[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 1412 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                S. 1412

 To amend the Internal Revenue Code of 1986 to permit certain tax free 
corporate liquidations into a 501(c)(3) organization and to revise the 
unrelated business income tax rules regarding receipt of debt-financed 
                    property in such a liquidation.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            November 7, 1997

   Mr. Smith of Oregon (for himself, Mrs. Feinstein, Mr. Wyden, Mr. 
 Baucus, and Mr. Gorton) introduced the following bill; which was read 
             twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to permit certain tax free 
corporate liquidations into a 501(c)(3) organization and to revise the 
unrelated business income tax rules regarding receipt of debt-financed 
                    property in such a liquidation.

    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 ``Charitable Giving Incentive Act''.

SEC. 2. ELIMINATION OF CORPORATE LEVEL TAX UPON LIQUIDATION OF CLOSELY 
              HELD CORPORATIONS UNDER CERTAIN CONDITIONS.

    (a) In General.--Paragraph (2) of section 337(b) of the Internal 
Revenue Code of 1986 (relating to treatment of indebtedness of 
subsidiary, etc.) is amended--
            (1) by striking ``Except as provided in subparagraph (B)'' 
        in subparagraph (A) and inserting ``Except as provided in 
        subparagraph (B) or (C)'', and
            (2) by adding at the end the following new subparagraph:
                    ``(C) Exception in the case of closely-held stock 
                acquired without consideration.--If the 80-percent 
                distributee is an organization described in section 
                501(c)(3) and acquired stock in a liquidated domestic 
                corporation from either a decedent (within the meaning 
                of section 1014(b)) or the decedent's spouse, 
                subparagraph (A) shall not apply to any distribution of 
                property to the 80-percent distributee. This 
                subparagraph shall apply only if all of the following 
                conditions are met:
                            ``(i) 80 percent or more of the stock in 
                        the liquidated corporation was acquired by the 
                        distributee, solely by a distribution from an 
                        estate or trust created by one or more 
                        qualified persons. For purposes of this clause, 
                        the term `qualified person' means a citizen or 
                        individual resident of the United States, an 
                        estate (other than a foreign estate within the 
                        meaning of section 7701(a)(31)(A)), or any 
                        trust described in clause (i), (ii), or (iii) 
                        of section 1361(c)(2)(A).
                            ``(ii) The liquidated corporation adopted 
                        its plan of liquidation on or after January 1, 
                        1999.
                            ``(iii) The 80-percent distributee is an 
                        organization created or organized under the 
                        laws of the United States or of any State.
                            ``(iv) All of the stock in the liquidated 
                        corporation is non-readily-tradable stock (as 
                        defined in section 6166(b)(7)(B)).
                Nothing in subsection (d) shall be construed to limit 
                the application of this subsection in circumstances in 
                which this subparagraph applies.''.
    (b) Revision of Unrelated Business Income Tax Rules To Exempt 
Certain Assets.--Subparagraph (B) of section 514(c)(2) of the Internal 
Revenue Code of 1986 (relating to property acquired subject to 
mortgage, etc.) is amended by inserting ``or pursuant to a liquidation 
described in section 337(b)(2)(C),'' after ``bequest or devise,''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.
                                 <all>