II 

110TH CONGRESS 

2D SESSION S. 3446 

To amend the Internal Revenue Code of 1986 to defer the tax on the 

gain on the sale of certain telecommunications and media businesses, 

and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

AUGUST 1, 2008 

Mr. MENENDEZ (for himself, Mr. SALAZAR, Mr. SMITH, Mr. LAUTENBERG, 

Mr. STEVENS, and Ms. STABENOW) 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 defer the 

tax on the gain on the sale of certain telecommunications 

and media businesses, and for other purposes. 

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

3 SECTION 1. FINDINGS AND PURPOSE. 

4 (a) FINDINGS.—Congress finds that: 

5 (1) Localism, competition, and diversity of 

6 voices have long been the stated goals of United 

7 States telecommunications and media policy. 

8 (2) In support of these goals, it has been long9 standing United States telecommunications and 


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1 media policy to facilitate diversity of ownership in 

2 the telecommunications and media industry, to fos3 ter ownership of telecommunications and media by 

4 socially disadvantaged businesses, and to dissemi5 nate spectrum licenses among a wide variety of ap6 plicants, including small businesses and businesses 

7 owned by members of minority groups and women. 

8 (3) Diversification of ownership of tele9 communications and media properties remains a pre10 eminent public interest concern that should be re11 flected in United States telecommunications, media, 

12 and tax policy. 

13 (4) In the years between 1995 and 2008, as 

14 broadcast media ownership rules have been relaxed, 

15 ownership opportunities of broadcast properties for 

16 socially disadvantaged individuals have decreased 

17 significantly. Businesses owned or controlled by so18 cially disadvantaged individuals, including, but not 

19 limited to, members of minority groups and women, 

20 have continued to be underrepresented as owners of 

21 telecommunications and media properties. As a re22 sult of the convergence and consolidation taking 

23 place in telecommunications and media markets, as 

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1 way to news, information, and entertainment pro2 gramming. 

3 (5) Fostered by the relaxation of the broadcast 

4 media ownership rules, local broadcast markets are 

5 increasingly characterized by consolidated ownership, 

6 with individual entities owning multiple broadcast 

7 stations within a single market that allow them to 

8 exploit economies of scale in the advertising market 

9 not available to smaller or individual operators. This 

10 results in individual operators frequently being shut 

11 out of large amounts of advertising revenues. 

12 (6) The cable television industry is increasingly 

13 characterized by firms that cluster their ownership 

14 of cable systems in a small number of markets, with 

15 the result that many local markets are dominated by 

16 a single cable company that serves most or all of the 

17 jurisdictions in that market and enjoys a favorable 

18 competitive and negotiating position in that market. 

19 (7) Tax policy has fostered telecommunications 

20 and media convergence and consolidation by pro21 viding a favorable tax consequence to telecommuni22 cations and media firms selling their properties to 

23 large entities that can purchase the properties using 

24 tax-free like-kind exchanges. This puts socially dis25 advantaged businesses at a greater disadvantage beVerDate Aug 31 2005 23:56 Aug 06, 2008 Jkt 069200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S3446.IS S3446

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1 cause often they are not able to purchase the prop2 erties through an exchange of stock. 

3 (8) Socially disadvantaged businesses and other 

4 small businesses are less likely to be able to pur5 chase telecommunications and media properties 

6 through a tax-free like-kind exchange than are es7 tablished businesses. 

8 (9) Prior to 1995, the tax treatment of the sale 

9 of appreciated telecommunications and media prop10 erties for transactions not involving like-kind ex11 changes was partially offset by the Federal Commu12 nications Commission tax certificate policy, a pro13 gram that allowed firms that sold telecommuni14 cations and media properties to minority or women15 owned firms to defer some of the taxes imposed on 

16 their sale of appreciated properties. This program 

17 was eliminated in 1995. 

