I 

108TH CONGRESS 

2D SESSION H. R. 4707 

To amend the Internal Revenue Code of 1986 to provide tax incentives 

to encourage diversity of ownership of telecommunications businesses, 

and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 24, 2004 

Mr. RANGEL (for himself and Mr. HOUGHTON) introduced the following bill; 

which was referred to the Committee on Ways and Means, and in addition to the Committee on Small Business, for a period to be subsequently 

determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

tax incentives to encourage diversity of ownership of 

telecommunications 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. NONRECOGNITION OF GAIN ON QUALIFIED 

4 SALES OF TELECOMMUNICATIONS BUSI5 NESSES. 

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

7 Internal Revenue Code of 1986 (relating to gain or loss 
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1 on disposition of property) is amended by inserting after 

2 part IV the following new part: 

3 ‘‘PART V—CERTAIN SALES OF 

4 TELECOMMUNICATIONS BUSINESSES 

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

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

6 OF TELECOMMUNICATIONS BUSINESSES. 

7 ‘‘(a) IN GENERAL.—In the case of any qualified tele8 communications sale, at the election of the taxpayer, such 

9 sale shall be treated as an involuntary conversion of prop10 erty within the meaning of section 1033. 

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

12 TAX MAY BE DEFERRED.—The amount of gain on any 

13 qualified telecommunications sale which is not recognized 

14 by reason of this section shall not exceed $50,000,000. 

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

16 purposes of this section, the term ‘qualified telecommuni17 cations sale’ means any sale to a qualified business of— 

18 ‘‘(1) the assets of a telecommunications busi19 ness, or 

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

21 such sale— 

22 ‘‘(A) the qualified business controls (within 

23 the meaning of section 368(c)) such corpora24 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. 

4 ‘‘(d) QUALIFIED BUSINESS.—For purposes of this 

5 section— 

6 ‘‘(1) IN GENERAL.—The term ‘qualified busi7 ness’ means— 

8 ‘‘(A) in the case of a telecommunications 

9 sale which includes the sale of any interest in 

10 a broadcast station (as defined in section 3(5) 

11 of the Communications Act of 1934), any per12 son if— 

13 ‘‘(i) such person owns, directly or in14 directly, a qualified interest in 10 or fewer 

15 broadcast stations (as so defined), and 

16 ‘‘(ii) the fair market value of the ag17 gregate interests of such person in broad18 cast stations (as so defined) is equal to or 

19 greater than 50 percent of the net assets 

20 of such entity, and 

21 ‘‘(B) in the case of any other telecommuni22 cations sale— 

23 ‘‘(i) any individual, and 

24 ‘‘(ii) any partnership or corporation 

25 if— 
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1 ‘‘(I) the net assets of such entity 

2 do not exceed $30,000,000, and 

3 ‘‘(II) the average after-tax in4 come of such entity for the preceding 

5 2 taxable years does not exceed 

6 $10,000,000. 

7 ‘‘(2) QUALIFIED INTEREST IN BROADCAST STA8 TIONS.—An interest in a broadcast station shall be 

9 treated as qualified if such interest represents 50 

10 percent or more of the total assets of the station. 

11 ‘‘(3) EACH BUSINESS LIMITED TO 3 PUR12 CHASES.—A person shall not be a qualified business 

13 with respect to a qualified telecommunications sale 

14 if such person (or any predecessor) was the pur15 chaser in more than 2 prior qualified telecommuni16 cations sales for which an election under this section 

17 was made by the seller. 

18 ‘‘(4) SPECIAL RULES FOR QUALIFIED BUSINESS

19 DETERMINATION.—For purposes of paragraph (1)— 

20 ‘‘(A) NET ASSETS.—The term ‘net assets’ 

21 means the excess of the aggregate gross assets 

22 (as defined in section 1202(d)(2)) of the entity 

23 over the indebtedness of such entity. 

24 ‘‘(B) AFTER-TAX INCOME.—The term 

25 ‘after-tax income’ means taxable income re-
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1 duced by the net income tax for the taxable 

2 year. For purposes of the preceding sentence, 

3 the term ‘net income tax’ means the tax im4 posed by this chapter reduced by the sum of the 

5 credits allowable under part IV of subchapter A 

6 of this chapter. Rules similar to the rules of 

7 subparagraphs (A), (B), and (D) of section 

8 448(c)(3) shall apply in determining average 

9 after-tax income. 

10 ‘‘(5) AGGREGATION RULES.—For purposes of 

11 this subsection, all persons treated as a single em12 ployer under subsection (a) or (b) of section 52 or 

13 subsection (m) or (o) of section 414 shall be treated 

14 as one person. 

15 ‘‘(e) TELECOMMUNICATIONS BUSINESS.—The term 

16 ‘telecommunications business’ means any business pro17 viding communication services by wire, cable, radio, sat18 ellite, or other technology if the providing of such services 

19 is governed by the Communications Act of 1934 or the 

20 Telecommunications Act of 1996. 

21 ‘‘(f) SPECIAL RULES.— 

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

23 for purposes of subsection (a) of this section, stock 

24 of a corporation operating a telecommunications 

25 business, whether or not representing control of such 
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1 corporation, shall be treated as property similar or 

2 related in service or use to the property sold in the 

3 qualified telecommunications sale. 

