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96 STAT. 1655

entitled "Coastal Barrier Resources System", numbered AOl through T12, and dated September 30, 1982. (2) Any person or persons or other entity owning or controlling land on an undeveloped coastal barrier, associated landform or any portion thereof not within the Coastal Barrier Resources System established under paragraph (1) may, within one year after the date of enactment of this Act, elect to have such land included within the Coastal Barrier Resources System. This election shall be made in compliance with regulations established for this purpose by the Secretary not later than one hundred and eighty days after the date of enactment of this Act; and, once made and filed in accordance with the laws regulating the sale or other transfer of land or other real property of the State in which such land is located, shall have the same force and effect as if such land had originally been included within the Coastal Barrier Resources System. Ob)(l) As soon as practicable after the enactment of this Act, the maps referred to in paragraph (1) of subsection (a) shall be filed with the Committees by the Secretary, and each such map shall have the same force and effect as if included in this Act, except that correction of clerical and typographical errors in each such map may be made. Each such map shall be on file and available for public inspection in the Office of the Director of the United States Fish and Wildlife Service, Department of the Interior, and in other appropriate offices of the Service. (2) As soon as practicable after the date of the enactment of this Act, the Secretary shall provide copies of the maps referred to in paragraph (1) of subsection (a) to the chief executive officer of (A) each State and county or equivalent jurisdiction in which a system unit is located, (B) each State coastal zone management agency in those States which have a coastal zone management plan approved pursuant to section 306 of the Cosistal Zone Management Act of 1972 (16 U.S.C. 1455) and in which a system unit is located, and (C) each appropriate Federal agency. (c) BOUNDARY MODIFICATIONS.—(1) Within 180 days after the date of enactment of this Act, the Secretary may make such minor and technical modifications to the boundaries of system units as depicted on the maps referred to in paragraph (1) of subsection (a) as are consistent with the purposes of this Act-and necessary to clarify the boundaries of said system units; except that, for system units within States which have, on the date of enactment, a coastal zone management plan approved pursuant to section 306 of the Coastal Zone Management Act of 1972 (16 U.S.C. 1455)— (A) each appropriate State coastal zone management agency may, within 90 days after the date of enactment of this Act, submit to the Secretary proposals for such minor and technical modifications; and (B) the Secretary may, within 180 days after the date of enactment of this Act, make such minor and technical modifications to the boundaries of such system units. (2) The Secretary shall, not less than 30 days prior to the effective date of any such boundary modification made under the authority of paragraph (1), submit written notice of such modification to (A) each of the Committees and (B) each of the appropriate officers referred to in paragraph (2) of subsection (b). (3) The Secretary shall conduct, at least once every five years, a review of the maps referred to in paragraph (1) of subsection (a) and make, in consultation with the appropriate officers referred to in

Maps, filing

Public inspection.

Copies, distribution.

Notice submittal.

Review.

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 96 STAT. 1656

PUBLIC LAW 97-348—OCT. 18, 1982

paragraph (2) of subsection (b), such minor and technical modifications to the boundaries of system units as are necessary solely to reflect changes that have occurred in the size or location of any system units as a result of natural forces. (4) If, in the case of any minor and technical modification to the boundaries of system units made under the authority of this subsection, an appropriate chief executive officer of a State, county or equivalent jurisdiction, or State coastal zone management agency to which notice was given in accordance with this subsection files comments disagreeing with all or part of the modification and the Secretary makes a modification which is in conflict with such comments, or if the Secretary fails to adopt a modification pursuant to a proposal submitted by an appropriate State coasted zone management agency under paragraph dXA), the Secretary shall submit to the chief executive officer a written justification for his failure to make modifications consistent with such comments or proposals. 16 USC 3504.

SEC. 5. LIMITATIONS ON FEDERAL EXPENDITURES AFFECTING THE SYSTEM.

(a) Except as provided in section 6, no new expenditures or new financial assistance may be made available under authority of any Federal law for any purpose within the Coastal Barrier Resources System, including, but not limited to— (1) the construction or purchase of any structure, appurtenance, facility, or related infrastructure; (2) the construction or purchase of any road, airport, boat landing facility, or other facility on, or bridge or causeway to, any System unit; and (3) the carrying out of any project to prevent the erosion of, or to otherwise stabilize, any inlet, shoreline, or inshore area, except that such assistance and expenditures may be made available on units designated pursuant to section 4 on maps numbered SOI through SOS for purposes other than encouraging development and, in all units, in cases where an emergency threatens life, land, and property immediately adjacent to that unit. (b) An expenditure or financial assistance made available under authority of Federal law shall, for purposes of this Act, be a new expenditure or new financial assistance if— (1) in any case with respect to which specific appropriations are required, no money for construction or purchase purposes was appropriated before the date of the enactment of this Act; or (2) no legally binding commitment for the expenditure or financial assistance was made before such date of enactment. 16 USC 3505.

SEC. 6. EXCEPTIONS.

(a) Notwithstanding section 5, the appropriate Federal officer, after consultation with the Secretary, may make Federal expenditures or financial assistance available within the Coastal Barrier R^ources System for— (1) any use or facility necessary for the exploration, extraction, or transportation of energy resources which can be carried out only on, in, or adjacent to coastal water areas because the use or facility requires access to the coastal water body;

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 PUBLIC LAW 97-348—OCT. 18, 1982

96 STAT. 1657

(2) the maintenance of existing channel improvements and related structures, such as jetties, and including the disposal of dredge materials related to such improvements; (3) the maintenance, replacement, reconstruction, or repair, but not the expansion, of publicly-owned or publicly-operated roads, structures, or facilities that are essential links in a larger network or system; (4) military activities essential to national security; (5) the construction, operation, maintenance, and rehabilitation of Coast Guard facilities and access thereto; and (6) any of the following actions or projects, but only if the making available of expenditures or assistance therefor is consistent with the purposes of this Act: (A) Projects for the study, management, protection and enhancement of fish and wildlife resources and habitats, including, but not limited to, acquisition of fish and wildlife habitats and related lands, stabilization projects for fish and wildlife habitats, and recreational projects. (B) The establishment, operation, and maintenance of air and water navigation aids and devices, and for access thereto. (C) Projects under the Land and Water Conservation Fund Act of 1965 (16 U.S.C. 4601-4 through 11) and the 16 USC 460/-4. Coastal Zone Management Act of 1972 (16 U.S.C. 1451 et seq.). (D) Scientific research, including but not limited to aeronautical, atmospheric, space, geologic, marine, fish and wildlife and other research, development, and applications. (E) Assistance for emergency actions essential to the saving of lives and the protection of property and the public health and safety, if such actions are performed pursuant to sections 305 and 306 of the Disaster Relief Act of 1974 (42 U.S.C. 5145 and 5146) and section 1362 of the National Flood Insurance Act of 1968 (42 U.S.C. 4103) and are limited to actions that are necessary to alleviate the emergency. (F) The maintenance, replacement, reconstruction, or repair, but not the expansion, of publicly owned or publicly operated roads, structures, or facilities. (G) Nonstructural projects for shoreline stabilization that are designed to mimic, enhance, or restore natural stabilization systems. (b) For purposes of subsection (a)(2), a channel improvement or a related structure shall be treated as an existing improvement or an existing related structure only if all, or a portion, of the moneys for such improvement or structure was appropriated before the date of the enactment of this Act. SEC. 7. CERTIFICATION OF COMPLIANCE.

16 USC 3506.

The Director of the Office of Management and Budget shall, on behalf of each Federal agency concerned, make written certification that each such agency has complied with the provisions of this Act during each fiscal year beginning after September 30, 1982. Such certification shall be submitted on an annual basis to the House of Submittal to Representatives and the Senate pursuant to the schedule required ^longress. under the Congressional Budget and Impoundment Control Act of 1974, 31 USC 1301 note.

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 96 STAT. 1658 16 USC 3507.

PUBLIC LAW 97-348—OCT. 18, 1982

SEC. 8. PRIORITY OF LAWS.

Nothing contained in this Act shall be construed as indicating an intent on the part of the Congress to change the existing relationship of other Federal laws to the law of a State, or a political subdivision of a State, or to relieve any person of any obligation imposed by any law of any State, or political subdivision of a State. No provision of this Act shall be construed to invalidate any provision of State or local law unless there is a direct conflict between such provision and the law of the State, or political subdivision of the State, so that the two cannot be reconciled or consistently stand together. This Act shall in no way be interpreted to interfere with a State's right to protect, rehabilitate, preserve, and restore lands within its established boundary. 16 USC 3508.

SEC. 9. SEPARABILITY.

If any provision of this Act or the application thereof to any person or circumstance is held invalid, the remainder of the Act and the application of such provision to other persons not similarly situated or to other circumstances shall not be affected thereby. 16 USC 3509.

SEC. 10. REPORTS TO CONGRESS.

(a) IN GENERAL.—Before the close of the 3-year period beginning on the date of the enactment of this Act, the Secretary shall prepare and submit to the Committees a report regarding the System. (b) CONSULTATION IN PREPARING REPORT.—The Secretary shall prepare the report required under subsection (a) in consultation with the Governors of the States in which System units are located and with the coastal zone management agencies of the States in which System units are located and after providing opportunity for, and considering, public comment. (c) REPORT CONTENT.—The report required under subsection (a) shall contain— (1) recommendations for the conservation of the fish, wildlife, and other natural resources of the System based on an evaluation and comparison of all management alternatives, and combinations thereof, such as State and local actions (including management plans approved under the Coastal Zone Management Act of 1972 (16 U.S.C. 1451 et seq.)). Federal actions (including acquisition for administration as part of the National Wildlife Refuge System), and initiatives by private organizations and individuals; (2) recommendations for additions to, or deletions from, the Coastal Barrier Resources System, and for modifications to the boundaries of System units; (3) a summary of the comments received from the Governors of the States, State coastal zone management agencies, other government officials, and the public regarding the System; and (4) an analysis of the effect, if any, that general revenue sharing grants made under section 102 of the State and Local Fiscal Assistance Amendments of 1972 (31 U.S.C. 1221) have had on undeveloped coastal barriers. SEC. 11. AMENDMENTS REGARDING FLOOD INSURANCE.

95 Stat. 419.

(a) Section 1321 of the National Flood Insurance Act of 1968 (42 U.S.C. 4028) is amended to read as follows:

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 PUBLIC LAW 97-348—OCT. 18, 1982

96 STAT. 1659

"UNDEVELOPED COASTAL BARRIERS

"SEC. 1321. No new flood insurance coverage may be provided under this title on or after October 1, 1983, for any new construction or substantial improvements of structures located on any coastal barrier within the Coastal Barrier Resources System established by section 4 of the Coastal Barrier Resources Act. A federally insured Ante, p. 1654. financial institution may make loans secured by structures which are not eligible for flood insurance by reason of this section.". (b) Section 341(d)(2) of the Omnibus Budget and Reconciliation Act of 1981 (Public Law 97-35) is repealed. 95 Stat. 418. SEC. 12. AUTHORIZATION OF APPROPRIATIONS.

There is authorized to be appropriated to the Department of the Interior $1,000,000 for the period beginning October 1, 1982, and ending September 30, 1985, for purposes of carrying out sections 4 and 10. Approved October 18, 1982.

