text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/971

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 923

"(I) the aggregate amount earned on all nonpurpose obligations (other than investments attributable to an excess described in this clause), over "(II) the amount which would have been earned if all nonpurpose obligations were invested at a rate equal to the yield on the issue, plus "(ii) any income attributable to the excess described in clause (i), is paid to the United States by the issuer in accordance with the requirements of subparagraph (E). "(E) DUE DATE OF PAYMENTS UNDER SUBPARAGRAPH (D).—

It

The amount which is required to be paid to the United States by the issuer shall be paid in installments which are made at least once every 5 years. Each installment shall be in an amount which insures that 90 percent of the amount described in subparagraph (D) with respect to the issue at the time payment of such installment is required will have been paid to the United States. The last installment shall be made no later than 30 days after the day on which the last obligation of the issue is redeemed and shall be in an amount sufficient to pay the remaining balance of the amount described in subparagraph (D) with respect to such issue. "(F) SPECIAL RULES FOR APPLYING SUBPARAGRAPH (D).—

"(i) IN GENERAL.—In determining the aggregate amount earned on nonpurpose obligations for purposes of subparagraph (D)— "(I) any gain or loss on the disposition of a nonpurpose obligation shall be taken into account, and "(II) unless the issuer otherwise elects, any amount earned on a bona fide debt service fund shall not be taken into account if the gross earnings on such fund for the bond year is less than $100,000. "(ii) TEMPORARY INVESTMENTS.—Under regulations prescribed by the Secretary, an issue shall, for purposes of this paragraph, be treated as meeting the requirements of subparagraph (D) if the gross proceeds of such issue are expended for the governmental purpose for which the bond was issued by no later than the day which is 6 months after the date of issuance of such issue. Gross proceeds which are held in a bona fide debt service fund shall not be considered gross proceeds for purposes of this clause only.

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"(G) EXEMPTION FROM GROSS INCOME OF SUM REBATED.—

Gross income does not include the sum described in subparagraph (D). Notwithstanding any other provision of this title, no deduction shall be allowed for any amount paid to the United States under subparagraph (D). "(H) DEFINITIONS.—For purposes of this paragraph— "(i) NONPURPOSE OBLIGATIONS.—The term 'nonpurpose obligation' means any security (within the meaning of subparagraph (A) or (B) of section 165(g)(2)) or any obligation not described in subsection (a) which— "(I) is acquired with the gross proceeds of an issue, and

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/972

 98 STAT. 924

PUBLIC LAW 98-369—JULY 18, 1984 "(11) is not acquired in order to carry out the governmental purpose of the issue, "(ii) GROSS PROCEEDS.—The gross proceeds of an issue

Ante, pp. 536, 538.

26 USC 103A. 26 USC 103.

26 USC 103 note.

include— "(I) amounts received (including repayments of principal) as a result of investing the original proceeds of the issue, and "(II) amounts used to pay debt service on the issue, "(iii) YIELD.—The yield on the issue shall be determined on the basis of the issue price (within the meaning of section 1273 or 1274)." (b) CONFORMING AMENDMENTS.—

(1) Paragraph (1) of section 103A(i) (relating to arbitrage) is amended by striking out "section 103(c)" and inserting in lieu thereof "section 103(c) (other than section 103(c)(6))". (2) Subsection (c) of section 103 is amended by striking out "Bonds" in the heading. (3) Paragraph (1) of section 103(c) is amended by inserting "to arbitrage bonds" in the heading. (c) EFFECTIVE D A T E. —

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply with respect to bonds issued after December 31, 1984. (2) EXCEPTION.—The amendments made by this section shall not apply to obligations issued by the Essex County Port Authority of New York and New Jersey as part of an issue approved by Essex County, New Jersey, on July 7, 1981, and approved by the State of New Jersey on December 31, 1981. The aggregate face amount of bonds to which this paragraph applies shall not exceed $350,000,000. 26 USC 103 note.

SEC. 625. STUDENT LOAN BONDS. (a) ARBITRAGE REGULATIONS.—

Ante, p. 922.

Post, p. 926.

(1) IN GENERAL.—The Secretary shall prescribe regulations which specify the circumstances under which a qualified student loan bond shall be treated as an arbitrage bond for purposes of section 103 of the Internal Revenue Code of 1954. Such regulations may provide that— (A) paragraphs (4) and (5) of section 103(c) of such Code shall not apply, and (B) rules similar to section 103(c)(6) shall apply, to qualified student loan bonds. (2) DEFINITIONS.—For purposes of this subsection— (A) QUALIFIED STUDENT LOAN BOND.—The term 'qualified student loan bond' has the meaning given to such term by section 103(o)(3) of the Internal Revenue Code of 1954 (as amended by this Act). (B) ARBITRAGE BOND.—The term "arbitrage bond" has the meaning given to such term by section 103(c)(2). (3) EFFECTIVE DATE.—

(A) IN GENERAL.—Except as otherwise provided in this paragraph, any regulations prescribed by the Secretary under paragraph (1) shall apply to obligations issued after the qualified date. (B) QUALIFIED DATE.—

—

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license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/973

 PUBLIC LAW 98-369—JULY 18, 1984 (i) IN GENERAL.—For purposes of this paragraph, the term "qualified date" means the earlier of— (I) the date on which the Higher Education Act of 1965 expires, or (II) the date, after the date of enactment of this Act, on which the Higher Education Act of 1965 is reauthorized. (ii) PUBLICATiON OF REGULATIONS.—Notwithstanding clause (i), the qualified date shall not be a date which is prior to the date that is 6 months after the date on which the regulations prescribed under paragraph (1) are published in the Federal Register. (C) REFUNDING OBLIGATIONS.—Regulations prescribed by the Secretary under paragraph (1) shall not apply to any obligation issued exclusively to refund any qualified student loan bond which was issued before the qualified date, except that the requirements of subparagraphs (A) and (B) of section 626(b)(4) of this Act must be met with respect to such refunding. (D) FULFILLMENT OF COMMITMENTS.—Regulations prescribed by the Secretary under paragraph (1) shall not apply to any obligations which are needed to fulfill written commitments to acquire or finance student loans which are originated after June 30, 1984, and before the qualified date, but only if— (i) such commitments are binding on the qualified date, and (ii) the amount of such commitments is consistent with practices of the issuer which were in effect on March 15, 1984, with respect to establishing secondary markets for student loans.

98 STAT. 925

20 USC 1001 note.

Federal Register, publication.

Post, p. 926.

(b) ARBITRAGE LIMITATION ON STUDENT LOAN BONDS WHICH ARE NOT QUALIFIED STUDENT LOAN BONDS.—Under regulations pre-

scribed by the Secretary of the Treasury or his delegate, any student loan bond (other than a qualified student loan bond) issued after December 31, 1985, shall be treated as an obligation not described in subsection (a)(1) or (2) of section 103 of the Internal Revenue Code of 1954 unless the issue of which such obligation is a part meets requirements similar to those of sections 103(c)(6) and 103A(i) of such Code.

Ante, p. 922.

(c) ISSUANCE OF STUDENT LOAN BONDS WHICH ARE NOT TAX-

EXEMPT.—Any issuer who may issue obligations described in section 103(a) of the Internal Revenue Code of 1954 may elect to issue student loan bonds which are not described in such section 103(a) of such Code without prejudice to— (1) the status of any other obligations issued, or to be issued, by such issuer as obligations described in section 103(a) of such Code, or (2) the status of the issuer as an organization exempt from taxation under such Code. (d) FEDERAL EXECUTIVE BRANCH JURISDICTION OVER TAX-EXEMPT

STATUS.—For purposes of Federal law, any determination by the executive branch of the Federal Government of whether interest on any obligation is exempt from taxation under the Internal Revenue Code of 1954 shall be exclusively within the jurisdiction of the 26 USC 1 et seq. Department of the Treasury. (e) STUDY ON TAX-EXEMPT STUDENT LOAN BONDS.—

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/974

 98 STAT. 926

20 USC 1001 note.

PUBLIC LAW 98-369—JULY 18, 1984 (1) IN GENERAL.—The Comptroller General of the United States and the Director of the Congressional Budget Office, shall conduct studies of^ (A) the appropriate role of tax-exempt bonds which are issued in connection with the guaranteed student loan program and the PLUS program established under the Higher Education Act of 1965, and (B) the appropriate arbitrage rules for such bonds. (2) REPORT.—The Comptroller General of the United States and the Director of the Congressional Budget Office, shall submit to the Committee on Finance and the Committee on Labor and Human Resources of the Senate and the Committee on Ways and Means and the Committee on Education and Labor of the House of Representatives reports on the studies conducted under paragraph (1) by no later than 9 months after the date of enactment of this Act. PART III—OTHER RESTRICTIONS

Ante, p. 926.

SEC. 626. DENIAL OF TAX EXEMPTION TO CONSUMER LOAN BONDS. (a) IN GENERAL.—Section 103 (relating to interest on certain governmental obligations) is amended by adding at the end thereof the following new subsection: "(o) CONSUMER LOAN BONDS.— "(1) DENIAL OF TAX EXEMPTION.—For

20 USC 1001 note.

purposes of this title, any consumer loan bond shall be treated as an obligation which is not described in subsection (a). "(2) CONSUMER LOAN BONDS.—For purposes of this subsection— "(A) IN GENERAL.—The term 'consumer loan bond' means any obligation which is issued as part of an issue all or a significant portion of the proceeds of which are reasonably expected to be used directly or indirectly to make or finance loans (other than loans described in subparagraph (C)) to persons who are not exempt persons (within the meaning of subsection (b)(3)). "(B) EXCLUDED OBLIGATIONS.—The term 'consumer loan bond' shall not include any— "(i) qualified student loan bond, "(ii) industrial development bond, or "(iii) qualified mortgage bond or qualified veterans' mortgage bond. "(C) EXCLUDED LOANS.—A loan is described in this subparagraph if the loan— "(i) enables the borrower to finance any governmental tax or assessment of general application for an essential governmental function, or "(ii) is used to acquire or carry nonpurpose obligations (within the meaning of subsection (c)(6)(G)(i)). "(3) QUALIFIED STUDENT LOAN BONDS.—For purposes of this subsection, the term 'qualified student loan bond' means any obligation which is issued as part of an issue all or a major portion of the proceeds of which are reasonably expected to be used directly or indirectly to make or finance student loans under a program of general application to which the Higher Education Act of 1965 applies if—

