[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 160 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 160

 To amend the Internal Revenue Code of 1986 to allow the expensing of 
    broadband Internet access expenditures, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 14, 2003

    Mr. Burns (for himself, Mr. Baucus, Mr. Hatch, Mr. Bunning, Mr. 
 Kennedy, Mrs. Clinton, Mr. Schumer, and Mr. Graham of South Carolina) 
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 allow the expensing of 
    broadband Internet access expenditures, 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. EXPENSING OF BROADBAND INTERNET ACCESS EXPENDITURES.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to itemized deductions for 
individuals and corporations) is amended by inserting after section 190 
the following new section:

``SEC. 191. BROADBAND EXPENDITURES.

    ``(a) Treatment of Expenditures.--
            ``(1) In general.--A taxpayer may elect to treat any 
        qualified broadband expenditure which is paid or incurred by 
        the taxpayer as an expense which is not chargeable to capital 
        account. Any expenditure which is so treated shall be allowed 
        as a deduction.
            ``(2) Election.--An election under paragraph (1) shall be 
        made at such time and in such manner as the Secretary may 
        prescribe by regulation.
    ``(b) Qualified Broadband Expenditures.--For purposes of this 
section--
            ``(1) In general.--The term `qualified broadband 
        expenditure' means, with respect to any taxable year, any 
        direct or indirect costs incurred and properly taken into 
        account with respect to the purchase or installation of 
        qualified equipment (including any upgrades thereto), together 
        with any direct or indirect costs incurred and properly taken 
        into account with respect to the connection of such qualified 
        equipment to any qualified subscriber, but only if such costs 
        are incurred after December 31, 2002, and before January 1, 
        2008.
            ``(2) Certain satellite expenditures excluded.--Such term 
        shall not include any costs incurred with respect to the 
        launching of any satellite equipment.
            ``(3) Leased equipment.--Such term shall include so much of 
        the purchase price paid by the lessor of equipment subject to a 
        lease described in subsection (c)(2)(B) as is attributable to 
        expenditures incurred by the lessee which would otherwise be 
        described in paragraph (1).
            ``(4) Limitation with regard to current generation 
        broadband services.--Only 50 percent of the amounts taken into 
        account under paragraph (1) with respect to qualified equipment 
        through which current generation broadband services are 
        provided shall be treated as qualified broadband expenditures.
    ``(c) When Expenditures Taken Into Account.--For purposes of this 
section--
            ``(1) In general.--Qualified broadband expenditures with 
        respect to qualified equipment shall be taken into account with 
        respect to the first taxable year in which--
                    ``(A) current generation broadband services are 
                provided through such equipment to qualified 
                subscribers, or
                    ``(B) next generation broadband services are 
                provided through such equipment to qualified 
                subscribers.
            ``(2) Limitation.--
                    ``(A) In general.--Qualified expenditures shall be 
                taken into account under paragraph (1) only with 
                respect to qualified equipment--
                            ``(i) the original use of which commences 
                        with the taxpayer, and
                            ``(ii) which is placed in service,
                after December 31, 2002.
                    ``(B) Sale-leasebacks.--For purposes of 
                subparagraph (A), if property--
                            ``(i) is originally placed in service after 
                        December 31, 2002, by any person, and
                            ``(ii) sold and leased back by such person 
                        within 3 months after the date such property 
                        was originally placed in service,
                such property shall be treated as originally placed in 
                service not earlier than the date on which such 
                property is used under the leaseback referred to in 
                clause (ii).
    ``(d) Special Allocation Rules.--
            ``(1) Current generation broadband services.--For purposes 
        of determining the amount of qualified broadband expenditures 
        under subsection (a)(1) with respect to qualified equipment 
        through which current generation broadband services are 
        provided, if the qualified equipment is capable of serving both 
        qualified subscribers and other subscribers,  the qualified 
broadband expenditures shall be multiplied by a fraction--
                    ``(A) the numerator of which is the sum of the 
                number of potential qualified subscribers within the 
                rural areas and the underserved areas which the 
                equipment is capable of serving with current generation 
                broadband services, and
                    ``(B) the denominator of which is the total 
                potential subscriber population of the area which the 
                equipment is capable of serving with current generation 
                broadband services.
