[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2513 Reported in House (RH)]





                                                 Union Calendar No. 196

105th CONGRESS

  1st Session

                               H. R. 2513

                      [Report No. 105-318, Part I]

_______________________________________________________________________

                                 A BILL

 To amend the Internal Revenue Code of 1986 to restore and modify the 
  provision of the Taxpayer Relief Act of 1997 relating to exempting 
 active financing income from foreign personal holding company income 
 and to provide for the nonrecognition of gain on the sale of stock in 
       agricultural processors to certain farmers' cooperatives.

_______________________________________________________________________

                            October 22, 1997

 Committee on the Budget discharged; committed to the Committee of the 
    Whole House on the State of the Union and ordered to be printed





                                                 Union Calendar No. 196
105th CONGRESS
  1st Session
                                H. R. 2513

                      [Report No. 105-318, Part I]

 To amend the Internal Revenue Code of 1986 to restore and modify the 
  provision of the Taxpayer Relief Act of 1997 relating to exempting 
 active financing income from foreign personal holding company income 
 and to provide for the nonrecognition of gain on the sale of stock in 
       agricultural processors to certain farmers' cooperatives.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 23, 1997

   Mr. Archer (for himself, Mr. Hulshof, Mr. Rangel, Mr. Thomas, Mr. 
Houghton, Mr. Nussle, Ms. Dunn, and Mr. Levin) introduced the following 
  bill; which was referred to the Committee on Ways and Means, and in 
      addition to the Committee on the Budget, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

                            October 9, 1997

    Reported from the Committee on Ways and Means with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

                            October 9, 1997

 Referral to the Committee on the Budget extended for a period ending 
                    not later than October 20, 1997

                            October 20, 1997

 Referral to the Committee on the Budget extended for a period ending 
                    not later than October 21, 1997

                            October 21, 1997

 Referral to the Committee on the Budget extended for a period ending 
                    not later than October 22, 1997

                            October 22, 1997

 Committee on the Budget discharged; committed to the Committee of the 
    Whole House on the State of the Union and ordered to be printed
 [For text of introduced bill, see copy as introduced on September 23, 
                                 1997]

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to restore and modify the 
  provision of the Taxpayer Relief Act of 1997 relating to exempting 
 active financing income from foreign personal holding company income 
 and to provide for the nonrecognition of gain on the sale of stock in 
       agricultural processors to certain farmers' cooperatives.

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

SECTION 1. EXEMPTION FOR ACTIVE FINANCING INCOME.

