I
107TH CONGRESS
1ST SESSION
H. R. 1692
To amend the Internal Revenue Code of 1986 to simplify and make more
equitable the tax treatment of Settlement Trusts established pursuant
to the Alaska Native Claims Settlement Act.
IN THE HOUSE OF REPRESENTATIVES
MAY 2, 2001
Mr. YOUNG of Alaska (for himself, Mr. HANSEN, Mr. RAHALL, Mr. GEORGE
MILLER of California, Mr. HOUGHTON, Mr. RANGEL, Mr. FOLEY, Mr.
KILDEE, Mr. MCINNIS, Mr. KENNEDY of Rhode Island, Mr. CAMP, Mr.
ABERCROMBIE, Mr. HAYWORTH, Mrs. BONO, Mr. FROST, MR. STUPAK,
Mr. FALEOMAVAEGA, Mr. UDALL of Colorado, and Mr. PALLONE) intro-
duced the following bill; which was referred to the Committee on Ways
and Means
A BILL
To amend the Internal Revenue Code of 1986 to simplify
and make more equitable the tax treatment of Settlement
Trusts established pursuant to the Alaska Native Claims
Settlement Act.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. TAX TREATMENT OF ALASKA NATIVE SETTLE-
MENT TRUSTS.
(a) TREATMENT OF ALASKA NATIVE SETTLEMENT
TRUSTS.—Subpart A of part I of subchapter J of chapter
1 of the Internal Revenue Code of 1986 (relating to gen-
eral rules for taxation of trusts and estates) is amended
by adding at the end the following new section:
‘‘SEC. 646. TAX TREATMENT OF ALASKA NATIVE SETTLE-
MENT TRUSTS.
‘‘(a) IN GENERAL.—Except as otherwise provided in
this section, the provisions of this subchapter and section
1(e) shall apply to all Settlement Trusts.
‘‘(b) TAXATION OF INCOME OF TRUST.—Except as
provided in subsection (f)(1)(B)(ii)—
‘‘(1) IN GENERAL.—There is hereby imposed on
the taxable income of an electing Settlement Trust,
other than its net capital gain, a tax at the lowest
rate specified in section 1.
‘‘(2) CAPITAL GAIN.—In the case of an electing
Settlement Trust with a net capital gain for the tax-
able year, a tax is hereby imposed on such gain at
the rate of tax which would apply to such gain if the
taxpayer were subject to a tax on its other taxable
income at only the lowest rate specified in section 1.
‘‘(c) ONE-TIME ELECTION.—
‘‘(1) IN GENERAL.—A Settlement Trust may
elect to have the provisions of this section apply to
the trust and its beneficiaries.
‘‘(2) TIME
AND
METHOD
OF
ELECTION.—An
election under paragraph (1) shall be made by the
trustee of such trust—
‘‘(A) on or before the due date (including
extensions) for filing the Settlement Trust’s re-
turn of tax for the first taxable year of such
trust ending after the date of the enactment of
this section, and
‘‘(B) by attaching to such return of tax a
statement specifically providing for such elec-
tion.
‘‘(3) PERIOD ELECTION IN EFFECT.—Except as
provided in subsection (f), an election under this
subsection—
‘‘(A) shall apply to the first taxable year
described in paragraph (2)(A) and all subse-
quent taxable years, and
‘‘(B) may not be revoked once it is made.
‘‘(d) CONTRIBUTIONS TO TRUST.—
‘‘(1) BENEFICIARIES OF ELECTING TRUST NOT
TAXED
ON
CONTRIBUTIONS.—In the case of an
electing Settlement Trust, no amount shall be in-
cludible in the gross income of a beneficiary of such
trust by reason of a contribution to such trust.
‘‘(2) EARNINGS AND PROFITS.—The earnings
and profits of the sponsoring Native Corporation
shall not be reduced on account of any contribution
to such Settlement Trust:
‘‘(e) TAX TREATMENT OF DISTRIBUTIONS TO BENE-
FICIARIES.—Amounts distributed by an electing Settle-
ment Trust during any taxable year shall be considered
as having the following characteristics in the hands of the
recipient beneficiary:
‘‘(1) First, as amounts excludable from gross
income for the taxable year to the extent of the tax-
able income of such trust for such taxable year (de-
creased by any income tax paid by the trust with re-
spect to the income) plus any amount excluded from
gross income of the trust under section 103.
‘‘(2) Second, as amounts excludable from gross
income to the extent of the amount described in
paragraph (1) for all taxable years for which an elec-
tion is in effect under subsection (c) with respect to
the trust, and not previously taken into account
under paragraph (1).
‘‘(3) Third, as amounts distributed by the spon-
soring Native Corporation with respect to its stock
(within the meaning of section 301(a)) during such
taxable year and taxable to the recipient beneficiary