I 

111TH CONGRESS 

1ST SESSION H. R. 3516 

To amend the Internal Revenue Code of 1986 to provide for rollover of 

gain from divesting certain qualified securities of business entities engaged in Iran or Sudan discouraged activities. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 31, 2009 

Mr. SHERMAN (for himself, Ms. ROS-LEHTINEN, Mr. KIRK, Mr. AL GREEN

of Texas, Mr. HOLT, Mr. KLEIN of Florida, Mr. ADLER of New Jersey, 

Mr. ENGEL, Mr. BURTON of Indiana, Mr. LOBIONDO, Mr. NADLER of 

New York, Mr. GRAYSON, Ms. BERKLEY, Mr. THOMPSON of California, 

Mr. HASTINGS of Florida, Mr. WEINER, Mr. COHEN, Ms. KILROY, and 

Mr. HALL of New York) 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 provide 

for rollover of gain from divesting certain qualified securities of business entities engaged in Iran or Sudan discouraged activities. 

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 ‘‘Enable Divestment 

5 from Sudan and Iran Act of 2009’’. 


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1 SEC. 2. ROLLOVER OF GAIN FROM DIVESTING CERTAIN 

2 QUALIFIED SECURITIES OF BUSINESS ENTI3 TIES ENGAGED IN DISCOURAGED ACTIVITIES 

4 IN IRAN OR SUDAN. 

5 (a) IN GENERAL.—Part III of subchapter O of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to 

7 common nontaxable exchanges) is amended by adding at 

8 the end the following new section: 

9 ‘‘SEC. 1046. ROLLOVER OF GAIN FROM DIVESTING CERTAIN 

10 QUALIFIED SECURITIES OF BUSINESS ENTI11 TIES ENGAGED IN DISCOURAGED ACTIVITIES 

12 IN IRAN OR SUDAN. 

13 ‘‘(a) NONRECOGNITION OF GAIN.— 

14 ‘‘(1) IN GENERAL.—In the case of any sale of 

15 any qualified security held by a taxpayer with re16 spect to which such taxpayer elects the application 

17 of this section, in any business entity that is en18 gaged in an Iran discouraged activity or a Sudan 

19 discouraged activity, gain from such sale shall be 

20 recognized only to the extent that the amount real21 ized on such sale exceeds— 

22 ‘‘(A) the cost of any qualified replacement 

23 property purchased by the taxpayer during the 

24 30-day period beginning on the date of such 

25 sale, reduced by 


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1 ‘‘(B) any portion of such cost previously 

2 taken into account under this section. 

3 ‘‘(2) EXCEPTION FOR ORDINARY INCOME

4 GAIN.—This section shall not apply to any gain 

5 which is treated as ordinary income for purposes of 

6 this title. 

7 ‘‘(3) EXCEPTION WHERE TAXPAYER OWNS CON8 TROLLING INTEREST IN THE BUSINESS ENTITY.— 

9 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

10 not apply to any sale if, immediately before 

11 such sale, the taxpayer owns a controlling inter12 est in the business entity that is engaged in an 

13 Iran discouraged activity or a Sudan discour14 aged activity. 

15 ‘‘(B) CONTROLLING INTEREST.—For pur16 poses of subparagraph (A), the term ‘control17 ling interest’ means direct or indirect ownership 

18 of at least 50 percent of the total voting power 

19 and value of all classes of stock of a corpora20 tion. For purposes of the preceding sentence, 

21 the rules of paragraphs (1) and (5) of section 

22 267(c) shall apply. 

23 ‘‘(C) AGGREGATION RULE.—For purposes 

24 of this paragraph, all members of the same con25 trolled group of corporations (within the meanVerDate Nov 24 2008 04:39 Aug 04, 2009 Jkt 079200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3516.IH H3516

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1 ing of section 267(f)) and all persons under 

2 common control (within the meaning of section 

3 52(b) but determined by treating an interest of 

4 more than 50 percent as a controlling interest) 

5 shall be treated as 1 person. 

