video games rated M, AO, RP, or any similar rating as determined by the Secretary, by the Entertainment Software Rating Board.
Partnerships owned by expanded affiliated groups
For purposes of this subsection, if all of the interests in the capital and profits of a partnership are owned by members of a single expanded affiliated group at all times during the taxable year of such partnership, the partnership and all members of such group shall be treated as a single taxpayer during such period.
domestic manufacturing gross receipts shall not include any gross receipts of the taxpayer derived from property leased, licensed, or rented by the taxpayer for use by any related person.
For purposes of subparagraph (A), a person shall be treated as related to another person if such persons are treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414, except that determinations under subsections (a) and (b) of section 52 shall be made without regard to section 1563(b).
Elective application of deduction
Except as otherwise provided by the Secretary, the taxpayer may elect not to take any item of income into account as domestic manufacturing gross receipts for purposes of this section.
Coordination with section 199
If a deduction is allowed under this section with respect to any taxpayer for any taxable year, any gross receipts of the taxpayer which are taken into account under this section for such taxable year (and any items properly allocable thereto under subsection (b) or (c)) shall not be taken into account under section 199 for such taxable year.
Application of section to pass-thru entities
Partnerships and S corporations
In the case of a partnership or S corporation—
this section shall be applied at the partner or shareholder level,
each partner or shareholder shall take into account such person’s allocable share of each item described in subparagraph (A) or (B) of subsection (c)(1) (determined without regard to whether the items described in such subparagraph (A) exceed the items described in such subparagraph (B)), and
each partner or shareholder shall be treated for purposes of subsection (b) as having an amount of each item taken into account in determining qualifying domestic investment of the partnership or S corporation for the taxable year equal to such person’s allocable share of such item (as determined under regulations prescribed by the Secretary).
Trust and estates
In the case of a trust or estate—
the items referred to in subparagraph (A)(ii) (as determined therein) and the qualifying domestic investment of the trust or estate for the taxable year, shall be apportioned between the beneficiaries and the fiduciary (and among the beneficiaries) under regulations prescribed by the Secretary, and
for purposes of paragraph (4), adjusted gross income of the trust or estate shall be determined as provided in section 67(e) with the adjustments described in such paragraph.
The Secretary may prescribe rules requiring or restricting the allocation of items and qualifying domestic investment under this paragraph and may prescribe such reporting requirements as the Secretary determines appropriate.
Application to individuals
In the case of an individual, subsection (a)(2) shall be applied by substituting
adjusted gross income for
taxable income. For purposes of the preceding sentence, adjusted gross income shall be determined—
after application of sections 86, 135, 137, 219, 221, 222, and 469, and
without regard to this section and section 199.
Application of other rules
Rules similar to the rules of paragraphs (3), (4), (5), (6), (7), and (10) of section 199(d) shall apply for purposes of this section.
Section 56(d)(1)(A) of such Code is amended by striking
deduction under section 199 both places it appears and inserting
deductions under sections 199 and 200.
Section 56(g)(4)(C) of such Code is amended by adding at the end the following new clause:
Deduction for domestic business income
Clause (i) shall not apply to any amount allowable as a deduction under section 200.
The following provisions of such Code are each amended by inserting
Section 222 (b)(2)(C)(i).
Section 163(j)(6)(A)(i) of such Code is amended by striking
and at the end of subclause (III) and by inserting after subclause (IV) the following new subclause:
any deduction allowable under section 200, and
Section 170(b)(2)(C) of such Code is amended by striking
and at the end of clause (iv), by striking the period at the end of clause (v) and inserting
, and, and by inserting after clause (v) the following new clause:
Section 172(d) of such Code is amended by adding at the end the following new paragraph:
Domestic business income
The deduction under section 200 shall not be allowed.
Section 199(d)(2)(A) of such Code is amended by inserting
Section 613(a) of such Code is amended by striking
deduction under section 199 and inserting
deductions under sections 199 and 200.
Section 613A(d)(1) of such Code is amended by redesignating subparagraphs (C), (D), and (E) as subparagraphs (D), (E), and (F), respectively, and by inserting after subparagraph (B) the following new subparagraph:
any deduction allowable under section 200,
Section 1402(a) of such Code is amended by striking
and at the end of paragraph (16), by redesignating paragraph (17) as paragraph (18), and by inserting after paragraph (16) the following new paragraph:
the deduction provided by section 200 shall not be allowed; and
The table of sections for part VI of subchapter B of chapter 1 of such Code is amended by adding at the end the following new item:
Sec. 200. Domestic manufacturing income.
The amendments made by this section shall apply to taxable years beginning after December 31, 2016.