Defending American Jobs and Investment Act

Bill Number

H.R. 591

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Foreign Trade and International Finance

Status

Introduced

Latest Action

2025-01-21: Referred to the Committee on Ways and Means, and in addition to the Committee on Oversight and Government Reform, 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.

Last Updated

2025-07-16T13:51:13Z

AI-Generated Summary

Purpose of the Legislation

The Defending American Jobs and Investment Act (H.R. 591) aims to protect U.S. persons and businesses from unfair foreign taxes by requiring the U.S. government to identify, engage with, and impose retaliatory measures against countries that levy extraterritorial taxes (taxes on income earned outside their borders through ownership links) or discriminatory taxes (taxes that unfairly target non-residents or violate international norms). The goal is to encourage foreign countries to repeal such taxes and safeguard American economic interests.

Key Provisions

• Reporting Requirements: The Secretary of the Treasury must submit a report to specified congressional committees within 90 days of enactment and every 180 days thereafter. Each report lists foreign countries imposing extraterritorial or discriminatory taxes, including tax descriptions, rates, enactment dates, and updates on any repeals or terminations.
• Bilateral Engagement: The Treasury Secretary must initiate enhanced discussions with listed countries to highlight U.S. concerns about these taxes' negative effects on trade and treaties, urge their repeal, and warn of potential U.S. remedies.
• Remedial Tax Increases:
• Applies escalating surtaxes (starting at 5 percentage points and rising to 20 over four years) to income taxes and withholding taxes on applicable persons (citizens or corporations from listed countries).
• Overrides U.S. tax treaty obligations for withholding taxes to enforce these increases.
• Includes special rules for taxes on U.S. real property dispositions (under the Foreign Investment in Real Property Tax Act, or FIRPTA), limiting increases to certain gains.
• Other Remedies:
• The President may ban federal procurement of goods or services from applicable persons until the foreign taxes are repealed.
• The Treasury Secretary must factor in these foreign taxes when negotiating or updating bilateral tax treaties, notifying Congress within 30 days.
• The U.S. Trade Representative and Secretary of Commerce must consider them in trade agreement talks, with similar congressional notifications.
• Definitions and Exceptions:
• Extraterritorial tax: A foreign tax on a corporation's income based on ownership chains to unrelated persons, beyond direct ownership.
• Discriminatory tax: Includes taxes on non-source income, gross (not net) income without cost recovery, those targeting non-residents via thresholds or exclusions, or taxes not treated as income taxes under foreign law or double-taxation agreements.
• Exceptions exclude common taxes like withholding on dividends/interest, value-added taxes, sales taxes, property taxes, or per-unit transaction taxes.
• Remedies end if a country fully repeals all such taxes.
• Implementation: Effective 180 days after the first report listing a country; Treasury may issue regulations to prevent avoidance.

Significant Changes to Existing Law

• Adds a new Section 899 to the Internal Revenue Code (under subpart D of part II of subchapter N), introducing mandatory reporting, diplomatic engagement, and automatic tax surcharges as countermeasures.
• Overrides U.S. treaty commitments for withholding taxes (sections 1441, 1442, 1445), which previously limited rates— a departure from current deference to international agreements.
• Expands executive authority in procurement and trade/tax negotiations by tying them explicitly to foreign tax practices, without prior equivalents in tax law.

Potential Impacts

• Government Agencies: Increases workload for the Treasury Department (reporting and engagement); empowers the President on procurement bans; requires notifications to congressional committees (Finance, Foreign Relations, Foreign Affairs, Ways and Means), potentially slowing trade/tax negotiations.
• Citizens and Businesses: U.S. individuals and companies may benefit from reduced foreign tax burdens through diplomatic pressure, but face indirect costs if foreign retaliation affects trade. Foreign investors from listed countries could see higher U.S. tax costs, possibly deterring investment and protecting U.S. jobs/investments as intended.
• International Relations: May escalate tensions with countries like those imposing digital services taxes (e.g., on U.S. tech firms), prompting retaliatory tariffs or disputes under World Trade Organization rules; could influence global tax norms but risk trade war dynamics.

Main Stakeholders Affected

• U.S. Persons and Businesses: Taxpayers and firms facing foreign extraterritorial/discriminatory taxes (e.g., multinational corporations) who gain from remedies.
• Foreign Citizens and Corporations: Residents or entities from listed countries investing in or earning U.S. income, facing higher taxes and procurement barriers.
• U.S. Government Entities: Treasury (lead on reporting/taxes), U.S. Trade Representative and Commerce Department (trade impacts), and the President (procurement decisions).
• Congress: Oversight committees monitoring reports and notifications.
• International Actors: Foreign governments potentially pressured to repeal taxes, affecting bilateral relations.

Notable Legal, Constitutional, or Political Implications

• Legal: Potential conflicts with U.S. tax treaties and international law (e.g., double-taxation pacts), as it disregards treaty rate limits; may invite challenges in U.S. courts or international forums like the WTO for discriminatory treatment of foreigners. Treasury's regulatory authority allows flexibility but risks inconsistent application.
• Constitutional: Relies on Congress's taxing and commerce powers (Article I), with delegated executive actions (e.g., procurement bans) that could raise separation-of-powers questions if seen as overly broad.
• Political: Bipartisan sponsorship (over 20 House members) signals cross-party support for protecting U.S. economic interests; could polarize debates on trade protectionism versus free markets, influencing future tax and foreign policy legislation.

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 (25)

Rep. Buchanan, Vern [R-FL-16], Rep. Smith, Adrian [R-NE-3], Rep. Kelly, Mike [R-PA-16], Rep. Schweikert, David [R-AZ-1], Rep. LaHood, Darin [R-IL-16], Rep. Arrington, Jodey C. [R-TX-19], Rep. Estes, Ron [R-KS-4], Rep. Smucker, Lloyd [R-PA-11], Rep. Hern, Kevin [R-OK-1], Rep. Miller, Carol D. [R-WV-1], Rep. Murphy, Gregory F. [R-NC-3], Rep. Kustoff, David [R-TN-8], Rep. Fitzpatrick, Brian K. [R-PA-1], Rep. Steube, W. Gregory [R-FL-17], Rep. Tenney, Claudia [R-NY-24], 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. Bean, Aaron [R-FL-4], Rep. Moran, Nathaniel [R-TX-1]

Recent Actions

• 2025-01-21: Referred to the Committee on Ways and Means, and in addition to the Committee on Oversight and Government Reform, 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.
• 2025-01-21: Referred to the Committee on Ways and Means, and in addition to the Committee on Oversight and Government Reform, 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.
• 2025-01-21: Introduced in House
• 2025-01-21: Introduced in House

Bill Versions

• Defending American Jobs and Investment Act — issued 2025-01-21 — PDF (19 pages)