II

107TH CONGRESS

1ST SESSION S. 1048

To amend the Internal Revenue Code of 1986 to provide relief for payment

of asbestos-related claims.

IN THE SENATE OF THE UNITED STATES

JUNE 14, 2001

Mr. DEWINE (for himself, Mr. LEAHY, Mr. VOINOVICH, Mr. BREAUX, Mr.

CONRAD, Mr. LUGAR, Mr. SANTORUM, Ms. LANDRIEU, and Mr. HATCH)

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

relief for payment of asbestos-related claims.

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

3 SECTION 1. EXEMPTION FOR ASBESTOS-RELATED SETTLE4 MENT FUNDS.

5 (a) EXEMPTION FOR ASBESTOS-RELATED SETTLE6 MENT FUNDS.—Subsection (b) of section 468B of the In7 ternal Revenue Code of 1986 (relating to special rules for

8 designated settlement funds) is amended by adding at the

9 end the following new paragraph:
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1 ‘‘(6) EXEMPTION FROM TAX FOR ASBESTOS-RE2 LATED SETTLEMENT FUNDS.—Notwithstanding

3 paragraph (1), no tax shall be imposed under this

4 section or any other provision of this subtitle on any

5 settlement fund to which this section or the regula6 tions thereunder applies that is established for the

7 principal purpose of resolving and satisfying present

8 and future claims relating to asbestos.’’.

9 (b) CONFORMING AMENDMENTS.—

10 (1) Paragraph (1) of section 468B(b) of such

11 Code is amended by striking ‘‘There’’ and inserting

12 ‘‘Except as provided in paragraph (6), there’’.

13 (2) Subsection (g) of section 468B of such Code

14 is amended by inserting ‘‘(other than subsection

15 (b)(6))’’ after ‘‘Nothing in any provision of law’’.

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

17 this section shall apply to taxable years ending on or after

18 December 31, 2000.

19 SEC. 2. MODIFY TREATMENT OF ASBESTOS-RELATED NET

20 OPERATING LOSSES.

21 (a) ASBESTOS-RELATED NET OPERATING LOSSES.—

22 Subsection (f) of section 172 of the Internal Revenue Code

23 of 1986 (relating to net operating loss deduction) is

24 amended by redesignating paragraphs (4), (5), and (6) as
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•S 1048 IS

1 paragraphs (5), (6), and (7), respectively, and by inserting

2 after paragraph (3) the following new paragraph:

3 ‘‘(4) SPECIAL RULES FOR ASBESTOS LIABILITY

4 LOSSES.—

5 ‘‘(A) IN GENERAL.—At the election of the

6 taxpayer, the portion of any specified liability

7 loss that is attributable to asbestos may, for

8 purposes of subsection (b)(1)(C), be carried

9 back to the taxable year in which the taxpayer,

10 including any predecessor corporation, was first

11 involved in the production or distribution of

12 products containing asbestos and each subse13 quent taxable year. In determining its specified

14 liability losses attributable to asbestos, the tax15 payer may elect to take into account payments

16 of related parties attributable to asbestos-re17 lated products produced or distributed by the

18 taxpayer.

19 ‘‘(B) COORDINATION WITH CREDITS.—If a

20 deduction is allowable for any taxable year by

21 reason of a carryback described in subpara22 graph (A)—

23 ‘‘(i) the credits allowable under part

24 IV (other than subpart C) of subchapter A
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1 shall be determined without regard to such

2 deduction, and

3 ‘‘(ii) the amount of taxable income

4 taken into account with respect to the

5 carryback under subsection (b)(2) for such

6 taxable year shall be reduced by an

7 amount equal to—

8 ‘‘(I) the increase in the amount

9 of such credits allowable for such tax10 able year solely by reason of clause

11 (i), divided by

12 ‘‘(II) the maximum rate of tax

13 under section 1 or 11 (whichever is

14 applicable) for such taxable year.

15 ‘‘(C) CARRYFORWARDS TAKEN INTO AC16 COUNT BEFORE ASBESTOS-RELATED DEDUC17 TIONS.—For purposes of this section—

18 ‘‘(i) in determining whether a net op19 erating loss carryforward may be carried

20 under subsection (b)(2) to a taxable year,

21 taxable income for such year shall be de22 termined without regard to the deductions

23 referred to in paragraph (1)(A) with re24 spect to asbestos, and
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1 ‘‘(ii) if there is a net operating loss

2 for such year after taking into account

3 such carryforwards and deductions, the

4 portion of such loss attributable to such

5 deductions shall be treated as a specified

6 liability loss that is attributable to asbes7 tos.

8 ‘‘(D) LIMITATION.—The amount of reduc9 tion in income tax liability arising from the

10 election described in subparagraph (A) that ex11 ceeds the amount of reduction in income tax li12 ability that would have resulted if the taxpayer

13 utilized the 10-year carryback period under sub14 section (b)(1)(C) shall be devoted by the tax15 payer solely to asbestos claimant compensation

16 and related costs, through a settlement fund or

17 otherwise.

18 ‘‘(E) COORDINATION WITH OTHER

19 CARRYBACK LIMITATIONS.—The amount of as20 bestos-related specified liability loss that may be

21 absorbed in a prior taxable year (and the

22 amount of refund attributable to such loss ab23 sorption) shall be determined without regard to

24 any limitation under section 381, 382, or 1502

25 or the regulations thereunder.
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1 ‘‘(F) PREDECESSOR CORPORATION.—For

2 purposes of this paragraph, a predecessor cor3 poration shall include a corporation that trans4 ferred or distributed assets to the taxpayer in

5 a transaction to which section 381(a) applies or

6 that distributed the stock of the taxpayer in a

7 transaction to which section 355 applies.’’.

8 (b) CONFORMING AMENDMENT.—Paragraph (7) of

9 section 172(f) of such Code, as redesignated by this sec10 tion, is amended by striking ‘‘10-year’’.

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

12 this section shall apply to taxable years ending on or after

13 December 31, 2000.

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