[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1953 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 1953

To amend the Internal Revenue Code of 1986 to encourage the development 
          of a commercial space industry in the United States.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 28, 1995

 Mr. Walker (for himself, Mr. Zimmer, Mr. English of Pennsylvania, Mr. 
      Rohrabacher, Mrs. Seastrand, Mr. Weldon of Florida, and Mr. 
Sensenbrenner) 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 encourage the development 
          of a commercial space industry in the United States.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Space Business Incentives Act of 
1995''.

SEC. 2. DEDUCTION FOR PURCHASE OF COMMERCIAL SPACE CENTER STOCK.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to itemized deductions for 
individuals and corporations) is amended by adding at the end the 
following new section:

``SEC. 198. DEDUCTION FOR PURCHASE OF COMMERCIAL SPACE CENTER STOCK.

    ``(a) In General.--At the election of the taxpayer, there shall be 
allowed as a deduction an amount equal to the aggregate amount paid 
during the taxable year for the purchase of qualified Commercial Space 
Center stock.
    ``(b) Maximum Deduction.--
            ``(1) In general.--The maximum amount allowed as a 
        deduction under subsection (a) to a taxpayer for the taxable 
        year shall not exceed $100,000 ($50,000 in the case of a 
        married individual filing a separate return).
            ``(2) Controlled groups.--
                    ``(A) In general.--All corporations which are 
                members of the same parent-subsidiary controlled group 
                shall be treated as 1 corporation for purposes of 
                paragraph (1), and the dollar amount applicable under 
                paragraph (1) shall be allocated among the members of 
                such group in proportion to their respective purchases 
                of stock during the taxable year for which the 
                deduction is allowable by this section.
                    ``(B) Parent-subsidiary controlled group.--For 
                purposes of subparagraph (A), the term `parent-
                subsidiary controlled group' means any controlled group 
                of corporations as defined in section 1563(a)(1), 
                except that--
                            ``(i) `more than 50 percent' shall be 
                        substituted for `at least 80 percent' each 
                        place it appears in section 1563(a)(1), and
                            ``(ii) section 1563(a)(4) shall not apply.
            ``(3) Allocation of deduction where stock purchased exceeds 
        limitation.--If the amount of stock purchased by any person 
        exceeds the limitation under this subsection with respect to 
        such person, the deduction allowed under this section shall be 
        allocated pro rata among the stock so purchased in accordance 
        with the purchase price per share.
    ``(c) Qualified Commercial Space Center Stock.--For purposes of 
this section--
            ``(1) In general.--The term `qualified Commercial Space 
        Center stock' means any common stock in a C corporation if--
                    ``(A) as of the date of issuance, such corporation 
                is a qualified Commercial Space Center business (or, in 
                the case of a new corporation, is being organized for 
                purposes of being a qualified Commercial Space Center 
                business),
                    ``(B) such stock is acquired by the taxpayer at its 
                original issue (directly or through an underwriter)--
                            ``(i) in exchange for money or other 
                        property (not including stock), or
                            ``(ii) as compensation for services 
                        provided to such corporation (other than 
                        services performed as an underwriter of such 
                        stock), and
                    ``(C) the proceeds of such issue are used by such 
                issuer during the 36-month period beginning on the date 
                of issuance to establish or operate a Commercial Space 
