To amend the Internal Revenue Code of 1986 to provide special rules for the taxation of certain residents of Taiwan with income from sources within the United States.

Bill Number: H.R. 33
Origin Chamber: House
Congress: 119th Congress, Session 1
Policy Area: Taxation
Status: Passed House
Latest Action: 2025-01-16: Received in the Senate and Read twice and referred to the Committee on Finance.
Last Updated: 2026-07-11T01:09:28Z

AI-Generated Summary

Purpose of the Legislation

This bill, titled the United States-Taiwan Expedited Double-Tax Relief Act, aims to reduce double taxation—where the same income is taxed in both the U.S. and Taiwan—on certain U.S.-source income earned by qualified residents of Taiwan. It does this by providing temporary tax relief rules and authorizing the negotiation of a bilateral tax agreement, recognizing Taiwan's unique international status that prevents a formal U.S. tax treaty (which requires Senate ratification under the Constitution).

Key Provisions

The bill is divided into two titles:

Title I: United States-Taiwan Expedited Double-Tax Relief Act

Special Tax Rules (New IRC Section 894A): Amends the Internal Revenue Code (IRC) to create favorable tax treatment for "qualified residents of Taiwan" (defined below).
Reduced Withholding on Passive Income: Lowers the standard 30% U.S. withholding tax on interest (not original issue discount), dividends, royalties, and certain other payments to 10% generally. For dividends, the rate is 15%, but drops to 10% if the recipient is a Taiwanese corporation owning at least 10% of the U.S. company's voting stock for 12 months. Exceptions apply to certain real estate investment trust dividends, income from U.S. real property sales, expatriated entities, and excess inclusions from mortgage-backed securities.
Exemption for Qualified Wages: No U.S. tax or withholding on wages paid to qualified Taiwanese residents for work in the U.S., if the employer is not a U.S. person and the wages are not connected to a U.S. permanent establishment (a fixed business location). Excludes directors' fees, entertainer/athlete income, student/trainee pay, pensions, and government employment.
Exemption for Low-Level Entertainers/Athletes: No tax on income from U.S. performances if total gross receipts are $30,000 or less per year, unless connected to wages or a permanent establishment.
Taxation via Permanent Establishment: Replaces the broad "U.S. trade or business" test with a narrower "U.S. permanent establishment" (e.g., a fixed office, branch, or factory; construction sites over 12 months; or agents habitually concluding contracts). Income effectively connected to such an establishment is taxed at regular U.S. rates (e.g., individual or corporate rates). Reduces branch profits tax from 30% to 10%. Adjusts rules for U.S. real property dispositions.
Definition of Qualified Resident of Taiwan:
Individuals or entities liable for tax in Taiwan due to residence, domicile, management, or incorporation.
Excludes U.S. persons.
For corporations: Must meet "limitation on benefits" tests to prevent abuse (e.g., at least 50% owned by Taiwanese residents; less than 50% of income paid as deductible payments to non-qualified persons; publicly traded on Taiwanese markets; or qualified subsidiaries).
Special rules for dual residents (e.g., tie-breakers based on permanent home, center of vital interests, or habitual abode in Taiwan) treat them as Taiwanese for U.S. tax purposes.
Active business income from Taiwan can qualify even if the entity doesn't fully meet resident tests, unless 50% owned by residents of a "foreign country of concern" (e.g., certain adversarial nations like China, per existing law).
Permanent Establishment Definition: A fixed place of business (e.g., office, factory); excludes preparatory activities like storage or purchasing. Independent agents (e.g., brokers) don't create one.
Reciprocity Requirement: Rules apply only if the U.S. Secretary of the Treasury determines Taiwan provides equivalent benefits to U.S. persons. The President can exchange letters or agreements to confirm this.
Withholding Rules (New IRC Section 1447): Directs withholding agents to apply reduced rates for qualified Taiwanese residents.
Regulations: Treasury must issue guidance on implementation, consistent with the 2016 U.S. Model Income Tax Convention, covering permanent establishments, abuse prevention, record-keeping, and more.

