S 1588 ISCommentsClose CommentsPermalink

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.CommentsClose CommentsPermalink

August 6, 2009CommentsClose CommentsPermalink

Mr. WYDEN introduced the following bill; which was read twice and referred to the Committee on FinanceCommentsClose CommentsPermalink

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.CommentsClose CommentsPermalink

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Stop Tax-breaks for Oil Profiteering Act’ or the ‘STOP Act’.CommentsClose CommentsPermalink

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-CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink

‘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.CommentsClose CommentsPermalink





‘(b) Applicable Commodity- For purposes of this section--CommentsClose CommentsPermalink





‘(1) IN GENERAL- The term ‘applicable commodity’ means--CommentsClose CommentsPermalink





‘(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)),CommentsClose CommentsPermalink





‘(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),CommentsClose CommentsPermalink





‘(C) any notional principal contract with respect to any commodity described in subparagraph (A) or (B), andCommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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).CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(d) Application- This section shall apply to any applicable commodity acquired after August 31, 2009, and before January 1, 2014.’.CommentsClose CommentsPermalink





(2) CONFORMING AMENDMENTS-CommentsClose CommentsPermalink





(A) Section 1222 of such Code is amended by striking the last sentence thereof.CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink





‘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.’.CommentsClose CommentsPermalink





(b) Application to Section 1256 Contracts-CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink





‘(6) SPECIAL RULES FOR CERTAIN COMMODITY CONTRACTS-CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(i) by substituting ‘100 percent’ for ‘40 percent’ in subparagraph (A) thereof, andCommentsClose CommentsPermalink





‘(ii) without regard to subparagraph (B) thereof.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(D) APPLICATION- This paragraph shall apply to any applicable commodity acquired after August 31, 2009, and before January 1, 2014.’.CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(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, andCommentsClose CommentsPermalink





‘(B) in applying this subsection to such portion--CommentsClose CommentsPermalink





‘(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, andCommentsClose CommentsPermalink





‘(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.’.CommentsClose CommentsPermalink





(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.CommentsClose CommentsPermalink

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:CommentsClose CommentsPermalink





‘(20) TREATMENT OF GAINS OR LOSSES FROM COMMODITIES-CommentsClose CommentsPermalink





‘(A) IN GENERAL- Notwithstanding paragraph (5) or any other provision of this part--CommentsClose CommentsPermalink





‘(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, andCommentsClose CommentsPermalink





‘(ii) all deductions directly connected with such income or gain shall be allowed.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(C) LOOK-THRU IN THE CASE OF FOREIGN CORPORATIONS-CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(E) REGULATIONS- The Secretary shall prescribe such regulations as are necessary to carry out the provisions of this paragraph, including regulations--CommentsClose CommentsPermalink





‘(i) to prevent the avoidance of the purposes of this paragraph through the use of pass-thru entities or tiered structures, andCommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(F) APPLICATION- This paragraph shall apply to any applicable commodity acquired after August 31, 2009, and before January 1, 2014.’.CommentsClose CommentsPermalink





(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.CommentsClose CommentsPermalink

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--CommentsClose CommentsPermalink





(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,CommentsClose CommentsPermalink





(2) whether the amendments made by this Act have had any effect on the number or type of such sales and exchanges,CommentsClose CommentsPermalink





(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, andCommentsClose CommentsPermalink





(4) such other matters with respect to such tax treatment as the Secretary determines appropriate.CommentsClose CommentsPermalink





(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.CommentsClose CommentsPermalink