[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6827 Introduced in House (IH)]







110th CONGRESS
  2d Session
                                H. R. 6827

 To amend the Internal Revenue Code of 1986 to provide for rollover of 
 gain from divesting certain qualified securities of business entities 
            engaged in Iran or Sudan discouraged activities.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             August 1, 2008

 Mr. Sherman (for himself, Ms. Ros-Lehtinen, Mr. Berman, Ms. Berkley, 
Mrs. Jones of Ohio, Mr. Davis of Alabama, Mr. Kirk, Mr. Perlmutter, Mr. 
     Burton of Indiana, Mr. Campbell of California, and Mr. Engel) 
 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 provide for rollover of 
 gain from divesting certain qualified securities of business entities 
            engaged in Iran or Sudan discouraged activities.

    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 ``Enable Divestment from Sudan and 
Iran Act of 2008''.

SEC. 2. ROLLOVER OF GAIN FROM DIVESTING CERTAIN QUALIFIED SECURITIES OF 
              BUSINESS ENTITIES ENGAGED IN DISCOURAGED ACTIVITIES IN 
              IRAN OR SUDAN.

    (a) In General.--Part III of subchapter O of chapter 1 of the 
Internal Revenue Code of 1986 (relating to common nontaxable exchanges) 
is amended by adding at the end the following new section:

``SEC. 1046. ROLLOVER OF GAIN FROM DIVESTING CERTAIN QUALIFIED 
              SECURITIES OF BUSINESS ENTITIES ENGAGED IN DISCOURAGED 
              ACTIVITIES IN IRAN OR SUDAN.

