[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 1588 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                S. 1588

  To amend the Internal Revenue Code of 1986 to provide the same tax 
 treatment for both commercial and noncommercial investors in oil and 
      natural gas and related commodities, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             August 6, 2009

   Mr. Wyden 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 provide the same tax 
 treatment for both commercial and noncommercial investors in oil and 
      natural gas and related commodities, 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. SHORT TITLE.

    This Act may be cited as the ``Stop Tax-breaks for Oil Profiteering 
Act'' or the ``STOP Act''.

SEC. 2. CAPITAL GAIN OR LOSS FROM SALE OR EXCHANGE OF OIL OR NATURAL 
              GAS AND RELATED COMMODITIES TREATED AS SHORT-TERM CAPITAL 
              GAIN OR LOSS.

    (a) Gain or Loss on Applicable Commodities.--
            (1) In general.--Part IV of subchapter P of chapter 1 of 
        the Internal Revenue Code of 1986 (relating to special rules 
        for determining capital gains and losses) is amended by adding 
        at the end the following new section:

``SEC. 1261. CAPITAL GAIN OR LOSS FROM SALE OR EXCHANGE OF OIL OR 
              NATURAL GAS AND RELATED COMMODITIES TREATED AS SHORT-TERM 
              CAPITAL GAIN OR LOSS.

    ``(a) General Rule.--If a taxpayer has gain or loss from the sale 
or exchange of any applicable commodity which, without regard to this 
section, would be treated as long-term capital gain or loss, such gain 
or loss shall, notwithstanding any other provision of this title, be 
treated as short-term capital gain or loss.
    ``(b) Applicable Commodity.--For purposes of this section--
            ``(1) In general.--The term `applicable commodity' means--
                    ``(A) oil or natural gas (or any primary product of 
                oil or natural gas) which is actively traded (within 
                the meaning of section 1092(d)(1)),
                    ``(B) a specified index (within the meaning of 
                section 1221(b)(1)(B)(ii)) a substantial portion of 
                which is, as of the date the taxpayer acquires its 
                position with respect to such specified index, based on 
                1 or more commodities described in subparagraph (A),
                    ``(C) any notional principal contract with respect 
                to any commodity described in subparagraph (A) or (B), 
                and
                    ``(D) any evidence of an interest in, or a 
                derivative instrument in, any commodity described in 
                subparagraph (A), (B), or (C), including any option, 
                forward contract, futures contract, short position, and 
                any similar instrument in such a commodity.
            ``(2) Exception for certain section 1256 contracts.--Such 
        term shall not include a section 1256 contract (as defined in 
        section 1256(b)) which is required to be marked to market under 
        section 1256(a).
    ``(c) Special Rule for Certain Partnership Interests.--For purposes 
of this section, if a taxpayer recognizes gain or loss on the sale or 
exchange of any interest in a partnership, the portion of such gain or 
loss which is attributable to unrecognized gain or loss with respect to 
1 or more applicable commodities shall be treated as short-term capital 
gain or loss. The preceding sentence shall not apply if the taxpayer is 
otherwise required to treat such portion of gain or loss as ordinary 
income or loss.
    ``(d) Application.--This section shall apply to any applicable 
commodity acquired after August 31, 2009, and before January 1, 
2014.''.
            (2) Conforming amendments.--
                    (A) Section 1222 of such Code is amended by 
                striking the last sentence thereof.
                    (B) The table of sections for part IV of subchapter 
                P of chapter 1 of such Code is amended by adding at the 
                end the following new item:

``Sec. 1261. Capital gain or loss from sale or exchange of oil or 
                            natural gas and related commodities treated 
                            as short-term capital gain or loss.''.
    (b) Application to Section 1256 Contracts.--
            (1) In general.--Section 1256(f) of the Internal Revenue 
        Code of 1986 (relating to special rules) is amended by adding 
        at the end the following new paragraph:
            ``(6) Special rules for certain commodity contracts.--
                    ``(A) All gain or loss from commodity contracts 
                treated as short-term gain or loss.--In the case of a 
                section 1256 contract which is an applicable commodity, 
                subsection (a)(3) shall be applied to any gain or loss 
                with respect to such contract--
                            ``(i) by substituting `100 percent' for `40 
                        percent' in subparagraph (A) thereof, and
                            ``(ii) without regard to subparagraph (B) 
                        thereof.
                    ``(B) Treatment of mixed straddles.--A taxpayer may 
                not make an election under subsection (d), or an 
                election under the regulations prescribed pursuant to 
                section 1092(b)(2), with respect to any mixed straddle 
                if any position forming a part of such straddle is a 
                section 1256 contract which is an applicable commodity. 
                For purposes of this subparagraph, if any section 1256 
                contract which is part of a straddle is an applicable 
                commodity, any other section 1256 contract which is 
                part of such straddle shall be treated as an applicable 
                commodity.
                    ``(C) Applicable commodity.--For purposes of this 
                paragraph, the term `applicable commodity' has the 
                meaning given such term by section 1261(b), except that 
                such section shall be applied without regard to 
                paragraph (2) thereof.
                    ``(D) Application.--This paragraph shall apply to 
                any applicable commodity acquired after August 31, 
                2009, and before January 1, 2014.''.
            (2) Special rule for loss carrybacks.--Section 1212(c) of 
        such Code (relating to carryback of losses from section 1256 
        contracts to offset prior gains from such contracts) is amended 
        by redesignating paragraph (7) as paragraph (8) and by 
        inserting after paragraph (6) the following new paragraph:
            ``(7) Special rule for losses all of which are treated as 
        short-term.--If any portion of the net section 1256 contracts 
        loss for any taxable year is attributable to a net loss from 
        contracts to which section 1256(f)(6) applies--
                    ``(A) this subsection shall be applied first to 
                such portion of such net section 1256 contracts loss 
                and then to the remainder of such loss, and
                    ``(B) in applying this subsection to such portion--
                            ``(i) notwithstanding paragraph (1)(B), all 
                        of the loss attributable to such portion and 
                        allowed as a carryback shall be treated as a 
                        short-term capital loss, and
                            ``(ii) notwithstanding paragraph (6)(A), 
                        all of the loss attributable to such portion 
                        and allowed as a carryback shall be treated for 
                        purposes of applying paragraph (6) as a short-
                        term capital gain for the loss year.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to applicable commodities acquired after August 31, 2009, in 
taxable years ending after such date.

