1046 of the Internal Revenue Code of 
1986, and to use due diligence to avoid 
making such investments. It is our policy 
to divest on or before December 31, 2012, 
from business entities engaged in Iran dis-
couraged 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— 
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‘‘(i) the business entity 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. This policy may or 
may not include investments concerning 
the provision of food, medicine, humani-
tarian services in or to Iran.’, and 
‘‘(ii) the business entity has adopted 
restrictions on investment in persons that 
invest in or carrying on a trade or business 
(within the meaning of section 162) in or 
with countries other than Iran that have 
been determined by the Secretary of State 
to have repeatedly provided support acts of 
international terrorism pursuant to— 
‘‘(I) section 6(j)(1)(A) of the Ex-
port Administration Act of 1979 (50 
U.S.C. App. 2405(j)(1)(A)) (as in ef-
fect pursuant to the International 
Emergency Economic Powers Act (50 
U.S.C. 1701 et seq.)) (or any suc-
cessor thereto); 
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‘‘(II) section 40(d) of the Arms 
Export 
Control 
Act 
(22 
U.S.C. 
2780(d)); or 
‘‘(III) section 620A(a) of the 
Foreign Assistance Act of 1961 (22 
U.S.C. 2371(a)). 
‘‘(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. 
‘‘(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 IRAN 
DISCOURAGED ACTIVITIES.—For purposes of this section, 
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the term ‘Iran discouraged activity’ means any activity de-
scribed in section 5(a) of the Iran Sanctions Act of 1996 
(Public Law 104–172; 50 U.S.C. 1701 note) with respect 
to which sanctions described in section 6(a) of such Act 
may be imposed. 
‘‘(d) DOING BUSINESS WITH TERRORISTS.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, a business entity has engaged in Iran discour-
aged activities if it conducts business with or makes 
any charitable donation to any Iranian person des-
ignated as a terrorist or to any foreign terrorist or-
ganization. 
‘‘(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 
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Nationality Act (8 U.S.C. 1189) as a foreign ter-
rorist organization. 
‘‘(e) IDENTIFICATION OF BUSINESS ENTITIES EN-
GAGING IN IRAN 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 Iran discouraged activity. 
‘‘(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, 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 carried on under contracts entered into 
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or expanded after the effective date of this sec-
tion, the contract was entered into at a time 
when the business entity did not own or control 
the subsidiary business entity, and after acquir-
ing such ownership or control the business enti-
ty has not extended or expanded or renewed 
such contract. 
‘‘(3) TAXPAYER SELF-HELP.—Until such time 
as the Secretary publishes a list of those engaging 
in Iran discouraged activities or if the Secretary fails 
to update that list as required in paragraph (1), the 
taxpayer may determine, using credible, publicly 
available information, which business entities engage 
in an Iran discouraged activity. 
‘‘(f) 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.’’. 
(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. 
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TITLE 
V—PROHIBITION 
ON 
UNITED 
STATES 
GOVERN-
MENT CONTRACTS AND IN-
VESTMENT FOR COMPANIES 
CONDUCTING 
BUSINESS 
IN 
IRAN 
SEC. 501. PROHIBITION ON UNITED STATES GOVERNMENT 
CONTRACTS. 
(a) CERTIFICATION REQUIREMENT.—The head of 
each executive agency shall ensure that each contract with 
a company entered into by such executive agency for the 
procurement of goods or services or agreement for the use 
of Federal funds as part of a grant, loan, or loan guar-
antee, the provision of insurance or reinsurance, or the 
provision of technical assistance to a company, includes 
a clause that requires the company to certify to the con-
tracting officer or other appropriate official, as the case 
may be, that the company does not conduct business oper-
ations in Iran described in section 504. 
(b) REMEDIES.— 
(1) IN GENERAL.—The head of an executive 
agency may impose remedies as provided in this sub-
section if the head of the executive agency deter-
mines that the contractor has submitted a false cer-
tification under subsection (a) after the date the 
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Federal Acquisition Regulation is revised pursuant 
to subsection (e) to implement the requirements of 
this section. 
(2) TERMINATION.—The head of an executive 
agency may terminate a covered contract with a 
company upon the determination of a false certifi-
cation under paragraph (1). 
(3) SUSPENSION AND DEBARMENT.—The head 
of an executive agency may debar or suspend a con-
tractor from eligibility for Federal contracts upon 
the determination of a false certification under para-
graph (1). The debarment period may not exceed 3 
years. 
(4) INCLUSION ON LIST OF PARTIES EXCLUDED 
FROM FEDERAL PROCUREMENT AND NONPROCURE-
MENT
PROGRAMS.—The Administrator of General 
Services shall include on the List of Parties Ex-
cluded from Federal Procurement and Nonprocure-
ment Programs maintained by the Administrator 
under part 9 of the Federal Acquisition Regulation 
issued pursuant to section 1303 of title 41, United 
States Code, each contractor that is debarred, sus-
pended, proposed for debarment or suspension, or 
declared ineligible by the head of an executive agen-
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cy on the basis of a determination of a false certifi-
cation under paragraph (1). 
(5) RULE
OF
CONSTRUCTION.—This section 
shall not be construed to limit the use of other rem-
edies available to the head of an executive agency or 
any other official of the Federal Government on the 
basis of a determination of a false certification 
under paragraph (1). 
(c) WAIVER.— 
(1) IN
GENERAL.—The President may waive 
the requirement of subsection (a) on a case-by-case 
basis if the President determines and certifies in 
writing to the appropriate congressional committees 
that it is in the national interest to do so. 
(2) REPORTING REQUIREMENT.—Not later than 
120 days after the date of the enactment of this Act 
and semi-annually thereafter, the Administrator for 
Federal Procurement Policy shall submit to the ap-
propriate congressional committees a report on waiv-
ers granted under paragraph (1). 
(d) IMPLEMENTATION THROUGH THE FEDERAL AC-
QUISITION REGULATION.—Not later than 120 days after 
the date of the enactment of this Act, the Federal Acquisi-
tion Regulation issued pursuant to section 1303 of title 
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