    ``(a) Nonrecognition of Gain.--
            ``(1) In general.--In the case of any sale of any qualified 
        security held by a taxpayer with respect to which such taxpayer 
        elects the application of this section, in any business entity 
        that is engaged in an Iran discouraged activity or a Sudan 
        discouraged activity, gain from such sale shall be recognized 
        only to the extent that the amount realized on such sale 
        exceeds--
                    ``(A) the cost of any qualified replacement 
                property purchased by the taxpayer during the 30-day 
                period beginning on the date of such sale, reduced by
                    ``(B) any portion of such cost previously taken 
                into account under this section.
            ``(2) Exception for ordinary income gain.--This section 
        shall not apply to any gain which is treated as ordinary income 
        for purposes of this title.
            ``(3) Exception where taxpayer owns controlling interest in 
        the business entity.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any sale if, immediately before such sale, the taxpayer 
                owns a controlling interest in the business entity that 
                is engaged in an Iran discouraged activity or a Sudan 
                discouraged activity.
                    ``(B) Controlling interest.--For purposes of 
                subparagraph (A), the term `controlling interest' means 
                direct or indirect ownership of at least 50 percent of 
                the total voting power and value of all classes of 
                stock of a corporation. For purposes of the preceding 
                sentence, the rules of paragraphs (1) and (5) of 
                section 267(c) shall apply.
                    ``(C) Aggregation rule.--For purposes of this 
                paragraph, all members of the same controlled group of 
                corporations (within the meaning of section 267(f)) and 
                all persons under common control (within the meaning of 
                section 52(b) but determined by treating an interest of 
                more than 50 percent as a controlling interest) shall 
                be treated as 1 person.
    ``(b) Definitions and Special Rules Relating to Securities and 
Replacement Property.--For purposes of this section--
            ``(1) Qualified security.--
                    ``(A) In general.--The term `qualified security' 
                means any security held by a taxpayer in any business 
                entity that is engaged in an Iran discouraged activity 
                or a Sudan discouraged activity.
                    ``(B) Exception.--Such term shall not include any 
                security purchased or otherwise acquired after the date 
                of the enactment of this section which, at the time of 
                such purchase or acquisition, was issued by a business 
                entity then engaged in an Iran discouraged activity or 
                a Sudan discouraged activity.
                    ``(C) Security defined.--The term `security' has 
                the meaning given such term by section 165(g)(2).
            ``(2) Qualified replacement property.--
                    ``(A) In general.--The term `qualified replacement 
                property' means any security of a business entity that, 
                on the date of purchase by the taxpayer--
                            ``(i) is not engaged in an Iran discouraged 
                        activity or a Sudan discouraged activity on 
                        such date,
                            ``(ii) is not a member of an expanded 
                        affiliated group, any member of which is 
                        engaged in an Iran discouraged activity or a 
                        Sudan discouraged activity on such date, and
                            ``(iii) meets the requirements of 
                        subparagraph (B).
                    ``(B) Replacement property.--Property meets the 
                requirements of this paragraph if, with respect to the 
                sale of any security--
                            ``(i) except as provided in clause (ii), in 
                        the case that the security is a share of stock 
                        in a corporation, the replacement property is a 
                        share of stock in a corporation,
                            ``(ii) in the case that the security is a 
                        share of stock of a regulated investment 
                        company, real estate investment trust, hedge 
                        fund, investment partnership, or similar 
                        business entity, the replacement property is a 
                        share of stock in a regulated investment 
                        company, real estate investment trust, hedge 
                        fund, investment partnership, or similar 
                        business entity,
                            ``(iii) in the case that the security is a 
                        right to subscribe for, or to receive, a share 
                        of stock in a corporation, the replacement 
                        property is a right to subscribe for, or to 
                        receive, a share of stock in a corporation, and
                            ``(iv) in the case that the security is a 
                        bond, debenture, note, or certificate, or other 
                        evidence of indebtedness issued by a 
                        corporation, with interest coupons or in 
                        registered form, the replacement property is a 
                        bond, debenture, note, or certificate, or other 
                        evidence of indebtedness issued by a 
                        corporation, with interest coupons or in 
                        registered form.
                    ``(C) Deemed investment if investing in entities 
                engaged in discouraged activities.--Any regulated 
                investment company, real estate investment trust, hedge 
                fund, investment partnership, or similar business 
                entity, which invests in the securities--
                            ``(i) issued by a business entity 
                        determined to be engaging in Iran discouraged 
                        activities or Sudan discouraged activities, or
                            ``(ii) issued by the government of Sudan or 
                        Iran or any agency thereof,
                shall be deemed to be a business entity engaging in 
