I

107TH CONGRESS

1ST SESSION H. R. 1303

To amend the Internal Revenue Code of 1986 to clarify the rules relating

to lessee construction allowances and to contributions to the capital

of retailers.

IN THE HOUSE OF REPRESENTATIVES

MARCH 29, 2001

Ms. DUNN 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 clarify

the rules relating to lessee construction allowances and

to contributions to the capital of retailers.

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

3 SECTION 1. EXCLUSION FROM GROSS INCOME OF QUALI4 FIED LESSEE CONSTRUCTION ALLOWANCES

5 NOT LIMITED TO SHORT-TERM LEASES.

6 (a) IN GENERAL.—Subsection (a) of section 110 of

7 the Internal Revenue Code of 1986 (relating to qualified

8 lessee construction allowances for short term leases) is

9 amended by striking the period at the end and inserting
2

•HR 1303 IH

1 ‘‘, and the amount expended meets the requirements of

2 the expenditure rule. Paragraph (1) shall not apply if the

3 lessee is a qualified retail business (as defined by section

4 118(d)(3) without regard to the proximity requirement in

5 subparagraph (A) thereof).’’.

6 (b) EXPENDITURE RULE.—Section 110 of such Code

7 is amended by redesignating subsections (b),(c), and (d)

8 as subsections (c), (d), and (e), respectively, and by insert9 ing after subsection (a) the following new subsection:

10 ‘‘(b) EXPENDITURE RULE.—An expenditure meets

11 the requirements of this subsection if the expenditure oc12 curs before the end of the second taxable year after such

13 amount was received.’’.

14 (c) CONFORMING AMENDMENTS.—

15 (1) The section heading for section 110 of such

16 Code is amended by striking ‘‘FOR SHORT-TERM

17 LEASES’’.

18 (2) The item relating to section 110 in the table

19 of sections for part III of subchapter B of chapter

20 1 of such Code is amended by striking ‘‘for short21 term leases’’.

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

23 this section shall apply to leases entered into after the date

24 of the enactment of this Act.
3

•HR 1303 IH

1 SEC. 2. EXCLUSION FROM GROSS INCOME FOR CERTAIN

2 CONTRIBUTIONS TO THE CAPITAL OF CER3 TAIN RETAILERS.

4 (a) IN GENERAL.—Section 118 of the Internal Rev5 enue Code of 1986 (relating to contributions to the capital

6 of a corporation) is amended by redesignating subsections

7 (d) and (e) as subsections (e) and (f ), respectively, and

8 by inserting after subsection (c) the following new sub9 section:

10 ‘‘(d) SAFE HARBOR FOR CONTRIBUTIONS TO CER11 TAIN RETAILERS.—

12 ‘‘(1) GENERAL RULE.—For purposes of this

13 section, the term ‘contribution to the capital of the

14 taxpayer’ includes any amount of money or other

15 property received by the taxpayer if—

16 ‘‘(A) the taxpayer has entered into an

17 agreement to operate (or cause to be operated)

18 a qualified retail business at a particular loca19 tion for a period of at least 15 years,

20 ‘‘(B)(i) immediately after the receipt of

21 such money or other property, the taxpayer

22 owns the land and the structure to be used by

23 the taxpayer in carrying on a qualified retail

24 business at such location, or
4

•HR 1303 IH

1 ‘‘(ii) the taxpayer uses such amount to ac2 quire ownership of at least such land and struc3 ture,

4 ‘‘(C) such amount meets the requirements

5 of the expenditure rule of paragraph (2), and

6 ‘‘(D) the contributor of such amount does

7 not hold a beneficial interest in any property lo8 cated on the premises of such qualified retail

9 business other than de minimis amounts of

10 property associated with the operation of prop11 erty adjacent to such premises.

12 ‘‘(2) EXPENDITURE RULE.—An amount meets

13 the requirements of this paragraph if—

14 ‘‘(A) an amount equal to such amount is

15 expended for the acquisition of land or for ac16 quisition or construction of other property de17 scribed in section 1231(b)—

18 ‘‘(i) which was the purpose motivating

19 the contribution, and

20 ‘‘(ii) which is used predominantly in a

21 qualified retail business at the location re22 ferred to in paragraph (1)(A),

23 ‘‘(B) the expenditure referred to in sub24 paragraph (A) occurs before the end of the sec-
5

•HR 1303 IH

1 ond taxable year after the year in which such

2 amount was received, and

3 ‘‘(C) accurate records are kept of the

4 amounts contributed and expenditures made on

5 the basis of the project for which the contribu6 tion was made and on the basis of the year of

7 the contribution expenditure.

8 ‘‘(3) DEFINITION OF QUALIFIED RETAIL BUSI9 NESS.—

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

11 subparagraph (B), the term ‘qualified retail

12 business’ means a trade or business of selling

13 tangible personal property to the general public

14 if the premises on which such trade or business

15 is conducted is in close proximity to property

16 that the contributor of the amount referred to

17 in paragraph (1) is developing or operating for

18 profit (or, in the case of a contributor which is

19 a governmental entity, is attempting to revi20 talize).

21 ‘‘(B) SERVICES.—A trade or business shall

22 not fail to be treated as a qualified retail busi23 ness by reason of sales of services if such sales

24 are incident to the sale of tangible personal
6

•HR 1303 IH

1 property or if the services are de minimis in

2 amount.

3 ‘‘(4) SPECIAL RULES.—

4 ‘‘(A) LEASES.—For purposes of paragraph

5 (1), property shall be treated as owned by the

6 taxpayer if the taxpayer is the lessee of such

7 property under a lease having a term of at least

8 30 years and on which only nominal rent is re9 quired.

10 ‘‘(B) CONTROLLED GROUPS.—For pur11 poses of this subsection, all persons treated as

12 a single employer under subsection (a) or (b) of

13 section 52 shall be treated as one person.

14 ‘‘(5) DISALLOWANCE OF DEDUCTIONS AND

15 CREDITS; ADJUSTED BASIS.—Notwithstanding any

16 other provision of this subtitle, no deduction or cred17 it shall be allowed for, or by reason of, any amount

18 received by the taxpayer which constitutes a con19 tribution to capital to which this subsection applies.

20 The adjusted basis of any property acquired with the

21 contributions to which this subsection applies shall

22 be reduced by the amount of the contributions to

23 which this subsection applies.

24 ‘‘(6) REGULATIONS.—The Secretary shall pre25 scribe such regulations are appropriate to prevent
7

•HR 1303 IH

1 the abuse of the purposes of the subsection, includ2 ing regulations which allocate income and deductions

3 (or adjust the amount excludable under this sub4 section) in cases in which—

5 ‘‘(A) payments in excess of fair market

6 value are paid to the contributor by the tax7 payer, or

8 ‘‘(B) the contributor and the taxpayer are

9 related parties.’’.

10 (b) CONFORMING AMENDMENT.—Subsection (e) of

11 section 118 of such Code (as redesignated by subsection

12 (a)) is amended by adding at the end the following flush

13 sentence:

14 ‘‘Rules similar to the rules of the preceding sentence shall

15 apply to any amount treated as a contribution to the cap16 ital of the taxpayer under subsection (d).’’.

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

18 this section shall apply to amounts received after the date

19 of the enactment of this Act.

Æ