APPENDIX D

Representative Ullman’s Statement Regarding Bankruptcy Tax Legislation

Congressional Record—House, December 12, 1980, H12419, H12420, H12459-H12464

REQUEST TO CONCUR IN SENATE AMENDMENTS TO H.R. 5043, BANKRUPTCY TAX ACT OF 1980

Mr. ROSTENKOWSKI. Mr. Speaker, I ask unanimous consent to take from the Speaker’s table the bill (H.R. 5043) to amend the Internal Revenue Code of 1954 to provide for the tax treatment of bankruptcy, insolvency, and similar proceedings, and for other purposes, with Senate amendments thereto, and concur in the Senate amendments.

The Clerk read that title of the bill.

The Clerk read the Senate amendments, as follows:

Page 4, after the matter below line 20, insert:

Page 8, line 20, strike out “(5)” and insert “(6)”.

Page 8, line 24, strike out “(6)” and insert “(7)”.

Page 9, line 9, strike out “(7)” and insert “(8)”.

Page 9, line 22, strike out “(8)” and insert “(9)”.

Page 11, line 6, after “debtor,” insert “Such regulations shall provide for such adjustments in the treatment of any subsequent transactions involving the indebtedness as may be appropriate by reason of the application of the preceding sentence”.

Page 11, line 17, strike out “section 414(c)” and insert “subsection (b) or (c) of section 414”.

Page 12, strike out all after line 9, over to and including line 9 on page 14, and insert:

Page 16, line 13, strike out “Any interest” and insert “For purposes of this section, any interest”. Page 16, line 17, after “partnership,” insert:

The preceding sentence shall apply only if there is a corresponding reduction in the partnership’s basis in depreciable property with respect to such partner.

Page 17, strike out lines 1 to 8, inclusive.

Page 17, line 9, strike out “(3)” and insert “(2)”.

Page 17, strike out lines 14 to 19, inclusive and insert:

Page 18, strike out all after line 10, over to and including line 7 on page 19, and insert:

Page 20 in the matter following line 3, strike out “108(f)(1)(B)” and insert “108(e)(6)”.

Page 20, strike out all of line 4 down to and including the matter which follows line 6.

Page 22, strike out lines 5 to 13, inclusive and insert:

Page 22, line 14, strike out “(3)” and insert “(2)”.

Page 24, line 4, strike out “(4)” and insert “(3)”.

Page 24, strike out all after line 8, down to and including the matter which follows line 9.

Page 24, line 16, after “Code.” insert: “The preceding sentence shall not apply to any amount received or accrued by the debtor before the commencement date (as defined in subsection (d)(3))”.

Page 24, strike out all after line 21 over to and including line 3 on page 25.

Page 25, line 4, strike out “(4)” and insert “(3)”.

Page 25, line 20, strike out “transfer” and insert “disposition”.

Page 25, line 22, strike out “transfer” and insert “disposition”.

Page 25, lines 23 and 24, strike out “transfer” and insert, “disposition”.

Page 26, line 2, strike out “transfer” and insert “disposition”.

Page 26, line 5, strike out “transfer” and insert “disposition”.

Page 26, lines 6 and 7, strike out “transfer” and insert “disposition”.

Page 45, strike out all after line 3, over to and including line 8 on page 46, and insert:

Page 47, line 20, strike out “is” and insert “are”.

Page 48, strike out lines 1 to 7, inclusive, and insert:

Page 48, strike out all after line 22 over to and including line 3 on page 49, and insert:

Page 60, strike out all after line 5, over to and including line 14 on page 63, and insert:

SEC. 7. EFFECTIVE DATES

Mr. ROSTENKOWSKI (during the reading). Mr. Speaker, I ask unanimous consent that the Senate amendments be considered as read and printed in the Record.

The SPEAKER. Is there objection to the request of the gentleman from Illinois?

There was no objection.

The SPEAKER. Is there objection to the initial request of the gentleman from Illinois?

Mr. JACOBS. Mr. Speaker, I object.

The SPEAKER. Objection is heard.

