II 

108TH CONGRESS 

1ST SESSION S. 267

To amend the Internal Revenue Code of 1986 to provide for a deferral 

of tax on gain from the sale of telecommunications businesses in specific 

circumstances or a tax credit and other incentives to promote diversity 

of ownership in telecommunications businesses. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 30, 2003

Mr. MCCAIN 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 provide 

for a deferral of tax on gain from the sale of telecommunications businesses in specific circumstances or 

a tax credit and other incentives to promote diversity 

of ownership in telecommunications businesses.

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 ‘‘Telecommunications 

5 Ownership Diversification Act of 2003’’. 
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1 SEC. 2. FINDINGS AND PURPOSES. 

2 (a) FINDINGS.—Congress makes the following find3 ings: 

4 (1) Current trends in the telecommunications 

5 industry show that there is increasing convergence 

6 among various media, including broadcasting, cable 

7 television, and Internet-based businesses, that pro8 vide news, information, and entertainment. 

9 (2) This convergence will continue, and there10 fore, diversifying the ownership of telecommuni11 cations facilities remains a preeminent public inter12 est concern that should be reflected in both tele13 communications and tax policy. 

14 (3) A market-based, voluntary system of invest15 ment incentives is an effective, lawful, and economi16 cally sound means of facilitating entry and diver17 sification of ownership in the telecommunications in18 dustry. 

19 (4) Opportunities for new entrants to partici20 pate and grow in the telecommunications industry 

21 have substantially decreased since the end of the 

22 Federal Communications Commission’s tax certifi23 cate policy in 1995, particularly in light of the avail24 ability of tax-free like-kind exchanges, despite the 

25 most robust period of transfers of radio and tele26 vision stations in history. During this time, busi-
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1 nesses owned or controlled by socially disadvantaged 

2 individuals, including, but not limited to, members of 

3 minority groups and women, have continued to be 

4 underrepresented as owners of telecommunications 

5 facilities. 

6 (5) Businesses owned or controlled by socially 

7 disadvantaged individuals are, and historically have 

8 been, economically disadvantaged in the tele9 communications industry. For these businesses, ac10 cess to and cost of capital are and have been sub11 stantial obstacles to new entry and growth. Con12 sequently, diversification of ownership in the tele13 communications industry has been limited. 

14 (6) Telecommunications facilities owned by new 

15 entrants may not be attractive to investors because 

16 their start-up costs are often high, their revenue 

17 streams are uncertain, and their profit margins are 

18 unknown. 

19 (7) It is consistent with the public interest and 

20 with the pro-competition policies of the Tele21 communications Act of 1996 to provide incentives 

22 that will facilitate investments in, and acquisition of, 

23 telecommunications facilities by economically and so24 cially disadvantaged businesses, thereby diversifying 

25 the ownership of telecommunications facilities. 
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1 (8) Increased participation by economically and 

2 socially disadvantaged businesses in the ownership of 

3 telecommunications facilities will enhance competi4 tion in the telecommunications industry. Permitting 

5 sellers of telecommunications facilities to defer tax6 ation of gains from transactions involving economi7 cally and socially disadvantaged businesses, or cer8 tain small businesses supported by investments from 

9 the Telecommunications Development Fund that 

10 provides capital for such businesses, will further the 

11 development of a competitive and diverse United 

12 States telecommunications industry without govern13 mental intrusion in private investment decisions. 

14 (9) The public interest would not be served by 

15 attempts to diversify the ownership of telecommuni16 cations businesses through any approach that would 

17 involve the use of mandated set-asides or quotas. 

18 (10) Today, the telecommunications industry is 

19 struggling to survive one of its most troubling times. 

20 Therefore, facilitating voluntary, pro-competitive 

21 transactions that will promote ownership of tele22 communications facilities by economically and so23 cially disadvantaged businesses and certain small 

24 businesses will aid in providing the investment and 

25 capital that is crucial to this sector. 
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1 (b) PURPOSE.—The purpose of this Act is to facili2 tate voluntary, pro-competitive transactions that will pro3 mote ownership of telecommunications facilities by eco4 nomically and socially disadvantaged businesses and cer5 tain small businesses. 

