I 

116TH CONGRESS 

2D SESSION H. R. 7283 

To amend the Internal Revenue Code of 1986 to provide that certain 

contributions by government entities are treated as contributions to capital. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 18, 2020 

Mr. WALDEN (for himself and Ms. KUSTER of New Hampshire) 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 provide 

that certain contributions by government entities are 

treated as contributions to capital. 

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

3 SECTION 1. TREATMENT OF CERTAIN CONTRIBUTIONS BY 

4 GOVERNMENT ENTITIES AS CONTRIBUTIONS 

5 TO CAPITAL. 

6 (a) IN GENERAL.—Section 118 of the Internal Rev7 enue Code of 1986 is amended— 

8 (1) by redesignating subsection (d) as sub9 section (e); and 


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1 (2) by striking subsections (b) and (c) and in2 serting the following: 

3 ‘‘(b) CONTRIBUTIONS IN AID OF CONSTRUCTION, 

4 ETC.—For purposes of subsection (a), except as provided 

5 in subsection (c), the term ‘contribution to the capital of 

6 the taxpayer’ does not include any contribution in aid of 

7 construction or any other contribution as a customer or 

8 potential customer. 

9 ‘‘(c) SPECIAL RULES FOR WATER AND SEWERAGE

10 DISPOSAL UTILITIES.— 

11 ‘‘(1) GENERAL RULE.—For purposes of this 

12 section, the term ‘contribution to the capital of the 

13 taxpayer’ includes any amount of money or other 

14 property received from any person (whether or not 

15 a shareholder) by a regulated public utility which 

16 provides water or sewerage disposal services if— 

17 ‘‘(A) such amount is a contribution in aid 

18 of construction, 

19 ‘‘(B) in the case of contribution of prop20 erty other than water or sewerage disposal fa21 cilities, such amount meets the requirements of 

22 the expenditure rule of paragraph (2), and 

23 ‘‘(C) such amount (or any property ac24 quired or constructed with such amount) is not 


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1 included in the taxpayer’s rate base for rate2 making purposes. 

3 ‘‘(2) EXPENDITURE RULE.—An amount meets 

4 the requirements of this paragraph if— 

5 ‘‘(A) an amount equal to such amount is 

6 expended for the acquisition or construction of 

7 tangible property described in section 

8 1231(b)— 

9 ‘‘(i) which is the property for which 

10 the contribution was made or is of the 

11 same type as such property, and 

12 ‘‘(ii) which is used predominantly in 

13 the trade or business of furnishing water 

14 or sewerage disposal services, 

15 ‘‘(B) the expenditure referred to in sub16 paragraph (A) occurs before the end of the sec17 ond taxable year after the year in which such 

18 amount was received, and 

19 ‘‘(C) accurate records are kept of the 

20 amounts contributed and expenditures made, 

21 the expenditures to which contributions are al22 located, and the year in which the contributions 

23 and expenditures are received and made. 

24 ‘‘(3) DEFINITIONS.—For purposes of this sub25 section— 


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1 ‘‘(A) CONTRIBUTION IN AID OF CONSTRUC2 TION.—The term ‘contribution in aid of con3 struction’ shall be defined by regulations pre4 scribed by the Secretary, except that such term 

5 shall not include amounts paid as service 

6 charges for starting or stopping services. 

7 ‘‘(B) PREDOMINANTLY.—The term ‘pre8 dominantly’ means 80 percent or more. 

9 ‘‘(C) REGULATED PUBLIC UTILITY.—The 

10 term ‘regulated public utility’ has the meaning 

11 given such term by section 7701(a)(33), except 

12 that such term shall not include any utility 

13 which is not required to provide water or sewer14 age disposal services to members of the general 

15 public in its service area. 

16 ‘‘(4) DISALLOWANCE OF DEDUCTIONS AND

17 CREDITS; ADJUSTED BASIS.—Notwithstanding any 

18 other provision of this subtitle, no deduction or cred19 it shall be allowed for, or by reason of, any expendi20 ture which constitutes a contribution in aid of con21 struction to which this subsection applies. The ad22 justed basis of any property acquired with contribu23 tions in aid of construction to which this subsection 

24 applies shall be zero. 


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1 ‘‘(d) STATUTE OF LIMITATIONS.—If the taxpayer for 

2 any taxable year treats an amount as a contribution to 

3 the capital of the taxpayer described in subsection (c), 

4 then— 

5 ‘‘(1) the statutory period for the assessment of 

6 any deficiency attributable to any part of such 

7 amount shall not expire before the expiration of 3 

8 years from the date the Secretary is notified by the 

9 taxpayer (in such manner as the Secretary may pre10 scribe) of— 

11 ‘‘(A) the amount of the expenditure re12 ferred to in subparagraph (A) of subsection 

13 (c)(2), 

14 ‘‘(B) the taxpayer’s intention not to make 

15 the expenditures referred to in such subpara16 graph, or 

17 ‘‘(C) a failure to make such expenditure 

18 within the period described in subparagraph 

19 (B) of subsection (c)(2), and 

20 ‘‘(2) such deficiency may be assessed before the 

21 expiration of such 3-year period notwithstanding the 

22 provisions of any other law or rule of law which 

23 would otherwise prevent such assessment.’’. 


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

2 this section shall apply to contributions made after De3 cember 22, 2017. 

Æ 


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