BANKRUPTCY TAX ACT OF 1980

Mr. ULLMAN. Mr. Speaker, I ask unanimous consent to take from the Speaker’s table the bill (H.R. 5043) to amend the Internal Revenue Code of 1954 to provide for the tax treatment of bankruptcy, insolvency, and similar proceedings, and for other purposes, with Senate amendments thereto, and concur in the Senate amendments.

The Clerk read the title of the bill.

The Clerk read the Senate amendments, as follows:

Page 4, after the matter below line 20, insert:

Page 8, line 20, strike out “(5)” and insert “(6)”.

Page 8, line 24, strike out “(6)” and insert “(7)”.

Page 9, line 8, strike out “(7)” and insert “(8)”.

Page 9, line 22, strike out “(8)” and insert “(9)”.

Page 11, line 6, after “debtor.” insert: “Such regulations shall provide for such adjustments in the treatment of any subsequent transactions involving the indebtedness as may be appropriate by reason of the application of the preceding sentence.”

Page 11, line 17, strike out “section 414(c)” and insert “subsection (b) or (c) of section 414”.

Page 12, strike out all after line 9, over to and including line 9 on page 14, and insert:

Page 16, line 13, strike out “Any interest” and insert “For purposes of this section, any interest”. Page 16, line 17, after “partnership”, insert:

The preceding sentence shall apply only if there is a corresponding reduction in the partnership’s basis in depreciable property with respect to such partner.

Page 17, strike out lines 1 to 8, inclusive.

Page 17, line 9, strike out “(3)” and insert “(2)”.

Page 17, strike out lines 14 to 19, inclusive and insert:

Page 18, strike out all after line 10, over to and including line 7 on page 19, and insert:

Page 20, in the matter following line 3, strike out “108(f)(1)(B)” and insert “108(e)(6)”.

Page 20, strike out all of line 4 down to and including the matter which follows line 6.

Page 22, strike out lines 5 to 13, inclusive and insert:

Page 22, line 14, strike out “(3)” and insert “(2)”.

Page 24, line 4, strike out “(4)” and insert “(3)”.

Page 24, strike out all after line 8, down to and including the matter which follows line 9.

Page 24, line 16, after “Code,” insert “The preceding sentence shall not apply to any amount received or accrued by the debtor before the commencement date (as defined in subsection (d)(3)).”

Page 24, strike out all after line 21 over to and including line 3 on page 25.

Page 25, line 4, strike out “(4)” and insert “(3)”.

Page 25, line 20, strike out “transfer” and insert “disposition”.

Page 25, line 22, strike out “transfer” and insert “disposition”.

Page 25, lines 23 and 24, strike out “transfer” and insert “disposition”.

Page 26, line 2, strike out “transfer” and insert “disposition”.

Page 26, line 5, strike out “transfer” and insert “disposition”.

Page 26, lines 6 and 7, strike out “transfer” and insert “disposition”.

Page 45, strike out all after line 3, over to and including line 8 on page 46, and insert:

Page 48, strike out all after line 22 over to and including line 3 on page 49, and insert:

Page 60, strike out all after line 5, over to and including line 14 on page 63, and insert:

SEC. 7. EFFECTIVE DATES

Mr. ULLMAN (during the reading). Mr. Speaker, I ask unanimous consent that further reading of the Senate amendments be dispensed with and that they be printed in the Record.

The SPEAKER pro tempore. Is there objection to the request of the gentleman from Oregon?

Mr. CONABLE. Mr. Speaker, I reserve the right to object.

Mr. Speaker, I would ask the distinguished committee chairman if he would quickly summarize the two major amendments made by the Senate.

D 1620

Mr. ULLMAN. Mr. Speaker, will the gentleman yield?

Mr. CONABLE. I yield to the gentleman from Oregon.

Mr. ULLMAN. Mr. Speaker, I urge the House to concur in the Senate amendments to H.R. 5043, the Bankruptcy Tax Act of 1980, thereby completing action on this important bill which has been carefully developed over the past 2 years. Unless H.R. 5043 is enacted this year, there will be no statutory rules governing the tax treatment of debt discharge in bankruptcy and insolvency, and there will be confusion and controversy as to this issue and many other tax aspects of bankruptcy and discharge of indebtedness.

