To amend the Internal Revenue Code of 1986 to allow non-exempt farmer cooperatives to elect patronage-sourced treatment for certain gains and losses, and for other purposes.

Amends the Internal Revenue Code to allow farmers' cooperatives to elect to treat as ordinary income or loss certain capital gains and losses from the disposition of assets used in conducting business with or for patrons.

Decreases from five years to four years the maturity date for high yield discount obligations for purposes of determining the deduction for interest on indebtedness.

Requires any interest received by a limited equity housing corporation on reasonable reserves (including reserves required by a government agency or lender) to be treated as income derived by such corporation from transactions with members.

 
Union Calendar No. 409
102d CONGRESS
2d Session
H. R. 5650
[Report No. 102-719]
A BILL
To amend the Internal Revenue Code of 1986 to allow non-exempt farmer
cooperatives to elect patronage-sourced treatment for certain gains and
losses, and for other purposes.
July 24, 1992
Committed to the Committee of the Whole House on the State of the Union and
ordered to be printed
HR 5650 RH
Union Calendar No. 409
102d CONGRESS
2d Session
 H. R. 5650
[Report No. 102-719]
To amend the Internal Revenue Code of 1986 to allow non-exempt farmer
cooperatives to elect patronage-sourced treatment for certain gains and
losses, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
July 22, 1992
Mr. DORGAN of North Dakota (for himself and Mr. RANGEL) introduced the
following bill; which was referred to the Committee on Ways and Means
July 24, 1992
Committed to the Committee of the Whole House on the State of the Union and
ordered to be printed
A BILL
To amend the Internal Revenue Code of 1986 to allow non-exempt farmer
cooperatives to elect patronage-sourced treatment for certain gains and
losses, 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. TREATMENT OF CERTAIN GAINS AND LOSSES OF FARMER COOPERATIVES.
  (a) GENERAL RULE- Section 1388 of the Internal Revenue Code of 1986 is
  amended by adding at the end thereof the following new subsection:
  `(k) TREATMENT OF GAINS OR LOSSES ON THE DISPOSITION OF CERTAIN ASSETS-
  For purposes of this title, in the case of any organization to which part
  I of this subchapter applies--
  `(1) IN GENERAL- An organization may elect to treat gain or loss from
  the sale or other disposition of any asset (including stock or any other
  ownership or financial interest in another entity) as ordinary income or
  loss and to include such gain or loss in net earnings of the organization
  from business done with or for patrons, if such asset was used by the
  organization to facilitate the conduct of business done with or for patrons.
  `(2) ALLOCATION- An election under paragraph (1) shall not apply to gain
  or loss on the sale or other disposition of any asset to the extent that
  such asset was used for purposes other than to facilitate the conduct
  of business done with or for patrons. For purposes of this paragraph,
  the extent of such use may be determined on the basis of any reasonable
  method for making allocations of income or expense between patronage and
  nonpatronage operations.
  `(3) PERIOD OF ELECTION- An election under paragraph (1) shall apply to
  the taxable year for which made and all subsequent taxable years unless
  revoked by the organization. Any such revocation shall be effective for
  taxable years beginning after the date on which notice of the revocation
  is filed with the Secretary.
  `(4) ELECTION AFTER REVOCATION- If an organization has made an election
  under paragraph (1) and such election has been revoked under paragraph (3),
  such organization shall not be eligible to make an election under paragraph
  (1) for any taxable year before its 3rd taxable year which begins after
  the 1st taxable year for which such revocation is effective, unless the
  Secretary consents to such election.
  `(5) NO INFERENCE- Nothing in this subsection shall be construed to infer
  that a change in the law is intended for organizations not having in effect
  an election under paragraph (1). Any gain or loss from the sale or other
  disposition of any asset by such organization shall be treated as if this
  subsection had not been enacted.'
  (b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to
  dispositions after the date of the enactment of this Act.
SEC. 2. TREATMENT OF CERTAIN HIGH YIELD DISCOUNT OBLIGATIONS.
  (a) GENERAL RULE- Paragraphs (1)(A) and (2)(A) of section 163(i) of the
  Internal Revenue Code of 1986 (relating to applicable high yield discount
  obligations) are each amended by striking `5 years' and inserting `4 years'.
  (b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to
  instruments issued after the date of the enactment of this Act.
SEC. 3. TREATMENT OF INTEREST ON RESERVES OF LIMITED EQUITY HOUSING
COOPERATIVES.
  (a) GENERAL RULE- Section 277 of the Internal Revenue Code of 1986
  (relating to deductions incurred by certain membership organizations in
  transactions with members) is amended by adding at the end thereof the
  following new subsection:
  `(c) TREATMENT OF INTEREST ON RESERVES OF LIMITED EQUITY HOUSING
  CORPORATIONS-
  `(1) IN GENERAL- For purposes of subsection (a), any interest received by
  a limited equity housing corporation on reasonable reserves established
  in connection with such corporation (including reserves required by a
  government agency or lender) shall be treated as income derived by such
  corporation from transactions with members.
  `(2) LIMITED EQUITY HOUSING CORPORATION- For purposes of paragraph (1),
  the term `limited equity housing corporation' means any cooperative housing
  corporation (as defined in section 216(b)(1)) with respect to which the
  requirements of section 143(k)(9)(D)(i) are met.'
  (b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to
  taxable years beginning after the date of the enactment of this Act.