6 SEC. 3. NONRECOGNITION OF GAIN ON CERTAIN QUALI7 FIED SALES OF TELECOMMUNICATIONS BUSI8 NESSES. 

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

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

11 on disposition of property) is amended by inserting after 

12 part IV the following new part: 

13 ‘‘PART V—CERTAIN SALES OF 

14 TELECOMMUNICATIONS BUSINESSES

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

15 ‘‘SEC. 1071. NONRECOGNITION OF GAIN ON CERTAIN SALES 

16 OF TELECOMMUNICATIONS BUSINESSES. 

17 ‘‘(a) IN GENERAL.—For purposes of this subtitle, if 

18 a taxpayer elects the application of this section to a quali19 fied telecommunications sale, such sale shall be treated as 

20 an involuntary conversion of property within the meaning 

21 of section 1033. 

22 ‘‘(b) LIMITATION ON AMOUNT OF GAIN ON WHICH

23 TAX MAY BE DEFERRED.—
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1 ‘‘(1) IN GENERAL.—The amount of gain on any 

2 qualified telecommunications sale which is not recog3 nized by reason of this section—

4 ‘‘(A) shall not exceed $250,000,000 per 

5 sale, and 

‘‘(B) shall not exceed 1 6 ⁄3 of such dollar 

7 amount per taxable year. 

8 ‘‘(2) CARRYFORWARDS OF UNUSED

9 AMOUNTS.—If the amount of gain on any qualified 

10 telecommunications sale which is not recognized by 

11 reason of this section exceeds the limitation imposed 

12 by paragraph (1)(B) for the taxable year, such ex13 cess shall be carried to the succeeding taxable year 

14 and added to the amount allowable under this sec15 tion for such taxable year. 

16 ‘‘(c) QUALIFIED TELECOMMUNICATIONS SALE.—For 

17 purposes of this section, the term ‘qualified telecommuni18 cations sale’ means any sale to an eligible purchaser of—

19 ‘‘(1) the assets of a telecommunications busi20 ness, or 

21 ‘‘(2) stock in a corporation if, immediately after 

22 such sale—

23 ‘‘(A) the eligible purchaser controls (within 

24 the meaning of section 368(c)) such corpora25 tion, and 
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1 ‘‘(B) substantially all of the assets of such 

2 corporation are assets of 1 or more tele3 communications businesses, or 

4 ‘‘(3) an interest in a partnership if, immediately 

5 after such sale—

6 ‘‘(A) the eligible purchaser owns a partner7 ship interest possessing—

8 ‘‘(i) at least 80 percent of the total 

9 combined voting power of all classes of 

10 partnership interests entitled to vote, 

11 ‘‘(ii) control over the management of 

12 the partnership, 

13 ‘‘(iii) at least 80 percent of the capital 

14 interests of the partnership, and 

15 ‘‘(iv) a distributive share of at least 

16 80 percent of each item of the partner17 ship’s income, gain, loss, deduction or 

18 credit, and 

19 ‘‘(B) substantially all of the assets of such 

20 partnership are assets of 1 or more tele21 communications businesses. 

22 ‘‘(d) SPECIAL RULES.—

23 ‘‘(1) IN GENERAL.—In applying section 1033 

24 for purposes of subsection (a), stock of a corporation 

25 or an interest in a partnership operating a tele-
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1 communications business, whether or not rep2 resenting control of such corporation or partnership, 

3 shall be treated as property similar or related in 

4 service or use to the property sold in the qualified 

5 telecommunications sale. 

