[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4035 Introduced in House (IH)]







109th CONGRESS
  1st Session
                                H. R. 4035

 To amend the Internal Revenue Code of 1986 to eliminate capital gains 
 taxes on investments in the Hurricane Katrina disaster area to reduce 
            the estate tax for victims of Hurricane Katrina.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 7, 2005

  Mr. Garrett of New Jersey introduced the following bill; which was 
              referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to eliminate capital gains 
 taxes on investments in the Hurricane Katrina disaster area to reduce 
            the estate tax for victims of Hurricane Katrina.

    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 ``Economic Relief for Gulf Coast 
Families and Businesses Act''.

SEC. 2. TAX BENEFITS RELATED TO HURRICANE KATRINA DISASTER AREA.

    (a) In General.--Subchapter Y of chapter 1 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new section:

``SEC. 1400M. TAX BENEFITS RELATED TO HURRICANE KATRINA DISASTER AREA.

    ``(a) Zero Percent Capital Gains Rate.--
            ``(1) Exclusion.--Gross income shall not include qualified 
        capital gain from the sale or exchange of any Katrina Zone 
        asset held for more than 5 years.
            ``(2) Katrina zone.--For purposes of this subsection, the 
        term `Katrina Zone asset' means--
                    ``(A) any Katrina Zone business stock,
                    ``(B) any Katrina Zone partnership interest, and
                    ``(C) any Katrina Zone business property.
            ``(3) Katrina zone business stock.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `Katrina Zone business 
                stock' means any stock in a domestic corporation which 
                is originally issued after August 28, 2005, if--
                            ``(i) such stock is acquired by the 
                        taxpayer, before January 1, 2007, at its 
                        original issue (directly or through an 
                        underwriter) solely in exchange for cash,
                            ``(ii) as of the time such stock was 
                        issued, such corporation was a Katrina Zone 
                        business (or, in the case of a new corporation, 
                        such corporation was being organized for 
                        purposes of being a Katrina Zone business), and
                            ``(iii) during substantially all of the 
                        taxpayer's holding period for such stock, such 
                        corporation qualified as a Katrina Zone 
                        business.
                    ``(B) Redemptions.--A rule similar to the rule of 
                section 1202(c)(3) shall apply for purposes of this 
                paragraph.
            ``(4) Katrina zone partnership interest.--For purposes of 
        this subsection, the term `Katrina Zone partnership interest' 
        means any capital or profits interest in a domestic partnership 
        which is originally issued after August 28, 2005, if--
                    ``(A) such interest is acquired by the taxpayer, 
                before January 1, 2007, from the partnership solely in 
                exchange for cash,
                    ``(B) as of the time such interest was acquired, 
                such partnership was a Katrina Zone business (or, in 
                the case of a new partnership, such partnership was 
                being organized for purposes of being a Katrina Zone 
                business), and
                    ``(C) during substantially all of the taxpayer's 
                holding period for such interest, such partnership 
                qualified as a Katrina Zone business.
        A rule similar to the rule of subparagraph (B)(ii) shall apply 
        for purposes of this paragraph.
            ``(5) Katrina zone business property.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `Katrina Zone business 
                property' means tangible property if--
                            ``(i) such property was acquired by the 
                        taxpayer by purchase (as defined in section 
                        179(d)(2)) after August 28, 2005, and before 
                        January 1, 2007,
                            ``(ii) the original use of such property in 
                        the Katrina Zone commences with the taxpayer, 
                        and
                            ``(iii) during substantially all of the 
                        taxpayer's holding period for such property, 
                        substantially all of the use of such property 
                        was in a Katrina Zone business of the taxpayer.
                    ``(B) Special rule for buildings which are 
                substantially improved.--
                            ``(i) In general.--The requirements of 
                        clauses (i) and (ii) of subparagraph (A) shall 
                        be treated as met with respect to--
                                    ``(I) property which is 
                                substantially improved by the taxpayer 
                                before January 1, 2007, and
                                    ``(II) any land on which such 
                                property is located.
                            ``(ii) Substantial improvement.--For 
                        purposes of clause (i), property shall be 
                        treated as substantially improved by the 
                        taxpayer only if, during any 24-month period 
                        beginning after August 28, 2005, additions to 
                        basis with respect to such property in the 
                        hands of the taxpayer exceed the greater of--
                                    ``(I) an amount equal to the 