4 ‘‘(2) ELECTION TO REDUCE BASIS RATHER

5 THAN RECOGNIZE REMAINDER OF GAIN.—If— 

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

7 subsection (a) with respect to any qualified tele8 communications sale, and 

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

10 this paragraph) be recognized on such sale 

11 other than by reason of subsection (b), 

12 then the amount of such gain shall not be recognized 

13 to the extent that the taxpayer elects to reduce the 

14 basis of depreciable property (as defined in section 

15 1017(b)(3)) held by the taxpayer immediately after 

16 the sale or acquired in the same taxable year. The 

17 manner and amount of such reduction shall be de18 termined under regulations prescribed by the Sec19 retary. 

20 ‘‘(3) BASIS.—For basis of property acquired on 

21 a sale or exchange treated as an involuntary conver22 sion under subsection (a), see section 1033(b). 

23 ‘‘(g) RECAPTURE OF TAX BENEFIT IF TELE24 COMMUNICATIONS BUSINESS RESOLD WITHIN 5 YEARS, 

25 ETC.— 
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1 ‘‘(1) IN GENERAL.—If, within 5 years after the 

2 date of any qualified telecommunications sale, there 

3 is a recapture event with respect to the property in4 volved in such sale, then the purchaser’s tax imposed 

5 by this chapter for the taxable year in which such 

6 event occurs shall be increased by 20 percent of the 

7 lesser of the consideration furnished by the pur8 chaser in such sale or the dollar limitation of sub9 section (b). 

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

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

12 which is a sale if— 

13 ‘‘(A) the sale is a qualified telecommuni14 cations sale, or 

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

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

17 purchaser in another qualified telecommuni18 cations sale in which the consideration fur19 nished by the taxpayer is not less than the 

20 amount realized on the recapture event sale. 

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

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

23 respect to any qualified telecommunications sale— 

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

25 assets or stock referred to in subsection (c) 
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1 which were acquired by the taxpayer in such 

2 sale, and 

3 ‘‘(B) in the case of a qualified tele4 communications sale described in subsection 

5 (c)(2)— 

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

7 telecommunications business by the cor8 poration referred to in such subsection, or 

9 ‘‘(ii) any other transaction which re10 sults in the qualified business not having 

11 control (as defined in subsection (c)(2)(A)) 

12 of such corporation. 

13 Such term shall not include any sale or other dis14 position resulting from the default, or imminent de15 fault, of any indebtedness of the taxpayer.’’ 

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

17 subchapter O of chapter 1 of such Code is amended by 

18 inserting after the item relating to part IV the following 

19 new item: 

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

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

21 this section shall apply to sales in taxable years beginning 

22 after the date of the enactment of this Act. 
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1 SEC. 2. LOAN GUARANTEE PROGRAM TO ENCOURAGE DI2 VERSITY OF OWNERSHIP OF TELECOMMUNI3 CATIONS BUSINESSES. 

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

5 Business Administration may guarantee any loan made to 

6 a qualified business for the purchase of assets or stock 

7 described in section 1071(c) of the Internal Revenue Code 

8 of 1986 (relating to qualified telecommunications sale). 

9 (b) LIMITATIONS.— 

10 (1) SECURITY.—The Administrator shall not 

11 guarantee any loan under subsection (a) unless the 

12 guaranteed portion of such loan is secured by a first 

13 lien position or first mortgage on the stock or assets 

14 financed by the loan. 

15 (2) GUARANTEE PERCENTAGE.—The amount of 

16 any loan guaranteed by the Administrator under 

17 subsection (a) shall not exceed 95 percent of the bal18 ance of the financing outstanding at the time of dis19 bursement of the loan. 

20 (3) FEES.—With respect to each loan guaran21 teed under subsection (a) (other than a loan that is 

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

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

24 participating lender, and may be charged to the bor25 rower. 
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1 (4) FORFEITURE OF FCC LICENSE.—The Ad2 ministrator shall not guarantee any loan under sub3 section (a) unless such loan provides that any license 

4 issued by the Federal Communications Commission 

5 to the borrower shall be returned and forfeited by 

6 the borrower to the Federal Communications Com7 mission immediately upon a finding by the Adminis8 trator that such borrower is in default under such 

9 loan. 

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

11 out this section, the Administrator may— 

12 (1) enter into contracts with private and Fed13 eral entities for professional and other services; 

14 (2) enter into memorandums of understanding 

15 with other Federal agencies; and 

16 (3) issue regulations, including regulations re17 garding— 

18 (A) notice of and opportunity to cure a de19 fault; 

20 (B) procedures related to foreclosure; and 

21 (C) such other matters as the Adminis22 trator considers appropriate. 

23 (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) of the Internal Revenue Code of 

7 1986. 

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. 

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