6 ‘‘(b) DEFINITIONS AND SPECIAL RULES RELATING

7 TO SECURITIES AND REPLACEMENT PROPERTY.—For 

8 purposes of this section— 

9 ‘‘(1) QUALIFIED SECURITY.— 

10 ‘‘(A) IN GENERAL.—The term ‘qualified 

11 security’ means any security held by a taxpayer 

12 in any business entity that is engaged in an 

13 Iran discouraged activity or a Sudan discour14 aged activity. 

15 ‘‘(B) EXCEPTION.—Such term shall not in16 clude any security purchased or otherwise ac17 quired after the date of the enactment of this 

18 section which, at the time of such purchase or 

19 acquisition, was issued by a business entity 

20 then engaged in an Iran discouraged activity or 

21 a Sudan discouraged activity. 

22 ‘‘(C) SECURITY DEFINED.—The term ‘se23 curity’ has the meaning given such term by sec24 tion 165(g)(2). 

25 ‘‘(2) QUALIFIED REPLACEMENT PROPERTY.— 


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1 ‘‘(A) IN GENERAL.—The term ‘qualified 

2 replacement property’ means any security of a 

3 business entity that, on the date of purchase by 

4 the taxpayer— 

5 ‘‘(i) is not engaged in an Iran discour6 aged activity or a Sudan discouraged activ7 ity on such date, 

8 ‘‘(ii) is not a member of an expanded 

9 affiliated group, any member of which is 

10 engaged in an Iran discouraged activity or 

11 a Sudan discouraged activity on such date, 

12 and 

13 ‘‘(iii) meets the requirements of sub14 paragraph (B). 

15 ‘‘(B) REPLACEMENT PROPERTY.—Property 

16 meets the requirements of this paragraph if, 

17 with respect to the sale of any security— 

18 ‘‘(i) except as provided in clause (ii), 

19 in the case that the security is a share of 

20 stock in a corporation, the replacement 

21 property is a share of stock in a corpora22 tion, 

23 ‘‘(ii) in the case that the security is a 

24 share of stock of a regulated investment 

25 company, real estate investment trust, 


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1 hedge fund, investment partnership, or 

2 similar business entity, the replacement 

3 property is a share of stock in a regulated 

4 investment company, real estate invest5 ment trust, hedge fund, investment part6 nership, or similar business entity, 

7 ‘‘(iii) in the case that the security is 

8 a right to subscribe for, or to receive, a 

9 share of stock in a corporation, the re10 placement property is a right to subscribe 

11 for, or to receive, a share of stock in a cor12 poration, and 

13 ‘‘(iv) in the case that the security is 

14 a bond, debenture, note, or certificate, or 

15 other evidence of indebtedness issued by a 

16 corporation, with interest coupons or in 

17 registered form, the replacement property 

18 is a bond, debenture, note, or certificate, 

19 or other evidence of indebtedness issued by 

20 a corporation, with interest coupons or in 

21 registered form. 

22 ‘‘(C) DEEMED INVESTMENT IF INVESTING

23 IN ENTITIES ENGAGED IN DISCOURAGED AC24 TIVITIES.—Any regulated investment company, 

25 real estate investment trust, hedge fund, investVerDate Nov 24 2008 04:39 Aug 04, 2009 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3516.IH H3516

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1 ment partnership, or similar business entity, 

2 which invests in the securities— 

3 ‘‘(i) issued by a business entity deter4 mined to be engaging in Iran discouraged 

5 activities or Sudan discouraged activities, 

6 or 

7 ‘‘(ii) issued by the government of 

8 Sudan or Iran or any agency thereof, 

9 shall be deemed to be a business entity engag10 ing in Iran discouraged activities or Sudan dis11 couraged activities. 

12 ‘‘(D) BUSINESS DECLARATION OF POL13 ICY.— 

14 ‘‘(i) IN GENERAL.—Notwithstanding 

15 any other provision of this section, in the 

16 case of a business entity described in 

17 clause (iii), a security in such business en18 tity shall not be treated as qualified re19 placement property unless the business en20 tity has made the following declaration: ‘It 

21 is our policy not to make investments in 

22 business entities which engage in Iran dis23 couraged activities or Sudan discouraged 

24 activities as defined in section 1046 of the 

25 Internal Revenue Code of 1986, and to use 


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1 due diligence to avoid making such invest2 ments. It is our policy to divest on or be3 fore December 31, 2010, from business en4 tities engaged in Iran discouraged activi5 ties and Sudan discouraged activities.’. 

