I 

118TH CONGRESS 

1ST SESSION H. R. 1178 

To amend the Internal Revenue Code of 1986 to exclude gain from the 

sale or exchange of the entire interest in a wholly owned rural incumbent 

local exchange carrier, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 24, 2023 

Mr. FERGUSON 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 exclude 

gain from the sale or exchange of the entire interest 

in a wholly owned rural incumbent local exchange carrier, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Broadband Stock Ac5 quisition in Local Exchanges Act’’ or as the ‘‘Broadband 

6 SALE Act’’. 


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1 SEC. 2. EXCLUSION OF GAIN FROM SALE OF RURAL INCUM2 BENT LOCAL EXCHANGE CARRIER STOCK. 

3 (a) IN GENERAL.—Part III of subchapter B of chap4 ter 1 of the Internal Revenue Code of 1986 is amended 

5 by inserting before section 140 the following new section: 

6 ‘‘SEC. 139J. GAIN FROM SALE OF RURAL INCUMBENT 

7 LOCAL EXCHANGE CARRIER STOCK. 

8 ‘‘(a) EXCLUSION.—Gross income shall not include 

9 gain from the sale or exchange of the entire interest in 

10 a wholly owned rural incumbent local exchange carrier. 

11 ‘‘(b) APPORTIONMENT.—In the case of a carrier de12 scribed in paragraph (1) that serves areas not described 

13 in paragraph (1), the amount excluded under subsection 

14 (a) shall not exceed the product of such amount (without 

15 regard to this paragraph) and the ratio of— 

16 ‘‘(1) revenues attributable to the provision of 

17 communications services in an area described in sub18 section (c) during the 1-year period preceding such 

19 sale, to 

20 ‘‘(2) all revenues during such period. 

21 ‘‘(c) RURAL INCUMBENT LOCAL EXCHANGE CAR22 RIER.—For purposes of this section, the term ‘rural in23 cumbent local exchange carrier’ means an incumbent local 

24 exchange carrier that serves an area that is an area— 

25 ‘‘(1) where the carrier was required (on the 

26 date of the enactment of the Telecommunications 


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1 Act of 1996) by law or regulation to provide commu2 nications services to any customer regardless of cost, 

3 and 

4 ‘‘(2) other than an urbanized area with— 

5 ‘‘(A) not fewer than 50,000 people, and 

6 ‘‘(B) a core where there are not fewer than 

7 1,000 people per square mile. 

8 ‘‘(d) DEFINITIONS.—For purposes of this section, 

9 terms defined in the Communications Act of 1934 have 

10 the meaning given such terms in such Act. 

11 ‘‘(e) TERMINATION.—This section shall not apply to 

12 sales or exchanges for which an application for a certifi13 cate under section 214 of the Communications Act of 

14 1934 is filed after the date that is 5 years after the date 

15 of the enactment of this section.’’. 

16 (b) CONFORMING AMENDMENT.—Section 338(a) of 

17 such Code is amended by inserting ‘‘(other than section 

18 139J)’’ after ‘‘For purposes of this subtitle’’. 

19 (c) CLERICAL AMENDMENT.—The table of sections 

20 for part III of subchapter B of chapter 1 of such Code 

21 is amended by inserting before the item relating to section 

22 140 the following new item: 

‘‘Sec. 139J. Gain from sale of rural incumbent local exchange carrier stock.’’. 

23 (d) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to sales or exchanges after the date 

25 of the enactment of this Act. 


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1 SEC. 3. RECAPTURE OF EXCLUSION OF GAIN FROM SALE 

2 OF RURAL INCUMBENT LOCAL EXCHANGE 

3 CARRIER STOCK. 

4 (a) IN GENERAL.—Subchapter B of chapter 1 of the 

5 Internal Revenue Code of 1986 is amended by adding at 

6 the end the following new part: 

7 ‘‘PART XII—RECAPTURE OF EXCLUSION OF GAIN 

8 FROM SALE OF RURAL INCUMBENT LOCAL 

9 EXCHANGE CARRIER STOCK 

‘‘Sec. 292. Recapture of exclusion of gain from sale of rural incumbent local 

exchange carrier stock. 

10 ‘‘SEC. 292. RECAPTURE OF EXCLUSION OF GAIN FROM SALE 

11 OF RURAL INCUMBENT LOCAL EXCHANGE 

12 CARRIER STOCK. 

13 ‘‘(a) IN GENERAL.—If a taxpayer acquired stock of 

14 a rural incumbent local exchange carrier in a sale or ex15 change described in section 139J and such carrier is not, 

16 for a qualified 1-year period with respect to such sale or 

17 exchange, a rural incumbent local exchange carrier, such 

18 taxpayer’s taxable income under this chapter for the tax19 able year in which such 1-year period ends shall be in20 creased by product of 1/6 and any amount excluded from 

21 tax by any person with respect to such sale or exchange 

22 under such section. Such increase shall be treated as cap23 ital gain. 


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1 ‘‘(b) RURAL INCUMBENT LOCAL EXCHANGE CAR2 RIER.—For purposes of this section, the term ‘rural in3 cumbent local exchange carrier’ means, with respect to a 

4 qualified 1-year period, a rural incumbent local exchange 

5 carrier (as defined in section 48F) that offers broadband 

6 internet access service at upload and download speeds of 

7 at least 1,000 megabits per second— 

8 ‘‘(1) in the case of the 4th qualified 1-year pe9 riod, to not less than 30 percent of locations in an 

10 area described in section 139J(c)(2), 

11 ‘‘(2) in the case of the 5th qualified 1-year pe12 riod, to not less than 40 percent of such locations, 

13 and 

14 ‘‘(3) in the case of the 6th qualified 1-year pe15 riod, to not less than 50 percent of such locations. 