Title II: United States-Taiwan Tax Agreement Authorization Act

Authorization to Negotiate: After Title I's reciprocity determination, the President can negotiate a tax agreement with Taiwan.
Must conform to standard U.S. bilateral tax treaty elements (per 2016 Model Convention) but can incorporate existing U.S. laws or prior agreements on double taxation.
Includes a statement attributing it to this Act; entry into force requires Taiwanese approval and U.S. congressional action.
Congressional Oversight:
Notify committees (Senate Foreign Relations/Finance; House Ways and Means) 15 days before negotiations start.
Provide briefings every 90-180 days; consult on objectives, consistency, and implementation.
Publish draft agreement 60 days before signing; submit final text and explanation to Congress within 270 days.
Approval and Implementation:
Requires separate "approval legislation" (simple congressional vote) and "implementing legislation" (IRC changes).
Agreement cannot override the IRC; takes effect only after both laws pass and Taiwan acts.
Future Agreements: Authorizes supplemental or superseding agreements with similar processes.
Policy Statement: Affirms U.S. commitment to bilateral tax relief with Taiwan via this framework, while pursuing formal treaties with other nations.

Significant Changes to Existing Law

From 30% Flat Rate to Tiered Rates: Replaces uniform 30% withholding on foreign investment income with 10-15% rates, mirroring treaty benefits without a formal treaty.
Permanent Establishment Over Trade or Business: Narrows U.S. business taxation for Taiwanese entities to fixed presences, reducing exposure for incidental activities (e.g., short projects under 12 months).
Exemptions Introduced: New zero-tax categories for certain wages and low entertainer income, not previously available to Taiwanese without a treaty.
Limitation on Benefits: Adds anti-abuse rules similar to treaties, excluding entities with significant ties to adversarial countries.
Bypasses Treaty Process: Authorizes a statutory agreement, sidestepping Article II Senate ratification due to Taiwan's non-sovereign recognition.
IRC Amendments: Inserts new sections 894A and 1447; clerical updates to section tables.

Potential Impacts

On Government Agencies: The IRS and Treasury will need to update withholding forms, guidance, and audits for "qualified residents" and permanent establishments, increasing administrative workload but enabling reciprocal U.S. benefits in Taiwan. Congress gains oversight but no ratification veto.
On Citizens and Businesses: Taiwanese individuals/companies gain lower taxes on U.S. investments, wages, and business income, potentially boosting cross-border trade, investment, and employment (e.g., easier for Taiwanese firms to operate in the U.S. without full taxation). U.S. persons may receive similar relief in Taiwan, benefiting exporters and investors. Minimal direct impact on average U.S. citizens unless they interact with Taiwanese entities.
On International Relations: Strengthens U.S.-Taiwan economic ties, signaling support amid geopolitical tensions (e.g., with China). Promotes reciprocity without formal diplomatic recognition; could encourage similar deals with other non-treaty partners.

Main Stakeholders Affected

Qualified Residents of Taiwan: Individuals (e.g., workers, investors) and corporations benefiting from reduced taxes; must comply with ownership and reporting rules.
U.S. Businesses and Withholding Agents: Employers, banks, and payers who handle U.S.-source payments to Taiwanese; gain clarity but face new verification duties.
U.S. Government Entities: Treasury/IRS (implementation and reciprocity checks); President (negotiation authority); Congress (approval role).
Taiwanese Government: Must provide reciprocal benefits; negotiates agreement implementation.
U.S. Taxpayers Generally: Indirectly affected via potential Taiwanese relief and broader economic ties.

Notable Legal, Constitutional, or Political Implications

Legal: Aligns with U.S. model tax conventions to prevent "treaty shopping" (abusing benefits via shell entities); reciprocity clause ensures mutuality. Explicitly subordinates the agreement to the IRC, avoiding conflicts. Defines terms like "permanent establishment" to match international standards, reducing disputes.
Constitutional: Addresses Taiwan's status by using statutory authorization instead of treaties, respecting Article II limits while enabling relief (a workaround for non-recognized entities).
Political: Highlights U.S. policy favoring Taiwan economically without escalating diplomatic issues; findings emphasize over 60 existing treaties and the need for alternatives. Could set precedent for tax deals with other partners (e.g., in sensitive regions), but requires congressional buy-in to avoid executive overreach. No partisan bias evident; focuses on mutual economic benefits.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Smith, Jason [R-MO-8]