6 ‘‘(2) ELECTION TO REDUCE BASIS RATHER

7 THAN RECOGNIZE REMAINDER OF GAIN.—If—

8 ‘‘(A) a taxpayer elects the treatment under 

9 subsection (a) with respect to any qualified tele10 communications sale, and 

11 ‘‘(B) an amount of gain would (but for 

12 this paragraph) be recognized on such sale 

13 under section 1033(a)(2)(A) in excess of the 

14 amount required to be recognized by reason of 

15 subsection (b), 

16 then the amount of gain described in this subpara17 graph shall not be recognized to the extent that the 

18 taxpayer elects to reduce the basis of depreciable 

19 property (within the meaning of section 1017(b)(3)) 

20 held by the taxpayer immediately after the sale or 

21 acquired in the same taxable year. The manner and 

22 amount of such reduction shall be determined under 

23 regulations prescribed by the Secretary. 
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1 ‘‘(3) BASIS.—For basis of property acquired on 

2 a sale or exchange treated as an involuntary conver3 sion under subsection (a), see section 1033(b). 

4 ‘‘(e) RECAPTURE OF TAX BENEFIT IF TELE5 COMMUNICATIONS BUSINESS RESOLD WITHIN 3 YEARS, 

6 ETC.—

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

8 date of any qualified telecommunications sale, there 

9 is a recapture event with respect to the property in10 volved in such sale, then the purchaser’s tax imposed 

11 by this chapter for the taxable year in which such 

12 event occurs shall be increased by an amount equal 

13 to the product of—

14 ‘‘(A) the highest marginal rate of income 

15 tax imposed on corporations under section 11, 

16 and 

17 ‘‘(B) the lesser of—

18 ‘‘(i) the consideration furnished by the 

19 purchaser in such sale, or 

20 ‘‘(ii) the dollar amount specified in 

21 subsection (b)(1)(A). 

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

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

24 which is a sale if—
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1 ‘‘(A) the sale is a qualified telecommuni2 cations sale, or 

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

4 on the date of such sale, the taxpayer is the

5 purchaser in another qualified telecommuni6 cations sale in which the consideration fur7 nished by the taxpayer is not less than the 

8 amount realized on the recapture event sale. 

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

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

11 respect to any qualified telecommunications sale—

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

13 assets, stock, or partnership interest referred to 

14 in subsection (c) which were acquired by the 

15 taxpayer in such sale, and 

16 ‘‘(B) in the case of a qualified tele17 communications sale described in paragraph (2) 

18 or (3) of subsection (c)—

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

20 telecommunications business by the cor21 poration or partnership referred to in such 

22 subsection, or 

23 ‘‘(ii) any other transaction which re24 sults in the eligible purchaser ceasing to be 

25 an eligible purchaser, or ceasing to have 
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1 control (as defined in subsection (c)(2)(A)) 

2 of such corporation or ownership of an in3 terest in such partnership sufficient to sat4 isfy the requirements of subsection 

5 (c)(3)(A). 

6 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur7 poses of this section—

8 ‘‘(1) ELIGIBLE PURCHASER.—The term ‘eligible 

9 purchaser’ means—

10 ‘‘(A) any economically and socially dis11 advantaged business, or 

12 ‘‘(B) any corporation or partnership if im13 mediately following the purchase—

14 ‘‘(i) substantially all the assets of 

15 such corporation or partnership are assets 

16 of 1 or more telecommunications busi17 nesses, and 

18 ‘‘(ii) the Telecommunications Develop19 ment Fund established under section 714 

20 of the Communications Act of 1934 (47 

21 U.S.C. 614) or any wholly-owned affiliate 

22 of such Fund owns at least 5 percent of—

23 ‘‘(I) the stock in such corpora24 tion, 
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1 ‘‘(II) the partnership interest in 

2 such partnership, or 

3 ‘‘(III) the indebtedness convert4 ible into such stock or partnership in5 terest. 