                Center or for operations within such a Center.
            ``(2) Qualified commercial space center business.--The term 
        `qualified Commercial Space Center business' means any domestic 
        corporation which, at the time of issuance of the stock 
        involved, is conducting a business at least 75 percent of the 
        gross receipts of which for the taxable year are attributable 
        to--
                    ``(A) operations within a Commercial Space Center, 
                or
                    ``(B) the establishment or operation of a 
                Commercial Space Center,
        in the active conduct of a trade or business.
            ``(3) Commercial space center.--The term `Commercial Space 
        Center' means any facility designated as such for purposes of 
        this section by the Secretary of Transportation.
            ``(4) Certain purchases by corporation of its own stock.--A 
        rule similar to the rule of section 1202(c)(3) shall apply for 
        purposes of this subsection.
    ``(d) Dispositions of Stock.--
            ``(1) Basis reduction.--For purposes of this title, the 
        basis of any qualified Commercial Space Center stock shall be 
        reduced by the amount of the deduction allowed under this 
        section with respect to such stock.
            ``(2) Deduction recaptured as ordinary income.--For 
        purposes of section 1245--
                    ``(A) any stock the basis of which is reduced under 
                paragraph (1) (and any other property the basis of 
                which is determined in whole or in part by reference to 
                the adjusted basis of such stock) shall be treated as 
                section 1245 property, and
                    ``(B) any reduction under paragraph (1) shall be 
                treated as a deduction allowed for depreciation.
        If an exchange of any stock described in paragraph (1) 
        qualifies under section 354(a), 355(a), or 356(a), the amount 
        of gain recognized under section 1245 by reason of this 
        paragraph shall not exceed the amount of gain recognized in the 
        exchange (determined without regard to this paragraph).
            ``(3) Certain events treated as dispositions.--For purposes 
        of determining the amount treated as ordinary income under 
        section 1245 by reason of paragraph (2), paragraph (3) of 
        section 1245(b) (relating to certain tax-free transactions) 
        shall not apply.
            ``(4) Interest charged if disposition within 3 years of 
        purchase.--
                    ``(A) In general.--If--
                            ``(i) a taxpayer disposes of any qualified 
                        Commercial Space Center stock with respect to 
                        which a deduction was allowed under subsection 
                        (a) (or any other property the basis of which 
                        is determined in whole or in part by reference 
                        to the adjusted basis of such stock) before the 
                        end of the 3-year period beginning on the date 
                        such stock was purchased by the taxpayer, and
                            ``(ii) section 1245(a) applies to such 
                        disposition by reason of paragraph (2),
                then the tax imposed by this chapter for the taxable 
                year in which such disposition occurs shall be 
                increased by the Commercial Space Center stock 
                recapture amount.
                    ``(B) Commercial space center stock recapture 
                amount.--For purposes of subparagraph (A), the term 
                `Commercial Space Center stock recapture amount' means 
                an amount equal to the amount of interest (determined 
                at the underpayment rate applicable under section 6621) 
                which would accrue--
                            ``(i) during the period beginning on the 
                        date such stock was purchased by the taxpayer 
                        and ending on the date such stock was disposed 
                        of by the taxpayer,
                            ``(ii) on an amount equal to the aggregate 
