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 addi-
tion to the Committee on Small Business, for a period to be subsequently 
determined by the Speaker, in each case for consideration of such provi-
sions 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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. NONRECOGNITION OF GAIN ON QUALIFIED 
SALES 
OF 
TELECOMMUNICATIONS 
BUSI-
NESSES. 
(a) IN GENERAL.—Subchapter O of chapter 1 of the 
Internal Revenue Code of 1986 (relating to gain or loss
on disposition of property) is amended by inserting after 
part IV the following new part: 
‘‘PART V—CERTAIN SALES OF 
TELECOMMUNICATIONS BUSINESSES 
‘‘Sec. 1071. Nonrecognition of gain on certain sales of telecommunications busi-
nesses. 
‘‘SEC. 1071. NONRECOGNITION OF GAIN ON CERTAIN SALES 
OF TELECOMMUNICATIONS BUSINESSES. 
‘‘(a) IN GENERAL.—In the case of any qualified tele-
communications sale, at the election of the taxpayer, such 
sale shall be treated as an involuntary conversion of prop-
erty within the meaning of section 1033. 
‘‘(b) LIMITATION ON AMOUNT OF GAIN ON WHICH 
TAX MAY BE DEFERRED.—The amount of gain on any 
qualified telecommunications sale which is not recognized 
by reason of this section shall not exceed $50,000,000. 
‘‘(c) QUALIFIED TELECOMMUNICATIONS SALE.—For 
purposes of this section, the term ‘qualified telecommuni-
cations sale’ means any sale to a qualified business of— 
‘‘(1) the assets of a telecommunications busi-
ness, or 
‘‘(2) stock in a corporation if, immediately after 
such sale— 
‘‘(A) the qualified business controls (within 
the meaning of section 368(c)) such corpora-
tion, and
‘‘(B) substantially all of the assets of such 
corporation are assets of 1 or more tele-
communications businesses. 
‘‘(d) QUALIFIED BUSINESS.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—The term ‘qualified busi-
ness’ means— 
‘‘(A) in the case of a telecommunications 
sale which includes the sale of any interest in 
a broadcast station (as defined in section 3(5) 
of the Communications Act of 1934), any per-
son if— 
‘‘(i) such person owns, directly or in-
directly, a qualified interest in 10 or fewer 
broadcast stations (as so defined), and 
‘‘(ii) the fair market value of the ag-
gregate interests of such person in broad-
cast stations (as so defined) is equal to or 
greater than 50 percent of the net assets 
of such entity, and 
‘‘(B) in the case of any other telecommuni-
cations sale— 
‘‘(i) any individual, and 
‘‘(ii) any partnership or corporation 
if—
‘‘(I) the net assets of such entity 
do not exceed $30,000,000, and 
‘‘(II) the average after-tax in-
come of such entity for the preceding 
2 taxable years does not exceed 
$10,000,000. 
‘‘(2) QUALIFIED INTEREST IN BROADCAST STA-
TIONS.—An interest in a broadcast station shall be 
treated as qualified if such interest represents 50 
percent or more of the total assets of the station. 
‘‘(3) EACH
BUSINESS
LIMITED
TO
PUR-
CHASES.—A person shall not be a qualified business 
with respect to a qualified telecommunications sale 
if such person (or any predecessor) was the pur-
chaser in more than 2 prior qualified telecommuni-
cations sales for which an election under this section 
was made by the seller. 
‘‘(4) SPECIAL RULES FOR QUALIFIED BUSINESS 
DETERMINATION.—For purposes of paragraph (1)— 
‘‘(A) NET ASSETS.—The term ‘net assets’ 
means the excess of the aggregate gross assets 
(as defined in section 1202(d)(2)) of the entity 
over the indebtedness of such entity. 
‘‘(B) 
AFTER-TAX
INCOME.—The 
term 
‘after-tax income’ means taxable income re-
duced by the net income tax for the taxable 
year. For purposes of the preceding sentence, 
the term ‘net income tax’ means the tax im-
posed by this chapter reduced by the sum of the 
credits allowable under part IV of subchapter A 
of this chapter. Rules similar to the rules of 
subparagraphs (A), (B), and (D) of section 
448(c)(3) shall apply in determining average 
after-tax income. 
‘‘(5) AGGREGATION RULES.—For purposes of 
this subsection, all persons treated as a single em-
ployer under subsection (a) or (b) of section 52 or 
subsection (m) or (o) of section 414 shall be treated 
as one person. 
‘‘(e) TELECOMMUNICATIONS BUSINESS.—The term 
‘telecommunications business’ means any business pro-
viding communication services by wire, cable, radio, sat-
ellite, or other technology if the providing of such services 
is governed by the Communications Act of 1934 or the 
Telecommunications Act of 1996. 
‘‘(f) SPECIAL RULES.— 
‘‘(1) IN GENERAL.—In applying section 1033 
for purposes of subsection (a) of this section, stock 
of a corporation operating a telecommunications 
business, whether or not representing control of such
corporation, shall be treated as property similar or 
related in service or use to the property sold in the 
qualified telecommunications sale. 