18 (10) As a result of the elimination of the tax 

19 certificate program, the changes in telecommuni20 cations and media ownership rules, and the market 

21 forces toward convergence and consolidation, oppor22 tunities for socially disadvantaged businesses to par23 ticipate and grow in telecommunications and media 

24 markets have decreased substantially despite the fact 


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1 that this has been an active period for the sale of 

2 telecommunications and media properties. 

3 (11) These recent trends exacerbate the pattern 

4 of businesses owned or controlled by socially dis5 advantaged individuals, who have historically been 

6 economically disadvantaged within the telecommuni7 cations industry, having greater difficulty obtaining 

8 access to capital and facing higher costs of capital 

9 than do other businesses. It is consistent with the 

10 public interest to provide incentives that will in11 crease diversity in telecommunications and media 

12 ownership by facilitating socially disadvantaged busi13 ness investment in, and acquisition of, telecommuni14 cations and media properties, and to eliminate ob15 stacles to such ownership. 

16 (12) Facilitating voluntary, pro-competitive 

17 transactions that will promote ownership of tele18 communications and media properties by socially 

19 disadvantaged businesses by reducing distortions in 

20 tax policy will aid in providing the investment and 

21 capital that are crucial to the development of diver22 sity of ownership in this sector. 

23 (b) PURPOSE.—The purpose of this Act is to facili24 tate voluntary, pro-competitive transactions that will pro25 mote socially disadvantaged business ownership of teleVerDate Aug 31 2005 23:56 Aug 06, 2008 Jkt 069200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S3446.IS S3446

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1 communications and media properties in order to diversify 

2 telecommunications and media ownership. 

3 SEC. 2. TREATMENT OF GAIN ON QUALIFIED SALES OF 

4 TELECOMMUNICATIONS BUSINESSES. 

5 (a) IN GENERAL.—Subchapter O of chapter 1 of the 

6 Internal Revenue Code of 1986 (relating to gain or loss 

7 on disposition of property) is amended by inserting after 

8 part IV the following new part: 

9 ‘‘PART V—CERTAIN SALES OF 

10 TELECOMMUNICATIONS BUSINESSES 

‘‘Sec. 1071. Treatment of gain on certain sales of telecommunications businesses. 

11 ‘‘SEC. 1071. TREATMENT OF GAIN ON CERTAIN SALES OF 

12 TELECOMMUNICATIONS BUSINESSES. 

13 ‘‘(a) IN GENERAL.—In the case of an eligible tax14 payer, at the election of the taxpayer— 

15 ‘‘(1) the tax imposed by this subtitle on the 

16 qualifying gain from a qualified telecommunications 

17 sale may be paid on or before the date that is 3 

18 years after the date prescribed by section 6151(a) 

19 for payment of such tax, or 

20 ‘‘(2) the recognition of such qualifying gain 

21 shall be deferred by reducing the basis of depreciable 

22 property (as defined in section 1017(b)(3)) held by 

23 the taxpayer immediately after such sale or acquired 


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1 within 1 year after such sale by the amount of such 

2 qualifying gain. 

3 ‘‘(b) ELIGIBLE TAXPAYER.—For purposes of this 

4 section, the term ‘eligible taxpayer’ means the seller in a 

5 qualified telecommunications sale if such seller has re6 ceived a qualifying gain certificate from the purchaser in 

7 such sale. 

8 ‘‘(c) QUALIFYING GAIN.—For purposes of this sec9 tion, the term ‘qualifying gain’ means the amount that 

10 is so much of the gain on any qualified telecommuni11 cations sale as does not exceed the amount of the quali12 fying gain certificate received by the seller in such sale 

13 from the purchaser. 

