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II 112TH CONGRESS 1ST SESSION S. 986 To amend the Internal Revenue Code of 1986 to regulate the subsidies paid to rum producers in Puerto Rico and the Virgin Islands, and for other purposes. IN THE SENATE OF THE UNITED STATES MAY 12, 2011 Mr. MENENDEZ 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 regulate the subsidies paid to rum producers in Puerto Rico and the Virgin Islands, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Investing in U.S. Ter- 4 ritories, Not Corporations Act of 2011’’. 5 SEC. 2. LIMITATION ON GOVERNMENT ASSISTANCE TO RUM 6 PRODUCERS. 7 Subsection (e) of section 7652 of the Internal Rev- 8 enue Code of 1986 (relating to shipments of rum to the 9 VerDate Mar 15 2010 04:34 May 19, 2011 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 jbell on DSKDVH8Z91PROD with BILLS 2 •S 986 IS United States) is amended by redesignating paragraphs 1 (3) and (4) as paragraphs (4) and (5), respectively, and 2 by inserting after paragraph (2) the following new para- 3 graph: 4 ‘‘(3) LIMITATION ON GOVERNMENT ASSISTANCE 5 TO RUM PRODUCERS.— 6 ‘‘(A) IN GENERAL.—If the amount of di- 7 rect and indirect government assistance paid or 8 incurred by any covered government during any 9 calendar year to persons producing rum within 10 the jurisdiction of such government exceeds the 11 limitation under subparagraph (B), the amount 12 which would (but for this paragraph) be covered 13 into the treasury of such government under this 14 subsection shall be reduced for each of the 2 15 succeeding calendar years by the amount of 16 such excess. 17 ‘‘(B) LIMITATION.—The limitation under 18 this subparagraph is the amount equal to 15 19 percent of the amount which would (but for this 20 paragraph) be covered into the treasury of such 21 government under this section for the calendar 22 year. 23 ‘‘(C) SEPARATE APPLICATION TO EACH 24 PRODUCER.—The provisions of subparagraphs 25 VerDate Mar 15 2010 04:34 May 19, 2011 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 jbell on DSKDVH8Z91PROD with BILLS 3 •S 986 IS (A) and (B) shall also be applied separately to 1 each rum producer, taking into account only the 2 assistance paid or incurred by any covered gov- 3 ernment to such producer and only such pro- 4 ducer’s production to which subsection (a)(3) or 5 (b)(3) applies, whichever is applicable. 6 ‘‘(D) GOVERNMENT ASSISTANCE.—For 7 purposes of this paragraph— 8 ‘‘(i) DIRECT GOVERNMENT ASSIST- 9 ANCE.—The term ‘direct government as- 10 sistance’ includes any transfer of funds, 11 grant, subsidy (other than any generally 12 available tax subsidy), loan, equity invest- 13 ment, loan guarantee, production or mar- 14 keting incentive, income or price support, 15 provision of goods or services (other than 16 generally available infrastructure and pub- 17 lic services), and such other assistance pro- 18 vided by a covered government as the Sec- 19 retary identifies as consistent with the pur- 20 poses of this paragraph. 21 ‘‘(ii) INDIRECT GOVERNMENT ASSIST- 22 ANCE.—The term ‘indirect government as- 23 sistance’ includes any amounts expended 24 by a covered government— 25 VerDate Mar 15 2010 04:34 May 19, 2011 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 jbell on DSKDVH8Z91PROD with BILLS 4 •S 986 IS ‘‘(I) to promote, market, or oth- 1 erwise support the rum industry with- 2 in the jurisdiction of such govern- 3 ment, 4 ‘‘(II) to pay principal and inter- 5 est on, and expenses related to, in- 6 debtedness incurred, the proceeds of 7 which are used to provide rum sub- 8 sidies, or 9 ‘‘(III) for any other purpose 10 identified by the Secretary as con- 11 sistent with the purposes of this para- 12 graph. 13 ‘‘(iii) CERTAIN DEBT-FINANCED PAY- 14 MENTS EXCLUDED.