I

104TH CONGRESS

1ST SESSION H. R. 2617

To amend the Internal Revenue Code of 1986 to exempt small issues from

the restrictions on the deduction by financial institutions for interest,

to disregard certain amounts of capital expenditures in applying

$10,000,000 limit on such issues, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

NOVEMBER 10, 1995

Mr. ENGLISH of Pennsylvania (for himself, Mr. FOX, and Mr. UNDERWOOD)

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 exempt

small issues from the restrictions on the deduction by

financial institutions for interest, to disregard certain

amounts of capital expenditures in applying $10,000,000

limit on such issues, 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. QUALIFIED SMALL ISSUE BONDS EXEMPT

4 FROM RESTRICTIONS ON DEDUCTION BY FI5 NANCIAL INSTITUTIONS FOR INTEREST.

6 (a) IN GENERAL.—Clause (ii) of section

7 265(b)(3)(B) of the Internal Revenue Code of 1986 (de-
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1 fining qualified tax-exempt obligation) is amended by

2 striking ‘‘or’’ at the end of subclause (I), by redesignating

3 subclause (II) as subclause (III), and by inserting after

4 subclause (I) the following new subclause:

5 ‘‘(II) any qualified small issue

6 bond (as defined in section 144(a)),

7 or’’.

8 (b) EFFECTIVE DATE.—The amendment made by

9 subsection (a) shall apply to taxable years beginning after

10 the date of the enactment of this Act.

11 SEC. 2. $10,000,000 OF CAPITAL EXPENDITURES DIS12 REGARDED IN APPLYING $10,000,000 LIMITA13 TION ON FACE AMOUNT OF QUALIFIED

14 SMALL ISSUE BONDS.

15 (a) IN GENERAL.—Subparagraph (A) of section

16 144(a)(4) of the Internal Revenue Code of 1986 (relating

17 to $10,000,000 limit in certain cases) is amended by add18 ing at the end the following new flush sentence:

19 ‘‘Capital expenditures which would (but for this

20 sentence) be taken into account under clause

21 (ii) shall be taken into account only to the ex22 tent such expenditures exceed $10,000,000.’’

23 (b) EFFECTIVE DATE.—The amendment made by

24 subsection (a) shall apply to—
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1 (1) obligations issued after the date of the en2 actment of this Act, and

3 (2) capital expenditures made after such date

4 with respect to obligations issued on or before such

5 date.

6 SEC. 3. LIMITATION ON LAND ACQUISITION NOT TO APPLY

7 TO QUALIFIED SMALL ISSUE BONDS.

8 (a) IN GENERAL.—Subsection (c) of section 147 of

9 the Internal Revenue Code of 1986 (relating to limitation

10 on use for land acquisition) is amended by adding at the

11 end the following new paragraph:

12 ‘‘(4) EXCEPTION FOR QUALIFIED SMALL ISSUE

13 BONDS.—Paragraph (1)(A) shall not apply to any

14 qualified small issue bond.’’

15 (b) EFFECTIVE DATE.—The amendment made by

16 subsection (a) shall apply to obligations issued after the

17 date of the enactment of this Act.

18 SEC. 4. REPEAL OF PERCENTAGE LIMITATION ON DI19 RECTLY RELATED AND ANCILLARY FACILI20 TIES WHICH MAY BE FINANCED BY QUALI21 FIED SMALL ISSUE BONDS.

22 (a) IN GENERAL.—The last sentence of section

23 144(a)(12)(C) of the Internal Revenue Code of 1986 (de24 fining manufacturing property) is amended by striking

25 ‘‘if—’’ and all that follows and inserting ‘‘if such facilities
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1 are located on the same site as the manufacturing facil2 ity.’’

3 (b) EFFECTIVE DATE.—The amendment made by

4 subsection (a) shall apply to obligations issued after the

5 date of the enactment of this Act.

6 SEC. 5. REPEAL OF DE MINIMIS LIMITATION APPLICABLE

7 TO FINANCING OF OFFICE SPACE BY QUALI8 FIED SMALL ISSUE BONDS.

9 (a) IN GENERAL.—Subparagraph (C) of section

10 144(a)(12) of the Internal Revenue Code of 1986 (defin11 ing manufacturing property) is amended by striking the

12 second sentence and by adding at the end the following

13 new sentence: ‘‘An office shall not be treated as described

14 in the 1st sentence of this subparagraph unless—

15 ‘‘(i) the office is located on the prem16 ises of a facility described in such sen17 tence, and

18 ‘‘(ii) not more than a de minimis

19 amount of the functions to be performed at

20 such office is not directly related to the

21 day-to-day operations at such facility.’’

22 (b) EFFECTIVE DATE.—The amendment made by

23 subsection (a) shall apply to obligations issued after the

24 date of the enactment of this Act.

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