[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 709 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                 S. 709

To amend the Internal Revenue Code of 1986 to clarify the tax treatment 
                  of Alaska Native Settlement Trusts.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 5, 2001

 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 the Internal Revenue Code of 1986 to clarify the tax treatment 
                  of Alaska Native Settlement Trusts.

    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 ``Alaska Native Settlement Trust Tax 
Fairness Act of 2001''.

SEC. 2. TAX TREATMENT AND INFORMATION REQUIREMENTS OF ALASKA NATIVE 
              SETTLEMENT TRUSTS.

    (a) Treatment of Alaska Native Settlement Trusts.--Subpart A of 
part I of subchapter J of chapter 1 of the Internal Revenue Code of 
1986 (relating to general rules for taxation of trusts and estates) is 
amended by adding at the end the following new section:

``SEC. 646. TAX TREATMENT OF ALASKA NATIVE SETTLEMENT TRUSTS.

    ``(a) In General.--Except as otherwise provided in this section, 
the provisions of this subchapter and section 1(e) shall apply to all 
Settlement Trusts.
    ``(b) Taxation of Income of Trust.--Except as provided in 
subsection (f)(1)(B)(ii)--
            ``(1) In general.--There is hereby imposed on the taxable 
        income of an electing Settlement Trust, other than its net 
        capital gain, a tax at the lowest rate specified in section 1.
            ``(2) Capital gain.--In the case of an electing Settlement 
        Trust with a net capital gain for the taxable year, a tax is 
        hereby imposed on such gain at the rate of tax which would 
        apply to such gain if the taxpayer were subject to a tax on its 
        other taxable income at only the lowest rate specified in 
        section 1.
    ``(c) One-Time Election.--
            ``(1) In general.--A Settlement Trust may elect to have the 
        provisions of this section apply to the trust and its 
        beneficiaries.
            ``(2) Time and method of election.--An election under 
        paragraph (1) shall be made by the trustee of such trust--
                    ``(A) on or before the due date (including 
                extensions) for filing the Settlement Trust's return of 
                tax for the first taxable year of such trust ending 
                after the date of the enactment of this section, and
                    ``(B) by attaching to such return of tax a 
                statement specifically providing for such election.
            ``(3) Period election in effect.--Except as provided in 
        subsection (f), an election under this subsection--
                    ``(A) shall apply to the first taxable year 
                described in paragraph (2)(A) and all subsequent 
                taxable years, and
                    ``(B) may not be revoked once it is made.
    ``(d) Contributions to Trust.--
            ``(1) Beneficiaries of electing trust not taxed on 
        contributions.--In the case of an electing Settlement Trust, no 
        amount shall be includible in the gross income of a beneficiary 
        of such trust by reason of a contribution to such trust.
            ``(2) Earnings and profits.--The earnings and profits of 
        the sponsoring Native Corporation shall not be reduced on 
        account of any contribution to such Settlement Trust:
    ``(e) Tax Treatment of Distributions to Beneficiaries.--Amounts 
distributed by an electing Settlement Trust during any taxable year 
shall be considered as having the following characteristics in the 
hands of the recipient beneficiary:
            ``(1) First, as amounts excludable from gross income for 
        the taxable year to the extent of the taxable income of such 
        trust for such taxable year (decreased by any income tax paid 
        by the trust with respect to the income) plus any amount 
        excluded from gross income of the trust under section 103.
            ``(2) Second, as amounts excludable from gross income to 
        the extent of the amount described in paragraph (1) for all 
        taxable years for which an election is in effect under 
        subsection (c) with respect to the trust, and not previously 
        taken into account under paragraph (1).
            ``(3) Third, as amounts distributed by the sponsoring 
        Native Corporation with respect to its stock (within the 
        meaning of section 301(a)) during such taxable year and taxable 
        to the recipient beneficiary as amounts described in section 
        301(c)(1), to the extent of current accumulated earnings and 
        profits of the sponsoring Native Corporation as of the close of 
        such taxable year after proper adjustment is made for all 
        distributions made by the sponsoring Native Corporation during 
        such taxable year.
            ``(4) Fourth, as amounts distributed by the trust in excess 
        of the distributable net income of such trust for such taxable 
        year.
Amounts distributed to which paragraph (3) applies shall not be treated 
as a corporate distribution subject to section 311(b), and for purposes 
of determining the amount of a distribution for purposes of paragraph 
(3) and the basis to the recipients, section 643(e) and not section 
301(b) or (d) shall apply.
    ``(f) Special Rules Where Transfer Restrictions Modified.--
            ``(1) Transfer of beneficial interests.--If, at any time, a 
        beneficial interest in an electing Settlement Trust may be 
        disposed of to a person in a manner which would not be 
        permitted by section 7(h) of the Alaska Native Claims 
        Settlement Act (43 U.S.C. 1606(h)) if such interest were 
        Settlement Common Stock--
                    ``(A) no election may be made under subsection (c) 
                with respect to such trust, and
                    ``(B) if such an election is in effect as of such 
                time--
                            ``(i) such election shall cease to apply as 
                        of the first day of the taxable year in which 
                        such disposition is first permitted,
                            ``(ii) the provisions of this section shall 
                        not apply to such trust for such taxable year 
                        and all taxable years thereafter, and
                            ``(iii) the distributable net income of 
                        such trust shall be increased by the current 
                        and accumulated earnings and profits of the 
                        sponsoring Native Corporation as of the close 
                        of such taxable year after proper adjustment is 
                        made for all distributions made by the 
                        sponsoring Native Corporation during such 
                        taxable year.
        In no event shall the increase under clause (iii) exceed the 
        fair market value of the trust's assets as of the date the 
        beneficial interest of the trust first becomes so disposable. 
        The earnings and profits of the sponsoring Native Corporation 
        shall be adjusted as of the last day of such taxable year by 
        the amount of earnings and profits so included in the 
        distributable net income of the trust.
            ``(2) Stock in corporation.--If--
                    ``(A) the Settlement Common Stock in the sponsoring 
                Native Corporation may be disposed of to a person in 
                any manner not permitted by section 7(h) of the Alaska 
                Native Claims Settlement Act (43 U.S.C. 1606(h)), and
                    ``(B) at any time after such disposition of stock 
                is first permitted, such corporation transfers assets 
                to a Settlement Trust,
        paragraph (1)(B) shall be applied to such trust on and after 
        the date of the transfer in the same manner as if the trust 
        permitted dispositions of beneficial interests in the trust in 
        a manner not permitted by such section 7(h).
            ``(3) Certain distributions.--For purposes of this section, 
        the surrender of an interest in a Native Corporation or an 
        electing Settlement Trust in order to accomplish the whole or 
        partial redemption of the interest of a shareholder or 
        beneficiary in such corporation or trust, or to accomplish the 
        whole or partial liquidation of such corporation or trust, 
        shall be deemed to be a transfer permitted by section 7(h) of 
        the Alaska Native Claims Settlement Act.
    ``(g) Taxable Income.--For purposes of this title, the taxable 
income of an electing Settlement Trust shall be determined under 
section 641(b) without regard to any deduction under section 651 or 
661.
    ``(h) Definitions.--For purposes of this section--
            ``(1) Electing settlement trust.--The term `electing 
        Settlement Trust' means a Settlement Trust which has made the 
        election, effective for a taxable year, described in subsection 
        (c).
            ``(2) Native corporation.--The term `Native Corporation' 
        has the meaning given such term by section 3(m) of the Alaska 
        Native Claims Settlement Act (43 U.S.C. 1602(m)).
            ``(3) Settlement common stock.--The term `Settlement Common 
        Stock' has the meaning given such term by section 3(p) of the 
        Alaska Native Claims Settlement Act (43 U.S.C. 1602(p)).
            ``(4) Settlement trust.--The term `Settlement Trust' means 
        a trust that constitutes a settlement trust under section 3(t) 
        of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(t)).
            ``(5) Sponsoring native corporation.--The term `sponsoring 
        Native Corporation' means the Native Corporation which 
        transfers assets to an electing Settlement Trust.
    ``(i) Special Loss Disallowance Rule.--Any loss that would 
otherwise be recognized by a shareholder upon a disposition of a share 
of stock of a sponsoring Native Corporation shall be reduced (but not 
below zero) by the per share loss adjustment factor. The per share loss 
adjustment factor shall be the aggregate of all contributions to all 
electing Settlement Trusts sponsored by such Native Corporation made on 
or after the first day each trust is treated as an electing Settlement 
Trust expressed on a per share basis and determined as of the day of 
each such contribution.
    ``(j) Cross Reference.--

