[Congressional Record Volume 149, Number 92 (Friday, June 20, 2003)]
[Senate]
[Pages S8301-S8303]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN (for himself, Mr. Hatch, Mr. Baucus, Mr. Conrad, 
        Mr. Breaux, Ms. Snowe, Mrs. Lincoln, and Mr. Smith):
  S. 1305. A bill to amend the Internal Revenue Code of 1986 to provide 
for the treatment of certain motor vehicle dealer transitional 
assistance; to the Committee on Finance.
  Mr. BINGAMAN. Mr. President, I am introducing legislation today with 
Senators Hatch, Baucus, Conrad, Breaux, Snowe, Lincoln and Smith that 
will provide thousands of our Nations' automobile dealerships with 
needed additional flexibility to re-invest franchise termination 
payments so that taxes are not unfairly imposed. This legislation has 
bipartisan support in both the House and the Senate and was included in 
the Chairman's modified mark in last year's small business tax bill.
  At the end of 2000, GM notified their 2,801 Oldsmobile dealers that 
they were phasing out the 100 year-old Oldsmobile brand and its 
complete line-up of vehicles shortly after the dealers had signed a new 
agreement with a commitment of up to five years on this

[[Page S8303]]

product line. With this surprising elimination of the Oldsmobile 
product line, many family-owned dealerships are facing an increased 
threat to the viability of other product lines at their dealerships 
and, in some cases, a complete loss of their business.
  GM is in the process of compensating these dealers to minimize the 
impact, as many of these dealers are facing a significant and 
previously unforeseeable financial burden, through no fault of their 
own, in connection with their efforts to continue in the automobile 
retail business. The legislation we are introducing today seeks to 
lessen that burden by allowing these dealerships up to two years to re-
invest their GM's financial assistance payments in other dealership 
properties and defer payment of taxes under IRC Section 1031. Under 
current law, the dealerships would only have 6 months to identify and 
purchase a similar business or property. This time restriction would 
make it difficult, if not impossible, for most of these businesses to 
re-invest these payments because, as is the case with most franchises, 
there are very few businesses or investments that are similar enough to 
be considered ``like kind'' and hence qualify for tax deferral. The 
failure to do so results in the owner paying taxes on the payment, even 
if they are ultimately re-invested in a business that would have 
qualified. Since the dealers did not want to forfeit their rights to 
sell Oldsmobiles, this seems like a particularly harsh result.
  In rural States like New Mexico, family-owned businesses supply the 
majority of jobs and services in the State. This legislation gives 
these small businesses an opportunity to continue their family-owned 
businesses and, at the same time, give a boost to the local economy. I 
look forward to working with my colleagues on advancing this 
legislation.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1305

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. MOTOR VEHICLE DEALER TRANSITIONAL ASSISTANCE.

       (a) In General.--For purposes of subtitle A of the Internal 
     Revenue Code of 1986, in the case of a taxpayer who elects 
     the application of this section and who was a party to a 
     motor vehicle sales and service agreement with a motor 
     vehicle manufacturer who announced in December 2000 that it 
     would phase-out the motor vehicle brand to which such 
     agreement relates--
       (1) amounts received by such taxpayer from such 
     manufacturer on account of the termination of such agreement 
     (hereafter in this section referred to as ``termination 
     payment'') are considered to be received for property used in 
     the trade or business of a motor vehicle retail sales and 
     service dealership, and
       (2) to the extent such termination payment is reinvested in 
     property used in a motor vehicle retail sales and service 
     dealership located within the United States, such property 
     shall qualify as like-kind replacement property to which 
     section 1031 of the Internal Revenue Code of 1986 shall apply 
     with the following modifications:
       (A) Such section shall be applied without regard to 
     subparagraphs (A) and (B)(ii) of subsection (a)(3).
       (B) The period described in section 1031(a)(3)(B) of such 
     Code shall be applied by substituting ``2 years'' for ``180 
     days''.
       (b) Rules for Election.--
       (1) Form of election.--The taxpayer shall make an election 
     under this section in such form and manner as the Secretary 
     of the Treasury may prescribe and shall include in such 
     election the amount of the termination payment received, the 
     identification of the replacement property purchased, and 
     such other information as the Secretary may prescribe.
       (2) Election on amended return.--The Secretary of the 
     Treasury shall permit an election under this section on an 
     amended tax return for taxable years beginning before the 
     date of the enactment of this Act.
       (c) Statute of Limitations.--Notwithstanding the provisions 
     of any other law or rule of law, the statutory period for the 
     assessment for any deficiency attributable to any termination 
     payment gain shall be extended until 3 years after the date 
     the Secretary of the Treasury is notified by the taxpayer of 
     the like-kind replacement property or an intention not to 
     replace.
       (d) Effective Date.--This section shall apply to amounts 
     received after December 12, 2000, in taxable years ending 
     after such date.

  Mr. BAUCUS. Mr. President, I am proud to support Senator Bingaman's 
legislation to ensure equitable tax treatment for Oldsmobile dealers 
impacted by General Motors' sudden decision to eliminate the Oldsmobile 
from its product line. General Motors did agree to partially compensate 
Oldsmobile dealers for their loss.
  Senator Bingaman's bill ensures that like-kind exchange treatment, 
which defers the gain on the exchange of business or investment 
property until it is ultimately sold, is also available for motor 
vehicle dealers who receive payments when the brand of automobile they 
carry is eliminated by the manufacturer. The proposal allows such 
reinvested payments to be treated as a like-kind exchange of property 
if exchanged within 2 years from receipt of the payments, thus 
deferring the tax consequences. As such, the proposal encourages 
capital investment by recognizing that a longer period of time is 
required for dealers to obtain a new franchise or establish a new car 
sales business.
  The manufacturer, not the automobile dealer, makes the unilateral 
decision to eliminate vehicle brands. Nonetheless, the dealer is the 
one who invests years of hard work in bringing a particular brand to 
his or her local community. When a manufacturer decides to eliminate a 
brand, many family-owned dealerships face a complete loss of business 
as well as an increased threat to the viability of other brands located 
in the same facility.
  Approximately one-third of the 2,801 Oldsmobile dealers across the 
country are expected to reinvest the GM payments into another franchise 
or other retail motor vehicle sales business. Many of the 27 Oldsmobile 
dealers in Montana have expressed their interest in reinvesting the GM 
payments they received, if this legislation becomes law. These 
Montanans have been stripped of a source of income at a time when the 
economy is not too forgiving.
  I urge my colleagues to support this important legislation.
                                 ______