6 ‘‘(2) ECONOMICALLY AND SOCIALLY DISADVAN7 TAGED BUSINESS.—The term ‘economically and so8 cially disadvantaged business’ means a person which 

9 is designated by the Secretary as an economically 

10 and socially disadvantaged business based on a de11 termination that such person—

12 ‘‘(A) meets the control requirements of 

13 paragraph (6), 

14 ‘‘(B) will be a telecommunications business 

15 after the purchase for which the eligibility de16 termination is sought, and 

17 ‘‘(C) before the purchase for which the eli18 gibility determination is sought does not have—

19 ‘‘(i) attributable ownership interest in 

20 television broadcast stations having an ag21 gregate national audience reach of more 

22 than 5 percent as defined by the Federal 

23 Communications Commission under section 

24 73.3555(e)(2)(i) of title 47 of the Code of 
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1 Federal Regulations as in effect on Janu2 ary 1, 2001, 

3 ‘‘(ii) attributable ownership interest 

4 in—

5 ‘‘(I) more than 50 radio stations 

6 nationally, and 

7 ‘‘(II) radio stations with a com8 bined market share exceeding 10 per9 cent of radio advertising revenues in 

10 the relevant market as defined by the 

11 Federal Communications Commission, 

12 or 

13 ‘‘(iii) attributable ownership interest 

14 in any other telecommunications business 

15 having more than 5 percent of national 

16 subscribers of their respective service. 

17 ‘‘(3) RELEVANT MARKET.—The term ‘relevant 

18 market’ means the local radio market served by the 

19 radio station or stations being purchased. 

20 ‘‘(4) TELECOMMUNICATIONS BUSINESS.—The 

21 term ‘telecommunications business’ means a busi22 ness which, as its primary purpose, engages in elec23 tronic communications and is regulated by the Fed24 eral Communications Commission pursuant to the 

25 Communications Act of 1934, including a cable sys-
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1 tem (as defined in section 602(7) of such Act (47 

2 U.S.C. 522(7))), a radio station (as defined in sec3 tion 3(35) of such Act (47 U.S.C. 153(35))), a 

4 broadcasting station providing television service (as 

5 defined in section 3(49) of such Act (47 U.S.C. 

6 153(49))), a provider of direct broadcast satellite 

7 service (as defined in section 335(b)(5)(A) of such 

8 Act (47 U.S.C. 335(b)(5)(A))), a provider of video 

9 programming (as defined in section 602(20) of such 

10 Act (47 U.S.C. 522(20))), a provider of commercial 

11 mobile services (as defined in section 332(d)(1) of 

12 such Act (47 U.S.C. 332(d)(1))), a telecommuni13 cations carrier (as defined in section 3(44) of such 

14 Act (47 U.S.C. 153(44))), a provider of fixed sat15 ellite service, a reseller of the communications serv16 ice or commercial mobile service, or a provider of 

17 multichannel multipoint distribution service. 

18 ‘‘(5) PURCHASE.—A taxpayer shall be consid19 ered to have purchased a property if, but for sub20 section (d)(2) and the application of section 1033(b), 

21 the basis of the property would be its cost within the 

22 meaning of section 1012. 

23 ‘‘(6) CONTROL.—

24 ‘‘(A) INDIVIDUALS.—For purposes of para25 graph (2)(A), an individual who meets the re-
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1 quirements of paragraph (7) also meets the re2 quirements of this paragraph.

3 ‘‘(B) ENTITIES.—For purposes of para4 graph (2)(A), an entity meets the requirement 

5 of this paragraph if the requirements of sub6 paragraphs (C), (D), or (E) are satisfied. 

7 ‘‘(C) 30-PERCENT TEST.—The require8 ments of this subparagraph are satisfied if—

9 ‘‘(i) with respect to any entity which 

10 is a corporation, individuals who meet the 

11 requirements of paragraph (7) collectively 

12 own at least 30 percent in value of the out13 standing stock of the corporation, and 

14 more than 50 percent of the total com15 bined voting power of all classes of stock 

16 entitled to vote of the corporation, and 

17 ‘‘(ii) with respect to any entity which 

18 is a partnership, individuals who meet the 

19 requirements of paragraph (7) collectively 

20 own at least 30 percent of the capital in21 terests in the partnership, a distributive 

22 share of at least 30 percent of each item 

23 of the partnership’s income, gain, loss, de24 duction, or credit, more than 50 percent of 

25 the total combined voting power of all 
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1 partnership interests entitled to vote, and 

2 control over the management of the part3 nership. 