    (a) Exemption From Foreign Personal Holding Company Income.--
Section 954 of the Internal Revenue Code of 1986 (as amended by 
subsection (d)) is amended by adding at the end the following new 
subsection:
    ``(h) Special Rule for Income Derived in the Active Conduct of 
Insurance Businesses and Banking, Financing, or Similar Businesses.--
            ``(1) In general.--For purposes of subsection (c)(1), 
        foreign personal holding company income shall not include 
        income which is--
                    ``(A) derived in the active conduct by a controlled 
                foreign corporation of a banking, financing, or similar 
                business, but only if--
                            ``(i) the corporation is predominantly 
                        engaged in the active conduct of such business, 
                        and
                            ``(ii) such income is derived from 
                        transactions with customers located within the 
                        country under the laws of which the corporation 
                        is created or organized,
                    ``(B) received from a person other than a related 
                person (within the meaning of subsection (d)(3)) and 
                derived from the investments made by a qualifying 
                insurance company of its reserves or of 80 percent of 
                its unearned premiums (as both are determined in the 
                manner prescribed under paragraph (4)), or
                    ``(C) received from a person other than a related 
                person (within the meaning of subsection (d)(3)) and 
                derived from investments made by a qualifying insurance 
                company of an amount of its assets equal to--
                            ``(i) in the case of property, casualty, or 
                        health insurance contracts, one-third of its 
                        premiums earned on such insurance contracts 
                        during the taxable year (as defined in section 
                        832(b)(4)), and
                            ``(ii) in the case of life insurance or 
                        annuity contracts, 10 percent of the reserves 
                        described in subparagraph (B) for such 
                        contracts.
            ``(2) Predominantly engaged.--For purposes of paragraph 
        (1)(A), a controlled foreign corporation shall be deemed 
        predominantly engaged in the active conduct of a banking, 
        financing, or similar business only if--
                    ``(A) more than 70 percent of its gross income is 
                derived from such business from transactions with 
                customers which are located within the country under 
                the laws of which the corporation is created or 
                organized, or
                    ``(B) the corporation is--
                            ``(i) engaged in the active conduct of a 
                        banking business and is an institution licensed 
                        to do business as a bank in the United States 
                        (or is any other corporation not so licensed 
                        which is specified by the Secretary in 
                        regulations), or
                            ``(ii) engaged in the active conduct of a 
                        securities business and is registered as a 
                        securities broker or dealer under section 15(a) 
                        of the Securities Exchange Act of 1934 or is 
                        registered as a Government securities broker or 
                        dealer under section 15C(a) of such Act (or is 
                        any other corporation not so registered which 
                        is specified by the Secretary in regulations).
            ``(3) Principles for determining insurance income.--Except 
        as provided by the Secretary, for purposes of paragraphs (1) 
        (B) and (C)--
                    ``(A) in the case of any contract which is a 
                separate account-type contract (including any variable 
                contract not meeting the requirements of section 817), 
                income credited under such contract shall be allocable 
                only to such contract, and
                    ``(B) income not allocable under subparagraph (A) 
                shall be allocated ratably among contracts not 
                described in subparagraph (A).
            ``(4) Methods for determining unearned premiums and 
        reserves.--For purposes of paragraph (1)(B)--
                    ``(A) Property and casualty contracts.--The 
                unearned premiums and reserves of a qualifying 
                insurance company with respect to property, casualty, 
                or health insurance contracts shall be determined using 
                the same methods and interest rates which would be used 
                if such company were subject to tax under subchapter L.
                    ``(B) Life insurance and annuity contracts.--The 
                amount of the reserve of a qualifying insurance company 
                for any life insurance or annuity contract shall be 
                equal to the greater of--
                            ``(i) the net surrender value of such 
                        contract (as defined in section 807(e)(1)(A)), 
                        or
                            ``(ii) the reserve determined under 
                        paragraph (5).
                    ``(C) Limitation on reserves.--In no event shall 
                the reserve determined under this paragraph for any 
                contract as of any time exceed the amount which would 
                be taken into account with respect to such contract as 
                of such time in determining foreign statement reserves 
                (less any catastrophe, deficiency, or similar 
                reserves).
            ``(5) Amount of reserve.--The amount of the reserve 
        determined under this paragraph with respect to any contract 
        shall be determined in the same manner as it would be 
        determined if the qualifying insurance company were subject to 