The Senate amendments, in brief summary, change the “stock-for-debt” rule and certain effective date provisions of the bill as passed by the House last March. First, the bill as amended generally returns to the present law rule developed by the courts that no income is recognized and no attribute reduction is required if a corporation issues its stock to creditors in cancellation of outstanding debt. By providing for favorable tax treatment if stock is issued to creditors in discharge of debt, this amendment seeks to encourage reorganization, rather than liquidation, of financially distressed companies that have a potential for surviving as operating concerns.

Second, under the Senate amendments the provisions of the bill relating to debt discharge in bankruptcy, tax-free bankruptcy reorganizations, and certain miscellaneous corporate amendments generally will apply to bankruptcy cases beginning after December 31, 1980. In the case of a bankrupt or insolvent debtor, however, the rule that the debtor must reduce net operating losses by the amount of debt discharge—or alternatively, must reduce basis in depreciable assets—will not apply to debt discharge which occurs in a bankruptcy case beginning before January 1, 1982.

Mr. Speaker, I believe that, in light of the pressing need for enacting bankruptcy tax legislation this year, these modifications represent an acceptable approach in seeking to strike a fair balance between tax policy and bankruptcy concerns.

Both the House Ways and Means Committee and the Senate Finance Committee have recognized that the development of tax rules for bankruptcy and insolvency can involve accommodation of tax policy and bankruptcy concerns—that is, the most appropriate tax rules may reflect neither pure tax theory on the one hand nor complete subordination of tax principles to asserted bankruptcy concerns on the other hand. The tax committees, in seeking to strike a fair balance between sometimes conflicting policies, have carefully considered the extensive testimony—at three hearings on bankruptcy tax legislation—and many additional written comments submitted by bar association groups, accounting groups, bankruptcy attorneys, and other groups and individuals with experience in bankruptcy tax matters, plus the views of the Treasury and Justice Departments and the Internal Revenue Service.

With respect to the issue of tax treatment of debt discharge, both the Ways and Means Committee and the Finance Committee agree that the basic-reduction mechanisms under the now-repealed Bankruptcy Act and under present Internal Revenue Code sections 108 and 1017 fail to effectuate the congressional intent of deferring, but eventually collecting tax on, ordinary income from debt discharge. The rules of the bill requiring a bankrupt or insolvent debtor to apply the debt discharge amount to reduce net operating losses—or basis in depreciable assets—are intended to carry out this congressional intent, while giving the debtor the flexibility of reducing either net operating losses or basis in depreciable assets. This basic approach-requiring reduction of net operating losses by the debt discharge amount before reduction in basis of nondepreciable assets—was recommended by the 1973 report of the Commission on the Bankruptcy Laws—established by Congress, endorsed during the 95th Congress by the House Judiciary Committee, enacted for State and local tax purposes in Public Law 95-598, and supported during consideration of H.R. 5043 by the American Bar Association Tax Section, the New York City Bar Tax Committee, and other groups and individuals as well as the Treasury.

Thus both tax committees are in accord on this fundamental point, as reflected in the two committee reports on H.R. 5043. However, because considerable time has elapsed since introduction of the House bill, and particularly in light of the overwhelming consideration of the need for legislation this year, the postponement of certain effective dates made by the Senate amendments is acceptable. The concurrence by the House in this effective date postponement should not be interpreted as suggesting that the Ways and Means Committee sees any need for reconsideration of the attribute-reduction rules of the bill.

The following is a more detailed description of the amendments made by the Senate to H.R. 5043 as passed by the House.

“STOCK-FOR-DEBT” RULES

The Senate amendments modify certain rules in the House bill with respect to the income tax treatment of discharge of indebtedness.