14 ‘‘(d) QUALIFIED TELECOMMUNICATIONS SALE.— 

15 ‘‘(1) IN GENERAL.—For purposes of this sec16 tion, the term ‘qualified telecommunications sale’ 

17 means any sale to a qualified business of— 

18 ‘‘(A) the assets of a telecommunications 

19 business, 

20 ‘‘(B) stock in a corporation if, immediately 

21 after such sale— 

22 ‘‘(i) the qualified business owns stock 

23 possessing at least the applicable percent24 age of the total combined voting power of 

25 all classes of stock entitled to vote and at 


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1 least the applicable percentage of the total 

2 number of shares of all other classes of 

3 stock of such corporation, and 

4 ‘‘(ii) substantially all of the assets of 

5 such corporation are assets of one or more 

6 telecommunications businesses, or 

7 ‘‘(C) an interest in a partnership if, imme8 diately after such sale— 

9 ‘‘(i) the qualified business owns a 

10 partnership interest possessing— 

11 ‘‘(I) a percentage that is at least 

12 equal to the applicable percentage of 

13 the total combined voting power of all 

14 classes of partnership interests enti15 tled to vote, 

16 ‘‘(II) control over the manage17 ment of the partnership, 

18 ‘‘(III) a percentage that is at 

19 least equal to the applicable percent20 age of the capital interests of the 

21 partnership, and 

22 ‘‘(IV) a distributive share that is 

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1 ship’s income, gain, loss, deduction or 

2 credit, and 

3 ‘‘(ii) substantially all of the assets of 

4 such partnership are assets of one or more 

5 telecommunications businesses. 

6 ‘‘(2) QUALIFIED BUSINESS.—For purposes of 

7 this section— 

8 ‘‘(A) IN GENERAL.—The term ‘qualified 

9 business’ means any entity in which a socially 

10 disadvantaged individual or a member of a so11 cially disadvantaged group has a qualified inter12 est. 

13 ‘‘(B) CERTIFICATION.— 

14 ‘‘(i) IN GENERAL.—A business shall 

15 not be a qualified business under this sec16 tion unless such business has been certified 

17 by the Federal Communications Commis18 sion as meeting the requirements of sub19 paragraph (A). 

20 ‘‘(ii) REPORTING REQUIREMENT.— 

21 ‘‘(I) IN GENERAL.—Any business 

22 certified by the Federal Communica23 tions Commission under this subpara24 graph shall report to such Commis25 sion any event that would lead to a 


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1 change in the eligibility of the busi2 ness for such certification. 

3 ‘‘(II) REVISION OF STRUCTURE

4 OR REVOCATION OF CERTIFICATION.— 

5 If the Federal Communications Com6 mission determines that such business 

7 no longer meets the requirements of 

8 subparagraph (A) as a result of a re9 portable event under subclause (I), 

10 such business may revise its owner11 ship structure in order to meet such 

12 requirements. If such business fails to 

13 revise its ownership structure in a 

14 manner sufficient to meet such re15 quirements, the certification of such 

16 business under this subparagraph 

17 shall be revoked. 

18 ‘‘(iii) QUALIFYING GAIN CERTIFI19 CATES.— 

20 ‘‘(I) IN GENERAL.—Upon certifi21 cation of any business under this sub22 paragraph, the Federal Communica23 tions Commission shall issue quali24 fying gain certificates to such business 

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1 communications businesses through 

2 qualified telecommunications sales. 

3 ‘‘(II) LIMITATION.—The aggre4 gate amount of the qualifying gain 

5 certificates issued to a business under 

6 this clause for any calendar year shall 

7 not exceed $350,000,000 reduced by 

8 the aggregate amount of qualifying 

9 gain certificates issued to such busi10 ness during the preceding 5 calendar 

11 years. 

12 ‘‘(iv) REGULATIONS.—The Federal 

13 Communications Commission shall issue 

14 regulations to establish a process for 

15 granting certification to qualified busi16 nesses and for requiring reporting and re17 view under this subparagraph. 

18 ‘‘(v) FCC REPORTING.—The Federal 

19 Communications Commission shall submit 

20 to the Secretary on or before January 31 

21 of each year a list of all businesses cer22 tified as qualified businesses in the pre23 vious calendar year. 

