[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 794 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                 S. 794

   To amend the Internal Revenue Code of 1986 to facilitate electric 
  cooperative participation in a competitive electric power industry.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 26, 2001

Mr. Thompson (for himself, Mrs. Lincoln, Mr. Grassley, and Mr. Baucus) 
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 facilitate electric 
  cooperative participation in a competitive electric power industry.

    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 ``Rural Electric Tax Equity Act''.

SEC. 2. MEMBER INCOME TEST.

    (a) Electric Industry Restructuring Income Excluded From Member 
Income Test.--
            (1) In general.--Section 501(c)(12)(C) of the Internal 
        Revenue Code of 1986 is amended by striking ``or'' at the end 
        of clause (i), by striking the period at the end of clause (ii) 
        and inserting a comma, and by adding at the end the following 
        new clauses:
                            ``(iii) from the prepayment of any loan, 
                        debt, or obligation made, insured, or 
                        guaranteed under the Rural Electrification Act 
                        of 1936,
                            ``(iv) from any organization or entity in 
                        which the electric company owns an interest, 
                        other than income received by the electric 
                        company and paid by the organization or entity,
                            ``(v) from any member that voluntarily 
                        waives any right to capital credits, patronage 
                        dividends, or similar amounts allocated or paid 
                        by the electric company,
                            ``(vi) from any member for electric energy 
                        sold or furnished by the electric company based 
                        upon the electric company's incremental cost of 
                        generating, purchasing, transmitting, or 
                        distributing the electric energy,
                            ``(vii) from the receipt of any money or 
                        capital or any other contribution in aid of 
                        construction that would be excluded from income 
                        under section 118(c) if received by a regulated 
                        public utility,
                            ``(viii) either--
                                    ``(I) from the transfer of any 
                                amount into a trust, fund, or 
                                instrument established to pay any 
                                nuclear decommissioning costs, if the 
                                transfer is in connection with the 
                                transfer of a nuclear powerplant or 
                                nuclear powerplant unit, or
                                    ``(II) from the distribution of any 
                                amount from any such trust, fund, or 
                                instrument, including income 
                                representing payments by the electric 
                                company to the trust, fund, or 
                                instrument, and investment income 
                                earned by the trust, fund, or 
                                instrument,
                            ``(ix) from any individual, organization, 
                        or entity for the electric company selling, 
                        leasing, exchanging, or otherwise transferring 
                        on a mutually agreed upon basis any property, 
                        property right, asset, or service territory, or
                            ``(x) from any organization or entity, 
                        including any municipality, resulting from the 
                        compulsory or involuntary requisition or 
                        condemnation, or the threat or imminence of a 
                        compulsory or involuntary requisition or 
                        condemnation, of any property, asset, or 
                        service territory.''.
            (2) Special rules.--Section 512(b)(12) of such Code is 
        amended by adding at the end the following new subparagraphs:
                    ``(E) For purposes of this paragraph, if any 
                Federal, State, or local law, regulation, holding, or 
                order prohibits an electric company from engaging in a 
                business on a cooperative basis, and if the electric 
                company owns an interest in any organization or entity 
                engaged in that business, then, at the electric 
                company's election, the percentage of any income 
                received by the electric company and paid by the 
                organization or entity equaling the percentage of 
                amounts collected by the organization or entity from 
                electric company members during the taxable year shall 
                be treated as amounts collected by the electric company 
                from members for the sole purpose of meeting losses and 
                expenses.
                    ``(F) For purposes of subparagraph (C), regardless 
                of any contrary Federal, State, or local law, 
                regulation, holding, or order, neither an electric 
                company's receipt of income described in clause (v) or 
                (vi) of such subparagraph, nor a member's voluntary 
                waiver of a right described in such clause (v) or 
                payment described in such clause (vi), shall affect any 
                determination that the electric company is operating on 
                a mutual or cooperative basis.''.
    (b) Electric Industry Restructuring Income Included as Member 
Income in Member Income Test.--Section 501(c)(12) of the Internal 
Revenue Code of 1986, as amended by subsection (a)(2), is amended by 
adding at the end the following new subparagraph:
                    ``(G)(i) For purposes of this paragraph, amounts 
                collected by a mutual or cooperative electric company 
                from members for the sole purpose of meeting losses and 
                expenses includes income received or accrued from any 
                individual, organization, or entity not a member for, 
                or in connection with, the electric company selling, 
                performing, or otherwise providing any goods or 
                services as required by, in voluntary compliance with, 
                or in order to conform to any electric industry 
                restructuring law, including the following:
                            ``(I) The transmission or distribution of 
                        electric energy to, with, or for any member, or 
                        the sale, performance, transfer, or other 
                        provision of any other goods or services 
                        related to the transmission or distribution of 
                        electric energy to, with, or for any member.
                            ``(II) The joining, participation in, 
                        transfer of ownership or control of property 
                        to, or provision of any other goods or services 
                        to or for a regional transmission organization, 
                        independent system operator, regional 
                        transmission group, or similar organization or 
                        entity, all as approved or authorized by the 
                        Federal Energy Regulatory Commission, the 
                        Public Utility Commission of Texas, the Rural 
                        Utilities Service, or other appropriate entity.
                            ``(III) The sale, performance, or other 
                        provision to, with, or for any member of any 
                        goods or services related to any metering, 
                        billing, collection, customer service, or 
                        similar activity.
                            ``(IV) The sale or furnishing of electric 
                        energy to, with, or for any member, or the 
                        sale, performance, or other provision of any 
                        other goods or services related to the sale or 
                        furnishing of electric energy to, with, or for 
                        any member.
                            ``(V) The sale or furnishing of electric 
                        energy other than to, with, or for any member, 
                        or the sale, performance, or other provision of 
                        any other goods or services related to the sale 
                        or furnishing of electric energy other than to, 
                        with, or for any member, but only to the extent 
                        that, after the electric company mandatorily or 
                        voluntarily complies with any electric industry 
                        restructuring law, the annual income received 
                        or accrued for, or in connection with, the sale 
                        or furnishing of electric energy to, with, or 
                        for any member, or the sale, performance, or 
                        other provision of any other goods or services 
                        to, with, or for any member, is less than the 
                        electric company's average annual income, 
                        adjusted for historical growth, received or 
                        accrued during the 3 calendar years preceding 
                        the electric company's compliance.
                    ``(ii) For purposes of this subparagraph, `electric 
                industry restructuring law' means any Federal, State, 
                or local law, regulation, holding, or order 
                restructuring the retail or wholesale electric industry 
                or providing for or facilitating the nondiscriminatory 
                open access to, reliability of, or safety associated 
                with the transmission or distribution of electric 
                energy.''.