4 ‘‘(D) 15-PERCENT TEST.—The require5 ments of this subparagraph are satisfied if—

6 ‘‘(i) with respect to any entity which 

7 is a corporation—

8 ‘‘(I) individuals who meet the re9 quirements of paragraph (7) collec10 tively own at least 15 percent in value 

11 of the outstanding stock of the cor12 poration, and more than 50 percent of 

13 the total combined voting power of all 

14 classes of stock entitled to vote of the 

15 corporation, and 

16 ‘‘(II) no other person owns more 

17 than 25 percent in value of the out18 standing stock of the corporation, and 

19 ‘‘(ii) with respect to any entity which 

20 is a partnership—

21 ‘‘(I) individuals who meet the re22 quirements of paragraph (7) collec23 tively own at least 15 percent of the 

24 capital interests in the partnership, a 

25 distributive share of at least 15 per-
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1 cent of each item of the partnership’s 

2 income, gain, loss, deduction, or cred3 it, more than 50 percent of the total 

4 combined voting power of all classes 

5 of partnership interests entitled to 

6 vote, and control over the manage7 ment of the partnership, and 

8 ‘‘(II) no other person owns more 

9 than 25 percent of the capital inter10 ests and profits interests in the part11 nership or a distributive share of more 

12 than 25 percent of any item of the 

13 partnership’s income, gain, loss, de14 duction, or credit. 

15 ‘‘(E) PUBLICLY-TRADED CORPORATION

16 TEST.—The requirements of this subparagraph 

17 are satisfied if, with respect to a corporation 

18 the securities of which are traded on an estab19 lished securities market, individuals who meet 

20 the requirements of paragraph (7) collectively 

21 own more than 50 percent of the total combined 

22 voting power of all classes of stock entitled to 

23 vote of the corporation. 

24 ‘‘(F) RESTRICTIONS ON AGREEMENTS CON25 CERNING VOTING OF STOCK OR PARTNERSHIP
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1 INTERESTS.—For purposes of satisfying the re2 quirements of subparagraph (C), (D), or (E), 

3 the stock or partnership interest relied upon to 

4 establish compliance shall not be subject to any 

5 agreement, arrangement, or understanding 

6 which provides for, or relates to, the voting of 

7 the stock or partnership interest in any manner 

8 by, or at the direction of, any person other than 

9 an eligible individual who meets the require10 ments of paragraph (7), or the right of any per11 son other than 1 of those individuals to acquire 

12 the voting power through purchase of shares, 

13 partnership interests, or otherwise. 

14 ‘‘(G) CONSTRUCTIVE OWNERSHIP.—In ap15 plying subparagraphs (C), (D), (E), and (F), 

16 the constructive ownership rules of section 318 

17 shall apply, but only if the interests for which 

18 constructive ownership is claimed are not 

19 owned, directly or indirectly, by individuals who 

20 do not meet the requirements of paragraph (7). 

21 ‘‘(7) INDIVIDUALS.—An individual meets the 

22 requirements of this paragraph if such individual 

23 is—

24 ‘‘(A) a United States citizen, and 
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1 ‘‘(B) a member of an economically or so2 cially disadvantaged class determined by the

3 Secretary to be underrepresented in the owner4 ship of the relevant telecommunications busi5 ness.’’. 

6 (b) CONFORMING AMENDMENTS.—

7 (1) Sections 1245(b)(5) and 1250(d)(5) of the 

8 Internal Revenue Code of 1986 are each amended—

9 (A) by inserting ‘‘section 1071 (relating to 

10 certain sales of telecommunications businesses) 

11 or’’ before section 1081’’, and 

12 (B) by inserting ‘‘AND 1071’’ before ‘‘1081’’ 

13 in the heading thereof. 

14 (2) The table of parts for subchapter O of 

15 chapter 1 of such Code is amended by inserting 

16 after the item relating to part IV the following new 

17 item:

‘‘Part V. Certain sales of telecommunications businesses.’’.