24 ‘‘(C) QUALIFIED INTEREST.—An interest 

25 in an entity shall be treated as qualified if such 


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1 interest represents a percentage that is at least 

2 equal to the applicable percentage of— 

3 ‘‘(i) the total assets of the entity, and 

4 ‘‘(ii) the total combined voting power 

5 in such entity of all classes of interests en6 titled to vote. 

7 ‘‘(D) SOCIALLY DISADVANTAGED INDI8 VIDUAL.—The term ‘socially disadvantaged in9 dividual’ means an individual that is— 

10 ‘‘(i) a United States citizen, and 

11 ‘‘(ii) socially and economically dis12 advantaged, as determined by the Federal 

13 Communications Commission using the fol14 lowing criteria: 

15 ‘‘(I) SOCIALLY DISADVAN16 TAGED.—An individual may be con17 sidered socially disadvantaged if such 

18 individual has been subjected to racial 

19 or ethnic prejudice or cultural bias 

20 within United States society because 

21 of the individual’s identity as a mem22 ber of a group and without regard to 

23 individual qualities. The social dis24 advantage must stem from cirVerDate Aug 31 2005 23:56 Aug 06, 2008 Jkt 069200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S3446.IS S3446

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1 cumstances beyond the individual’s 

2 control. 

3 ‘‘(II) MEMBERS OF DESIGNATED

4 GROUPS.— 

5 ‘‘(aa) There shall be a re6 buttable presumption that— 

7 ‘‘(AA) those individuals 

8 asserting membership in a 

9 group previously designated 

10 as socially disadvantaged by 

11 the Small Business Adminis12 tration according to proce13 dures set forth under section 

14 124.103 of title 13, Code of 

15 Federal Regulations (or a 

16 successor regulation), in17 cluding Black Americans, 

18 Hispanic Americans, Native 

19 Americans, Asian Pacific 

20 Americans, and members of 

21 other groups that have been 

22 so designated, and 

23 ‘‘(BB) those entities 

24 that are deemed socially dis25 advantaged under section 


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1 124.109 of title 13, Code of 

2 Federal Regulations (or a 

3 successor regulation), 

4 shall be considered socially dis5 advantaged for purposes of this 

6 section. 

7 ‘‘(bb) In order to be consid8 ered a member of a socially dis9 advantaged group, the Federal 

10 Communications Commission 

11 may require that an individual 

12 has held himself or herself out, 

13 and has been identified by others, 

14 as a member of such group. 

15 ‘‘(cc) The presumption of 

16 membership in a socially dis17 advantaged group may be over18 come with the presentation of 

19 credible evidence to the contrary. 

20 Individuals in possession or 

21 knowledge of such evidence shall 

22 submit such information in writ23 ing to the Federal Communica24 tions Commission at such time 


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1 and in such manner as such 

2 Commission shall require. 

3 ‘‘(III) INDIVIDUALS NOT MEM4 BERS OF A DESIGNATED GROUP.—An 

5 individual who is not a member of a 

6 group described in subclause (II)(aa) 

7 must establish individual social dis8 advantage by a preponderance of the 

9 evidence, which must include the fol10 lowing elements: 

11 ‘‘(aa) At least one objective 

12 distinguishing feature that has 

13 contributed to the social dis14 advantage of the individual, such 

15 as race, ethnic origin, gender, 

16 physical handicap, long-term resi17 dence in an environment isolated 

18 from the mainstream of United 

19 States society, or other similar 

20 features not common to individ21 uals who are not socially dis22 advantaged. 

23 ‘‘(bb) Personal experiences 

24 of substantial and chronic social 


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1 disadvantage in United States so2 ciety. 

