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 en-
gaged 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 secu-
rities of business entities engaged in Iran or Sudan dis-
couraged activities. 
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 ‘‘Enable Divestment 
from Sudan and Iran Act of 2009’’. 
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SEC. 2. ROLLOVER OF GAIN FROM DIVESTING CERTAIN 
QUALIFIED SECURITIES OF BUSINESS ENTI-
TIES ENGAGED IN DISCOURAGED ACTIVITIES 
IN IRAN OR SUDAN. 
(a) IN GENERAL.—Part III of subchapter O of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
common nontaxable exchanges) is amended by adding at 
the end the following new section: 
‘‘SEC. 1046. ROLLOVER OF GAIN FROM DIVESTING CERTAIN 
QUALIFIED SECURITIES OF BUSINESS ENTI-
TIES ENGAGED IN DISCOURAGED ACTIVITIES 
IN IRAN OR SUDAN. 
‘‘(a) NONRECOGNITION OF GAIN.— 
‘‘(1) IN GENERAL.—In the case of any sale of 
any qualified security held by a taxpayer with re-
spect to which such taxpayer elects the application 
of this section, in any business entity that is en-
gaged in an Iran discouraged activity or a Sudan 
discouraged activity, gain from such sale shall be 
recognized only to the extent that the amount real-
ized on such sale exceeds— 
‘‘(A) the cost of any qualified replacement 
property purchased by the taxpayer during the 
30-day period beginning on the date of such 
sale, reduced by 
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‘‘(B) any portion of such cost previously 
taken into account under this section. 
‘‘(2) 
EXCEPTION
FOR
ORDINARY
INCOME 
GAIN.—This section shall not apply to any gain 
which is treated as ordinary income for purposes of 
this title. 
‘‘(3) EXCEPTION WHERE TAXPAYER OWNS CON-
TROLLING INTEREST IN THE BUSINESS ENTITY.— 
‘‘(A) IN
GENERAL.—Paragraph (1) shall 
not apply to any sale if, immediately before 
such sale, the taxpayer owns a controlling inter-
est in the business entity that is engaged in an 
Iran discouraged activity or a Sudan discour-
aged activity. 
‘‘(B) CONTROLLING INTEREST.—For pur-
poses of subparagraph (A), the term ‘control-
ling interest’ means direct or indirect ownership 
of at least 50 percent of the total voting power 
and value of all classes of stock of a corpora-
tion. For purposes of the preceding sentence, 
the rules of paragraphs (1) and (5) of section 
267(c) shall apply. 
‘‘(C) AGGREGATION RULE.—For purposes 
of this paragraph, all members of the same con-
trolled group of corporations (within the mean-
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ing of section 267(f)) and all persons under 
common control (within the meaning of section 
52(b) but determined by treating an interest of 
more than 50 percent as a controlling interest) 
shall be treated as 1 person. 
‘‘(b) DEFINITIONS AND SPECIAL RULES RELATING 
TO SECURITIES
AND REPLACEMENT PROPERTY.—For 
purposes of this section— 
‘‘(1) QUALIFIED SECURITY.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
security’ means any security held by a taxpayer 
in any business entity that is engaged in an 
Iran discouraged activity or a Sudan discour-
aged activity. 
‘‘(B) EXCEPTION.—Such term shall not in-
clude any security purchased or otherwise ac-
quired after the date of the enactment of this 
section which, at the time of such purchase or 
acquisition, was issued by a business entity 
then engaged in an Iran discouraged activity or 
a Sudan discouraged activity. 
‘‘(C) SECURITY DEFINED.—The term ‘se-
curity’ has the meaning given such term by sec-
tion 165(g)(2). 
‘‘(2) QUALIFIED REPLACEMENT PROPERTY.— 
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‘‘(A) IN
GENERAL.—The term ‘qualified 
replacement property’ means any security of a 
business entity that, on the date of purchase by 
the taxpayer— 
‘‘(i) is not engaged in an Iran discour-
aged activity or a Sudan discouraged activ-
ity on such date, 
‘‘(ii) is not a member of an expanded 
affiliated group, any member of which is 
engaged in an Iran discouraged activity or 
a Sudan discouraged activity on such date, 
and 
‘‘(iii) meets the requirements of sub-
paragraph (B). 
