SECTION 1. SHORT TITLE.

    This Act may be cited as the ``World Trade Center Zone Tax 
Incentive Act''.

SEC. 2. TAX TREATMENT OF FOREIGN CORPORATIONS RELOCATING TO WORLD TRADE 
              CENTER AREA.

    (a) In General.--Subchapter Y of chapter 1 of the Internal Revenue 
Code of 1986 (relating to New York Liberty Zone benefits) is amended by 
adding at the end the following new section:

``SEC. 1400M. NO ADDITIONAL CORPORATE INCOME TAXES ON FOREIGN 
              CORPORATIONS RELOCATING HEADQUARTERS OPERATIONS TO NEW 
              YORK LIBERTY ZONE.

    ``(a) General Rule.--If there is a qualified headquarters 
relocation of an eligible foreign corporation, any qualified 
headquarters activities of the corporation conducted in the New York 
Liberty Zone shall be treated as conducted outside the United States 
for purposes of determining--
            ``(1) the amount of any tax imposed by this chapter, or the 
        amount of withholding tax under chapter 3, on the corporation, 
        or
            ``(2) whether the corporation has a permanent establishment 
        within the United States for purposes of any applicable income 
        tax treaty between the United States and any foreign country.
    ``(b) Qualified Headquarters Relocation.--For purposes of this 
section--
            ``(1) In general.--The term `qualified headquarters 
        relocation' means any relocation of an eligible foreign 
        corporation's qualified headquarters activities to the New York 
        Liberty Zone but only if the corporation with respect to such 
        relocation--
                    ``(A) before September 11, 2007, enters into a 
                contract--
                            ``(i) under which the corporation agrees to 
                        acquire, lease, sublease, or otherwise occupy 
                        office space located in the New York Liberty 
                        Zone for use in the conduct of the activities 
                        to be relocated, and
                            ``(ii) which requires a substantial 
                        financial commitment or provides a substantial 
                        cancellation penalty, and
                    ``(B) before September 11, 2009--
                            ``(i) transfers to the New York Liberty 
                        Zone qualified headquarters activities meeting 
                        the requirements of paragraph (2), and
                            ``(ii) locates employees in the New York 
                        Liberty Zone in accordance with the 
                        requirements of paragraph (3).
            ``(2) Transfer of qualified headquarters activities.--The 
        requirements of this paragraph are met if the transfer of 
        qualified headquarters activities includes at least the 
        transfer of a substantial part of the following activities 
        which the eligible foreign corporation was performing for 
        members of its expanded affiliated group immediately before the 
        requirement of paragraph (1)(A) is met:
                    ``(A) The activities described in clause (ii) of 
                subsection (c)(2)(A).
                    ``(B) High-level activities described in clause 
                (iii) of subsection (c)(2)(A).
                    ``(C) The activities described in clause (iv) of 
                subsection (c)(2)(A).
            ``(3) Transfer of employees.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if the eligible foreign corporation 
                locates in the New York Liberty Zone a number of 
                employees equal to or greater than the lesser of--
                            ``(i) 200 employees, or
                            ``(ii) the greater of--
                                    ``(I) 10 percent of the employees 
                                of the corporation and the members of 
                                its expanded affiliated group for which 
                                the corporation performs headquarters 
                                activities (as of the date the 
                                requirements of paragraph (1)(B) are 
                                first met), or
                                    ``(II) 50 employees.
                    ``(B) High-level employees.--The requirements of 
                this paragraph shall be treated as met only if the 
                eligible foreign corporation locates in the New York 
                Liberty Zone at least--
                            ``(i) 50 percent of the senior officers of 
                        the corporation, and
                            ``(ii) 50 percent of the senior business 
                        development personnel of the corporation.
                    ``(C) Current united states employees not 
                counted.--For purposes of determining whether the 
                requirements of this paragraph are first met, and 
                continue to be met during the 2-year period after the 
                date on which the requirements are first met, there 
                shall not be taken into account any individual who was 
                an employee of the eligible foreign corporation or any 
                member of its expanded affiliated group who was located 
                in the United States at any time during the 1-year 
                period ending on the later of--
                            ``(i) the date the requirements of 
                        subsection (b)(1)(B) are first met, or
                            ``(ii) the date the employee is first 
                        located in the New York Liberty Zone.
                Any period during which an individual was located in 
                the New York Liberty Zone solely as part of a qualified 
                headquarters relocation shall not be taken into account 
                for purposes of the preceding sentence.
                    ``(D) Located.--An employee shall be treated as 
                located in the New York Liberty Zone or the United 
                States for any period if the services performed by the 
                employee during the period are performed primarily in 
                the New York Liberty Zone or the United States, 
                respectively.
    ``(c) Eligible Foreign Corporation; Qualified Headquarters 
Activities.--For purposes of this section--
            ``(1) Eligible foreign corporation.--The term `eligible 
        foreign corporation' means a foreign corporation which--
                    ``(A) performs qualified headquarters activities 
                for 1 or more members of an expanded affiliated group 
                including such corporation, and
                    ``(B) agrees to furnish to the Secretary (at such 
                time and in such manner as the Secretary may prescribe) 
                such information as the Secretary may require to carry 
                out this section, including the gross revenue of the 
                corporation derived from qualified headquarters 
                activities.
            ``(2) Qualified headquarters activities.--
                    ``(A) In general.--The term `qualified headquarters 
                activities' means, with respect to any eligible foreign 
                corporation--
                            ``(i) the ownership and management of any 
                        member of the expanded affiliated group of 
                        which it is a member,
                            ``(ii) the conduct of any treasury function 
                        of a member of the expanded affiliated group of 