3 ‘‘(cc) Negative impact of so4 cial disadvantage on entry into or 

5 advancement in the business 

6 world. This impact may be prov7 en by any relevant evidence show8 ing that the totality of cir9 cumstances reflects disadvantage 

10 in entering into or advancing in 

11 the business world, but such evi12 dence must include information 

13 concerning the education, em14 ployment, and business history of 

15 the individual as follows: 

16 ‘‘(AA) Evidence relat17 ing to education may include 

18 such factors as denial of 

19 equal access to institutions 

20 of higher education, exclu21 sion from social and profes22 sional association with stu23 dents or teachers, denial of 

24 educational honors rightfully 

25 earned, and social patterns 


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1 or pressures which discour2 aged the individual from 

3 pursuing a professional or 

4 business education. 

5 ‘‘(BB) Evidence relat6 ing to employment may in7 clude such factors as un8 equal treatment in hiring, 

9 promotions, or other aspects 

10 of professional advancement, 

11 pay and fringe benefits, and 

12 other terms and conditions 

13 of employment, retaliatory 

14 or discriminatory behavior 

15 by an employer, and social 

16 patterns or pressures which 

17 have channeled the indi18 vidual into nonprofessional 

19 or nonbusiness fields. 

20 ‘‘(CC) Evidence relat21 ing to business history may 

22 include such factors as un23 equal access to credit or 

24 capital, acquisition of credit 

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1 cially unfavorable cir2 cumstances, unequal treat3 ment in opportunities for 

4 government contracts or 

5 other work, unequal treat6 ment by potential customers 

7 and business associates, and 

8 exclusion from business or 

9 professional organizations. 

10 ‘‘(IV) ECONOMICALLY DISADVAN11 TAGED.— 

12 ‘‘(aa) IN GENERAL.—An in13 dividual may be considered eco14 nomically disadvantaged if such 

15 individual is socially disadvan16 taged, as determined under sub17 clauses (I) through (III), and if 

18 the individual’s ability to compete 

19 in the free enterprise system has 

20 been impaired due to diminished 

21 capital and credit opportunities 

22 as compared to others in the 

23 same or similar line of business 

24 who are not socially disadvan25 taged. 


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1 ‘‘(bb) DIMINISHED OPPOR2 TUNITIES.—In considering 

3 whether an individual has been 

4 impaired by diminished capital 

5 and credit opportunities, the 

6 Federal Communications Com7 mission shall examine factors re8 lating to the financial conditions 

9 of any persons claiming dis10 advantaged status, including the 

11 personal financial condition of 

12 the individual and the fair mar13 ket value of the stock and assets, 

14 whether encumbered or not, of 

15 any business under the control of 

16 the individual, and the financial 

17 condition of the individual com18 pared to the financial profiles of 

19 other businesses in the same or 

20 similar line of business which are 

21 not owned and controlled by so22 cially and economically disadvan23 taged individuals. The financial 

24 profiles so compared shall include 

25 total assets, net sales, pre-tax 


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1 profit, and sales to working cap2 ital ratio. 

3 ‘‘(cc) INCLUSION.—There 

4 shall be a rebuttable presumption 

5 that entities that are deemed eco6 nomically disadvantaged under 

7 section 124.109 of title 13, Code 

8 of Federal Regulations (or a suc9 cessor regulation) shall be consid10 ered economically disadvantaged 

11 for purposes of this section. 

12 ‘‘(E) SOCIALLY DISADVANTAGED GROUP.— 

13 ‘‘(i) IN GENERAL.—The term ‘socially 

14 disadvantaged group’ means a group 

15 that— 

16 ‘‘(I) is described in subparagraph 

17 (D)(ii)(II)(aa), or has been subjected 

18 to racial or ethnic prejudice or cul19 tural bias within United States society 

20 because of circumstances or qualities 

21 beyond the individual control of the 

22 members of such group, and 

23 ‘‘(II) is economically disadvan24 taged, as determined under subpara25 graph (D)(ii)(IV) by applying the 


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1 rules of such subparagraph to the 

2 group as a whole. 

3 ‘‘(ii) REBUTTABLE PRESUMPTION OF

4 DISADVANTAGE; EVIDENCE; ETC.—For 

5 purposes of this subparagraph, rules simi6 lar to the rules of subclauses (II) and (III) 

7 of subparagraph (D)(ii) shall apply by ap8 plying such rules to the group as a whole. 

