[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 794 Introduced in Senate (IS)]
107th CONGRESS
1st Session
S. 794
To amend the Internal Revenue Code of 1986 to facilitate electric
cooperative participation in a competitive electric power industry.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 26, 2001
Mr. Thompson (for himself, Mrs. Lincoln, Mr. Grassley, and Mr. Baucus)
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 facilitate electric
cooperative participation in a competitive electric power industry.
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 ``Rural Electric Tax Equity Act''.
SEC. 2. MEMBER INCOME TEST.
(a) Electric Industry Restructuring Income Excluded From Member
Income Test.--
(1) In general.--Section 501(c)(12)(C) of the Internal
Revenue Code of 1986 is amended by striking ``or'' at the end
of clause (i), by striking the period at the end of clause (ii)
and inserting a comma, and by adding at the end the following
new clauses:
``(iii) from the prepayment of any loan,
debt, or obligation made, insured, or
guaranteed under the Rural Electrification Act
of 1936,
``(iv) from any organization or entity in
which the electric company owns an interest,
other than income received by the electric
company and paid by the organization or entity,
``(v) from any member that voluntarily
waives any right to capital credits, patronage
dividends, or similar amounts allocated or paid
by the electric company,
``(vi) from any member for electric energy
sold or furnished by the electric company based
upon the electric company's incremental cost of
generating, purchasing, transmitting, or
distributing the electric energy,
``(vii) from the receipt of any money or
capital or any other contribution in aid of
construction that would be excluded from income
under section 118(c) if received by a regulated
public utility,
``(viii) either--
``(I) from the transfer of any
amount into a trust, fund, or
instrument established to pay any
nuclear decommissioning costs, if the
transfer is in connection with the
transfer of a nuclear powerplant or
nuclear powerplant unit, or
``(II) from the distribution of any
amount from any such trust, fund, or
instrument, including income
representing payments by the electric
company to the trust, fund, or
instrument, and investment income
earned by the trust, fund, or
instrument,
``(ix) from any individual, organization,
or entity for the electric company selling,
leasing, exchanging, or otherwise transferring
on a mutually agreed upon basis any property,
property right, asset, or service territory, or
``(x) from any organization or entity,
including any municipality, resulting from the
compulsory or involuntary requisition or
condemnation, or the threat or imminence of a
compulsory or involuntary requisition or
condemnation, of any property, asset, or
service territory.''.
(2) Special rules.--Section 512(b)(12) of such Code is
amended by adding at the end the following new subparagraphs:
``(E) For purposes of this paragraph, if any
Federal, State, or local law, regulation, holding, or
order prohibits an electric company from engaging in a
business on a cooperative basis, and if the electric
company owns an interest in any organization or entity
engaged in that business, then, at the electric
company's election, the percentage of any income
received by the electric company and paid by the
organization or entity equaling the percentage of
amounts collected by the organization or entity from
electric company members during the taxable year shall
be treated as amounts collected by the electric company
from members for the sole purpose of meeting losses and
expenses.
``(F) For purposes of subparagraph (C), regardless
of any contrary Federal, State, or local law,
regulation, holding, or order, neither an electric
company's receipt of income described in clause (v) or
(vi) of such subparagraph, nor a member's voluntary
waiver of a right described in such clause (v) or
payment described in such clause (vi), shall affect any
determination that the electric company is operating on
a mutual or cooperative basis.''.
(b) Electric Industry Restructuring Income Included as Member
Income in Member Income Test.--Section 501(c)(12) of the Internal
Revenue Code of 1986, as amended by subsection (a)(2), is amended by
adding at the end the following new subparagraph:
``(G)(i) For purposes of this paragraph, amounts
collected by a mutual or cooperative electric company
from members for the sole purpose of meeting losses and
expenses includes income received or accrued from any
individual, organization, or entity not a member for,
or in connection with, the electric company selling,
performing, or otherwise providing any goods or
services as required by, in voluntary compliance with,
or in order to conform to any electric industry
restructuring law, including the following:
``(I) The transmission or distribution of
electric energy to, with, or for any member, or
the sale, performance, transfer, or other
provision of any other goods or services
related to the transmission or distribution of
electric energy to, with, or for any member.
