I 98TH CONGRESS 1ST SESSION H. R. 2129 To amend the Internal Revenue Code of 1954 to provide an alternative method of allocation of property taxes for cooperative housing corporations. IN THE HOUSE OF REPRESENTATIVES MARCH 16, 1983 Mr. MATSUI (for himself, Mr. STARK, and Mr. THOMAS of California) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1954 to provide an alternative method of allocation of property taxes for cooperative housing corporations. 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That (a) paragraph (3) of section 216(b) of the Internal Reve4 nue Code of 1954 (defining tenant-stockholder's proportion5 ate share) is amended by inserting before the period at the 6 end thereof "; except that, with respect to taxes, if the laws 7 or ordinances of any State (or political subdivision thereof) 8 require a different allocation based upon separate appraisal of 9 some or all of the individual units, the term 'proportionate 2 1 share' means the amount allocated to those individual units 2 pursuant to such law or ordinance". 3 (b) The amendment made by subsection (a) shall apply 4 to taxable years beginnning after December 31, 1982. SUMMARY AND DESCRIPTION PRESENT LAW Taxation of housing cooperatives Under present law (sec. 216), a tenant-stockholder in a cooperative housing corporation is entitled to deduct amounts paid to the cooperative which represent his or her proportionate share of allowable real estate taxes and interest (e.g., mortgage interest) relating to the land and buildings held by the cooperative. In general, for a cooperative to qualify for this pass-through treatment, (1) each stockholder of the cooperative must be entitled to occupy a house or apartment owned or leased by the cooperative, (2) no stockholder may receive any distribution from the cooperative (other than distributions out of earnings and profits) except on a liquidation of the cooperative, and (3) tenant-stockholders qualifying for pass-through treatment must have paid amounts for their stock which bear a reasonable relationship to the value of that portion of the cooperative's land and building which is attributable to their house or apartment. To qualify for pass-through treatment, 80 percent or more of the cooperative's gross income must be derived from tenant-stockholders. For purposes for this rule, as well as the rules above, tenant-stockholders are generally limited to individuals. Thus, corporations, trusts, and other similar entities generally do not qualify for pass-through treatment. Limited exceptions to this rule are provided for certain original sellers of property to a cooperative and for banks or other lending institutions which acquire cooperative stock by foreclosure. In addition to being allowed deductions for rent and taxes, and to the extent a tenant-stockholder uses depreciable property leased from the cooperative in a trade or business or for production of income, the tenant-stockholder is allowed a deduction with respect to the stock the ownership of which entitles him or her to lease the property. This deduction generally cannot exceed that portion of the taxpayer's adjusted basis for the stock which is allocable to the depreciable property. Allocation of property taxes Under present law, a tenant-stockholder's proportionate share of interest or property taxes, for deduction purposes, is equivalent to the portion of total cooperative stock which is owned by the tenant-stockholder. This rule applies even if property taxes are imposed on certain tenant-stockholders out of proportion to the value of their coopertative stock (e.g., under certain California property taxes which are assessed based on separate appraisals of individual cooperative units).1 In such cases, individual tenant-stockholders may be allowed a deduction which is signficantly less than (or greater than) the amount of real estate taxes attributable to their property. EXPLANATION OF THE BILL The bill would provide that, if State or local law (or ordinance) requires an allocation of property taxes based on separate appraisal of some or all of the individual units in a housing cooperative, the proportionate share of such taxes for deduction purposes is to be the amount allocated to those units pursuant to such law or ordinance. Thus, property tax deductions would be allocated among the tenant-stockholders according to the actual amount of such taxes attributable to the property of each tenant-stockholder. For example, if an Year 1 all units in a housing cooperative were appraised at the same value for State property tax purposes, but in Year 2 several of the units were given a higher appraisal, then in Year 1 all tenant-stockholders (owning equal shares) would generally be entitled to deduct the same proportionate share of real estate taxes, which in Year 2 the proportionate share allocable to those in reappraised units would be increased, and the proportionate share allocable to those in other units would be decreased, in accordance with the reappraisals. EFFECTIVE DATE The bill would be effective retroactively for taxable years beginning after December 31, 1982. As a result of Proposition 13, California property tax assessments may generally be increased only upon resale of a unit. Thus, proportionately higher taxes are imposed on units which have been resold. REVENUE EFFECT The provisions of the fill are estimated to reduce budget receipts by less than $10 million annually. PRIOR CONGRESSIONAL ACTION H.R. 4170 the (Deficit Reduction Act of 1984) as passed by the Senate, included a similar provision (adopted as a floor amendment by Senator Wilson). This provision (together with other amendments which would have affected cooperative housing corporations) was deleted from the bill in conference. To amend the Internal Revenue Code of 1954 with respect to the treatment of business development companies. IN THE HOUSE OF REPRESENTATIVES APRIL 21, 1983 Mr. GUARINI (for himself, Mr. STARK, and Mr. FRENZEL) introduced the following bill; which was referred to the Committee on Ways and Means I A BILL To amend the Internal Revenue Code of 1954 with respect to 1 the treatment of business development companies. Be it enacted by the Senate and House of Representa 2 tives of the United States of America in Congress assembled, 3 SECTION 1. BUSINESS DEVELOPMENT COMPANIES. 4 (a) IN GENERAL.-Subchapter M (relating to regulated 5 investment companies and real estate investment trusts) of 6 chapter 1 of the Internal Revenue Code of 1954 is amended 7 by adding at the end thereof the following new part: 9 "PART IV-PROVISIONS WHICH APPLY TO BUSINESS DEVELOPMENT COMPANIES "Sec. 860A. Tax Treatment of business development companies. |