9 ‘‘(F) AGGREGATION RULES.—For purposes 

10 of this subsection, all persons treated as a sin11 gle employer under subsection (a) or (b) of sec12 tion 52 or subsection (m) or (o) of section 414 

13 shall be treated as one person. 

14 ‘‘(3) APPLICABLE PERCENTAGE.—For purposes 

15 of this subsection— 

16 ‘‘(A) IN GENERAL.—Except as provided in 

17 subparagraph (B), the term ‘applicable percent18 age’ means the percentage prescribed by the 

19 Federal Communications Commission in regula20 tions implementing this section. Such percent21 age shall not be less than— 

22 ‘‘(i) in the case of interest in the total 

23 assets of an entity, 20 percent, and 

24 ‘‘(ii) in the case of interest in the 

25 total combined voting power in an entity of 


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1 all classes of interests entitled to vote, 51 

2 percent. 

3 ‘‘(B) PUBLICLY TRADED CORPORATIONS.— 

4 In the case of a corporation the shares of which 

5 are regularly traded on an established securities 

6 market, the applicable percentage is 51 percent. 

7 ‘‘(C) RESTRICTION ON AGREEMENTS CON8 CERNING VOTING OF STOCK OR PARTNERSHIP

9 INTERESTS.—Any interest relied upon to meet 

10 the applicable percentage shall not be subject to 

11 any agreement, arrangement, or understanding 

12 which provides for, or relates to— 

13 ‘‘(i) the voting of such interest in any 

14 manner by, or at the direction of, any per15 son other than a socially disadvantaged in16 dividual or a member of a socially dis17 advantaged group, or 

18 ‘‘(ii) the right of any person other 

19 than a socially disadvantaged individual or 

20 a member of a socially disadvantaged 

21 group to acquire such interest through 

22 purchase of shares, partnership interests, 

23 or otherwise. 

24 ‘‘(e) QUALIFYING GAIN CERTIFICATE.—For purposes 

25 of this section, the term ‘qualifying gain certificate’ means 


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1 a certificate that is issued to a qualified business by the 

2 Federal Communications Commission under subsection 

3 (d)(2)(B)(iii). 

4 ‘‘(f) TELECOMMUNICATIONS BUSINESS.—The term 

5 ‘telecommunications business’ means any business pro6 viding communication services by wire, cable, radio, sat7 ellite, or other technology if the providing of such services 

8 is governed by the Communications Act of 1934 or the 

9 Telecommunications Act of 1996. 

10 ‘‘(g) RECAPTURE OF TAX BENEFIT IF TELE11 COMMUNICATIONS BUSINESS RESOLD WITHIN 3 YEARS, 

12 ETC.— 

13 ‘‘(1) IN GENERAL.—If, within 3 years after the 

14 date of any qualified telecommunications sale, there 

15 is a recapture event with respect to the property in16 volved in such sale, then the qualified business’s tax 

17 imposed by this chapter for the taxable year in 

18 which such event occurs shall be increased by 20 

19 percent of the consideration furnished by such busi20 ness in such sale. 

21 ‘‘(2) EXCEPTION FOR REINVESTED AMOUNTS.— 

22 Paragraph (1) shall not apply to any recapture event 

23 which is a sale if— 

24 ‘‘(A) the sale is a qualified telecommuni25 cations sale, or 


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1 ‘‘(B) during the 60-day period beginning 

2 on the date of such sale, the qualified business 

3 is the purchaser in another qualified tele4 communications sale in which the consideration 

5 furnished by such business is not less than the 

6 amount realized on the recapture event sale. 