                Iran discouraged activities or Sudan discouraged 
                activities.
                    ``(D) Business declaration of policy.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of this section, in the case of 
                        a business entity described in clause (iii), a 
                        security in such business entity shall not be 
                        treated as qualified replacement property 
                        unless the business entity has made the 
                        following declaration: `It is our policy not to 
                        make investments in business entities which 
                        engage in Iran discouraged activities or Sudan 
                        discouraged activities as defined in section 
                        1046 of the Internal Revenue Code of 1986, and 
                        to use due diligence to avoid making such 
                        investments. It is our policy to divest on or 
                        before December 31, 2010, from business 
                        entities engaged in either Iran discouraged 
                        activities or Sudan discouraged activities.'.
                            ``(ii) Not qualified security.--If a 
                        business entity described in clause (iii) has 
                        made the declaration specified in clause (i), 
                        then from the time of such declaration an 
                        interest in such business entity shall not be 
                        treated as a qualified security.
                            ``(iii) Business entity described.--A 
                        business entity described in this clause is a 
                        regulated investment company, real estate 
                        investment trust, hedge fund, investment 
                        partnership, or similar business entity.
                    ``(E) Expanded affiliated group.--The term 
                `expanded affiliated group' means an affiliated group 
                as defined in section 1504(a), determined--
                            ``(i) by substituting `more than 50 
                        percent' for `at least 80 percent' each place 
                        it appears, and
                            ``(ii) without regard to paragraphs (2) and 
                        (4) of section 1504(b).
                    ``(F) Basis adjustments.--If gain from any sale is 
                not recognized by reason of subsection (a), such gain 
                shall be applied to reduce (in the order acquired) the 
                basis for determining gain or loss of any qualified 
                replacement property which is purchased by the taxpayer 
                during the 30-day period described in subsection (a).
                    ``(G) Holding period.--For purposes of determining 
                the period for which the taxpayer has held qualified 
                replacement property the acquisition of which resulted 
                in the nonrecognition under subsection (a) of any part 
                of the gain realized on the sale of a qualified 
                security, there shall be included the period for which 
                such qualified security had been held by the taxpayer.
            ``(3) Special rule for securities of certain entities.--
                    ``(A) In general.--For any business entity 
                described in subparagraph (C), a security in such 
                business entity shall be treated as qualified 
                replacement property if the business entity has made 
                the following declaration: `It is our policy not to 
                make investments in any person having an investment in, 
                or carrying on a trade or business (within the meaning 
                of section 162) in or with, Iran and Sudan. This policy 
                may or may not include investments concerning the 
                provision of food, medicine, humanitarian services in 
                or to Iran or Sudan or investments concerning 
                marginalized areas of Sudan (as defined in section 2 of 
                the Sudan Accountability and Divestment Act of 2007 
                (121 Stat. 2518)).'.
                    ``(B) Not qualified security.--If a business entity 
                described in subparagraph (C) has made the declaration 
                specified in subparagraph (A), then from the time of 
                such declaration an interest in such business entity 
                shall not be treated as a qualified security.
                    ``(C) Business entity described.--A business entity 
                described in this subparagraph is a regulated 
                investment company, real estate investment trust, hedge 
                fund, investment partnership, or similar business 
                entity.
                    ``(D) Certain business entities as replacement 
                property.--A business entity described in subparagraph 
                (C) making the declaration described in subparagraph 
                (A) may qualify as replacement property if it has 
                adopted restrictions on investment in persons that 
                invest in or carrying on a trade or business (within 
                the meaning of section 162) in or with countries other 
                than Iran and Sudan that are designated as state 
                sponsors of terrorism under section 6(j) of the Export 
                Administration Act of 1979, section 40 of the Arms 
                Export Control Act, or section 620A of the Foreign 
                Assistance Act of 1961.
            ``(4) Business entity.--The term `business entity' means 
        any corporation, limited liability partnership, limited 
        liability company, or any other business entity conducting 
        business activities in which the taxpayer has purchased or can 
        purchase securities.
    ``(c) Definitions and Rules Relating to Sudan Discouraged 
Activity.--For purposes of this section, the term `Sudan discouraged 
activity' means an investment in any business operation described in 
section 3(d) of the Sudan Accountability and Divestment Act of 2007 
(121 Stat. 2518).
    ``(d) Definitions and Rules Relating to Iran Discouraged 
Activities.--For purposes of this section--
            ``(1) Iran discouraged activity.--The term `Iran 
        discouraged activity' means--
                    ``(A) the sale of munitions to the Iranian 
                government,
                    ``(B) loans aggregating more than $20 million to 
                the Iranian government, or
