I

105TH CONGRESS

1ST SESSION H. R. 711

To amend the Internal Revenue Code of 1986 concerning the tax treatment

of distributions from qualified retirement plans investing in public benefit

bonds.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 12, 1997

Ms. DELAURO introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 concerning

the tax treatment of distributions from qualified retirement plans investing in public benefit bonds.

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 ‘‘Public Benefit Bonds

5 Innovative Financing Act’’.
2

•HR 711 IH

1 SEC. 2. TAX TREATMENT OF DISTRIBUTIONS FROM QUALI2 FIED RETIREMENT PLANS INVESTING IN

3 PUBLIC BENEFIT BONDS.

4 (a) IN GENERAL.—Section 72 of the Internal Reve5 nue Code of 1986 (relating to annuities; certain proceeds

6 of endowment and life insurance contracts) is amended by

7 redesignating subsection (w) as subsection (x) and by in8 serting after subsection (v) the following new subsection:

9 ‘‘(w) TREATMENT OF DISTRIBUTION FROM QUALI10 FIED RETIREMENT PLANS INVESTING IN PUBLIC BENE11 FIT BONDS.—

12 ‘‘(1) IN GENERAL.—In the case of any qualified

13 retirement plan which receives directly or indirectly

14 any interest on any public benefit bond (including

15 any payments in respect thereof made by a surety

16 or guarantor) for purposes of applying this section

17 to any distribution from such plan, the distributee’s

18 investment in the contract shall be treated as includ19 ing such distributee’s allocable share of such interest

20 under the terms of the qualified retirement plan,

21 and any such distribution shall be treated as a dis22 tribution described in subsection (e)(2)(B) in which

23 the distribution is allocable first to the investment in

24 the contract attributable to such interest.

25 ‘‘(2) TREATMENT OF INSTALLMENTS.—In the

26 case of a distribution to be made over more than one
3

•HR 711 IH

1 calendar year, the amount of public benefit bond in2 terest to be taken into account with respect to a

3 given calendar year shall be the aggregate amount of

4 such interest allocable to the distributee as of the

5 end of the prior calendar year. With respect to the

6 final calendar year, the amount of public benefit

7 bond interest to be taken into account shall include

8 the amount of such interest received by the plan

9 during such year that is allocable to the plan partici10 pant with respect to whom the distribution is made.

11 ‘‘(3) PUBLIC BENEFIT BOND.—The term ‘pub12 lic benefit bond’ means any obligation issued after

13 the date of the enactment of this subsection if—

14 ‘‘(i) 95 percent or more of the net proceeds

15 of such obligation are used in connection with

16 the financing or refinancing of 1 or more infra17 structure facilities,

18 ‘‘(ii) such obligation has received a pub19 lished rating, and

20 ‘‘(iii) the development of such infrastruc21 ture facilities have been or will be undertaken

22 by a governmental entity or public-private part23 nership,

24 as such terms are defined in paragraph (7).
4

•HR 711 IH

1 ‘‘(4) LEGEND REQUIRED.—No obligation shall

2 be a public benefit bond for purposes of this sub3 section unless it is designated as intended to be a

4 public benefit bond on the date of issuance and

5 bears a legend to such effect.

6 ‘‘(5) QUALIFIED RETIREMENT PLAN.—For pur7 poses of this subsection, the term ‘qualified retire8 ment plan’ means—

9 ‘‘(A) a qualified retirement plan (as de10 fined in section 4974(c)), and

11 ‘‘(B) an eligible deferred compensation

12 plan (as defined in section 457(b)).

13 ‘‘(6) TREATMENT OF DIVIDENDS FROM MUTUAL

14 FUNDS.—

15 ‘‘(A) IN GENERAL.—For purposes of this

16 subsection, in the case of any dividend (other

17 than a dividend described in section 854(a)) re18 ceived from a regulated investment company

19 which meets the requirements of section 852 for

20 the taxable year in which it paid the dividend—

21 ‘‘(i) the entire amount of such divi22 dend shall be treated as interest on a pub23 lic benefit bond if the aggregate interest on
5

•HR 711 IH

1 such bonds received by such company dur2 ing the taxable year equals or exceeds 75

3 percent of its gross income, or

4 ‘‘(ii) if clause (i) does not apply, a

5 portion of such dividend shall be treated as

6 interest on a public benefit bond based on

7 the portion of the company’s gross income

8 which consists of such interest.

9 ‘‘(B) NOTICE TO SHAREHOLDERS.—The

10 amount of any distribution by a regulated in11 vestment company which may be taken into ac12 count as interest on a public benefit bond for

13 purposes of this section shall not exceed the

14 amount so designated by the company in a writ15 ten notice to its shareholders mailed not later

16 than 45 days after the close of its taxable year.

17 ‘‘(C) GROSS INCOME.—For purposes of

18 this section, the term ‘gross income’ does not

19 include gain from the sale or other disposition

20 of stock or securities.

21 ‘‘(7) DEFINITIONS.—In this section, the follow22 ing definitions apply:
6

•HR 711 IH

1 ‘‘(A) ENTITY.—The term ‘entity’ means an

2 individual, corporation, partnership, joint ven3 ture, trust or governmental entity or instrumen4 tality.

5 ‘‘(B) INFRASTRUCTURE FACILITY.—The

6 term ‘infrastructure facility’ means a road,

7 highway, bridge, tunnel, airport, mass transpor8 tation vehicle or system, passenger rail vehicle

9 or system, intermodal transportation facility,

10 waterway, commercial port, drinking or waste

11 water treatment facility, solid waste disposal fa12 cility, pollution control system, hazardous waste

13 facility, federally designated national informa14 tion highway facility, school, and any ancillary

15 facility which forms a part of any such facility

16 or is reasonably related to such facility, whether

17 owned, leased or operated by a public entity or

18 a private entity or by a combination of such en19 tities, and the financing or refinancing of the

20 development of which is, or will be, supported

21 in whole or in part by user fees or other dedi22 cated revenue sources.

23 ‘‘(C) PUBLIC-PRIVATE PARTNERSHIP.—

24 The term ‘public-private partnership’ means

25 any entity—
7

•HR 711 IH

1 ‘‘(i) which is undertaking the develop2 ment of all or part of any infrastructure

3 facility—

4 ‘‘(I) pursuant to requirements es5 tablished in 1 or more contracts be6 tween such entity and a State or an

7 instrumentality of a State, or

8 ‘‘(II) the activities of which with

9 respect to such facility are subject to

10 regulation by a State or any instru11 mentality of a State, and

12 ‘‘(ii) which owns, leases, or operates,

13 or will own, lease, or operate, such infra14 structure facility in whole or in part, and

15 at least 1 of the participants in such entity

16 is a nongovernmental entity.’’.

17 (b) CONFORMING AMENDMENT.—Subsection (w) of

18 section 72 of the Internal Revenue Code of 1986 is amend19 ed by adding the following new paragraph:

20 ‘‘(4) TREATMENT OF QUALIFYING PUBLIC BEN21 EFIT BOND INTEREST.—For purposes of subsections

22 (c)(1)(A) and (c)(2)(A), the total amount of public

23 benefit bond interest described in subsection (w)
8

•HR 711 IH

1 with respect to a participant in a qualified retire2 ment plan (determined without reference to the an3 nuity starting date) shall be treated as an invest4 ment in the contract.’’.

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

6 section shall apply to distributions after the date of the

7 enactment of this Act.

Æ