            ``(2) Next generation broadband services.--For purposes of 
        determining the amount of qualified broadband expenditures 
        under subsection (a)(1) with respect to qualified equipment 
        through which next generation broadband services are provided, 
        if the qualified equipment is capable of serving both qualified 
        subscribers and other subscribers, the qualified expenditures 
        shall be multiplied by a fraction--
                    ``(A) the numerator of which is the sum of--
                            ``(i) the number of potential qualified 
                        subscribers within the rural areas and 
                        underserved areas, plus
                            ``(ii) the number of potential qualified 
                        subscribers within the area consisting only of 
                        residential subscribers not described in clause 
                        (i),
                which the equipment is capable of serving with next 
                generation broadband services, and
                    ``(B) the denominator of which is the total 
                potential subscriber population of the area which the 
                equipment is capable of serving with next generation 
                broadband services.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Antenna.--The term `antenna' means any device used to 
        transmit or receive signals through the electromagnetic 
        spectrum, including satellite equipment.
            ``(2) Cable operator.--The term `cable operator' has the 
        meaning given such term by section 602(5) of the Communications 
        Act of 1934 (47 U.S.C. 522(5)).
            ``(3) Commercial mobile service carrier.--The term 
        `commercial mobile service carrier' means any person authorized 
        to provide commercial mobile radio service as defined in 
        section 20.3 of title 47, Code of Federal Regulations.
            ``(4) Current generation broadband service.--The term 
        `current generation broadband service' means the transmission 
        of signals at a rate of at least 1,000,000 bits per second to 
        the subscriber and at least 128,000 bits per second from the 
        subscriber.
            ``(5) Multiplexing or demultiplexing.--The term 
        `multiplexing' means the transmission of 2 or more signals over 
        a single channel, and the term `demultiplexing' means the 
        separation of 2 or more signals previously combined by 
        compatible multiplexing equipment.
            ``(6) Next generation broadband service.--The term `next 
        generation broadband service' means the transmission of signals 
        at a rate of at least 22,000,000 bits per second to the 
        subscriber and at least 5,000,000 bits per second from the 
        subscriber.
            ``(7) Nonresidential subscriber.--The term `nonresidential 
        subscriber' means any person who purchases broadband services 
        which are delivered to the permanent place of business of such 
        person.
            ``(8) Open video system operator.--The term `open video 
        system operator' means any person authorized to provide service 
        under section 653 of the Communications Act of 1934 (47 U.S.C. 
        573).
            ``(9) Other wireless carrier.--The term `other wireless 
        carrier' means any person (other than a telecommunications 
        carrier, commercial mobile service carrier, cable operator, 
        open video system operator, or satellite carrier) providing 
        current generation broadband services or next generation 
        broadband service to subscribers through the radio transmission 
        of energy.
            ``(10) Packet switching.--The term `packet switching' means 
        controlling or routing the path of any digitized transmission 
        signal which is assembled into packets or cells.
            ``(11) Provider.--The term `provider' means, with respect 
        to any qualified equipment--
                    ``(A) a cable operator,
                    ``(B) a commercial mobile service carrier,
                    ``(C) an open video system operator,
                    ``(D) a satellite carrier,
                    ``(E) a telecommunications carrier, or
                    ``(F) any other wireless carrier,
        providing current generation broadband services or next 
        generation broadband services to subscribers through such 
        qualified equipment.
            ``(12) Provision of services.--A provider shall be treated 
        as providing services to 1 or more subscribers if--
                    ``(A) such a subscriber has been passed by the 
                provider's equipment and can be connected to such 
                equipment for a standard connection fee,
                    ``(B) the provider is physically able to deliver 
                current generation broadband services or next 
                generation broadband services, as applicable, to such a 
                subscriber without making more than an insignificant 
                investment with respect to such subscriber,
                    ``(C) the provider has made reasonable efforts to 
                make such subscribers aware of the availability of such 
                services,
                    ``(D) such services have been purchased by 1 or 
                more such subscribers, and
                    ``(E) such services are made available to such 
                subscribers at average prices comparable to those at 
                which the provider makes available similar services in 
                any areas in which the provider makes available such 
                services.