The House bill provided that if a corporation issues stock in cancellation of short-term debt or trade credit, the corporate debtor would be required to reduce tax attributes by an amount equal to the excess of the indebtedness over the value of the stock. The Senate amendment generally does not change the present law rule developed by the courts governing whether income is recognized if a corporation issues its own stock to its creditor for outstanding debt—whether or not the debt constitutes a security for tax purposes. Therefore, no attribute reduction generally will be required where such stock is issued to discharge the debt. This stock-for-debt rule under the amendment will not apply if only a de minimis amount of stock is issued for the outstanding debt.

The amendment also changes rules of the House bill with respect to issuance of a package of stock and other property in cancellation of debt. Under the House bill, the stock would be treated as issued for a proportion of the debt equal to its proportion of the value of the total consideration. Under the amendment, the cash or other property would be treated as satisfying an equal amount of debt, and the stock as satisfying the remainder of the debt. Consequently, there would be no tax consequences to the debtor—subject to the de minimis exception stated above.

The amendment also provides that if a creditor receiving stock for debt has taken an ordinary bad debt deduction, any gain on a later sale of the stock by the creditor would be “recaptured” as ordinary income up to the amount of the creditor’s prior deduction against income.

Under the Senate amendment, the provision of the House bill excepting stock for debt exchanges in a bankruptcy or similar case from code section 382(a) would be deleted.

EFFECTIVE DATE PROVISIONS

The Senate also amended certain effective date provisions of the House bill.

Under the House bill, the provisions relating to tax treatment of debt discharge (section 2), corporate reorganizations in bankruptcy (section 4), and certain miscellaneous corporate amendments (section 5) would apply for bankruptcy cases (or receivership, foreclosure, or similar judicial proceedings) commenced on or after October 1, 1979.

Under the amendment, the provisions of sections 2, 4, and 5 of the bill generally would apply to bankruptcy cases (or receivership, etc. proceedings) commenced after December 31, 1980. However, some taxpayers may have entered into bankruptcy reorganizations with the expectation that the bill would be enacted with the original retroactive effective dates. Accordingly, the amendment allows a bankrupt or insolvent debtor to elect to have all the debt discharge and related provisions of the bill apply retroactively (in the case of proceedings commenced on or after October 1, 1979).

The amendment also postpones for 1 additional year the requirement under the bill that a bankrupt or insolvent debtor must reduce net operating losses by the amount of debt discharge (or alternatively, must reduce basis in depreciable assets). Under the Senate amendment, this attribute reduction requirement will not apply, in the case of a bankrupt or insolvent debtor, to debt discharge which occurs before January 1, 1982 or which occurs in a bankruptcy case or similar judicial proceeding beginning before January 1, 1982.

Thus, under the amendment, a bankrupt or insolvent debtor will apply the amount of debt discharge to reduce basis in assets in the case of a debt discharge to which the bill applies occurring before January 1, 1982 or occurring in a bankruptcy case or similar proceeding commencing before January 1, 1982. Furthermore, such a debtor will not be required to reduce asset basis below fair market value. Under the amendment, any amount of debt discharge remaining after asset basis is so reduced will not have any tax consequences—that is, the remaining amount will not be included in income and will not result in reduction of net operating losses or other tax attributes. Thus, in the case of debt discharge before 1982, or bankruptcy cases or similar judicial proceedings beginning before 1982, bankrupt or insolvent debtors will be subject to a basis reduction rule like that in the now repealed provisions of the Bankruptcy Act.

In the case of solvent debtors outside bankruptcy—or receiverships, et cetera, the rules of the bill generally would apply to transactions after December 31, 1980, and the Senate amendment does not change this provision.

TECHNICAL AMENDMENTS

The Senate also adopted the following technical and clarifying amendments to the House bill.

SECTION 2.’TAX TREATMENT OF DISCHARGE OF INDEBTEDNESS

First. Election to reduce basis in depreciable assets held by certain subsidiaries—modification to section 2(b) of the bill, amending Code section 1017.

Under the House-passed bill, a debtor in bankruptcy or an insolvent debtor could elect to apply the amount of discharged debt first to reduce basis in depreciable property, before applying any remaining amount to reduction of specified tax attributes. Similarly, a solvent debtor outside bankruptcy could elect to reduce basis in depreciable assets instead of recognizing current income from debt cancellation. To insure that ordinary income treatment eventually would be given to the full amount of basis reduction, the bill provides that any gain on a subsequent disposition of reduced-basis assets would be subject to “recapture” as ordinary income.