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/975

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 927

"(A) limitations are imposed under the program on— "(i) the maximum amount of loans outstanding to any student, and "(ii) the maximum rate of interest payable on any loan, "(B) the loans are directly or indirectly guaranteed by the Federal Government, . F "(C) the financing of loans under the program is not limited by Federal law to the proceeds of obligations the interest on which is exempt from taxation under this title, and "(D) special allowance payments under section 438 of the Higher Education Act of 1965— 20 USC 1087-1. "(i) are authorized to be paid with respect to loans made under the program, or "(ii) would be authorized to be made with respect to loans under the program if such loans were not financed with the proceeds of obligations the interest on which is exempt from taxation under this title. Such term shall not include any obligation issued under a State program which discriminates on the basis of the location (in the United States) at which the educational institution is located." (b) EFFECTIVE DATES.— 26 USC 103 note. (1) IN GENERAL.—Except as otherwise provided in this subsection the amendment made by subsection (a) shall apply to obligations issued after the date of enactment of this Act. (2) EXCEPTIONS FOR CERTAIN STUDENT LOAN PROGRAMS.—

(A) IN GENERAL.—The amendments made by this section shall not apply to obligations issued by a program described in the following table to the extent the aggregate face amount of such obligations does not exceed the amount of allowable obligations specified in the following table with respect to such program: Amount of Allowable Obligations

Program Colorado Student Obligation Bond Authority Connecticut Higher Education Supplementary Loan Authority. District of Columbia ,. Illinois Higher Education Authority State of Iowa Louisiana Public Facilities Authority Maine Health and Higher Education Facilities Authority... Maryland Higher Education Supplemental Loan Program.. Massachusetts College Student Loan Authority Minnesota Higher Education Coordinating Board New Hampshire Higher Education and Health Facilities Authority. New York Dormitory Authority Pennsylvania Higher Education Assistance Agency Georgia Private Colleges and University Authority Wisconsin State Building Commission South Dakota Health and Educational Facilities Authority. (B)

PENNSYLVANIA

HIGHER

EDUCATION

$60 million $15.5 million $50 million $11 million $16 million $75 million $5 million $24 million $90 million $60 million $39 million $120 million $300 million $31 million $60 million $6 million ASSISTANCE

AGENCY.—Subparagraph (A) shall apply to obligations

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/976

 98 STAT. 928

Ante, p. 915. 26 USC 103A, P'*ec. 101.

PUBLIC LAW 98-369—JULY 18, 1984 issued by the Pennsylvania Higher Education Assistance Agency only if such obligations are issued solely for the purpose of refunding student loan bonds outstanding on March 15, 1984. (3) CERTAIN TAX-EXEMPT MORTGAGE SUBSIDY BONDS.—For purposes of applying section 103(o) of the Internal Revenue Code of 1954, the term "consumer loan bond" shall not include any mortgage subsidy bond (within the meaning of section 103A(b) of such Code) to which the amendments made by section 1102 of the Mortgage Subsidy Bond Tax Act of 1980 do not apply. (4) REFUNDING EXCEPTION.—The amendments made by this section shall not apply to any obligation or series of obligations the proceeds of which are used exclusively to refund obligations issued before March 15, 1984, except that— (A) the amount of the refunding obligations may not exceed 101 percent of the aggregate face amount of the refunded obligations, and (B) the maturity date of any refunding obligation may not be later than the date which is 17 years after the date on which the refunded obligation was issued (or, in the case of a series of refundings, the date on which the original obligation was issued). (5)

EXCEPTION

FOR CERTAIN ESTABLISHED PROGRAMS.—The

amendments made by this section shall not apply to any obligation substantially all of the proceeds of which are used to carry out a program established under State law which has been in effect in substantially the same form during the 30-year period ending on the date of enactment of this Act, but only if such proceeds are used to make loans or to fund similar obligations— (A) in the same manner in which, (B) in the same (or lesser) amount per participant, and (C) for the same purposes for which, such program was operated on March 15, 1984. This subparagraph shall not apply to obligations issued on or after March 15, 1987. (6) CERTAIN BONDS FOR RENEWABLE ENERGY PROPERTY.—The

26 USC 103 note.

amendments made by this section shall not apply to any obligations described in section 243 of the Crude Oil Windfall Profit Tax Act of 1980. SEC. 627. LIMITATIONS ON ACQUISITIONS OF LAND, EXISTING FACILITIES, ETC. (a) LIMITATION ON USE FOR LAND ACQUISITION.—Subsection (b) of

Ante, p. 921.

section 103 is amended by adding at the end thereof the following new paragraph: "(16) LIMITATION ON USE FOR LAND ACQUISITION.—

"(A) IN GENERAL.—Paragraphs (4), (5), and (6) shall not apply with respect to any obligation issued as part of an issue if^ "(i) any portion of the proceeds of such issue are to be used (directly or indirectly) for the acquisition of land (or an interest therein) to be used for farming purposes, or "(ii) 25 percent or more of the proceeds of such issue are to be used (directly or indirectly) for the acquisition of land not described in clause (i) (or an interest therein).

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text: Author:Isaac Kinley

title: Author:Isaac Kinley


text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/977

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 929

In the case of an obligation described in paragraph (5) (relating to industrial parks), clause (i) shall be applied by substituting '50 percent' for '25 percent'. "(B) EXCEPTION FOR FIRST-TIME FARMERS.—

"(i) IN GENERAL.—If the requirements of clause (ii) are met with respect to any land, subparagraph (A) shall not apply to such land, and paragraph (17) shall not apply to property located thereon or to property to be acquired within 1 year to be used in farming, but only to the extent of expenditures (financed with the proceeds of the issue) not in excess of $250,000. "(ii)

ACQUISITION BY FIRST-TIME FARMERS.—The

re-

quirements of this clause are met with respect to any land if^ "(I) such land is to be used for farming purposes, and "(II) such land is to be acquired by an individual who is a first-time farmer, who will be the principal user of such land, and who will materially and substantially participate on the farm of which such land is a part in the operation of such farm. "(iii) FIRST-TIME FARMER.—For purposes of this subparagraph, the term 'first-time farmer' means any individual if such individual has not at any time had any direct or indirect ownership interest in substantial farmland in the operation of which such individual materially participated. For purposes of this subparagraph, any ownership or material participation by an individual's spouse or minor child shall be treated as ownership and material participation by the individual. "(iv) FARM.—For purposes of this subparagraph, the term 'farm' has the meaning given such term by section 6420(c)(2). "(v) SUBSTANTIAL FARMLAND.—The term 'substantial farmland' means any parcel of land unless— "(I) such parcel is smaller than 15 percent of the median size of a farm in the county in which such parcel is located, and (II) the fair market value of the land does not at any time while held by the individual exceed $125,000. "(C) EXCEPTION FOR CERTAIN LAND ACQUIRED FOR ENVIRONMENTAL PURPOSES.—Any land acquired by a public agency

in connection with an airport, mass transit, or port development project which consists of facilities described in paragraph (4)(D) shall not be taken into account under subparagraph (A) if— "(i) such land is acquired for a noise abatement, wetland preservation, future use, or other public purpose, and "(ii) there is not other significant use of such land." (b) ACQUISITION OF EXISTING PROPERTY NOT PERMITTED.—Subsec-

tion (b) of section 103 (relating to industrial development bonds) is Ante, p. 928. amended by adding at the end thereof the following new paragraph: "(17)

ACQUISITION OF EXISTING PROPERTY NOT PERMITTED.—

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/978

 98 STAT. 930

PUBLIC LAW 98-369—JULY 18, 1984 ( V

"(A) IN GENERAL.—Paragraphs (4), (5), (6), and (7) shall not apply to any obligation issued as part of an issue if any portion of the proceeds of such issue is to be used for the acquisition of any property (or an interest therein) unless the first use of such property is pursuant to such acquisition. "(B) EXCEPTION FOR CERTAIN REHABILITATIONS.—Subpara-

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graph (A) shall not apply with respect to any building (and the equipment therefor) if^ "(i) the rehabilitation expenditures with respect to such building equals or exceeds "(ii) 15 percent of the portion of the cost of acquiring such building (and equipment) financed with the proceeds of the issue. A rule similar to the rule of the preceding sentence shall apply in the case of facilities other than a building except that clause (ii) shall be applied by substituting '100 percent' for '15 percent'. "(C) REHABIUTATION EXPENDITURES.—For purposes of this paragraph— "(i) IN GENERAL.—Except as provided in this subparagraph, the term 'rehabilitation expenditures' means any amount properly chargeable to capital account which is incurred by the person acquiring the building for property (or additions or improvements to property) in connection with the rehabilitation of a building. In the case of an integrated operation contained in a building before its acquisition, such term includes rehabilitating existing equipment in such building or replacing it with equipment having substantially the same function. For purposes of this clause, any amount incurred by a successor to the person acquiring the building or by the seller under a sales contract with such person shall be treated as incurred by such person. "(ii)

CERTAIN

EXPENDITURES

NOT INCLUDED.—The

term 'rehabilitation expenditures' does not include any expenditure described in section 48(g)(2)(B) (other than clause (i) thereof). "(iii) PERIOD DURING WHICH EXPENDITURES MUST BE

INCURRED.—The term 'rehabilitation expenditures' shall not include any amount which is incurred after the date 2 years after the later of^ "(I) the date on which the building was acquired, or "(II) the date on which the obligation was issued. "(D) SPECIAL RULE FOR CERTAIN PROJECTS.—In the case of a project involving 2 or more buildings, this paragraph shall be applied on a project basis." (c) U S E OF TAX-EXEMPT BONDS PROHIBITED FOR SKYBOXES, AIRPLANES, GAMBLING ESTABLISHMENTS, ETC.—Subsection (b) of section

Ante, p. 929. , J

103 (relating to industrial development bonds) is amended by adding at the end thereof the following new paragraph: "(18) No PORTION OF BONDS MAY BE ISSUED FOR SKYBOXES, AIRPLANES, GAMBLING ESTABLISHMENTS, ETC.—Paragraphs (4), (5),

and (6) shall not apply to any obligation issued as part of an issue if any portion of the proceeds of such issue is to be used to

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/979

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 931

provide any airplane, skybox, or other private luxury box, any health club facility, any facility primarily used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises." SEC. 628. MISCELLANEOUS INDUSTRIAL DEVELOPMENT BOND PROVISIONS. (a) CERTAIN RESTRICTIONS APPLY TO EXEMPTIONS NOT CONTAINED

IN INTERNAL REVENUE CODE OF 1954.— (1) Paragraph (1) of section 103(m) (relating to obligations 26 USC 103. exempt other than under this title) is amended by adding at the end thereof the following new sentence: *Tn the case of an obligation issued after December 31, 1983, such obligation shall not be treated as described in this paragraph unless the appropriate requirements of subsections (b), (c), (h), (k), (1), and (n) of this section and section 103A are met with respect to such obligation. For purposes of applying such requirements, a possession of the United States shall be treated as a State; except that clause (ii) of subsection (n)(4)(A) shall not apply." (2) Subparagraph (B) of section 103(m)(2) is amended to read as follows: ,,, r,,;,,,, "(B) is exempt from tax under this title without regard to any provision of law which is not contained in this title and which is not contained in a revenue Act." (3) Subsection (m) of section 103 is amended by adding at the end thereof the following new paragraph: "(3) EXCEPTIONS.—The following obligations shall be treated as obligations described in paragraph (1) (without regard to the second sentence thereof): "(A) Any obligation issued pursuant to the Northwest Power Act (16 U.S.C. 839d) as in effect on the date of the enactment of the Tax Reform Act of 1984. Ante, p. 494. "(B) Any obligation issued pursuant to section 608(6)(A) of Public Law 97-468. 45 USC 1207. "(C) Any obligation issued before June 19, 1984, under section 11(b) of the United States Housing Act of 1937." 42 USC I437i. (b) EXPANSION OF TAX-EXEMPT BOND FINANCED PROPERTY R E QUIRED To B E DEPRECIATED ON STRAIGHT-LINE BASIS.—

(1) IN GENERAL.—Subpar^raph (C) of section 168(fK12) (relating to limitations on property financed with tax-exempt bonds) is amended to read as follows:

26 USC 168.

"(C) EXCEPTION FOR PROJECTS FOR RESIDENTIAL RENTAL

PROPERTY.—Subparagraph (A) shall not apply to any recovery property which is placed in service in connection with projects for residentisd rental property financed by the proceeds of obligations described in section 103(b)(4)(A)."