        tax under subchapter L, except that in applying such 
        subchapter--
                    ``(A) the interest rate determined for the foreign 
                country in which such company is created or organized 
                and which, except as provided by the Secretary, is 
                calculated in the same manner as the Federal mid-term 
                rate under section 1274(d) shall be substituted for the 
                applicable Federal interest rate,
                    ``(B) the highest assumed interest rate permitted 
                to be used in determining foreign statement reserves 
                shall be substituted for the prevailing State assumed 
                interest rate, and
                    ``(C) tables for mortality and morbidity which 
                reasonably reflect the current mortality and morbidity 
                risks in the foreign country shall be substituted for 
                the mortality and morbidity tables otherwise used for 
                such subchapter.
            ``(6) Definitions.--For purposes of this subsection--
                    ``(A) Qualifying insurance company.--The term 
                `qualifying insurance company' means any entity which--
                            ``(i) is subject to regulation as an 
                        insurance company by the country under the laws 
                        of which the entity is created or organized,
                            ``(ii) derives at least 50 percent of its 
                        net written premiums from the insurance or 
                        reinsurance of risks located within such 
                        country, and
                            ``(iii) is engaged in the active conduct of 
                        an insurance business and would be subject to 
                        tax under subchapter L if it were a domestic 
                        corporation.
                    ``(B) Life insurance or annuity contract.--For 
                purposes of this section and section 953, the 
                determination of whether a contract issued by a 
                controlled foreign corporation is a life insurance 
                contract or an annuity contract shall be made without 
                regard to sections 72(s), 101(f), 817(h), and 7702 if--
                            ``(i) such contract is regulated as a life 
                        insurance or annuity contract by the country 
                        under the laws of which the corporation is 
                        created or organized, and
                            ``(ii) no policyholder, insured, annuitant, 
                        or beneficiary with respect to the contract is 
                        a United States person.
                    ``(C) Noncancellable accident and health insurance 
                contracts.--A noncancellable accident and health 
                insurance contract shall be treated for purposes of 
                this subsection in the same manner as a life insurance 
                contract except that paragraph (4)(B)(i) shall not 
                apply.
                    ``(D) Located.--
                            ``(i) In general.--The determination of 
                        where a customer is located shall be made under 
                        rules prescribed by the Secretary.
                            ``(ii) Special rule for qualified business 
                        units.--Gross income derived by a corporation's 
                        qualified business unit (within the meaning of 
                        section 989(a)) from transactions with 
                        customers which are located in the country in 
                        which the qualified business unit both 
                        maintains its principal office and conducts 
                        substantial business activity shall be treated 
                        as derived from transactions with customers 
                        which are located within the country under the 
                        laws of which the controlled foreign 
                        corporation is created or organized.
                    ``(E) Customer.--
                            ``(i) In general.--The term `customer' 
                        means, with respect to any controlled foreign 
                        corporation, any person which has a customer 
                        relationship with such corporation.
                            ``(ii) Exception for related, etc. 
                        persons.--A person who is a related person (as 
                        defined in subsection (d)(3)), an officer, a 
                        director, or an employee with respect to any 
                        controlled foreign corporation shall not be 
                        treated as a customer with respect to any 
                        transaction if a principal purpose of such 
                        transaction is to satisfy any requirement of 
                        this subsection.
            ``(7) Anti-abuse rules.--For purposes of applying this 
        subsection and subsection (c)(2)(C)(ii), there shall be 
        disregarded any item of income, gain, loss, or deduction with 
        respect to any transaction or series of transactions one of the 
        principal purposes of which is qualifying income or gain for 
        the exclusion under this section, including--
                    ``(A) any change in the method of computing 
                reserves or any other transaction or series of 
                transactions a principal purpose of which is the 
                acceleration or deferral of any item in order to claim 
                the benefits of such exclusion through the application 
                of this subsection, and
                    ``(B) organizing entities in order to satisfy any 
                same country requirement under this subsection.
            ``(8) Coordination with other provisions.--
                    ``(A) Section 901(k).--
                            ``(i) In general.--The amount of qualified 
                        taxes (as defined in section 901(k)(4)) to 
                        which paragraphs (1) and (2) of section 901(k) 
