I
104TH CONGRESS
1ST SESSION
H. R. 1953
To amend the Internal Revenue Code of 1986 to encourage the development
of a commercial space industry in the United States.
IN THE HOUSE OF REPRESENTATIVES
JUNE 28, 1995
Mr. WALKER (for himself, Mr. ZIMMER, Mr. ENGLISH of Pennsylvania, Mr.
ROHRABACHER, Mrs. SEASTRAND, Mr. WELDON of Florida, and Mr.
SENSENBRENNER) 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 encourage
the development of a commercial space industry in the
United States.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Space Business Incen-
tives Act of 1995’’.
SEC. 2. DEDUCTION FOR PURCHASE OF COMMERCIAL
SPACE CENTER STOCK.
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
itemized deductions for individuals and corporations) is
amended by adding at the end the following new section:
‘‘SEC. 198. DEDUCTION FOR PURCHASE OF COMMERCIAL
SPACE CENTER STOCK.
‘‘(a) IN GENERAL.—At the election of the taxpayer,
there shall be allowed as a deduction an amount equal to
the aggregate amount paid during the taxable year for the
purchase of qualified Commercial Space Center stock.
‘‘(b) MAXIMUM DEDUCTION.—
‘‘(1) IN GENERAL.—The maximum amount al-
lowed as a deduction under subsection (a) to a tax-
payer for the taxable year shall not exceed $100,000
($50,000 in the case of a married individual filing
a separate return).
‘‘(2) CONTROLLED GROUPS.—
‘‘(A) IN GENERAL.—All corporations which
are members of the same parent-subsidiary con-
trolled group shall be treated as 1 corporation
for purposes of paragraph (1), and the dollar
amount applicable under paragraph (1) shall be
allocated among the members of such group in
proportion to their respective purchases of stock
during the taxable year for which the deduction
is allowable by this section.
‘‘(B) PARENT-SUBSIDIARY
CONTROLLED
GROUP.—For purposes of subparagraph (A),
the term ‘parent-subsidiary controlled group’
means any controlled group of corporations as
defined in section 1563(a)(1), except that—
‘‘(i) ‘more than 50 percent’ shall be
substituted for ‘at least 80 percent’ each
place it appears in section 1563(a)(1), and
‘‘(ii) section 1563(a)(4) shall not
apply.
‘‘(3) ALLOCATION
OF
DEDUCTION
WHERE
STOCK
PURCHASED
EXCEEDS
LIMITATION.—If the
amount of stock purchased by any person exceeds
the limitation under this subsection with respect to
such person, the deduction allowed under this sec-
tion shall be allocated pro rata among the stock so
purchased in accordance with the purchase price per
share.
‘‘(c) QUALIFIED
COMMERCIAL
SPACE
CENTER
STOCK.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified Com-
mercial Space Center stock’ means any common
stock in a C corporation if—
‘‘(A) as of the date of issuance, such cor-
poration is a qualified Commercial Space Cen-
ter business (or, in the case of a new corpora-
tion, is being organized for purposes of being a
qualified Commercial Space Center business),
‘‘(B) such stock is acquired by the tax-
payer at its original issue (directly or through
an underwriter)—
‘‘(i) in exchange for money or other
property (not including stock), or
‘‘(ii) as compensation for services pro-
vided to such corporation (other than serv-
ices performed as an underwriter of such
stock), and
‘‘(C) the proceeds of such issue are used
by such issuer during the 36-month period be-
ginning on the date of issuance to establish or
operate a Commercial Space Center or for oper-
ations within such a Center.
‘‘(2) QUALIFIED COMMERCIAL SPACE CENTER
BUSINESS.—The term ‘qualified Commercial Space
Center business’ means any domestic corporation
which, at the time of issuance of the stock involved,
is conducting a business at least 75 percent of the
gross receipts of which for the taxable year are at-
tributable to—
‘‘(A) operations within a Commercial
Space Center, or
‘‘(B) the establishment or operation of a
Commercial Space Center,
in the active conduct of a trade or business.
‘‘(3) COMMERCIAL SPACE CENTER.—The term
‘Commercial Space Center’ means any facility des-
ignated as such for purposes of this section by the
Secretary of Transportation.
‘‘(4) CERTAIN PURCHASES BY CORPORATION OF
ITS OWN STOCK.—A rule similar to the rule of sec-
tion 1202(c)(3) shall apply for purposes of this sub-
section.
‘‘(d) DISPOSITIONS OF STOCK.—
‘‘(1) BASIS REDUCTION.—For purposes of this
title, the basis of any qualified Commercial Space
Center stock shall be reduced by the amount of the
deduction allowed under this section with respect to
such stock.
‘‘(2) DEDUCTION
RECAPTURED
AS
ORDINARY
INCOME.—For purposes of section 1245—
‘‘(A) any stock the basis of which is re-
duced under paragraph (1) (and any other
property the basis of which is determined in
whole or in part by reference to the adjusted
whole or in part by reference to the ad-
justed basis of such stock) before the end
of the 3-year period beginning on the date
such stock was purchased by the taxpayer,
and
‘‘(ii) section 1245(a) applies to such
disposition by reason of paragraph (2),
then the tax imposed by this chapter for the
taxable year in which such disposition occurs
shall be increased by the Commercial Space
Center stock recapture amount.