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

19 this section shall apply to elections made with respect to 

20 any sale on or after the date of the enactment of this Act. 

21 SEC. 4. TELECOMMUNICATIONS BUSINESS CREDIT. 

22 (a) IN GENERAL.—Subpart E of part IV of sub23 chapter A of chapter 1 of the Internal Revenue Code of 

24 1986 (relating to rules for computing investment credit) 
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1 is amended by inserting after section 48 the following new 

2 section: 

3 ‘‘SEC. 48A. TELECOMMUNICATIONS BUSINESS CREDIT. 

4 ‘‘For purposes of section 46, there is allowed as a 

5 credit against the tax imposed by this chapter for any tax6 able year an amount equal to 10 percent of the taxable 

7 income of any taxpayer which at all times during such tax8 able year—

9 ‘‘(1) is a local exchange carrier (as defined in 

10 section 3(26) of the Communications Act of 1934 

11 (47 U.S.C. 153(26))), 

12 ‘‘(2) is not a Bell operating company (as de13 fined in section 3(4) of such Act (47 U.S.C. 

14 153(4))), and 

15 ‘‘(3) is headquartered in an area designated as 

16 an empowerment zone by the Secretary of Housing 

17 and Urban Development.’’. 

18 (b) TRANSITIONAL RULE.—Section 39(d) of the In19 ternal Revenue Code of 1986 (relating to transitional 

20 rules) is amended by adding at the end the following new 

21 paragraph: 

22 ‘‘(11) NO CARRYBACK OF SECTION 48A CREDIT

23 BEFORE EFFECTIVE DATE.—No portion of the un24 used business credit for any taxable year which is 

25 attributable to the telecommunications business 
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1 credit determined under section 48A may be carried 

2 back to a taxable year ending on or before the date 

3 of the enactment of section 48A.’’. 

4 (c) CONFORMING AMENDMENTS.—

5 (1) Section 46 of the Internal Revenue Code of 

6 1986 (relating to amount of credit) is amended by 

7 striking ‘‘and’’ at the end of paragraph (2), by strik8 ing the period at the end of paragraph (3) and in9 serting ‘‘, and’’, and by adding at the end the fol10 lowing new paragraph: 

11 ‘‘(4) the telecommunications business credit.’’. 

12 (2) The table of sections for subpart E of part 

13 IV of subchapter A of chapter 1 of such Code is 

14 amended by inserting after the item relating to sec15 tion 48 the following new item:

‘‘48A. Telecommunications business credit.’’.

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

17 this section shall apply to taxable years ending after the 

18 date of the enactment of this Act. 

19 SEC. 5. EXCLUSION OF 50 PERCENT OF GAIN. 

20 (a) IN GENERAL.—Section 1202 of the Internal Rev21 enue Code of 1986 (relating to partial exclusion for gain 

22 from certain small business stock) is amended—

23 (1) by adding at the end of subsection (a) the 

24 following new paragraph: 
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1 ‘‘(3) CERTAIN TELECOMMUNICATIONS INVEST2 MENTS BY CORPORATIONS AND INVESTMENT COMPA3 NIES.—Gross income shall not include 50 percent of 

4 any gain from the sale or exchange of stock in an 

5 eligible purchaser (as defined in section 1071(f)(1)), 

6 engaged in a telecommunications business (as de7 fined in section 1071(f)(4)) held for more than 5 

8 years.’’, 

9 (2) by striking subparagraphs (A) and (B) of 

10 subsection (b)(1) and inserting the following new 

11 subparagraphs: 

12 ‘‘(A) in the case of gain from the sale or 

13 exchange of qualified small business stock held 

14 for more than 5 years—

15 ‘‘(i) $10,000,000 reduced by the ag16 gregate amount of eligible gain taken into 

17 account by the taxpayer under subsection 

18 (a) for prior taxable years attributable to 

19 dispositions of stock issued by such cor20 poration, or 

21 ‘‘(ii) 10 times the aggregate adjusted 

22 bases of qualified small business stock 

23 issued by such corporation and disposed of 

24 by the taxpayer during the taxable year, 

25 and 
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1 ‘‘(B) in the case of gain from the sale or 

