Ponzi Scheme Victims' Tax Relief Act of 2010 - Amends the Internal Revenue Code to allow: (1) a special theft loss tax deduction for qualified fraudulent investment losses and for such losses in connection with assets held in an individual retirement account (IRA); (2) a carryback of net operating losses which are qualified fraudulent investment losses for up to 10 years; (3) withdrawals from tax-exempt retirement plans for a 10-year period without penalty to replace qualified fraudulent investment losses; (4) catch-up contributions to retirement plans to compensate for fraudulent investment losses; and (5) an extension of the limitation period for filing refund claims for overpayments of tax in connection with gifts and bequests of an interest in an investment for which there is a qualified fraudulent investment loss.
Defines "qualified fraudulent investment loss" as a loss discovered in 2008 or 2009 resulting from a fraudulent arrangement in which a person receives cash or property from investors, purports to earn income for investors, reports partially or wholly fictitious income to such investors, makes payments to some investors from payments made by other investors, and appropriates some or all of the investors' cash or property.
[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5058 Introduced in House (IH)]
111th CONGRESS
2d Session
H. R. 5058
To amend the Internal Revenue Code of 1986 to provide special rules for
investments lost in a fraudulent Ponzi-type scheme.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 15, 2010
Mr. Pascrell (for himself, Mr. Weiner, and Ms. Ros-Lehtinen) introduced
the following bill; which was referred to the Committee on Ways and
Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide special rules for
investments lost in a fraudulent Ponzi-type scheme.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Ponzi Scheme Victims' Tax Relief Act
of 2010''.
SEC. 2. LOSS TREATMENT OF INVESTMENT LOSSES IN FRAUDULENT PONZI-TYPE
SCHEME.
(a) In General.--Section 165 of the Internal Revenue Code of 1986
is amended by redesignating subsection (m) as subsection (n) and by
inserting after subsection (l) the following new subsection:
``(m) Special Rules for Qualified Fraudulent Investment Losses in
Individual Retirement Accounts.--
``(1) In general.--If--
``(A) a taxpayer has qualified fraudulent
investment loss, and
``(B) the amount of such loss (without taking into
account any potential recoveries) can reasonably be
estimated as of the close of the taxable year,
then the taxpayer may elect to treat the amount so estimated as
a theft loss described in subsection (c)(2) incurred during the
taxable year.
``(2) Special rule for individual retirement plans.--In the
case of any qualified fraudulent investment loss in connection
with assets held in an individual retirement plan, the
beneficiary of such plan shall be allowed a deduction with
respect to such loss in an amount equal to the lesser of--
``(A) the greater of--
``(i) the sum of the amount of
contributions to such individual retirement
plan by such beneficiary plus the amount of
contributions to such individual retirement
plan by such beneficiary's employer on behalf
of such beneficiary, or
``(ii) 60 percent of the excess of--
``(I) the value of the assets held
by such beneficiary in such individual
retirement plan, as reported
immediately before such loss was
discovered, over
``(II) the sum of value of the
assets held by such beneficiary in such
individual retirement plan immediately
after such loss was discovered, or
``(B) $2,000,000.
``(3) Qualified fraudulent investment loss.--For purposes
of this subsection
``(A) In general.--The term `qualified fraudulent
investment loss' means a loss discovered in 2008 or
2009 resulting from a specified fraudulent arrangement
in which, as a result of the conduct that caused the
loss--
``(i) a person described in subparagraph
(B) was charged under State or Federal law with
the commission of fraud, embezzlement, or
similar crime which, if proven, would
constitute a theft (within the meaning of
subsection (c)(3)), or
``(ii) a person described in subparagraph
(B) was the subject of a State or Federal
criminal complaint (not withdrawn or dismissed)
alleging the commission of fraud, embezzlement,
or similar crime which, if proven, would
constitute a theft (within the meaning of
subsection (c)(3)), and either--
``(I) the complaint alleged an
admission by such person or the
execution of an affidavit by such
person admitting the crime, or
``(II) a receiver or trustee was
appointed with respect to the
arrangement or assets of the
arrangement were frozen.
``(B) Specified fraudulent arrangement.--The term
`specified fraudulent arrangement' means an arrangement
in which a person--
``(i) receives cash or property from
investors,
``(ii) purports to earn income for
investors,
``(iii) reports income amounts to the
investors that are partially or wholly
fictitious,
``(iv) makes payments, if any, of purposed
income or principal to some investors from
amounts that other investors invested in the
fraudulent arrangement, and
``(v) appropriates some or all of the
investors' cash or property.
``(4) Regulations.--The Secretary shall issue such
regulations or other guidance as may be necessary or
appropriate to carry out this subsection, including to prevent
fraud and abuse under this subsection.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2007.
SEC. 3. EXTENSION OF NET OPERATING LOSS CARRYBACK PERIOD.
(a) In General.--Paragraph (1) of section 172(b) of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
subparagraph:
``(K) Losses attributable to investments in
fraudulent schemes.--
``(i) In general.--In the case of the
portion of a net operating loss which is a
qualified fraudulent investment loss (as
defined in section 165(m)(2)) with respect to
which the taxpayer has elected the application
of this subparagraph--
``(I) subparagraph (A)(i) shall be
applied by substituting `the applicable
number of taxable years' for `2 taxable
years' with respect to the portion of
the net operating loss for the taxable
year which is a qualified fraudulent
investment loss, and
``(II) subparagraphs (F) and (H)
shall not apply with respect to any
qualified fraudulent investment loss.
