[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 3276 Introduced in Senate (IS)]
111th CONGRESS
2d Session
S. 3276
To provide an election to terminate certain capital construction funds
without penalties.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 28, 2010
Mr. Wyden (for himself and Ms. Murkowski) introduced the following
bill; which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To provide an election to terminate certain capital construction funds
without penalties.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. ELECTION TO TERMINATE CERTAIN CAPITAL CONSTRUCTION FUNDS.
(a) Amendments to Chapter 535 of Title 46, United States Code.--
(1) In general.--Chapter 535 of title 46, United States
Code, is amended by adding at the end the following new
section:
``Sec. 53518. Election to terminate
``(a) In General.--
``(1) Election.--Any person who has entered into an
agreement under this chapter with respect to a vessel operated
in the fisheries of the United States may make an election
under this paragraph to terminate the capital construction fund
established under such agreement.
``(2) Effect of election on individuals.--In the case of an
individual who makes an election under paragraph (1) with
respect to a capital construction fund--
``(A) any amount remaining in such capital
construction fund on the applicable date shall be
distributed to such individual as a nonqualified
withdrawal, except that--
``(i) in computing the tax on such
withdrawal, except as provided in paragraph
(4), subsections (c)(3)(B) and (f) of section
53511 shall not apply; and
``(ii) the taxpayer may elect to average
the income from such withdrawal as provided in
subsection (b); and
``(B) such individual shall not be eligible to
enter into, directly or indirectly, any future
agreement to establish a capital construction fund
under this chapter with respect to a vessel operated in
the fisheries of the United States.
``(3) Effect of election for entities.--
``(A) In general.--In the case of a person (other
than an individual) who makes an election under
paragraph (1)--
``(i) the total amount in the capital
construction fund on the applicable date shall
be distributed to the shareholders, partners,
or members of such person in accordance with
the terms of the instruments setting forth the
ownership interests of such shareholders,
partners, or members;
``(ii) each shareholder, partner, or member
shall be treated as having established a
special temporary capital construction fund and
having deposited amounts received in the
distribution into such special temporary
capital construction fund;
``(iii) no gain or loss shall be recognized
with respect to such distribution;
``(iv) the basis of any shareholder,
partner, or member in the person shall not be
reduced as a result of such distribution;
``(v) any amounts not distributed pursuant
to clause (i) shall be distributed in a
nonqualified withdrawal; and
``(vi) such person shall not be eligible to
enter into, directly or indirectly, any future
agreement to establish a capital construction
fund under this chapter with respect to a
vessel operated in the fisheries of the United
States.
``(B) Special temporary capital construction
funds.--For purposes of this chapter, a special
temporary capital construction fund shall be treated in
the same manner as a capital construction fund
established under section 53503, except that the
following rules shall apply:
``(i) A special temporary capital
construction fund shall be established without
regard to any agreement under section 53503 and
without regard to any eligible or qualified
vessel.
``(ii) Section 53505 shall not apply and no
amounts may be deposited into a special
temporary capital construction fund other than
amounts received pursuant to a distribution
described in subparagraph (A)(i).
``(iii) In the case of any amounts
distributed from a special temporary capital
construction fund directly to a capital
construction fund of the taxpayer established
under section 53505--
``(I) no gain or loss shall be
recognized;
``(II) the limitation under section
53505 shall not apply with respect to
any amount so transferred;
``(III) such amounts shall not
reduce taxable income under section
53507(a)(1); and
``(IV) for purposes of section
53511(e), such amounts shall be treated
as deposited in the capital
construction fund on the date that such
funds were deposited in the capital
construction fund with respect to which
the election under paragraph (1) was
made.
``(iv) In the case of any amounts
distributed from a special temporary capital
construction fund pursuant to an election under
paragraph (1), clauses (i) and (ii) of
paragraph (2)(A) shall not apply to so much of
such amounts as are attributable to earnings
accrued after the date of the establishment of
such special temporary capital construction
fund.