SEC. 3. GAINS AND LOSSES FROM OIL AND NATURAL GAS AND RELATED 
              COMMODITIES TREATED AS UNRELATED BUSINESS TAXABLE INCOME.

    (a) In General.--Section 512(b) of the Internal Revenue Code of 
1986 (relating to modifications to unrelated business taxable income) 
is amended by adding at the end the following new paragraph:
            ``(20) Treatment of gains or losses from commodities.--
                    ``(A) In general.--Notwithstanding paragraph (5) or 
                any other provision of this part--
                            ``(i) income, gain, or loss of an 
                        organization with respect to any applicable 
                        commodity shall not be excluded but shall be 
                        taken into account as income, gain, or loss 
                        from an unrelated trade or business, and
                            ``(ii) all deductions directly connected 
                        with such income or gain shall be allowed.
                    ``(B) Exception for ordinary income and losses.--
                Subparagraph (A) shall not apply to any income, gain, 
                or loss of an organization which, if not excluded under 
                this title and without regard to subparagraph (A), 
                would be treated as ordinary income or loss.
                    ``(C) Look-thru in the case of foreign 
                corporations.--
                            ``(i) In general.--If an organization owns 
                        directly or indirectly stock in a foreign 
                        corporation, the organization's pro rata share 
                        of any income, gain, or loss of such 
                        corporation (and any deductions directly 
                        connected with such income or gain) with 
                        respect to 1 or more applicable commodities 
                        shall be taken into account under subparagraph 
                        (A) in the same manner as if such commodities 
                        were held directly by the organization. Any 
                        such item shall be taken into account for the 
                        taxable year of the organization in which the 
                        item arises without regard to whether there was 
                        an actual distribution to the organization with 
                        respect to the item. For purposes of this 
                        clause, the rule under section 1261(c) shall 
                        apply in determining the income, gain, or loss 
                        of the foreign corporation with respect to 
                        applicable commodities.
                            ``(ii) Sale of interests in corporation.--
                        If a taxpayer recognizes gain or loss on the 
                        sale or exchange of any share of stock in a 
                        foreign corporation, the portion of such gain 
                        or loss which is attributable to unrecognized 
                        gain or loss with respect to 1 or more 
                        applicable commodities shall be taken into 
                        account under subparagraph (A) in the same 
                        manner as if such commodities were sold or 
                        exchanged directly by the organization.
                            ``(iii) No double counting.--The Secretary 
                        shall prescribe such rules as are necessary to 
                        ensure that any item of income, gain, loss, or 
                        deduction described in clause (i) or (ii) is 
                        taken into account only once for purposes of 
                        this paragraph.
                    ``(D) Applicable commodity.--For purposes of this 
                paragraph, the term `applicable commodity' has the 
                meaning given such term by section 1261(b), except that 
                such section shall be applied without regard to 
                paragraph (2) thereof.
                    ``(E) Regulations.--The Secretary shall prescribe 
                such regulations as are necessary to carry out the 
                provisions of this paragraph, including regulations--
                            ``(i) to prevent the avoidance of the 
                        purposes of this paragraph through the use of 
                        pass-thru entities or tiered structures, and
                            ``(ii) to provide that this paragraph shall 
                        not apply to ownership interests of 
                        organizations in foreign corporations in cases 
                        where the income or gain of the foreign 
                        corporation from any applicable commodity is 
                        otherwise subject to tax imposed by this 
                        chapter.
                    ``(F) Application.--This paragraph shall apply to 
                any applicable commodity acquired after August 31, 
                2009, and before January 1, 2014.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to applicable commodities acquired after August 31, 2009, in taxable 
years ending after such date.

SEC. 4. STUDY OF TAX TREATMENT OF COMMODITIES AND SECTION 1256 
              CONTRACTS.

    (a) Study.--The Secretary of the Treasury, or the Secretary's 
delegate, shall conduct a study of the Federal income tax treatment of 
section 1256 contracts under section 1256 of the Internal Revenue Code 
of 1986 and of applicable commodities under sections 1261, 1256(f)(6), 
and 512(b)(20) of such Code. Such study shall include an analysis of--
            (1) the average annual number of sales or exchanges of such 
        contracts and commodities, including the number of sales and 
        exchanges involving organizations exempt from Federal income 
        taxation under such Code,
            (2) whether the amendments made by this Act have had any 
        effect on the number or type of such sales and exchanges,
            (3) the effect of tax policy on the operation of the 
        commodities exchanges and on the demand for, and price of, 
        commodities, particularly with respect to oil and natural gas, 
        and
            (4) such other matters with respect to such tax treatment 
        as the Secretary determines appropriate.
    (b) Report.--The Secretary shall, not later than January 1, 2012, 
report the results of the study conducted under subsection (a) to the 
Committee on Finance of the Senate and the Committee on Ways and Means 
of the House of Representatives, together with such legislative 
recommendations as the Secretary determines appropriate with respect to 
the Federal income tax treatment of section 1256 contracts and 
applicable commodities.
                                 <all>