—The terms ‘direct 15 government assistance’ and ‘indirect gov- 16 ernment assistance’ shall not include any 17 payment made by a covered government to 18 a rum producer out of funds raised 19 through a loan (including the issuance of a 20 debt instrument), but shall include any 21 payment of principal and interest on the 22 loan (or debt instrument). 23 ‘‘(E) ANNUAL REPORTS.—Each covered 24 government shall, for each calendar year, sub- 25 VerDate Mar 15 2010 04:34 May 19, 2011 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 jbell on DSKDVH8Z91PROD with BILLS 5 •S 986 IS mit a report to the Secretary detailing the 1 amount and type of direct and indirect govern- 2 ment assistance provided by such government 3 to each rum producer during such calendar year 4 and to rum producers in the aggregate during 5 such year. Such report shall be submitted at 6 such time, and in such form, as is prescribed by 7 the Secretary. 8 ‘‘(F) COVERED GOVERNMENT.—For pur- 9 poses of this paragraph, the term ‘covered gov- 10 ernment’ means the government of Puerto Rico 11 and the government of the Virgin Islands.’’. 12 SEC. 3. MAXIMUM AND MINIMUM ALLOCATIONS OF RUM 13 EXCISE TAXES BETWEEN PUERTO RICO AND 14 THE VIRGIN ISLANDS. 15 Section 7652 of the Internal Revenue Code of 1986 16 is amended by inserting after subsection (h) the following 17 new subsection: 18 ‘‘(i) LIMITATIONS ON ALLOCATION OF RUM EXCISE 19 TAXES BETWEEN PUERTO RICO AND THE VIRGIN IS- 20 LANDS.— 21 ‘‘(1) IN GENERAL.—Notwithstanding sub- 22 sections (a), (b), and (e), if, without regard to this 23 subsection and subsection (e)(3)), the Secretary de- 24 termines that the respective shares of Puerto Rico 25 VerDate Mar 15 2010 04:34 May 19, 2011 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 jbell on DSKDVH8Z91PROD with BILLS 6 •S 986 IS and the Virgin Islands of the aggregate amount to 1 be covered into their treasuries under this section 2 for any calendar year are not within the parameters 3 of paragraph (2), the Secretary shall increase or de- 4 crease such shares to the extent necessary to bring 5 them within such parameters. 6 ‘‘(2) PARAMETERS.—The parameters of this 7 paragraph are that— 8 ‘‘(A) Puerto Rico’s share shall be at least 9 65 percent but not more than 70 percent of 10 such aggregate amount, and 11 ‘‘(B) the Virgin Island’s share shall be at 12 least 30 percent but not more than 35 percent 13 of such aggregate amount. 14 ‘‘(3) APPLICATION WITH SUBSECTION (e)(3).— 15 This subsection shall be applied before subsection 16 (e)(3).’’. 17 SEC. 4. DENIAL OF COVER OVER FOR RUM REDISTILLED 18 INTO CANE NEUTRAL SPIRITS. 19 Section 7652 of the Internal Revenue Code of 1986 20 is amended by inserting after subsection (i) the following 21 new subsection: 22 ‘‘(j) DENIAL OF COVER OVER FOR RUM REDIS- 23 TILLED INTO CANE NEUTRAL SPIRITS.—No amount shall 24 be covered over under subsection (a) or (b) with respect 25 VerDate Mar 15 2010 04:34 May 19, 2011 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 jbell on DSKDVH8Z91PROD with BILLS 7 •S 986 IS to rum which is redistilled into cane neutral spirits after 1 being brought into the United States. The Secretary shall 2 prescribe such information reporting as the Secretary de- 3 termines necessary to carry out the preceding sentence.’’. 4 SEC. 5. EFFECTIVE DATE. 5 (a) IN GENERAL.—Except as provided in subsection 6 (b), the amendments made by this section shall apply to 7 calendar years after 2011. 8 (b) DENIAL OF COVER OVER FOR RUM REDISTILLED 9 INTO CANE NEUTRAL SPIRITS.—The amendment made 10 by section 4 shall apply to rum brought into the United 11 States after the date of the enactment of this Act. 12 Æ VerDate Mar 15 2010 04:34 May 19, 2011 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6301 E:\BILLS\S986.IS S986 jbell on DSKDVH8Z91PROD with BILLS