Gigabit Opportunity Act

To amend the Internal Revenue Code of 1986 to provide tax benefits for investments in gigabit opportunity zones. 1. Short title This Act may be cited as the Gigabit Opportunity Act 2. Gigabit Opportunity Zones (a) Establishment of zones and benefits (1) In general Chapter 1 Z Gigabit Opportunity Zones Sec. 1400Z–1. Designation. Sec. 1400Z–2. Deferral for eligible taxpayer of capital gains invested in gigabit opportunity zones. Sec. 1400Z–3. Immediate expensing of qualified gigabit opportunity zone business property. 1400Z–1. Designation (a) Qualified gigabit opportunity zone defined For the purposes of this subchapter, the term qualified gigabit opportunity zone (1) which is located in a jurisdiction— (A) that has been certified by Secretary, in consultation with the National Telecommunications and Information Administration, as having adopted the Uniform Model Broadband Deployment Act prescribed by the Federal Communications Commission pursuant to section 4 of the Gigabit Opportunity Act (B) which has been determined by the Secretary, in consultation with the National Telecommunications and Information Administration, to have adopted laws which are comparable to such Model Broadband Development Act, and (2) which is designated as a qualified gigabit opportunity zone. Paragraph (1)(B) shall not apply with respect to any jurisdiction for which a determination has been made after the date which is 3 years after the date of the enactment of this section. (b) Designation (1) In general For purposes of subsection (a)(3), a population census tract that is a low-income community and which meets the requirements of paragraph (1) of subsection (a) is designated as a qualified gigabit opportunity zone if— (A) not later than the end of the determination period, the governor of the State in which the tract is located— (i) nominates the tract for designation as a qualified gigabit opportunity zone, and (ii) notifies the Secretary in writing of such nomination, and (B) the Secretary certifies such nomination and designates such tract as a qualified gigabit opportunity zone before the end of the consideration period. (2) Extension of periods A governor may request that the Secretary extend either the determination or consideration period, or both (determined without regard to this subparagraph), for an additional 30 days. (c) Other definitions For purposes of this subsection— (1) Low-income communities The term low-income community (2) Definition of periods (A) Consideration period The term consideration period (B) Determination period The term determination period (d) Guidance for opportunity zone nominations When considering the nomination of qualified gigabit opportunity zones, governors should strive for the creation of qualified gigabit opportunity zones that are geographically concentrated and contiguous clusters of population census tracts and should give particular consideration to areas that— (1) are currently facing obstacles to economic development due to a lack of geographic broadband coverage or a lack of broadband speed, (2) are currently the focus of mutually reinforcing State, local, or private economic development initiatives, and (3) (A) are poised for economic growth that requires access to high speed broadband for commercial purposes, and (B) represent the areas of a State where such service would result in the highest return on investment. (e) Number of designations (1) In general Except as provided by paragraph (2), the number of population census tracts in a State that may be designated as qualified gigabit opportunity zones under this section may not exceed 25 percent of the number of low-income communities in the State. (2) Exception If the number of low-income communities in a State is less than 100, then a total of 25 of such tracts may be designated as qualified gigabit opportunity zones. (f) Designation of tracts contiguous with low-Income communities (1) In general A population census tract that is not a low-income community may be designated as a qualified gigabit opportunity zone under this section if— (A) such tract meets the requirements of paragraph (1) of subsection (a), (B) the tract is contiguous with the low-income community that is designated as a qualified gigabit opportunity zone, and (C) the median family income of the tract does not exceed 150 percent of the median family income of the low-income community with which the tract is contiguous. (2) Limitation Not more than 25 percent of the population census tracts designated in a State as a qualified gigabit opportunity zone may be designated under paragraph (1). (g) Period for which designation is in effect A designation as a qualified gigabit opportunity zone shall remain in effect for the period beginning on the date of the designation and ending at the close of the 7th calendar year beginning on or after such date of designation. 