SEC. 3. UNRELATED BUSINESS TAXABLE INCOME.

    Section 512(b) of the Internal Revenue Code of 1986 (relating to 
modifications) is amended by adding at the end the following new 
paragraph:
            ``(18) There shall be excluded all income described in 
        section 501(c)(12)(G).''.

SEC. 4. TREATMENT OF TAXABLE ELECTRIC COOPERATIVES.

    Section 7701 of the Internal Revenue Code of 1986 (relating to 
definitions) is amended by redesignating subsection (n) as subsection 
(o) and by inserting after subsection (m) the following new subsection:
    ``(n) Treatment of Certain Amounts Received by Nonexempt Electric 
Companies.--
            ``(1) In general.--With respect to any nonexempt electric 
        company--
                    ``(A) any amount received from any individual, 
                organization, or entity that would not be a 
                `contribution to the capital of the taxpayer' under 
                section 118(b), or that, if the company were a 
                regulated public utility under section 118(c), would be 
                a `contribution to the capital of the taxpayer' under 
                section 118(c), shall be treated as a contribution to 
                the company's capital, and
                    ``(B) capital credits, patronage dividends, and 
                similar amounts include any amount paid to a patron to 
                the extent that such amount is from income received 
                from business done with or for other patrons to whom no 
                amounts are paid, or to whom smaller amounts are paid, 
                with respect to substantially identical transactions, 
                and income shall be treated as received from business 
                done with or for the nonexempt electric company's 
                patrons, if the income is received:
                            ``(i) Electric industry restructuring 
                        income.--From any individual, organization, or 
                        entity not a patron for, or in connection with, 
                        the nonexempt electric company selling, 
                        performing, or otherwise providing any goods or 
                        services as required by, in voluntary 
                        compliance with, or in order to conform to any 
                        electric industry restructuring law, including 
                        the following:
                                    ``(I) Wheeling income.--The 
                                transmission or distribution of 
                                electric energy to, with, or for any 
                                patron, or the sale, performance, 
                                transfer, or other provision of any 
                                other goods or services related to the 
                                transmission or distribution of 
                                electric energy to, with, or for any 
                                patron.
                                    ``(II) Regional transmission 
                                organization income.--The joining, 
                                participation in, transfer of ownership 
                                or control of property to, or provision 
                                of any other goods or services to or 
                                for a regional transmission 
                                organization, independent system 
                                operator, regional transmission group, 
                                or similar organization or entity, all 
                                as approved or authorized by the 
                                Federal Energy Regulatory Commission, 
                                the Public Utility Commission of Texas, 
                                the Rural Utilities Service, or other 
appropriate entity.
                                    ``(III) Unbundling income.--The 
                                sale, performance, or other provision 
                                to, with, or for any patron of any 
                                goods or services related to any 
                                metering, billing, collection, customer 
                                service, or similar activity.
                                    ``(IV) Electric energy sales 
                                income.--The sale or furnishing of 
                                electric energy to, with, or for any 
                                patron, or the sale, performance, or 
                                other provision of any other goods or 
                                services related to the sale or 
                                furnishing of electric energy to, with, 
                                or for any patron.
                                    ``(V) Replacement electric energy 
                                sales income.--The sale or furnishing 
                                of electric energy other than to, with, 
                                or for any patron, or the sale, 
                                performance, or other provision of any 
                                other goods or services related to the 
                                sale of or furnishing of electric 
                                energy other than to, with, or for any 
                                patron, but only to the extent that, 
                                after the nonexempt electric company 
                                mandatorily or voluntarily complies 
                                with any electric industry 