7 ‘‘(3) RECAPTURE EVENT.—For purposes of this 

8 subsection, the term ‘recapture event’ means, with 

9 respect to any qualified telecommunications sale— 

10 ‘‘(A) any sale or other disposition of the 

11 assets, stock, or interest referred to in sub12 section (d)(1) which were acquired by the quali13 fied business in such sale, 

14 ‘‘(B) in the case of a qualified tele15 communications sale described in subsection 

16 (d)(1)(B)— 

17 ‘‘(i) any sale or other disposition of a 

18 telecommunications business by the cor19 poration referred to in such subsection, or 

20 ‘‘(ii) any other transaction which re21 sults in the qualified business not having 

22 control (as defined in subsection 

23 (d)(1)(B)(i)) of such corporation, and 


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1 ‘‘(C) in the case of a qualified tele2 communications sale described in subsection 

3 (d)(1)(C)— 

4 ‘‘(i) any sale or other disposition of a 

5 telecommunications business by the part6 nership referred to in such subsection, or 

7 ‘‘(ii) any other transaction which re8 sults in the qualified business not having 

9 control (as defined in subsection 

10 (d)(1)(C)(i)) of such partnership. 

11 Such term shall not include any sale or other dis12 position resulting from the default, or imminent de13 fault, of any indebtedness of the taxpayer. 

14 ‘‘(h) CROSS-REFERENCES.— 

15 ‘‘(1) SECURITY.—For authority of the Sec16 retary to require security in the case of an extension 

17 under subsection (a)(1), see section 6165. 

18 ‘‘(2) PERIOD OF LIMITATION.—For extension of 

19 the period of limitation in the case of an extension 

20 under subsection (a)(1), see section 6503(k).’’. 

21 (b) CLERICAL AMENDMENT.—The table of parts for 

22 subchapter O of chapter 1 of the Internal Revenue Code 

23 of 1986 is amended by inserting after the item relating 

24 to part IV the following new item: 

‘‘PART V. CERTAIN SALES OF TELECOMMUNICATIONS BUSINESSES.’’. 

25 (c) CONFORMING AMENDMENTS.— 


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1 (1) EXTENSION OF PERIOD OF LIMITATION.— 

2 Section 6503 of the Internal Revenue Code of 1986 

3 (relating to suspension of running of period of limi4 tation) is amended— 

5 (A) by redesignating subsection (k) as sub6 section (l), and 

7 (B) by inserting after subsection (j) the 

8 following new subsection: 

9 ‘‘(k) EXTENSION OF TIME FOR PAYMENT OF CER10 TAIN TELECOMMUNICATIONS GAIN TAX LIABILITY.—The 

11 running of any period of limitations for collection of any 

12 amount of tax liability on gain from qualified tele13 communications sales (as defined in section 1071(d)(1)) 

14 shall be suspended for the period of any extension of time 

15 under section 1071(a)(1) for payment of such amount.’’. 

16 (2) REDUCTION IN BASIS.—Subsection (a) of 

17 section 1016 of such Code (relating to general rule) 

18 is amended— 

19 (A) by striking ‘‘and’’ at the end of para20 graph (36), 

21 (B) by striking the period at the end of 

22 paragraph (37) and inserting ‘‘, and’’, and 

23 (C) by adding at the end the following new 

24 paragraph: 


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1 ‘‘(38) to the extent provided in section 

2 1071(a)(2).’’. 

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

4 this section shall apply to sales in taxable years beginning 

5 after the date of the enactment of this Act. 

6 SEC. 3. LOAN GUARANTEE PROGRAM TO ENCOURAGE DI7 VERSITY OF OWNERSHIP OF TELECOMMUNI8 CATIONS BUSINESSES. 

9 (a) IN GENERAL.—The Administrator of the Small 

10 Business Administration may guarantee any loan made to 

11 a qualified business for the purchase of assets, stock, or 

12 interests described in section 1071(d)(1) of the Internal 

13 Revenue Code of 1986 (relating to qualified telecommuni14 cations sale), as added by this Act. 

15 (b) LIMITATIONS.— 

16 (1) SECURITY.—The Administrator shall not 

17 guarantee any loan under subsection (a) unless the 

18 guaranteed portion of such loan is secured by a first 

19 lien position or first mortgage on the stock, assets, 

20 or interests financed by the loan. 