                        do not apply by reason of paragraph (4) of such 
                        section 901(k) shall be reduced by an amount 
                        which bears the same ratio to such qualified 
                        taxes as the amount of income from the active 
                        conduct of a securities business which is not 
                        subpart F income solely by reason of this 
                        subsection, subsection (c)(2)(C)(ii), and 
                        subsection (e)(2)(C) bears to the total income 
                        from the active conduct of a securities 
                        business by a controlled foreign corporation 
                        which is not subpart F income. The 
                        determination under the preceding sentence 
                        shall be made by treating all members of an 
                        affiliated group as 1 corporation. For purposes 
                        of this clause, the term `subpart F income' has 
                        the meaning given such term by section 952(a) 
                        but determined without regard to section 952(c) 
                        and paragraphs (3) and (4) of subsection (b) of 
                        this section.
                            ``(ii) Election not to have subsection and 
                        certain other provisions apply.--Clause (i) 
                        shall not apply for any taxable year of a 
                        foreign corporation if such corporation (and 
                        all members of the affiliated group of which 
                        such corporation is a member) elect not to have 
                        this subsection, subsection (c)(2)(C)(ii), and 
                        subsection (e)(2)(C) apply for such taxable 
                        year.
                    ``(B) Treatment of income to which section 953 
                applies.--Subparagraphs (B) and (C) of paragraph (1) 
                shall not apply to investment income allocable to 
                contracts that insure related party risks or risks 
                located in a foreign country other than the country in 
                which the qualifying insurance company is created or 
                organized.
            ``(9) Application.--This subsection, subsection 
        (c)(2)(C)(ii), and subsection (e)(2)(C) shall apply only to the 
        first full taxable year of a foreign corporation beginning 
        after December 31, 1997, and before January 1, 1999, and to 
        taxable years of United States shareholders with or within 
        which such taxable year of such foreign corporation ends.''
    (b) Special Rules for Dealers.--Section 954(c)(2)(C) of such Code 
is amended to read as follows:
                    ``(C) Exception for dealers.--Except as provided by 
                regulations, in the case of a regular dealer in 
                property (within the meaning of paragraph (1)(B)), 
                forward contracts, option contracts, or similar 
                financial instruments (including notional principal 
                contracts and all instruments referenced to 
                commodities), there shall not be taken into account in 
                computing foreign personal holding income--
                            ``(i) any item of income, gain, deduction, 
                        or loss (other than any item described in 
                        subparagraph (A), (E), or (G) of paragraph (1)) 
                        from any transaction (including hedging 
                        transactions) entered into in the ordinary 
                        course of such dealer's trade or business as 
                        such a dealer, and
                            ``(ii) if such dealer is a dealer in 
                        securities (within the meaning of section 475), 
                        any interest or dividend or equivalent amount 
                        described in subparagraph (E) or (G) of 
                        paragraph (1) from any transaction (including 
                        any hedging transaction or transaction 
                        described in section 956(c)(2)(J)) entered into 
                        in the ordinary course of such dealer's trade 
                        or business as such a dealer in securities, but 
                        only if employees of the dealer which are 
                        located in the country under the laws of which 
                        the dealer is created or organized (or in the 
                        case of a qualified business unit described in 
                        section 989(a) which both maintains its 
                        principal office and conducts substantial 
                        business activity in a country, employees of 
                        such unit which are located in such country) 
                        materially participate in such transaction.''.
    (c) Exemption From Foreign Base Company Services Income.--Paragraph 
(2) of section 954(e) of such Code (as amended by subsection (d)) is 
amended by striking ``or'' at the end of subparagraph (A), by striking 
the period at the end of subparagraph (B) and inserting ``, or'', and 
by adding at the end the following:
                    ``(C)(i) a transaction by the controlled foreign 
                corporation if the income from the transaction is not 
                foreign personal holding company income by reason of 
                subsection (h), or
                    ``(ii) a transaction by the controlled foreign 
                corporation if subsection (c)(2)(C)(ii) applies to such 
                transaction.''.
    (d) Repeal of Canceled Provisions.--Section 1175 of the Taxpayer 
Relief Act of 1997, and the amendments made by such section, are hereby 
repealed, and the Internal Revenue Code of 1986 shall be applied and 
administered as if such section (and amendments) had never been 
enacted.
    (e) Budgetary Treatment.--For purposes of section 10213 of the 
Balanced Budget Act of 1997, the provisions of this section shall be 
considered to have been enacted as part of the Taxpayer Relief Act of 
1997.