            ``(13) Qualified equipment.--
                    ``(A) In general.--The term `qualified equipment' 
                means equipment which provides current generation 
                broadband services or next generation broadband 
                services--
                            ``(i) at least a majority of the time 
                        during periods of maximum demand to each 
                        subscriber who is utilizing such services, and
                            ``(ii) in a manner substantially the same 
                        as such services are provided by the provider 
                        to subscribers through equipment with respect 
                        to which no deduction is allowed under 
                        subsection (a)(1).
                    ``(B) Only certain investment taken into account.--
                Except as provided in subparagraph (C) or (D), 
                equipment shall be taken into account under 
                subparagraph (A) only to the extent it--
                            ``(i) extends from the last point of 
                        switching to the outside of the unit, building, 
                        dwelling, or office owned or leased by a 
                        subscriber in the case of a telecommunications 
                        carrier,
                            ``(ii) extends from the customer side of 
                        the mobile telephone switching office to a 
                        transmission/receive antenna (including such 
                        antenna) owned or leased by a subscriber in the 
                        case of a commercial mobile service carrier,
                            ``(iii) extends from the customer side of 
                        the headend to the outside of the unit, 
                        building, dwelling, or office owned or leased 
                        by a subscriber in the case of a cable operator 
                        or open video system operator, or
                            ``(iv) extends from a transmission/receive 
                        antenna (including such antenna) which 
                        transmits and receives signals to or from 
                        multiple subscribers, to a transmission/receive 
                        antenna (including such antenna) on the outside 
                        of the unit, building, dwelling, or office 
                        owned or leased by a subscriber in the case of 
                        a satellite carrier or other wireless carrier, 
                        unless such other wireless carrier is also a 
                        telecommunications carrier.
                    ``(C) Packet switching equipment.--Packet switching 
                equipment, regardless of location, shall be taken into 
                account under subparagraph (A) only if it is deployed 
                in connection with equipment described in subparagraph 
                (B) and is uniquely designed to perform the function of 
                packet switching for current generation broadband 
                services or next generation broadband services, but 
                only if such packet switching is the last in a series 
                of such functions performed in the transmission of a 
                signal to a subscriber or the first in a series of such 
                functions performed in the transmission of a signal 
                from a subscriber.
                    ``(D) Multiplexing and demultiplexing equipment.--
                Multiplexing and demultiplexing equipment shall be 
                taken into account under subparagraph (A) only to the 
                extent it is deployed in connection with equipment 
                described in subparagraph (B) and is uniquely designed 
                to perform the function of multiplexing and 
                demultiplexing packets or cells of data and making 
                associated application adaptions, but only if such 
                multiplexing or demultiplexing equipment is located 
                between packet switching equipment described in 
                subparagraph (C) and the subscriber's premises.
            ``(14) Qualified subscriber.--The term `qualified 
        subscriber' means--
                    ``(A) with respect to the provision of current 
                generation broadband services--
                            ``(i) any nonresidential subscriber 
                        maintaining a permanent place of business in a 
                        rural area or underserved area, or
                            ``(ii) any residential subscriber residing 
                        in a dwelling located in a rural area or 
                        underserved area which is not a saturated 
                        market, and
                    ``(B) with respect to the provision of next 
                generation broadband services--
                            ``(i) any nonresidential subscriber 
                        maintaining a permanent place of business in a 
                        rural area or underserved area, or
                            ``(ii) any residential subscriber.
            ``(15) Residential subscriber.--The term `residential 
        subscriber' means any individual who purchases broadband 
        services which are delivered to such individual's dwelling.
            ``(16) Rural area.--The term `rural area' means any census 
        tract which--
                    ``(A) is not within 10 miles of any incorporated or 
                census designated place containing more than 25,000 
                people, and
                    ``(B) is not within a county or county equivalent 
                which has an overall population density of more than 
                500 people per square mile of land.
            ``(17) Rural subscriber.--The term `rural subscriber' means 
        any residential subscriber residing in a dwelling located in a 
        rural area or nonresidential subscriber maintaining a permanent 
        place of business located in a rural area.
