To amend the Internal Revenue Code of 1986 to provide tax incentives to encourage diversity of ownership of telecommunications businesses, and for other purposes.

Summary: Amends the Internal Revenue Code to allow a taxpayer election to defer from tax up to $50 million of the gain from the sale of the assets or stock of a telecommunications business to certain small businesses that own 10 or fewer broadcast stations. Limits to three the number of such purchases by any qualifying small business. Requires the recapture of such deferred gain for any telecommunications business resold within five years.

Authorizes the Administrator of the Small Business Administration to guarantee loans made to small businesses for the purchase of a telecommunications business.

SECTION 1. NONRECOGNITION OF GAIN ON QUALIFIED SALES OF 
              TELECOMMUNICATIONS BUSINESSES.

    (a) In General.--Subchapter O of chapter 1 of the Internal Revenue 
Code of 1986 (relating to gain or loss on disposition of property) is 
amended by inserting after part IV the following new part:

        ``PART V--CERTAIN SALES OF TELECOMMUNICATIONS BUSINESSES

``Sec. 1071. Nonrecognition of gain on certain sales of 
                            telecommunications businesses.

``SEC. 1071. NONRECOGNITION OF GAIN ON CERTAIN SALES OF 
              TELECOMMUNICATIONS BUSINESSES.

    ``(a) In General.--In the case of any qualified telecommunications 
sale, at the election of the taxpayer, such sale shall be treated as an 
involuntary conversion of property within the meaning of section 1033.
    ``(b) Limitation on Amount of Gain on Which Tax May Be Deferred.--
The amount of gain on any qualified telecommunications sale which is 
not recognized by reason of this section shall not exceed $50,000,000.
    ``(c) Qualified Telecommunications Sale.--For purposes of this 
section, the term `qualified telecommunications sale' means any sale to 
a qualified business of--
            ``(1) the assets of a telecommunications business, or
            ``(2) stock in a corporation if, immediately after such 
        sale--
                    ``(A) the qualified business controls (within the 
                meaning of section 368(c)) such corporation, and
                    ``(B) substantially all of the assets of such 
                corporation are assets of 1 or more telecommunications 
                businesses.
    ``(d) Qualified Business.--For purposes of this section--
            ``(1) In general.--The term `qualified business' means--
                    ``(A) in the case of a telecommunications sale 
                which includes the sale of any interest in a broadcast 
                station (as defined in section 3(5) of the 
                Communications Act of 1934), any person if--
                            ``(i) such person owns, directly or 
                        indirectly, a qualified interest in 10 or fewer 
                        broadcast stations (as so defined), and
                            ``(ii) the fair market value of the 
                        aggregate interests of such person in broadcast 
                        stations (as so defined) is equal to or greater 
                        than 50 percent of the net assets of such 
                        entity, and
                    ``(B) in the case of any other telecommunications 
                sale--
                            ``(i) any individual, and
                            ``(ii) any partnership or corporation if--
                                    ``(I) the net assets of such entity 
                                do not exceed $30,000,000, and
                                    ``(II) the average after-tax income 
                                of such entity for the preceding 2 
                                taxable years does not exceed 
                                $10,000,000.
            ``(2) Qualified interest in broadcast stations.--An 
        interest in a broadcast station shall be treated as qualified 
        if such interest represents 50 percent or more of the total 
        assets of the station.
            ``(3) Each business limited to 3 purchases.--A person shall 
        not be a qualified business with respect to a qualified 
        telecommunications sale if such person (or any predecessor) was 
        the purchaser in more than 2 prior qualified telecommunications 
        sales for which an election under this section was made by the 
        seller.
            ``(4) Special rules for qualified business determination.--
        For purposes of paragraph (1)--
                    ``(A) Net assets.--The term `net assets' means the 
                excess of the aggregate gross assets (as defined in 
                section 1202(d)(2)) of the entity over the indebtedness 
                of such entity.
                    ``(B) After-tax income.--The term `after-tax 
                income' means taxable income reduced by the net income 
                tax for the taxable year. For purposes of the preceding 
                sentence, the term `net income tax' means the tax 
                imposed by this chapter reduced by the sum of the 
                credits allowable under part IV of subchapter A of this 
                chapter. Rules similar to the rules of subparagraphs 
                (A), (B), and (D) of section 448(c)(3) shall apply in 
                determining average after-tax income.
            ``(5) Aggregation rules.--For purposes of this subsection, 
        all persons treated as a single employer under subsection (a) 
        or (b) of section 52 or subsection (m) or (o) of section 414 
        shall be treated as one person.
    ``(e) Telecommunications Business.--The term `telecommunications 
business' means any business providing communication services by wire, 
cable, radio, satellite, or other technology if the providing of such 
services is governed by the Communications Act of 1934 or the 
Telecommunications Act of 1996.
    ``(f) Special Rules.--
            ``(1) In general.--In applying section 1033 for purposes of 
        subsection (a) of this section, stock of a corporation 
        operating a telecommunications business, whether or not 
        representing control of such corporation, shall be treated as 
        property similar or related in service or use to the property 
        sold in the qualified telecommunications sale.
            ``(2) Election to reduce basis rather than recognize 
        remainder of gain.--If--
                    ``(A) a taxpayer elects the treatment under 
                subsection (a) with respect to any qualified 
                telecommunications sale, and
                    ``(B) an amount of gain would (but for this 
                paragraph) be recognized on such sale other than by 
                reason of subsection (b),
        then the amount of such gain shall not be recognized to the 
        extent that the taxpayer elects to reduce the basis of 
        depreciable property (as defined in section 1017(b)(3)) held by 
        the taxpayer immediately after the sale or acquired in the same 
        taxable year. The manner and amount of such reduction shall be 
        determined under regulations prescribed by the Secretary.
            ``(3) Basis.--For basis of property acquired on a sale or 
        exchange treated as an involuntary conversion under subsection 
        (a), see section 1033(b).
    ``(g) Recapture of Tax Benefit if Telecommunications Business 
Resold Within 5 Years, etc.--
            ``(1) In general.--If, within 5 years after the date of any 
        qualified telecommunications sale, there is a recapture event 
        with respect to the property involved in such sale, then the 
        purchaser's tax imposed by this chapter for the taxable year in 
        which such event occurs shall be increased by 20 percent of the 
        lesser of the consideration furnished by the purchaser in such 
        sale or the dollar limitation of subsection (b).
            ``(2) Exception for reinvested amounts.--Paragraph (1) 
        shall not apply to any recapture event which is a sale if--
                    ``(A) the sale is a qualified telecommunications 
                sale, or
                    ``(B) during the 60-day period beginning on the 
                date of such sale, the taxpayer is the purchaser in 
                another qualified telecommunications sale in which the 
                consideration furnished by the taxpayer is not less 
                than the amount realized on the recapture event sale.
            ``(3) Recapture event.--For purposes of this subsection, 
        the term `recapture event' means, with respect to any qualified 
        telecommunications sale--
                    ``(A) any sale or other disposition of the assets 
                or stock referred to in subsection (c) which were 
                acquired by the taxpayer in such sale, and
                    ``(B) in the case of a qualified telecommunications 
                sale described in subsection (c)(2)--
                            ``(i) any sale or other disposition of a 
                        telecommunications business by the corporation 
                        referred to in such subsection, or
                            ``(ii) any other transaction which results 
                        in the qualified business not having control 
                        (as defined in subsection (c)(2)(A)) of such 
                        corporation.
        Such term shall not include any sale or other disposition 
        resulting from the default, or imminent default, of any 
        indebtedness of the taxpayer.''.
    (b) Clerical Amendment.--The table of parts for subchapter O of 
chapter 1 of such Code is amended by inserting after the item relating 
to part IV the following new item:

      ``Part V. Certain Sales of Telecommunications Businesses.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to sales in taxable years beginning after the date of the 
enactment of this Act.

SEC. 2. LOAN GUARANTEE PROGRAM TO ENCOURAGE DIVERSITY OF OWNERSHIP OF 
              TELECOMMUNICATIONS BUSINESSES.

    (a) In General.--The Administrator of the Small Business 
Administration may guarantee any loan made to a qualified business for 
the purchase of assets or stock described in section 1071(c) of the 
Internal Revenue Code of 1986 (relating to qualified telecommunications 
sale).
    (b) Limitations.--
            (1) Security.--The Administrator shall not guarantee any 
        loan under subsection (a) unless the guaranteed portion of such 
        loan is secured by a first lien position or first mortgage on 
        the stock or assets financed by the loan.
            (2) Guarantee percentage.--The amount of any loan 
        guaranteed by the Administrator under subsection (a) shall not 
        exceed 95 percent of the balance of the financing outstanding 
        at the time of disbursement of the loan.
            (3) Fees.--With respect to each loan guaranteed under 
        subsection (a) (other than a loan that is repayable in 1 year 
        or less), the Administrator may collect a guarantee fee, which 
        shall be payable by the participating lender, and may be 
        charged to the borrower.
            (4) Forfeiture of fcc license.--The Administrator shall not 
        guarantee any loan under subsection (a) unless such loan 
        provides that any license issued by the Federal Communications 
        Commission to the borrower shall be returned and forfeited by 
        the borrower to the Federal Communications Commission 
        immediately upon a finding by the Administrator that such 
        borrower is in default under such loan.
    (c) General Authority.--For purposes of carrying out this section, 
the Administrator may--
            (1) enter into contracts with private and Federal entities 
        for professional and other services;
            (2) enter into memorandums of understanding with other 
        Federal agencies; and
            (3) issue regulations, including regulations regarding--
                    (A) notice of and opportunity to cure a default;
                    (B) procedures related to foreclosure; and
                    (C) such other matters as the Administrator 
                considers appropriate.
    (d) Definitions.--For purposes of this section:
            (1) Administrator.--The term ``Administrator'' means the 
        Administrator of the Small Business Administration.
            (2) Qualified business.--The term ``qualified business'' 
        has the meaning given such term in section 1071(d) of the 
        Internal Revenue Code of 1986.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out the purposes of 
this section.