[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1936 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                S. 1936

 To amend the Internal Revenue Code of 1986 to exclude from unrelated 
  business taxable income the gain or loss on the sale or exchange of 
           certain brownfield sites, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 24, 2003

 Mr. Baucus (for himself, Mr. Inhofe, Mrs. Dole, and Mr. Rockefeller) 
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 exclude from unrelated 
  business taxable income the gain or loss on the sale or exchange of 
           certain brownfield sites, 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. EXCLUSION OF GAIN OR LOSS ON SALE OR EXCHANGE OF CERTAIN 
              BROWNFIELD SITES FROM UNRELATED BUSINESS TAXABLE INCOME.

    (a) In General.--Subsection (b) of section 512 of the Internal 
Revenue Code of 1986 (relating to unrelated business taxable income) is 
amended by adding at the end the following new paragraph:
            ``(18) Treatment of gain or loss on sale or exchange of 
        certain brownfield sites.--
                    ``(A) In general.--Notwithstanding paragraph 
                (5)(B), there shall be excluded any gain or loss from 
                the qualified sale, exchange, or other disposition of 
                any qualifying brownfield property by an eligible 
                taxpayer.
                    ``(B) Eligible taxpayer.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `eligible 
                        taxpayer' means, with respect to a property, 
                        any organization exempt from tax under section 
                        501(a) which--
                                    ``(I) acquires from an unrelated 
                                person a qualifying brownfield 
                                property, and
                                    ``(II) pays or incurs eligible 
                                remediation expenditures with respect 
                                to such property in an amount which 
                                exceeds the greater of $550,000 or 12 
                                percent of the fair market value of the 
                                property at the time such property was 
                                acquired by the eligible taxpayer, 
                                determined as if there was not a 
                                presence of a hazardous substance, 
                                pollutant, or contaminant on the 
                                property which is complicating the 
                                expansion, redevelopment, or reuse of 
                                the property.
                            ``(ii) Exception.--Such term shall not 
                        include any organization which is--
                                    ``(I) potentially liable under 
                                section 107 of the Comprehensive 
                                Environmental Response, Compensation, 
                                and Liability Act of 1980 with respect 
                                to the qualifying brownfield property,
                                    ``(II) affiliated with any other 
                                person which is so potentially liable 
                                through any direct or indirect familial 
                                relationship or any contractual, 
                                corporate, or financial relationship 
                                (other than a contractual, corporate, 
                                or financial relationship which is 
                                created by the instruments by which 
                                title to any qualifying brownfield 
                                property is conveyed or financed or by 
                                a contract of sale of goods or 
                                services), or
                                    ``(III) the result of a 
                                reorganization of a business entity 
                                which was so potentially liable.
                    ``(C) Qualifying brownfield property.--For purposes 
                of this paragraph--
                            ``(i) In general.--The term `qualifying 
                        brownfield property' means any real property 
                        which is certified, before the taxpayer incurs 
                        any eligible remediation expenditures (other 
                        than to obtain a Phase I environmental site 
                        assessment), by an appropriate State agency 
                        (within the meaning of section 198(c)(4)) in 
                        the State in which such property is located as 
                        a brownfield site within the meaning of section 
                        101(39) of the Comprehensive Environmental 
                        Response, Compensation, and Liability Act of 
                        1980 (as in effect on the date of the enactment 
                        of this paragraph).
                            ``(ii) Request for certification.--Any 
                        request by an eligible taxpayer for a 
                        certification described in clause (i) shall 
                        include a sworn statement by the eligible 
                        taxpayer and supporting documentation of the 
                        presence of a hazardous substance, pollutant, 
                        or contaminant on the property which is 
                        complicating the expansion, redevelopment, or 
                        reuse of the property given the property's 
                        reasonably anticipated future land uses or 
                        capacity for uses of the property (including a 
                        Phase I environmental site assessment and, if 
                        applicable, evidence of the property's presence 
                        on a local, State, or Federal list of 
                        brownfields or contaminated property) and other 
                        environmental assessments prepared or obtained 
                        by the taxpayer.
