S. 199 — United States-Taiwan Tax Agreement Authorization Act

This section adds new IRC §894A to provide special U.S. income tax rules for qualified residents of Taiwan, including (1) reducing the withholding tax rate on U.S.-source interest (other than original issue discount), royalties, and certain other fixed or determinable annual or periodical income to 10% (from 30%), and on dividends to 15% (from 30%; or 10% if the recipient directly holds at least 10% by vote and value of the paying corporation for the prior 12 months); (2) exempting qualified wages paid by non-U.S. persons (not borne by a U.S. permanent establishment) from U.S. tax and withholding; (3) exempting gross receipts of up to $30,000 from U.S. personal services by entertainers or athletes from U.S. tax and withholding (unless effectively connected with a U.S. permanent establishment or qualifying as wages); and (4) taxing income effectively connected with a U.S. permanent establishment at regular U.S. individual or corporate rates (in lieu of IRC §§871(b) and 882) while substituting "U.S. permanent establishment" for "trade or business within the United States" in relevant provisions. (Certain exceptions apply, including for non-qualified REIT dividends, §897 dispositions, expatriated entities, and REMIC excess inclusions.)

This section defines key terms for purposes of this title: (1) "Agreement," meaning the tax agreement authorized by section 203(a); (2) "appropriate congressional committees," meaning the Senate Committees on Foreign Relations and Finance and the House Committee on Ways and Means; (3) "approval legislation," meaning legislation that approves the Agreement; and (4) "implementing legislation," meaning legislation that makes changes to the Internal Revenue Code of 1986 necessary to implement the Agreement.

This section authorizes the President to negotiate and enter into a tax agreement with Taiwan subsequent to a determination under new IRC §894A(e)(1). The agreement must (1) conform to U.S. bilateral income tax conventions as exemplified by the 2016 U.S. Model Income Tax Convention, without elements outside its scope; (2) incorporate provisions of existing double taxation agreements or U.S. law; (3) state it is entered into pursuant to the United States-Taiwan Tax Agreement Authorization Act; and (4) condition entry into force on enactment of approval and implementing legislation under §207 and Treasury Secretary confirmation of Taiwan's approval and implementation steps.

This section establishes congressional consultation requirements for U.S. negotiations with Taiwan on the Agreement. Specifically, it (1) requires the President to provide written notification to the appropriate congressional committees at least 15 calendar days before commencing negotiations; (2) requires briefings to those committees not later than 90 days after commencement and every 180 days thereafter until the President enters into the Agreement, covering the status of negotiations and elements under negotiation; and (3) requires the Secretary of the Treasury, in coordination with the Secretary of State, to meet upon request with the chairman or ranking member of any appropriate committee regarding negotiating objectives and status, and to consult closely with those committees on the Agreement's nature, consistency with elements in section 203(b), and implementation (including effects on existing laws, proposed legislative changes, and proposed administrative actions).

This section prohibits the Agreement from entering into force unless the President publishes its text on a publicly available Department of the Treasury website at least 60 days prior to entry and Congress enacts approval legislation and implementing legislation pursuant to section 207. The section authorizes the President to bring the Agreement into force upon such enactment and the Secretary of the Treasury's confirmation that Taiwan's relevant authority has approved it and taken required implementation steps.

This section requires, not later than 270 days after the President enters into the Agreement, (1) the President or designee to submit to Congress the final text of the Agreement and a technical explanation of the Agreement; and (2) the Secretary of the Treasury to submit to Congress a description of changes to existing laws required for U.S. consistency with the Agreement and a statement of anticipated administrative actions to implement the Agreement.

This section requires that approval legislation for the United States-Taiwan Tax Agreement include a statement that Congress approves the agreement submitted pursuant to section 206 on a specified date. It further directs that (1) approval legislation be referred in the Senate to the Committee on Foreign Relations and in the House to the Committee on Ways and Means; and (2) implementing legislation be referred in the Senate to the Committee on Finance and in the House to the Committee on Ways and Means.

This section provides that no provision of the Agreement or approval legislation inconsistent with the Internal Revenue Code of 1986 shall have effect. The section further clarifies that nothing in this title amends or modifies any U.S. law or limits any authority under U.S. law unless specifically provided in this title.

This section authorizes subsequent tax agreements relative to Taiwan—those that supplement or supersede the initial agreement approved under section 207—by deeming them included in the definitions of "tax agreement" and "Agreement" in section 203(a). The provisions of this title, including section 204, apply separately to each such tax agreement.

This section states congressional findings that the United States enters into more than 60 bilateral income tax treaties to address double taxation but cannot enter into such a treaty with Taiwan due to its unique status. It declares it to be U.S. policy (1) to provide additional bilateral tax relief with respect to Taiwan beyond IRC §894A (as added by the United States-Taiwan Expedited Double-Tax Relief Act) only after entry into force of the Agreement specified in section 205 and consistent with such Agreement; and (2) to continue providing bilateral tax relief to sovereign states through tax treaties subject to Senate advice and consent pursuant to Article II of the Constitution.