SEC. 2. NONRECOGNITION OF GAIN ON SALE OF STOCK TO CERTAIN FARMERS' 
              COOPERATIVES.

    (a) In General.--Part III of subchapter O of chapter 1 of the 
Internal Revenue Code of 1986 (relating to nontaxable exchanges) is 
amended by inserting after section 1042 the following new section:

``SEC. 1042A. SALES OF STOCK TO CERTAIN FARMERS' COOPERATIVES.

    ``(a) Nonrecognition of Gain.--If--
            ``(1) the taxpayer elects the application of this section 
        with respect to any sale of qualified agricultural processor 
        stock,
            ``(2) the taxpayer purchases qualified replacement property 
        within the replacement period, and
            ``(3) the requirements of subsection (c) are met with 
        respect to such sale,
then the gain (if any) on such sale which would be recognized as long-
term capital gain shall be recognized only to the extent that the 
amount realized on such sale exceeds the cost to the taxpayer of such 
qualified replacement property. The preceding sentence shall not apply 
to a sale by an eligible farmers' cooperative.
    ``(b) Limitation.--
            ``(1) In general.--If subsection (a) applies to the sale of 
        any stock by the taxpayer in a qualified agricultural 
        processor, the aggregate amount of gain taken into account by 
        the taxpayer under subsection (a) with respect to stock in such 
        processor shall not exceed the amount of the limitation under 
        paragraph (2) which is allocated to such sale by the eligible 
        farmers' cooperative.
            ``(2) Allocation.--The amount allocated under this 
        paragraph by any cooperative with respect to stock acquired by 
        such cooperative during any taxable year of such cooperative 
        shall not exceed $75,000,000.
            ``(3) Aggregation rules.--All eligible farmers' 
        cooperatives which are under common control (within the meaning 
        of subsection (a) or (b) of section 52) shall be treated as 1 
        cooperative for purposes of paragraph (2), and the limitation 
        under such paragraph shall be allocated among such cooperatives 
        in such manner as the Secretary shall prescribe.
    ``(c) Requirements To Qualify for Nonrecognition.--A sale of 
qualified agricultural processor stock meets the requirements of this 
subsection if--
            ``(1) Sale to eligible farmers' cooperative.--Such stock is 
        sold to an eligible farmers' cooperative.
            ``(2) Special rule for certain cooperatives.--
                    ``(A) In general.--In the case of a sale of such 
                stock to an eligible farmers' cooperative described in 
                subparagraph (B), the processor purchased, during at 
                least 3 of the 5 most recent taxable years of such 
                processor ending on or before the date of the sale, 
                more than one-half of the agricultural or horticultural 
                products to be refined or processed by such processor 
                from such cooperative or farmers who are members of 
                such cooperative.
                    ``(B) Cooperatives described.--A cooperative is 
                described in this subparagraph with respect to any sale 
                if, for any taxable year ending before the date of such 
                sale--
                            ``(i) such cooperative had gross receipts 
                        of more than $1,000,000,000, or
                            ``(ii) such cooperative sold more than a de 
                        minimis amount of specialty produce.
                    ``(C) Specialty produce.--For purposes of 
                subparagraph (B), the term `specialty produce' means 
                any agricultural or horticultural product other than 
                wheat, feed grains, oil seeds, cotton, rice, cattle, 
                hogs, sheep, or dairy products.
                    ``(D) Special rules.--
                            ``(i) Gross receipts.--For purposes of 
                        subparagraph (B)(i), rules similar to the rules 
                        of paragraph (2), and subparagraphs (B) and (C) 
                        of paragraph (3), of section 448(c) shall 
                        apply.
                            ``(ii) Predecessor.--Any reference in this 
                        paragraph to a cooperative or processor shall 
                        be treated as including a reference to any 
                        predecessor thereof.
            ``(3) Cooperative must hold 100 percent of stock after 
        sale.--The eligible farmers' cooperative owns, immediately 
        after the sale, all of the qualified agricultural processor 
        stock of the corporation.
            ``(4) Written statement and holding period.--Requirements 
        similar to the requirements of paragraphs (3) and (4) of 
        section 1042(b) are met.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified agricultural processor stock.--The term 
        `qualified agricultural processor stock' means stock (other 
        than stock described in section 1504(a)(4)) issued by a 
        qualified agricultural processor.
            ``(2) Qualified agricultural processor.--The term 
        `qualified agricultural processor' means a domestic C 
        corporation substantially all of the assets of which are used 
        in the active conduct of the trade or business of refining or 
        processing agricultural or horticultural products in the United 
        States.
            ``(3) Eligible farmers' cooperative.--The term `eligible 
        farmers' cooperative' means an organization to which part I of 
        subchapter T applies and which is engaged in the marketing of 
        agricultural or horticultural products.
            ``(4) Replacement period.--The term `replacement period' 
        means the period which begins 3 months before the date on which 
        the sale of qualified agricultural processor stock occurs and 
        which ends 12 months after the date of such sale.
            ``(5) Qualified replacement property.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `qualified replacement 
                property' has the meaning given such term by section 
                1042(c)(4).
                    ``(B) Exception.--The term `qualified replacement 
