Amends the Internal Revenue Code to allow the nonrecognition of up to $50 million of gain (for capital gains tax purposes) from the sale of a telecommunications business to a qualified business. Defines "qualified business" to mean: (1) for a telecommunications sale including any interest in a broadcast station, any person that owns, directly or indirectly, a 50 percent or greater interest in ten or fewer broadcast stations; and (2) for any other telecommunications sale, any individual, partnership, or corporation with net assets not exceeding $30 million and average after-tax income for the two preceding taxable years of not more than $10 million. Restricts to three the number of telecommunications sales a qualified business may complete without forfeiting tax deferral.
Requires the recapture of deferred gain if a qualified business resells a telecommunications business within five years, unless the resale is to another qualified business or the sales proceeds are reinvested in another telecommunications business within 60 days of the resale.
Authorizes the Small Business Administration to guarantee loans made to a qualified business for the purchase of a telecommunications business. Requires security for such loans, including forfeiture of any Federal Communications Commission license of a borrower who defaults on a loan.
[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4707 Introduced in House (IH)]
108th CONGRESS
2d Session
H. R. 4707
To amend the Internal Revenue Code of 1986 to provide tax incentives to
encourage diversity of ownership of telecommunications businesses, and
for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 24, 2004
Mr. Rangel (for himself and Mr. Houghton) introduced the following
bill; which was referred to the Committee on Ways and Means, and in
addition to the Committee on Small Business, for a period to be
subsequently determined by the Speaker, in each case for consideration
of such provisions as fall within the jurisdiction of the committee
concerned
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide tax incentives to
encourage diversity of ownership of telecommunications businesses, and
for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. NONRECOGNITION OF GAIN ON QUALIFIED SALES OF
TELECOMMUNICATIONS BUSINESSES.
(a) In General.--Subchapter O of chapter 1 of the Internal Revenue
Code of 1986 (relating to gain or loss on disposition of property) is
amended by inserting after part IV the following new part:
``PART V--CERTAIN SALES OF TELECOMMUNICATIONS BUSINESSES
``Sec. 1071. Nonrecognition of gain on certain sales of
telecommunications businesses.
``SEC. 1071. NONRECOGNITION OF GAIN ON CERTAIN SALES OF
TELECOMMUNICATIONS BUSINESSES.
``(a) In General.--In the case of any qualified telecommunications
sale, at the election of the taxpayer, such sale shall be treated as an
involuntary conversion of property within the meaning of section 1033.
``(b) Limitation on Amount of Gain on Which Tax May Be Deferred.--
The amount of gain on any qualified telecommunications sale which is
not recognized by reason of this section shall not exceed $50,000,000.
``(c) Qualified Telecommunications Sale.--For purposes of this
section, the term `qualified telecommunications sale' means any sale to
a qualified business of--
``(1) the assets of a telecommunications business, or
``(2) stock in a corporation if, immediately after such
sale--
``(A) the qualified business controls (within the
meaning of section 368(c)) such corporation, and
``(B) substantially all of the assets of such
corporation are assets of 1 or more telecommunications
businesses.
``(d) Qualified Business.--For purposes of this section--
``(1) In general.--The term `qualified business' means--
``(A) in the case of a telecommunications sale
which includes the sale of any interest in a broadcast
station (as defined in section 3(5) of the
Communications Act of 1934), any person if--
``(i) such person owns, directly or
indirectly, a qualified interest in 10 or fewer
broadcast stations (as so defined), and
``(ii) the fair market value of the
aggregate interests of such person in broadcast
stations (as so defined) is equal to or greater
than 50 percent of the net assets of such
entity, and
``(B) in the case of any other telecommunications
sale--
``(i) any individual, and
``(ii) any partnership or corporation if--
``(I) the net assets of such entity
do not exceed $30,000,000, and
``(II) the average after-tax income
of such entity for the preceding 2
taxable years does not exceed
$10,000,000.
``(2) Qualified interest in broadcast stations.--An
interest in a broadcast station shall be treated as qualified
if such interest represents 50 percent or more of the total
assets of the station.
``(3) Each business limited to 3 purchases.--A person shall
not be a qualified business with respect to a qualified
telecommunications sale if such person (or any predecessor) was
the purchaser in more than 2 prior qualified telecommunications
sales for which an election under this section was made by the
seller.
``(4) Special rules for qualified business determination.--
For purposes of paragraph (1)--
``(A) Net assets.--The term `net assets' means the
excess of the aggregate gross assets (as defined in
section 1202(d)(2)) of the entity over the indebtedness
of such entity.
``(B) After-tax income.--The term `after-tax
income' means taxable income reduced by the net income
tax for the taxable year. For purposes of the preceding
sentence, the term `net income tax' means the tax
imposed by this chapter reduced by the sum of the
credits allowable under part IV of subchapter A of this
chapter. Rules similar to the rules of subparagraphs
(A), (B), and (D) of section 448(c)(3) shall apply in
determining average after-tax income.
``(5) Aggregation rules.--For purposes of this subsection,
all persons treated as a single employer under subsection (a)
or (b) of section 52 or subsection (m) or (o) of section 414
shall be treated as one person.
``(e) Telecommunications Business.--The term `telecommunications
business' means any business providing communication services by wire,
cable, radio, satellite, or other technology if the providing of such
services is governed by the Communications Act of 1934 or the
Telecommunications Act of 1996.