``(II) The joining, participation in,
transfer of ownership or control of property
to, or provision of any other goods or services
to or for a regional transmission organization,
independent system operator, regional
transmission group, or similar organization or
entity, all as approved or authorized by the
Federal Energy Regulatory Commission, the
Public Utility Commission of Texas, the Rural
Utilities Service, or other appropriate entity.
``(III) The sale, performance, or other
provision to, with, or for any member of any
goods or services related to any metering,
billing, collection, customer service, or
similar activity.
``(IV) The sale or furnishing of electric
energy to, with, or for any member, or the
sale, performance, or other provision of any
other goods or services related to the sale or
furnishing of electric energy to, with, or for
any member.
``(V) The sale or furnishing of electric
energy other than to, with, or for any member,
or the sale, performance, or other provision of
any other goods or services related to the sale
or furnishing of electric energy other than to,
with, or for any member, but only to the extent
that, after the electric company mandatorily or
voluntarily complies with any electric industry
restructuring law, the annual income received
or accrued for, or in connection with, the sale
or furnishing of electric energy to, with, or
for any member, or the sale, performance, or
other provision of any other goods or services
to, with, or for any member, is less than the
electric company's average annual income,
adjusted for historical growth, received or
accrued during the 3 calendar years preceding
the electric company's compliance.
``(ii) For purposes of this subparagraph, `electric
industry restructuring law' means any Federal, State,
or local law, regulation, holding, or order
restructuring the retail or wholesale electric industry
or providing for or facilitating the nondiscriminatory
open access to, reliability of, or safety associated
with the transmission or distribution of electric
energy.''.
SEC. 3. UNRELATED BUSINESS TAXABLE INCOME.
Section 512(b) of the Internal Revenue Code of 1986 (relating to
modifications) is amended by adding at the end the following new
paragraph:
``(18) There shall be excluded all income described in
section 501(c)(12)(G).''.
SEC. 4. TREATMENT OF TAXABLE ELECTRIC COOPERATIVES.
Section 7701 of the Internal Revenue Code of 1986 (relating to
definitions) is amended by redesignating subsection (n) as subsection
(o) and by inserting after subsection (m) the following new subsection:
``(n) Treatment of Certain Amounts Received by Nonexempt Electric
Companies.--
``(1) In general.--With respect to any nonexempt electric
company--
``(A) any amount received from any individual,
organization, or entity that would not be a
`contribution to the capital of the taxpayer' under
section 118(b), or that, if the company were a
regulated public utility under section 118(c), would be
a `contribution to the capital of the taxpayer' under
section 118(c), shall be treated as a contribution to
the company's capital, and
``(B) capital credits, patronage dividends, and
similar amounts include any amount paid to a patron to
the extent that such amount is from income received
from business done with or for other patrons to whom no
amounts are paid, or to whom smaller amounts are paid,
with respect to substantially identical transactions,
and income shall be treated as received from business
done with or for the nonexempt electric company's
patrons, if the income is received:
``(i) Electric industry restructuring
income.--From any individual, organization, or
entity not a patron for, or in connection with,
the nonexempt electric company selling,
performing, or otherwise providing any goods or
services as required by, in voluntary
compliance with, or in order to conform to any
electric industry restructuring law, including
the following:
``(I) Wheeling income.--The
transmission or distribution of
electric energy to, with, or for any
patron, or the sale, performance,
transfer, or other provision of any
other goods or services related to the
transmission or distribution of
electric energy to, with, or for any
patron.
``(II) Regional transmission
organization income.--The joining,
participation in, transfer of ownership
or control of property to, or provision
of any other goods or services to or
for a regional transmission
organization, independent system
operator, regional transmission group,
or similar organization or entity, all
as approved or authorized by the
Federal Energy Regulatory Commission,
the Public Utility Commission of Texas,
the Rural Utilities Service, or other
appropriate entity.