            ``(18) Satellite carrier.--The term `satellite carrier' 
        means any person using the facilities of a satellite or 
        satellite service licensed by the Federal Communications 
        Commission and operating in the Fixed-Satellite Service under 
        part 25 of title 47 of the Code of Federal Regulations or the 
        Direct Broadcast Satellite Service under part 100 of title 47 
        of such Code to establish and operate a channel of 
        communications for distribution of signals, and owning or 
        leasing a capacity or service on a satellite in order to 
        provide such point-to-multipoint distribution.
            ``(19) Saturated market.--The term `saturated market' means 
        any census tract in which, as of the date of the enactment of 
        this section--
                    ``(A) current generation broadband services have 
                been provided by a single provider to 85 percent or 
                more of the total number of potential residential 
                subscribers residing in dwellings located within such 
                census tract, and
                    ``(B) such services can be utilized--
                            ``(i) at least a majority of the time 
                        during periods of maximum demand by each such 
                        subscriber who is utilizing such services, and
                            ``(ii) in a manner substantially the same 
                        as such services are provided by the provider 
                        to subscribers through equipment with respect 
                        to which no deduction is allowed under 
                        subsection (a)(1).
            ``(20) Subscriber.--The term `subscriber' means any person 
        who purchases current generation broadband services or next 
        generation broadband services.
            ``(21) Telecommunications carrier.--The term 
        `telecommunications carrier' has the meaning given such term by 
        section 3(44) of the Communications Act of 1934 (47 U.S.C. 
        153(44)), but--
                    ``(A) includes all members of an affiliated group 
                of which a telecommunications carrier is a member, and
                    ``(B) does not include a commercial mobile service 
                carrier.
            ``(22) Total potential subscriber population.--The term 
        `total potential subscriber population' means, with respect to 
        any area and based on the most recent census data, the total 
        number of potential residential subscribers residing in 
        dwellings located in such area and potential nonresidential 
        subscribers maintaining permanent places of business located in 
        such area.
            ``(23) Underserved area.--The term `underserved area' means 
        any census tract which is located in--
                    ``(A) an empowerment zone or enterprise community 
                designated under section 1391,
                    ``(B) the District of Columbia Enterprise Zone 
                established under section 1400,
                    ``(C) a renewal community designated under section 
                1400E, or
                    ``(D) a low-income community designated under 
                section 45D.
            ``(24) Underserved subscriber.--The term `underserved 
        subscriber' means any residential subscriber residing in a 
        dwelling located in an underserved area or nonresidential 
        subscriber maintaining a permanent place of business located in 
        an underserved area.
    ``(f) Special Rules.--
            ``(1) Property used outside the united states, etc., not 
        qualified.--No expenditures shall be taken into account under 
        subsection (a)(1) with respect to the portion of the cost of 
        any property referred to in section 50(b) or with respect to 
        the portion of the cost of any property taken into account 
        under section 179.
            ``(2) Basis reduction.--
                    ``(A) In general.--For purposes of this title, the 
                basis of any property shall be reduced by the portion 
                of the cost of such property taken into account under 
                subsection (a)(1).
                    ``(B) Ordinary income recapture.--For purposes of 
                section 1245, the amount of the deduction allowable 
                under subsection (a)(1) with respect to any property 
                which is of a character subject to the allowance for 
                depreciation shall be treated as a deduction allowed 
                for depreciation under section 167.
            ``(3) Coordination with section 38.--No credit shall be 
        allowed under section 38 with respect to any amount for which a 
        deduction is allowed under subsection (a)(1).''.
    (b) Special Rule for Mutual or Cooperative Telephone Companies.--
Section 501(c)(12)(B) of the Internal Revenue Code of 1986 (relating to 
list of exempt organizations) is amended by striking ``or'' at the end 
of clause (iii), by striking the period at the end of clause (iv) and 
inserting ``, or'', and by adding at the end the following:
                            ``(v) from the sale of property subject to 
                        a lease described in section 191(c)(2)(B), but 
                        only to the extent such income does not in any 
                        year exceed an amount equal to the qualified 
                        broadband expenditures which would be taken 
                        into account under section 191 for such year if 
                        the mutual or cooperative telephone company was 
                        not exempt from taxation and was treated as the 
                        owner of the property subject to such lease.''.