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(2) CONFORMING AMENDMENT.—Paragraph (12) of section

168(f) is amended by striking out subparagraph (D) and by redesignating subparagraph (E) as subparagraph (D). (c) AGGREGATION OF ISSUES FOR SINGLE PROJECT.—Paragraph (6) of

section 103(b) (relating to exemption for small issues) is amended by adding at the end thereof the following new subparagraph: "(P) AGGREGATION OF ISSUES WITH RESPECT TO SINGLE

PROJECT.—For purposes of this paragraph, 2 or more issues part or all of which are to be used with respect to a single building, an enclosed shopping mall, or a strip of offices, stores, or warehouses using substantial common facilities

26 USC los.

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/980

 98 STAT. 932

PUBLIC LAW 98-369—JULY 18, 1984 shall be treated as 1 issue (and any person who is a principal user with respect to any of such issues shall be treated as a principal user with respect to the aggregated issue)." (d) DEFINITION OF RELATED PERSONS IN THE CASE OF PARTNER-

26 USC 103.

SHIPS.—Paragraph (13) of section 103(b) (relating to exception where bond held by substantial user) is amended by adding at the end thereof the following new sentence: "For purposes of this paragraph— "(A) a partnership and each of its partners (and their spouses and minor children) shall be treated as related persons, and "(B) an S corporation and each of its shareholders (and their spouses and minor children) shall be treated as related persons.". (e) RESIDENTIAL RENTAL PROPERTY MAY BE IN MIXED USE STRUC-

TURE.—Paragraph (4) of section 103(b) (relating to certain exempt activities) is amended by adding at the end thereof the following new sentence: "For purposes of subparagraph (A), any property shall not be treated as failing to be residential rental property merely because part of the building in which such property is located is used for purposes other than residential rental purposes." 26 USC 103 note.

(f) PUBLIC APPROVAL REQUIREMENT IN THE CASE OF PUBLIC AlRPORT.—If—

(1) the proceeds of any issue are to be used to finance a facility or facilities located on a public airport, and (2) the governmental unit issuing such obligations is the owner or operator of such airport, such governmental unit shall be deemed to be the only governmental unit having jurisdiction over such airport for purposes of subsection (k) of section 103 of the Internal Revenue Code of 1954 (relating to public approval for industrial development bonds). ^) REPEAL OF ADVANCE REFUNDING OF QUALIFIED PUBLIC FACILI-

TIES.—Paragraph (7) of section 103(b) (relating to advance refunding of qualified public facilities) is hereby repealed. 26 USC 103 note.

42 USC 5318.

^r

(h) SMALL ISSUE LIMIT IN CASE OF CERTAIN U R B A N DEVELOPMENT ACTION GRANTS.—In the case of any obligation issued on December

11, 1981, section 103(b)(6)(I) of the Internal Revenue Code of 1954 shall be applied by substituting "$15,000,000" for "$10,000,000" if— (1) such obligation is part of an issue, (2) substantially all of the proceeds of such issue are used to provide facilities with respect to which an urban development action grant under section 119 of the Housing and Community Development Act of 1974 was preliminarily approved by the Secretary of Housing and Urban Development on January 10, 1980, and (3) the Secretary of Housing and Urban Development determines, at the time such grant is approved, that the amount of such grant will equal or exceed 5 percent of the total capital expenditures incurred with respect to such facilities. SEC. 629. CERTAIN PUBLIC UTILITIES TREATED AS EXEMPTED PERSONS UNDER SECTION 103(b); SPECIAL RULES FOR CERTAIN RAILROADS. (a) CERTAIN PUBLIC UTILITIES.—For purposes of applying section

103(b)(3) of the Internal Revenue Code with respect to— (1) any obligations issued after the date of enactment of this Act, and

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/981

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 933

(2) any obligations issued after December 31, 1969, which were treated as obligations described in section 103(a) of such Code on the day on which such obligations were issued, the term "exempt person" shall include a regulated public utility having any customer service area within a State served by a public power authority which was required as a condition of a Federal Power Commission license specified by an Act of Congress enacted prior to the enactment of section 107 of the Revenue and Expenditure Control Act of 1968 (Public Law 90-364) to contract to sell 26 USC 103and power to one such utility and which is authorized by State law to notes. sell power to other such utilities, but only with respect to the purchase by any such utility and resale to its customers of any output of any electrical generation facility or any portion thereof or i, > • any use of any electrical transmission facility or any portion thereof financed by such power authority and owned by it or by such State, and provided that by agreement between such power authority and any such utility there shall be no markup in the resale price charged by such utility of that component of the resale price which represents the price paid by such utility for such output or use. (b) CERTAIN RAILROADS.—Section 103(b)(1) of the Internal Revenue Code of 1954 shall not apply to any obligation which is described in section 103(b)(6)(A) of such Code if— (1) substantially all of the proceeds of such obligation are used to acquire railroad track and right-of-way from a railroad involved in a title 11 or similar proceeding (within the meaning of section 368(a)(3)(A) of such Code), and (2) the Federal Railroad Administration provides joint financing for such acquisitions. (c) SPECIAL RULES FOR SUBSECTION (a).— Q) OBLIGATIONS SUBJECT TO CAP.—Any

obligation described in subsection (a) shall be treated as a private activity bond for purposes of section 103(n) of the Internal Revenue Code of 1954. Ante, p. 915. (2) LIMITATION ON AMOUNT OF OBLIGATIONS TO WHICH SUBSEC-

TION (a)(1) APPLIES—The aggregate amount of obligations to which subsection (a)(1) applies shall not exceed $625,000,000 (3) LIMITATION ON PURPOSES.—Subsection (a)(1) shall only apply to obligations issued as part of an issue substantially all the proceeds of which are used to provide 1 or more of the following: (A) Cable facilities. (B) Small hydroelectric facilities. (C) The acquisition of an interest in an electrical generating facility. SEC. 630. EXTENSION OF SMALL ISSUE INDUSTRIAL DEVELOPMENT BOND EXCEPTION. Subparagraph (N) of section 103(b)(6) (relating to termination date) is amended to read as follows: "(N) TERMINATION DATES.—

"(i) IN GENERAL.—This paragraph shall not apply to any obligation issued after December 31, 1986 (including any obligations issued to refund an obligation issued on or before such date). "(ii) OBLIGATIONS USED TO FINANCE MANUFACTURING

FACILITIES.—In the case of any obligation which is part of an issue substantially all of the proceeds of which are to be used to provide a manufacturing facility

,

26 USC 103.

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/982

 98 STAT. 934

PUBLIC LAW 98-369—JULY 18, 1984 ^y ^ '

clause (i) shall be applied by substituting '1988' for '1986'. "(iii) MANUFACTURING FACILITY.—For purposes of this subparagraph, the term 'manufacturing facility' means any facility which is used in the manufacturing or production of tangible personal property (including the processing resulting in a change in the condition of such property).

26 USC 103 note. SEC. 631. EFFECTIVE DATES. (a) PRIVATE ACTIVITY BOND CAP.—

Ante, p. 915.

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendment made by section 621 shall apply to obligations issued after December 31, 1983. (2)

INDUCEMENT RESOLUTION BEFORE JUNE 19,

1984.—The

amendment made by section 621 shall not apply to any issue of obligations if— (A) there was an inducement resolution (or other compa^ rable preliminary approval) for the issue before June 19, 1984, and (B) the issue is issued before January 1, 1985. (3) CERTAIN PROJECTS PREUMINARILY APPROVED BEFORE OCTO-

BER 19, 1983, GIVEN APPROVAL.—If—

Ante, p. 915.

(A) there was an inducement resolution (or other comparable preliminary approval) for a project before October 19, 1983, by any issuing authority, (B) a substantial user of such project notifies the issuing authority within 30 days after the date of the enactment of this Act that it intends to claim its rights under this paragraph, and (C) construction of such project began before October 19, 1983, or the substantial user was under a binding contract on such date to incur significant expenditures with respect to such project, such issuing authority shall allocate its share of the limitation Under section 103(n) of such Code for the calendar year during which the obligations were to be issued pursuant to such resolution (or other approval) first to such project. If the amount of obligations required by all projects which meet the requirements of the preceding sentence exceeds the issuing authority's share of the limitation under section 103(n) of such Code, priority under the preceding sentence shall be provided first to those projects for which substantial expenditures were incurred before October 19, 1983. If any issuing authority fails to meet the requirements of this paragraph, the limitation under section 103(n) of such Code for the issuing authority for the calendar year following such failure shall be reduced by the amount of obligations with respect to which such failure occurred. (3) EXCEPTION FOR CERTAIN BONDS FOR A CONVENTION CENTER

AND RESOURCE RECOVERY PROJECT.—In the case of any city, if— (A) the city council of such city authorized a feasibility study for a convention center on June 10, 1982, and (B) on November 4, 1983, a municipal authority acting for such city accepted a proposal for the construction of a facility that is capable of generating steam and electricity through the combustion of municipal waste.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/983

 PUBLIC LAW 98-369—JULY 18, 1984 the amendment made by section 621 shall not apply to any issue, issued during 1984, 1985, 1986, or 1987 and substantially all of the proceeds of which are to be used to finance the convention center (or access ramps and parking facilities therefor) described in subparagraph (A) or the facility described in subparagraph (B).

98 STAT. 935 Ante, p. 915.

r y^i

(b) PROPERTY FINANCED WITH TAX-EXEMPT BONDS REQUIRED TO B E DEPRECIATED ON STRAIGHT-LINE BASIS.—

(1) IN GENERAL.—Except as otherwise provided in this section, the amendments made by section 628(b) shall apply to property placed in service after December 31, 1983, to the extent such property is financed by the proceeds of an obligation (including a refunding obligation) issued after October 18, 1983.

Ante, p. 931.