The amendment would expand these election provisions to provide also that if the debtor is a parent holding company which files a consolidated tax return with a subsidiary, the debtor could elect to apply the debt discharge amount, in accordance with Treasury regulations, to reduce the basis of the stock of the subsidiary to the extent the subsidiary consents to reduce the basis of its depreciable assets. The “recapture” rule stated above would apply to a disposition of the reduced-basis assets.

Second. Election to reduce basis in realty held as inventory—modification to section 2(b) of the bill, amending code section 1017.

The election provisions summarized in paragraph 1 above would be further expanded by the amendment to also allow application of the debt discharge amount to reduce basis in real property held primarily for sale to customers in the ordinary course of a trade or business-within the meaning of code section 1221(1). To the extent the debtor elects to reduce basis in such realty, the particular real properties the bases of which would be reduced are to be determined pursuant to Treasury regulations. A subsequent disposition of reduced-basis realty would result in recognition of a larger amount of ordinary income, just as reduction in basis of depreciable assets results in lower depreciation deductions to offset ordinary income.

Third. Discharge of partnership debt, modification to section 2(b) of the bill.

The House-passed bill provides that if a taxpayer must account for a debt discharge amount because indebtedness is canceled, the taxpayer’s interest in any partnership may be treated as depreciable property to the extent of his interest in depreciable property of the partnership. Under the bill, in the case of discharge of partnership debt, the partner could elect to reduce the basis of his partnership interest—in lieu of attribute reduction or income recognition—only if the partnership makes a corresponding reduction in the basis of depreciable assets of the partnership with respect to such partner.

The amendment would clarify that a partner’s interest in any partnership (whether or not that partnership’s debt was discharged) may be treated as a depreciable asset only if the partnership makes a corresponding reduction in the basis of depreciable assets of the partnership with respect to such partner. Also, the amendment would state that the amount of reduction in the partner’s basis in the partnership interest, and the particular depreciable assets of the partnership the bases of which are to be reduced, are to be determined pursuant to Treasury regulations.

Fourth. Debt acquired by related parties, modification to section 2(a) of the bill, amending Code section 108.

The House-passed bill provides that, for purposes of the debt discharge rules, acquisition of a debt by a related party would be treated as acquisition by the debtor. The Ways and Means Committee report states that the income tax consequences of repayment or capital contribution of a debt which had been acquired by a related party are to be provided in Treasury regulations. The report further indicates that the tax consequences would include allowing the debtor a deduction equal to the amount of any gain or income recognized by the related party if the debt is repaid or contributed to capital (House Rep. 96-833, p. 16).

The related party rules in the bill would be amended to add a provision stating that the tax treatment of a repayment or a capital contribution of a debt which had been acquired by a related party would, pursuant to Treasury regulations, be substantially the same as if the debtor itself had originally acquired the debt. For example, assume a parent corporation purchases for $900 on the open market a $1,000 bond issued at par by its wholly owned subsidiary. Under the bill, the subsidiary has a debt discharge amount of $100. If the subsidiary pays its parent the full principal amount ($1,000) when the debt matures, the Treasury regulations would treat the $100 difference as a dividend to the parent, against which the dividends received deduction would be available as provided by present law (Code section 243-246). The repayment would not have any tax consequences to the subsidiary. Likewise, if the debt were later cancelled, the parent would be treated as having contributed $900 to the subsidiary (with no tax consequences).

Fifth. Reduction of certain credit carryovers on debt discharge in bankruptcy or insolvency modification to section 2(a) of the bill, amending Code section 108.

Unless the taxpayer elects first to reduce basis in depreciable assets or in section 1221(1) realty, the amount of debt discharge in bankruptcy—or in the case of an insolvent debtor—would be applied under the House-passed bill to reduce net operating losses or carryovers, carryovers of certain tax credits, capital losses and carryovers, and the basis of the taxpayer’s assets. These provisions would be modified also to provide that if any debt discharge amount remains after reduction of such attributes—including any debt discharge amount which remains unapplied solely by virtue of the limitation in the bill with respect to basis reduction, such remaining amount would be applied to reduce carryovers of the foreign tax credit.