                    ``(D) Qualified sale, exchange, or other 
                disposition.--For purposes of this paragraph--
                            ``(i) In general.--A sale, exchange, or 
                        other disposition of property shall be 
                        considered as qualified if--
                                    ``(I) such property is transferred 
                                by the eligible taxpayer to an 
                                unrelated person, and
                                    ``(II) within 1 year of such 
                                transfer the eligible taxpayer has 
                                received a certification from the 
                                Environmental Protection Agency or an 
                                appropriate State agency (within the 
meaning of section 198(c)(4)) in the State in which such property is 
located that, as a result of the eligible taxpayer's remediation 
actions, such property would not be treated as a qualifying brownfield 
property in the hands of the transferee.
                            ``(ii) Request for certification.--Any 
                        request by an eligible taxpayer for a 
                        certification described in clause (i) shall be 
                        made not later than the date of the transfer 
                        and shall include a sworn statement by the 
                        eligible taxpayer certifying the following:
                                    ``(I) Remedial actions which comply 
                                with all applicable or relevant and 
                                appropriate requirements (consistent 
                                with section 121(d) of the 
                                Comprehensive Environmental Response, 
                                Compensation, and Liability Act of 
                                1980) have been substantially 
                                completed, such that there are no 
                                hazardous substances, pollutants, or 
                                contaminants which complicate the 
                                expansion, redevelopment, or reuse of 
                                the property given the property's 
                                reasonably anticipated future land uses 
                                or capacity for uses of the property.
                                    ``(II) The reasonably anticipated 
                                future land uses or capacity for uses 
                                of the property are more economically 
                                productive or environmentally 
                                beneficial than the uses of the 
                                property in existence on the date of 
                                the certification described in 
                                subparagraph (C)(i). For purposes of 
                                the preceding sentence, use of property 
                                as a landfill or other hazardous waste 
                                facility shall not be considered more 
                                economically productive or 
                                environmentally beneficial.
                                    ``(III) A remediation plan has been 
                                implemented to bring the property into 
                                compliance with all applicable local, 
                                State, and Federal environmental laws, 
                                regulations, and standards and to 
                                ensure that the remediation protects 
                                human health and the environment.
                                    ``(IV) The remediation plan 
                                described in subclause (III), including 
                                any physical improvements required to 
                                remediate the property, is either 
                                complete or substantially complete, 
                                and, if substantially complete, 
                                sufficient monitoring, funding, 
                                institutional controls, and financial 
                                assurances have been put in place to 
                                ensure the complete remediation of the 
                                property in accordance with the 
                                remediation plan as soon as is 
                                reasonably practicable after the sale, 
                                exchange, or other disposition of such 
                                property.
                                    ``(V) Public notice that such 
                                request for certification would be made 
                                was completed before the date of such 
                                request. Such notice shall be in the 
                                same form and manner as required for 
                                public participation required under 
                                section 117(a) of the Comprehensive 
                                Environmental Response, Compensation, 
                                and Liability Act of 1980 (as in effect 
                                on the date of the enactment of this 
                                paragraph).
                            ``(iii) Attachment to tax returns.--A copy 
                        of each of the requests for certification 
                        described in clause (ii) of subparagraph (C) 
                        and this subparagraph shall be included in the 
                        tax return of the eligible taxpayer (and, where 
                        applicable, of the qualifying partnership) for 
                        the taxable year during which the transfer 
                        occurs.
                    ``(E) Eligible remediation expenditures.--For 
                purposes of this paragraph--
                            ``(i) In general.--The term `eligible 
                        remediation expenditures' means, with respect 
                        to any qualifying brownfield property, any 
                        amount paid or incurred by the eligible 
                        taxpayer to an unrelated third person to obtain 
                        a Phase I environmental site assessment of the 
                        property, and any amount so paid or incurred 
                        after the date of the certification described 
                        in subparagraph (C)(i) for goods and services 
                        necessary to obtain a certification described 
                        in subparagraph (D)(i) with respect to such 
                        property, including expenditures--
                                    ``(I) to manage, remove, control, 
                                contain, abate, or otherwise remediate 
                                a hazardous substance, pollutant, or 
                                contaminant on the property,
                                    ``(II) to obtain a Phase II 
                                environmental site assessment of the 
                                property, including any expenditure to 
                                monitor, sample, study, assess, or 
                                otherwise evaluate the release, threat 
                                of release, or presence of a hazardous 
                                substance, pollutant, or contaminant on 
                                the property,
                                    ``(III) to obtain environmental 
                                regulatory certifications and approvals 
                                required to manage the remediation and 
                                monitoring of the hazardous substance, 
                                pollutant, or contaminant on the 
                                property, and
                                    ``(IV) regardless of whether it is 
                                necessary to obtain a certification 
                                described in subparagraph (D)(i)(II), 
                                to obtain remediation cost-cap or stop-
                                loss coverage, re-opener or regulatory 
                                action coverage, or similar coverage 
                                under environmental insurance policies, 
                                or financial guarantees required to 
manage such remediation and monitoring.