(2) EXCEPTIONS.— (A) CONSTRUCTION OR BINDING AGREEMENT.—The

amendments made by section 628(b) shall not apply with respect to facilities— (i) the original use of which commences with the taxpayer and the construction, reconstruction, or rehabilitation of which began before October 19, 1983, or (ii) with respect to which a binding contract to incur significant expenditures was entered into before October 19, 1983.

^fit c. ii^ii

(B) REFUNDING.—

Is

If

(i) IN GENERAL.—Except as provided in clause (ii), in the case of property placed in service after December 31, 1983, which is financed by the proceeds of an obligation which is issued solely to refund another obligation which was issued before October 19, 1983, the amendments made by section 628(b) shall apply only with respect to an amount equal to the basis in such property which has not been recovered before the date such refunded obligation is issued. (ii) SIGNIFICANT EXPENDITURES.—In the case of facilities the original use of which commences with the taxpayer and with respect to which significant expenditures are made before January 1, 1984, the amendments made by section 628(b) shall not apply with respect to such facilities to the extent such facilities are financed by the proceeds of an obligation issued solely to refund another obligation which was issued before October 19, 1983. (C) FACILITIES.—In the case of an inducement resolution or other comparable preliminary approval adopted by an issuing authority before October 19, 1983, for purposes of applying subparagraphs (A)(i) and (B)(ii) with respect to obligations described in such resolution, the term "facilities" means the facilities described in such resolution.

- ft

i?'

'^

(c) OTHER PROVISIONS RELATING TO TAX-EXEMPT BONDS.—

(1) IN GENERAL.—Except as otherwise provided in this subtitle, the amendments made by this subtitle shall apply to obligations issued after December 31, 1983. (2) OBLIGATIONS INVESTED IN FEDERALLY INSURED DEPOSITS.—

Notwithstanding any other provision of this section, clause (ii) of section 103(h)(2)(B) of the Internal Revenue Code of 1954 (as Ante, p. 918. amended by this subtitle) shall apply to obligations issued after April 14, 1983; except that such clause shall not apply to any

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Page:United States Statutes at Large Volume 98 Part 1.djvu/984

 98 STAT. 936

PUBLIC LAW 98-369—JULY 18, 1984 obligation issued pursuant to a binding contract in effect on March 4, 1983. (3) EXCEPTIONS.— (A) CONSTRUCTION OR BINDING AGREEMENT.—The

Ante, p. 915.

amendments made by this subtitle (other than section 621) shall not apply to obligations with respect to facilities— (i) the original use of which commences with the taxpayer and the construction, reconstruction, or rehabilitation of which began before October 19, 1983, or (ii) with respect to which a binding contract to incur significant expenditures was entered into before October 19, 1983. (B) FACILITIES.—Subparagraph (C) of subsection (b)(2)(A) shall apply for purposes of subparagraph (A) of this paragraph.

(4) REPEAL OF ADVANCE REFUNDING OF QUALIFIED PUBLIC FA-

Ante, p. 931.

ciLiTiES.—The amendment made by section 628(g) shall apply to refunding obligations issued after the date of the enactment of this Act; except that if substantially all the proceeds of the refunded issue were used to provide airports or docks, such amendment shall only apply to refunding obligations issued after December 31, 1984. In the case of any refunding obligation with respect to the Alabama State Docks Department or the Dade County Florida Airport, the preceding sentence shall be applied by substituting "December 31, 1985" for "December 31, 1984". (d) PROVISIONS OF THIS SUBTITLE NOT TO APPLY TO CERTAIN PROP-

ERTY.—The amendments made by this subtitle shall not apply to any property (and shall not apply to obligations issued to finance such property) if such property is described in any of the following paragraphs: (1) Any property described in paragraph (5), (6), or (7) of Ante, p. 509. section 31(g) of this Act. (2) Any property described in paragraph (4), (8), or (17) of section 31(g) of this Act but only if the obligation is issued before January 1, 1985, and only if before June 19, 1984, the issuer had evidenced an intent to issue obligations exempt from taxation 26 USC 1 et seq. Under the Internal Revenue Code of 1954 in connection with such property. (3) Any property described in paragraph (3) of section 216(b) of 96 Stat. 470. the Tax Equity and Fiscal Responsibility Act of 1982. (4) Any solid waste disposal facility described in section 103(b)(4)(E) of the Internal Revenue Code of 1954 if— (A) a State public authority created pursuant to State legislation which took effect on June 18, 1973, took formal action before October 19, 1983, to commit development funds for such facility. (B) such authority issues obligations for any such facility before January 1, 1987, and (C) expenditures have been made for the development of any such facility before October 19, 1983. (e) DETERMINATION OF SIGNIFICANT EXPENDITURE.—

.

(1) IN GENERAL.—For purposes of this section, the term "significant expenditures" means expenditures which equal or exceed the lesser of— (A) $15,000,000, or _ (B) 20 percent of the estimated cost of the facilities.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/985

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 937

(2) CERTAIN GRANTS TREATED AS EXPENDITURES.—For purposes

of paragraph (1), the amount of any UDAG grant preUminarily approved on May 5, 1981, or April 4, 1983, shall be treated as an expenditure with respect to the facility for which such grant was so approved. if) EXCEPTIONS FOR CERTAIN OTHER AMENDMENTS.—If—

(1) there was an inducement resolution (or other comparable preliminary approval) for an issue before June 19, 1984, by any issuing authority, and (2) such issue is issued before January 1, 1985, the following amendments shall not apply: (A) the amendments made by section 623, Ante, p. 921. (B) the amendments made by subsections (a) and (b) of section 627 (except to the extent such amendments relate to Ante, p. 928. farm land), (C) in the case of a race track, the amendment made by section 627(c), and (D) the amendments made by section 628(c). Ante, p. 931. SEC. 632. MISCELLANEOUS EXCEPTIONS AND SPECIAL RULES. (a) EXCEPTION FROM PROVISIONS OTHER THAN ARBITRAGE AND FEDERAL GUARANTEES.—Notwithstanding any other provision of this

subtitle, the amendments made by this subtitle (other than by section 622 (relating to Federal guarantees) and section 623 (relating to arbitrage)) shall not apply to the following obligations: (1) Obligations issued with respect to any waste-to-energy facility authorized by official action on April 10, 1980 and with respect to which a subsequent agreement was signed between a city government and the Department of the Army on December 27, 1982, to jointly pursue construction and operation of such facility. (2) Obligations issued to finance a redevelopment program on 9 city blocks adjacent to a transit station but only if such program was approved on October 25, 1983. (3) Obligations issued pursuant to an inducement resolution adopted on August 8, 1978, for a redevelopment plan for which a redevelopment trust fund was established on September 7, 1977. (4) Obligations issued to finance a UDAG project which was preliminarily approved on December 29, 1982, and which received final approval on May 3, 1984. (5) Obligations issued to finance a parking garage pursuant to an inducement resolution adopted on March 9, 1984, in connection with a project for which a UDAG grant application was made on January 31, 1984. (6) Obligations which— (A) are issued to finance a downtown development project with respect to which an urban development action grant is made but only if such grant— (i) was preliminarily approved on November 3, 1983, and (ii) received final approval before June 1, 1984, and (B) are issued in connection with inducement resolutions that were adopted on December 21, 1982, July 5, 1983, and March 1, 1983, but only to the extent the aggregate face amount of such obligations does not exceed $34,000,000.

Ante, p. 918.

-^^i q s^r fc

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Page:United States Statutes at Large Volume 98 Part 1.djvu/986

 98 STAT. 938

PUBLIC LAW 98-369—JULY 18, 1984

(7) Obligations with respect to which an inducement resolution was adopted on March 5, 1984, for the purpose of acquiring existing airport facilities at more than 12 locations in 1 State but— (A) only if the Civil Aeronautics Board certifies that such transaction would reduce the amount of Federal subsidies provided under section 419 of the Airline Deregulation Act 49 USC app. of 1978, and 1389. (B) only to the extent the aggregate face amount of such obligations does not exceed $25,000,000. (8) Obligations described in subsection (b). (b) CERTAIN PARKING FACILITY BONDS.—For purposes of the Inter26 USC 1 et seq. nal Revenue Code of 1954, any obligation issued with respect to a parking facility approved by an agency of a county government on December 1, 1982, as part of an urban revitalization plan shall be treated as an obligation described in section 103(b)(4)(D) of such Code. (c) EXCEPTION TO CERTAIN BOND LIMITATIONS.—The amendments Ante, p. 915. made by section 621 (relating to the limitations on amount of private Ante, p. 926. activity bonds) and section 626(a) (relating to the prohibition on acquiring existing facilities) shall not apply to obligations issued before January 1, 1987, in connection with the Claymont, Delaware, regeneration plant of the Delaware Economic Development Authority, but only to the extent the aggregate face amount of such obligation does not exceed $30,000,000. (d) CERTAIN OBLIGATIONS TREATED AS NOT FEDERALLY GUARAN-

Ante, p. 918.

TEED.—For purposes of section 103(h) of the Internal Revenue Code of 1954, obligations (including refunding obligations) shall not be treated as federally guaranteed if— (A) such obligations are issued with respect to any facility, and (B) any obligation was issued on June 3, 1982 in the principal amount of $11,312,125 for the purpose of financing the development, study, or related costs incurred with respect to such facility. (e) CERTAIN EXPENDITURES TREATED AS SIGNIFICANT EXPENDI-

TURES.—For purposes of this title, expenditures of $850,000 incurred with respect to any project involving $15,000,000 shall be treated as significant expenditures if such expenditures were incurred pursuant to an agreement entered into on July 13, 1982, relating to the discharge of industrial waste after January 1, 1986. (f) CERTAIN ORDINANCES TREATED AS INDUCEMENT RESOLUTIONS.—

For purposes of this title, any ordinance passed on May 3, 1982, with respect to a planned development district shall be treated as an inducement resolution with respect to obligations issued in 1984 in connection with a mall project for such district. (g) DELAYED EFFECTIVE DATE WITH RESPECT TO CERTAIN I D B S. —

(1) F E R C PROJECTS.—Notwithstanding any other provision of this title, any amendments made by this title (other than the amendments to section 103(c) of the Internal Revenue Code of 1954) which, but for this paragraph, would apply to industrial development bonds issued after December 31, 1984, shall not apply to any of the following obligations issued before January 1, 1986: (A) obligations issued with respect to Federal Energy Regulatory Commission project 4657, but only to the extent

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Page:United States Statutes at Large Volume 98 Part 1.djvu/987

 PUBLIC LAW 98-369—JULY 18, 1984

./

98 STAT. 939

the aggregate face amount of such obligations does not exceed $12,900,000; (B) obligations issued with respect to Federal Energy Regulatory Commission project 2853, but only to the extent the aggregate face amount of such obligations does not exceed $28,600,000; or (C) obligations issued with respect to Federal Energy Regulatory Commission project 4700, but only to the extent the aggregate face amount of such obligations does not exceed $3,850,000. (2) PARK CENTRAL NEW TOWN IN TOWN PROJECT.—Notwith-

standing any other provision of this title, any amendments made by this title (other than the amendments to section 103(c) of the Internal Revenue Code of 1954) which, but for this paragraph, would apply to industrial development bonds issued after December 31, 1984, shall not apply to any obligation issued before January 1, 1988, with respect to Park Central New Town In Town Project located in Port Arthur, Texas, but only to the extent the aggregate face amount of such obligations does not exceed $80,000,000.