    (c) Conforming Amendments.--
            (1) Section 263(a)(1) of the Internal Revenue Code of 1986 
        (relating to capital expenditures) is amended by striking 
        ``or'' at the end of subparagraph (G), by striking the period 
        at the end of subparagraph (H) and inserting ``, or'', and by 
        adding at the end the following new subparagraph:
                    ``(I) expenditures for which a deduction is allowed 
                under section 191.''.
            (2) Section 1016(a) of such Code is amended by striking 
        ``and'' at the end of paragraph (27), by striking the period at 
        the end of paragraph (28) and inserting ``, and'', and by 
        adding at the end the following new paragraph:
            ``(29) to the extent provided in section 191(f)(2).''.
            (3) The table of sections for part VI of subchapter A of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 190 the following new item:

``Sec. 191. Broadband expenditures.''.
    (d) Designation of Census Tracts.--
            (1) In general.--The Secretary of the Treasury shall, not 
        later than 90 days after the date of the enactment of this Act, 
designate and publish those census tracts meeting the criteria 
described in paragraphs (16), (22), and (23) of section 191(e) of the 
Internal Revenue Code of 1986 (as added by this section). In making 
such designations, the Secretary of the Treasury shall consult with 
such other departments and agencies as the Secretary determines 
appropriate.
            (2) Saturated market.--
                    (A) In general.--For purposes of designating and 
                publishing those census tracts meeting the criteria 
                described in subsection (e)(19) of such section 191--
                            (i) the Secretary of the Treasury shall 
                        prescribe not later than 30 days after the date 
                        of the enactment of this Act the form upon 
                        which any provider which takes the position 
                        that it meets such criteria with respect to any 
                        census tract shall submit a list of such census 
                        tracts (and any other information required by 
                        the Secretary) not later than 60 days after the 
                        date of the publication of such form, and
                            (ii) the Secretary of the Treasury shall 
                        publish an aggregate list of such census tracts 
                        and the applicable providers not later than 30 
                        days after the last date such submissions are 
                        allowed under clause (i).
                    (B) No subsequent lists required.--The Secretary of 
                the Treasury shall not be required to publish any list 
                of census tracts meeting such criteria subsequent to 
                the list described in subparagraph (A)(ii).
                    (C) Authority to disregard false submissions.--In 
                addition to imposing any other applicable penalties, 
                the Secretary of the Treasury shall have the discretion 
                to disregard any form described in subparagraph (A)(i) 
                on which a provider knowingly submitted false 
                information.
    (e) Other Regulatory Matters.--
            (1) Prohibition.--No Federal or State agency or 
        instrumentality shall adopt regulations or ratemaking 
        procedures that would have the effect of confiscating any 
        deduction or portion thereof allowed under section 191 of the 
        Internal Revenue Code of 1986 (as added by this section) or 
        otherwise subverting the purpose of this section.
            (2) Treasury regulatory authority.--It is the intent of 
        Congress in providing the election to deduct qualified 
        broadband expenditures under section 191 of the Internal 
        Revenue Code of 1986 (as added by this section) to provide 
        incentives for the purchase, installation, and connection of 
        equipment and facilities offering expanded broadband access to 
        the Internet for users in certain low income and rural areas of 
        the United States, as well as to residential users nationwide, 
        in a manner that maintains competitive neutrality among the 
        various classes of providers of broadband services. 
        Accordingly, the Secretary of the Treasury shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of section 191 of such Code, including--
                    (A) regulations to determine how and when a 
                taxpayer that incurs qualified broadband expenditures 
                satisfies the requirements of section 191 of such Code 
                to provide broadband services, and
                    (B) regulations describing the information, 
                records, and data taxpayers are required to provide the 
                Secretary to substantiate compliance with the 
                requirements of section 191 of such Code.
    (f) Effective Date.--The amendments made by this section shall 
apply to expenditures incurred after December 31, 2002.
                                 <all>