                property' shall not include any security issued by the 
                taxpayer or by any corporation controlled by the 
                taxpayer immediately after the purchase. For purposes 
                of the preceding sentence, the term `control' has the 
                meaning given such term by section 304(c) (determined 
                by substituting `10 percent' for `50 percent' each 
                place it appears in paragraph (1) thereof).
    ``(e) Special Rules.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, rules similar to the rules of paragraphs (5) and 
        (6) of section 1042(c), subsections (d), (e), and (f) of 
        section 1042, section 1016(a)(22), and section 1223(13) shall 
        apply for purposes of this section.
            ``(2) Certain provisions not to apply.--
                    ``(A) Recognition on complete liquidation.--Section 
                332 shall not apply to the liquidation into the 
                cooperative or any related person of a qualified 
                agricultural processor if the cooperative or related 
                person acquired the stock in such processor in a sale 
                to which subsection (a) applied.
                    ``(B) Deemed sale election not available.--No 
                election may be made under section 338(h)(10) with 
                respect to a sale to which subsection (a) applies.
    ``(f) Recapture of Tax Benefit Where Lack of Continuity.--
            ``(1) In general.--If there is a recapture event during any 
        taxable year with respect to any sale to an eligible farmers' 
        cooperative to which this section applied, such cooperative's 
        tax imposed by this chapter for such taxable year shall be 
        increased by an amount equal to--
                    ``(A) the recapture percentage of the amount 
                allocated under subsection (b) to such sale, multiplied 
                by
                    ``(B) the highest rate of tax imposed by section 11 
                for such taxable year.
            ``(2) Recapture event.--For purposes of this subsection, a 
        recapture event shall be treated as occurring in any taxable 
        year if--
                    ``(A) any portion of such taxable year is within 
                the 3-year period beginning on the date on which the 
                eligible farmers' cooperative acquired stock in a 
                qualified agricultural processor in a sale to which 
                this section applied and, as of the close of such 
                portion, there is a decrease in the direct or indirect 
                percentage ownership of such stock held by such 
                cooperative which was not previously taken into account 
                under this subsection, or
                    ``(B) such taxable year is one of the first 5 
                taxable years ending after the date of such sale and is 
                the third of such taxable years during which one-half 
                or less of the agricultural or horticultural products 
                refined or processed by the qualified agricultural 
                processor are purchased from the eligible farmers' 
                cooperative or farmers who are members of such 
                cooperative.
            ``(3) Recapture percentage.--For purposes of this 
        subsection, the term `recapture percentage' means--
                    ``(A) in the case of a recapture event described in 
                paragraph (2)(A), the percentage equal to a fraction--
                            ``(i) the numerator of which is the 
                        percentage decrease described in paragraph 
                        (2)(A), and
                            ``(ii) the denominator of which is the 
                        percentage which the qualified agricultural 
                        processor stock acquired by the cooperative in 
                        a sale to which this section applied bears to 
                        all qualified agricultural processor stock in 
                        the processor, and
                    ``(B) in the case of a recapture event described in 
                paragraph (2)(B), 100 percent.
        In no event shall the recapture percentage for any taxable year 
        exceed 100 percent minus the sum of the recapture percentages 
        for all prior taxable years.
            ``(4) Exceptions to purchase requirement.--The purchase 
        requirement of paragraph (2)(B) shall be treated as met for any 
        taxable year if the Secretary determines that such requirement 
        was not met due to 1 or more of the following: flood, drought, 
        or other weather-related conditions, environmental 
        contamination, disease, fire, or other similar extenuating 
        circumstances prescribed by the Secretary.
    ``(g) Coordination With Section 1042.--No election may be made 
under this section with respect to any sale if an election is made 
under section 1042 with respect to such sale.
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
as are appropriate to carry out this section, including regulations 
which treat 2 or more sales which are part of the same transaction as 1 
sale.''
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 26(b) of such Code is amended 
        by striking ``and'' at the end of subparagraph (P), by striking 
        the period at the end of subparagraph (Q) and inserting ``, 
        and'', and by adding at the end the following new subparagraph:
                    ``(R) section 1042A(f) (relating to recapture of 
                tax benefit where lack of continuity in certain 
                agricultural processors).''
            (2) The table of sections for part III of subchapter O of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 1042 the following new item:

                              ``Sec. 1042A. Sales of stock to certain 
                                        farmers' cooperatives.''
    (c) Effective Date.--The amendments made by this section shall 
apply to sales after December 31, 1997.
    (d) Budgetary Treatment.--For purposes of section 10213 of the 
Balanced Budget Act of 1997, the provisions of this section shall be 
considered to have been enacted as part of the Taxpayer Relief Act of 
1997.