Subtitle C—Miscellaneous Provisions SEC. 641. CLARIFICATION OF TREATMENT OF CERTAIN EXEMPTIONS FOR PURPOSES OF THE FEDERAL ESTATE AND GIFT TAXES.

26 USC 2001 note.

(a) GENERAL RULE.—Nothing in any provision of law exempting any property (or interest therein) from taxation shall exempt the transfer of such property (or interest therein) from Federal estate, gift, and generation-skipping transfer taxes. In the case of any provision of law enacted after the date of the enactment of this Act, such provision shall not be treated as exempting the transfer of property from Federal estate, gift, and generation-skipping transfer taxes unless it refers to the appropriate provisions of the Internal Revenue Code of 1954.

26 USC l et seq.

(b) EFFECTIVE DATE.—

"(1) IN GENERAL.—The provisions of subsection (a) shall apply to the estates of decedents dying, gifts made, and transfers made on or after June 19, 1984. "(2) TREATMENT OF CERTAIN TRANSFERS TREATED AS TAXABLE.—

The provisions of subsection (a) shall also apply in the case of any transfer of property (or interest therein) if at any time there was filed an estate or gift tax return showing such transfer as subject to Federal estate or gift tax. "(3) No INFERENCE.—No inference shall arise from paragraphs (1) and (2) that any transfer of property (or interest therein) before June 19, 1984, is exempt from Federal estate and gift taxes. SEC. 642. REPORTS WITH TRANSFERS OF PUBLIC HOUSING BONDS.

(a) GENERAL RULE.—With respect to transfers of public housing bonds occurring after December 31, 1983, and before June 19, 1984, the taxpayer shall report the date and amount of such transfer and such other information as the Secretary of the Treasury or his delegate shall prescribe by regulations to allow the determination of the tax and interest due if it is ultimately determined that such transfers are subject to estate, gift, or generation-skipping tax.

26 USC 2001

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Page:United States Statutes at Large Volume 98 Part 1.djvu/988

 98 STAT. 940

PUBLIC LAW 98-369—JULY 18, 1984 O> PENALTY FOR FAILURE TO REPORT.—Any taxpayer failing to t)

provide the information required by subsection (a) shall be liable for a penalty equal to 25 percent of the excess of (1) the estate, gift, or generation-skipping tax that is payable assuming that such transfers are subject to tax, over (2) the tax payable assuming such transfers are not so subject. SEC. 643. TAX-EXEMPT STATUS OF OBLIGATIONS OF CERTAIN EDUCATIONAL ORGANIZATIONS.

(a) IN GENERAL.—For purposes of section 103 of the Internal Revenue Code of 1954, a qualified educational organization shall be treated as a State governmental unit, but only with respect to a trade or business carried on by such organization which is not an unrelated trade or business (determined by applying section 513(a) of such Code to such organization). (b) QUALIFIED EDUCATIONAL ORGANIZATION.—For purposes of subsection (a), the term "qualified educational organization" means a college or university created on February 22, 1855, by specific act of the legislature of the State within which such college or university is located. (c) EFFECTIVE DATE.—This section shall apply to obligations issued after December 31, 1953. SEC. 644. LOCAL FURNISHING OF ELECTRICITY OR GAS.

(a) GENERAL RULE.—For the purposes of section 1030t>)(4)(E), facilities for the local furnishing of electric energy also shall include a facility that is part of a system providing service to the general populace (i) if at least 97 percent (measured both by total number of metered customers and by their annual consumption on a kilowatt hour basis) of the retail customers of such system are located in two contiguous counties, and (ii) if the remainder of such customers are located in a portion of a third contiguous county which portion is located on a peninsula not directly connected by land to the rest of the county of which it is a part. (b) ELECTION TO ALLOCATE TO 1984 ONE-HALF OF STATE LIMIT FOR

1985, 1986, AND 1987.—Solely for purposes of issuing obligations described in subsection (a), the issuing authorities of a State may elect (at such time and in such manner as the Secretary of the Treasury shall by regulations prescribe) to use in 1984 one-half of the amount which would have been the State limit for the calendar years 1985, 1986, and 1987. SEC. 645. LOCAL FURNISHING WHERE FACILITY INITIALLY AUTHORIZED BY FEDERAL GOVERNMENT.

For the purpose of section 1030t))(4)(E), facilities for the local furnishing of electric energy also shall include a facility that is part of a system providing service to the general populace— (i) if the facility was initially authorized by the Federal Government in 1962; (ii) if the facility receives financing of at least 25 percent by an exempt person; (iii) if the electric energy generated by the facility is purchased by an electric cooperative qualified as a rural electric borrower under 7 U.S.C. section 901 et seq. and if; (iv) the facility is located in a noncontiguous State.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/989

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 941

SEC. 646. TREASURY DEPARTMENT DECISIONS AFFECTING TAX-EXEMPT BONDS.

20 USC 1087-1 ^°^-

(a) The Secretary of Education and the Secretary of the Treasury shall within 90 days of the date of enactment of this provision, establish procedures under which issuers affected by any decision of the Secretary of Education or his delegate under section 7 of the Student Loan Consolidation and Technical Amendments Act of 1983 20 USC 1087-1 may request and obtain a review of such decision by the Secretary of ^^ir,^°]f' the Treasury or his delegate followed by a written report to the 1087-la. Secretary of Education and to such person with respect to such review to be filed no later than 60 days of the request for review (unless the person requesting such review consents to an extension of time). (b) Nothing in this section shall affect the exemption from income taxation of interest on any student loan bond or any issuer of such bonds. SEC. 647. SPECIAL RULE FOR POSSESSIONS AND DISTRICT OF COLUMBIA.

Notwithstanding any other provision of law, in the case of obligations issued before July 1, 1987— (1) the Virgin Islands and American Samoa shall have authority to issue industrial development bonds (within the meaning of section 103(b)(2) of the Internal Revenue Code of 1954), and (2) the District of Columbia Housing Finance Agency shall have the authority to issue obligations described in section 103(b)(4)(A) of such Code and to issue mortgage subsidy bonds (as defined in section 103A of such Code). SEC. 648. SPECIAL ARBITRAGE RULE.

Securities or obligations are not described in section 103(c)(2)(A) or (B) of the Internal Revenue Code of 1954 and are not subject to yield restrictions to the extent that on the date of issue of a bond issue which is payable from the investment earnings on such securities or obligations— (1) such securities or obligations are held in a fund which, except to the extent of the investment earnings on such securities or obligations, cannot be used, under State constitutional or statutory restrictions continuously in effect since October 9, 1969, to pay debt service on the bond issue or to finance the facilities that are to be financed with the proceeds of the bonds, (2) the fund has received no substantial discretionary contributions after October 9, 1969, (3) the issuer (A) had a practice of issuing bonds secured by the investment earnings of the fund during the period commencing January 1, 1960, and ending on October 9, 1969, and (B) has had a continuous practice of issuing bonds secured by the investment earnings of the fund at least once during each 5year period beginning on October 9, 1969, and (4) the amount of securities or obligations benefitting from this rule cannot exceed the principal amount of bonds (to which such securities or other obligations would, but for this rule, be allocated) which could be issued under applicable laws restricting the amount of bonds that can be issued (but not restrictions on the purposes for which bonds can be issued) in effect on October 9, 1969, as applied to the facts on the day of issue.

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 98 STAT. 942

PUBLIC LAW 98-369—JULY 18, 1984

TITLE VII—TECHNICAL CORRECTIONS 26 USC 31 note.

SEC. 701. COORDINATION WITH OTHER TITLES. For purposes of applying the amendments made by any title of this Act other than this title, the provisions of this title shall be treated as having been enacted immediately before the provisions of such other titles.

Subtitle A—Amendments Related to the Tax Equity and Fiscal Responsibility Act of 1982 SEC. 711. TECHNICAL CORRECTIONS OF PROVISIONS RELATING TO INDIVIDUALS. (a) AMENDMENTS RELATED TO SECTION 201.—

26 USC 55.

(1) DEFINITION OF REGULAR TAX.—Paragraph (2) of section 55(f)

(defining regular tax) is amended by striking out "sections 72(m)(5)(B)" and inserting in lieu thereof "sections 47(a), 72(m)(5)(B)". (2) SPECIAL ELECTION FOR INTANGIBLE DRILLING AND DEVELOPMENT COSTS LIMITED TO WELLS LOCATED IN THE UNITED STATES.—

26 USC 58.

26 USC 57.

26 USC 58.

26 USC 173.

Subparagraph (A) of section 58(i)(4) (relating to special election for intangible drilling and development cost not allocable to interest as limited partner) is amended by inserting "(with respect to wells located in the United States)" after "intangible drilling costs". (3) 3-YEAR AMORTIZATION FOR CIRCULATION EXPENSES.— (A) Subparagraph (B) of section 57(a)(6) (relating to circulation and research and experimental expenditures) is amended to read as follows: "(B) the amount which would have been allowable for the taxable year with respect to expenditures paid or incurred during such taxable year if— "(i) the circulation expenditures described in section 173 had been capitalized and amortized ratably over the 3-year period beginning with the taxable year in which such expenditures were made, or "(ii) the research and experimental expenditures described in section 174 had been capitalized and amortized ratably over the 10-year period beginning with the taxable year in which such expenditures were made." (B) Paragraph (1) of section 58(i) (relating to optional 10year writeoff of certain tax preferences) is amended by striking out "10-year period" and inserting in lieu thereof "10-year period (3-year period in the case of circulation expenditures described in section 173)". (C) Subsection (b) of section 173 is amended by striking out "10-year" and inserting in lieu thereof "3-year". (4) LOSSES TREATED AS INVESTMENT LOSSES.—Subparagraph (B)

26 USC 55.

of section 55(e)(8) is amended to read as follows: "(B) INCOME AND LOSSES TAKEN INTO ACCOUNT IN COMPUT-

ING QUALIFIED NET INVESTMENT INCOME.—Any income or loss derived from a limited business interest shall be taken

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Page:United States Statutes at Large Volume 98 Part 1.djvu/991

 PUBLIC LAW 98-369—JULY 18, 1984 into account income."