                                ``For information required with respect 
to electing Settlement Trusts and sponsoring Native Corporations, see 
section 6039H.''.
    (b) Reporting.--Subpart A of part III of subchapter A of chapter 61 
of subtitle F of such Code (relating to information concerning persons 
subject to special provisions) is amended by inserting after section 
6039G the following new section:

``SEC. 6039H. INFORMATION WITH RESPECT TO ALASKA NATIVE SETTLEMENT 
              TRUSTS AND SPONSORING NATIVE CORPORATIONS.

    ``(a) Requirement.--The fiduciary of an electing Settlement Trust 
(as defined in section 646(h)(1)) shall include with the return of 
income of the trust a statement containing the information required 
under subsection (c).
    ``(b) Application With Other Requirements.--The filing of any 
statement under this section shall be in lieu of the reporting 
requirements under section 6034A to furnish any statement to a 
beneficiary regarding amounts distributed to such beneficiary (and such 
other reporting rules as the Secretary deems appropriate).
    ``(c) Required Information.--The information required under this 
subsection shall include--
            ``(1) the amount of distributions made during the taxable 
        year to each beneficiary,
            ``(2) the treatment of such distribution under the 
        applicable provision of section 646, including the amount that 
        is excludable from the recipient beneficiary's gross income 
        under section 646, and
            ``(3) the amount (if any) of any distribution during such 
        year that is deemed to have been made by the sponsoring Native 
        Corporation (as defined in section 646(h)(5)).
    ``(d) Sponsoring Native Corporation.--
            ``(1) In general.--The electing Settlement Trust shall, on 
        or before the date on which the statement under subsection (a) 
        is required to be filed, furnish such statement to the 
        sponsoring Native Corporation (as so defined).
            ``(2) Distributees.--The sponsoring Native Corporation 
        shall furnish each recipient of a distribution described in 
        section 646(e)(3) a statement containing the amount deemed to 
        have been distributed to such recipient by such corporation for 
        the taxable year.''.
    (c) Clerical Amendment.--
            (1) The table of sections for subpart A of part I of 
        subchapter J of chapter 1 of such Code is amended by adding at 
        the end the following new item:

                              ``Sec. 646. Tax treatment of Alaska 
                                        Native Settlement Trusts.''.
            (2) The table of sections for subpart A of part III of 
        subchapter A of chapter 61 of subtitle F of such Code is 
        amended by inserting after the item relating to section 6039G 
        the following new item:

                              ``Sec. 6039H. Information with respect to 
                                        Alaska Native Settlement Trusts 
                                        and sponsoring Native 
                                        Corporations.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act and to contributions made to electing Settlement Trusts for such 
year or any subsequent year.
                                 <all>