,i #aacth ,,congress #ast ,session ,h4 ,r4 #hib ,,in ,,the ,,house ,,of ,,representatives ,february #bh1 #bjac ,mr4 ,reichert 7for himself and ,mr4 ,kind7 introduced the following bill2 which was referred to the ,committee on ,ways and ,means ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to provide for ,s corporation reform1 and for other purposes4 #a4 ,short title1 reference 7a7 ,short ,title ,this ,act may be cited as the ,s ,corporation ,modernization ,act of #bjac4 7b7 ,amendment of #aihf ,code ,except as otherwise expressly provided1 whenever in this ,act an amendment or repeal is expressed in terms of an amendment to1 or repeal of1 a section or other provision1 the reference shall be considered to be made to a section or other provision of the ,internal ,revenue ,code of #aihf4 #b4 ,reduced recognition period for built-in gains made permanent 7a7 ,in general ,paragraph 7#g7 of section #acgd7;d7 7relating to definitions and special rules7 is amended to read as follows3 7#g7 ,recognition period ,the term recognition period means the #e-year period beginning with the #ast day of the #ast taxable year for which the corporation was an ,s corporation4 ,for purposes of applying this section to any amount includible in income by reason of distributions to shareholders pursuant to section #eic7;e71 the preceding sentence shall be applied without regard to the duration of the recognition period in effect on the date of such distribution4 4 7b7 ,effective date ,the amendment made by this section-- 7#a7 shall apply for purposes of determining the recognition period with respect to #ast days referred to in section #acgd7;d77#g7 of the ,internal ,revenue ,code of #aihf occurring before1 on1 or after ,january #a1 #bjac1 but 7#b7 shall not apply for purposes of determining the tax imposed by section #acgd of such ,code for taxable years ending before such date4 #c4 ,repeal of excessive passive investment income as a termination event 7a7 ,in general ,paragraph 7#c7 of section #acfb7;d7 7relating to termination7 is amended by adding at the end the following new subparagraph3 7,d7 ,termination ,this paragraph shall not apply to taxable years beginning after ,december #ca1 #bjab4 4 7b7 ,effective ,date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjab4 #d4 ,modifications to passive income rules 7a7 ,increased ,limit 7#a7 ,in general ,paragraph 7#b7 of section #acge7;a7 7relating to tax imposed when passive investment income of corporation having accumulated earnings and profits exceeds #be percent of gross receipts7 is amended by striking #be percent and inserting #fj percent4 7#b7 ,conforming amendments 7,a7 ,subparagraph 7,j7 of section #bf7;b77#b7 is amended by striking #be percent and inserting #fj percent4 7,b7 ,clause 7i7 of section #acge7;b77#a77;,a7 is amended by striking #be percent and inserting #fj percent4 7,c7 ,the heading for section #acge is amended by striking #be percent and inserting #fj percent4 7,d7 ,the table of sections for part ,,iii of subchapter ,s of chapter #a is amended by striking #be percent in the item relating to section #acge and inserting #fj percent4 7b7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjab4 #e4 ,expansion of qualifying beneficiaries of an electing small business trust 7a7 ,no ,look ,through for ,eligibility ,purposes ,clause 7v7 of section #acfa7;c77#b77;,b7 7relating to treatment as shareholders7 is amended by adding at the end the following new sentence3 ,this clause shall not apply for purposes of subsection 7b77#a77;,c744 7b7 ,effective date ,the amendment made by this section shall take effect on ,january #a1 #bjac4 #f4 ,expansion of ,s corporation eligible shareholders to include ,i,r,as 7a7 ,in ,general ,clause 7vi7 of section #acfa7;c77#b77;,a7 7relating to certain trusts permitted as shareholders7 is amended to read as follows3 7vi7 ,a trust which constitutes an individual retirement account under section #djh7;a71 including one designated as a ,roth ,,ira under section #djh;,a4 4 7b7 ,sale of ,stock in ,,ira ,relating to ,s ,corporation ,election ,exempt ,from ,prohibited ,transaction ,rules ,paragraph 7#af7 of section #dige7;d7 7relating to exemptions7 is amended to read as follows3 7#af7 a sale of stock held by a trust which constitutes an individual retirement account under section #djh7;a7 to the individual for whose benefit such account is established if-- 7,a7 such sale is pursuant to an election under section #acfb7;a7 by the issuer of such stock1 7,b7 such sale is for fair market value at the time of sale 7as established by an independent appraiser7 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 party1 7,c7 such trust does not pay any commissions1 costs1 or other expenses in connection with the sale1 and 7,d7 the stock is sold in a single transaction for cash not later than #abj days after the ,s corporation election is made4 4 7c7 ,effective ,date ,the amendments made by this section shall take effect on ,january #a1 #bjac4 #g4 ,allowance of deduction for charitable contributions for electing small business trusts 7a7 ,in general ,section #fda7;c77#b77;,c7 7relating to modifications7 is amended by adding at the end the following new sentence3 ,the deduction for charitable contributions allowed under clause 7i7 shall be determined without regard to section #fdb7;c71 and the limitations imposed by section #agj7;b77#a7 on the amount of the deduction shall be applied to the electing small business trust as if it were an individual44 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjab4 #h4 ,permanent rule regarding basis adjustment to stock of ,s corporations making charitable contributions of property 7a7 ,in general ,section #acfg7;a77#b7 7relating to decreases in basis7 is amended by striking the last sentence4 7b7 ,effective date ,the amendment made by this section shall apply to contributions made in taxable years beginning after ,december #ca1 #bjab4