H.R.363 - Territorial Economic Recovery Act (119th Congress)
Summary
H.R. 363, the Territorial Economic Recovery Act, proposes amendments to the Internal Revenue Code of 1986, specifically targeting the treatment of income from controlled foreign corporations operating in U.S. possessions. The bill aims to exclude certain amounts from the tested income of these corporations, providing a tax incentive for businesses operating in areas like Puerto Rico and the U.S. Virgin Islands. This exclusion applies to income effectively connected with active trade or business within these possessions, provided certain conditions are met regarding the source and nature of the income.
Expected Effects
The primary effect of this bill would be to reduce the tax burden on qualifying corporations operating in U.S. possessions. This could incentivize investment and job creation in these territories. The bill defines 'qualified possession corporation' based on income thresholds related to business activity within the specified possessions.
Potential Benefits
- Increased Investment: Tax incentives could attract more businesses to establish or expand operations in U.S. possessions.
- Job Creation: New and expanding businesses may lead to increased employment opportunities for residents of these territories.
- Economic Growth: The overall economic activity in Puerto Rico, the Virgin Islands, and other specified possessions could be stimulated.
- Improved Infrastructure: Increased tax revenue (potentially, in the long run) could support infrastructure development.
- Reduced Reliance on Federal Aid: Stronger local economies could decrease the need for federal assistance.
Most Benefited Areas:
Potential Disadvantages
- Potential Revenue Loss: Excluding certain income from taxation could reduce federal government revenue.
- Complexity: The new rules may create complexity in tax compliance and administration.
- Abuse Potential: There is a risk that corporations may structure their operations to take undue advantage of the tax benefits.
- Unfair Competition: Businesses operating outside these possessions may face a competitive disadvantage.
- Limited Scope: The benefits are limited to specific U.S. possessions, potentially creating disparities.
Most Disadvantaged Areas:
Constitutional Alignment
The bill falls under the purview of Congress's power to lay and collect taxes, as outlined in Article I, Section 8, Clause 1 of the Constitution. The uniformity clause might be relevant, as it requires that duties, imposts, and excises be uniform throughout the United States; however, the bill targets specific territories rather than states, which may provide some leeway. The bill does not appear to infringe upon any individual rights or liberties protected by the Constitution or its amendments.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).