16 ‘‘(c) QUALIFIED 1-YEAR PERIOD.—For purposes of 

17 this section, the term ‘qualified 1-year period’ means, with 

18 respect to a rural incumbent local exchange carrier with 

19 respect to a sale or exchange described in subsection 139J, 

20 the 1-year period starting on the date of such sale or ex21 change, and each of the 5 subsequent 1-year periods. 

22 ‘‘(d) DEFINITIONS.—For purposes of this section, 

23 terms defined in the Communications Act of 1934 have 

24 the meaning given such terms in such Act.’’. 


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1 (b) CLERICAL AMENDMENT.—The table of parts of 

2 subchapter B of chapter 1 of such Code is amended by 

3 adding at the end the following new item: 

‘‘PART XII—RECAPTURE OF EXCLUSION OF GAIN FROM SALE OF RURAL

INCUMBENT LOCAL EXCHANGE CARRIER STOCK’’. 

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply after the date of the enactment 

6 of this Act. 

7 SEC. 4. RURAL COMMUNICATIONS INVESTMENT TAX CRED8 IT. 

9 (a) IN GENERAL.—Subpart E of part IV of sub10 chapter A of chapter 1 of the Internal Revenue Code of 

11 1986 is amended by inserting after subsection 48E the 

12 following new section: 

13 ‘‘SEC. 48F. RURAL COMMUNICATIONS INVESTMENT CREDIT. 

14 ‘‘(a) IN GENERAL.— 

15 ‘‘(1) CREDIT AMOUNT.—For the purposes of 

16 section 46, in the case of a rural incumbent local ex17 change carrier, the rural communications investment 

18 credit for any taxable year is an amount equal to 30 

19 percent of the amounts that are paid or incurred by 

20 such carrier during any qualified 1-year period end21 ing in such taxable year to purchase, maintain, or 

22 improve property for the purpose of providing voice 

23 telephone service or broadband internet access serv24 ice in an area described in section 139J(c)(2). 


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1 ‘‘(2) EXCLUSION OF CERTAIN FEDERAL

2 FUNDS.—Amounts paid or incurred which are other3 wise taken into account under paragraph (1) with 

4 respect to any qualified 1-year period shall be re5 duced (including for purposes of subsection (b)) by 

6 the amount of any Federal universal service support 

7 under section 254 of the Communications Act of 

8 1934 for the deployment of communications infra9 structure, or any Federal grant for the deployment 

10 of communications infrastructure received by such 

11 carrier and properly attributable to such period. 

12 ‘‘(b) RURAL INCUMBENT LOCAL EXCHANGE CAR13 RIER.—For purposes of this section, the term ‘rural in14 cumbent local exchange carrier’ means, for a 1-year pe15 riod, an incumbent local exchange carrier— 

16 ‘‘(1) whose stock has been acquired in a sale or 

17 exchange described in section 139J, 

18 ‘‘(2) for which— 

19 ‘‘(A) the ratio of— 

20 ‘‘(i) the amount described in sub21 section (a)(1), divided by 

22 ‘‘(ii) the average active voice telephone 

23 service or broadband internet access serv24 ice connections during the qualified 1-year 


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1 period referred to in subsection (a)(1), is 

2 not less than; and 

3 ‘‘(B) the ratio of— 

4 ‘‘(i) the product of 1.25 and the 

5 annualized average of the amounts de6 scribed in subsection (a)(1) for the 3-year 

7 period preceding the sale or exchange, di8 vided by 

9 ‘‘(ii) the average active voice telephone 

10 service or broadband internet access serv11 ice connections during such 3-year period; 

12 and 

13 ‘‘(3) in the case of the 3rd qualified 1-year pe14 riod, that offers broadband internet access service 

15 described in section 292(b) to not less than 20 per16 cent of locations in an area described in section 

17 139J(c)(2). 

18 ‘‘(c) QUALIFIED 1-YEAR PERIOD.—For purposes of 

19 this section, the term ‘qualified 1-year period’ means, with 

20 respect to a rural incumbent local exchange carrier with 

21 respect to a sale or exchange described in subsection 139J, 

22 the 1-year period starting on the date of such sale or ex23 change, and each of the 2 subsequent 1-year periods. 


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1 ‘‘(d) DEFINITIONS.—For purposes of this section, 

2 terms defined in the Communications Act of 1934 have 

3 the meaning given such terms in such Act. 

4 ‘‘(e) TRANSFER OF CREDIT.—If, with respect to a 

5 credit under subsection (a) for any taxable year, the tax6 payer elects the application of this paragraph for such tax7 able year with respect to all (or any portion specified in 

8 such election) of such credit, the person specified in such 

9 election, and not the taxpayer, shall be treated as the tax10 payer for purposes of this title with respect to such credit 

11 (or such portion thereof).’’. 

12 (b) CONFORMING AMENDMENT.—Section 46 of such 

13 Code is amended by striking ‘‘and’’ at the end of para14 graph (6), by striking the period at the end of paragraph 

15 (7) and inserting ‘‘, and’’, and by adding at the end the 

16 following new paragraph: 

17 ‘‘(8) the rural communications investment cred18 it.’’. 

19 (c) CLERICAL AMENDMENT.—The table of sections 

20 for subpart E of part IV of subchapter A of chapter 1 

21 of such Code is amended by inserting after the item relat22 ing to section 48E the following new item: 

‘‘Sec. 48F. Rural communications investment credit.’’. 


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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to amounts paid or incurred after 

3 the date of the enactment of this Act. 

Æ 


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