                            ``(ii) Exceptions.--Such term shall not 
                        include--
                                    ``(I) any portion of the purchase 
                                price paid or incurred by the eligible 
                                taxpayer to acquire the qualifying 
                                brownfield property,
                                    ``(II) environmental insurance 
                                costs paid or incurred to obtain legal 
                                defense coverage, owner/operator 
                                liability coverage, lender liability 
                                coverage, professional liability 
                                coverage, or similar types of coverage,
                                    ``(III) any amount paid or incurred 
                                to the extent such amount is 
                                reimbursed, funded, or otherwise 
                                subsidized by grants provided by the 
                                United States, a State, or a political 
                                subdivision of a State for use in 
                                connection with the property, proceeds 
                                of an issue of State or local 
                                government obligations used to provide 
                                financing for the property the interest 
                                of which is exempt from tax under 
                                section 103, or subsidized financing 
                                provided (directly or indirectly) under 
                                a Federal, State, or local program 
                                provided in connection with the 
                                property, or
                                    ``(IV) any expenditure paid or 
                                incurred before the date of the 
                                enactment of this paragraph.
                        For purposes of subclause (III), the Secretary 
                        may issue guidance regarding the treatment of 
                        government-provided funds for purposes of 
                        determining eligible remediation expenditures.
                    ``(F) Determination of gain or loss.--For purposes 
                of this paragraph, the determination of gain or loss 
                shall not include an amount treated as gain which is 
                ordinary income with respect to section 1245 or section 
                1250 property, including amounts deducted as section 
                198 expenses which are subject to the recapture rules 
                of section 198(e), if the taxpayer had deducted such 
                amounts in the computation of its unrelated business 
                taxable income.
                    ``(G) Special rules for partnerships.--
                            ``(i) In general.--In the case of an 
                        eligible taxpayer which is a partner of a 
                        qualifying partnership which acquires, 
                        remediates, and sells, exchanges, or otherwise 
                        disposes of a qualifying brownfield property, 
                        this paragraph shall apply to the eligible 
                        taxpayer's distributive share of the qualifying 
                        partnership's gain or loss from the sale, 
                        exchange, or other disposition of such 
                        property.
                            ``(ii) Qualifying partnership.--The term 
                        `qualifying partnership' means a partnership 
                        which--
                                    ``(I) has a partnership agreement 
                                which satisfies the requirements of 
                                section 514(c)(9)(B)(vi) at all times 
                                beginning on the date of the first 
                                certification received by the 
                                partnership under subparagraph (C)(i),
                                    ``(II) satisfies the requirements 
                                of subparagraphs (B)(i), (C), (D), and 
                                (E), if `qualified partnership' is 
                                substituted for `eligible taxpayer' 
                                each place it appears therein (except 
                                subparagraph (D)(iii)), and
                                    ``(III) is not an organization 
                                which would be prevented from 
                                constituting an eligible taxpayer by 
                                reason of subparagraph (B)(ii).
                            ``(iii) Requirement that tax-exempt partner 
                        be a partner since first certification.--This 
                        paragraph shall apply with respect to any 
                        eligible taxpayer which is a partner of a 
                        partnership which acquires, remediates, and 
                        sells, exchanges, or otherwise disposes of a 
                        qualifying brownfield property only if such 
                        eligible taxpayer was a partner of the 
                        qualifying partnership at all times beginning 
                        on the date of the first certification received 
                        by the partnership under subparagraph (C)(i) 
                        and ending on the date of the sale, exchange, 
                        or other disposition of the property by the 
                        partnership.
                            ``(iv) Regulations.--The Secretary shall 
                        prescribe such regulations as are necessary to 
                        prevent abuse of the requirements of this 
                        subparagraph, including abuse through--
                                    ``(I) the use of special 
                                allocations of gains or losses, or
                                    ``(II) changes in ownership of 
                                partnership interests held by eligible 
                                taxpayers.
