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[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 1013 Introduced in Senate (IS)]

<DOC>

115th CONGRESS
  1st Session
                                S. 1013

To amend the Internal Revenue Code of 1986 to provide tax benefits for 
               investments in gigabit opportunity zones.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                              May 3, 2017

  Mrs. Capito introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
To amend the Internal Revenue Code of 1986 to provide tax benefits for 
               investments in gigabit opportunity zones.

    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 ``Gigabit Opportunity Act''.

SEC. 2. GIGABIT OPPORTUNITY ZONES.

    (a) Establishment of Zones and Benefits.--
            (1) In general.--Chapter 1 of the Internal Revenue Code of 
        1986 is amended by adding at the end the following:

               ``Subchapter Z--Gigabit Opportunity Zones

``Sec. 1400Z-1. Designation.
``Sec. 1400Z-2. Deferral for eligible taxpayer of capital gains 
                            invested in gigabit opportunity zones.
``Sec. 1400Z-3. Immediate expensing of qualified gigabit opportunity 
                            zone business property.

``SEC. 1400Z-1. DESIGNATION.

    ``(a) Qualified Gigabit Opportunity Zone Defined.--For the purposes 
of this subchapter, the term `qualified gigabit opportunity zone' means 
a population census tract that is a low-income community--
            ``(1) which is located in a jurisdiction--
                    ``(A) that has been certified by Secretary, in 
                consultation with the National Telecommunications and 
                Information Administration, as having adopted the 
                Uniform Model Broadband Deployment Act prescribed by 
                the Federal Communications Commission pursuant to 
                section 4 of the Gigabit Opportunity Act, or
                    ``(B) which has been determined by the Secretary, 
                in consultation with the National Telecommunications 
                and Information Administration, to have adopted laws 
                which are comparable to such Model Broadband 
                Development Act, and
            ``(2) which is designated as a qualified gigabit 
        opportunity zone.
Paragraph (1)(B) shall not apply with respect to any jurisdiction for 
which a determination has been made after the date which is 3 years 
after the date of the enactment of this section.
    ``(b) Designation.--
            ``(1) In general.--For purposes of subsection (a)(3), a 
        population census tract that is a low-income community and 
        which meets the requirements of paragraph (1) of subsection (a) 
        is designated as a qualified gigabit opportunity zone if--
                    ``(A) not later than the end of the determination 
                period, the governor of the State in which the tract is 
                located--
                            ``(i) nominates the tract for designation 
                        as a qualified gigabit opportunity zone, and
                            ``(ii) notifies the Secretary in writing of 
                        such nomination, and
                    ``(B) the Secretary certifies such nomination and 
                designates such tract as a qualified gigabit 
                opportunity zone before the end of the consideration 
                period.
            ``(2) Extension of periods.--A governor may request that 
        the Secretary extend either the determination or consideration 
        period, or both (determined without regard to this 
        subparagraph), for an additional 30 days.
    ``(c) Other Definitions.--For purposes of this subsection--
            ``(1) Low-income communities.--The term `low-income 
        community' has the same meaning as when used in section 45D(e).
            ``(2) Definition of periods.--
                    ``(A) Consideration period.--The term 
                `consideration period' means the 30-day period 
                beginning on the date on which the Secretary receives 
                notice under subsection (b)(1)(A)(ii), as extended 
                under subsection (b)(2).
                    ``(B) Determination period.--The term 
                `determination period' means the 90-day period 
                beginning on the date on which the State adopts the 
                Uniform Model Broadband Act described in subsection 
                (a)(1)(A), as extended under subsection (b)(2).
    ``(d) Guidance for Opportunity Zone Nominations.--When considering 
the nomination of qualified gigabit opportunity zones, governors should 
strive for the creation of qualified gigabit opportunity zones that are 
geographically concentrated and contiguous clusters of population 
census tracts and should give particular consideration to areas that--
            ``(1) are currently facing obstacles to economic 
        development due to a lack of geographic broadband coverage or a 
        lack of broadband speed,
            ``(2) are currently the focus of mutually reinforcing 
        State, local, or private economic development initiatives, and
            ``(3)(A) are poised for economic growth that requires 
        access to high speed broadband for commercial purposes, and
            ``(B) represent the areas of a State where such service 
        would result in the highest return on investment.
    ``(e) Number of Designations.--
            ``(1) In general.--Except as provided by paragraph (2), the 
        number of population census tracts in a State that may be 
        designated as qualified gigabit opportunity zones under this 
        section may not exceed 25 percent of the number of low-income 
        communities in the State.
            ``(2) Exception.--If the number of low-income communities 
        in a State is less than 100, then a total of 25 of such tracts 
        may be designated as qualified gigabit opportunity zones.
    ``(f) Designation of Tracts Contiguous With Low-Income 
Communities.--
            ``(1) In general.--A population census tract that is not a 
        low-income community may be designated as a qualified gigabit 
        opportunity zone under this section if--
                    ``(A) such tract meets the requirements of 
                paragraph (1) of subsection (a),
                    ``(B) the tract is contiguous with the low-income 
                community that is designated as a qualified gigabit 
                opportunity zone, and
                    ``(C) the median family income of the tract does 
                not exceed 150 percent of the median family income of 
                the low-income community with which the tract is 
                contiguous.
            ``(2) Limitation.--Not more than 25 percent of the 
        population census tracts designated in a State as a qualified 
        gigabit opportunity zone may be designated under paragraph (1).
    ``(g) Period for Which Designation Is in Effect.--A designation as 
a qualified gigabit opportunity zone shall remain in effect for the 
period beginning on the date of the designation and ending at the close 
of the 7th calendar year beginning on or after such date of 
designation.