Sixth. Real estate investment trusts, modification to section 2 of the bill.

To qualify as a real estate investment trust (REIT), an organization must satisfy, among other requirements, source-of-income tests establishing that it has primarily passive income from real estate investments (Code section 856). In light of the bill’s rules governing the tax consequences of debt discharge, the amendment would add a provision specifying that income from cancellation of indebtedness is not to be taken into account for the source-of-income tests. For example, if a solvent REIT investing primarily in mortgages has debt cancellation on redemption of bonds, and such amount would be includable in gross income under the rules of the bill—absent an election to apply such amount to reduce the basis of depreciable assets, the amount of such income would not be taken into account for purposes of Code section 856.

Seventh. Amendment to Code section 382(b), modification of section 2(d) of the bill, amending Code section 382.

The House-passed bill provides that creditors of a debtor corporation would be treated as shareholders in applying the continuity rules of Code section 382(b) to a “G” reorganization. The amendment would extend this rule to apply to any reorganization in a bankruptcy or similar case, rather than solely in a “G” reorganization.

SECTION 3.’RULES RELATING TO TITLE 11 CASES FOR INDIVIDUALS

First. Taxable year of the estate—prop. code section 1398(d)(1).

The House-passed bill provides that the first taxable year of the bankruptcy estate of an individual debtor ends on the same day as the debtor’s taxable year which includes the date on which the bankruptcy case commences. This rule had been developed as a part of a prior version of the bill, which would have required that the estate report certain income recognized prior to commencement of the case. Inasmuch as the bill has been changed and now permits the debtor to close his or her taxable year on commencement of the case, the rule relating to the estate’s taxable year no longer is necessary and accordingly would be deleted by the amendment.

Second. Estate’s share of the debtor’s income—prop. code section 1398(e)(1).

The House-passed bill provides that the gross income of the bankruptcy estate of an individual debtor would include any gross income of the debtor to which the estate is entitled under bankruptcy law. The amendment would clarify that only such income which is recognized after commencement of the case would be includable in the estate’s gross income.

Third. Allocation of deductions and credits—prop. code section 1398(e)(3).

In cases where the bankruptcy estate of an individual would be treated as a separate taxable entity, the House-passed bill provides rules for allocating deduction and credits between the debtor and the estate. The amendment would modify these rules to make clear that only those expenses paid or accrued by the debtor which are not properly allowable to the debtor would be allocated to the estate. For example, an expense paid by a cash basis debtor before commencement of the bankruptcy case would be allowed to the debtor, even if such deduction could be considered to be associated with income which is allocated to the estate under the rules of the bill. Also, an expense paid or accrued by the debtor after commencement of the bankruptcy case would be allocated to the debtor, and not to the estate.

Fourth. No disposition rules—prop. code section 1398(f).

The bill provides that a transfer (other than by sale or exchange) of an asset from an individual debtor to the bankruptcy estate, or from the bankruptcy estate to the debtor on termination of the estate, would not be treated as a “transfer” giving rise to recognition of gain or loss, recapture of deductions, or acceleration of income or deductions. To conform with language used in related Code provisions, these provisions would be modified to provide that such a transfer would not be treated as a “disposition” for tax purposes.

Fifth. Carryover of attributes to debtors—prop. code section 1398(i).

The bill provides that on termination of a bankruptcy estate, the debtor would succeed to various tax attributes of the estate. This provision would be modified to make clear that the carryover includes attributes first arising during administration of the estate (other than the new administrative expense deduction which would be provided under the bill).

SECTION 5.’MISCELLANEOUS CORPORATE AMENDMENTS

First. Application of section 337 liquidation rule to insolvent corporations— modification to section 5(c) of the bill, amending code section 337.

