3 corporation by any donor or member of his family, and "(bb) substantially all of the operating assets of the corporation are used in operating such hotel business enter prise. For purposes of this clause, a hotel business enterprise owned by a private foundation through a holding company all the voting stock of which is owned directly by the foundation on the dates designated by this clause shall be treated as being owned directly by the foundation for these purposes. This clause shall apply to the private foun dation only if the foundation does not acquire any stock or other interest in any business enterprise on or after May 26, 1969, which would otherwise II 98TH CONGRESS 1ST SESSION S. 1549 To amend the Internal Revenue Code of 1954 to permit individual retirement accounts, qualified retirement trusts and certain educational organizations to invest in working interests in oil and gas properties without incurring unrelated business taxable income. IN THE SENATE OF THE UNITED STATES JUNE 27, 1983 Mr. ARMSTRONG (for himself and Mr. LONG, Mr. DURENBERGER, Mr. WALLOP, Mr. GRASSLEY, Mr. SYMMS, Mr. BENTSEN, Mr. BAUCUS, Mr. BOREN, and Mr. PRYOR) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1954 to permit individual retirement accounts, qualified retirement trusts and certain educational organizations to invest in working interests in oil and gas properties without incurring unrelated business taxable income. 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That (a) subsection (b) of section 512 of the Internal Revenue 4 Code of 1954 (relating to modifications to unrelated business 5 taxable income) is amended by inserting after paragraph (15) 6 the following new paragraph: 2 “(16)(A) In the case of a trust which constitutes a qualified trust under section 401 or which is described in section 408(a) or of an organization described in section 170(b)(1)(A) (ii) or (iv), there shall be excluded all income from a working interest in a domestic oil or gas well, and all deductions and credits directly connected with such income or interest, if such income is allo cated to such trust or organization as a limited partner by a limited partnership which at no time during the partnership taxable year in which such allocation is made "(i) allocated to the limited partners a lesser share of any item of deduction, loss or credit than their share of income or gain, "(ii) allocated among the limited partners shares of any item of deduction, loss or credit which differed from the ratio in which they shared income or gain, "(iii) allocated cash distributions to partners in a different manner than the allocation of income or gain, and "(iv) had a general partner related to such trust or organization. "(B) Subparagraph (A) shall not apply in any case, as determined under regulations prescribed by the 3 Secretary, in which multitier partnerships or other arrangements are used for the principal purpose of avoiding the conditions of such subparagraph. Clauses (i), (ii) and (iii) of subparagraph (A) shall not apply to allocations made in accordance with section 704(c)(2) (relat ing to property contributed to the partnership) on a nondiscriminatory basis as between exempt and nonexempt limited partners. "(C) For purposes of subparagraph (A)— "(i) a trust is related to any person that bears the relationship to it described in section 514(c)(9)(B)(iv) (I) and (II); and "(ii) an organization is related to any person described in section 4946(a)(1)(A) through (G); and “(iii) a trust or organization is related to "(I) any corporation in which it (directly or together with any persons described in clause (i) or (ii)) holds 35 percent or more of the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of such corporation, "(II) any partnership in which it (directly or together with any persons described in I 2 3 4 5 в 7 8 9 10 11 12 234 13 14 15 16 17 18 19 clause or colds 15 percent or more of the capital interest or rosterest r " a Tust or estate in vinch 1 di rectly or together with any persons iescribed in clause or i) holds 35 percent or more of the beneficial interest. "For purposes of this subparagraph, in applying section 514(c)(9)(B)(iv) (D) and (I), 35 percent' shail be substituted for '50 percent in section 4975(e)(2) (E) and (G), and in applying section 4946(a)(1) (A) through (G), ‘organization described in section 170(b)(1)(A) (ii) or (iv)' shall be substituted for 'foundation' or 'private foundation' in section 4946 and section 507(d)(2). In applying this subparagraph, a trust or organization which is a limited partner in a partnership shall be treated as owning an interest in the general partner held by any other such trust or organization (or any person related thereto) which is a partner in such partnership.". (b) Subsection (c) of section 514 of the Internal Revenue 20 Code of 1954 (relating to unrelated debt-financed income) is 21 amended by inserting after paragraph (9) the following new 92 paragraph: 98 94 "(10) CERTAIN OIL AND GAS INTERESTS.-For purposes of this section |