The Patriotic Investment Act would amend the tax code to discourage Americans from holding investments connected to China by imposing significant tax penalties on gains from selling such securities. The bill defines "disqualified PRC securities" broadly to include stocks, bonds, and derivatives tied to the Chinese government, Communist Party, Chinese citizens and companies, or entities substantially owned by these groups. When investors sell these securities at a profit, the gains would be taxed at the highest individual income tax rate rather than potentially lower capital gains rates, and corporations would face similar elevated tax treatment. The legislation includes a provision allowing taxpayers to spread the resulting tax liability over three years through installments. The new tax rules would take effect six months after the bill's enactment, and investors would be denied any foreign tax credits they might otherwise claim on income from these transactions.
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