‘‘(2) ELECTION
TO
REDUCE
BASIS
RATHER 
THAN RECOGNIZE REMAINDER OF GAIN.—If— 
‘‘(A) a taxpayer elects the treatment under 
subsection (a) with respect to any qualified tele-
communications sale, and 
‘‘(B) an amount of gain would (but for 
this paragraph) be recognized on such sale 
other than by reason of subsection (b), 
then the amount of such gain shall not be recognized 
to the extent that the taxpayer elects to reduce the 
basis of depreciable property (as defined in section 
1017(b)(3)) held by the taxpayer immediately after 
the sale or acquired in the same taxable year. The 
manner and amount of such reduction shall be de-
termined under regulations prescribed by the Sec-
retary. 
‘‘(3) BASIS.—For basis of property acquired on 
a sale or exchange treated as an involuntary conver-
sion under subsection (a), see section 1033(b). 
‘‘(g) RECAPTURE
OF
TAX
BENEFIT
IF
TELE-
COMMUNICATIONS BUSINESS RESOLD WITHIN 5 YEARS, 
ETC.—
‘‘(1) IN GENERAL.—If, within 5 years after the 
date of any qualified telecommunications sale, there 
is a recapture event with respect to the property in-
volved in such sale, then the purchaser’s tax imposed 
by this chapter for the taxable year in which such 
event occurs shall be increased by 20 percent of the 
lesser of the consideration furnished by the pur-
chaser in such sale or the dollar limitation of sub-
section (b). 
‘‘(2) EXCEPTION FOR REINVESTED AMOUNTS.— 
Paragraph (1) shall not apply to any recapture event 
which is a sale if— 
‘‘(A) the sale is a qualified telecommuni-
cations sale, or 
‘‘(B) during the 60-day period beginning 
on the date of such sale, the taxpayer is the 
purchaser in another qualified telecommuni-
cations sale in which the consideration fur-
nished by the taxpayer is not less than the 
amount realized on the recapture event sale. 
‘‘(3) RECAPTURE EVENT.—For purposes of this 
subsection, the term ‘recapture event’ means, with 
respect to any qualified telecommunications sale— 
‘‘(A) any sale or other disposition of the 
assets or stock referred to in subsection (c)
which were acquired by the taxpayer in such 
sale, and 
‘‘(B) in the case of a qualified tele-
communications sale described in subsection 
(c)(2)— 
‘‘(i) any sale or other disposition of a 
telecommunications business by the cor-
poration referred to in such subsection, or 
‘‘(ii) any other transaction which re-
sults in the qualified business not having 
control (as defined in subsection (c)(2)(A)) 
of such corporation. 
Such term shall not include any sale or other dis-
position resulting from the default, or imminent de-
fault, of any indebtedness of the taxpayer.’’ 
(b) CLERICAL AMENDMENT.—The table of parts for 
subchapter O of chapter 1 of such Code is amended by 
inserting after the item relating to part IV the following 
new item: 
‘‘PART V. CERTAIN SALES OF TELECOMMUNICATIONS BUSINESSES’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to sales in taxable years beginning 
after the date of the enactment of this Act.
SEC. 2. LOAN GUARANTEE PROGRAM TO ENCOURAGE DI-
VERSITY OF OWNERSHIP OF TELECOMMUNI-
CATIONS BUSINESSES. 
(a) IN GENERAL.—The Administrator of the Small 
Business Administration may guarantee any loan made to 
a qualified business for the purchase of assets or stock 
described in section 1071(c) of the Internal Revenue Code 
of 1986 (relating to qualified telecommunications sale). 
(b) LIMITATIONS.— 
(1) SECURITY.—The Administrator shall not 
guarantee any loan under subsection (a) unless the 
guaranteed portion of such loan is secured by a first 
lien position or first mortgage on the stock or assets 
financed by the loan. 
(2) GUARANTEE PERCENTAGE.—The amount of 
any loan guaranteed by the Administrator under 
subsection (a) shall not exceed 95 percent of the bal-
ance of the financing outstanding at the time of dis-
bursement of the loan. 
(3) FEES.—With respect to each loan guaran-
teed under subsection (a) (other than a loan that is 
repayable in 1 year or less), the Administrator may 
collect a guarantee fee, which shall be payable by the 
participating lender, and may be charged to the bor-
rower.
(4) FORFEITURE OF FCC LICENSE.—The Ad-
ministrator shall not guarantee any loan under sub-
section (a) unless such loan provides that any license 
issued by the Federal Communications Commission 
to the borrower shall be returned and forfeited by 
the borrower to the Federal Communications Com-
mission immediately upon a finding by the Adminis-
trator that such borrower is in default under such 
loan. 
(c) GENERAL AUTHORITY.—For purposes of carrying 
out this section, the Administrator may— 
(1) enter into contracts with private and Fed-
eral entities for professional and other services; 
(2) enter into memorandums of understanding 
with other Federal agencies; and 
(3) issue regulations, including regulations re-
garding— 
(A) notice of and opportunity to cure a de-
fault; 
(B) procedures related to foreclosure; and 
(C) such other matters as the Adminis-
trator considers appropriate. 
(d) DEFINITIONS.—For purposes of this section:
(1) ADMINISTRATOR.—The term ‘‘Adminis-
trator’’ means the Administrator of the Small Busi-
ness Administration. 
(2) QUALIFIED BUSINESS.—The term ‘‘quali-
fied business’’ has the meaning given such term in 
section 1071(d) of the Internal Revenue Code of 
1986. 
(e) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated such sums as may be 
necessary to carry out the purposes of this section. 
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