[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3124 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 3124

To amend the Internal Revenue Code of 1986 to provide that the special 
  tax imposed on the recognition of built-in gain by an S corporation 
 shall not apply to the extent such gain is reinvested in the business.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 12, 2001

 Mr. Ramstad 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 provide that the special 
  tax imposed on the recognition of built-in gain by an S corporation 
 shall not apply to the extent such gain is reinvested in the business.

    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 ``Built-In Gain Economic Growth Act of 
2001''.

SEC. 2. EXCEPTION FROM TAX ON RECOGNIZED BUILT-IN GAIN OF S 
              CORPORATIONS.

    (a) In General.--Section 1374 of the Internal Revenue Code of 1986 
(relating to tax imposed on certain built-in gains) is amended by 
redesignating subsection (e) as subsection (f) and by inserting after 
subsection (d) the following new subsection:
    ``(e) Exception for Reinvested Gain.--
            ``(1) In general.--If an existing S corporation has a net 
        recognized built-in gain for any taxable year in the 
        recognition period and elects the application of this 
        subsection--
                    ``(A) the tax (if any) imposed by subsection (a) on 
                such gain shall not be imposed until the second 
                succeeding taxable year, and
                    ``(B) the amount of such gain on which tax is 
                imposed by subsection (a) for such second succeeding 
                taxable year shall be only the amount by which such 
                gain exceeds--
                            ``(i) the aggregate qualified expenditures 
                        made by the S corporation during nonrecognition 
                        period, reduced by
                            ``(ii) any portion of such expenditures 
                        previously taken into account under this 
                        subsection.
            ``(2) Qualified expenditures.--For purposes of this 
        subsection, the term `qualified expenditures' means--
                    ``(A) amounts for which a deduction is allowed 
                under section 162,
                    ``(B) amounts chargeable to capital account for 
                property used in a trade or business of the S 
                corporation,
                    ``(C) payments of principal and interest on debt of 
                the S corporation, and
                    ``(D) amounts distributed to shareholders to the 
                extent such amounts do not exceed the aggregate of such 
                shareholders' tax imposed by this chapter and State and 
                local taxes on such net recognized built-in gain.
            ``(3) Nonrecognition period.--For purposes of this 
        subsection, the term `nonrecognition period' means, with 
        respect to a taxable year for which an S corporation has a net 
        recognized built-in gain, the first and second succeeding 
        taxable years.
            ``(4) Existing s corporation.--The term `existing S 
        corporation' means any S corporation for which an election 
        under section 1362 is filed before October 12, 2001.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.
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