I

107TH CONGRESS

1ST SESSION H. R. 1359

To amend the Internal Revenue Code of 1986 to expand and extend the

ability of certain exempt organizations to avoid recognizing a gain on

the sale of property used directly in the performance of an exempt

function.

IN THE HOUSE OF REPRESENTATIVES

APRIL 3, 2001

Mr. MCNULTY 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 expand

and extend the ability of certain exempt organizations

to avoid recognizing a gain on the sale of property used

directly in the performance of an exempt function.

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

3 SECTION 1. NONRECOGNITION OF GAIN ON THE SALE OF

4 PROPERTY USED IN PERFORMANCE OF AN

5 EXEMPT FUNCTION.

6 (a) IN GENERAL.—Subparagraph (D) of section

7 512(a)(3) of the Internal Revenue Code of 1986 is amend8 ed to read as follows:
2

•HR 1359 IH

1 ‘‘(D) NONRECOGNITION OF GAIN.—

2 ‘‘(i) IN GENERAL.—If property used

3 directly in the performance of the exempt

4 function of an organization described in

5 paragraph (7), (9), (17), or (20) of section

6 501(c) is sold by such organization, gain

7 (if any) from such sale shall be recognized

8 only to the extent that such organization’s

9 sales price of such property exceeds the

10 sum of—

11 ‘‘(I) such organization’s cost of

12 purchasing, during a period beginning

13 1 year before the date of such sale

14 and ending 10 years after such date,

15 other property that is used directly in

16 the performance of the exempt func17 tion of the organization, and

18 ‘‘(II) any amount paid by such

19 organization during such period to ac20 complish one or more purposes de21 scribed in section 170(c)(2)(B).

22 ‘‘(ii) STATUTE OF LIMITATIONS.—If

23 an organization sells property on which

24 gain is not recognized, in whole or in part,

25 by reason of clause (i), then the statutory
3

•HR 1359 IH

1 period for the assessment of any deficiency

2 attributable to such gain shall not expire

3 until the end of the 3-year period begin4 ning on the date that the Secretary is noti5 fied by such organization (in such manner

6 as the Secretary may prescribe) that—

7 ‘‘(I) the organization has met the

8 requirements of clause (i) with respect

9 to gain which was not recognized,

10 ‘‘(II) the organization does not

11 intend to meet such requirements, or

12 ‘‘(III) the organization failed to

13 meet such requirements within the

14 prescribed period.

15 For the purposes of this clause, any defi16 ciency may be assessed before the expira17 tion of such 3-year period notwithstanding

18 the provisions of any other law or rule of

19 law which would otherwise prevent such as20 sessment.

21 ‘‘(iii) DESTRUCTION AND LOSS.—For

22 purposes of this subparagraph, the de23 struction in whole or in part, theft, seizure,

24 requisition, or condemnation of property,

25 shall be treated as the sale of such prop-
4

•HR 1359 IH

1 erty, and rules similar to the rules pro2 vided by subsections (b), (c), (e), and (j) of

3 section 1034 (as in effect on the day be4 fore the date of the enactment of the Tax5 payer Relief Act of 1997) shall apply.’’.

6 (b) EFFECTIVE DATE.—The amendment made by

7 this section shall apply with respect to the sale of any

8 property for which the 3-year period for offsetting gain

9 by purchasing other property under subparagraph (D) of

10 section 512(a)(3) of the Internal Revenue Code (as in ef11 fect on the day before the date of the enactment of this

12 Act) had not expired as of January 1, 2001.

Æ