[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2203 Introduced in Senate (IS)]







106th CONGRESS
  2d Session
                                S. 2203

 To amend title 26 of the Taxpayer Relief Act of 1986 to allow income 
   averaging for fishermen without negative Alternative Minimum Tax 
 treatment, for the creation of risk management accounts for fishermen 
                        and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 7, 2000

 Mr. Murkowski (for himself and Mr. Stevens) introduced the following 
  bill; which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend title 26 of the Taxpayer Relief Act of 1986 to allow income 
   averaging for fishermen without negative Alternative Minimum Tax 
 treatment, for the creation of risk management accounts for fishermen 
                        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. SHORT TITLE.

    This Act may be referred to as the ``Fair Tax Treatment for 
Fishermen Act of 2000''.

SEC. 2. INCOME AVERAGING FOR FISHERMEN WITHOUT INCREASING ALTERNATIVE 
              MINIMUM LIABILITY.

    (a) In General.--Section 55(c) (defining regular tax) is amended by 
redesignating paragraph (2) as paragraph (3) and by inserting after 
paragraph (1) the following:
            ``(2) Coordination with income averaging for fishermen.--
        Solely for purposes of this section, section 1301 (relating to 
        averaging of fishing income) shall not apply in computing the 
        regular tax.''.
    (b) Allowing Income Averaging for Fishermen.--
            (1) In general.--Section 1301(a) is amended by striking 
        ``farming business'' and inserting ``farming business or 
        fishing business,''.
            (2) Definition of elected farm income.--
                    (A) In general.--Clause (i) of section 
                1301(b)(1)(A) is amended by inserting ``or fishing 
                business'' before the semicolon.
                    (B) Conforming amendment.--Subparagraph (B) of 
                section 1301(b)(1) is amended by inserting ``or fishing 
                business'' after ``farming business'' both places it 
                occurs.
            (3) Definition of fishing business.--Section 1301(b) is 
        amended by adding at the end the following new paragraph:
            ``(4) Fishing business.--The term `fishing business' means 
        the conduct of commercial fishing (as defined in section 3 of 
        the Magnuson-Stevens Fishery Conservation and Management Act 
        (16 U.S.C. 1802, Public Law 94-265 as amended).)''.

SEC. 3. FISHING RISK MANAGEMENT ACCOUNTS.

    (a) In General.--Subpart C of part II of subchapter E of chapter 1 
(relating to taxable year for which deductions taken) is amended by 
inserting after section 468B the following:

