II

105TH CONGRESS

1ST SESSION S. 1412

To amend the Internal Revenue Code of 1986 to permit certain tax free

corporate liquidations into a 501(c)(3) organization and to revise the

unrelated business income tax rules regarding receipt of debt-financed

property in such a liquidation.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 7, 1997

Mr. SMITH of Oregon (for himself, Mrs. FEINSTEIN, Mr. WYDEN, Mr. BAUCUS, and Mr. GORTON) 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 permit

certain tax free corporate liquidations into a 501(c)(3)

organization and to revise the unrelated business income

tax rules regarding receipt of debt-financed property in

such a liquidation.

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 ‘‘Charitable Giving In5 centive Act’’.
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1 SEC. 2. ELIMINATION OF CORPORATE LEVEL TAX UPON

2 LIQUIDATION OF CLOSELY HELD CORPORA3 TIONS UNDER CERTAIN CONDITIONS.

4 (a) IN GENERAL.—Paragraph (2) of section 337(b)

5 of the Internal Revenue Code of 1986 (relating to treat6 ment of indebtedness of subsidiary, etc.) is amended—

7 (1) by striking ‘‘Except as provided in subpara8 graph (B)’’ in subparagraph (A) and inserting ‘‘Ex9 cept as provided in subparagraph (B) or (C)’’, and

10 (2) by adding at the end the following new sub11 paragraph:

12 ‘‘(C) EXCEPTION IN THE CASE OF CLOSE13 LY-HELD STOCK ACQUIRED WITHOUT CONSID14 ERATION.—If the 80-percent distributee is an

15 organization described in section 501(c)(3) and

16 acquired stock in a liquidated domestic corpora17 tion from either a decedent (within the meaning

18 of section 1014(b)) or the decedent’s spouse,

19 subparagraph (A) shall not apply to any dis20 tribution of property to the 80-percent distribu21 tee. This subparagraph shall apply only if all of

22 the following conditions are met:

23 ‘‘(i) 80 percent or more of the stock

24 in the liquidated corporation was acquired

25 by the distributee, solely by a distribution

26 from an estate or trust created by one or
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1 more qualified persons. For purposes of

2 this clause, the term ‘qualified person’

3 means a citizen or individual resident of

4 the United States, an estate (other than a

5 foreign estate within the meaning of sec6 tion 7701(a)(31)(A)), or any trust de7 scribed in clause (i), (ii), or (iii) of section

8 1361(c)(2)(A).

9 ‘‘(ii) The liquidated corporation

10 adopted its plan of liquidation on or after

11 January 1, 1999.

12 ‘‘(iii) The 80-percent distributee is an

13 organization created or organized under

14 the laws of the United States or of any

15 State.

16 ‘‘(iv) All of the stock in the liquidated

17 corporation is non-readily-tradable stock

18 (as defined in section 6166(b)(7)(B)).

19 Nothing in subsection (d) shall be construed to

20 limit the application of this subsection in cir21 cumstances in which this subparagraph ap22 plies.’’.

23 (b) REVISION OF UNRELATED BUSINESS INCOME

24 TAX RULES TO EXEMPT CERTAIN ASSETS.—Subpara25 graph (B) of section 514(c)(2) of the Internal Revenue
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1 Code of 1986 (relating to property acquired subject to

2 mortgage, etc.) is amended by inserting ‘‘or pursuant to

3 a liquidation described in section 337(b)(2)(C),’’ after

4 ‘‘bequest or devise,’’.

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

6 this section shall take effect on the date of the enactment

7 of this Act.

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