Katrina Economic Opportunity Act - Amends the Internal Revenue Code to: (1) exclude from gross income gain from the sale or exchange of a Gulf Opportunity Zone asset (business stock, partnership interest, or property in a Hurricane Katrina disaster area) held for more than five years; (2) waive small business asset expensing limits for Gulf Opportunity Zone assets; and (3) qualify Gulf Opportunity Zone investments for the new markets tax credit.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3987 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 3987
To amend the Internal Revenue Code of 1986 to provide tax incentives
for Hurricane Katrina recovery in the Gulf Opportunity Zone.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 6, 2005
Mr. Jindal 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 provide tax incentives
for Hurricane Katrina recovery in the Gulf Opportunity Zone.
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 ``Katrina Economic Opportunity Act''.
SEC. 2. TAX BENEFITS FOR GULF OPPORTUNITY ZONE.
(a) In General.--Subchapter Y of chapter 1 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new section:
``SEC. 1400M. TAX BENEFITS FOR GULF OPPORTUNITY ZONE.
``(a) Zero Percent Capital Gains Rate.--
``(1) Exclusion.--Gross income shall not include qualified
capital gain from the sale or exchange of any Gulf Opportunity
Zone asset held for more than 5 years.
``(2) Gulf opportunity zone.--For purposes of this
subsection, the term `Gulf Opportunity Zone asset' means--
``(A) any Gulf Opportunity Zone business stock,
``(B) any Gulf Opportunity Zone partnership
interest, and
``(C) any Gulf Opportunity Zone business property.
``(3) Gulf opportunity zone business stock.--For purposes
of this subsection--
``(A) In general.--The term `Gulf Opportunity Zone
business stock' means any stock in a domestic
corporation which is originally issued after August 28,
2005, if--
``(i) such stock is acquired by the
taxpayer, before January 1, 2007, at its
original issue (directly or through an
underwriter) solely in exchange for cash,
``(ii) as of the time such stock was
issued, such corporation was a Gulf Opportunity
Zone business (or, in the case of a new
corporation, such corporation was being
organized for purposes of being a Gulf
Opportunity Zone business), and
``(iii) during substantially all of the
taxpayer's holding period for such stock, such
corporation qualified as a Gulf Opportunity
Zone business.
``(B) Redemptions.--A rule similar to the rule of
section 1202(c)(3) shall apply for purposes of this
paragraph.
``(4) Gulf opportunity zone partnership interest.--For
purposes of this subsection, the term `Gulf Opportunity Zone
partnership interest' means any capital or profits interest in
a domestic partnership which is originally issued after August
28, 2005, if--
``(A) such interest is acquired by the taxpayer,
before January 1, 2007, from the partnership solely in
exchange for cash,
``(B) as of the time such interest was acquired,
such partnership was a Gulf Opportunity Zone business
(or, in the case of a new partnership, such partnership
was being organized for purposes of being a Gulf
Opportunity Zone business), and
``(C) during substantially all of the taxpayer's
holding period for such interest, such partnership
qualified as a Gulf Opportunity Zone business.
A rule similar to the rule of subparagraph (B)(ii) shall apply
for purposes of this paragraph.
``(5) Gulf opportunity zone business property.--For
purposes of this subsection--
``(A) In general.--The term `Gulf Opportunity Zone
business property' means tangible property if--
``(i) such property was acquired by the
taxpayer by purchase (as defined in section
179(d)(2)) after August 28, 2005, and before
January 1, 2007,
``(ii) the original use of such property in
the Gulf Opportunity Zone commences with the
taxpayer, and
``(iii) during substantially all of the
taxpayer's holding period for such property,
substantially all of the use of such property
was in a Gulf Opportunity Zone business of the
taxpayer.
``(B) Special rule for buildings which are
substantially improved.--
``(i) In general.--The requirements of
clauses (i) and (ii) of subparagraph (A) shall
be treated as met with respect to--
``(I) property which is
substantially improved by the taxpayer
before January 1, 2007, and
``(II) any land on which such
property is located.
``(ii) Substantial improvement.--For
purposes of clause (i), property shall be
treated as substantially improved by the
taxpayer only if, during any 24-month period
beginning after August 28, 2005, additions to
basis with respect to such property in the
hands of the taxpayer exceed the greater of--
``(I) an amount equal to the
adjusted basis of such property at the
beginning of such 24-month period in
the hands of the taxpayer, or
``(II) $5,000.
``(6) Gulf opportunity zone business.--For purposes of this
subsection, the term `Gulf Opportunity Zone business' means any
corporation, partnership, or business which would be an
enterprise zone business (as defined in section 1397C) if such
section were applied by substituting `Gulf Opportunity Zone'
for `empowerment zone' each place it appears.
``(7) Special rules related to gulf opportunity zone
assets.--For purposes of this subsection--
``(A) Treatment of subsequent purchasers, etc.--For
purposes of this subsection, the term `Gulf Opportunity
Zone asset' includes any property which would be a Gulf
Opportunity Zone asset but for paragraph (3)(A)(i),
(4)(A), or (5)(A)(i) or (ii) in the hands of the
taxpayer if such property was a Gulf Opportunity Zone
asset in the hands of a prior holder.