LEGISLATIVE HISTORY—S. 1018 (H.R. 3252): HOUSE REPORTS: No. 97-841, pt. I accompanying H.R. 3252 (Comm. on Merchant Marine and Fisheries) and No. 97-928 (Comm. of Conference). SENATE REPORT No. 97-419 (Comm. on Environment and Public Works). CONGRESSIONAL RECORD, Vol. 128 (1982): Sept. 23, considered and passed Senate. Sept. 28, H.R. 3252 considered and passed House; S. 1018, amended, passed in lieu. Oct. 1, Senate and House agreed to conference report. WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 18, No. 42 (1982): Oct. 18, Presidential statement.

42 USC 4028 note.

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28 made everybody laugh, for it brought to mind the funny adventure of little white Downy, the duck.

"They certainly can fly," said the conductor with a smile, as he went along with a polite bow to the sandwich party.

Bert had attended to the wants of the animals, not trusting Freddie to open the boxes. Snoop got a chicken leg and Downy had some of his own soft food, that had been prepared by Aunt Sarah and carried along in a small tin can.

"Well, I'se done," announced Dinah, picking up her crumbs in her napkins. "Bert, how many miles you say it takes me to eat?"

"Let me see! Five, eight, twelve, fourteen: well, I guess Dinah, you had fifteen miles of a chicken sandwich."

"An' you go 'long!" she protested. "'Taint no sech thing. I aint got sich a long appetite as date. Fifteen miles! Lan'a massa! whot you take me fo?"

Everybody laughed and the children clapped hands at the length of Dinah's appetite, but when the others had finished they found their


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 96 STAT. 1660

PUBLIC LAW 97-349—OCT. 18, 1982

Public Law 97-349 97th Congress Joint Resolution Oct. 18, 1982 [S.J. Res. 261]

To designate "National Housing Week".

Whereas Congress has repeatedly reaffirmed the national goal of a decent home and a suitable living environment for every American family; Whereas nullions of Americans, particularly young families, are finding the opportunity for homeownership and decent housing out of their reach; Whereas excessive and duplicative government regulations at the Federal, State, and local level have increased the cost of housing throughout the country; Whereas the Nation's housing industry has been a msQor contributor to the national economy by creating jobs and generating revenue; Whereas homeownership and decent housing promotes pride and contributes to the stability of the family in ^ e r i c a; and Whereas it is appropriate to reaffirm our Nation's historic commitment to housing as a national priority to preserve the American dream: Now, therefore, be it Resolved by the Senate and House of Representatives of the United National Stotcs of America in Congress assembled. That October 24-31, 1982, Housing Week, y^ dcclarcd "National Housing Week" and that the President of the United States be autiiorized and requested to issue a proclamation cedlhig upon all people of the United states to observe tms week with appropriate ceremonies and activities. Approved October 18, 1982.

LEGISLATIVE HISTORY—S.J. Res. 261: CONGRESSIONAL RECORD, Vol. 128 (1982): Oct. 1, considered and passed Senate and House.

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 PUBLIC LAW 97-350—OCT. 18, 1982 Public Law 97-350 97th Congress

96 STAT. 1661

An Act To authorize appropriations for the operations of the Office of Environmental Quality and the Council on Environmental Quality during flscal years 1982, 1983, and 1984, and withdraw certain lands within the Mount Baker-Snoqualmie National Forest from leasing under mineral and geothermal leasing laws.

Oct. 18, 1982 [S. 1210]

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 205 ofEnvironmental the Environmental Quality Improvement Act of 1970 (42 U.S.C. Quality, Office and Council 4374) is amended— appropriation (1) by striking out "; and" at the end of paragraph (a) and authorization, fiscal years inserting in lieu thereof a period; and 1982-1984. (2) by adding at the end thereof the following: Mt. Baker"(c) $44,000 for the fiscal years ending September 30, 1982, Snoqualmie National Forest, 1983, and 1984.". SEC. 2. (a) Subject to valid existing rights, all Federal lands within leasing of exemption the area described in subsection (b) are hereby withdrawn from all certain lands. forms of appropriation under the mining laws and from disposition under all laws pertaining to mineral and geothermal leasing and all amendments thereto. (b) The area referred to in subsection (a) shall comprise those lands which are owned by the United States within the Mount Baker-Snoqualmie National Forest and which lie within the physiographic boundaries of the watersheds of the Cedar River, the Green River, and the North and South Forks of the Tolt River. The boundaries of such areas shall be as depicted on maps entitled "Boundary Map, Mount Baker-Snoqualmie Proposed Withdrawals", dated May 12, 1982. Such maps shall be on file and available for Public inspection in the offices of the United States Forest Service, Depart- inspection. ment of Agriculture. (c) The withdrawal described in subsection (a) shall not apply to any exchange carried out by the Secretary of Agriculture pursuant to the Alpine Lakes Area Management Act of 1976 (Public Law 94357, 90 Stat. 905) nor shall such withdrawed apply to any Federal 16 USC 1132 land exchange in process. For purposes of this Act an exchange is in note. process if publication of notice of the contemplated exchange has commenced by the date of enactment of this Act.

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 96 STAT. 1662

PUBLIC LAW 97-350—OCT. 18, 1982

(d) Additionally, the Secretary may dispose of land or interests therein within the area described in subsection (b) by exchange if the Secretary determines that the public will be well-served by the exchange: Provided, That the Secretary determines that the values of the watersheds as sources of drinking water are protected: And provided further. That such exchanges shall not alter, diminish, or abridge rights and obligations contained in State law and watershed management agreements between local government and landowners inside the watershed existing as of the effective date of this Act. Approved October 18, 1982.

LEGISLATIVE HISTORY—S. 1210 (H.R. 1953): HOUSE REPORT No. 97-50 accompanying H.R. 1953 (Comm. on Merchant Marine and Fisheries). SENATE REPORT No. 97-116 (Comm. on Environmental and Public Works). CONGRESSIONAL RECORD: Vol. 127 (1981): June 2, considered and passed Senate. Sept. 21, 22, H.R. 1953 considered and passed House; proceedings vacated and S. 1210, amended, passed in lieu. Vol. 128 (1982): June 14, Senate concurred in House amendments with an amendment. Sept. 30, House agreed to Senate amendment with an amendment. Oct. 1, Senate concurred in House amendments.

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 PUBLIC LAW 97-351—OCT. 18, 1982

96 STAT. 1663

Public Law 97-351 97th Congress An Act To amend title 18 of the United States Code to implement the Convention on the Physical Protection of Nuclear Material, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SHORT TITLE

1. This Act may be cited as the "Convention on the Physical Protection of Nuclear Material Implementation Act of 1982". SECTION

Oct. 18, 1982 [H.R. 5228] Convention on the Physical Protection of Nuclear Material Implementation Act of 1982. 18 USC 831 note.

IMPLEMENTATION OF CONVENTION AND PROHIBITION OF RELATED OFFENSES

SEC. 2. (a) Chapter 89 of title 18 of the United States Code is amended by inserting after the table of sections at the beginning of such chapter the following new section: 18 USC 831. "(a) Whoever, if one of the circumstances described in subsection (c) of this section occurs— "(1) without lawful authority, intentionally receives, possesses, uses, transfers, alters, disposes of, or disperses any nuclear material and— "(A) thereby knowingly causes the death of or serious bodily injury to any person or substantial damage to property; or "(B) knows that circumstances exist which are likely to cause the death of or serious bodily injury to any person or substantial damage to property; "(2) with intent to deprive another of nuclear material, knowingly— "(A) takes and carries away nuclear material of another without authority; "(B) makes an unauthorized use, disposition, or transfer, of nuclear material belonging to another; or "(C) uses fraud and thereby obtains nuclear material belonging to another; "(3) knowingly— "(A) uses force; or "(B) threatens or places another in fear that any person other than the actor will imminently be subject to bodily injury; and thereby takes nuclear material belonging to another from the person or presence of any other; "(4) intentionally intimidates any person and thereby obtains nuclear material belonging to another;
 * '§ 831. Prohibited transactions involving nuclear materials

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 96 STAT. 1664

PUBLIC LAW 97-351—OCT. 18, 1982

"(5) with intent to compel any person, international organization, or governmental entity to do or refrain from doing any act, knowingly threatens to engage in conduct described in paragraph (2)(A) or (3) of this subsection; "(6) knowingly threatens to use nuclear material to cause death or serious bodily injury to any person or substantial damage to property under circumstances in which the threat may reasonably be understood as an expression of serious purposes; "(7) attempts to commit an offense under paragraph (1), (2), (3), or (4) of this subsection; or "(8) is a party to a conspiracy of two or more persons to commit an offense under paragraph (1), (2), (3), or (4) of this subsection, if any of the parties intentionally engages in any conduct in furtherance of such offense; shall be punished as provided in subsection (b) of this section. "(b) The punishment for an offense under— "(1) paragraphs (1) through (7) of subsection (a) of this section is— "(A) a fine of not more than $250,000; and "(B) imprisonment— "(i) for any term of years or for life (I) if, while committing the offense, the offender knowingly causes the death of any person; or (II) if, while committing an offense under paragraph (1) or (3) of subsection (a) of this section, the offender, under circumstances manifesting extreme indifference to the life of an individual, knowingly engages in any conduct and thereby recklessly causes the death of or serious bodily injury to any person; and (ii) for not more than 20 years in any other case; and "(2) paragraph (8) of subsection (a) of this section is— ^*(A) a fine of not more than $250,000; and "(B) imprisonment— "(i) for not more than 20 years if the offense which is the object of the conspiracy is punishable under paragraph (l)(B)(i); and "(ii) for not more than 10 years in any other case. "(c) The circumstances referred to in subsection (a) of this section are that— "(1) the offense is committed in the United States or the special maritime and territorial jurisdiction of the United States, or the special aircraft jurisdiction of the United States (as defined in section 101 of the Federal Aviation Act of 1958 (49 U.S.C. 1301)); "(2) the defendant is a national of the United States, as defined in section 101 of the Immigration and Nationality Act (8 U.S.C. 1101); "(3) at the time of the offense the nuclear material is in use, storage, or transport, for peaceful purposes, and after the conduct required for the offense occurs the defendant is found in the United States, even if the conduct required for the offense occurs outside the United States; or "(4) the conduct required for the offense occurs with respect to the carriage of a consignment of nuclear material for peaceful purposes by any means of transportation intended to go beyond the territory of the state where the shipment originates begin-

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 PUBLIC LAW 97-351—OCT. 18, 1982

