I
105TH CONGRESS
1ST SESSION
H. R. 711
To amend the Internal Revenue Code of 1986 concerning the tax treatment
of distributions from qualified retirement plans investing in public benefit
bonds.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 12, 1997
Ms. DELAURO introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 concerning
the tax treatment of distributions from qualified retire-
ment plans investing in public benefit bonds.
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 ‘‘Public Benefit Bonds
Innovative Financing Act’’.
SEC. 2. TAX TREATMENT OF DISTRIBUTIONS FROM QUALI-
FIED RETIREMENT PLANS INVESTING IN
PUBLIC BENEFIT BONDS.
(a) IN GENERAL.—Section 72 of the Internal Reve-
nue Code of 1986 (relating to annuities; certain proceeds
of endowment and life insurance contracts) is amended by
redesignating subsection (w) as subsection (x) and by in-
serting after subsection (v) the following new subsection:
‘‘(w) TREATMENT OF DISTRIBUTION FROM QUALI-
FIED RETIREMENT PLANS INVESTING IN PUBLIC BENE-
FIT BONDS.—
‘‘(1) IN GENERAL.—In the case of any qualified
retirement plan which receives directly or indirectly
any interest on any public benefit bond (including
any payments in respect thereof made by a surety
or guarantor) for purposes of applying this section
to any distribution from such plan, the distributee’s
investment in the contract shall be treated as includ-
ing such distributee’s allocable share of such interest
under the terms of the qualified retirement plan,
and any such distribution shall be treated as a dis-
tribution described in subsection (e)(2)(B) in which
the distribution is allocable first to the investment in
the contract attributable to such interest.
‘‘(2) TREATMENT OF INSTALLMENTS.—In the
case of a distribution to be made over more than one
calendar year, the amount of public benefit bond in-
terest to be taken into account with respect to a
given calendar year shall be the aggregate amount of
such interest allocable to the distributee as of the
end of the prior calendar year. With respect to the
final calendar year, the amount of public benefit
bond interest to be taken into account shall include
the amount of such interest received by the plan
during such year that is allocable to the plan partici-
pant with respect to whom the distribution is made.
‘‘(3) PUBLIC BENEFIT BOND.—The term ‘pub-
lic benefit bond’ means any obligation issued after
the date of the enactment of this subsection if—
‘‘(i) 95 percent or more of the net proceeds
of such obligation are used in connection with
the financing or refinancing of 1 or more infra-
structure facilities,
‘‘(ii) such obligation has received a pub-
lished rating, and
‘‘(iii) the development of such infrastruc-
ture facilities have been or will be undertaken
by a governmental entity or public-private part-
nership,
as such terms are defined in paragraph (7).
such bonds received by such company dur-
ing the taxable year equals or exceeds 75
percent of its gross income, or
‘‘(ii) if clause (i) does not apply, a
portion of such dividend shall be treated as
interest on a public benefit bond based on
the portion of the company’s gross income
which consists of such interest.
‘‘(B) NOTICE
TO
SHAREHOLDERS.—The
amount of any distribution by a regulated in-
vestment company which may be taken into ac-
count as interest on a public benefit bond for
purposes of this section shall not exceed the
amount so designated by the company in a writ-
ten notice to its shareholders mailed not later
than 45 days after the close of its taxable year.
‘‘(C) GROSS
INCOME.—For purposes of
this section, the term ‘gross income’ does not
include gain from the sale or other disposition
of stock or securities.
‘‘(7) DEFINITIONS.—In this section, the follow-
ing definitions apply:
‘‘(A) ENTITY.—The term ‘entity’ means an
individual, corporation, partnership, joint ven-
ture, trust or governmental entity or instrumen-
tality.
‘‘(B) INFRASTRUCTURE
FACILITY.—The
term ‘infrastructure facility’ means a road,
highway, bridge, tunnel, airport, mass transpor-
tation vehicle or system, passenger rail vehicle
or system, intermodal transportation facility,
waterway, commercial port, drinking or waste
water treatment facility, solid waste disposal fa-
cility, pollution control system, hazardous waste
facility, federally designated national informa-
tion highway facility, school, and any ancillary
facility which forms a part of any such facility
or is reasonably related to such facility, whether
owned, leased or operated by a public entity or
a private entity or by a combination of such en-
tities, and the financing or refinancing of the
development of which is, or will be, supported
in whole or in part by user fees or other dedi-
cated revenue sources.
‘‘(C) 
PUBLIC-PRIVATE
PARTNERSHIP.—
The term ‘public-private partnership’ means
any entity—
‘‘(i) which is undertaking the develop-
ment of all or part of any infrastructure
facility—
‘‘(I) pursuant to requirements es-
tablished in 1 or more contracts be-
tween such entity and a State or an
instrumentality of a State, or
‘‘(II) the activities of which with
respect to such facility are subject to
regulation by a State or any instru-
mentality of a State, and
‘‘(ii) which owns, leases, or operates,
or will own, lease, or operate, such infra-
structure facility in whole or in part, and
at least 1 of the participants in such entity
is a nongovernmental entity.’’.
(b) CONFORMING AMENDMENT.—Subsection (w) of
section 72 of the Internal Revenue Code of 1986 is amend-
ed by adding the following new paragraph:
‘‘(4) TREATMENT OF QUALIFYING PUBLIC BEN-
EFIT BOND INTEREST.—For purposes of subsections
(c)(1)(A) and (c)(2)(A), the total amount of public
benefit bond interest described in subsection (w)
with respect to a participant in a qualified retire-
ment plan (determined without reference to the an-
nuity starting date) shall be treated as an invest-
ment in the contract.’’.
(c) EFFECTIVE DATE.—The amendments made this
section shall apply to distributions after the date of the
enactment of this Act.
Æ