‘‘(B) REPLACEMENT PROPERTY.—Property 
meets the requirements of this paragraph if, 
with respect to the sale of any security— 
‘‘(i) except as provided in clause (ii), 
in the case that the security is a share of 
stock in a corporation, the replacement 
property is a share of stock in a corpora-
tion, 
‘‘(ii) in the case that the security is a 
share of stock of a regulated investment 
company, real estate investment trust, 
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hedge fund, investment partnership, or 
similar business entity, the replacement 
property is a share of stock in a regulated 
investment company, real estate invest-
ment trust, hedge fund, investment part-
nership, or similar business entity, 
‘‘(iii) in the case that the security is 
a right to subscribe for, or to receive, a 
share of stock in a corporation, the re-
placement property is a right to subscribe 
for, or to receive, a share of stock in a cor-
poration, and 
‘‘(iv) in the case that the security is 
a bond, debenture, note, or certificate, or 
other evidence of indebtedness issued by a 
corporation, with interest coupons or in 
registered form, the replacement property 
is a bond, debenture, note, or certificate, 
or other evidence of indebtedness issued by 
a corporation, with interest coupons or in 
registered form. 
‘‘(C) DEEMED INVESTMENT IF INVESTING 
IN
ENTITIES
ENGAGED
IN
DISCOURAGED
AC-
TIVITIES.—Any regulated investment company, 
real estate investment trust, hedge fund, invest-
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due diligence to avoid making such invest-
ments. It is our policy to divest on or be-
fore December 31, 2010, from business en-
tities engaged in Iran discouraged activi-
ties and Sudan discouraged activities.’. 
‘‘(ii) NOT QUALIFIED SECURITY.—If a 
business entity described in clause (iii) has 
made the declaration specified in clause (i), 
then from the time of such declaration an 
interest in such business entity shall not be 
treated as a qualified security. 
‘‘(iii) 
BUSINESS
ENTITY
DE-
SCRIBED.—A business entity described in 
this clause is a regulated investment com-
pany, real estate investment trust, hedge 
fund, investment partnership, or similar 
business entity. 
‘‘(E) EXPANDED
AFFILIATED
GROUP.— 
The term ‘expanded affiliated group’ means an 
affiliated group as defined in section 1504(a), 
determined— 
‘‘(i) by substituting ‘more than 50 
percent’ for ‘at least 80 percent’ each place 
it appears, and 
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‘‘(ii) without regard to paragraphs (2) 
and (4) of section 1504(b). 
‘‘(F) BASIS ADJUSTMENTS.—If gain from 
any sale is not recognized by reason of sub-
section (a), such gain shall be applied to reduce 
(in the order acquired) the basis for deter-
mining gain or loss of any qualified replacement 
property which is purchased by the taxpayer 
during the 30-day period described in sub-
section (a). 
‘‘(G) HOLDING PERIOD.—For purposes of 
determining the period for which the taxpayer 
has held qualified replacement property the ac-
quisition of which resulted in the nonrecognition 
under subsection (a) of any part of the gain re-
alized on the sale of a qualified security, there 
shall be included the period for which such 
qualified security had been held by the tax-
payer. 
‘‘(3) SPECIAL RULE FOR SECURITIES OF CER-
TAIN ENTITIES.— 
‘‘(A) IN GENERAL.—For any business enti-
ty described in subparagraph (C), a security in 
such business entity shall be treated as quali-
fied replacement property if the business entity 
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has made the following declaration: ‘It is our 
policy not to make investments in any person 
having an investment in, or carrying on a trade 
or business (within the meaning of section 162) 
in or with, Iran and Sudan. This policy may or 
may not include investments concerning the 
provision of food, medicine, humanitarian serv-
ices in or to Iran or Sudan or investments con-
cerning marginalized areas of Sudan (as de-
fined in section 2 of the Sudan Accountability 
and Divestment Act of 2007 (121 Stat. 
2518)).’. 
‘‘(B) NOT
QUALIFIED
SECURITY.—If a 
business entity described in subparagraph (C) 
has made the declaration specified in subpara-
graph (A), then from the time of such declara-
tion an interest in such business entity shall not 
be treated as a qualified security. 
‘‘(C) BUSINESS
ENTITY
DESCRIBED.—A 
business entity described in this subparagraph 
is a regulated investment company, real estate 
investment trust, hedge fund, investment part-
nership, or similar business entity. 