                        decrease in tax of the taxpayer resulting from 
                        the deduction allowed under this section with 
                        respect to the stock so disposed of.
                    ``(C) Special rule.--Any increase in tax under 
                subparagraph (A) shall not be treated as a tax imposed 
                by this chapter for purposes of--
                            ``(i) determining the amount of any credit 
                        allowable under this chapter, and
                            ``(ii) determining the amount of the tax 
                        imposed by section 55.
    ``(e) Treatment Where Issuer Ceases to be Qualified.--
            ``(1) In general.--If, during the 5-year period beginning 
        on the date qualified Commercial Space Center stock was 
        purchased by the taxpayer, the issuer of such stock ceases to 
        meet the requirements of subsection (c)(2)(A), then 
        notwithstanding any provision of this subtitle other than 
        paragraph (2), the taxpayer shall be treated for purposes of 
        subsection (d) as disposing of such stock (and any other 
        property the basis of which is determined in whole or in part 
        by reference to the adjusted basis of such stock) during the 
        taxable year during which such cessation occurs at its fair 
        market value as of the 1st day of such taxable year.
            ``(2) Exception for small investors.--In the case of an 
        individual, paragraph (1) shall not apply if the aggregate of 
        the deductions allowed to the taxpayer under this section with 
        respect to stock issued by such issuer for all taxable years 
        ending before the issuer first ceased to meet the requirements 
        of subsection (c)(2)(A) does not exceed $5,000 ($10,000 in the 
        case of a joint return).
    ``(f) Special Rules.--
            ``(1) Amount paid after close of taxable year.--An amount 
        paid after the close of the taxable year for the purchase of 
        Commercial Space Center stock shall be treated for purposes of 
        subsection (a) as paid during such year if--
                    ``(A) such amount is so paid not later than the 
                time prescribed by law for filing the return for such 
                taxable year (including extensions thereof), and
                    ``(B) the taxpayer was under a binding contract as 
                of the close of such taxable year to purchase such 
                stock.
            ``(2) Limitation on amount of deduction.--If--
                    ``(A) any Commercial Space Center stock is issued 
                in exchange for property (other than money or stock),
                    ``(B) the basis of such stock in the hands of the 
                taxpayer is determined by reference to the basis of 
                such property, and
                    ``(C) the adjusted basis (for determining gain) of 
                such property immediately before the exchange exceeded 
                its fair market value at such time,
        then the deduction under this section, and such adjusted basis, 
        shall both be reduced by the excess described in subparagraph 
        (C).
            ``(3) Application of limits to partnerships and s 
        corporations.--In the case of a partnership or an S 
        corporation, the limitations under subsection (b) shall apply 
        at the partner and shareholder level and shall not apply at the 
        partnership or corporation level.
    ``(g) Application of Section.--This section shall apply only to 
stock acquired after December 31, 1995, and before January 1, 2011.''
    (b) Technical Amendment.--Subsection (a) of section 1016 of such 
Code (relating to adjustments to basis) is amended by striking ``and'' 
at the end of paragraph (24), by striking the period at the end of 
paragraph (25) and inserting ``, and'', and by adding at the end the 
following new paragraph:
            ``(26) to the extent provided in section 198(d), in the 
        case of stock with respect to which a deduction was allowed 
        under section 198.''
    (c) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 of such Code is amended by adding at the end 
the following new item:

                              ``Sec. 198. Deduction for purchase of 
                                        Commercial Space Center 
                                        stock.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1995.

SEC. 3. EXCLUSION OF GAIN ON SALE OF STOCK OF CORPORATION SUBSTANTIALLY 
              ENGAGED IN SPACE-RELATED ACTIVITIES.

    (a) In General.--Part I of subchapter P of chapter 1 of the 
Internal Revenue Code of 1986 (relating to treatment of capital gains) 
is amended by adding at the end the following new section:

``SEC. 1203. GAIN ON SPACE CORPORATION STOCK.

    ``(a) General Rule.--Gross income shall not include gain on the 
sale or exchange of qualified space corporation stock held for more 
than 5 years.
    ``(b) Limitations.--
            ``(1) Maximum dollar amount.--
                    ``(A) In general.--The maximum amount excluded 
                under subsection (a) to a taxpayer for the taxable year 
                shall not exceed $100,000 ($50,000 in the case of a 
                married individual filing a separate return).
                    ``(B) Controlled groups.--For purposes of 
                subparagraph (A), all corporations which are members of 
                the same parent-subsidiary controlled group (as defined 
                in section 198(b)(2)) with respect to the taxpayer 
                shall be treated as 1 person, and the dollar amount 
                applicable under subparagraph (A) shall be allocated 
                among the taxpayer and such persons in proportion to 
                their respective sales and exchanges of stock during 
                the calendar year in which the taxable year of the 
                taxpayer begins.
            ``(2) Excluded gain must be long-term capital gain.--
        Subsection (a) shall not apply to any gain other than long-term 
        capital gain.
    ``(c) Qualified Space Corporation Stock.--
            ``(1) In general.--The term `qualified space corporation 
        stock' means common stock in a C corporation if--
                    ``(A) as of the date of issuance, such corporation 
                is a qualified space corporation (or, in the case of a 
                new corporation, is being organized for purposes of 
                being a qualified space corporation),
                    ``(B) such stock is acquired by the taxpayer at its 
                original issue (directly or through an underwriter)--
                            ``(i) in exchange for money or other 
                        property (not including stock), or
                            ``(ii) as compensation for services 
                        provided to such corporation (other than 
                        services performed as an underwriter of such 
                        stock), and
                    ``(C) during substantially all of the taxpayer's 
                holding period for such stock, such corporation 
                qualified as a space corporation.
            ``(2) Space corporation.--The term `space corporation' 
        means, with respect to any taxable year, any domestic 
        corporation which is a C corporation if at least 75 percent of 
        its gross receipts for such taxable year are derived from the 
        active conduct of a trade or business involving the providing 
        of space-related products or services. For purposes of the 
        preceding sentence, gross receipts attributable to operations 
        within a Commercial Space Center, or to the establishment or 
        operation of a Commercial Space Center, shall not be taken into 
        account.
            ``(3) Certain purchases by corporation of its own stock.--A 
        rule similar to the rule of section 1202(c)(3) shall apply for 
        purposes of this subsection.
    ``(d) Special Rules.--
            ``(1) 10-year safe harbor.--If any stock ceases to be 
        qualified space corporation stock by reason of subsection 
        (c)(1)(C) after the 10-year period beginning on the date the 
        taxpayer acquired such stock, such stock shall continue to be 
        treated as meeting the requirements of such subsection; except 
        that the amount of gain to which subsection (a) applies on any 
        sale or exchange of such stock shall not exceed the amount 
        which would be qualified capital gain had such stock been sold 
        on the date of such cessation.
            ``(2) Other rules to apply.--Rules similar to the rules of 
        subsections (f), (g), (h), (i), and (j) of section 1202 shall 
        apply for purposes of this section.
    ``(e) Application of Section.--This section shall apply only to 
stock acquired after December 31, 1995, and before January 1, 2011.''
    (b) Clerical Amendment.--The table of sections for such part I is 
amended by adding at the end the following new item:

                              ``Sec. 1203. Gain on space corporation 
                                        stock.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1995.

SEC. 4. TREATMENT OF BONDS TO FINANCE SPACE LAUNCH AND LAUNCH SUPPORT 
              FACILITIES.