96 STAT. 1665

ning with the departure from a facility of the shipper in that state and ending with the arrival at a facility of the receiver within the state of ultimate destination and either of such states is the United States. "(d) The Attorney General may request assistance from the Secretary of Defense under chapter 18 of title 10 in the enforcement of 10 USC 371 et this section and the Secretary of Defense may provide such assist- seq. eince in accordance with chapter 18 of title 10, except that the Secretary of Defense may provide such assistance through any Department of Defense personnel. "(e)(1) The Attorney General may also request assistance from the Secretary of Defense under this subsection in the enforcement of this section. Notwithstanding section 1385 of this title, the Secretary 18 USC 1385. of Defense may, in accordance with other applicable law, provide such assistance to the Attorney General if— "(A) an emergency situation exists (as jointly determined by the Attorney General and the Secretary of Defense in their discretion); and "(B) the provision of such assistance will not adversely affect the military preparedness of the United States (as determined by the Secretary of Defense in such Secretary's discretion). "(3) As used in this subsection, the term 'emergency situation' "Emergency situation." means a circumstance— "(A) that poses a serious threat to the interests of the United States; and "(B) in which— "(i) enforcement of the law would be seriously impaired if the assistance were not provided; and "(ii) civilian law enforcement personnel are not capable of enforcing the law. "(4) Assistance under this section may include— "(A) use of personnel of the Department of Defense to arrest persons and conduct searches and seizures with respect to violations of this section; and "(B) such other activity as is incidental to the enforcement of this section, or to the protection of persons or property from conduct that violates this section. "(5) The Secretary of Defense may require reimbursement as a condition of assistance under this section. "(6) The Attorney General may delegate the Attorney General's function under this subsection only to a Deputy, Associate, or Assistant Attorney General. Definitions. "(f) As used in this section— "(1) the term 'nuclear material' means material containing any— "(A) Plutonium with an isotopic concentration not in excess of 80 percent plutonium 238; "(B) uranium not in the form of ore or ore residue that contains the mixture of isotopes as occurring in nature; "(C) uranium that contains the isotope 233 or 235 or both in such amount that the abundance ratio of the sum of those isotopes to the isotope 238 is greater than the ratio of the isotope 235 to the isotope 238 occurring in nature; or "(D) uranium 233; "(2) the term 'international organization' means a public international organization designated as such pursuant to section 1 of the International Organizations Immunities Act (22

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 96 STAT. 1666

PUBLIC LAW 97-351—OCT. 18, 1982

U.S.C. 288) or a public organization created pursuant to treaty or other agreement under international law as an instrument through or by which two or more foreign governments engage in some aspect of their conduct of international affairs; "(3) the term 'serious bodily injury' means bodily injury which involves— "(A) a substantial risk of death; "(B) extreme physical pain; "(C) protracted and obvious disfigurement; or "(D) protracted loss or impairment of the function of a bodily member, organ, or mental faculty; and "(4) the term 'bodily injury' means— "(A) a cut, abrasion, bruise, burn, or disfigurement; "(B) physical pain; "(C) illness; "(D) impairment of a function of a bodily member, organ, or mental faculty; or "(E) any other injury to the body, no matter how temporary.", (b) The table of sections for chapter 39 of title 18 of the United States Code is amended by striking out the items relating to sections 831 through 835 and inserting in lieu thereof the following: "831. Prohibited transactions involving nuclear materials.". AMENDMENT TO DEFINITION OF INTERNATIONAL ORGANIZATIONS USED IN DEFINING OFFENSES AGAINST INTERNATIONALY PROTECTED PERSONS

SEC. 3. Section 1116(b)(5) of title 18 of the United States Code is amended by inserting before the period the following: "or a public organization created pursuant to treaty or other agreement under international law as an instrument through or by which two or more foreign governments engage in some aspect of their conduct of international affairs". Approved October 18, 1982.

LEGISLATIVE HISTORY—H.R. 5228 (S. 1446): HOUSE REPORT No. 97-624 (Comm. on the Judiciary). CONGRESSIONAL RECORD, Vol. 128 (1982): July 19, 20, considered and passed House. Sept. 14, considered and passed Senate, amended. Sept. 28, House concurred in Senate amendment No. 1; disagreed to certain amendments; concurred in others with amendments. Oct. 1, Senate concurred in House amendments and receded from its disagreements. WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 18, No. 42 (1982): Oct. 19, Presidential statement.

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 PUBLIC LAW 97-352—OCT. 18, 1982

96 STAT. 1667

Public Law 97-352 97th Congress An Act To amend the Perishable Agricultural Commodities Act, 1930, to require the Secretary of Agriculture to accept the payment of monetary penalties for certain admitted and infrequent violations involving misrepresentation under such Act, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 2(5) of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499b(5)), is amended by amending the proviso to read as follows: "Provided, That any commission merchant, dealer, or broker who has violated— "(A) any provision of this paragraph may, with the consent of the Secretary, admit the violation or violations; or "(B) any provision of this paragraph relating to a misrepresentation by mark, stencil, or label shall be permitted by the Secretary to admit the violation or violations if such violation or violations are not repeated or flagrant; and pay, in the case of a violation under either clause (A) or (B) of this paragraph, a monetary penalty not to exceed $2,000 in lieu of a formal proceeding for the suspension or revocation of license, any payment so made to be deposited in the Treasury of the United States as miscellaneous receipts;". SEC. 2. Section 6(e) of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499f[e)), is amended by inserting "or by a resident of the United States to whom the claim of a nonresident of the United States has been assigned," after "nonresident of the United States,". SEC. 3. The amendment made by section 2 shall not apply with respect to complaints made under section 6(e) of the Perishable Agricultural Commodities Act, 1930, before the date of enactment of this Act. Approved October 18, 1982.

LEGISLATIVE HISTORY—H.R. 6865: HOUSE REPORT No. 97-876 (Comm. on Agriculture). CONGRESSIONAL RECORD, Vol. 128 (1982): Sept. 28, considered and passed House. Oct. 1, considered and passed Senate.

Oct. 18, 1982 [H.R. 6865] "

Perishable Agricultural Commodities Act, 1930, amendment.

Effective date. 7 USC 499f note.

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 96 STAT. 1668

PUBLIC LAW 97-353—OCT. 19, 1982

Public Law 97-353 97th Congress Joint Resolution Oct. 19, 1982 [S.J. Res. 257]

National M^noT^

rj,^ designate the month of November 1982, as "National Diabetes Month".

Whereas diabetes kills more Americans than all other diseases except cancer and cardiovascular diseases; Whereas eleven million Americans suffer from diabetes and five million seven hundred thousand of such Americans are not aware of their illness; Whereas $9,700,000,000 annually are used for health care costs, disability payments, and premature mortality costs due to diabetes; Whereas up to 85 per centum of all cases of noninsulin-dependent diabetes may be preventable through greater public understanding, awareness, and education; and Whereas diabetes is a leading cause of blindness, kidney disease, heart disease, stroke, birth defects, and lower life expectancy, which complications may be reduced through greater patient and public understanding, awareness, and education: Now, therefore, be it Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That the month of Novem^^^ 1982 is designated as "National Diabetes Month", and the President of the United States is authorized and requested to issue a proclamation calling upon the people of the United States to observe that month with appropriate programs, ceremonies, and activities. Approved October 19, 1982.

LEGISLATIVE HISTORY—S.J. Res. 257: CONGRESSIONAL RECORD, Vol. 128 (1982): Oct. 1, considered and passed Senate and House.

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Rh own were even longer than the maid's, the average being eighteen miles!

"When will we get to Aunt Emily's?" Flossie asked, growing tired over the day's journey.

"Not until night," her father answered. "When we leave the train we will have quite a way to go by stage. We could go all the way by train, but it would be a long distance around, and I think the stage ride in the fresh air will do us good."

"Oh yes, let's go by the stage," pleaded Freddie, to whom the word stage was a stranger, except in the way it had been used at the Meadow Brook circus.

"This stage will be a great, big wagon," Bert told him, "with seats along the sides."

"Can I sit up top and drive?" the little one asked.

"Maybe the man will let you sit by him," answered Mr. Bobbsey, "but you could hardly drive a big horse over those rough roads."

The train came to a standstill, just then, on a switch. There was no station, but the shore train had taken on another section.


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Page:United States Statutes at Large Volume 96 Part 2.djvu/307

 PUBLIC LAW 97-354—OCT. 19, 1982

96 STAT. 1669

Public Law 97-354 97th Congress An Act To revise subchapter S of the Internal Revenue Code of 1954 (relating to small business corporations).

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. SECTION 1. SHORT TITLE; AMENDMENT OF 1954 CODE. (a) SHORT TITLE.—This Act may be cited as the "Subchapter S

Oct. 19, 1982 [H.R. 6055]

Subchapter S

Revision Act of 1982. ^^ ^^

^ "°*^-

Revision Act of 1982". (b) AMENDMENT OF 1954 CODE.—Except as otherwise expressly

provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1954.

26 USC i et seq.

SEC. 2. AMENDMENT OF SUBCHAPTER S.

Subchapter S of chapter 1 is amended to read as follows:

"Subchapter S—Tax Treatment of S Corporations and Their Shareholders "Part "Part "Part "Part

I. In general. II. Tax treatment of shareholders. III. Special rules. IV. Definitions; miscellaneous.

"PART I—IN GENERAL "Sec. 1361. S corporation defined. "Sec. 1362. Election; revocation; termination. "Sec. 1363. Effect of election on corporation. "SEC. 1361. S CORPORATION DEFINED. "(a) S CORPORATION DEFINED.—

"(1) IN GENERAL.—For purposes of this title, the term *S corporation' means, with respect to any taxable year, a small business corporation for which an election under section 1362(a) is in effect for such year. "(2) CORPORATION.—For purposes of this title, the term 'C corporation' means, with respect to any taxable year, a corporation which is not an S corporation for such year. "(b) SMALL BUSINESS CORPORATION.—

"(1) IN GENERAL.—For purposes of this subchapter, the term 'small business corporation means a domestic corporation which is not an ineligible corporation and which does not— "(A) have more than 35 shareholders, "(B) have as a shareholder a person (other than an estate and other than a trust described in subsection (c)(2)) who is not an individual, "(C) have a nonresident alien as a shareholder, and

26 USC 1361.

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Page:United States Statutes at Large Volume 96 Part 2.djvu/308

 96 STAT. 1670

PUBLIC LAW 97-354—OCT. 19, 1982 "(D) have more than 1 class of stock.