‘‘(D) CERTAIN BUSINESS ENTITIES AS RE-
PLACEMENT PROPERTY.—A business entity de-
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scribed in subparagraph (C) making the dec-
laration described in subparagraph (A) may 
qualify as replacement property if it has adopt-
ed restrictions on investment in persons that in-
vest in or carrying on a trade or business (with-
in the meaning of section 162) in or with coun-
tries other than Iran and Sudan that are des-
ignated as state sponsors of terrorism under 
section 6(j) of the Export Administration Act of 
1979, section 40 of the Arms Export Control 
Act, or section 620A of the Foreign Assistance 
Act of 1961. 
‘‘(4) BUSINESS
ENTITY.—The term ‘business 
entity’ means any corporation, limited liability part-
nership, limited liability company, or any other busi-
ness entity conducting business activities in which 
the taxpayer has purchased or can purchase securi-
ties. 
‘‘(c) DEFINITIONS AND RULES RELATING TO SUDAN 
DISCOURAGED ACTIVITY.—For purposes of this section, 
the term ‘Sudan discouraged activity’ means an invest-
ment in any business operation described in section 3(d) 
of the Sudan Accountability and Divestment Act of 2007 
(121 Stat. 2518). 
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‘‘(d) DEFINITIONS AND RULES RELATING TO IRAN 
DISCOURAGED ACTIVITIES.—For purposes of this sec-
tion— 
‘‘(1) IRAN DISCOURAGED ACTIVITY.—The term 
‘Iran discouraged activity’ means— 
‘‘(A) an investment of $20,000,000 or 
more— 
‘‘(i) in the energy sector of Iran; or 
‘‘(ii) in a person that provides oil or 
liquefied natural gas tankers, or products 
used to construct or maintain pipelines 
used to transport oil or liquefied natural 
gas, for the energy sector in Iran; 
‘‘(B) an extension of $20,000,000 or more 
in credit to another person, for 45 days or 
more, if that person will use the credit to invest 
in the energy sector in Iran; 
‘‘(C) except as provided in section 5(f) of 
the Iran Sanctions Act of 1996 (50 U.S.C. 
1701 note), an investment of $20,000,000 or 
more (or any combination of investments of at 
least $5,000,000 each, which in the aggregate 
equals or exceeds $20,000,000 in any 12-month 
period), that directly and significantly contrib-
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uted to the enhancement of Iran’s ability to de-
velop petroleum resources of Iran; 
‘‘(D) except as provided in section 5(f) of 
the Iran Sanctions Act of 1996 (50 U.S.C. 
1701 note), the sale, lease, or provision to Iran 
of any goods, services, technology, information, 
or support that would allow Iran to maintain or 
expand its domestic production of refined petro-
leum resources, including any assistance in re-
finery construction, modernization, or repair; or 
‘‘(E) except as provided in section 5(f) of 
the Iran Sanctions Act of 1996 (50 U.S.C. 
1701 note), providing Iran with refined petro-
leum resources or engaging in any activity that 
could contribute to the enhancement of Iran’s 
ability to import refined petroleum resources, 
including— 
‘‘(i) providing ships or shipping serv-
ices to deliver refined petroleum resources 
to Iran; 
‘‘(ii) underwriting or otherwise pro-
viding insurance or reinsurance for such 
activity; or 
‘‘(iii) financing or brokering such ac-
tivity. 
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‘‘(2) INVESTMENT.—The ‘investment’ of assets, 
with respect to a State or local government, in-
cludes— 
‘‘(A) a commitment or contribution of as-
sets; 
‘‘(B) a loan or other extension of credit; or 
‘‘(C) the entry into or renewal of a con-
tract for goods or services. 
‘‘(3) ENERGY SECTOR.—The term ‘energy sec-
tor’ refers to activities to develop petroleum or nat-
ural gas resources or nuclear power. 
‘‘(4) IRAN.—The term ‘Iran’ includes any agen-
cy or instrumentality of Iran. 
‘‘(e) DOING BUSINESS WITH TERRORISTS.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion— 
‘‘(A) A business entity has engaged in Iran 
discouraged activities if it conducts business 
with or makes any charitable donation to any 
Iranian person designated as a terrorist or to 
any foreign terrorist organization. 
‘‘(B) A business entity has engaged in 
Sudan discouraged activities if it conducts busi-
ness with or makes any charitable donation to 
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any Sudanese person designated as a terrorist 
or to any foreign terrorist organization. 