``(f) Special Rules.--
``(1) In general.--In applying section 1033 for purposes of
subsection (a) of this section, stock of a corporation
operating a telecommunications business, whether or not
representing control of such corporation, shall be treated as
property similar or related in service or use to the property
sold in the qualified telecommunications sale.
``(2) Election to reduce basis rather than recognize
remainder of gain.--If--
``(A) a taxpayer elects the treatment under
subsection (a) with respect to any qualified
telecommunications sale, and
``(B) an amount of gain would (but for this
paragraph) be recognized on such sale other than by
reason of subsection (b),
then the amount of such gain shall not be recognized to the
extent that the taxpayer elects to reduce the basis of
depreciable property (as defined in section 1017(b)(3)) held by
the taxpayer immediately after the sale or acquired in the same
taxable year. The manner and amount of such reduction shall be
determined under regulations prescribed by the Secretary.
``(3) Basis.--For basis of property acquired on a sale or
exchange treated as an involuntary conversion under subsection
(a), see section 1033(b).
``(g) Recapture of Tax Benefit if Telecommunications Business
Resold Within 5 Years, Etc.--
``(1) In general.--If, within 5 years after the date of any
qualified telecommunications sale, there is a recapture event
with respect to the property involved in such sale, then the
purchaser's tax imposed by this chapter for the taxable year in
which such event occurs shall be increased by 20 percent of the
lesser of the consideration furnished by the purchaser in such
sale or the dollar limitation of subsection (b).
``(2) Exception for reinvested amounts.--Paragraph (1)
shall not apply to any recapture event which is a sale if--
``(A) the sale is a qualified telecommunications
sale, or
``(B) during the 60-day period beginning on the
date of such sale, the taxpayer is the purchaser in
another qualified telecommunications sale in which the
consideration furnished by the taxpayer is not less
than the amount realized on the recapture event sale.
``(3) Recapture event.--For purposes of this subsection,
the term `recapture event' means, with respect to any qualified
telecommunications sale--
``(A) any sale or other disposition of the assets
or stock referred to in subsection (c) which were
acquired by the taxpayer in such sale, and
``(B) in the case of a qualified telecommunications
sale described in subsection (c)(2)--
``(i) any sale or other disposition of a
telecommunications business by the corporation
referred to in such subsection, or
``(ii) any other transaction which results
in the qualified business not having control
(as defined in subsection (c)(2)(A)) of such
corporation.
Such term shall not include any sale or other disposition
resulting from the default, or imminent default, of any
indebtedness of the taxpayer.''
(b) Clerical Amendment.--The table of parts for subchapter O of
chapter 1 of such Code is amended by inserting after the item relating
to part IV the following new item:
``Part V. Certain Sales of Telecommunications Businesses''.
(c) Effective Date.--The amendments made by this section shall
apply to sales in taxable years beginning after the date of the
enactment of this Act.
SEC. 2. LOAN GUARANTEE PROGRAM TO ENCOURAGE DIVERSITY OF OWNERSHIP OF
TELECOMMUNICATIONS BUSINESSES.
(a) In General.--The Administrator of the Small Business
Administration may guarantee any loan made to a qualified business for
the purchase of assets or stock described in section 1071(c) of the
Internal Revenue Code of 1986 (relating to qualified telecommunications
sale).
(b) Limitations.--
(1) Security.--The Administrator shall not guarantee any
loan under subsection (a) unless the guaranteed portion of such
loan is secured by a first lien position or first mortgage on
the stock or assets financed by the loan.
(2) Guarantee percentage.--The amount of any loan
guaranteed by the Administrator under subsection (a) shall not
exceed 95 percent of the balance of the financing outstanding
at the time of disbursement of the loan.
(3) Fees.--With respect to each loan guaranteed under
subsection (a) (other than a loan that is repayable in 1 year
or less), the Administrator may collect a guarantee fee, which
shall be payable by the participating lender, and may be
charged to the borrower.
(4) Forfeiture of fcc license.--The Administrator shall not
guarantee any loan under subsection (a) unless such loan
provides that any license issued by the Federal Communications
Commission to the borrower shall be returned and forfeited by
the borrower to the Federal Communications Commission
immediately upon a finding by the Administrator that such
borrower is in default under such loan.
(c) General Authority.--For purposes of carrying out this section,
the Administrator may--
(1) enter into contracts with private and Federal entities
for professional and other services;
(2) enter into memorandums of understanding with other
Federal agencies; and
(3) issue regulations, including regulations regarding--
(A) notice of and opportunity to cure a default;
(B) procedures related to foreclosure; and
(C) such other matters as the Administrator
considers appropriate.
(d) Definitions.--For purposes of this section:
(1) Administrator.--The term ``Administrator'' means the
Administrator of the Small Business Administration.
(2) Qualified business.--The term ``qualified business''
has the meaning given such term in section 1071(d) of the
Internal Revenue Code of 1986.
(e) Authorization of Appropriations.--There are authorized to be
appropriated such sums as may be necessary to carry out the purposes of
this section.
<all>
Introduced in House
Introduced in House
Referred to the Committee on Ways and Means, and in addition to the Committee on Small Business, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committee on Small Business, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committee on Small Business, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
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