``(III) Unbundling income.--The
sale, performance, or other provision
to, with, or for any patron of any
goods or services related to any
metering, billing, collection, customer
service, or similar activity.
``(IV) Electric energy sales
income.--The sale or furnishing of
electric energy to, with, or for any
patron, or the sale, performance, or
other provision of any other goods or
services related to the sale or
furnishing of electric energy to, with,
or for any patron.
``(V) Replacement electric energy
sales income.--The sale or furnishing
of electric energy other than to, with,
or for any patron, or the sale,
performance, or other provision of any
other goods or services related to the
sale of or furnishing of electric
energy other than to, with, or for any
patron, but only to the extent that,
after the nonexempt electric company
mandatorily or voluntarily complies
with any electric industry
restructuring law, the annual income
received or accrued for, or in
connection with, the sale or furnishing
of electric energy to, with, or for any
patron, or the sale, performance, or
other provision of any other goods or
services to, with, or for any patron,
is less than from the company's average
annual income, adjusted for historical
growth, received or accrued during the
3 calendar years preceding the
company's compliance.
``(ii) Attribution income.--From any
organization or entity in which the nonexempt
electric company owns an interest.
``(iii) Waiver income.--From any patron
that voluntarily waives any right to capital
credits, patronage dividends, or similar
amounts allocated or paid by the nonexempt
electric company.
``(iv) Incremental cost electric energy
income.--From any patron for electric energy
sold or furnished by the nonexempt electric
company based upon the company's incremental
cost of generating, purchasing, transmitting,
or distributing the electric energy.
``(v) Nuclear decommissioning income.--
Either--
``(I) from the transfer of any
amount into a trust, fund, or
instrument established to pay any
nuclear decommissioning costs, if the
transfer is in connection with the
transfer of a nuclear powerplant or
nuclear powerplant unit, or
``(II) from the distribution of any
amount from such trust, fund, or
instrument, including income
representing payments by the nonexempt
electric company to the trust, fund, or
instrument, and investment income
earned by the trust, fund, or
instrument.
``(vi) Property transfer income.--From any
individual, organization, or entity for the
nonexempt electric company selling, leasing,
exchanging, or otherwise transferring on a
mutually agreed upon basis any property,
property right, asset, or service territory.
``(vii) Condemnation income.--From any
organization or entity, including any
municipality, resulting from the compulsory or
involuntary requisition or condemnation, or the
threat or imminence of a compulsory or
involuntary requisition or condemnation, of any
property, asset, or service territory.
``(2) Special rules.--For purposes of this subsection--
``(A) Waiver income.--Regardless of any contrary
Federal, State, or local law, regulation, holding, or
order, neither a nonexempt electric company's receipt
of income described in paragraph (1)(B)(iii), nor a
patron's voluntary waiver of a right described in such
paragraph, shall affect any determination that the
company is operating on a cooperative basis.
``(B) Incremental cost electric energy income.--
Regardless of any contrary Federal, State, or local
law, regulation, holding, or order, neither a nonexempt
electric company's receipt of income described in
paragraph (1)(B)(iv), nor a patron's payment of the
amount described in such paragraph, shall affect any
determination that the company is operating on a
cooperative basis.
``(3) Definitions.--For purposes of this subsection--
``(A) Electric industry restructuring law.--The
term `electric industry restructuring law' means any
Federal, State, or local law, regulation, holding, or
order restructuring the retail or wholesale electric
industry or providing for or facilitating the
nondiscriminatory open access to, reliability of, or
safety associated with the transmission or distribution
of electric energy.
``(B) Nonexempt electric company.--The term
`nonexempt electric company' means any corporation or
organization described in section 1381(a)(2)(C) and
engaged in furnishing electric energy.''.
SEC. 5. EFFECTIVE DATE.
The amendments made by this Act shall apply to amounts received on
or after the date of the enactment of this Act.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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