SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Telecommunications 
Ownership Diversification Act of 2003’’. 
SEC. 2. FINDINGS AND PURPOSES. 
(a) FINDINGS.—Congress makes the following find-
ings: 
(1) Current trends in the telecommunications 
industry show that there is increasing convergence 
among various media, including broadcasting, cable 
television, and Internet-based businesses, that pro-
vide news, information, and entertainment. 
(2) This convergence will continue, and there-
fore, diversifying the ownership of telecommuni-
cations facilities remains a preeminent public inter-
est concern that should be reflected in both tele-
communications and tax policy. 
(3) A market-based, voluntary system of invest-
ment incentives is an effective, lawful, and economi-
cally sound means of facilitating entry and diver-
sification of ownership in the telecommunications in-
dustry. 
(4) Opportunities for new entrants to partici-
pate and grow in the telecommunications industry 
have substantially decreased since the end of the 
Federal Communications Commission’s tax certifi-
cate policy in 1995, particularly in light of the avail-
ability of tax-free like-kind exchanges, despite the 
most robust period of transfers of radio and tele-
vision stations in history. During this time, busi-
nesses owned or controlled by socially disadvantaged 
individuals, including, but not limited to, members of 
minority groups and women, have continued to be 
underrepresented as owners of telecommunications 
facilities. 
(5) Businesses owned or controlled by socially 
disadvantaged individuals are, and historically have 
been, economically disadvantaged in the tele-
communications industry. For these businesses, ac-
cess to and cost of capital are and have been sub-
stantial obstacles to new entry and growth. Con-
sequently, diversification of ownership in the tele-
communications industry has been limited. 
(6) Telecommunications facilities owned by new 
entrants may not be attractive to investors because 
their start-up costs are often high, their revenue 
streams are uncertain, and their profit margins are 
unknown. 
(7) It is consistent with the public interest and 
with the pro-competition policies of the Tele-
communications Act of 1996 to provide incentives 
that will facilitate investments in, and acquisition of,
telecommunications facilities by economically and so-
cially disadvantaged businesses, thereby diversifying 
the ownership of telecommunications facilities. 
(8) Increased participation by economically and 
socially disadvantaged businesses in the ownership of 
telecommunications facilities will enhance competi-
tion in the telecommunications industry. Permitting 
sellers of telecommunications facilities to defer tax-
ation of gains from transactions involving economi-
cally and socially disadvantaged businesses, or cer-
tain small businesses supported by investments from 
the Telecommunications Development Fund that 
provides capital for such businesses, will further the 
development of a competitive and diverse United 
States telecommunications industry without govern-
mental intrusion in private investment decisions. 
(9) The public interest would not be served by 
attempts to diversify the ownership of telecommuni-
cations businesses through any approach that would 
involve the use of mandated set-asides or quotas. 
(10) Today, the telecommunications industry is 
struggling to survive one of its most troubling times. 
Therefore, facilitating voluntary, pro-competitive 
transactions that will promote ownership of tele-
communications facilities by economically and so-
cially disadvantaged businesses and certain small 
businesses will aid in providing the investment and 
capital that is crucial to this sector. 
(b) PURPOSE.—The purpose of this Act is to facili-
tate voluntary, pro-competitive transactions that will pro-
mote ownership of telecommunications facilities by eco-
nomically and socially disadvantaged businesses and cer-
tain small businesses. 
SEC. 3. NONRECOGNITION OF GAIN ON CERTAIN QUALI-
FIED 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 tele-
communications businesses.
‘‘SEC. 1071. NONRECOGNITION OF GAIN ON CERTAIN SALES 
OF TELECOMMUNICATIONS BUSINESSES. 
‘‘(a) IN GENERAL.—For purposes of this subtitle, if 
a taxpayer elects the application of this section to a quali-
fied telecommunications sale, such sale shall be treated as 
an involuntary conversion of property within the meaning 
of section 1033.
‘‘(b) LIMITATION ON AMOUNT OF GAIN ON WHICH 
TAX MAY BE DEFERRED.—
‘‘(1) IN GENERAL.—The amount of gain on any 
qualified telecommunications sale which is not recog-
nized by reason of this section—
‘‘(A) shall not exceed $250,000,000 per 
sale, and 
‘‘(B) shall not exceed 1⁄3 of such dollar 
amount per taxable year. 