``SEC. 1400Z-2. DEFERRAL FOR ELIGIBLE TAXPAYER OF CAPITAL GAINS 
              INVESTED IN GIGABIT OPPORTUNITY ZONES.

    ``(a) In General.--
            ``(1) Exclusion of gain invested in gigabit opportunity 
        zone property.--In the case of gain from the sale to, or 
        exchange with, an unrelated person of any property held by an 
        eligible taxpayer, at the election of the eligible taxpayer--
                    ``(A) gross income for the taxable year shall not 
                include so much of such gain as does not exceed the 
                aggregate cost of all qualified gigabit opportunity 
                zone property acquired by the taxpayer during the 180-
                day period beginning on the date of such sale or 
                exchange, and
                    ``(B) the amount of gain excluded by subparagraph 
                (A) shall be included in gross income as provided by 
                paragraph (2).
            ``(2) Deferral of gain invested in qualified gigabit 
        opportunity zone property.--
                    ``(A) Year of inclusion.--Except as provided by 
                subparagraph (C), gain to which paragraph (1)(B) 
                applies shall be included in income in the taxable year 
                in which the qualified gigabit opportunity zone 
                property related to such gain is sold or exchanged in 
                the amount determined under subparagraph (B).
                    ``(B) Amount includible.--The amount of gain 
                determined under this clause shall be--
                            ``(i) 100 percent of such gain in the case 
                        of the sale or exchange of the qualified 
                        gigabit opportunity zone property with respect 
                        to which gain is deferred under paragraph (1) 
                        that is held for less than 5 years,
                            ``(ii) 90 percent of such gain in the case 
                        of the sale or exchange of the qualified 
                        gigabit opportunity zone property with respect 
                        to which gain is deferred under paragraph (1) 
                        that is held for at least 5 years but less than 
                        7 years, and
                            ``(iii) 85 percent of such gain in the case 
                        of the sale or exchange of the qualified 
                        gigabit opportunity zone property with respect 
                        to which gain is deferred under paragraph (1) 
                        that is held for at least 7 years.
            ``(3) Exclusion of gain on qualified gigabit opportunity 
        zone property held for at least 10 years.--Except as provided 
        in paragraph (2), in the case of the sale or exchange of 
        qualified gigabit opportunity zone property, or an investment 
        in a qualified opportunity fund, held for at least 10 years, 
        gross income for the taxable year shall not include any gain 
        from the sale or exchange of such property or investment.
            ``(4) One election per property.--No election may be made 
        under paragraph (1) with respect to a sale or exchange if an 
        election previously made with respect to such sale or exchange 
        is in effect.
    ``(b) Basis Rules Relating to Qualified Gigabit Opportunity Zone 
Property.--
            ``(1) Reduced by gain deferred under subsection (a)(1).--
        The basis of a qualified gigabit opportunity zone property 
        immediately after its acquisition under subsection (a) shall be 
        reduced by the amount of gain deferred by reason of subsection 
        (a)(1)(A) with respect to such property.
            ``(2) Increase for gain recognized under subsection 
        (a)(2).--The basis of qualified gigabit opportunity zone 
        property shall be increased by the amount of gain recognized by 
        reason of subsection (a)(2) with respect to such property.
            ``(3) Subsequent increase in basis for property held for at 
        least 5 years but less than 10 years.--In the case of qualified 
        gigabit opportunity zone property held for at least 5 years but 
        less than 10 years--
                    ``(A) Property held for 5 years.--For qualified 
                gigabit opportunity zone property held for at least 5 
                years, the basis of such property shall be increased by 
                an amount equal to 10 percent of the amount of gain 
                deferred by reason of subsection (a)(1)(A) with respect 
                to such property.
                    ``(B) Property held for 7 years.--For qualified 
                gigabit opportunity zone property held for at least 7 
                years, the basis of such property shall be increased by 
                an amount equal to 5 percent of the amount of gain 
                deferred by reason of subsection (a)(1)(A) with respect 
                to such property.
    ``(c) Eligible Taxpayer.--For purposes of this section, the term 
`eligible taxpayer' means any taxpayer who has a trade or business a 
substantial part of which consists of selling broadband Internet 
service to commercial customers, residential customers, or both through 
one or a combination of the following technologies:
            ``(1) Digital Subscriber Line transmission technology that 
        transmits data faster over traditional copper telephone lines, 
        without regards to the specific type of Digital Subscriber Line 
        transmission technology such as Asymmetrical Digital Subscriber 