                    ``(H) Special rules for multiple properties.--
                            ``(i) In general.--An eligible taxpayer or 
                        a qualifying partnership of which the eligible 
                        taxpayer is a partner may make a 1-time 
                        election to apply this paragraph to more than 1 
                        qualifying brownfield property by averaging the 
                        eligible remediation expenditures for all such 
                        properties acquired during the election period. 
                        If the eligible taxpayer or qualifying 
                        partnership makes such an election, the 
                        election shall apply to all qualified sales, 
                        exchanges, or other dispositions of qualifying 
                        brownfield properties the acquisition and 
                        transfer of which occur during the period for 
                        which the election remains in effect.
                            ``(ii) Election.--An election under clause 
                        (i) shall be made with the eligible taxpayer's 
                        or qualifying partnership's timely filed tax 
                        return (including extensions) for the first 
                        taxable year for which the taxpayer or 
                        qualifying partnership intends to have the 
                        election apply. An election under clause (i) is 
                        effective for the period--
                                    ``(I) beginning on the date which 
                                is the first day of the taxable year of 
                                the return in which the election is 
                                included or a later day in such taxable 
                                year selected by the eligible taxpayer 
                                or qualifying partnership, and
                                    ``(II) ending on the date which is 
                                the earliest of a date of revocation 
                                selected by the eligible taxpayer or 
                                qualifying partnership, the date which 
                                is 8 years after the date described in 
                                subclause (I), or, in the case of an 
                                election by a qualifying partnership of 
                                which the eligible taxpayer is a 
                                partner, the date of the termination of 
                                the qualifying partnership.
                            ``(iii) Revocation.--An eligible taxpayer 
                        or qualifying partnership may revoke an 
                        election under clause (i)(II) by filing a 
                        statement of revocation with a timely filed tax 
                        return (including extensions). A revocation is 
                        effective as of the first day of the taxable 
                        year of the return in which the revocation is 
                        included or a later day in such taxable year 
                        selected by the eligible taxpayer or qualifying 
                        partnership. Once an eligible taxpayer or 
                        qualifying partnership revokes the election, 
                        the eligible taxpayer or qualifying partnership 
                        is ineligible to make another election under 
                        clause (i) with respect to any qualifying 
                        brownfield property subject to the revoked 
                        election.
                    ``(I) Recapture.--If an eligible taxpayer excludes 
                gain or loss from a sale, exchange, or other 
                disposition of property to which an election under 
                subparagraph (H) applies, and such property fails to 
                satisfy the requirements of this paragraph, the 
                unrelated business taxable income of the eligible 
                taxpayer for the taxable year in which such failure 
                occurs shall be determined by including any previously 
                excluded gain or loss from such sale, exchange, or 
                other disposition allocable to such taxpayer, and 
                interest shall be determined at the overpayment rate 
                established under section 6621 on any resulting tax for 
                the period beginning with the due date of the return 
                for the taxable year during which such sale, exchange, 
                or other disposition occurred, and ending on the date 
                of payment of the tax.
                    ``(J) Related persons.--For purposes of this 
                paragraph, a person shall be treated as related to 
                another person if--
                            ``(i) such person bears a relationship to 
                        such other person described in section 267(b) 
                        (determined without regard to paragraph (9) 
                        thereof), or section 707(b)(1), determined by 
                        substituting `25 percent' for `50 percent' each 
                        place it appears therein, and
                            ``(ii) in the case such other person is a 
                        nonprofit organization, if such person controls 
                        directly or indirectly more than 25 percent of 
                        the governing body of such organization.''
    (b) Exclusion From Definition of Debt-Financed Property.--Section 
514(b)(1) of the Internal Revenue Code of 1986 (defining debt-financed 
property) is amended by striking ``or'' at the end of subparagraph (C), 
by striking the period at the end of subparagraph (D) and inserting ``; 
or'', and by inserting after subparagraph (D) the following new 
subparagraph:
                    ``(E) any property the gain or loss from the sale, 
                exchange, or other disposition of which would be 
                excluded by reason of the provisions of section 
                512(b)(18) in computing the gross income of any 
                unrelated trade or business.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any gain or loss on the sale, exchange, or other disposition 
of any property acquired by the taxpayer after the date of the 
enactment of this Act.
                                 <all>