S 33 PCSCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 with respect to the proper tax treatment of certain indebtedness discharged in 2009 or 2010, and for other purposes.CommentsClose CommentsPermalink

January 6, 2009CommentsClose CommentsPermalink

Mr. ENSIGN introduced the following bill; which was read the first timeCommentsClose CommentsPermalink

January 7, 2009CommentsClose CommentsPermalink

Read the second time and placed on the calendarCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 with respect to the proper tax treatment of certain indebtedness discharged in 2009 or 2010, 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. PROPER TAX TREATMENT OF CERTAIN FINANCIAL INDEBTEDNESS DISCHARGED IN 2009 OR 2010.

(a) In General- Section 108(a)(1) of the Internal Revenue Code of 1986 (relating to exclusion from gross income) is amended by striking ‘or’ at the end of subparagraph (D), by striking the period at the end of subparagraph (E) and inserting ‘, or’ and by adding at the end the following new subparagraph:CommentsClose CommentsPermalink





‘(F) the indebtedness discharged is applicable financial indebtedness which is discharged after December 31, 2008, and before January 1, 2011.’.CommentsClose CommentsPermalink





(b) Applicable Financial Indebtedness- Section 108 of such Code is amended by adding at the end the following new subsection:CommentsClose CommentsPermalink





‘(i) Definitions and Rules Relating to Applicable Financial Indebtedness- For purposes of subsection (a)(1)(F)--CommentsClose CommentsPermalink





‘(1) APPLICABLE FINANCIAL INDEBTEDNESS- The term ‘applicable financial indebtedness’ means indebtedness--CommentsClose CommentsPermalink





‘(A) which was originally issued by a corporation, or by a partnership engaged in a trade or business (other than a trade or business of trading in stocks or securities for the partnership’s own account), andCommentsClose CommentsPermalink





‘(B) which is--CommentsClose CommentsPermalink





‘(i) indebtedness originally issued or syndicated by a financial institution (as defined in section 582(c)(2) without regard to subparagraph (C) thereof) or a depository institution holding company (as defined in section 3(w)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(1)),CommentsClose CommentsPermalink





‘(ii) indebtedness which--CommentsClose CommentsPermalink





‘(I) constitutes a security within the meaning of the Securities Act of 1933, andCommentsClose CommentsPermalink





‘(II) was originally issued pursuant to a registration statement that was declared effective under such Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of such Act, orCommentsClose CommentsPermalink





‘(iii) indebtedness that is traded on an established market (within the meaning of section 1273(b)(3)).CommentsClose CommentsPermalink





‘(2) APPLICABLE DISCHARGES- Subsection (a)(1)(F) shall only apply to a discharge of applicable financial indebtedness if such discharge is by reason of--CommentsClose CommentsPermalink





‘(A) the acquisition of the indebtedness by the issuer of the indebtedness,CommentsClose CommentsPermalink





‘(B) the acquisition of the indebtedness of the issuer by a person related, or who becomes related, to the issuer of the indebtedness from a person who is not related to the issuer, orCommentsClose CommentsPermalink





‘(C) the significant modification of the indebtedness (within the meaning of section 1001).CommentsClose CommentsPermalink





For purposes of subparagraph (B), the determination of whether a person is related to another person shall be made in the same manner as under subsection (e)(4).’.CommentsClose CommentsPermalink





(c) Coordination of Exclusions- Section 108(a)(2) of such Code is amended--CommentsClose CommentsPermalink





(1) by striking ‘and (E)’ in subparagraph (A) and inserting ‘(E), and (F)’, andCommentsClose CommentsPermalink





(2) by adding at the end the following new subparagraph:CommentsClose CommentsPermalink





‘(D) FINANCIAL INDEBTEDNESS EXCLUSION TAKES PRECEDENCE OVER INSOLVENCY EXCLUSION UNLESS ELECTED OTHERWISE- Paragraph (1)(B) shall not apply to a discharge to which paragraph (1)(F) applies unless the taxpayer elects to apply paragraph (1)(B) in lieu of paragraph (1)(F).’.CommentsClose CommentsPermalink





(d) Earnings and Profits- Section 312(l) of such Code is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





‘(3) DISCHARGE OF CERTAIN FINANCIAL INDEBTEDNESS- The earnings and profits of a corporation shall not include income from a discharge of indebtedness to which section 108(a)(1)(F) applies.’.CommentsClose CommentsPermalink





(e) Other Special Rules-CommentsClose CommentsPermalink





(1) TREATMENT AS MARKET DISCOUNT BOND- For purposes of the Internal Revenue Code of 1986, any indebtedness acquired in a transaction described in section 108(i)(2)(B) of such Code (as added by subsection (b)), or received pursuant to an exchange arising from a transaction described in section 108(i)(2)(C) of such Code (as so added), shall be treated as a market discount bond (within the meaning of section 1278(a)(1) of such Code) having market discount equal to the amount (if any) which, but for section 108(a)(1)(F) of such Code (as added by subsection (a)), would have been includible in gross income by reason of the discharge of such indebtedness in any such transaction.CommentsClose CommentsPermalink





(2) ACQUISITIONS BY FOREIGN PERSONS- Any interest (or original issue discount) paid or accrued after December 31, 2008, and before January 1, 2011, on indebtedness which is described in section 108(a)(1)(F) of such Code by reason of the acquisition of such indebtedness by a foreign person or by a partnership (or other pass-through entity) in which a foreign person is a partner (or other profits or capital owner) shall not be subject to sections 871(h)(3), 881(c)(3)(B) or 881(c)(3)(C) of such Code.CommentsClose CommentsPermalink

Calendar No. 11CommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 with respect to the proper tax treatment of certain indebtedness discharged in 2009 or 2010, and for other purposes.CommentsClose CommentsPermalink

January 7, 2009CommentsClose CommentsPermalink