in computing qualified

98 STAT. 943

net investment

(5) TREATMENT OF ALCOHOL FUELS CREDIT.—Subparagraph (c)

of section 55(b)(l) (defining alternative minimum taxable 26 USC 55. income) is amended by striking out "section 667" and inserting in lieu thereof "section 87 or 667". (b) AMENDMENT RELATED TO SECTION 202.—Paragraph (5) of section 213(d) (relating to definitions) is amended by striking out Ante, p. 847. "paragraph (2)" and inserting in lieu thereof "paragraph (4)". (c) AMENDMENTS RELATED TO SECTION 203.— (1) CLARIFICATION OF ADJUSTED GROSS INCOME IN THE CASE OF ESTATES AND TRUSTS.—Paragraph (2) of section 165(h) (relating to

26 USC 165.

casualty and theft losses) is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting after subparagraph (A) the following new subparagraph: "(B) DETERMINATION OF ADJUSTED GROSS INCOME IN CASE

OF ESTATES AND TRUSTS.—For purposes of paragraph (1), the

.adjusted gross income of an estate or trust shall be computed in the same manner as in the case of an individual, except that the deductions for costs paid or incurred in connection with the administration of the estate or trust shall be treated as allowable in arriving at adjusted gross income." (2) COORDINATION OF SECTION 165(h) WITH SECTION 1231.— (A) COORDINATION FOR 1984 AND SUBSEQUENT YEARS.— (i) CLARIFICATION OF LOSSES TO WHICH SECTION

165(c)(3) APPLIES.—Paragraph (3) of section 165(c) (relating to limitation on loss of individuals) is amended by striking out "trade or business" and inserting in lieu thereof "trade or business or a transaction entered into for profit". (ii) AMENDMENT OF SECTION 165(h).—Subsection (h) of section 165 (relating to casualty and theft losses) is amended to read as follows: "(h) TREATMENT OF CASUALTY GAINS AND LOSSES.—

"(1) $100 UMiTATiON PER CASUALTY.—Any loss of an individual described in subsection (c)(3) shall be allowed only to the extent that the amount of the loss to such individual arising from each casualty, or from each theft, exceeds $100. "(2) N E T CASUALTY LOSS ALLOWED ONLY TO THE EXTENT IT EXCEEDS 1 0 PERCENT OF ADJUSTED GROSS INCOME.—

"'

"(A) IN GENERAL.—If the personal casualty losses for any taxable year exceed the personal casualty gains for such taxable year, such losses shall be allowed for the taxable year only to the extent of the sum of— "(i) the amount of the personal casualty gains for the taxable year, plus "(ii) so much of such excess as exceeds 10 percent of the adjusted gross income of the individual. "(B) SPECIAL RULE WHERE PERSONAL CASUALTY GAINS EXCEED PERSONAL CASUALTY LOSSES.—If the personal cas-

ualty gains for any taxable year exceed the personal casualty losses for such taxable year— "(i) all such gains shall be treated as gains from sales or exchanges of capital assets, and "(ii) all such losses shall be treated as losses from sales or exchanges of capital assets.

' *

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Page:United States Statutes at Large Volume 98 Part 1.djvu/992

 98 STAT. 944

PUBLIC LAW 98-369—JULY 18, 1984 "(3) DEFINITIONS OF PERSONAL CASUALTY GAIN AND PERSONAL

CASUALTY LOSS.—For purposes of this subsection— "(A) PERSONAL CASUALTY GAIN.—The term 'personal casualty gain' means the recognized gain from any involuntary conversion of property which is described in subsection (c)(3) arising from fire, storm, shipwreck, or other casualty, or from theft. "(B) PERSONAL CASUALTY LOSS.—The term 'personal casualty loss' means any loss described in subsection (c)(3). For purposes of paragraph (2), the amount of any personal casualty loss shall be determined after the application of paragraph (1). "(4) SPECIAL RULES.— "(A) PERSONAL CASUALTY LOSSES ALLOWABLE I N COMPUTING ADJUSTED GROSS INCOME TO THE EXTENT OF PERSONAL CASUALTY GAINS.—In any case to which paragraph (2)(A)

^

applies, the deduction for personal casualty losses for any taxable year shall be treated as a deduction allowable in computing adjusted gross income to the extent such losses do not exceed the personal casualty gains for the taxable year. "(B) JOINT RETURNS.—For purposes of this subsection, a husband and wife making a joint return for the taxable year shall be treated as 1 individual. "(C) DETERMINATION OF ADJUSTED GROSS INCOME IN CASE

OF ESTATES AND TRUSTS.—For purposes of paragraph (2), the

adjusted gross income of an estate or trust shall be computed in the same manner as in the case of an individual, except that the deductions for costs paid or incurred in connection with the administration of the estate or trust shall be treated as allowable in arriving at adjusted gross income. "(D) COORDINATION WITH ESTATE TAX.—No loss described in subsection (c)(3) shall be allowed if, at the time of filing the return, such loss has been claimed for estate tax purposes in the estate tax return." (iii) SECTION 1 2 3 1 NOT TO APPLY TO PERSONAL CASU-

26 USC 1231.

ALTY GAINS OR LOSSES.—Subsection (a) of section 1231 (relating to property used in the trade or business and involuntary conversions) is amended to read as follows: "(a) GENERAL RULE.— "(1) GAINS EXCEED LOSSES.—If—

"(A) the section 1231 gains for any taxable year, exceed "(B) the section 1231 losses for such taxable year, such gains and losses shall be treated as long-term capital gains or long-term capital losses, as the case may be. "(2) GAINS DO NOT EXCEED LOSSES.—If—

"(A) the section 1231 gains for any taxable year, do not exceed "(B) the section 1231 losses for such taxable year, such gains and losses shall not be treated as gains and losses from sales or exchanges of capital assets. "(3) SECTION 1231 GAINS AND LOSSES.—For purposes of this subsection— "(A) SECTION 1231 GAIN.—The term 'section 1231 gain' means—

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Page:United States Statutes at Large Volume 98 Part 1.djvu/993

 PUBLIC LAW 98-369—JULY 18, 1984 "(i) any recognized gain on the sale or exchange of property used in the trade or business, and "(ii) any recognized gain from the compulsory or involuntary conversion (as a result of destruction in whole or in part, theft or seizure, or an exercise of the power of requisition or condemnation or the threat or }• imminence thereof) into other property or money of— '"(I) property used in the trade or business, or "(II) any capital asset which is held for more than 1 year and is held in connection with a trade or business or a transaction entered into for profit. H "(B) SECTION 1231 LOSS.—The term 'section 1231 loss' means any recognized loss from a sale or exchange or conversion described in subparagraph (A). "(4) SPECIAL RULES.—For purposes of this subsection— "(A) In determining under this subsection whether gains exceed losses— ^^" "(i) the section 1231 gains shall be included only if and to the extent taken into account in computing ri;: gross income, and "(ii) the section 1231 losses shall be included only if and to the extent taken into account in computing taxable income, except that section 1211 shall not apply. "(B) Losses (including losses not compensated for by ' insurance or otherwise) on the destruction, in whole or in part, theft or seizure, or requisition or condemnation of— "(i) property used in the trade or business, or js c*a'<(jj) capital assets which are held for more than 1 year and are held in connection with a trade or business or a transaction entered into for profit, • shall be treated as losses from a compulsory or involuntary conversion. "(C) In the case of any involuntary conversion (subject to the provisions of this subsection but for this sentence) arising from fire, storm, shipwreck, or other casualty, or from theft, of any— "(i) property used in the trade or business, or "(ii) any capital asset which is held for more than 1 ' year and is held in connection with a trade or business or a transaction entered into for profit, this subsection shall not apply to such conversion (whether resulting in gain or loss) if during the taxable year the recognized losses from such conversions exceed the recognized gains from such conversions." (iv) Sections 873(b)(l) and 931(d)(2)(B) are each amended by striking out ", for losses of property not connected with the trade or business if arising from certain casualties or theft," and inserting in lieu thereof "for losses". (v) EFFECTIVE DATE.—The amendments made by this subparagraph shall apply to taxable years beginning after December 31, 1983. (B) TRANSITIONAL RULE.—In the case of taxable years beginning before January 1, 1984— (i) For purposes of paragraph dXB) of section 165(h) of the Internal Revenue Code of 1954, adjusted gross

31-194 0 - 86 - 32: QL. 3 Part 1

98 STAT. 945

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26 USC 873,931.

26 USC 165 note. 26 USC 165 note. Ante, p. 943.

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/994

 98 STAT. 946

PUBLIC LAW 98-369—JULY 18, 1984 1o sgiife

Ante, p. 943. 26 USC 6405.

income shall be determined without regard to the application of section 1231 of such Code to any gain or loss from an involuntary conversion of property described in subsection (c)(3) of section 165 of such Code arising from fire, storm, shipwreck, or other casualty or from theft. (ii) Section 1231 of such Code shall be applied after the application of paragraph (1) of section 165(h) of such Code. (3) CLERICAL AMENDMENT.—Subsection (d) of section 6405 (relating to refunds attributable to certain disaster losses) is amended by striking out "section 165(h)" and inserting in lieu thereof "section 165(i)". SEC. 712. TECHNICAL CORRECTIONS OF PROVISIONS PRIMARILY RELATING TO BUSINESSES. (a) AMENDMENTS RELATED TO SECTION 204.— (1) CLARIFICATION OF ADDITIONAL AMOUNT TREATED AS ORDINARY INCOME UNDER SECTION 1250.—

26 USC 291.

26 USC 1250.

(A) Paragraph (1) of section 291(a) (relating to section 1250 capital gain treatment) is amended— (i) by striking out "under section 1250" in subparagraph (B) and inserting in lieu thereof "under section 1250 (determined without regard to this paragraph)", and (ii) by striking out "which is ordinary income" and inserting in lieu thereof "which is ordinary income under section 1250". (B) Subsection (a) of section 1250 is amended by adding at the end thereof the following new paragraph: "(4) CROSS REFERENCE.—

"For reduction in the case of corporations on capital gain treatment under this section, see section 291(a)(1)." (2) INVESTMENT TAX CREDIT ALLOWED ONLY FOR MINERAL EXPLORATION AND DEVELOPMENT COSTS FOR DEPOSITS LOCATED IN THE

26 USC 291.

UNITED STATES.—Clause (ii) of section 291(b)(2)(B) is amended by inserting "in the case of a deposit located in the United States,' after "(ii)". (3) CLARIFICATION OF COORDINATION WITH COST DEPLETION.—

Paragraph (6) of section 291(b) (relating to coordination with cost depletion) is amended to read as follows: "(6) COORDINATION WITH COST DEPLETION.—The portion of the

adjusted basis of any property which is attributable to amounts to which paragraph (1) applied shall not be taken into account for purposes of determining depletion under section 611." (4) CLARIFICATION OF DEFINITION OF INTEREST.—Subparagraph

