I
103D CONGRESS
1ST SESSION
H. R. 2603
To amend the Internal Revenue Code of 1986 to provide transition relief
for nonprofit student loan funding corporations.
IN THE HOUSE OF REPRESENTATIVES
JULY 1, 1993
Mr. NEAL of Massachusetts (for himself and Mr. MOAKLEY) 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
transition relief for nonprofit student loan funding
corporations.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. ELECTION TO CEASE STATUS AS QUALIFIED
SCHOLARSHIP FUNDING CORPORATION.
‘‘(a) IN GENERAL.—Subsection (d) of section 150 of
the Internal Revenue Code of 1986 (relating to definitions
and special rules) is amended by adding at the end thereof
the following new paragraph:
‘‘(3) ELECTION TO CEASE STATUS AS QUALI-
FIED SCHOLARSHIP FUNDING CORPORATION.—
‘‘(A) IN GENERAL.—Any bond outstanding
on the date of the issuer’s election under this
paragraph (and any bond issued to refund such
a bond) shall not fail—
‘‘(i) to be qualified scholarship fund-
ing bond; or
‘‘(ii) to be a qualified student loan
bond—
(or similar provisions of prior law) merely be-
cause the issuer ceases to be described in para-
graph (2) if the issuer meets the requirements
of subparagraphs (B) and (C), or engages in a
transaction described in subparagraph (B), of
this paragraph.
‘‘(B) ASSETS AND LIABILITIES OF ISSUER
TRANSFERRED TO TAXABLE SUBSIDIARY.—The
requirements of this subparagraph are met by
an issuer if—
‘‘(i) all of the student loan notes of
the issuer are transferred to another cor-
poration within a reasonable period after
the election is made under this paragraph;
‘‘(ii) such other corporation assumes
or otherwise provides for the payment of
all of the qualified scholarship funding
bond indebtedness of the issuer within a
reasonable period after the election is
made under this paragraph;
‘‘(iii) to the extent permitted by law,
such other corporation assumes all of the
responsibilities, and succeeds to all of the
rights, of the issuer under the issuer’s
agreements with the Secretary of Edu-
cation in respect of student loans;
‘‘(iv) immediately after such transfer,
the issuer holds all of the stock in such
other corporation; and
‘‘(v) such other corporation is not ex-
empt from tax under this chapter.
‘‘(C) ISSUER TO OPERATE AS ORGANIZA-
TION DESCRIBED IN SECTION 501(c)(3)—The re-
quirements of this subparagraph are met by an
issuer if, after the transfer referred to in sub-
paragraph (B), the issuer is described in section
501(c)(3) and exempt from tax under section
501(a).
‘‘(D) COORDINATION
WITH
TAX
ON
EX-
CESS
BUSINESS
HOLDINGS.—For purposes of
section 4943, the corporation to which the is-
suer makes the transfer referred to in subpara-
graph (B) shall be treated as a functionally re-
lated business (as defined in section 4942(j)(4))
with respect to the issuer so long as more than
50 percent of the gross income of such corpora-
tion is derived from, or more than 50 percent
of the assets (by value) of such corporation con-
sists of, student loan notes incurred under the
Higher Education Act of 1965.
‘‘(E) ELECTION.—An election under this
paragraph may be revoked only with the con-
sent of the Secretary.’’
(b) EFFECTIVE DATE.—the amendment made by this
section shall take effect on the date of the enactment of
this Act.
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