HR 1416 IH
106th CONGRESS
1st Session
H. R. 1416
To amend the Internal Revenue Code of 1986 to provide that interest
on indebtedness used to finance the furnishing or sale of rate-regulated
electric energy or natural gas in the United States shall be allocated solely to
sources within the United States.
IN THE HOUSE OF REPRESENTATIVES
April 14, 1999
Mr. MCCRERY 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 that interest
on indebtedness used to finance the furnishing or sale of rate-regulated
electric energy or natural gas in the United States shall be allocated solely to
sources within the United States.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. ALLOCATION TO SOURCES WITHIN THE UNITED STATES OF INTEREST
EXPENSE ON INDEBTEDNESS FINANCING RATE-REGULATED ELECTRIC ENERGY OR NATURAL GAS
INFRASTRUCTURE INVESTMENTS.
(a) IN GENERAL- Subsection (e) of section 864 of the Internal Revenue Code
of 1986 (relating to rules for allocating interest, etc.) is amended by
redesignating paragraphs (6) and (7) as paragraphs (7) and (8), respectively,
and by inserting after paragraph (5) the following new paragraph:
`(6) TREATMENT OF CERTAIN INTEREST EXPENSE RELATING TO QUALIFIED
INFRASTRUCTURE INDEBTEDNESS-
`(A) IN GENERAL- Interest on any qualified infrastructure indebtedness
shall be allocated and apportioned solely to sources within the United
States, and such indebtedness shall not be taken into account in
allocating and apportioning other interest expense.
`(B) QUALIFIED INFRASTRUCTURE INDEBTEDNESS- For purposes of this
paragraph, the term `qualified infrastructure indebtedness' means any
indebtedness incurred--
`(i) to carry on the trade or business of the furnishing or sale of
electric energy or natural gas in the United States, or
`(ii) to acquire, construct, or otherwise finance property used
predominantly in such trade or business.
`(i) IN GENERAL- If only a portion of the furnishing or sale
referred to in subparagraph (B)(i) in a trade or business is rate
regulated, the term `qualified infrastructure indebtedness' shall not
include nonqualified indebtedness.
`(ii) NONQUALIFIED INDEBTEDNESS- For purposes of clause (i), the
term `nonqualified indebtedness' means so much of the indebtedness which
would (but for clause (i)) be qualified infrastructure indebtedness as
exceeds the amount which bears the same ratio to the aggregate
indebtedness of the taxpayer as the value of the assets used in the
furnishing or sale referred to in subparagraph (B)(i) which is
rate-regulated bears to the value of the total assets of the
taxpayer.
`(iii) RATE-REGULATED DEFINED- For purposes of this subparagraph,
furnishing or sale is rate-regulated if the rates for the furnishing or
sale, as the case may be, have been established or approved by a State
or political subdivision thereof, by an agency or instrumentality of the
United States, or by a public service or public utility commission or
other similar body of the District of Columbia or of any State or
political subdivision thereof.
`(iv) ASSET VALUES- For purposes of clause (ii), assets shall be
treated as having a value equal to their adjusted bases (within the
meaning of section 1016) unless the taxpayer elects to use fair market
value for all assets. Such an election, once made, shall be
irrevocable.
`(v) TIME FOR MAKING DETERMINATION- The determination of whether
indebtedness is qualified infrastructure indebtedness or nonqualified
indebtedness shall be made at the time the indebtedness is
incurred.
`(vi) SEPARATE APPLICATION TO ELECTRIC ENERGY AND NATURAL GAS- This
subparagraph shall be applied separately to electric energy and natural
gas.'
(1) IN GENERAL- The amendment made by this section shall apply to
indebtedness incurred in taxable years beginning after the date of enactment
of this Act.
(2) OUTSTANDING DEBT- In the case of indebtedness outstanding as of the
date of enactment of this Act, the determination of whether such
indebtedness constitutes qualified infrastructure indebtedness shall be made
by applying the rules of subparagraphs (B) and (C) of section 864(e)(6) of
the Internal Revenue Code of 1986, as added by this section, on the date
such indebtedness was incurred.
END