2 exchange of stock in an eligible purchaser en3 gaged in a telecommunications business for 

4 more than 5 years—

5 ‘‘(i) $20,000,000 reduced by the ag6 gregate amount of eligible gain taken into 

7 account by the taxpayer under subsection 

8 (a) for prior taxable years attributable to 

9 dispositions of stock issued by an eligible 

10 purchaser engaged in a telecommunications 

11 business, or 

12 ‘‘(ii) 15 times the aggregate adjusted 

13 bases of stock of an eligible purchaser en14 gaged in a telecommunications business 

15 issued by such eligible purchaser and dis16 posed of by the taxpayer during the tax17 able year.’’, 

18 (3) by striking ‘‘subparagraph (B)’’ in the last 

19 sentence of subsection (b)(1) and inserting ‘‘sub20 paragraphs (A)(ii) and (B)(ii)’’, 

21 (4) by striking ‘‘years.’’ in subsection (b)(2) 

22 and inserting ‘‘years or any gain from the sale or ex23 change of stock in an eligible purchaser engaged in 

24 a telecommunications business held for more than 5 

25 years.’’, and 
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1 (5) by striking the period at the end of sub2 section (b)(3)(A) and inserting ‘‘, and paragraph 

3 (1)(B) shall be applied by substituting ‘$10,000,000’ 

4 for ‘$20,000,000’.’’. 

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

6 this section shall apply to sales on or after the date of 

7 the enactment of this Act. 

8 SEC. 6. TECHNICAL AND CONFORMING AMENDMENTS; REG9 ULATIONS. 

10 (a) TECHNICAL AND CONFORMING AMENDMENTS.—

11 The Secretary of the Treasury shall, not later than 150 

12 days after the date of the enactment of this Act, submit 

13 to the Committee on Ways and Means of the House of 

14 Representatives and the Committee on Finance of the 

15 Senate, a draft of any technical and conforming amend16 ments of the Internal Revenue Code of 1986 which are 

17 necessary to reflect throughout such Code the amend18 ments made by this Act. 

19 (b) REGULATIONS.—The Secretary of the Treasury, 

20 in consultation with the Federal Communications Com21 mission, shall promulgate regulations to implement the 

22 amendments made by this Act not later than 90 days after 

23 the date of the enactment of this Act. The regulations 

24 shall provide for the determination by the Secretary of the 

25 Treasury as to whether an applicant is an ‘‘eligible pur-
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1 chaser’’ as defined in section 1071(f) of the Internal Rev2 enue Code of 1986 (as added by section 3(a)). The regula3 tions shall further provide that such determinations of eli4 gibility shall be made not later than 45 calendar days after 

5 an application is filed with the Secretary of the Treasury. 

6 The regulations implementing section 1071(f)(7) of such 

7 Code (as added by section 3) shall be updated on an ongo8 ing basis not less frequently than every 5 years. 

9 SEC. 7. BIENNIAL PROGRAM AUDITS BY GAO. 

10 Not later than January 1, 2005, and not later than 

11 2 years thereafter, the Comptroller General of the United 

12 States shall audit the administration of the sections of the 

13 Internal Revenue Code of 1986 added or amended by this 

14 Act, and issue a report on the results of that audit. The 

15 Comptroller General shall include in the report, notwith16 standing any provision of section 6103 of the Internal 

17 Revenue Code of 1986 to the contrary—

18 (1) a list of eligible purchasers (as defined in 

19 section 1071(f)(1) of such Code) and any other tax20 payer receiving a benefit from the operation of sec21 tion 48A or 1202 of such Code as such section was 

22 added or amended by this Act, and 

23 (2) an assessment of the effect the amendments 

24 made by this Act have on increasing new entry and 

25 growth in the telecommunications industry by eco-
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1 nomically and socially disadvantaged businesses, and 

2 the effect of this Act on enhancing the competitive3 ness of the telecommunications industry.

Æ