``(v) Any amount not distributed from a
special temporary capital construction fund
before the due date of the tax return
(including extension) for the last taxable year
of the individual ending before January 1,
2012, shall be treated as distributed to the
taxpayer on the day before such due date as if
an election under paragraph (1) were made by
the taxpayer on such day.
``(C) Regulations.--The joint regulations shall
provide rules for--
``(i) assigning the amounts received by the
shareholders, partners, or members in a
distribution described in subparagraph (A)(i)
to the accounts described in section 53508(a)
in special temporary capital construction
funds; and
``(ii) preventing the abuse of the purposes
of this section.
``(4) Tax benefit rule.--Rules similar to the rules under
section 53511(f)(3) shall apply for purposes of determining tax
liability on any nonqualified withdrawal under paragraph
(2)(A), (3)(A)(v), or (3)(B)(v).
``(5) Applicable date.--For purposes of this subsection,
the term `applicable date' means--
``(A) with respect to any capital construction fund
which has a balance of less than $1,000,000 on the date
that an election under paragraph (1) was made, the date
of such election; and
``(B) with respect to any other capital
construction fund, the last day of the taxable year
which includes the date of the enactment of this
section.
``(6) Election.--Any election under paragraph (1)--
``(A) may only be made--
``(i) by a person who maintains a capital
construction fund with respect to a vessel
operated in the fisheries of the United States
on the date of the enactment of this section;
or
``(ii) by a person who maintains a capital
construction fund which was established
pursuant to paragraph (3)(A)(ii) as a result of
an election made by an entity in which such
person was a shareholder, partner, or member;
``(B) shall be made not later than the due date of
the tax return (including extensions) for the person's
last taxable year ending on or before December 31,
2012; and
``(C) shall apply to all amounts in the capital
construction fund with respect to which the election is
made.
``(b) Election to Average Income.--At the election of an individual
who has received a distribution described in subsection (a), for
purposes of section 1301 of the Internal Revenue Code of 1986--
``(1) such individual shall be treated as engaged in a
fishing business, and
``(A) such distribution shall be treated as income
attributable to a fishing business for such taxable
year.''.
(2) Conforming amendments.--
(A) Section 53511 of title 46, United States Code,
is amended by striking ``section 53513'' and inserting
``sections 53513 and 53518''.
(B) The table of sections for chapter 535 of title
46, United States Code, is amended by inserting after
the item relating to section 53517 the following new
item:
``53518. Election to terminate.''.
(b) Amendments to the Internal Revenue Code of 1986.--
(1) In general.--Section 7518 of the Internal Revenue Code
of 1986 is amended by adding at the end the following new
subsection:
``(j) Election To Terminate Capital Construction Funds.--
``(1) In general.--Any person who has entered into an
agreement under chapter 535 of title 46 of the United States
Code, with respect to a vessel operated in the fisheries of the
United States may make an election under this paragraph to
terminate the capital construction fund established under such
agreement.
``(2) Effect of election on individuals.--In the case of an
individual who makes an election under paragraph (1) with
respect to a capital construction fund, any amount remaining in
such capital construction fund on the applicable date shall be
distributed to such individual as a nonqualified withdrawal,
except that--
``(A) in computing the tax on such withdrawal,
except as provided in paragraph (4), paragraphs
(3)(C)(ii) and (6) of subsection (g) shall not apply,
and
``(B) the taxpayer may elect to average the income
from such withdrawal as provided in paragraph (7).
``(3) Effect of election for entities.--
``(A) In general.--In the case of a person (other
than an individual) who makes an election under
paragraph (1)--
``(i) the total amount in the capital
construction fund on the applicable date shall
be distributed to the shareholders, partners,
or members of such person in accordance with
the terms of the instruments setting forth the
ownership interests of such shareholders,
partners, or members,
``(ii) each shareholder, partner, or member
shall be treated as having established a
special temporary capital construction fund and
having deposited amounts received in the
distribution into such special temporary
capital construction fund,
``(iii) no gain or loss shall be recognized
with respect to such distribution,
``(iv) the basis of any shareholder,
partner, or member in the person shall not be
reduced as a result of such distribution, and
``(v) any amounts not distributed pursuant
to clause (i) shall be distributed as a
nonqualified withdrawal.