        Line, Symmetrical Digital Subscriber Line, High data rate 
        Digital Subscriber Line, or Very High data rate Digital 
        Subscriber Line.
            ``(2) Cable Modem transmission technology that enables 
        operators to provide broadband using the same coaxial cables 
        that deliver pictures and sound to televisions.
            ``(3) Fiber optic transmission technology that converts 
        electrical signals carrying data to light and sends the light 
        through transparent glass fibers.
            ``(4) Wireless transmission technology that utilizes a 
        radio link between the customer's location and the service 
        provider's facility, whether mobile or fixed.
            ``(5) Satellite transmission technology that provides 
        broadband links via orbiting satellites.
            ``(6) Broadband over powerline transmission technology that 
        delivers broadband over the existing low- and medium-voltage 
        electric power distribution network.
            ``(7) Such other technologies as the Secretary, in 
        consultation with the Federal Communications Commission, may 
        designate by rule as a broadband provider technology.
    ``(d) Qualified Gigabit Opportunity Zone Property.--For purposes of 
this section:
            ``(1) In general.--The term `qualified gigabit opportunity 
        zone property' means property which is--
                    ``(A) qualified gigabit opportunity zone stock,
                    ``(B) qualified gigabit opportunity zone 
                partnership interest,
                    ``(C) qualified gigabit opportunity zone business 
                property, or
                    ``(D) an interest in a qualified investment fund.
            ``(2) Qualified gigabit opportunity zone stock.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `qualified gigabit 
                opportunity zone stock' means any stock in a domestic 
                corporation if--
                            ``(i) such stock is acquired by the 
                        taxpayer after December 31, 2017, at its 
                        original issue (directly or through an 
                        underwriter) from the corporation solely in 
                        exchange for cash,
                            ``(ii) as of the time such stock was 
                        issued, such corporation was a qualified 
                        gigabit opportunity zone business (or, in the 
                        case of a new corporation, such corporation was 
                        being organized for purposes of being a 
                        qualified gigabit opportunity zone business), 
                        and
                            ``(iii) during substantially all of the 
                        taxpayer's holding period for such stock, such 
                        corporation qualified as a qualified gigabit 
                        opportunity zone business.
                    ``(B) Redemptions.--A rule similar to the rule of 
                section 1202(c)(3) shall apply for purposes of this 
                paragraph.
            ``(3) Qualified gigabit opportunity zone partnership 
        interest.--The term `qualified gigabit opportunity zone 
        partnership interest' means any capital or profits interest in 
        a domestic partnership if--
                    ``(A) such interest is acquired by the taxpayer 
                after December 31, 2017, from the partnership solely in 
                exchange for cash,
                    ``(B) as of the time such interest was acquired, 
                such partnership was a qualified gigabit opportunity 
                zone business (or, in the case of a new partnership, 
                such partnership was being organized for purposes of 
                being a qualified gigabit opportunity zone business), 
                and
                    ``(C) during substantially all of the taxpayer's 
                holding period for such interest, such partnership 
                qualified as a qualified gigabit opportunity zone 
                business.
            ``(4) Qualified gigabit opportunity zone business 
        property.--
                    ``(A) In general.--The term `qualified gigabit 
                opportunity zone business property' means tangible 
                property used in a trade or business of the taxpayer 
                if--
                            ``(i) such property--
                                    ``(I) is used primarily to provide 
                                broadband transmission services to 
                                locations which do not have such 
                                service that meets the minimum speed 
                                requirements required for universal 
                                service support under Phase II of the 
                                Connect America Fund of the Federal 
                                Communications Commission, as set forth 
                                under subpart D of part 54 of title 47, 
                                Code of Federal Regulations, and
                                    ``(II) is capable of transmitting 
                                signals at a rate of at least 
                                1,000,000,000 bits per second,
                            ``(ii) such property was acquired by the 
                        taxpayer by purchase (as defined in section 
                        179(d)(2)) after December 31, 2017,
                            ``(iii) the original use of such property 
                        in the qualified gigabit opportunity zone 
