graphs (5) and (6) of section 1042(c), subsections (d),
(e), and (f) of section 1042, section 1016(a)(22), and
section 1223(13) shall apply for purposes of this sec-
tion.
‘‘(2) CERTAIN PROVISIONS NOT TO APPLY.—
‘‘(A) RECOGNITION ON COMPLETE LIQUIDA-
TION.—Section 332 shall not apply to the liq-
uidation into the cooperative or any related per-
son of a qualified agricultural processor if the
cooperative or related person acquired the stock
in such processor in a sale to which subsection
(a) applied.
‘‘(B) DEEMED SALE ELECTION NOT AVAIL-
ABLE.—No election may be made under section
338(h)(10) with respect to a sale to which sub-
section (a) applies.
‘‘(f) RECAPTURE OF TAX BENEFIT WHERE LACK OF
CONTINUITY.—
‘‘(1) IN GENERAL.—If there is a recapture event
during any taxable year with respect to any sale to
an eligible farmers’ cooperative to which this section
applied, such cooperative’s tax imposed by this chap-
ter for such taxable year shall be increased by an
amount equal to—
‘‘(A) the recapture percentage of the amount
allocated under subsection (b) to such sale, mul-
tiplied by
‘‘(B) the highest rate of tax imposed by sec-
tion 11 for such taxable year.
‘‘(2) RECAPTURE EVENT.—For purposes of this
subsection, a recapture event shall be treated as occur-
ring in any taxable year if—
‘‘(A) any portion of such taxable year is
within the 3-year period beginning on the date
on which the eligible farmers’ cooperative ac-
quired stock in a qualified agricultural processor
in a sale to which this section applied and, as
of the close of such portion, there is a decrease
in the direct or indirect percentage ownership of
such stock held by such cooperative which was
not previously taken into account under this sub-
section, or
‘‘(B) such taxable year is one of the first 5
taxable years ending after the date of such sale
and is the third of such taxable years during
which one-half or less of the agricultural or hor-
ticultural products refined or processed by the
qualified agricultural processor are purchased
from the eligible farmers’ cooperative or farmers
who are members of such cooperative.
‘‘(3) RECAPTURE PERCENTAGE.—For purposes of
this subsection, the term ‘recapture percentage’
means—
‘‘(A) in the case of a recapture event de-
scribed in paragraph (2)(A), the percentage
equal to a fraction—
‘‘(i) the numerator of which is the per-
centage decrease described in paragraph
(2)(A), and
‘‘(ii) the denominator of which is the
percentage which the qualified agricultural
processor stock acquired by the cooperative
in a sale to which this section applied bears
to all qualified agricultural processor stock
in the processor, and
‘‘(B) in the case of a recapture event de-
scribed in paragraph (2)(B), 100 percent.
In no event shall the recapture percentage for any
taxable year exceed 100 percent minus the sum of the
recapture percentages for all prior taxable years.
‘‘(4) EXCEPTIONS
TO
PURCHASE
REQUIRE-
MENT.—The purchase requirement of paragraph
(2)(B) shall be treated as met for any taxable year if
the Secretary determines that such requirement was
not met due to 1 or more of the following: flood,
drought, or other weather-related conditions, environ-
mental contamination, disease, fire, or other similar
extenuating circumstances prescribed by the Sec-
retary.
‘‘(g) COORDINATION WITH SECTION 1042.—No elec-
tion may be made under this section with respect to any
sale if an election is made under section 1042 with respect
to such sale.
‘‘(h) REGULATIONS.—The Secretary shall prescribe
such regulations as are appropriate to carry out this sec-
tion, including regulations which treat 2 or more sales
which are part of the same transaction as 1 sale.’’
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 26(b) of such Code
is amended by striking ‘‘and’’ at the end of subpara-
graph (P), by striking the period at the end of sub-
paragraph (Q) and inserting ‘‘, and’’, and by adding
at the end the following new subparagraph:
‘‘(R) section 1042A(f) (relating to recapture
of tax benefit where lack of continuity in certain
agricultural processors).’’
(2) The table of sections for part III of sub-
chapter O of chapter 1 of such Code is amended by
inserting after the item relating to section 1042 the
following new item:
‘‘Sec. 1042A. Sales of stock to certain farmers’ cooperatives.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to sales after December 31, 1997.
(d) BUDGETARY TREATMENT.—For purposes of section
10213 of the Balanced Budget Act of 1997, the provisions
of this section shall be considered to have been enacted as
part of the Taxpayer Relief Act of 1997.