26 USC 801.

"(2) INELIGIBLE CORPORATION DEFINED.—For purposes of paragraph (1), the term 'ineligible corporation' means any corporation which is— "(A) a member of an affiliated group (determined under section 1504 without regard to the exceptions contained in subsection (b) thereof), "(B) a financial institution to which section 585 or 593 applies, "(C) an insurance company subject to tax under subchapter L, "(D) a corporation to which an election under section 936 applies, or "(E) a DISC or former DISC. "(c) SPECIAL RULES FOR APPLYING SUBSECTION (b).— "(1) HUSBAND AND WIFE TREATED AS i SHAREHOLDER.—For

purposes of subsection (b)(1)(A), a husband and wife (and their estates) shall be treated as 1 shareholder. "(2) CERTAIN TRUSTS PERMITTED AS SHAREHOLDERS.—

26 USC 671.

"(A) IN GENERAL.—For purposes of subsection (b)(1)(B), the following trusts may be shareholders: "(i) A trust all of which is treated (under subpart E of part I of subchapter J of this chapter) as owned by an individual who is a citizen or resident of the United States. "(ii) A trust which was described in clause (i) immediately before the death of the deemed owner and which continues in existence after such death, but only for the 60-day period beginning on the day of the deemed owner's death. If a trust is described in the preceding sentence and if the entire corpus of the trust is includible in the gross estate of the deemed owner, the preceding sentence shall be applied by substituting '2-year period' for '60-day period'. "(iii) A trust with respect to stock transferred to it pursuant to the terms of a will, but only for the 60-day period beginning on the day on which such stock is transferred to it. "(iv) A trust created primarily to exercise the voting power of stock transferred to it. This subparagraph shall not apply to any foreign trust. "(B) TREATMENT AS SHAREHOLDERS.—For purposes of subsection (b)(1)— "(i) In the case of a trust described in clause (i) of subparagraph (A), the deemed owner shall be treated as the shareholder. "(ii) In the case of a trust described in clause (ii) of subparagraph (A), the estate of the deemed owner shall be treated as the shareholder. "(iii) In the case of a trust described in clause (iii) of subparagraph (A), the estate of the testator shall be treated as the shareholder. "(iv) In the case of a trust described in clause (iv) of subparagraph (A), each beneficiary of the trust shall be treated as a shareholder. "(3)

ESTATE OF INDIVIDUAL IN BANKRUPTCY MAY BE SHARE-

HOLDER.—For purposes of subsection (b)(1)(B), the term 'estate'

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Page:United States Statutes at Large Volume 96 Part 2.djvu/309

 PUBLIC LAW 97-354—OCT. 19, 1982

96 STAT. 1671

includes the estate of an individual in a case under title 11 of the United States Code. "(4)

DIFFERENCES IN COMMON STOCK VOTING RIGHTS DISRE-

GARDED.—For purposes of subsection (b)(1)(D), a corporation shall not be treated as having more than 1 class of stock solely because there are differences in voting rights among the shares of common stock. "(5) STRAIGHT DEBT SAFE HARBOR.—

"(A) IN GENERAL.—For purposes of subsection (b)(1)(D), straight debt shall not be treated as a second class of stock. "(B) STRAIGHT DEBT DEFINED.—For purposes of this paragraph, the term 'straight debt' means any written unconditional promise to pay on demand or on a specified date a sum certain in money if— "(i) the interest rate (and interest payment dates) are not contingent on profits, the borrower's discretion, or similar factors, "(ii) there is no convertibility (directly or indirectly) into stock, and "(iii) the creditor is an individual (other than a nonresident alien), an estate, or a trust described in paragraph (2). "(C) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to provide for the proper treatment of straight debt under this subchapter and for the coordination of such treatment with other provisions of this title. "(6)

OWNERSHIP OF STOCK IN CERTAIN INACTIVE CORPORA-

TIONS.—For purposes of subsection (b)(2)(A), a corporation shall not be treated as a member of an affiliated group at any time during any taxable year by reason of the ownership of stock in another corporation if such other corporation— "(A) has not begun business at any time on or after the date of its incorporation and before the close of such taxable year, and "(B) does not have taxable income for the period included within such taxable year.
 * (d) SPECIAL RULE FOR QUALIFIED SUBCHAPTER S TRUST.—

"(1) IN GENERAL.—In the case of a qualified subchapter S trust with respect to which a beneficiary makes an election under paragraph (2)— "(A) such trust shall be treated as a trust described in subsection (c)(2)(A)(i), and "(B) for purposes of section 678(a), the beneficiary of such trust shall be treated as the owner of that portion of the trust which consists of stock in an S corporation with respect to which the election under paragraph (2) is made. "(2) ELECTION.—

"(A) IN GENERAL.—A beneficiary of a qualified subchapter S trust (or his legal representative) may elect to have this subsection apply. "(B) MANNER AND TIME OF ELECTION.— "(i) SEPARATE ELECTION WITH RESPECT TO EACH S COR-

PORATION.—An election under this paragraph shall be made separately with respect to each S corporation the stock of which is held by the trust.

n use loi et ^^^

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Page:United States Statutes at Large Volume 96 Part 2.djvu/310

 96 STAT. 1672

PUBLIC LAW 97-354—OCT. 19, 1982 "(ii) ELECTIONS WITH RESPECT TO SUCCESSIVE INCOME

26 USC 1362

BENEFICIARIES.—If there is an election under this paragraph with respect to any beneficiary, an election under this paragraph shall be treated as made by each successive beneficiary unless such beneficiary affirmatively refuses to consent to such election. "(iii) TIME, MANNER, AND FORM OF ELECTION.—Any election, or refusal, under this paragraph shall be made in such manner and form, and at such time, as the Secretary may prescribe. "(C) ELECTION IRREVOCABLE.—An election under this paragraph, once made, may be revoked only with the consent of the Secretary. "(D) GRACE PERIOD.—An election under this paragraph shall be effective up to 60 days before the date of the election. "(3) QuAUFiED SUBCHAPTER s TRUST.—For purposes of this subsection, the term 'qualified subchapter S trust' means a trust— "(A) which owns stock in 1 or more S corporations, "(B) all of the income (within the meaning of section 643(b)) of which is distributed (or required to be distributed) currently to 1 individual who is a citizen or resident of the United States, and "(C) the terms of which require that— "(i) during the life of the current income beneficiary there shall be only 1 income beneficiary of the trust, "(ii) any corpus distributed during the life of the current income beneficiary may be distributed only to such beneficiary, "(iii) the income interest of the current income beneficianr in the trust shall terminate on the earlier of such beneficiary's death or the termination of the trust, and "(iv) upon the termination of the trust during the life of the current income beneficiary, the trust shall distribute all of its assets to such beneficiary. "(4) TRUST CEASING TO BE QUALIFIED.—If a qualified subchapter S trust ceases to meet any requirement under paragraph (3), the provisions of this subsection shall not apply to such trust as of the date it ceases to meet such requirements. "SEC. 1362. ELECTION; REVOCATION; TERMINATION. "(a) ELECTION.—

"(1) IN GENERAL.—Except as provided in subsection (g), a small business corporation may elect, in accordance with the provisions of this section, to be an S corporation. "(2) ALL SHAREHOLDERS MUST CONSENT TO ELECTION.—An election under this subsection shall be valid only if all persons who are shareholders in such corporation on the day on which such election is made consent to such election.

"(b) WHEN MADE.—

"(1) IN GENERAL.—An election under subsection (a) may be made by a small business corporation for any taxable year— "(A) at any time during the preceding taxable year, or "(B) at any time during the taxable year and on or before the 15th day of the 3d month of the taxable year.

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Page:United States Statutes at Large Volume 96 Part 2.djvu/311

 PUBLIC LAW 97-354—OCT. 19, 1982

96 STAT. 1673

"(2) CERTAIN ELECTIONS MADE DURING IST 2y2 MONTHS TREATED AS MADE FOR NEXT TAXABLE YEAR.—If—

"(A) an election under subsection (a) is made for any taxable year during such year and on or before the 15th day of the 3d month of such year, but "(B) either— "(i) on 1 or more days in such taxable year before the day on which the election was made the corporation did not meet the requirements of subsection (b) of section 1361, or

"(ii) 1 or more of the persons who held stock in the corporation during such taxable year and before the election was made did not consent to the election, then such election shall be treated as made for the following taxable year. "(3) ELECTION MADE AFTER IST 2y2 MONTHS TREATED AS MADE FOR FOLLOWING TAXABLE YEAR.—If—

"(A) a small business corporation makes an election under subsection (a) for any taxable year, and "(B) such election is made after the 15th day of the 3d month of the taxable year and on or before the last day of such taxable year, then such election shall be treated as made for the following taxable year. "(c) YEARS FOR WHICH EFFECTIVE,—An election under subsection

(a) shall be effective for the taxable year of the corporation for which it is made and for all succeeding taxable years of the corporation, until such election is terminated under subsection (d). "(d) TERMINATION.— "(1) BY REVOCATION.—

"(A) IN GENERAL.—An election under subsection (a) may be terminated by revocation. "(B) MORE THAN ONE-HALF OF SHARES MUST CONSENT TO

REVOCATION.—An election may be revoked only if shareholders holding more than one-half of the shares of stock of the corporation on the day on which the revocation is made consent to the revocation. "(C) WHEN EFFECTIVE.—Except as provided in subpara-

graph (D)— "(i) a revocation made during the taxable year and on or before the 15th day of the 3d month thereof shall be effective on the 1st day of such taxable year, and "(ii) a revocation made during the taxable year but after such 15th day shall be effective on the 1st day of the following taxable year. "(D) REVOCATION MAY SPECIFY PROSPECTIVE DATE.—If the

revocation specifies a date for revocation which is on or after the day on which the revocation is made, the revocation shall be effective on and after the date so specified. "(2) BY CORPORATION CEASING TO BE SMALL BUSINESS CORPORATION.—

"(A) IN GENERAL.—An election under subsection (a) shall be terminated whenever (at any time on or after the 1st day of the i s t taxable year for which the corporation is an S corporation) such corporation ceases to be a small business corporation.

Ante, p. 1669.

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Page:United States Statutes at Large Volume 96 Part 2.djvu/312

 96 STAT. 1674

PUBLIC LAW 97-354—OCT. 19, 1982 "(B) W H E N EFFECTIVE.—Any termination under this paragraph shall be effective on and after the date of cessation. "(3) WHERE PASSIVE INVESTMENT INCOME EXCEEDS 25 PERCENT OF GROSS RECEIPTS FOR 3 CONSECUTIVE TAXABLE YEARS AND CORPORATION HAS SUBCHAPTER C EARNINGS AND PROFITS.— "(A) TERMINATION.—

26 USC 301.

"(i) IN GENERAL.—An election under subsection (a) shall be terminated whenever the corporation— "(I) has subchapter C earnings and profits a t the close of each of 3 consecutive taxable years, and "(n) has gross receipts for each of such taxable years more than 25 percent of which a r e passive investment income. "(ii) W H E N EFFECTIVE.—Any termination under this paragraph shall be effective on and after the first day of the first taxable year beginning after the third consecutive taxable year referred to in clause (i). "(iii) YEARS TAKEN INTO ACCOUNT.—A prior taxable

year shall not be teJ^en into account under clause (i) unless— "(I) such taxable year began after December 31, 1981, and "(II) the corporation was a n S corporation for such taxable year. "(B) SUBCHAPTER C EARNINGS AND PROFITS.—For purposes

Ante, p. 1672.

of subparagraph (A), the term 'subchapter C earnings and profits means esimings and profits of any corporation for any taxable year with respect to which a n election under section 1362(a) (or under section 1372 of prior law) was not in effect. "(C) GROSS RECEIPTS FROM SALES OF CAPITAL ASSETS (OTHER THAN STOCK AND SECURITIES).—For purposes of this para-

graph, in the case of dispositions of capital assets (other than stock and securities), gross receipts from such dispositions shall be taken into account only to the extent of the capital gain net income therefrom. (D) PASSIVE INVESTMENT INCOME DEFINED.—For purposes

of this paragraph— (i) IN GENERAL.—Except as otherwise provided in this subparagraph, the term 'passive investment income' means gross receipts derived from royalties, rents, dividends, interest, annuities, and sales or exchanges of stock or securities (gross receipts from such sales or exchanges being taken into account for purposes of this paragraph only to the extent of gains therefrom). "(ii) EXCEPTION FOR INTEREST ON NOTES FROM SALES OF