                        commences with the taxpayer or the taxpayer 
                        substantially improves the property, and
                            ``(iv) during substantially all of the 
                        taxpayer's holding period for such property, 
                        substantially all of the use of such property 
                        was in a qualified gigabit opportunity zone.
                    ``(B) Special rule for certain property.--In the 
                case of property which is placed in service before 
                January 1, 2021, and which is with respect to 
                technology described in paragraph (4) or (5) of 
                subsection (c), subparagraph (A)(i)(II) shall be 
                applied by substituting `150,000,000 bits per second' 
                for `1,000,000,000 bits per second'.
                    ``(C) Substantial improvement.--For purposes of 
                subparagraph (A)(iii), property shall be treated as 
                substantially improved by the taxpayer only if, during 
                any 30-month period beginning after the date of 
                acquisition of such property, additions to basis with 
                respect to such property in the hands of the taxpayer 
                exceed an amount equal to the adjusted basis of such 
                property at the beginning of such 30-month period in 
                the hands of the taxpayer.
                    ``(D) Treatment of related parties.--For purposes 
                of subparagraph (A)(ii), the rules of subparagraph (A) 
                of section 179(d)(2) shall be applied using the 
                relationship described in subsection (e)(2) in lieu of 
                the relationship described in such subparagraph.
            ``(5) Qualified gigabit opportunity fund.--The term 
        `qualified gigabit opportunity fund' means any investment 
        vehicle organized as a corporation or a partnership for the 
        purpose of investing in qualified gigabit opportunity zone 
        property (other than another qualified opportunity fund) that 
        holds at least 90 percent of its assets in qualified 
        opportunity zone property, determined--
                    ``(A) on the last day of the first 6-month period 
                of the taxable year of the fund, and
                    ``(B) on the last day of the taxable year of the 
                fund.
            ``(6) Qualified gigabit opportunity zone business.--
                    ``(A) In general.--The term `qualified gigabit 
                opportunity zone business' means a trade or business--
                            ``(i) in which substantially all of the 
                        tangible property owned or leased by the 
                        taxpayer is qualified gigabit opportunity zone 
                        business property,
                            ``(ii) which satisfies the requirements of 
                        paragraphs (2), (4), and (8) of section 
                        1397C(b), and
                            ``(iii) which is not described in section 
                        144(c)(6)(B).
                    ``(B) Special rule.--For purposes of subparagraph 
                (A), tangible property that ceases to be a qualified 
                gigabit opportunity zone business property shall 
                continue to be treated as a qualified gigabit 
                opportunity zone business property for the lesser of--
                            ``(i) 5 years after the date on which such 
                        tangible property ceases to be so qualified, or
                            ``(ii) the date on which such tangible 
                        property is no longer held by the qualified 
                        gigabit opportunity zone business.
    ``(e) Applicable Rules.--
            ``(1) In general.--For purposes of this section and except 
        as otherwise provided in this section, rules similar to the 
        rules applicable to deferred like kind exchanges under section 
        1031 shall apply except that reinvestment in qualified gigabit 
        opportunity zone property need not require an intermediary 
        party.
            ``(2) Related persons.--For purposes of this subsection, 
        persons are related to each other if such persons are described 
        in section 267(b) or 707(b)(1), determined by substituting `20 
        percent' for `50 percent' each place it occurs in such 
        sections.
            ``(3) Decedents.--In the case of a decedent, amounts 
        recognized under this section shall, if not properly includible 
        in the gross income of the decedent, be includible in gross 
        income as provided by section 691.
            ``(4) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this section, including--
                    ``(A) rules providing for proportionate inclusion 
                in income and increases in basis for purposes of 
                subsections (a) and (b) in cases in which a sale or 
                exchange of any qualified gigabit opportunity zone 
                property with respect to which gain is deferred under 
                subsection (a)(1)(A) is less than all of such property,
                    ``(B) rules requiring taxpayers to provide such 
                information as the Secretary determines to be necessary 
                or appropriate for the identification of both the 
                assets sold (including basis and sale price) and the 
                assets acquired and investments made, and
                    ``(C) rules to prevent abuse.