Cosponsors (46)

Rep. Neal, Richard E. [D-MA-1], Rep. Buchanan, Vern [R-FL-16], Rep. Doggett, Lloyd [D-TX-37], Rep. Smith, Adrian [R-NE-3], Rep. Thompson, Mike [D-CA-4], Rep. Kelly, Mike [R-PA-16], Rep. Sánchez, Linda T. [D-CA-38], Rep. LaHood, Darin [R-IL-16], Rep. Sewell, Terri A. [D-AL-7], Rep. Estes, Ron [R-KS-4], Rep. DelBene, Suzan K. [D-WA-1], Rep. Smucker, Lloyd [R-PA-11], Rep. Chu, Judy [D-CA-28], Rep. Hern, Kevin [R-OK-1], Rep. Moore, Gwen [D-WI-4], Rep. Miller, Carol D. [R-WV-1], Rep. Beyer, Donald S. [D-VA-8], Rep. Murphy, Gregory F. [R-NC-3], Rep. Panetta, Jimmy [D-CA-19], Rep. Fitzpatrick, Brian K. [R-PA-1], Rep. Horsford, Steven [D-NV-4], Rep. Tenney, Claudia [R-NY-24], Rep. Suozzi, Thomas R. [D-NY-3], Rep. Fischbach, Michelle [R-MN-7], Rep. Moore, Blake D. [R-UT-1], Rep. Van Duyne, Beth [R-TX-24], Rep. Feenstra, Randy [R-IA-4], Rep. Malliotakis, Nicole [R-NY-11], Rep. Carey, Mike [R-OH-15], Rep. Yakym, Rudy [R-IN-2], Rep. Miller, Max L. [R-OH-7], Rep. Gomez, Jimmy [D-CA-34], Rep. Bean, Aaron [R-FL-4], Rep. Moran, Nathaniel [R-TX-1], Rep. Finstad, Brad [R-MN-1], Rep. Houchin, Erin [R-IN-9], Rep. Lawler, Michael [R-NY-17], Rep. Goldman, Craig [R-TX-12], Rep. Gottheimer, Josh [D-NJ-5], Rep. Carter, Earl L. "Buddy" [R-GA-1], Rep. Stanton, Greg [D-AZ-4], Rep. Nunn, Zachary [R-IA-3], Rep. Johnson, Dusty [R-SD-At Large], Rep. Barr, Andy [R-KY-6], Rep. Gooden, Lance [R-TX-5], Del. Plaskett, Stacey E. [D-VI-At Large]

Recent Actions

2025-01-16: Received in the Senate and Read twice and referred to the Committee on Finance.
2025-01-15: Motion to reconsider laid on the table Agreed to without objection.
2025-01-15: On passage Passed by the Yeas and Nays: 423 - 1 (Roll no. 15). (text: CR H160-164) (Roll call 15)
2025-01-15: Passed/agreed to in House: On passage Passed by the Yeas and Nays: 423 - 1 (Roll no. 15). (text: CR H160-164) (Roll call 15)
2025-01-15: Considered as unfinished business. (consideration: CR H170)
2025-01-15: POSTPONED PROCEEDINGS - At the conclusion of debate on H.R. 33, the Chair put the question on passage and by voice vote, announced that the ayes had prevailed. Mr. Smith (MO) demanded the yeas and nays and the Chair postponed further proceedings until a time to be announced.
2025-01-15: The previous question was ordered pursuant to the rule.
2025-01-15: DEBATE - The House proceeded with one hour of debate on H.R. 33.
2025-01-15: Considered under the provisions of rule H. Res. 5. (consideration: CR H160-168)
2025-01-03: Referred to the Committee on Ways and Means, and in addition to the Committee on Rules, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
2025-01-03: Referred to the Committee on Ways and Means, and in addition to the Committee on Rules, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
2025-01-03: Introduced in House
2025-01-03: Introduced in House

Bill Versions

United States-Taiwan Expedited Double-Tax Relief Act — issued 2025-01-15 — PDF (42 pages)
United States-Taiwan Expedited Double-Tax Relief Act — issued 2025-01-03 — PDF (41 pages)
United States-Taiwan Expedited Double-Tax Relief Act — issued 2025-01-16 — PDF (41 pages)