INVENTORY.—The term 'passive investment income' shall not include interest on any obligation acquired in the ordinary course of the corporation's trade or business from its sale of property described in section 1221(1). "(iii) TREATMENT OF CERTAIN LENDING OR FINANCE COMPANIES.—If the S corporation meets the requirements of section 542(c)(6) for the taxable year, the term 'passive investment income' shall not include gross receipts for the taxable year which are derived directly

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Page:United States Statutes at Large Volume 96 Part 2.djvu/313

 PUBLIC LAW 97-354—OCT. 19, 1982

96 STAT. 1675

from the active and regular conduct of a lending or finance business (as defined in section 542(d)(l))"(iv) TREATMENT OF CERTAIN LIQUIDATIONS.—Gross

receipts derived from sales or exchanges of stock or securities shall not include amounts received by an S corporation which are treated under section 331 (relating to corporate liquidations) as payments in exchange for stock where the S corporation owned more than 50 percent of each class of stock of the liquidating corporation. "(e) TREATMENT OF S TERMINATION YEAR.—

"(1) IN GENERAL.—In the case of an S termination year, for purposes of this title— "(A) S SHORT YEAR.—The portion of such year ending before the 1st day for which the termination is effective shall be treated as a short taxable year for which the corporation is an S corporation. "(B) C SHORT YEAR.—The portion of such year beginning on such 1st day shall be treated as a short taxable year for which the corporation is a C corporation. "(2) PRO RATA ALLOCATION.—Except as provided in paragraph

(3), the determination of which items are to be taken into account for each of the short taxable years referred to in paragraph (1) shall be made— "(A) first by determining for the S termination year— "(i) the amount of each of the items of income, loss, deduction, or credit described in section 1366(a)(1)(A), Post, p. 1677. and "(ii) the amount of the nonseparately computed income or loss, and "(B) then by assigning an equal portion of each amount determined under subparagraph (A) to each day of the S termination year. "(3) ELECTION TO HAVE ITEMS ASSIGNED TO EACH SHORT TAXABLE YEAR UNDER NORMAL TAX ACCOUNTING RULES.—

"(A) IN GENERAL.—A corporation may elect to have paragraph (2) not apply. "(B) ALL SHAREHOLDERS MUST CONSENT TO ELECTION.—

An election under this paragraph shall be valid only if all persons who are shareholders in the corporation at any time during the S termination year consent to such election. "(4) S TERMINATION YEAR.—For purposos of this subsection, the term 'S termination year' means any taxable year of a corporation (determined without regard to this subsection) in which a termination of an election made under subsection (a) takes effect (other than on the 1st day thereof). "(5) TAX FOR C SHORT YEAR DETERMINED ON ANNUAUZED

BASIS.—

"(A) IN GENERAL.—The taxable income for the short year described in subparagraph (B) of paragraph (1) shall be placed on an annual basis by multiplying the taxable income for such short year by the number of days in the S termination year and by dividing the result by the number of days in the short year. The tax shall be the same part of the tax computed on the annual basis as the number of

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Page:United States Statutes at Large Volume 96 Part 2.djvu/314

 96 STAT. 1676

PUBLIC LAW 97-354—OCT. 19, 1982 days in such short year is of the number of days in the S termination year. "(B) SECTION 443(d)(2) TO APPLY.—Subsection (d)(2) of section 443 shall apply to the short taxable year described in subparagraph (B) of paragraph (1). "(6) OTHER SPECIAL RULES.—For purposes of this title— "(A)

SHORT YEARS TREATED AS i YEAR FOR CARRYOVER

PURPOSES.—The short taxable year described in subparagraph (A) of paragraph (1) shall not be taken into account for purposes of determining the number of taxable years to which any item may be carried back or carried forward by the corporation. "(B) DUE DATE FOR S YEAR.—The due date for filing the return for the short taxable year described in subparagraph (A) of paragraph (1) shall be the same as the due date for filing the return for the short taxable year described in subparagraph (B) of paragraph (1) (including extensions thereof). "(f) INADVERTENT TERMINATIONS.—If—

"(1) an election under subsection (a) by any corporation was terminated under paragraph (2) or (3) of subsection (d), "(2) the Secretary determines that the termination was inadvertent, "(3) no later than a reasonable period of time after discovery of the event resulting in such termination, steps were taken so that the corporation is once more a small business corporation, and "(4) the corporation, and each person who was a shareholder of the corporation at any time during the period specified pursuant to this subsection, agrees to make such adjustments (consistent with the treatment of the corporation as an S corporation) as may be required by the Secretary with respect to such period, then, notwithstanding the terminating event, such corporation shall be treated as continuing to be an S corporation during the period specified by the Secretary. "(g) ELECTION AFTER TERMINATION.—If a small business corporation has made an election under subsection (a) and if such election has been terminated under subsection (d), such corporation (and any successor corporation) shall not be eligible to make an election under subsection (a) for any taxable year before its 5th taxable year which begins after the 1st taxable year for which such termination is effective, unless the Secretary consents to such election. 26 USC 1363.

Ante, p. 1677.

"SEC. 1363. EFFECT OF ELECTION ON CORPORATION. "(a) GENERAL RULE.—Except as otherwise provided in this sub-

chapter and in section 58(d), an S corporation shall not be subject to the taxes imposed by this chapter. "(b) COMPUTATION OF CORPORATION'S TAXABLE INCOME.—The taxable income of an S corporation shall be computed in the same manner as in the case of an individual, except that— "(1) the items described in section 1366(a)(l)(A) shall be separately stated, "(2) the deductions referred to in section 703(a)(2) shall not be allowed to the corporation, and "(3) section 248 shall apply. "(c) ELECTIONS OF THE S CORPORATION.—

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Page:Bobbsey Twins at the Seashore.djvu/40

30 "Can Flossie and I walk through that new car?" Nan asked, as the cars had been separated and the new section joined to that directly back of the one which the Bobbseys were in.

"Why, yes, if you are very careful," the mother replied, and so the two little girls started off.

Dinah took Freddie on her lap and told him his favorite story about "Pickin' cotton in de Souf," and soon the tired little yellow head fell off in the land of Nod.

Bert and his father were enjoying their magazines, while Mrs. Bobbsey busied herself with some fancy work, so a half-hour passed without any more excitement. At the end of that time the girls returned.

"Oh, mother!" exclaimed Nan, "we found Mrs. Manily, the matron of the Meadow Brook Fresh Air Camp, and she told us Nellie, the little cash girl, was so run down the doctors think she will have to go to the seashore. Mother, couldn't we have her down with us awhile?"

"We are only going to visit, you know,


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Page:United States Statutes at Large Volume 96 Part 2.djvu/315

 PUBLIC LAW 97-354—OCT. 19, 1982

96 STAT. 1677

"(1) IN GENERAL.—Except as provided in paragraph (2), any election affecting the computation of items derived from an S corporation shall be made by the corporation. "(2) EXCEPTIONS.—In the case of an S corporation, elections under the following provisions shall be made by each shareholder separately— "(A) subsection (b)(5) or (d)(4) of section 108 (relating to income from discharge of indebtedness), "(B) section 163(d) (relating to limitation on interest on investment indebtedness), "(C) section 617 (relating to deduction and recapture of certain mining exploration expenditures), and "(D) section 901 (relating to taxes of foreign countries and possessions of the United States). "(d) DISTRIBUTIONS OF APPRECIATED PROPERTY.—If—

"(1) an S corporation makes a distribution of property (other than an obligation of such corporation) with respect to its stock, and "(2) the fair market value of such property exceeds its adjusted basis in the hands of the S corporation, then, notwithstanding any other provision of this subtitle, gain shall be recognized to the S corporation on the distribution in the same manner as if it had sold such property to the distributee at its fair market vsdue.

"PART II—TAX TREATMENT OF SHAREHOLDERS "Sec. 1366. Pass-thru of items to shareholders. "Sec. 1367 Adjustments to basis of stock of shareholders, etc. "Sec. 1368. Distributions. "SEC. 1366. PASS-THRU OF ITEMS TO SHAREHOLDERS. "(a) DETERMINATION OF SHAREHOLDER'S TAX LIABILITY.-

"(1) IN GENERAL.—In determining the tax under this chapter of a shareholder for the shareholder's taxable year in which the taxable year of the S corporation ends (or for the final taxable year of a shareholder who dies before the end of the corporation's taxable year), there shall be taken into account the shareholder's pro rata share of the corporation's— "(A) items of income (including tax-exempt income), loss, deduction, or credit the separate treatment of which could affect the liability for tax of any shareholder, and "(B) nonseparately computed income or loss. For purposes of the preceding sentence, the items referred to in subparagraph (A) shall include amounts described in paragraph (4) or (6) of section 702(a). "(2) NONSEPARATELY COMPUTED INCOME OR LOSS DEFINED.—For

purposes of this subchapter, the term 'nonseparately computed income or loss' means gross income minus the deductions allowed to the corporation under this chapter, determined by excluding all items described in paragraph (I)(A). "(b) CHARACTER PASSED THRU.—The character of any item included in a shareholder's pro rata share under paragraph (1) of subsection (a) shall be determined as if such item were realized directly from the source from which realized by the corporation, or incurred in the same manner as incurred by the corporation.

26 USC 1366.

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Page:United States Statutes at Large Volume 96 Part 2.djvu/316

 96 STAT. 1678

PUBLIC LAW 97-354—OCT. 19, 1982

"(c) GROSS INCOME OF A SHAREHOLDER.—In any case where it is necessary to determine the gross income of a shareholder for purposes of this title, such gross income shall include the shareholder's pro rata share of the gross income of the corporation. "(d) SPECIAL RULES FOR LOSSES AND DEDUCTIONS.— "(1) CANNOT EXCEED SHAREHOLDER'S BASIS IN STOCK AND

DEBT.—The aggregate amount of losses and deductions taken into account by a shareholder under subsection (a) for any taxable year shall not exceed the sum of— "(A) the adjusted basis of the shareholder's stock in the S corporation (determined with regard to paragraph (1) of section 1367(a) for the taxable year), and "(B) the shareholder's adjusted basis of any indebtedness of the S corporation to the shareholder (determined without regard to any adjustment under paragraph (2) of section 1367(b) for the taxable year). "(2) INDEFINITE CARRYOVER OF DISALLOWED LOSSES AND DEDUC-

TIONS.—Any loss or deduction which is disallowed for any taxable year by reason of paragraph (1) shall be treated as incurred by the corporation in the succeeding taxable year with respect to that shareholder. "(3) CARRYOVER OF DISALLOWED LOSSES AND DEDUCTIONS TO POST-TERMINATION TRANSITION PERIOD.—

"(A) IN GENERAL.—If for the last taxable year of a corporation for which it was an S corporation a loss or deduction was disallowed by reason of paragraph (1), such loss or deduction shall be treated as incurred by the shareholder on the last day of any post-termination transition period. "(B) CANNOT EXCEED SHAREHOLDER'S BASIS IN STOCK.—The

aggregate amount of losses and deductions taken into account by a shareholder under subparagraph (A) shall not exceed the adjusted basis of the shareholder's stock in the corporation (determined at the close of the last day of the post-termination transition period and without regard to this paragraph). "(C) ADJUSTMENT IN BASIS OF STOCK.—The shareholder's

basis in the stock of the corporation shall be reduced by the amount allowed as a deduction by reason of this paragraph. "(e) TREATMENT OF FAMILY GROUP.—If an individual who is a member of the family (within the meaning of section 704(e)(3)) of one or more shareholders of an S corporation renders services for the corporation or furnishes capital to the corporation without receiving reasonable compensation therefor, the Secretary shall make such adjustments in the items taken into account by such individual and such shareholders as may be necessary in order to reflect the value of such services or capital. "(f) SPECIAL RULES.— "(1) SUBSECTION (a) NOT TO APPLY TO CREDIT ALLOWABLE UNDER SECTION 39.—Subsection (a) shall not apply with respect

to any credit allowable under section 39 (relating to certain uses of gasoline, special fuels, and lubricating oil). "(2) REDUCTION IN PASS-THRU FOR TAX IMPOSED ON CAPITAL

Post, p. 1683.

