II

103D CONGRESS

1ST SESSION S. 1778

To amend the Internal Revenue Code of 1986 with respect to the tax

treatment of cooperative housing corporations.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 22, 1993

Mr. MOYNIHAN 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 with respect

to the tax treatment of cooperative housing corporations.

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

3 SECTION 1. TAX TREATMENT OF COOPERATIVE HOUSING

4 CORPORATIONS.

5 (a) SECTION 277 NOT TO APPLY TO COOPERATIVE

6 HOUSING CORPORATIONS.—Section 277(b) of the Internal

7 Revenue Code of 1986 (relating to exceptions) is amended

8 by striking ‘‘or’’ at the end of paragraph (3), by striking

9 the period at the end of paragraph (4) and inserting a
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1 comma and ‘‘or’’, and by adding at the end thereof the

2 following new paragraph:

3 ‘‘(5) which for the taxable year is a cooperative

4 housing corporation described in section 216(b)(1)

5 (determined without regard to section

6 143(k)(9)(E)).’’

7 (b) APPLICATION OF RULES RELATING TO TAX

8 TREATMENT OF COOPERATIVES.—

9 (1) PATRONAGE EARNINGS MAY BE OFFSET

10 ONLY BY PATRONAGE LOSSES.—Section 1388(a) of

11 such Code is amended by adding at the end the fol12 lowing new sentence: ‘‘In no event shall any patron13 age losses of an organization described in section

14 277(b)(5) be used to offset earnings which are not

15 patronage earnings.’’

16 (2) PATRONAGE EARNINGS AND LOSSES OF CO17 OPERATIVE HOUSING CORPORATIONS.—Section 1388

18 of such Code is amended by adding at the end the

19 following new subsection:

20 ‘‘(k) PATRONAGE EARNINGS OR LOSSES DEFINED.—

21 For purposes of this section—

22 ‘‘(1) IN GENERAL.—The terms ‘patronage earn23 ings’ and ‘patronage losses’ mean earnings and

24 losses, respectively, which are derived from business

25 done with or for patrons of the organization.
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1 ‘‘(2) SPECIAL RULES FOR COOPERATIVE HOUS2 ING CORPORATION.—In the case of a cooperative

3 housing corporation, the following earnings shall be

4 treated as patronage earnings:

5 ‘‘(A) Interest on reasonable reserves estab6 lished in connection with the corporation, in7 cluding reserves required by a governmental

8 agency or lender.

9 ‘‘(B) Income from laundry and parking fa10 cilities to the extent attributable to use of the

11 facilities by tenant-stockholders and their

12 guests.

13 ‘‘(C) In the case of a cooperative housing

14 corporation with respect to which the require15 ments of clause (i) of section 143(k)(9)(D) are

16 met at all times during the taxable year, rental

17 income from other than tenant-stockholders to

18 the extent attributable to any project operated

19 by the corporation.

20 ‘‘(3) DEFINITIONS.—For purposes of paragraph

21 (2)—

22 ‘‘(A) COOPERATIVE HOUSING CORPORA23 TION.—The term ‘cooperative housing corpora24 tion’ has the meaning given such term by sec-
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1 tion 216(b)(1) (without regard to section

2 143(k)(9)(E)).

3 ‘‘(B) TENANT-STOCKHOLDER.—The term

4 ‘tenant-stockholder’ has the meaning given such

5 term by section 216(b)(2).’’

6 (3) CONFORMING AMENDMENT.—Section

7 1388(j) of such Code is amended by striking para8 graph (4).

9 (c) EFFECTIVE DATE.—

10 (1) IN GENERAL.—Except as provided in para11 graph (2), the amendments made by this section

12 shall apply to taxable years beginning after the date

13 of the enactment of this Act.

14 (2) ELECTION TO HAVE AMENDMENTS APPLY

15 RETROACTIVELY.—Any corporation which is a coop16 erative housing corporation as of the 1st day of the

17 1st taxable year beginning after the date of the en18 actment of this Act may elect to have the amend19 ments made by this section apply to all taxable years

20 whether beginning before, on, or after the date of

21 the enactment of this Act.

22 (3) NO INFERENCE.—Nothing in the provisions

23 of this section shall be construed as a change in the

24 treatment of income derived by any cooperative

25 housing corporation, and the treatment of such in-
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1 come for any year to which the amendments made

2 by this section does not apply shall be made as if

3 this section had not been enacted.

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