I 117th CONGRESS 1st Session H. R. 2977 IN THE HOUSE OF REPRESENTATIVES May 4, 2021 Mr. Ferguson introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to exclude gain from the sale or exchange of the entire interest in a wholly-owned rural incumbent local exchange carrier, and for other purposes.

1. Short title This Act may be cited as the Connect America Now Act or as the CAN Act . 2. Exclusion of gain from sale of rural incumbent local exchange carrier stock (a) In general Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting before section 140 the following new section: 139I. Gain from sale of rural incumbent local exchange carrier stock (a) Exclusion Gross income shall not include gain from the sale or exchange of the entire interest in a wholly-owned rural incumbent local exchange carrier. (b) Apportionment In the case of a carrier described in paragraph (1) that serves areas not described in paragraph (1), the amount excluded under subsection (a) shall not exceed the product of such amount (without regard to this paragraph) and the ratio of— (1) revenues attributable to the provision of communications services in an area described in subsection (c) during the 1-year period preceding such sale, to (2) all revenues during such period. (c) Rural incumbent local exchange carrier For purposes of this section, the term rural incumbent local exchange carrier means an incumbent local exchange carrier that serves an area that is an area— (1) where the carrier was required (on the date of the enactment of the Telecommunications Act of 1996) by law or regulation to provide communications services to any customer regardless of cost, and (2) other than an urbanized area with— (A) not fewer than 50,000 people, and (B) a core where there are not fewer than 1,000 people per square mile. (d) Definitions For purposes of this section, terms defined in the Communications Act of 1934 have the meaning given such terms in such Act. (e) Termination This section shall not apply to sales or exchanges for which an application for a certificate under section 214 of the Communications Act of 1934 is filed after the date that is 5 years after the date of the enactment of this section. . (b) Conforming amendment Section 338(a) of such Code is amended by inserting (other than section 139I) after For purposes of this subtitle . (c) Clerical amendment The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting before the item relating to section 140 the following new item: Sec. 139I. Gain from sale of rural incumbent local exchange carrier stock. . (d) Effective date The amendments made by this section shall apply to sales or exchanges after the date of the enactment of this Act. 3. Recapture of exclusion of gain from sale of rural incumbent local exchange carrier stock (a) In general Subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new part: XII Recapture of exclusion of gain from sale of rural incumbent local exchange carrier stock Sec. 292. Recapture of exclusion of gain from sale of rural incumbent local exchange carrier stock. 292. Recapture of exclusion of gain from sale of rural incumbent local exchange carrier stock (a) In general If a taxpayer acquired stock of a rural incumbent local exchange carrier in a sale or exchange described in section 139I and such carrier is not, for a qualified 1-year period with respect to such sale or exchange, a rural incumbent local exchange carrier, such taxpayer’s taxable income under this chapter for the taxable year in which such 1-year period ends shall be increased by product of 1/6 and any amount excluded from tax by any person with respect to such sale or exchange under such section. Such increase shall be treated as capital gain. (b) Rural incumbent local exchange carrier For purposes of this section, the term rural incumbent local exchange carrier means, with respect to a qualified 1-year period, a rural incumbent local exchange carrier (as defined in section 48D) that offers broadband internet access service at upload and download speeds of at least 1,000 megabits per second— (1) in the case of the 4th qualified 1-year period, to not less than 30 percent of locations in an area described in section 139I(c)(2), (2) in the case of the 5th qualified 1-year period, to not less than 40 percent of such locations, and (3) in the case of the 6th qualified 1-year period, to not less than 50 percent of such locations. (c) Qualified 1-Year period For purposes of this section, the term qualified 1-year period means, with respect to a rural incumbent local exchange carrier with respect to a sale or exchange described in subsection 139I, the 1-year period starting on the date of such sale or exchange, and each of the 5 subsequent 1-year periods. (d) Definitions For purposes of this section, terms defined in the Communications Act of 1934 have the meaning given such terms in such Act. . (b) Clerical amendment The table of parts of subchapter B of chapter 1 of such Code is amended by adding at the end the following new item: Part XII—Recapture of exclusion of gain from sale of rural incumbent local exchange carrier stock . (c) Effective date The amendments made by this section shall apply after the date of the enactment of this Act. 4. Rural communications investment tax credit (a) In general Subpart E of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after subsection 48C the following new section: 48D. Rural communications investment credit (a) In general (1) Credit amount For the purposes of section 46, in the case of a rural incumbent local exchange carrier, the rural communications investment credit for any taxable year is an amount equal to 30 percent of the amounts that are paid or incurred by such carrier during any qualified 1-year period ending in such taxable year to purchase, maintain, or improve property for the purpose of providing voice telephone service or broadband internet access service in an area described in section 139I(c)(2). (2) Exclusion of certain Federal funds Amounts paid or incurred which are otherwise taken into account under paragraph (1) with respect to any qualified 1-year period shall be reduced (including for purposes of subsection (b)) by the amount of any Federal universal service support under section 254 of the Communications Act of 1934 for the deployment of communications infrastructure, or any Federal grant for the deployment of communications infrastructure received by such carrier and properly attributable to such period. (b) Rural incumbent local exchange carrier For purposes of this section, the term rural incumbent local exchange carrier means, for a 1-year period, an incumbent local exchange carrier— (1) whose stock has been acquired in a sale or exchange described in section 139I, (2) for which— (A) the ratio of— (i) the amount described in subsection (a)(1), divided by (ii) the average active voice telephone service or broadband internet access service connections during the qualified 1-year period referred to in subsection (a)(1), is not less than (B) the ratio of— (i) the product of 1.25 and the annualized average of the amounts described in subsection (a)(1) for the 3-year period preceding the sale or exchange, divided by (ii) the average active voice telephone service or broadband internet access service connections during such 3-year period, and (3) in the case of the 3rd qualified 1-year period, that offers broadband internet access service described in section 292(b) to not less than 20 percent of locations in an area described in section 139I(c)(2). (c) Qualified 1-Year period For purposes of this section, the term qualified 1-year period means, with respect to a rural incumbent local exchange carrier with respect to a sale or exchange described in subsection 139I, the 1-year period starting on the date of such sale or exchange, and each of the 2 subsequent 1-year periods. (d) Definitions For purposes of this section, terms defined in the Communications Act of 1934 have the meaning given such terms in such Act. (e) Transfer of credit If, with respect to a credit under subsection (a) for any taxable year, the taxpayer elects the application of this paragraph for such taxable year with respect to all (or any portion specified in such election) of such credit, the person specified in such election, and not the taxpayer, shall be treated as the taxpayer for purposes of this title with respect to such credit (or such portion thereof). . (b) Conforming amendment Paragraph (6) of section 46 of such Code is amended to read as follows: (6) the rural communications investment credit. . (c) Clerical amendment The table of sections for subpart E of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 48C the following new item: Sec. 48D. Rural communications investment credit. . (d) Effective date The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act. 5. Increase and expansion of private activity bonds (a) Increase in volume cap Section 146(d)(1) of the Internal Revenue Code of 1986 is amended by inserting 120 percent of before the greater of . (b) Exempt facility bonds for broadband infrastructure Section 142(a) of such Code is amended by striking or at the end of paragraph (14), by striking the period at the end of paragraph (15) and inserting , or , and by adding at the end the following new paragraph: (16) infrastructure for the provision of broadband internet access service. . (c) Effective dates (1) Increase in volume cap The amendment made by subsection (a) shall apply to calendar years after 2020. (2) Exempt facility bonds for broadband infrastructure The amendments made by subsection (b) shall apply to bonds issued after the date of the enactment of this Act.