(B) of section 291(e)(1) (relating to interest on debt to carry taxexempt obligations acquired after December 31, 1982) is amended by adding at the end thereof the following new clause: (iii) INTEREST.—For purposes of this subparagraph, the term 'interest' includes amounts (whether or not .sJon.'tii '::a'5 B', designated as interest) paid in respect of deposits, investment certificates, or withdrawable or repurchasable shares." 26 USC 48. (b) AMENDMENT RELATED TO SECTION 205.—Subsection (q) of section 48 (relating to basis adjustment to section 38 property) is ,, amended by adding at the end thereof the following new paragraph:

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/995

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 947

"(6) ADJUSTMENT IN BASIS OF INTEREST IN PARTNERSHIP OR S

CORPORATION.—The adjusted basis of— "(A) a partner's interest in a partnership, and "(B) stock in an S corporation, shall be appropriately adjusted to take into account adjustments made under this subsection in the basis of property held by the partnership or S corporation (as the case may be)." (c) AMENDMENT RELATED TO SECTION 207.—Paragraph (4) of section 189(e) (defining residential real property) is amended by striking out "or" at the end of subparagraph (A), by striking out the period at the end of subparagraph (B) and inserting in lieu thereof ", or", and by adding at the end thereof the following new subparagraph: "(C) real property held by a cooperative housing corporation (as defined in section 216(b)) and used for dwelling purposes." (d) AMENDMENTS RELATED TO SECTION 210.— (1) SPECIAL RULE WHERE DEALER-LESSEE REQUIRED TO PURCHASE

'-; 26 USC 189.
 * i^l

• '

> '*?'~ ^-

VEHICLE.—Paragraph (2) of section 210(b) of the Tax Equity and Fiscal Responsibility Act of 1982 (defining terminal rental ad- 26 USC 168 note. justment clause) is amended by adding at the end thereof the following new sentence: "Such term also includes a provision of an agreement which requires a lessee who is a dealer in motor vehicles to purchase the motor vehicle for a predetermined price and then resell such vehicle where such provision achieves substantially the same results as a provision described in the preceding sentence." (2) EXCEPTION WHERE LESSEE TOOK POSITION ON RETURN THAT

HE WAS OWNER.—Section 210 of the Tax Equity and Fiscal Responsibility Act of 1982 is amended by adding at the end thereof the following new subsection:

 * 0: %

"(c) EXCEPTION WHERE LESSEE TOOK POSITION ON RETURN.—Sub-

section (a) shall not apply to deny a deduction for interest paid or accrued claimed by a lessee with respect to a qualified motor vehicle agreement on a return of tax imposed by chapter 1 of the Internal Revenue Code of 1954 which was filed before the date of the enactment of this Act or to deny a credit for investment in depreciable property claimed by the lessee on such a return pursuant to an agreement with the lessor that the lessor would not claim the credit." (e) AMENDMENT RELATED TO SECTION 211.—Subparagraph (A) of section 211(e)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to retention of old sections 907(b) and 904(f)(4) where taxpayer had separate basket foreign loss) is amended by striking out "the 8-year period" and inserting in lieu thereof "the 8-year period (or such shorter period as the taxpayer may select)". (f) AMENDMENT RELATED TO SECTION 212.—Paragraph (1) of section 954(h) (defining foreign base company oil-related income) is amended by striking out "section 907(c)(2)" and inserting in lieu thereof "paragraphs (2) and (3) of section 907(c)". (g) AMENDMENT RELATED TO SECTION 213.—The table contained in subparagraph (C) of section 936(a)(2) is amended by striking out "The percentage tax is:" and inserting in lieu thereof "The percentage is:". (h) AMENDMENT RELATED TO SECTION 217.—Subsection (e) of section 217 of the Tax Equity and Fiscal Responsibility Act of 1982 (relating to effective date) is amended by adding at the end thereof

26 USC i et seq.

26 USC 907 note.

26 USC 954.

26 USC 936.

26 USC 103 note.

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text:
Page:United States Statutes at Large Volume 98 Part 1.djvu/996

 98 STAT. 948

Ante, p. 569. 26 USC 302. 26 USC 306. 26 USC 543.

26 USC 311. .

PUBLIC LAW 98-369—JULY 18, 1984 the following new sentence: "For purposes of applying section 168(f)(8)(D)(v) of the Internal Revenue Code of 1954, the amendments made by subsection (c) shall apply to agreements entered into after the date of the enactment of this Act." (i) AMENDMENTS RELATED TO SECTION 222.— (1) Sections 301(e)(2) and 302(f)(3) are each amended by striking out "partial or complete liquidation" and inserting in lieu thereof "complete liquidation". (2) The paragraph heading of paragraph (1) of section 306(b) (relating to exceptions) is amended by striking out "INTEREST." and inserting in lieu thereof "INTEREST, ETC.". (3) Paragraph (1) of section 543(a) (defining personal holding company income) is amended by striking out subparagraph (C), by adding "and" at the end of subparagraph (A), and by striking out ", and" at the end of subparagraph (B) and inserting in lieu thereof a period. 0*) AMENDMENT RELATED TO SECTION 223.—Paragraph (1) of section 311(e) (defining qualified stock) is amended by adding at the end thereof the following new subparagraph: "(C) RULES FOR PASSTHRU ENTITIES.—In the case of an S corporation, partnership, trust, or estate— "(i) the determination of whether subparagraph (A) is satisfied shall be made at the shareholder, partner, or beneficiary level (rather than at the entity level), and "(ii) the distribution shall be treated as made directly to the shareholders, partners, or beneficiaries in proportion to their respective interests in the entity." (k) AMENDMENTS RELATED TO SECTION 224.— (1) ASSETS TREATED AS SOLD AT FAIR MARKET VALUE.—

26 USC 338.

(A) IN GENERAL.—Paragraph (1) of section 338(a) (relating to general rule) is amended by inserting "at fair market value" after "acquisition date". (B) BASIS OF ASSETS AFTER DEEMED PURCHASE.—Subsection

(b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: , >

, i

"(b) BASIS OF ASSETS AFTER DEEMED PURCHASE.—

"(1) IN GENERAL.—For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— "(A) the grossed-up basis of the purchasing corporation's recently purchased stock, and "(B) the basis of the purchasing corporation's nonrecently purchased stock.

^

"(2)

ADJUSTMENT FOR LIABILITIES

AND OTHER RELEVANT

ITEMS.—The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items.
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"(3) ELECTION TO STEP-UP THE BASIS OF CERTAIN TARGET STOCK.—

"(A) IN GENERAL.—Under regulations prescribed by the Secretary, the basis of the purchasing corporation's nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B).

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Page:United States Statutes at Large Volume 98 Part 1.djvu/997

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 949

"(B) DETERMINATION OF BASIS AMOUNT.—For purposes of

•ifiM

subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— "(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation's nonrecently purchased stock, and "(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i).

' ' i *-

"(4) GROSSED-UP BASIS.—For purposes of paragraph (1), the

grossed-up basis shall be an amount equal to the basis of the corporation's recently purchased stock, multiplied by a fraction— "(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation's nonrecently purchased stock, and "(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation's recently purchased stock. "(5) ALLOCATION AMONG ASSETS.—The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. "(6) DEFINITIONS OF RECENTLY PURCHASED STOCK AND NONRECENTLY PURCHASED STOCK.—For purposes of this subsection— "(A) RECENTLY PURCHASED STOCK.—The term 'recently

purchased stock' means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. "(B) NONRECENTLY PURCHASED STOCK.—The term 'nonrecently purchased stock' means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock." (2) COORDINATION WITH SECTION 333.—The last sentence of paragraph (1) of section 338(c) (relating to coordination with section 337 where purchasing corporation holds less than 100 percent of stock) is amended by striking out "such 1-year period" and inserting in lieu thereof "such 1-year period and section 333 does not apply to such liquidation".

26 USC 338.

(3) EXCEPTIONS TO DEEMED ELECTION RULE.—Paragraph (2) of

section 338(e) (relating to exceptions) is amended— (A) by striking out "(in whole or in part)" in subparagraph (B) and inserting in lieu thereof "wholly", (B) by inserting "or at the end of subparagraph (C), and (C) by striking out subparagraphs (D) and (E) and inserting in lieu thereof the following: "(D) such acquisition is described in regulations prescribed by the Secretary and meets such conditions as such regulations may provide." (4) TIME FOR MAKING ELECTION.—Paragraph (1) of section

338(g) (relating to election) is amended to read as follows:

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Page:United States Statutes at Large Volume 98 Part 1.djvu/998

 98 STAT. 950

PUBLIC LAW 98-369—JULY 18, 1984 "(1) WHEN MADE.—Except as otherwise provided in regulations, an election under this section shall be made not later than the 15th day of the 9th month beginning after the month in which the acquisition date occurs." (5) DEFINITION OF PURCHASE.—

26 USC 338.

(A) Subparagraph (B) of section 338(h)(3) (defining purchase) is amended to read as follows: "(B) DEEMED PURCHASE UNDER SUBSECTION (a).—The term 'purchase' includes any deemed purchase under subsection (a)(2). The acquisition date for a corporation which is deemed purchased under subsection (a)(2) shall be determined under regulations prescribed by the Secretary." (B) Paragraph (3) of section 338(h) is amended by adding at the end thereof the following new subparagraph: "(C) CERTAIN STOCK ACQUISITIONS FROM RELATED CORPORATIONS.—

"(i) IN GENERAL.—Clause (iii) of subparagraph (A) shall not apply to an acquisition of stock from a related corporation if at least 50 percent in value of the stock of such related corporation was acquired by purchase (within the meaning of subparagraph (A) and (B)). "(ii) CERTAIN DISTRIBUTIONS.—Clause (i) of subpara-

26 USC 318.

graph (A) shall not apply to an acquisition of stock described in clause (i) of this subparagraph if the corporation acquiring such stock— "(I) made a qualified stock purchase of stock of the related corporation, and "(II) made an election under this section (or is treated under subsection (e) as having made such an election) with respect to such qualified stock purchase, "(iii) RELATED CORPORATION DEFINED.—For purposes of this subparagraph, a corporation is a related corporation if stock owned by such corporation is treated (under section 318(a) other than paragraph (4) thereof) as owned by the corporation acquiring the stock." (C) Paragraph (1) of section 338(h) (defining 12-month acquisition period) is amended by inserting before the period at the end thereof the following: "(or, if any of such stock was acquired in an acquisition which is a purchase by reason of subparagraph (C) of paragraph (3), the date on which the acquiring corporation is first considered under section 318(a) (other than paragraph (4) thereof) as owning stock owned by the corporation from which such acquisition was made)." (D) Clause (ii) of section 338(h)(3)(A) (defining purchase) is amended to read as follows: "(ii) the stock is not acquired in an exchange to which section 351, 354, 355, or 356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction, and". (E) Paragraph (4) of section 3180t)) (relating to cross references) is amended to read as follows: "(4) section 338(h)(3) (defining purchase);". (6) SPECIAL RULES FOR APPLYING SECTION 338.—

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Page:United States Statutes at Large Volume 98 Part 1.djvu/999

