I 

108TH CONGRESS 

1ST SESSION H. R. 2604

To amend the Internal Revenue Code of 1986 to provide tax incentives 

to encourage diversity of ownership of telecommunications businesses, 

and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 25, 2003

Mr. RANGEL introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Small 

Business, for a period to be subsequently determined by the Speaker, in 

each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL

To amend the Internal Revenue Code of 1986 to provide 

tax incentives to encourage diversity of ownership of 

telecommunications businesses, 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. NONRECOGNITION OF GAIN ON QUALIFIED 

4 SALES OF TELECOMMUNICATIONS BUSI5 NESSES. 

6 (a) IN GENERAL.—Subchapter O of chapter 1 of the 

7 Internal Revenue Code of 1986 (relating to gain or loss 
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1 on disposition of property) is amended by inserting after 

2 part IV the following new part: 

3 ‘‘PART V—CERTAIN SALES OF 

4 TELECOMMUNICATIONS BUSINESSES

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

5 ‘‘SEC. 1071. NONRECOGNITION OF GAIN ON CERTAIN SALES 

6 OF TELECOMMUNICATIONS BUSINESSES. 

7 ‘‘(a) IN GENERAL.—In the case of any qualified tele8 communications sale, at the election of the taxpayer, such 

9 sale shall be treated as an involuntary conversion of prop10 erty within the meaning of section 1033. 

11 ‘‘(b) LIMITATION ON AMOUNT OF GAIN ON WHICH

12 TAX MAY BE DEFERRED.—The amount of gain on any 

13 qualified telecommunications sale which is not recognized 

14 by reason of this section shall not exceed $75,000,000. 

15 ‘‘(c) QUALIFIED TELECOMMUNICATIONS SALE.—For 

16 purposes of this section, the term ‘qualified telecommuni17 cations sale’ means any sale to a qualified business of—

18 ‘‘(1) the assets of a telecommunications busi19 ness, or 

20 ‘‘(2) stock in a corporation if, immediately after 

21 such sale—

22 ‘‘(A) the qualified business controls (within 

23 the meaning of section 368(c)) such corpora24 tion, and 
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1 ‘‘(B) substantially all of the assets of such 

2 corporation are assets of 1 or more tele3 communications businesses, 

4 but only if such sale is certified by the Federal Commu5 nications Commission to be in furtherance of such Com6 mission’s policy of expanding ownership of telecommuni7 cations businesses. 

8 ‘‘(d) QUALIFIED BUSINESS.—For purposes of this 

9 section—

10 ‘‘(1) IN GENERAL.—The term ‘qualified busi11 ness’ means—

12 ‘‘(A) in the case of a telecommunications 

13 sale which includes the sale of any interest in 

14 a broadcast station (as defined in section 3(5) 

15 of the Communications Act of 1934), any per16 son if—

17 ‘‘(i) such person owns, directly or in18 directly, a qualified interest in 20 or fewer 

19 broadcast stations (as so defined), and 

20 ‘‘(ii) the fair market value of the ag21 gregate interests of such person in broad22 cast stations (as so defined) is equal to or 

23 greater than 50 percent of the net assets 

24 of such entity, and 
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1 ‘‘(B) in the case of any other telecommuni2 cations sale—

3 ‘‘(i) any individual, and 

4 ‘‘(ii) any partnership or corporation 

5 if—

6 ‘‘(I) the net assets of such entity 

7 do not exceed $18,000,000, and 

8 ‘‘(II) the average after-tax in9 come of such entity for the preceding 

10 2 taxable years does not exceed 

11 $6,000,000. 

12 ‘‘(2) QUALIFIED INTEREST IN BROADCAST STA13 TIONS.—An interest in a broadcast station shall be 

14 treated as qualified if such interest represents 50 

15 percent or more of the total assets of the station. 

16 ‘‘(3) EACH BUSINESS LIMITED TO 3 PUR17 CHASES.—A person shall not be a qualified business 

18 with respect to a qualified telecommunications sale 

19 if such person (or any predecessor) was the pur20 chaser in more than 2 prior qualified telecommuni21 cations sales for which an election under this section 

22 was made by the seller. 

