S. 3063Senate110th Congress (2007-2009)In Committee

S Corporation Modernization Act of 2008

Introduced May 22, 2008

Legislative Activity

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2 earlier actions
SenateIntro Referral Latest Action

Read twice and referred to the Committee on Finance.

May 22, 2008

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SenateIntro Referral

Introduced in Senate

May 22, 2008

SenateIntro Referral

Sponsor introductory remarks on measure. (CR S4803)

May 22, 2008

SenateIntro Referral

Read twice and referred to the Committee on Finance.

May 22, 2008

Floor Debate

9 members

What members said about S. 3063 on the floor

6 Republicans3 Democrats
Susan M. Collins
Sen. Susan M. CollinsR-ME · May 22, 2008

Mr. President, I rise today to introduce the Commercial Truck Fuel Savings Demonstration Act of 2008, which would help address the growing crisis of energy costs for our Nation's trucking industry.…

Wayne Allard
Sen. Wayne AllardR-CO · May 22, 2008

Mr. President, this weekend is the unofficial beginning of summer and the start of the summer driving season. This is as oil hits $135 per barrel and more and more cities and towns all over the…

Olympia J. Snowe
Sen. Olympia J. SnoweR-ME · May 22, 2008

Mr. President, I rise today to commend my colleague from Maine, Senator Collins, in introducing legislation critical to rectifying not only a serious impediment to the movement of international…

Joseph R. Biden Jr.
Sen. Joseph R. Biden Jr.D-DE · May 22, 2008

Mr. President, today, Senator Lugar and I are introducing the Naval Vessel Transfer Act of 2008, a bill to permit the transfer of certain U.S. Navy vessels to particular foreign countries. All of the…

John Barrasso
Sen. John BarrassoR-WY · May 22, 2008

Mr. President, today I am introducing legislation to address the reality of the needs of species and the global nature of climate change. Recently, the U.S. Fish and Wildlife Service decided to list…

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John Cornyn
Sen. John CornynR-TX · May 22, 2008

Mr. President, the right to participate in democratic elections and vote for candidates of your choice is fundamental to the American experience. That right to vote is safeguarded by our men and…

Gordon H. Smith
Sen. Gordon H. SmithR-OR · May 22, 2008

Mr. President, on behalf of Senator Cantwell, I introduce a bill to provide grants to Area Agencies on Aging to provide services to improve financial literacy among older individuals. A number of…

Blanche L. Lincoln
Sen. Blanche L. LincolnD-AR · May 22, 2008

Mr. President, I am very pleased to rise today to introduce the S Corporation Modernization Act of 2008 with my good friend, Senator Orrin Hatch. I also want to say a special thanks to our…

Blanche L. Lincoln
Sen. Blanche L. LincolnD-AR · May 22, 2008

Mr. President, I am very pleased to rise today to introduce the S Corporation Modernization Act of 2008 with my good friend, Senator Orrin Hatch. I also want to say a special thanks to our…

Ron Wyden
Sen. Ron WydenD-OR · May 22, 2008

Mr. President, today, along with Senator Smith, I am introducing a bill to exempt wooden practice arrows from the unfair impact of an excise tax designed for much more expensive hunter and…

Bill Text

Latest available legislative text

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Introduced in SenateIssued May 22, 2008

II

110th CONGRESS

2d Session

S. 3063

IN THE SENATE OF THE UNITED STATES

May 22, 2008

Mrs. Lincoln (for herself, Mr. Hatch, Mr. Cardin, and Mr. Smith) 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 provide for S corporation reform, and for other purposes.

1.

Short title, reference

(a)

Short Title

This Act may be cited as the S Corporation Modernization Act of 2008.

(b)

Amendment of 1986 Code

Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

2.

Reduced recognition period for built-in gains

(a)

In general

Paragraph (7) of section 1374(d) (relating to definitions and special rules) is amended as follows:

(7)

Recognition period

The term recognition period means the 7-year period beginning with the 1st day of the 1st taxable year for which the corporation was an S corporation. For purposes of applying this section to any amount includible in income by reason of distributions to shareholders pursuant to section 593(e), the preceding sentence shall be applied without regard to the duration of the recognition period in effect on the date of such distribution.

.

(b)

Effective date

The amendment made by this section—

(1)

shall apply for purposes of determining the recognition period with respect to 1st days referred to in section 1374(d)(7) of the Internal Revenue Code of 1986 occurring before, on, or after January 1, 2008, but

(2)

shall not apply for purposes of determining the tax imposed by section 1374 of such Code for taxable years ending before such date.

3.

Repeal of excessive passive investment income as a termination event

(a)

In general

Paragraph (3) of section 1362(d) (relating to termination) is amended by adding at the end the following new subparagraph:

(D)

Termination

This paragraph shall not apply to taxable years beginning after December 31, 2007.

.

(b)

Effective Date

The amendment made by this section shall apply to taxable years beginning after December 31, 2007.

4.

Modifications to passive income rules

(a)

Increased Limit

(1)

In general

Paragraph (2) of section 1375(a) (relating to tax imposed when passive investment income of corporation having accumulated earnings and profits exceeds 25 percent of gross receipts) is amended by striking 25 percent and inserting 60 percent.

(2)

Conforming amendments

(A)

Subparagraph (J) of section 26(b)(2) is amended by striking 25 percent and inserting 60 percent.

(B)

Clause (i) of section 1375(b)(1)(A) is amended by striking 25 percent and inserting 60 percent.

(C)

The heading for section 1375 is amended by striking 25 percent and inserting 60 percent.

(D)

The table of sections for part III of subchapter S of chapter 1 is amended by striking 25 percent in the item relating to section 1375 and inserting 60 percent.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2007.

5.

Expansion of qualifying beneficiaries of an electing small business trust

(a)

No Look Through for Eligibility Purposes

Clause (v) of section 1361(c)(2)(B) (relating to treatment as shareholders) is amended by adding at the end the following new sentence: This clause shall not apply for purposes of subsection (b)(1)(C)..

(b)

Effective date

The amendment made by this section shall take effect on January 1, 2008.

6.

Expansion of S corporation eligible shareholders to include IRAs

(a)

In General

Clause (vi) of section 1361(c)(2)(A) (relating to certain trusts permitted as shareholders) is amended to read as follows:

(vi)

A trust which constitutes an individual retirement account under section 408(a), including one designated as a Roth IRA under section 408A.

.

(b)

Sale of Stock in IRA Relating to S Corporation Election Exempt From Prohibited Transaction Rules

Paragraph (16) of section 4975(d) (relating to exemptions) is amended to read as follows:

(16)

a sale of stock held by a trust which constitutes an individual retirement account under section 408(a) to the individual for whose benefit such account is established if—

(A)

such sale is pursuant to an election under section 1362(a) by the issuer of such stock,

(B)

such sale is for fair market value at the time of sale (as established by an independent appraiser) and the terms of the sale are otherwise at least as favorable to such trust as the terms that would apply on a sale to an unrelated party,

(C)

such trust does not pay any commissions, costs, or other expenses in connection with the sale, and

(D)

the stock is sold in a single transaction for cash not later than 120 days after the S corporation election is made.

.

(c)

Effective Date

The amendments made by this section shall take effect on January 1, 2008.

7.

Allowance of deduction for charitable contributions for electing small business trusts

(a)

In general

Section 641(c)(2)(C) (relating to modifications) is amended by adding at the end the following new sentence: The deduction for charitable contributions allowed under clause (i) shall be determined without regard to section 642(c), and the limitations imposed by section 170(b)(1) on the amount of the deduction shall be applied to the electing small business trust as if it were an individual..

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2007.