``SEC. 1400Z-3. IMMEDIATE EXPENSING OF QUALIFIED GIGABIT OPPORTUNITY 
              ZONE BUSINESS PROPERTY.

    ``(a) In General.--A eligible taxpayer may elect to treat the cost 
of any qualified gigabit opportunity zone business property (as defined 
in section 1400Z-2) as an expense which is not chargeable to capital 
account. Any cost so treated shall be allowed as a deduction for the 
taxable year in which the qualified gigabit opportunity zone business 
property is placed in service.
    ``(b) Eligible Taxpayer.--For purposes of this section, the term 
`eligible taxpayer' has the same meaning given to such term under 
section 1400Z-2(c).
    ``(c) Exception for Certain Property.--For purposes of this 
section, the term `qualified gigabit opportunity zone business 
property' shall not include any property to which section 168(g) 
applies.
    ``(d) Election.--An election under this section shall be made under 
rules similar to the rules of section 179(c).
    ``(e) Coordination With Section 179.--For purposes of section 179, 
qualified gigabit opportunity zone business property shall not be 
treated as section 179 property.
    ``(f) Application of Other Rules.--Rules similar to the rules of 
paragraphs (3), (4), (5), (7), (9), and (10) of section 179(d) shall 
apply for purposes of this section.
    ``(g) Taxpayer Reporting.--This section shall not apply with 
respect to any taxpayer for any taxable year unless such taxpayer 
provides the Secretary with such information as the Secretary may 
require to allow the Secretary to evaluate the effectiveness of the 
program established under this part.''.
            (2) Basis adjustments.--Section 1016(a) of such Code is 
        amended by striking ``and'' at the end of paragraph (36), by 
        striking the period at the end of paragraph (37) and inserting 
        ``, and'', and by inserting after paragraph (37) the following:
            ``(38) to the extent provided in section 1400Z-2(b).''.
            (3) Clerical amendment.--The table of subchapters for 
        chapter 1 of such Code is amended by adding at the end the 
        following new item:

              ``subchapter z. gigabit opportunity zones''.

            (4) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act.

SEC. 3. PRIVATE ACTIVITY BONDS FOR QUALIFIED BROADBAND PROJECTS.

    (a) In General.--Section 142(a) of the Internal Revenue Code of 
1986 is amended by striking ``or'' at the end of paragraph (14), by 
striking the period at the end of paragraph (15) and inserting ``, 
or'', and by adding at the end the following new paragraph:
            ``(16) qualified broadband projects.''.
    (b) Qualified Broadband Projects.--Section 142 of such Code is 
amended by adding at the end the following new subsection:
    ``(n) Qualified Broadband Project.--
            ``(1) In general.--For purposes of subsection (a)(16), the 
        term `qualified broadband project' means any project which--
                    ``(A) is located in a jurisdiction that has been 
                certified by Secretary, in consultation with the 
                National Telecommunications and Information 
                Administration, as having adopted the Uniform Model 
                Broadband Deployment Act prescribed by the Federal 
                Communications Commission pursuant to section 4 of the 
                Gigabit Opportunity Act, and
                    ``(B) results in gigabit capable Internet access to 
                residential or commercial locations--
                            ``(i) where a broadband service provider 
                        previously did not provide service, or
                            ``(ii) which do not have broadband service 
                        which meets the minimum speed requirements 
                        required for universal service support under 
                        Phase II of the Connect America Fund of the 
                        Federal Communications Commission, as set forth 
                        under subpart D of part 54 of title 47, Code of 
                        Federal Regulations.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to bonds issued after the date of the enactment of this Act.

SEC. 4. UNIFORM MODEL BROADBAND ACT.

    (a) In General.--Not later than 1 year after the date of the 
enactment of this Act, the Federal Communications Commission shall 
publish a Uniform Model Broadband Deployment Act containing laws for 
the State regulation of the deployment of broadband services.
    (b) No Inference Relating to Data Collection.--Nothing in this Act 
or the amendments made by this Act shall be construed to provide 
additional authority for the collection of data to the Federal 
Communications Commission or the National Telecommunications and 
Information Administration.
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