                        which it is a member, including the borrowing 
                        of funds, financing of members of the group and 
                        related entities, and investment of excess 
                        corporate funds, but not including the taking 
                        of deposits from, or the making of loans to, 
                        the public,
                            ``(iii) marketing and branding functions,
                            ``(iv) senior business management and 
                        development, and
                            ``(v) any other activity incidental to any 
                        activity described in clauses (i) through (iv).
                    ``(B) Certain activities previously conducted in 
                united states not included.--
                            ``(i) In general.--Such term shall not 
                        include any activity which the eligible foreign 
                        corporation or any member of its expanded 
                        affiliated group engaged in through an office 
                        or fixed place of business in the United States 
                        at any time during the 3-year period ending on 
                        the date the requirements of subsection 
                        (b)(1)(B) are first met.
                            ``(ii) Exception for relocation 
                        activities.--The conduct of any activity as 
                        part of a qualified headquarters relocation 
                        shall not be taken into account in determining 
                        whether clause (i) applies to the activity.
                            ``(iii) Exclusion ceases to apply if 
                        activity not conducted in united states for 5 
                        years.--
                                    ``(I) In general.--Clause (i) shall 
                                not apply to any activity conducted in 
                                the New York Liberty Zone during the 
                                taxable year described in subclause 
                                (II) or any succeeding taxable year.
                                    ``(II) Applicable taxable year.--A 
                                taxable year is described in this 
                                subclause with respect to any activity 
                                if such year is the first taxable year 
                                in which ends a consecutive 5-year 
                                period which begins after the date the 
                                requirements of subsection (b)(1)(B) 
                                are first met and during which the 
                                eligible foreign corporation or any 
                                member of its expanded affiliated group 
                                did not engage in such activity through 
                                an office or fixed place of business 
                                within the United States.
                            ``(iv) Special rules for acquired 
                        entities.--
                                    ``(I) In general.--If an acquired 
                                entity engaged in an activity described 
                                in subparagraph (A) through an office 
                                or fixed place of business in the 
                                United States (other than an activity 
                                which was a qualified headquarters 
                                activity of the acquired entity for 
                                purposes of subsection (a)) at any time 
                                during the 1-year period preceding the 
                                first date on which the acquired entity 
                                became a member of the expanded 
                                affiliated group of the eligible 
                                foreign corporation, such activity 
                                shall be treated as an activity engaged 
                                in by the eligible foreign corporation 
                                on the day preceding the first day the 
                                requirements of subsection (b)(1)(B) 
                                are met.
                                    ``(II) Activities not conducted in 
                                united states for 5 years.--If 
                                subclause (I) applies to an activity, 
                                clause (iii) shall be applied to the 
                                activity by substituting the date the 
                                acquired entity became a member of the 
                                expanded affiliated group of the 
                                eligible foreign corporation for the 
                                first day the requirements of 
                                subsection (b)(1)(B) are met.
                                    ``(III) Acquired entity.--The term 
                                `acquired entity' means any corporation 
                                or partnership which became a member of 
                                the eligible foreign corporation's 
                                expanded affiliated group after the 
first date the requirements of subsection (b)(1)(B) are met.
                            ``(v) Predecessor entities.--For purposes 
                        of this subparagraph, any activity conducted by 
                        a predecessor or related person with respect to 
                        a member of an expanded affiliated group shall 
                        be treated as conducted by the member.
    ``(d) Termination and Recapture of Tax Benefits.--
            ``(1) In general.--This section shall not apply to any 
        qualified headquarters activities of an eligible foreign 
        corporation for any taxable year if the corporation at any time 
        during the taxable year or any preceding taxable year fails 
        to--
                    ``(A) conduct the qualified headquarters activities 
                described in subsection (b)(2), or
                    ``(B) meet the requirements of subsection (b)(3).
        The Secretary may waive the application of this paragraph in 
        the case of a de minimis or inadvertent failure which is 
        corrected within a reasonable period of time after discovery.
            ``(2) Recapture of tax on certain eligible foreign 
        corporations.--
                    ``(A) In general.--In addition to any tax imposed 
                by this chapter for the first taxable year during which 
                this section does not apply to an eligible foreign 
                corporation by reason of paragraph (1), there is hereby 
                imposed on the eligible foreign corporation a tax equal 
                to the recapture amount described in subparagraph (B).
                    ``(B) Recapture amount.--
                            ``(i) In general.--The recapture amount 
                        described in this subparagraph shall be the sum 
                        of the amounts determined for each of the 4 
                        taxable years preceding the first taxable year 
                        to which this section does not apply by reason 
                        of paragraph (1) by multiplying the qualified 
                        tax benefits for each such year by the 
                        following recapture percentage:

