To amend the Internal Revenue Code of 1986 to provide for the cover over of the refundable portion of the earned income and child tax credits to Guam and the Virgin Islands.

April 12, 2005

Ms. BORDALLO (for herself and Mrs. CHRISTENSEN) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to provide for the cover over of the refundable portion of the earned income and child tax credits to Guam and the Virgin Islands.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Insular Areas Tax Credit Act'.

SEC. 2. COVER OVER OF REFUNDABLE PORTION OF EARNED INCOME AND CHILD TAX CREDITS TO GUAM AND THE VIRGIN ISLANDS.

(a) In General- Section 7654 of the Internal Revenue Code of 1986 (relating to coordination of United States and certain possession individual income taxes) is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection:

`(e) Refundable Portion of Earned Income and Child Tax Credits-

`(1) IN GENERAL- In addition to the amounts determined under the preceding provisions of this section, with respect to calendar year 2006 and each calendar year thereafter, the United States shall pay an estimate of the applicable refundable tax credit amount to Guam and the Virgin Islands during the first 3 1/2 months of such calendar year.

`(2) ADJUSTMENTS; SUPPLEMENTAL PAYMENTS- Proper adjustments shall be made in amounts transferred under this subsection to the extent that prior estimates of the applicable refundable tax credit amount are in excess of or less than such amount. In the case of an estimate which is less than the applicable refundable tax credit amount, the Secretary may make supplemental payments which, in the aggregate, do not exceed the difference between such estimate and the applicable refundable tax credit amount. Any adjustment under this paragraph shall take into account any such supplemental payment.

`(3) APPLICABLE REFUNDABLE TAX CREDIT AMOUNT- For purposes of this subsection, the term `applicable refundable tax credit amount' means, with respect to Guam or the Virgin Islands for any calendar year, the excess of--

`(A) the aggregate refunds paid by Guam or the Virgin Islands, as the case may be, to individuals with respect to taxable years ending in or with the preceding calendar year, over

`(B) the aggregate refunds which (as determined by the Secretary) would have been so paid if section 24(d) did not apply and the credit allowed under section 32 was not refundable.'.

(b) Effective Date- The amendments made by this section shall take effect on the date of the enactment of this Act.

END