| Home > 106th Congressional Bills > H.R. 1499 (ih) For the relief of Jean-Loup J. M. Chretien. [Introduced in House] ...
H.R. 1499 (ih) For the relief of Jean-Loup J. M. Chretien. [Introduced in House] ...
108th CONGRESS 1st Session H. R. 1498 To amend the Internal Revenue Code of 1986 to provide that the tax on recognized built-in gain of an S corporation shall not apply to amounts reinvested in the business. _______________________________________________________________________ IN THE HOUSE OF REPRESENTATIVES March 27, 2003 Mr. Ramstad (for himself, Mr. Crane, Mrs. Johnson of Connecticut, Mr. Herger, Mr. Camp, Mr. Sam Johnson of Texas, Mr. English, Mr. Weller, Mr. McInnis, Mr. Foley, Mr. Brady of Texas, and Mr. Cox) introduced the following bill; which was referred to the Committee on Ways and Means _______________________________________________________________________ A BILL To amend the Internal Revenue Code of 1986 to provide that the tax on recognized built-in gain of an S corporation shall not apply to amounts reinvested in the business. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Small Business Opportunity and Growth Act of 2003''. SEC. 2. EXCEPTION FROM TAX ON RECOGNIZED BUILT-IN GAIN OF S CORPORATIONS. (a) In General.--Section 1374 of the Internal Revenue Code of 1986 (relating to tax imposed on certain built-in gains) is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection: ``(e) Exception for Reinvested Amounts.-- ``(1) In general.--If an existing S corporation has a net recognized built-in gain for any taxable year in the recognition period (determined by taking into account only assets held on March 27, 2003) and elects the application of this subsection, the amount of such gain on which tax is imposed by subsection (a) shall not exceed the amount equal to the excess of-- ``(A) the amount realized on the disposition of those assets that resulted in such gain, over ``(B) the excess of-- ``(i) the aggregate qualified expenditures made by the S corporation during the nonrecognition period, over ``(ii) the portion (if any) of such expenditures previously taken into account under this subsection. ``(2) Payment of tax.--If-- ``(A) the return of an S corporation shows that no tax is required to be paid on an amount of recognized built-in gain for any taxable year by reason of paragraph (1) because the S corporation anticipates making qualified expenditures during the succeeding taxable year, and ``(B) as of the close of such succeeding taxable year, tax is required to be paid on such amount because of the failure to make such expenditures, then the tax imposed by this chapter for the first taxable year of the nonrecognition period shall be increased by 10 percent of the increase in tax (determined without regard to this paragraph) for such year by reason of the failure to make such expenditures. ``(3) Qualified expenditures.--For purposes of this subsection, the term `qualified expenditures' means-- ``(A) amounts chargeable to capital account for property used in a trade or business of the S corporation, ``(B) payments of principal and interest on pre- effective date debt of the S corporation, and ``(C) amounts distributed to shareholders to the extent such amounts do not exceed the aggregate of such shareholders' tax imposed by this chapter (and State and local taxes) on amounts attributable to the disposition of those assets that resulted in such net recognized built-in gain. Payments of principal as part of a refinancing of pre-effective date debt shall not be taken into account under subparagraph (B). ``(4) Nonrecognition period.--For purposes of this subsection, the term `nonrecognition period' means, with respect to a taxable year for which an S corporation has a net recognized built-in gain, such taxable year and the succeeding taxable year. ``(5) Pre-effective date debt.--For purposes of paragraph (2)(B), the term `pre-effective date debt' means-- ``(A) debt incurred before March 27, 2003, and ``(B) debt incurred on or after such date to refinance debt described in subparagraph (A) (or refinanced indebtedness meeting the requirements of this subparagraph) to the extent that (immediately after the refinancing) the principal amount of the indebtedness resulting from the refinancing does not exceed the principal amount of the refinanced indebtedness (immediately before the refinancing). ``(6) Anti-abuse rule.--Solely for purposes of determining the treatment of distributions to shareholders under section 1368 during the recognition period-- ``(A) any increase in the accumulated adjustment account and shareholder basis by reason of the disposition of those assets that resulted in the net recognized built-in gain shall not exceed the amounts described in paragraph (2)(C), and ``(B) any increase in such account and shareholder basis which is not permitted under subparagraph (A) shall occur immediately after the recognition period. ``(7) Existing s corporation.--The term `existing S corporation' means any S corporation for which an election under section 1362 is filed before March 27, 2003.'' (b) Effective Date.--The amendment made by this section shall apply to taxable years beginning during or after the calendar year which includes the date of the enactment of this Act but only with respect to built-in gain recognized after such date. <all>
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