``(B) Special temporary capital construction
funds.--For purposes of this section, a special
temporary capital construction fund shall be treated in
the same manner as a capital construction fund
established under section 53503 of title 46, United
States Code, except that the following rules shall
apply:
``(i) Subsection (a) shall not apply and no
amounts may be deposited into a special
temporary capital construction fund other than
amounts received pursuant to a distribution
described in subparagraph (A)(i).
``(ii) In the case of any amounts
distributed from a special temporary capital
construction fund directly to a capital
construction fund of the taxpayer established
under section 53505 of title 46, United States
Code--
``(I) no gain or loss shall be
recognized;
``(II) the limitation under
subsection (a) shall not apply with
respect to any amount so transferred;
``(III) such amounts shall not
reduce taxable income under subsection
(c)(1)(A); and
``(IV) for purposes of subsection
(g)(5), such amounts shall be treated
as deposited in the capital
construction fund on the date that such
funds were deposited in the capital
construction fund with respect to which
the election under paragraph (1) was
made.
``(iii) In the case of any amounts
distributed from a special temporary capital
construction fund pursuant to an election under
paragraph (1), subparagraphs (A) and (B) of
paragraph (2) shall not apply to so much of
such amounts as are attributable to earnings
accrued after the date of the establishment of
such special temporary capital construction
fund.
``(iv) Any amount not distributed from a
special temporary capital construction fund
before the due date of the tax return
(including extension) for the last taxable year
of the individual ending before January 1,
2012, shall be treated as distributed to the
taxpayer on the day before such due date as if
an election under paragraph (1) were made by
the taxpayer on such day the date.
``(C) Regulations.--The joint regulations shall
provide rules for--
``(i) assigning the amounts received by the
shareholders, partners, or members in a
distribution described in subparagraph (A)(i)
to the accounts described in subsection (d)(1)
in special temporary capital construction
funds; and
``(ii) preventing the abuse of the purposes
of this section.
``(4) Tax benefit rule.--Rules similar to the rules under
subsection (g)(6)(B) shall apply for purposes of determining
tax liability on any nonqualified withdrawal under paragraph
(2), (3)(A)(v), or (3)(B)(iv).
``(5) Applicable date.--For purposes of this subsection,
the term `applicable date' means--
``(A) with respect to any capital construction fund
which has a balance of less than $1,000,000 on the date
that an election under paragraph (1) was made, the date
of such election; and
``(B) with respect to any other capital
construction fund, the last day of the taxable year
which includes the date of the enactment of this
subsection.
``(6) Election.--Any election under paragraph (1)--
``(A) may only be made--
``(i) by a person who maintains a capital
construction fund with respect to a vessel
operated in the fisheries of the United States
on the date of the enactment of this
subsection, or
``(ii) by a person who maintains a capital
construction fund which was established
pursuant to subparagraph (3)(A)(ii) as a result
of an election made by an entity in which such
person was a shareholder, partner, or member,
``(B) shall be made not later than the due date of
the tax return (including extensions) for the person's
last taxable year ending on or before December 31,
2012, and
``(C) shall apply to all amounts in the capital
construction fund with respect to which the election is
made.
``(7) Election to average income.--At the election of an
individual who has received a distribution described in
paragraph (2), for purposes of section 1301--
``(A) such individual shall be treated as engaged
in a fishing business, and
``(B) such distribution shall be treated as income
attributable to a fishing business for such taxable
year.''.
(2) Conforming amendment.--Section 7518(g)(1) of such Code
is amended by striking ``subsection (h)'' and inserting
``subsections (h) and (j)''.
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