6 ‘‘(ii) NOT QUALIFIED SECURITY.—If a 

7 business entity described in clause (iii) has 

8 made the declaration specified in clause (i), 

9 then from the time of such declaration an 

10 interest in such business entity shall not be 

11 treated as a qualified security. 

12 ‘‘(iii) BUSINESS ENTITY DE13 SCRIBED.—A business entity described in 

14 this clause is a regulated investment com15 pany, real estate investment trust, hedge 

16 fund, investment partnership, or similar 

17 business entity. 

18 ‘‘(E) EXPANDED AFFILIATED GROUP.— 

19 The term ‘expanded affiliated group’ means an 

20 affiliated group as defined in section 1504(a), 

21 determined— 

22 ‘‘(i) by substituting ‘more than 50 

23 percent’ for ‘at least 80 percent’ each place 

24 it appears, and 


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1 ‘‘(ii) without regard to paragraphs (2) 

2 and (4) of section 1504(b). 

3 ‘‘(F) BASIS ADJUSTMENTS.—If gain from 

4 any sale is not recognized by reason of sub5 section (a), such gain shall be applied to reduce 

6 (in the order acquired) the basis for deter7 mining gain or loss of any qualified replacement 

8 property which is purchased by the taxpayer 

9 during the 30-day period described in sub10 section (a). 

11 ‘‘(G) HOLDING PERIOD.—For purposes of 

12 determining the period for which the taxpayer 

13 has held qualified replacement property the ac14 quisition of which resulted in the nonrecognition 

15 under subsection (a) of any part of the gain re16 alized on the sale of a qualified security, there 

17 shall be included the period for which such 

18 qualified security had been held by the tax19 payer. 

20 ‘‘(3) SPECIAL RULE FOR SECURITIES OF CER21 TAIN ENTITIES.— 

22 ‘‘(A) IN GENERAL.—For any business enti23 ty described in subparagraph (C), a security in 

24 such business entity shall be treated as quali25 fied replacement property if the business entity 


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1 has made the following declaration: ‘It is our 

2 policy not to make investments in any person 

3 having an investment in, or carrying on a trade 

4 or business (within the meaning of section 162) 

5 in or with, Iran and Sudan. This policy may or 

6 may not include investments concerning the 

7 provision of food, medicine, humanitarian serv8 ices in or to Iran or Sudan or investments con9 cerning marginalized areas of Sudan (as de10 fined in section 2 of the Sudan Accountability 

11 and Divestment Act of 2007 (121 Stat. 

12 2518)).’. 

13 ‘‘(B) NOT QUALIFIED SECURITY.—If a 

14 business entity described in subparagraph (C) 

15 has made the declaration specified in subpara16 graph (A), then from the time of such declara17 tion an interest in such business entity shall not 

18 be treated as a qualified security. 

19 ‘‘(C) BUSINESS ENTITY DESCRIBED.—A 

20 business entity described in this subparagraph 

21 is a regulated investment company, real estate 

22 investment trust, hedge fund, investment part23 nership, or similar business entity. 

24 ‘‘(D) CERTAIN BUSINESS ENTITIES AS RE25 PLACEMENT PROPERTY.—A business entity deVerDate Nov 24 2008 04:39 Aug 04, 2009 Jkt 079200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3516.IH H3516

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1 scribed in subparagraph (C) making the dec2 laration described in subparagraph (A) may 

3 qualify as replacement property if it has adopt4 ed restrictions on investment in persons that in5 vest in or carrying on a trade or business (with6 in the meaning of section 162) in or with coun7 tries other than Iran and Sudan that are des8 ignated as state sponsors of terrorism under 

9 section 6(j) of the Export Administration Act of 

10 1979, section 40 of the Arms Export Control 

11 Act, or section 620A of the Foreign Assistance 

12 Act of 1961. 

13 ‘‘(4) BUSINESS ENTITY.—The term ‘business 

14 entity’ means any corporation, limited liability part15 nership, limited liability company, or any other busi16 ness entity conducting business activities in which 

17 the taxpayer has purchased or can purchase securi18 ties. 

19 ‘‘(c) DEFINITIONS AND RULES RELATING TO SUDAN

20 DISCOURAGED ACTIVITY.—For purposes of this section, 

21 the term ‘Sudan discouraged activity’ means an invest22 ment in any business operation described in section 3(d) 

23 of the Sudan Accountability and Divestment Act of 2007 

24 (121 Stat. 2518). 