                                adjusted basis of such property at the 
                                beginning of such 24-month period in 
                                the hands of the taxpayer, or
                                    ``(II) $5,000.
            ``(6) Katrina zone business.--For purposes of this 
        subsection, the term `Katrina Zone business' means any 
        corporation, partnership, or business which would be an 
        enterprise zone business (as defined in section 1397C) if such 
        section were applied by substituting `Katrina Zone' for 
        `empowerment zone' each place it appears.
            ``(7) Special rules related to katrina zone assets.--For 
        purposes of this subsection--
                    ``(A) Treatment of subsequent purchasers, etc.--For 
                purposes of this subsection, the term `Katrina Zone 
                asset' includes any property which would be a Katrina 
                Zone asset but for paragraph (3)(A)(i), (4)(A), or 
                (5)(A)(i) or (ii) in the hands of the taxpayer if such 
                property was a Katrina Zone asset in the hands of a 
                prior holder.
                    ``(B) 5-year safe harbor.--If any property ceases 
                to be a Katrina Zone asset by reason of paragraph 
                (3)(A)(iii), (4)(C), or (5)(A)(iii) after the 5-year 
                period beginning on the date the taxpayer acquired such 
                property, such property shall continue to be treated as 
                meeting the requirements of such paragraph; except that 
                the amount of gain to which paragraph (1) applies on 
                any sale or exchange of such property shall not exceed 
                the amount which would be qualified capital gain had 
                such property been sold on the date of such cessation.
            ``(8) Qualified capital gain.--For purposes of this 
        subsection--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the term `qualified capital gain' means 
                any gain recognized on the sale or exchange of--
                            ``(i) a capital asset, or
                            ``(ii) property used in the trade or 
                        business (as defined in section 1231(b).
                    ``(B) Gain before hurricane or after 2011 not 
                qualified.--The term `qualified capital gain' shall not 
                include any gain attributable to periods before August 
                29, 2005, or after December 31, 2011.
                    ``(C) Certain ordinary income gain not qualified.--
                The term `qualified capital gain' shall not include any 
                gain which would be treated as ordinary income under 
                section 1245 or under section 1250 if section 1250 
                applied to all depreciation rather than the additional 
                depreciation.
                    ``(D) Intangibles and land not integral part of 
                katrina zone business.--The term `qualified capital 
                gain' shall not include any gain which is attributable 
                to real property, or an intangible asset, which is not 
                an integral part of a Katrina Zone business.
                    ``(E) Related party transactions.--The term 
                `qualified capital gain' shall not include any gain 
                attributable, directly or indirectly, in whole or in 
                part, to a transaction with a related person. For 
                purposes of this subparagraph, persons are related to 
                each other if such persons are described in section 
                267(b) or 707(b)(1).
            ``(9) Certain other rules to apply.--Rules similar to the 
        rules of subsections (g), (h), (i)(2), and (j) of section 1202 
        shall apply for purposes of this subsection.
            ``(10) Sales and exchanges of interests in partnerships and 
        s corporations which are katrina zone businesses.--In the case 
        of the sale or exchange of an interest in a partnership, or of 
        stock in an S corporation, which was a Katrina Zone business 
        during substantially all of the period the taxpayer held such 
        interest or stock, the amount of qualified capital gain shall 
        be determined without regard to--
                    ``(A) any gain which is attributable to real 
                property, or an intangible asset, which is not an 
                integral part of a Katrina Zone business, and
                    ``(B) any gain attributable to periods before 
                August 29, 2005, or after December 31, 2011.
    ``(b) Estate Tax Reduction for Hurricane Katrina Victims.--
            ``(1) In general.-- For purposes of this title, a Hurricane 
        Katrina victim shall be treated as a qualified decedent within 
        the meaning of section 2201(b).
            ``(2) Hurricane katrina victim.--For purposes of this 
        section, the term `Hurricane Katrina victim' means any decedent 
        who dies after August 28, 2005, as a result of wounds or 
        injuries incurred in the Katrina Zone as a result of Hurricane 
        Katrina.
    ``(c) Katrina Zone.--For purposes of this section, the term 
`Katrina Zone' means an area determined by the President to warrant 
individual or individual and public assistance from the Federal 
Government under the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act by reason of Hurricane Katrina.''.
    (b) Conforming Amendments.--
            (1) The heading for subchapter Y of chapter 1 of such Code 
        is amended to read as follows:

            ``Subchapter Y--Short-term Regional Benefits''.

            (2) The table of sections for such subchapter is amended by 
        adding at the end the following new item:

``Sec. 1400M. Tax benefits related to Hurricane Katrina disaster 
                            area.''.
                                 <all>