‘‘(2) TERRORIST.—A person is designated as a 
terrorist for purposes of paragraph (1) if such per-
son is designated or otherwise individually identified 
in or pursuant to an Executive Order which is re-
lated to terrorism and issued under the authority of 
the International Emergency Economic Powers Act 
or section 5 of the United Nations Participation Act 
of 1945 for the purpose of imposing on such organi-
zation an economic or other sanction. 
‘‘(3) FOREIGN
TERRORIST
ORGANIZATION.— 
For purposes of paragraph (1), the term ‘foreign 
terrorist organization’ means an organization des-
ignated under section 219 of the Immigration and 
Nationality Act (8 U.S.C. 1189) as a foreign ter-
rorist organization. 
‘‘(f) IDENTIFICATION OF BUSINESS ENTITIES EN-
GAGING IN IRAN DISCOURAGED ACTIVITIES OR SUDAN 
DISCOURAGED ACTIVITIES.— 
‘‘(1) PUBLICATION OF LIST.—For purposes of 
this section, the Secretary shall publish and update 
at least every six months a list of business entities 
engaging in any Sudan discouraged activities or Iran 
discouraged activities, or both. 
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‘‘(2) REGULATIONS.—The Secretary shall issue 
regulations defining how a business entity shall not 
be deemed to be engaged in an Iran discouraged ac-
tivity or Sudan discouraged activity, if— 
‘‘(A) with regard to activities on the date 
this section becomes effective, the business enti-
ty limits its activity to continuing existing con-
tracts, without extension or expansion (except 
that an investment (as defined in section 14 of 
the Iran Sanctions Act of 1996) that would 
subject a business entity to sanctions under sec-
tion 5 of the Iran Sanctions Act of 1996 shall 
be considered an Iran discouraged activity, not-
withstanding contracts entered into prior to the 
effective date of this section), and 
‘‘(B) with regard to any Iran discouraged 
activity or Sudan discouraged activity carried 
on under contracts entered into or expanded 
after the effective date of this section, the con-
tract was entered into at a time when the busi-
ness entity did not own or control the sub-
sidiary business entity, and after acquiring such 
ownership or control the business entity has not 
extended or expanded or renewed such contract. 
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‘‘(3) TAXPAYER SELF-HELP.—Until such time 
as the Secretary publishes a list of those engaging 
in Iran discouraged activities or Sudan discouraged 
activities or if the Secretary fails to update that list 
as required in paragraph (1), the taxpayer may de-
termine, using credible, publicly available informa-
tion, which business entities engage in an Iran dis-
couraged activity or a Sudan discouraged activity. 
‘‘(g) IMPROVEMENT IN THE ACTIONS OF THE GOV-
ERNMENT OF THE SUDAN.—Effective on the date when 
the President certifies under a section 12 of the Sudan 
Accountability and Divestment Act of 2007 (121 Stat. 
2523), subsection (a) shall not apply to any Sudan dis-
couraged activity after such date. 
‘‘(h) IMPROVEMENT IN THE ACTIONS OF THE GOV-
ERNMENT OF IRAN.— 
‘‘(1) 
TERMINATION
OF
NONRECOGNITION 
TREATMENT.—Effective on the date when the re-
quirements described in paragraph (2) are met, sub-
section (a) shall not apply to any Iran discouraged 
activity after such date. 
‘‘(2) REQUIREMENTS.—The requirements de-
scribed in this paragraph are— 
‘‘(A) a declaration by the President which 
states that, in the opinion of the President, 
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Iran is no longer engaging in efforts to develop 
or retain weapons of mass destruction, and has 
not developed and is not developing the capacity 
to enrich or reprocess uranium or plutonium, 
and 
‘‘(B) a determination by the Secretary of 
State that Iran should no longer be listed as a 
state sponsor of acts of international terrorism 
pursuant to section 6(j) of the Export Adminis-
tration Act of 1979, section 620A of the For-
eign Assistance Act of 1961, section 40 of the 
Arms Export Control Act, or any other provi-
sion of law.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for part III of subchapter O of chapter 1 of such Code 
is amended by adding at the end the following new item: 
‘‘Sec. 1046. Rollover of gain from divesting certain qualified securities of busi-
ness entities engaged in discouraged activities in Iran or 
Sudan.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to with respect to sales of securities 
after the date of the enactment of this Act. 
Æ 
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