1400Z–2. Deferral for eligible taxpayer of capital gains invested in gigabit opportunity zones (a) In general (1) Exclusion of gain invested in gigabit opportunity zone property In the case of gain from the sale to, or exchange with, an unrelated person of any property held by an eligible taxpayer, at the election of the eligible taxpayer— (A) gross income for the taxable year shall not include so much of such gain as does not exceed the aggregate cost of all qualified gigabit opportunity zone property acquired by the taxpayer during the 180-day period beginning on the date of such sale or exchange, and (B) the amount of gain excluded by subparagraph (A) shall be included in gross income as provided by paragraph (2). (2) Deferral of gain invested in qualified gigabit opportunity zone property (A) Year of inclusion Except as provided by subparagraph (C), gain to which paragraph (1)(B) applies shall be included in income in the taxable year in which the qualified gigabit opportunity zone property related to such gain is sold or exchanged in the amount determined under subparagraph (B). (B) Amount includible The amount of gain determined under this clause shall be— (i) 100 percent of such gain in the case of the sale or exchange of the qualified gigabit opportunity zone property with respect to which gain is deferred under paragraph (1) that is held for less than 5 years, (ii) 90 percent of such gain in the case of the sale or exchange of the qualified gigabit opportunity zone property with respect to which gain is deferred under paragraph (1) that is held for at least 5 years but less than 7 years, and (iii) 85 percent of such gain in the case of the sale or exchange of the qualified gigabit opportunity zone property with respect to which gain is deferred under paragraph (1) that is held for at least 7 years. (3) Exclusion of gain on qualified gigabit opportunity zone property held for at least 10 years Except as provided in paragraph (2), in the case of the sale or exchange of qualified gigabit opportunity zone property, or an investment in a qualified opportunity fund, held for at least 10 years, gross income for the taxable year shall not include any gain from the sale or exchange of such property or investment. (4) One election per property No election may be made under paragraph (1) with respect to a sale or exchange if an election previously made with respect to such sale or exchange is in effect. (b) Basis rules relating to qualified gigabit opportunity zone property (1) Reduced by gain deferred under subsection (a)(1) The basis of a qualified gigabit opportunity zone property immediately after its acquisition under subsection (a) shall be reduced by the amount of gain deferred by reason of subsection (a)(1)(A) with respect to such property. (2) Increase for gain recognized under subsection (a)(2) The basis of qualified gigabit opportunity zone property shall be increased by the amount of gain recognized by reason of subsection (a)(2) with respect to such property. (3) Subsequent increase in basis for property held for at least 5 years but less than 10 years In the case of qualified gigabit opportunity zone property held for at least 5 years but less than 10 years— (A) Property held for 5 years For qualified gigabit opportunity zone property held for at least 5 years, the basis of such property shall be increased by an amount equal to 10 percent of the amount of gain deferred by reason of subsection (a)(1)(A) with respect to such property. (B) Property held for 7 years For qualified gigabit opportunity zone property held for at least 7 years, the basis of such property shall be increased by an amount equal to 5 percent of the amount of gain deferred by reason of subsection (a)(1)(A) with respect to such property. (c) Eligible taxpayer For purposes of this section, the term eligible taxpayer (1) Digital Subscriber Line transmission technology that transmits data faster over traditional copper telephone lines, without regards to the specific type of Digital Subscriber Line transmission technology such as Asymmetrical Digital Subscriber Line, Symmetrical Digital Subscriber Line, High data rate Digital Subscriber Line, or Very High data rate Digital Subscriber Line. (2) Cable Modem transmission technology that enables operators to provide broadband using the same coaxial cables that deliver pictures and sound to televisions. (3) Fiber optic transmission technology that converts electrical signals carrying data to light and sends the light through transparent glass fibers. (4) Wireless transmission technology that utilizes a radio link between the customer’s location and the service provider’s facility, whether mobile or fixed. (5) Satellite transmission technology that provides broadband links via orbiting satellites. (6) Broadband over powerline transmission technology that delivers broadband over the existing low- and medium-voltage electric power distribution network. (7) Such other technologies as the Secretary, in consultation with the Federal Communications Commission, may designate by rule as a broadband provider technology. (d) Qualified gigabit opportunity zone property For purposes of this section: (1) In general The term qualified gigabit opportunity zone property (A) qualified gigabit opportunity zone stock, (B) qualified gigabit opportunity zone partnership interest, (C) qualified gigabit opportunity zone business property, or (D) an interest in a qualified investment fund. (2) Qualified gigabit opportunity zone stock (A) In general Except as provided in subparagraph (B), the term qualified gigabit opportunity zone stock (i) such stock is acquired by the taxpayer after December 31, 2017, at its original issue (directly or through an underwriter) from the corporation solely in exchange for cash, (ii) as of the time such stock was issued, such corporation was a qualified