GAIN.—If any tax is imposed under section 56 or 1374 for any taxable year on an S corporation, for purposes of subsection (a)-

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Page:United States Statutes at Large Volume 96 Part 2.djvu/317

 PUBLIC LAW 97-354—OCT. 19, 1982

96 STAT. 1679

"(A) the amount of the corporation's long-term capital gains for the taxable year shall be reduced by the amount of such tax, and "(B) if the amount of such tax exceeds the amount of such long-term capital gains, the corporation's gains from sales or exchanges of property described in section 1231 shall be reduced by the amount of such excess. For purposes of the preceding sentence, the term 'long-term capital gain' shall not include any gain from the sale or exchange of property described in section 1231.

"Long-term capital gam."

"(3) REDUCTION IN PASS-THRU FOR TAX IMPOSED ON EXCESS NET

PASSIVE INCOME.—If any tax is imposed under section 1375 for Post, p. 1684. any taxable year on an S corporation, for purposes of subsection (a), each item of passive investment income shall be reduced by an amount which bears the same ratio to the amount of such tax as— "(A) the amount of such item, bears to "(B) the total passive investment income for the taxable year. "(g) CROSS REFERENCE.— "For rules relating to procedures for determining the tax treatment of subchapter S items, see subchapter D of chapter 63. •SEC. 1367. ADJUSTMENTS TO BASIS OF STOCK OF SHAREHOLDERS, ETC.

26 USC 1367.

"(a) GENERAL RULE.— "(1) INCREASES IN BASIS.—The basis of each shareholder's

stock in an S corporation shall be increased for any period by the sum of the following items determined with respect to that shareholder for such period: "(A) the items of income described in subparagraph (A) of section 1366(a)(1), Ante, p. 1677. "(B) any nonseparately computed income determined under subparagraph (B) of section 1366(a)(1), and "(C) the excess of the deductions for depletion over the basis of the property subject to depletion. "(2) DECREASES IN BASIS.—The basis of each shareholder's stock in an S corporation shall be decreased for any period (but not below zero) by the sum of the following items determined with respect to the shareholder for such period: "(A) distributions by the corporation which were not includible in the income of the shareholder by reason of section 1368, "(B) the items of loss and deduction described in subparagraph (A) of section 1366(a)(l), "(C) any nonseparately computed loss determined under subparagraph (B) of section 1366(a)(1), "(D) any expense of the corporation not deductible in computing its taxable income and not properly chargeable to capital account, and "(E) the amount of the shareholder's deduction for depletion under section 611 with respect to oil and gas wells. "(b) SPECIAL RULES.— "(1) INCOME ITEMS.—An amount which is required to be in-

cluded in the gross income of a shareholder and shown on his return shall be taken into account under subparagraph (A) or (B) of subsection (a)(1) only to the extent such amount is included in the shareholder's gross income on his return, in-

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Page:United States Statutes at Large Volume 96 Part 2.djvu/318

 96 STAT. 1680

PUBLIC LAW 97-354—OCT. 19, 1982 creased or decreased by any adjustment of such amount in a redetermination of the shareholder's tax liability. "(2) ADJUSTMENTS IN BASIS OF INDEBTEDNESS.— "(A) REDUCTION OF BASIS.—If for any taxable year the

Ante, p. 1677.

26 USC 1368.

amounts specified in subparagraphs (B), (C), (D), and (E) of subsection (a)(2) exceed the amount which reduces the shareholder's basis to zero, such excess shall be applied to reduce (but not below zero) the shareholder's basis in any indebtedness of the S corporation to the shareholder. "(B) RESTORATION OF BASIS.—If for any taxable year there is a reduction under subparagraph (A) in the shareholder's basis in the indebtedness of an S corporation to a shareholder, any net increase (after the application of paragraphs (1) and (2) of subsection (a)) for any subsequent taxable year shall be applied to restore such reduction in basis before any of it may be used to increase the shareholder's basis in the stock of the S corporation. "(3) COORDINATION WITH SECTION 165(g).—This section and section 1366 shall be applied before the application of section 165(g) to any taxable year of the shareholder or the corporation in which the stock becomes worthless. "SEC. 1368. DISTRIBUTIONS.

"(a) GENERAL RULE.—A distribution of property made by an S corporation with respect to its stock to which (but for this subsection) section 301(c) would apply shall be treated in the manner provided in subsection (b) or (c), whichever applies. "(b) S CORPORATION HAVING N O EARNINGS AND PROFITS.—In the

case of a distribution described in subsection (a) by an S corporation which has no accumulated earnings and profits— "(1) AMOUNT APPLIED AGAINST BASIS.—The distribution shall not be included in gross income to the extent that it does not exceed the adjusted basis of the stock. "(2) AMOUNT IN EXCESS OF BASIS.—If the amount of the distri-

bution exceeds the adjusted basis of the stock, such excess shall be treated as gain from the sale or exchange of property. "(c) S CORPORATION HAVING EARNINGS AND PROFITS.—In the case of a distribution described in subsection (a) by an S corporation which has accumulated earnings and profits— "(1) ACCUMULATED ADJUSTMENTS ACCOUNT.—That portion of

the distribution which does not exceed the accumulated adjustments account shall be treated in the manner provided by subsection (b). "(2) DIVIDEND.—That portion of the distribution which remains after the application of paragraph (1) shall be treated as a dividend to the extent it does not exceed the accumulated earnings and profits of the S corporation. "(3) TREATMENT OF REMAINDER.—Any portion of the distribution remaining after the application of paragraph (2) of this subsection shall be treated in the manner provided by subsection (b). "(d) CERTAIN ADJUSTMENTS TAKEN INTO ACCOUNT.—Subsections

Ante, p. 1679.

(b) and (c) shall be applied by taking into account (to the extent proper)— "(1) the adjustments to the basis of the shareholder's stock described in section 1367, and

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Page:United States Statutes at Large Volume 96 Part 2.djvu/319

 PUBLIC LAW 97-354—OCT. 19, 1982

96 STAT. 1681

"(2) the adjustments to the accumulated adjustments account which are required by subsection (e)(D. "(e) DEFINITIONS AND SPECIAL RULES.—For purposes of this section— "(1) ACCUMULATED ADJUSTMENTS ACCOUNT.—

"(A) IN GENERAL.—Except as provided in subparagraph (B), the term 'accumulated adjustments account' means an account of the S cor^ration which is adjusted for the S period in a manner similar to the adjustments under section 1367 (except that no adjustment shall be made for income which is exempt from tax under this title and no adjustment shall be made for any expense not deductible in computing the corporation's taxable income and not properly chargeable to capital account).

^^te, p. i679.

(B) AMOUNT OF ADJUSTMENT IN THE CASE OF REDEMP-

TIONS.—In the case of any redemption which is treated as an exchange under section 302(a) or 303(a), the adjustment in the accumulated adjustments account shall be an amount which bears the same ratio to the balance in such account as the number of shares redeemed in such redemption bears to the number of shares of stock in the corporation immediately before such redemption. "(2) S PERIOD.—The term *S period' means the most recent continuous period during which the corporation has been an S corporation. Such period shall not include any taxable year beginning before January 1, 1983. "PART III—SPECIAL RULES "Sec. "Sec. "Sec. "Sec. "Sec.

1371. Coordination with subchapter C. 1372. Partnership rules to apply for fringe benefit purposes. 1373. Foreign income. 1374. Tax imposed on certain capital gains. 1375. Tax imposed when passive investment income of corporation having subchapter C earnings and profits exceeds 25 percent of gross receipts. "SEC. 1371. COORDINATION WITH SUBCHAPTER C. "(a) APPLICATION OF SUBCHAPTER C RULES.—

"(1) IN GENERAL.—Except as otherwise provided in this title, and except to the extent inconsistent with this subchapter, subchapter C shall apply to an S corporation and its shareholders. "(2) S CORPORATION AS SHAREHOLDER TREATED LIKE INDIVIDUAL.—For purposes of subchapter C, an S corporation in its capacity as a shareholder of another corporation shall be treated as an individual. "(b) NO CARRYOVER BETWEEN C YEAR AND S YEAR.— "(1) FROM C YEAR TO S YEAR.—NO carryforward, and no carry-

back, arising for a taxable year for which a corporation is a C corporation may be carried to a taxable year for which such corporation is an S corporation. (2) No CARRYOVER FROM s YEAR.—No Carryforward, and no carryback, shall arise at the corporate level for a taxable year for which a corporation is an S corporation. "(3) TREATMENT OP S YEAR AS ELAPSED YEAR.—Nothing in

paragraphs (1) and (2) shall prevent treating a taxable year for which a corporation is an s corporation as a taxable year for

26 USC 1371

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Page:United States Statutes at Large Volume 96 Part 2.djvu/320

 96 STAT. 1682

PUBLIC LAW 97-354—OCT. 19, 1982 purposes of determining the number of taxable years to which an item may be carried back or carried forward. "(c) EARNINGS AND PROFITS.—

"(1) IN GENERAL.—Except as provided in paragraphs (2) and (3), no adjustment shall be made to the earnings and profits of an S corporation. "(2) ADJUSTMENTS FOR REDEMPTIONS, LIQUIDATIONS, REORGANIZATIONS, DivisiVES, ETC.—In the case of any transaction involv-

26 USC 301.

ing the application of subchapter C to any S corporation, proper adjustment to any accumulated earnings and profits of the corporation shall be made. "(3) ADJUSTMENTS IN CASE OF DISTRIBUTIONS TREATED AS DIVIDENDS UNDER SECTION 1368(C)(2).—Paragraph (1) shall not

Ante, p. 1680.

apply with respect to that portion of a distribution which is treated as a dividend under section 1368(c)(2). "(d) COORDINATION WITH INVESTMENT CREDIT RECAPTURE.—

Ante, p. 1672.