‘‘(2) 
CARRYFORWARDS
OF
UNUSED 
AMOUNTS.—If the amount of gain on any qualified 
telecommunications sale which is not recognized by 
reason of this section exceeds the limitation imposed 
by paragraph (1)(B) for the taxable year, such ex-
cess shall be carried to the succeeding taxable year 
and added to the amount allowable under this sec-
tion for such taxable year. 
‘‘(c) QUALIFIED TELECOMMUNICATIONS SALE.—For 
purposes of this section, the term ‘qualified telecommuni-
cations sale’ means any sale to an eligible purchaser of—
‘‘(1) the assets of a telecommunications busi-
ness, or 
‘‘(2) stock in a corporation if, immediately after 
such sale—
‘‘(A) the eligible purchaser 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, or 
‘‘(3) an interest in a partnership if, immediately 
after such sale—
‘‘(A) the eligible purchaser owns a partner-
ship interest possessing—
‘‘(i) at least 80 percent of the total 
combined voting power of all classes of 
partnership interests entitled to vote, 
‘‘(ii) control over the management of 
the partnership, 
‘‘(iii) at least 80 percent of the capital 
interests of the partnership, and 
‘‘(iv) a distributive share of at least 
80 percent of each item of the partner-
ship’s income, gain, loss, deduction or 
credit, and 
‘‘(B) substantially all of the assets of such 
partnership are assets of 1 or more tele-
communications businesses. 
‘‘(d) SPECIAL RULES.—
‘‘(1) IN GENERAL.—In applying section 1033 
for purposes of subsection (a), stock of a corporation 
or an interest in a partnership operating a tele-
communications business, whether or not rep-
resenting control of such corporation or partnership, 
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 
under section 1033(a)(2)(A) in excess of the 
amount required to be recognized by reason of 
subsection (b), 
then the amount of gain described in this subpara-
graph shall not be recognized to the extent that the 
taxpayer elects to reduce the basis of depreciable 
property (within the meaning of 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 determined under 
regulations prescribed by the Secretary. 
‘‘(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). 
‘‘(e) RECAPTURE
OF
TAX
BENEFIT
IF
TELE-
COMMUNICATIONS BUSINESS RESOLD WITHIN 3 YEARS, 
ETC.—
‘‘(1) IN GENERAL.—If, within 3 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 an amount equal 
to the product of—
‘‘(A) the highest marginal rate of income 
tax imposed on corporations under section 11, 
and 
‘‘(B) the lesser of—
‘‘(i) the consideration furnished by the 
purchaser in such sale, or 
‘‘(ii) the dollar amount specified in 
subsection (b)(1)(A).
‘‘(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, stock, or partnership interest 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 paragraph (2) 
or (3) of subsection (c)—
‘‘(i) any sale or other disposition of a 
telecommunications business by the cor-
poration or partnership referred to in such 
subsection, or
‘‘(ii) any other transaction which re-
sults in the eligible purchaser ceasing to be 
an eligible purchaser, or ceasing to have
control (as defined in subsection (c)(2)(A)) 
of such corporation or ownership of an in-
terest in such partnership sufficient to sat-
isfy 
the 
requirements 
of 
subsection 
(c)(3)(A). 
‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) ELIGIBLE PURCHASER.—The term ‘eligible 
purchaser’ means—
‘‘(A) any economically and socially dis-
advantaged business, or 
‘‘(B) any corporation or partnership if im-
mediately following the purchase—
‘‘(i) substantially all the assets of 
such corporation or partnership are assets 
of 1 or more telecommunications busi-
nesses, and 
‘‘(ii) the Telecommunications Develop-
ment Fund established under section 714 
of the Communications Act of 1934 (47 
U.S.C. 614) or any wholly-owned affiliate 
of such Fund owns at least 5 percent of—
‘‘(I) the stock in such corpora-
tion, 
‘‘(II) the partnership interest in 
such partnership, or 
‘‘(III) the indebtedness convert-
ible into such stock or partnership in-
terest. 
‘‘(2) ECONOMICALLY AND SOCIALLY DISADVAN-
TAGED BUSINESS.—The term ‘economically and so-
cially disadvantaged business’ means a person which 
is designated by the Secretary as an economically 
and socially disadvantaged business based on a de-
termination that such person—
‘‘(A) meets the control requirements of 
paragraph (6), 
‘‘(B) will be a telecommunications business 
after the purchase for which the eligibility de-
termination is sought, and 
‘‘(C) before the purchase for which the eli-
gibility determination is sought does not have—
‘‘(i) attributable ownership interest in 
television broadcast stations having an ag-
gregate national audience reach of more 
than 5 percent as defined by the Federal 
Communications Commission under section