gigabit opportunity zone business (or, in the case of a new corporation, such corporation was being organized for purposes of being a qualified gigabit opportunity zone business), and (iii) during substantially all of the taxpayer's holding period for such stock, such corporation qualified as a qualified gigabit opportunity zone business. (B) Redemptions A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this paragraph. (3) Qualified gigabit opportunity zone partnership interest The term qualified gigabit opportunity zone partnership interest (A) such interest is acquired by the taxpayer after December 31, 2017, from the partnership solely in exchange for cash, (B) as of the time such interest was acquired, such partnership was a qualified gigabit opportunity zone business (or, in the case of a new partnership, such partnership was being organized for purposes of being a qualified gigabit opportunity zone business), and (C) during substantially all of the taxpayer's holding period for such interest, such partnership qualified as a qualified gigabit opportunity zone business. (4) Qualified gigabit opportunity zone business property (A) In general The term qualified gigabit opportunity zone business property (i) such property— (I) is used primarily to provide broadband transmission services to locations which do not have such service that meets the minimum speed requirements required for universal service support under Phase II of the Connect America Fund of the Federal Communications Commission, as set forth under subpart D of part 54 of title 47, Code of Federal Regulations, and (II) is capable of transmitting signals at a rate of at least 1,000,000,000 bits per second, (ii) such property was acquired by the taxpayer by purchase (as defined in section 179(d)(2)) after December 31, 2017, (iii) the original use of such property in the qualified gigabit opportunity zone commences with the taxpayer or the taxpayer substantially improves the property, and (iv) during substantially all of the taxpayer’s holding period for such property, substantially all of the use of such property was in a qualified gigabit opportunity zone. (B) Special rule for certain property In the case of property which is placed in service before January 1, 2021, and which is with respect to technology described in paragraph (4) or (5) of subsection (c), subparagraph (A)(i)(II) shall be applied by substituting 150,000,000 bits per second 1,000,000,000 bits per second (C) Substantial improvement For purposes of subparagraph (A)(iii), property shall be treated as substantially improved by the taxpayer only if, during any 30-month period beginning after the date of acquisition of such property, additions to basis with respect to such property in the hands of the taxpayer exceed an amount equal to the adjusted basis of such property at the beginning of such 30-month period in the hands of the taxpayer. (D) Treatment of related parties For purposes of subparagraph (A)(ii), the rules of subparagraph (A) of section 179(d)(2) shall be applied using the relationship described in subsection (e)(2) in lieu of the relationship described in such subparagraph. (5) Qualified gigabit opportunity fund The term qualified gigabit opportunity fund (A) on the last day of the first 6-month period of the taxable year of the fund, and (B) on the last day of the taxable year of the fund. (6) Qualified gigabit opportunity zone business (A) In general The term qualified gigabit opportunity zone business (i) in which substantially all of the tangible property owned or leased by the taxpayer is qualified gigabit opportunity zone business property, (ii) which satisfies the requirements of paragraphs (2), (4), and (8) of section 1397C(b), and (iii) which is not described in section 144(c)(6)(B). (B) Special rule For purposes of subparagraph (A), tangible property that ceases to be a qualified gigabit opportunity zone business property shall continue to be treated as a qualified gigabit opportunity zone business property for the lesser of— (i) 5 years after the date on which such tangible property ceases to be so qualified, or (ii) the date on which such tangible property is no longer held by the qualified gigabit opportunity zone business. (e) Applicable rules (1) In general For purposes of this section and except as otherwise provided in this section, rules similar to the rules applicable to deferred like kind exchanges under section 1031 shall apply except that reinvestment in qualified gigabit opportunity zone property need not require an intermediary party. (2) Related persons For purposes of this subsection, persons are related to each other if such persons are described in section 267(b) or 707(b)(1), determined by substituting 20 percent 50 percent (3) Decedents In the case of a decedent, amounts recognized under this section shall, if not properly includible in the gross income of the decedent, be includible in gross income as provided by section 691. (4) Regulations The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including— (A) rules providing for proportionate inclusion in income and increases in basis for purposes of subsections (a) and (b) in cases in which a sale or exchange of any qualified gigabit opportunity zone property with respect to which gain is deferred under subsection (a)(1)(A) is less than all of such property, (B) rules requiring taxpayers to provide such information as the Secretary determines to be necessary or appropriate for the identification of both the assets sold (including basis and sale price) and the assets acquired and investments made, and (C) rules to prevent abuse. 