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1 ‘‘(d) DEFINITIONS AND RULES RELATING TO IRAN

2 DISCOURAGED ACTIVITIES.—For purposes of this sec3 tion— 

4 ‘‘(1) IRAN DISCOURAGED ACTIVITY.—The term 

5 ‘Iran discouraged activity’ means— 

6 ‘‘(A) an investment of $20,000,000 or 

7 more— 

8 ‘‘(i) in the energy sector of Iran; or 

9 ‘‘(ii) in a person that provides oil or 

10 liquefied natural gas tankers, or products 

11 used to construct or maintain pipelines 

12 used to transport oil or liquefied natural 

13 gas, for the energy sector in Iran; 

14 ‘‘(B) an extension of $20,000,000 or more 

15 in credit to another person, for 45 days or 

16 more, if that person will use the credit to invest 

17 in the energy sector in Iran; 

18 ‘‘(C) except as provided in section 5(f) of 

19 the Iran Sanctions Act of 1996 (50 U.S.C. 

20 1701 note), an investment of $20,000,000 or 

21 more (or any combination of investments of at 

22 least $5,000,000 each, which in the aggregate 

23 equals or exceeds $20,000,000 in any 12-month 

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1 uted to the enhancement of Iran’s ability to de2 velop petroleum resources of Iran; 

3 ‘‘(D) except as provided in section 5(f) of 

4 the Iran Sanctions Act of 1996 (50 U.S.C. 

5 1701 note), the sale, lease, or provision to Iran 

6 of any goods, services, technology, information, 

7 or support that would allow Iran to maintain or 

8 expand its domestic production of refined petro9 leum resources, including any assistance in re10 finery construction, modernization, or repair; or 

11 ‘‘(E) except as provided in section 5(f) of 

12 the Iran Sanctions Act of 1996 (50 U.S.C. 

13 1701 note), providing Iran with refined petro14 leum resources or engaging in any activity that 

15 could contribute to the enhancement of Iran’s 

16 ability to import refined petroleum resources, 

17 including— 

18 ‘‘(i) providing ships or shipping serv19 ices to deliver refined petroleum resources 

20 to Iran; 

21 ‘‘(ii) underwriting or otherwise pro22 viding insurance or reinsurance for such 

23 activity; or 

24 ‘‘(iii) financing or brokering such ac25 tivity. 


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1 ‘‘(2) INVESTMENT.—The ‘investment’ of assets, 

2 with respect to a State or local government, in3 cludes— 

4 ‘‘(A) a commitment or contribution of as5 sets; 

6 ‘‘(B) a loan or other extension of credit; or 

7 ‘‘(C) the entry into or renewal of a con8 tract for goods or services. 

9 ‘‘(3) ENERGY SECTOR.—The term ‘energy sec10 tor’ refers to activities to develop petroleum or nat11 ural gas resources or nuclear power. 

12 ‘‘(4) IRAN.—The term ‘Iran’ includes any agen13 cy or instrumentality of Iran. 

14 ‘‘(e) DOING BUSINESS WITH TERRORISTS.— 

15 ‘‘(1) IN GENERAL.—For purposes of this sec16 tion— 

17 ‘‘(A) A business entity has engaged in Iran 

18 discouraged activities if it conducts business 

19 with or makes any charitable donation to any 

20 Iranian person designated as a terrorist or to 

21 any foreign terrorist organization. 

22 ‘‘(B) A business entity has engaged in 

23 Sudan discouraged activities if it conducts busi24 ness with or makes any charitable donation to 


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1 any Sudanese person designated as a terrorist 

2 or to any foreign terrorist organization. 

3 ‘‘(2) TERRORIST.—A person is designated as a 

4 terrorist for purposes of paragraph (1) if such per5 son is designated or otherwise individually identified 

6 in or pursuant to an Executive Order which is re7 lated to terrorism and issued under the authority of 

8 the International Emergency Economic Powers Act 

9 or section 5 of the United Nations Participation Act 

10 of 1945 for the purpose of imposing on such organi11 zation an economic or other sanction. 

