[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3832 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 3832

      To amend the Internal Revenue Code of 1986 to allow certain 
  corporations and certain trusts to be shareholders of subchapter S 
                             corporations.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            February 9, 1994

Mr. Sensenbrenner (by request) 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 allow certain 
  corporations and certain trusts to be shareholders of subchapter S 
                             corporations.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. CORPORATIONS ALLOWED TO BE SHAREHOLDERS OF SUBCHAPTER S 
              CORPORATIONS IN CERTAIN CASES.

    (a) In General.--Subsection (c) of section 1361 of the Internal 
Revenue Code of 1986 (defining S corporation) is amended by adding at 
the end thereof the following new paragraph:
            ``(7) Corporations permitted as shareholders in certain 
        cases.--
                    ``(A) In general.--Subsections (b)(1)(B) and 
                (b)(2)(A) shall not apply to a shareholder which is a 
                corporation if each shareholder of such corporation is 
                of a type permitted (without regard to this paragraph) 
                to be a shareholder of an S corporation.
                    ``(B) Corporation's shareholders counted.--The 
                shareholders of each corporate shareholder of a 
                corporation (and not such corporate shareholder) shall 
                be counted in determining whether such corporation 
                meets the requirement of subsection (b)(1)(A).''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 2. ADDITIONAL TRUSTS ALLOWED TO BE SHAREHOLDERS OF SUBCHAPTER S 
              CORPORATIONS.

    (a) In General.--Subsection (d) of section 1361 of the Internal 
Revenue Code of 1986 (relating to special rule for qualified subchapter 
S trust) is amended by redesignating paragraph (4) as paragraph (5) and 
by inserting after paragraph (3) the following new paragraph:
            ``(4) Additional trusts included as subchapter s trusts.--
        For purposes of this subsection, the term `qualified subchapter 
        S trust' also means a trust--
                    ``(A) all of the income beneficiaries of which are 
                individuals who are citizens or residents of the United 
                States,
                    ``(B) all of the income (within the meaning of 
                section 643(b)) of which is distributed (or required to 
                be distributed) not less frequently than annually to 1 
                or more of such individuals, and
                    ``(C) an election is in effect under paragraph (2) 
                for each of such individuals with respect to each 
                corporation the stock of which is held by the trust.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

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