``SEC. 468C. FISHING RISK MANAGEMENT ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an individual engaged in 
an eligible commercial fishing activity, there shall be allowed as a 
deduction for any taxable year the amount paid in cash by the taxpayer 
during the taxable year Fishing Risk Management Account (hereinafter 
referred to as the `FisheRMen Account').
    ``(b) Limitation.--
            ``(1) Contributions.--The amount which a taxpayer may pay 
        into the FisheRMen Account for any taxable year shall not 
        exceed 20 percent of so much of the taxable income of the 
        taxpayer (determined without regard to this section) which is 
        attributable (determined in the manner applicable under section 
        1301) to any eligible commercial fishing activity.
            ``(2) Distributions.--Distributions from a FisheRMen 
        Account may not be used to purchase, lease, or finance any new 
        fishing vessel, add capacity to any fishery, or otherwise 
        contribute to the overcapitalization of any fishery. The 
        Secretary of Commerce shall implement regulations to enforce 
        this paragraph.
    ``(c) Eligible Businesses.--For purposes of this section--
            ``(1) Commercial fishing activity.--The term `commercial 
        fishing activity' has the meaning given the term `commercial 
        fishing' by section (3) of the Magnuson-Stevens Fishery 
        Conservation and Management Act (16 U.S.C. 1802, Public Law 94-
        265 as amended) but only if such fishing is not a passive 
        activity (within the meaning of section 469(c)) of the 
        taxpayer.
    ``(d) Fishermen Account.--For purposes of this section--
            ``(1) In general.--The term `FisheRMen Account' means a 
        trust created or organized in the United States for the 
        exclusive benefit of the taxpayer, but only if the written 
        governing instrument creating the trust meets the following 
        requirements:
                    ``(A) No contribution will be accepted for any 
                taxable year in excess of the amount allowed as a 
deduction under subsection (a) for such year.
                    ``(B) The trustee is a bank (as defined in section 
                408(n)) or another person who demonstrates to the 
                satisfaction of the Secretary that the manner in which 
                such person will administer the trust will be 
                consistent with the requirements of this section.
                    ``(C) The assets of the trust consist entirely of 
                cash or of obligations which have adequate stated 
                interest (as defined in section 1274(c)(2)) and which 
                pay such interest not less often than annually.
                    ``(D) All income of the trust is distributed 
                currently to the grantor.
                    ``(E) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
            ``(2) Account taxed as grantor trust.--The grantor of a 
        FisheRMen Account shall be treated for purposes of this title 
        as the owner of such Account and shall be subject to tax 
        thereon in accordance with subpart E of part I of subchapter J 
        of this chapter (relating to grantors and others treated as 
        substantial owners).
    ``(e) Inclusion of Amounts Distributed.--
            ``(1) In general.--Except as provided in paragraph (2), 
        there shall be includible in the gross income of the taxpayer 
        for any taxable year--
                    ``(A) any amount distributed from a FisheRMen 
                Account of the taxpayer during such taxable year, and
                    ``(B) any deemed distribution under--
                            ``(i) subsection (f)(1) (relating to 
                        deposits not distributed within 5 years),
                            ``(ii) subsection (f)(2) (relating to 
                        cessation in eligible commercial fishing 
                        activities), and
                            ``(iii) subparagraph (A) or (B) of 
                        subsection (f)(3) (relating to prohibited 
                        transactions and pledging account as security).
            ``(2) Exceptions.--Paragraph (1)(A) shall not apply to--
                    ``(A) any distribution to the extent attributable 
                to income of the Account, and
                    ``(B) the distribution of any contribution paid 
                during a taxable year to a FisheRMen Account to the 
                extent that such contribution exceeds the limitation 
                applicable under subsection (b) if requirements similar 
                to the requirements of section 408(d)(4) are met.
        For purposes of subparagraph (A), distributions shall be 
        treated as first attributable to income and then to other 
        amounts.
    ``(f) Special Rules.--
            ``(1) Tax on deposits in account which are not distributed 
        within 5 years.--
                    ``(A) In general.--If, at the close of any taxable 
                year, there is a nonqualified balance in any FisheRMen 
                Account--
                            ``(i) there shall be deemed distributed 
                        from such Account during such taxable year an 
                        amount equal to such balance, and
                            ``(ii) the taxpayer's tax imposed by this 
                        chapter for such taxable year shall be 
                        increased by 10 percent of such deemed 
                        distribution.
                The preceding sentence shall not apply if an amount 
                equal to such nonqualified balance is distributed from 
                such Account to the taxpayer before the due date 
                (including extensions) for filing the return of tax 
                imposed by this chapter for such year (or, if earlier, 
                the date the taxpayer files such return for such year).
                    ``(B) Nonqualified balance.--For purposes of 
                subparagraph (A), the term `nonqualified balance' means 
                any balance in the Account on the last day of the 
                taxable year which is attributable to amounts deposited 
                in such Account before the 4th preceding taxable year.
                    ``(C) Ordering rule.--For purposes of this 
                paragraph, distributions from a FisheRMen Account 
                (other than distributions of current income) shall be 
                treated as made from deposits in the order in which 
                such deposits were made, beginning with the earliest 
                deposits.
            ``(2) Cessation in eligible business.--At the close of the 
        first disqualification period after a period for which the 
        taxpayer was engaged in an eligible commercial fishing 
        activity, there shall be deemed distributed from the FisheRMen 
        Account of the taxpayer an amount equal to the balance in such 
        Account (if any) at the close of such disqualification period. 
        For purposes of the preceding sentence, the term 
        `disqualification period' means any period of 2 consecutive 
        taxable years for which the taxpayer is not engaged in an 
        eligible commercial fishing activity.
            ``(3) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Section 220(f)(8) (relating to treatment on 
                death).
                    ``(B) Section 408(e)(2) (relating to loss of 
                exemption of account where individual engages in 
                prohibited transaction).
                    ``(C) Section 408(e)(4) (relating to effect of 
                pledging account as security).
                    ``(D) Section 408(g) (relating to community 
                property laws).
                    ``(E) Section 408(h) (relating to custodian 
                accounts).
            ``(4) Time when payments deemed made.--For purposes of this 
        section, a taxpayer shall be deemed to have made a payment to a 
        FisheRMen Account on the last day of a taxable year if such 
        payment is made on account of such taxable year and is made on 
        or before the due date (without regard to extensions) for 
        filing the return of tax for such taxable year.
            ``(5) Individual.--For purposes of this section, the term 
        `individual' shall not include an estate or trust.
            ``(6) Deduction not allowed for self-employment tax.--The 
        deduction allowable by reason of subsection (a) shall not be 
        taken into account in determining an individual's net earnings 
        from self-employment (within the meaning of section 1402(a)) 
        for purposes of chapter 2.
    ``(g) Reports.--The trustee of a FisheRMen Account shall make such 
reports regarding such Account to the Secretary and to the person for 
whose benefit the Account is maintained with respect to contributions, 
distributions, and such other matters as the Secretary may require 
under regulations. The reports required by this subsection shall be 
filed at such time and in such manner and furnished to such persons at 
such time and in such manner as may be required by such regulations.''.
    (b) Tax on Excess Contributions.--
            (1) Subsection (a) of section 4973 (relating to tax on 
        excess contributions to certain tax-favored accounts and 
        annuities) is amended by striking ``or'' at the end of 
        paragraph (3), by redesignating paragraph (4) as paragraph (5), 
        and by inserting after paragraph (3) the following:
            ``(4) a FisheRMen Account (within the meaning of section 
        468C(d)), or''.
            (2) Section 4973 is amended by adding at the end the 
        following:
    ``(g) Excess Contributions to Fishermen Accounts.--For purposes of 
this section, in the case of a FisheRMen Account (within the meaning of 
section 468C(d)), the term `excess contributions' means the amount by 
which the amount contributed for the taxable year to the Account 
exceeds the amount which may be contributed to the Account under 
section 468C(b) for such taxable year. For purposes of this subsection, 
any contribution which is distributed out of the FisheRMen Account in a 
distribution to which section 468C(e)(2)(B) applies shall be treated as 
an amount not contributed.''.
            (3) The section heading for section 4973 is amended to read 
        as follows:

``SEC. 4973. EXCESS CONTRIBUTIONS TO CERTAIN ACCOUNTS, ANNUITIES, 
              ETC.''.

            (4) The table of sections for chapter 43 is amended by 
        striking the item relating to section 4973 and inserting the 
        following:

``Sec. 4973 Excess contributions to certain accounts, annuities, 
                            etc.''.
    (c) Tax on Prohibited Transactions.--
            (1) Subsection (c) of section 4975 (relating to tax on 
        prohibited transactions) is amended by adding at the end the 
        following:
            ``(6) Special rule for fishermen accounts.--A person for 
        whose benefit a FisheRMen Account (within the meaning of 
        section 468C(d)) is established shall be exempt from the tax 
        imposed by this section with respect to any transaction 
        concerning such account (which would otherwise be taxable under 
        this section) if, with respect to such transaction, the account 
        ceases to be a FisheRMen Account by reason of the application 
        of section 468C(f)(3)(A) to such account.''.
            (2) Paragraph (1) of section 4975(e) is amended by 
        redesignating subparagraphs (E) and (F) as subparagraphs (F) 
        and (G), respectively, and by inserting after subparagraph (D) 
        the following:
                    ``(E) a FisheRMen Account described in section 
                468C(d),''.
    (d) Failure To Provide Reports on Fishermen Accounts.--Paragraph 
(2) of section 6693(a) (relating to failure to provide reports on 
certain tax-favored accounts or annuities) is amended by redesignating 
subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively, 
and by inserting after subparagraph (B) the following:
                    ``(C) section 468C(g) (relating to FisheRMen 
                Accounts),''.
    (e) Clerical Amendment.--The table of sections for subpart C of 
part II of subchapter E of chapter 1 is amended by inserting after the 
item relating to section 468B the following:

``Sec. 468C. Fishing Risk Management Accounts.''.

SECTION 4. EFFECTIVE DATE.

    The changes made by this Act shall apply to taxable years beginning 
after December 31, 2000.
                                 <all>