23 ‘‘(4) SPECIAL RULES FOR QUALIFIED BUSINESS

24 DETERMINATION.—For purposes of paragraph (1)—
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1 ‘‘(A) NET ASSETS.—The term ‘net assets’ 

2 means the excess of the aggregate gross assets 

3 (as defined in section 1202(d)(2)) of the entity 

4 over the indebtedness of such entity. 

5 ‘‘(B) AFTER-TAX INCOME.—The term 

6 ‘after-tax income’ means taxable income re7 duced by the net income tax for the taxable 

8 year. For purposes of the preceding sentence, 

9 the term ‘net income tax’ means the tax im10 posed by this chapter reduced by the sum of the 

11 credits allowable under part IV of subchapter A 

12 of this chapter. Rules similar to the rules of 

13 subparagraphs (A), (B), and (D) of section 

14 448(c)(3) shall apply in determining average 

15 after-tax income. 

16 ‘‘(5) AGGREGATION RULES.—For purposes of 

17 this subsection, all persons treated as a single em18 ployer under subsection (a) or (b) of section 52 or 

19 subsection (m) or (o) of section 414 shall be treated 

20 as one person. 

21 ‘‘(e) TELECOMMUNICATIONS BUSINESS.—The term 

22 ‘telecommunications business’ means any business pro23 viding communication services by wire, cable, radio, sat24 ellite, or other technology if the providing of such services 
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1 is governed by the Communications Act of 1934 or the 

2 Telecommunications Act of 1996. 

3 ‘‘(f) SPECIAL RULES.—

4 ‘‘(1) IN GENERAL.—In applying section 1033 

5 for purposes of subsection (a) of this section, stock 

6 of a corporation operating a telecommunications 

7 business, whether or not representing control of such 

8 corporation, shall be treated as property similar or 

9 related in service or use to the property sold in the 

10 qualified telecommunications sale. 

11 ‘‘(2) ELECTION TO REDUCE BASIS RATHER

12 THAN RECOGNIZE REMAINDER OF GAIN.—If—

13 ‘‘(A) a taxpayer elects the treatment under 

14 subsection (a) with respect to any qualified tele15 communications sale, and 

16 ‘‘(B) an amount of gain would (but for 

17 this paragraph) be recognized on such sale 

18 other than by reason of subsection (b), 

19 then the amount of such gain shall not be recognized 

20 to the extent that the taxpayer elects to reduce the 

21 basis of depreciable property (as defined in section 

22 1017(b)(3)) held by the taxpayer immediately after 

23 the sale or acquired in the same taxable year. The 

24 manner and amount of such reduction shall be de-
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1 termined under regulations prescribed by the Sec2 retary. 

3 ‘‘(3) BASIS.—For basis of property acquired on 

4 a sale or exchange treated as an involuntary conver5 sion under subsection (a), see section 1033(b). 

6 ‘‘(g) RECAPTURE OF TAX BENEFIT IF TELE7 COMMUNICATIONS BUSINESS RESOLD WITHIN 3 YEARS, 

8 ETC.—

9 ‘‘(1) IN GENERAL.—If, within 3 years after the 

10 date of any qualified telecommunications sale, there 

11 is a recapture event with respect to the property in12 volved in such sale, then the purchaser’s tax imposed 

13 by this chapter for the taxable year in which such 

14 event occurs shall be increased by 20 percent of the 

15 lesser of the consideration furnished by the pur16 chaser in such sale or the dollar limitation of sub17 section (b). 

18 ‘‘(2) EXCEPTION FOR REINVESTED AMOUNTS.—

19 Paragraph (1) shall not apply to any recapture event 

20 which is a sale if—

21 ‘‘(A) the sale is a qualified telecommuni22 cations sale, or 

23 ‘‘(B) during the 60-day period beginning 

24 on the date of such sale, the taxpayer is the 

25 purchaser in another qualified telecommuni-
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1 cations sale in which the consideration fur2 nished by the taxpayer is not less than the 

3 amount realized on the recapture event sale. 