The House bill expands the nonrecognition provisions under code section 337 to allow a liquidating corporation in a bankruptcy or similar case generally to sell its assets tax-free during the entire duration of the proceeding. The amendment would make this provision applicable whether or not any shareholder receives any consideration for this stock and also would clarify that assets may be retained to pay administrative claims following the close of the case.

Second. Effect of discharge of indebtedness on earnings and profits—modification of section 5(f) of the bill, amending Code section 312.

The House bill provides that to the extent income from discharge of indebtedness—including an amount excluded from gross income pursuant to Code section 108, as amended by the bill—is applied to reduce basis under Code section 1017, such basis-reduction amount does not affect the debtor corporation’s earnings and profits. Otherwise, discharge of indebtedness income, including amounts excluded from gross income—pursuant to Code section 108, as amended by the bill, increases the earnings and profits of the corporation (or reduces a deficit). The amendment would provide also that any deficit in earnings and profits would be reduced by the capital account of any shareholder whose interest is eliminated in a bankruptcy proceeding.

Mr. CONABLE. Mr. Speaker, further reserving the right to object, the first amendment delays for 1 year the application of the bill’s attribution reduction rules and adds the bankruptcy and insolvency section. Is that correct? And the second amendment liberalizes the debt provisions of the House bill.

Mr. ULLMAN. The gentleman is correct.

Mr. CONABLE. Mr. Speaker, I rise in support of H.R. 5043, the Bankruptcy Tax Act of 1980, as amended by the other body.

As the Members will recall, the House earlier this year unanimously passed H.R. 5043. The other body adopted the House-passed bill with only two major amendments.

The first amendment would delay for 1 year the application of the bill’s attribution reduction rules in the case of bankrupt of insolvent taxpayers. The amendment does not delay the application of these rules in the case of solvent taxpayers.

The second amendment liberalizes the “stock for debt” provisions of the House bill. The amendment provides that the exchange of stock for short-term debt will not result in the reduction of attributes except where the amount of stock exchanged is de minimis. Under the House-passed bill, the exchange of stock for short-term debt resulted in attribute reduction; while the exchange of stock for long-term debt or a security, did not trigger this type of reduction.

The other amendments made by the other body are technical in nature.

The bill represents the efforts of several professional organizations and the Treasury Department. The Select Revenue Measures Subcommittee and particularly its chairman, Mr. Rostenkowski, are to be complimented for their efforts in putting this bill together and reconciling the various differences that existed.

I urge the bill’s passage.

Mr. DUNCAN of Tennessee. Mr. Speaker, I support the chairman’s unanimous consent request to accept H.R. 5043, the Bankruptcy Tax Act of 1980 as amended by the Senate.

The legislation is a necessary follow-on to the legislation earlier in this Congress which altered the substantive bankruptcy law. H.R. 5043 updates the tax treatment of bankruptcy to complement the new bankruptcy law.

The Senate made only two major amendments to H.R. 5043. First, it adopted an amendment which postpones for 1 year the effective date of certain rules in section 2 regarding the reduction of a net operating loss and basis of depreciable assets with respect to a bankrupt or insolvent debtor. My understanding is that this postponement is supported by elements of the bankruptcy bar. They apparently believe these provisions should be reviewed further. After the 1-year postponement ends, then these rules will become effective unless subsequent congressional action amends them.

The second amendment expands the stock for debt provisions. It provides that the exchange of stock for short-term debt will not result in the reduction of attributes in certain situations.

Mr. Speaker, H.R. 5043 passed the House on March 24, 1980, on a recorded vote with not one Member casting a nay vote. I believe the Senate amendments are acceptable and accordingly the bill before us now likewise merits our unanimous approval.

Mr. CONABLE. Mr. Speaker, I withdraw my reservation of objection.

The SPEAKER pro tempore. Is there objection to the request of the gentleman from Oregon?

There was no objection.

The SPEAKER pro tempore. Is there objection to the initial request of the gentleman from Oregon?

There was no objection.

A motion to reconsider was laid on the table.

GENERAL LEAVE

Mr. ULLMAN. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks on the legislation first considered.

The SPEAKER pro tempore. Is there objection to the request of the gentleman from Oregon?

There was no objection.