‘‘(B) COMMERCIAL SPACE CENTER STOCK
RECAPTURE
AMOUNT.—For purposes of sub-
paragraph (A), the term ‘Commercial Space
Center stock recapture amount’ means an
amount equal to the amount of interest (deter-
mined at the underpayment rate applicable
under section 6621) which would accrue—
‘‘(i) during the period beginning on
the date such stock was purchased by the
taxpayer and ending on the date such
stock was disposed of by the taxpayer,
‘‘(ii) on an amount equal to the aggre-
gate decrease in tax of the taxpayer result-
ing from the deduction allowed under this
section with respect to the stock so dis-
posed of.
‘‘(C) SPECIAL RULE.—Any increase in tax
under subparagraph (A) shall not be treated as
a tax imposed by this chapter for purposes of—
‘‘(i) determining the amount of any
credit allowable under this chapter, and
‘‘(ii) determining the amount of the
tax imposed by section 55.
‘‘(e) TREATMENT WHERE ISSUER CEASES TO BE
QUALIFIED.—
‘‘(1) IN GENERAL.—If, during the 5-year period
beginning on the date qualified Commercial Space
Center stock was purchased by the taxpayer, the is-
suer of such stock ceases to meet the requirements
of subsection (c)(2)(A), then notwithstanding any
provision of this subtitle other than paragraph (2),
the taxpayer shall be treated for purposes of sub-
section (d) as disposing of such stock (and any other
property the basis of which is determined in whole
or in part by reference to the adjusted basis of such
stock) during the taxable year during which such
cessation occurs at its fair market value as of the
1st day of such taxable year.
‘‘(2) EXCEPTION FOR SMALL INVESTORS.—In
the case of an individual, paragraph (1) shall not
apply if the aggregate of the deductions allowed to
the taxpayer under this section with respect to stock
issued by such issuer for all taxable years ending be-
fore the issuer first ceased to meet the requirements
of subsection (c)(2)(A) does not exceed $5,000
($10,000 in the case of a joint return).
‘‘(f) SPECIAL RULES.—
‘‘(1) AMOUNT PAID AFTER CLOSE OF TAXABLE
YEAR.—An amount paid after the close of the tax-
able year for the purchase of Commercial Space
Center stock shall be treated for purposes of sub-
section (a) as paid during such year if—
‘‘(A) such amount is so paid not later than
the time prescribed by law for filing the return
for such taxable year (including extensions
thereof), and
‘‘(B) the taxpayer was under a binding
contract as of the close of such taxable year to
purchase such stock.
‘‘(2) LIMITATION
ON
AMOUNT
OF
DEDUC-
TION.—If—
‘‘(A) any Commercial Space Center stock
is issued in exchange for property (other than
money or stock),
‘‘(B) the basis of such stock in the hands
of the taxpayer is determined by reference to
the basis of such property, and
‘‘(C) the adjusted basis (for determining
gain) of such property immediately before the
exchange exceeded its fair market value at such
time,
then the deduction under this section, and such ad-
justed basis, shall both be reduced by the excess de-
scribed in subparagraph (C).
‘‘(3) APPLICATION
OF
LIMITS
TO
PARTNER-
SHIPS AND S CORPORATIONS.—In the case of a part-
nership or an S corporation, the limitations under
subsection (b) shall apply at the partner and share-
holder level and shall not apply at the partnership
or corporation level.
‘‘(g) APPLICATION OF SECTION.—This section shall
apply only to stock acquired after December 31, 1995, and
before January 1, 2011.’’
(b) TECHNICAL AMENDMENT.—Subsection (a) of
section 1016 of such Code (relating to adjustments to
basis) is amended by striking ‘‘and’’ at the end of para-
graph (24), by striking the period at the end of paragraph
(25) and inserting ‘‘, and’’, and by adding at the end the
following new paragraph:
‘‘(26) to the extent provided in section 198(d),
in the case of stock with respect to which a deduc-
tion was allowed under section 198.’’
(c) CLERICAL AMENDMENT.—The table of sections
for part VI of subchapter B of chapter 1 of such Code
is amended by adding at the end the following new item:
‘‘Sec. 198. Deduction for purchase of Commercial Space Center
stock.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 1995.
SEC. 3. EXCLUSION OF GAIN ON SALE OF STOCK OF COR-
PORATION 
SUBSTANTIALLY 
ENGAGED 
IN
SPACE-RELATED ACTIVITIES.
(a) IN GENERAL.—Part I of subchapter P of chapter
1 of the Internal Revenue Code of 1986 (relating to treat-
ment of capital gains) is amended by adding at the end
the following new section:
‘‘SEC. 1203. GAIN ON SPACE CORPORATION STOCK.
‘‘(a) GENERAL RULE.—Gross income shall not in-
clude gain on the sale or exchange of qualified space cor-
poration stock held for more than 5 years.
‘‘(b) LIMITATIONS.—