                                restructuring law, the annual income 
                                received or accrued for, or in 
                                connection with, the sale or furnishing 
                                of electric energy to, with, or for any 
                                patron, or the sale, performance, or 
                                other provision of any other goods or 
                                services to, with, or for any patron, 
                                is less than from the company's average 
                                annual income, adjusted for historical 
                                growth, received or accrued during the 
                                3 calendar years preceding the 
                                company's compliance.
                            ``(ii) Attribution income.--From any 
                        organization or entity in which the nonexempt 
                        electric company owns an interest.
                            ``(iii) Waiver income.--From any patron 
                        that voluntarily waives any right to capital 
                        credits, patronage dividends, or similar 
                        amounts allocated or paid by the nonexempt 
                        electric company.
                            ``(iv) Incremental cost electric energy 
                        income.--From any patron for electric energy 
                        sold or furnished by the nonexempt electric 
                        company based upon the company's incremental 
                        cost of generating, purchasing, transmitting, 
                        or distributing the electric energy.
                            ``(v) Nuclear decommissioning income.--
                        Either--
                                    ``(I) from the transfer of any 
                                amount into a trust, fund, or 
                                instrument established to pay any 
                                nuclear decommissioning costs, if the 
                                transfer is in connection with the 
                                transfer of a nuclear powerplant or 
                                nuclear powerplant unit, or
                                    ``(II) from the distribution of any 
                                amount from such trust, fund, or 
                                instrument, including income 
                                representing payments by the nonexempt 
                                electric company to the trust, fund, or 
                                instrument, and investment income 
                                earned by the trust, fund, or 
                                instrument.
                            ``(vi) Property transfer income.--From any 
                        individual, organization, or entity for the 
                        nonexempt electric company selling, leasing, 
                        exchanging, or otherwise transferring on a 
                        mutually agreed upon basis any property, 
                        property right, asset, or service territory.
                            ``(vii) Condemnation income.--From any 
                        organization or entity, including any 
                        municipality, resulting from the compulsory or 
                        involuntary requisition or condemnation, or the 
                        threat or imminence of a compulsory or 
                        involuntary requisition or condemnation, of any 
                        property, asset, or service territory.
            ``(2) Special rules.--For purposes of this subsection--
                    ``(A) Waiver income.--Regardless of any contrary 
                Federal, State, or local law, regulation, holding, or 
                order, neither a nonexempt electric company's receipt 
                of income described in paragraph (1)(B)(iii), nor a 
                patron's voluntary waiver of a right described in such 
                paragraph, shall affect any determination that the 
                company is operating on a cooperative basis.
                    ``(B) Incremental cost electric energy income.--
                Regardless of any contrary Federal, State, or local 
                law, regulation, holding, or order, neither a nonexempt 
                electric company's receipt of income described in 
                paragraph (1)(B)(iv), nor a patron's payment of the 
                amount described in such paragraph, shall affect any 
                determination that the company is operating on a 
                cooperative basis.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Electric industry restructuring law.--The 
                term `electric industry restructuring law' means any 
                Federal, State, or local law, regulation, holding, or 
                order restructuring the retail or wholesale electric 
                industry or providing for or facilitating the 
                nondiscriminatory open access to, reliability of, or 
                safety associated with the transmission or distribution 
                of electric energy.
                    ``(B) Nonexempt electric company.--The term 
                `nonexempt electric company' means any corporation or 
                organization described in section 1381(a)(2)(C) and 
                engaged in furnishing electric energy.''.

SEC. 5. EFFECTIVE DATE.

    The amendments made by this Act shall apply to amounts received on 
or after the date of the enactment of this Act.
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