Sec. 702. Equitable treatment for residents of Puerto Rico and the Virgin Islands with respect to the earned income tax credit and the child tax credit

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Section 32 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection: In the case of residents of Puerto Rico— the United States shall be treated as including Puerto Rico for purposes of subsections (c)(1)(A)(ii)(I) and (c)(3)(C), subsection (c)(1)(D) shall not apply to nonresident alien individuals who are residents of Puerto Rico, and adjusted gross income and gross income shall be computed without regard to section 933 for purposes of subsections (a)(2)(B) and (c)(2)(A)(i).

The credit allowed under this section by reason of this subsection for any taxable year shall not exceed the amount, determined under regulations or other guidance promulgated by the Secretary, that a similarly situated taxpayer would receive if residing in a State. . Subclause

(II)of section 24(d)(1)(B)(ii) of such Code is amended by inserting before the period (determined without regard to section 32(n) in the case of residents of Puerto Rico) . The amendments made this subsection shall apply to taxable years beginning after December 31, 2016. Section 24(d)(1) of the Internal Revenue Code of 1986 is amended by inserting or section 933 after section 112 . The amendment made by paragraph

(1)shall apply to taxable years beginning after December 31, 2016. The Secretary of the Treasury shall pay to the government of the Virgin Islands amounts equal to the loss to that possession by reason of the application of— section 32 of the Internal Revenue Code of 1986 (determined as if subsection

(n)of such section, as added by subsection (a), applied to bona fide residents of that possession), and section 24(d) of such Code (determined as if the amendment made by subsection

(b)applied to bona fide residents of that possession), with respect to taxable years beginning after December 31, 2016. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the Virgin Islands. For purposes of section 1324(b)(2) of title 31, United States Code, the payments under this subsection shall be treated in the same manner as a refund due from the credit allowed under section 32 or 24 (by reason of subsection

(d)thereof), whichever is applicable, of the Internal Revenue Code of 1986.