12 ‘‘(3) FOREIGN TERRORIST ORGANIZATION.— 

13 For purposes of paragraph (1), the term ‘foreign 

14 terrorist organization’ means an organization des15 ignated under section 219 of the Immigration and 

16 Nationality Act (8 U.S.C. 1189) as a foreign ter17 rorist organization. 

18 ‘‘(f) IDENTIFICATION OF BUSINESS ENTITIES EN19 GAGING IN IRAN DISCOURAGED ACTIVITIES OR SUDAN

20 DISCOURAGED ACTIVITIES.— 

21 ‘‘(1) PUBLICATION OF LIST.—For purposes of 

22 this section, the Secretary shall publish and update 

23 at least every six months a list of business entities 

24 engaging in any Sudan discouraged activities or Iran 

25 discouraged activities, or both. 


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1 ‘‘(2) REGULATIONS.—The Secretary shall issue 

2 regulations defining how a business entity shall not 

3 be deemed to be engaged in an Iran discouraged ac4 tivity or Sudan discouraged activity, if— 

5 ‘‘(A) with regard to activities on the date 

6 this section becomes effective, the business enti7 ty limits its activity to continuing existing con8 tracts, without extension or expansion (except 

9 that an investment (as defined in section 14 of 

10 the Iran Sanctions Act of 1996) that would 

11 subject a business entity to sanctions under sec12 tion 5 of the Iran Sanctions Act of 1996 shall 

13 be considered an Iran discouraged activity, not14 withstanding contracts entered into prior to the 

15 effective date of this section), and 

16 ‘‘(B) with regard to any Iran discouraged 

17 activity or Sudan discouraged activity carried 

18 on under contracts entered into or expanded 

19 after the effective date of this section, the con20 tract was entered into at a time when the busi21 ness entity did not own or control the sub22 sidiary business entity, and after acquiring such 

23 ownership or control the business entity has not 

24 extended or expanded or renewed such contract. 


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1 ‘‘(3) TAXPAYER SELF-HELP.—Until such time 

2 as the Secretary publishes a list of those engaging 

3 in Iran discouraged activities or Sudan discouraged 

4 activities or if the Secretary fails to update that list 

5 as required in paragraph (1), the taxpayer may de6 termine, using credible, publicly available informa7 tion, which business entities engage in an Iran dis8 couraged activity or a Sudan discouraged activity. 

9 ‘‘(g) IMPROVEMENT IN THE ACTIONS OF THE GOV10 ERNMENT OF THE SUDAN.—Effective on the date when 

11 the President certifies under a section 12 of the Sudan 

12 Accountability and Divestment Act of 2007 (121 Stat. 

13 2523), subsection (a) shall not apply to any Sudan dis14 couraged activity after such date. 

15 ‘‘(h) IMPROVEMENT IN THE ACTIONS OF THE GOV16 ERNMENT OF IRAN.— 

17 ‘‘(1) TERMINATION OF NONRECOGNITION

18 TREATMENT.—Effective on the date when the re19 quirements described in paragraph (2) are met, sub20 section (a) shall not apply to any Iran discouraged 

21 activity after such date. 

22 ‘‘(2) REQUIREMENTS.—The requirements de23 scribed in this paragraph are— 

24 ‘‘(A) a declaration by the President which 

25 states that, in the opinion of the President, 


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1 Iran is no longer engaging in efforts to develop 

2 or retain weapons of mass destruction, and has 

3 not developed and is not developing the capacity 

4 to enrich or reprocess uranium or plutonium, 

5 and 

6 ‘‘(B) a determination by the Secretary of 

7 State that Iran should no longer be listed as a 

8 state sponsor of acts of international terrorism 

9 pursuant to section 6(j) of the Export Adminis10 tration Act of 1979, section 620A of the For11 eign Assistance Act of 1961, section 40 of the 

12 Arms Export Control Act, or any other provi13 sion of law.’’. 

14 (b) CLERICAL AMENDMENT.—The table of sections 

15 for part III of subchapter O of chapter 1 of such Code 

16 is amended by adding at the end the following new item: 

‘‘Sec. 1046. Rollover of gain from divesting certain qualified securities of business entities engaged in discouraged activities in Iran or 

Sudan.’’. 

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

18 this section shall apply to with respect to sales of securities 

19 after the date of the enactment of this Act. 

Æ 


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