1400Z–3. Immediate expensing of qualified gigabit opportunity zone business property (a) In general A eligible taxpayer may elect to treat the cost of any qualified gigabit opportunity zone business property (as defined in section 1400Z–2) as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the qualified gigabit opportunity zone business property is placed in service. (b) Eligible taxpayer For purposes of this section, the term eligible taxpayer (c) Exception for certain property For purposes of this section, the term qualified gigabit opportunity zone business property (d) Election An election under this section shall be made under rules similar to the rules of section 179(c). (e) Coordination with section 179 For purposes of section 179, qualified gigabit opportunity zone business property shall not be treated as section 179 property. (f) Application of other rules Rules similar to the rules of paragraphs (3), (4), (5), (7), (9), and (10) of section 179(d) shall apply for purposes of this section. (g) Taxpayer reporting This section shall not apply with respect to any taxpayer for any taxable year unless such taxpayer provides the Secretary with such information as the Secretary may require to allow the Secretary to evaluate the effectiveness of the program established under this part. . (2) Basis adjustments Section 1016(a) of such Code is amended by striking and , and (38) to the extent provided in section 1400Z–2(b). . (3) Clerical amendment The table of subchapters for chapter 1 of such Code is amended by adding at the end the following new item: Subchapter Z. Gigabit opportunity zones . (4) Effective date The amendments made by this subsection shall take effect on the date of the enactment of this Act. 3. Private activity bonds for qualified broadband projects (a) In general Section 142(a) or , or (16) qualified broadband projects. . (b) Qualified broadband projects Section 142 of such Code is amended by adding at the end the following new subsection: (n) Qualified broadband project (1) In general For purposes of subsection (a)(16), the term qualified broadband project (A) is located in a jurisdiction that has been certified by Secretary, in consultation with the National Telecommunications and Information Administration, as having adopted the Uniform Model Broadband Deployment Act prescribed by the Federal Communications Commission pursuant to section 4 of the Gigabit Opportunity Act (B) results in gigabit capable Internet access to residential or commercial locations— (i) where a broadband service provider previously did not provide service, or (ii) which do not have broadband service which meets the minimum speed requirements required for universal service support under Phase II of the Connect America Fund of the Federal Communications Commission, as set forth under subpart D of part 54 of title 47, Code of Federal Regulations. . (c) Effective date The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act. 4. Uniform Model Broadband Act (a) In general Not later than 1 year after the date of the enactment of this Act, the Federal Communications Commission shall publish a Uniform Model Broadband Deployment Act containing laws for the State regulation of the deployment of broadband services. (b) No inference relating to data collection Nothing in this Act or the amendments made by this Act shall be construed to provide additional authority for the collection of data to the Federal Communications Commission or the National Telecommunications and Information Administration.

Summary: Gigabit Opportunity Act This bill amends the Internal Revenue Code to authorize the designation of qualified gigabit opportunity zones in low-income communities and to provide tax incentives for investments in the zones. Governors may submit nominations for a limited number of qualified gigabit opportunity zones in low-income communities to the Department of the Treasury for certification and designation. Governors must give particular consideration to areas that: are facing obstacles to economic development due to a lack of geographic broadband coverage or speed; are the focus of mutually reinforcing state, local, or private economic development initiatives; are poised for economic growth that requires access to high speed broadband for commercial purposes; and represent the areas of a state where such service would result in the highest return on investment. For eligible taxpayers that sell certain broadband services, the bill allows: (1) deferrals, reductions, or exemptions from taxes on capital gains invested in certain property used to provide broadband services in a zone (depending on how long the property is held), and (2) immediate expensing of the costs of the property. The bill also allows tax-exempt private activity bonds to be used for certain broadband projects in the zones. Within one year of enactment of this bill, the Federal Communications Commission must publish a Uniform Model Broadband Deployment Act containing laws for the state regulation of the deployment of broadband services. Qualified zones must adopt either the Act or laws comparable to the Act.