                    ``(C) investments of over $20 million in the 
                Iranian energy sector.
            ``(2) Iranian government.--The term `Iranian government' 
        includes the government and any agency thereof.
            ``(3) Loan to iranian government.--A loan to the Iranian 
        government includes any sale in which payment is not due within 
        45 days of the transfer of the goods or services sold, and also 
        includes any sale as to which the business entity does not take 
        all reasonable action to enforce payment when due.
            ``(4) Investment in the energy sector.--Investment in the 
        energy sector includes any investment with regards to nuclear 
        facilities, gas pipelines, natural gas, petroleum extraction or 
        refinery facilities, or transportation facilities.
    ``(e) Doing Business With Terrorists.--
            ``(1) In general.--For purposes of this section--
                    ``(A) A business entity has engaged in Iran 
                discouraged activities if it conducts business with or 
                makes any charitable donation to any Iranian person 
                designated as a terrorist or to any foreign terrorist 
                organization.
                    ``(B) A business entity has engaged in Sudan 
                discouraged activities if it conducts business with or 
                makes any charitable donation to any Sudanese person 
                designated as a terrorist or to any foreign terrorist 
                organization.
            ``(2) Terrorist.--A person is designated as a terrorist for 
        purposes of paragraph (1) if such person is designated or 
        otherwise individually identified in or pursuant to an 
        Executive Order which is related to terrorism and issued under 
        the authority of the International Emergency Economic Powers 
        Act or section 5 of the United Nations Participation Act of 
        1945 for the purpose of imposing on such organization an 
        economic or other sanction.
            ``(3) Foreign terrorist organization.--For purposes of 
        paragraph (1), the term `foreign terrorist organization' means 
        an organization designated under section 219 of the Immigration 
        and Nationality Act (8 U.S.C. 1189) as a foreign terrorist 
        organization.
    ``(f) Identification of Business Entities Engaging in Iran 
Discouraged Activities or Sudan Discouraged Activities.--
            ``(1) Publication of list.--For purposes of this section, 
        the Secretary shall publish and update at least every six 
        months a list of business entities engaging in any Sudan 
        discouraged activities or Iran discouraged activities, or both.
            ``(2) Regulations.--The Secretary shall issue regulations 
        defining how a business entity shall not be deemed to be 
        engaged in an Iran discouraged activity or Sudan discouraged 
        activity, if--
                    ``(A) with regard to activities on the date this 
                section becomes effective, the business entity limits 
                its activity to continuing existing contracts, without 
                extension or expansion (except that an investment (as 
                defined in section 14 of the Iran Sanctions Act of 
                1996) that would subject a business entity to sanctions 
                under section 5 of the Iran Sanctions Act of 1996 shall 
                be considered an Iran discouraged activity, 
                notwithstanding contracts entered into prior to the 
                effective date of this section), and
                    ``(B) with regard to any Iran discouraged activity 
                or Sudan discouraged activity carried on under 
                contracts entered into or expanded after the effective 
                date of this section, the contract was entered into at 
                a time when the business entity did not own or control 
                the subsidiary business entity, and after acquiring 
                such ownership or control the business entity has not 
                extended or expanded or renewed such contract.
            ``(3) Taxpayer self-help.--Until such time as the Secretary 
        publishes a list of those engaging in Iran discouraged 
        activities or Sudan discouraged activities or if the Secretary 
        fails to update that list as required in paragraph (1), the 
        taxpayer may determine, using his best knowledge and belief, 
        which business entities engage in an Iran discouraged activity 
        or a Sudan discouraged activity.
    ``(g) Improvement in the Actions of the Government of the Sudan.--
Effective on the date when the President certifies under a section 12 
of the Sudan Accountability and Divestment Act of 2007 (121 Stat. 
2523), subsection (a) shall not apply to any Sudan discouraged activity 
after such date.
    ``(h) Improvement in the Actions of the Government of Iran.--
            ``(1) Termination of nonrecognition treatment.--Effective 
        on the date when the requirements described in paragraph (2) 
        are met, subsection (a) shall not apply to any Iran discouraged 
        activity after such date.
            ``(2) Requirements.--The requirements described in this 
        paragraph are--
                    ``(A) a declaration by the President which states 
                that, in the opinion of the President, Iran is no 
                longer engaging in efforts to develop or retain weapons 
                of mass destruction, and has not developed and is not 
                developing the capacity to enrich or reprocess uranium 
                or plutonium, and
                    ``(B) a determination by the Secretary of State 
                that Iran should no longer be listed as a state sponsor 
                of acts of international terrorism pursuant to section 
                6(j) of the Export Administration Act of 1979, section 
                620A of the Foreign Assistance Act of 1961, section 40 
                of the Arms Export Control Act, or any other provision 
                of law.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter O of chapter 1 of such Code is amended by adding at the end 
the following new item:

``Sec. 1046. Rollover of gain from divesting certain qualified 
                            securities of business entities engaged in 
                            discouraged activities in Iran or Sudan.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to with respect to sales of securities after the date of the 
enactment of this Act.
                                 <all>