[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1481 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 1481

     To amend the Internal Revenue Code of 1986 to provide for the 
     nonrecognition of gain for sale of stock to certain farmers' 
                 cooperatives, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           December 15, 1995

    Mr. Hatch (for himself, Mr. Harkin, Mr. Craig, and Mr. Bennett) 
 introduced the following bill; which was referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
     To amend the Internal Revenue Code of 1986 to provide for the 
     nonrecognition of gain for sale of stock to certain farmers' 
                 cooperatives, and for other purposes.

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

SECTION 1. NONRECOGNITION OF GAIN ON SALE OF STOCK TO CERTAIN FARMERS' 
              COOPERATIVES.

    (a) Application of Section 1042 to Certain Farmers' Cooperatives.--
Section 1042 of the Internal Revenue Code of 1986 (relating to sales of 
stock to employee stock ownership plans or certain cooperatives) is 
amended by adding at the end the following new subsection:
    ``(g) Application of Section to Sales of Stock in Agricultural 
Refiners and Processors to Eligible Farm Cooperatives.--
            ``(1) In general.--This section shall apply to the sale of 
        stock of a qualified refiner or processor to an eligible 
        farmers' cooperative.
            ``(2) Qualified refiner or processor.--For purposes of this 
        subsection, the term `qualified refiner or processor' means a 
        domestic corporation--
                    ``(A) substantially all of the activities of which 
                consist of the active conduct of the trade or business 
                of refining or processing agricultural or horticultural 
                products, and
                    ``(B) which purchases more than one-half of such 
                products to be refined or processed from farmers who 
                make up the eligible farmers' cooperative which is 
                purchasing stock in the corporation in a transaction to 
                which this subsection is to apply.
            ``(3) Eligible farmers' cooperative.--For purposes of this 
        section, the term `eligible farmers' cooperative' means an 
        organization to which part I of subchapter T applies which is 
        engaged in the marketing of agricultural or horticultural 
        products.
            ``(4) Special rules.--In applying this section to a sale to 
        which paragraph (1) applies--
                    ``(A) the eligible farmers' cooperative shall be 
                treated in the same manner as a cooperative described 
                in subsection (b)(1)(B),
                    ``(B) subsection (b)(2) shall be applied by 
                substituting `100 percent' for `30 percent',
                    ``(C) the determination as to whether any stock in 
                the domestic corporation is a qualified security shall 
                be made--
                            ``(i) without regard to whether the stock 
                        is an employer security, and
                            ``(ii) by treating the requirements of 
                        subsection (c)(1)(A) as being met if more than 
                        50 percent of the outstanding stock of the 
                        corporation is not readily tradable on an 
                        established securities market, and
                    ``(D) subsection (c)(7) shall not apply.''
    (b) Coordination With Section 338(h)(10).--Section 338(h)(10) of 
the Internal Revenue Code of 1986 is amended by adding at the end the 
following new subparagraph:
                    ``(D) Coordination with section 1042.--An election 
                may be made under this paragraph with respect to a sale 
                described in section 1042(g) for which an election was 
                made under section 1042(a), except that no gain shall 
                be recognized by reason of subparagraph (A)(ii) to the 
                extent it is not recognized under section 1042(a).''
    (c) Effective Date.--The amendments made by this section shall 
apply to sales after the date of the enactment of this Act.
                                 <all>