    (a) In General.--Subsection (a) of section 142 of the Internal 
Revenue Code of 1986 (defining exempt facility bond) is amended by 
striking ``or'' at the end of paragraph (11), by striking the period at 
the end of paragraph (12) and inserting ``, or'', and by adding at the 
end the following:
            ``(13) space launch and launch support facilities.
Paragraph (13) shall not apply to any bond issued after December 31, 
2010.''
    (b) Space Launch and Launch Support Facilities.--Section 142 of 
such Code is amended by adding at the end the following new subsection:
    ``(k) Space Launch and Launch Support Facilities.--
            ``(1) In general.--For purposes of subsection (a)(13), the 
        term `space launch and launch support facilities' means--
                    ``(A) all facilities, equipment, and real property 
                used to prepare space transportation vehicles and their 
                payloads for transportation to, from, or within outer 
                space, or in suborbital trajectory or to launch such 
                vehicles, and
                    ``(B) all facilities, equipment, and real property 
                used to conduct research and development, manufacture, 
                process, and service space transportation vehicles and 
                their payloads.
            ``(2) Payload.--For purposes of this subsection, the term 
        `payload' means anything that a person undertakes to transport 
        to, from, or within outer space, or in suborbital trajectory, 
        by means of a space transportation vehicle, but does not 
        include the space transportation vehicle itself except for its 
        components which are specifically designed or adapted for that 
        payload.
            ``(3) Space transportation vehicle.--For purposes of this 
        subsection, the term `space transportation vehicle' means any 
        vehicle constructed for the purpose of operating in, or 
        transporting a payload to, from, or within, outer space, or in 
        suborbital trajectory, and includes any component of such 
        vehicle not specifically designed or adapted for a payload.''
    (c) Exception From Volume Cap.--Paragraph (3) of section 146(g) of 
such Code is amended--
            (1) by striking ``or (12)'' and inserting ``, (12), or 
        (13)'', and
            (2) by striking ``and environmental enhancements of 
        hydroelectric generating facilities'' and inserting ``, 
        environmental enhancements of hydroelectric generating 
        facilities, and space launch and launch support facilities''.
    (d) Certain Additional Requirements Not To Apply to Space Launch 
and Launch Support Facilities Bonds.--
            (1) Subsection (h) of section 147 of such Code is amended 
        by adding at the end the following new paragraph:
            ``(3) Space launch and launch support facilities bonds.--
        Subsections (a), (b), (c), and (d) shall not apply to any 
        exempt facility bond described in section 142(a)(13).''
            (2) The heading for subsection (h) of section 147 of such 
        Code is amended by striking ``and Qualified 501(c)(3) Bonds'' 
        and inserting ``Qualified 501(c)(3) Bonds, and Space Launch and 
        Launch Support Facilities Bonds''.
    (e) Federal Guaranteed Space Launch and Launch Support Facilities 
Bonds Permitted.--Paragraph (3) of section 149(b) of such Code is 
amended by adding at the end the following new subparagraph:
                    ``(E) Exception for space launch and launch support 
                facilities bonds.--Paragraph (1) shall not apply to any 
                exempt facility bond described in section 142(a)(13) in 
                situations where the guarantee of the United States (or 
                any agency or instrumentality thereof) is the result of 
                payment of rent, user fees, or other charges by the 
                United States (or any agency or instrumentality 
                thereof) for the use of a facility financed with such a 
                bond.''
    (f) Effective Date.--The amendments made by this section shall 
apply to obligations issued after the date of the enactment of this 
Act.

SEC. 5. SPACE MANUFACTURING INCENTIVE.
    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by redesignating section 137 as section 
138 and inserting after section 136 the following new section:

``SEC. 137. SPACE MANUFACTURING INCOME.

    ``(a) General Rule.--Gross income shall not include space 
manufacturing income.
    ``(b) Space Manufacturing Income.--For purposes of this section, 
the term `space manufacturing income' means--
            ``(1) income derived from the sale by the taxpayer to an 
        unrelated person of any product which is manufactured by the 
        taxpayer in outer space and returned to Earth, and
            ``(2) income of an individual attributable to services 
        performed in outer space by such individual in a trade or 
        business.
    ``(c) Exclusion From Tariffs, Etc.--Any product--
            ``(1) which is manufactured in outer space, and
            ``(2) which was--
                    ``(A) launched from, and returned to Earth at, 
                within the United States, or
                    ``(B) manufactured at a facility in outer space 
                which is owned by 1 or more United States persons,
shall be exempt from all Federal excises, imposts, and duties and any 
other Federal tariffs.
    ``(d) Phaseout of Benefits.--In the case of a taxable year 
beginning after December 31, 2025, the amount excluded under subsection 
(a) shall be reduced (but not below zero) by x/20th's of the amount 
excludable without regard to this subsection, where `x' is the number 
of years such taxable year is after the last taxable year beginning 
before January 1, 2026. A similar rule shall apply to the benefits 
under subsection (c).''
    (b) Clerical Amendment.--The table of sections for such part III is 
amended by striking the last item and inserting the following new 
items:

                              ``Sec. 137. Space manufacturing income.
                              ``Sec. 138. Cross references to other 
                                        Acts.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 6. STATE TAX BENEFITS FOR COMMERCIAL SPACE ACTIVITIES TO BE 
              ENCOURAGED.

    The President shall encourage State and local governments to offer 
tax and other incentives to encourage commercial space activities.
                                 <all>
HR 1953 IH----2