"(1) No RECAPTURE B REASON OF ELECTION.—Any election Y under section 1362 shall be treated as a mere change in the form of conducting a trade or business for purposes of the second sentence of section 47(b). "(2) CORPORATION CONTINUES TO BE LIABLE.—Notwithstanding

an election under section 1362, an S corporation shall continue to be liable for any increase in tax under section 47 attributable to credits allowed for taxable years for which such corporation was not an S corporation. "(e) CASH DISTRIBUTIONS DURING POST-TERMINATION TRANSITION

PERIOD.—Any distribution of money by a corporation with respect to its stock during a post-termination transition period shall be applied against and reduce the adjusted basis of the stock, to the extent that the amount of the distribution does not exceed the accumulated adjustments account. 26 USC 1372.

"SEC. 1372. PARTNERSHIP RULES TO APPLY FOR FRINGE BENEFIT PURPOSES. "(a) GENERAL RULE.—For purposes of applying the provisions of

this subtitle which relate to employee fringe benefits— "(1) the S corporation shall be treated as a partnership, and "(2) any 2-percent shareholder of the S corporation shall be treated as a partner of such partnership. "(b) 2-PERCENT SHAREHOLDER DEFINED.—For purposes of this section, the term '2-percent shareholder' means any person who owns (or is considered as owning within the meaning of section 318) on any day during the taxable year of the S corporation more than 2 percent of the outstanding stock of such corporation or stock possessing more than 2 percent of the total combined voting power of all stock of such corporation. 26 USC 1373.

"SEC. 1373. FOREIGN INCOME. "(a) S CORPORATION TREATED AS PARTNERSHIP, ETC.—For purposes

26 USC 901, 951. of subparts A and F of part III, and part V, of subchapter N (relating 26 USC 999. to income from sources without the United States)— "(1) an S corporation shall be treated as a partnership, and "(2) the shareholders of such corporation shall be treated as partners of such partnership. "(b) RECAPTURE OF OVERALL FOREIGN LOSS.—For purposes of section 904(f) (relating to recapture of overall foreign loss), the making

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Page:United States Statutes at Large Volume 96 Part 2.djvu/321

 PUBLIC LAW 97-354—OCT. 19, 1982

96 STAT. 1683

or termination of an election to be treated as an S corporation shall be treated as a disposition of the business. "SEC. 1374. TAX IMPOSED ON CERTAIN CAPITAL GAINS.

26 USC 1374.

"(a) GENERAL RULE.—If for a taxable year of an S corporation— "(1) the net capital gain of such corporation exceeds $25,000, and exceeds 50 percent of its taxable income for such year, and "(2) the taxable income of such corporation for such year exceeds $25,000, there is hereby imposed a tax (computed under subsection (b)) on the income of such corporation. "(b) AMOUNT OF TAX.—The tax imposed by subsection (a) shall be the lower of— "(1) an amount equal to the tax, determined as provided in section 1201(a), on the amount by which the net capital gain of the corporation for the taxable year exceeds $25,000, or "(2) an amount equal to the tax which would be imposed by section 11 on the taxable income of the corporation for the taxable year if the corporation were not an S corporation. No credit shall be allowable under part IV of subchapter A of this chapter (other than under section 39) against the tax imposed by 26 USC 31. subsection (a). "(c) EXCEPTIONS.—

"(1) IN GENERAL.—Subsection (a) shall not apply to an S corporation for any taxable year if the election under section 1362(a) which is in effect with respect to such corporation for Ante, p. 1672. such taxable year has been in effect for the 3 immediately preceding taxable years. "(2) NEW CORPORATIONS.—Subsection (a) shall not apply to an S corporation if— "(A) it (and any predecessor corporation) has been in existence for less than 4 taxable years, and "(B) an election under section 1362(a) has been in effect with respect to such corporation for each of its taxable years. "(3) PROPERTY WITH SUBSTITUTED BASIS.—If—

"(A) but for paragraph (1) or (2), subsection (a) would apply for the taxable year, "(B) any long-term capital gain is attributable to property acquired by the S corporation during the period beginning 3 years before the first day of the taxable year and ending on the last day of the taxable year, and "(C) the basis of such property is determined in whole or in part by reference to the basis of any property in the hands of another corporation which was not an S corporation throughout all of the period described in subparagraph (B) before the transfer by such other corporation and during which such other corporation was in existence, then subsection (a) shall apply for the taxable year, but the amount of the tax determined under subsection (b) shall not exceed a tax, determined as provided in section 1201(a), on the net capital gain attributable to property acquired as provided in subparagraph (B) and having a basis described in subparagraph (C). "(d) DETERMINATION OF TAXABLE INCOME.—For purposes of subsec-

tions (a)(2) and (b)(2), taxable income of the corporation shall be determined under section 63(a) without regard to—

97-200 O - 8 4 - p t. 2

11: QL3

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Page:United States Statutes at Large Volume 96 Part 2.djvu/322

 96 STAT. 1684

26 USC 241.

26 USC 1375.

26 USC 341.

PUBLIC LAW 97-354—OCT. 19, 1982 "(1) the deduction allowed by section 172 (relating to net operating loss deduction), and "(2) the deductions allowed by part VIII of subchapter B (other than the deduction allowed by section 248, relating to organization expenditures).

"SEC. 1375. TAX IMPOSED WHEN PASSIVE INVESTMENT INCOME OF CORPORATION HAVING SUBCHAPTER C EARNINGS AND PROFITS EXCEEDS 25 PERCENT OF GROSS RECEIPTS.

"(a) GENERAL RULE.—If for the taxable year an S corporation has— "(1) subchapter C earnings and profits at the close of such taxable year, and "(2) gross receipts more than 25 percent of which are passive investment income, then there is hereby imposed a tax on the income of such corporation for such taxable year. Such tax shall be computed by multiplying the excess net passive income by the highest rate of tax specified in section 11(b). "(b) DEFINITIONS.—For purposes of this section— "(1) EXCESS NET PASSIVE INCOME.—

Ante, p. 1683.

Ante, p. 1672.

"(A) IN GENERAL.—Except as provided in subparagraph (B), the term 'excess net passive income' means an amount which bears the same ratio to the net passive income for the taxable year as— "(i) the amount by which the passive investment income for the taxable year exceeds 25 percent of the gross receipts for the taxable year, bears to "(ii) the passive investment income for the taxable year. "(B) LIMITATION.—The amount of the excess net passive income for any taxable year shall not exceed the corporation's taxable income for the taxable year (determined in accordance with section 1374(d)). "(2) NET PASSIVE INCOME.—The term 'net passive income' means— "(A) passive investment income, reduced by "(B) the deductions allowable under this chapter which are directly connected with the production of such income (other than deductions allowable under section 172 and part VIII of subchapter B). "(3) PASSIVE INVESTMENT INCOME; ETC.—The terms 'subchapter C earnings and profits', 'passive investment income', and 'gross receipts' shall have the same respective meanings as when used in paragraph (3) of section 1362(d). "(c) SPECIAL RULES.— "(1) DISALLOWANCE OF CREDIT.—No

26 USC 31.

credit shall be allowed under part IV of subchapter A of this chapter (other than section 39) against the tax imposed by subsection (a). "(2) COORDINATION WITH SECTION 1374.—If any gain— "(A) is taken into account in determining passive income for purposes of this section, and "(B) is taken into account under section 1374, the amount of such gain taken into account under section 1374 shall be reduced by the portion of the excess net passive income for the taxable year which is attributable (on a pro rata basis) to such gain.

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Page:United States Statutes at Large Volume 96 Part 2.djvu/323

 PUBLIC LAW 97-354—OCT. 19, 1982

96 STAT. 1685

"PART IV—DEFINITIONS; MISCELLANEOUS "Sec. 1377. Definitions and special rule. "Sec. 1378. Taxable year of S corporation. "Sec. 1379. Transitional rules on enactment. "SEC. 1377, DEFINITIONS AND SPECIAL RULE.

26 USC 1377.

"(a) PRO RATA SHARE.—For purposes of this subchapter— "(1) IN GENERAL.—Except as provided in paragraph (2), each shareholder's pro rata share of any item for any taxable year shall be the sum of the amounts determined with respect to the shareholder— "(A) by assigning an equal portion of such item to each day of the taxable year, and (B) then by dividing that portion pro rata among the shares outstanding on such day. "(2) ELECTION TO TERMINATE YEAR.—Under regulations prescribed by the Secretary, if any shareholder terminates his interest in the corporation during the taxable year and all persons who are shareholders during the taxable year agree to the application of this paragraph, paragraph (1) shall be applied as if the taxable year consisted of 2 taxable years the first of which ends on the date of the termination. "(b) POST-TERMINATION TRANSITION PERIOD.—

"(1) IN GENERAL.—For purposes of this subchapter, the term 'post-termination transition period' means— "(A) the period beginning on the day after the last day of the corporation's last taxable year as an S corporation and ending on the later of— "(i) the day which is 1 year after such last day, or "(ii) the due date for filing the return for such last year as an S corporation (including extensions), and "(B) the 120-day period beginning on the date of a determination that the corporation's election under section 1362(a) had terminated for a previous taxable year. "(2) DETERMINATION DEFINED.—For purposes of paragraph (1), the term 'determination' means— "(A) a court decision which becomes final, "(B) a closing agreement, or "(C) an agreement between the corporation and the Secretary that the corporation failed to qualify as an S corporation. "(c) MANNER OF MAKING ELECTIONS, ETC.—Any election under this subchapter, and any revocation under section 1362(d)(l), shall be made in such manner as the Secretary shall by regulations prescribe. "SEC. 1378. TAXABLE YEAR OF S CORPORATION. "(a) GENERAL RULE.—For purposes of this subtitle—

"(1) an S corporation shall not change its taxable year to any accounting period other than a permitted year, and "(2) no corporation may make an election under section 1362(a) for any taxable year unless such taxable year is a permitted year, "(b) PERMITTED YEAR DEFINED.—For purposes of this section, the term 'permitted year' means a taxable year which— "(1) is a year ending December 31, or

^"^^' P '^^'^^• 26 USC 1378.

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Rh daughter, and how can we invite more company? But where is Mrs. Manily? I would like to talk to her," said Mrs. Bobbsey, who was always interested in those who worked to help the poor.

Nan and Flossie brought their mother into the next car to see the matron. We told in our book, "The Bobbsey Twins in the Country," how good a matron this Mrs. Manily was, and how little Nellie, the cash girl, one of the visitors at the Fresh Air Camp, was taken sick while there, and had to go to the hospital tent. It was this little girl that Nan wanted to have enjoy the seashore, and perhaps visit Aunt Emily.

Mrs. Manily was very glad to see Mrs. Bobbsey, for the latter had helped with money and clothing to care for the poor children at the Meadow Brook Camp.

"Why, how pleasant to meet a friend in traveling!" said the matron as she shook hands with Mrs. Bobbsey. "You are all off for the seashore, the girls tell me."

"Yes," replied Mrs. Bobbsey. "One month at the beach, and we must then hurry home to


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Page:United States Statutes at Large Volume 96 Part 2.djvu/324

 96 STAT. 1686

PUBLIC LAW 97-354—OCT. 19, 1982 "(2) is any other accounting period for which the corporation establishes a business purpose to the satisfaction of the Secretary.