4 ‘‘(3) RECAPTURE EVENT.—For purposes of this 

5 subsection, the term ‘recapture event’ means, with 

6 respect to any qualified telecommunications sale—

7 ‘‘(A) any sale or other disposition of the 

8 assets or stock referred to in subsection (c) 

9 which were acquired by the taxpayer in such 

10 sale, and 

11 ‘‘(B) in the case of a qualified tele12 communications sale described in subsection 

13 (c)(2)—

14 ‘‘(i) , any sale or other disposition of 

15 a telecommunications business by the cor16 poration referred to in such subsection, or 

17 ‘‘(ii) any other transaction which re18 sults in the qualified business not having 

19 control (as defined in subsection (c)(2)(A)) 

20 of such corporation. 

21 Such term shall not include any sale or other dis22 position resulting from the default, or imminent de23 fault, of any indebtedness of the taxpayer.’’. 

24 (b) CLERICAL AMENDMENT.—The table of parts for 

25 subchapter O of chapter 1 of such Code is amended by 
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1 inserting after the item relating to part IV the following 

2 new item:

‘‘PART V. CERTAIN SALES OF TELECOMMUNICATIONS BUSINESSES’’.

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

4 this section shall apply to sales in taxable years beginning 

5 after the date of the enactment of this Act. 

6 SEC. 2. LOAN GUARANTEE PROGRAM TO ENCOURAGE DI7 VERSITY OF OWNERSHIP OF TELECOMMUNI8 CATIONS BUSINESSES. 

9 (a) IN GENERAL.—The Administrator of the Small 

10 Business Administration may guarantee any loan made to 

11 a qualified business for the purchase of assets or stock 

12 described in section 1071(c) of the Internal Revenue Code 

13 of 1986 (relating to qualified telecommunications sale) if 

14 the sale of such assets or stock is certified by the Federal 

15 Communications Commission to be in furtherance of such 

16 Commission’s policy of expanding ownership of tele17 communications businesses. 

18 (b) LIMITATIONS.—

19 (1) SECURITY.—The Administrator shall not 

20 guarantee any loan under subsection (a) unless the 

21 guaranteed portion of such loan is secured by a first 

22 lien position or first mortgage on the stock or assets 

23 financed by the loan. 

24 (2) GUARANTEE PERCENTAGE.—The amount of 

25 any loan guaranteed by the Administrator under 
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1 subsection (a) shall not exceed 95 percent of the bal2 ance of the financing outstanding at the time of dis3 bursement of the loan. 

4 (3) FEES.—With respect to each loan guaran5 teed under subsection (a) (other than a loan that is 

6 repayable in 1 year or less), the Administrator may 

7 collect a guarantee fee, which shall be payable by the 

8 participating lender, and may be charged to the bor9 rower. 

10 (4) FORFEITURE OF FCC LICENSE.—The Ad11 ministrator shall not guarantee any loan under sub12 section (a) unless such loan provides that any license 

13 issued by the Federal Communications Commission 

14 to the borrower shall by returned and forfeited by 

15 the borrower to the Federal Communications Com16 mission immediately upon a finding by the Adminis17 trator that such borrower is in default under such 

18 loan. 

19 (c) GENERAL AUTHORITY.—For purposes of carrying 

20 out this section, the Administrator may—

21 (1) enter into contracts with private and Fed22 eral entities for professional and other services; 

23 (2) enter into memorandums of understanding 

24 with other Federal agencies; and 
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1 (3) issue regulations, including regulations re2 garding—

3 (A) notice of and opportunity to cure a de4 fault; 

5 (B) procedures related to foreclosure; and 

6 (C) such other matters as the Adminis7 trator considers appropriate. 

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

9 (1) ADMINISTRATOR.—The term ‘‘Adminis10 trator’’ means the Administrator of the Small Busi11 ness Administration. 

12 (2) QUALIFIED BUSINESS.—The term ‘‘quali13 fied business’’ has the meaning given such term in 

14 section 1071(d) of the Internal Revenue Code of 

15 1986. 

16 (e) AUTHORIZATION OF APPROPRIATIONS.—There 

17 are authorized to be appropriated such sums as may be 

18 necessary to carry out the purposes of this section.

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