II 

111TH CONGRESS 

1ST SESSION S. 1341 

To amend the Internal Revenue Code of 1986 to impose an excise tax 

on certain proceeds received on SILO and LILO transactions. 

IN THE SENATE OF THE UNITED STATES 

JUNE 24, 2009 

Mr. MENENDEZ 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 impose 

an excise tax on certain proceeds received on SILO and 

LILO transactions. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Close the SILO/LILO 

5 Loophole Act of 2009’’. 

6 SEC. 2. EXCISE TAX ON CERTAIN PROCEEDS RECEIVED ON 

7 SILO AND LILO TRANSACTIONS. 

8 (a) IN GENERAL.—Subchapter F of chapter 42 of 

9 subtitle D of the Internal Revenue Code of 1986 is amend10 ed by adding at the end the following new section: 


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1 ‘‘SEC. 4965A. EXCISE TAX ON CERTAIN PROCEEDS RE2 CEIVED ON SILO AND LILO TRANSACTIONS. 

3 ‘‘(a) IMPOSITION OF TAX.—In the case of any person 

4 other than a SILO/LILO lessee that receives any ineligible 

5 amount as a party to any SILO transaction or any LILO 

6 transaction, such person shall pay a tax for the taxable 

7 year in which such ineligible amounts are received. 

8 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im9 posed under subsection (a) with respect to any person 

10 shall be an amount equal to the aggregate ineligible 

11 amounts received by such person in the taxable year. 

12 ‘‘(c) DEFINITIONS.—For purposes of this section— 

13 ‘‘(1) INELIGIBLE AMOUNT.—The term ‘ineli14 gible amount’ means, with respect to any SILO 

15 transaction or LILO transaction, the excess of— 

16 ‘‘(A) the aggregate proceeds received by 

17 the taxpayer attributable to or arising from any 

18 remedial action relating to such transaction, or 

19 any consensual termination or rescission of any 

20 such transaction (including the value of any 

21 property received and any additional amounts 

22 purporting to indemnify or reimburse the tax23 payer for taxes assessable on any amounts re24 ceived), over 

25 ‘‘(B) the aggregate proceeds described in 

26 subparagraph (A) that are received from third 


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1 parties (other than the SILO/LILO lessee) pur2 suant to a payment arrangement (including a 

3 defeasance escrow arrangement) entered into at 

4 the time of such transaction in which the SILO/ 

5 LILO lessee’s payment obligations were eco6 nomically defeased in whole or in part. 

7 ‘‘(2) SILO TRANSACTION.—The term ‘SILO 

8 transaction’ means a purported sale-leaseback ar9 rangement which is identified as a listed transaction 

10 in Notice 2005–13. 

11 ‘‘(3) LILO TRANSACTION.—The term ‘LILO 

12 transaction’ means a transaction which is a ‘lease13 in/lease-out’ transaction described in Revenue Rul14 ings 99–14 and 2002–69 and identified as a listed 

15 transaction in Notice 2000–15, or which is substan16 tially similar to such a transaction. 

17 ‘‘(4) SILO/LILO LESSEE.—The term ‘SILO/ 

18 LILO lessee’ means any lessee in a SILO trans19 action or a LILO transaction that is— 

20 ‘‘(A) a tax-exempt entity (within the mean21 ing of section 168(h)(2)) or any other coopera22 tive, nonprofit, limited dividend, or mutual as23 sociation, or 


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1 ‘‘(B) any other person that does not derive 

2 a substantial economic benefit from the tax 

3 characterization of such transaction. 

4 ‘‘(d) CERTAIN TRANSFERS DISREGARDED.—If any 

5 person who is subject to the tax under subsection (a) is 

6 a party to any transaction that results in the transfer of 

7 such person’s rights with respect to a SILO transaction 

8 or a LILO transaction to any other person who would, 

9 but for this subsection, not be subject to the full amount 

10 of the tax under subsection (a) with respect to such SILO 

11 transaction or LILO transaction, then such transfer shall 

12 be disregarded for purposes of this section and the tax13 payer shall continue to be treated as the recipient of any 

14 ineligible amount. 

15 ‘‘(e) REGULATORY AUTHORITY.—The Secretary is 

16 authorized to promulgate regulations consistent with the 

17 purposes of this section, including regulations to prevent 

18 the avoidance of such purposes. 

19 ‘‘(f) COORDINATION WITH OTHER TAXES AND PEN20 ALTIES.—The tax imposed by this section is in addition 

21 to any other tax, addition to tax, or penalty imposed under 

22 this title.’’. 

23 (b) CLERICAL AMENDMENT.—The table of sections 

24 for subchapter F of chapter 42 of subtitle D of the InterVerDate Nov 24 2008 04:50 Jun 25, 2009 Jkt 079200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1341.IS S1341

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1 nal Revenue Code of 1986 is amended by adding at the 

2 end the following new item: 

‘‘Sec. 4965A. Excise tax on certain proceeds received on SILO and LILO 

transactions.’’. 

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

4 this section shall apply to amounts received after the date 

5 of the introduction of this Act, in taxable years ending 

6 after such date. 

7 SEC. 3. DENIAL OF DEDUCTION FOR COSTS OF CERTAIN 

8 ACTIONS RELATING TO SILO AND LILO 

9 TRANSACTIONS. 

10 (a) IN GENERAL.—Part IX of subchapter B of chap11 ter 1 of the Internal Revenue Code of 1986 is amended 

12 by inserting after section 269B the following new section: 

13 ‘‘SEC. 269C. COSTS OF CERTAIN ACTIONS RELATING TO 

14 SILO AND LILO TRANSACTIONS. 

15 ‘‘(a) GENERAL RULE.—If any party to a SILO trans16 action or a LILO transaction (other than a SILO/LILO 

17 lessee) brings a remedial action seeking to recover any in18 eligible amount with respect to such transaction, in com19 puting taxable income no deduction shall be allowed for 

20 any attorney fees or other costs attributable to such ac21 tion. 

22 ‘‘(b) DEFINITIONS.—For purposes of this section, the 

23 terms ‘SILO transaction’, ‘LILO transaction’, ‘SILO/ 


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1 LILO lessee’, and ‘ineligible amount’ have the meanings 

2 given such terms by section 4965A(c).’’. 

3 (b) CLERICAL AMENDMENT.—The table of sections 

4 for part IX of subchapter B of chapter 1 of the Internal 

5 Revenue Code of 1986 is amended by inserting after the 

6 item relating to section 269B the following new item: 

‘‘Sec. 269C. Costs of certain actions relating to SILO and LILO transactions.’’. 

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

8 this section shall apply to costs incurred after the date 

9 of the introduction of this Act. 

Æ 


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