"(c) EXISTING S CORPORATIONS REQUIRED To U S E PERMITTED YEAR AFTER 50-PERCENT SHIFT IN OWNERSHIP.—

"(1) IN GENERAL.—A corporation which is an S corporation for a taxable year which includes December 31, 1982, shall not be treated as an S corporation for any subsequent taxable year beginning after the first day on which more than 50 percent of the stock is newly owned stock unless such subsequent taxable year is a permitted year. "(2) NEWLY OWNED STOCK.—For purposes of paragraph (1), the

stock held by any person on any day shall be treated as newly owned stock to the extent that— "(A) the percentage of the stock of such corporation owned by such person on such day, exceeds "(B) the percentage of the stock of such corporation owned by such person on December 31, 1982. "(3) STOCK ACQUIRED BY REASON OF DEATH, GIFT FROM FAMILY MEMBER, ETC.—

"(A) IN GENERAL.—For purposes of paragraph (2), if— "(i) a person acquired stock in the corporation after December 31, 1982, and "(ii) such stock was acquired by such person— "(I) by reason of the death of a qualified transferor, "(II) by reason of a gift from a qualified transferor who is a member of such person's family, or "(III) by reason of a qualified buy-sell agreement from a qualified transferor (or his estate) who was a member of such person's family, then such stock shall be treated as held on December 31, 1982, by the person described in clause (i). "(B) QUALIFIED TRANSFEROR.—For purposes of subparagraph (A), the term 'qualified transferor' means a person— "(i) who held the stock in the corporation (or predecessor stock) on December 31, 1982, or "(ii) who acquired the stock in an acquisition which meets the requirements of subparagraph (A). "(C) FAMILY.—For purposes of subparagraph (A), the term 'family' has the meaning given such term by section 267(c)(4). "(D) QUALIFIED BUY-SELL AGREEMENT.—For purpOSeS of

subparagraph (A), the term 'qualified buy-sell agreement' means any agreement which— "(i) has been continuously in existence since September 28, 1982, and "(ii) provides that on the death of any party to such agreement, the stock in the S corporation held by such party will be sold to surviving parties to such agreement who were parties to such agreement on September 28, 1982. 26 USC 1379.

"SEC. 1379. TRANSITIONAL RULES ON ENACTMENT.

Ante, p. 1669.

"(a) OLD ELECTIONS.—Any election made under section 1372(a) (as in effect before the enactment of the Subchapter S Revision Act of 1982) shall be treated as an election made under section 1362.

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 PUBLIC LAW 97-354—OCT. 19, 1982

96 STAT. 1687

"(b) REFERENCES TO PRIOR LAW INCLUDED.—In applying this subchapter to any taxable year beginning after December 31, 1982, any reference in this subchapter to another provision of this subchapter shall, to the extent not inconsistent with the purposes of this subchapter, include a reference to the corresponding provision as in effect before the enactment of the Subchapter S Revision Act of 1982. "(c) DISTRIBUTIONS OF UNDISTRIBUTED TAXABLE INCOME.—If a corporation was an electing small business corporation for the last preenactment year, subsections (f) and (d) of section 1375 (as in effect before the enactment of the Subchapter S Revision Act of 1982) shall continue to apply with respect to distributions of undistributed taxable income for any taxable year beginning before January 1, 1983. "(d) CARRYFORWARDS.—If a corporation was an electing small business corporation for the last preenactment year and is an S corporation for the 1st postenactment year, any carryforward to the 1st postenactment year which arose in a taxable year for which the corporation was an electing small business corporation shall be treated as arising in the 1st postenactment year. "(e)

PREENACTMENT AND POSTENACTMENT YEARS DEFINED.—For

purposes of this subsection— "(1) LAST PREENACTMENT YEAR.—The term 'last preenactment year' means the last taxable year of a corporation which begins before January 1, 1983. "(2) 1ST POSTENACTMENT YEAR.—The term '1st postenactment year' means the 1st taxable year of a corporation which begins after December 31, 1982." SEC. 3. S CORPORATION TREATED LIKE PARTNERSHIP FOR PURPOSES OF CERTAIN PROVISIONS. (a) DEPLETION IN THE CASE OF OIL AND GAS WELLS (SECTION

613A).—Subsection (c) of section 613A (relating to exemption for independent producers and royalty owners) is amended by adding at the end thereof the following new paragraph: "(13) SUBCHAPTER S CORPORATIONS.— "(A) COMPUTATION OF DEPLETION ALLOWANCE AT SHAREHOLDER LEVEL.—In the case of an S corporation, the allow-

ance for depletion with respect to any oil or gas property shall be computed separately by each shareholder. "(B) ALLOCATION OF BASIS.—The S corporation shall allocate to each shareholder his pro rata share of the adjusted basis of the S corporation in each oil or gas property held by the S corporation. The allocation shall be made as of the later of the date of acquisition of the property by the S corporation, or the first day of the first taxable year of the S corporation to which the Subchapter S Revision Act of 1982 applies. Each shareholder shall separately keep records of his share of the adjusted basis in each oil and gas property of the S corporation, adjust such share of the adjusted basis for any depletion taken on such property, and use such adjusted basis each year in the computation of his cost depletion or in the computation of his gain or loss on the disposition of such property by the S corporation. In the case of any distribution of oil or gas property to its shareholders by the S corporation, the corporation's adjusted basis in the property shall be an amount equal to the sum

26 USC 613A.

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Page:United States Statutes at Large Volume 96 Part 2.djvu/326

 96 STAT. 1688

PUBLIC LAW 97-354—OCT. 19, 1982 of the shareholders' adjusted bases in such property, as determined under this subparagraph. "(C) COORDINATION WITH TRANSFER RULE OF PARAGRAPH

(9).—For purposes of paragraph (9)— "(i) an S corporation shall be treated as a partnership, and the shareholders of the S corporation shall be treated as partners, and "(ii) an election by a C corporation to become an S corporation shall be treated as a transfer of all its properties effective on the day on which such election first takes effect. "(D) COORDINATION WITH TRANSFER RULE OF PARAGRAPH

(10).—For purposes of paragraphs (9) and (10), if an S corporation becomes a C corporation, each shareholder shall be treated as having transferred to such corporation his pro rata share of all the assets of the S corporation." (b) WINDFALL PROFIT TAX.—

26 USC 4996.

(1) Paragraph (1) of section 4996(a) (defining producer) is amended by adding at the end thereof the following new subparagraph: "(C) SUBCHAPTER S CORPORATIONS.—

Ante, p. 1685. 26 USC 4992.

"(i) IN GENERAL.—If (but for this subparagraph) an S corporation would be treated as a producer of any crude oil— "(I) such crude oil shall be allocated among the shareholders of such corporation, and "(II) any shareholder to whom such crude oil is allocated (and not the S corporation) shall be treated as the producer of such crude oil. "(ii) ALLOCATION.—Except to the extent otherwise provided in regulations, any allocation under clause (i)(1) shall be determined on the basis of the shareholder's pro rata share (as determined under section 1377(a)) of the income of the corporation." (2) Section 4992 (relating to independent producer oil) is amended by adding at the end thereof the following new subsection: "(f) S CORPORATION TREATED AS PARTNERSHIP.—For purposes of

subsections (d) and (e)— "(1) an S corporation shall be treated as a partnership, and "(2) the shareholders of the S corporation shall be treated as partners of such partnership." (c) OPTIONAL WRITEOFF OF CERTAIN TAX PREFERENCES (SECTION

Ante, p. 417.

58(i)).(j) Subparagraph (C) of section 58(i)(4) (defining nonlimited partnership intangible drilling costs) is amended to read as follows: "(C) NONUMITED INTANGIBLE DRILLING COSTS.—For pur-

Ante, p. 411.

poses of this paragraph, the term 'nonlimited intangible drilling costs' means any qualified expenditure described in paragraph (2)(C) of an individual which is not allocable to a limited business interest (as defined in section 55(e)(8)(C)) of such individual." (2) Subparagraph (D) of section 58(i)(5) is amended— (A) by adding at the end thereof the following new sentence: "A similar rule shall apply in the case of an S corporation and its shareholders.', and

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96 STAT. 1689

(B) by striking out "PARTNERS" in the subparagraph heading and inserting in lieu thereof "PARTNERS AND SHAREHOLDERS OF S CORPORATIONS".

(3) The paragraph heading for paragraph (4) of section 58(i) is amended by striking out "INTEREST AS LIMITED PARTNER" and inserting in lieu thereof "LIMITED BUSINESS INTEREST".

Ante, p. 417.

(d) USED PROPERTY FOR PURPOSES OF INVESTMENT CREDIT (SECTION

48(c)).—Subparagraph (D) of section 48(c)(2) (relating to partnerships) is amended— (1) by adding at the end thereof the following new sentence: "A similar rule shall apply in the case of an S corporation and its shareholders.", and (2) by striking out "PARTNERSHIPS" in the subparagraph heading and inserting in lieu thereof "PARTNERSHIPS AND S

26 USC 48.

CORPORATIONS". (e) INCOME FROM DISCHARGE OF INDEBTEDNESS (SECTION

108).— Paragraph (6) of section 108(d) (relating to application of section at partner level) is amended to read as follows:

26 USC 108.

"(6) SUBSECTIONS (a), (b), AND (C) TO BE APPLIED AT PARTNER LEVEL OR S CORPORATION SHAREHOLDER LEVEL.—In the case of a

partnership, subsections (a), (b), and (c) shall be applied at the partner level. In the case of an S corporation, subsections (a), (b), and (c) shall be applied at the shareholder level." (f) ELECTION TO EXPENSE CERTAIN DEPRECIABLE BUSINESS ASSETS (SECTION 179).—Paragraph (8) of section 179(d) (relating to dollar

limitation in the case of partnerships) is amended— (1) by adding at the end thereof the following new sentence: "A similar rule shall apply in the case of an S corporation and its shareholders.", and (2) by striking out "PARTNERSHIPS" in the paragraph heading and inserting in lieu thereof "PARTNERSHIPS AND S

95 Stat. 219. ^" ^^^ ^' ^•

CORPORATIONS". (g) AMORTIZATION OF REFORESTATION EXPENDITURES (SECTION

194).—Subparagraph (B) of section 194(b)(2) (relating to partnerships) is amended— (1) by adding at the end thereof the following new sentence: "A similar rule shall apply in the case of an S corporation and its shareholders.", and (2) by striking out "PARTNERSHIPS" in the subparagraph heading and inserting in lieu thereof "PARTNERSHIPS AND S

26 USC 194.

CORPORATIONS". (h) TREATMENT OF LOSSES AND UNPAID EXPENSES AND INTEREST IN THE CASE OF TRANSACTIONS BETWEEN S CORPORATIONS AND CERTAIN RELATED ENTITIES (SECTION 267(b)).—

(1) Subsection (b) of section 267 (relating to losses, expenses, and interest with respect to transactions between related taxpayers) is amended by adding at the end thereof the following new paragraphs: "(10) An S corporation and a partnership if the same persons own— "(A) more than 50 percent in value of the outstanding stock of the S corporation, and "(B) more than 50 percent of the capital interest, or the profits interest, in the partnership; "(11) An S corporation and another S corporation if the same persons own more than 50 percent in value of the outstanding stock of each corporation; or

26 USC 267.

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