``(ii) Applicable number of taxable
years.--For purposes of clause (i), the
applicable number of taxable years is any whole
number elected by the taxpayer which is more
than 2 but not more than 10 years.
``(iii) Special rule for deceased
spouses.--If an individual was included on a
joint return of a taxpayer for a taxable year
to which a qualified fraudulent investment loss
(as so defined) is carried back under this
subparagraph and such individual has died
before the beginning of the taxable year in
which such qualified fraudulent investment loss
arises, then such qualified fraudulent
investment loss shall be treated as a loss with
respect to both the taxpayer and such
individual with respect to the taxable year to
which such loss carried.
``(iv) Coordination with paragraph (2).--
For purposes of applying paragraph (2), a loss
to which an election under section 165(m)
applies for any taxable year shall be treated
in a manner similar to the manner in which a
specified liability loss is treated.''.
(b) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to net operating
losses arising in taxable years beginning after December 31,
2007.
(2) Transition rule.--In the case of a net operating loss
for a taxable year ending before the date of the enactment of
this Act--
(A) any election made under subsection
(b)(1)(H)(iii) or (b)(3) of section 172 of such Code
with respect to such loss may (notwithstanding such
section) be revoked before the due date (including
extension of time) for filing the return for the
taxpayer's last taxable year beginning during 2010, and
(B) any application under section 6411(a) of such
Code with respect to such loss shall be treated as
timely filed if filed before such due date.
SEC. 4. HARDSHIP WITHDRAWALS.
(a) In General.--Paragraph (2) of section 72(t) of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
subparagraph:
``(H) Distributions to replace qualified fraudulent
investment losses.--Any distribution which was made
during the 10-year period beginning on the date on
which a qualified fraudulent investment loss (as
defined in section 165(m)(2)) was discovered to the
extent the aggregate of such distributions do not
exceed such qualified fraudulent investment loss.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2007.
SEC. 5. CATCH-UP CONTRIBUTIONS.
(a) In General.--Section 219(b)(5) of the Internal Revenue Code of
1986 is amended by redesignating subparagraphs (C) and (D) as
subparagraphs (D) and (E), respectively, and by inserting after
subparagraph (B) the following new subparagraph:
``(C) Catchup contributions relating to qualified
fraudulent investment losses.--
``(i) In general.--In the case of any
applicable individual who elects to make a
qualified retirement contribution in addition
to the amount determined under subparagraph
(A), the deductible amount for any taxable year
shall be increased by an amount equal to the
lesser of--
``(I) 100 percent of the amount
determined under subparagraph (A) for
such taxable year, or
``(II) the excess of the qualified
fraudulent investment loss described in
clause (ii) over the amount of
contributions allowed as a deduction by
reason of this subparagraph for all
preceding taxable years.
``(ii) Applicable individual.--For purposes
of this subparagraph, the term `applicable
individual' means, with respect to any taxable
year, any individual with a qualified
fraudulent investment loss (as defined in
section 165(m)(2)) in an individual retirement
plan in any of the 10 immediately preceding
taxable years if the amount of such loss
exceeded 50 percent of the value of such
individual retirement plan on the day
immediately preceding the discovery of the
qualified fraudulent investment loss.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2007.
SEC. 6. EXTENSION OF LIMITATION FOR CREDITS AND REFUNDS FOR GIFTS AND
BEQUESTS OF ASSETS WITH QUALIFIED FRAUDULENT INVESTMENT
LOSSES.
(a) In General.--Section 6511 of the Internal Revenue Code of 1986
is amended by redesignating subsection (i) as subsection (j) and by
inserting after subsection (h) the following new subsection:
``(i) Special Rules Applicable to Estate and Gift Taxes With
Respect to Assets With Qualified Fraudulent Investment Losses.--
``(1) In general.--If a claim for a credit or refund
relates to an overpayment of taxes imposed under subtitle B in
connection with a gift or bequest of an interest in an
investment with respect to which there is a qualified
fraudulent investment loss (as defined in section 165(m)(2))
and the taxpayer did not know, and reasonably should not have
known, about the criminal behavior in connection with such
loss, such credit or refund may be allowed or made if claim
therefor is filed on or before the date that is 6 years after
the return to which the credit or overpayment relates was
filed.
``(2) Determination of value.--
``(A) Gift taxes.--In determining the amount of any
credit or refund described in paragraph (1) relating to
a gift, the value of such gift shall be not more than
the greater of the value of such gift on the last day
of the taxable year in which the qualified fraudulent
investment loss was discovered or the amount realized
from the disposition of such gift (if any) by the
donee.
``(B) Estate taxes.--In determining the amount of
any credit or refund described in paragraph (1)
relating to a bequest, the value of such bequest shall
be not more than the greater of the value of such
bequest on the last day of the calendar year in which
the qualified fraudulent investment loss was discovered
or the amount realized from the disposition of such
bequest (if any) by the donee.''.
(b) Effective Date.--The amendments made by this section shall
apply to gifts or bequests made after December 31, 2007.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line