 PUBLIC LAW 98-369—JULY 18, 1984 (A) Subsection (h) of section 338 (relating to definitions and special rules) is amended by striking out paragraph (7), by redesignating paragraphs (8) and (9) as paragraphs (9) and (10), respectively, and by inserting after paragraph (6) the following new paragraphs: "(7) ADDITIONAL PERCENTAGE MUST BE ATTRIBUTABLE TO PURCHASE, ETC.—For purposes of subsection (c)(1), any increase in

98 STAT. 951 26 USC 338.

 * j& j oS

the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to— "(A) purchase, or "(B) a redemption of stock of the target corporation— "(i) to which section 302(a) applies, or "(ii) in the case of a shareholder who is not a corporation, to which section 301 applies. "(8) ACQUISITIONS BY AFFILIATED GROUP TREATED AS MADE BY i

CORPORATION.—Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation." (B) Paragraph (9) of section 338(h), as redesignated by subparagraph (A), is amended by striking out "paragraph (9)" and inserting in lieu thereof 'paragraph (10)". (C) Subsection (h) of section 338 is amended by adding at the end thereof the following new paragraphs: "(11)

ELECTIVE FORMULA FOR DETERMINING FAIR MARKET

VALUE.—For purposes of subsection (a)(1), fair market value may be determined on the basis of a formula provided in regulations prescribed by the Secretary which takes into account liabilities and other relevant items. "(12) SECTION 337 TO APPLY WHERE TARGET HAD ADOPTED PLAN FOR COMPLETE LIQUIDATION.—If—

"(A) during the 12-month period ending on the acquisition date the target corporation adopted a plan of complete liquidation, "(B) such plan was not rescinded before the close of the acquisition date, and "(C) the purchasing corporation makes an election under this section (or is treated under subsection (e) as having made such an election) with respect to the target corporation, then, subject to rules similar to the rules of subsection (c)(1), for purposes of section 337 (and other provisions which relate to section 337), the target corporation shall be treated as having distributed all of its assets as of the close of the acquisition date. "(13) TAX ON DEEMED SALE NOT TAKEN INTO ACCOUNT FOR ESTIMATED TAX PURPOSES.—For purposes of section 6655, tax

attributable to the sale described in subsection (a)(1) shall not be taken into account. "(14) COORDINATION WITH SECTION 341.—For purposes of determining whether section 341 applies to a disposition within 1 year after the acquisition date of stock by a shareholder (other than the acquiring corporation) who held stock in the target corporation on the acquisition date, section 341 shall be applied without regard to this section.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1000

 98 STAT. 952

26 USC 338.

PUBLIC LAW 98-369—JULY 18, 1984 "(15) COMBINED DEEMED SALE RETURN.—Under regulations prescribed by the Secretary, a combined deemed sale return may be filed by all target corporations acquired by a purchasing corporation on the same acquisition date if such target corporations were members of the same selling consolidated group (as defined in subparagraph (B) of paragraph (10))." (7) Subsection (i) of section 338 (relating to regulations) is amended to read as follows: "(i) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including— "(1) regulations to ensure that the purpose of this section to require consistency of treatment of stock and asset sales and purchases may not be circumvented through the use of any provision of law or regulations (including the consolidated return regulations) and "(2) regulations providing for the coordination of the provisions of this section with the provision of this title relating to foreign corporations and their shareholders." (8) TREATMENT OF CERTAIN LIQUIDATIONS.—

26 USC 269.

(A) IN GENERAL.—Section 269 (relating to acquisitions made to evade or avoid income tax) is amended by redesignating subsection (b) as subsection (c) and by inserting after subsection (a) the following new subsection: "(b) CERTAIN LIQUIDATIONS AFTER QUALIFIED STOCK PURCHASES.— "(1) IN GENERAL.—If—

"(A) there is a qualified stock purchase by a corporation of another corporation, "(B) an election is not made under section 338 with respect to such purchase, "(C) the acquired corporation is liquidated pursuant to a plan of liquidation adopted not more than 2 years after the acquisition date, and "(D) the principal purpose for such liquidation is the evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance which the acquiring corporation would not otherwise enjoy, then the Secretary may disallow such deduction, credit, or other allowance. "(2) MEANING OF TERMS.—For purposes of paragraph (1), the

terms 'qualified stock purchase' and 'acquisition date' have the same respective meanings as when used in section 338." (B) CONFORMING AMENDMENT.—Subsection (c) of section

26 USC 269 note.

269 (as redesignated by subparagraph (A)) is amended by striking out "subsection (a)" and inserting in lieu thereof "subsection (a) or (b)". (C) EFFECTIVE DATE.—The amendments made by this paragraph shall apply to liquidations after October 20, 1983, in taxable years ending after such date. (9) AMENDMENTS NOT TO APPLY TO ACQUISITIONS BEFORE SEP-

TEMBER 1, 1982.—

26 USC 338 note.

(A) IN GENERAL.—The amendments made by this subsection shall not apply to any qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954) where the acquisition date (as defined in section 338(h)(2) of such Code) is before September 1, 1982.

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1001

 PUBLIC LAW 98-369—JULY 18, 1984 (B) EXTENSION OF TIME FOR MAKING ELECTION.—In

98 STAT. 953 the

case of any qualified stock purchase described in subparagraph (A), the time for making an election under section 338 of such Code shall not expire before the close of the 60th day after the date of the enactment of this Act. (10) SPECIAL RULES FOR DEEMED PURCHASES UNDER PRIOR LAW.—If, before October 20, 1983, a corporation was treated as making a qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1954), but would not be so treated under the amendments made by paragraphs (5) and (6) of this subsection, the amendments made by such paragraphs shall not apply to such purchase unless such corporation elects (at such time and in such manner as the Secretary of the Treasury or his delegate may by regulations prescribe) to have the amendments made by such paragraphs apply. (1) AMENDMENTS RELATED TO SECTION 226.—

26 USC 338 note.

-•, >...

(1) AMOUNT CONSTITUTING DIVIDEND.—Paragraph (2) of section

304(b) (relating to amount constituting dividend) is amended to 26 USC 304. read as follows: "(2) AMOUNT CONSTITUTING DIVIDEND.—In the case of any acquisition of stock to which subsection (a) applies, the determination of the amount which is a dividend (and the source thereoD shall be made as if the property were distributed— "(A) by the acquiring corporation to the extent of its earnings and profits, and "(B) then by the issuing corporation to the extent of its earnings and profits." o^': •; '<•'-. (2) COORDINATION WITH SECTION 351.—Subparagraph (A) of section 304(b)(3) (relating to coordination with section 351) is amended by striking out "(and not part III)" and inserting in . v& i lieu thereof "(and not section 351 and not so much of sections 357 and 358 as relates to section 351)". (3) CERTAIN ASSUMPTIONS OF LIABILITY.—

'

(A) The first sentence of clause (i) of section 304(b)(3)(B) (relating to certain assumptions of liability, etc.) is amended by striking out "Subsection (a)" and inserting in lieu thereof "In the case of an acquisition described in section 351, subsection (a)". (B) Subparagraph (B) of section 304(b)(3) (relating to coordination with section 351) is amended by adding at the end thereof the following new clause: "(iii) CLAUSE (i) DOES NOT APPLY TO STOCK ACQUIRED

"

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FROM RELATED PERSON EXCEPT WHERE COMPLETE TERMI-

'

NATION.—Clause (i) shall apply only to stock acquired by the transferor from a person— "(I) none of whose stock is attributable to the transferor under section 318(a) (other than paragraph (4) thereof), or "(II) who satisfies rules similar to the rules of section 302(c)(2) with respect to both the acquiring and the issuing corporations (determined as if such person were a distributee of each such corporation)."

(4) DISTRIBUTIONS INCIDENT TO FORMATION OF BANK HOLDING

COMPANIES.—Subparagraph (C) of section 304(b)(3) (relating to distributions incident to formation of bank holding companies) is amended by adding at the end thereof the following new

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Page:United States Statutes at Large Volume 98 Part 1.djvu/1002

 98 STAT. 954

PUBLIC LAW 98-369—JULY 18, 1984 sentence: "For purposes of this subparagraph, any assumption of (or acquisition of stock subject to) a hability under subparagraph (B) shall not be treated as a distribution of property." (5) CONSTRUCTIVE OWNERSHIP.—

26 USC 304.

(A) Paragraph (3) of section 804(c) (relating to constructive ownership) is amended to read as follows: "(3) CONSTRUCTIVE OWNERSHIP.—

"(A) IN GENERAL.—Section 318(a) (relating to constructive ownership of stock) shall apply for purposes of determining control under this section. "(B) MODIFICATION OF 50-PERCENT LIMITATIONS IN SECTION

26 USC 318.

.:'-«DEl'«':

26 USC 306. Supra.

318.—For purposes of subparagraph (A)— "(i) paragraph (2)(C) of section 318(a) shall be applied by substituting *5 percent' for '50 percent', and "(ii) paragraph (3)(C) of section 318(a) shall be applied— "(I) by substituting '5 percent' for '50 percent', and "(II) in any case where such paragraph would not apply but for subclause (I), by considering a corporation as owning the stock (other than stock in such corporation) owned by or for any shareholder of such corporation in that proportion which the value of the stock which such shareholder owned in such corporation bears to the value of all stock in such corporation." (B) Paragraph (4) of section 306(c) is amended by striking out the last sentence and inserting in lieu thereof the following: "For purposes of applying the preceding sentence to paragraph (3), the rules of section 304(c)(3)(B) shall apply." (6) CERTAIN STOCK ACQUIRED IN SECTION 351 EXCHANGE.—Para-

Ante, p. 953.

26 USC 304 note.

graph (3) of section 306(c) (relating to certain stock acquired in section 351 exchange) is amended by striking out the last sentence and inserting in lieu thereof the following: "Rules similar to the rules of section 304(b)(2) shall apply— "(A) for purposes of the preceding sentence, and "(B) for purposes of determining the application of this section to any subsequent disposition of stock which is section 306 stock by reason of an exchange described in the preceding sentence," (7) EFFECTIVE DATES FOR AMENDMENTS MADE BY PARAGRAPHS (1) AND (3). —

(A) IN GENERAL.—Except as otherwise provided in this paragraph, the amendments made by paragraphs (1) and (3) shall apply to stock acquiied after June 18, 1984, in taxable years ending after such date. (B) ELECTION BY TAXPAYER TO HAVE AMENDMENTS APPLY

96 Stat. 490.

EARLIER.—Any taxpayer may elect, at such time and in such manner as the Secretary of the Treasury or his delegate may pjescribe, to have the amendments made by paragraphs (1) and (3) apply as if included in section 226 of the Tax Equity and Fiscal Responsibility Act of 1982. (C) SPECTAI, RULE FOR CERTAIN TRANSFERS TO FORM BANK HOLDING COMPANY.—Except as provided in subparagraph 'D), the amendments made by paragraphs (1) and (3) shall not apply to transfers pursuant to an application to form a

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