``In the case of--                  The recapture percentage is--
    The immediately preceding taxable year........                 80% 
    The second preceding taxable year.............                 60% 
    The third preceding taxable year..............                 40% 
    The fourth preceding taxable year.............                 20%.
                            ``(ii) Qualified tax benefits.--For 
                        purposes of this subparagraph, the term 
                        `qualified tax benefits' means, with respect to 
                        any taxable year described in clause (i), an 
                        amount equal to the excess (if any) of--
                                    ``(I) the amount of the tax 
                                liability which a foreign corporation 
                                would have had for the taxable year 
                                under this chapter and chapter 3 if 
                                this section had not applied, over
                                    ``(II) the amount of such tax 
                                liability for such corporation for such 
                                taxable year without regard to this 
                                paragraph.
                    ``(C) Interest.--
                            ``(i) In general.--In addition to the tax 
                        imposed by subparagraph (A), an eligible 
                        foreign corporation shall pay interest on the 
                        recapture amount.
                            ``(ii) Calculation of interest.--The amount 
                        of interest under clause (i) shall be 
                        determined--
                                    ``(I) at the underpayment rate 
                                specified in section 6621,
                                    ``(II) separately for each taxable 
                                year, and
                                    ``(III) for the period beginning on 
                                the due date for the tax return of the 
                                corporation for such taxable year 
                                (without regard to extensions) and 
                                ending on the due date for the tax 
                                return of the corporation for the first 
                                taxable year to which this section 
                                ceases to apply.
    ``(e) Expanded Affiliated Group.--For purposes of this section--
            ``(1) In general.--The term `expanded affiliated group' 
        means an affiliated group as defined in section 1504(a) but 
        without regard to paragraphs (2) and (3) of section 1504(b), 
        except that section 1504(a) shall be applied by substituting 
        `50 percent' for `80 percent' each place it appears.
            ``(2) Partnerships.--Such term includes any partnership in 
        which the eligible foreign corporation or its expanded 
        affiliated group owns directly or indirectly more than 50 
        percent of the capital or profit interests.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations--
            ``(1) which exclude from qualified headquarters activities 
        any activities of a type not ordinarily performed by a 
        corporation performing headquarters activities,
            ``(2) to apply this section in the case of eligible foreign 
        corporations that conduct activities in the United States other 
        than qualified headquarters activities, and
            ``(3) which prevent qualified foreign corporations from 
        expanding the benefits available by reason of this paragraph 
        through intercompany transactions.''
    (b) Conforming Amendment.--The table of sections for subchapter Y 
of chapter 1 of the Internal Revenue Code of 1986 is amended by adding 
at the end the following new item:

``Sec. 1400M. No additional corporate income taxes on foreign 
                            corporations relocating headquarters 
                            operations to New York Liberty Zone.''
World Trade Center Zone Tax Incentive Act - Amends the Internal Revenue Code to state that if there is a qualified headquarters relocation of an eligible foreign corporation, any qualified headquarters activities of the corporation conducted in the New York Liberty Zone shall be treated as conducted outside the United States for purposes of determining: (1) the amount of any tax or withholding tax; or (2) whether the corporation has a permanent establishment within the United States for purposes of any applicable income tax treaty between the United States and any foreign country.Sets forth "qualified headquarters relocation" criteria with respect to transfers of employees and headquarters activities.Provides for termination and recapture of tax benefits for failure to meet such requirements.Defines "expanded affiliated group" for purposes of this Act.
{"src": "billsum_test", "title": "A bill to amend the Internal Revenue Code of 1986 to attract foreign corporations to relocate to the area in New York City surrounding the former World Trade Center."}