``(B) 5-year safe harbor.--If any property ceases
to be a Gulf Opportunity Zone asset by reason of
paragraph (3)(A)(iii), (4)(C), or (5)(A)(iii) after the
5-year period beginning on the date the taxpayer
acquired such property, such property shall continue to
be treated as meeting the requirements of such
paragraph; except that the amount of gain to which
paragraph (1) applies on any sale or exchange of such
property shall not exceed the amount which would be
qualified capital gain had such property been sold on
the date of such cessation.
``(8) Qualified capital gain.--For purposes of this
subsection--
``(A) In general.--Except as otherwise provided in
this paragraph, the term `qualified capital gain' means
any gain recognized on the sale or exchange of--
``(i) a capital asset, or
``(ii) property used in the trade or
business (as defined in section 1231(b).
``(B) Gain before hurricane or after 2011 not
qualified.--The term `qualified capital gain' shall not
include any gain attributable to periods before August
29, 2005, or after December 31, 2011.
``(C) Certain ordinary income gain not qualified.--
The term `qualified capital gain' shall not include any
gain which would be treated as ordinary income under
section 1245 or under section 1250 if section 1250
applied to all depreciation rather than the additional
depreciation.
``(D) Intangibles and land not integral part of
gulf opportunity zone business.--The term `qualified
capital gain' shall not include any gain which is
attributable to real property, or an intangible asset,
which is not an integral part of a Gulf Opportunity
Zone business.
``(E) Related party transactions.--The term
`qualified capital gain' shall not include any gain
attributable, directly or indirectly, in whole or in
part, to a transaction with a related person. For
purposes of this subparagraph, persons are related to
each other if such persons are described in section
267(b) or 707(b)(1).
``(9) Certain other rules to apply.--Rules similar to the
rules of subsections (g), (h), (i)(2), and (j) of section 1202
shall apply for purposes of this subsection.
``(10) Sales and exchanges of interests in partnerships and
s corporations which are gulf opportunity zone businesses.--In
the case of the sale or exchange of an interest in a
partnership, or of stock in an S corporation, which was a Gulf
Opportunity Zone business during substantially all of the
period the taxpayer held such interest or stock, the amount of
qualified capital gain shall be determined without regard to--
``(A) any gain which is attributable to real
property, or an intangible asset, which is not an
integral part of a Gulf Opportunity Zone business, and
``(B) any gain attributable to periods before
August 29, 2005, or after December 31, 2011.
``(b) Increase and Expansion of Expensing of Business Property.--
``(1) Waiver of dollar limitations.--The limitations of
paragraphs (1) and (2) of section 179(b) shall not apply to
Gulf Opportunity Zone property and shall be applied to other
property without regard to Gulf Opportunity Zone property.
``(2) Inclusion of real property, etc.--Gulf Opportunity
Zone property shall be treated as section 179 property (as
defined in section 179(d)) without regard to the limitation of
subparagraph (B) of section 179(d)(1).
``(3) Gulf opportunity zone property.--The term `Gulf
Opportunity Zone property' means any property--
``(A) placed in service by the taxpayer during the
period beginning on August 28, 2005, and ending on
December 31, 2007, in the Gulf Opportunity Zone, and
``(B) substantially all of the use of which is in
such Zone and is in the active conduct of a trade or
business by the taxpayer in such Zone.
``(4) Recapture.--Rules similar to the rules under section
170(d)(10) shall apply with respect to any Gulf Opportunity
Zone property which ceases to be used in the Gulf Opportunity
Zone.
``(c) Application of New Markets Tax Credit.--
``(1) In general.--The Gulf Opportunity Zone shall be
treated as a low-income community for purposes of section 45D.
``(2) Coordination with national limitation.--
``(A) In general.--Any credit allowed under section
45D by reason of paragraph (1) shall not be taken into
account under section 45D(f).
``(B) Separate limitation.--There is a limitation
on the aggregate credits allowed under section 45D by
reason of paragraph (1). Such limitation is--
``(i) $32,200,000 for 2005,
``(ii) $56,300,000 for 2006, and
``(iii) $56,300,000 for 2007.
``(C) Allocation of limitation.--The limitation
under subparagraph (B) shall be allocated by the
Secretary among those qualified community development
entities (as defined in section 45D(c)) with respect to
the Gulf Opportunity Zone which are selected by the
Secretary. In making allocations under the preceding
sentence, the Secretary shall give priority to entities
described in subparagraph (A) or (B) of section
45D(f)(2).
``(D) Carryover of unused limitation.--The rules of
paragraph (3) of section 45D(f) shall apply for
purposes of this paragraph.
``(d) Gulf Opportunity Zone.--For purposes of this section, the
term `Gulf Opportunity Zone' means an area determined by the President
to warrant individual or individual and public assistance from the
Federal Government under the Robert T. Stafford Disaster Relief and
Emergency Assistance Act by reason of Hurricane Katrina.''.
(b) Conforming Amendments.--
(1) The heading for subchapter Y of chapter 1 of such Code
is amended to read as follows:
``Subchapter Y--Temporary Regional Benefits''.
(2) The table of sections for such subchapter is amended by
adding at the end the following new item:
``Sec. 1400M. Tax benefits for Gulf Opportunity Zone.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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