Plain English
GovGreed Synthesis ·
Territorial Economic Recovery Act This bill excludes the income of certain controlled foreign corporations in U.S. territories from the calculation of global intangible low-taxed income (GILTI) for federal tax purposes. Under current law, a U.S. shareholder of a controlled foreign corporation is required to include in gross income the GILTI of the shareholder. The calculation of GILTI is based, in part, on the controlled foreign corporation’s tested income (the controlled foreign corporation’s gross income less certain exclusions). Under the bill, the income from a qualified possession corporation that is effectively connected with an active trade or business within a U.S. territory (Puerto Rico, U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands) is excluded from gross income for purposes of calculating a controlled foreign corporation’s tested income. The bill defines a qualified possession corporation as any controlled foreign corporation if, for a three-year period ending in the prior tax year (or for the existence of the controlled foreign corporation if less than three years) (1) 80% or more of the controlled foreign corporation’s gross income was derived from a U.S. territory, and (2) 75% or more of the controlled foreign corporation’s gross income was effectively connected to the active conduct of a trade or business within a U.S. territory.
Market Impact Map
Action Timeline
2025-01-13
Referred to the House Committee on Ways and Means.
2025-01-13
Introduced in House
2025-01-13
Introduced in House
Full Bill Text
119 HR 363 IH: Territorial Economic Recovery Act U.S. House of Representatives 2025-01-13 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain. I 119th CONGRESS 1st Session H. R. 363 IN THE HOUSE OF REPRESENTATIVES January 13, 2025 Ms. Plaskett 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 exclude certain amounts from the tested income of controlled foreign corporations, and for other purposes. 1. Short title This Act may be cited as the Territorial Economic Recovery Act . 2. Income of certain qualified possession corporations excluded from tested income (a) In general Section 951A of the Internal Revenue Code of 1986 is amended— (1) in subsection (c)(2)(A)(i), by striking and at the end of subclause (IV), by striking over at the end of subclause (V) and inserting and , and by adding at the end the following new subclause: (VI) any income of a qualified possession corporation that is effectively connected with the active conduct of a trade or business within a possession of the United States, over ; and (2) by adding at the end the following new subsections: (g) Possession of the united states For purposes of this section, the term possession of the United States means Puerto Rico, the Virgin Islands, and any specified possession described in section 931(c). (h) Qualified possession corporation For purposes of this section, the term qualified possession corporation means any controlled foreign corporation for any taxable year, if, for the 3-year period (or the period during which the controlled foreign corporation has been in existence, if shorter) ending in the taxable year preceding the taxable year in which the determination is made— (1) 80 percent or more of the gross income of such corporation was derived from sources within a possession of the United States, and (2) 75 percent or more of the gross income of such corporation was effectively connected with the active conduct of a trade or business within a possession of the United States. . (b) Effective date The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2023, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.
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