21 (2) GUARANTEE PERCENTAGE; CAP.—The 

22 amount of any loan guaranteed by the Administrator 

23 under subsection (a)— 


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1 (A) shall not exceed 95 percent of the bal2 ance of the financing outstanding at the time of 

3 disbursement of the loan, and 

4 (B) shall not exceed $8,000,000. 

5 (3) FEES.—With respect to each loan guaran6 teed under subsection (a) (other than a loan that is 

7 repayable in 1 year or less), the Administrator may 

8 collect a guarantee fee, which shall be payable by the 

9 participating lender, and may be charged to the bor10 rower. 

11 (c) GENERAL AUTHORITY.—For purposes of carrying 

12 out this section, the Administrator may— 

13 (1) enter into contracts with private and Fed14 eral entities for professional and other services; 

15 (2) enter into memorandums of understanding 

16 with other Federal agencies; and 

17 (3) issue regulations, including regulations re18 garding— 

19 (A) notice of and opportunity to cure a de20 fault; 

21 (B) procedures related to foreclosure; and 

22 (C) such other matters as the Adminis23 trator considers appropriate. 

24 (d) DEFINITIONS.—For purposes of this section: 


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1 (1) ADMINISTRATOR.—The term ‘‘Adminis2 trator’’ means the Administrator of the Small Busi3 ness Administration. 

4 (2) QUALIFIED BUSINESS.—The term ‘‘quali5 fied business’’ has the meaning given such term in 

6 section 1071(d)(2) of the Internal Revenue Code of 

7 1986, as added by this Act. 

8 (e) AUTHORIZATION OF APPROPRIATIONS.—There 

9 are authorized to be appropriated such sums as may be 

10 necessary to carry out the purposes of this section. 

11 SEC. 4. PROGRAM AUDITS BY GAO. 

12 (a) TREATMENT OF GAIN ON QUALIFYING TELE13 COMMUNICATIONS SALES.—Not later than 5 years after 

14 the date of the enactment of this Act, and every 5 years 

15 thereafter, the Comptroller General of the United States 

16 shall audit the administration of section 1071 of the Inter17 nal Revenue Code of 1986, as added by this Act, and issue 

18 a report on the results of that audit. The Comptroller Gen19 eral shall include in the report, notwithstanding any provi20 sion of section 6103 of the Internal Revenue Code of 1986 

21 to the contrary— 

22 (1) a list of qualified businesses (as defined in 

23 section 1071(d)(2) of such Code) and any other tax24 payer receiving a benefit from the operation of sec25 tion 1071 as such section was added by this Act, 


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1 (2) an assessment of the effect the amendments 

2 made by this Act have on increasing new entry and 

3 growth in the telecommunications industry by quali4 fied businesses, and 

5 (3) an assessment of whether the $350,000,000 

6 limitation amount under section 

7 1071(d)(2)(B)(iii)(II) of such Code should be ad8 justed for inflation in order to respond to the tele9 communications market, and in what year such ad10 justment should begin. 

11 (b) ASSESSMENT OF LOAN GUARANTEE PROGRAM.— 

12 The report required under subsection (a) shall include an 

13 assessment of the loan guarantee program under section 

14 3 of this Act, including an assessment of whether the 

15 $8,000,000 limitation amount under section 3(b)(2)(B) of 

16 this Act should be adjusted for inflation in order to re17 spond to the telecommunications market, and in what year 

18 such adjustment should begin. 

19 SEC. 5. SEVERABILITY. 

20 If any provision of this Act or any amendment made 

21 by this Act, or the application of a provision or amend22 ment to any person or circumstance, is held to be uncon23 stitutional, the remainder of this Act and the amendments 

24 made by this Act, and the application of the provisions 


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1 and amendments of this Act to any person or cir2 cumstance, shall not be affected thereby. 

Æ 


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