To amend the Internal Revenue Code of 1986 to modify the active business definition under section 355.

Amends the Internal Revenue Code to treat all members of a corporation's separate affiliated group as one corporation for purposes of determining whether such corporation and its subsidiaries meet the active business test required for corporations seeking nonrecognition of gain from the distribution of property in a reorganization.

[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2911 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 2911

    To amend the Internal Revenue Code of 1986 to modify the active 
                 business definition under section 355.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 15, 2005

Mr. Cantor (for himself and Mr. Tanner) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
    To amend the Internal Revenue Code of 1986 to modify the active 
                 business definition under section 355.

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

SECTION 1. MODIFICATION OF ACTIVE BUSINESS DEFINITION UNDER SECTION 
              355.

    (a) In General.--Section 355(b) of the Internal Revenue Code of 
1986 (defining active conduct of a trade or business) is amended by 
adding at the end the following new paragraph:
            ``(3) Special rules relating to active business 
        requirement.--
                    ``(A) In general.--For purposes of determining 
                whether a corporation meets the requirement of 
                paragraph (2)(A), all members of such corporation's 
                separate affiliated group shall be treated as one 
                corporation. For purposes of the preceding sentence, a 
                corporation's separate affiliated group is the 
                affiliated group which would be determined under 
                section 1504(a) if such corporation were the common 
                parent and section 1504(b) did not apply.
                    ``(B) Control.--For purposes of paragraph (2)(D), 
                all distributee corporations which are members of the 
                same affiliated group (as defined in section 1504(a) 
                without regard to section 1504(b)) shall be treated as 
                one distributee corporation.''.
    (b) Conforming Amendments.--
            (1) Subparagraph (A) of section 355(b)(2) of the Internal 
        Revenue Code of 1986 is amended to read as follows:
                    ``(A) it is engaged in the active conduct of a 
                trade or business,''.
            (2) Section 355(b)(2) of such Code is amended by striking 
        the last sentence.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply--
                    (A) to distributions after the date of the 
                enactment of this Act, and
                    (B) for purposes of determining the continued 
                qualification under section 355(b)(2)(A) of the 
                Internal Revenue Code of 1986 (as amended by subsection 
                (b)(1)) of distributions made before such date, as a 
                result of an acquisition, disposition, or other 
                restructuring after such date.
            (2) Transition rule.--The amendments made by this section 
        shall not apply to any distribution pursuant to a transaction 
        which is--
                    (A) made pursuant to an agreement which was binding 
                on such date of enactment and at all times thereafter,
                    (B) described in a ruling request submitted to the 
                Internal Revenue Service on or before such date, or
                    (C) described on or before such date in a public 
                announcement or in a filing with the Securities and 
                Exchange Commission.
            (3) Election to have amendments apply.--Paragraph (2) shall 
        not apply if the distributing corporation elects not to have 
        such paragraph apply to distributions of such corporation. Any 
        such election, once made, shall be irrevocable.
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